<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Glossary of Terms................................ 5
Performance Results.............................. 7
Portfolio of Investments......................... 8
Statement of Assets and Liabilities.............. 14
Statement of Operations.......................... 15
Statement of Changes in Net Assets............... 16
Financial Highlights............................. 17
Notes to Financial Statements.................... 18
Dividend Reinvestment Plan....................... 23
</TABLE>
VIM SAR 6/98
<PAGE> 2
LETTER TO SHAREHOLDERS
May 22, 1998
Dear Shareholder,
The Taxpayer Relief Act of 1997,
signed into law by President Clinton
last year, was created to fill the need
for a broad variety of tax-advantaged
investments to promote asset growth. We [PHOTO]
are pleased that you selected our Trust
as a vehicle to provide the potential
for tax-free income within your
investment portfolio. As you are aware,
dividends distributed by the Trust are DENNIS J. MCDONNELL AND DON G. POWELL
generally free from federal income
taxes, and often from state and local
taxes as well. At Van Kampen American Capital, we strive not only for a high
level of current income, but total return performance as well.
ECONOMIC OVERVIEW
After nearly seven years of continuous growth, the economy remained buoyant
with few signs of accelerating inflation. Wholesale prices in the first quarter
plummeted at an annual rate of 4.2 percent, while consumer prices inched up 0.2
percent and employment costs rose just 0.7 percent. However, inflationary
pressures were eased by factors such as lower oil prices, increasing
productivity, and a pending budget surplus. The Asian financial crisis led to a
stronger dollar and a decline in the prices of Asian imports, which in turn has
discouraged price increases on competing U.S. goods.
To date, Asia's slowdown has had a modest impact on U.S. economic growth. In
the first quarter, the U.S. economy grew at a 4.2 percent annual rate, its
fastest pace in the past year. Strong consumer spending and inventory buildup by
manufacturers offset a decrease in exports to Asia. Despite the economy's
strength, the Federal Reserve Board refrained from raising interest rates, given
the lack of domestic inflationary pressure and concerns about Asia's economic
future.
MARKET OVERVIEW
Against the backdrop of benign inflation and no action by the Fed, U.S. bond
prices rose during the past six months, although they ended the reporting period
below the highs reached in early January.
The yield of the 30-year Treasury bond, which moves in the opposite
direction of its price, fell from 6.15 percent on October 31 to 5.95 percent on
April 30. Bond prices hit a record high as yields reached 5.69 percent in early
January amidst expectations that the Fed would cut interest rates, but the yield
went back to 6.00 percent in early March after the Fed chose not to act. Yields
were volatile for the rest of the reporting period, as
Continued on page two
1
<PAGE> 3
foreign investors sold U.S. Treasury holdings and investors began to fear that
the Fed was leaning toward a rate hike.
Municipal bond yields generally moved in unison with Treasuries but did not
gain nearly as much in price. By the end of the reporting period, the average
yield of AAA-rated, 30-year generic general obligation bonds was 5.14 percent,
two basis points above the yield posted on October 31 of last year. The
underperformance of municipal bonds can be attributed in part to heavy supply
that outpaced demand. Supply increased as state and local governments took
advantage of low interest rates by issuing bonds to refinance outstanding issues
with higher interest rates, as well as to fund new projects. In the first
quarter, long-term municipal issuance totaled $71 billion, up from $40 billion a
year earlier.
More than half of the new issue volume was AAA-rated and insured, which
significantly diminished the amount of uninsured, higher-yielding securities
available in the marketplace. The dominance of insured volume and the high
demand for uninsured paper created an imbalance that compressed the yields
between higher-quality and lower-quality bonds.
Portfolio Composition by Credit Quality
as of April 30, 1998*
AAA................................ 100%
* As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings issued by
Standard & Poor's or Moody's.
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.
These high-quality 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 the number of new acquisitions because current
market yields were lower than the average yields of bonds in the portfolio.
However, some of the Trust's long-term bonds were called away by issuers taking
advantage of lower interest rates, and others were prerefunded. We replaced
these bonds with new long-term securities and extended the call protection of
the Trust. We had little trouble finding replacement bonds because there was a
substantial supply of new, insured securities from which to choose.
