<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Portfolio of Investments.................... 3
Statement of Assets and Liabilities......... 7
Financial Statements........................ 8
Statement of Operations..................... 8
Statement of Changes in Net Assets.......... 8
Financial Highlights........................ 9
Notes to Financial Statements............... 10
Independent Auditor's Report................ 12
</TABLE>
MOSH ANR 2/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
February 8, 1996
Dear Shareholder,
For most investors, it would be hard to surpass the success enjoyed during
1995. The stock and bond markets enjoyed substantial gains, driven by a combi-
nation of continuing economic growth and low inflation. The strength of equity
and fixed-income securities in 1995 was particularly impressive because it
followed a year in which both markets declined. People who remained invested
during 1995 generally shared in the growth of the markets, while investors who
retreated after 1994's downturn may have missed out on the double-digit re-
turns.
The rebound in the markets last year reinforces the importance of maintain-
ing a long-term perspective for your investments. While the environment for
stocks and bonds remains positive, it is unlikely that 1996 will see a repeat
of the markets' strong 1995 performance. However, municipal bonds continue to
meet the needs of investors who seek capital preservation and regular income
free from federal income taxes.
ECONOMIC OVERVIEW
The U.S. economy grew throughout 1995, but the rate of growth slowed toward
year-end. The gross domestic product grew at an annual rate of more than 4
percent in the third quarter of 1995, but slowed to an estimated 2 to 3 per-
cent in the fourth quarter of the year, with retail and auto sales particu-
larly sluggish. The slower growth rate eased concerns about inflation and
allowed the Federal Reserve Board in late December to lower short-term inter-
est rates by a quarter-percentage point. Just as the Fed's raising of short-
term rates in 1994 helped slow economic growth in 1995, the reduction in rates
during the latter half of 1995 was expected to help generate moderate economic
growth in 1996.
The cut in short-term rates, combined with moderate growth forecasts, was
viewed by the financial markets as a positive event, pushing up both stock and
bond prices. For example, during 1995 the yield on the Bond Buyer's Municipal
Bond Index fell from 6.97 percent to 5.56 percent. Many observers expect the
Fed to cut rates further if Congress and the President are able to reach an
agreement on the federal budget, provided economic conditions justify further
easing. Although municipal bond yields have declined, they still are offering
compelling yields, particularly to investors in high tax brackets.
PERFORMANCE SUMMARY
For the year ended December 31, 1995, Mosher Inc. achieved a total return of
14.12 percent. At its current annualized dividend level of $1.30 per share,
the Fund provides shareholders with a tax-free distribution rate of 6.54 per-
cent as of December 31, 1995. At this
Continued on page two
1
<PAGE>
distribution rate, the Fund provides shareholders in the 36 percent federal in-
come tax bracket with a yield equivalent to a taxable investment earning 10.22
percent. During the reporting period, the Fund's portfolio continued to focus
on higher-quality, medium-term issues.
OUTLOOK
Looking ahead, we are cautiously optimistic. We expect the economy to grow at
a rate of 2 to 3 percent throughout 1996, with growth stronger in the second
half of the year as the full impact of the Fed's rate cuts take effect. Lower
rates will have the greatest impact on interest-sensitive industries, such as
housing. Although inflation appears to be under control, there probably will be
some upward pressure in 1996 as lower interest rates generate increased eco-
nomic activity.
The current economic conditions are ideal for stocks, especially the stocks
of smaller companies, since they tend to be affected less by economic cycles.
The outlook for the fixed-income market--including municipal bonds--is posi-
tive, too. In the near-term, we believe domestic markets will benefit from a
stable U.S. dollar and increased business activity driven in part by a number
of recently announced strategic reorganizations of some of the nation's blue
chip industry leaders.
During recent months, debate over tax reform and the federal deficit has dom-
inated the agenda in Washington. Now that we are in a presidential election
year, tax reform likely will replace the budget battle as the top issue in
Washington. There has been varied speculation about the impact of these issues
on the economy and on various types of investments. We are following the tax
reform debate very closely, and we will keep you updated on this issue through-
out the year.
