VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST, N-30D, 1997-12-19

VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
N-30D, 1997-12-19

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<PAGE> 1

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 12
Statement of Operations.......................... 13
Statement of Changes in Net Assets............... 14
Financial Highlights............................. 15
Notes to Financial Statements.................... 16
Report of Independent Accountants................ 21
Dividend Reinvestment Plan....................... 22
</TABLE>

VKS ANR 12/97

<PAGE> 2

LETTER TO SHAREHOLDERS

December 4, 1997

Dear Shareholder,
In the past year, we have been
participants in and witnesses to two
mergers that we believe have positioned
our company at the forefront of the
financial industry's evolution. Our
latest announcement continues our [PHOTO]
forward progress. I am pleased to
announce that Philip N. Duff, formerly
the chief financial officer of Morgan
Stanley, has joined Van Kampen American
Capital as president and chief DENNIS J. MCDONNELL AND DON G. POWELL
executive officer. I will continue as
chairman of the firm. Together, we will continue to work to the benefit of our
fund shareholders as Van Kampen American Capital advances toward the next
century.

ECONOMIC REVIEW
The last quarter of 1996 brought renewed strength and rumblings of
inflation, which continued to feed investors' uncertainties about the direction
of interest rates. This was reflected in the volatility of taxable yields, with
the 30-year Treasury ranging from a high of 6.70 percent to a low of 6.35
percent, and ending the period at 6.64 percent.
The economy grew at a brisk 3.9 percent annual rate during the first three
quarters of 1997. At the same time, the federal budget deficit fell to its
lowest level in 23 years, while consumer prices rose less than 2.0 percent on an
annual basis and producer prices declined 1.4 percent.
The bond market advanced in price during the first 10 months of 1997, but
its ascension was not a smooth ride. Bond prices fell early in the period as
economic growth soared, fueling concerns about rising inflation and a potential
interest rate hike by the Federal Reserve Board. When the Fed did raise interest
rates by a modest 0.25 percent in late March, bond prices fell further, sending
the yield of the 30-year U.S. Treasury bond above 7.0 percent for the first time
in six months. By mid-April, however, the market's mood had changed, reflecting
few signs of price pressures despite the economy's strength. Bonds also
benefited from continued heavy purchases by foreign investors and concerns that
the stock market rally was nearing an end. The 7.0 percent slump in the Dow
Jones Industrial Average on October 27 reinforced the benefit of owning bonds
for diversification. By the end of October, the yield on the 30-year Treasury
bond was near its lowest level in 20 months, at 6.15 percent.
Throughout 1997, municipal bond prices moved in the same direction as the
Treasury bond market, but gained less when Treasury prices rallied and lost less
when Treasuries fell. Between December 31, 1996 and October 31, 1997, the yield
on the long-term municipal revenue bond index fell 36 basis points as the yield
on the 30-year Treasury bond fell 48 basis points. Because yields move in the
opposite direction of prices, the smaller yield decline of municipal bonds
indicates that their prices did not rise as much as Treasuries.

Continued on page two

<PAGE> 3

[PIE CHART]

PORTFOLIO COMPOSITION BY CREDIT QUALITY*
AS OF OCTOBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
AAA................. 49.8%
AA.................. 14.9%
A................... 0.9%
BBB................. 32.2%
BB.................. 2.1%
Non-Rated........... 0.1%
</TABLE>

* As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's
or Moody's.

TRUST STRATEGY

In managing the Trust, we used the following strategies:
We continued to position the credit quality of the portfolio's assets in a
"barbell" pattern. In other words, we invested in both high-quality and
low-quality bonds, which helps to balance the portfolio's volatility in response
to changing interest rates. Bonds rated AAA, the highest credit rating assigned
to bonds by the Standard & Poor's Ratings Group, tend to perform better when
interest rates are falling. Most AAA-rated bonds are insured bonds, which
currently comprise well over half of new issues in the municipal bond market.
They are extremely liquid and carry minimal credit risk. Bonds rated BBB, the
lowest investment-grade credit rating used by Standard & Poor's, and below BBB
tend to perform better when rates are rising, and have the potential to provide
additional income.
Portfolio turnover during the fiscal year was limited due to market
conditions that afforded few opportunities to add value to existing holdings.
The average yield of bonds in the Trust's portfolio was higher than average
market yields. As a result, there was little incentive to replace bonds in the
portfolio, because such trades would have reduced the Trust's dividend-paying
ability.
Trading was also restrained by tight spreads between yields of AAA-rated
bonds and lower-rated securities. These spreads compressed to historically
narrow levels due to the increasing number of insured bonds in the municipal
market. For example, when a new long-term California transportation issue was
sold in September, its BBB-rated portion yielded only 20 basis points more than
the AAA-rated insured component in the same maturity. As a result of the narrow
yield spreads, there was often not enough incentive to purchase lower-rated
securities and assume the additional credit risk.
Acquisitions focused on enhancing the Trust's call protection. Because we
hope to limit the number of bonds that could be "called" at any one time, we
purchased new long-term discount securities that will not be callable for many
years. To increase income, we favored high-yielding, lower-rated bonds from a
diversified mix of market sectors. When searching for new securities for the
Trust's portfolio, we try to identify bonds that we believe will outperform
within a particular sector and that can be purchased at an