Our acquisitions emphasized bonds with maturities near 25 years, especially
those securities from high-tax states such as California and New York. The fund
also holds an issue from Puerto Rico, whose bonds are exempt from federal,
state, and local income taxes for most nonresidents. These so-called "specialty
state" bonds tend to benefit from strong demand because of their relatively high
after-tax yields. They can be traded easily and have a strong potential to
appreciate in value. Although these bonds may yield slightly less than other
securities, they are likely to provide higher total return. The addition of
several specialty state bonds also broadened the geographic diversification of
the portfolio.
Continued on page three
2
<PAGE> 4
Most of our purchases were discount securities. In a falling interest rate
environment, these securities have the potential to appreciate in value faster
than premium bonds as they move closer to maturity. They also tend to 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 the low interest rate environment caused more securities to be
priced to call dates rather than maturity. As of April 30, the duration of the
Trust was 7.17 years compared with 7.58 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 APRIL 30, 1998*
Airport........................... 15.4%
Single-Family Housing............. 13.6%
Retail Electric/Gas/Telephone..... 12.7%
Health Care....................... 11.9%
Multi-Family Housing.............. 10.6%
*As a percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the six-month period ended April 30, 1998, the Trust generated a total
return of (0.10) percent(1). This reflects a decrease in market price per common
share from $17.250 on October 31, 1997, to $16.625 on April 30, 1998, plus
reinvestment of all dividends. The Trust had a tax-exempt distribution rate of
5.95 percent(3), based on the closing price of its common shares. Because income
from the Trust is exempt from federal income taxes, this distribution rate is
equivalent to a yield of 9.30 percent(4) on a taxable investment for investors
in the 36 percent federal income tax bracket.
As a result of a decrease in Trust earnings, the Board of Trustees approved
a decrease in its monthly dividend from $0.0875 to $0.08250 per common share,
first payable December 31, 1997. The Trust declared a capital gains distribution
of $0.1135 per share, first payable December 31, 1997, as a result of the sale
of some assets that had appreciated in value. Please refer to the chart on page
seven for additional performance numbers.
Continued on page four
3
<PAGE> 5
[DISTRIBUTION HISTORY GRAPH]
Six-month Distribution History
For the Period Ended April 30, 1998
<TABLE>
<CAPTION>
Distribution per Common Share
<S> <C>
Nov 1997............................... $.0875
Dec 1997............................... $.1960
Jan 1998............................... $.0825
Feb 1998............................... $.0825
Mar 1998............................... $.0825
Apr 1998............................... $.0825
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
ECONOMIC OUTLOOK
We expect the economy to slow from its brisk first-quarter pace, although
the extent of the slowdown depends on the continued effects of Asia's crisis and
on Fed policy. We believe the Fed is biased toward raising rates, given concerns
about the economy's increasing strength. If economic strength ignites
inflationary pressures, then we believe the Fed would raise interest rates later
this year. As a result, the yield of the 30-year Treasury bond could top 6.25
percent.
We will continue to track market developments and their effects on the
Trust. When appropriate, we will make adjustments to the portfolio. As we
mentioned earlier, our goal remains a high level of current income for the
investor. Thank you for your continued support and confidence in Van Kampen
American Capital and the management of your Trust.
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 seven
4
<PAGE> 6
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to one 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 call dates before
maturity. Call dates and prices are set when the bond is issued. To compensate
the bond holder for loss of income and ownership, the 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.
A callable bond is "priced to call" when it is selling at a premium, because it
is assumed that the issuer will redeem the bond at its call date, rather than at
maturity.
COUPON RATE: The stated rate of interest a bond pays until maturity, expressed
as a percentage of its face value.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investor Services are two
companies that assign bond ratings. Standard & Poor's ratings range from a high
of AAA to a low of D; Moody's ratings range from a high of Aaa to a low of D.
CREDIT SPREAD: The difference in yield between higher-quality issues and
lower-quality issues. Normally, lower-quality issues provide higher yields than
higher-quality issues in order to compensate investors for the additional credit
risk.
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.
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
one-percent change in the price of the bond for every one-percent change in
interest rates. The longer a fund's duration, the greater the effect of interest
rate movements on net asset value. Typically, funds with shorter durations have
performed better in rising rate environments, while funds with longer durations
have performed better when rates decline.
FEDERAL RESERVE BOARD (THE FED): A group that meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.