We appreciate your continued confidence in your investment, and we look for-
ward 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
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 93.7%
EDUCATION 12.9%
$1,000 Columbus, Indiana, Four Star School
Building Corp., 1st Mtg. Rev., MBIA..... 6.000% 01/15/06 $ 1,081,470
500 Connecticut, Health & Educational
Facilities Rev. (University of Hartford)
Series D................................ 6.750 07/01/12 508,065
500 District of Columbia, Rev., (Howard
University) Series A.................... 7.250 10/01/20 544,945
1,000 King County, Washington, School District
No. 411, Series A....................... 5.850 12/01/11 1,037,330
100 New Hampshire, Higher Education & Health
Rev. ................................... 7.625 07/01/16 103,879
150 New York City, New York, Industrial
Development Agency, Civil Facility Rev.
(Marymount Manhattan College Project)... 7.000 07/01/23 160,076
500 New York, State Dormitory Authority Rev.
(City University System) Series C....... 6.000 07/01/16 504,505
890 Rhode Island, State Health &
Educational, CONN....................... 6.500 11/15/24 952,425
------------
4,892,695
------------
HOSPITAL 8.4%
250 Delaware, State Economic Development
Authority Rev.
(Osteopathic Hospital Association)
Series A................................ 6.750 01/01/13 246,277
150 Doylestown, Pennsylvania, Hospital
Authority Rev. (Pine Run) Series A...... 7.200 07/01/23 157,249
500 Fayette County, Pennsylvania, Hospital
Authority Rev. (Uniontown Hospital)
Series 1985............................. 7.625 07/01/15 518,080
200 Illinois Health Facilities Authority
Rev. (Elmhurst Memorial Hospital) Series
B....................................... 7.250 05/01/22 209,514
250 Laramie County, Wyoming, Hospital Rev.
(Memorial Hospital Project) AMBAC....... 6.700 05/01/12 274,695
250 Newton, Kansas, Hospital Rev., (Newton
Healthcare Corp.)
Series A................................ 7.375 11/15/14 268,565
250 Scranton-Lackawanna, Pennsylvania,
Health & Welfare Authority Rev. (Moses
Taylor Hospital Project) Series B....... 8.500 07/01/20 277,943
100 South Dakota, State Health Authority
Rev. ................................... 7.250 04/01/20 104,850
500 Tulsa, Oklahoma, Industrial Authority,
Hospital Rev. (Tulsa Regional Medical
Center)................................. 7.200 06/01/17 543,815
500 Wisconsin, State Health & Educational
Facilities Authority, Rev. (Wheaton
Franciscan Services, Inc.) Series 1988
(Prerefunded at 08/15/98)............... 8.200 08/15/18 560,195
------------
3,161,183
------------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HOUSING 7.8%
$ 100 Iowa, Finance Authority, Multi-family
Rev., Refunding (Park West Project).... 8.000% 10/01/23 $ 103,356
100 Minneapolis, Minnesota, Health Care
Facility (Ebenezer Society Project)
Series A............................... 7.000 07/01/12 101,662
650 Rhode Island, Housing, Single Family
Mtg. Rev. Series A, AMBAC.............. 6.150 07/01/17 672,770
250 Ridgeland, Mississippi, Urban Renewal
Rev. (The Orchard, Ltd. Project) Series
A...................................... 7.750 12/01/15 263,155
960 Tennessee, Housing Development Agency
Rev. (Home Ownership Program).......... 6.800 07/01/17 1,014,499
250 Virginia, State Housing Development
Rev., (Commonwealth Mortgage) Series A. 7.100 01/01/17 263,385
500 Wisconsin, Housing and Economic
Development Authority, Home Ownership
Rev. .................................. 7.350 01/01/17 537,695
-----------
2,956,522
-----------
INDUSTRIAL DEVELOPMENT REVENUE
(IDR)/POLLUTION CONTROL REVENUE
(PCR) 14.6%
1,695 Claiborne County, Mississippi, PCR,
(Middle South Energy).................. 9.500 04/01/16 1,762,224
1,000 Gila County, Arizona, Industrial
Development Authority, Refunding, PCR
(Asarco, Inc.)......................... 8.900 07/01/06 1,088,330
1,000 Independence County, Arkansas, PCR
(Mississippi Power & Light Company
Project)............................... 9.500 07/01/14 1,125,620
250 Massachusetts, Industrial Finance
Agency, IDR, Refunding (Beverly
Enterprises, Inc./Gloucester and
Lexington Projects) Series 1992........ 8.000 05/01/02 270,407
100 Montgomery County, Pennsylvania, IDR
(Pennsburg Nursing & Rehabilitation
Center)................................ 7.625 07/01/18 100,285
1,000 Parish of West Feliciana, Louisiana,
PCR.................................... 7.500 05/01/15 1,086,990
105 St. Charles, Illinois, Rev., IDR (Tri-
City Center Project)................... 7.500 11/01/13 111,356
-----------
5,545,212
-----------
LIFE CARE 3.3%
600 Butler County, Pennsylvania, Industrial
Development Authority, 1st Mtg. Rev.
