<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.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 20
Dividend Reinvestment Plan....................... 24
</TABLE>
VKL 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
[GRAPH]
<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 SELECT SECTOR MUNICIPAL TRUST
(AMEX TICKER SYMBOL--VKL)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
Six-month total return based on market price(1)........... (1.06%)
Six-month total return based on NAV(2).................... .99%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 5.62%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 8.78%
SHARE VALUATIONS
Net asset value........................................... $ 13.92
Closing common stock price................................ $12.8125
Six-month high common stock price (11/27/98).............. $13.5625
Six-month low common stock price (4/20/99)................ $12.6250
Preferred share (Series A) rate(5)........................ 3.270%
Preferred share (Series B) rate(5)........................ 3.180%
</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.
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 SELECT SECTOR MUNICIPAL TRUST
We recently spoke with the management team of the Van Kampen Select Sector
Municipal Trust about the key events and economic forces that shaped the markets
during the reporting period. The team includes Dennis S. Pietrzak, 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. As a result, most of our purchases were
bonds with 15-to 20-year maturities, as the intermediate range of the
yield curve offered almost as much yield as comparable 30-year bonds but is
potentially less volatile. We would have received minimal incremental yield for
assuming the additional interest-rate risk associated with purchasing
longer-maturity bonds.
In addition, we sold bonds in the portfolio that had a high risk of being
called, or repaid early by the issuer. 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. To help
protect the Trust from future bond calls, we began to replace some of our
housing bonds. These bonds carry a risk that the mortgage holder will refinance
the mortgage or pay it off early, especially during a low interest-rate
environment like we are currently experiencing. Thus, housing bonds are more
likely than many other issues to be called from the portfolio.
Another strategy we used was to purchase bonds issued in states that have
strong demand for municipal securities as a result of heavy state and local
taxation. In particular, we purchased several securities issued in New York. The
large supply in that state provided a number of opportunities to find attractive
bonds with appreciation potential.
Q HOW DID YOU FIND VALUE IN THE MUNICIPAL MARKET?
A By working closely with our experienced research analysts, we continued to
look for bonds that may be temporarily out of favor but that we feel have
the potential to appreciate in price if market conditions change. For
example, we had previously purchased securities that were subject to the
alternative minimum tax (AMT) because they offered very attractive yields during
a time when AMT bonds were plentiful. Since that time, the supply of AMT bonds
has dropped significantly, so we sold several AMT holdings and replaced them
with insured bonds that offered approximately the same yield--effectively
increasing the quality of the portfolio without sacrificing yield. 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 -1.06
percent(1) based on market price. This reflects a decrease in market price
from $13.3125 per share on October 31, 1998, to $12.8125 on April 30,
1999. In addition, the Trust provided a distribution rate of 5.62 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 8.78 percent(4) on a taxable investment for shareholders in
6
<PAGE> 8
the 36 percent federal income tax bracket. The Trust's monthly dividend of $.06
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.
