<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 12
Statement of Operations.......................... 13
Statement of Changes in Net Assets............... 14
Financial Highlights............................. 15
Notes to Financial Statements.................... 16
Report of Independent Accountants................ 21
Dividend Reinvestment Plan....................... 22
</TABLE>
VIM ANR 12/97
<PAGE> 2
LETTER TO SHAREHOLDERS
December 4, 1997
Dear Shareholder,
In the past year, we have been
participants in and witnesses to two
mergers that we believe have positioned
our company at the forefront of the
financial industry's evolution. Our
latest announcement continues our
forward progress. I am pleased to [PHOTO]
announce that Philip N. Duff, formerly
the chief financial officer of Morgan
Stanley, has joined Van Kampen DENNIS J. MCDONNELL AND DON G. POWELL
American Capital as president and
chief executive officer. I will continue as
chairman of the firm. Together, we will continue to work to the benefit of our
fund shareholders as Van Kampen American Capital advances toward the next
century.
ECONOMIC REVIEW
The last quarter of 1996 brought renewed strength and rumblings of
inflation, which continued to feed investors' uncertainties about the direction
of interest rates. This was reflected in the volatility of taxable yields, with
the 30-year Treasury ranging from a high of 6.70 percent to a low of 6.35
percent, and ending the period at 6.64 percent.
The economy grew at a brisk 3.9 percent annual rate during the first three
quarters of 1997. At the same time, the federal budget deficit fell to its
lowest level in 23 years, while consumer prices rose less than 2.0 percent on an
annual basis and producer prices declined 1.4 percent.
The bond market advanced in price during the first 10 months of 1997, but
its ascension was not a smooth ride. Bond prices fell early in the period as
economic growth soared, fueling concerns about rising inflation and a potential
interest rate hike by the Federal Reserve Board. When the Fed did raise interest
rates by a modest 0.25 percent in late March, bond prices fell further, sending
the yield of the 30-year U.S. Treasury bond above 7.0 percent for the first time
in six months. By mid-April, however, the market's mood had changed, reflecting
few signs of price pressures despite the economy's strength. Bonds also
benefited from continued heavy purchases by foreign investors and concerns that
the stock market rally was nearing an end. The 7.0 percent slump in the Dow
Jones Industrial Average on October 27 reinforced the benefit of owning bonds
for diversification. By the end of October, the yield on the 30-year Treasury
bond was near its lowest level in 20 months, at 6.15 percent.
Throughout 1997, municipal bond prices moved in the same direction as the
Treasury bond market, but gained less when Treasury prices rallied and lost less
when Treasuries fell. Between December 31, 1996 and October 31, 1997, the yield
on the long-term municipal revenue bond index fell 36 basis points as the yield
on the 30-year Treasury
Continued on page two
1
<PAGE> 3
bond fell 48 basis points. Because yields move in the opposite direction of
prices, the smaller yield decline of municipal bonds indicates that their prices
did not rise as much as Treasuries.
Portfolio Composition by Credit Quality as a
Percentage of Long-Term Investments as of October 31,
1997
AAA................................ 100%
Based upon the highest credit quality ratings issued by
Standard & Poor's or Moody's.
TRUST STRATEGY
In managing the Trust, we used the following strategies:
We continued to maintain a 100 percent concentration in AAA-rated insured
bonds. These bonds have the highest credit rating assigned by the Standard &
Poor's Ratings Group and are plentiful in the municipal bond market. Insured
bonds currently comprise well over half of new issues in the municipal market.
As a result of their ample supply and high credit rating, AAA-rated insured
bonds are very liquid and carry minimal credit risk. When interest rates fall,
as they did for most of the second half of the fiscal year, AAA-rated bonds tend
to outperform lower-rated securities.
Portfolio turnover during the fiscal year was moderate due to market
conditions that afforded few opportunities to add value to existing holdings.
The average yield of bonds in the Trust's portfolio was higher than average
market yields. As a result, there was little incentive to replace bonds in the
Trust, because such trades would have reduced the Trust's dividend-paying
ability.
Acquisitions focused on enhancing the Trust's call protection as well as its
dividend-paying ability. Because we hoped to limit the number of bonds that
could be "called" at any one time, we purchased long-term discount bonds that
will not be callable for many years. We favored high-yielding bonds from states
whose securities attract strong demand. These purchases were financed by sales
of bonds that had appreciated in price, as well as proceeds from a call on a
housing bond issue. When searching for new securities for the Trust's portfolio,
we try to identify bonds that we believe will outperform within a particular
sector and that can be purchased at an attractive price. We believe this
"bottom-up" approach, supported by our research, provides significant added
value to the portfolio.
During the second half of the fiscal year, we attempted to keep the Trust's
duration in line with the market benchmark. Duration, which is expressed in
years, is a measure of a portfolio's sensitivity to interest rate movements.