Continued on page three

2
<PAGE> 4

attractive price. We believe this "bottom-up" approach, supported by our
research, provides significant added value to the portfolio.
The Trust remains well-diversified by sector, but maintains its heaviest
weightings in health-care, general purpose, and single-family housing bonds. The
health-care sector continues to benefit from consolidation within the industry
and from an emphasis by facilities to stabilize operating expenses. General
purpose bonds have been underpinned by the improving finances of state and local
governments, and single-family housing bonds have benefited from strong demand
by retail buyers who are attracted to their relatively high yields.
During the fiscal year, the duration of the portfolio's core holdings
declined moderately as the bonds moved closer to their maturity dates. Duration,
which is expressed in years, is a measure of a portfolio's sensitivity to
interest rate movements. Portfolios with long durations tend to perform better
when interest rates are falling, while portfolios with short durations tend to
do better when rates are rising. As of October 31, the duration of the Trust's
bond portfolio stood at 6.71 years, compared to 7.34 years for the Lehman
Brothers 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 Industry Holdings by Sector as of October 31, 1997*
Health Care....................... 26.1%
General Purpose................... 16.3%
Single-Family Housing............. 11.3%
Retail Electric/Gas/Telephone...... 9.0%
Industrial Revenue................. 6.7%

*As a Percentage of Long-Term
Investments

PERFORMANCE SUMMARY

For the one-year period ended October 31, 1997, the Van Kampen American
Capital Strategic Sector Municipal Trust generated a total return at market
price of 15.55 percent(1). The Trust offered a tax-exempt distribution rate of
6.12 percent(3), based on the closing common stock price on October 31, 1997. At
the end of the reporting period, the closing share price of the Trust traded at
$12.750, an 11.14 percent discount to its net asset value of $14.35. Because
income from the Trust is exempt from federal income taxes, this distribution
rate represents a yield equivalent to a taxable investment earning 9.56
percent(4) (for investors in the federal income tax bracket of 36 percent).

Continued on page four

<PAGE> 5

[PIE CHART]

TWELVE-MONTH DIVIDEND HISTORY
FOR THE PERIOD ENDED OCTOBER 31, 1997

<TABLE>
<CAPTION>
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1996 1996 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution $0.065 $0.065 $0.065 $0.065 $0.065 $0.065 $0.065 $0.065 $0.065 $0.065 $0.065 $0.065
per Common
Share
</TABLE>

The dividend history represents past performance of the Trust and does not
predict the Trust future distributions.

OUTLOOK

We expect the economy to remain strong in the coming months, although the
growth rate might slow to a more moderate pace. The weakness in the Far East,
which was the impetus for the recent volatility in world stock markets, will
most likely reduce U.S. exports to the region. In turn, this could trim U.S.
economic growth as well as the earnings of many U.S. companies. As a result, we
believe there is little chance that the Fed will raise interest rates in the
coming months. A rate hike reemerges as a possibility if inflation picks up, or
if growth continues at its current brisk pace.
As a result of this outlook, we expect that the yield on the 30-year
Treasury bond will trade within a range of 5.75 percent and 6.50 percent for the
next six months, possibly falling further in mid-1998. A decline in rates would
not only boost the prices of long-term investments in the portfolio, but could
also positively affect the Trust as a result of its leveraged structure. That
structure, which involves borrowing short-term funds to purchase long-term
municipal bonds, provides common shareholders with above-market levels of
dividend income. It should be noted, however, that if short-term rates rise,
borrowing costs would increase; this would negatively impact the income and
performance of common shares.
We will continue to seek a balance between the Trust's total return and its
dividend income, and to add value through our investment strategies and bond
selection. Thank you for your continued confidence in Van Kampen American
Capital and your Trust's portfolio manager.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

Please see footnotes on page five

<PAGE> 6

PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1997

VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
(NYSE TICKER SYMBOL--VKS)

COMMON SHARE TOTAL RETURNS

<TABLE>
<S> <C>
One-year total return based on market price(1)............. 15.55%
One-year total return based on NAV(2)...................... 11.01%
</TABLE>

DISTRIBUTION RATES

<TABLE>
<S> <C>
Distribution rate as a % of closing common stock
price(3)................................................. 6.12%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 9.56%
</TABLE>

SHARE VALUATIONS

<TABLE>
<S> <C>
Net asset value........................................... $ 14.35
Closing common stock price................................ $ 12.750
One-year high common stock price (08/01/97)............... $13.3125
One-year low common stock price (04/14/97)................ $11.2500
Preferred share (Series A) rate(5)........................ 3.57%
Preferred share (Series B) rate(5)........................ 3.50%
</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
income tax bracket.

(5)See "Notes to Financial Statements" footnote #5, 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.

