<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 19
Statement of Operations.......................... 20
Statement of Changes in Net Assets............... 21
Financial Highlights............................. 22
Notes to Financial Statements.................... 24
Dividend Reinvestment Plan....................... 29
</TABLE>
VIM SAR 6/99
<PAGE> 2
LETTER TO SHAREHOLDERS
May 20, 1999
Dear Shareholder,
With the volatility that we've experienced in many financial markets in
recent months, some investors have sold securities because of uncertainty about
where the markets were going, only to be left rethinking whether they made the
right decision. We've witnessed this kind of market activity numerous times over
the past several years, sparked by concerns such as the impact of the Asian
economic crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the latest rally. That's partly because most of the recent big gains happened
in relatively short periods of time. This kind of volatility--and the danger of
making short-term decisions--highlights the importance of investing for the long
term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather whatever the markets have in store.
Sincerely,
[SIG]
Richard F. Powers III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
A surge in consumer confidence led to strong economic growth over the past
six months, as fears about the impact of the Asian financial crisis subsided. In
the fourth quarter, the nation's gross domestic product (GDP) rose at an
astounding 6.0 percent annual rate and remained strong at 4.5 percent through
the first quarter of 1999. This powerful level of growth is attributed to a
continued increase in consumer spending, a strong housing market, and high
retail sales--all the result of a more confident consumer given the positive
employment environment. The economy began to show signs of slowing down early in
1999, however, as corporate profits and wage growth declined.
Despite continued improvements in Asia and Latin America and the record
economic growth in the United States, inflation remained at bay in late 1998 as
commodity prices tumbled. Although rising oil prices pushed inflation up 3.3
percent on an annualized basis in the first four months of 1999, price increases
remained moderate enough overall to keep inflation-adjusted interest rates
attractive.
Our outlook for the domestic economy remains positive, although we
anticipate slower growth in the second half of the year. We look for a gradual
but steady rise in inflation throughout 1999 to more normal but certainly not
alarming levels. Internationally, low interest rates and improving financial
conditions should continue to support the economic progress we've witnessed
overseas.
INTEREST RATES AND INFLATION
April 30, 1997, through April 30, 1999
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Apr 1997 6.0000 2.5000
5.6250 2.2000
6.5000 2.3000
Jul 1997 6.0000 2.2000
5.5000 2.2000
6.2500 2.2000
Oct 1997 5.7500 2.1000
5.6875 1.8000
6.5000 1.7000
Jan 1998 5.5625 1.6000
5.6250 1.4000
6.1250 1.4000
Apr 1998 5.6250 1.4000
5.6875 1.7000
6.0000 1.7000
Jul 1998 5.5625 1.7000
5.9375 1.6000
5.7500 1.5000
Oct 1998 5.2500 1.5000
4.8750 1.5000
4.0000 1.6000
Jan 1999 4.8125 1.7000
4.8750 1.6000
5.1250 1.7000
Apr 1999 4.9375 2.3000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1999
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
(NYSE TICKER SYMBOL--VIM)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
Six-month total return based on market price(1)........... 1.70%
Six-month total return based on NAV(2).................... 1.33%
DISTRIBUTION RATES
Distribution rate as a % of closing stock price(3)........ 5.70%
Taxable-equivalent distribution rate as a % of closing
stock price(4)........................................... 8.91%
SHARE VALUATIONS
Net asset value........................................... $17.00
Closing stock price....................................... $17.375
Six-month high common stock price (12/10/98).............. $17.8125
Six-month low common stock price (04/23/99)............... $17.250
Preferred share (Series A) rate(5)........................ 3.190%
Preferred share (Series B) rate(5)........................ 3.200%
</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.
3
<PAGE> 5
GLOSSARY OF TERMS
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.
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.
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.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investors Service. Bonds rated below BBB or Baa are
noninvestment grade.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1998
and maturing in 2008 is a 10-year bond.
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,
in some states, from state and local income taxes.
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.
REFUNDING: Retiring an outstanding bond issue at maturity using money from the
sale of a new offering.
YIELD: The annual rate of return on an investment, expressed as a percentage.
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.
4
<PAGE> 6
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
We recently spoke with the management team of the Van Kampen Trust for Insured
Municipals about the key events and economic forces that shaped the markets
during the reporting period. The team includes Joseph A. Piraro, portfolio
manager, and Peter W. Hegel, chief investment officer for fixed-income
investments. The following comments reflect their views on the Trust's
performance during the six months ended April 30, 1999.
Q HOW WOULD YOU DESCRIBE THE CONDITIONS IN THE MUNICIPAL MARKET DURING THE
PAST SIX MONTHS?
A Although most of the financial markets experienced volatility during the
period, the municipal market remained relatively stable. For the majority
of the six months, long-term municipal bond yields remained within a range
of about 5.1 to 5.3 percent, even as the Federal Reserve cut interest rates.
Much of the stability in the municipal market can be attributed to its isolation
from turbulence abroad. Concerns about the financial conditions in Asia and
Latin America hurt the stock and high-yield bond markets last fall, but had
little effect on municipals.
The positive economic and market conditions encouraged more municipalities
to take advantage of low interest rates and issue new bonds. Although the amount
of municipal debt increased, the credit quality of many issuers was not
compromised--in fact, it improved as the positive economic environment led to
stronger balance sheets. As a result, we saw more issuers using municipal bonds
to finance special growth and expansion projects, as opposed to financing their
regular operations.
