<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Portfolio of Investments.................... 3
Statement of Assets and Liabilities......... 6
Statement of Operations..................... 7
Statement of Changes in Net Assets.......... 7
Financial Highlights........................ 8
Notes to Financial Statements............... 9
</TABLE>
MOSH SAR 8/95
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
August 3, 1995
Dear Shareholder:
The first half of 1995 has been a very positive one for most investors. Both
the fixed- income and stock markets have made considerable gains for the period
ended June 30, 1995. This year has been particularly rewarding for investors
after weathering the difficult markets of 1994.
The first six months of 1995 serve as a reminder of just how quickly markets
can move, and how difficult it can be to predict the timing of those movements.
Moreover, this year reinforces the importance of maintaining a long-term per-
spective, and reaffirms the principle that it is time--not timing--that leads
to investment success.
ECONOMIC OVERVIEW
Due in large part to the Federal Reserve Board's efforts to tighten monetary
supply in 1994, the economy has slowed significantly this year. Evidence of
this guided slowdown was reflected in gross domestic product for the second
quarter, which grew at an annual rate of 0.5 percent, substantially lower than
its first quarter rate of 2.7 percent and fourth quarter 1994 rate of 5.1 per-
cent. While other key economic data, including unemployment rates and housing
starts have shown mixed signs during recent weeks, the general trend for the
first half of the year suggested a "soft landing" scenario. Subsequently, con-
cern over inflation has subsided, as its annualized rate has run at a modest
pace of 3.2 percent year-to-date.
Financial markets, perceiving the Fed's monetary initiatives had taken hold
without driving the economy into a recession, rallied through the first six
months of the year. With slowing growth, interest rates declined and the value
of fixed-income investments rose. For example, the yield on 30-year Treasury
securities fell from 7.88 percent at the end of December to 6.62 percent at the
end of June, while prices on the "long bond" rose 18 percent. Likewise, the
yield on the Bond Buyer's Municipal Bond Index fell from 7.28 percent to 6.37
percent during the same period. Although municipal bond yields have declined,
they are still offering compelling yields, particularly to investors in high
tax brackets. Average yields on municipal bonds reached 90 percent of their
taxable counterparts during the six-month period ended June 30, 1995.
PERFORMANCE SUMMARY
For the six-month period ended June 30, 1995, Mosher Inc. achieved a total
return of 7.65 percent. At its current annualized dividend level of $1.20 per
share, the Fund provides shareholders with a tax-free distribution rate of 6.20
percent as June 30, 1995. At this distribution rate, the Fund provides share-
holders in the 36 percent federal income tax bracket with a yield equivalent to
a taxable investment earning 9.69 percent.
Despite the default of Orange County, California securities, the municipal
market is not compensating investors for buying low-rated securities. Neither
is it paying investors to take
(Continued on page two)
1
<PAGE>
interest rate risk associated with longer-term maturities. As a result, the
Fund's portfolio continued to focus on higher-quality, medium-term issues. For
example, the portfolio recently sold some BBB-rated Maury County, Tennessee in-
dustrial development bonds related to the Saturn automobile project, and pur-
chased AAA-rated Rhode Island Housing bonds eight years shorter in maturity--
and gave up only 0.1 percent in yield.
OUTLOOK
Comfortable with the economy's rate of growth and level of inflation, the Fed
reversed course and lowered short-term interest rates on July 6. We believe
that the Fed will move cautiously before easing again, waiting for further
signs that the economy has settled into a slow growth pattern. We anticipate
that the economy will grow at an annual rate between 2 and 3 percent in the
second half of the year, and that inflation will run at an annualized rate be-
tween 3.3 and 3.5 percent. Based upon this generally slow growth and low infla-
tion outlook, we believe that fixed-income markets--including municipal bonds--
will continue to make attractive gains as interest rates fall.
Mosher, Inc. contains a number of high coupon bonds that were acquired many
years ago. As we move into 1996, those bonds will increasingly be retired or
refunded at lower interest rates. To minimize the impact on the portfolio's
yield, the Fund's Board of Directors has approved an increase in the percentage
of non-rated securities that the portfolio may hold from 20 to 25 percent. As
we seek to provide shareholders with high current income, and as we identify
good quality non-rated credits, we will increase the Fund's holdings in non-
rated securities.