<PAGE> 7

PORTFOLIO OF INVESTMENTS

October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 99.8%
ALABAMA 1.9%
$ 5,000 Alabama Wtr Pollutn Ctl Auth Revolving Fund Ln
Ser A (AMBAC Insd)............................ 5.000% 08/15/15 $ 4,822,600
------------
CALIFORNIA 14.3%
3,330 Anaheim, CA Ctfs Partn Anaheim Mem Hosp Assn
Rfdg (AMBAC Insd)............................. 5.000 05/15/13 3,301,528
3,000 California Hlth Fac Fin Auth Rev Kaiser
Permanente Med Cent........................... 5.450 10/01/13 3,012,630
6,420 California Pollutn Ctl Fin Auth Pollutn Ctl
Rev Pacific Gas & Elec Co Ser B (MBIA Insd)... 6.350 06/01/09 6,995,425
1,110 California Rural Home Mtg Fin Auth Single
Family Mtg Rev Ser C (GNMA Collateralized)
(a)........................................... 6.40/7.80 02/01/28 1,254,589
10,000 California Statewide Cmntys Dev Auth Rev Ctfs
Partn Insd Children's Hosp Rfdg (MBIA Insd)... 4.750 06/01/21 9,064,200
2,000 Los Angeles Cnty, CA Pub Wks (FSA Insd)....... 5.500 10/01/18 2,070,680
2,000 Mount Diablo, CA Hosp Dist Rev Ser A (Embedded
Cap) (AMBAC Insd)............................. 5.125 12/01/23 1,931,580
3,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd)......................................... 6.000 06/01/08 3,343,350
4,300 Paramount, CA Redev Agy Tax Alloc Redev Proj
Area No 1 Rfdg (MBIA Insd).................... 6.250 08/01/23 4,645,806
------------
35,619,788
------------
COLORADO 6.3%
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser B (Prerefunded @ 08/31/05)..... 7.000 08/31/26 1,185,700
2,000 CO Hsg Fin Auth Multi-Family Hsg Insd Mtg Ser
A............................................. 6.800 10/01/37 2,137,440
1,500 CO Hsg Fin Auth Single Family Pgm Sr Ser C1... 7.550 11/01/27 1,693,620
4,345 CO Hsg Fin Auth Single Family Pgm Sr Ser F.... 8.625 06/01/25 4,912,109
3,415 Denver, CO City & Cnty Arpt Rev Ser B......... 6.900 11/15/00 3,652,104
1,000 E-470 Pub Hwy Auth CO Rev Cap Apprec Sr Ser B
Rfdg (MBIA Insd).............................. * 09/01/22 264,350
2,000 E-470 Pub Hwy Auth CO Rev Sr Ser A Rfdg (MBIA
Insd)......................................... 5.000 09/01/26 1,911,700
------------
15,757,023
------------
CONNECTICUT 1.3%
3,000 Mashantucket Western Pequot Tribe CT Spl Rev
Ser A 144A-Private Placement (b).............. 6.400 09/01/11 3,319,800
------------
FLORIDA 0.1%
340 Escambia Cnty, FL Hlth Fac Auth Rev........... 4.250 01/01/98 339,990
------------
GEORGIA 2.7%
3,000 Atlanta, GA Spl Purp Fac Rev Delta Airls Ser
B............................................. 7.900 12/01/18 3,230,250
1,425 Georgia Muni Elec Auth Pwr Rev Ser A Rfdg
(FGIC Insd)................................... 5.500 01/01/12 1,489,966
2,000 Georgia Muni Elec Auth Pwr Rev Ser Z Rfdg
(FGIC Insd)................................... 5.500 01/01/12 2,091,180
------------
6,811,396
------------
</TABLE>

See Notes to Financial Statements

<PAGE> 8

PORTFOLIO OF INVESTMENTS (CONTINUED)

October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ILLINOIS 5.7%
$ 2,060 Alton, IL Hosp Fac Rev Saint Anthony's Hlth
Cent.......................................... 5.875% 09/01/06 $ 2,150,784
4,500 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
American Airls Inc Proj Ser A................. 7.875 11/01/25 4,944,510
1,235 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
United Airls Inc Proj Ser 84C................. 8.200 05/01/18 1,330,935
5,450 Illinois Hlth Fac Auth Rev Westlake Cmnty
Hosp.......................................... 7.750 01/01/04 5,726,587
------------
14,152,816
------------
INDIANA 3.5%
2,000 Indiana Hlth Fac Fin Auth Rev Ancilla Sys Inc
Oblig Group (MBIA Insd) (c)................... 5.250 07/01/22 1,938,020
3,000 Kokomo, IN Hosp Auth Hosp Rev Saint Joseph
Hosp & Hlth Cent Rfdg......................... 6.000 08/15/02 3,124,140
2,000 Kokomo, IN Hosp Auth Hosp Rev Saint Joseph
Hosp & Hlth Cent Rfdg......................... 6.250 08/15/05 2,136,460
990 La Porte Cnty, IN Hosp Auth Hosp Fac Rev La
Porte Hosp Inc Rfdg........................... 5.900 03/01/01 1,020,274
540 La Porte Cnty, IN Hosp Auth Hosp Fac Rev La
Porte Hosp Inc Rfdg........................... 6.000 03/01/02 560,445
------------
8,779,339
------------
IOWA 2.1%
5,000 Muscatine, IA Elec Rev Rfdg (AMBAC Insd)
(d)........................................... 6.125 01/01/12 5,294,100
------------
KANSAS 2.2%
5,000 Burlington, KS Pollutn Ctl Rev KS Gas & Elec
Co Proj Rfdg (MBIA Insd)...................... 7.000 06/01/31 5,464,800
------------
KENTUCKY 3.2%
2,415 Kenton Cnty, KY Arpt Brd Rev (MBIA Insd)
(c)........................................... 5.900 03/01/05 2,597,767
1,000 Kentucky Econ Dev Fin Hosp Sys Rev Rfdg & Impt
(c)........................................... 5.875 10/01/22 994,100
4,020 Louisville, KY Hsg Assistance Corp Mtg Rev
Carrousel Pptys Ser A Rfdg (FHA Gtd).......... 8.300 07/01/24 4,363,107
------------
7,954,974
------------
LOUISIANA 1.0%
2,250 Saint Charles Parish, LA Pollutn Ctl Rev LA
Pwr & Lt Co Proj (FSA Insd)................... 7.500 06/01/21 2,488,005
------------
MARYLAND 6.9%
4,435 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty
Dev Rev Single Family Pgm Seventh Ser......... 7.300 04/01/25 4,744,785
6,325 Maryland St Hlth & Higher Edl Fac Auth Rev
Greater Baltimore Med Cent Rfdg (FGIC Insd)... 5.000 07/01/13 6,263,584
6,270 Maryland St Hlth & Higher Edl Fac Auth Rev
Subn Hosp Rfdg (AMBAC Insd)................... 5.000 07/01/13 6,209,118
------------
17,217,487
------------
</TABLE>