The proportion of higher-yielding municipal bonds also increased during the
period as the number of insured bonds declined. Because bond insurers tightened
their underwriting criteria, more issuers came to market without insurance and
offered higher yields to compensate bondholders for the increased credit risk.
This benefited the Trust because it allowed our experienced research staff to
seek out those higher-yielding bonds that we felt had strong underlying quality.
Q WHY WERE MUNICIPAL BONDS SO ATTRACTIVE RELATIVE TO COMPARABLE TREASURY
BONDS?
A Toward the end of 1998, the yields on 30-year insured municipal bonds and
comparable U.S. Treasury bonds reached equivalent levels, which is a rare
occurrence. Typically, investment-grade municipal bonds have offered about 85 to
90 percent as much yield as comparable Treasury bonds because their interest
payments are exempt from federal income taxes. However, as Treasury yields fell
and municipal yields remained stable, the yield difference between the two types
of bonds shrank. Early in 1999, investors recognized the tremendous
opportunities available in the municipal market, and demand for municipals began
to increase. In conjunction with a recent slowdown in supply, this boost in
municipal demand pushed the municipal-to-Treasury yield ratio back to more
traditional but still attractive levels.
5
<PAGE> 7
Q WHAT STRATEGIES DID YOU USE TO MANAGE THE TRUST?
A Our focus was on supporting the Trust's income stream while monitoring its
risk level and price volatility. Most of our purchases were bonds with 15-
to 25-year maturities, as this portion of the yield curve offered almost
as much yield as comparable 30-year bonds but is potentially less volatile.
In addition, we reduced the Trust's holdings in the health-care sector as a
result of increasing financial pressures on that industry. Although many
health-care bonds remain attractive, the challenges imposed by managed care and
changing Medicare reimbursement policies have led us to look to other sectors
for value in recent months. We sold some lower-rated health-care issues and
replaced them with longer-maturity insured bonds. In addition, we sold bonds in
the portfolio that had a high risk of being called, or refinanced by the issuer.
Bond calls can lower the Trust's income stream because when issues are called
from the portfolio, we must reinvest the proceeds into bonds paying current
lower interest rates. These higher-yielding bonds had increased in value since
we purchased them, so we took advantage of the opportunity to sell them at a
premium and contribute to the Trust's total return.
We also continued to seek value in the municipal market by working closely
with our experienced research analysts. With the help of our analysts, we
searched for bonds that had favorable yields and good call protection. During
the reporting period, we took advantage of a shortage of airport bonds to sell
some of our holdings in that sector that had appreciated and replace them with
industrial revenue issues that provided attractive yields.
Another strategy we used to enhance performance was to purchase bonds issued
in states that have strong demand for municipal bonds as a result of heavy state
and local taxation. In particular, we purchased securities issued in New York,
California, and Florida. The large supply in these states provided a number of
opportunities to find quality bonds with appreciation potential. For additional
portfolio highlights, please refer to page 8.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A During the past six months, the Trust generated a total return of 1.70
percent(1) based on market price. This reflects a decrease in market price
from $17.750 per share on October 31, 1998, to $17.375 on April 30, 1999.
In addition, the Trust provided a distribution rate of 5.70 percent(3) based on
its closing common stock price on April 30, 1999. Because the Trust is exempt
from federal income taxes, this distribution rate is equivalent to a yield of
8.91 percent(4) on a taxable investment for shareholders in the 36 percent
federal income tax bracket. The Trust's monthly dividend of $.0825 per share was
unchanged during the reporting period. Past performance does not guarantee
future results. Please refer to the footnotes and chart on page 3 for additional
Trust performance results.
6
<PAGE> 8
Q WHAT DO YOU SEE AHEAD FOR THE MUNICIPAL MARKET?
A Strong economic performance should continue to bolster the credit
conditions of municipal issuers. In addition, we expect that this economic
strength will continue to make municipalities more likely to issue debt
for special projects rather than for general operating financing.
Although insured debt has been increasing in recent years, we have started
to see a reversal of this trend in the last few months, as municipal bond
insurers have become more cautious. If this caution continues, credit spreads
may widen as the proportion of higher-yielding uninsured bonds increases.
Finally, we see the potential for changes in traditional economic activity
toward the end of the year because of investor concerns about the year 2000
computer problem. These temporary concerns, however, may result in attractive
investment opportunities that our research staff can explore to uncover
potential value.
[SIG]
Joseph A. Piraro
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF APRIL 30, 1999 AS OF OCTOBER 31, 1998
<S> <C> <C> <C>
Airport..................... 13.2% Airport..................... 16.0%
Retail Electric/Gas/Telephone 12.8% Retail Electric/Gas/Telephone 14.6%
Single-Family Housing....... 11.2% Single-Family Housing....... 12.5%
Transportation.............. 10.2% Multi-Family Housing........ 10.1%
Multi-Family Housing........ 9.8% Health Care................. 10.0%
</TABLE>
PORTFOLIO COMPOSITION BY CREDIT QUALITY
AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF APRIL 30, 1999 AS OF OCTOBER 31, 1998
<S> <C> <C> <C>
AAA/Aaa..................... 100% AAA/Aaa..................... 100%
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DISTRIBUTION HISTORY
FOR THE PERIOD ENDED APRIL 30, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS CAPITAL GAINS
--------- -------------
<S> <C> <C>
'Nov 1998' .08250
'Dec 1998' .08250 0.1639
'Jan 1999' .08250
'Feb 1999' .08250
'Mar 1999' .08250
'Apr 1999' .08250
</TABLE>
The distribution history represents past performance of the Trust and does not
predict the Trust's future distributions.