During recent months, debate over tax reform has dominated the agenda in
Washington. There has been varied speculation about the impact of reform, which
may have caused you to wonder how it might affect your investment goals. At
this point, no one knows for sure what will happen or when it might actually
take place. As various proposals come to the forefront, there may be short-term
market fluctuations, just as we saw during the debate over the U.S. health care
system. We will continue to keep a close watch over any new developments and
evaluate the potential impact that they may have on your investments.
Once again, it is important to remember that financial markets will inevita-
bly experience highs and lows, but by maintaining a long-term investment per-
spective, it may allow you to ride the ups and downs of the markets more easily
as you pursue your investment goals.
We appreciate your continued confidence in your investment with Van Kampen
American Capital, and we look forward to communicating with you again regarding
the performance of your Fund.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
- --------------------------- ---------------------------
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 93.9%
EDUCATION 7.2%
$ 500 Connecticut Health & Educational
Facilities Rev. (University of
Hartford) Series D.................. 6.750% 07/01/12 $ 480,970
500 District of Columbia, Rev., (Howard
University) Series A................ 7.250 10/01/20 532,275
100 New Hampshire Higher Education &
Health Rev. ........................ 7.625 07/01/16 101,186
150 New York City, New York, Industrial
Development Agency, Civil Facility
Rev. (Marymount Manhattan College
Project)............................ 7.000 07/01/23 152,695
500 New York State Dormitory Authority
Rev. (City University System) Series
C................................... 6.000 07/01/16 487,770
890 Rhode Island State Health &
Educational, CONN................... 6.500 11/15/24 912,499
-----------
TOTAL EDUCATION..................... 2,667,395
-----------
HOSPITAL 12.7%
250 Delaware State, Economic Development
Authority Rev. (Osteopathic Hospital
Association) Series A............... 6.750 01/01/13 231,660
150 Doylestown, Pennsylvania, Hospital
Authority Rev. (Pine Run) Series A.. 7.200 07/01/23 150,741
500 Fayette County, Pennsylvania,
Hospital Authority Rev. (Uniontown
Hospital) Series 1985............... 7.625 07/01/15 514,695
200 Illinois Health Facilities Authority
Rev. (Elmhurst Memorial Hospital)
Series B............................ 7.250 05/01/22 201,656
250 Laramie County, Wyoming, Hospital
Rev. (Memorial Hospital Project)
AMBAC............................... 6.700 05/01/12 266,762
500 McKeesport, Pennsylvania, Hospital
Authority Rev. (McKeesport Hospital
Project)............................ 6.500 07/01/08 497,400
1,090 Mercer County, West Virginia,
Commercial Development Rev.
(American Health Enterprises, Ltd.). 12.000 12/01/15 1,138,941
250 Newton, Kansas, Hospital Rev.,
(Newton Healthcare Corp.)
Series A............................ 7.375 11/15/14 255,373
250 Scranton-Lackawanna, Pennsylvania,
Health & Welfare Authority Rev.
(Moses Taylor Hospital Project)
Series B............................ 8.500 07/01/20 271,560
100 South Dakota State Health Authority
Rev. ............................... 7.250 04/01/20 100,189
500 Tulsa, Oklahoma, Industrial
Authority, Hospital Rev. (Tulsa
Regional Medical Center)............ 7.200 06/01/17 492,385
500 Wisconsin State Health & Educational
Facilities Authority, Rev. (Wheaton
Franciscan Services, Inc.) Series
1988 (Prerefunded at 08/15/98)...... 8.200 08/15/18 563,600
-----------
TOTAL HOSPITAL...................... 4,684,962
-----------
HOUSING 7.9%
100 Iowa Finance Authority, Multi-family
Rev., Refunding (Park West Project). 8.000 10/01/23 103,639
100 Minneapolis, Minnesota, Health Care
Facility (Ebenezer Society Project)
Series A............................ 7.000 07/01/12 97,674
650 Rhode Island Housing, Single Family
Mtg. Rev. Series A, AMBAC........... 6.150 07/01/17 643,052
250 Ridgeland, Mississippi, Urban
Renewal Rev. (The Orchard, Ltd.