GENERAL OBLIGATION BONDS: Bonds backed by the full faith and credit (taxing
authority) of the issuer for timely payment of interest and principal. These
bonds are issued to finance essential government projects, such as highways and
schools.
INFLATION: An economic situation in which money supply and business activity
5
<PAGE> 7
dramatically increase, accompanied by sharply rising 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 municipal bond
insurer. If the issuer defaults, the insurance company will step in and take
over payments of interest and principal. As a result of this protection against
credit risk, most municipal bonds are AAA-rated. Insurance on the bonds does not
relate to mutual fund shares, which will fluctuate in price.
INVESTMENT GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investor Services. Bonds rated below BBB or Baa are
noninvestment grade.
MARKET PRICE: The price of a share of a closed-end fund trading on a stock
exchange. When the price is less than a fund's NAV, the fund is trading at a
discount. When the price is more than the NAV, the fund is trading at a premium.
MUNICIPAL BOND: A debt security issued by a state, municipality, or other
governmental entity to finance capital expenditures such as the construction of
highways or public works.
NET ASSET VALUE (NAV): The value of a fund share, calculated by deducting a
fund's liabilities from its total assets and dividing this amount by the number
of shares outstanding.
PREREFUNDING: A process whereby new bonds are issued to refinance an outstanding
bond issue. This 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.
YIELD SPREAD: The difference between the yields of distinct bonds, due to
variant credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the
lower-quality bond. When yield spreads between bonds of different maturities are
narrow, there is less incentive to own the bond with the longer maturity. In
both cases, the investor is not being compensated for the additional risk.
ZERO COUPON BONDS: A corporate or municipal debt security that trades at a deep
discount to face value and pays no interest. It may be redeemed at maturity for
full face value.
6
<PAGE> 8
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1998
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
(NYSE TICKER SYMBOL--VIM)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
Six-month total return based on market price(1)........... (0.10%)
Six-month total return based on NAV(2).................... 2.72%
DISTRIBUTION RATES
Distribution rate as a % of closing stock price(3)........ 5.95%
Taxable-equivalent distribution rate as a % of closing
stock price(4).......................................... 9.30%
SHARE VALUATIONS
Net asset value........................................... $ 16.86
Closing stock price....................................... $16.625
Six-month high common stock price (11/14/97).............. $17.5625
Six-month low common stock price (04/29/98)............... $16.375
Preferred share (Series A) rate(5)........................ 3.600%
Preferred share (Series B) rate(5)........................ 3.830%
</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.
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 102.1%
ALABAMA 1.3%
$1,000 Birmingham-Carraway, AL Methodist Hlth Sys Ser A
(Connie Lee Insd)............................... 5.875% 08/15/25 $ 1,043,910
2,000 Huntsville, AL Pub Bldg Auth Lease Rev Muni Just
Pub & Safety Cent A (MBIA Insd)................. 5.900 10/01/16 2,119,620
------------
3,163,530
------------
ALASKA 2.2%
5,000 Alaska Indl Dev & Expt Auth Revolving Fund Ser A
Rfdg (MBIA Insd) (a)............................ 5.250 04/01/23 4,805,100
625 Alaska St Hsg Fin Corp Coll Mtg Oblig Ser A
Subser A2 (GNMA Collateralized)................. 7.050 06/01/25 666,206
------------
5,471,306
------------
ARIZONA 2.3%
1,500 Arizona Hlth Fac Auth Hosp Sys Rev Phoenix
Baptist Hosp & Med Rfdg (MBIA Insd)............. 6.250 09/01/11 1,650,000
1,501 Peoria, AZ Indl Dev Auth Multi-Family Rev Sr Hsg
Casa Del Rio A Rfdg (GNMA Collateralized)....... 7.300 02/20/15 1,668,707
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 2,574,597