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 110.5%
ALABAMA 1.8%
$1,500 Birmingham, AL Arpt Auth Arpt Rev
Rfdg (AMBAC Insd) (a).............. 5.375% 07/01/20 $ 1,496,655
1,000 Birmingham-Carraway, AL Methodist
Hlth Sys Ser A (Connie Lee Insd)... 5.875 08/15/25 1,062,550
2,000 Huntsville, AL Pub Bldg Auth Lease
Rev Muni Justice & Pub Safety Cent
Ser A (MBIA Insd).................. 5.900 10/01/16 2,153,520
------------
4,712,725
------------
ALASKA 0.1%
195 Alaska St Hsg Fin Corp Coll Mtg
Oblig Ser A Subser A2 (GNMA
Collateralized).................... 7.050 06/01/25 206,930
------------
ARIZONA 2.2%
1,500 Arizona Hlth Fac Auth Hosp Sys Rev
Phoenix Baptist Hosp & Med Rfdg
(MBIA Insd)........................ 6.250 09/01/11 1,645,530
1,462 Peoria, AZ Indl Dev Auth
Multi-Family Rev Sr Hsg Casa Del
Rio Ser A Rfdg (GNMA
Collateralized).................... 7.300 02/20/15 1,624,735
2,140 Pima Cnty, AZ Indl Dev Auth Indl
Rev Lease Oblig Irvington Proj
Tucson Ser A Rfdg (FSA Insd)....... 7.250 07/15/10 2,366,241
------------
5,636,506
------------
CALIFORNIA 13.1%
6,235 California Hsg Fin Agy Rev Home Mtg
Ser B (MBIA Insd) (b).............. 6.100 02/01/28 6,625,124
2,500 California Pollutn Ctl Fin Auth
Pollutn Ctl Rev Pacific Gas & Elec
Ser B (FSA Insd)................... 6.350 06/01/09 2,744,800
2,000 California St (FGIC Insd).......... 4.500 12/01/21 1,838,820
9,000 Los Angeles Cnty, CA Pension Oblig
Ctfs Ltd Muni Oblig Ser A (MBIA
Insd) (b).......................... 6.900 06/30/08 10,789,110
2,000 Midpeninsula Regl Open Space Dist
CA Fin Auth Rev Cap Apprec (AMBAC
Insd).............................. * 09/01/29 400,220
1,155 Paramount, CA Redev Agy Tax Alloc
(MBIA Insd)........................ 6.250 08/01/10 1,278,492
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (CONTINUED)
$1,000 Pico Rivera, CA Wtr Auth Rev Wtr
Sys Proj Ser A (MBIA Insd)......... 5.500% 05/01/19 $ 1,069,280
3,600 Sacramento Cnty, CA Arpt Ser A
(MBIA Insd)........................ 5.900 07/01/24 3,869,964
1,000 San Diego, CA Pub Fac Fin Auth Swr
Rev Ser A (FGIC Insd).............. 5.000 05/15/29 982,420
9,000 San Jose, CA Single Family Mtg Rev
Ser A Cap Apprec (GEMIC Mtg
Collateralized).................... * 04/01/16 3,915,540
------------
33,513,770
------------
COLORADO 2.0%
2,330 Castle Rock, CO Multi-Family Rev
Hsg Pines at Castle Rock Ser A (FSA
Insd).............................. 6.100 12/01/16 2,462,065
770 El Paso Cnty, CO Sch Dist No 003
Widefield (MBIA Insd).............. * 12/15/18 279,017
670 El Paso Cnty, CO Sch Dist No 003
Widefield (MBIA Insd).............. * 12/15/19 229,622
300 El Paso Cnty, CO Sch Dist No 003
Widefield (MBIA Insd).............. * 12/15/20 97,407
1,855 Greeley, CO Multi-Family Rev Hsg
Mtg Creek Stone (FHA Gtd).......... 5.950 07/01/28 1,938,011
------------
5,006,122
------------
FLORIDA 6.0%
2,000 Florida St Tpk Auth Tpk Rev Dept
Tran Ser A (FGIC Insd)............. 4.500 07/01/27 1,811,840
1,000 Hillsborough Cnty, FL Aviation
Tampa Intl Arpt Ser A (FGIC
Insd).............................. 6.000 10/01/23 1,078,630
1,000 Jacksonville, FL Wtr & Swr Rev
United Wtr FL Proj (AMBAC Insd).... 6.350 08/01/25 1,116,950
3,885 Lakeland, FL Elec & Wtr Rev Cap
Apprec Ser A Rfdg (MBIA
Insd) (a).......................... * 10/01/13 1,941,218
2,000 Lakeland, FL Elec & Wtr Rev Cap
Apprec Ser A Rfdg (MBIA
Insd) (a).......................... * 10/01/14 945,240
1,225 Miami-Dade Cnty, FL Spl Oblig
Courthouse Cent Proj Ser A (AMBAC
Insd).............................. 4.750 04/01/20 1,169,434
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FLORIDA (CONTINUED)
$1,500 Miami-Dade Cnty, FL Spl Oblig
Courthouse Cent Proj Ser B Rfdg
(AMBAC Insd)....................... 4.750% 04/01/18 $ 1,446,405
1,045 Orange Cnty, FL Hsg Fin Auth Single
Family Mtg Rev Ser A (GNMA
Collateralized).................... 6.200 10/01/16 1,113,395
2,000 Pasco Cnty, FL Solid Waste Disp &
Res Recovery Sys Rev (AMBAC
Insd).............................. 6.000 04/01/11 2,228,340
1,270 Pinellas Cnty, FL Hsg Fin Auth
Single Family Mtg Rev (GNMA
Collateralized).................... 6.000 09/01/18 1,343,343
