<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................................................... 1
Performance Results......................................................... 3
Portfolio Management Review................................................. 4
Portfolio of Investments.................................................... 6
Statement of Assets and Liabilities......................................... 12
Statement of Operations..................................................... 13
Statement of Changes in Net Assets.......................................... 14
Financial Highlights........................................................ 15
Notes to Financial Statements............................................... 17
</TABLE>
INM SAR 7/95
<PAGE>
LETTER TO SHAREHOLDERS
DON G. POWELL
July 3, 1995
Dear Shareholder:
During the six-month period covered by this report, December 1, 1994 through
May 31, 1995, we saw the close of a challenging and difficult year in the fi-
nancial markets--and the beginning of a new year, with renewed optimism and
strength on many fronts.
MARKET OVERVIEW
Most of 1994 was a difficult period for both stock and bond investors as the
Federal Reserve Board's crusade against inflation drove interest rates markedly
higher. The yield on 30-year Treasury securities, for example, climbed from
6.35 percent as the year began to a high of 8.16 percent by early November. As
interest rates rose, fixed-income investments declined in value. Stock market
investors did not fare much better, despite a robust economy and stronger cor-
porate earnings.
In stark contrast, 1995 began more positively as the bond market got a boost
from growing sentiment that the Fed had stabilized economic growth while keep-
ing inflation under control. Subsequently, we saw the yield on 30-year Treasury
securities fall to 6.64 percent at the end of May. Falling yields have pushed
bond prices back up to February 1994 levels. For example, the Bond Buyer's Mu-
nicipal Index rose to 94.06 at the end of May--an increase of more than 16 per-
cent from its low of 80.81 in November. Meanwhile, the stock market continued
to climb through the first part of the year. The Dow Jones Industrial Average
broke the 4400 mark in May, setting a new record high and sustaining expecta-
tions for a stronger market in 1995. Mutual fund investors have been among the
beneficiaries in this impressive rally, as many funds (municipal bond funds in
particular) have earned back virtually all of last year's losses and posted at-
tractive returns.
This positive climate was apparently reflected in the public's sentiment to-
ward the economy. At the end of May, the Van Kampen American Capital Index of
Investor Intentions reached 145, an increase of 5 percent over its April-end
level of 138--with a total of 46 percent of those individuals surveyed saying
the next 60-90 days would be a "good" time to invest. The index, computed from
an independently conducted survey and published by Van Kampen American Capital,
measures the investment climate (the public's confidence) by asking 1,000 indi-
viduals about what they intend to do with their money over the next 60-90 days.
Recently in the news, you may have read or heard about the prospects for tax
reform. You may be wondering how this might affect the status of your tax-ex-
empt municipal bond investments. At this point, no one knows for sure what will
happen or when it might actually take place. While we will keep a close watch
over any new developments, we do not anticipate adoption of any national tax
reform in the near term. Furthermore, we believe any tax reform act that would
affect the municipal bond market would have to be gradually phased in over
(Continued on page two)
1
<PAGE>
time. Right now, it's key to remember that investors continue to benefit from
tax-advantaged municipal investments.
On the following pages, you can read about your Fund's performance during
the past six months, as well as portfolio management's outlook for the Fund in
the coming months. We hope that you will find the information contained in the
question-and-answer section helpful.
Additionally, we are pleased to announce the addition of Joseph A. Piraro to
the portfolio management team of the Tax-Exempt Trust--Insured Municipal Port-
folio effective April 1995. Mr. Piraro has 24 years of experience in the tax-
free fixed-income sector, and will be primarily responsible for the day-to-day
management of the Fund's investment portfolio. You can be assured that the
Fund's portfolio management team remains committed to seeking a high level of
current income exempt from federal income tax.
CORPORATE NEWS
As you may have already noticed, we have adopted a new design for our share-
holder reports that reflects our new identity as Van Kampen American Capital.
Going forward, we will continue to look for new ways to improve upon the pre-
sentation of information in your Fund's report.
In addition, we have developed a new corporate advertising campaign intro-
ducing Van Kampen American Capital and our wide range of investment opportuni-
ties designed to help you build and preserve wealth. Full page ads appeared in
The Wall Street Journal in the first quarter of 1995--watch for more advertis-
ing throughout the year.
We look forward to communicating with you on a regular basis, providing in-
formation about your Fund's performance, new investment opportunities, and our
newly created company. We appreciate your continued confidence in your invest-
ment with Van Kampen American Capital.
Sincerely,
/s/ Don G. Powell
Don G. Powell
Chairman
Van Kampen American Capital
Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED MAY 31, 1995
AMERICAN CAPITAL TAX-EXEMPT TRUST--INSURED MUNICIPAL PORTFOLIO
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return
based on NAV1........................................ 9.58% 9.16% 9.17%
Six month total return2.............................. 4.34% 5.16% 8.17%
One-year total return2............................... 2.08% 2.42% 5.33%
Five-year average
annual total return2................................. 5.99% N/A N/A
Life of Fund average
annual total return2................................. 5.38% 3.55% 2.21%
Commencement Date.................................... 01/02/86 07/20/92 12/10/93
DISTRIBUTION RATES AND YIELD
Distribution Rate3................................... 5.08% 4.59% 4.59%
Taxable Equivalent
Distribution Rate4................................... 7.94% 7.17% 7.17%
SEC Yield5........................................... 4.35% 3.79% 3.81%
</TABLE>
N/A = Not Applicable
1Assumes reinvestment of all distributions for the period ended May 31, 1995,
and does not include payment of the maximum sales charge (4.75% for A shares)
or contingent deferred sales charge for early withdrawal (4% for B shares and
1% for C shares).
2Standardized total return. Assumes reinvestment of all distributions for the
period ended May 31, 1995, and includes payment of the maximum sales charge
(4.75% for A shares) or contingent deferred sales charge for early withdrawal
(4% for B shares and 1% for C shares).
3Distribution Rate represents the monthly annualized distributions of the Fund
at the end of May 1995, and not the earnings of the Fund.
4Taxable equivalent calculations reflect a federal income tax rate of 36%.
5SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ending May 31, 1995.
The terms of the insurance are more fully described in the Fund's prospectus;
no representation is made as to the insurer's ability to meet its commitments.
In addition, the insurance does not remove market risk, as it does not apply
to the value of the securities in the Fund's portfolio, which may increase or
decrease depending on interest rates and other factors affecting the municipal
credit markets.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
LOGO
PORTFOLIO MANAGEMENT REVIEW
AMERICAN CAPITAL TAX-EXEMPT TRUST--INSURED MUNICIPAL PORTFOLIO
The following is an interview with the management team of American Capital
Tax-Exempt Trust--Insured Municipal Portfolio. The team is led by Joseph A.
Piraro, portfolio manager, and Dennis J. McDonnell, president of Van Kampen
American Capital Asset Management, Inc.
Q WHAT MARKET CONDITIONS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
DURING THE SIX MONTHS ENDED MAY 31, 1995?
A The municipal bond market experienced a significant rally during the last
six months. The speed and strength of the market's recovery--after the
'94 downturn due to the sharp increase in interest rates--was impressive.
(Rising interest rates have a negative effect on the value of municipal bonds,
while falling interest rates cause their value to rise.)
When it became apparent at the beginning of the year that the economy was
slowing down, and interest rates had likely peaked--there was a very positive
impact on the bond market, and in turn, on the Fund. As interest rates began
to fall, higher-quality municipal bonds--which make up approximately 98 per-
cent of the Fund's holdings--benefited quickly.
The overall supply and demand scenario has also remained positive. The
availability of new municipal bonds (supply) is down approximately 45 percent
from 1994 levels. However, we feel demand has waned somewhat. This is due--in
part--to the increased attractiveness of alternative investments (like CDs)
over last year. Another factor contributing to lower demand is wariness about
tax-reform. However, the general supply/demand ratio still favors the market
and contributes to its overall price stability.
Q HOW DID YOU POSITION THE FUND IN RESPONSE TO THE EVENTS OF THE PAST SIX
MONTHS?
A During the period, the Portfolio was not repositioned in any major way.
The focus remained on delivering a competitive, high level of interest
income exempt from federal income taxes. In staying consistent with the Fund's
long-term investment strategy, we invest primarily in AAA-rated municipal
bonds (the highest credit rating assigned to municipal bonds by Standard &
Poor's Ratings Group) which are insured for timely payment of principal and
interest.
[PIE CHART APPEARS HERE]
Portfolio Composition by Credit Quality as of May 31, 1995
Non-rated 1%
Cash Equivalents 1%
AA 2%
AAA 96%
4
<PAGE>
The Fund's average weighted maturity remained in the 20-year range. At the
end of the reporting period its duration was 5.4 years (duration is a measure
of a bond will respond to a changes in interest rates).
Q HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED MAY 31, 1995?
A The Fund performed well and met its objective during the reporting period
by providing shareholders with an attractive level of tax-free income. At
its current annualized dividend level of $0.600 per share, the Fund provides
shareholders with a tax-free distribution rate of 5.08 percent/3/ (Class A
Shares) as of May 31, 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 7.94 percent/4/.
For the six-month period ending May 31, 1995, the Fund's total return, for
Class A shares, was 9.58 percent/1/ (at net asset value), compared with the
Lehman Brothers Municipal Bond Index which earned a total return of 13.05 per-
cent over the same period. The Lehman Index is a broad-based unmanaged index
of municipal bonds and does not reflect any commissions or fees that would be
paid by an investor purchasing the securities it represents. (Please refer to
the chart on page three for additional Fund performance results.)
Q WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN 1995 AND, MORE
SPECIFICALLY, FOR THE FUND?
A We believe the economy will continue to slow, and that the Fed may move
to reduce interest rates. With that in mind, we look for continued modest
advances in the municipal bond market, following what may be a minor mid-sum-
mer correction. However, we don't expect a dramatic rally like we had the last
six months--but we do expect positive year-end results.
Q MR. PIRARO, WHO ALSO MANAGES SEVERAL OTHER MUNICIPAL BOND FUNDS FOR VAN
KAMPEN AMERICAN CAPITAL, TOOK OVER THE DAY-TO-DAY MANAGEMENT
RESPONSIBILITIES FOR THE PORTFOLIO IN APRIL. WILL THERE BE ANY SHIFTS IN THE
PORTFOLIO THAT REFLECT THE NEW MANAGER'S STYLE AND STRATEGIES?
A Of course, the Portfolio's overall objective will not change. However, we
may look at increasing our specialty state holdings--municipal bonds from
states that offer dual tax-exemption (federal and state). These securities
have offered very good liquidity--and have always been in demand.
Further, we plan to maintain our focus on well-known general market securi-
ties that are easy to research and monitor. Last, we will aim for an eventual,
modest increase in the Portfolio's duration to boost its upside potential
should interest rates continue to decline.
/s/ Dennis J. McDonnell
Dennis J. McDonnell
President
Van Kampen American Capital
Asset Management, Inc. /s/ Joseph A. Piraro
Joseph A. Piraro
Portfolio Manager
Please see footnotes on page three.
5
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 97.1%
EDUCATION 5.2%
$ 500 Cook County, Illinois, Community
College, District #508, Certificates
of Participation, FGIC.............. 8.750% 01/01/07 $ 645,335
1,000 Corona-Norco, California, University
School District Lease Rev., FSA..... 6.000 04/15/19 1,005,470
425 Earlimart, California, Elementary
School District, Series 1, AMBAC.... 6.700 08/01/21 463,981
500 Indiana State University Rev.,
Building 3 (Student Fee),
Series E, MBIA...................... 7.375 10/01/10 566,230
1,000 Pennsylvania State Higher Education,
Assistance Agency, Student Loan
Rev., Series D, AMBAC............... 6.050 01/01/19 1,009,700
1,000 University of Washington, Housing &
Dining Rev., MBIA................... 7.000 12/01/21 1,069,950
750 Wisconsin State Health & Educational
Facilities Rev., FGIC............... 6.250 12/01/10 786,585
--------------
TOTAL EDUCATION..................... 5,547,251
--------------
GENERAL OBLIGATIONS 6.7%
1,000 Berwyn, Illinois, MBIA.............. 7.000 11/15/10 1,082,250
1,075 Cicero, Illinois, Refunding, Tax
Increment, Series A, MBIA........... 5.700 12/01/13 1,072,560
245 Henderson, Texas, Limited Tax,
AMBAC............................... 9.125 05/15/04 314,382
1,000 Mountain Village Metropolitan
District, San Miguel County,
Colorado, Refunding, Series-92...... 8.100 12/01/11 1,059,740
1,000 St. Clair County, Illinois, FGIC.... 5.750 10/01/15 974,200
960 Texas State Veterans Housing
Assistance, MBIA.................... 6.800 12/01/23 1,025,366
500 Travis County, Texas, Series A,
MBIA................................ 5.500 03/01/03 516,510
1,000 Webb County, Texas, Limited Tax,
CGIC, Series-89..................... 7.250 02/15/09 1,091,020
--------------
TOTAL GENERAL OBLIGATIONS........... 7,136,028
--------------
HOSPITALS 27.3%
500 Ames, Iowa, Hospital Rev. (Mary
Greeley Medical Center Project),
AMBAC............................... 5.750 08/15/22 486,550
1,000 Charleston County, South Carolina,
Hospital Facilities Rev. (Bon
Secours Health System Project), FSA. 5.625 08/15/25 944,650
190 Clermont County, Ohio, Hospital
Facilities Rev. (Mercy Health Care
System), Series A, AMBAC............ 9.750 09/01/13 196,371
750 Decatur, Illinois, Health Care
Facilities Rev. (DMH Community
Services Corp. Project), BIG........ 8.100 11/15/18 796,620
750 District of Columbia Hospital Rev.
(National Rehabilitation Hospital
MedLantic), Series A, MBIA.......... 7.100 11/01/11 807,322
500 Florence County, South Carolina,
Hospital Rev. (McLeod Regional
Medical Center Project), Series B,
FGIC, Pre-refunded, 11/1/95......... 8.750 11/01/09 519,295
1,650 Fort Wayne, Indiana, Hospital
Authority Rev. (Ancilla Health
Systems, Inc.), Series C, BIG, Pre-
refunded, 1/1/99.................... 8.125 07/01/18 1,884,778
1,250 Harris County, Texas, Health
Facilities, (Development Corp.
Thermal Utility Rev.), Series A,
AMBAC............................... 7.250 02/15/15 1,352,338
1,500 Harris County, Texas, Hospital
District Mtg. Rev., BIG, Pre-
refunded, 4/1/96.................... 8.500 04/01/15 1,581,120
</TABLE>
6
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,685 Illinois Health Facilities Authority
Rev., Brokaw Mennonite Association,
FGIC................................ 8.000% 08/15/17 $ 1,886,829
775 Illinois Health Facilities Authority
Rev., Franciscan Sisters Health
Project, MBIA....................... 7.875 09/01/18 847,742
1,695 Illinois Health Facilities Authority
Rev., Sisters of St. Mary's Health
Care, Series B, MBIA................ 8.000 06/01/14 1,891,959
1,000 Indiana Health Facility Financing
Authority (Lutheran Hospital
Indiana, Inc.), MBIA................ 6.850 07/01/22 1,071,810
1,000 Indiana Health Facility Financing
Authority (Lutheran Hospital
Indiana, Inc.), AMBAC............... 7.000 02/15/19 1,054,210
500 Kent Hospital Finance Authority,
Michigan Hospital Facility Rev.
(Pine Rest Christian Hospital
Association), FGIC.................. 9.000 11/01/10 519,805
1,000 Laramie County, Wyoming, Hospital
Rev. (Memorial Hospital Project),
AMBAC............................... 6.700 05/01/12 1,077,320
1,000 Louisiana Public Facilities
Authority, Health & Educational
Capital Facilities Rev. (Our Lady of
the Lake Medical Center), Series A,
BIG................................. 8.200 12/01/15 1,111,930
500 Louisiana Public Facilities
Authority, Hospital Rev. Southern
Baptist Hospital Project, FSA....... 6.800 05/15/12 539,765
500 Louisiana Public Facilities
Authority, Hospital Rev. Touro
Infirmary Project, Series A, BIG.... 8.000 06/01/09 558,100
500 Maine Health & Higher Educational
Facilities Authority Rev., Series-
91, FSA............................. 6.375 07/01/21 514,260
250 Marion County, Florida, Hospital
District Rev., Refunding, Ocala,
Florida (Munroe Regional Medical
Center), FGIC....................... 6.250 10/01/12 262,220
1,000 Massachusetts State Health &
Educational Facilities Authority
Rev. University Hospital, Series C,
MBIA................................ 7.250 07/01/19 1,086,230
500 Mississippi, Hospital Equipment &
Facilities (Wesley Health System,
Inc.), CONN, Series A............... 6.050 04/01/12 481,075
475 Missouri State Health & Educational
Facilities Authority Rev., Heartland
Health Systems Project, AMBAC....... 6.350 11/15/17 493,093
500 North Central Texas, Health Facility
Development Corp. Rev. (Presbyterian
Healthcare Project), Series B, BIG,
Pre-refunded, 12/1/97............... 8.875 12/01/15 562,610
1,000 Sayre, Pennsylvania, Health Care
Facility Authority Rev., Series H-2,
AMBAC............................... 7.625 12/01/15 1,097,540
1,000 St. Joseph County, Indiana, Hospital
Authority, Hospital Facilities Rev.
(Memorial Hospital South Bend
Project), MBIA...................... 6.250 08/15/12 1,040,730
280 Waco, Texas, Health Facilities
Development Corp., Hospital Rev.
(Hillcrest Baptist Medical Center),
MBIA, Pre-refunded, 9/1/95.......... 9.200 09/01/14 289,010
1,395 Washington State Health Care
Facilities Authority Rev.,
Refunding, Empire Health Services
Spokane, MBIA....................... 8.375 11/01/06 1,549,092
1,000 Washington State Health Care
Facilities Authority Rev.,
Refunding, Virginia-Mason Medical
Center, MBIA........................ 8.000 07/01/15 1,074,570
500 West Virginia State Hospital Finance
Authority, Hospital Rev. (Monongalia
General Hospital), BIG, Pre-
refunded, 7/1/97.................... 8.600 07/01/17 542,380
1,000 Wisconsin State Health & Educational
Rev. (Milwaukee Regional Medical
Center, Inc. Project), AMBAC........ 7.500 08/01/11 1,080,430
--------------
TOTAL HOSPITALS..................... 29,201,754
--------------
</TABLE>
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HOUSING 4.3%
$ 255 Bexar County, Texas, Housing Finance
Corp., Rev., Series B............... 9.250% 04/01/16 $ 268,038
1,225 Houston, Texas, Housing Finance
Corp., Single Family Mgt. Rev.,
Series A, FSA....................... 5.950 12/01/10 1,226,825
955 Louisiana Public Facilities
Authority, Multi-family Housing Rev.
