VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUN, N-30D, 1996-02-28

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUN
N-30D, 1996-02-28

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<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Letter to Shareholders................. 1
Performance Results.................... 3
Performance Perspective................ 4
Portfolio Management Review............ 5
Portfolio of Investments............... 7
Statement of Assets and Liabilities.... 14
Statement of Operations................ 15
Statement of Changes in Net Assets..... 16
Financial Highlights................... 17
Notes to Financial Statements.......... 20
Independent Auditors' Report........... 27
</TABLE>

Letter to Shareholders

January 30, 1996

Dear Shareholder,

For most investors, it would be hard to surpass the success enjoyed during
1995. The stock and bond markets achieved substantial gains, driven by a
combination of continuing economic growth and low inflation. The strength
of equity and fixed-income securities in 1995 was particularly impressive
because it followed a year in which both markets declined. People who
remained invested during 1995 generally shared in the growth of the markets,
while investors who retreated after 1994's downturn may have missed out on the
double-digit returns.

The rebound in the markets last year reinforces the importance of maintaining a
long-term perspective for your investments. While the environment for stocks and
bonds remains positive, it is unlikely that 1996 will see a repeat of the
markets' strong 1995 performance. However, over the long-term, stocks have
outperformed virtually all other types of investments, and bonds have met the
needs of investors who seek capital preservation and regular income.

[PHOTO]

Dennis J. McDonnell and Don G. Powell

Economic Overview

The U.S. economy grew throughout 1995, though the rate of growth slowed toward
year-end. The gross domestic product (the value of all goods and services
produced in the United States) grew at an annual rate of more than 4.2 percent
in the third quarter of 1995, but slowed to an estimated 2 to 3 percent in the
fourth quarter, with retail and auto sales particularly sluggish. The slower
growth rate eased concerns about a rise in inflation and allowed the Federal
Reserve Board to lower short-term interest rates by a quarter-percentage point
in late December. The reduction in rates during the latter half of 1995 is
expected to help generate moderate economic growth in 1996, just as the Fed's
raising of short-term rates in 1994 helped slow economic growth in 1995.
The cut in short-term rates, combined with modest growth forecasts, was viewed
by the financial markets as a positive event, pushing up both stock and bond
prices. For the year ended December 31, 1995, the Standard & Poor's 500-Stock
Index achieved a total return of 37.45 percent. The yield on 10-year Treasury
notes was 5.57 percent on December 31, compared to 7.83 percent at the beginning
of the year. Because bond prices and yields move in opposite directions, bond
prices rose. Many observers expect the Fed to cut rates further if Congress and
the President are able to reach an agreement on the federal budget, provided
economic conditions justify further easing.
With a low inflation, low interest rate environment, corporate earnings
remained quite strong during the year, helping to push stocks to new highs. The
strongest sectors were technology and finance, as these stocks benefited from
the impact of the Internet,

1 Continued on page two

telecommunications deregulation and bank mergers. U.S. companies with global
operations also did well, aided by a declining U.S. dollar.

Economic Outlook

Looking ahead, we are cautiously optimistic. We expect the economy to grow at
a rate of 2 to 3 percent throughout 1996, with growth stronger in the second
half of the year as the full impact of the Fed's rate cuts take effect. Lower
rates will have the greatest impact on interest sensitive industries, such as
housing. Although inflation appears to be under control, there probably will be
some cyclical upward pressure in 1996.
The current economic conditions are ideal for stocks, especially those of
smaller companies, because they tend to be affected less by economic cycles. The
outlook for the fixed-income market---including municipal bonds---is positive,
too. In the near-term, we believe domestic markets will benefit from a stable
U.S. dollar and increased business activity driven in part by a number of
recently announced strategic reorganizations of some of the nation's blue chip
industry leaders.
During recent months, debate over tax reform and the federal deficit has
dominated the agenda in Washington. Now that we are in a presidential election
year, tax reform likely will replace the budget battle as the top issue in
Washington. There has been varied speculation about the impact tax reform could
have on the economy and on various types of investments. We are following the
tax reform debate very closely, and we will keep you updated on this issue
throughout the year. See the winter issue of "Your Portfolio" for a detailed
discussion of tax reform.
On the following pages, you can read about your Fund's performance in 1995, as
well as the portfolio management team's outlook for the Fund in the coming
months. We hope that you will find this information helpful.

Corporate News

As part of our commitment to helping you achieve your investment goals, Van
Kampen American Capital strives to provide shareholders with the best service in
the mutual fund industry. That is why we are especially pleased to have received
the 1995 Quality Tested Service Seal, which is awarded annually by DALBAR, Inc.,
an independent research firm. The Seal, which symbolizes the achievement of the
highest tier of service in the mutual fund industry, was awarded to American
Capital annually from 1990 to 1994 and we are honored that the service provided
by Van Kampen American Capital has achieved the same level of excellence.

Sincerely,

Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Investment Advisory Corp. Investment Advisory Corp.

<TABLE>

Performance Results for the Period Ended December 31, 1995

Van Kampen American Capital Pennsylvania Tax Free Income Fund

A Shares B Shares C Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Returns

One-year total return
based on NAV<F1>............. 16.62% 15.72% 15.72%
One-year total return<F2>.... 11.08% 11.72% 14.72%
Five-year average annual
total return<F2>............. 7.83% N/A N/A
Life-of-Fund average annual
total return<F2>............. 8.89% 4.41% 4.65%
Commencement date............ 05/01/87 05/01/93 08/13/93

Distribution Rates and Yield

Distribution rate<F3>........ 5.10% 4.66% 4.66%
Taxable equivalent
distribution rate<F4>...... 8.20% 7.49% 7.49%
SEC Yield<F5>................ 4.52% 3.98% 3.98%

N/A = Not Applicable

<FN>
<F1> Assumes reinvestment of all distributions for the period 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).

<F2> Standardized total return. Assumes reinvestment of all distributions for the
period 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).

<F3> Distribution rate represents the monthly annualized distributions of the Fund at
the end of the period and not the earnings of the Fund.

<F4> Taxable equivalent calculations reflect a combined federal and state income tax
rate of 37.8%, which takes into consideration the deductibility of individual
state taxes paid.

<F5> SEC 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 December 30, 1995. Had
certain expenses of the Fund not been assumed by VKAC, the SEC Yield would have
been 4.42%, 3.88% and 3.88% for Classes A, B and C, respectively, and the total
returns would have been lower.
</TABLE>

See the Fund 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.

Putting Your Fund's Performance in Perspective
- --------------------------------------------------------------------------------

As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:

* Illustrate the general market environment in which your investments are being
managed

* Reflect the impact of favorable market trends or difficult market conditions

* Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured

For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Lehman Brothers Municipal Bond
Index over time. As a broad-based, unmanaged statistical composite, this index
does not reflect any commissions or fees which would be incurred by an investor
purchasing the securities it represents. Similarly, its performance does not
reflect any sales charges or other costs which would be applicable to an
actively managed portfolio, such as that of the Fund.