980 Pinellas Cnty, FL Hsg Fin Auth
Single Family Mtg Rev (GNMA
Collateralized).................... 6.100 09/01/29 1,036,330
------------
15,231,125
------------
GEORGIA 1.4%
1,860 George L Smith II GA Wrld Congress
Cent Auth Rev Domed Stadium Proj
Rfdg (MBIA Insd) (a)............... 6.000 07/01/10 2,011,051
1,500 George L Smith II GA Wrld Congress
Cent Auth Rev Domed Stadium Proj
Rfdg (MBIA Insd) (a)............... 5.500 07/01/20 1,502,235
------------
3,513,286
------------
HAWAII 2.9%
1,450 Hawaii St Dept Budget & Fin Spl
Purp Mtg Rev Hawaiian Elec Co &
Subsidiaries (MBIA Insd)........... 6.550 12/01/22 1,589,040
3,500 Hawaii St Dept Budget & Fin Spl
Purp Mtg Rev Hawaiian Elec Co Proj
Ser B (MBIA Insd).................. 7.600 07/01/20 3,720,080
2,100 Honolulu, HI City & Cnty Ser D
(FGIC Insd) (a).................... 4.850 02/01/10 2,094,855
------------
7,403,975
------------
ILLINOIS 9.2%
4,000 Bolingbrook, IL Cap Apprec Ser
B (a).............................. * 01/01/32 657,280
9,050 Chicago, IL O'Hare Intl Arpt Spl
Facs Rev Intl Terminal (MBIA
Insd) (b).......................... 6.750 01/01/18 9,796,716
1,515 Chicago, IL Residential Mtg Rev Cap
Apprec Ser B Rfdg (MBIA Insd)...... * 10/01/09 744,213
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$2,220 Illinois Dev Fin Auth Rev Loc Govt
Pgm Lincoln Way Cmnty (FGIC
Insd).............................. 5.700% 01/01/16 $ 2,435,207
3,000 Onterie Cent Hsg Fin Corp IL Mtg
Rev Onterie Cent Proj Ser A Rfdg
(MBIA Insd)........................ 7.000 07/01/12 3,201,180
6,150 Onterie Cent Hsg Fin Corp IL Mtg
Rev Onterie Cent Proj Ser A Rfdg
(MBIA Insd)........................ 7.050 07/01/27 6,574,965
------------
23,409,561
------------
KANSAS 2.7%
3,500 Burlington, KS Pollutn Ctl Rev KS
Gas & Elec Co Proj Rfdg (MBIA
Insd).............................. 7.000 06/01/31 3,774,925
2,000 Kansas St Dev Fin Auth Hlth Fac Rev
Stormont Vail Hlthcare Inc Ser G
(MBIA Insd)........................ 5.800 11/15/21 2,112,940
955 Olathe Labette Cnty, KS Single
Family Mtg Rev Coll Ser A-I Rfdg
(GNMA Collateralized).............. 8.100 08/01/23 1,070,154
------------
6,958,019
------------
KENTUCKY 0.4%
1,000 Kenton Cnty, KY Arpt Brd Rev
Cincinnati/ Northn KY Intl Arpt Ser
A Rfdg (MBIA Insd)................. 6.200 03/01/08 1,124,690
------------
LOUISIANA 3.2%
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 3,456,953
1,000 Louisiana Hsg Fin Agy Mtg Rev Coll
Mtg Malta Square Proj (GNMA
Collateralized).................... 6.450 09/01/27 1,095,280
30 Louisiana Pub Fac Auth Rev Student
Ln LA Opportunity Ln Ser A (FSA
Insd).............................. 6.600 01/01/04 32,163
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LOUISIANA (CONTINUED)
$ 460 Louisiana Pub Fac Auth Rev Student
Ln LA Opportunity Ln Ser A (FSA
Insd).............................. 6.700% 01/01/05 $ 493,971
310 Louisiana Pub Fac Auth Rev Student
Ln LA Opportunity Ln Ser A (FSA
Insd).............................. 6.800 01/01/06 333,309
660 Louisiana Pub Fac Auth Rev Student
Ln LA Opportunity Ln Ser A (FSA
Insd).............................. 6.850 01/01/09 709,922
1,000 New Orleans, LA Rfdg (FGIC Insd)... 5.500 12/01/17 1,074,510
1,000 New Orleans, LA Rfdg (FGIC Insd)... 5.500 12/01/18 1,071,680
------------
8,267,788
------------
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 1,809,067
------------
MASSACHUSETTS 1.6%
3,915 Massachusetts Edl Ln Auth Rev Muni
Forwards Issue E Ser A (AMBAC
Insd).............................. 7.000 01/01/10 4,185,801
------------
MICHIGAN 7.1%
5,510 Detroit, MI Econ Dev Corp Res
Recovery Rev Ser A (FSA Insd) (b).. 6.875 05/01/09 5,901,596
7,000 Michigan St Strategic Fd Ltd Oblig
Rev Detroit Edison Co Ser A Rfdg
(MBIA Insd) (a).................... 5.550 09/01/29 7,103,740
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 1,259,450
3,500 Monroe Cnty, MI Pollutn Ctl Rev
Coll Detroit Edison Monroe Ser 1
(MBIA Insd)........................ 6.875 09/01/22 3,853,325
------------
18,118,111
------------
MISSISSIPPI 3.2%
1,696 Mississippi Home Corp Single Family
Rev Mtg Access Pgm (GNMA
Collateralized).................... 7.100 05/01/23 1,807,840