(One Lakeshore Place Apartments).... 9.250 07/20/20 989,351
1,125 Minnesota State Housing Finance
Agency, Single Family Mtg. Rev...... 6.750 01/01/26 1,134,563
1,000 South Dakota State Housing
Development Authority............... 6.850 05/01/26 1,026,000
--------------
TOTAL HOUSING....................... 4,644,777
--------------
INDUSTRIAL DEVELOPMENT REVENUE 4.1%
2,000 Clark County, Nevada (Nevada Power
Co. Project), AMBAC................. 7.200 10/01/22 2,170,140
850 Manatee County, Florida (Manatee
Hospital & Health System), MBIA..... 8.250 08/15/14 919,743
720 Pima County, Arizona, Refunding,
FSA................................. 7.250 07/15/10 782,294
500 Parish of St. Charles, Louisiana,
Solid Waste Disposal Rev., FSA...... 7.050 04/01/22 537,410
--------------
TOTAL INDUSTRIAL DEVELOPMENT
REVENUE............................. 4,409,587
--------------
MISCELLANEOUS 7.3%
600 Arizona State Municipal Financing
Program, Certificates of
Participation, Series 17, BIG....... 8.125 08/01/17 632,166
1,000 Charleston County, South Carolina,
Certificates of Participation,
Charleston Public Facilities Corp.,
MBIA................................ 7.100 06/01/11 1,139,350
875 Chicago, Illinois, Public Building
Commission, Building Rev. (Community
College, District #508), Series B,
BIG................................. 8.750 01/01/07 940,336
1,000 Dade County, Florida, Special
Obligation (Miami Beach Convention
Center Project), Series B, FGIC..... 8.800 12/01/02 1,116,730
310 Louisiana Public Facilities
Authority Rev. (Medical Center
Louisiana at New Orleans Project),
CONN................................ 6.250 10/15/10 320,497
1,000 Pennsylvania Convention Center
Authority Rev., Series A, FGIC...... 6.000 09/01/19 1,047,160
1,500 Philadelphia, Pennsylvania,
Municipal Authority Rev., Refunding
Lease, Series A, FGIC............... 5.625 11/15/14 1,485,960
1,000 South Dakota, Lease Rev., Series A,
CGIC................................ 6.625 09/01/12 1,103,570
--------------
TOTAL MISCELLANEOUS................. 7,785,769
--------------
MUNICIPAL UTILITY DISTRICT 0.7%
425 Maple Run at Austin, Texas Contract,
Rev., FGIC.......................... 8.250 11/15/05 455,043
250 Montgomery County, Texas, MBIA...... 6.250 03/01/14 261,000
--------------
TOTAL MUNICIPAL UTILITY DISTRICT.... 716,043
--------------
POLLUTION CONTROL REVENUE 13.7%
1,000 Beaver County, Pennsylvania,
Industrial Development Authority,
Refunding (Ohio Edison Co.
Mansfield), Series A, FGIC.......... 7.100 06/01/18 1,069,410
500 Beaver County, Pennsylvania,
Industrial Development Authority,
Refunding (Ohio Edison Co.
Mansfield), Series A, FGIC.......... 7.750 09/01/24 551,000
</TABLE>
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,870 Brazos River Authority, Texas, Rev.
Houston Lighting & Power,
Refunding, Series B, FGIC.......... 7.200% 12/01/18 $ 2,031,624
1,270 Brazos River Authority, Texas, Rev.
Texas Utilities Electric Co., FGIC. 9.875 10/01/17 1,421,409
1,000 Emery County, Utah, Refunding
(Pacificorp Project), Series A,
AMBAC.............................. 5.650 11/01/23 956,410
1,000 Lehigh County, Pennsylvania,
Industrial Development Authority
(Pennsylvania Power & Light Co.
Project), Series A, MBIA........... 6.400 11/01/21 1,044,480
1,000 Matagorda County, Texas, Navigation
District #1 (Houston Lighting &
Power), Series D, FGIC............. 7.600 10/01/19 1,115,390
750 Monroe County, Michigan (Detroit
Edison Co.), Series A, AMBAC....... 9.625 12/01/15 788,085
1,000 Monroe County, Michigan (Detroit
Edison Co.), Series I-B, MBIA...... 6.550 09/01/24 1,027,660
1,500 Ohio State Air Quality Development
Authority Rev. (Cleveland Co.
Project), FGIC..................... 8.000 12/01/13 1,749,105
200 Parish of West Feliciana, Louisiana
(Gulf State Utilities), Series A... 7.500 05/01/15 207,046
1,000 Pope County, Arkansas (Arkansas
Power & Light Co. Project), FSA.... 10.625 12/01/15 1,051,180
1,000 Rockport, Indiana (Indiana &
Michigan Electric Co.), Series A,
BIG................................ 9.250 08/01/14 1,028,180
500 Warren County, New Jersey,
Pollution Control Financing
Authority, Series A, FGIC.......... 9.000 12/01/06 559,315
--------------
TOTAL POLLUTION CONTROL REVENUE.... 14,600,294
--------------
PUBLIC IMPROVEMENT 0.5%
465 Dallas, Texas, Civic Center, Sr.
Lien, AMBAC........................ 7.000 01/01/10 506,724
--------------
SALES TAX REVENUE 2.3%
250 Arvada, Colorado, Sales & Use Tax
Rev., Refunding & Improvement,
FGIC............................... 6.250 12/01/12 260,772
500 Arvada, Colorado, Sales & Use Tax
Rev., Refunding & Improvement,
FGIC............................... 6.250 12/01/17 516,900
1,000 Marion County, Indiana, Convention
& Recreational Facilities, Series
A, AMBAC........................... 7.000 06/01/21 1,081,150
500 Rhode Island, Depositors Economic
Corp., Special Obligation, Series
A, FSA, Pre-refunded, 8/1/02....... 6.625 08/01/19 563,335
--------------
TOTAL SALES TAX REVENUE............ 2,422,157
--------------
TRANSPORTATION 6.5%
500 Chicago, Illinois, O'Hare
International Airport, Special
Facility Rev. (International
Terminal), Series A, MBIA.......... 7.500 01/01/17 546,940
500 Chicago, Illinois, O'Hare
International Airport, Special
Facility Rev. (International
Terminal), Series A, MBIA.......... 7.625 01/01/10 549,555
500 Harris County, Texas, Refunding,
Toll Road Sr. Lien, Series B,
AMBAC.............................. 6.625 08/15/17 532,528
350 Hawaii State, Airports System Rev,
AMBAC.............................. 7.375 07/01/11 381,693
500 Hawaii State, Airports System Rev,
2nd Series, MBIA................... 7.000 07/01/18 539,290
</TABLE>
9
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,250 Louisville & Jefferson County,
Kentucky, Regional Airport
Authority Rev., Series A, MBIA..... 8.500% 07/01/17 $ 1,352,050
500 Memphis-Shelby County, Tennessee,
Airport Authority Rev., MBIA....... 8.125 02/15/12 543,095
1,700 Palm Beach County, Florida, Airport
System Rev., MBIA.................. 7.750 10/01/10 1,944,851
500 Tulsa, Oklahoma, Airport
Improvement, General Rev., MBIA.... 7.500 06/01/08 533,155
--------------
TOTAL TRANSPORTATION............... 6,923,157
--------------
UTILITIES 17.6%
1,000 Austin, Texas, Utility Systems
Rev., BIG.......................... 8.625 11/15/12 1,226,920
1,000 Chicago, Illinois, Waste Water
Transmission, Rev., FGIC........... 6.300 01/01/12 1,108,320
565 City of Brownsville, Texas,
Utilities System Priority Rev.,
Series 1990, AMBAC................. 6.500 09/01/17 592,159
1,000 Colorado River, Texas, Municipal
Water District (Water Transmission
Facilities Project-A), AMBAC....... 6.625 01/01/21 1,093,280
100 Farmington, New Mexico, Utility
System Rev., FGIC, Pre-refunded,
5/15/96............................ 9.750 05/15/13 107,064
2,000 Lower Colorado River Authority,
Texas, Rev., Refunding, FSA........ 5.625 01/01/17 1,970,041
700 Missouri State Environmental
Improvement & Energy Resource
Authority, Environment Improvement
Rev., AMBAC........................ 7.400 05/01/20 768,250
2,000 M-S-R Public Power Agency,
California, San Juan Project Rev.,
Refunding, Series F, AMBAC......... 6.000 07/01/20 2,017,940
200 New York City, New York, Municipal
Water Finance Authority, Water &
Sewer System Rev., Series A, Pre-
refunded, 6/15/97.................. 9.000 06/15/17 222,450
1,000 North Carolina Municipal Power
Agency, Catawba Electric Rev.,
MBIA............................... 5.750 01/01/20 1,001,770
1,000 Northern Minnesota, Municipal Power
Agency, Series A, AMBAC............ 7.250 01/01/16 1,083,840
215 Piedmont Municipal Power Agency,
South Carolina Electric Rev.,
Refunding, Series A, AMBAC, Pre-
refunded, 1/1/96................... 9.250 01/01/19 227,474
500 Provo City, Utah, Energy System
Rev., Series A, AMBAC.............. 9.500 11/01/10 525,740
1,500 Reedy Creek, Florida, Improvement
District Utilities Rev., Series 1,
MBIA............................... 9.000 10/01/07 1,663,485
400 Rock Hill, South Carolina, Utility
Systems Rev., FGIC................. 8.000 01/01/18 441,412
600 Tacoma, Washington, Electric
Systems Rev., AMBAC, Pre-refunded,
1/1/98............................. 8.000 01/01/11 662,118
450 Washington State Public Power
Supply System Rev. (Nuclear Project
No. 3), BIG........................ 7.250 07/01/16 502,277
2,000 Washington State Public Power
Supply System Rev. (Nuclear Project
No. 3), MBIA....................... 5.600 07/01/15 1,911,720
1,500 Washington State Public Power
Supply System Rev. (Nuclear Project
No. 3), MBIA....................... 5.600 07/01/17 1,423,500
250 Washington State Public Power
Supply System Rev. (Nuclear Project
No. 3), Refunding, Rev., BIG....... 6.000 07/01/18 248,133
--------------
TOTAL UTILITIES.................... 18,797,893
--------------
</TABLE>
10
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WASTE DISPOSAL 0.9%
$ 1,000 Montgomery County, Maryland, Solid
Waste System Rev., Series A, AMBAC. 5.875% 06/01/13 $ 982,570
--------------
TOTAL MUNICIPAL BONDS (Cost
$100,731,768)...................... 103,674,004
--------------
MUNICIPAL VARIABLE RATE DEMAND
NOTES+ 0.9%
1,000 New York City, New York, Municipal
Water, Series A
(Cost $1,000,000).................. 3.250 06/15/25 $ 1,000,000
--------------
TOTAL INVESTMENTS (Cost $101,731,768) 98.0%.................. 104,674,004
OTHER ASSETS AND LIABILITIES, NET 2.0%....................... 2,130,030
--------------
NET ASSETS 100%.............................................. $ 106,804,034
--------------
</TABLE>
+Interest rates are as of May 31, 1995
Insurers:
Rev.--Revenue bond AMBAC--AMBAC Indemnity Corp.
BIG--Bond Investors Guaranty Insurance Co.
CGIC--Capital Guaranty Insurance Corp.
CONN--Connie Lee
FGIC--Financial Guaranty Insurance Corp.
FSA--Financial Security Assurance, Inc.
MBIA--Municipal Bond Investors' Assurance
Corp.
11
<PAGE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $101,731,768)................. $104,674,004
Cash............................................................. 34,244
Interest receivable.............................................. 2,272,380
Receivable for Fund shares sold.................................. 376,838
Receivable for investments sold.................................. 60,000
Other assets..................................................... 682
------------
Total Assets.................................................... 107,418,148
------------
LIABILITIES
Dividends payable................................................ 225,913
Payable for Fund shares redeemed................................. 190,938
Due to Distributor............................................... 69,439
Due to Adviser................................................... 49,026
Due to shareholder service agent................................. 10,750
Deferred Trustees' compensation.................................. 7,555
Accrued expenses................................................. 60,493
------------
Total Liabilities............................................... 614,114
------------
NET ASSETS, equivalent to $11.25 per share for Class A and Class
B shares, and $11.24 per share for Class C shares............... $106,804,034
------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 6,078,404 Class A,
3,296,697 Class B, and 118,058 Class C shares outstanding....... 94,932
Capital surplus.................................................. 109,847,508
Accumulated net realized loss on securities...................... (6,208,527)
Net unrealized appreciation of securities........................ 2,942,236
Undistributed net investment income.............................. 127,885
------------
NET ASSETS....................................................... $106,804,034
------------
</TABLE>
12
<PAGE>
See Notes to Financial Statements
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest........................................................... $3,605,834
----------
EXPENSES
Management fees.................................................... 295,842
Shareholder service agent's fees and expenses...................... 57,014
Accounting services................................................ 36,625
Service fees--Class A.............................................. 83,088
Distribution and service fees--Class B............................. 181,581
Distribution and service fees--Class C............................. 9,436
Trustee's fees and expenses........................................ 5,630
Audit fees......................................................... 9,067
Custodian fees..................................................... 10,629
Legal fees......................................................... 2,518
Reports to shareholders............................................ 20,700
Registration and filing fees....................................... 46,026
Miscellaneous...................................................... 1,797
----------
Total expenses.................................................... 759,953
----------
NET INVESTMENT INCOME.............................................. 2,845,881
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized loss on securities.................................... (332,188)
Net unrealized appreciation of securities during the period........ 7,039,056
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... 6,706,868
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $9,552,749
----------
</TABLE>
13
<PAGE>
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1995 November 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period........... $104,854,489 $109,719,511
------------ ------------
Operations
Net investment income.................... 2,845,881 5,870,481
Net realized loss on securities.......... (332,188) (464,507)
Net unrealized appreciation
(depreciation) of securities during the
period.................................. 7,039,056 (10,201,344)
------------ ------------
Increase (decrease) in net assets
resulting from operations................ 9,552,749 (4,795,370)
------------ ------------
Distributions to shareholders from net
investment income
Class A.................................. (1,845,340) (3,998,830)
Class B.................................. (849,634) (1,770,263)
Class C.................................. (44,551) (73,782)
------------ ------------
(2,739,525) (5,842,875)
------------ ------------
Capital transactions
Proceeds from shares sold
Class A.................................. 2,741,734 11,790,509
Class B.................................. 1,931,586 10,898,379
Class C.................................. 362,814 2,707,049
------------ ------------
5,036,134 25,395,937
------------ ------------
Proceeds from shares issued for
distributions reinvested
Class A.................................. 912,035 2,032,068
Class B.................................. 472,739 1,023,631
Class C.................................. 37,020 58,216
------------ ------------
1,421,794 3,113,915
------------ ------------
Cost of shares redeemed
Class A.................................. (6,906,427) (14,932,364)
Class B.................................. (3,317,030) (7,093,131)
Class C.................................. (1,098,150) (711,134)
------------ ------------
(11,321,607) (22,736,629)
------------ ------------
Increase (decrease) in net assets
resulting from capital transactions....... (4,863,679) 5,773,223
------------ ------------
INCREASE (DECREASE) IN NET ASSETS......... 1,949,545 (4,865,022)
------------ ------------
NET ASSETS, end of period................. $106,804,034 $104,854,489
------------ ------------
</TABLE>
14
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
Six Months
Ended Year Ended November 30
May 31, ---------------------------------------
1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period.................. $10.55 $11.59 $11.30 $11.07 $10.86 $10.95
------ ------- ------ ------ ------ ------
Income from investment
operations
Investment income......... .37 .74 .790 .810 .86 .84
Expenses.................. (.06) (.13) (.127) (.135) (.13) (.12)
------ ------- ------ ------ ------ ------
Net investment income...... .31 .61 .663 .675 .73 .72
Net realized and unrealized
gains or losses on
securities................ .69 (1.0425) .274 .240 .19 (.07)
------ ------- ------ ------ ------ ------
Total from investment
operations................. 1.00 (.4325) .937 .915 .92 .65
------ ------- ------ ------ ------ ------
Distributions from net
investment income.......... (.30) (.6075) (.647) (.685) (.71) (.74)
------ ------- ------ ------ ------ ------
Net asset value, end of
period..................... $11.25 $ 10.55 $11.59 $11.30 $11.07 $10.86
------ ------- ------ ------ ------ ------
TOTAL RETURN (/1/)......... 9.58% (3.88%) 8.47% 8.48% 8.73% 6.21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)................. $68.4 $67.3 $75.3 $64.3 $52.2 $42.3
Average net assets
(millions)................. $67.4 $73.6 $72.0 $57.8 $48.6 $39.3
Ratios to average net
assets (annualized)(/2/)
Expenses.................. 1.17% 1.15% 1.07% 1.20% 1.20% 1.08%
Expenses, without expense
reimbursement............. -- -- 1.17% -- -- 1.20%
Net investment income..... 5.66% 5.45% 5.57% 5.98% 6.59% 6.63%
Net investment income,
without expense
reimbursement............ -- -- 5.47% -- -- 6.51%
Portfolio turnover rate.... 0% 5% 5% 3% 5% 1%
</TABLE>
(1) Total return for a period less than one full year is not annualized. Total
return does not consider the effect of sales charges.
(2) See Note 2.
