<PAGE>
TABLE OF CONTENTS
<TABLE>
<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......................................... 10
Statement of Operations..................................................... 11
Statement of Changes in Net Assets.......................................... 12
Financial Highlights........................................................ 13
Notes to Financial Statements............................................... 16
Report of Independent Accountants........................................... 21
</TABLE>
TXM ANR 11/95
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
November 7, 1995
Dear Shareholder:
The first nine months of 1995 have been very positive for most investors.
Both the fixed-income and stock markets have made considerable gains during the
period ended September 30, 1995.
This year serves as a reminder of just how quickly markets can move and how
difficult it can be to predict the timing of those movements. Moreover, this
year reinforces the importance of maintaining a long-term perspective and reaf-
firms the principle that it is time--not timing--that leads to investment suc-
cess.
ECONOMIC OVERVIEW
Due in large part to the Federal Reserve Board's efforts to tighten monetary
supply in 1994, the economy has slowed significantly this year. Despite a
stronger-than-expected third quarter growth rate of 4.2 percent, economic
growth during the first half of the year was substantially lower than its
fourth quarter 1994 rate of 5.1 percent. And, while other key economic data,
including unemployment rates and housing starts, have shown mixed signs during
recent months, the general economic trends for the year continue to support a
"soft landing" scenario.
Comfortable with the economy's rate of growth and level of inflation, the Fed
reversed its trend of raising interest rates and lowered short-term rates by a
quarter percent on July 6. Financial markets, perceiving that the Fed's mone-
tary initiatives had taken hold without driving the economy into a recession,
rallied through much of the year. With slowing growth, interest rates declined
and the value of many fixed-income investments rose (bond yields and prices
move in opposite directions). For example, the yield on 30-year Treasury secu-
rities fell from 7.88 percent at the end of December 1994 to 6.50 percent at
the end of September 1995, while its price rose more than 16 percent. Likewise,
the yield on the Bond Buyer's Municipal Bond Index fell from 7.28 percent at
the end of December to 6.23 percent at the end of September. Although municipal
bond yields have declined, they are still offering competitive yields, particu-
larly to those investors in higher tax brackets.
ECONOMIC OUTLOOK
We believe the Fed will move cautiously before it continues to lower short-
term rates, waiting for further signs that the economy has settled into a slow
growth pattern. We expect moderate growth, as economic data continues to send
mixed signals. We anticipate the economy will grow at an annual rate of 3 per-
cent in the fourth quarter and inflation will continue to run under 3 percent,
driven by slowing population and labor force growth.
(Continued on page two)
1
<PAGE>
Based upon a generally modest growth and low inflation outlook, we believe
the outlook for fixed-income markets--including municipal bonds--is positive.
In the near term, we believe domestic markets will benefit from a stable U.S.
dollar and an increase in business activity driven in part by a number of re-
cently announced strategic reorganizations of some of the nation's blue chip
industry leaders.
On the following pages, you can read about your Fund's performance for the
period, 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
On October 6 all Van Kampen American Capital open-end mutual funds, currently
listed in newspapers nationwide, began appearing under one heading. The new
listing reflects our company name and is abbreviated as "Van Kamp Amer Cap."
Once again, thank you for your continued confidence in your investment with
Van Kampen American Capital and for the privilege of working with you in seek-
ing to reach your financial goals.
Sincerely,
/s/Don G. Powell /s/Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1995
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
One-year total return based on NAV/1/................ 10.05% 9.11% 9.11%
One-year total return/2/............................. 4.83% 5.11% 8.11%
Three-year average annual total return/2/............ 5.20% 5.16% N/A
Life-of-Fund average annual total return/2/.......... 6.15% 4.76% 3.85%
Commencement Date.................................... 03/02/92 07/27/92 08/30/93
DISTRIBUTION RATES AND YIELD
Distribution Rate/3/................................. 5.12% 4.67% 4.66%
Taxable Equivalent Distribution Rate/4/.............. 8.00% 7.30% 7.28%
SEC Yield/5/......................................... 4.96% 4.40% 4.40%
</TABLE>
N/A = Not Applicable
/1/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). The Adviser has subsidized a portion of the expenses. Without this
subsidy, the total returns would have been lower.
/2/Standardized total return for the period. Assumes reinvestment of all
distributions for the period ended and includes payment of the maximum sales
charge or contingent deferred sales charge for early withdrawal. The Adviser
has subsidized a portion of the expenses. Without this subsidy, the total
returns would have been lower.
/3/Distribution rate represents the monthly annualized distributions of the Fund
at the end of the period and not the earnings of the Fund.
/4/Taxable equivalent calculations reflect federal income tax rate of 36%. A
portion of the interest income may be subject to the Federal alternative
minimum tax.
