<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
A Farewell from the Chairman..................... 5
Glossary of Terms................................ 6
Performance Results.............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 16
Statement of Operations.......................... 17
Statement of Changes in Net Assets............... 18
Financial Highlights............................. 19
Notes to Financial Statements.................... 20
Report of Independent Accountants................ 25
Dividend Reinvestment Plan....................... 26
</TABLE>
VIM ANR 12/98
<PAGE> 2
LETTER TO SHAREHOLDERS
November 20, 1998
Dear Shareholder,
The past decade has been a
remarkable time for investors.
Together, we've witnessed one of the
greatest bull markets in investment [PHOTO]
history, unprecedented growth in mutual
fund investing, and a surge in personal
retirement planning. The coming
millennium promises to hold even more DENNIS J. MCDONNELL AND DON G. POWELL
challenges and opportunities.
To lead us into this new era of
investing, we are proud to announce
that Richard F. Powers III has joined
Van Kampen as President and Chief Executive Officer, and will assume the
additional role of Chairman of Van Kampen in 1999. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. Dick Powers brings 27 years of
experience in the financial services industry, including vast expertise in
product management, strategic planning and brand development. While at Morgan
Stanley Dean Witter, he developed many of the firm's core products and services.
You'll hear more from Dick Powers in the coming months as he becomes
increasingly involved in matters related to your Trust and joins Dennis
McDonnell in addressing shareholders in future reports. (See Don Powell's
farewell to shareholders on page 5.)
ECONOMIC OVERVIEW
After two years of solid gains, the U.S. economy began to lose some of its
luster during the reporting period. No longer immune to the global economic
turmoil, the economy retreated from a 5.5 percent annual growth rate in the
first quarter to a tepid 1.8 percent in the second quarter (as measured by gross
domestic product). By the third quarter, however, growth rebounded to a 3.3
percent annual rate.
A strong dollar was largely responsible for moderating economic growth. As
the Asian financial crisis worsened and spread to other regions, foreign
investors amassed dollar-denominated U.S. Treasury bonds. These purchases sent
the dollar sharply higher, which increased the price of U.S. exports and slashed
the price of imports--resulting in reduced demand for U.S. goods and services
abroad. In light of the reduced demand and global economic problems, corporate
earnings fell, business investment declined, and stock prices plummeted. By the
end of August, the Dow Jones Industrial Average was down 19 percent from its
record high, set in mid-July. Although the stock market has since recovered much
of its losses, consumer confidence has declined and growth in consumer spending
has slowed.
Concerns about further economic deterioration, weakness in the stock market,
and a potential credit crunch prompted the Federal Reserve Board to cut
short-term interest rates
Continued on page 2
1
<PAGE> 3
0.25 percent in late September. It was the first rate cut in almost three years
and was followed by additional cuts of 0.25 percent in October and November.
Despite these rate cuts, the Fed took care to note that inflation was well
contained.
MARKET OVERVIEW
The volatility in overseas markets and U.S. stocks was a boon to bonds.
Foreign investors bought U.S. Treasury bonds in an attempt to escape the global
turmoil, while domestic investors purchased them to avoid further losses in U.S.
stocks. Because these purchases occurred at a time when the supply of new
Treasury issues was declining, Treasury bond prices soared.
The Fed rate cuts propelled bond prices even higher. Following the Fed's
first rate cut, the yield on the 30-year Treasury bond, which moves in the
opposite direction of its price, dropped to a record low of 4.72 percent on
October 5. However, subsequent sales of Treasuries by Asian and institutional
investors dampened the rally. As of October 31, the 30-year Treasury bond had a
5.15 percent yield, down 1 percent from a year ago.
Municipal bond prices followed Treasuries higher, but, as usual, they didn't
gain nearly as much in price. The yield on a typical AAA-rated general
obligation municipal bond fell only 32 basis points to 4.80 percent as of
October 31, from 5.12 percent a year earlier. Earlier in October, municipal bond
yields topped comparable Treasury bond yields, which is a rare event. Municipal
bonds generally yield less than Treasury securities because their interest
payments are exempt from federal and sometimes state and local income taxes.
During the past year, municipal bonds were burdened by an excess of supply
relative to demand. State and local governments, taking advantage of the
market's low interest rates, issued $230.9 billion worth of long-term bonds
during the first 10 months of the year--34 percent more than they had issued
during the same period last year. Approximately 44 percent of the new issues
were refinancings of older, higher-yielding bonds. However, new issuance slowed
recently as the number of bonds eligible for refinancing shrank.
Despite an abundant supply, many investors were reluctant to purchase
municipal bonds because of their generally low yields. Compounding the situation
was the abundance of insured issues, which accounted for almost 60 percent of
the new supply. The dominance of insured bonds reduced the supply of
lower-rated, higher-yielding bonds and narrowed the yield spread between higher-
and lower-rated bonds. (The insurance relates to the timely payment of principal
and interest, when due, on the bonds. The insurance does not protect the bonds
from market risk.)
Portfolio Composition by Credit Quality*
as of October 31, 1998
<TABLE>
<S> <C>
AAA............................... 100%
</TABLE>
*As a percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's.
Continued on page 3
2
<PAGE> 4
TRUST STRATEGY
We used the following strategies to manage the Trust during the period:
We maintained a portfolio consisting exclusively of AAA-rated insured bonds.
AAA-rated bonds generally have performed better than lower-rated securities when
interest rates are falling, which was the case for most of the reporting period.