15
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
---------------------------------------------- -------------------------
July 20, December 10,
Six Months Year Ended 1992(/2/) Six Months 1993(/2/)
Ended November 30 through Ended through
May 31, ------------------- November May 31, November
1995 1994 1993(/1/) 30, 1992(/1/) 1995 30, 1994(/1/)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, begin-
ning of period......... $10.55 $11.58 $11.30 $11.39 $10.54 $11.66
------ ------- ------ ------ ------ ------
Income from investment
operations
Investment income...... .38 .74 .754 .28 .38 .77
Expenses............... (.11) (.21) (.205) (.08) (.11) (.22)
------ ------- ------ ------ ------ ------
Net investment Income... .27 .53 .549 .20 .27 .55
Net realized and
unrealized gains or
losses on securities... .688 (1.0365) .294 (.07) .688 (1.161)
------ ------- ------ ------ ------ ------
Total from investment
operations............. .958 (.5065) .843 .13 .958 (.611)
------ ------- ------ ------ ------ ------
Distributions from net
investment income...... (.258) (.5235) (.563) (.22) (.258) (.509)
------ ------- ------ ------ ------ ------
Net asset value, end of
period................. $11.25 $10.55 $11.58 $11.30 $11.24 $10.54
------ ------- ------ ------ ------ ------
TOTAL RETURN (/3/)...... 9.16% (4.52%) 7.59% 1.16% 9.17% (5.38%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)...... $37.1 $35.6 $34.4 $10.1 $1.3 $1.9
Average net assets
(millions)............. $36.4 $37.9 $23.8 $5.2 $1.9 $1.6
Ratios to average net
assets
(annualized)(/4/)
Expenses............... 1.92% 1.91% 1.77% 1.82% 1.92% 1.89%
Expenses, without
expense reimbursement. -- -- 1.87% -- -- --
Net investment income.. 4.90% 4.71% 4.74% 4.33% 4.93% 4.64%
Net investment, income,
without expense
reimbursement......... -- -- 4.64% -- -- --
Portfolio turnover rate. 0% 5% 5% 3% 0% 5%
</TABLE>
(1) Based on average month-end shares.
(2) Commencement of offering of sales.
(3) Total return for periods of less than one year are not annualized. Total
return does not consider the effect of sales charges.
(4) See Note 2.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital Tax-Exempt Trust (the "Trust") is registered under the Invest-
ment Company Act of 1940, as amended, as a diversified open-end management in-
vestment company, which offers shares in two municipal bond portfolios, one of
which is described in this report, Insured Municipal Portfolio (the "Fund").
Each portfolio is accounted for as a separate entity. The following is a sum-
mary of significant accounting policies consistently followed by the Trust in
the preparation of its financial statements.
A. INVESTMENT VALUATIONS-Municipal bonds are valued at the most recently quoted
bid prices or at bid prices based on a matrix system (which considers such fac-
tors as security prices, yields, maturities and ratings) furnished by dealers
and an independent pricing service. Securities for which market quotations are
not readily available are valued at a fair value as determined in good faith by
the Board of Trustees of the Fund. Short-term investments with a maturity of 60
days or less when purchased are valued at amortized cost, which approximates
market value. Short-term investments with a maturity of more than 60 days when
purchased are valued based on market quotations until the remaining days to ma-
turity becomes less than 61 days. From such time, until maturity, the invest-
ments are valued at amortized cost.
Issuers of certain securities owned by the Fund have obtained insurance guar-
anteeing their timely payment of principal at maturity and interest. The insur-
ance reduces credit risk but not market risk of the security.
B. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment in
which a Fund acquires ownership of a debt security and the seller agrees to re-
purchase the security at a future time and specified price. The Fund may invest
independently in repurchase agreements, or transfer uninvested cash balances
into a pooled cash account along with other investment companies advised by Van
Kampen American Capital Asset Manager, Inc. ("The Adviser"), the daily aggre-
gate of which is invested in repurchase agreements. Repurchase agreements are
collateralized by the underlying debt securities. The Fund will make payment
for such securities only upon physical delivery or evidence of book entry
transfer to the account of the custodian bank. The seller is required to main-
tain the value of the underlying security at not less than the repurchase pro-
ceeds due the Fund.
C. FUTURES CONTRACTS-Transactions in futures contracts are utilized in strate-
gies to manage the market risk of the Fund's investments. The purchase of a
futures contract increases the impact on net asset value of changes in the mar-
ket price of investments. There is also a risk that the market movement of such
instruments may not be in the direction forecasted.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. A portion of these funds is held as collateral in
an account in the name of the broker, the Fund's agent in acquiring the
futures position. During the period the futures contract is open, changes in
the value of the contract ("variation margin") are recognized by marking the
contract to market on a daily basis. As unrealized gains or losses are in-
curred, variation margin payments are received from or made to the broker.
Upon the closing or cash settlement of a contract, gains and losses are real-
ized. The cost of securities acquired through delivery under a contract is ad-
justed by the unrealized gain or loss on the contract.
D. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as "regulated investment company" under
the Internal Revenue Code and intends to maintain this qualification by annu-
ally distributing all of its taxable net investment income and taxable net re-
alized capital 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.
The net realized capital loss carryforward for federal income tax purposes
of approximately $5.9 million at November 30, 1994 may be utilized to offset
current or future capital gains until expiration in 1995 through 2002. Approx-
imately 31% and 55% of the capital loss carryforward may expire in 1995 and
1996, respectively.
E. 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 daily.
F. DIVIDENDS AND DISTRIBUTIONS-The Fund declares dividends from net investment
income on each business day. The Fund intends to continue to invest princi-
pally in tax-exempt obligations sufficient in amount to qualify it to pay "ex-
empt-interest dividends" as defined in the Internal Revenue Code.
The Fund distributes tax basis earnings in accordance with the minimum dis-
tribution requirements of the Internal Revenue Code, which may differ from
generally accepted accounting principles. Such dividends or distributions may
exceed financial statement earnings.
G. 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 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 ordinary income for tax purposes.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
H. 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 obligations, sufficient cash or liquid securities
equal to the amount that will be due are set aside with the custodian.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as the investment manager of the Fund. Management fees are
paid monthly, based on the aggregate average daily net assets of the Trust at
an annual rate of .60% of the first $300 million of the aggregate average
daily net assets, .55% of the next $300 million, and .50% of the amount in ex-
cess of $600 million, and are allocated on a pro-rata basis to each portfolio.
From time to time, the Adviser may voluntarily elect to subsidize a portion of
the Fund's expenses. The voluntary subsidy may be discontinued at any time
without prior notice. There were no subsidies during the period.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allo-
cated among investment companies advised by the Adviser. For the period, these
charges included $5,055 as the Fund's share of the employee costs attributable
to the Fund's accounting officers. A portion of the accounting services ex-
pense was paid to the Adviser in reimbursement of personnel, facilities and
equipment costs attributable to the provision of accounting services. These
services provided by the Adviser are at cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. For the period, such fees aggregated $45,607.
The Fund was advised that Van Kampen American Capital Distributors, Inc.
(the "Distributor") and Advantage Capital Corporation (the "Retail Dealer"),
both affiliates of the Adviser, received $8,042 and $5,599, respectively, as
their portion of commissions charged on sales of Fund shares during the peri-
od.
Under the Distribution plans, each class of shares pays up to .25% per annum
of its average daily net assets to reimburse the Distributor for expenses and
service fees incurred. Class B and Class C shares pay an additional distribu-
tion fee of up to .75% per annum of their average net assets to reimburse the
Distributor for its distribution expenses. Actual distribution expenses in-
curred by the Distributor for Class B and Class C shares may exceed the
amounts reimbursed to the Distributor by the Fund. At the end of the period,
the unreimbursed expenses by the Distributor under the Class B and Class C
plans aggregated approximately $1.3 million and $35,000, respectively, and may
be carried forward and reimbursed through either the collection of the contin-
gent deferred sales charges from share
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
redemptions or, subject to the annual renewal of the plans, future Fund reim-
bursements of distribution fees.
Legal fees were for services rendered by O'Melveny & Myers, counsel for the
Fund. Lawrence J. Sheehan, of counsel to that firm, is a trustee of the Fund.
Certain officers and trustees of the Fund are officers and directors of the
Adviser, the Distributor, the Retail Dealer, and the shareholder service
agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the proceeds from sales of investments, excluding short-
term investments, was $4,287,464. There were no purchases during the period.
The cost of investments owned at the end of the period was the same for fed-
eral income tax and financial reporting purposes. Gross unrealized apprecia-
tion of investments aggregated $4,184,373 and gross unrealized depreciation of
investments aggregated $1,242,137.
During the period, proceeds from sales of an investment resulting from a
transaction between the Fund and another investment company advised by the Ad-
viser was $100,000.
Such transaction was at current market price on the date of the transaction
for cash payment against prompt delivery, with no brokerage commissions. The
transaction did not result in a net realized gain or loss to the Fund.
NOTE 4--TRUSTEE COMPENSATION
Fund Trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $860 plus a fee of $25 per day for the Board and
Committee meetings attended. The Chairman receives additional fees at an an-
nual rate of $320. During the period, such fees aggregated $4,608.
The trustees may participate in a voluntary Deferred Compensation Plan (the
"Plan"). The Plan is not funded, and obligations under the Plan will be paid
solely out of the Fund's general accounts. The Fund will not reserve or set
aside funds by any form of trust or escrow. Each trustee covered by the Plan
elects to be credited with an earnings component on amounts deferred equal to
the income earned by the Fund on its short-term investments or equal to the
total return of the Fund.
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(the Class A shares) or at the time of redemption on a contingent deferred ba-
sis (the Class B and Class C shares). All classes of shares have the same
rights, except that Class B and Class C shares bear the cost of a higher dis-
tribution services fee and certain other class specific expenses. Realized and
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
unrealized gains or losses, investment income and expenses (other than class
specific expenses) are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Class B and Class C shares au-
tomatically convert to Class A shares six years and ten years after purchase,
respectively, subject to certain conditions.
The Fund has an unlimited number of each class of $.01 par value shares of
beneficial interest authorized. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
Six Months Year Ended
Ended May 31, November 30,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A........................................... 249,433 1,040,502
Class B........................................... 178,561 959,397
Class C........................................... 33,394 240,049
---------- ----------
461,388 2,239,948
---------- ----------
Shares issued for distributions reinvested
Class A........................................... 82,934 182,323
Class B........................................... 42,987 91,999
Class C........................................... 3,374 5,302
---------- ----------
129,295 279,624
---------- ----------
Shares redeemed
Class A........................................... (633,580) (1,344,232)
Class B........................................... (304,428) (640,367)
Class C........................................... (98,898) (65,163)
---------- ----------
(1,036,906) (2,049,762)
---------- ----------
Increase (decrease) in shares outstanding.......... (446,223) 469,810
---------- ----------
</TABLE>
NOTE 6--SHAREHOLDER MEETING
On July 21, 1995, a shareholder meeting of the Fund will be held to vote on:
(1) the reorganization of the Fund from a Massachusetts Business Trust to a
Delaware Business Trust and (2) an election of fourteen trustees.
21
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Govett Emerging Markets Fund
AC Global Equity Fund
Govett Global Government Income Fund
AC Global Government Securities
AC Global Managed Assets Fund
Govett International Equity Fund
Govett Latin America Fund
Govett Pacific Strategy Fund
EQUITY
GROWTH
AC Emerging Growth Fund
AC Enterprise Fund
AC Pace Fund
Govett Smaller Companies Fund
GROWTH & INCOME
VKM Balanced Fund
AC Comstock Fund
AC Equity Income Fund
AC Growth and Income Fund
VKM Growth and Income Fund
AC Harbor Fund
AC Real Estate Securities Fund
VKM Utility Fund
AC Utilities Income Fund
FIXED INCOME
VKM Adjustable Rate U.S. Government Fund
AC Corporate Bond Fund
AC Federal Mortgage Trust
AC Government Securities
VKM High Yield Fund
AC High Yield Investments
VKM Money Market Fund
VKM Prime Rate Income Trust
AC Reserve Fund
VKM Short-Term Global Income Fund
VKM Strategic Income Fund
VKM U.S. Government Fund
AC U.S. Government Trust for Income
TAX-FREE
VKM California Insured Tax Free Fund
VKM Florida Insured Tax Free Income Fund
VKM Insured Tax Free Income Fund
VKM Limited Term Municipal Income Fund
AC Municipal Bond Fund
VKM Municipal Income Fund
VKM New Jersey Tax Free Income Fund
VKM New York Tax Free Income Fund
VKM Pennsylvania Tax Free Income Fund
AC Tax-Exempt Trust
--High Yield Municipal Portfolio
--Insured Municipal Portfolio
VKM Tax Free High Income Fund
VKM Tax Free Money Fund
AC Texas Municipal Securities
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.
22
<PAGE>
AMERICAN CAPITAL TAX-EXEMPT TRUST
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD E. CARUSO
ROGER HILSMAN
DON G. POWELL
DAVID REES
LAWRENCE J. SHEEHAN
FERNANDO SISTO*
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President
CURTIS W. MORELL
Vice President and Treasurer
WAYNE D. GODLIN
DENNIS J. MCDONNELL
RONALD A. NYBERG
ROBERT C. PECK, JR.
JOSEPH A. PIRARO
PAUL R. WOLKENBERG
Vice Presidents
TANYA M. LODEN
Vice President and Controller
NORI L. GABERT
Vice President and Secretary
J. DAVID WISE
Vice President and Assistant Secretary
PERRY F. FARRELL
M. ROBERT SULLIVAN
Assistant Treasurers
HUEY P. FALGOUT, JR.
Assistant Secretary
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd. Houston, Texas 77056
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
2800 Post Oak Blvd. Houston, Texas 77056
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256 Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street Boston, Massachusetts 02110
COUNSEL
O'MELVENY & MYERS
400 South Hope Street Los Angeles, California 90071
(CVan)Kampen American Capital Distributors, Inc., 1995 All rights reserved.
SM denotes a service mark of Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors un-
less it has been preceded or is accompanied by an effective prospectus of the
Fund which contains additional information on how to purchase shares, the
sales charge, and other pertinent data.
23
<PAGE>
AMERICAN CAPITAL TAX-EXEMPT TRUST
THIS PAGE INTENTIONALLY LEFT BLANK
24
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................................................... 1
Performance Results......................................................... 3
Portfolio Management Review................................................. 4
Portfolio of Investments.................................................... 6
Statement of Assets and Liabilities......................................... 24
Statement of Operations..................................................... 25
Statement of Changes in Net Assets.......................................... 26
Financial Highlights........................................................ 27
Notes to Financial Statements............................................... 29
</TABLE>
HYM SAR 7/95
<PAGE>
LETTER TO SHAREHOLDERS
DON G. POWELL
July 3, 1995
Dear Shareholder:
During the six-month period covered by this report, December 1, 1994 through
May 31, 1995, we saw the close of a challenging and difficult year in the fi-
nancial markets--and the beginning of a new year, with renewed optimism and
strength on many fronts.
MARKET OVERVIEW
Most of 1994 was a difficult period for both stock and bond investors as the
Federal Reserve
Board's crusade against inflation drove interest rates markedly higher. The
yield on 30-year Treasury securities, for example, climbed from 6.35 percent as
the year began to a high of 8.16 percent by early November. As interest rates
rose, fixed-income investments declined in value. Stock market investors did
not fare much better, despite a robust economy and stronger corporate earnings.
In stark contrast, 1995 began more positively as the bond market got a boost
from growing sentiment that the Fed had stabilized economic growth while keep-
ing inflation under control. Subsequently, we saw the yield on 30-year Treasury
securities fall to 6.64 percent at the end of May. Falling yields have pushed
bond prices back up to February 1994 levels. For example, the Bond Buyer's Mu-
nicipal Index rose to 94.06 at the end of May--an increase of more than 16 per-
cent from its low of 80.81 in November. Meanwhile, the stock market continued
to climb through the first part of the year. The Dow Jones Industrial Average
broke the 4400 mark in May, setting a new record high and sustaining expecta-
tions for a stronger market in 1995. Mutual fund investors have been among the
beneficiaries in this impressive rally, as many funds (municipal bond funds in
particular) have earned back virtually all of last year's losses and posted at-
tractive returns.
This positive climate was apparently reflected in the public's sentiment to-
ward the economy. At the end of May, the Van Kampen American Capital Index of
Investor Intentions reached 145, an increase of 5 percent over its April-end
level of 138--with a total of 46 percent of those individuals surveyed saying
the next 60-90 days would be a "good" time to invest. The index, computed from
an independently conducted survey and published by Van Kampen American Capital,
measures the investment climate (the public's confidence) by asking 1,000 indi-
viduals about what they intend to do with their money over the next 60-90 days.
Recently in the news, you may have read or heard about the prospects for tax
reform. You may be wondering how this might affect the status of your tax-ex-
empt municipal bond investments. At this point, no one knows for sure what will
happen or when it might actually take place. While we will keep a close watch
over any new developments, we do not anticipate
(Continued on page two)
1
<PAGE>
adoption of any national tax reform in the near term. Furthermore, we believe
any tax reform act that would affect the municipal bond market would have to be
gradually phased in over time. Right now, it's key to remember that investors
continue to benefit from tax-advantaged municipal investments.
On the following pages, you can read about your Fund's performance during the
past six months, as well as portfolio management's outlook for the Fund in the
coming months. We hope that you will find the information contained in the
question-and-answer section helpful.
CORPORATE NEWS
As you may have already noticed, we have adopted a new design for our share-
holder reports that reflects our new identity as Van Kampen American Capital.
Going forward, we will continue to look for new ways to improve upon the pre-
sentation of information in your Fund's report.
In addition, we have developed a new corporate advertising campaign introduc-
ing Van Kampen American Capital and our wide range of investment opportunities
designed to help you build and preserve wealth. Full page ads appeared in The
Wall Street Journal in the first quarter of 1995--watch for more advertising
throughout the year.
We look forward to communicating with you on a regular basis, providing in-
formation about your Fund's performance, new investment opportunities, and our
newly created company. We appreciate your continued confidence in your invest-
ment with Van Kampen American Capital.