Project) Series A................... 7.750 12/01/15 252,045
</TABLE>
See Notes to Financial Statements
3
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$1,000 Tennessee Housing Development Agency
Rev., (Home Ownership Program)...... 6.800% 07/01/17 $1,039,520
250 Virginia State Housing Development
Rev., (Commonwealth Mortgage) Series
A................................... 7.100 01/01/17 260,343
500 Wisconsin Housing and Economic
Development Authority, Home
Ownership Rev. ..................... 7.350 01/01/17 529,300
----------
TOTAL HOUSING....................... 2,925,573
----------
INDUSTRIAL DEVELOPMENT REVENUE
(IDR)/POLLUTION CONTROL REVENUE
(PCR) 24.6%
1,610 Beaver County, Pennsylvania,
Industrial Development Authority,
PCR, (Toledo Edison) Series A....... 10.750 11/15/15 1,674,851
1,695 Claiborne County, Mississippi, PCR,
(Middle South Energy)............... 9.500 04/01/16 1,787,801
1,000 Gila County, Arizona, Industrial
Development Authority, Refunding,
PCR (Asarco, Inc.).................. 8.900 07/01/06 1,080,420
1,000 Independence County, Arkansas, PCR
(Mississippi Power & Light Company
Project)............................ 9.500 07/01/14 1,115,400
1,700 Indiana County, Pennsylvania,
Industrial Development Authority,
PCR (Pennsylvania Electric Co.
Project) Series 1976-A.............. 7.750 07/01/06 1,711,390
250 Massachusetts Industrial Finance
Agency, IDR, Refunding (Beverly
Enterprises, Inc./Gloucester and
Lexington Projects) Series 1992..... 8.000 05/01/02 262,120
100 Montgomery County, Pennsylvania, IDR
(Pennsburg Nursing & Rehabilitation
Center)............................. 7.625 07/01/18 94,040
1,000 Parish of West Feliciana, Louisiana,
PCR................................. 7.500 05/01/15 1,021,450
195 Pope County, Arkansas, PCR (Arkansas
Power & Light Project).............. 11.000 12/01/15 203,557
105 St. Charles, Illinois, Rev., IDR,
(Tri-City Center Project)........... 7.500 11/01/13 106,719
----------
TOTAL IDR/PCR....................... 9,057,748
----------
LIFE CARE 3.3%
600 Butler County, Pennsylvania,
Industrial Development Authority,
1st Mtg. Rev. (Sherwood Oaks
Project)............................ 8.750 06/01/16 626,466
100 Montgomery County, Pennsylvania,
Industrial Development Authority,
1st Mtg. Rev. (Meadowood Corp
Project)............................ 10.250 12/01/20 111,034
250 Plantation, Florida, Health
Facilities Authority Rev. (Covenant
Retirement Communities, Inc.)....... 7.750 12/01/22 254,650
200 Scottsdale, Arizona, Industrial
Development Authority, 1st Mtg. Rev.
(Westminister Village) (Prerefunded
at 06/01/97)........................ 10.000 06/01/17 226,704
----------
TOTAL LIFE CARE..................... 1,218,854
----------
MISCELLANEOUS 11.2%
500 Dade County, Florida, Special
Obligation, Rev. ................... 5.900 04/01/10 491,260
500 Detroit, Michigan, G.O., Series 87-
A................................... 8.625 04/01/07 526,405
500 Highlands Ranch Metropolitan
District, Colorado, No. 1, Refunding
and Improvement, G.O., Series A..... 7.300 09/01/12 552,135
215 Indianapolis, Indiana, Local Public
Improvement Rev., Series D.......... 6.750 02/01/20 219,696
500 Mountain Village Metropolitan
District, San Miguel County,
Colorado, G.O. ..................... 7.950 12/01/03 520,130
500 New York, New York, G.O., Series B.. 7.375 08/15/13 531,970
500 Parish of St. John the Baptist,
Louisiana, Public Improvement,
Series 1987......................... 7.600 01/01/08 594,045
</TABLE>
See Notes to Financial Statements
4
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Parish of St. John the Baptist,
Louisiana, Public Improvement,
Series 1987......................... 7.600% 01/01/09 $ 593,870
100 Southtech Metropolitan District,
Colorado, Refunding, G.O.