See Notes to Financial Statements

<PAGE> 9

PORTFOLIO OF INVESTMENTS (CONTINUED)

October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MASSACHUSETTS 1.6%
$ 1,775 Massachusetts Muni Whsl Elec Co Pwr Supply Sys
Rev Ser B Rfdg................................ 6.750% 07/01/05 $ 1,927,810
1,705 Massachusetts St Hlth & Edl Fac Auth Rev Vly
Regl Hlth Sys Ser C Rfdg (Connie Lee Insd).... 7.000 07/01/09 1,989,513
------------
3,917,323
------------
MICHIGAN 1.7%
1,355 Flint, MI Hosp Bldg Auth Rev Hurley Med Cent
Ser A Rfdg.................................... 5.750 07/01/03 1,405,189
2,745 Michigan Muni Bond Auth Rev St Revolving
Fund.......................................... 5.400 10/01/14 2,790,814
------------
4,196,003
------------
MISSISSIPPI 1.9%
2,000 Mississippi Home Corp Single Family Rev Mtg
Ser C (GNMA Collateralized) (a)............... 5.50/7.60 06/01/29 2,264,120
1,000 Mississippi Home Corp Single Family Rev Mtg
Ser F (GNMA Collateralized) (a)............... 6.00/7.55 12/01/27 1,133,580
1,263 Mississippi Home Corp Single Family Rev Mtg
Ser D (GNMA Collateralized)................... 8.100 12/01/24 1,412,893
------------
4,810,593
------------
MISSOURI 0.8%
765 Missouri St Hlth & Edl Fac Auth Hlth Fac Rev
Lake of the Ozarks Genl Hosp.................. 6.250 02/15/11 804,635
980 Missouri St Hsg Dev Comm Mtg Rev Single Family
Ln Ser A...................................... 7.200 09/01/26 1,089,554
------------
1,894,189
------------
NEVADA 0.9%
2,180 Nevada Hsg Division Single Family Pgm Ser E
(FHA Gtd)..................................... 6.900 10/01/11 2,330,289
------------
NEW JERSEY 2.3%
900 Camden Cnty, NJ Impt Auth Rev Hlth Care Dev
Proj Cooper Hlth Sys.......................... 4.300 02/15/98 900,099
2,000 New Jersey Econ Dev Auth Dist Heating &
Cooling Rev Trigen Trenton Ser A.............. 6.200 12/01/10 2,099,560
2,500 New Jersey Econ Dev Auth Wtr Fac Rev NJ
American Wtr Co Inc Proj Ser A (FGIC Insd).... 6.875 11/01/34 2,807,800
------------
5,807,459
------------
</TABLE>

See Notes to Financial Statements

<PAGE> 10

PORTFOLIO OF INVESTMENTS (CONTINUED)