Sincerely,
/s/ Don G. Powell
Don G. Powell
Chairman
Van Kampen American Capital
Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED MAY 31, 1995
AMERICAN CAPITAL TAX-EXEMPT TRUST--HIGH YIELD MUNICIPAL PORTFOLIO
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return
based on NAV1........................................ 9.36% 9.05% 8.95%
Six month total return2.............................. 4.18% 5.05% 7.95%
One-year total return2............................... 4.02% 4.47% 7.38%
Five-year average
annual total return2................................. 7.18% N/A N/A
Life of Fund average
annual total return2................................. 6.79% 5.48% 4.67%
Commencement Date.................................... 01/02/86 07/20/92 12/10/93
DISTRIBUTION RATES AND YIELD
Distribution Rate3................................... 6.48% 6.04% 6.04%
Taxable Equivalent
Distribution Rate4................................... 10.13% 9.44% 9.44%
SEC Yield5........................................... 5.85% 5.35% 5.35%
</TABLE>
N/A = Not Applicable
1Assumes reinvestment of all distributions for the period ended May 31, 1995,
and does not include payment of the maximum sales charge (4.75% for A shares)
or contingent deferred sales charge for early withdrawal (4% for B shares and
1% for C shares).
2Standardized total return. Assumes reinvestment of all distributions for the
period ended May 31, 1995, and includes payment of the maximum sales charge
(4.75% for A shares) or contingent deferred sales charge for early withdrawal
(4% for B shares and 1% for C shares).
3Distribution Rate represents the monthly annualized distributions of the Fund
at the end of May 1995, and not the earnings of the Fund.
4Taxable equivalent calculations reflect a federal income tax rate of 36%.
5SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ending May 31, 1995.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
AMERICAN CAPITAL TAX-EXEMPT TRUST--HIGH YIELD MUNICIPAL PORTFOLIO
The following is an interview with the management team of American Capital Tax-
Exempt Trust--High Yield Municipal Portfolio. The team is led by Wayne D.
Godlin, portfolio manager, and Robert C. Peck, Jr., executive vice president
for fixed-income investments.
Q. WHAT MARKET CONDITIONS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
DURING THE SIX MONTHS ENDED MAY 31, 1995?
A. The bond markets experienced a significant rally during the last six
months, after rising interest rates drove bond prices down through late
'94. In fact, the municipal bond market's recovery has been dramatic, more than
recouping its '94 losses. (Rising interest rates have a negative effect on the
value of municipal bonds, while falling interest rates cause their value to
rise.)
The overall supply and demand scenario has also remained positive. The avail-
ability of municipal bonds (supply) is down approximately 45 percent from 1994
levels. However, demand has waned somewhat. We believe this is due--in part--to
the increased attractiveness of alternative investments (like CDs) over last
year. Another factor contributing to lower demand is wariness about tax-reform.
Nevertheless, the general supply/demand ratio still favors the market and
should contribute to its overall price stability.
Q. HOW DID YOU POSITION THE FUND IN RESPONSE TO THE EVENTS OF THE PAST SIX
MONTHS?
A. During the period, the Portfolio was not repositioned in any major way.
The focus remains on maintaining a relatively stable net asset value,
while delivering a competitive, attractive level of current income. In staying
consistent with the Fund's long-term investment strategy, we continued to focus
on purchasing non-rated municipal bond issues, which offer higher yields than
investment grade bonds, while meeting our stringent internal standards for
credit quality.
As usual, we maintained an average weighted maturity of approximately 20
years, and kept the Portfolio's duration in the six- to seven-year range. Dura-
tion is a measure of how a bond is expected respond to a change in interest
rates; the lower the duration the less a bond's value will fluctuate as inter-
est rates change.
[LOGO -- PIE CHART APPEARS HERE]
Portfolio Composition by Credit Quality as of May 31, 1995
Cash Equivalents 1%
AAA 2%
AA 4%
A 4%
BAA 16%
BA & B 5%
Non-rated 68%
4
<PAGE>
Q. HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED MAY 31, 1995?
A. The Fund performed well and met its objective during the reporting peri-
od. For example, during the '94 market downturn--with our short duration,
strict credit standards, and generally conservative positioning--the Fund was
well-positioned to weather the market's upheavals.
During the '95 rally, because high yield munis are usually not as responsive
to interest rate movements as general market municipals, we did not have as
much upside potential as some funds with different objectives. Nevertheless,
the Fund's performance was strong. Our careful approach--intended to help re-
duce volatility--has consistently resulted in impressive long-term returns
throughout the markets' ups and downs. However, past performance is not indica-
tive of future results.
Most important, we have continued to provide investors with an attractive
level of tax-free income. At its current annualized dividend level of $0.750
per share, the Fund provides shareholders with a tax-free distribution rate of
6.48 percent/3/ (Class A Shares) as of May 31, 1995. At this distribution rate
the Fund provides shareholders in the 36 percent federal income tax bracket
with a yield equivalent to a taxable investment earning 10.13 percent/4/.
For the six-month period ending May 31, 1995, the Fund's total return was
9.36 percent/1/ at net asset value. During the same period the Lehman Brothers
Municipal Bond Index earned a total return of 13.05 percent over the same peri-
od. The Lehman Index is an unmanaged index of municipal bonds and does not re-
flect any commissions or fees that would be paid by an investor purchasing the
securities it represents. (Please refer to the chart on page three for addi-
tional Fund performance results.)
Q. WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN 1995 AND, MORE
SPECIFICALLY, FOR THE FUND?
A. Going forward, we look for continued modest advances in the municipal
bond market, following what may be a minor mid-summer correction. Al-
though, we don't expect a dramatic rally like we had the last six months--posi-
tive year-end results are anticipated.
Q. THE PORTFOLIO WAS RECENTLY CLOSED TO NEW INVESTORS. WHY? AND, WHAT, IF
ANY EFFECT WILL THIS HAVE ON ITS INVESTMENT STRATEGY GOING FORWARD?
A. For years, the Portfolio has maintained a "managed growth" policy. That
is, we carefully monitor cash flow into the Fund, making sure that the
market's current supply and demand balance will allow us to conservatively in-
vest the assets to achieve our objectives and meet shareholder expectations.
When it appears that there is more cash coming in than we can invest in a
timely manner, it is in the best interest of current shareholders to temporar-
ily close the Fund. Later, when the portfolio is fully invested--meaning its
cash position is at a satisfactory level (often very low)--and there is an sup-
ply of new, non-rated municipals on the market, the Fund may be re-opened. Of
course, current shareholders may add to their investments at any time. The
closing of the Fund will not affect its management strategy or goals in any
way.
/s/ Robert C. Peck, Jr. /s/ Wayne D. Godlin
Robert C. Peck, Jr. Wayne D. Godlin
Executive Vice President Portfolio Manager
Fixed Income Investments
Please see footnotes on page three.
5
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 95.5%
EDUCATION 2.2%
$ 2,570 California Educational Facilities
Authority Rev. (College of
Osteopathic Medicine) ........... 7.500% 06/01/18 $ 3,080,684
2,660 Montgomery County, Pennsylvania,
Industrial Development Authority
Rev., 1st Mtg. (Meadowood Corp.
Project)......................... 7.750 09/01/14 2,764,804
5,000 New Hampshire Higher Education &
Health (Daniel Webster College
Issue)........................... 7.625 07/01/16 5,055,350
(/2/)1,000 New Jersey State Educational
Facilities, Series A............. 7.250 07/01/25 998,690
1,500 New York, New York, City
Industrial Development Agency,
Marymount-Manhattan College...... 7.000 07/01/23 1,548,015
645 Pennsylvania State Higher
Educational Facilities Authority,
College and University Rev.,
(College of Science &
Agriculture)..................... 6.900 04/01/14 656,236
1,000 Pennsylvania State Higher
Educational Facilities Authority,
College and University Rev.,
(College of Science &
Agriculture)..................... 7.000 04/01/22 1,013,500
1,000 Vermont Educational & Health
Buildings Finance Authority...... 7.150 04/15/14 1,046,810
--------------
TOTAL EDUCATION.................. 16,164,089
--------------
GENERAL OBLIGATIONS 8.9%
1,000 Arrowhead Metropolitan District,
Colorado......................... 8.125 12/01/11 1,054,090
2,000 Beaver Creek Metropolitan
District, Colorado............... 9.250 12/01/05 2,164,140
1,060 Berry Creek Metropolitan
District, Colorado, Refunding.... 7.300 12/01/12 1,085,747
240 Brazoria County, Texas, MUD...... 6.100 09/01/07 238,543
260 Brazoria County, Texas, MUD...... 6.200 09/01/08 258,346
1,000 Brush Creek Village, Colorado,
Water District................... 8.875 11/15/09 1,216,820
(/3/)6,720 California State, Veterans Bonds. 7.375 04/01/19 6,923,011
3,000 Connecticut State, Series A...... 5.400 03/15/06 3,029,280
1,250 Cordillera Metropolitan District,
Colorado, Eagle County........... 8.250 12/01/13 1,332,275
1,650 Dove Valley Metropolitan
District, Arapahoe County,
Colorado......................... 9.500 12/01/08 1,732,253
(/3/)4,000 Fairlake Metropolitan District,
City & County of Denver,
Colorado, Series 1991............ 9.625 12/01/10 4,689,600
2,000 Greenwood Metropolitan District,
Colorado......................... 7.300 12/01/06 2,118,100
1,500 Greenwood South Metropolitan,
Colorado......................... 7.250 12/01/06 1,585,065
2,000 Highlands Ranch, Colorado,
Metropolitan District 1.......... 7.300 09/01/12 2,232,640
2,000 Illinois Development Finance
Authority, (Debt Restructure--
East St. Louis).................. 7.375 11/15/11 2,134,580
1,000 Landmark Metropolitan District,
Colorado......................... 8.750 12/01/05 1,013,300
225 Mountain Village Metropolitan
District, San Miguel County,
Colorado......................... 10.500 12/01/05 232,056
355 Mountain Village Metropolitan
District, San Miguel County,
Colorado......................... 11.000 12/01/04 367,003
3,000 Mountain Village Metropolitan
District, San Miguel County,
Colorado, Pre-refunded, 12/1/98.. 11.000 12/01/07 3,681,840
1,000 New York, New York, Series A..... 6.250 08/01/09 1,004,680
1,830 New York, New York, Series A..... 6.250 08/01/10 1,834,172
3,000 New York, New York, Series B..... 7.300 08/15/10 3,234,600
2,000 New York, New York, Series C..... 7.200 08/15/13 2,091,020
2,000 New York, New York, Series C..... 7.200 08/15/15 2,091,020
</TABLE>
6
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Panorama Metropolitan District,
Colorado, Series B................... 9.000% 12/01/09 $ 534,745
265 Panorama Metropolitan District,
Colorado............................. 9.500 12/01/05 277,246
1,175 Puerto Rico Commonwealth Issues...... 6.000 07/01/22 1,183,096
146 Skyland Metropolitan District,
Colorado Facilities.................. * 12/01/08 102,550
1,500 Southtech Metropolitan District,
Colorado............................. 6.875 12/01/11 1,533,555
2,175 Section 14 Metropolitan District,
Jefferson County, Colorado........... 9.000 12/01/09 2,618,156
2,175 Southtech Metropolitan District,
Colorado, Refunding.................. 9.500 12/01/11 2,459,947
660 Superior, Colorado, Metropolitan
District No. 2, Refunding,
Series A............................. 7.250 12/01/02 676,837
840 Superior, Colorado, Metropolitan
District No. 2, Refunding,
Series A............................. 7.750 12/01/13 871,063
1,210 University of the Virgin Islands,
Public Finance Authority,
Series A............................. 7.500 10/01/09 1,290,804
1,965 University of the Virgin Islands,
Public Finance Authority,
Series A............................. 7.650 10/01/14 2,084,059
3,000 Virgin Islands, Public Finance
Authority............................ 7.250 10/01/18 3,157,380
--------------
TOTAL GENERAL OBLIGATIONS............ 64,133,619
--------------
HEALTH CARE 3.0%
750 Chisago City, Minnesota, Health
Facilities........................... 7.300 07/01/25 740,963
1,000 Colorado Health Facilities Authority
Rev., Cleo Wallace Center Project.... 7.000 08/01/15 1,017,250
400 Colorado Health Facilities Authority
Rev., Mile High Transplant Bank...... 8.500 06/01/07 419,048
1,225 Connecticut State Development
Authority, Health Care Rev.
(Independent Living Project) Series
B.................................... 8.000 07/01/17 1,266,797
1,350 Doylestown, Pennsylvania, Hospital
Authority Rev. (Pine Run) Series A... 7.200 07/01/23 1,374,057
2,470 Illinois Development Finance
Authority, Health Facilities......... 7.125 03/01/10 2,506,655
1,500 Massachusetts State Health &
Educational Facilities Authority,
Rev. (Independent Living)............ 8.100 07/01/18 1,560,570
1,200 Massachusetts State, Industrial
Finance Rev.......................... 7.100 11/15/18 1,190,472
3,770 Massachusetts State, Industrial
Finance Rev.......................... 8.800 06/01/14 4,214,747
2,425 New Hampshire, Higher Educational &
Health Care, purchased 9/23/93 (Cost
$2,382,133).......................... 7.250 09/01/23 2,447,286
560 Valparaiso, Indiana, Economic
Development Rev...................... 7.300 01/01/02 592,222
980 Valparaiso, Indiana, Economic
Development Rev...................... 7.500 01/01/07 1,048,923
1,405 Valparaiso, Indiana, Economic
Development Rev...................... 7.750 01/01/12 1,502,535
2,045 Valparaiso, Indiana, Economic
Development Rev...................... 8.000 01/01/17 2,193,508
--------------
TOTAL HEALTH CARE.................... 22,075,033
--------------
HOSPITALS 14.2%
1,470 Arizona Health Facilities Authority,
Hospital System Rev., Refunding (St.
Lukes Health System)................. 7.250 11/01/14 1,736,613
1,500 Athens County, Ohio, Hospital
Facilities Rev. (O'Bleness Memorial
Hospital Project).................... 7.100 11/15/23 1,426,395
</TABLE>
7
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,500 Bay County, Florida, Hospital
Systems Rev...................... 8.000% 10/01/12 $ 1,655,220
500 Bay County, Florida, Hospital
Systems Rev...................... 8.000 10/01/19 551,740
1,130 Bell County, Texas, Health
Facilities Development Corp.
(King's Daughters Hospital) ..... 9.250 07/01/08 1,265,023
1,500 Bexar County, Texas, Health
Facilities Development Rev. (St.
Lukes Hospital Project).......... 7.900 05/01/18 1,803,180
3,150 Clark County, Ohio, Hospital
Improvement Rev., Refunding
(Community Hospital) Series A.... 9.375 04/01/08 3,266,077
1,990 Clearfield, Pennsylvania,
Hospital Authority Rev.
(Clearfield Hospital Project)
Series 1994...................... 6.875 06/01/16 2,033,262
1,460 Colorado Health Facilities
Authority Rev., Presbyterian/St.
Luke Healthcare System Project,
Series A......................... 6.750 02/15/13 1,465,986
3,000 Delaware State Economic
Development Authority Rev.,
(Osteopathic Hospital Association
of Delaware) Series A............ 6.900 01/01/18 2,826,930
980 Delaware State Economic
Development Authority Rev.,
(Osteopathic Hospital Association
of Delaware) Series A............ 9.500 01/01/22 1,030,793
1,000 Dickinson County, Michigan,
Memorial Hospital................ 8.000 11/01/14 1,035,470
2,090 District of Columbia Hospital,
Series A ........................ 7.125 08/15/19 2,061,221
385 Edinburg, Texas, Hospital
Authority Rev., Project 86
(Edinburg General Hospital)...... 10.000 07/01/11 397,220
1,500 Glendale, California, Hospital
Rev., Refunding (Glendale
Memorial Hospital & Health)
Series A......................... 9.000 11/01/17 1,612,365
500 Illinois Health Facilities
Authority Rev. (Holy Cross
Hospital Project)................ 6.250 03/01/04 500,940
1,250 Illinois Health Facilities
Authority Rev. (Holy Cross
Hospital Project)................ 6.700 03/01/14 1,217,350
1,250 Illinois Health Facilities
Authority Rev. (St. Elizabeths
Hospital)........................ 7.625 07/01/10 1,289,500
1,500 Illinois Health Facilities
Authority Rev. (St. Elizabeths
Hospital)........................ 7.750 07/01/16 1,537,950
1,000 Jackson County, Oklahoma,
Memorial Hospital Authority Rev.
(Jackson Memorial Hospital)...... 9.000 08/01/15 1,114,380
(/1/)1,500 Jackson Park Hospital Foundation,
Chicago, Illinois (Jackson Park
Hospital)........................ 9.000 03/01/05 1,239,375
860 Lee County, Virginia, Industrial
Development Authority, Hospital
Facility Rev. (Lee County
Community Hospital).............. 10.500 08/01/11 894,606
500 Leflore County, Oklahoma,
Hospital Authority Improvement
Rev.............................. 9.400 05/01/06 543,245
2,000 Lorain, Ohio, Hospital
Improvement Rev., Refunding
(Lakeland Community Hospital,
Inc. Project).................... 9.500 11/01/12 2,083,300
765 Loves Park, Illinois, 1st Mtg.
Rev. (Hossier Care Project)
Series A......................... 9.750 08/01/19 826,345
1,000 Lowndes County, Mississippi,
Hospital Rev., Refunding (Golden
Triangle Medical Center)......... 8.500 02/01/10 1,093,250
470 Maine Health & Higher Educational
Facilities Authority Rev.
(Franklin Memorial Hospital)..... 9.875 07/01/13 534,508
1,080 Massachusetts State Health &
Educational Facilities Authority
Rev., Series B (Holyoke
Hospital)........................ 6.500 07/01/15 1,059,761
</TABLE>
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000 Massachusetts State Health &
Educational Facilities Authority
Rev., Series B (Milford-Whitinsville
Regional Project)................... 7.750% 07/15/17 $ 997,770
500 Massachusetts State Industrial
Finance Agency, Rev. (Atlanticare
Medical Center) Series B............ 10.125 11/01/14 558,245
2,585 Mercer County, West Virginia,
Commercial Development Rev.