/5/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 as shown above.
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>
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 inter-
vals. 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 con-
ditions
. 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 in-
vestor 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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Texas Tax Free Income Fund vs. Lehman Brothers
Municipal Bond Index (March 1992 through September 1995)
[GRAPH APPEARS HERE]
Fund's Total Return
1 Year Avg. Annual = 4.83%
3 Year Avg. Annual = 5.20%
Inception Avg. Annual = 6.15%
<TABLE>
<CAPTION>
VKAC Texas Tax Free Lehman Brothers Municipal
Income Fund Bond Index
------------------- -------------------------
<S> <C> <C>
Mar 1992 $ 9,526 $10,000
Dec 1992 $10,329 $10,849
Dec 1993 $11,606 $12,182
Dec 1994 $11,188 $11,552
Sep 1995 $12,381 $13,031
</TABLE>
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 September 30,
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 in-
formation provides a broader vantage point from which to evaluate the discus-
sion of the Fund's performance found in the following pages.
4
<PAGE>
LOGO
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
The following is an interview with the management team of Van Kampen American
Capital Texas Tax Free Income Fund. The team is led by Joseph A. Piraro,
portfolio manager, and Peter W. Hegel, executive vice president, fixed-income
investments.
WHAT MARKET CONDITIONS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
Q DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1995.
A While 1994 was generally a down year for the bond markets, 1995 was char-
acterized by a significant rally. The rally, which began early in the
year and remained strong through July, resulted as the Federal Reserve Board
notched interest rates down to spur economic growth.
Another market condition that has had a positive impact on the municipal
bond market (and on this Fund) has been the supply and demand ratio. The new
issue supply of the municipal market is about $140 billion, which is down ap-
proximately $25 billion from last year. This lower supply, compounded with
continued demand from investors, has helped municipal bond prices to appreci-
ate.
Q HOW DID YOU POSITION THE FUND IN RESPONSE TO THE EVENTS OF THE PAST YEAR?
A In seeking a combination of both yield and credit safety, the majority of
the Fund's total assets are diversified among the top four ratings cate-
gories by Standard & Poor's Ratings Group (AAA, AA, A, BBB). For credit safe-
ty, the Fund continues to hold a majority weighting in the AAA-rating category
(the highest credit rating assigned to municipal bonds by Standard & Poor's
Ratings Group).
The top five sector holdings of this Fund's portfolio (as of September 30,
1995) are Water & Sewer, Health Care, Single Family Housing, Retail Utility,
and Multi-Family Housing. We feel those are the strongest sectors in Texas at
the present time.
[PIE CHART FOR PORTFOLIO COMPOSITION BY CREDIT QUALITY
AS OF SEPTEMBER 30, 1995]
Not Rated 21%
BA 1%
BAA 19%
A 19%
AA 19%
AAA 27%
Cash & Equivalents 2%
5
<PAGE>
Q HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 1995?
A The Fund continues to provide investors with an attractive level of tax-
free income. At its current annualized dividend level of $0.54 per share,
the Fund provides shareholders with a tax-free distribution rate of 5.12 per-
cent/3/ (Class A shares) as of September 30, 1995. At this distribution rate,
the Fund provides shareholders in the 36 percent federal income bracket with a
yield equivalent to a taxable investment earning 8.00 percent/4/.
Overall, for the twelve months ended September 30, 1995, the Fund's one-year
annual return was 10.05 percent/1/ (for Class A shares based on net asset val-
ue). By comparison, The Lehman Brothers Municipal Bond Index earned a total
return of 11.18 percent over the same period. The Index is a broad-based un-
managed index of municipal bonds and does not reflect any commissions or fees
that would be paid by an investor purchasing the securities it represents.
During part of the reporting period, Van Kampen American Capital Asset Manage-
ment, Inc., the Adviser, subsidized a portion of the Fund's expenses. Without
this subsidy, the total returns would have been lower. (Please refer to the
chart on page three for additional Fund performance).
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN GENERAL FOR THE NEXT
Q YEAR AND MORE SPECIFICALLY, FOR THE FUND?
A We anticipate that the economy will grow modestly, and that inflation
should stay low. As a result, we believe that fixed-income markets-in-
cluding municipal bonds-will continue to make modest gains.
In the future, we may see interest rates drop slightly which, as we men-
tioned previously, is good for investors already in the bond market because
falling interest rates cause the value of municipal bonds to rise.
We see three key factors that may affect this market going forward. These
are the tax reform debates, the presidential election, and the strength of the
economy.
. Potential tax reform in some form is an issue we will watch in the year
ahead.