We limited our new acquisitions because current market yields were lower
than the average yields of bonds in the portfolio. However, some of the Trust's
bonds were called away by issuers who took advantage of lower interest rates to
retire or refinance their outstanding debt. We replaced these bonds with new
long-term securities and extended the call protection of the Trust. Because the
supply of replacement bonds was extremely high during the reporting period,
there were plenty of options from which to choose in selecting new, insured
securities to add to the portfolio. Since the yields of these bonds were lower
than those of the bonds that were replaced, the Trust's income obtained from
coupon payments was somewhat reduced during the reporting period.
In making purchases, we emphasized long-term discount bonds with maturities
near 25 years. In an environment of falling interest rates, these bonds have the
potential to appreciate in value faster than premium bonds because they have a
longer duration, which makes them more sensitive to changing interest rates.
Discount bonds helped offset the declining duration of the portfolio that
occurred as low interest rates caused some of our higher-coupon holdings to be
prerefunded, or priced to call dates. Housing bonds were particularly vulnerable
to prerefunding, because many homeowners sought to refinance mortgages as
interest rates continued to decline.
As of October 31, 1998, the duration of the Trust was 7.21 years, compared
with 7.59 years for the Lehman Brothers Insured Municipal Bond Index. Because of
the longer-term nature of the Trust, the calculation of this index's duration
has been adjusted to eliminate bonds with maturities of five years or less.
Top Five Portfolio Sectors as of October 31, 1998*
Airport........................... 16.0%
Retail Electric/Gas/Telephone..... 14.6%
Single-Family Housing............. 12.5%
Multi-Family Housing.............. 10.1%
Health Care....................... 10.0%
*As a percentage of Long-Term
Investments
PERFORMANCE SUMMARY
For the 12-month period ended October 31, 1998, the Trust generated a total
return of 9.77 percent.(1) This reflects a gain in market price per common share
from $17.25 on October 31, 1997, to $17.75 on October 31, 1998, plus
reinvestment of all dividends. The Trust had a tax-exempt distribution rate of
5.58 percent,(3) based on the closing price of the Trust's common shares.
Because income from the Trust is exempt from federal income taxes, this
distribution rate is equivalent to a yield of 8.72 percent(4) on a taxable
investment (for investors in the federal income tax bracket of 36 percent).
Please refer to the chart on page 8 for additional performance numbers.
Continued on page 4
3
<PAGE> 5
[DISTRIBUTION HISTORY CHART]
Twelve-Month Distribution History
For The Period Ended October 31, 1998
<TABLE>
<CAPTION>
Distribution per Common Share
Dividend Capital
<S> <C> <C>
Nov 1997 ........................... $0.0875 0.0000
Dec 1997 ........................... $0.0825 0.1135
Jan 1998 ........................... $0.0825 0.0000
Feb 1998 ........................... $0.0825 0.0000
Mar 1998 ........................... $0.0825 0.0000
Apr 1998 ........................... $0.0825 0.0000
May 1998 ........................... $0.0825 0.0000
Jun 1998 ........................... $0.0825 0.0000
Jul 1998 ........................... $0.0825 0.0000
Aug 1998 ........................... $0.0825 0.0000
Sep 1998 ........................... $0.0825 0.0000
Oct 1998 ........................... $0.0825 0.0000
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
ECONOMIC OUTLOOK
We believe the economy will continue to grow at a moderate rate for the
remainder of the year, supported by low interest rates. The housing industry has
already benefited from the sharp decline in interest rates, and other sectors
could follow if consumer and business spending picks up.
Looking ahead into next year, we see the potential for stronger economic
growth as long as domestic interest rates remain low and the global financial
crisis stabilizes. We believe the current low inflationary environment in the
United States paves the way for further Fed rate cuts if the economy resumes its
slowdown.
Overseas, we see some promising signs of recovery, including Japan's new
bank reform package, which includes a willingness to let problem banks fail, and
approval of an International Monetary Fund rescue package for Brazil.
We will closely monitor these global and domestic events and their effects
on the performance of the Trust, adjusting the portfolio when appropriate. We
remain committed to the goal of providing a high level of tax-exempt income
while preserving shareholders' capital. Thank you for your continued support and
confidence in Van Kampen and the management of your Trust.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Please see footnotes on page 8
4
<PAGE> 6
A FAREWELL FROM THE CHAIRMAN
------------------------ - ------------------------
Dear Shareholder,
Since I became president and chief executive officer in 1987, much has
changed in our business. However, one thing has remained constant through these
years--my commitment to you, the trust shareholder. Through the many events at
Van Kampen that have marked the passage of time--including several mergers,
company name changes, and leadership changes--we have always focused on
providing superior investments and the highest level of customer service to help
you meet your investment objectives. I'm proud to say that during my tenure, Van
Kampen won eight consecutive awards for high-quality customer service--more
consecutive service awards than any other firm in the financial services
industry.(1) My successor, Dick Powers, shares this commitment to meeting your
needs and providing innovative and efficient ways to help you work with your
investment adviser to reach your financial goals.
Although my official retirement begins on January 1, 1999, I will remain
active in the industry and the community. I plan to continue my service as a
member of the board of directors of the Investment Company Institute, the
leading mutual fund industry association, and I will remain a trustee of your
Trust.
In closing, I want to say farewell to all of you. Thank you for your support
of Van Kampen over the years and for giving me the opportunity to serve you.