(Rehabilitation Hospital)........... 12.000 12/01/15 2,710,967
1,000 Michigan State Hospital Financing
Authority--Series A................. 7.200 10/01/03 1,032,690
500 Michigan State Hospital Financing
Authority--Series A................. 7.500 10/01/07 517,015
1,500 Michigan State Hospital Financing
Authority--Series A................. 8.100 10/01/13 1,559,100
2,800 Michigan State Hospital Finance
Authority Rev., Refunding (Saratoga
Community Hospital)................. 8.750 06/01/10 2,982,784
1,075 Missouri State Health & Educational
Facilities, Series A (Bethesda
Health Group, Inc. Project)......... 7.500 08/15/12 1,091,673
1,500 Missouri State Health & Educational
Facilities, Series A................ 6.625 08/15/05 1,482,870
820 Montgomery County, Texas, Health
Facilities Development Corp.,
Hospital Mortgage Rev. (Woodlands
Medical Center Project)............. 8.850 08/15/14 896,924
1,495 Newark-Wayne Community Hospital,
Inc., New Jersey, Hospital Rev.,
Refunding & Improvement, Series A... 7.600 09/01/15 1,588,826
2,000 New Hampshire Higher Educational &
Health Facility Authority, Hospital
Rev. ............................... 7.500 06/01/05 2,165,280
1,455 New Hampshire Higher Educational &
Health Facility Authority Hospital
Rev. (Monadnock Community Hospital),
Series 1990......................... 9.125 10/01/20 1,668,390
2,500 New Jersey Health Care Facilities
Authority Rev. (Raritan Bay Medical
Center)............................. 7.250 07/01/14 2,590,325
1,500 Newton, Kansas, Hospital Rev.,
Series A............................ 7.375 11/15/14 1,546,740
1,000 Newton, Kansas, Hospital Rev.,
Series A............................ 7.750 11/15/24 1,068,950
1,250 Northeast Hospital, Texas, Rev.,
Series B............................ 7.250 07/01/22 1,269,700
170 Ohio County, Kentucky, Hospital
Facilities Rev. (Ohio County
Hospital)........................... 12.000 10/01/15 179,401
2,000 Ohio State, Refunding, 1st Mtg.
(Swifton Commons)................... 8.125 12/01/15 2,022,320
750 Philadelphia, Pennsylvania,
Hospitals & Higher Education
Children's Seashore House, Series B. 7.000 08/15/12 776,625
1,900 Philadelphia, Pennsylvania,
Hospitals & Higher Education
Facilities Authority, Hospital Rev.
(Roxborough Memorial Hospital)
Series 2............................ 7.250 03/01/24 1,824,570
500 Philadelphia, Pennsylvania,
Hospitals & Higher Education
Facilities Authority, Hospital Rev.
(Temple University Hospital)
Series A............................ 6.625 11/15/23 505,235
1,025 Pinal County, Arizona, Industrial
Development Authority (Casa Grande
Regional Medical Center Project)
Series A............................ 8.125 12/01/22 1,059,830
475 Pinal County, Arizona, Industrial
Development Authority (Casa Grande
Regional Medical Center Project)
Series B............................ 8.125 12/01/22 487,854
</TABLE>
9
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 715 Pinal County, Arizona, Industrial
Development Authority (Casa Grande
Regional Medical Center Project).... 9.000% 12/01/13 $ 739,846
500 Randolph County, West Virginia,
Building Commission, Refunding &
Improvement (Davis Memorial Hospital
Project)............................ 7.650 11/01/21 534,445
3,255 Rusk County, Texas, Health
Facilities Corp., Hospital Rev.
(Henderson Memorial Hospital
Project)............................ 7.750 04/01/13 3,418,889
1,500 Scranton-Lackawana, Pennsylvania,
Health & Welfare Authorities Rev.
(Allied Services Rehabilitation
Hospital), Series A................. 7.125 07/15/05 1,555,650
3,000 Scranton-Lackawana, Pennsylvania,
Health & Welfare Authorities Rev.
(Allied Services Rehabilitation
Hospital), Series A................. 7.375 07/15/08 3,117,360
300 Scranton-Lackawana, Pennsylvania,
Health & Welfare Authorities Rev.
(Moses Taylor Hospital Project),
Series B............................ 8.250 07/01/09 325,347
400 Selma, Alabama, Special Care
Facilities Financing Authority
Hospital Rev. (Vaughan Regional
Medical Center Project)............. 9.500 06/01/14 450,476
1,000 South Dakota State Health and
Educational Authority Rev. (Huron
Regional Medical Center)............ 7.000 04/01/10 998,040
1,000 South Dakota State Health and
Educational Authority Rev. (Huron
Regional Medical Center)............ 7.250 04/01/20 1,027,780
2,000 Somerset County, Pennsylvania,
Hospital Authority.................. 7.500 03/01/17 2,058,160
2,000 Southwestern Illinois Development
Authority, Medical Facilities Rev.
(Andersen Hospital Project) Series
A................................... 7.000 08/15/12 2,041,820
3,000 Tulsa, Oklahoma, Industrial
Authority, Hospital Rev. (Tulsa
Regional Medical Center)............ 7.200 06/01/17 3,016,950
1,380 Tyler, Texas, Health Facilities
Development Corp. (East Texas
Medical Center Regional Health)
Series A............................ 6.625 11/01/11 1,394,366
800 Vermont Educational & Health
Buildings Financing Agency Rev.
(Northwestern Medical Center)....... 9.750 09/01/18 892,408
1,000 Warren County, Pennsylvania,
Hospital Authority Rev. (Warren
General Hospital Project) Series A.. 6.900 04/01/11 1,017,420
2,000 Washington County, Pennsylvania,
Hospital Authority Rev. (Canonsburg
General Hospital Project)........... 7.350 06/01/13 1,951,400
400 Wells County, Indiana, Hospital
Authority Rev. (Caylor-Nickel
Medical Center, Inc.)............... 8.500 04/15/03 425,352
3,600 Wells County, Indiana, Hospital
Authority Rev. (Caylor-Nickel
Medical Center, Inc.)............... 8.750 04/15/12 4,022,388
790 Weslaco, Texas, Health Facilities
Development Corp., Hospital Rev.
(Weslaco Health Facility)........... 10.375 06/01/16 926,915
300 Wilmington, Delaware, Hospital Rev.
(Osteopathic Hospital, Association
of Delaware/Riverside Hospital)
Series A............................ 10.000 10/01/03 356,199
500 Wilmington, Delaware, Hospital Rev.
(Osteopathic Hospital, Association
of Delaware/Riverside Hospital)
Series A............................ 10.200 10/01/18 596,730
500 Woodward, Oklahoma, Municipal
Authority Hospital, Rev............. 8.250 11/01/09 511,170
500 Woodward, Oklahoma, Municipal
Authority Hospital, Rev............. 9.250 11/01/14 549,240
--------------
TOTAL HOSPITALS................... $ 102,614,440
--------------
</TABLE>
10
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HOUSING 12.7%
$ 1,055 Albuquerque, New Mexico,
Retirement Facilities Rev.,
Refunding (La Vida Liena Project)
Series A......................... 8.850% 02/01/23 $ 1,167,631
(/1/)1,000 Atlanta, Georgia, Urban
Residential Finance Authority,
Multi-family Mtg. Rev. (Peachtree
Apartments)...................... 10.500 12/01/10 931,110
1,020 Austin, Minnesota, Multi-family
Rev., Refunding (Cedars of Austin
Project)......................... 7.500 04/01/17 1,029,945
2,000 Austin, Minnesota, Multi-family
Rev., Refunding (Cedars of Austin
Project)......................... 7.500 04/01/18 2,007,000
710 Austin, Texas, Housing Finance
Corp., Multi-family Rev. (Stassey
Woods Apartments Project)........ 6.750 04/01/19 706,577
2,500 Berks County, Pennsylvania,
Municipal Authority Rev. (Phoebe
Berks Village, Inc. Project)..... 8.250 05/15/22 2,632,200
1,730 Brevard County, Florida, Health
Facilities Authority Rev......... 7.375 11/15/04 1,783,284
2,200 Brevard County, Florida, Health
Facilities Authority Rev.
(Courtenay Springs Village)...... 7.750 11/15/17 2,362,558
1,955 Brooklyn Center, Minnesota,
Multi-family..................... 7.400 12/01/15 1,959,398
1,220 Brooklyn Center, Minnesota,
Multi-family..................... 7.500 06/01/25 1,222,745
1,500 Colorado Health Facilities
Authority Rev.................... 9.000 01/01/25 1,593,075
275 Harris County, Texas, Housing
Finance Corp., Single Family Mtg.
Rev.............................. 9.875 03/15/14 276,628
5 Harris County, Texas, Housing
Finance Corp., Single Family Mtg.
Rev.............................. 11.250 04/15/06 5,152
330 Harris County, Texas, Housing
Finance Corp., Single Family Mtg.
Rev. Series 1983-A............... 10.125 07/15/03 331,574
1,540 Harris County, Texas, Housing
Finance Corp., Single Family Mtg.
Rev. Series 1983-A............... 10.375 07/15/14 1,546,514
2,770 Iowa Finance Authority, Multi-
family Rev., Refunding (Park West
Project)......................... 8.000 10/01/23 2,892,545
1,130 Jefferson County, Missouri,
Industrial Development Authority,
1st Mtg. Rev. (Cedar Hills
Retirement Village Project)...... 12.000 12/01/15 1,177,415
1,250 Lebanon County, Pennsylvania,
Health Facilities Authority Rev.
(Church of Christ Homes Project). 7.000 10/01/14 1,274,538
1,250 Lebanon County, Pennsylvania,
Health Facilities Authority Rev.
(Church of Christ Homes Project). 7.250 10/01/19 1,269,713
1,000 Massachusetts State Housing
Finance Agency, Series 38........ 7.200 12/01/26 1,036,000
690 Massachusetts State Industrial,
1st Mtg.......................... 7.250 07/01/07 701,088
1,410 Massachusetts State Industrial,
1st Mtg.......................... 7.400 07/01/12 1,422,182
1,530 Massachusetts State Industrial,
1st Mtg.......................... 7.500 07/01/17 1,550,655
1,950 Minneapolis, Minnesota, Health
Care Facilities Authority Rev.,
Ebenezer Society Project, Series
A................................ 7.200 07/01/23 1,910,727
3,780 Montgomery County, Pennsylvania,
Industrial Development Authority,
Rev. (Assisted Living
Facilities)...................... 8.250 05/01/23 4,060,287
3,040 New Brighton, Minnesota, Rental
Housing Rev...................... 7.500 10/01/17 3,108,278
4,535 New Hampshire State Housing
Finance Authority, Series A...... 8.500 07/01/14 4,873,991
495 New Hampshire State Housing
Finance Authority (Single Family
Residential Mortgage)............ 6.850 07/01/16 499,826
</TABLE>
11
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 185 New Hampshire State Housing Finance
Authority (Single Family Residential
Mortgage)............................ 6.950% 01/01/26 $ 187,960
950 New Hope, Minnesota, Multi-family
Rev., Refunding (Broadway Lanel
Project)............................. 7.750 09/01/07 975,888
2,320 New Hope, Minnesota, Multi-family
Rev., Refunding (Broadway Lanel
Project)............................. 8.000 09/01/18 2,328,120
1,240 New Jersey Economic Development
Authority, 1st Mtg. Gross Rev. Dover
Residential Healthcare Facilities.... 13.375 11/01/14 870,492
1,000 North Canton, Ohio, Health Care
Facilities Rev. (Waterford at St.
Luke Project)........................ 8.625 11/15/21 1,067,410
2,595 North Miama, Florida, Health Care
Facilities Rev. (Imperial Club
Project) Series A.................... 9.250 01/01/13 2,872,354
960 North St. Paul, Minnesota, Multi-
family, Refunding (Cottages North
St. Paul)............................ 9.000 02/01/09 1,018,560
2,220 North St. Paul, Minnesota, Multi-
family, Refunding (Cottages North
St. Paul)............................ 9.250 02/01/22 2,424,795
2,000 North Syracuse, New York, Housing
Authority Rev. (Janus Park Project).. 8.000 06/01/14 2,006,120
1,255 Oklahoma Housing Finance Agency,
Single Family, Class A............... 7.997 08/01/18 1,372,343
6,000 Rhode Island Housing & Mortgage,
Series 1-B........................... 8.400 10/01/22 6,482,700
3,105 Richmond, California, Redevelopment
Agency............................... 7.500 09/01/23 3,136,050
300 Richmond County, Georgia, Development
Authority, Nurisng Home Rev.,
Refunding (Beverly Enterprises,
Inc.-Georgia Project)................ 8.750 06/01/11 328,095
6,000 Richmond, Virginia, Redevelopment &
Housing Authority, Multi-family Mtg.
Rev, Series A........................ 8.750 12/15/21 6,000,000
3,000 Ridgeland, Mississippi, Urban Renewal
(The Orchard, Ltd. Project) Series A. 7.750 12/01/15 3,064,080
4,000 St. Charles, Illinois, Multi-family
Rev. (Wessel Court Project).......... 7.600 04/01/24 4,190,560
1,000 Santa Rosa, California (Fountaingrove
Parkway Extension)................... 7.625 09/02/19 1,014,250
750 Snowmass Village, Colorado, Multi-
family, Refunding, Series A.......... 8.000 09/01/14 759,623
2,000 Spring Lake Park, Minnesota, Multi-
family Rev., Refunding............... 8.375 01/01/22 2,067,000
470 Sunrise, Florida, series 86 (Sunshine
Palms Adult Congregate Living
Facility)............................ 10.750 12/01/16 483,832
2,000 Telluride, Colorado, Housing
Authority, Housing Rev.
Refunding (Shandoka Apartments
Project)............................. 7.875 06/01/17 2,103,020
1,500 Telluride, Colorado, Housing
Authority, Housing Rev.
Series 1991.......................... 9.100 06/01/01 1,707,015
-------------
TOTAL HOUSING....................... 91,792,903
-------------
INDUSTRIAL DEVELOPMENT REVENUE 6.7%
500 Casa Grande, Arizona, Industrial
Development Authority, Refunding..... 8.250 12/01/15 513,065
</TABLE>
12
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,955 Chandler, Arizona, Industrial
Development Authority Rev.
(Chandler Financial Center Project)
Series 1986......................... 7.125% 12/01/16 $ 2,855,741
(/1/)875 Chandler, Arizona, Industrial
Development Authority Rev.
(Chandler Financial Center Project)
Series 1986......................... 10.750 12/01/15 875,971
1,055 Denver, Colorado, City and County,
Industrial Development Rev. (Jewish
Community Centers Project).......... 7.375 03/01/09 1,110,872
1,130 Denver, Colorado, City and County,
Industrial Development Rev. (Jewish
Community Centers Project).......... 7.500 03/01/14 1,185,065
815 Denver, Colorado, City and County,
Industrial Development Rev. (Jewish
Community Centers Project).......... 7.875 03/01/19 862,751
875 Fort Walton Beach, Florida, 1st Mtg.
(Shoney's Inn & Restaurant)......... 10.500 12/01/16 928,900
1,575 Gulf Shores, Alabama Rev. (Quality
Inn, Beachsiding Project) Series
1986................................ 11.000 06/01/16 1,614,029
2,030 Harrison, Ohio, Refunding (Harrison
Avenue K Mart Corp. Project) Series
A................................... 8.125 12/01/02 2,098,858
2,500 Hialeah Gardens, Florida (Waterford
Convalescent) Series A.............. 8.250 12/01/14 2,699,600
1,500 Homestead, Florida (Brookwood
Gardens Center Project) Series A.... 8.250 12/01/14 1,619,760
4,000 Lehigh County, Pennsylvania
(Allentown Interstate Motel)........ 8.000 08/01/12 4,171,040
3,000 Luzerne County, Pennsylvania,
Industrial Development Authority,
Exempt Facilities Rev., Refunding
(Pennsylvania Gas & Water Co.
Project) Series A................... 7.200 10/01/17 3,138,450
1,300 Marion County, Florida, Industrial
Development Authority Rev. (Marion
Ross Corp.)......................... 11.875 08/01/11 1,315,080
1,000 Martin County, Florida, Industrial
Development Rev. (Indiantown
Cogeneration Project), Series A..... 7.875 12/15/25 1,087,670
650 Minneapolis, Minnesota, Community
Development Agency, Commercial
Development Rev. (Standard Mill
Whitney Hotel Project).............. 12.800 04/01/10 516,750
800 Minneapolis, Minnesota, Commercial
Development Rev. (Holiday Inn
Metrodome Project).................. 10.500 06/01/03 828,000
1,000 New Jersey Economic Development
Authority Series E (Borg Warner
Corp.).............................. 11.200 08/01/04 1,081,060
1,000 Pittsylvania County, Virginia,
Series A............................ 7.450 01/01/09 1,042,480
510 Pocahontas, Iowa (International
Harvester Co.)...................... 10.250 10/01/00 526,601
4,505 Port of Corpus Christi, Texas
(Valero Refining & Marketing Co.)... 10.250 06/01/17 5,024,517
500 Port of Corpus Christi, Texas
(Valero Refining & Marketing Co.)
Series B............................ 10.625 06/01/08 561,120
2,000 Port of New Orleans, Louisiana
(Avondale Industries Inc., Project). 8.250 06/01/04 2,169,040
3,000 Port of New Orleans, Louisiana
(Continental Grain Co.) Refunding... 7.500 07/01/13 3,054,870
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000 Port of New Orleans, Louisiana
(Continental Grain Co.)