. With the presidential election in 1996, changes in the economic climate
may occur. We will continue to carefully monitor fixed-income market
conditions closely, and adjust the Fund's holdings accordingly.
. We feel that municipal bond supply may go down slightly, which would be
good news for investors because a decline in supply combined with steady
demand should help increase prices.
For now, we are comfortable with the Fund's positioning. However, we will
pay close attention to political and economic events and adjust the Fund's
holdings accordingly. We believe that the expertise of the Fund's management
team, combined with our extensive research capabilities enables us to seek the
best bond values for investors--balancing attractive yields with a comfortable
level of risk.
/s/Peter W. Hegel
Peter W. Hegel /s/Joseph A. Piraro
Executive Vice President Joseph A. Piraro
Fixed Income Investments Portfolio Manager
Please see footnotes on page three.
6
<PAGE>
PORTFOLIO OF INVESTMENTS
September 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 98.0%
EDUCATION 5.3%
$ 500 Houston, Texas, Higher Education
Finance Corp., Rev. (University of St.
Thomas Project)........................ 7.250% 12/01/07 $ 519,425
500 North Texas Higher Education Authority,
Inc., Texas Student Loan Rev.,
Refunding, Series D.................... 6.300 04/01/09 512,200
-----------
1,031,625
-----------
HOSPITAL 19.7%
165 Bell County, Texas, Health Facilities
Development Corp. (King's Daughters
Hospital).............................. 9.250 07/01/08 183,127
250 Harris County, Texas, Health Facilities
Development Corp., Health Care System
Rev. (Memorial Hospital System
Project)............................... 7.125 06/01/15 267,642
375 Harris County, Texas, Health Facilities
Devlopment Corp., Health Care System
Rev. (Sisters of Charity).............. 7.100 07/01/21 400,493
90 Jefferson County, Texas, Health
Facility Authority (Baptist Health Care
Project)............................... 8.300 10/01/14 98,023
150 Montgomery County, Texas, Health
Facilities Development Corp., Hospital
Mortgage Rev. (Woodlands Medical Center
Project)............................... 8.850 08/15/14 162,837
500 Richardson, Texas, Hospital Authority,
Refunding & Improvement Rev.
(Richardson Medical Center)............ 6.750 12/01/23 509,880
300 Rusk County, Texas, Health Facility
Corp., Refunding Hospital Rev.
(Henderson Memorial Hospital Project).. 7.750 04/01/13 312,681
500 Tarrant County, Texas, Health Facilites
Development Corp., Refunding &
Improvement, Hospital Rev. (Fort Worth
Osteopathic Hospital).................. 7.000 05/15/28 516,550
250 Texas Health Facilities Development
Corp., Hospital Rev. (Fort Worth
Children's Center) FGIC................ 6.250 12/01/12 257,890
250 Tomball, Texas, Hospital Authority Rev.
Refunding.............................. 6.125 07/01/23 226,290
150 Tyler, Texas, Health Facilities
Development Corp., Refunding Rev. (East
Texas Medical Center-Regional Health)
Series A............................... 8.250 11/01/06 169,356
500 Tyler, Texas, Health Facilities
Development Corp., Refunding Rev. (East
Texas Medical Center-Regional Health)
Series B............................... 6.750 11/01/25 492,995
210 Weslaco, Texas, Health Facilities
Development Corp., Hospital Rev.
(Weslaco Health Facility).............. 10.375 06/01/16 243,415
-----------
3,841,179
-----------
HOUSING 15.2%
500 Austin, Texas, Housing Finance Corp.,
Multi-Family Mtg....................... 6.500 10/01/10 500,375
500 Baytown, Texas, Property Management &
Development Corp., Series A (Baytown
Terrace Project) FNMA.................. 6.100 08/15/21 500,575
330 Bexar County, Texas, Housing Finance
Corp., Rev., Series B, GNMA............ 9.250 04/01/16 344,127
115 East Texas Housing Finance Corp.,
Single Family Mtg. Rev., GNMA.......... 7.200 01/01/26 117,076
250 El Paso, Texas, Housing Authority,
Multi-Family Mtg. Rev.,
Series A............................... 6.250 12/01/09 249,042
</TABLE>
See Notes to Financial Statements
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 135 El Paso,Texas, Property Finance
Authority, Inc., Single Family Mtg.
Rev., Series A, GNMA................... 8.700% 12/01/18 $ 142,370
140 Galveston, Texas Property Finance
Authority, Inc., Single Family Mtg.
