<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Management Review................. 4
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
</TABLE>
TXM SAR 5/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO APPEARS HERE]
DENNIS J. MCDONNELL AND DON G. POWELL
May 9, 1996
Dear Shareholder,
We are pleased to report continued positive results for the Van Kampen Amer-
ican Capital Texas Tax Free Income Fund. Amidst a relatively volatile market
at the start of 1996, Class A shares of the Fund generated a total return of
3.21 percent/1/, based on net asset value for the six months ended March 31,
1996. Longer term, the Fund's one-year and three-year average annual total re-
turns (Class A shares at NAV) were 7.54 percent/1/ and 6.10 percent/1/, re-
spectively, for the same ending period.
You can read more about your Fund's performance and investment strategies on
the following pages, including a recent interview with the Fund's portfolio
management team.
ECONOMIC OVERVIEW
The economy continued to grow at a slow pace through the end of 1995, re-
flected in weak consumer demand and disappointing retail sales during the hol-
iday season. Severe winter weather in many parts of the country further
dampened retail activity and hindered distribution and manufacturing. These
conditions helped to keep inflation in check, prompting the Federal Reserve
Board to continue easing short-term interest rates. In turn, long-term inter-
est rates declined, causing bond prices to rise. Municipal bond yields de-
clined in concert with other interest rates, with the yield on the Bond
Buyer's 40 Municipal Bond Index dropping by 51 basis points from 6.07 percent
at the end of the September to 5.56 percent at year-end. At the same time, the
price measure of the Index increased by 6.4 percent to 122.62. This bond mar-
ket rally was reflected in your Fund's twelve-month total return performance
of 15.07 percent for the period ended December 31, 1995, based on net asset
value for Class A shareholders.
In contrast, at the beginning of 1996, the market experienced a higher level
of volatility, and an abrupt end to the rally in bond prices. This volatility
was triggered in part by three factors: fiscal uncertainty caused by two shut-
downs of the federal government, presidential primary debates laced heavily
with discussion of impending tax reform, and unexpected reversals in a number
of key economic indicators, which sent the market mixed signals on the direc-
tion of the economy.
Despite a rise in interest rates during the first quarter, municipal bond
yields remained quite attractive compared to taxable yields. For example, at
the end of March, 20-year AAA-rated municipals were yielding 5.61 percent,
while 20-year U.S. Treasuries yielded 6.50 percent. In other words, municipals
were yielding 86 percent of taxable U.S. Treasury yields. The relative attrac-
tiveness of municipal bond yields also can be demonstrated by comparing their
yields to the taxable-equivalent yields available on taxable bonds. In order
to earn the same after-tax return as these municipal bonds, a taxable invest-
ment would need to yield 8.77 percent (for investors in the 36 percent federal
income tax bracket).
Continued on page two
1
<PAGE>
ECONOMIC OUTLOOK
In general, we anticipate a pickup in economic activity during the first half
of the year and a slowdown toward the end of the year, with possibilities of a
modest increase in inflation. Overall, we are impressed by the benign trend of
inflation, particularly in light of the noticeable increases in commodity pric-
es, such as oil and grain, in the first part of the year.
We believe the Federal Reserve Board will be cautious in its monetary policy
toward short-term interest rates, as mixed economic news continues to be re-
ported. The Fed is expected to focus on maintaining economic growth at an an-
nual rate of 2 to 3 percent while striving to keep inflation at bay. Long-term
rates have risen substantially to current levels that we view as attractive. We
look for long-term rates to move back in a trading range of 6 1/2 and 7 1/4
percent, as measured by long-term U.S. Tresury bonds over the near term.
Our long-term outlook for the fixed-income sector continues to be positive,
as market fundamentals such as modest growth, low inflation, and a trend toward
lower interest rates remain in place. Additionally, the supply of newly issued
municipal bonds is anticipated to be significantly lower than demand, which is
typically driven by maturing bonds and bond calls (a bond redeemed by the is-
suer before the maturity date). A decline in supply combined with steady demand
should lend price stability to this market and provide opportunity for
municipals to outperform other market sectors.
FUND UPDATE
The Trustees of the Fund have approved its reorganization into the Van Kampen
American Capital Municipal Income Fund. The reorganization is subject to share-
holder approval. If approved, Texas Tax Free Income Fund shareholders will re-
ceive shares of the Municipal Income Fund in exchange for their current shares.
You will receive a proxy statement and voting card in the near future. The
proxy is designed to provide you with information about the proposed reorgani-
zation and to request your participation in the proxy process.