------------
5,893,304
------------
CALIFORNIA 14.4%
6,235 California Hsg Fin Agy Rev Home Mtg Ser B (MBIA
Insd)........................................... 6.100 02/01/28 6,560,903
2,500 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Pacific Gas & Elec Ser B (FSA Insd)............. 6.350 06/01/09 2,697,050
1,000 Colton, CA Pub Fin Auth Rev Tax Alloc Ser A
(MBIA Insd)..................................... 5.000 08/01/18 972,620
9,000 Los Angeles Cnty, CA Pension Oblig Ctfs Ltd Muni
Oblig Ser A (MBIA Insd) (b)..................... 6.900 06/30/08 10,608,210
7,500 Mount Diablo, CA Hosp Dist Rev Ser A (Embedded
Cap) (AMBAC Insd)............................... 5.125 12/01/23 7,224,225
1,155 Paramount, CA Redev Agy Tax Alloc (MBIA Insd)... 6.250 08/01/10 1,257,726
3,600 Sacramento Cnty, CA Arpt Ser A (MBIA Insd)...... 5.900 07/01/24 3,764,952
9,000 San Jose, CA Single Family Mtg Rev Ser A Cap
Apprec (GEMIC Mtg Collateralized)............... * 04/01/16 3,466,980
------------
36,552,666
------------
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 2,429,421
1,855 Greeley, CO Multi-Family Rev AMT Hsg Mtg Creek
Stone (FHA Gtd)................................. 5.950 07/01/28 1,910,966
------------
4,340,387
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<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 $ 1,057,080
1,000 Jacksonville, FL Wtr & Swr Rev United Wtr FL
Proj (AMBAC Insd)............................... 6.350 08/01/25 1,081,800
1,065 Orange Cnty, FL Hsg Fin Auth Single Family Mtg
Rev Ser A (GNMA Collateralized)................. 6.200 10/01/16 1,123,852
2,000 Pasco Cnty, FL Solid Waste Displ & Res Recovery
Sys Rev (AMBAC Insd)............................ 6.000 04/01/11 2,187,560
1,300 Pinellas Cnty, FL Hsg Fin Auth Single Family Mtg
Rev (GNMA Collateralized)....................... 6.000 09/01/18 1,358,903
1,000 Pinellas Cnty, FL Hsg Fin Auth Single Family Mtg
Rev (GNMA Collateralized)....................... 6.100 09/01/29 1,045,080
------------
7,854,275
------------
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 1,935,572
1,500 George L Smith II GA Wrld Congress Cent Auth Rev
Domed Stadium Proj Rfdg (MBIA Insd) (a)......... 5.500 07/01/20 1,451,055
------------
3,386,627
------------
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 3,773,770
1,450 Hawaii St Dept Budget & Fin Spl Purp Rev
Hawaiian Elec Co (MBIA Insd).................... 6.550 12/01/22 1,575,976
------------
5,349,746
------------
ILLINOIS 8.1%
9,050 Chicago, IL O'Hare Intl Arpt Spl Fac Rev Intl
Terminal (MBIA Insd)............................ 6.750 01/01/18 9,779,068
2,295 Chicago, IL Residential Mtg Rev Cap Apprec Ser B
Rfdg (MBIA Insd)................................ * 10/01/09 1,047,805
3,000 Onterie Cent Hsg Fin Corp IL Mtg Rev Onterie
Cent Proj Ser A Rfdg (MBIA Insd)................ 7.000 07/01/12 3,191,220
6,150 Onterie Cent Hsg Fin Corp IL Mtg Rev Onterie
Cent Proj Ser A Rfdg (MBIA Insd)................ 7.050 07/01/27 6,546,183
------------
20,564,276
------------
IOWA 0.4%
1,000 Des Moines, IA Aviation Sys Rev Ser B (FSA Insd)
(a)............................................. 5.125 07/01/28 950,650
------------
KANSAS 3.1%
3,500 Burlington, KS Pollutn Ctl Rev KS Gas & Elec Co
Proj Rfdg (MBIA Insd)........................... 7.000 06/01/31 3,796,590
2,000 Kansas St Dev Fin Auth Hlth Fac Rev Stormont
Vail Hlthcare Inc G (MBIA Insd)................. 5.800 11/15/21 2,079,060
1,705 Olathe Labette Cnty, KS Single Family Mtg Rev
Coll Ser A-I Rfdg (GNMA Collateralized)......... 8.100 08/01/23 1,907,281
------------
7,782,931
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $ 1,094,150
1,000 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn
KY Intl Arpt Ser A Rfdg (MBIA Insd)............. 6.200 03/01/08 1,107,010
------------
2,201,160
------------
LOUISIANA 2.7%
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 3,429,685
1,000 Louisiana Hsg Fin Agy Mtg Rev Coll Mtg Malta
Square Proj (GNMA Collateralized)............... 6.450 09/01/27 1,064,790
600 Louisiana Pub Fac Auth Rev Dillard Univ Proj
Rfdg (AMBAC Insd)............................... 5.000 02/01/28 569,712