Rev., Series A......................... 8.500 09/01/11 160,103
30 Harris County, Texas, Housing Financing
Corp., Single Family Mtg. Rev., Series
1983-A................................. 10.125 07/15/03 30,054
100 Harris County, Texas, Housing Financing
Corp., Single Family Mtg. Rev., Series
1983-A................................. 10.375 07/15/14 100,140
50 Houston, Texas, Housing Finance Corp.,
Single Family Mtg. Rev................. 10.000 09/15/14 50,167
395 Houston, Texas, Housing Finance Corp.,
Single Family Mtg. Rev................. 10.375 12/15/13 400,826
170 Texas Housing Agency, Single Family
Mtg. Rev., Refunding,
Series A............................... 7.150 09/01/12 176,321
190 Travis County, Texas, Housing Finance
Corp., Single Family Mtg. Rev., GNMA... 8.200 04/01/22 195,373
-----------
2,966,549
-----------
MISCELLANEOUS 7.3%
60 Fort Bend County, Texas, Levee
Improvement, District No. 11, G.O...... 8.700 03/01/10 68,009
250 Garland, Texas, Economic Development
Authority, IDR (Yellow Freight System,
Inc. Project).......................... 8.000 12/01/16 260,120
250 Lockhart, Texas, Correctional
Facilities Rev., Financing Corp., MBIA. 6.625 04/01/12 260,378
283 Texas General Services Community
Partner Interests (Office Building and
Land Acquisition Project).............. 7.000 08/01/09 292,087
250 Texas State, G.O., Refunding, Veterans
Land................................... 6.500 12/01/21 261,733
250 Texas State, G.O., National Research
Lab Commission......................... 7.125 04/01/20 279,990
-----------
1,422,317
-----------
MUNICIPAL UTILITY DISTRICT (MUD) 15.0%
250 Brazoria County, Texas, MUD No. 2,
Refunding.............................. 7.000 09/01/08 255,922
60 Fort Bend County, Texas, MUD No. 25,
Refunding.............................. 8.000 10/01/15 63,977
250 Harris County, Texas, MUD No. 120,
Refunding.............................. 8.000 08/01/14 276,493
500 Harris County, Texas, MUD No. 322...... 6.250 05/01/18 475,070
500 Mills Road, Texas, MUD, Refunding...... 6.500 09/01/14 496,205
125 Mission Bend, Texas, MUD No. 2......... 10.000 09/01/00 144,641
250 Montgomery County, Texas, MUD.......... 6.000 09/01/19 231,218
250 Montgomery County, Texas, MUD.......... 6.000 09/01/16 230,970
250 Montgomery County, Texas, MUD, MBIA.... 6.250 03/01/10 258,243
50 Montgomery County, Texas, MUD No. 4.... 8.900 09/01/02 56,177
100 West Harris County, Texas, MUD No. 1,
Refunding.............................. 7.000 04/01/05 104,677
300 Woodlands, Texas, Metro Center, MUD,
Refunding, Series B.................... 7.100 04/01/07 339,060
-----------
2,932,653
-----------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NURSING HOMES 1.4%
$ 250 San Antonio, Texas, Health Facilities
Development Corp., Rev. (Encore Nursing
Center Partner)........................ 8.250% 12/01/19 $ 273,265
-----------
TRANSPORTATION 7.7%
1,000 Austin, Texas, Airport System Rev.,
Series A, MBIA......................... 6.125 11/15/25 991,750
250 Harris County, Texas, Toll Road Rev.... 6.750 08/01/14 265,897
250 Texas State Turnpike Authority, Dallas
North Toll Road, Tollway Rev........... 6.000 01/01/20 244,660
-----------
1,502,307
-----------
UTILITIES 26.4%
220 Austin, Texas, Utility System Rev.,
Series B............................... 7.800 11/15/12 242,191
1,000 Bexar, Texas, Metro Water District,
Waterworks System Rev., MBIA........... 5.875 05/01/22 971,140
435 City of Brownsville, Texas, Utilities
System Priority Rev., Series 1990,
AMBAC.................................. 6.500 09/01/17 478,983
250 Coastal Water Authority, Texas, Water
Rev., AMBAC............................ 6.250 12/15/17 253,560
250 Colorado River, Texas, Municipal Water
District (Water Transmission Facilities
Project A), AMBAC...................... 6.625 01/01/21 272,707
250 Guadalupe Blanco River Authority,
Texas, IDR............................. 6.350 07/01/22 258,435
100 Harris County, Texas, Water Control &
Improvement District No. 75 7.000 03/01/14 104,286
500 Houston, Texas, Water and Sewer System,
Refunding Rev.,
Series B............................... 6.375 12/01/14 511,790
100 Matagorda County, Texas, Navigation
District 1, Control Rev, (Central Power
& Light Co. Project)................... 7.875 12/01/16 105,624
385 Port of Corpus Christi, Texas, IDR
(Valero Refining & Marketing Co. ),
Series A............................... 10.250 06/01/17 426,234
100 Port of Corpus Christi, Texas, IDR
(Valero Refining & Marketing Co.),
Series B............................... 10.625 06/01/08 111,295
220 San Antonio, Texas, Electric and Gas
Rev., Series A......................... 6.500 02/01/12 228,813
250 Tarrant County, Texas, Water Control &
Improvement Rev........................ 6.000 03/01/10 266,000
435 Texas Municipal Power Agency, Rev...... 5.500 09/01/13 413,789
500 Willow Fork, Texas, Drainage District.. 7.000 03/01/11 521,430
-----------
5,166,277
-----------
TOTAL INVESTMENTS (Cost $18,470,839) 98.0% .................... 19,136,172
OTHER ASSETS AND LIABILITIES, NET 2.0%......................... 394,903
-----------
NET ASSETS 100%................................................ $19,531,075
</TABLE> -----------
Insurers:
G.O. general obligation bond AMBAC AMBAC Indemnity Corp.