Similar to the Texas Tax Free Income Fund, the Municipal Income Fund seeks to
provide a high level of current income exempt from federal income tax, consis-
tent with preservation of capital. Moreover, because the Municipal Income Fund
invests in municipal bonds from across the country and in various levels of
credit ratings, it offers investors a higher level of diversification and in-
come potential than a single-state fund.
Throughout the history of the Texas Tax Free Income Fund, the support of our
shareholders and our commitment to a disciplined investment approach have been
important to our long-term performance record. Thank you for your continued
confidence in Van Kampen American Capital and in your Fund's management team.
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 MARCH 31, 1996
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return based on NAV/1/............. 3.21% 2.85% 2.85%
Six-month total return/2/.......................... (1.68%) (1.15%) 1.85%
One-year total return/2/........................... 2.46% 2.67% 5.66%
Three-year average annual total return/2/.......... 4.38% 4.33% N/A
Life-of-Fund average annual total return/2/........ 6.20% 4.92% 4.22%
Commencement Date.................................. 03/02/92 07/27/92 08/30/93
DISTRIBUTION RATES AND YIELD
Distribution rate/3/............................... 5.36% 4.65% 4.64%
Taxable equivalent distribution rate/4/............ 8.38% 7.27% 7.25%
SEC yield/5/....................................... 4.73% 4.25% 4.23%
</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 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. The
Adviser has subsidized a portion of the expenses. Without this subsidy, the
yield would have been 3.16%, 2.61%, and 2.59% for A, B, and C shares,
respectively.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
We recently spoke with the management team of the Van Kampen American
Capital Texas Tax Free Income Fund about the key events and economic forces
that shaped the markets during the first half of the Fund's fiscal year. The
team includes Joseph A. Piraro, 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 six-month period
ended March 31, 1996.
Q WHAT WERE SOME OF THE IMPORTANT EVENTS OR MARKET CONDITIONS THAT HAD AN
IMPACT ON THE FUND'S PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED MARCH
31, 1996?
A The bond market rally that characterized most of 1995 continued through
the year's last quarter. The economy was weak--held down by various fac-
tors including the government shut-down--and inflation remained low. This com-
bination led the Federal Reserve Board to lower its key lending rate by one-
quarter of a percentage point in December. The Fed's effort to spur the
lackluster economy helped to fuel the bond markets into a strong year-end, as
bond prices rose and yield levels declined.
In early 1996, however, the market environment changed. February, in partic-
ular, was a crucial month. The month's employment report showed a significant
reduction in unemployment rates, indicating stronger-than-expected economic
growth. Surprised by this, the bond market began adjusting prices downward to
reflect the possibilities of stronger economic growth. Expectations for the
future course of monetary policy also shifted sharply, with the consensus ro-
tating from expectations of further easing to one of little change or even a
modest tightening.
Dramatic as this correction was, we believe it reflects the market's reac-
tion to economic growth returning to long-term trend rates. This coupled with
continued low inflationary conditions has served to put the Fed in a neutral
policy mode, allowing calm to be restored in the bond market--although at
higher interest rate levels.
Other factors that influenced the municipal bond markets during the period in-
cluded:
. Intense weather conditions experienced by much of the United States from
December through March had an effect in the municipal bond market.
. The expectation that a balanced budget agreement was forthcoming helped
to bolster municipal bonds, especially at the longer end of the maturity
spectrum.
. The possibility of tax reform--a potential threat to the tax advantages
of municipal bonds--continued to dampen demand for municipals to some
extent. The importance of this factor waned, however, as the ranks of
presidential hopefuls thinned.
Q WHAT ABOUT TEXAS-SPECIFIC ECONOMIC CONDITIONS OR NEWS?
A The Texas growth rate and general economy have remained strong during the
last six months. An interesting consideration for the Texas Tax Free In-
come Fund is the state's changing demographics. Texas has seen a continued in-
flow of senior citizens as the state
4
<PAGE>
becomes increasingly popular among retirees. By 2010, it is projected that ap-
proximately 22 percent of Texans will be over the age of 65. This trend is pos-
itive for the Fund because it invests in sectors, such as healthcare, where
demand is fueled by this aging population. Furthermore, an increase in retirees
(who may prefer more conservative, income-oriented, and tax-advantaged invest-
ments) could help to keep demand for Texas municipal bonds strong.
Q HOW DID YOU POSITION THE FUND DURING THE PAST SIX MONTHS?
A Throughout the period, in spite of weathering a significant market advance
and decline--we maintained our long-term perspective and avoided any
abrupt changes to the portfolio. We extended duration slightly in our efforts
to increase yield (duration is a measure of how much a bond's price will re-
spond to changes in interest rates). The Fund's current duration remains below
averages for similar funds, giving the Fund a defensive nature.