Portfolios with long durations tend to perform better when interest rates are
falling, while portfolios with short durations tend to do better when rates are
rising. As of October 31, 1997, the Trust's duration stood at 7.21 years,
compared to 7.34 years for the Lehman Brothers Municipal Bond Index.
Continued on page three
2
<PAGE> 4
Top Five Portfolio Industry Holdings by Sector as of October 31, 1997*
Airport........................... 14.7%
Health Care....................... 13.2%
Multi-Family Housing.............. 13.1%
Retail Electric/Gas/Telephone..... 12.8%
Single-Family Housing............. 11.5%
*As a Percentage of Long-Term
Investments
PERFORMANCE SUMMARY
For the one-year period ended October 31, 1997, the Van Kampen American
Capital Trust for Insured Municipals generated a total return at market price of
15.04 percent(1). The Trust offered a tax-exempt distribution rate of 6.09
percent(3), based on the closing common stock price on October 31, 1997. At the
end of the reporting period, the closing share price of the Trust traded at
$17.25, a 1.4 percent premium to its net asset value of $17.01. Because income
from the Trust is exempt from federal income taxes, this distribution rate
represents a yield equivalent to a taxable investment earning 9.52 percent(4)
(for investors in the federal income tax bracket of 36 percent).
The Trust declared a capital gains distribution of $0.1608 per share paid
December 31, 1996, as a result of the sale of some assets that had appreciated
in value.
TWELVE-MONTH DISTRIBUTION HISTORY FOR THE PERIOD ENDED OCTOBER 31, 1997
[BAR CHART]
<TABLE>
<CAPTION>
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1996 1996 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends $.0875 $.0875 $.0875 $.0875 $.0875 $.0875 $.0875 $.0875 $.0875 $.0875 $.0875 $.0875
Capital Gains $.16077
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
</TABLE>
OUTLOOK
We expect the economy to remain strong in the coming months, although the
growth rate might slow to a more moderate pace. The weakness in the Far East,
which was the
Continued on page four
3
<PAGE> 5
impetus for the recent volatility in world stock markets, will most likely
reduce U.S. exports to the region. In turn, this could trim U.S. economic growth
as well as the earnings of many U.S. companies. As a result, we believe there is
little chance that the Fed will raise interest rates in the coming months. A
rate hike reemerges as a possibility if inflation picks up, or if growth
continues at its current brisk pace.
As a result of this outlook, we expect that the yield on the 30-year
Treasury bond will trade within a range of 5.75 percent and 6.50 percent for the
next six months, possibly falling further in mid-1998. A decline in rates would
not only boost the prices of long-term investments in the portfolio, but could
also positively affect the Trust as a result of its leveraged structure. That
structure, which involves borrowing short-term funds to purchase long-term
municipal bonds, provides common shareholders with above-market levels of
dividend income. It should be noted, however, that if short-term rates rise,
borrowing costs would increase; this would negatively impact the income and
performance of common shares.
We will continue to seek a balance between the Trust's total return and its
dividend income, and to add value through our investment strategies and bond
selection. Thank you for your continued confidence in Van Kampen American
Capital and your Trust's portfolio manager.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1997
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
(NYSE TICKER SYMBOL--VIM)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)............ 15.04%
One-year total return based on NAV(2)..................... 9.58%
DISTRIBUTION RATES
Distribution rate as a % of closing stock price(3)........ 6.09%
Taxable-equivalent distribution rate as a % of closing
stock price(4).......................................... 9.52%
SHARE VALUATIONS
Net asset value........................................... $ 17.01
Closing stock price....................................... $ 17.250
One-year high common stock price (07/16/97)............... $17.6875
One-year low common stock price (12/17/96)................ $ 15.750
Preferred share (Series A) rate(5)........................ 3.520%
Preferred share (Series B) rate(5)........................ 3.530%
</TABLE>
(1)Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing common stock price at the end of the period
indicated.
(2)Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3)Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4)The taxable-equivalent distribution rate is calculated assuming a 36% federal
tax bracket.