IDR industrial development FGIC Financial Guaranty Insurance Corp.
revenue bond FNMA Federal National Mtg. Association
Rev. revenue bond GNMA Government National Mtg. Association
MBIA Municipal Bond Investor's Assurance
Corp.
See Notes to Financial Statements
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $18,470,839).................. $19,136,172
Interest receivable.............................................. 356,808
Receivable for Fund shares sold.................................. 216,682
Receivable for investments sold.................................. 10,030
Other assets..................................................... 4,278
-----------
Total Assets.................................................... 19,723,970
-----------
LIABILITIES
Dividends payable................................................ 47,345
Bank overdraft................................................... 32,376
Due to Distributor............................................... 15,607
Due to Adviser................................................... 9,690
Deferred Trustees' compensation.................................. 5,359
Due to shareholder service agent................................. 3,377
Due to Trustees.................................................. 2,310
Accrued expenses and other payables.............................. 76,831
-----------
Total Liabilities............................................... 192,895
-----------
NET ASSETS, equivalent to $10.03 per share for Class A and Class
B, and $10.04 per share for Class C shares...................... $19,531,075
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 1,110,686 Class A, 729,051
Class B and 107,241 Class C shares outstanding.................. $ 19,470
Capital surplus.................................................. 18,827,031
Undistributed net realized gain on securities.................... 24,601
Net unrealized appreciation of securities........................ 665,333
Accumulated net investment loss.................................. (5,360)
-----------
NET ASSETS....................................................... $19,531,075
-----------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
STATEMENT OF OPERATIONS
Year Ended September 30, 1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest........................................................... $1,414,127
----------
EXPENSES
Management fees.................................................... 123,404
Shareholder service agent's fees and expenses...................... 18,769
Accounting services................................................ 67,413
Service fees--Class A.............................................. 26,331
Distribution and service fees--Class B............................. 75,938
Distribution and service fees--Class C............................. 11,528
Trustees' fees and expenses........................................ 9,920
Audit fees......................................................... 26,600
Custodian fees..................................................... 3,109
Legal fees......................................................... 9,038
Reports to shareholders............................................ 24,199
Registration and filing fees....................................... 9,230
Organization expenses.............................................. 3,000
Miscellaneous...................................................... 1,344
Expense reimbursement (see Note 2) ................................ (61,815)
----------
Total expenses.................................................... 348,008
----------
NET INVESTMENT INCOME.............................................. 1,066,119
----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities.................................... 65,437
Net unrealized appreciation of securities during the period........ 739,651
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... 805,088
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $1,871,207
----------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30
------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period...................... $22,616,594 $25,210,015
----------- -----------
OPERATIONS
Net investment income............................... 1,066,119 1,279,721
Net realized gain (loss) securities................. 65,437 (39,911)
Net unrealized appreciation (depreciation) of
securities during the period....................... 739,651 (1,799,595)
----------- -----------
Increase (decrease) in net assets resulting from
operations......................................... 1,871,207 (559,785)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM (see Note 1D)
Net investment income(/1/)
Class A............................................. (653,415) (849,857)
Class B............................................. (363,880) (383,566)
Class C............................................. (55,017) (40,808)
----------- -----------
(1,072,312) (1,274,231)
----------- -----------
Excess of book-basis net realized gain on securities
Class A............................................. -- (21,198)
Class B............................................. -- (9,656)
Class C............................................. -- (729)
----------- -----------
-- (31,583)
----------- -----------
Total distributions................................. (1,072,312) (1,305,814)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A............................................. 517,409 1,892,676
Class B............................................. 362,817 2,691,555
Class C............................................. 299,878 1,309,798
----------- -----------
1,180,104 5,894,029
----------- -----------
Proceeds from shares issued for distributions
reinvested
Class A............................................. 299,151 428,301
Class B............................................. 179,325 197,947
Class C............................................. 9,580 10,051
----------- -----------
488,056 636,299
----------- -----------
Cost of shares redeemed
Class A............................................. (2,969,102) (6,308,560)
Class B............................................. (2,085,815) (872,378)
Class C............................................. (497,657) (77,212)
----------- -----------
(5,552,574) (7,258,150)
----------- -----------
Decrease in net assets from capital transactions.... (3,884,414) (727,822)
----------- -----------
DECREASE IN NET ASSETS............................... (3,085,519) (2,593,421)
----------- -----------
NET ASSETS, end of period (including accumulated net
investment loss of $(5,360) and undistributed net
investment income of $5,628, respectively).......... $19,531,075 $22,616,594
----------- -----------
</TABLE>
(1) Includes $2,502, $3,224, and $467 in excess of book-basis net investment
income as of September 30, 1995 for Class A, B, and C, respectively.