As always, the Fund continued to seek a combination of both yield and credit
safety. To help achieve this, the majority of the Fund's portfolio was diversi-
fied among the top four ratings categories (Standard & Poor's ratings AAA, AA,
A, BBB). To enhance overall credit safety, the Fund held a significant weight-
ing in the highest AAA-rating category as of March 31, 1996, as shown by the
accompanying pie chart.
[PIE CHART: PORTFOLIO COMPOSITION BY CREDIT QUALITY
AS OF MARCH 31, 1996 APPEARS HERE]
Not Rated 24%
BBB 18%
A 20%
AA 9%
AAA 29%
In terms of sector allocations, we continued to rely on our strong internal
credit research team to identify Texas municipal securities offering an appro-
priate balance of yield and credit safety. As stated earlier, we currently fa-
vor the Texas health care industry and maintained a significant health care
position throughout the period. Please see the Portfolio of Investments Section
on page seven for the Fund's sector holdings.
Q HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED MARCH 31, 1996?
A For the six-month period, the Fund's total return was 3.21 percent/1/ (for
Class A shares based on net asset value). The Fund compared favorably to
the Lehman Brothers Municipal Bond Index which earned a total return of 2.88
percent over the same six-month period. The Index is a broad-based unmanaged
index of over 30,000 municipals. Its perfor-
5
<PAGE>
mance does not reflect any commissions or fees that would be paid by an in-
vestor purchasing the securities it represents, or in periodically
"rebalancing" any such portfolio to the index over time. Keep in mind, too,
that this is a index including bonds from around the nation, not specific to
the state of Texas.
The Fund continued to provide investors with an attractive level of tax-free
current income during the period. At its current annualized dividend level of
$0.54 per share, Fund shareholders earned a tax-free distribution rate of 5.36
percent/3/ (Class A shares) as of March 31, 1996. At this distribution rate,
shareholders in the 36 percent federal income tax bracket would have to find a
taxable investment earning 8.38 percent just to equal the Fund's tax- exempt
yield/4/. (Please refer to the chart on page three for additional Fund perfor-
mance results.)
Q WHAT IS YOUR OUTLOOK FOR THE FUND, AND THE MARKET FOR THE MONTHS AHEAD?
A Looking ahead, we believe the environment for fixed-income investments is
generally positive. A modestly expanding economy and low inflation are
fundamentals for a positive performance by tax-exempt securities. The Fed ap-
pears to be in a neutral mode at the moment, but there may be room for further
interest rate reductions during the upcoming months. Moreover, we expect in-
vestor demand for Texas municipal securities to exceed supply, which could help
provide price stability in the market.
As the November elections approach, the debate on tax reform continues. How-
ever, we believe the outcome will be positive, or at worst neutral, for the mu-
nicipal bond market. Furthermore, municipal bond yields are very attractive
relative to Treasuries--a factor that seems to have bolstered investor demand
for tax-exempt securities in spite of the tax reform question.
We believe the Fund is positioned to take advantage of these potential oppor-
tunities as we move into the next reporting period.
/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
March 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 104.6%
EDUCATION 5.8%
$ 500 Houston, Texas, Higher Education
Finance Corp., Rev. (University of St.
Thomas Project)........................ 7.250% 12/01/07 $ 526,045
500 North Texas Higher Education Authority,
Inc., Texas Student Loan Rev.,
Refunding, Series D.................... 6.300 04/01/09 508,230
-----------
1,034,275
-----------
GENERAL OBLIGATION 8.6%
500 Harris County, Texas, MUD No. 322...... 6.250 05/01/18 488,850
250 Montgomery County, Texas, MUD.......... 6.000 09/01/16 237,585
250 Texas State Refunding Veterans Land.... 6.500 12/01/21 263,852
500 Willow Fork, Texas, Drainage District.. 7.000 03/01/11 522,560
-----------
1,512,847
-----------
HOSPITAL 24.5%
165 Bell County, Texas, Health Facilities
Development Corp. (King's Daughters
Hospital).............................. 9.250 07/01/08 180,987
1,000 Brazoria County, Texas, Health
Facilities Development Corp. Hospital
Rev., Refunding (Brazosport Memorial
Hospital) FSA.......................... 5.500 07/01/13 960,090
375 Harris County, Texas, Health Facilities
Development Corp., Health Care System
Rev. (Sisters of Charity).............. 7.100 07/01/21 403,736
250 Harris County, Texas, Health Facilities
Development Corp. (Memorial Hospital
System Project)........................ 7.125 06/01/15 268,380
150 Montgomery County, Texas, Health
Facilities Development Corp., Hospital
Mortgage Rev. (Woodlands Medical Center
Project)............................... 8.850 08/15/14 162,555
500 Richardson, Texas, Hospital Authority,
Refunding & Improvement Rev.