35 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.600 01/01/04 37,204
530 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.700 01/01/05 564,906
355 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.800 01/01/06 379,183
750 Louisiana Pub Fac Auth Rev Student Ln LA
Opportunity Ln A (FSA Insd)..................... 6.850 01/01/09 801,705
------------
6,847,185
------------
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 1,796,454
------------
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 4,490,203
------------
MICHIGAN 4.3%
5,510 Detroit, MI Econ Dev Corp Res Recovery Rev Ser A
(FSA Insd)...................................... 6.875 05/01/09 5,926,556
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 1,235,310
3,500 Monroe Cnty, MI Pollutn Ctl Rev Coll Detroit
Edison Monroe Ser 1 (MBIA Insd)................. 6.875 09/01/22 3,833,620
------------
10,995,486
------------
MISSISSIPPI 3.8%
2,036 Mississippi Home Corp Single Family Rev Mtg
Access Pgm (GNMA Collateralized)................ 7.100 05/01/23 2,176,979
1,537 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser C (GNMA Collateralized).......... 8.125 12/01/24 1,712,240
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MISSISSIPPI (CONTINUED)
$1,399 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser D (GNMA Collateralized).......... 8.100% 12/01/24 $ 1,561,855
1,243 Mississippi Home Corp Single Family Rev Mtg
Access Pgm Ser E (GNMA Collateralized).......... 8.100 12/01/25 1,389,575
2,500 Mississippi Hosp Equip & Fac Auth Rev Rush Med
Fndtn Proj (Connie Lee Insd).................... 6.700 01/01/18 2,701,625
------------
9,542,274
------------
MISSOURI 0.9%
1,000 Missouri St Hsg Dev Comm Multi-Family Hsg
Brookstone A (FSA Insd)......................... 6.000 12/01/16 1,042,110
1,095 Missouri St Hsg Dev Comm Multi-Family Hsg Truman
Farm A (FSA Insd)............................... 5.750 10/01/11 1,134,902
------------
2,177,012
------------
NEBRASKA 1.8%
1,305 Nebraska Invt Fin Auth Multi-Family Rev Hsg
Cambury Hills Apts Pgm (FSA Insd)............... 5.700 10/01/12 1,351,497
1,100 Nebraska Invt Fin Auth Multi-Family Rev Hsg
Summit Club Apts Proj (FSA Insd)................ 5.700 10/01/12 1,139,193
1,950 Nebraska Invt Fin Auth Single Family Mtg Rev
(Inverse Fltg) (GNMA Collateralized)............ 9.388 09/15/24 2,179,125
------------
4,669,815
------------
NEVADA 3.8%
9,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser A
(FGIC Insd)..................................... 6.700 06/01/22 9,730,080
------------
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 1,086,910
------------
NEW JERSEY 0.2%
2,850 East Orange, NJ Bd Ctfs Partn Cap Apprec (FSA
Insd)........................................... * 02/01/28 592,259
------------
NEW MEXICO 2.1%
1,900 Albuquerque, NM Arpt Rev Ser A (AMBAC Insd)..... 6.600 07/01/16 2,063,533
2,070 New Mexico Edl Assistance Fndtn Student Ln Rev
Ser A (AMBAC Insd).............................. 6.850 04/01/05 2,229,328
1,000 New Mexico Mtg Fin Auth Amt Single Family Mtg
Pgm A2 (GNMA Collateralized).................... 6.050 07/01/16 1,046,210
------------
5,339,071
------------
NEW YORK 3.6%
3,855 Metropolitan Tran Auth NY Commuter Fac Rev Ser A
(MBIA Insd)..................................... 5.625 07/01/27 3,952,724
5,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (MBIA Insd)................ 5.750 12/01/25 5,148,200
------------
9,100,924
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OHIO 1.1%
$1,000 Columbus, OH Muni Arpt Auth Rev Imprv Port
Columbus B (AMBAC Insd)......................... 5.000% 01/01/28 $ 955,310
1,750 Ohio Hsg Fin Agy Mtg Rev Residential Ser A1
(GNMA Collateralized)........................... 6.150 03/01/29 1,843,345
------------
2,798,655
------------
PENNSYLVANIA 8.7%
7,500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser A (FSA Insd)........................... 6.800 01/01/10 8,106,075
1,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser A-1 (MBIA Insd)........................ 5.750 01/01/11 1,064,360
4,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl
Arpt Ser B (FSA Insd)........................... 6.625 01/01/22 4,308,400