Series A............................ 14.500% 02/01/02 $ 1,110,970
1,000 Port of New Orleans, Louisiana
(Continental Grain Co.)............. 14.500 01/01/02 1,105,820
1,340 Scott County, Tennessee (Fruehauf
Corp.).............................. 10.750 01/01/09 1,439,173
3,190 St. Charles, Illinois (Tri-City
Center Project)..................... 7.500 11/01/13 3,284,903
750 Vincent, Alabama, Industrial
Development Board (Shelby Motel
Group, Inc. Project)................ 10.500 09/01/16 743,438
--------------
TOTAL INDUSTRIAL DEVELOPMENT
REVENUE............................. 48,565,594
--------------
LIFE CARE 8.6%
1,590 Atlantic Beach, Florida, Rev.,
Series A............................ 7.500 10/01/02 1,653,218
2,085 Atlantic Beach, Florida, Rev.,
Series A............................ 7.875 10/01/08 2,206,367
500 Chartiers Valley, Pennsylvania,
Industrial & Commercial Development
Authority (Ashbury Health Center
Project)............................ 6.700 12/01/05 509,430
500 Chartiers Valley, Pennsylvania,
Industrial & Commercial Development
Authority (Ashbury Health Center
Project)............................ 6.750 12/01/06 509,610
1,000 Chartiers Valley, Pennsylvania,
Industrial & Commercial Development
Authority (Ashbury Health Center
Project)............................ 7.250 12/01/11 1,029,070
2,000 Chartiers Valley, Pennsylvania,
Industrial & Commercial Development
Authority (Ashbury Health Center
Project)............................ 7.400 12/01/15 1,997,900
1,000 Chartiers Valley, Pennsylvania,
Industrial & Commercial Development
Authority, Series A................. 9.500 12/01/15 1,179,160
1,150 Cumberland County, Pennsylvania,
Muncipal Authority Rev., 1st Mtg.
(Carlisle Hospital & Health)........ 6.800 11/15/14 1,151,760
500 Fayetteville, Arkansas, Public
Facilities Board Rev. (Butterfield
Trail Village Project) Series B..... 9.500 09/01/14 542,885
1,350 Hanover Park, Illinois, 1st Mtg.
Rev. (Windsor Park Manor Project)... 9.500 12/01/14 1,462,820
1,475 Illinois Health Facilities Authority
Rev. Covenant Retirement
Communities, Series A............... 7.600 12/01/12 1,467,950
1,000 Illinois Health Facilities Authority
Rev. Fairview Obligated Group
Project, Series A................... 9.500 10/01/22 1,063,990
1,645 Illinois Health Facilities Authority
Rev. (Friendship Village)........... 6.750 12/01/08 1,692,063
1,700 Illinois Health Facilities Authority
Rev. Series B....................... 8.000 02/15/25 1,667,581
2,500 Massachusetts State Industrial
Finance Agency Rev.................. 9.000 05/01/22 2,748,600
1,000 Massachusetts State Industrial
Finance Agency Rev., 1st Mtg.
Brookhaven Community, Series A...... 7.000 01/01/15 997,800
500 Massachusetts State Industrial
Finance Agency Rev., 1st Mtg.
Brookhaven Community................ 10.250 01/01/18 583,385
75 Massachusetts State Industrial
Finance Agency Rev., 1st Mtg.
Pioneer Valley...................... 7.000 10/01/01 75,198
500 Massachusetts State Industrial
Finance Agency Rev., 1st Mtg.
Pioneer Valley...................... 7.000 10/01/20 496,250
3,000 Massachusetts State Industrial
Finance Agency Rev., 1st Mtg. Reeds
Landing Project..................... 8.625 10/01/23 3,097,980
500 Montgomery County, Pennsylvania,
Higher Education & Health Authority
Rev., Retirement Community (GDL
Farms) Series A..................... 9.500 01/01/20 607,135
</TABLE>
14
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,500 Montgomery County, Pennsylvania,
Industrial Development Authority
Rev., 1st Mtg. (Meadowood Corp.
Project)......................... 10.250% 12/01/20 $ 2,800,175
1,550 Montgomery County, Pennsylvania,
Industrial Development Authority
Rev., 1st Mtg. (Meadowood Corp.
Project) Series A................ 9.250 12/01/00 1,668,994
2,025 Montgomery County, Pennsylvania,
Industrial Development Authority
Rev., 1st Mtg. (Meadowood Corp.
Project) Series A................ 10.000 12/01/19 2,275,817
2,199 Montgomery County, Pennsylvania,
Industrial Development Authority
Rev., 1st Mtg. (Meadowood Corp.
Project) Series B................ * 12/01/20 184,883
500 New Jersey Economic Development,
Series A......................... 8.500 01/01/10 531,030
1,000 New Jersey Economic Development,
Series A......................... 9.250 01/01/25 1,059,760
1,000 New Jersey Economic Development
Authority, 1st Mtg. Gross Rev.
Franciscan Oaks Project, Series
A................................ 8.500 10/01/23 1,074,150
1,000 New Jersey Economic Development
Authority, 1st Mtg. Gross Rev.
The Evergreens................... 9.250 10/01/23 1,055,350
750 North Hampton County,
Pennsylvania, Industrial
Development Authority Rev., 1st
Mtg. (Kirkland Village Project).. 7.375 12/15/18 731,985
750 North Hampton County,
Pennsylvania, Industrial
Development Authority Rev., 1st
Mtg. (Kirkland Village Project).. 7.500 12/15/23 731,048
3,000 Palm Beach County, Florida,
Health Facilities Authority Rev.,
Refunding (Waterford Project).... 7.750 10/01/15 3,064,500
(/1/)1,083 Peoria, Arizona, Industrial
Development Authority (Sierra
Winds Life Care Community
Project)......................... 10.750 11/01/17 801,712
1,500 Philadelphia, Pennsylvania,
Industrial Development Authority
Rev. (Cathedral Village)......... 7.250 04/01/15 1,560,720
1,000 Philadelphia, Pennsylvania,
Industrial Development Authority
Rev. (Lutheran Retirement Home),
Series B......................... 5.000 01/01/17 716,300
1,370 Plantation, Florida, Health
Facilities Authority Rev.
(Covenant Retirement Communities,
Inc.)............................ 7.625 12/01/12 1,401,551
750 Plantation, Florida, Health
Facilities Authority Rev.
(Covenant Retirement Communities,
Inc.)............................ 7.750 12/01/22 773,873
2,500 Riverside County, California,
Refunding (Air Force Village
West, Inc.) Series A............. 8.125 06/15/20 2,554,300
250 St. John's County, Florida,
Industrial Development Authority,
Refunding (Vicars Landing
Project) Series A................ 6.250 02/15/04 248,648
2,580 St. John's County, Florida,
Industrial Development Authority,
Refunding (Vicars Landing
Project) Series A................ 6.750 02/15/12 2,521,640
700 Salem, Oregon, Hospital Facility
Authority Rev.................... 7.250 12/01/15 709,807
1,500 Salem, Oregon, Hospital Facility
Authority Rev.................... 7.500 12/01/24 1,556,175
1,035 Scottsdale, Arizona, Industrial
Development...................... 8.000 06/01/11 1,108,537
2,000 Scottsdale, Arizona, Industrial
Development...................... 8.250 06/01/15 2,156,820
2,540 Scottsdale, Arizona, Industrial
Development Authority Rev., 1st
Mtg. (Westminister Village)...... 10.000 06/01/17 2,884,627
1,400 Tempe, Arizona, Industrial
Development Authority Rev.
(Friendship Village Temple)
Series A......................... 6.750 12/01/13 1,394,148
--------------
TOTAL LIFE CARE................. 62,306,702
--------------
</TABLE>
15
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MISCELLANEOUS 4.6%
$ 1,800 Brea & Olinda, California,
University School District,
Certificate of Participation
(High School Refunding Program)
Series B......................... 7.000% 08/01/18 $ 1,623,474
500 Brevard County, Florida, Tourist
Development Tax Rev.............. 6.875 03/01/13 478,720
890 Chimney Hill, Texas, Municipal
Utility District................. 7.750 10/01/11 981,376
1,250 Clay Road, Texas, Municipal
Utilities District............... 7.625 09/01/11 1,352,125
3,905 Denver, Colorado, City and
County, Series A................. 8.125 12/01/20 4,122,899
3,500 District of Columbia Rev.
(National Public Radio) Series A. 7.700 01/01/23 3,778,005
1,000 Fairfax County, Virginia, Park
Authorities Facilities........... 6.625 07/15/14 1,015,370
2,910 Fresno, California, Certificates
of Participation................. 8.500 05/01/16 3,063,415
500 Hopewell, Virginia, Industrial
Development Authority, Resource
Recovery Rev., Refunding (Stone
Container Corp. Project)......... 8.250 06/01/16 522,480
2,500 Hyland Hills, Colorado,
Metropolitan Park & Recreation
District, Special Rev., Series A. 8.625 12/15/12 2,686,100
(/3/)4,000 Lake Charles, Louisiana, Harbor &
Terminal Facilities Rev.
(Trunkline Liquified Nautural Gas
Co. Project)..................... 7.750 08/15/22 4,381,040
1,555 Pennsylvania Convention Center
Authorities Rev., Refunding,
Series A......................... 6.700 09/01/14 1,591,807
2,000 Rhode Island, Housing, Series 17-
A................................ 6.250 04/01/17 2,026,500
1,000 South Orange County, California,
Public Funding Authority Rev.,
Series B......................... 7.000 09/01/07 940,440
1,001 Texas General Services, Community
Partner Interests (Office
Building and Land Acquisition
Project)......................... 7.000 08/01/09 1,031,295
1,091 Texas General Services, Community
Partner Interests (Office
Building and Land Acquisition
Project)......................... 7.000 08/01/19 1,124,066
1,400 Texas General Services, Community
Partner Interests (Office
Building and Land Acquisition
Project)......................... 7.000 08/01/24 1,443,607
790 Virgin Islands Port Authority,
Marine Division Rev. (Marine
Terminal) Series A............... 10.125 11/01/05 814,711
--------------
TOTAL MISCELLANEOUS............. 32,977,430
--------------
NURSING HOMES 11.2%
720 Albuquerque, New Mexico, Nursing
Home Rev., Refunding (Albuquerque
Health Care)..................... 9.750 12/01/14 782,690
2,000 Calvert County, Maryland,
Economic Development............. 8.375 01/01/15 2,048,780
500 Carmel, Indiana, Retirement
Rental Housing Rev., Refunding
(Beverly Enterprises, Inc.)...... 8.750 12/01/08 547,375
750 Charleston County, South
Carolina, Health Facilities Rev.,
Refunding, 1st Mtg. (Episcopal
Project)......................... 9.750 04/01/16 952,635
1,500 Charleston County, South
Carolina, Health Facilities Rev.,
Refunding, 1st Mtg. (Roper
Geriatric Center, Inc. Project).. 7.750 05/01/17 1,570,560
190 Charlotte County, Florida,
Industrial Development Authority,
Refunding (Beverly Enterprises,
Inc.)............................ 10.000 06/01/11 215,587
1,500 Chesterfield, Missouri,
Industrial Development Authority
Rev. (St. Andrews Episcopal-
Presbyterian) Series A........... 8.500 12/01/19 1,603,785
</TABLE>
16
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,740 Collier County, Florida, Industrial
Development Authority Rev.,
Retirement Rent Housing, Refunding
(Beverly Enterprises, Inc.).......... 10.750% 03/01/03 $ 2,031,328
585 Colorado Health Facilities Authority
Rev. (Beth Israel at Shalom, Park
Project)............................. 7.400 12/15/07 603,767
250 Colorado Health Facilities Authority
Rev. (Beth Israel at Shalom, Park
Project)............................. 8.000 12/15/22 262,407
925 Columbia County, Pennsylvania,
Industrial Development Authority,
Refunding (1st Street Association
Project)............................. 9.000 05/01/14 1,037,554
1,095 Covington-Alleghany County, Virginia,
Industrial Development Authority
Rev., Refunding (Beverly Enterprises,
Inc. Project)........................ 9.375 09/01/01 1,208,639
1,000 Cuyahoga County, Ohio, Health Care
Facilities Rev. (Jennings Hall)...... 7.200 11/15/14 987,600
1,500 Cuyahoga County, Ohio, Health Care
Facilities Rev. (Jennings Hall)...... 7.300 11/15/23 1,461,405
2,800 Delaware State, Economic Development
Authority, Refunding, 1st Mtg. (Dover
Health Care)......................... 7.875 04/01/08 3,021,284
2,500 DeSoto, Texas, Health Facilities
Development Corp. Rev. (Park Manor
Senior Care, Inc. Project)........... 11.000 12/01/16 2,625,125
500 Fairfield, Ohio, Economic Development
Rev., Refunding (Beverly Enterprises,
Inc.)................................ 8.500 01/01/03 533,450
1,000 Gardendale, Alabama, Hospital &
Nursing Home Medical Clinic Board
Rev., Series A....................... 9.500 04/01/20 1,048,970
285 Hernando County, Florida, Refunding
(Beverly Enterprises, Inc.).......... 10.000 09/01/11 324,293
1,500 Indiana Health Facilities Authority
(St. Anthony Home)................... 7.000 05/15/17 1,516,290
1,000 Indiana Health Facilities Authority
(St. Anthony Home)................... 7.250 05/15/24 1,026,020
250 Lee County, Florida, Industrial
Development Authority, Economic
Development Rev., Refunding (Encore
Nursing Center Partner).............. 8.125 12/01/07 263,543
250 Lehigh County, Pennsylvania, 1st Mtg,
(Bible Fellowship Project)........... 7.150 12/15/08 255,883
1,815 Lehigh County, Pennsylvania, 1st Mtg,
(Bible Fellowship Project)........... 8.000 12/15/23 1,861,065
710 Louisiana Public Facilities Authority
Rev., Refunding Industrial
Development (Beverly Enterprises,
Inc.)................................ 8.250 09/01/08 764,336
2,000 Luzerne County, Pennsylvania,
Industrial Development Authority, 1st
Mtg. Rev., Refunding (Birchwood
Nursing Center Project) Series A..... 7.875 12/01/13 2,132,460
1,200 Maplewood, Minnesota, Health Care
Facilities Rev., (VOA Care Centers
Project)............................. 7.450 10/01/16 1,220,940
800 Massachusetts Industrial Finance
Agency, Industrial Development
Authority, Refunding (Beverly
Enterprises, Inc.)................... 8.375 05/01/09 864,016
1,500 Massachusetts State Industrial
Finance Agency Rev., 1st Mtg......... 7.700 01/01/14 1,555,725
1,005 Massachusetts State Industrial
Finance, Refunding, 1st Mtg., Series
A.................................... 7.400 01/15/09 1,018,949
2,000 Massachusetts State Industrial
Finance, Refunding, 1st Mtg., Series
A, Evanswood Bethzatha............... 7.625 01/15/14 2,061,960
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000 Massachusetts State Industrial
Finance, Refunding, 1st Mtg., Series
A, Healthcare Corp Project.......... 7.625% 04/01/13 $ 1,018,620
395 McCormick County, South Carolina,
Hospital Facilities Rev., Series 88
(McCormick Hospital)................ 10.500 03/01/18 420,481
1,000 Minneapolis, Minnesota, Health Care
Facilities Authority Rev., St. Olaf
Residence, Inc. Project............. 7.100 10/01/23 1,006,800
910 Montgomery County, Pennsylvania
(Pennsburg Nursing & Rehabilitation
Center)............................. 7.625 07/01/18 871,907
3,595 Montgomery County, Pennsylvania,
Industrial Development Authority
Rev., Health Care (Advanced
Geriatric) Series A................. 8.375 07/01/23 3,902,948
2,200 Nevada State Department Community
Health Facilities, Rev., Refunding
(Washoe Convalescent Center
Project)............................ 8.125 06/01/03 2,245,716
1,620 New Hampshire Higher Education &
Health Rev.......................... 8.000 06/01/04 1,691,701
2,000 New Hampshire Higher Education &
Health Rev.......................... 9.000 06/01/14 2,224,600
1,250 New Jersey Economic Development
Authority........................... 7.250 07/01/14 1,250,888
4,365 New Jersey Economic Development
Authority........................... 7.500 07/01/20 4,402,539
500 New Jersey Economic Development
Authority Rev., Refunding, Burnt
Tavern Convalescent, Series A....... 9.000 11/15/13 552,670
840 New Jersey Economic Development
Authority Rev., Refunding, Stone
Arch Nursing Home Project........... 8.750 12/01/10 921,178
500 New Jersey Economic Development
Authority Rev., Refunding, Zirbser-
Greenbriar, Inc., Series A.......... 7.375 07/15/03 510,325
915 New Jersey Economic Development
Authority Rev., Refunding, Zirbser-
Greenbriar, Inc., Series A.......... 7.750 07/15/08 945,314
750 New Jersey Economic Development
Authority Rev., Refunding, 1st Mtg.,
Delaire Nursing, Series A........... 8.750 11/01/10 809,835
500 New Jersey Economic Development
Rev., Series A...................... 8.000 01/01/09 519,435
1,000 New Jersey Economic Development
Rev., Series A...................... 8.250 01/01/17 1,038,510
500 Oakland County, Michigan, Economic
Development (Pontiac Osteopathic
Hospital Project)................... 9.625 01/01/20 609,585
480 Orange County, Florida, Industrial
Development Authority Rev.,
Refunding (Beverly Enterprises,
Inc.)............................... 9.250 08/01/10 529,176
2,000 Philadelphia, Pennsylvania
(FFE/Maplewood)..................... 8.000 01/01/14 2,076,740
1,000 Philadelphia, Pennsylvania
(FFE/Maplewood)..................... 8.000 01/01/24 1,039,980
1,170 Philadelphia, Pennsylvania,
Industrial Development Authority
Rev. 1st Mtg., (RHA/Care Pavilion
Project)............................ 10.250 02/01/18 1,215,852
500 San Antonio, Texas, Health
Facilities Development Corp. Rev.
