MOSHER INC.
Semi-Annual Report
June 30, 1997
A Wealth of Knowledge - A Knowledge of Wealth
Van Kampen American Capital
Table of Contents
Letter to Shareholders 1
Portfolio Investments 4
Statement of Assets and Liabilities 7
Statement of Operations 8
Statement oF Changes in Net Assets 9
Financial Highlights 10
Notes to Financial Statements 11
Letter to Shareholders
July 28, 1997
Dear Shareholder,
As you know, Van Kampen American Capital was acquired by Morgan
Stanley Group Inc., a world leader in asset management. More
recently, on February 5, 1997, Morgan Stanley Group Inc. and
Dean Witter, Discover & Co. agreed to merge. The merger was
completed on May 31, creating the combined company of Morgan
Stanley, Dean Witter, Discover & Co. This preeminent global
financial services firm boasts a market capitalization of $21
billion and leading market positions in securities, asset
management, and credit services. Additionally, I am very pleased
to announce that Philip N. Duff, formerly the chief financial
officer of Morgan Stanley, has joined Van Kampen American
Capital as president and chief executive officer. I will
continue as chairman of the firm.
As the financial industry continues to witness unprecedented
consolidations and new partnerships, we believe that those firms
who are leaders in all facets of their business will be able to
offer investors the greatest opportunities and services as we
move into the next century. We are confident that these changes
will continue to work to the benefit of our fund shareholders as
we move into the next century.
Mosher, Inc. has undergone a merger of its own, following the
decision by shareholders to transfer its assets to the AIM
Municipal Bond Fund, a member of the AIM Funds Group. The
transfer was structured as a tax-free reorganization with no
sales charge. Each shareholder of Mosher, Inc. received a number
of Class A shares of the AIM Municipal Bond Fund equal to the
aggregate net asset value of his or her shares of Mosher, Inc.
Van Kampen American Capital appreciates the support you have
given us in the past concerning your investments in Mosher,
Inc., and we hope that the transfer of assets to the AIM Funds
Group proceeds smoothly.
ECONOMIC REVIEW
Bond prices were volatile during the six months ended June 30.
Initially, prices fell as the economy rebounded, culminating at
a 4.9 percent pace in GDP in the first quarter. This strength,
coupled with warnings by Federal Reserve Board chairman Alan
Greenspan that tighter monetary policy might be appropriate,
reignited fears of a rate hike. Then, on March 25, the Fed
raised short-term rates a modest quarter percentage point, a
hike that market participants viewed as the first of many. As a
result, the 30-year Treasury bond's yield, which moves in the
opposite direction of its price, jumped above 7 percent for the
first time in six months.
By the end of April, the bond market turned its attention to a
succession of positive news about inflation and signs that
economic growth had moderated. This view was reinforced by the
Fed's decision not to raise rates again when its policymakers
met in May. By the end of June, the yield on the 30-year
Treasury bond stood at 6.79 percent, up slightly from 6.64
percent at the end of December, but down sharply from the 7.17
percent high reached in mid-April.
Throughout the first half of 1997, municipal bonds outperformed
Treasuries. From the end of December to the end of June, the
yield for long-term municipal bonds fell 8 basis points, while
the yield on the 30-year Treasury bond rose 20 basis points. A
relatively stable supply of new issues, coupled with an increase
in retail and institutional demand, contributed to the improved
performance of municipal bonds.
Portfolio Strategy
We continued to manage the Fund in a conservative manner in
order to seek to preserve shareholders' capital. We maintained a
level of high credit quality among bonds in the portfolio, with
82 percent of Fund assets rated at or above investment grade.
Within the investment-grade category of bonds, however, we
maintained a diversified mix of credit ratings in order to seek
to minimize the Fund's volatility to interest rate changes.
As of June 30, about 39 percent of bonds in the portfolio were
AAA-rated, which is the highest credit rating assigned to bonds
by Standard & Poor's Ratings Group. Many are insured bonds,
which are protected against default. Insured bonds currently
comprise about half of all new municipal bonds and, as a result,
they are extremely liquid. Approximately 9 percent of bonds in
the portfolio were pre-funded and fully backed by U.S.