(Sherwood Oaks Project)................ 8.750 06/01/16 620,274
100 Montgomery County, Pennsylvania,
Industrial Development Authority, 1st
Mtg. Rev. (Meadowood Corp Project)..... 10.250 12/01/20 127,759
250 Plantation, Florida, Health Facilities
Authority Rev. (Covenant Retirement
Communities, Inc.)..................... 7.750 12/01/22 272,880
200 Scottsdale, Arizona, Industrial
Development Authority, 1st Mtg. Rev.
(Westminister Village) (Prerefunded at
06/01/97).............................. 10.000 06/01/17 222,238
-----------
1,243,151
-----------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MISCELLANEOUS 13.4%
$ 500 Dade County, Florida, Special
Obligation, Rev. ....................... 5.900% 04/01/10 $ 522,550
500 Detroit, Michigan, G.O., Series 87-A.... 8.625 04/01/07 537,800
1,000 Hammond, Indiana, Local Public
Improvement Rev., Series A, FGIC........ 5.300 03/15/09 998,970
500 Highlands Ranch Metropolitan District,
Colorado, No. 1, Refunding and
Improvement, G.O., Series A............. 7.300 09/01/12 591,025
500 Mountain Village Metropolitan District,
San Miguel County, Colorado, G.O. ...... 7.950 12/01/03 533,295
500 New York, New York, G.O., Series B...... 7.375 08/15/13 551,050
500 Parish of St. John the Baptist,
Louisiana, Public Improvement,
Series 1987............................. 7.600 01/01/08 611,235
500 Parish of St. John the Baptist,
Louisiana, Public Improvement, Series
1987.................................... 7.600 01/01/09 612,435
100 Southtech Metropolitan District,
Colorado, Refunding, G.O. (Prerefunded
at 12/01/97) ........................... 9.500 12/01/11 111,098
-----------
5,069,458
-----------
NURSING HOMES 1.3%
100 Carmel, Indiana, Retirement Rent Housing
Rev., Refunding
(Beverly Enterprises, Inc.) Series 1992. 8.750 12/01/08 114,125
75 Covington-Alleghany County, Virginia,
Refunding (Beverly Enterprises, Inc.)... 9.375 09/01/01 85,407
250 Fairfield, Ohio, Economic Development
Rev., Refunding (Beverly Enterprises,
Inc.)................................... 8.500 01/01/03 275,452
-----------
474,984
-----------
SALES TAX REVENUE 3.7%
100 Crestwood, Illinois, Tax Increment Rev.,
Refunding............................... 7.250 12/01/08 102,362
1,185 Reno, Nevada, Redevelopment Agency Tax
Allocation Rev.,
Series A................................ 6.000 06/01/10 1,199,054
100 Round Lake Beach, Illinois, Tax
Increment Rev., Series 1993............. 7.200 12/01/04 106,275
-----------
1,407,691
-----------
TRANSPORTATION 3.9%
500 Cleveland, Ohio, Parking Facilities
Improvement Rev. ....................... 8.000 09/15/12 537,925
500 Indiana, Finance Authority, Airport
Facilities Lease Rev.,
Series A................................ 6.250 11/01/16 517,785
400 Foothill Eastern Transportation Corridor
Agency (California Toll Road) Sr. Lien,
Series A................................ 6.000 01/01/16 403,016
-----------
1,458,726
-----------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UTILITIES 24.4%
$ 400 Chicago, Illinois, Emergency Telephone
System, FGIC............................ 5.600% 01/01/10 $ 414,160
2,160 Georgia, Municipal Electric Authority,
Power Rev.,
Series L, FSA .......................... 6.000 01/01/19 2,173,349
500 Indiana, Municipal Power Agency, Supply
Systems Rev.,
Series A................................ 5.750 01/01/18 500,045
1,550 Intermountain Power Agency, Utah,
Special Obligation, 1st Crossover
Series.................................. 5.000 07/01/16 1,439,221
950 Intermountain Power Agency, Utah,
Special Obligation, 2nd Crossover Series
C....................................... 5.000 07/01/18 884,469
500 Irvine Ranch, California, Water District
Rev. ................................... 8.250 08/15/23 538,355
1,500 Piedmont Municipal Power Agency, South
Carolina, Electric Rev., Refunding,
Series A................................ 5.750 01/01/24 1,471,350
1,350 New York City, Municipal Water Finance
Authority, New York, Water & Sewer Rev.,
Series A................................ 5.000 06/15/17 1,275,291
500 West Richland, Washington, Water & Sewer
Rev., MBIA.............................. 7.000 12/01/14 558,275
-----------
9,254,515
-----------
TOTAL MUNICIPAL BONDS (Cost
$32,265,569)............................ 35,464,137
-----------
MUNICIPAL VARIABLE RATE DEMAND NOTES 0.3%
100 Wilmington, Delaware, Hospital, Series B
(Cost $100,000)......................... 3.750 07/01/11 100,000
-----------