(5)See "Notes to Financial Statements" footnote #6, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 101.4%
ALABAMA 1.6%
$1,000 Birmingham-Carraway, AL Methodist Hlth Sys Ser A
(Connie Lee Insd)............................... 5.875% 08/15/25 $ 1,034,120
2,000 Huntsville, AL Pub Bldg Auth Lease Rev Muni
Justice Pub & Safety Cent A (MBIA Insd)......... 5.900 10/01/16 2,101,600
1,000 Lee Cnty, AL (AMBAC Insd)....................... 5.500 02/01/21 1,011,620
------------
4,147,340
------------
ALASKA 0.3%
745 Alaska St Hsg Fin Corp Coll Mtg Oblig Ser A
Subser A2 (GNMA Collateralized)................. 7.050 06/01/25 792,188
------------
ARIZONA 2.4%
1,500 Arizona Hlth Fac Auth Hosp Sys Rev Phoenix
Baptist Hosp & Med Rfdg (MBIA Insd)............. 6.250 09/01/11 1,650,270
1,520 Peoria, AZ Indl Dev Auth Multi-Family Rev Sr Hsg
Casa Del Rio A Rfdg (GNMA Collateralized)....... 7.300 02/20/15 1,673,414
2,490 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig
Irvington Proj Tucson Ser A Rfdg (FSA Insd)..... 7.250 07/15/10 2,785,862
------------
6,109,546
------------
CALIFORNIA 17.0%
6,235 California Hsg Fin Agy Rev AMT Ser Home Mtg Ser
B (MBIA Insd)................................... 6.100 02/01/28 6,486,707
2,500 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Pacific Gas & Elec Ser B (FSA Insd)............. 6.350 06/01/09 2,724,075
9,000 Los Angeles Cnty, CA Pension Oblig Ctfs Ltd Muni
Oblig Ser A (MBIA Insd) (b)..................... 6.900 06/30/08 10,720,529
7,500 Mount Diablo, CA Hosp Dist Rev Ser A (Embedded
Cap) (AMBAC Insd)............................... 5.125 12/01/23 7,243,425
1,155 Paramount, CA Redev Agy Tax Alloc (MBIA Insd)... 6.250 08/01/10 1,263,096
3,600 Sacramento Cnty, CA Arpt Ser A (MBIA Insd)...... 5.900 07/01/24 3,735,324
1,000 San Francisco, CA City & Cnty Redev Agy Hotel
Tax Rev (FSA Insd).............................. 6.750 07/01/15 1,135,070
2,000 San Joaquin Hills, CA Trans Toll Ser A Rfdg
(MBIA Insd)..................................... 5.375 01/15/29 1,998,320
9,000 San Jose, CA Single Family Mtg Rev Ser A Cap
Apprec (GEMIC Mtg Collateralized)............... * 04/01/16 3,328,290
4,240 University of CA Rev Multi Purp Proj Ser D (MBIA
Insd)........................................... 6.300 09/01/14 4,616,936
------------
43,251,772
------------
COLORADO 1.7%
2,330 Castle Rock, CO Multi-Family Rev Hsg Pines at
Castle Rock Ser A (FSA Insd).................... 6.100 12/01/16 2,422,338
1,855 Greeley, CO Multi-Family Rev AMT Hsg Mtg Creek
Stone (FHA Gtd) (a)............................. 5.950 07/01/28 1,888,149
------------
4,310,487
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FLORIDA 3.1%
$1,000 Hillsborough Cnty, FL Aviation Tampa Intl Arpt
Ser A (FGIC Insd)............................... 6.000% 10/01/23 $ 1,047,270
1,000 Jacksonville, FL Wtr & Swr Rev United Wtr FL
Proj (AMBAC Insd)............................... 6.350 08/01/25 1,083,250
1,095 Orange Cnty, FL Hsg Fin Auth Single Family Mtg
Rev Ser A (GNMA Collateralized)................. 6.200 10/01/16 1,153,331
2,000 Pasco Cnty, FL Solid Waste Displ & Res Recovery
Sys Rev (AMBAC Insd) (a)........................ 6.000 04/01/11 2,149,040
1,300 Pinellas Cnty, FL Hsg Fin Auth Single Family Mtg
Rev (GNMA Collateralized)....................... 6.000 09/01/18 1,350,830
1,000 Pinellas Cnty, FL Hsg Fin Auth Single Family Mtg
Rev (GNMA Collateralized)....................... 6.100 09/01/29 1,038,890
------------
7,822,611
------------
HAWAII 2.1%
3,500 Hawaii St Dept Budget & Fin Spl Purp Mtg Rev
Hawaiian Elec Co Proj Ser B (MBIA Insd)......... 7.600 07/01/20 3,821,440
1,450 Hawaii St Dept Budget & Fin Spl Purp Rev
Hawaiian Elec Co (MBIA Insd).................... 6.550 12/01/22 1,577,731
------------
5,399,171
------------
ILLINOIS 8.6%
9,050 Chicago, IL O'Hare Intl Arpt Spl Fac Rev Intl
Terminal (MBIA Insd)............................ 6.750 01/01/18 9,821,241
2,650 Chicago, IL Residential Mtg Rev Ser B Rfdg (MBIA
Insd)........................................... * 10/01/09 1,177,395
1,250 Illinois Hlth Fac Auth Rev Ancilla Sys Inc Ser A
Rfdg (MBIA Insd) (a)............................ 5.250 07/01/16 1,229,463
3,000 Onterie Cent Hsg Fin Corp IL Mtg Rev Onterie
Cent Proj Ser A Rfdg (MBIA Insd)................ 7.000 07/01/12 3,201,120
6,150 Onterie Cent Hsg Fin Corp IL Mtg Rev Onterie
Cent Proj Ser A Rfdg (MBIA Insd)................ 7.050 07/01/27 6,566,908
------------
21,996,127
------------
INDIANA 0.4%
1,000 Indiana Hlth Fac Fin Auth Rev Ancilla Sys Inc
Oblig Grp (MBIA Insd) (a)....................... 5.250 07/01/17 981,890
------------
KANSAS 3.2%
3,500 Burlington, KS Pollutn Ctl Rev KS Gas & Elec Co
Proj Rfdg (MBIA Insd)........................... 7.000 06/01/31 3,825,360
2,000 Kansas St Dev Fin Auth Hlth Fac Rev Stormont