See Notes to Financial Statements
12
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
of the periods indicated.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
----------------------------------------------
March 2, 1992(/1/)
Year Ended September 30 through
-------------------------- September 30,
1995 1994 1993(/2/) 1992(/2/)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period........................ $9.64 $10.36 $9.74 $9.45
------ ------ ------ -----
INCOME FROM OPERATIONS
Investment income............. .67 .64 .63 .42
Expenses...................... (.13) (.10) (.06) (.06)
------ ------ ------ -----
Net investment income.......... .54 .54 .57 .36
Net realized and unrealized
gains or losses on securities. .39 (.7025) .65 .23
------ ------ ------ -----
Total from investment opera-
tions......................... .93 (.1625) 1.22 .59
------ ------ ------ -----
LESS DISTRIBUTIONS FROM
Net investment income......... (.54) (.545) (.5875) (.30)
Excess of book-basis net real-
ized gains on securities..... -- (.0125) (.0125) --
------ ------ ------ -----
Total distributions............ (.54) (.5575) (.60) (.30)
------ ------ ------ -----
Net asset value, end of period. $10.03 $9.64 $10.36 $9.74
------ ------ ------ -----
TOTAL RETURN(/4/).............. 10.05% (1.62%) 12.94% 6.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (mil-
lions)........................ $11.1 $12.8 $18.0 $14.1
Average net assets (millions).. $11.8 $15.7 $16.8 $11.7
Ratios to average net assets
(annualized)(/3/)
Expenses...................... 1.36% 1.03% 0.61% 0.93%
Expenses, without expense re-
imbursement.................. 1.66% 1.70% 1.86% 1.41%
Net investment income......... 5.51% 5.41% 5.74% 5.94%
Net investment income, without
expense reimbursement........ 5.21% 4.74% 4.49% 5.45%
Portfolio turnover rate........ 15% 10% 5% 4%
</TABLE>
(1) Commencement of operations
(2) Based on average month-end shares outstanding.
(3) See Note 2.
(4) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
See Notes to Financial Statements
13
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each
of the periods indicated.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
------------------------------------------
July 27,
1992(/1/)
Year Ended September 30 through
--------------------------- September 30,
1995 1994 1993(/2/) 1992(/2/)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of pe-
riod............................. $9.64 $10.35 $9.74 $9.91
------ ------- ------- ------
INCOME FROM OPERATIONS
Investment income................ .67 .65 .63 .09
Expenses......................... (.21) (.18) (.13) (.025)
------ ------- ------- ------
Net investment income............. .46 .47 .50 .065
Net realized and unrealized gains
or losses on securities.......... .396 (.7065) .633 (.103)
------ ------- ------- ------
Total from investment operations.. .856 (.2365) 1.133 (.038)
------ ------- ------- ------
LESS DISTRIBUTIONS FROM
Net investment income............ (.46) (.461) (.5105) (.132)
Excess of book-basis net invest-
ment income..................... (.006) -- -- --
Excess of book-basis net realized
gains on securities............. -- (.0125) (.0125) --
------ ------- ------- ------
Total distributions............... (.466) (.4735) (.523) (.132)
------ ------- ------- ------
Net asset value, end of period.... $10.03 $9.64 $10.35 $9.74
------ ------- ------- ------
TOTAL RETURN(/4/)................. 9.11% (2.35%) 11.97% (.73%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (mil-
lions)........................... $7.3 $8.6 $7.1 $0.9
Average net assets (millions)..... $7.6 $8.4 $4.6 $0.5
Ratios to average net assets
(annualized)(/3/)
Expenses......................... 2.14% 1.80% 1.30% 1.41%
Expenses, without expense reim-
bursement....................... 2.44% 2.47% 2.55% 2.15%
Net investment income............ 4.74% 4.66% 4.92% 3.83%
Net investment income, without
expense reimbursement........... 4.44% 3.99% 3.67% 3.07%
Portfolio turnover rate........... 15% 10% 5% 4%
</TABLE>
(1) Commencement of operations
(2) Based on average month-end shares outstanding.