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]
Dennis S. Pietrzak
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST
TOP FIVE PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF APRIL 30, 1999
<S> <C>
Health Care................. 18.8%
Industrial Revenue.......... 12.2%
Transportation.............. 12.2%
Higher Education............ 9.5%
Single-Family Housing....... 8.9%
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1998
<S> <C>
Health Care................. 17.1%
Transportation.............. 12.3%
Retail/Electric/Gas/Telephone... 10.4%
Single-Family Housing....... 10.3%
Industrial Revenue.......... 9.8%
</TABLE>
PORTFOLIO COMPOSITION BY CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM INVESTMENTS
AS OF APRIL 30, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa BB/Ba B/B
------- ----- --- ------- ----- ---
<S> <C> <C> <C> <C> <C> <C>
As of April 30, 1999 67.6% 8.1% 9.2% 8.5% 3.9% 1.3%
<CAPTION>
NON-RATED
---------
<S> <C>
As of April 30, 1999 1.4%
</TABLE>
AS OF OCTOBER 31, 1998
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa BB/Ba B/B
------- ----- --- ------- ----- ---
<S> <C> <C> <C> <C> <C> <C>
As of October 31, 1998 60.4% 12.0% 12.3% 8.6% 3.9% 1.5%
<CAPTION>
NON-RATED
---------
<S> <C>
As of October 31, 1998 1.3%
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED APRIL 30, 1999
Distribution per Common Share
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDEND
--------
<S> <C>
'Nov 1998' 0.06
'Dec 1998' 0.06
'Jan 1999' 0.06
'Feb 1999' 0.06
'Mar 1999' 0.06
'Apr 1999' 0.06
</TABLE>
The dividend 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 105.2%
ALASKA 1.5%
$1,500 Alaska St Hsg Fin Corp Ser A Rfdg..... 5.000% 12/01/18 $ 1,488,825
------------
CALIFORNIA 8.8%
3,000 Los Angeles, CA Regl Arpts Impt Corp
Lease Rev Los Angeles Intl Arpt (FSA
Insd) (b)............................. 6.700 01/01/22 3,243,780
3,900 Los Angeles Cnty, CA Metro Tran Auth
Sales Tax Rev Ser A Rfdg (FGIC
Insd)................................. 5.000 07/01/21 3,840,642
1,500 Orange Cnty, CA Recovery Ctfs Partn
Ser A (MBIA Insd)..................... 6.000 07/01/07 1,686,645
------------
8,771,067
------------
COLORADO 5.9%
1,000 Castle Rock, CO Multi-Family Rev Hsg
Pines at Castle Rock Ser A (FSA
Insd)................................. 6.100 12/01/16 1,056,680
1,016 Colorado Hsg Fin Auth Single Family
Pgm Sr Ser E.......................... 8.125 12/01/24 1,107,874
2,500 Meridian Metro Dist CO Rfdg........... 7.000 12/01/01 2,674,150
1,000 University of CO Hosp Auth Rev Ser
A (a)................................. 5.000 11/15/29 968,790
------------
5,807,494
------------
CONNECTICUT 1.1%
1,000 Connecticut St Dev Auth Wtr Fac Rev
Bridgeport Hydraulic.................. 6.150 04/01/35 1,086,890
------------
FLORIDA 1.9%
1,900 Florida St Govt Util Auth Rev Golden
Gate Util Sys (AMBAC Insd)............ 5.000 07/01/29 1,860,727
------------
HAWAII 2.0%
1,000 Hawaii St Arpts Sys Rev (FGIC
Insd) (b)............................. 7.000 07/01/10 1,076,550
1,000 Honolulu, HI City & Cnty Waste Wtr Sys
Rev Rfdg (FGIC Insd).................. 4.500 07/01/28 900,270
------------
1,976,820
------------
</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>
ILLINOIS 2.0%
$1,000 Illinois Hlth Fac Auth Rev Ravenswood
Hosp Med Cent Ser A Rfdg.............. 8.800% 06/01/06 $ 1,003,160
2,500 Will Cnty, IL Cmnty Unit Sch Dist No
365U Vly View Ser B (FSA Insd)........ * 11/01/16 1,028,400
------------
2,031,560
------------
INDIANA 3.8%
3,450 Indiana Hlth Fac Fin Auth Hosp Rev
Comm Hosp of IN (MBIA Insd) (b)....... 6.850 07/01/22 3,788,100
------------
KENTUCKY 5.5%
1,280 Kenton Cnty, KY Arpt Brd Arpt Rev
Cincinnati/Nrthn KY Intl Ser A Rfdg
(MBIA Insd)........................... 6.100 03/01/07 1,421,299
4,000 Louisville & Jefferson Cnty, KY Metro
Swr Dist Drainage Rev Rfdg (MBIA
Insd) (b)............................. 5.300 05/15/19 4,054,520
------------
5,475,819
------------
LOUISIANA 5.8%
1,750 Saint Charles Parish, LA Environmental
Impt Rev LA Pwr & Lt Co Proj A (AMBAC
Insd) (b)............................. 6.875 07/01/24 1,972,215
3,500 Saint Charles Parish, LA Pollutn Ctl
Rev LA Pwr & Lt Co Proj A (FSA
Insd) (b)............................. 7.500 06/01/21 3,802,260