(Prerefunded at 12/01/97) .......... 9.500 12/01/11 112,971
-----------
TOTAL MISCELLANEOUS................. 4,142,482
-----------
NURSING HOMES 1.3%
100 Carmel, Indiana, Retirement Rent
Housing Rev., Refunding
(Beverly Enterprises, Inc.) Series
1992................................ 8.750 12/01/08 109,125
85 Covington-Alleghany County,
Virginia, Refunding (Beverly
Enterprises, Inc.).................. 9.375 09/01/01 92,459
250 Fairfield, Ohio, Economic
Development Rev., Refunding (Beverly
Interprises, Inc.).................. 8.500 01/01/03 265,022
-----------
TOTAL NURSING HOMES................. 466,606
-----------
SALE TAX REVENUE 0.5%
100 Crestwood, Illinois, Tax Increment
Rev., Refunding..................... 7.250 12/01/08 99,231
100 Round Lake Beach, Illinois, Tax
Increment Rev., Series 1993......... 7.200 12/01/04 102,392
-----------
TOTAL SALE TAX REVENUE.............. 201,623
-----------
TRANSPORTATION 2.4%
500 Cleveland, Ohio, Parking Facilities
Improvement Rev. ................... 8.000 09/15/12 525,135
400 Foothill Eastern Transportation
Corridor Agency, (California Toll
Road) Sr. Lien, Series A............ 6.000 01/01/16 375,368
-----------
TOTAL TRANSPORTATION................ 900,503
-----------
UTILITIES 22.8%
2,160 Georgia Municipal Electric
Authority, Power Rev.,
Series L, FSA ...................... 6.000 01/01/19 2,162,441
500 Indiana Municipal Power Agency,
Supply Systems Rev.,
Series A............................ 5.750 01/01/18 467,725
1,550 Intermountain Power Agency, Utah,
Special Obligation, 1st Crossover
Series.............................. 5.000 07/01/16 1,359,582
950 Intermountain Power Agency, Utah,
Special Obligation, 2nd Crossover
Series C............................ 5.000 07/01/18 810,236
1,500 Piedmont Municipal Power Agency,
South Carolina, Electric Rev.,
Refunding, Series A................. 5.750 01/01/24 1,374,780
500 Irvine Ranch, California, Water
District Rev. ...................... 8.250 08/15/23 521,465
1,350 New York City Municipal Water
Finance Authority, New York, Water &
Sewer Rev., Series A................ 5.000 06/15/17 1,164,280
500 West Richland, Washington, Water &
Sewer Rev., MBIA.................... 7.000 12/01/14 535,175
-----------
TOTAL UTILITIES..................... 8,395,684
-----------
TOTAL INVESTMENTS (Cost $32,023,104) 93.9%..................... 34,661,430
OTHER ASSETS AND LIABILITIES, NET 6.1%......................... 2,235,458
-----------
NET ASSETS 100%................................................ $36,896,888
-----------
</TABLE>
G.O.--general obligation bond
Rev.--revenue bond
Insurers:
AMBAC--AMBAC Indemnity Corp.
CONN--Connie Lee
FSA--Financial Security Assurance, Inc.
MBIA--Municipal Bond Investor's
Assurance Corp.