(Richardson Medical Center)............ 6.750 12/01/23 517,515
300 Rusk County, Texas, Health Facilities
Corp., Hospital Rev. (Henderson
Memorial Hospital Project)............. 7.750 04/01/13 315,864
500 Tarrant County, Texas, Health Facilites
Development Corp., Hospital Rev.,
Refunding & Improvement (Fort Worth
Osteopathic Hospital).................. 7.000 05/15/28 522,555
250 Texas Health Facilities Development
Corp., Hospital Rev. (Fort Worth
Children's Center) FGIC................ 6.250 12/01/12 257,215
250 Tomball, Texas, Hospital Authority
Rev., Refunding........................ 6.125 07/01/23 235,185
500 Tyler, Texas, Health Facilities
Development Corp., Refunding Rev. (East
Texas Medical Center-Regional Center)
Series B............................... 6.750 11/01/25 504,520
-----------
4,328,602
-----------
HOUSING 16.2%
500 Austin, Texas, Housing Finance Corp.,
Multi-Family Housing Rev............... 6.500 10/01/10 501,820
500 Baytown, Texas, Property Management &
Development Corp. (Baytown Terrace
Project) Series A, FNMA................ 6.100 08/15/21 508,260
330 Bexar County, Texas, Housing Finance
Corp., Rev., Series B, GNMA............ 9.250 04/01/16 341,959
115 East Texas Housing Finance Corp.,
Single Family Mtg. Rev., GNMA.......... 7.200 01/01/26 116,374
</TABLE>
See Notes to Financial Statements
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250 El Paso, Texas, Housing Authority,
Multi-Family Mtg. Rev.,
Series A............................... 6.250% 12/01/09 $ 251,325
130 El Paso, Texas, Property Finance
Authority, Inc., Single Family Mtg.
Rev., Series A, GNMA................... 8.700 12/01/18 136,154
125 Galveston, Texas, Property Finance
Authority, Inc., Single Family Mtg.
Rev., Series A......................... 8.500 09/01/11 142,434
30 Harris County, Texas, Housing Financing
Corp., Single Family Mtg. Rev., Series
1983-A................................. 10.125 07/15/03 29,999
100 Harris County, Texas, Housing Financing
Corp., Single Family Mtg. Rev., Series
1983-A................................. 10.375 07/15/14 99,981
395 Houston, Texas, Housing Financing
Corp., Single Family Mtg. Rev.......... 10.375 12/15/13 396,872
155 Texas Housing Agency, Single Family
Mtg. Rev., Refunding,
Series A............................... 7.150 09/01/12 159,745
180 Travis County, Texas, Housing Finance
Corp., Single Family Mtg. Rev., GNMA... 8.200 04/01/22 184,090
-----------
2,869,013
-----------
MISCELLANEOUS 6.1%
250 Brazoria County, Texas, MUD No. 2,
Refunding.............................. 7.000 09/01/08 267,500
250 Garland, Texas, Economic Development
Authority, IDR (Yellow Freight System,
Inc. Project).......................... 8.000 12/01/16 256,193
250 Lockhart, Texas, Correctional
Facilities Rev., Financing Corp., MBIA. 6.625 04/01/12 262,107
283 Texas General Services Community
Partner Interests (Office Building and
Land Acquisition Project).............. 7.000 08/01/09 291,980
-----------
1,077,780
-----------
MUNICIPAL UTILITY DISTRICT (MUD) 12.0%
250 Harris County, Texas, MUD No. 120,
Refunding.............................. 8.000 08/01/14 276,725
650 Harris County, Texas, MUD No. 322,
Refunding (Waterworks & Sewer Systems)
Series A............................... 6.000 05/01/15 607,971
500 Mills Road, Texas, MUD, Refunding...... 6.500 09/01/14 502,175
125 Mission Bend, Texas, MUD No. 2......... 10.000 09/01/00 142,154
250 Montgomery County, Texas, MUD.......... 6.000 09/01/19 238,223
250 Montgomery County, Texas, MUD, MBIA.... 6.250 03/01/10 257,700
100 West Harris County, Texas, MUD No. 1,
Refunding.............................. 7.000 04/01/05 104,312
-----------
2,129,260
-----------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NURSING HOMES 1.6%
$ 250 San Antonio, Texas, Health Facilities
Development Corp., Rev. (Encore Nursing
Center Partner)........................ 8.250% 12/01/19 $ 275,797
-----------
TRANSPORTATION 8.7%
1,000 Austin, Texas, Airport System Rev.,
Series A, MBIA......................... 6.125 11/15/25 1,015,710
250 Harris County, Texas, Toll Road Rev.... 6.750 08/01/14 269,818
250 Texas State Turnpike Authority, Dallas
North Toll Road, Tollway Rev........... 6.000 01/01/20 250,303
-----------
1,535,831
-----------
UTILITIES 21.1%
220 Austin, Texas, Utility System Rev.,
Series B............................... 7.800 11/15/12 240,781
1,000 Bexar, Texas, Metro Water District,
Waterworks System Rev., MBIA........... 5.875 05/01/22 1,003,980
250 Coastal Water Authority, Texas, Water
Rev., AMBAC............................ 6.250 12/15/17 256,107
60 Fort Bend County, Texas Refunding #25.. 8.000 10/01/15 68,478
250 Guadalupe Blanco River Authority,
Texas, IDR............................. 6.350 07/01/22 262,857