October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK 11.9%
$ 1,615 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev Ser A (Prerefunded @ 06/15/99) (FGIC
Insd)......................................... 6.750% 06/15/14 $ 1,710,252
835 New York City Ser B........................... 7.250 08/15/19 950,497
1,685 New York City Ser B (Prerefunded @
08/15/04)..................................... 7.250 08/15/19 1,984,728
4,320 New York City Ser B1.......................... 7.000 08/15/16 4,885,272
680 New York City Ser B1 (Prerefunded @
08/15/04)..................................... 7.000 08/15/16 791,051
4,235 New York City Ser C........................... 7.250 08/15/24 4,610,009
1,730 New York City Ser C (Prerefunded @
08/15/01)..................................... 7.250 08/15/24 1,918,328
2,000 New York City Ser G........................... 5.750 02/01/14 2,037,020
4,355 New York St Dorm Auth Rev Court Fac Lease Ser
A............................................. 5.500 05/15/10 4,424,680
595 New York St Med Care Fac Fin Agy Rev.......... 7.625 08/15/17 667,108
1,285 New York St Med Care Fac Fin Agy Rev
(Prerefunded @ 08/15/01)...................... 7.625 08/15/17 1,459,272
4,350 Triborough Brdg & Tunl Auth NY Rev Genl Purp
Ser A Rfdg.................................... 5.000 01/01/12 4,310,502
------------
29,748,719
------------
NORTH CAROLINA 0.3%
2,500 University of North Carolina Chapel Hill Rev
Util Sys...................................... * 08/01/20 760,525
------------
OHIO 3.3%
1,000 Akron, OH Ctfs Partn Akron Muni Baseball
Stadium Proj (a).............................. 0/6.500 12/01/07 849,690
1,000 Delaware Cnty, OH Hlthcare Fac Rev Mtg Centrum
at Willow Brook (FHA Gtd) (d)................. 6.550 02/01/35 1,084,510
2,045 Marion Cnty, OH Hosp Impt Rev Cmnty Hosp
Rfdg.......................................... 6.000 05/15/05 2,168,784
1,000 Miami Cnty, OH Hosp Fac Rev Upper Vly Med Cent
Ser C Rfdg & Impt............................. 6.000 05/15/06 1,059,800
3,000 Ohio Hsg Fin Agy Mtg Rev...................... 6.050 09/01/17 3,152,520
------------
8,315,304
------------
OKLAHOMA 1.1%
2,750 Shawnee, OK Hosp Auth Hosp Rev MidAmerica
Hlthcare Inc Rfdg............................. 6.125 10/01/14 2,823,480
------------
</TABLE>

See Notes to Financial Statements

<PAGE> 11

PORTFOLIO OF INVESTMENTS (CONTINUED)

October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA 12.1%
$ 1,000 Allegheny Cnty, PA Indl Dev Auth Rev
Environmental Impt USX Corp Proj Rfdg......... 6.100% 07/15/20 $ 1,044,490
3,000 Butler Cnty, PA Hosp Auth Hosp Rev North Hills
Passavant Hosp Ser A (Prerefunded @ 06/01/01)
(FSA Insd).................................... 6.900 06/01/09 3,316,830
3,000 Delaware Cnty, PA Auth Hlth Care Rev Mercy
Hlth Corp Southeastn B........................ 6.000 11/15/07 3,172,110
1,500 Northeastern PA Hosp & Edl Auth Wyoming Vly
Hlthcare Ser A (AMBAC Insd)................... 5.250 01/01/26 1,461,150
6,000 Pennsylvania Intergovtl Coop Auth Spl Tax Rev
City of Philadelphia Fdg Pgm (FGIC Insd)...... 5.350 06/15/07 6,205,380
10,000 Pennsylvania St Ctfs Partn Ser A Rfdg (AMBAC
Insd)......................................... 5.400 07/01/09 10,271,900
4,325 Philadelphia, PA Hosps & Higher Edl Auth Fac
Hosp Rev...................................... 6.350 07/01/07 4,673,162
------------
30,145,022
------------
TENNESSEE 1.0%
2,485 Shelby Cnty, TN Hlth Edl & Hsg Fac Brd Rev.... 5.750 09/01/16 2,523,194
------------
TEXAS 4.2%
3,000 Harris Cnty, TX Toll Road Sr Lien Rfdg (AMBAC
Insd)......................................... 4.950 08/15/06 3,092,520
2,000 Houston, TX Arpt Sys Rev Spl Fac Continental
Airls......................................... 6.125 07/15/17 2,068,520
2,940 San Antonio, TX Arpt Sys Rev Rfdg (AMBAC
Insd)......................................... 7.375 07/01/13 3,378,560
1,805 Texas Hsg Agy Residential Dev Rev Mtg Ser D
(GNMA Collateralized)......................... 8.400 01/01/21 1,893,806
------------
10,433,406
------------
UTAH 3.4%
3,000 Intermountain Pwr Agy UT Pwr Supply Rev Ser B
Rfdg (MBIA Insd).............................. 5.750 07/01/19 3,116,100
3,000 Salt Lake City, UT Arpt Rev Delta Airls Inc
Proj.......................................... 7.900 06/01/17 3,183,780
2,125 Utah St Hsg Fin Agy Single Family Mtg Sr Ser
D2............................................ 6.850 07/01/25 2,246,444
------------
8,546,324
------------
WASHINGTON 2.1%
2,030 Washington St Pub Pwr Supply Sys Nuclear Proj
No 3 Rev Ser C Rfdg (MBIA Insd)............... * 07/01/13 884,999
3,380 Washington St Pub Pwr Supply Sys Nuclear Proj
No 3 Rev Ser C Rfdg (MBIA Insd)............... * 07/01/15 1,307,249
3,000 Washington St Ser B........................... 5.500 05/01/18 3,108,810
------------
5,301,058
------------
</TABLE>

See Notes to Financial Statements

<PAGE> 12

PORTFOLIO OF INVESTMENTS (CONTINUED)

*Zero coupon bond
(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(c) Securities purchased on a when issued or delayed delivery basis.
(d) Assets segregated as collateral for when issued or delayed delivery purchase
commitments, and open option transactions.