Best wishes,
[SIG]
Don G. Powell
------------------------ - ------------------------
(1)American Capital, which merged with Van Kampen in 1995, received the DALBAR
Service Award annually from 1990 to 1994. The award was called the Quality
Tested Service Seal until 1997.
5
<PAGE> 7
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to 1 percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis-point move.
CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly
that the issuer can save money by issuing new bonds at lower rates.
COUPON RATE: The stated rate of interest the bond pays on an annual basis,
expressed as a percentage of the face value.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has
more potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest rate
movements on net asset value. Typically, funds with shorter durations are
expected to perform better in rising rate environments, while funds with
longer durations are expected to perform better when rates decline.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
INSURED BOND: A bond that is insured against default by the bond insurer. If the
issuer defaults, the insurance company will step in and take over payments
of interest and principal when due. Once a bond is insured, it typically
carries the rating of the insurer. Most insurers are rated AAA.
6
<PAGE> 8
MUNICIPAL BOND: A debt security issued by a state, municipality, or other
government entity to finance capital expenditures of public projects, such
as the construction of highways, public works, or school buildings. Interest
on public-purpose municipal bonds is exempt from federal income taxes and,
potentially, from state and local income taxes.
NET ASSET VALUE (NAV): The value of a trust share, calculated by deducting a
trust's liabilities from the total assets applicable to common shareholders
in its portfolio and dividing this amount by the number of common shares
outstanding.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding
municipal bond issue prior to its maturity or call date. The proceeds from
the new bonds are generally invested in U.S. government securities.
Prerefunding typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
PREMIUM BOND: A bond whose market price is above its face value (or "par
value"). Because bonds usually mature at face value, a premium bond has less
potential to appreciate in price than a par bond does.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
ZERO COUPON BONDS: A corporate or municipal bond that is traded at a deep
discount to face value and pays no interest. It may be redeemed at maturity
for full face value.
7
<PAGE> 9
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1998
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
(NYSE TICKER SYMBOL--VIM)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
One-year total return based on market price(1)............ 9.77%
One-year total return based on NAV(2)..................... 9.27%
DISTRIBUTION RATES
Distribution rate as a % of closing stock price(3)........ 5.58%
Taxable-equivalent distribution rate as a % of closing
stock price(4).......................................... 8.72%
SHARE VALUATIONS
Net asset value........................................... $ 17.43
Closing stock price....................................... $17.750
One-year high common stock price (10/08/98)............... $17.875
One-year low common stock price (05/26/98)................ $16.3125
Preferred share (Series A) rate(5)........................ 3.340%
Preferred share (Series B) rate(5)........................ 3.400%
</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.
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 105.0%
ALABAMA 1.2%
$1,000 Birmingham-Carraway, AL Methodist Hlth Sys Ser A
(Connie Lee Insd)............................... 5.875% 08/15/25 $ 1,068,520
2,000 Huntsville, AL Pub Bldg Auth Lease Rev Muni Just
Pub & Safety Cent A (MBIA Insd)................. 5.900 10/01/16 2,174,120
------------
3,242,640
------------
ALASKA 0.2%
485 Alaska St Hsg Fin Corp Coll Mtg Oblig Ser A
Subser A2 (GNMA Collateralized)................. 7.050 06/01/25 518,426
------------
ARIZONA 2.7%
1,500 Arizona Hlth Fac Auth Hosp Sys Rev Phoenix
Baptist Hosp & Med Rfdg (MBIA Insd)............. 6.250 09/01/11 1,662,525
1,000 Maricopa Cnty, AZ Uni Sch Dist No 80 Chandler
Rfdg (MBIA Insd)................................ 4.375 07/01/11 995,140
1,482 Peoria, AZ Indl Dev Auth Multi-Family Rev Sr Hsg
Casa Del Rio A Rfdg (GNMA Collateralized)....... 7.300 02/20/15 1,660,047
2,320 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease Oblig
Irvington Proj Tucson Ser A Rfdg (FSA Insd)..... 7.250 07/15/10 2,595,361
------------
6,913,073
------------
CALIFORNIA 13.3%
6,235 California Hsg Fin Agy Rev Home Mtg Ser B (MBIA
Insd)........................................... 6.100 02/01/28 6,670,889
2,500 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Pacific Gas & Elec Ser B (FSA Insd)............. 6.350 06/01/09 2,769,075
1,000 Emeryville, CA Pub Fin Auth Rev Shellmound Pk
Redev & Hsg Proj B (MBIA Insd).................. 5.000 09/01/19 1,002,010
9,000 Los Angeles Cnty, CA Pension Oblig Ctfs Ltd Muni
Oblig Ser A (MBIA Insd)......................... 6.900 06/30/08 10,985,040
1,155 Paramount, CA Redev Agy Tax Alloc (MBIA Insd)... 6.250 08/01/10 1,289,684
1,000 Roseville, CA Spl Tax Cmnty Fac Dist 1 Northwst
Rfdg (FSA Insd)................................. 4.750 09/01/20 971,470