------------
5,774,475
------------
MAINE 4.3%
4,000 Maine Muni Bond Bk Ser A Rfdg......... 5.375 11/01/08 4,224,320
------------
MASSACHUSETTS 2.8%
1,495 Massachusetts St Hlth & Edl Fac Auth
Rev Saint Mem Med Cent Ser A.......... 6.000 10/01/23 1,487,331
1,235 Massachusetts St Indl Fin Agy Rev..... 6.750 12/01/20 1,338,456
------------
2,825,787
------------
</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>
MICHIGAN 9.1%
$1,580 Michigan Higher Edl Fac Auth Ltd Oblig
Rev Hope College Rfdg (Connie Lee
Insd)................................. 7.000% 10/01/13 $ 1,801,279
1,000 Michigan St Hosp Fin Auth Rev Hosp
Genesys Rfdg.......................... 5.500 10/01/27 1,002,700
2,500 Michigan St Strategic Fund Ltd Oblig
Rev Detroit Edison Co College Rfdg
(FGIC Insd)........................... 6.950 09/01/21 2,705,875
3,500 Michigan St Strategic Fund Ltd Oblig
Rev Detroit Edison Co College Rfdg Ser
A (MBIA Insd) (a)..................... 5.550 09/01/29 3,551,870
------------
9,061,724
------------
MISSOURI 5.6%
3,855 Missouri St Hlth & Edl Fac Auth Hlth
Fac Rev SSM Hlthcare Ser AA Rfdg (MBIA
Insd) (b)............................. 6.400 06/01/10 4,486,834
1,000 St Charles Cnty, MO Indl Dev Auth Indl
Rev Dev Westchester Vlg Apts Ser A
Rfdg (FNMA Collateralized)............ 6.150 02/01/27 1,063,860
------------
5,550,694
------------
NEVADA 1.7%
1,570 Nevada Hsg Div Single Family Prog Ser
E..................................... 6.900 10/01/14 1,681,250
------------
NEW JERSEY 4.6%
2,845 East Orange, NJ Brd of Ed Ctfs Partn
Cap Apprec (FSA Insd)................. * 08/01/22 867,014
1,340 New Jersey Econ Dev Auth Dist Heating
& Cooling Rev Trigen Trenton Proj Ser
A..................................... 6.200 12/01/10 1,407,375
2,000 New Jersey Hlthcare Fac Fin Auth Rev
Genl Hosp Cent at Passaic (FSA
Insd)................................. 6.000 07/01/14 2,276,600
------------
4,550,989
------------
NEW MEXICO 1.0%
1,000 New Mexico St Hosp Equip Council Hosp
Rev................................... 5.500 06/01/28 977,250
------------
</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>
NEW YORK 18.1%
$2,000 New York City, NY Hsg Dev Corp Mtg Rev
Multi-Family Ser A Rfdg (FHA Gtd)..... 6.550% 10/01/15 $ 2,143,440
955 New York City Ser H (Prerefunded @
02/01/02) (FSA Insd).................. 7.000 02/01/21 1,051,359
45 New York City Ser H (FSA Insd)........ 7.000 02/01/21 49,131
1,000 New York City Adj-SubSer A-1 (Embedded
Swap)................................. 5.435 08/01/12 1,068,090
1,500 New York City Ser I (MBIA Insd)....... 5.000 04/15/24 1,461,360
2,000 New York City Ser I (MBIA Insd)....... 5.000 04/15/29 1,941,040
4,000 New York St Dorm Auth Rev City Univ
Ser F................................. 5.000 07/01/14 3,997,600
2,500 New York St Dorm Auth Rev St Univ Edl
Fac Ser B Rfdg........................ 5.250 05/15/09 2,642,850
3,100 New York St Med Care Fac Fin Agy Rev
NY Hosp Ser A (Prerefunded @ 02/15/05)
(AMBAC Insd).......................... 6.800 08/15/24 3,592,962
------------
17,947,832
------------
OHIO 2.5%
1,500 Akron, OH Ctfs Partn Akron Muni
Baseball Stad Proj (c)................ 0/6.900 12/01/01 1,475,295
1,000 Cleveland OH Arprt Spl Rev Rev
Continental Airlines, Inc Rfdg (a).... 5.700 12/01/19 984,270
------------
2,459,565
------------
OKLAHOMA 2.3%
2,000 Oklahoma Hsg Fin Agy Single Family Mtg
Rev Homeownership Ln Pgm Ser A (GNMA
Collateralized)....................... 7.050 09/01/26 2,235,360
------------
PENNSYLVANIA 0.7%
2,625 Westmoreland Cnty, PA Muni Auth Svc
Rev Cap Apprec Ser A (MBIA
Insd) (a)............................. * 08/15/23 730,433
------------
</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>
TEXAS 8.3%
$3,000 Houston, TX Arpt Sys Rev Spl Facs
Continental Airls Ser B............... 6.125% 07/15/27 $ 3,074,460
1,425 Tarrant Cnty, TX Jr College Dist...... 5.050 02/15/10 1,471,483
2,505 Texas Hsg Agy Res Dev Rev Mtg Ser D
(GMNA Collateralized)................. 8.400 01/01/21 2,563,191
1,005 Texas St Higher Edl Coordinating Brd
College Student Ln Rev Sr Lien........ 7.700 10/01/25 1,080,315
------------
8,189,449
------------
WISCONSIN 0.2%
205 Wisconsin Hsg & Econ Dev Auth
Homeownership Rev Ser F............... 7.550 07/01/26 211,033