Vail Hlthcare Inc G (MBIA Insd)................. 5.800 11/15/21 2,073,940
1,935 Olathe Labette Cnty, KS Single Family Mtg Rev
Coll Ser A-I Rfdg (GNMA Collateralized)......... 8.100 08/01/23 2,168,651
------------
8,067,951
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KENTUCKY 1.3%
$1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn
KY Intl Arpt Ser A Rfdg (MBIA Insd)(a).......... 5.850% 03/01/04 $ 1,066,550
1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn
KY Intl Arpt Ser A Rfdg (MBIA Insd)(a).......... 6.100 03/01/07 1,095,860
1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn
KY Intl Arpt Ser A Rfdg (MBIA Insd)(a).......... 6.200 03/01/08 1,103,490
------------
3,265,900
------------
LOUISIANA 2.5%
3,145 Calcasieu Parish, LA Mem Hosp Svc Dist Hosp Rev
Lake Charles Mem Hosp Proj Ser A (Connie Lee
Insd)........................................... 6.650 12/01/21 3,468,967
1,000 Louisiana Hsg Fin Agy Mtg Rev Coll Mtg Malta
Square Proj (GNMA Collateralized)............... 6.450 09/01/27 1,063,760
40 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.600 01/01/04 42,453
585 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.700 01/01/05 621,001
395 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.800 01/01/06 419,241
830 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.850 01/01/09 879,916
------------
6,495,338
------------
MARYLAND 0.7%
1,675 Prince Georges Cnty, MD Hsg Auth Mtg Rev
Riverview Terrace Ser A Rfdg (GNMA
Collateralized)................................. 6.400 12/20/10 1,798,163
------------
MASSACHUSETTS 1.8%
4,225 Massachusetts Edl Ln Auth Rev Edl Ln Rev Muni
Forwards Issue E Ser A (AMBAC Insd)............. 7.000 01/01/10 4,489,020
------------
MICHIGAN 4.6%
6,000 Detroit, MI Econ Dev Corp Res Recovery Rev Ser A
(FSA Insd)...................................... 6.875 05/01/09 6,514,620
1,000 Monroe Cnty, MI Econ Dev Corp Ltd Oblig Rev Coll
Detroit Edison Co Ser AA Rfdg (FGIC Insd)....... 6.950 09/01/22 1,234,460
3,500 Monroe Cnty, MI Pollutn Ctl Rev Coll Detroit
Edison Monroe Ser 1 (MBIA Insd)................. 6.875 09/01/22 3,849,370
------------
11,598,450
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MISSISSIPPI 3.9%
$2,145 Mississippi Home Corp Single Family Rev Mtg
Access Pgm (GNMA Collateralized)................ 7.100% 05/01/23 $ 2,294,978
1,650 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser C (GNMA Collateralized).......... 8.125 12/01/24 1,841,763
1,527 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser D (GNMA Collateralized).......... 8.100 12/01/24 1,708,224
1,318 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser E (GNMA Collateralized).......... 8.100 12/01/25 1,476,358
2,500 Mississippi Hosp Equip & Fac Auth Rev Rush Med
Fndtn Proj (Connie Lee Insd).................... 6.700 01/01/18 2,723,225
------------
10,044,548
------------
MISSOURI 0.8%
1,000 Missouri St Hsg Dev Comm Multi-Family Hsg
Brookstone A (FSA Insd)......................... 6.000 12/01/16 1,034,310
1,095 Missouri St Hsg Dev Comm Multi-Family Hsg Truman
Farm A (FSA Insd)............................... 5.750 10/01/11 1,129,887
------------
2,164,197
------------
NEBRASKA 1.9%
1,305 Nebraska Invt Fin Auth Multi-Family Rev Hsg
Cambury Hills Apts Pgm (FSA Insd)............... 5.700 10/01/12 1,344,803
1,100 Nebraska Invt Fin Auth Multi-Family Rev Hsg
Summit Club Apts Proj (FSA Insd)................ 5.700 10/01/12 1,133,550
2,050 Nebraska Invt Fin Auth Single Family Mtg Rev
(Inverse Fltg) (GNMA Collateralized)............ 9.159 09/15/24 2,262,687
------------
4,741,040
------------
NEVADA 3.8%
9,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser A
(FGIC Insd)..................................... 6.700 06/01/22 9,789,930
------------
NEW HAMPSHIRE 0.4%
1,000 New Hampshire St Business Fin Auth Wtr Fac Rev
Pennichuck Wtrwks Inc (AMBAC Insd).............. 6.300 05/01/22 1,071,040
------------
NEW MEXICO 2.1%
1,900 Albuquerque, NM Arpt Rev Ser A (AMBAC Insd)..... 6.600 07/01/16 2,074,781
2,070 New Mexico Edl Assistance Fndtn Student Ln Rev
Ser A (AMBAC Insd).............................. 6.850 04/01/05 2,201,486
1,000 New Mexico Mtg Fin Auth Amt Single Family Mtg
Pgm A2 (GNMA Collateralized).................... 6.050 07/01/16 1,032,880
------------
5,309,147
------------
NEW YORK 3.6%
3,855 Metropolitan Tran Auth NY Commuter Fac Rev Ser A
(MBIA Insd)..................................... 5.625 07/01/27 3,952,531
5,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd)................ 5.750 12/01/25 5,118,800
------------
9,071,331
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OHIO 0.7%
$1,750 Ohio Hsg Fin Agy Mtg Rev Residential Ser A1
(GNMA Collateralized)........................... 6.150% 03/01/29 $ 1,838,498
------------
PENNSYLVANIA 7.7%