Treasuries, whose credit worthiness exceeds all other bonds in
the market. Both AAA-rated bonds and pre-refunded bonds tend to
provide for safety of principal and perform better when interest
rates are falling. Among the remaining assets of the Fund, 5
percent were AA-rated, 15 percent were A-rated, and 23 percent
were BBB-rated, which the lowest credit rating in the investment
grade category. Another 18 percent were BB-rated or non-rated.
These lower-rated bonds have tended to perform better when
interest rates are rising, and they have the potential to
provide additional income. The insurance does not remove market
risk.
Portfolio Composition by Credit Quality as of June 30, 1997
As a Percentage of Long-Term Investments
AAA................... 39.4%
AA.................... 4.9%
A..................... 14.8%
BBB................... 23.2%
BB.................... 3.4%
Non-Rated............. 14.3%
Based upon the highest credit quality ratings as issued by
Standard & Poor's or Moody's.
Portfolio turnover during the period focused on maintaining the
Fund's income-paying ability as well as its high credit quality
in order to ensure a smooth transfer of assets to the AIM
Municipal Bond Fund. For example, we sold our position in
University of Hartford, Conn. bonds because the bonds had been
downgraded to below investment grade by Moody's. This timely
sale had virtually no material impact on the Fund's NAV.
During the period, the Fund's duration declined as a result of
coupon payments and maturities, which increased its cash
position. Duration, which is expressed in years, is a measure of
the portfolio's sensitivity to interest rate changes. Portfolios
with shorter durations tend to perform better when interest
rates are rising, and those with longer durations tend to
perform better when rates are falling. The relatively short
duration of the Fund helped cushion its share price in March
and April, when interest rates rose as a result of monetary
tightening by the Fed. During the second half of 1996, when
interest rates were falling, the Fund's duration limited its
gains.
We continue to hold a diverse mix of bonds, including essential
service revenue bonds as well as general obligation bonds. The
Fund's leading revenue service sectors are electric utilities,
health care, water and sewage, and transportation.
Performance Summary
For the six-month period ended June 30, 1997, the Fund
generated a total return at net asset value of 2.91 percent(1).
The Fund offered a tax-exempt distribution rate of 6.22
percent(3), based on the ending net asset value of $19.29 per
share on June 30, 1997. Because income from the Fund is exempt
from federal income tax, this distribution rate represents a
yield equivalent to a taxable investment earning 9.72 percent(4)
for investors in the 36 percent federal income tax bracket.
Outlook
We continue to see strength in the economy, but we do not
believe that second-quarter growth was nearly as vibrant as the
4.9 percent pace set in the first quarter. While labor
productivity and manufacturing remained strong in the second
quarter, retail sales fell, and the unemployment rate, which had
slipped below 5.0 percent in April and May, edged up to that
level in June.
We expect that growth will accelerate again during the second
half of the year because the economy's strong underlying
fundamentals, including consumer confidence, job growth, and
moderate inflation, remain intact. As a result, we believe the
Federal Reserve may raise rates again before year end. Given
this outlook, we expect the yield on the 30-year Treasury bond
to range between 6.5 and 7.5 percent for the remainder of the
year.
Thank you for your past confidence in Van Kampen American
Capital. On behalf of your portfolio management team, we wish
you success in your future endeavors.
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.
<TABLE>
MOSHER, INC.