1,185 Mississippi Home Corp Single Family
Rev Mtg Access Pgm Ser C (GNMA
Collateralized).................... 8.125 12/01/24 1,320,327
1,165 Mississippi Home Corp Single Family
Rev Mtg Access Pgm Ser D (GNMA
Collateralized).................... 8.100 12/01/24 1,302,738
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MISSISSIPPI (CONTINUED)
$1,046 Mississippi Home Corp Single Family
Rev Mtg Access Pgm Ser E (GNMA
Collateralized).................... 8.100% 12/01/25 $ 1,169,878
2,500 Mississippi Hosp Equip & Fac Auth
Rev Rush Med Fndtn Proj (Connie Lee
Insd).............................. 6.700 01/01/18 2,706,475
------------
8,307,258
------------
MISSOURI 0.9%
1,000 Missouri St Hsg Dev Comm
Multi-Family Hsg Brookstone Ser A
(FSA Insd)......................... 6.000 12/01/16 1,057,420
1,095 Missouri St Hsg Dev Comm
Multi-Family Hsg Truman Farm Ser A
(FSA Insd)......................... 5.750 10/01/11 1,153,517
------------
2,210,937
------------
NEBRASKA 1.7%
1,305 Nebraska Invt Fin Auth Multi-Family
Rev Hsg Cambury Hills Apts Pgm (FSA
Insd).............................. 5.700 10/01/12 1,366,531
1,100 Nebraska Invt Fin Auth Multi-Family
Rev Hsg Summit Club Apts Proj (FSA
Insd).............................. 5.700 10/01/12 1,151,865
1,650 Nebraska Invt Fin Auth Single
Family Mtg Rev (Inverse Fltg) (GNMA
Collateralized).................... 9.719 09/15/24 1,837,687
------------
4,356,083
------------
NEVADA 3.8%
9,000 Clark Cnty, NV Indl Dev Rev NV Pwr
Co Proj Ser A (FGIC Insd) (b)...... 6.700 06/01/22 9,785,070
------------
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 1,098,700
------------
NEW JERSEY 2.3%
1,000 New Jersey Hlthcare Facs Fin Auth
Rev St Barnabas Hlth Ser C Rfdg
(MBIA Insd) (a).................... 5.000 07/01/09 1,018,950
1,000 New Jersey Hlthcare Facs Fin Auth
Rev St Barnabas Hlth Ser C Rfdg
(MBIA Insd) (a).................... 5.000 07/01/10 1,012,150
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW JERSEY (CONTINUED)
$2,275 New Jersey St Edl Fac Auth Rev
Seton Hall Univ Proj Rfdg (AMBAC
Insd) (a).......................... 5.250% 07/01/08 $ 2,421,100
1,250 New Jersey St Edl Fac Auth Rev
Seton Hall Univ Proj Rfdg (AMBAC
Insd) (a).......................... 5.250 07/01/09 1,330,175
------------
5,782,375
------------
NEW MEXICO 3.0%
1,900 Albuquerque, NM Arpt Rev Ser A
(AMBAC Insd)....................... 6.600 07/01/16 2,049,796
2,250 Farmington, NM Pollutn Ctl Rev
Southern CA Edison Ser A Rfdg (MBIA
Insd) (a).......................... 5.125 04/01/29 2,226,128
2,070 New Mexico Edl Assistance Fndtn
Student Ln Rev Ser A (AMBAC
Insd).............................. 6.850 04/01/05 2,246,260
1,000 New Mexico Mtg Fin Auth Amt Single
Family Mtg Pgm A2 (GNMA
Collateralized).................... 6.050 07/01/16 1,057,480
------------
7,579,664
------------
NEW YORK 6.2%
3,855 Metropolitan Trans Auth NY Commuter
Facs Rev Ser A (MBIA Insd)......... 5.625 07/01/27 4,090,733
1,095 New York St Dorm Auth Lease Rev St
Univ Dorm Facs Ser B (AMBAC
Insd).............................. 4.500 07/01/11 1,083,317
5,000 New York St Dorm Auth Rev Insd NY
Univ Ser A (AMBAC Insd) (a)........ 5.500 07/01/11 5,255,500
5,000 Port Auth NY & NJ Spl Oblig Rev Spl
Proj JFK Intl Arpt Terminal 6 (MBIA
Insd).............................. 5.750 12/01/25 5,300,100
------------
15,729,650
------------
OHIO 0.7%
1,730 Ohio Hsg Fin Agy Mtg Rev
Residential Ser A1 (GNMA
Collateralized).................... 6.150 03/01/29 1,837,225
------------
PENNSYLVANIA 8.4%
7,500 Allegheny Cnty, PA Arpt Rev Gtr
Pittsburgh Intl Arpt Ser A (FSA
Insd).............................. 6.800 01/01/10 8,107,350
4,000 Allegheny Cnty, PA Arpt Rev Gtr
Pittsburgh Intl Arpt Ser B (FSA
Insd).............................. 6.625 01/01/22 4,317,520
2,000 Allegheny Cnty, PA Hosp Dev Auth
Rev Pittsburgh Mercy Hlth Sys Inc
(AMBAC Insd)....................... 5.625 08/15/26 2,145,380
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$1,330 Allegheny Cnty, PA Residential Fin
Auth Mtg Rev Single Family (GNMA
Collateralized).................... 7.100% 05/01/24 $ 1,406,741
1,000 Crawford Cent Sch Dist PA (FGIC