7,500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser A (FSA Insd)........................... 6.800 01/01/10 8,167,950
4,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser B (FSA Insd)........................... 6.625 01/01/22 4,317,520
2,000 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh
Mercy Hlth Sys Inc (AMBAC Insd)................. 5.625 08/15/26 2,024,820
1,330 Allegheny Cnty, PA Residential Fin Auth Mtg Rev
Single Family (GNMA Collateralized)............. 7.100 05/01/24 1,411,595
1,500 Jim Thorpe PA Area Sch Dist Ser A (MBIA Insd)... 5.375 03/15/27 1,500,465
1,950 Sayre, PA Hlthcare Fac Auth Rev Hosp VHA PA/VHA
East Fin Pgm B (AMBAC Insd)..................... 6.375 07/01/22 2,118,402
------------
19,540,752
------------
RHODE ISLAND 0.7%
1,500 Rhode Island Port Auth & Econ Dev Corp Arpt Rev
Ser A (FSA Insd)................................ 7.000 07/01/14 1,799,325
------------
SOUTH CAROLINA 3.9%
9,150 South Carolina St Port Auth Port Rev (AMBAC
Insd)........................................... 6.750 07/01/21 9,889,960
------------
TENNESSEE 0.5%
1,085 Memphis-Shelby Cnty, TN Arpt Rev Ser A Rfdg
(MBIA Insd)(a).................................. 6.250 02/15/10 1,209,363
------------
TEXAS 11.2%
1,085 Brazos River Auth TX Johnson Cnty Surface (AMBAC
Insd)........................................... 5.800 09/01/11 1,129,854
5,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj A (AMBAC Insd)................ 6.750 04/01/22 5,443,850
5,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj B (FGIC Insd)................. 6.625 06/01/22 5,423,650
1,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj C (FGIC Insd)................. 6.700 10/01/22 1,092,140
2,305 Harris Cnty, TX Hsg Fin Corp Multi-Family Hsg
Rev Cypress Ridge Apts (FSA Insd)............... 6.350 06/01/26 2,443,992
4,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FGIC
Insd)........................................... 6.750 07/01/21 4,323,480
1,800 Midland, TX Ctfs Oblig Arpt Sub Lien (FSA
Insd)........................................... 5.850 03/01/13 1,877,670
4,320 Texas St Veterans Hsg Assistance (MBIA Insd).... 6.800 12/01/23 4,617,907
2,000 Tyler, TX Hlth Fac Dev Corp Hosp Rev Mother
Frances Hosp of Tyler (FGIC Insd)............... 6.500 07/01/22 2,181,320
------------
28,533,863
------------
VIRGINIA 0.6%
1,495 Harrisonburg, VA Redev & Hsg Auth Multi-Family
Hsg Rev (FSA Insd).............................. 6.200 04/01/17 1,565,968
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WASHINGTON 3.1%
$2,235 Grant Cnty, WA Pub Util Dist No 002 Wanapum
Hydro Elec Rev AMT Second Ser D (AMBAC Insd).... 6.000% 01/01/13 $ 2,366,932
1,770 Grant Cnty, WA Pub Util Dist No 002 Wanapum
Hydro Elec Rev AMT Second Ser D (AMBAC Insd).... 6.250 01/01/17 1,887,687
1,855 Grant Cnty, WA Pub Util Dist No 2 Priest Rapids
Hydro Elec Rev AMT Second Ser D (AMBAC Insd).... 6.000 01/01/13 1,964,501
1,460 Grant Cnty, WA Pub Util Dist No 2 Priest Rapids
Hydro Elec Rev AMT Second Ser D (AMBAC Insd).... 6.250 01/01/17 1,557,075
------------
7,776,195
------------
WISCONSIN 2.9%
5,000 Wisconsin St Hlth & Edl Fac Auth Rev Children's
Hosp (Embedded Cap) (FGIC Insd)................. 5.000 08/15/10 5,004,600
1,250 Wisconsin St Hlth & Edl Fac Auth Rev Felician
Hlth Care Ser A Rfdg (AMBAC Insd)............... 7.000 01/01/15 1,336,163
1,000 Wisconsin St Hlth & Edl Fac Auth Rev Saint Lukes
Med Cent Proj (MBIA Insd)....................... 7.100 08/15/19 1,117,040
------------
7,457,803
------------
PUERTO RICO 2.3%
5,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser
Y Rfdg (Embedded Cap) (FSA Insd)................ 5.730 07/01/21 5,743,500
------------
TOTAL LONG-TERM INVESTMENTS 101.4%
(Cost $238,829,468)........................................................ 258,072,414
SHORT-TERM INVESTMENTS 0.2%
(Cost $400,000)............................................................ 400,000
------------
TOTAL INVESTMENTS 101.6%
(Cost $239,229,468)........................................................ 258,472,414
LIABILITIES IN EXCESS OF OTHER ASSETS (1.6%)................................ (4,020,733)
------------
NET ASSETS 100.0%........................................................... $254,451,681
============
</TABLE>
*Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $239,229,468)....................... $258,472,414
Cash........................................................ 47,129
Receivables:
Interest.................................................. 4,714,919
Investments Sold.......................................... 252,818
Other....................................................... 1,739
------------
Total Assets.......................................... 263,489,019
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 8,476,703
Income Distributions -- Common and Preferred Shares....... 165,193