(3) See Note 2.
(4) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
See Notes to Financial Statements
14
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each
of the periods indicated.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
---------------------------------
August 30,
Year Ended 1993(/1/)
September 30 through
----------------- September 30,
1995 1994(/2/) 1993(/2/)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........ $9.65 $10.36 $10.28
------ ------ ------
INCOME FROM OPERATIONS
Investment income.......................... .67 .64 .05
Expenses................................... (.21) (.18) (.01)
------ ------ ------
Net investment income....................... .46 .46 .04
Net realized and unrealized gains or losses
on securities.............................. .396 (.6965) .121
------ ------ ------
Total from investment operations............ .856 (.2365) .161
------ ------ ------
LESS DISTRIBUTIONS FROM
Net investment income...................... (.46) (.461) (.081)
Excess of book-basis net investment income. (.006) -- --
Excess of book-basis net realized gains on
securities................................ -- (.0125) --
------ ------ ------
Total distributions......................... (.466) (.4735) (.081)
------ ------ ------
Net asset value, end of period.............. $10.04 $9.65 $10.36
------ ------ ------
TOTAL RETURN(/4/)........................... 9.11% (2.35%) 1.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)........ $1.1 $1.2 $0.1
Average net assets (millions)............... $1.2 $0.9 $.02
Ratios to average net assets
(annualized)(/3/)
Expenses................................... 2.14% 1.79% 0.66%
Expenses, without expense reimbursement.... 2.44% 2.46% 1.89%
Net investment income...................... 4.73% 4.59% 4.17%
Net investment income, without expense re-
imbursement............................... 4.43% 3.92% 2.92%
Portfolio turnover rate..................... 15% 10% 5%
</TABLE>
(1) Commencement of operations
(2) Based on average month-end shares outstanding.
(3) See Note 2.
(4) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
See Notes to Financial Statements
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Texas Tax Free Income Fund (the "Fund", formerly
American Capital Texas Municipal Securities, Inc.) is registered under the In-
vestment Company Act of 1940, as amended, as a non-diversified, open-end man-
agement investment company. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements.
A. INVESTMENT VALUATIONS-Investments in municipal bonds are valued at the most
recently quoted bid prices or at bid prices based on a matrix system (which
considers such factors as security prices, yields, maturities and ratings)
furnished by dealers and an independent pricing service.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations until the remaining days to maturity becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
cost.
Issuers of certain securities owned by the Fund have obtained insurance
guaranteeing their timely payment of principal at maturity and interest. Such
insurance reduces financial risk but not market risk of the security.
Fund investments include lower rated debt securities which may be more sus-
ceptible to adverse economic conditions than other investment grade holdings.
These securities are often subordinated to the prior claims of other senior
lenders and uncertainties may exist as to an issuer's ability to meet princi-
pal and interest payments. At the end of the period, debt securities rated be-
low investment grade and comparable unrated securities represented
approximately 22% of the investment portfolio.
B. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized capital gains to its shareholders. It is anticipated that no further
distributions of capital gains will be made until tax basis capital loss
carryforwards, if any, expire or are offset by net realized capital gains.
C. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. Interest income is
accrued daily.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
D. DIVIDENDS AND DISTRIBUTIONS-The Fund declares dividends from net investment
income each business day. Dividends and distributions to shareholders are re-
corded on the record dates. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may differ from generally accepted accounting principles. Such dividends
and distributions may exceed financial statement earnings.
The Fund intends to continue to invest principally in tax-exempt obligations
sufficient in amount to qualify the Fund to pay "exempt-interest dividends" as
defined in the Internal Revenue Code. However, a portion of such dividends may
represent tax preference items subject to alternative minimum tax.
E. DEBT DISCOUNT OR PREMIUM-The Fund accounts for debt discounts and premiums
on the same basis as is used for federal income tax reporting. Accordingly,
original issue debt discounts and all premiums are amortized over the life of
a security. Market discounts are recognized at the time of sale as realized
gains for book purposes and ordinary income for tax purposes.
F. WHEN-ISSUED SECURITIES-Delivery and payment for securities purchased on a
when- issued basis may take place up to 45 days after the date of the transac-
tion. The securities purchased are subject to market fluctuations during this
period. To meet the payment obligation, sufficient cash or liquid securities,
equal to the amount that will be due, are set aside with the custodian.