Insd).............................. 4.000 02/15/08 977,100
1,000 Philadelphia, PA Wtr & Wastewtr Rev
Ser 1999 Rfdg (AMBAC Insd) (a)..... 5.000 12/15/06 1,045,930
1,950 Sayre, PA Hlthcare Fac Auth Rev
Hosp VHA PA/VHA East Fin Pgm B
(AMBAC Insd)....................... 6.375 07/01/22 2,119,923
2,055 Southeast Delco Sch Dist PA Cap
Apprec (MBIA Insd) (a)............. * 02/01/19 738,320
1,555 Southeast Delco Sch Dist PA Cap
Apprec (MBIA Insd) (a)............. * 02/01/21 500,384
------------
21,358,648
------------
RHODE ISLAND 0.7%
1,500 Rhode Island Port Auth & Econ Dev
Corp Arpt Rev Ser A (FSA Insd)..... 7.000 07/01/14 1,831,170
------------
SOUTH CAROLINA 3.9%
4,575 South Carolina St Port Auth Port
Rev (AMBAC Insd)................... 6.750 07/01/21 4,910,119
4,575 South Carolina St Port Auth Port
Rev (Escrowed to Maturity) (AMBAC
Insd).............................. 6.750 07/01/21 4,965,247
------------
9,875,366
------------
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 1,054,950
------------
TENNESSEE 0.5%
1,085 Memphis-Shelby Cnty, TN Arpt Rev
Ser A Rfdg (MBIA Insd)............. 6.250 02/15/10 1,231,399
------------
TEXAS 12.3%
1,085 Brazos River Auth TX Johnson Cnty
Surface (AMBAC Insd)............... 5.800 09/01/11 1,154,451
5,000 Brazos River Auth TX Pollutn Ctl
Rev Coll TX Util Elec Co Proj A
(AMBAC Insd)....................... 6.750 04/01/22 5,440,300
5,000 Brazos River Auth TX Pollutn Ctl
Rev Coll TX Util Elec Co Proj B
(FGIC Insd)........................ 6.625 06/01/22 5,425,400
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$1,000 Brazos River Auth TX Pollutn Ctl
Rev Coll TX Util Elec Co Proj C
(FGIC Insd)........................ 6.700% 10/01/22 $ 1,093,980
1,530 Coastal Wtr Auth TX Contract Rev
City of Houston Proj Rfdg (FSA
Insd).............................. 5.125 12/15/15 1,562,865
2,305 Harris Cnty, TX Hsg Fin Corp
Multi-Family Hsg Rev Cypress Ridge
Apts (FSA Insd).................... 6.350 06/01/26 2,527,294
4,000 Houston, TX Arpt Sys Rev Sub Lien
Ser A (FGIC Insd).................. 6.750 07/01/21 4,293,000
2,000 Matagorda Cnty, TX Navigation Dist
No 1 Houston Lighting Pwr Co Rfdg
(AMBAC Insd)....................... 5.125 11/01/28 1,976,000
1,800 Midland, TX Ctfs Oblig Arpt Sub
Lien (FSA Insd).................... 5.850 03/01/13 1,943,820
3,660 Texas St Veterans Hsg Assistance
(MBIA Insd)........................ 6.800 12/01/23 3,933,658
2,000 Tyler, TX Hlth Fac Dev Corp Hosp
Rev Mother Frances Hosp of Tyler
(FGIC Insd)........................ 6.500 07/01/22 2,178,520
------------
31,529,288
------------
VIRGINIA 0.6%
1,495 Harrisonburg, VA Redev & Hsg Auth
Multi-Family Hsg Rev (FSA Insd).... 6.200 04/01/17 1,585,836
------------
WASHINGTON 3.6%
2,235 Grant Cnty, WA Pub Util Dist No 002
Wanapum Hydro Elec Rev Second Ser D
(AMBAC Insd)....................... 6.000 01/01/13 2,423,008
1,770 Grant Cnty, WA Pub Util Dist No 002
Wanapum Hydro Elec Rev Second Ser D
(AMBAC Insd)....................... 6.250 01/01/17 1,923,247
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WASHINGTON (CONTINUED)
$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 $ 2,011,043
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 1,586,407
1,350 Washington St Hlthcare Facs Auth
Rev Sisters of Providence (AMBAC
Insd).............................. 5.000 10/01/19 1,322,041
------------
9,265,746
------------
WISCONSIN 1.2%
3,000 Wisconsin St Hlth & Edl Fac Auth
Rev Children's Hosp (FGIC Insd).... 5.000 08/15/10 3,045,870
------------
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 5,858,400
------------
TOTAL LONG-TERM INVESTMENTS 110.5%
(Cost $262,348,026)............................................. 282,421,111
SHORT-TERM INVESTMENTS 0.7%
(Cost $1,700,000)............................................... 1,700,000
------------
TOTAL INVESTMENTS 111.2%
(Cost $264,048,026)............................................. 284,121,111
LIABILITIES IN EXCESS OF OTHER ASSETS (11.2%).................... (28,636,810)
------------
NET ASSETS 100.0%................................................ $255,484,301
============
</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.