------------
PUERTO RICO 5.7%
4,800 Puerto Rico Comwlth Hwy & Tran Auth
Hwy Rev Ser Y (Embedded Cap) (FSA
Insd)................................. 5.730 07/01/21 5,624,064
------------
</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
- --------------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS 105.2%
(Cost $95,175,445).................................................. $104,331,527
LIABILITIES IN EXCESS OF OTHER ASSETS $(5.2%)........................ (5,140,360)
------------
NET ASSETS 100.0%.................................................... $ 99,191,167
============
</TABLE>
* Zero coupon bond
(a) Security purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
(c) Security is currently a zero coupon bond which will convert to a coupon
paying bond at a predetermined date.
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FHA/VA--Federal Housing Administration/Department of Veterans Affairs
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $95,175,445)........................ $104,331,527
Receivables:
Interest.................................................. 1,667,735
Investments Sold.......................................... 10,338
------------
Total Assets.......................................... 106,009,600
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 6,244,752
Custodian Bank............................................ 227,865
Income Distributions -- Common and Preferred Shares....... 73,167
Investment Advisory and Administrative Fees............... 57,184
Affiliates................................................ 8,441
Accrued Expenses............................................ 114,080
Trustees' Deferred Compensation and Retirement Plans........ 92,944
------------
Total Liabilities..................................... 6,818,433
------------
NET ASSETS.................................................. $ 99,191,167
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 1,360 issued with liquidation preference of
$25,000 per share)........................................ $ 34,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 4,682,128 shares issued and
outstanding).............................................. 46,821
Paid in Surplus............................................. 64,532,602
Net Unrealized Appreciation................................. 9,156,082
Accumulated Undistributed Net Investment Income............. 500,104
Accumulated Net Realized Loss............................... (9,044,442)
------------
Net Assets Applicable to Common Shares................ 65,191,167
------------
NET ASSETS.................................................. $ 99,191,167
============
NET ASSET VALUE PER COMMON SHARE ($65,191,167 divided by
4,682,128 shares outstanding)............................. $ 13.92
=============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 2,759,696
-----------
EXPENSES:
Investment Advisory and Administrative Fees................. 346,321
Preferred Share Maintenance................................. 58,302
Trustees' Fees and Related Expenses......................... 8,869
Legal....................................................... 5,792
Custody..................................................... 3,801
Amortization of Organizational Costs........................ 540
Other....................................................... 43,801
-----------
Total Expenses.......................................... 467,426
-----------
NET INVESTMENT INCOME....................................... $ 2,292,270
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (45,018)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 10,200,728
End of the Period......................................... 9,156,082
-----------
Net Unrealized Depreciation During the Period............... (1,044,646)
-----------
NET REALIZED AND UNREALIZED LOSS............................ ($1,089,664)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 1,202,606
===========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
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............................. $ 2,292,270 $ 4,618,008
Net Realized Gain/Loss............................ (45,018) 344,445
Net Unrealized Appreciation/Depreciation During