100 Harris County, Texas, Water Control &
Improvement District No. 75 7.000 03/01/14 104,916
500 Houston, Texas, Water and Sewer System,
Refunding Rev.,
Series B............................... 6.375 12/01/14 526,465
100 Matagorda County, Texas, Navigation
District 1, Control Rev, (Central Power
& Light Project)....................... 7.875 12/01/16 104,261
385 Port of Corpus Christi, Texas, IDR
(Valero Refining & Marketing Co. )..... 10.250 06/01/17 418,630
100 Port of Corpus Christi, Texas, IDR
(Valero Refining & Marketing Co.),
Series B............................... 10.625 06/01/08 108,752
220 San Antonio, Texas, Electric and Gas
Rev., Series A......................... 6.500 02/01/12 229,284
435 Texas Municipal Power Agency, Rev...... 5.500 09/01/13 410,771
-----------
3,735,282
-----------
TOTAL INVESTMENTS (Cost $17,908,571) 104.6% ................... 18,498,687
OTHER ASSETS AND LIABILITIES, NET (4.6%)....................... (819,875)
-----------
NET ASSETS 100%................................................ $17,678,812
</TABLE> -----------
Insurers:
IDR industrial development AMBAC AMBAC Indemnity Corp.
revenue bond FGIC Financial Guaranty Insurance Corp.
Rev. revenue bond FSA Financial Security Assurance, Inc.
FNMA Federal National Mtg. Association
GNMA Government National Mtg. Association
MBIA Municipal Bond Investor's Assurance Corp.
See Notes to Financial Statements
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $17,908,571).................. $18,498,687
Interest receivable.............................................. 368,230
Receivable for investments sold.................................. 5,030
Receivable for Fund shares sold.................................. 2,517
Other assets..................................................... 35,576
-----------
Total Assets.................................................... 18,910,040
-----------
LIABILITIES
Bank overdraft................................................... 1,083,762
Dividends payable................................................ 44,800
Payable for Fund shares redeemed................................. 21,208
Due to Distributor............................................... 10,033
Deferred Trustees' compensation.................................. 7,214
Due to shareholder service agent................................. 1,973
Accrued expenses and other payables.............................. 62,238
-----------
Total Liabilities............................................... 1,231,228
-----------
NET ASSETS, equivalent to $10.08 per share for Class A, $10.07
per share for Class B, and $10.08 per share for Class C shares.. $17,678,812
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 974,382 Class A, 700,313
Class B, and 79,749 Class C shares outstanding.................. $ 17,544
Capital surplus.................................................. 16,882,682
Undistributed net realized gain on securities.................... 194,447
Net unrealized appreciation of securities........................ 590,116
Accumulated net investment loss.................................. (5,977)
-----------
NET ASSETS....................................................... $17,678,812
-----------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended March 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest............................................................. $640,868
--------
EXPENSES
Management fees...................................................... 58,283
Shareholder service agent's fees and expenses........................ 9,700
Accounting services.................................................. 42,674
Service fees--Class A................................................ 12,843
Distribution and service fees--Class B............................... 35,822
Distribution and service fees--Class C............................... 5,478
Trustees' fees and expenses.......................................... 5,957
Audit fees........................................................... 13,703
Custodian fees....................................................... 3,332
Legal fees........................................................... 4,036
Reports to shareholders.............................................. 12,099
Registration and filing fees......................................... 4,665
Organization expenses................................................ 1,500
Miscellaneous........................................................ 1,206
Expense reimbursement (see Note 2) .................................. (55,500)
--------
Total expenses...................................................... 155,798
--------
NET INVESTMENT INCOME................................................ 485,070