2,000 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh
Mercy Hlth Sys Inc (AMBAC Insd)................. 5.625 08/15/26 2,168,200
1,330 Allegheny Cnty, PA Residential Fin Auth Mtg Rev
Single Family (GNMA Collateralized)............. 7.100 05/01/24 1,408,443
1,000 Parkland, PA Sch Dist (FGIC Insd)............... 5.000 09/01/18 968,910
1,100 Pennsylvania St Higher Edl Fac Auth Rev Drexel
Univ Second Ser (MBIA Insd)..................... 5.000 05/01/17 1,064,613
1,000 Punxsutawney, PA Area Sch Dist Rfdg (FGIC
Insd)........................................... 5.000 04/15/19 959,840
1,950 Sayre, PA Hlthcare Fac Auth Rev Hosp VHA PA/VHA
East Fin Pgm B (AMBAC Insd)..................... 6.375 07/01/22 2,105,883
------------
22,154,724
------------
RHODE ISLAND 0.7%
1,500 Rhode Island Port Auth & Econ Dev Corp Arpt Rev
Ser A (FSA Insd)................................ 7.000 07/01/14 1,811,145
------------
SOUTH CAROLINA 3.9%
9,150 South Carolina St Port Auth Port Rev (AMBAC
Insd)........................................... 6.750 07/01/21 9,831,126
------------
SOUTH DAKOTA 0.4%
1,000 South Dakota St Hlth & Edl Fac Auth Vocational
Ed Pgm Ser A (AMBAC Insd) (a)................... 5.400 08/01/13 1,012,970
------------
TENNESSEE 0.5%
1,085 Memphis-Shelby Cnty, TN Arpt Rev Ser A Rfdg
(MBIA Insd)..................................... 6.250 02/15/10 1,213,366
------------
TEXAS 11.3%
1,085 Brazos River Auth TX Johnson Cnty Surface (AMBAC
Insd)........................................... 5.800 09/01/11 1,135,897
5,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj A (AMBAC Insd)................ 6.750 04/01/22 5,421,750
5,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj B (FGIC Insd)................. 6.625 06/01/22 5,415,100
1,000 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj C (FGIC Insd)................. 6.700 10/01/22 1,090,600
2,305 Harris Cnty, TX Hsg Fin Corp Multi-Family Hsg
Rev Cypress Ridge Apts (FSA Insd)............... 6.350 06/01/26 2,469,508
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$4,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (FGIC
Insd)........................................... 6.750% 07/01/21 $ 4,297,760
1,800 Midland, TX Ctfs Oblig Arpt Sub Lien (FSA
Insd)........................................... 5.850 03/01/13 1,883,322
4,320 Texas St Veterans Hsg Assistance (MBIA Insd).... 6.800 12/01/23 4,648,320
2,000 Tyler, TX Hlth Fac Dev Corp Hosp Rev Mother
Frances Hosp of Tyler (FGIC Insd)............... 6.500 07/01/22 2,165,280
------------
28,527,537
------------
VIRGINIA 0.6%
1,495 Harrisonburg, VA Redev & Hsg Auth Multi-Family
Hsg Rev (FSA Insd).............................. 6.200 04/01/17 1,569,944
------------
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 2,381,504
1,770 Grant Cnty, WA Pub Util Dist No 002 Wanapum
Hydro Elec Rev Second Ser D (AMBAC Insd)........ 6.250 01/01/17 1,905,069
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 1,976,595
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 1,571,413
------------
7,834,581
------------
WISCONSIN 2.5%
5,000 Wisconsin St Hlth & Edl Fac Auth Rev Children's
Hosp (Embedded Cap) (FGIC Insd)................. 5.000 08/15/10 4,999,950
1,250 Wisconsin St Hlth & Edl Fac Auth Rev Felician
Hlth Care Ser A Rfdg (AMBAC Insd)............... 7.000 01/01/15 1,332,125
------------
6,332,075
------------
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 5,725,950
------------
TOTAL LONG-TERM INVESTMENTS 102.1%
(Cost $240,598,593)........................................................ 258,690,604
SHORT-TERM INVESTMENTS 0.1%
(Cost $200,000)............................................................ 200,000
------------
TOTAL INVESTMENTS 102.2%
(Cost $240,798,593)........................................................ 258,890,604
LIABILITIES IN EXCESS OF OTHER ASSETS (2.2%)................................ (5,553,450)
------------
NET ASSETS 100.0%........................................................... $253,337,154
------------
</TABLE>
*Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Asset segregated as collateral for when issued or delayed delivery purchase
commitment.