See Notes to Financial Statements
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $32,023,104)................... $34,661,430
Cash.............................................................. 52,038
Investments sold.................................................. 1,520,841
Interest receivable............................................... 878,936
Other receivables................................................. 487
-----------
Total Assets..................................................... 37,113,732
-----------
LIABILITIES
Dividend payable.................................................. 190,528
Due to Adviser.................................................... 13,968
Accrued expenses.................................................. 12,348
-----------
Total Liabilities................................................ 216,844
-----------
NET ASSETS, equivalent to $19.37 per share on 1,905,282 share
outstanding...................................................... $36,896,888
-----------
NET ASSETS WERE COMPRISED OF:
Common stock, at par value $1 per share; 5 million shares
authorized; 1,910,907 shares issued of which 5,625 shares are
held in treasury................................................. $ 1,910,907
Capital surplus................................................... 32,007,341
Less cost of treasury stock....................................... (23,357)
Accumulated net realized loss on securities....................... (130,060)
Net unrealized appreciation of securities......................... 2,638,326
Undistributed net investment income............................... 493,731
-----------
NET ASSETS........................................................ $36,896,888
-----------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest............................................................ $1,338,505
----------
EXPENSES
Management fees..................................................... 82,525
Director's fees and expenses........................................ 24,902
Audit fees.......................................................... 6,348
Custodian fees...................................................... 1,384
Legal fees.......................................................... 4,251
Reports to shareholders............................................. 8,983
Miscellaneous....................................................... 2,580
----------
Total expenses..................................................... 130,973
----------
NET INVESTMENT INCOME.............................................. 1,207,532
----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities..................................... 66,256
Net unrealized appreciation of securities during the period......... 1,420,089
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... 1,486,345
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $2,693,877
----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period........... $35,346,181 $38,792,324
----------- -----------
Operations
Net investment income.................... 1,207,532 2,601,385
Net realized gain (loss) on securities... 66,256 (62,701)
Net unrealized appreciation
(depreciation) of securities during the
period.................................. 1,420,089 (3,374,591)
----------- -----------
Increase (decrease) in net assets
resulting from operations................ 2,693,877 (835,907)
----------- -----------
Distributions to shareholders from net
investment income......................... (1,143,170) (2,610,236)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS......... 1,550,707 (3,446,143)
----------- -----------
NET ASSETS, end of period................. $36,896,888 $35,346,181
----------- -----------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each of the
periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31
June 30, --------------------------------------
1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period................... $18.55 $20.36 $19.88 $19.45 $18.83 $19.54
------ ------ ------ ------ ------ ------
Income from investment
operations
Investment income.......... .63 1.51 1.56 1.53 1.60 1.62
Expenses................... (.07) (.15) (.15) (.17) (.145) (.16)
------ ------ ------ ------ ------ ------
Net investment income....... .56 1.36 1.41 1.36 1.455 1.46
Net realized and unrealized
gains or losses on
securities................. .86 (1.80) .47 .47 .665 (.67)
------ ------ ------ ------ ------ ------
Total from investment
operations.................. 1.42 (.44) 1.88 1.83 2.12 .79
------ ------ ------ ------ ------ ------
Distributions from net
investment income........... (.60) (1.37) (1.40) (1.40) (1.50) (1.50)
------ ------ ------ ------ ------ ------
Net asset value, end of
period...................... $19.37 $18.55 $20.36 $19.88 $19.45 $18.83
------ ------ ------ ------ ------ ------
TOTAL RETURN(/1/)........... 7.65% (2.16%) 9.46% 9.41% 11.26% 4.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).................. $36.9 $35.3 $38.8 $37.9 $37.1 $35.9
Average net assets
(millions).................. $36.7 $37.0 $38.8 $37.5 $36.5 $36.4
Ratios to average net assets
(annualized)
Expenses................... .71% .74% .73% .85% .77% .81%
Expenses, without waiver... -- .76% .78% -- -- --
Net investment income...... 6.58% 7.03% 6.93% 6.91% 7.59% 7.67%
Net investment income,
without waiver............ -- 7.01% 6.88% -- -- --
Portfolio turnover rate..... 6% 18% 5% 15% 2% 1%
</TABLE>
(1) Total return for a period of less than one full year is not annualized.
See Notes to Financial Statements
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Mosher, Inc, (the "Fund") is registered under the Investment Company Act of
1940, as amended, as a diversified, closed-end management investment company.
The following is a summary of the significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. INVESTMENT VALUATIONS-Investments in municipal bonds are valued at the most
recently quoted bid prices or at bid prices based on a matrix system (which
considers such factors as security prices, yields, maturities and ratings)
furnished by dealers and an independent pricing service. Short-term invest-
ments are valued at amortized cost, which approximates market value. Municipal
variable rate demand notes are valued at par. Periodic rate changes reflect
current market conditions.