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain on securities...................................... 194,780
Net unrealized depreciation of securities during the period.......... (75,217)
--------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES....................... 119,563
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $604,633
--------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
March 31, September 30,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period.................... $19,531,075 $22,616,594
----------- -----------
OPERATIONS
Net investment income............................. 485,070 1,066,119
Net realized gain securities...................... 194,780 65,437
Net unrealized appreciation (depreciation) of
securities during the period..................... (75,217) 739,651
----------- -----------
Increase in net assets resulting from operations.. 604,633 1,871,207
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM (see Note 1D)
Net investment income
Class A........................................... (296,010) (650,913)
Class B........................................... (163,341) (360,656)
Class C........................................... (24,789) (54,550)
----------- -----------
(484,140) (1,066,119)
----------- -----------
Net realized gain on securities
Class A........................................... (14,428) --
Class B........................................... (8,986) --
Class C........................................... (1,520) --
----------- -----------
(24,934) --
----------- -----------
Excess of book-basis net investment income
Class A........................................... -- (2,502)
Class B........................................... (1,131) (3,224)
Class C........................................... (416) (467)
----------- -----------
(1,547) (6,193)
----------- -----------
Total distributions............................... (510,621) (1,072,312)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A........................................... 409,938 517,409
Class B........................................... 241,935 362,817
Class C........................................... 111,646 299,878
----------- -----------
763,519 1,180,104
----------- -----------
Proceeds from shares issued for distributions
reinvested
Class A........................................... 140,379 299,151
Class B........................................... 88,432 179,325
Class C........................................... 4,328 9,580
----------- -----------
233,139 488,056
----------- -----------
Cost of shares redeemed
Class A........................................... (1,918,993) (2,969,102)
Class B........................................... (626,471) (2,085,815)
Class C........................................... (397,469) (497,657)
----------- -----------
(2,942,933) (5,552,574)
----------- -----------
Decrease in net assets from capital transactions.. (1,946,275) (3,884,414)
----------- -----------
DECREASE IN NET ASSETS............................. (1,852,263) (3,085,519)
----------- -----------
NET ASSETS, end of period (including accumulated
net investment loss of $5,977 and $5,360,
respectively)..................................... $17,678,812 $19,531,075
----------- -----------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------
March 2,
Six Months 1992(/1/)
Ended Year Ended September 30 through
March 31, -------------------------- September 30,
1996 1995 1994 1993(/2/) 1992(/2/)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period.... $10.03 $9.64 $10.36 $9.74 $9.45
------ ------ ------ ------ -----
INCOME FROM OPERATIONS
Investment income...... .33 .67 .64 .63 .42
Expenses............... (.06) (.13) (.10) (.06) (.06)
------ ------ ------ ------ -----
Net investment income... .27 .54 .54 .57 .36
Net realized and
unrealized gain (loss)
on securities.......... .063 .39 (.7025) .65 .23
------ ------ ------ ------ -----
Total from investment
operations............. .333 .93 (.1625) 1.22 .59
------ ------ ------ ------ -----
LESS DISTRIBUTIONS FROM
(see Note 1D)
Net investment income.. (.27) (.54) (.545) (.5875) (.30)
Net realized gain on
securities............ (.013) -- -- -- --
Excess of book-basis
net realized gain on
securities............ -- -- (.0125) (.0125) --
------ ------ ------ ------ -----
Total distributions..... (.283) (.54) (.5575) (.60) (.30)
------ ------ ------ ------ -----
Net asset value, end of
period................. $10.08 $10.03 $9.64 $10.36 $9.74
------ ------ ------ ------ -----
TOTAL RETURN(/4/)....... 3.21% 10.05% (1.62%) 12.94% 6.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)...... $9.8 $11.1 $12.8 $18.0 $14.1
Average net assets