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $240,798,593)....................... $258,890,604
Cash........................................................ 50,336
Receivables:
Interest.................................................. 4,634,841
Investments Sold.......................................... 1,805,833
Other....................................................... 4,252
------------
Total Assets.......................................... 265,385,866
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 11,427,824
Income Distributions -- Common and Preferred Shares....... 233,893
Investment Advisory Fee................................... 125,825
Administrative Fee........................................ 41,942
Affiliates................................................ 12,430
Accrued Expenses............................................ 122,912
Trustees' Deferred Compensation and Retirement Plans........ 83,886
------------
Total Liabilities..................................... 12,048,712
------------
NET ASSETS.................................................. $253,337,154
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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, 9,685,073 shares issued and
outstanding).............................................. 96,851
Paid in Surplus............................................. 142,758,877
Net Unrealized Appreciation................................. 18,092,011
Accumulated Net Realized Gain............................... 1,217,142
Accumulated Undistributed Net Investment Income............. 1,172,273
------------
Net Assets Applicable to Common Shares................ 163,337,154
------------
NET ASSETS.................................................. $253,337,154
============
NET ASSET VALUE PER COMMON SHARE ($163,337,154 divided
by 9,685,073 shares outstanding).......................... $ 16.86
============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 7,460,563
-----------
EXPENSES:
Investment Advisory Fee..................................... 761,111
Administrative Fee.......................................... 253,704
Preferred Share Maintenance................................. 127,877
Trustees' Fees and Expenses................................. 13,379
Legal....................................................... 8,068
Custody..................................................... 7,630
Other....................................................... 96,318
-----------
Total Expenses.......................................... 1,268,087
-----------
NET INVESTMENT INCOME....................................... $ 6,192,476
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 1,200,000
Futures................................................... 17,136
-----------
Net Realized Gain........................................... 1,217,136
-----------
Net Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 19,242,946
End of the Period:
Investments............................................. 18,092,011
-----------
Net Unrealized Depreciation During the Period............... (1,150,935)
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 66,201
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 6,258,677
===========
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1998 and
the Year Ended October 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 6,192,476 $ 12,529,001
Net Realized Gain....................................... 1,217,136 1,417,016
Net Unrealized Appreciation/Depreciation During the
Period................................................ (1,150,935) 4,177,741
----------- -----------
Change in Net Assets from Operations.................... 6,258,677 18,123,758
----------- -----------
Distributions from Net Investment Income:
Common Shares......................................... (4,839,704) (10,134,229)
Preferred Shares...................................... (1,391,849) (2,828,542)
----------- -----------
(6,231,553) (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..................................... (7,648,569) (15,033,890)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... (1,389,892) 3,089,868
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment........................................ 275,365 341,130
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS................... (1,114,527) 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 $1,172,273 and $1,211,350
respectively)......................................... $253,337,154 $254,451,681
============ ============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 24, 1992
Six Months (Commencement
Ended Year Ended October 31 of Investment
April 30, ----------------------------------------------- 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......... .639 1.297 1.323 1.340 1.351 1.365 .924
Net Realized and Unrealized
Gain/Loss................... .007 .581 .054 1.883 (3.150) 2.949 .340
------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations.................... .646 1.878 1.377 3.223 (1.799) 4.314 1.264
------- ------- ------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders.............. .500 1.050 1.050 1.050 1.050 .970 .525
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.... .144 .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............ .790 1.558 1.382 1.413 1.531 1.379 .723
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period........................ $16.864 $17.008 $16.688 $16.693 $14.883 $18.213 $15.278
======== ======= ======= ======= ======= ======= =======
Market Price Per Share at End
of the Period................. $16.625 $17.250 $16.125 $15.750 $13.500 $17.250 $14.500
Total Investment Return at
Market Price (b).............. (0.10%)* 15.04% 9.19% 24.96% (15.57%) 26.98% .09%*
Total Return at Net Asset
Value (c)..................... 2.72%* 9.58% 6.53% 19.80% (12.20%) 26.75% 5.33%*
Net Assets at End of the Period
(In millions)................. $ 253.3 $ 254.5 $ 251.0 $ 250.6 $ 233.2 $ 265.2 $ 237.0
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares**............... 1.54% 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).................... 5.84% 6.05% 5.99% 6.16% 6.33% 6.29% 6.08%
Portfolio Turnover............. 26%* 36% 35% 28% 26% 38% 90%*
* Non-Annualized
** Ratio of Expenses to Average
Net Assets Including
Preferred Shares............ 1.00% 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
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 April 30, 1998, for federal income tax purposes, the cost of long- and
short-term investments is $240,798,593; the aggregate gross unrealized
appreciation is $18,272,119 and the aggregate gross unrealized depreciation is
$180,108 resulting in net unrealized appreciation on investments of $18,092,011.