G. ORGANIZATION COSTS-Organization expenses of approximately $15,000 were de-
ferred and are being amortized over a five year period ending April 1997.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen American Capital Asset Management, Inc. (the "Adviser") serves as
investment manager of the Fund. Management fees are paid monthly, based on the
average daily net assets of the Fund at an annual rate of .60% of the first
$300 million, .55% of the next $300 million, and .50% of the amount in excess
of $600 million. From time to time, the Adviser may voluntarily elect to reim-
burse the Fund a portion of the Fund's expenses. This reimbursement may be
discontinued at any time without prior notice. For the period, such reimburse-
ment was $61,815.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
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 $6,427 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 to the
Fund. The 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 the fees for such services were $12,513.
The Fund has been advised that Van Kampen American Capital Distributors,
Inc. (the "Distributor") and Advantage Capital Corp. (the "Retail Dealer"),
both affiliates of the Adviser, received $2,589 and $157, respectively, as
their portion of the commissions 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 net assets to reimburse the Distributor for expenses and serv-
ice fees incurred. Class B and Class C shares pay an additional fee of up to
.75% per annum of their average net assets to reimburse the Distributor for
its distribution expenses. Actual distribution expenses incurred by the Dis-
tributor 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 ex-
penses incurred by the Distributor under the Class B and Class C plans aggre-
gated approximately $347,000 and $16,000, respectively, and may be carried
forward and reimbursed through either the collection of the contingent de-
ferred sales charges from shares redemptions or, subject to the annual renewal
of the plans, future Fund reimbursements of distribution fees.
Legal fees of $9,011 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 directors of the Fund are officers and trustees 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 $3,050,373 and $6,987,281, re-
spectively.
For federal income tax purposes, the identified cost of investments owned at
the end of the period, was $18,470,877. Net unrealized appreciation of invest-
ments aggregated $665,295, gross unrealized appreciation of investments aggre-
gated $746,294, and gross unrealized depreciation of investments aggregated
$80,999.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
NOTE 4--TRUSTEE COMPENSATION
Fund trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $629 plus a fee of $18 per day for Board meetings
attended. During the period, such fees aggregated $8,342.
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 its obligations under the Plan by any form of
trust or escrow. Each trustee covered under 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 distribution
fees 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 purchase, respectively, sub-
ject to certain conditions.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
The Fund has an unlimited number of shares of $.01 par value beneficial in-
terest authorized. Transactions in shares of beneficial interest were as fol-
lows:
<TABLE>
<CAPTION>
Year Ended September 30
-----------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A.............................................. 52,801 187,834
Class B.............................................. 37,593 265,842
Class C.............................................. 30,198 128,146
----------- -----------
120,592 581,822
----------- -----------
Shares issued for distributions reinvested
Class A.............................................. 30,626 42,661
Class B.............................................. 18,363 19,840
Class C.............................................. 981 1,010
----------- -----------
49,970 63,511
----------- -----------
Shares redeemed
Class A.............................................. (304,310) (637,534)
Class B.............................................. (215,721) (87,755)
Class C.............................................. (50,161) (7,831)
----------- -----------
(570,192) (733,120)
----------- -----------
Decrease in shares outstanding........................ (399,630) (87,787)
----------- -----------
</TABLE>
NOTE 6--FUND REORGANIZATION
On July 21, 1995, the shareholders approved the reorganization of the Fund to
a Delaware Business Trust and the election of fourteen trustees. On August 26,
1995, the reorganization became effective.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
In our opinion, the accompanying statement of assets and liabilities, includ-
ing the portfolio of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen American Capital Texas
Tax Free Income Fund at September 30, 1995, and the results of its operations,
the changes in its net assets and the financial highlights for each of the
fiscal periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter re-
ferred to as "financial statements") are the responsibility of the Fund's man-
agement; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which re-
quire that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and dis-
closures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall fi-
nancial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmation from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
November 7, 1995
21
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
22
<PAGE>
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
PHILIP P. GAUGHAN
LINDA H. HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DONALD C. MILLER
JACK E. NELSON
DON G. POWELL
DAVID REES
JEROME L. ROBINSON
LAWRENCE J. SHEEHAN
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President
CURTIS W. MORELL
Vice President and Treasurer
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.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
/(C)/Van 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. If used for distributions to prospec-
tive investors after 12/31/95, this annual report must be accompanied by a Van
Kampen American Capital Texas Tax Free Income Fund performance data update for
the most recent calendar quarter.
23
<PAGE>
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
THIS PAGE INTENTIONALLY LEFT BLANK
24