[GRAPH]

Growth of a Hypothetical $10,000 Investment
Van Kampen American Capital Pennsylvania Tax Free Income Fund vs.
Lehman Brothers Municipal Bond Index (May 1987 through December 1995)

Fund Index
01-May-87 9,526.10 10,000.00
31-May-87 9,672.90 9,950.00
30-Jun-87 9,646.90 10,242.53
31-Jul-87 9,700.60 10,347.00
31-Aug-87 9,788.70 10,370.80
30-Sep-87 9,495.30 9,988.12
31-Oct-87 9,406.10 10,024.08
30-Nov-87 9,758.40 10,285.70
31-Dec-87 10,028.90 10,434.85
31-Jan-88 10,465.50 10,806.33
29-Feb-88 10,613.30 10,920.88
31-Mar-88 10,365.10 10,793.10
30-Apr-88 10,421.80 10,875.13
31-May-88 10,443.10 10,843.59
30-Jun-88 10,623.40 11,001.91
31-Jul-88 10,790.70 11,073.42
31-Aug-88 10,870.80 11,082.28
30-Sep-88 11,105.70 11,282.87
31-Oct-88 11,305.20 11,481.45
30-Nov-88 11,207.80 11,376.96
31-Dec-88 11,486.90 11,493.01
31-Jan-89 11,653.50 11,730.92
28-Feb-89 11,592.20 11,597.18
31-Mar-89 11,553.50 11,569.35
30-Apr-89 11,776.30 11,844.70
31-May-89 12,085.80 12,089.89
30-Jun-89 12,256.40 12,254.31
31-Jul-89 12,389.10 12,420.97
31-Aug-89 12,302.20 12,299.24
29-Sep-89 12,254.00 12,262.34
31-Oct-89 12,380.90 12,413.17
30-Nov-89 12,557.10 12,630.40
29-Dec-89 12,731.80 12,733.97
31-Jan-90 12,707.40 12,674.12
28-Feb-90 12,837.90 12,786.92
30-Mar-90 12,878.90 12,790.76
30-Apr-90 12,722.10 12,698.66
31-May-90 12,929.50 12,975.49
30-Jun-90 13,021.30 13,089.68
31-Jul-90 13,239.60 13,282.10
31-Aug-90 13,028.40 13,089.51
28-Sep-90 13,062.40 13,097.36
31-Oct-90 13,207.60 13,335.73
30-Nov-90 13,482.60 13,603.78
31-Dec-90 13,664.10 13,662.28
31-Jan-91 13,811.90 13,845.35
28-Feb-91 13,995.40 13,965.80
28-Mar-91 13,977.80 13,969.99
30-Apr-91 14,136.80 14,157.19
31-May-91 14,323.60 14,283.19
28-Jun-91 14,225.30 14,268.91
31-Jul-91 14,396.10 14,442.99
30-Aug-91 14,640.20 14,633.64
30-Sep-91 14,831.20 14,823.87
31-Oct-91 14,950.10 14,957.29
30-Nov-91 15,023.60 14,999.17
31-Dec-91 15,254.70 15,321.65
31-Jan-92 15,413.20 15,356.89
29-Feb-92 15,460.00 15,361.50
31-Mar-92 15,497.70 15,367.64
30-Apr-92 15,639.70 15,504.41
31-May-92 15,839.70 15,687.37
30-Jun-92 16,060.00 15,950.91
31-Jul-92 16,618.50 16,429.44
31-Aug-92 16,347.60 16,270.08
30-Sep-92 16,444.90 16,375.83
30-Oct-92 16,210.10 16,215.35
30-Nov-92 16,550.80 16,505.60
31-Dec-92 16,794.50 16,673.96
31-Jan-93 17,009.70 16,867.38
26-Feb-93 17,735.40 17,477.98
31-Mar-93 17,440.80 17,292.71
30-Apr-93 17,699.60 17,467.37
31-May-93 17,817.60 17,565.18
30-Jun-93 18,180.70 17,858.52
31-Jul-93 18,115.80 17,881.74
31-Aug-93 18,564.70 18,253.68
30-Sep-93 18,816.90 18,461.77
29-Oct-93 18,841.80 18,496.85
30-Nov-93 18,595.60 18,334.08
31-Dec-93 19,019.20 18,720.93
31-Jan-94 19,262.40 18,934.34
28-Feb-94 18,734.50 18,443.94
31-Mar-94 17,853.60 17,693.28
30-Apr-94 17,961.50 17,843.67
31-May-94 18,166.50 17,998.91
30-Jun-94 18,059.80 17,889.12
31-Jul-94 18,405.50 18,216.49
31-Aug-94 18,459.10 18,280.24
30-Sep-94 18,195.80 18,011.52
31-Oct-94 17,843.40 17,690.92
30-Nov-94 17,467.20 17,370.71
30-Dec-94 17,932.40 17,752.87
31-Jan-95 18,455.60 18,260.60
28-Feb-95 19,014.90 18,791.98
31-Mar-95 19,171.60 19,008.09
28-Apr-95 19,125.40 19,030.90
31-May-95 19,635.90 19,637.99
30-Jun-95 19,372.30 19,467.14
31-Jul-95 19,520.50 19,652.08
31-Aug-95 19,796.20 19,901.66
30-Sep-95 19,853.10 20,027.04
31-Oct-95 20,212.60 20,317.43
30-Nov-95 20,679.00 20,654.70
31-Dec-95 20,912.80 20,852.98

Fund's Total Return
1 Year Avg. Annual = 11.08%
5 Year Avg. Annual = 7.83%
Inception Avg. Annual = 8.89%

The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions for the period ended December 31,
1995, and includes payment of the maximum sales charge (4.75% for A shares).

While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.

Portfolio Management Review

Van Kampen American Capital Pennsylvania Tax Free Income Fund

We recently spoke with the management team of the Van Kampen American Capital
Pennsylvania Tax Free Income Fund about the key events and economic forces which
shaped the markets during the past fiscal year. The team includes Dennis
Pietrzak, portfolio manager, and Peter W. Hegel, executive vice president for
fixed-income investments. The following excerpts reflect their views on the
Fund's performance during the twelve-month period ended December 31, 1995.

Q What were some of the important events or market conditions
which had an impact on the Fund's performance during 1995?

A The bond market in general was quite strong in 1995, and municipal
securities, of course, participated in the year's rally. Clearly, the
environment for investing in fixed-income securities was extremely
favorable across the board.
Inflation continued to remain in check, with rates hovering around
the 2 percent range, while the economy grew at a fairly steady
but modest pace. As a result, the Federal Reserve Board lowered its key
lending rate (the fed funds rate) by one-quarter percentage point in July of
1995 and again, by one-quarter of a percentage point, in December.
Naturally, bond prices were driven higher as rates trended downward over
the course of the year (bond prices go up when rates go down, and vice
versa).
Another factor that had been priced into the municipal market late in
the year was the expectation that a federal budget agreement was inevitable.
The market anticipated a positive budget compromise, and reacted
accordingly. Even though the possibility of tax reform weighed on the
market to some extent, the belief that progress on the federal budget
deficit would be made helped to bolster municipal bonds, especially at the
longer end of the maturity spectrum.

Q What were some of the challenges you faced in managing the Fund, and how
was it positioned to take advantage of 1995 market conditions?

A The Pennsylvania municipal market is a relatively robust market. The state
has a number of large metropolitan areas, fostering a diverse, active mix of
economic activity. This activity triggers an ongoing need for
infrastructure, support facilities and government services which are funded
by the issuance of municipal securities.

[PIE CHART]

Portfolio Composition as of December 31, 1995

Health Care 28.2%
Other* 21.3%
Water / Sewer 10.4%
Industrial Revenue 9.8%
Public Education 7.3%
Public Building 7.0%
General Purpose 6.7%
Single Family Housing 4.9%
Retail Electric / Gas / Telephone 4.4%

*Other consists of 8 sectors each less than 4%

We were able to take advantage of Pennsylvania's vast array of
investment choices by maintaining the Fund's portfolio, and investing the
majority of assets in investment-grade securities. In fact, as of
December 31, 1995, 49.1 percent of the Fund's holdings are in Pennsylvania
securities rated AAA by Standard & Poor's Ratings Group.
With such a diverse market offering an array of investment
opportunities, we continued to rely on our strong internal credit research
team to help us identify Pennsylvania securities offering the greatest
relative value. We feel the health care industry continues to remain a good
investment, and as of December 31, 1995, the Fund holds a significant
portion of its assets in the health care industry (28.2 percent).