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
GEMIC--General Electric Mortgage Insurance Corporation
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
18
<PAGE> 20
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $264,048,026)....................... $284,121,111
Cash........................................................ 8,346
Receivables:
Interest.................................................. 4,473,134
Investments Sold.......................................... 1,266,866
Other....................................................... 1,016
------------
Total Assets.......................................... 289,870,473
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 33,907,089
Investment Advisory Fee................................... 126,138
Administrative Fee........................................ 42,046
Income Distributions -- Preferred Shares.................. 39,440
Affiliates................................................ 24,670
Accrued Expenses............................................ 145,998
Trustees' Deferred Compensation and Retirement Plans........ 100,791
------------
Total Liabilities..................................... 34,386,172
------------
NET ASSETS.................................................. $255,484,301
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 3,600 issued with liquidation preference of
$25,000 per share)........................................ $ 90,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 9,733,518 shares issued and
outstanding).............................................. 97,335
Paid in Surplus............................................. 143,592,528
Net Unrealized Appreciation................................. 20,073,085
Accumulated Undistributed Net Investment Income............. 1,093,666
Accumulated Net Realized Gain............................... 627,687
------------
Net Assets Applicable to Common Shares................ 165,484,301
------------
NET ASSETS.................................................. $255,484,301
============
NET ASSET VALUE PER COMMON SHARE ($165,484,301 divided by
9,733,518 shares outstanding)............................. $ 17.00
============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 7,369,329
-----------
EXPENSES:
Investment Advisory Fee..................................... 764,438
Administrative Fee.......................................... 254,813
Preferred Share Maintenance................................. 120,823
Trustees' Fees and Related Expenses......................... 13,201
Custody..................................................... 11,886
Legal....................................................... 5,095
Other....................................................... 118,657
-----------
Total Expenses.......................................... 1,288,913
-----------
NET INVESTMENT INCOME....................................... $ 6,080,416
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 627,681
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 22,903,190
End of the Period:
Investments............................................. 20,073,085
-----------
Net Unrealized Depreciation During the Period............... (2,830,105)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(2,202,424)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 3,877,992
===========
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1999
and the Year Ended October 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1999 October 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 6,080,416 $ 12,370,189
Net Realized Gain................................ 627,681 2,092,144
Net Unrealized Appreciation/Depreciation During
the Period..................................... (2,830,105) 3,660,244
------------ ------------
Change in Net Assets from Operations............. 3,877,992 18,122,577
------------ -------------
Distributions from Net Investment Income:
Common Shares.................................. (4,810,316) (9,636,410)
Preferred Shares............................... (1,148,041) (2,973,522)
------------ ------------
(5,958,357) (12,609,932)
------------ ------------
Distributions from Net Realized Gain:
Common Shares.................................. (1,590,029) (1,098,187)
Preferred Shares............................... (502,115) (318,829)
------------ ------------
(2,092,144) (1,417,016)
------------ ------------
Total Distributions.............................. (8,050,501) (14,026,948)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (4,172,509) 4,095,629
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment................................. 542,621 566,879
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS............ (3,629,888) 4,662,508
NET ASSETS:
Beginning of the Period.......................... 259,114,189 254,451,681
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$1,093,666 and $971,607 respectively).......... $255,484,301 $259,114,189
============ ============
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended ------------------
April 30, 1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period (a)............................... $17.431 $17.008 $16.688
------- ------- -------
Net Investment Income.................... .625 1.276 1.297
Net Realized and Unrealized Gain/Loss.... (.227) .594 .581
------- ------- -------
Total from Investment Operations........... .398 1.870 1.878
------- ------- -------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders............ .495 .995 1.050
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... .118 .306 .293
Distributions from Net Realized Gain:
Paid to Common Shareholders............ .164 .113 .161
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders......................... .051 .033 .054
------- ------- -------
Total Distributions........................ .828 1.447 1.558
------- ------- -------
Net Asset Value, End of the Period......... $17.001 $17.431 $17.008
======= ======= =======
Market Price Per Share at End of the
Period................................... $17.375 $17.750 $17.250
Total Investment Return at Market
Price (b)................................ 1.70%* 9.77% 15.04%
Total Return at Net Asset Value (c)........ 1.33%* 9.27% 9.58%
Net Assets at End of the Period (In
millions)................................ $ 255.5 $ 259.1 $ 254.5
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**............ 1.56% 1.56% 1.57%
Ratio of Net Investment Income to Average
Net Assets Applicable to Common
Shares (d)............................... 5.96% 5.65% 6.05%
Portfolio Turnover......................... 32%* 66% 36%
* Non-Annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares.............. 1.01% 1.01% 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.