3,600 Sacramento Cnty, CA Arpt Ser A (MBIA Insd)...... 5.900 07/01/24 3,875,796
1,000 Sacramento, CA City Fin Auth Lease Rev CA EPA
Bldg Ser A (AMBAC Insd) (a)..................... 4.750 05/01/23 966,000
1,000 San Dimas, CA Redev Agy Tax Alloc Creative
Growth A (FSA Insd)............................. 5.000 09/01/16 1,019,190
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
$9,000 San Jose, CA Single Family Mtg Rev Ser A Cap
Apprec (GEMIC Mtg Collateralized)............... * 04/01/16 $ 3,788,100
1,200 Santa Ana, CA Uni Sch Dist Ctfs Partn Energy
Savings Proj (FSA Insd)......................... 5.000% 04/01/18 1,205,652
------------
34,542,906
------------
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 2,478,468
1,855 Greeley, CO Multi-Family Rev Hsg Mtg Creek Stone
(FHA Gtd)....................................... 5.950 07/01/28 1,950,180
------------
4,428,648
------------
FLORIDA 3.5%
1,000 Hillsborough Cnty, FL Aviation Tampa Intl Arpt
Ser A (FGIC Insd)............................... 6.000 10/01/23 1,084,040
1,000 Jacksonville, FL Wtr & Swr Rev United Wtr FL
Proj (AMBAC Insd)............................... 6.350 08/01/25 1,129,870
1,045 Orange Cnty, FL Hsg Fin Auth Single Family Mtg
Rev Ser A (GNMA Collateralized)................. 6.200 10/01/16 1,119,582
2,000 Pasco Cnty, FL Solid Waste Displ & Res Recovery
Sys Rev (AMBAC Insd)............................ 6.000 04/01/11 2,273,760
1,300 Pinellas Cnty, FL Hsg Fin Auth Single Family Mtg
Rev (GNMA Collateralized)....................... 6.000 09/01/18 1,382,238
1,000 Pinellas Cnty, FL Hsg Fin Auth Single Family Mtg
Rev (GNMA Collateralized)....................... 6.100 09/01/29 1,062,950
1,000 Port Orange, FL Wtr & Swr Rev Rfdg (AMBAC Insd)
(a)............................................. 4.900 10/01/11 1,030,470
------------
9,082,910
------------
GEORGIA 1.3%
1,860 George L Smith II GA Wrld Congress Cent Auth Rev
Domed Stadium Proj Rfdg (MBIA Insd) (a)......... 6.000 07/01/10 2,003,685
1,500 George L Smith II GA Wrld Congress Cent Auth Rev
Domed Stadium Proj Rfdg (MBIA Insd) (a)......... 5.500 07/01/20 1,496,310
------------
3,499,995
------------
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 3,772,405
1,450 Hawaii St Dept Budget & Fin Spl Purp Rev
Hawaiian Elec Co & Subsidiaries (MBIA Insd)..... 6.550 12/01/22 1,602,569
------------
5,374,974
------------
ILLINOIS 8.9%
1,500 Chicago, IL Midway Arpt Rev Ser A (MBIA Insd)... 5.125 01/01/35 1,461,360
9,050 Chicago, IL O'Hare Intl Arpt Spl Fac Rev Intl
Terminal (MBIA Insd) (b)........................ 6.750 01/01/18 9,890,383
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$1,905 Chicago, IL Residential Mtg Rev Cap Apprec Ser B
Rfdg (MBIA Insd)................................ * 10/01/09 $ 910,628
3,000 Onterie Cent Hsg Fin Corp IL Mtg Rev Onterie
Cent Proj Ser A Rfdg (MBIA Insd)................ 7.000% 07/01/12 3,224,550
6,150 Onterie Cent Hsg Fin Corp IL Mtg Rev Onterie
Cent Proj Ser A Rfdg (MBIA Insd)................ 7.050 07/01/27 6,599,134
1,000 Southwestern IL Dev Auth Retirement Cmnty Rev
Meridian Village Proj (GNMA Collateralized)..... 5.300 08/20/38 995,800
------------
23,081,855
------------
KANSAS 3.3%
3,500 Burlington, KS Pollutn Ctl Rev KS Gas & Elec Co
Proj Rfdg (MBIA Insd)........................... 7.000 06/01/31 3,823,470
1,125 Harvey Cnty, KS Uni Sch Dist No 373 Newton Impt
& Rfdg (FSA Insd) (a)........................... 5.000 09/01/16 1,142,899
2,000 Kansas St Dev Fin Auth Hlth Fac Rev Stormont
Vail Hlthcare Inc G (MBIA Insd)................. 5.800 11/15/21 2,131,400
1,235 Olathe Labette Cnty, KS Single Family Mtg Rev
Ser A-I Rfdg (GNMA Collateralized).............. 8.100 08/01/23 1,392,907
------------
8,490,676
------------
KENTUCKY 0.9%
1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn
KY Intl Arpt Ser A Rfdg (MBIA Insd)............. 6.100 03/01/07 1,126,040
1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn
KY Intl Arpt Ser A Rfdg (MBIA Insd)............. 6.200 03/01/08 1,137,760
------------
2,263,800
------------
LOUISIANA 2.4%
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 3,487,616
1,000 Louisiana Hsg Fin Agy Mtg Rev Mtg Malta Square
Proj (GNMA Collateralized)...................... 6.450 09/01/27 1,098,360
30 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.600 01/01/04 32,303
460 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.700 01/01/05 496,483
310 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.800 01/01/06 335,147
660 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.850 01/01/09 713,889
------------
6,163,798
------------
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 1,813,003
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MASSACHUSETTS 2.7%
$4,065 Massachusetts Edl Ln Auth Rev Edl Ln Rev Muni
Forwards Issue E Ser A (AMBAC Insd)............. 7.000% 01/01/10 $ 4,377,192
2,600 Massachusetts St Hlth & Edl Fac Auth Rev Harvard
Pilgrim Hlth Ser A.............................. 5.000 07/01/18 2,600,962
------------
6,978,154
------------
MICHIGAN 4.3%
5,510 Detroit, MI Econ Dev Corp Res Recovery Rev Ser A
(FSA Insd) (b).................................. 6.875 05/01/09 5,964,244
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 1,280,480
3,500 Monroe Cnty, MI Pollutn Ctl Rev Coll Detroit
Edison Monroe Ser 1 (MBIA Insd)................. 6.875 09/01/22 3,889,935
------------
11,134,659
------------
MISSISSIPPI 3.5%