Q How well did the Fund perform under these conditions?

A We had a good year, providing Class A shares with a total return at net
asset value of 16.62 percent<F1> over the twelve months ended
December 31, 1995.
The Fund continues to provide an attractive level of tax-exempt
income, with a Class A share distribution rate of 5.10 percent<F3> as of
December 31, 1995. Since income from the Fund is exempt from federal and
state income taxes, it is important to compare the Fund's distribution
rate to an equivalent taxable rate. For example, for Pennsylvania
residents in a combined marginal tax bracket of 37.8 percent, the Fund's
Class A share distribution rate represents a yield equivalent to a
taxable investment earning 8.20 percent.<F4> At the same time, the Fund's
Class A share net asset value closed the fiscal year at $17.74 per share,
up from $16.08 per share at the beginning of the year.
In comparison, the total return of the Lehman Brothers Municipal
Bond Index, a broad-based, unmanaged index, was 17.46 percent for the
twelve months through December 31, 1995. During the same period, the
category average for all Pennsylvania municipal bond funds tracked by
Lipper Analytical Services was 17.15 percent.

Q What is your outlook for the Fund and the market in the months ahead?

A We're confident that the investment environment will remain positive for
fixed-income securities in the near term. Inflation appears to be under
control and the economy shows no signs of overheating.
We anticipate the Fed will continue its accommodative monetary
policy and reduce the fed funds rate further during the first half of
1996. Based on the historically high level of real interest rates
(market rates less the inflation rate), there seems to be room for
short-term interest rates to trend lower, which is a good sign for
long-term rates as well.
We expect the supply of new municipal issues to follow the trend
of 1995, and remain somewhat low in 1996. However, refunding activity
should be high as the lower interest rate environment makes it more
attractive for municipalities to retire their higher-yielding
outstanding issues.
In general, conditions appear positive for the continuation of a
favorable environment in which to invest in fixed-income securities.

Peter W. Hegel Dennis Pietrzak
Executive Vice President Portfolio Manager
Fixed Income Investments

6 Please see footnotes on page three

<TABLE>

Portfolio of Investments
December 31, 1995
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds
Pennsylvania 95.4%

$ 3,500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt
Ser B (FSA Insd) ....................................... 6.625% 01/01/22 $ 3,761,695
500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt
Ser C (MBIA Insd) ...................................... 8.250 01/01/16 545,275
1,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt
Ser C (FSA Insd) ....................................... 5.625 01/01/23 997,240
1,625 Allegheny Cnty, PA C-34 Conv Cap Apprec <F2> ........... 0/8.625 02/15/04 1,738,474
265 Allegheny Cnty, PA Hosp Dev Auth Rev ................... 7.375 04/01/15 272,078
2,500 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Cent
Presbyterian Univ Ser A (MBIA Insd) .................... 6.000 11/01/12 2,591,125
2,500 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Cent
Presbyterian Univ Ser A (MBIA Insd) .................... 6.250 11/01/23 2,629,425
2,140 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Fac Allegheny
Vly Sch ................................................ 7.750 02/01/15 2,228,639
990 Allegheny Cnty, PA Indl Dev Auth Med Cent Rev
Presbyterian Med Cent Rfdg (FHA Gtd) ................... 6.750 02/01/26 1,045,658
2,500 Allegheny Cnty, PA Indl Dev Auth Rev Environmental Impt
Ser A Rfdg ............................................. 6.700 12/01/20 2,606,450
3,000 Allegheny Cnty, PA Residential Fin Auth Mtg Rev 1983
Ser B .................................................. * 10/01/15 369,960
2,000 Allegheny Cnty, PA Residential Fin Auth Mtg Rev Single
Family Ser Z (GNMA Collateralized) ..................... 6.875 05/01/26 2,110,020
2,380 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ........ * 12/01/10 1,096,728
1,365 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ........ * 12/01/11 592,574
2,350 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ........ * 12/01/13 914,667
2,835 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ........ * 12/01/14 1,045,860
1,250 Allegheny County, PA Hosp Dev Auth Rev Magee Womens
Hosp (FGIC Insd) ....................................... 5.625 10/01/20 1,259,212
2,500 Allentown, PA Area Hosp Auth Rev Sacred Heart Hosp Ser
A Rfdg ................................................. 6.750 11/15/14 2,557,575
2,060 Allentown, PA Area Hosp Auth Rev Sacred Heart Hosp Ser B 6.750 11/15/15 2,092,404
2,000 Beaver Cnty, PA Hosp Auth Rev Med Cent Beaver, PA Inc
Ser A (AMBAC Insd) ..................................... 6.250 07/01/22 2,126,620
1,000 Beaver Cnty, PA Indl Dev Auth Environmental Impt Rev PA
Pwr Co Proj A Rfdg (FSA Insd) .......................... 5.400 10/01/13 1,015,450
4,500 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev OH Edison
Proj Ser A Rfdg ........................................ 7.750 09/01/24 4,823,370
6,000 Berks Cnty, PA (Inverse Fltg) (FGIC Insd) .............. 8.270 11/10/20 7,417,500
3,300 Berks Cnty, PA Muni Auth College Rev Albright College
(Cap Guar Insd) ........................................ 5.250 10/01/13 3,311,187
</TABLE>

7 See Notes to Financial Statements

<TABLE>

Portfolio of Investments (Continued)
December 31, 1995
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania (Continued)

$ 2,000 Berks Cnty, PA Muni Auth Rev Highlands at Wyomissing
Proj B ................................................. 6.875% 10/01/17 $ 2,166,680
1,500 Bradford Cnty, PA Indl Dev Auth Solid Waste Disposal
Rev Intl Paper Co Proj A ............................... 6.600 03/01/19 1,588,635
4,000 Bradford County, PA Indl Dev Auth Solid Waste Disp Rev
Ser B .................................................. 5.900 12/01/19 4,006,560
2,600 Bristol Twp, PA Sch Dist Ser A (MBIA Insd) ............. 5.250 02/15/12 2,619,500
500 Bucks Cnty, PA Wtr & Swr Auth Rev Neshaminy Interceptor
Sys (Prerefunded @ 12/01/98) (FGIC Insd)................ 7.500 12/01/13 548,515
1,650 Butler Cnty, PA Indl Dev Auth First Mtg Rev Sherwood
Oaks Proj Ser A Rfdg (Crossover Rfdg @ 06/01/96) ....... 8.750 06/01/16 1,716,165
1,000 Cambria Cnty, PA Hosp Dev Auth Hosp Rev Conemaugh Vly
Mem Hosp Ser B Rfdg (Prerefunded @ 07/01/98) ........... 8.875 07/01/18 1,131,950
1,000 Cambria Cnty, PA Indl Dev Auth Pollutn Ctl Rev
Bethlehem Steel Corp Proj Rfdg ......................... 7.500 09/01/15 1,054,700
1,000 Cambria Cnty, PA Indl Dev Auth Res Recovery Rev Cambria
Cogen Proj Ser F ....................................... 7.750 09/01/19 1,070,730
2,000 Cambria County, PA Indl Dev Auth Pollutn Ctl Rev
PA Elec Co Proj Ser B Rfdg (MBIA Insd) ................. 6.050 11/01/25 2,077,840
835 Canon McMillan Sch Dist PA (AMBAC Insd) ................ * 02/01/13 340,989
575 Canon McMillan Sch Dist PA (AMBAC Insd) ................ * 02/01/14 221,651
1,000 Canon McMillan Sch Dist PA (AMBAC Insd) ................ * 02/01/15 365,690
1,000 Chester Cnty, PA Hlth & Edl Fac Auth Hlth Sys Rev
Registered Fixed Airs (AMBAC Insd) ..................... 5.650 05/15/20 1,003,030
90 Chester Cnty, PA Hosp Auth Rev Brandywine Hosp ......... 7.000 07/01/10 93,484
760 Chichester Sch Dist PA Ser 1989 (MBIA Insd) ............ * 06/01/01 597,573
860 Chichester Sch Dist PA Ser 1989 (MBIA Insd) ............ * 06/01/02 644,071
1,130 Clearfield Cnty, PA Indl Dev Auth Coml Dev Rev First
Mtg Kmart Corp Ser A Rfdg .............................. 7.200 07/01/07 1,050,019
2,230 Cumberland Cnty, PA Muni Auth Rev First Mtg Carlisle
Hosp & Hlth ............................................ 6.800 11/15/23 2,243,380
2,000 Delaware Cnty, PA Auth Hosp Rev Cmnty Hosp Crozer
Chester Mem Hosp ....................................... 6.000 12/15/20 1,898,500
2,000 Delaware Cnty, PA Auth Hosp Rev Crozer Chester Med Cent
Ser A, B & C (Prerefunded @ 12/15/00) (MBIA Insd) ...... 7.500 12/15/20 2,330,200
3,000 Delaware Cnty, PA Auth Hosp Rev Crozer Chester Med Cent
(MBIA Insd) ............................................ 5.300 12/15/20 2,940,930
3,000 Delaware Cnty, PA Auth Hosp Rev Delaware Cnty Mem Hosp
Rfdg (MBIA Insd) ....................................... 5.500 08/15/19 2,997,810
2,475 Delaware Cnty, PA Auth Rev Elwyn Inc Proj .............. 8.350 06/01/15 2,767,669
</TABLE>