the Period...................................... (1,044,646) 2,146,304
------------ ------------
Change in Net Assets from Operations.............. 1,202,606 7,108,757
------------ ------------
Distributions from Net Investment Income:
Common Shares................................... (1,685,505) (3,359,301)
Preferred Shares................................ (551,075) (1,225,228)
------------ ------------
Total Distributions............................... (2,236,580) (4,584,529)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... (1,033,974) 2,524,228
NET ASSETS:
Beginning of the Period........................... 100,225,141 97,700,913
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $500,104
and $444,414, respectively)..................... $ 99,191,167 $100,225,141
============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
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
- -----------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period (a)......... $ 14.144 $ 13.605
-------- --------
Net Investment Income................................ .490 .987
Net Realized and Unrealized Gain/Loss................ (.233) .532
-------- --------
Total from Investment Operations..................... .257 1.519
-------- --------
Less Distributions from Net Investment Income:
Paid to Common Shareholders........................ .360 .718
Common Share Equivalent of Distributions Paid to
Preferred Shareholders........................... .118 .262
-------- --------
Total Distributions.................................. .478 .980
-------- --------
Net Asset Value, End of
the Period......................................... $ 13.923 $ 14.144
======== ========
Market Price Per Share at End of the Period.......... $12.8125 $13.3125
Total Investment Return at Market Price (b).......... (1.06%)* 19.91%
Total Return at Net Asset
Value (c).......................................... .99%* 9.38%
Net Assets at End of the Period (In millions)........ $ 99.2 $ 100.2
Ratio of Expenses to Average Net Assets Applicable to
Common Shares**.................................... 1.43% 1.47%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d).................... 5.34% 5.22%
Portfolio Turnover................................... 30%* 44%
* Non-Annualized
**Ratio of Expenses to Average Net Assets Including
Preferred Shares................................... .94% .97%
</TABLE>
(a) Net Asset Value at November 26, 1993, is adjusted for common and preferred
share offering costs of $.317 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.
18
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 26, 1993
(Commencement
Year Ended October 31, of Investment
- ------------------------------- Operations) to
1997 1996 1995 October 31, 1994
--------------------------------------------------
<S> <C> <C> <C> <C>
$12.923 $12.828 $11.507 $ 13.783
------- ------- ------- --------
.981 .983 .992 .894
.652 .068 1.391 (2.377)
------- ------- ------- --------
1.633 1.051 2.383 (1.483)
------- ------- ------- --------
.690 .693 .774 .621
.261 .263 .288 .172
------- ------- ------- --------
.951 .956 1.062 .793
------- ------- ------- --------
$13.605 $12.923 $12.828 $ 11.507
======= ======= ======= ========
$11.750 $10.625 $10.750 $ 9.625
17.46% 5.35% 19.87% (27.90%)*
11.01% 6.29% 18.75% (14.18%)*
$ 97.7 $ 94.5 $ 94.1 $ 87.9
1.53% 1.55% 1.68% 1.58%
5.50% 5.62% 5.77% 6.06%
39% 47% 84% 224%*
.99% .99% 1.05% 1.04%
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Select 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 primary 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 primarily in a
portfolio of municipal securities from those market sectors which the Adviser
feels will best meet the Trust's investment objective. The Trust commenced
investment operations on November 26, 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--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.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
D. ORGANIZATIONAL COSTS--The Trust has reimbursed Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Trust's organization in the amount of $40,000. These costs were amortized on a
straight line basis over the 60 month period ended November 25, 1998.