1,806 Mississippi Home Corp Single Family Rev Mtg
Access Pgm (GNMA Collateralized)................ 7.100 05/01/23 1,937,332
1,377 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser C (GNMA Collateralized).......... 8.125 12/01/24 1,544,742
1,274 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser D (GNMA Collateralized).......... 8.100 12/01/24 1,433,638
1,163 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser E (GNMA Collateralized).......... 8.100 12/01/25 1,310,422
2,500 Mississippi Hosp Equip & Fac Auth Rev Rush Med
Fndtn Proj (Connie Lee Insd).................... 6.700 01/01/18 2,732,400
------------
8,958,534
------------
MISSOURI 0.9%
1,000 Missouri St Hsg Dev Comm Multi-Family Hsg
Brookstone A (FSA Insd)......................... 6.000 12/01/16 1,059,710
1,095 Missouri St Hsg Dev Comm Multi-Family Hsg Truman
Farm A (FSA Insd)............................... 5.750 10/01/11 1,154,185
------------
2,213,895
------------
NEBRASKA 1.8%
1,305 Nebraska Invt Fin Auth Multi-Family Rev Hsg
Cambury Hills Apts Pgm (FSA Insd)............... 5.700 10/01/12 1,374,583
1,100 Nebraska Invt Fin Auth Multi-Family Rev Hsg
Summit Club Apts Proj (FSA Insd)................ 5.700 10/01/12 1,158,652
1,800 Nebraska Invt Fin Auth Single Family Mtg Rev
(Inverse Fltg) (GNMA Collateralized)............ 9.413 09/15/24 2,027,250
------------
4,560,485
------------
NEVADA 3.8%
9,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser A
(FGIC Insd)..................................... 6.700 06/01/22 9,869,580
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $ 1,112,250
------------
NEW JERSEY 1.4%
2,275 New Jersey St Edl Fac Auth Rev Seton Hall Univ
Proj Rfdg (AMBAC Insd) (a)...................... 5.250 07/01/08 2,406,040
1,250 New Jersey St Edl Fac Auth Rev Seton Hall Univ
Proj Rfdg (AMBAC Insd) (a)...................... 5.250 07/01/09 1,326,537
------------
3,732,577
------------
NEW MEXICO 2.1%
1,900 Albuquerque, NM Arpt Rev Ser A (AMBAC Insd)..... 6.600 07/01/16 2,067,637
2,070 New Mexico Edl Assistance Fndtn Student Ln Rev
Ser A (AMBAC Insd).............................. 6.850 04/01/05 2,263,566
1,000 New Mexico Mtg Fin Auth Single Family Mtg Pgm A2
(GNMA Collateralized)........................... 6.050 07/01/16 1,064,630
------------
5,395,833
------------
NEW YORK 5.2%
2,115 Long Island Pwr Auth NY Elec Sys Rev Genl (MBIA
Insd) (a)....................................... 4.250 04/01/08 2,110,876
1,875 Long Island Pwr Auth NY Elec Sys Rev Genl (MBIA
Insd) (a)....................................... 5.000 04/01/08 1,979,438
3,855 Metropolitan Tran Auth NY Commuter Fac Rev Ser A
(MBIA Insd)..................................... 5.625 07/01/27 4,126,353
5,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd)................ 5.750 12/01/25 5,302,750
------------
13,519,417
------------
OHIO 1.5%
2,000 Cuyahoga Cnty, OH Util Sys Rev Impt Med Ctr Co
Proj (AMBAC Insd)............................... 5.125 02/15/28 1,990,820
1,745 Ohio Hsg Fin Agy Mtg Rev Residential Ser A1
(GNMA Collateralized)........................... 6.150 03/01/29 1,870,396
------------
3,861,216
------------
PENNSYLVANIA 7.1%
7,500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser A (FSA Insd) (b)....................... 6.800 01/01/10 8,185,200
4,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser B (FSA Insd)........................... 6.625 01/01/22 4,356,760
2,000 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh
Mercy Hlth Sys Inc (AMBAC Insd)................. 5.625 08/15/26 2,212,660
1,330 Allegheny Cnty, PA Residential Fin Auth Mtg Rev
Single Family (GNMA Collateralized)............. 7.100 05/01/24 1,415,080
1,950 Sayre, PA Hlthcare Fac Auth Rev Hosp VHA PA/VHA
East Fin Pgm B (AMBAC Insd)..................... 6.375 07/01/22 2,137,727
------------
18,307,427
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RHODE ISLAND 0.7%
$ 1,500 Rhode Island Port Auth & Econ Dev Corp Arpt Rev
Ser A (FSA Insd)................................ 7.000% 07/01/14 $ 1,868,940
------------
SOUTH CAROLINA 3.8%
4,575 South Carolina St Port Auth Port Rev (AMBAC
Insd)........................................... 6.750 07/01/21 4,960,352
4,575 South Carolina St Port Auth Port Rev Rfdg
(Escrowed to Maturity) (AMBAC Insd)............. 6.750 07/01/21 4,992,377
------------
9,952,729
------------
SOUTH DAKOTA 0.4%
1,000 South Dakota St Hlth & Edl Fac Auth Vocational
Ed Pgm Ser A (AMBAC Insd)....................... 5.400 08/01/13 1,076,970
------------
TENNESSEE 0.5%
1,085 Memphis-Shelby Cnty, TN Arpt Rev Ser A Rfdg
(MBIA Insd)..................................... 6.250 02/15/10 1,252,090
------------
TEXAS 13.0%
1,085 Brazos River Auth TX Johnson Cnty Surface (AMBAC
Insd)........................................... 5.800 09/01/11 1,172,668
5,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj A (AMBAC Insd)................ 6.750 04/01/22 5,491,250
5,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj B (FGIC Insd)................. 6.625 06/01/22 5,490,100
1,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj C (FGIC Insd)................. 6.700 10/01/22 1,107,390
2,305 Harris Cnty, TX Hsg Fin Corp Multi-Family Hsg
Rev Cypress Ridge Apts (FSA Insd)............... 6.350 06/01/26 2,549,768
4,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FGIC
Insd)........................................... 6.750 07/01/21 4,336,920
5,000 Houston, TX Arpt Sys Rev Sub Lien Ser B (FGIC