See Notes to Financial Statements

<PAGE> 13

STATEMENT OF ASSETS AND LIABILITIES

October 31, 1997
<TABLE>
- --------------------------------------------------------------------------------
ASSETS:
<S> <C>
Total Investments (Cost $232,675,365)....................... $253,279,857
Receivables:
Interest.................................................. 4,769,595
Investments Sold.......................................... 346,909
Unamortized Organizational Costs............................ 1,789
Other....................................................... 539
------------
Total Assets.......................................... 258,398,689
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 7,574,288
Custodian Bank............................................ 186,963
Income Distributions--Common and Preferred Shares......... 182,504
Investment Advisory Fee................................... 137,584
Administrative Fee........................................ 31,750
Affiliates................................................ 7,168
Accrued Expenses............................................ 93,582
Trustees' Deferred Compensation and Retirement Plans........ 70,118
Options at Market Value (Net premiums received of
$43,321).................................................. 16,406
------------
Total Liabilities..................................... 8,300,363
------------
NET ASSETS.................................................. $250,098,326
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 1,900 issued with liquidation preference of
$50,000 per share)........................................ $ 95,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 10,806,700 shares issued and
outstanding).............................................. 108,067
Paid in Surplus............................................. 149,167,283
Net Unrealized Appreciation................................. 20,631,407
Accumulated Undistributed Net Investment Income............. 717,323
Accumulated Net Realized Loss............................... (15,525,754)
------------
Net Assets Applicable to Common Shares................ 155,098,326
------------
NET ASSETS.................................................. $250,098,326
============
NET ASSET VALUE PER COMMON SHARE ($155,098,326 divided
by 10,806,700 shares outstanding)......................... $ 14.35
============
</TABLE>

See Notes to Financial Statements

12
<PAGE> 14

STATEMENT OF OPERATIONS

For the Year Ended October 31, 1997
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $14,329,094
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,592,910
Administrative Fee.......................................... 367,595
Preferred Share Maintenance................................. 258,924
Trustees' Fees and Expenses................................. 26,656
Custody..................................................... 21,343
Legal....................................................... 12,056
Amortization of Organizational Costs........................ 7,997
Other....................................................... 195,358
-----------
Total Expenses.......................................... 2,482,839
-----------
NET INVESTMENT INCOME....................................... $11,846,255
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 646,541
Options................................................... (124,638)
Futures................................................... 79,198
-----------
Net Realized Gain........................................... 601,101
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 13,932,357
-----------
End of the Period:
Investments............................................. 20,604,492
Options................................................. 26,915
-----------
20,631,407
-----------
Net Unrealized Appreciation During the Period............... 6,699,050
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 7,300,151
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $19,146,406
===========
</TABLE>

See Notes to Financial Statements

<PAGE> 15

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended October 31, 1997 and 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 11,846,255 $ 12,061,348
Net Realized Gain/Loss.................................. 601,101 (1,677,218)
Net Unrealized Appreciation During the Period........... 6,699,050 969,703
------------ ------------
Change in Net Assets from Operations.................... 19,146,406 11,353,833
------------ ------------
Distributions from Net Investment Income:
Common Shares......................................... (8,428,596) (8,536,845)
Preferred Shares...................................... (3,331,038) (3,395,189)
------------ ------------
Total Distributions..................................... (11,759,634) (11,932,034)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 7,386,772 (578,201)
NET ASSETS:
Beginning of the Period................................. 242,711,554 243,289,755
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $717,323 and $630,702,
respectively)......................................... $250,098,326 $242,711,554
============ ============
</TABLE>

See Notes to Financial Statements

14
<PAGE> 16

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
January 22, 1993
(Commencement
Year Ended October 31, of Investment
------------------------------------- Operations) to
1997 1996 1995 1994 October 31, 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a)....... $13.669 $13.722 $12.284 $15.253 $13.808
------ ------ ------ ------ -----------
Net Investment Income............. 1.096 1.116 1.147 1.181 .803
Net Realized and Unrealized
Gain/Loss....................... .675 (.065) 1.507 (2.927) 1.329
------ ------ ------ ------ -----------
Total from Investment Operations.... 1.771 1.051 2.654 (1.746) 2.132
------ ------ ------ ------ -----------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders..... .780 .790 .874 .938 .547
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders........ .308 .314 .342 .244 .140
Distributions from Net Realized
Gain:
Paid to Common Shareholders..... -0- -0- -0- .034 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders........ -0- -0- -0- .007 -0-
------ ------ ------ ------ -----------
Total Distributions................. 1.088 1.104 1.216 1.223 .687
------ ------ ------ ------ -----------
Net Asset Value, End of the
Period............................ $14.352 $13.669 $13.722 $12.284 $15.253
======= ======= ======= ======= =======
Market Price Per Share at End of the
Period............................ $12.750 $11.750 $11.875 $10.750 $14.625
Total Investment Return at Market
Price (b)......................... 15.55% 5.69% 18.79% (20.83%) 8.26%*
Total Return at Net Asset
Value (c)......................... 11.01% 5.58% 19.39% (13.59%) 12.82%*
Net Assets at End of the Period (In
millions)......................... $250.1 $242.7 $243.3 $227.7 $259.8
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares............................ 1.65% 1.67% 1.77% 1.61% 1.49%
Ratio of Expenses to Average Net
Assets............................ 1.01% 1.01% 1.06% .99% 1.02%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)................. 5.67% 5.91% 6.14% 6.76% 5.97%
Portfolio Turnover.................. 23% 24% 75% 165% 114%*
</TABLE>

(a) Net Asset Value at January 22, 1993, is adjusted for common and preferred
share offering costs of $.217 per common share.