TOTAL INVESTMENTS (Cost $32,365,569) 94.0%...................... 35,564,137
OTHER ASSETS AND LIABILITIES, NET 6.0%.......................... 2,288,755
-----------
NET ASSETS 100%................................................. $37,852,892
-----------
</TABLE>
G.O.--general obligation bond
Rev.--revenue bond
Insurers:
AMBAC--AMBAC Indemnity Corp.
CONN--Connie Lee
FGIC--Financial Guaranty Insurance Corp.
FSA--Financial Security Assurance, Inc.
MBIA--Municipal Bond Investor's Assurance Corp.
See Notes to Financial Statements
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $32,365,569)................... $35,564,137
Receivable for investments sold................................... 1,765,143
Interest receivable............................................... 751,407
Other receivables................................................. 637
-----------
Total Assets..................................................... 38,081,324
-----------
LIABILITIES
Dividend payable.................................................. 190,528
Due to Adviser.................................................... 11,023
Accrued expenses.................................................. 26,881
-----------
Total Liabilities................................................ 228,432
-----------
NET ASSETS, equivalent to $19.87 per share on 1,905,282 shares
outstanding...................................................... $37,852,892
-----------
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)
Undistributed net realized gain on securities..................... 388,731
Net unrealized appreciation of securities......................... 3,198,568
Undistributed net investment income............................... 370,702
-----------
NET ASSETS........................................................ $37,852,892
-----------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31,
1995
------------
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $2,654,299
----------
EXPENSES
Management fees................................................... 166,477
Director's fees and expenses...................................... 50,843
Audit fees........................................................ 12,700
Custodian fees.................................................... 2,256
Legal fees........................................................ 8,257
Reports to shareholders........................................... 11,045
Miscellaneous..................................................... 3,178
Expense waiver (see Note 2)....................................... (18,656)
----------
Total expenses................................................... 236,100
----------
NET INVESTMENT INCOME............................................ 2,418,199
----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities................................... 585,047
Net unrealized appreciation of securities during the period....... 1,980,331
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES................... 2,565,378
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $4,983,577
----------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period...................... $35,346,181 $38,792,324
----------- -----------
OPERATIONS
Net investment income............................... 2,418,199 2,601,385
Net realized gain (loss) on securities.............. 585,047 (62,701)
Net unrealized appreciation (depreciation) of
securities during the period....................... 1,980,331 (3,374,591)
----------- -----------
Increase (decrease) in net assets resulting from
operations.......................................... 4,983,577 (835,907)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME............................................... (2,476,866) (2,610,236)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS.................... 2,506,711 (3,446,143)
----------- -----------
NET ASSETS, end of period (including undistributed
net investment income of $370,702 and $429,369,
respectively)....................................... $37,852,892 $35,346,181
----------- -----------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each of the
periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <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
------ ------ ------ ------ ------
INCOME FROM OPERATIONS
Investment income..................... 1.39 1.51 1.56 1.53 1.60
Expenses.............................. (.12) (.15) (.15) (.17) (.145)