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, 1998, the Trust had an accumulated capital loss
carryforward for tax purposes of $8,999,424 which will expire between October
31, 2002 and October 31, 2003.
At April 30, 1999, for federal income tax purposes, cost of long-term
investments is $95,175,445; the aggregate gross unrealized appreciation is
$9,216,167 and the aggregate gross unrealized depreciation is $60,085, resulting
in net unrealized appreciation on long-term investments of $9,156,082.
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.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory and Administrative Agreement,
Van Kampen Investment Advisory Corp. (the "Adviser") will provide investment
advice, administrative services and facilities to the Trust for an annual fee
payable monthly of .70% of the average net assets of the Trust.
For the six months ended April 30, 1999, the Trust recognized expenses of
approximately $1,000 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 six months ended April 30, 1999, the Trust recognized expenses of
approximately $9,000 representing Van Kampen's cost of providing accounting and
legal services to the Trust.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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.
At April 30, 1999, Van Kampen owned 7,128 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 $32,657,000 and $30,757,959,
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 the unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when taking delivery of a security underlying a
futures contract. In this instance, the recognition of gain or loss is postponed
until the disposal of the security underlying the futures contract.
The following types of indexed securities 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.
A. EMBEDDED CAPS--These securities 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 Trust invests in
these instruments as a hedge against a rise in the short term interest rates
which it pays on its preferred shares.
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
B. EMBEDDED SWAPS--These securities include a swap component such that the fixed
coupon component of the underlying bond is adjusted by the difference between
the securities fixed swap rate and the floating swap index. 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 1,360 Auction Preferred Shares ("APS") in two series
of 680 shares each. Dividends are cumulative and the dividend rate is
periodically reset through an auction process. The dividend period for Series A
is 7 days while Series B is 28 days. The average rate in effect on April 30,
1999, was 3.225%. During the year ended April 30, 1999, the rates ranged from
2.950% to 4.750%.
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.
23
<PAGE> 25
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
automatically reinvested in Common Shares of the Trust.
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
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 American 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
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
24
<PAGE> 26
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
25
<PAGE> 27
VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST
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
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG 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.
26
<PAGE> 28
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.
27
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> SELECT SECTOR MUNICIPAL TRUST
<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> 95,175,445
<INVESTMENTS-AT-VALUE> 104,331,527
<RECEIVABLES> 1,678,073
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 106,009,600
<PAYABLE-FOR-SECURITIES> 6,244,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 573,681
<TOTAL-LIABILITIES> 6,818,433
<SENIOR-EQUITY> 34,000,000
<PAID-IN-CAPITAL-COMMON> 64,579,423
<SHARES-COMMON-STOCK> 4,682,128
<SHARES-COMMON-PRIOR> 4,682,128
<ACCUMULATED-NII-CURRENT> 500,104
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,044,442)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,156,082
<NET-ASSETS> 99,191,167
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,759,696
<OTHER-INCOME> 0
<EXPENSES-NET> (467,426)
<NET-INVESTMENT-INCOME> 2,292,270
<REALIZED-GAINS-CURRENT> (45,018)
<APPREC-INCREASE-CURRENT> (1,044,646)
<NET-CHANGE-FROM-OPS> 1,202,606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,236,580)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,033,974)
<ACCUMULATED-NII-PRIOR> 444,414
<ACCUMULATED-GAINS-PRIOR> (8,999,424)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 346,321
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 467,426
<AVERAGE-NET-ASSETS> 99,768,545
<PER-SHARE-NAV-BEGIN> 14.144
<PER-SHARE-NII> 0.490
<PER-SHARE-GAIN-APPREC> (0.233)
<PER-SHARE-DIVIDEND> (0.478)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.923
<EXPENSE-RATIO> 1.43
</TABLE>