(b) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.

(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.

(d) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
* Non-Annualized

See Notes to Financial Statements

15
<PAGE> 17

NOTES TO FINANCIAL STATEMENTS

October 31, 1997
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Strategic Sector Municipal Trust (the "Trust") is
registered as a non-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. The Trust will invest in a portfolio
consisting substantially of municipal obligations from those market sectors
which the Adviser feels will best meet the Trust's investment objective. The
Trust commenced investment operations on January 22, 1993.

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.

D. ORGANIZATIONAL COSTS--The Trust has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Trust's organization in the amount of $40,000. These costs
are being amortized on a

16
<PAGE> 18

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

October 31, 1997
- --------------------------------------------------------------------------------

straight line basis over the 60 month period ending January 21, 1998. Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") has agreed that in
the event any of the initial shares of the Trust originally purchased by VKAC
are redeemed during the amortization period, the Trust will be reimbursed for
any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.

E. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.

The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1997, the Trust had an accumulated capital loss
carryforward for tax purposes of $15,498,839 which will expire between October
31, 2002 and October 31, 2004. Net realized gains or losses differ for financial
and tax reporting purposes as a result of gains or losses recognized for tax
purposes on open option positions at October 31, 1997.

At October 31, 1997, for federal income tax purposes, cost of long- and
short-term investments is $232,675,365; the aggregate gross unrealized
appreciation is $20,604,492 and the aggregate gross unrealized depreciation is
$0, resulting in net unrealized appreciation of $20,604,492.

F. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.

For the year ended October 31, 1997, 99.9% of the income distributions made
by the Trust were exempt from federal income taxes. In January, 1998, the Trust
will provide tax information to shareholders for the 1997 calendar year.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly of .65% of the average net assets of the Trust. In addition, the Trust
will pay a monthly administrative fee to VKAC, the Trust's Administrator, at an
annual rate of .15% of the average net assets of the Trust. The administrative
services provided by the Administrator include

17
<PAGE> 19

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

October 31, 1997
- --------------------------------------------------------------------------------

record keeping and reporting responsibilities with respect to the Trust's
portfolio and preferred shares and providing certain services to shareholders.

For the year ended October 31, 1997, the Trust recognized expenses of
approximately $3,400, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust of which a trustee of the
Trust is an affiliated person.

For the year ended October 31, 1997, the Trust recognized expenses of
approximately $74,600 representing VKAC's cost of providing accounting and legal
services to the Trust.

Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.

The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Trust. The maximum annual
benefit under the plan is equal to the trustee's annual retainer fee, which is
currently $2,500.

At October 31, 1997, VKAC owned 6,700 common shares of the Trust.

3. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $56,036,931 and $54,981,899,
respectively.

4. 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 these instances, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.

18
<PAGE> 20

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

October 31, 1997
- --------------------------------------------------------------------------------

Summarized below are the specific types of derivative financial instruments
used by the Trust.

A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.

Transactions in options for the year ended October 31, 1997, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1996................... 15 $(28,246)
Options Written and Purchased (Net)............... 2,709 (50,470)
Options Terminated in Closing Transactions
(Net)........................................... (199) (41,927)
Options Expired (Net)............................. (2,375) 163,964
---- ---------
Outstanding at October 31, 1997................... 150 $ 43,321
==== =========
</TABLE>

The related futures contracts of the outstanding option transactions as of
October 31, 1997, and the descriptions and market values are as follows:

<TABLE>
<CAPTION>
MARKET
EXPIRATION MONTH/ VALUE OF
CONTRACTS EXERCISE PRICE OPTIONS
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Bond Index
December 1997--Written Puts
(Current notional value of
$121,844 per contract)......... 150 Dec/115 $16,406
</TABLE>

B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Trust generally invests in futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration. Upon entering into futures contracts, the Trust maintains, in a
segregated account with its custodian, securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin).

19
<PAGE> 21

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

October 31, 1997
- --------------------------------------------------------------------------------

Transactions in futures contracts for the year ended October 31, 1997, were
as follows:

<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1996............................ -0-
Futures Opened............................................. 288
Futures Closed............................................. (288)
----
Outstanding at October 31, 1997............................ 0
====
</TABLE>

C. EMBEDDED CAPS--These securities, which are identified in the portfolio of
investments, include 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 price of these securities may be more
volatile than the price of a comparable fixed rate security. 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.