------ ------ ------ ------ ------
Net investment income.................. 1.27 1.36 1.41 1.36 1.455
Net realized and unrealized gain (loss)
on securities......................... 1.35 (1.80) .47 .47 .665
------ ------ ------ ------ ------
Total from investment operations....... 2.62 (.44) 1.88 1.83 2.12
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM NET INVESTMENT
INCOME................................. (1.30) (1.37) (1.40) (1.40) (1.50)
------ ------ ------ ------ ------
Net asset value, end of period......... $19.87 $18.55 $20.36 $19.88 $19.45
------ ------ ------ ------ ------
TOTAL RETURN........................... 14.12% (2.16%) 9.46% 9.41% 11.26%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)... $37.9 $35.3 $38.8 $37.9 $37.1
Average net assets (millions).......... $37.0 $37.0 $38.8 $37.5 $36.5
Ratios to average net assets(1)
Expenses.............................. .64% .74% .73% .85% .77%
Expenses, without waiver.............. .69% .76% .78% -- --
Net investment income................. 6.54% 7.03% 6.93% 6.91% 7.59%
Net investment income, without waiver. 6.49% 7.01% 6.88% -- --
Portfolio turnover rate................ 21% 18% 5% 15% 2%
</TABLE>
(1) See Note 2
See Notes to Financial Statements
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
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 Fund seeks income that is exempt from federal income tax by investing pri-
marily in municipal debt securities.
The following is a summary of the significant accounting policies consist-
ently followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted ac-
counting principles requires management to make estimates and assumptions that
affect the amounts reported. Actual amounts may differ from the estimates.
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 20% 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.
During the period, the Fund utilized approximately $186,000 in capital loss
carryforward to offset 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.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
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 suf-
ficient in amount to qualify the Fund to pay "exempt-interest dividends" as
defined 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, orig-
inal issue debt discounts and all premiums are amortized over the life of the
security. 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. As of July 1, 1995, the Ad-
viser voluntarily agreed to waive all management fees in excess of .35% of the
Fund's 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 $7,559,714 and $7,446,922, re-
spectively.
The cost of investments owned at the end of the period was the same for
federal income tax purposes. Gross unrealized appreciation of investments ag-
gregated $3,198,568 and there was no gross unrealized depreciation of invest-
ments.
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
$47,700.
11
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF MOSHER, INC.
We have audited the accompanying statement of assets and liabilities including
the portfolio of investments of Mosher, Inc., as of December 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the years in the two-year period then ended,
and financial highlights for each of the years in the five-year period then
ended. These financial statements and financial highlights are the responsi-
bility of the Fund'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 stan-
dards. 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 De-
cember 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial state-
ment 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
Mosher, Inc. as of December 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with generally accepted ac-
counting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
January 19, 1996
12
<PAGE>
MOSHER, INC.
BOARD OF DIRECTORS
DOUGAL A. CAMERON, IV
MILTON E. ELIOT
CHRISTOPHER T. JONES
RICHARD L. KENDALL
JOHN H. LINDSEY
ROBERT C. MCNAIR
CHARLES C. RYRIE
ROBERT STEWART, JR.
OFFICERS
MILTON E. ELIOT
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
INDEPENDENT AUDITORS
KPMG PEAT MARWICK
NationsBank Center
700 Louisiana
Houston, Texas 77210-4545
(c) Van Kampen American Capital Distributors, Inc., 1996 All rights reserved.
SM denotes a service mark of 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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