Portfolio of Investments
June 30, 1997 (Unaudited)
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds 94.8%
Arizona 2.9%
$1,000 Gila Cnty, AZ Indl Dev Auth Rev Pollutn Ctl Asarco Inc
Rfd 8 8.900 % 07/01/06 $ 1,051,690
---------
Arkansas 2.9%
1,000 Independence Cnty, AR Pollutn Ctl Rev MS Pwr & Light Co
Proj Ser C 9.500 07/01/14 1,067,850
---------
California 2.5%
400 Foothill/Eastern Tran Corridor Agy CA Toll Road Rev Sr
Lien Ser A 6.000 01/01/16 407,044
500 Irvine Ranch, CA Wtr Dist Jt Pwrs Agy Local Pool Rev
Issue II 8.250 08/15/23 520,025
---------
927,069
---------
Colorado 3.3%
500 Highlands Ranch Metro Dist No 1 CO Rfdg & Impt Ser A
(Prerefunded @ 09/01/02) 7.300 09/01/12 575,805
500 Mountain Vlg Metro Dist CO San Miguel Cnty Rfdg 7.950 12/01/03 521,040
100 Southtech Metro Dist CO Rfdg (Prerefunded @ 12/01/97) 9.500 12/01/11 103,369
---------
1,200,214
---------
Connecticut 2.9%
1,000 Bridgeport, CT Ser A Rfdg (AMBAC Insd) 6.000 09/01/06 1,078,860
---------
Delaware 0.8%
250 Delaware St Econ Dev Auth Rev Osteopathic Hosp Assoc DE
Ser A 6.750 01/01/13 288,010
---------
Florida 2.1%
500 Dade Cnty, FL Spl Oblig Courthouse Cent Proj 5.900 04/01/10 513,370
250 Plantation, FL Hlth Fac Auth Rev Covenant Retirement Cmnty
Inc Rfdgs 7.750 12/01/22 267,717
---------
781,087
---------
Illinois 8.1%
400 Chicago, IL Emergency Tel Sys (FGIC Insd) 5.600 01/01/10 413,828
100 Crestwood, IL Tax Increment Rev Rfdg 7.250 12/01/08 101,132
200 Illinois Hlth Fac Auth Rev Mem Hosp 7.250 05/01/22 206,370
1,000 Illinois St Rfdg (FGIC Insd) 5.000 02/01/07 1,009,820
1,000 Kane Cnty, IL Sch Dist No 131 Aurora East Side (FSA Insd) 5.350 01/01/04 1,032,100
100 Round Lake Beach, IL Tax Increment Rev Rfdg 7.200 12/01/04 104,002
105 Saint Charles, IL Indl Dev Rev Tri-City Cent Proj 7.500 11/01/13 108,862
---------
2,976,114
---------
Indiana 6.6%
100 Carmel, IN Retirement Rent Hsg Rev Beverly Enterprises Inc
Proj Rfdg 8.750 12/01/08 112,750
1,000 Columbus, IN Four Star Sch Bldg Corp First Mtg (MBIA Insd) 6.000 01/15/06 1,070,960
500 Indiana Muni Pwr Agy Pwr Supply Sys Rev Ser A Rfdg 5.750 01/01/18 496,430
190 Indiana St Hsg Fin Auth Single Family Mtg Rev Ser B-1 6.150 07/01/17 194,275
105 Indiana Tran Fin Auth Arpt Fac Lease Rev Ser A 6.250 11/01/16 109,627
395 Indiana Tran Fin Auth Arpt Fac Lease Rev Ser A
(Prerefunded @ 11/01/02) 6.250 11/01/16 433,671
---------
2,417,713
---------
Iowa 0.3%
100 Iowa Fin Auth Multi-Family Rev Hsg Park West Proj Rfdg 8.000 10/01/23 101,300
---------
Kansas 0.7%
250 Newton, KS Hosp Rev Newton Hlthcare Corp Ser A 7.375 11/15/14 267,600
---------
Louisiana 6.3%
500 Saint John Baptist Parish LA Sales Tax Dist Pub Impt Ser
ST-1987 7.600 01/01/08 607,050
500 Saint John Baptist Parish LA Sales Tax Dist Pub Impt Ser
ST-1987 7.600 01/01/09 609,725
1,000 West Feliciana Parish, LA Pollutn Ctl Rev Gulf States Util
Co Proj Ser A 7.500 05/01/15 1,082,380
---------
2,299,155
---------
Massachusetts 3.5%
$1,000 Massachusetts St Hlth & Edl Fac Auth Rev Winchester Hosp Ser D Rfdg
(Conn Insd) 5.800 % 07/01/09 $ 1,017,520
250 Massachusetts St Indl Fin Agy Indl Rev Beverly Enterprises Inc/
Glouchester & Lexington Proj Rfdg 8.000 05/01/02 267,877
---------
1,285,397
---------
Michigan 2.9%
1,000 Michigan St Underground Storage Tank Finl Assurance Auth Rev Ser I
Rfdg (AMBAC Insd) 6.000 05/01/05 1,076,850
---------
Minnesota 3.1%
1,000 Centennial Indpt Sch Dist No 12 MN Ser A (MBIA Insd) 5.600 02/01/05 1,055,520
100 Minneapolis, MN Hlthcare Fac Rev Ebenezer Society Proj Ser A 7.000 07/01/12 100,000
---------
1,155,520