Insd) (a)....................................... 5.000 07/01/25 4,838,750
1,800 Midland, TX Ctfs Oblig Arpt Sub Lien (FSA
Insd)........................................... 5.850 03/01/13 1,976,796
4,145 Texas St Veterans Hsg Assistance (MBIA Insd).... 6.800 12/01/23 4,488,123
2,000 Tyler, TX Hlth Fac Dev Corp Hosp Rev Mother
Frances Hosp of Tyler (FGIC Insd)............... 6.500 07/01/22 2,197,380
------------
33,649,145
------------
VIRGINIA 1.0%
1,495 Harrisonburg, VA Redev & Hsg Auth Multi-Family
Hsg Rev (FSA Insd).............................. 6.200 04/01/17 1,596,645
1,000 Russell Cnty, VA Indl Dev Auth Pollutn Ctl Rev
Appalachian Pwr Co Proj Ser H (MBIA Insd)....... 5.000 11/01/21 988,550
------------
2,585,195
------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
<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 Second Ser D (AMBAC Insd)........ 6.000% 01/01/13 $ 2,454,120
1,770 Grant Cnty, WA Pub Util Dist No 002 Wanapum
Hydro Elec Rev Second Ser D (AMBAC Insd)........ 6.250 01/01/17 1,942,929
1,855 Grant Cnty, WA Pub Util Dist No 2 Priest Rapids
Hydro Elec Rev Second Ser D (AMBAC Insd)........ 6.000 01/01/13 2,036,864
1,460 Grant Cnty, WA Pub Util Dist No 2 Priest Rapids
Hydro Elec Rev Second Ser D (AMBAC Insd)........ 6.250 01/01/17 1,602,642
------------
8,036,555
------------
WISCONSIN 3.3%
5,000 Wisconsin St Hlth & Edl Fac Auth Rev Children's
Hosp (FGIC Insd)................................ 5.000 08/15/10 5,134,250
3,500 Wisconsin St Hlth & Edl Fac Auth Rev Marquette
Univ (MBIA Insd) (a)............................ 4.750 06/01/23 3,331,650
------------
8,465,900
------------
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 5,950,900
------------
TOTAL LONG-TERM INVESTMENTS 105.0%
(Cost $248,995,965)........................................................ 271,899,155
SHORT-TERM INVESTMENTS 0.9%
(Cost $2,400,000).......................................................... 2,400,000
------------
TOTAL INVESTMENTS 105.9%
(Cost $251,395,965)........................................................ 274,299,155
LIABILITIES IN EXCESS OF OTHER ASSETS (5.9%)................................ (15,184,966)
------------
NET ASSETS 100.0%........................................................... $259,114,189
============
</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
15
<PAGE> 17
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $251,395,965)....................... $274,299,155
Cash........................................................ 62,457
Receivables:
Investments Sold.......................................... 5,516,426
Interest.................................................. 4,521,780
Other....................................................... 2,084
------------
Total Assets.......................................... 284,401,902
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 24,688,049
Income Distributions -- Preferred Shares.................. 166,487
Investment Advisory Fee................................... 132,476
Administrative Fee........................................ 44,159
Affiliates................................................ 14,275
Accrued Expenses............................................ 150,552
Trustees' Deferred Compensation and Retirement Plans........ 91,715
------------
Total Liabilities..................................... 25,287,713
------------
NET ASSETS.................................................. $259,114,189
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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, 9,701,930 shares issued and
outstanding).............................................. 97,019
Paid in Surplus............................................. 143,050,223
Net Unrealized Appreciation................................. 22,903,190
Accumulated Net Realized Gain............................... 2,092,150
Accumulated Undistributed Net Investment Income............. 971,607
------------
Net Assets Applicable to Common Shares................ 169,114,189
------------
NET ASSETS.................................................. $259,114,189
============
NET ASSET VALUE PER COMMON SHARE ($169,114,189 divided
by 9,701,930 shares outstanding).......................... $ 17.43
============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $14,963,914
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,537,735
Administrative Fee.......................................... 512,578
Preferred Share Maintenance................................. 257,873
Trustees' Fees and Expenses................................. 26,865
Legal....................................................... 17,328
Custody..................................................... 17,136
Other....................................................... 224,210
-----------
Total Expenses.......................................... 2,593,725
-----------
NET INVESTMENT INCOME....................................... $12,370,189
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 2,071,361
Futures................................................... 20,783
-----------
Net Realized Gain........................................... 2,092,144
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 19,242,946
End of the Period:
Investments............................................. 22,903,190
-----------
Net Unrealized Appreciation During the Period............... 3,660,244
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 5,752,388