8 See Notes to Financial Statements

<TABLE>

$ 1,500 Delaware Cnty, PA Auth Rev First Mtg Riddle Village Proj. 9.250% 06/01/22 $ 1,664,175
1,900 Delaware Cnty, PA Rfdg .................................. 6.000 11/15/22 1,953,105
2,000 Erie Cnty, PA Hosp Auth Rev Saint Vincent Hlth Cent Proj
Ser A (MBIA Insd) ....................................... 6.375 07/01/22 2,137,920
2,130 Erie, PA Sch Dist Ser C (Cap Guar Insd) ................. * 09/01/09 1,054,350
2,140 Greene Cnty, PA Unlimited Tax (Prerefunded @ 08/01/00)... 8.500 08/01/10 2,513,494
1,045 Harrisburg, PA Wtr & Swr Auth Swr Rev Second Ser Rfdg
(FGIC Insd) ............................................. * 10/15/08 549,325
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/11 804,135
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/12 763,085
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/13 721,501
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/14 683,394
1,000 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/15 349,970
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/16 604,532
1,260 Lackawanna Cnty, PA Multi-Purp Stadium Auth Stadium Rev
Gtd (Prerefunded @ 08/15/98) ............................ 8.625 08/15/07 1,424,695
1,000 Lancaster Cnty, PA Solid Waste Mgmt Auth Res Recovery
Sys Rev Ser A ........................................... 8.375 12/15/04 1,076,320
2,000 Lancaster Cnty, PA Solid Waste Mgmt Auth Res Recovery
Sys Rev Ser A ........................................... 8.500 12/15/10 2,165,500
4,100 Lehigh Cnty, PA Genl Purp Auth Rev Muhlenberg Hosp Ser A
Rfdg .................................................... 8.100 07/15/10 4,470,517
1,000 Lehigh Cnty, PA Indl Dev Auth Pollutn Ctl Rev PA Pwr &
Lt Co Proj Ser A Rfdg (MBIA Insd) ....................... 6.400 11/01/21 1,075,420
1,000 Luzerne Cnty, PA Ser A (FGIC Insd) ...................... 5.350 11/15/20 988,950
2,000 Lycoming Cnty, PA Auth Hosp Lease Rev Divine Providence
Sisters Ser A ........................................... 6.500 07/01/22 2,047,000
2,500 Lycoming Cnty, PA Auth Hosp Lease Rev Divine Providence
Sisters Ser A (Prerefunded @ 07/01/00) .................. 7.750 07/01/16 2,874,475
400 Lycoming Cnty, PA Auth Hosp Lease Rev Williamsport Hosp
Ser B (AMBAC Insd) ...................................... 7.000 11/01/15 419,320
5,000 Lycoming Cnty, PA Auth Hosp Rev Divine Providence Hosp
Rfdg (Connie Lee Insd) .................................. 5.250 11/15/15 4,840,900
1,000 McKean Cnty, PA Hosp Auth Hosp Rev Bradford Hosp Proj
(Crossover Rfdg @ 10/01/00) ............................. 8.875 10/01/20 1,201,500
750 McKeesport, PA Indl Dev Auth Rev The Kroger Corp
Allegheny Cnty Rfdg ..................................... 8.650 06/01/11 848,317
1,750 Meadville, PA Area Wtr Auth Wtr Rev Rfdg (FSA Insd) ..... 5.350 07/01/22 1,738,975
3,000 Monroeville, PA Hosp Auth Hosp Rev Forbes Hlth Sys Rfdg.. 6.250 10/01/15 3,029,490
</TABLE>

9 See Notes to Financial Statements

<TABLE>

$ 500 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp Rev
Suburban Genl Hosp Bonds (AMBAC Insd) ................ 7.250% 05/01/16 $ 529,780
415 Montgomery Cnty, PA Higher Edl & Hlth Auth Nursing
Home Rev Delco Sys Svcs Proj A ....................... 9.875 11/01/18 421,590
2,500 Montgomery Cnty, PA Indl Dev Auth Rev Pollutn Ctl
Philadelphia Elec Co Ser A Rfdg ...................... 7.600 04/01/21 2,742,825
3,000 Montgomery Cnty, PA Indl Dev Auth Rev Res Recovery.... 7.500 01/01/12 3,290,190
1,000 North Penn, PA Wtr Auth Wtr Rev (FGIC Insd) .......... 6.875 11/01/19 1,185,550
1,500 North Penn, PA Wtr Auth Wtr Rev (FGIC Insd) .......... 6.200 11/01/22 1,585,065
1,000 Northampton Cnty, PA Indl Dev Auth Rev Moravian Hall
Square Proj Rfdg ..................................... 7.450 06/01/14 1,087,740
2,500 Northampton Cnty, PA Indl Dev Auth Rev Pollutn Ctl
Bethlehem Steel Rfdg ................................. 7.550 06/01/17 2,655,450
1,000 Northeastern PA Hosp & Edl Auth College Rev Gtd
Luzerne Cnty Cmnty College (AMBAC Insd) .............. 6.625 08/15/15 1,122,920
2,362 Oil City, PA Towne Tower Proj ........................ 6.750 05/01/20 2,531,342
2,000 Pennsylvania Econ Dev Fin Auth Exempt Fac Rev
Macmillan Ltd Partnership Proj ....................... 7.600 12/01/20 2,249,140
3,000 Pennsylvania Econ Dev Fin Auth Recycling Rev
Ponderosa Fibres Proj Ser A .......................... 9.250 01/01/22 3,132,600
1,500 Pennsylvania Econ Dev Fin Auth Res Recovery Rev
Colver Proj Ser D .................................... 7.050 12/01/10 1,617,285
2,700 Pennsylvania Econ Dev Fin Auth Res Recovery Rev
Northampton Generating Ser A ......................... 6.600 01/01/19 2,707,830
4,000 Pennsylvania Hsg Fin Agy (Inverse Fltg) .............. 9.534 10/03/23 4,450,000
1,000 Pennsylvania Hsg Fin Agy Rental Hsg Rfdg (FNMA
Collateralized) ...................................... 6.500 07/01/23 1,031,580
1,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 40 .... 6.900 04/01/25 1,055,520
2,500 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 42 .... 6.850 04/01/25 2,633,900
850 Pennsylvania Infrastructure Invt Auth Rev Pennvest
Subser B ............................................. 6.800 09/01/10 954,499
2,000 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City of
Philadelphia Funding Pgm (MBIA Insd) ................. 5.600 06/15/15 2,010,220
1,500 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City of
Philadelphia Funding Pgm (MBIA Insd) ................. 5.625 06/15/23 1,509,945
4,000 Pennsylvania St Ctfs Partn (FSA Insd) ................ 6.250 05/01/16 4,250,040
2,000 Pennsylvania St Higher Edl Assistance Agy Student Ln
Rev Rfdg (Inverse Fltg) (AMBAC Insd) ................. 9.533 09/01/26 2,292,500
2,500 Pennsylvania St Higher Edl Assistance Agy Student Ln
Rev Ser B (Inverse Fltg) (MBIA Insd) ................. 10.515 03/01/20 2,934,375
</TABLE>