---------
Mississippi 0.7%
250 Ridgeland, MS Urban Renewal Rev The Orchard Ltd Proj Ser A
Rfdg 7.750 12/01/15 257,373
---------
Nevada 3.2%
1,185 Reno, NV Redev Agy Downtown Redev Proj Sub Tax Alloc Ser A
Rfdg 6.000 06/01/10 1,178,625
---------
New Hampshire 0.3%
100 New Hampshire Higher Edl & Hlth Fac Auth Rev Daniel Webster College
Issue Rfdg 7.625 07/01/16 102,681
---------
New York 9.6%
150 New York City Indl Dev Agy Civic Fac Marymount Manhattan
College Proj 7.000 07/01/23 159,031
1,350 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev Ser A 5.000 06/15/17 1,242,702
455 New York City Ser B Subser B1 7.375 08/15/13 501,433
45 New York City Ser B Subser B1 (Prerefunded @ 08/15/04) 7.375 08/15/13 52,822
500 New York St Dorm Auth Rev City Univ Sys Ser C Rfdg 6.000 07/01/16 501,630
1,000 New York St Dorm Auth Rev St Univ Edl Fac Ser A Rfdg 6.500 05/15/06 1,081,800
---------
3,539,418
---------
Ohio 2.2%
500 Cleveland, OH Pkg Fac Rev Impt (Prerefunded @ 09/15/02) 8.000 09/15/12 589,610
220 Fairfield, OH Econ Dev Rev Beverly Enterprises Inc Proj
Rfdg 8.500 01/01/03 235,750
---------
825,360
---------
Oklahoma 1.6%
500 Tulsa, OK Indl Auth Hosp Rev Tulsa Regl Med Cent (Prerefunded
@ 06/01/03) 7.200 06/01/17 574,315
---------
Oregon 2.8%
1,000 Marion Cnty, OR Solid Waste & Elec Rev Ogden Martin Sys
Marion Rfdg (AMBAC Insd) 5.500 10/01/06 1,038,850
---------
Pennsylvania 1.8%
150 Doylestown, PA Hosp Auth Hosp Rev Pine Run Ser A 7.200 07/01/23 154,869
100 Montgomery Cnty, PA Indl Dev Auth Rev First Mtg The
Meadowood Corp Proj Ser A Rfdg 10.250 12/01/20 120,456
100 Montgomery Cnty, PA Indl Dev Auth Rev Pennsburg Nursing &
Rehab Cent 7.625 07/01/18 98,458
250 Scranton-Lackawanna, PA Hlth & Welfare Auth Rev Moses Taylor
Hosp Proj Ser B (Prerefunded @ 07/01/01) 8.500 07/01/20 270,785
---------
644,568
---------
South Carolina 3.0%
1,150 Piedmont Muni Pwr Agy SC Elec Rev Ser A Rfdg 5.750 01/01/24 1,116,535
---------
South Dakota 0.3%
$100 South Dakota St Hlth & Edl Fac Auth Rev Huron Regl Med Cent 7.250 % 04/01/20 $ 103,183
---------
Tennessee 2.5%
895 Tennessee Hsg Dev Agy Home Ownership Pgm 6.800 07/01/17 938,569
---------
Utah 6.2%
1,550 Intermountain Pwr Agy UT Pwr Supply Rev Ser 86 B 5.000 07/01/16 1,414,995
950 Intermountain Pwr Agy UT Pwr Supply Rev Ser 86 C 5.000 07/01/18 852,026
---------
2,267,021
---------
Virginia 0.9%
65 Covington-Alleghany Cnty, VA Indl Dev Auth Beverly Enterprises Inc
Proj Rfdg 9.375 09/01/01 71,434
250 Virginia St Hsg Dev Auth Comwlth Mtg Ser A 7.100 01/01/17 259,863
---------
331,297
---------
Washington 4.4%
1,000 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev Ser A Rfdg
(AMBAC Insd) 6.000 07/01/07 1,061,780
500 West Richland, WA Wtr & Swr Rev (MBIA Insd) 7.000 12/01/14 547,070
---------
1,608,850
---------
Wisconsin 2.9%
500 Wisconsin Hsg & Econ Dev Auth Home Ownership Rev Ser E 7.350 01/01/17 528,830
500 Wisconsin St Hlth & Edl Fac Auth Rev Wheaton Franciscan Svcs Inc Rfdg
(Prerefunded @ 08/15/98) 8.200 08/15/18 533,555
---------
1,062,385
---------
Wyoming 3.5%
1,000 Campbell Cnty, WY Sch Dist No 1 5.350 06/01/04 1,033,800
250 Laramie Cnty, WY Hosp Rev Mem Hosp Proj (AMBAC Insd) 6.700 05/01/12 267,790
---------
1,301,590
---------
Total Long-Term Investments 94.8%
(Cost $32,315,949) 34,865,049
Short-Term Investments at Amortized Cost 2.2% 800,000
---------
Total Investments 97.0%
(Cost $33,115,949) 35,665,049
Other Assets in Excess of Liabilities 3.0% 1,096,828
---------
Net Assets 100.0% $36,761,877
==========
</TABLE>
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.