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $18,122,577
===========
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1998 October 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 12,370,189 $ 12,529,001
Net Realized Gain....................................... 2,092,144 1,417,016
Net Unrealized Appreciation During the Period........... 3,660,244 4,177,741
------------ ------------
Change in Net Assets from Operations.................... 18,122,577 18,123,758
------------ ------------
Distributions from Net Investment Income:
Common Shares......................................... (9,636,410) (10,134,229)
Preferred Shares...................................... (2,973,522) (2,828,542)
------------ ------------
(12,609,932) (12,962,771)
------------ ------------
Distributions from Net Realized Gain:
Common Shares......................................... (1,098,187) (1,551,225)
Preferred Shares...................................... (318,829) (519,894)
------------ ------------
(1,417,016) (2,071,119)
------------ ------------
Total Distributions..................................... (14,026,948) (15,033,890)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 4,095,629 3,089,868
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment........................................ 566,879 341,130
------------ ------------
TOTAL INCREASE IN NET ASSETS............................ 4,662,508 3,430,998
NET ASSETS:
Beginning of the Period................................. 254,451,681 251,020,683
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $971,607 and $1,211,350
respectively)......................................... $259,114,189 $254,451,681
============ ============
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
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
1998 1997 1996 1995 1994 1993 October 31, 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period (a)................ $17.008 $16.688 $16.693 $14.883 $18.213 $15.278 $14.737
------- ------- ------- ------- ------- ------- -------
Net Investment Income......... 1.276 1.297 1.323 1.340 1.351 1.365 .924
Net Realized and Unrealized
Gain/Loss................... .594 .581 .054 1.883 (3.150) 2.949 .340
------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations.................... 1.870 1.878 1.377 3.223 (1.799) 4.314 1.264
------- ------- ------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders.............. .995 1.050 1.050 1.050 1.050 .970 .525
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.... .306 .293 .332 .363 .301 .293 .198
Distributions from Net
Realized Gain:
Paid to Common
Shareholders.............. .113 .161 -0- -0- .146 .086 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.... .033 .054 -0- -0- .034 .030 -0-
------- ------- ------- ------- ------- ------- -------
Total Distributions............ 1.447 1.558 1.382 1.413 1.531 1.379 .723
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period........................ $17.431 $17.008 $16.688 $16.693 $14.883 $18.213 $15.278
======= ======= ======= ======= ======= ======= =======
Market Price Per Share at End
of the Period................. $17.750 $17.250 $16.125 $15.750 $13.500 $17.250 $14.500
Total Investment Return at
Market Price (b).............. 9.77% 15.04% 9.19% 24.96% (15.57%) 26.98% .09%*
Total Return at Net Asset
Value (c)..................... 9.27% 9.58% 6.53% 19.80% (12.20%) 26.75% 5.33%*
Net Assets at End of the Period
(In millions)................. $ 259.1 $ 254.5 $ 251.0 $ 250.6 $ 233.2 $ 265.2 $ 237.0
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares**............... 1.56% 1.57% 1.60% 1.63% 1.57% 1.54% 1.51%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common
Shares (d).................... 5.65% 6.05% 5.99% 6.16% 6.33% 6.29% 6.08%
Portfolio Turnover............. 66% 36% 35% 28% 26% 38% 90%*
* Non-Annualized
** Ratio of Expenses to Average
Net Assets Including
Preferred Shares............ 1.01% 1.01% 1.02% 1.03% 1.01% .99% 1.01%
</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.
See Notes to Financial Statements
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Trust for Insured Municipals, formerly known as 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.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
D. 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, 1998, for federal income tax purposes, the cost of long- and
short-term investments is $251,395,965; the aggregate gross unrealized
appreciation is $22,928,811 and the aggregate gross unrealized depreciation is
$25,621 resulting in net unrealized appreciation on long- and short-term
investments of $22,903,190.
E. 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, 1998, 100% of the income distributions made
by the Trust were exempt from federal income taxes. Additionally, during the
period, the Trust designated and paid a 28% rate capital gain distribution of
$741,324 and a 20% rate capital gain distribution of $301,102. In January, 1999,
the Trust will provide tax information to shareholders for the 1998 calendar
year.
F. 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
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 Van Kampen Funds Inc. or its affiliates (collectively "Van
Kampen"), 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 reporting responsibilities with respect
to the Trust's portfolio and preferred shares and providing certain services to
shareholders.