Investment Advisory Fee................................... 129,137
Administrative Fee........................................ 43,046
Affiliates................................................ 9,948
Accrued Expenses............................................ 140,889
Trustees' Deferred Compensation and Retirement Plans........ 72,422
------------
Total Liabilities..................................... 9,037,338
------------
NET ASSETS.................................................. $254,451,681
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 1,800 issued with liquidation preference of
$50,000 per share)........................................ $ 90,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 9,668,986 shares issued and
outstanding).............................................. 96,690
Paid in Surplus............................................. 142,483,673
Net Unrealized Appreciation................................. 19,242,946
Accumulated Undistributed Net Investment Income............. 1,211,350
Accumulated Net Realized Gain............................... 1,417,022
------------
Net Assets Applicable to Common Shares................ 164,451,681
------------
NET ASSETS.................................................. $254,451,681
============
NET ASSET VALUE PER COMMON SHARE ($164,451,681 divided
by 9,668,986 shares outstanding).......................... $ 17.01
============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $15,051,813
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,502,315
Administrative Fee.......................................... 500,772
Preferred Share Maintenance................................. 257,873
Trustees' Fees and Expenses................................. 28,601
Custody..................................................... 22,480
Legal....................................................... 10,894
Amortization of Organizational Costs........................ 1,797
Other....................................................... 198,080
-----------
Total Expenses.......................................... 2,522,812
-----------
NET INVESTMENT INCOME....................................... $12,529,001
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 1,619,089
Options................................................... 12,401
Futures................................................... (214,474)
-----------
Net Realized Gain........................................... 1,417,016
-----------
Net Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 15,065,205
End of the Period:
Investments............................................. 19,242,946
-----------
Net Unrealized Appreciation During the Period............... 4,177,741
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 5,594,757
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $18,123,758
===========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 12,529,001 $ 12,738,618
Net Realized Gain....................................... 1,417,016 2,792,852
Net Unrealized Appreciation/Depreciation During the
Period................................................ 4,177,741 (2,254,455)
------------ ------------
Change in Net Assets from Operations.................... 18,123,758 13,277,015
------------ ------------
Distributions from Net Investment Income:
Common Shares......................................... (10,134,229) (10,110,226)
Preferred Shares...................................... (2,828,542) (3,199,725)
------------ ------------
(12,962,771) (13,309,951)
------------ ------------
Distributions from Net Realized Gain:
Common Shares......................................... (1,551,225) -0-
Preferred Shares...................................... (519,894) -0-
------------ ------------
(2,071,119) -0-
------------ ------------
Total Distributions..................................... (15,033,890) (13,309,951)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 3,089,868 (32,936)
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment........................................ 341,130 476,622
------------ ------------
TOTAL INCREASE IN NET ASSETS............................ 3,430,998 443,686
NET ASSETS:
Beginning of the Period................................. 251,020,683 250,576,997
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $1,211,350 and $1,645,120,
respectively)......................................... $254,451,681 $251,020,683
============ ============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 24, 1992
(Commencement
Year Ended October 31 of Investment
-------------------------------------------------- Operations) to
1997 1996 1995 1994 1993 October 31, 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period (a)......... $16.688 $16.693 $14.883 $18.213 $15.278 $14.737