5. PREFERRED SHARES
The Trust has outstanding 1,900 Auction Preferred Shares ("APS") in two series.
Series A contains 1,000 shares while Series B contains 900 shares. Dividends are
cumulative and the dividend rate for both Series is currently reset every 28
days through an auction process. At October 31, 1997, the average rate in effect
was 3.537%. During the year ended October 31, 1997, the rates ranged from 3.249%
to 3.747%.

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.

<PAGE> 22

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders of

Van Kampen American Capital Strategic Sector Municipal Trust:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Strategic Sector Municipal Trust (the "Trust"),
including the portfolio of investments, as of October 31, 1997, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Strategic Sector Municipal Trust as of October 31, 1997,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
December 11, 1997

21
<PAGE> 23

DIVIDEND REINVESTMENT PLAN

The Trust offers a Dividend Reinvestment Plan (the "Plan") pursuant to which
Common Shareholders who are participants in the Plan may have dividends and
capital gains distributions automatically reinvested in Common Shares of the
Trust. All Common Shareholders are deemed to be participants in the Plan unless
they specifically elect not to participate. Common Shareholders who elect not to
participate in the Plan will receive all distributions of dividends and capital
gains in cash paid by check mailed directly to the Common Shareholder by the
Trust's dividend disbursing agent.

HOW THE PLAN WORKS
State Street Bank and Trust Company, as your Plan Agent, serves as agent for
the Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Common Shares in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts. The Trust will not issue any new Common Shares
in connection with the Plan. All reinvestments are in full and fractional Common
Shares, 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
change 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
All Common Shareholders of the Trust are deemed to be participants in the Plan
unless they specifically elect not to participate. You may withdraw from the
Plan at any time by calling 1-800-341-2929 or by writing State Street Bank and
Trust Company, P.O. Box 8200, Boston, MA 02266-8200. If you withdraw, you will
receive, without charge, a share certificate issued in your name for all full
Common Shares credited to your account under the Plan and a cash payment will be
made for any fractional Common Share credited to your account under the Plan.
You may again elect to participate in the Plan at any time by calling
1-800-341-2929 or writing to the Trust at:
Van Kampen American Capital
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056

22
<PAGE> 24

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund

FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income

TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund

MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund

Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds or
Morgan Stanley funds.

23
<PAGE> 25

VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST

BOARD OF TRUSTEES

DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*

OFFICERS

DENNIS J. MCDONNELL*
President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

PETER W. HEGEL*
Vice President

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

CUSTODIAN AND
TRANSFER AGENT

STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

* "Interested" persons of the Trust, as defined in the Investment Company Act of
1940.

(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.

24
<PAGE> 26

RESULTS OF SHAREHOLDER VOTES

The Annual Meeting of Shareholders of the Trust was held on May 28, 1997,
where shareholders voted on a new investment advisory agreement, the election of
Trustees whose terms expired in 1997 and independent public accountants.

1) With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Trust,
9,218,685 shares voted for the proposal, 90,951 shares voted against, 197,370
shares abstained and 0 shares represented broker non-votes.

2) With regard to the election of the following Trustees by the common
shareholders of the Trust:

<TABLE>
<CAPTION>
# OF SHARES
-----------------------
IN FAVOR WITHHELD
- -----------------------------------------------------------------------
<S> <C> <C>
David C. Arch 9,399,053 106,089
Howard J Kerr 9,395,938 109,204
Dennis J. McDonnell 9,397,957 107,185
</TABLE>

3) With regard to the ratification of KPMG Peat Marwick LLP as independent
public accountants for its current fiscal year, 9,362,190 shares voted for the
proposal, 26,023 shares voted against, 118,793 shares abstained and 0 shares
represented broker non-votes.

<ARTICLE> 6
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 232,675,365
<INVESTMENTS-AT-VALUE> 253,279,857
<RECEIVABLES> 5,116,504
<ASSETS-OTHER> 2,328
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 258,398,689
<PAYABLE-FOR-SECURITIES> 7,574,288
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 726,075
<TOTAL-LIABILITIES> 8,300,363
<SENIOR-EQUITY> 95,000,000
<PAID-IN-CAPITAL-COMMON> 149,275,350
<SHARES-COMMON-STOCK> 10,806,700
<SHARES-COMMON-PRIOR> 10,806,700
<ACCUMULATED-NII-CURRENT> 717,323
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (15,525,754)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,631,407
<NET-ASSETS> 250,098,326
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,329,094
<OTHER-INCOME> 0
<EXPENSES-NET> (2,482,839)
<NET-INVESTMENT-INCOME> 11,846,255
<REALIZED-GAINS-CURRENT> 601,101
<APPREC-INCREASE-CURRENT> 6,699,050
<NET-CHANGE-FROM-OPS> 19,146,406
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,759,634)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,386,772
<ACCUMULATED-NII-PRIOR> 630,702
<ACCUMULATED-GAINS-PRIOR> (16,126,855)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,592,910
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,482,839
<AVERAGE-NET-ASSETS> 245,077,000
<PER-SHARE-NAV-BEGIN> 13.669
<PER-SHARE-NII> 1.096
<PER-SHARE-GAIN-APPREC> 0.675
<PER-SHARE-DIVIDEND> (1.088)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.352
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>