(millions)............. $11.2 $11.8 $15.7 $16.8 $11.7
Ratios to average net
assets
(annualized)(/3/)
Expenses............... 1.28% 1.36% 1.03% 0.61% 0.93%
Expenses, without
expense reimbursement. 1.85% 1.66% 1.70% 1.86% 1.41%
Net investment income.. 5.32% 5.51% 5.41% 5.74% 5.94%
Net investment income,
without expense
reimbursement......... 4.75% 5.21% 4.74% 4.49% 5.45%
Portfolio turnover rate. 8% 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 a period of less than one year is 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. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
------------------------------------------------------
July 27,
Six Months 1992(/1/)
Ended Year Ended September 30 through
March 31, --------------------------- September 30,
1996 1995 1994 1993(/2/) 1992(/2/)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period.... $10.03 $9.64 $10.35 $9.74 $9.91
------ ------ ------- ------- ------
INCOME FROM OPERATIONS
Investment income...... .33 .67 .65 .63 .09
Expenses............... (.10) (.21) (.18) (.13) (.025)
------ ------ ------- ------- ------
Net investment income... .23 .46 .47 .50 .065
Net realized and
unrealized gain (loss)
on securities.......... .057 .396 (.7065) .633 (.103)
------ ------ ------- ------- ------
Total from investment
operations............. .287 .856 (.2365) 1.133 (.038)
------ ------ ------- ------- ------
LESS DISTRIBUTIONS FROM
(see Note 1D)
Net investment income.. (.23) (.46) (.461) (.5105) (.132)
Net realized gain on
securities............ (.013) -- -- -- --
Excess of book-basis
net investment income. (.004) (.006) -- -- --
Excess of book-basis
net realized gain on
securities............ -- -- (.0125) (.0125) --
------ ------ ------- ------- ------
Total distributions..... (.247) (.466) (.4735) (.523) (.132)
------ ------ ------- ------- ------
Net asset value, end of
period................. $10.07 $10.03 $9.64 $10.35 $9.74
------ ------ ------- ------- ------
TOTAL RETURN(/4/)....... 2.85% 9.11% (2.35%) 11.97% (.73%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)...... $7.1 $7.3 $8.6 $7.1 $0.9
Average net assets
(millions)............. $7.2 $7.6 $8.4 $4.6 $0.5
Ratios to average net
assets
(annualized)(/3/)
Expenses............... 2.04% 2.14% 1.80% 1.30% 1.41%
Expenses, without
expense reimbursement. 2.61% 2.44% 2.47% 2.55% 2.15%
Net investment income.. 4.56% 4.74% 4.66% 4.92% 3.83%
Net investment income,
without expense
reimbursement......... 3.99% 4.44% 3.99% 3.67% 3.07%
Portfolio turnover rate. 8% 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 a period of less than one year is 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. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
---------------------------------------------
August 30,
Six Months Year Ended 1993(/1/)
Ended September 30 through
March 31, ----------------- September 30,
1996 1995 1994(/2/) 1993(/2/)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period......................... $10.04 $9.65 $10.36 $10.28
------ ------ ------ ------
INCOME FROM OPERATIONS
Investment income.............. .33 .67 .64 .05
Expenses....................... (.10) (.21) (.18) (.01)
------ ------ ------ ------
Net investment income........... .23 .46 .46 .04
Net realized and unrealized gain
(loss) on securities........... .057 .396 (.6965) .121
------ ------ ------ ------
Total from investment opera-
tions.......................... .287 .856 (.2365) .161
------ ------ ------ ------
LESS DISTRIBUTIONS FROM (see
Note 1D)
Net investment income.......... (.23) (.46) (.461) (.081)
Net realized gain on securi-
ties.......................... (.013) -- -- --
Excess of book-basis net in-
vestment income............... (.004) (.006) -- --
Excess of book-basis net real-
ized gain on securities....... -- -- (.0125) --
------ ------ ------ ------
Total distributions............. (.247) (.466) (.4735) (.081)
------ ------ ------ ------
Net asset value, end of period.. $10.08 $10.04 $9.65 $10.36
------ ------ ------ ------
TOTAL RETURN(/4/)............... 2.85% 9.11% (2.35%) 1.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (mil-
lions)......................... $0.8 $1.1 $1.2 $0.1
Average net assets (millions)... $1.1 $1.2 $0.9 $.02
Ratios to average net assets
(annualized)(/3/)
Expenses....................... 2.07% 2.14% 1.79% 0.66%
Expenses, without expense reim-
bursement..................... 2.64% 2.44% 2.46% 1.89%
Net investment income.......... 4.52% 4.73% 4.59% 4.17%
Net investment income, without
expense reimbursement......... 3.95% 4.43% 3.92% 2.92%
Portfolio turnover rate......... 8% 15% 10% 5%
</TABLE>
(1) Commencement of operations
(2) Based on average month-end shares outstanding.
(3) See Note 2.