------- ------- ------- ------- ------- -------
Net Investment Income..... 1.297 1.323 1.340 1.351 1.365 .924
Net Realized and
Unrealized Gain/Loss.... .581 .054 1.883 (3.150) 2.949 .340
------- ------- ------- ------- ------- -------
Total from Investment
Operations................ 1.878 1.377 3.223 (1.799) 4.314 1.264
------- ------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders.......... 1.050 1.050 1.050 1.050 .970 .525
Common Share Equivalent
of Distributions Paid
to Preferred
Shareholders.......... .293 .332 .363 .301 .293 .198
Distributions from Net
Realized Gain:
Paid to Common
Shareholders.......... .161 -0- -0- .146 .086 -0-
Common Share Equivalent
of Distributions Paid
to Preferred
Shareholders.......... .054 -0- -0- .034 .030 -0-
------- ------- ------- ------- ------- -------
Total Distributions......... 1.558 1.382 1.413 1.531 1.379 .723
------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period.................... $17.008 $16.688 $16.693 $14.883 $18.213 $15.278
======= ======= ======= ======= ======= =======
Market Price Per Share at
End of the Period......... $17.250 $16.125 $15.750 $13.500 $17.250 $14.500
Total Investment Return at
Market Price (b).......... 15.04% 9.19% 24.96% (15.57%) 26.98% .09%*
Total Return at Net Asset
Value (c)................. 9.58% 6.53% 19.80% (12.20%) 26.75% 5.33%*
Net Assets at End of the
Period (In millions)...... $ 254.5 $ 251.0 $ 250.6 $ 233.2 $ 265.2 $ 237.0
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares............. 1.57% 1.60% 1.63% 1.57% 1.54% 1.51%
Ratio of Expenses to Average
Net Assets................ 1.01% 1.02% 1.03% 1.01% .99% 1.01%
Ratio of Net Investment
Income to Average Net
Assets Applicable to
Common Shares (d)......... 6.05% 5.99% 6.16% 6.33% 6.29% 6.08%
Portfolio Turnover.......... 36% 35% 28% 26% 38% 90%*
</TABLE>
(a) Net Asset Value at January 24, 1992, is adjusted for common and preferred
share offering costs of $.263 per common share.
(b) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.
(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.
(d) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
* Non-Annualized
See Notes to Financial Statements
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Trust for Insured Municipals (the "Trust") is
registered as a diversified closed-end management investment company under the
Investment Company Act of 1940, as amended. The Trust's investment objective is
to provide a high level of current income exempt from federal income tax,
consistent with preservation of capital. In normal market conditions, the Trust
intends to invest substantially all of its assets in municipal securities which
are covered by insurance with respect to the timely payment of principal and
interest. The Trust commenced investment operations on January 24, 1992.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
D. ORGANIZATIONAL COSTS--The Trust reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Trust's organization in the amount of $40,000. These costs
were amortized on a straight line basis over the 60 month period ended January
23, 1997.
E. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
At October 31, 1997, for federal income tax purposes, cost of long- and
short-term investments is $239,229,468; the aggregate gross unrealized
appreciation is $19,242,946 and the aggregate gross unrealized depreciation is
$0 resulting in net unrealized appreciation on investments of $19,242,946.
F. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
For the year ended October 31, 1997, 99.9% of the income distributions made
by the Trust were exempt from federal income taxes. Additionally, during the
period, the Trust paid a 28% rate gain distribution of $2,071,119. In January,
1998, the Trust will provide tax information to shareholders for the 1997
calendar year.
G. INSURANCE EXPENSE--The Trust typically invests in insured bonds. Any
portfolio securities not specifically covered by a primary insurance policy are
insured either through secondary market insurance or portfolio insurance. The
insurance policies guarantee the timely payment of principal and interest on the
securities in the Trust's portfolio.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") will provide
investment advice and facilities to the Trust for an annual fee payable monthly
of .60% of the average net assets of the Trust. In addition, the Trust will pay
a monthly administrative fee to VKAC, the Trust's Administrator, at an annual
rate of .20% of the average net assets of the Trust. The administrative services
provided by the Administrator include record keeping and
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
reporting responsibilities with respect to the Trust's portfolio and preferred
shares and providing certain services to shareholders.