(Encore Nursing Center Partner)..... 8.250 12/01/19 539,370
725 Santa Fe, New Mexico, Refunding
(Casa Real Nursing Home)............ 9.750 01/01/13 784,327
250 Santa Rosa County, Florida,
Industrial Development Authority
Rev., 1st Mtg. (Sandy Ridge Care
Center)............................. 10.500 04/01/16 253,535
</TABLE>
18
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Sherman, Illinois (Villa Health
Care) 1st Mtg., Series A......... 8.250% 10/01/14 $ 522,205
500 Sherman, Illinois (Villa Health
Care) 1st Mtg., Series A......... 8.500 10/01/24 522,965
250 Smith County, Tennessee, Health
and Educational Facilities,
(Healthcare Corporation Project)
Refunding........................ 7.000 04/01/08 252,102
500 Smith County, Tennessee, Health
and Educational Facilities,
(Healthcare Corporation Project)
Refunding........................ 7.400 04/01/13 504,150
250 South Carolina Jobs Economic Dev.
Authority, Health Facilities
Rev., 1st Mtg. (Lutheran Homes
South Carolina Project).......... 7.750 10/01/12 265,163
750 South Carolina Jobs Economic Dev.
Authority, Health Facilities
Rev., 1st Mtg. (Lutheran Homes
South Carolina Project).......... 8.000 10/01/22 800,873
500 St. Louis, Missouri, Industrial
Development Authority Rev., 1st
Mtg. (Deaconess Manor
Association)..................... 7.500 06/01/16 476,225
500 St. Louis, Missouri, Industrial
Development Authority Rev., 1st
Mtg. (Deaconess Manor
Association)..................... 7.500 06/01/23 476,500
1,000 St. Paul, Minnesota, Housing &
Redevelopment Authority,
Commercial Development Rev.,
Refunding (Beverly Enterprises,
Inc.)............................ 7.750 11/01/02 1,033,500
470 Truth or Consequences, New
Mexico, Nursing Home Rev.,
Refunding & Improvement (Sierra
Health Care)..................... 9.750 12/01/14 510,923
3,860 Valparaiso, Indiana, Economic
Development Rev., Refunding, 1st
Mtg. (Whispering Pines).......... 9.500 01/01/07 4,687,082
250 Warren County, Pennsylvania,
Industrial Development Authority
Rev., Refunding (Beverly
Enterprises, Inc.)............... 9.000 11/01/12 278,013
250 Westmoreland County, Virginia,
Industrial Development Authority,
Health Facilities Rev., 1st Mtg.
(Mary Washington Health Center).. 7.000 02/01/13 247,473
1,500 Westmoreland County, Virginia,
Industrial Development Authority,
Health Facilities Rev., 1st Mtg.
(Mary Washington Health Center).. 7.000 02/01/23 1,451,805
--------------
TOTAL NURSING HOMES.............. 80,819,432
--------------
POLLUTION CONTROL REVENUE 8.6%
2,500 Baltimore County, Maryland
(Bethlehem Steel Corp. Project),
Series A......................... 7.500 06/01/15 2,550,625
560 Baltimore County, Maryland
(Bethlehem Steel Corp. Project),
Series A......................... 7.550 06/01/17 570,460
(/3/)2,500 Beaver County, Pennsylvania,
Industrial Development Authority
Cleveland Electric Illuminating
Co............................... 10.500 09/01/15 2,583,250
(/3/)4,075 Beaver County, Pennsylvania,
Industrial Development Authority
Ohio Edison...................... 10.500 10/01/15 4,269,133
650 Beaver County, Pennsylvania,
Industrial Development Authority
Toledo Edison, Series A.......... 10.750 11/15/15 679,620
7,000 Beaver County, Pennsylvania,
Industrial Development Authority
Toledo Edison, Series A.......... 7.625 05/01/20 7,142,100
565 Brazos River Authority, Texas
(Texas Utilities Electric Co.
Project A)....................... 9.875 10/01/17 627,200
2,500 Clairborne County, Mississippi
(Middle South Energy)............ 8.250 06/01/14 2,730,400
1,500 Clairborne County, Mississippi
(Middle South Energy)............ 9.500 04/01/16 1,588,215
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ (/3/)5,575 Clairborne County, Mississippi
(Middle South Energy).......... 9.875% 12/01/14 $ 6,346,914
1,800 Hodge, Louisiana, Utility Rev.
(Stone Container) Series 1990.. 9.000 03/01/10 1,934,982
1,500 Illinois Development Finance
Authority (Illinois Power Co.
Project) Refunding, Series A... 8.300 04/01/17 1,627,755
3,000 Monroe County, Georgia,
Development Authority (Georgia
Power Co. Project)............. 10.500 09/01/15 3,101,760
4,000 New Hampshire State Industrial
Authority Rev.................. 10.750 10/01/12 4,571,520
3,420 New Hampshire State Industrial
Authority Rev. Public Service
Co. of New Hampshire Project,
Series A....................... 7.650 05/01/21 3,568,018
1,000 New Hampshire State Industrial
Authority Rev. Public Service
Co. of New Hampshire Project,
Series A....................... 7.650 05/01/21 1,043,280
2,500 New York State Energy Research
& Development Authority (Long
Island Lighting) Series B...... 7.150 02/01/22 2,504,825
3,000 Ohio State Air Quality
Development Authority Rev.
Cincinnati Gas & Electric...... 10.125 12/01/15 3,147,150
4,930 Ohio State Air Quality
Development Authority Rev.
Toledo Edison, Series B........ 9.875 11/01/22 5,391,054
2,000 Ohio State Water Development
Authority Pollution Control
Facilities Rev., Series A...... 8.000 10/01/23 2,103,220
500 Parish of West Beliciana,
Louisiana (Gulf States
Utilities Project) Series A.... 7.500 05/01/15 517,615
1,000 Parish of West Beliciana,
Louisiana (Gulf States
Utilities Project) Series A.... 9.000 05/01/15 1,137,870
1,515 Pope County, Arkansas (Arkansas
Power & Light Project)......... 11.000 12/01/15 1,589,917
1,500 Sabine River Authority, Texas,
Refunding (Texas Utilities Co.
Project)....................... 7.750 04/01/16 1,559,130
--------------
TOTAL POLLUTION CONTROL
REVENUE........................ 62,886,013
--------------
PUBLIC IMPROVEMENTS 2.1%
1,835 Antioch, California,
Improvement Act................ 7.125 09/02/16 1,835,220
1,300 Emeryville, California,
Improvement Bonds.............. 7.300 09/02/21 1,336,842
1,250 Erlanger, Kentucky, Assessment
Rev. (Public Improvement
Project)....................... 7.500 08/01/18 1,263,813
2,400 Fresno, California, JT Powers
Financing Authority, Local
Agency Rev. Series B........... 6.750 09/02/01 2,428,872
1,000 Fresno, California, JT Powers
Financing Authority, Local
Agency Rev. Series B........... 7.350 09/02/12 1,010,500
960 Las Vegas, Nevada, Local
Improvement Bonds Special
Improvement District No. 404... 7.300 11/01/09 978,778
1,000 Las Vegas, Nevada, Local
Improvement Bonds Special
Improvement District No. 505
(Elkhorn Springs).............. 8.000 09/15/13 1,003,970
2,000 Perris, California, Public
Funding, Series D.............. 7.875 09/01/25 2,040,600
100 Rancho Cucamonga, California,
Community Facilities District.. 8.000 09/01/20 103,297
1,500 Rancho Cucamonga, California,
Community Facilities District.. 8.250 09/01/19 1,547,805
</TABLE>
20
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Riverside County, California,
Improvement Bonds................ 7.400% 09/02/09 $ 511,340
1,000 Riverside County, California,
Improvement Bonds................ 7.625 09/02/14 1,016,900
--------------
TOTAL PUBLIC IMPROVEMENT......... 15,077,937
--------------
SALES TAX REVENUE 4.8%
1,000 Bedford Park, Illinois, Tax
Increment Rev. Bedford City
Project.......................... 9.250 02/01/12 1,096,490
1,500 Bedford Park, Illinois, Tax
Increment Rev. Mark IV Project... 9.750 03/01/12 1,707,855
(/3/)3,000 Broadview, Illinois, Tax
Increment Rev.................... 8.250 07/01/13 3,276,540
3,000 Crestwood, Cook County, Illinois,
Tax Increment Rev................ 7.250 12/01/08 3,018,390
1,965 Denver, Colorado, Urban Renewal
Authority, Tax Increment Rev..... 8.500 05/01/16 2,126,975
445 Detroit, Michigan, Location
Development Finance Authority.... 9.500 05/01/21 494,426
1,315 Edgewater, Colorado,
Redevelopment Rev. .............. 6.750 12/01/08 1,357,922
1,500 Hodgkins, Illinois, Tax Increment
Rev.............................. 9.500 12/01/09 1,943,640
4,000 Hodgkins, Illinois, Tax Increment
Rev.............................. 7.625 12/01/13 4,048,200
500 Hodgkins, Illinois, Tax Increment
Rev.............................. 9.500 12/01/09 625,275
1,500 Huntington Park, California,
Series C......................... 7.600 09/01/18 1,544,310
1,000 Moreno Valley, California,
Special Tax Rev., Towngate
Community Facilities District 87-
1................................ 7.125 10/01/23 977,270
4,215 New York City, New York,
Industrial Development Agency.... 8.500 12/30/22 4,637,469
375 Portland, Texas Community Center
Sale Rev......................... 6.750 02/15/10 384,428
540 Portland, Texas Community Center
Sale Rev......................... 7.000 02/15/15 553,408
765 Portland, Texas Community Center
Sale Rev......................... 7.125 02/15/20 783,880
1,500 Richmond, California, JT Powers
Financing Authority, Improvement
District No. 851 & No. 853,
Series A......................... 7.400 09/02/19 1,540,905
1,900 Round Lake Beach, Illinois Tax
Increment Rev., Series 1993...... 7.200 12/01/04 1,970,034
500 Round Lake Beach, Illinois Tax
Increment Rev., Series 1993...... 7.500 12/01/13 458,990
1,950 St. Louis, Missouri, Tax
Increment Rev. (Scullin
Redevelopment Area) Series A..... 10.000 08/01/10 2,333,117
--------------
TOTAL SALES TAX REVENUE.......... 34,879,524
--------------
TRANSPORTATION 3.9%
1,000 Chicago, Illinois, O'Hare
International Airport, Special
Facilities Rev. (American
Airlines, Inc. Project).......... 8.250 12/01/24 1,116,370
2,000 Chicago, Illinois, Skyway
Tollbridge Rev., Refunding....... 6.500 01/01/10 2,021,180
2,000 Chicago, Illinois, Skyway
Tollbridge Rev., Refunding....... 6.750 01/01/17 2,022,440
(/3/)3,000 Cleveland, Ohio, Parking
Facilities Rev.,................. 8.000 09/15/12 3,187,140
1,500 Dallas-Fort Worth, Texas,
International Airport Facilities
Improvement Corp. Rev., American
Airlines, Inc.................... 7.250 11/01/30 1,525,425
500 Dallas-Fort Worth, Texas,
International Airport Facilities
Improvement Corp. Rev., American
Airlines, Inc.................... 7.500 11/01/25 514,235
1,250 Dallas-Fort Worth, Texas,
International Airport Facilities
Improvement Corp. Rev., Delta
Airlines, Inc.................... 7.625 11/01/21 1,290,562
</TABLE>
21
<PAGE>
See Notes to Financial Statements
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$(/3/)7,625 Dayton, Ohio, Special Facilities
Rev. (Emery Air Freight Corp.)
Series A......................... 12.50% 10/01/09 $ 8,891,055
1,195 Kenton County, Kentucky, Airport
Board, Special Facilities, Rev.
(Delta Airlines, Inc. Project)... 8.100 12/01/15 1,277,802
2,000 New Jersey, Economic Development
Authority Rev. (Holt Hauling)
Series D......................... 10.250 09/15/14 2,150,580
1,000 New York City, New York,
Industrial Development Agency.... 6.900 08/01/24 996,130
500 Philadelphia, Pennsylvania,
Parking Authority, Parking Rev... 8.750 03/01/05 504,890
1,785 Philadelphia, Pennsylvania,
Parking Authority, Parking Rev... 8.875 03/01/10 1,802,975
1,000 Port Authority of New York & New
Jersey, Consolidated Board 53rd
Series........................... 8.700 07/15/20 1,035,720
--------------
TOTAL TRANSPORTATION............ 28,336,504
--------------
UTILITIES 3.0%
275 Fort Bend County, Texas,
Refunding #25.................... 8.000 10/01/15 295,477
955 Hawaii County, Hawaii,
Improvement District No. 17,
Special Assessment-Kaloko
Subdivision...................... 9.500 08/01/11 1,016,531
5 Massachusettes Municipal
Wholesale Electric Co., Power
Supply Systems Rev............... 13.625 07/01/94 5,039
4,110 New Hampshire State Business
Finance Authority, Electric
Facilities Rev. (Plymouth
Cogeneration Light Power)........ 7.750 06/01/14 4,190,063
1,000 New Jersey Economic Development
Authority........................ 7.875 06/01/19 1,073,080
3,200 New York City, New York,
Municipal Water Authority,
Series A......................... 7.000 06/15/09 3,483,968
2,000 New York State Energy............ 7.150 12/01/20 2,003,860
2,000 New York State Energy Research,
Series A......................... 7.125 12/01/29 2,170,300
1,530 Norco, California, Sewer and
Water Rev., Refunding............ 7.200 10/01/19 1,546,310
200 Northwest Harris County, Texas,
Municipal Utility #22, Refunding,
Combined Tax and Rev., Water
Works and Sewer System........... 8.000 10/01/15 216,054
1,000 Pennsylvania Economic Development
Funding.......................... 7.600 12/01/20 1,068,390
1,500 Pennsylvania Economic Development
Funding, Series A................ 9.250 01/01/22 1,564,005
2,120 Puerto Rico Electric Power,
Series U......................... 6.000 07/01/14 2,124,982
1,000 Swanton Village, Vermont,
Electric Systems Rev............. 6.700 12/01/23 964,530
--------------
TOTAL UTILITIES................. 21,722,589
--------------
WASTE DISPOSAL 1.0%
1,750 Greater Detroit, Michigan,
Resource Recovery Agency, Rev.,
Series C......................... 9.250 12/13/08 1,829,555
1,500 Parish of St. James, Louisana,
Solid Waste Disposal Rev. (Kaiser
Aluminum Project)................ 7.750 08/01/22 1,602,135
1,500 Rockdale County, Georgia,
Development Authnority Rev.,
Solid Waste Disposal (Visy Paper,
Inc. Project).................... 7.500 01/01/26 1,537,260
1,825 Sweetwater County, Wyoming, Solid
Waste Disposal Rev., (FMC
Corporate Project) Series A...... 7.000 06/01/24 1,860,022
--------------
TOTAL WASTE DISPOSAL............. 6,828,972
--------------
TOTAL MUNICIPAL BONDS (Cost
$665,112,967).................... 691,180,781
--------------
</TABLE>
22
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL VARIABLE RATE DEMAND NOTES+
1.0%
$ 100 Burke County, GA Development Pollution
Control................................ 3.200% 07/01/24 $ 100,000
200 Harris County, Texas, Health Facilities
Development............................ 3.350 10/01/17 200,000
2,100 Illinois Development Financial
Authorities Rev........................ 3.350 06/01/04 2,100,000
1,000 New York City, New York................ 3.250 08/01/22 1,000,000
1,500 New York City, New York ............... 3.250 08/15/22 1,500,000
1,100 New York City, New York, Municipal
Water.................................. 3.400 06/15/23 1,100,000
100 Palm Beach County, Florida, Water &
Sewer.................................. 3.350 10/01/11 100,000
700 Sullivan County, Tennessee............. 3.300 10/01/16 700,000
------------
TOTAL MUNICIPAL VARIABLE RATE DEMAND NOTES
(Cost $6,800,000)....................................... 6,800,000
------------
TOTAL INVESTMENTS (Cost $671,912,967) 96.5%............. 697,980,781
Other assets and liabilities, net 3.5%.................. 25,388,448
------------
NET ASSETS 100%......................................... $723,369,229
------------
</TABLE>
*Zero Coupon Bond
**Private placement security
+Interest rates as of May 31, 1995
(1)Security is not accruing at the stated rate, but a lesser interest rate.
(2)When issued security (Note 1H)
(3) Securities with a market value of approximately $41.3 million were placed
as collateral for futures contracts (Note 1C).
Rev.--Revenue bond.