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.
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
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 Van Kampen American Capital Distributors, Inc.
or its affiliates (collectively "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 reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.
For the six months ended April 30, 1998, the Trust recognized expenses of
approximately $2,500 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.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1998, the Trust recognized expenses of
approximately $35,800 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 per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At April 30, 1998 and October 31, 1997, paid in surplus related to common shares
aggregated $142,758,877 and $142,483,673, respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares...................... 9,668,986 9,648,688
Shares Issued Through Dividend
Reinvestment........................ 16,087 20,298
--------- ---------
Ending Shares......................... 9,685,073 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 $67,094,758 and $66,606,775,
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 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
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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). The potential risk of loss associated
with a futures contract could be in excess of the variation margin reflected on
the Statement of Assets and Liabilities.
Transactions in futures contracts, each with a par value of $100,000, for
the six months ended April 30, 1998, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1997........................... -0-
Futures Opened............................................ 100
Futures Closed............................................ (100)
----
Outstanding at April 30, 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.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 April 30, 1998, was
3.715%. During the six months ended April 30, 1998, the rates ranged from
3.4000% 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.
22
<PAGE> 24
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
23
<PAGE> 25
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
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 American Capital or Morgan Stanley fund
prospectus or to receive additional fund information, choose from one of the
following:
- visit our web site at WWW.VKAC.COM -- to view prospectuses, select
Investors' Place, then Download a 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.VKAC.COM and selecting Investors' Place
24
<PAGE> 26
VAN KAMPEN AMERICAN CAPITAL 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
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., 1998
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
25
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> TRUST FOR INSURED MUNI'S
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 240,798,593
<INVESTMENTS-AT-VALUE> 258,890,604
<RECEIVABLES> 6,440,674
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 54,588
<TOTAL-ASSETS> 265,385,866
<PAYABLE-FOR-SECURITIES> 11,427,824
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 620,888
<TOTAL-LIABILITIES> 12,048,712
<SENIOR-EQUITY> 90,000,000
<PAID-IN-CAPITAL-COMMON> 142,855,728
<SHARES-COMMON-STOCK> 9,685,073
<SHARES-COMMON-PRIOR> 9,668,986
<ACCUMULATED-NII-CURRENT> 1,172,273
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,217,142
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 18,092,011
<NET-ASSETS> 253,337,154
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,460,563
<OTHER-INCOME> 0
<EXPENSES-NET> (1,268,087)
<NET-INVESTMENT-INCOME> 6,192,476
<REALIZED-GAINS-CURRENT> 1,217,136
<APPREC-INCREASE-CURRENT> (1,150,935)
<NET-CHANGE-FROM-OPS> 6,258,677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,231,553)
<DISTRIBUTIONS-OF-GAINS> (1,417,016)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 16,087
<NET-CHANGE-IN-ASSETS> (1,114,527)
<ACCUMULATED-NII-PRIOR> 1,211,350
<ACCUMULATED-GAINS-PRIOR> 1,417,022
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 761,111
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,268,087
<AVERAGE-NET-ASSETS> 165,841,325
<PER-SHARE-NAV-BEGIN> 17.008
<PER-SHARE-NII> 0.639
<PER-SHARE-GAIN-APPREC> 0.007
<PER-SHARE-DIVIDEND> (0.644)
<PER-SHARE-DISTRIBUTIONS> (0.146)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.864
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