10 See Notes to Financial Statements

<TABLE>

$ 4,000 Pennsylvania St Higher Edl Assistance Agy Student Ln Rev
Ser C (AMBAC Insd) ...................................... 6.400% 03/01/22 $ 4,212,880
60 Pennsylvania St Higher Edl Fac Auth College & Univ Rev
Drexel Univ First Ser (MBIA Insd) ....................... 7.700 05/01/12 61,999
105 Pennsylvania St Higher Edl Fac Auth College & Univ Rev
Trustees Univ Ser A ..................................... 6.625 01/01/17 107,164
2,500 Pennsylvania St Higher Edl Fac Auth Rev Drexel Univ Rfdg. 6.375 05/01/17 2,601,375
1,000 Pennsylvania St Higher Edl Fac Auth Rev Med College PA
Ser A ................................................... 8.375 03/01/11 1,092,630
650 Pennsylvania St Higher Edl Fac Auth Rev Med College PA
Ser A ................................................... 7.500 03/01/14 677,794
2,500 Pennsylvania St Tpk Comm Tpk Rev Ser P (AMBAC Insd) ..... 5.750 12/01/12 2,601,575
1,250 Philadelphia, PA Auth for Indl Dev Coml Dev Philadelphia
Arpt Rev Rfdg ........................................... 7.750 12/01/17 1,309,950
2,000 Philadelphia, PA Auth for Indl Dev Rev Long Term Care.... 8.000 01/01/24 2,156,240
3,000 Philadelphia, PA Gas Wks Rev Fourteenth Ser (FSA Insd)... 6.250 07/01/08 3,253,050
250 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Albert Einstein Med Cent ................................ 7.000 10/01/21 266,488
2,800 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Chestnut Hill Hosp ...................................... 6.500 11/15/22 2,897,944
2,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Frankford Hosp Ser A .................................... 6.000 06/01/14 1,985,580
4,500 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Frankford Hosp Ser A .................................... 6.000 06/01/23 4,443,120
4,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Friends Hosp ............................................ 6.200 05/01/11 4,036,240
4,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Temple Univ Hosp Ser A .................................. 6.625 11/15/23 4,170,320
1,500 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) .................................. * 03/15/08 815,940
3,750 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) .................................. * 03/15/11 1,689,750
3,775 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) .................................. * 03/15/12 1,614,152
4,500 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) .................................. * 03/15/13 1,824,705
2,155 Philadelphia, PA Muni Auth Rev Rfdg (Prerefunded @
04/01/00) (FGIC Insd) ................................... 7.800 04/01/18 2,463,273
220 Philadelphia, PA Muni Auth Rev Rfdg (Prerefunded @
04/01/98) (FGIC Insd) ................................... 7.800 04/01/18 241,965
</TABLE>

11 See Notes to Financial Statements

<TABLE>

$ 1,500 Philadelphia, PA Sch Dist Ser B (AMBAC Insd) ........... 5.500% 09/01/25 $ 1,500,510
1,800 Philadelphia, PA Wtr & Swr Rev Sixteenth Ser
(Prerefunded @ 08/01/01) ............................... 7.500 08/01/10 2,117,664
2,000 Philadelphia, PA Wtr & Wastewtr Rev Reg Fixed Airs
(FGIC Insd) ............................................ 5.650 06/15/12 2,021,800
2,000 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (MBIA Insd).... 5.625 06/15/08 2,110,100
1,425 Pittsburgh, PA Sch Dist Ser B (AMBAC Insd) ............. * 08/01/08 758,242
4,070 Pittsburgh, PA Sch Dist Ser B (AMBAC Insd) ............. * 08/01/09 2,036,750
50 Pittsburgh, PA Urban Redev Auth Mtg Rev Ser A .......... 8.750 10/01/19 53,101
1,470 Pittsburgh, PA Urban Redev Auth Mtg Rev Ser C-1 ........ 6.800 10/01/25 1,530,167
960 Pittsburgh, PA Urban Redev Auth Single Family Mtg Rev
Ser A (GNMA Collateralized) ............................ 8.000 12/01/20 1,027,747
2,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A
Rfdg (FGIC Insd) ....................................... * 09/01/06 1,206,540
1,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A
Rfdg (FGIC Insd) ....................................... * 09/01/07 567,690
1,500 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A
Rfdg (FGIC Insd) ....................................... * 09/01/08 800,250
2,485 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser B
(FSA Insd) ............................................. 5.700 09/01/20 2,517,032
1,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser B
(FSA Insd) ............................................. 5.750 09/01/25 1,018,100
1,500 Ridley Park, PA Hosp Auth Rev Taylor Hosp Ser A ........ 6.125 12/01/20 1,392,660
250 Scranton-Lackawanna, PA Hlth & Welfare Auth Rev Cmnty
Med Cent Proj (BIGI Insd) .............................. 7.875 07/01/10 275,793
3,500 Seneca Vly, PA Sch Dist Ser A (FGIC Insd) .............. 5.500 07/01/14 3,514,210
2,650 Sharon, PA Regl Hlth Sys Auth Hosp Rev Sharon Regl Hlth
Sys Proj A Rfdg ........................................ 6.875 12/01/09 2,823,310
355 Somerset Cnty, PA Indl Dev Auth Coml Dev Rev First Mtg
Kmart Corp Ser A Rfdg .................................. 7.200 04/01/07 330,146
2,180 State Pub Sch Bldg Auth PA Sch Rev Burgettstown Sch
Dist Ser D (MBIA Insd) ................................. 6.500 02/01/14 2,410,513
1,035 Unity Twp, PA Muni Auth Gtd Swr Cap Apprec (AMBAC Insd). * 11/01/17 320,540
1,035 Unity Twp, PA Muni Auth Gtd Swr Cap Apprec (AMBAC Insd). * 11/01/18 301,226
1,875 Unity Twp, PA Muni Auth Gtd Swr Cap Apprec (AMBAC Insd). * 11/01/20 488,381
2,725 Upper Merion, PA Muni Util Auth Swr Rev Gtd ............ 6.000 08/15/16 2,875,556
1,500 Washington Cnty, PA Auth Lease Rev Muni Fac Pool Cap
Ser C Subser C-1D (Prerefunded @ 06/15/00) (AMBAC Insd). 7.450 12/15/18 1,737,135

</TABLE>

12 See Notes to Financial Statements

<TABLE>

$ 1,000 Wayne Cnty, PA Hosp & Hlth Fac Auth Cnty Gtd Hosp Rev
Wayne Mem Hosp Rfdg (MBIA Insd) ........................ 5.375% 07/01/12 $ 1,006,130
2,935 West Shore, PA Area Auth Hlth Cent Rev United Methodist
Homes Aging Inc (Prerefunded @ 06/01/01)................ 7.400 06/01/16 3,418,923
410 West View, PA Muni Auth Wtr Rev (FGIC Insd) ............ 7.500 11/15/17 415,916
350 Westmoreland Cnty, PA Indl Dev Auth Rev Citizens Genl
Hosp Proj A Rfdg ....................................... 8.250 07/01/13 371,588
-------------
264,079,562
-------------