23
<PAGE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $671,912,967)............... $ 697,980,781
Cash........................................................... 92,556
Interest receivable............................................ 17,284,654
Receivable for investments sold................................ 10,789,664
Receivable for Fund shares sold................................ 6,916,419
Other assets................................................... 3,789
--------------
Total Assets.................................................. 733,067,863
--------------
LIABILITIES
Payable for investments purchased.............................. 5,406,239
Dividends payable.............................................. 2,239,428
Payable for Fund shares redeemed............................... 1,028,446
Due to Distributor............................................. 436,560
Due to Adviser................................................. 325,690
Due to shareholder service agent............................... 76,000
Due to broker-variation margin................................. 34,219
Deferred Trustees' compensation................................ 11,138
Accrued expenses............................................... 140,914
--------------
Total Liabilities............................................. 9,698,634
--------------
NET ASSETS, equivalent to $11.03 per share for Class A and
Class B shares, and $11.02 per share for Class C shares....... $ 723,369,229
--------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 43,824,232 Class A,
19,334,972 Class B, and 2,430,755 Class C shares outstanding.. $ 655,900
Capital surplus................................................ 735,161,465
Accumulated net realized loss on securities.................... (36,040,744)
Net unrealized appreciation (depreciation) of securities
Investments................................................... 26,067,814
Futures contracts............................................. (2,708,193)
Undistributed net investment income............................ 232,987
--------------
NET ASSETS..................................................... $ 723,369,229
--------------
</TABLE>
24
<PAGE>
See Notes to Financial Statements
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest....................................................... $ 25,494,223
--------------
EXPENSES
Management fees................................................ 1,803,987
Shareholder service agent's fees and expenses.................. 396,913
Accounting services............................................ 84,295
Service fees--Class A.......................................... 544,561
Distribution and service fees--Class B......................... 907,797
Distribution and service fees--Class C......................... 101,745
Trustees' fees and expenses.................................... 12,294
Audit fees..................................................... 15,155
Custodian fees................................................. 16,613
Legal fees..................................................... 6,416
Reports to shareholders........................................ 45,900
Registration and filing fees................................... 63,006
Miscellaneous.................................................. 10,389
--------------
Total expenses................................................ 4,009,071
--------------
NET INVESTMENT INCOME.......................................... 21,485,152
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized loss on securities
Investments................................................... (6,116,370)
Futures contracts............................................. (2,322,900)
Net unrealized appreciation (depreciation) of securities during
the period
Investments................................................... 45,505,733
Futures contracts............................................. (2,201,893)
--------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES................. 34,864,570
--------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $ 56,349,722
--------------
</TABLE>
25
<PAGE>
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1995 November 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period........... $585,718,311 $512,768,709
------------ ------------
OPERATIONS
Net investment income.................... 21,485,152 37,931,627
Net realized loss on securities.......... (8,439,270) (6,750,830)
Net unrealized appreciation (deprecia-
tion) of securities during the period... 43,303,840 (31,271,797)
------------ ------------
Increase (decrease) in net assets result-
ing from operations..................... 56,349,722 (91,000)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME
Class A.................................. (15,309,716) (29,486,022)
Class B.................................. (5,546,315) (8,334,914)
Class C.................................. (618,045) (399,671)
------------ ------------
(21,474,076) (38,220,607)
------------ ------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A.................................. 76,489,163 98,704,070
Class B.................................. 50,899,000 70,654,239
Class C.................................. 11,884,653 15,954,972
------------ ------------
139,272,816 185,313,281
------------ ------------
Proceeds from shares issued for
distributions reinvested
Class A.................................. 6,426,673 11,857,412
Class B.................................. 2,422,356 3,702,608
Class C.................................. 329,580 230,780
------------ ------------
9,178,609 15,790,800
------------ ------------
Cost of shares redeemed
Class A.................................. (34,741,772) (78,622,401)
Class B.................................. (9,172,520) (10,751,774)
Class C.................................. (1,761,861) (468,697)
------------ ------------
(45,676,153) (89,842,872)
------------ ------------
Increase in net assets resulting from
capital transactions..................... 102,775,272 111,261,209
------------ ------------
INCREASE IN NET ASSETS.................... 137,650,918 72,949,602
------------ ------------
NET ASSETS, end of period................. $723,369,229 $585,718,311
------------ ------------
</TABLE>
26
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the
periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------
Six Months
Ended Year Ended November 30
May 31, --------------------------------------
1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period................... $10.44 $11.19 $10.95 $10.78 $10.72 $10.91
------ ------ ------ ------ ------ ------
Income from investment
operations
Investment income.......... .43 .87 .9310 .93 .885 1.005
Expenses................... (.06) (.11) (.1178) (.115) (.115) (.105)
------ ------ ------ ------ ------ ------
Net investment income....... .37 .76 .8132 .815 .77 .90
Net realized and unrealized
gains or losses on
securities................. .595 (.744) .2303 .195 .13 (.23)
------ ------ ------ ------ ------ ------
Total from investment
operations.................. .965 .016 1.0435 1.01 .90 .67
------ ------ ------ ------ ------ ------
Distributions from net
investment income........... (.375) (.766) (.8035) (.84) (.84) (.86)
------ ------ ------ ------ ------ ------
Net asset value, end of
period .................... $11.03 $10.44 $11.19 $10.95 $10.78 $10.72
------ ------ ------ ------ ------ ------
TOTAL RETURN(/1/)........... 9.36% .10% 9.65% 9.77% 8.73% 6.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).................. $483.4 $411.1 $408.0 $309.5 $225.3 $222.3
Average net assets
(millions).................. $442.4 $419.5 $357.8 $257.5 $220.5 $226.8
Ratios to average net assets
(annualized)(/2/)
Expenses................... 1.01% 1.02% 1.03% 1.07% 1.06% .97%
Expenses, without expense
reimbursement.............. -- -- -- -- -- 1.06%
Net investment income...... 6.92% 6.98% 7.13% 7.45% 7.20% 8.34%
Net investment income,
without expense
reimbursement............. -- -- -- -- -- 8.27%
Portfolio turnover rate..... 7% 33% 27% 24% 20% 29%
</TABLE>
(1) Total return for a period of less than one full year is not annualized.
Total return does not consider the effect of sales charges.
(2) See Note 2.
27
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
--------------------------------------------- -------------------------
July 20, December
Six Months Year Ended 1992(/2/) Six Months 10, 1993(/2/)
Ended November 30 through Ended through
May 31, ------------------ November May 31, November 30,
1995 1994 1993(/1/) 30, 1992(/1/) 1995 1994(/1/)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, begin-
ning of period......... $10.43 $11.18 $10.96 $11.08 $10.42 $11.29
------ ------ ------ ------ ------ ------
Income from investment
operations
Investment income...... .43 .87 .8905 .35 .43 .81
Expenses............... (.09) (.19) (.1986) (.08) (.10) (.18)
------ ------ ------ ------ ------ ------
Net investment Income... .34 .68 .6919 .27 .33 .63
Net realized and
unrealized gains or
losses on securities... .593 (.748) .2476 (.1122) .603 (.8363)
------ ------ ------ ------ ------ ------
Total from investment
operations............. .933 (.068) .9395 .1578 .933 (.2063)
------ ------ ------ ------ ------ ------
Distributions from net
investment income...... (.333) (.682) (.7195) (.2778) (.333) (.6637)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $11.03 $10.43 $11.18 $10.96 $11.02 $10.42
------ ------ ------ ------ ------ ------
TOTAL RETURN (/3/)...... 9.05% (.76%) 8.84% 1.45% 8.95% (1.80%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)...... $213.2 $159.3 $104.8 $21.0 $26.8 $15.3
Average net assets
(millions)............. $181.6 $133.6 $54.9 $13.4 $20.3 $6.7
Ratios to average net
assets (annualized)
Expenses............... 1.76% 1.77% 1.77% 1.71% 1.76% 1.75%
Net investment income.. 6.12% 6.19% 6.15% 5.88% 6.04% 6.07%
Portfolio turnover rate. 7% 33% 27% 24% 7% 33%
</TABLE>
(1) Based on average month-end shares.
(2) Commencement of offering of sales.
(3) Total return for periods of less than one year are not annualized. Total
return does not consider the effect of sales charges.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital Tax-Exempt Trust (the "Trust") is registered under the Invest-
ment Company Act of 1940, as amended, as a diversified open-end management in-
vestment company, which offers shares in two municipal bond portfolios, one of
which is described in this report: High Yield Municipal Portfolio (the "Fund").
Each portfolio is accounted for as a separate entity. The following is a sum-
mary of significant accounting policies consistently followed by the Trust in
the preparation of its financial statements.
A. INVESTMENT VALUATIONS-Municipal bonds are valued at the most recently quoted
bid prices or at bid prices based on a matrix system (which considers such fac-
tors as security prices, yields, maturities and ratings) furnished by dealers
and an independent pricing service. Securities for which market quotations are
not readily available are valued at a fair value as determined in good faith by
the Board of Trustees of the Fund. Short-term investments with a maturity of 60
days or less when purchased are valued at amortized cost, which approximates
market value. Short-term investments with a maturity of more than 60 days when
purchased are valued based on market quotations until the remaining days to ma-
turity becomes less than 61 days. From such time, until maturity, the invest-
ments 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 prin-
cipal and interest payments. Securities rated below investment grade and compa-
rable unrated securities represented approximately 73% of High Yield's
investment portfolio at the end of the period.
Issuers of certain securities owned by the Fund may have obtained insurance
guaranteeing their timely payment of principal at maturity and interest. The
insurance reduces credit risk but not market risk of the security.
B. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment in
which a Fund acquires ownership of a debt security and the seller agrees to re-
purchase the security at a future time and specified price. The Fund may invest
independently in repurchase agreements, or transfer uninvested cash balances
into a pooled cash account along with other investment companies advised by Van
Kampen American Capital Asset Manager, Inc. ("The Adviser"), the daily aggre-
gate of which is invested in repurchase agreements. Repurchase agreements are
collateralized by the underlying debt securities. The Fund will make payment
for such securities only upon physical delivery or evidence of book entry
transfer to the
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
account of the custodian bank. The seller is required to maintain the value of
the underlying security at not less than the repurchase proceeds due the Fund.
C. FUTURES CONTRACTS-Transactions in futures contracts are utilized in strate-
gies to manage the market risk of the Fund's investments. The purchase of a
futures contract increases the impact on net asset value of changes in the
market price of investments. There is also a risk that the market movement of
such instruments may not be in the direction forecasted.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. A portion of these funds is held as collateral in
an account in the name of the broker, the Fund's agent in acquiring the
futures position. During the period the futures contract is open, changes in
the value of the contract ("variation margin") are recognized by marking the
contract to market on a daily basis. As unrealized gains or losses are in-
curred, variation margin payments are received from or made to the broker.
Upon the closing or cash settlement of a contract, gains and losses are real-
ized. The cost of securities acquired through delivery under a contract is ad-
justed by the unrealized gain or loss on the contract.
D. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as "regulated investment company" under
the Internal Revenue Code and intends to maintain this qualification by annu-
ally distributing all of its taxable net investment income and taxable net re-
alized capital 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.
The net realized capital loss carryforwards of $27.1 million at November 30,
1994 may be utilized to offset any current or future capital gains until expi-
ration from 1995 through 2002. Approximately 28% and 24% of the capital loss
carryforwards may expire in 1995 and 1996, respectively. Additionally, approx-
imately $1 million of financial statement capital losses are deferred for tax
purposes to the 1995 fiscal year.
E. 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 daily.
F. DIVIDENDS AND DISTRIBUTIONS-The Fund declares dividends from net investment
income on each business day. The Fund intends to continue to invest princi-
pally in tax-exempt obligations sufficient in amount to qualify it to pay "ex-
empt-interest dividends" as defined in the Internal Revenue Code.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
The Fund distributes tax basis earnings in accordance with the minimum dis-
tribution requirements of the Internal Revenue Code, which may differ from
generally accepted accounting principles. Such dividends or distributions may
exceed financial statement earnings.
G. 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 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 ordinary income for tax purposes.
H. 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 obligations, sufficient cash or liquid securities
equal to the amount that will be due are set aside with the custodian.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as the investment manager of the Fund. Management fees are
paid monthly, based on the aggregate average daily net assets of the Trust at
an annual rate of .60% of the first $300 million of the aggregate average
daily net assets, .55% of the next $300 million, and .50% of the amount in ex-
cess of $600 million, and are allocated on a pro-rata basis to each portfolio.
From time to time, the Adviser may voluntarily elect to subsidize a portion of
the Fund's expenses. The voluntary subsidy may be discontinued at any time
without prior notice. There were no subsidies during the period.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allo-
cated among investment companies advised by the Adviser. For the period these
charges included $10,394 as the Fund's share of the employee costs attribut-
able to the Fund's accounting officers. A portion of the accounting services
expense was paid to the Adviser in reimbursement of personnel, facilities and
equipment costs attributable to the provision of accounting services. These
services provided by the Adviser are at cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. For the period such fees aggregated $335,785.
The Fund was advised that Van Kampen American Capital Distributors, Inc.
(the "Distributor") and Advantage Capital Corporation (the "Retail Dealer"),
both affiliates of the Adviser,
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
received $96,007 and $124,842, respectively, as their portion of the commis-
sions charged on sales of Fund shares during the period.
Under the Distribution plans, each class of shares pays up to .25% per annum
of its average daily net assets to reimburse the Distributor for expenses and
service fees incurred. Class B and Class C shares pay an additional distribu-
tion fee of up to .75% per annum of their average net assets to reimburse the
Distributor for its distribution expenses. Actual distribution expenses in-
curred by the Distributor for Class B and Class C shares may exceed the
amounts reimbursed to the Distributor by the Fund. At the end of the period,
the unreimbursed expenses by the Distributor under the Class B and Class C
plans aggregated approximately $7.5 million and $221,000, respectively, and
may be carried forward and reimbursed through either the collection of the
contingent deferred sales charges from share redemptions or, subject to the
annual renewal of the plans, future Fund reimbursements of distribution fees.
Legal fees of $4,927 were for services rendered by O'Melveny & Myers, coun-
sel for the Fund. Lawrence J. Sheehan, of counsel to that firm, is a trustee
of the Fund.
Certain officers and trustees of the Fund are officers and directors of the
Adviser, the Distributor, the Retail Dealer, and the shareholder service
agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments were $129,154,551 and $45,890,603, re-
spectively.
For federal income tax purposes, the identified cost of investments owned at
the end of the period, was $671,918,466. Net unrealized appreciation of in-
vestments aggregated $26,062,314, gross unrealized appreciation of investments
aggregated $34,577,355, and gross unrealized depreciation of investments ag-
gregated $8,515,041.
At the end of the period, the Fund held the following short United States
Treasury Bonds futures contracts:
<TABLE>
<CAPTION>
Unrealized
Contracts Market Value Depreciation
--------- ------------ ------------
<S> <C> <C>
255 (expiring 6/95).............................. $(28,822,969) $(2,079,290)
110 (expiring 9/95).............................. (12,392,188) (628,903)
------------ -----------
$(41,215,157) $(2,708,193)
------------ -----------
</TABLE>
During the period, the cost of purchases and proceeds from sales of invest-
ments resulting from transactions between the Fund and other investment compa-
nies advised by the Adviser were $100,000 and $3,000,000, respectively.
Such transactions were at current market prices on the dates of the transac-
tions for cash payment against prompt delivery, with no brokerage commissions.
The sales transactions did not result in a net realized gain or loss to the
Fund.
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 4--TRUSTEE COMPENSATION
Fund Trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $1,670 plus a fee of $40 per day for the Board and
Committee meetings attended. The Chairman receives additional fees at an an-
nual rate of $630. During the period, such fees aggregated $10,134.
The trustees may participate in a voluntary Deferred Compensation Plan (the
"Plan"). The Plan is not funded, and obligations under the Plan will be paid
solely out of the Fund's general accounts. The Fund will not reserve or set
aside funds for the payment of obligations under the Plan, by any form of
trust or escrow. Each trustee covered by the Plan elects to be credited with
an earnings component on amounts deferred equal to the income earned by the
Fund on its short-term investments or equal to the total return of the Fund.
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(the Class A shares) or at the time of redemption on a contingent deferred ba-
sis (the Class B and Class C shares). All classes of shares have the same
rights, except that Class B and Class C shares bear the cost of a higher dis-
tribution services fee and certain other class specific expenses. Realized and
unrealized gains or losses, investment income and expenses (other than class
specific expenses) are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Class B and Class C shares
automatically convert to Class A shares six years and ten years after pur-
chase, respectively, subject to certain conditions.
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
The Fund has an unlimited number of each class of $.01 par value shares of
beneficial interest authorized. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
Six Months Year Ended
Ended May 31, November 30,
1995 1994
------------- ------------
<S> <C> <C>
Shares sold
Class A........................................... 7,067,614 9,122,951
Class B........................................... 4,690,309 6,562,885
Class C........................................... 1,099,443 1,487,816
---------- ----------
12,857,366 17,173,652
---------- ----------
Shares issued for distributions reinvested
Class A........................................... 593,284 1,092,261
Class B........................................... 223,606 342,025
Class C........................................... 30,408 21,563
---------- ----------
847,298 1,455,849
---------- ----------
Shares redeemed
Class A........................................... (3,234,842) (7,290,648)
Class B........................................... (852,273) (999,142)
Class C........................................... (164,904) (43,571)
---------- ----------
(4,252,019) (8,333,361)
---------- ----------
Increase in shares outstanding..................... 9,452,645 10,296,140
---------- ----------
</TABLE>
NOTE 6--SHAREHOLDER MEETING
On July 21, 1995, a shareholder meeting of the Fund will be held to vote on:
(1) the reorganization of the Fund from a Massachusetts Business Trust to a
Delaware Business Trust and (2) an election of fourteen trustees.
34
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Govett Emerging Markets Fund
AC Global Equity Fund
Govett Global Government Income Fund
AC Global Government Securities
AC Global Managed Assets Fund
Govett International Equity Fund
Govett Latin America Fund
Govett Pacific Strategy Fund
VKM Short-Term Global Income Fund
VKM Strategic Income Fund
EQUITY
Growth
AC Emerging Growth Fund
AC Enterprise Fund
AC Pace Fund
Govett Smaller Companies Fund
Growth & Income
VKM Balanced Fund
AC Comstock Fund
AC Equity Income Fund
AC Growth and Income Fund
VKM Growth and Income Fund
AC Harbor Fund
AC Real Estate Securities Fund
VKM Utility Fund
AC Utilities Income Fund
FIXED INCOME
VKM Adjustable Rate U.S. Government Fund
AC Corporate Bond Fund
AC Federal Mortgage Trust
AC Government Securities
VKM High Yield Fund
AC High Yield Investments
VKM Money Market Fund
VKM Prime Rate Income Trust
AC Reserve Fund
VKM U.S. Government Fund
AC U.S. Government Trust for Income
TAX-FREE
VKM California Insured Tax Free Fund
VKM Florida Insured Tax Free Income Fund
VKM Insured Tax Free Income Fund
VKM Limited Term Municipal Income Fund
AC Municipal Bond Fund
VKM Municipal Income Fund
VKM New Jersey Tax Free Income Fund
VKM New York Tax Free Income Fund
VKM Pennsylvania Tax Free Income Fund
AC Tax-Exempt Trust
--High Yield Municipal Portfolio
--Insured Municipal Portfolio
VKM Tax Free High Income Fund
VKM Tax Free Money Fund
AC Texas Municipal Securities
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.
35
<PAGE>
AMERICAN CAPITAL TAX-EXEMPT TRUST
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD E. CARUSO
ROGER HILSMAN
DON G. POWELL
DAVID REES
LAWRENCE J. SHEEHAN
FERNANDO SISTO*
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President
CURTIS W. MORELL
Vice President and Treasurer
WAYNE D. GODLIN
DENNIS J. MCDONNELL
RONALD A. NYBERG
ROBERT C. PECK, JR.
JOSEPH A. PIRARO
PAUL R. WOLKENBERG
Vice Presidents
TANYA M. LODEN
Vice President and Controller
NORI L. GABERT
Vice President and Secretary
J. DAVID WISE
Vice President and Assistant Secretary
PERRY F. FARRELL
M. ROBERT SULLIVAN
Assistant Treasurers
HUEY P. FALGOUT, JR.
Assistant Secretary
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd.
Houston, Texas 77056
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
2800 Post Oak Blvd.
Houston, Texas 77056
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street
Boston, Massachusetts 02110
COUNSEL
O'MELVENY & MYERS
400 South Hope Street
Los Angeles, California 90071
(C)Van Kampen American Capital Distributors, Inc., 1995
All rights reserved.
SMdenotes a service mark of
Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors un-
less it has been preceded or is accompanied by an effective prospectus of the
Fund which contains additional information on how to purchase shares, the
sales charge, and other pertinent data.
36