(4) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
See Notes to Financial Statements
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Texas Tax Free Income Fund (the "Fund") is regis-
tered under the Investment Company Act of 1940, as amended, as a non-diversi-
fied, open-end management investment company. The Fund seeks to provide as
high a level of interest income exempt from federal income tax as is consis-
tent with the Fund's investment policies. The Fund invests principally in
Texas state, municipal, and government obligations which are tax-exempt.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prep-
aration of financial statements in conformity with generally accepted account-
ing principles requires management to make estimates and assumptions that
effect the amounts reported. Actual amounts may differ from the estimates.
A. INVESTMENT VALUATIONS-Investments in municipal bonds are valued at the most
recently quoted bid prices or at bid prices based on a matrix system (which
considers such factors as security prices, yields, maturities and ratings)
furnished by dealers and an independent pricing service.
Short-term 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 24% 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.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
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.
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
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
may voluntarily elect to reimburse the Fund a portion of the Fund's expenses.
This reimbursement may be discontinued at any time without prior notice. For
the period, such reimbursement was $55,500.
Accounting services include the salaries and overhead expenses of the Fund's
Chief Accounting Officer and the personnel operating under his direction.
Charges are allocated among investment companies advised by the Adviser. For
the period, these charges included $2,449 as the Fund's share of the employee
costs attributable to the Fund's accounting officers. A portion of the account-
ing services expense was paid to the Adviser in reimbursement of personnel, fa-
cilities 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 $6,938.
The Fund has been advised that Van Kampen American Capital Distributors, Inc.
(the "Distributor"), an affiliate of the Adviser, received $1,543, as its por-
tion 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 service
fees incurred. Class B and C shares pay an additional fee of up to .75% per an-
num of their average net assets to reimburse the Distributor for its distribu-
tion expenses. Actual distribution expenses incurred by the Distributor for
Class B and C shares may exceed the amounts reimbursed to the Distributor by
the Fund. At the end of the period, the unreimbursed expenses incurred by the
Distributor under the Class B and C plans aggregated approximately $344,000 and
$15,000, respectively, and may be carried forward and reimbursed through either
the collection of the contingent deferred sales charges from share redemptions
or, subject to the annual renewal of the plans, future Fund reimbursements of
distribution fees.
Legal fees of $1,775 were for services rendered by former counsel of the
Fund, O'Melveny & Myers. A former trustee was of counsel to that firm.
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor, and the shareholder service agent.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $1,596,779 and $2,353,752, re-
spectively.
For federal income tax purposes, the identified cost of investments owned at
the end of the period, was $17,908,609. Net unrealized appreciation of invest-
ments aggregated $590,078, gross unrealized appreciation of investments aggre-
gated $693,392, and gross unrealized depreciation of investments aggregated
$103,314.
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 $5,445.
The Fund has in effect a deferred compensation plan for its trustees not af-
filiated with the Adviser. 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 obligation under the plan by
any form of trust or escrow.
Under the plan, trustees may elect to defer all or a portion of their com-
pensation to a later date. Each trustee under the plan elects to earn on the
deferred balances an amount equal to the total return of the Fund or equal to
the income earned by the Fund on its short-term investments.
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
(Class A shares) or at the time of redemption on a contingent deferred basis
(Class B and C shares). All classes of shares have the same rights, except
that Class B and 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 C shares automatically convert to Class A shares six
years and ten years after purchase, respectively, subject to certain condi-
tions.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
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>
Six Months Year
Ended Ended
March 31, September 30,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A............................................. 40,115 52,801
Class B............................................. 23,684 37,593
Class C............................................. 10,943 30,198
-------- --------
74,742 120,592
-------- --------
Shares issued for distributions reinvested
Class A............................................. 13,746 30,626
Class B............................................. 8,663 18,363
Class C............................................. 423 981
-------- --------
22,832 49,970
-------- --------
Shares redeemed
Class A............................................. (190,165) (304,310)
Class B............................................. (61,085) (215,721)
Class C............................................. (38,858) (50,161)
-------- --------
(290,108) (570,192)
-------- --------
Decrease in shares outstanding....................... (192,534) (399,630)
-------- --------
</TABLE>
NOTE 6--PROPOSED FUND REORGANIZATION
The Trustees of the Fund have approved, subject to a vote of shareholders, an
Agreement and Plan of Reorganization between the Fund and Van Kampen American
Capital Municipal Income Fund. The proposal is expected to be submitted to
shareholders for approval in August, 1996.
20
<PAGE>
VAN KAMPEN AMERICAN CAPITAL TEXAS TAX FREE INCOME FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL
DONALD C. MILLER
JACK E. NELSON
DON G. POWELL
JEROME L. ROBINSON
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Chairman of the Board
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 ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, llinois 60181
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
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
(C) Van Kampen American Capital Distributors, Inc., 1996
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.
21