Guam 1.0%

2,750 Guam Govt Ser A ........................................ 5.750 09/01/04 2,774,035
-------------
Puerto Rico 1.9%

205 Puerto Rico Comwlth Pub Impt Rfdg ...................... 7.125 07/01/02 216,213
1,445 Puerto Rico Elec Pwr Auth Pwr Rev Ser Z Rfdg ........... 5.500 07/01/13 1,463,438
1,720 Puerto Rico Elec Pwr Auth Pwr Rev Ser Z Rfdg ........... 5.500 07/01/14 1,734,586
2,000 Puerto Rico Elec Pwr Auth Pwr Rev Ser Z Rfdg ........... 5.500 07/01/16 1,991,480
-------------
5,405,717
-------------

Total Long-Term Investments 98.3%
(Cost $248,677,085) <F1>.......................................................... 272,259,314

Short-Term Investments at Amortized Cost 0.7%....................................... 1,800,000

Other Assets in Excess of Liabilities 1.0%.......................................... 2,810,586
-------------
Net Assets 100%.................................................................... $ 276,869,900
==============

*Zero coupon bond

<FN>
<F1> At December 31, 1995, cost for federal income tax purposes is $248,677,085;
the aggregate gross unrealized appreciation is $23,855,957 and the aggregate
gross unrealized depreciation is $273,728, resulting in net unrealized
appreciation of $23,582,229.

<F2> Currently is a zero coupon bond which will convert to a coupon paying bond
at a predetermined date.
</TABLE>

The following table summarizes the portfolio composition at December 31, 1995,
based upon quality ratings issued by Standard & Poor's. For securities not rated
by Standard & Poor's, the Moody's rating is used.

<TABLE>
<CAPTION>
Portfolio Composition by Credit Quality
<S> <C>
AAA.......................... 49.1%
AA........................... 7.2
A............................ 14.6
BBB.......................... 18.7
BB........................... 3.9
Non-Rated.................... 6.5
------
100.0%
======
</TABLE>

13 See Notes to Financial Statements

Statement of Assets and Liabilities
December 31, 1995
- -------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at Market Value (Cost $248,677,085) (Note 1).............................. $ 272,259,314
Short-Term Investments (Note 1)........................................................ 1,800,000
Cash................................................................................... 47,509
Receivables:
Interest............................................................................. 3,827,287
Fund Shares Sold..................................................................... 220,449
Other.................................................................................. 6,986
---------------
Total Assets...................................................................... 278,161,545
---------------

Liabilities:
Payables:
Income Distributions ................................................................ 473,881
Investment Advisory Fee (Note 2)..................................................... 239,198
Fund Shares Repurchased.............................................................. 49,791
Accrued Expenses....................................................................... 528,775
---------------
Total Liabilities................................................................. 1,291,645
---------------
Net Assets............................................................................. $ 276,869,900
===============

Net Assets Consist of:
Paid in Surplus (Note 3)............................................................... $ 258,939,706
Net Unrealized Appreciation on Investments............................................. 23,582,229
Accumulated Distributions in Excess of Net Investment Income (Note 1).................. (7,423)
Accumulated Net Realized Loss on Investments........................................... (5,644,612)
---------------
Net Assets............................................................................. $ 276,869,900
===============

Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of $226,675,514
and 12,779,959 shares of beneficial interest issued and outstanding) (Note 3)..... $ 17.74

Maximum sales charge (4.75%* of offering price)................................... .88
---------------
Maximum offering price to public.................................................. $ 18.62
===============

Class B Shares:
Net asset value and offering price per share (Based on net assets of $46,795,869
and 2,639,237 shares of beneficial interest issued and outstanding) (Note 3)...... $ 17.73
===============

Class C Shares:
Net asset value and offering price per share (Based on net assets of $3,398,517
and 191,696 shares of beneficial interest issued and outstanding) (Note 3)........ $ 17.73
===============
*On sales of $100,000 or more, the sales charge will be reduced.
</TABLE>

14 See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended December 31, 1995
- ----------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest..................................................................... $ 17,122,479
---------------

Expenses:
Investment Advisory Fee (Note 2)............................................. 1,569,561
Distribution (12b-1) and Service Fees (Allocated to Classes A, B, C and D of
$567,231, $425,761, $29,106 and $2, respectively) (Note 6) ................ 1,022,100
Shareholder Services (Note 2) ............................................... 327,273
Custody (Note 1)............................................................. 128,189
Legal (Note 2)............................................................... 48,300
Trustees Fees and Expenses (Note 2).......................................... 43,504
Other........................................................................ 187,527
---------------
Total Expenses.......................................................... 3,326,454
Less: Fees Waived and Expenses Reimbursed ($356,593 and $13,125)........ 369,718
Earnings Credits on Cash Balances (Note 1)........................ 26,522
---------------
Net Expenses............................................................ 2,930,214
---------------
Net Investment Income........................................................ $ 14,192,265
===============

Realized and Unrealized Gain/Loss on Investments:
Realized Gain/Loss on Investments:
Proceeds from Sales........................................................ $ 65,043,601
Cost of Securities Sold.................................................... (70,678,682)
---------------
Net Realized Loss on Investments (Including realized loss on futures
transactions of $4,651,926)................................................ (5,635,081)
---------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period.................................................... (7,446,092)
End of the Period.......................................................... 23,582,229
---------------
Net Unrealized Appreciation on Investments During the Period................. 31,028,321
---------------
Net Realized and Unrealized Gain on Investments.............................. $ 25,393,240
===============

Net Increase in Net Assets from Operations................................... $ 39,585,505
===============
</TABLE>

15 See Notes to Financial Statements

<TABLE>
Statement of Changes in Net Assets
For the Years Ended December 31, 1995 and 1994
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Year Ended Year Ended
December 31, 1995 December 31, 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.............................................. $ 14,192,265 $ 14,167,689
Net Realized Gain/Loss on Investments.............................. (5,635,081) 1,589,125
Net Unrealized Appreciation/Depreciation on Investments
During the Period................................................ 31,028,321 (31,188,136)
----------------- -----------------
Change in Net Assets from Operations .............................. 39,585,505 (15,431,322)
----------------- -----------------
Distributions from Net Investment Income........................... (14,259,564) (14,104,104)
Distributions in Excess of Net Investment Income (Note 1).......... (7,423) -0
----------------- -----------------
Distributions from and in Excess of Net Investment Income*......... (14,266,987) (14,104,104)
----------------- -----------------
Net Change in Net Assets from Investment Activities................ 25,318,518 (29,535,426)
----------------- -----------------
From Capital Transactions (Note 3):
Proceeds from Shares Sold.......................................... 27,514,827 45,228,180
Net Asset Value of Shares Issued Through Dividend Reinvestment..... 8,632,984 8,518,915
Cost of Shares Repurchased......................................... (27,500,706) (32,797,611)
----------------- -----------------
Net Change in Net Assets from Capital Transactions................. 8,647,105 20,949,484
----------------- -----------------
Total Increase/Decrease in Net Assets.............................. 33,965,623 (8,585,942)
Net Assets:

Beginning of the Period............................................ 242,904,277 251,490,219
----------------- -----------------
End of the Period (Including undistributed net investment income
of$(7,423) and $67,299, respectively) ........................... $ 276,869,900 $ 242,904,277
================= =================
</TABLE>