For the year ended October 31, 1998, the Trust recognized expenses of
approximately $6,200 representing legal services provided by Skadden, Arps,
Slate,
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
For the year ended October 31, 1998, the Trust recognized expenses of
approximately $94,500 representing Van Kampen's cost of providing accounting and
legal services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. 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 per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At October 31, 1998 and October 31, 1997, paid in surplus related to common
shares aggregated $143,050,223 and $142,483,673, respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997
- ------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares....................... 9,668,986 9,648,688
Shares Issued Through Dividend
Reinvestment......................... 32,944 20,298
--------- ---------
Ending Shares.......................... 9,701,930 9,668,986
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $181,239,334 and $173,307,631,
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.
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
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising an
option contract or taking delivery of a security underlying a futures contract.
In this instance, the recognition of gain or loss is postponed until the
disposal of the security underlying the option or futures contract.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. 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).
Transactions in futures contracts, each with a par value of $100,000, for
the year ended October 31, 1998, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1997........................... -0-
Futures Opened............................................ 550
Futures Closed............................................ (550)
----
Outstanding at October 31, 1998........................... -0-
----
</TABLE>
B. 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.
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
- --------------------------------------------------------------------------------
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, 1998, was
3.370%. During the year ended October 31, 1998, the rates ranged from 3.0000% to
5.3900%.
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 DISTRIBUTION
On December 3, 1998, the Trust declared a capital gain of $.1639 per common
share, of which $.0836 is long-term and $.08030 is short-term, to common
shareholders of record on December 15, 1998. The gain will be payable on
December 31, 1998.
8. YEAR 2000 COMPLIANCE (UNAUDITED)
Van Kampen utilizes a number of computer programs across its entire operation
relying on both internal software systems as well as external software systems
provided by third parties. In 1996, Van Kampen initiated a CountDown 2000
Project to review both the internal systems and external vendor connections. The
goal of this project is to position its business to continue unaffected as a
result of the century change. At this time, there can be no assurance that the
steps taken will be sufficient to avoid any adverse impact to the Trust but Van
Kampen does not anticipate that the move to Year 2000 will have a material
impact on its ability to continue to provide the Trust with service at current
levels. In addition, it is possible that the securities markets in which the
Trust invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues.
24
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Trust for Insured Municipals:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Trust for Insured Municipals (the "Trust"), including the portfolio of
investments, as of October 31, 1998, 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, 1998, 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 Trust for Insured Municipals as of October 31, 1998, 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 1, 1998
25
<PAGE> 27
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 Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
26
<PAGE> 28
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our web site at
WWW.VANKAMPEN.COM -- to view a prospectus, select Download Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
- - e-mail us by visiting
WWW.VANKAMPEN.COM and selecting Contact Us
27
<PAGE> 29
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer
and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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 Funds Inc., 1998 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
28
<PAGE> 30
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on July 28, 1998,
where shareholders voted on the election of trustees and the selection of
independent public accountants.
1) With regard to the election of the following trustees by the preferred
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
-------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------
<S> <C> <C>
Theodore A. Myers................................... 1,545 2
</TABLE>
2) With regard to the election of the following trustees by the common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- -----------------------------------------------------------------------
<S> <C> <C>
Don G. Powell..................................... 8,532,846 92,667
Hugo F. Sonnenschein.............................. 8,534,846 90,667
</TABLE>
The other trustees of the Trust whose terms did not expire in 1998 are: David C.
Arch, Rod Dammeyer, Howard J Kerr, Dennis J. McDonnell, Steven Muller and Wayne
W. Whalen.
3) With regard to the ratification of KPMG Peat Marwick LLP as independent
public accountants for the Trust, 8,450,928 shares voted in favor of the
proposal, 49,573 shares voted against and 126,560 shares abstained.
29
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> VK TRUST FOR INSURED MUNI'S
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 251,395,965
<INVESTMENTS-AT-VALUE> 274,299,155
<RECEIVABLES> 10,038,206
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 64,541
<TOTAL-ASSETS> 284,401,902
<PAYABLE-FOR-SECURITIES> 24,688,049
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 599,664
<TOTAL-LIABILITIES> 25,287,713
<SENIOR-EQUITY> 90,000,000
<PAID-IN-CAPITAL-COMMON> 143,147,242
<SHARES-COMMON-STOCK> 9,701,930
<SHARES-COMMON-PRIOR> 9,668,986
<ACCUMULATED-NII-CURRENT> 971,607
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,092,150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,903,190
<NET-ASSETS> 259,114,189
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,963,914
<OTHER-INCOME> 0
<EXPENSES-NET> (2,593,725)
<NET-INVESTMENT-INCOME> 12,370,189
<REALIZED-GAINS-CURRENT> 2,092,144
<APPREC-INCREASE-CURRENT> 3,660,244
<NET-CHANGE-FROM-OPS> 18,122,577
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,609,932)
<DISTRIBUTIONS-OF-GAINS> (1,417,016)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 32,944
<NET-CHANGE-IN-ASSETS> 4,662,508
<ACCUMULATED-NII-PRIOR> 1,211,350
<ACCUMULATED-GAINS-PRIOR> 1,417,022
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,537,735
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,593,725
<AVERAGE-NET-ASSETS> 166,338,298
<PER-SHARE-NAV-BEGIN> 17.008
<PER-SHARE-NII> 1.276
<PER-SHARE-GAIN-APPREC> 0.594
<PER-SHARE-DIVIDEND> (1.301)
<PER-SHARE-DISTRIBUTIONS> (0.146)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.431
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