<TABLE>
<CAPTION>
MOSHER, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<S> <C>
ASSETS:
Total Investments (Cost $33,115,949) $ 35,665,049
Cash 4,131
Receivables:
Interest 803,402
Investments Sold 515,000
Other 2,237
-------------
Total Assets 36,989,819
-------------
LIABILITIES:
Payables:
Income Distributions 190,528
Investment Advisory Fee 10,604
Accrued Expenses 26,810
-------------
Total Liabilities 227,942
-------------
NET ASSETS $ 36,761,877
=============
NET ASSETS CONSIST OF:
Common Shares ($1.00 par value, authorized 5,000,000 shares,
1,910,907 shares issued, of which 5,625 are held in treasury
and 1,905,282 shares are outstanding $ 1,905,282
Paid in Surplus 31,989,609
Net Unrealized Appreciation 2,549,100
Accumulated Undistributed Net Investment Income 296,019
Accumulated Net Realized Gain 21,867
-------------
NET ASSETS $ 36,761,877
=============
Net Asset Value Per Share ($36,761,877 divided by
1,905,282 shares outstanding) $ 19.29
=============
</TABLE>
<TABLE>
<CAPTION>
MOSHER, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<S> <C>
INVESTMENT INCOME:
Interest $ 1,139,366
-------------
EXPENSES:
Investment Advisory Fee 82,382
Directors Fees and Expenses 20,253
Legal 9,717
Other 7,335
-------------
Total Expenses 119,687
Less Fees Waived 18,837
-------------
Net Expenses 100,850
-------------
NET INVESTMENT INCOME $ 1,038,516
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain $ 21,867
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period 2,552,599
End of the Period 2,549,100
-------------
Net Unrealized Depreciation During the Period (3,499)
-------------
NET REALIZED AND UNREALIZED GAIN $ 18,368
=============
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,056,884
=============
</TABLE>
<TABLE>
<CAPTION>
MOSHER, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1997
and the Year Ended December 31, 1996 (Unaudited)
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
--------------- -------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 1,038,516 $ 2,102,185
Net Realized Gain 21,867 206,450
Net Unrealized Depreciation (3,499) (645,969)
-------------- --------------
Change in Net Assets from Operations 1,056,884 1,662,666
-------------- --------------
Distributions from Net Investment Income (1,143,169) (2,000,547)
Distributions from and in Excess of Net Realized Gain -0- (666,849)
-------------- --------------
Total Distributions (1,143,169) (2,667,396)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES (86,285) (1,004,730)
-------------- --------------
NET ASSETS:
Beginning of the Period 36,848,162 37,852,892
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
$296,019 and $400,672, respectively). $ 36,761,877 $ 36,848,162
============== ==============
</TABLE>
<TABLE>
<CAPTION>
MOSHER, INC.