<TABLE>
<CAPTION> Year Ended Year Ended
*Distributions by Class December 31, 1995 December 31, 1994
-------------------------------------------------------------
Distributions from and in Excess of Net Investment Income:
<S> <C> <C>
Class A Shares........... $ (12,063,809) $ (12,279,314)
Class B Shares........... (2,062,857) (1,704,000)
Class C Shares........... (140,285) (120,704)
Class D Shares........... (36) (86)
---------------- ----------------
$ (14,266,987) $ (14,104,104)
================ ================
</TABLE>

16 See Notes to Financial Statements

<TABLE>

Financial Highlights

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Year Ended December 31
-------------------------------------------------------------
Class A Shares 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period........................... $16.081 $18.062 $16.899 $16.373 $15.716
------- ------- ------- ------- -------
Net Investment Income................... .946 .965 1.027 1.074 1.081
Net Realized and Unrealized Gain/Loss
on Investments....................... 1.660 (1.985) 1.164 .525 .696
------- ------- ------- ------- -------
Total from Investment Operations.......... 2.606 (1.020) 2.191 1.599 1.777
------- ------- ------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income (Note 1)......... .950 .961 1.028 1.073 1.080
Distributions from Net Realized
Gain on Investments ............... -0- -0- -0- -0- .040
------ ------- ------- ------- -------
Total Distributions..................... .950 .961 1.028 1.073 1.120
------ ------- ------- ------- -------
Net Asset Value, End of the Period...... $17.737 $16.081 $18.062 $16.899 $16.373
======= ======= ======= ======= =======

Total Return*........................... 16.62% (5.72%) 13.25% 10.09% 11.64%
Net Assets at End of the Period
(In Millions)......................... $ 226.7 $ 203.2 $ 221.7 $ 153.8 $ 103.1
Ratio of Expenses to Average
Net Assets* (Annualized) <F1>......... 1.00% .90% .71% .72% .70%
Ratio of Net Investment Income to
Average Net Assets* (Annualized)...... 5.57% 5.73% 5.80% 6.41% 6.70%
Portfolio Turnover...................... 27.66% 7.94% 1.35% 9.87% 48.47%

*If certain expenses had not been assumed
by VKAC, total return would have been
lower and the ratios would have been as
follows:

Ratio of Expenses to Average Net
Assets (Annualized) <F1>............... 1.14% 1.17% 1.09% 1.17% 1.26%
Ratio of Net Investment Income to
Average Net Assets (Annualized)........ 5.42% 5.46% 5.41% 5.95% 6.13%

<FN>
<F1> Beginning with the year ended December 31, 1995, the Ratios of Expenses to
Average Net Assets are based upon expense amounts which do not reflect
credits earned on overnight cash balances. (Note 1)
</TABLE>

17 See Notes to Financial Statements

<TABLE>

Financial Highlights (Continued)

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
- -----------------------------------------------------------------------------------------------
<CAPTION>
May 1, 1993
Year Year (Commencement of
Ended Ended Distribution) to
December 31, December 31, December 31,
Class B Shares 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $16.080 $18.055 $17.460
------- ------- -------
Net Investment Income.......................... .819 .841 .586
Net Realized and Unrealized Gain/Loss on
Investments................................. 1.659 (1.985) .603
------- ------- -------
Total from Investment Operations................. 2.478 (1.144) 1.189
Less Distributions from and in Excess of Net
Investment Income (Note 1).................. .827 .831 .594
------- ------- -------
Net Asset Value, End of the Period............... $17.731 $16.080 $18.055
======= ======= =======

Total Return*.................................... 15.72% (6.39%) 6.81%**
Net Assets at End of the Period (In millions).... $ 46.8 $ 37.6 $ 27.7
Ratio of Expenses to Average Net
Assets* (Annualized) <F1>...................... 1.75% 1.64% 1.48%
Ratio of Net Investment Income to
Average Net Assets* (Annualized) .............. 4.81% 4.98% 4.47%
Portfolio Turnover............................... 27.66% 7.94% 1.35%

*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:

Ratio of Expenses to Average Net
Assets (Annualized) <F1>......................... 1.89% 1.90% 1.82%
Ratio of Net Investment Income to
Average Net Assets (Annualized).................. 4.66% 4.71% 4.13%

**Non-Annualized

18 See Notes to Financial Statements

<TABLE>

Financial Highlights (Continued)

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
- -----------------------------------------------------------------------------------------------
<CAPTION>
May 1, 1993
Year Year (Commencement of
Ended Ended Distribution) to
December 31, December 31, December 31,
Class C Shares 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period.......... $16.079 $18.045 $17.850
------- ------- -------
Net Investment Income........................... .812 .850 .325
Net Realized and Unrealized Gain/Loss on
Investments.................................. 1.665 (1.985) .208
------- ------- -------
Total from Investment Operations.................. 2.477 (1.135) .533
Less Distributions from and in Excess of
Net Investment Income (Note 1).................. .827 .831 .338
------- ------- -------
Net Asset Value, End of the Period................ $17.729 $16.079 $18.045
======= ======= =======

Total Return*..................................... 15.72% (6.34%) 2.98%**
Net Assets at End of the Period (In millions)..... $ 3.4 $ 2.2 $ 2.1
Ratio of Expenses to Average Net
Assets* (Annualized) <F1>....................... 1.75% 1.63% 1.54%
Ratio of Net Investment Income to
Average Net Assets* (Annualized)................ 4.76% 4.97% 4.08%
Portfolio Turnover................................ 27.66% 7.94% 1.35%

*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:

Ratio of Expenses to Average Net
Assets (Annualized) <F1>.......................... 1.90% 1.90% 1.89%
Ratio of Net Investment Income to
Average Net Assets (Annualized)................... 4.61% 4.70% 3.73%

**Non-Annualized

19 See Notes to Financial Statements

Notes to Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------

1. Significant Accounting Policies

Van Kampen American Capital Pennsylvania Tax Free Income Fund (the "Fund") is
organized as a Pennsylvania trust and is registered as a non-diversified
open-end management investment company under the Investment Company Act of 1940,
as amended. The Fund's investment objective is to provide Pennsylvania investors
a high level of current income exempt from federal and Pennsylvania state income
taxes and, where possible under local law, local income and personal property
taxes, through investment primarily in a varied portfolio of medium and lower
grade municipal securities. The Fund commenced investment operations on May 1,
1987. The distribution of the Fund's Class B and Class C shares commenced on May
1, 1993, and August 13, 1993, respectively. On May 2, 1995, all Class D
shareholders redeemed their shares and the class was eliminated. The Fund will
no longer offer Class D shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.

A. Security Valuation-Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of less than 60 days are valued at
amortized cost.

B. Security Transactions-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. As of December 31, 1995, there were
no when issued or delayed delivery purchase commitments.

C. Investment Income and Expenses-Interest income and expenses are recorded on
an accrual basis. Bond premium and original issue discount are amortized over
the expected life of each applicable security.
During the year ended December 31, 1995, the Fund's custody fee was reduced by
approximately $26,500 as a result of credits earned on overnight cash balances.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported

Notes to Financial Statements (Continued)
December 31, 1995
- --------------------------------------------------------------------------------

amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

D. Federal Income Taxes-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income, if any, to its
shareholders. Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of loss and offset such losses against any future realized capital gains.
At December 31, 1995, the Fund had an accumulated capital loss carryforward for
tax purposes of $5,644,612, of which $9,531 and $5,635,081 will expire on
December 31, 2001 and 2003, respectively. Net realized gains or losses may
differ for financial and tax reporting purposes primarily as a result of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.

E. Distribution of Income and Gains-The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included as ordinary income for
tax purposes. Due to inherent differences in the recognition of certain expenses
under generally accepted accounting principles and federal income tax purposes,
the amount of distributable net investment income may differ between book and
federal income tax purposes for a particular period. These differences are
temporary in nature, but may result in book basis distribution in excess of net
investment income for certain periods.