22
<PAGE> 24
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 24, 1992
(Commencement
Year Ended October 31, of Investment
- ------------------------------------------- Operations) to
1996 1995 1994 1993 October 31, 1992
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
$16.693 $14.883 $18.213 $15.278 $ 14.737
------- ------- ------- ------- -----------
1.323 1.340 1.351 1.365 .924
.054 1.883 (3.150) 2.949 .340
------- ------- ------- ------- -----------
1.377 3.223 (1.799) 4.314 1.264
------- ------- ------- ------- -----------
1.050 1.050 1.050 .970 .525
.332 .363 .301 .293 .198
-0- -0- .146 .086 -0-
-0- -0- .034 .030 -0-
------- ------- ------- ------- -----------
1.382 1.413 1.531 1.379 .723
------- ------- ------- ------- -----------
$16.688 $16.693 $14.883 $18.213 $ 15.278
======= ======= ======= ======= ===========
$16.125 $15.750 $13.500 $17.250 $ 14.500
9.19% 24.96% (15.57%) 26.98% .09%*
6.53% 19.80% (12.20%) 26.75% 5.33%*
$251.0 $250.6 $233.2 $265.2 $ 237.0
1.60% 1.63% 1.57% 1.54% 1.51%
5.99% 6.16% 6.33% 6.29% 6.08%
35% 28% 26% 38% 90%*
1.02% 1.03% 1.01% .99% 1.01%
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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--Municipal bonds are valued by independent pricing
services or dealers using the mean of the bid and asked prices or, in the
absence of market quotations, at fair value based upon yield data relating to
municipal bonds with similar characteristics and general market conditions.
Securities which are not valued by independent pricing services are valued at
fair value using procedures established in good faith by the Board of Trustees.
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.
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (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, 1999, for federal income tax purposes, the cost of long- and
short-term investments is $264,048,026; the aggregate gross unrealized
appreciation is $20,248,284 and the aggregate gross unrealized depreciation is
$175,199 resulting in net unrealized appreciation on long- and short-term
investments of $20,073,085.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends
monthly 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
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 six months ended April 30, 1999, the Trust recognized expenses of
approximately $1,800 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.
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1999, the Trust recognized expenses of
approximately $45,400 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 April 30, 1999 and October 31, 1998, paid in surplus related to common shares
aggregated $143,592,528 and $143,050,223, respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31, 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares...................... 9,701,930 9,668,986
Shares Issued Through Dividend
Reinvestment........................ 31,588 32,944
--------- ---------
Ending Shares......................... 9,733,518 9,701,930
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $98,922,477 and $86,305,063,
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 a call option contract or
taking delivery
26
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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).
There were no transactions in futures contracts for the six months ended
April 30, 1999.
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.
6. PREFERRED SHARES
Effective with the close of business on April 23, 1999, the liquidation
preference on the Trust's preferred shares decreased from $50,000 to $25,000 per
share. This decrease was effected by means of a 2 for 1 stock split that doubled
the Trust's number of outstanding preferred shares. The total liquidation value
for the Trust was unchanged.
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
As of April 30, 1999, the Trust had outstanding 3,600 Auction Preferred
Shares ("APS") in two series of 1,800 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, 1999 was 3.195%. During the six months ended April 30, 1999, the rates
ranged from 3.000% to 5.500%.
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 $25,000 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.
28
<PAGE> 30
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
29
<PAGE> 31
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
Utility
Value
Global/International
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 advisor 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
30
<PAGE> 32
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
A. THOMAS SMITH, III*
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 AMERICAN CAPITAL
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
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
KPMG LLP
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., 1999
All rights reserved.
(SM) denotes a service mark of
Van Kampen Funds Inc.
31
<PAGE> 33
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
32
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> TRUST FOR INSURED MUNICIPALS
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<INVESTMENTS-AT-COST> 264,048,026
<INVESTMENTS-AT-VALUE> 284,121,111
<RECEIVABLES> 5,740,000
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 9,362
<TOTAL-ASSETS> 289,870,473
<PAYABLE-FOR-SECURITIES> 33,907,089
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 479,083
<TOTAL-LIABILITIES> 34,386,172
<SENIOR-EQUITY> 90,000,000
<PAID-IN-CAPITAL-COMMON> 143,689,863
<SHARES-COMMON-STOCK> 9,733,518
<SHARES-COMMON-PRIOR> 9,701,930
<ACCUMULATED-NII-CURRENT> 1,093,666
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 627,687
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,073,085
<NET-ASSETS> 255,484,301
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,369,329
<OTHER-INCOME> 0
<EXPENSES-NET> (1,288,913)
<NET-INVESTMENT-INCOME> 6,080,416
<REALIZED-GAINS-CURRENT> 627,681
<APPREC-INCREASE-CURRENT> (2,830,105)
<NET-CHANGE-FROM-OPS> 3,877,992
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,958,357)
<DISTRIBUTIONS-OF-GAINS> (2,092,144)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 31,588
<NET-CHANGE-IN-ASSETS> (3,629,888)
<ACCUMULATED-NII-PRIOR> 971,607
<ACCUMULATED-GAINS-PRIOR> 2,092,150
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 764,438
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,288,913
<AVERAGE-NET-ASSETS> 166,893,654
<PER-SHARE-NAV-BEGIN> 17.431
<PER-SHARE-NII> 0.625
<PER-SHARE-GAIN-APPREC> (0.227)
<PER-SHARE-DIVIDEND> (0.613)
<PER-SHARE-DISTRIBUTIONS> (0.215)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.001
<EXPENSE-RATIO> 1.56
</TABLE>