Issuers of certain securities owned by the Fund may have obtained insurance
guaranteeing their timely payment of principal and interest at maturity. The
insurance reduces financial risk but not market risk of the security.
Fund investments include lower rated and unrated debt securities which may
be more susceptible to adverse economic conditions than investment grade hold-
ings. These securities are often subordinated to the prior claims of other se-
nior lenders and uncertainties exist as to an issuer's ability to meet
principal and interest payments. Securities rated below investment grade and
comparable unrated securities represented approximately 28% of the investment
portfolio at the end of the period.
B. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized gains to its shareholders. It is anticipated that no distributions of
capital gains will be made until tax basis capital loss carryforwards expire
or are offset by net realized capital gains.
At December 31, 1994, the Fund had a capital loss carryforward for federal
income tax purposes of approximately $186,000, which will expire in 1996
through 2002 if not used to offset current or future capital gains.
C. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. Interest income is
accrued weekly.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
D. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.
The Fund will continue to invest principally in tax-exempt obligations suffi-
cient in amount to qualify the Fund to pay "exempt-interest dividends" as de-
fined in the Internal Revenue Code.
E. DEBT DISCOUNT OR PREMIUM-The Fund accounts for discounts and premiums on the
same basis as is used for federal income tax reporting. Accordingly, original
issue debt discounts and all premiums are amortized over the life of the secu-
rity. Market discounts are recognized at the time of sale as realized gains for
book purposes and as ordinary income for tax purposes.
F. WHEN-ISSUED SECURITIES-Delivery and payment for securities purchased on a
when- issued basis may take place up to 45 days after the date of the transac-
tion. The securities purchased are subject to market fluctuation during this
period. To meet the payment obligation, sufficient cash or liquid securities
equal to the amount that will be due are set aside with the custodian.
NOTE 2--MANAGEMENT FEES
Van Kampen American Capital Asset Management, Inc. (the "Adviser"), serves as
investment manager of the Fund. Management fees are paid monthly based on an
annual rate of .45% of average weekly net assets.
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $2,432,026 and $2,031,022, re-
spectively.
For federal income tax purposes, the identified cost of investments owned at
the end of the period was $32,033,028. Net unrealized appreciation of invest-
ments aggregated $2,628,402, gross unrealized appreciation of investments ag-
gregated $2,789,650, and gross unrealized depreciation of investments
aggregated $161,248.
NOTE 4--DIRECTOR COMPENSATION
Fund directors who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $3,000 plus a fee of $750 per Board meeting and $200
per Committee meeting attended. During the period, such fees aggregated
$23,850.
10
<PAGE>
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
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
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
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies 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 direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
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MOSHER, INC.
BOARD OF DIRECTORS
DOUGAL A. CAMERON, IV
MILTON E. ELLIOT
CHRISTOPHER T. JONES
RICHARD L. KENDAL
JOHN H. LINDSEY
ROBERT C. MCNAIR
CHARLES C. RYRIE
ROBERT STEWART, JR.
OFFICERS
MILTON E. ELLIOT
Chairman
CHRISTOPHER T. JONES
President
CHARLES C. RYRIE
Vice President and Treasurer
ARTHUR H. ROGERS
Secretary
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd. Houston, Texas 77056
SHAREHOLDER SERVICE AGENT
BOSTON FINANCIAL DATA SERVICES, INC.
P.O. Box 366
Boston, Massachusetts 02101
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street Boston, Massachusetts 02110
LEGAL COUNSEL
Fulbright & Jaworski
1301 McKinney
Houston, Texas 77010
(C)Van Kampen American Capital Distributors, Inc., 1995 All rights reserved.
/SM/ denotes a service mark of Van Kampen American Capital Distributors, Inc.
Nationally distributed by Van Kampen American Capital Distributors, Inc.
Inquiries about an investor's account should be referred
to the Fund's Transfer Agent. Boston Financial Data Services, Inc.
P.O. Box 366
Boston, Massachusetts 02101
Telephone: (800) 821-1238
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