2. Investment Advisory Agreement and Other Transactions with Affiliates

Under the terms of the Fund's Investment Advisory Agreement, Van Kampen American
Capital Investment Advisory Corp. (the "Adviser") will provide investment advice
and facilities to the Fund for an annual fee payable monthly as follows:

<TABLE>
<CAPTION>
Average Net Assets % Per Annum
- --------------------------------------------------------------------------------
<S> <C>
First $500 million................................................. .600 of 1%
Over $500 million.................................................. .500 of 1%
</TABLE>

Notes to Financial Statements (Continued)
December 31, 1995
- --------------------------------------------------------------------------------

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the year ended December 31, 1995, the Fund recognized expenses of
approximately $75,600 representing VKAC's cost of providing accounting, cash
management, legal and certain shareholder services (prior to July, 1995) to the
Fund.
In July, 1995, the Fund began using ACCESS Investor Services, Inc., an
affiliate of the Adviser, as the transfer agent of the Fund. For the year ended
December 31, 1995, the Fund recognized expenses of approximately $118,400,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC. The Fund's liability under the
deferred compensation and retirement plans at December 31, 1995, was
approximately $45,500.
At December 31, 1995, VKAC owned 100 shares each of Classes B and C.

Notes to Financial Statements (Continued)
December 31, 1995
- --------------------------------------------------------------------------------

3. Capital Transactions

The Fund has outstanding three classes of common shares, Classes A, B and C.
There are an unlimited number of shares of each class without par value
authorized. At December 31, 1995, paid in surplus aggregated $209,246,584,
$46,293,822 and $3,399,300 for Classes A, B and C, respectively. For the year
ended December 31, 1995, transactions were as follows:

<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------
<S> <C> <C>
Sales:
Class A....................... 1,119,488 $ 19,063,890
Class B....................... 432,811 7,360,052
Class C....................... 64,263 1,090,885
Class D....................... -0- -0-
------------ ----------------
Total Sales................... 1,616,562 $ 27,514,827
============ ================

Dividend Reinvestment:
Class A....................... 429,117 $ 7,328,175
Class B....................... 70,444 1,203,406
Class C....................... 5,929 101,400
Class D....................... -0- 3
------------ ----------------
Total Dividend Reinvestment... 505,490 $ 8,632,984
============ ================

Repurchases:
Class A....................... (1,402,145) $ (23,853,016)
Class B....................... (200,582) (3,410,196)
Class C....................... (13,519) (235,564)
Class D....................... (112) (1,930)
------------ ----------------
Total Repurchases............. (1,616,358) $ (27,500,706)
============ ================
</TABLE>

Notes to Financial Statements (Continued)
December 31, 1995
- --------------------------------------------------------------------------------

At December 31, 1994, paid in surplus aggregated $206,707,535, $41,140,560,
$2,442,579 and $1,927 for Classes A, B, C and D, respectively. For the year
ended December 31, 1994, transactions were as follows:

<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------
<S> <C> <C>
Sales:
Class A........................ 1,647,629 $ 28,038,358
Class B........................ 919,103 15,718,097
Class C........................ 85,268 1,469,806
Class D........................ 112 1,919
------------ ----------------
Total Sales.................... 2,652,112 $ 45,228,180
============ ================

Dividend Reinvestment:
Class A........................ 444,194 $ 7,432,733
Class B........................ 59,918 998,687
Class C........................ 5,238 87,487
Class D........................ -0- 8
------------ ----------------
Total Dividend Reinvestment.... 509,350 $ 8,518,915
============ ================

Repurchases:
Class A........................ (1,733,757) $ (28,705,184)
Class B........................ (177,182) (2,922,282)
Class C........................ (70,025) (1,170,145)
Class D........................ -0- -0-
------------ ----------------
Total Repurchases.............. (1,980,964) $ (32,797,611)
============ ================
</TABLE>

Notes to Financial Statements (Continued)
December 31, 1995
- -------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within six years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.

<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
Year of Redemption Class B Class C
- -------------------------------------------------------------------------------
<S> <C> <C>
First.......................................... 4.00% 1.00%
Second......................................... 3.75% None
Third.......................................... 3.50% None
Fourth......................................... 2.50% None
Fifth.......................................... 1.50% None
Sixth.......................................... 1.00% None
Seventh and Thereafter......................... None None
</TABLE>

For the year ended December 31, 1995, VKAC, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$89,100 and CDSC on the redeemed shares of Classes B and C of approximately
$87,700. Sales charges do not represent expenses of the Fund.

4. Investment Transactions

Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the year ended December 31, 1995, were $75,663,800 and
$70,678,682, respectively.

5. Derivative Financial Instruments

A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Fund's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the unrealized
appreciation/depreciation on investments. Upon disposition, a realized gain or
loss is recognized accordingly.

Notes to Financial Statements (Continued)
December 31, 1995
- -------------------------------------------------------------------------------
Summarized below are the specific types of derivative financial instruments
used by the Fund.

A. Futures Contracts-A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
The fluctuation in market value of the contracts is settled daily through a
cash margin account. Realized gains and losses are recognized when the contracts
are closed or expire.
Transactions in futures contracts, each with a par value of $100,000, for the
year ended December 31, 1995, were as follows:

<TABLE>
<CAPTION>
Contracts
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1994...................................... 300
Futures Opened........................................................ 400
Futures Closed........................................................ (700)
------
Outstanding at December 31, 1995...................................... -0-
======
</TABLE>

B. Indexed Securities-These instruments are identified in the portfolio of
investments. The price of these securities may be more volatile than the
price of a comparable fixed rate security.
An Inverse Floating security is one where the coupon is inversely indexed to a
short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Fund to enhance the yield of the portfolio.

6. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and a service plan (the "Service Plan," collectively the "Plans"). The
Plans govern payments for the distribution of the Fund's shares, ongoing
shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A shares and 1.00% each of
Class B and Class C shares are accrued daily. Included in these fees for the
year ended December 31, 1995, are payments to VKAC of approximately $377,000.

Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Van Kampen American Capital Pennsylvania Tax Free Income Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Pennsylvania Tax Free Income Fund (the "Fund"),
including the portfolio of investments, as of December 31, 1995, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Pennsylvania Tax Free Income Fund as of December 31,
1995, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
February 13, 1996

Funds Distributed by Van Kampen American Capital
- --------------------------------------------------------------------------------

GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund

FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income

TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund

THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund

Ask your investment adviser 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.

Van Kampen American Capital Pennsylvania Tax Free Income Fund
- --------------------------------------------------------------------------------

Board of Trustees

J. Miles Branagan
Linda Hutton Heagy
Roger Hilsman
R. Craig Kennedy
Dennis J. McDonnell*
Donald C. Miller - Chairman
Jack E. Nelson
Don G. Powell*
Jerome L. Robinson
Fernando Sisto
Wayne W. Whalen*
William Stewart Woodside

Officers

Don G. Powell*
President and Chief Executive Officer

Dennis J. McDonnell*
Executive Vice President

Ronald A. Nyberg*
Vice President and Secretary

Edward C. Wood III*
Vice President and Chief Financial Officer

Curtis W. Morell*
Vice President and Chief Accounting Officer

John L. Sullivan*
Treasurer

Tanya M. Loden*
Controller

William N. Brown*
Peter W. Hegel*
Robert C. Peck, Jr.*
Alan T. Sachtleben*
Paul R. Wolkenberg*
Vice Presidents

Investment Adviser

Van Kampen American Capital Investment Advisory Corp.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

Distributor

Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

Transfer Agent

ACCESS Investor Services, Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256

Custodian

State Street Bank and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

Legal Counsel

Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606

Independent Auditors

KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

* "Interested" persons of the Fund, as defined in the Investment Company
Act of 1940.

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 unless 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.