For the year ended October 31, 1997, the Trust recognized expenses of
approximately $3,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
For the year ended October 31, 1997, the Trust recognized expenses of
approximately $72,600 representing VKAC's cost of providing accounting and legal
services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Trust. The maximum annual
benefit under the plan is equal to the trustees' annual retainer fee, which is
currently $2,500.
3. CAPITAL TRANSACTIONS
At October 31, 1997 and October 31, 1996, paid in surplus related to common
shares aggregated $142,483,673 and $142,142,746, respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares...................... 9,648,688 9,619,286
Shares Issued Through Dividend
Reinvestment........................ 20,298 29,402
--------- ---------
Ending Shares......................... 9,668,986 9,648,688
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $101,515,863 and $92,873,100,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
Transactions in options for the year ended October 31, 1997, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1996.................... -0- $ -0-
Options Written and Purchased (Net)................ 200 (110,987)
Options Terminated in Closing Transactions (Net)... (200) 110,987
---- ---------
Outstanding at October 31, 1997.................... -0- $ -0-
</TABLE> ==== =========
B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Trust generally invests in futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
Upon entering into futures contracts, the Trust maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin). The cost of securities acquired through
delivery under a contract is adjusted by the unrealized gain or loss on the
contract.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
Transactions in futures contracts, each with a par value of $100,000, for
the year ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1996........................... -0-
Futures Opened............................................ 800
Futures Closed............................................ (800)
----
Outstanding at October 31, 1997........................... -0-
====
</TABLE>
C. INDEXED SECURITIES--These instruments are identified in the portfolio of
investments. The price of these securities may be more volatile than the price
of a comparable fixed rate security.
An Inverse Floating security is one where the coupon is inversely indexed to
a short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Trust to enhance the yield of the portfolio.
An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The Trust invests in these
instruments as a hedge against a rise in the short-term interest rates which it
pays on its preferred shares.
6. PREFERRED SHARES
The Trust has outstanding 1,800 Auction Preferred Shares ("APS") in two series
of 900 shares each. Dividends are cumulative and the dividend rate is
periodically reset through an auction process. The dividend periods for Series A
and Series B are 28 days. The average rate in effect on October 31, 1997, was
3.525%. During the year ended October 31, 1997, the rates ranged from 3.360% to
5.300%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $50,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.
7. CAPITAL GAIN DISTRIBUTIONS
On December 1, 1997, the Trust declared a capital gain of $0.1135 per common
share, of which 73.6% is long-term and 26.4% is short-term, to common
shareholders of record on December 15, 1997, which will be payable on December
31, 1997.
20
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Trust for Insured Municipals:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Trust for Insured Municipals (the "Trust"), including
the portfolio of investments, as of October 31, 1997, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Trust for Insured Municipals as of October 31, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
December 4, 1997
21
<PAGE> 23
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be re-
registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common Shares and are carried to three
decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen American Capital
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
22
<PAGE> 24
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free
Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds or
Morgan Stanley funds.
23
<PAGE> 25
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in
the Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1997
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
24
<PAGE> 26
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on May 28, 1997,
where shareholders voted on a new investment advisory agreement, the election of
Trustees whose terms expired in 1997 and independent public accountants.
1) With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Trust,
7,775,004 shares voted for the proposal, 98,130 shares voted against, 221,937
shares abstained and 86,000 shares represented broker non-votes.
2) With regard to the election of Rod Dammeyer as elected trustee by the
preferred shareholders of the Trust, 1,462 shares voted in his favor, 0 shares
withheld.
3) With regard to the election of Wayne W. Whalen as elected trustee by the
common shareholders of the Trust, 8,040,835 shares voted in his favor, 138,774
shares withheld.
4) With regard to the ratification of KPMG Peat Marwick LLP as independent
public accountants for its current fiscal year, 7,991,017 shares voted for the
proposal, 40,852 shares voted against, 149,202 shares abstained and 0 shares
represented broker non-votes.
25
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<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 239,229,468
<INVESTMENTS-AT-VALUE> 258,472,414
<RECEIVABLES> 4,967,737
<ASSETS-OTHER> 1,739
<OTHER-ITEMS-ASSETS> 47,129
<TOTAL-ASSETS> 263,489,019
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<SENIOR-LONG-TERM-DEBT> 0
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<PAID-IN-CAPITAL-COMMON> 142,580,363
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<REALIZED-GAINS-CURRENT> 1,417,016
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<NET-CHANGE-FROM-OPS> 18,123,758
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,962,771)
<DISTRIBUTIONS-OF-GAINS> (2,071,119)
<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 20,298
<NET-CHANGE-IN-ASSETS> 3,430,998
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<GROSS-EXPENSE> 2,522,812
<AVERAGE-NET-ASSETS> 160,377,130
<PER-SHARE-NAV-BEGIN> 16.688
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