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
Year Ended December 31,
----------------------------------------------------------------------
Six Months Ended
June 30, 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 19.340 $ 19.87 $ 18.55 $ 20.36 $ 19.88 $ 19.45 $ 18.83 $ 19.54 $ 18.86 $ 17.99
---------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Investment Income .545 1.103 1.27 1.36 1.41 1.36 1.455 1.46 1.47 1.47
Net Realized and Unrealized Gain/Loss .009 (.233) 1.35 (1.80) .47 .47 .665 (.67) .71 .85
---------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations .554 .870 2.62 (.44) 1.88 1.83 2.12 .79 2.18 2.32
Less: ---------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions from Net Investment Income .600 1.050 1.30 1.37 1.40 1.40 1.50 1.50 1.50 1.45
Distributions from Net Realized Gain -0- .350 -0- -0- -0- -0- -0- -0- -0- -0-
---------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions .600 1.400 1.30 1.37 1.40 1.40 1.50 1.50 1.50 1.45
---------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of the Period $ 19.294 $19.340 $ 19.87 $ 18.55 $ 20.36 $ 19.88 $ 19.45 $ 18.83 $ 19.54 $ 18.86
========== ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return 2.91%** 4.59% 14.12% (2.16%) 9.46% 9.41% 11.26% 4.04% 11.56% 12.90%
Net Assets at End of the Period (In millions) $36.8 $36.8 $37.9 $35.3 $38.8 $37.9 $37.1 $35.9 $37.2 $35.9
Ratio of Expenses to Average Net Assets* 0.56% 0.67% 0.64% .74% .73% .85% .77% .81% .85% .85%
Ratio of Net Investment Income to Average Net
Assets* 5.72% 5.67% 6.54% 7.03% 6.93% 6.91% 7.59% 7.67% 7.57% 7.93%
Portfolio Turnover 3%** 35% 21% 18% 5% 15% 2% 1% 0% 5%
*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets 0.66% 0.77% 0.69% .76% .78% N/A N/A N/A N/A N/A
Ratio of Net Investment Income to Average Net Assets 5.62% 5.57% 6.49% 7.01% 6.88% N/A N/A N/A N/A N/A
N/A = Not Applicable
** Non-Annualized
</TABLE>
MOSHER INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
1. Significant Accounting Policies
Mosher Inc. (the "Fund") is registered as a diversified
closed-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment
objective is to provide current income that is exempt form
federal income tax by investing primarily in municipal debt
securities.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
A. Security Valuation - Investments 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
securities with remaining maturities of 60 days or less are
valued at amortized cost.
The Fund's investments include lower-rated and unrated debt
securities which may be more susceptible to adverse economic
conditions than investment grade holdings. These securities are
often subordinated to the prior claims of other senior 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 18% of the Fund's long-term investments at the end
of the period.
B. Security Transactions - Security transactions are recorded
on a trade date basis. Realized gains and losses are determined
on an identified cost basis. The Fund 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 Fund 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. At June 30, 1997, there were
no when issued or delayed delivery purchase commitments.
C. Investment Income - Interest income is recorded on an
accrual basis. Bond premium and original issue discount are
amortized over the life of each applicable security. Market
discounts are recognized at the time of sale as realized gains
for book purposes and ordinary income for tax purposes.
D. Federal Income Taxes - It is the Fund's policy to comply
with the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially
all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required.
At June 30, 1997, for federal income tax purposes the cost
of long- and short-term investments is $33,115,949, the
aggregate gross unrealized appreciation is $2,550,645 and the
aggregate gross unrealized depreciation is $1,545, resulting in
net unrealized appreciation of $2,549,100.
E. Distribution of Income and Gains - The Fund declares daily
and pays monthly dividends from net investment income. Net
realized gains, if any, are distributed annually.
2. Investment Advisory Agreement
Under the terms of the Fund's Investment Advisory Agreement, the
Adviser will provide investment advice and facilities to the
Fund for an annual fee payable monthly of .45% of average weekly
net assets. The Adviser has voluntarily agreed to waive all
management fees in excess of .35% of the Fund's average weekly
net assets.
3. Investment Transactions
During the period, the cost of purchases and proceeds from sales
of investments, excluding short-term investments, were
$1,007,750 and $1,725,625, respectively.
4. Directors 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 $18,700.
5. Subsequent Event
On July 28, 1997, the Fund was combined into AIM Municipal Bond
Fund pursuant to a letter of intent dated February 20, 1997.
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
Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Shareholder Servicing Agent
Boston Equiserve LP
P.O. Box 8200
Boston, Massachusetts 02266-8200
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Legal Counsel
Fulbright & Jaworski
1301 McKinney
Houston, Texas 77010
Independent Accountants
KPMG Peat Marwick LLP
Peat Marwick Plaza
700 Louisiana
Houston, Texas 77210-4545
Inquires about an investor's account should be referred to the
Fund's Transfer Agent,
AIM Fund Services, Inc.
P.O. Box 4739
Houston, Texas 77210-4739
Investor Services: (800) 959-4246
