AMERICAN CAPITAL HIGH YIELD INVESTMENTS INC, N-30D, 1995-05-03

AMERICAN CAPITAL HIGH YIELD INVESTMENTS INC
N-30D, 1995-05-03

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Manager Comments.................. 4
Portfolio of Investments.................... 6
Statement of Assets and Liabilities......... 13
Statement of Operations..................... 14
Statement of Changes in Net Assets.......... 15
Financial Highlights........................ 16
Notes to Financial Statements............... 18
</TABLE>

11-HYI-SAR-4/95

<PAGE>

LETTER TO SHAREHOLDERS

[PHOTO OF DON G. POWELL]

DON G. POWELL
March 27, 1995

Dear Shareholder:
During the six-month period covered by this report, September 1, 1994 through
February 28, 1995, we saw the close of a challenging and difficult year in the
financial markets--and the beginning of a new year, with renewed optimism and
strength on many fronts.

MARKET OVERVIEW
In an effort to moderate economic growth and keep inflation under control,
the Federal
Reserve Board (the "Fed") raised the federal funds rate (the rate banks charge
each other for overnight loans) seven times over a 12-month period. As a re-
sult, the fed funds rate doubled from 3 percent to 6 percent, its highest level
in three years. Intermediate and long-term interest rates quickly followed the
Fed's lead and moved significantly higher as well. The yield on 30-year Trea-
sury securities, for example, began 1994 at 6.35 percent and increased to a
high of 8.16 percent, before retreating to 7.89 percent at the end of the year.
However, since yields and prices move in opposite directions, this had a nega-
tive impact on prices of fixed- income securities.
Stock market investors did not fare much better during this rising interest
rate environment, despite the robust economy and stronger corporate earnings.
Concerned that higher interest rates and the prospect for continued rate hikes
might altogether extinguish the
economic expansion, the equity market sputtered for most of 1994. The S&P 500
Index, for example, produced a 1.36 percent total return for 1994, while the
average price change for the year for all stocks listed on the New York Stock
Exchange was down 20 percent.
In contrast, 1995 began more positively, as the bond market got a boost from
growing sentiment that the Fed appeared to have stabilized economic growth
while keeping inflation under control, and that it may be near the end of its
tightening cycle. Subsequently, the yield on 30-year Treasury securities fell
to 7.44 percent by the end of February--down nearly three quarters of a per-
centage point--from its high of 8.16 percent in November.
The stock market responded in late February with the Dow Jones Industrial Av-
erage breaking through the 4000 mark, setting a new record high and raising ex-
pectations for a stronger market in 1995. At the same time, almost all other
major stock indexes rose, including the S&P 500 Index, the New York Stock Ex-
change Composite Index, and the Nasdaq Composite Index.
Additionally, the Van Kampen American Capital Index of Investor Intentions
for February reached 233--an increase of 17 percent over January's level of
200--its largest monthly increase since February 1994. The index, computed from
an independently conducted survey and published by Van Kampen American Capital,
measures the investment climate (investors' confidence) by asking 1,000 invest-
ors about what they intend to do with their money over the next 60-90 days. A
total of 45.6 percent of investors said the next 60-90 days would be a "good"
time to invest.
(Continued on page two)

1
<PAGE>

On the following pages, you can read about your Fund's performance during
the past six months, as well as portfolio management's outlook for 1995. We
hope that you will find the information contained in the question-and-answer
section helpful.

CORPORATE NEWS
As you may have already noticed, we have adopted a new design for our share-
holder reports that begins to reflect our new identity as Van Kampen American
Capital. Going forward, we will continue to look for new ways to improve upon
the presentation of information in your Fund's report.
In addition, we have developed a new corporate ad campaign introducing Van
Kampen American Capital to investors and the investment community. Full page
ads appeared in The Wall Street Journal in February--watch for more advertis-
ing throughout the year.
We look forward to communicating with you on a regular basis, providing in-
formation about your Fund's performance, new investment opportunities, and our
newly created company. We appreciate your continued confidence in your Fund
and Van Kampen American Capital.

Sincerely,
LOGO
Don G. Powell
President
Van Kampen American Capital
Asset Management, Inc.

2
<PAGE>

PERFORMANCE RESULTS FOR THE PERIOD ENDED FEBRUARY 28, 1995

AMERICAN CAPITAL HIGH YIELD INVESTMENTS

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES

<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV/1/.............. 2.17% 1.59% 1.76%
Six-month total return/2/........................... (2.76%) (2.30%) 0.79%
One-year total return/2/............................ (6.66%) (6.38%) (3.71%)
Five-year average annual total return/2/............ 11.41% N/A N/A
Ten-year average annual total return/2/............. 7.57% N/A N/A
Life of Fund average annual total return/2/......... 8.69% 6.70% 2.68%
Commencement Date................................... 10/02/78 07/02/92 07/06/93

DISTRIBUTION RATE AND YIELD
Distribution Rate/3/................................ 9.11% 8.74% 8.77%
SEC Yield/4/........................................ 10.12% 9.86% 9.91%
</TABLE>
N/A = Not Applicable

/1/Assumes reinvestment of all distributions for the period ended February 28,
1995, and does not include payment of the maximum sales charge (4.75% for A
shares) or contingent deferred sales charge (4% for B shares; 1% for C
shares).

/2/Standardized total return for the period ended February 28, 1995.

/3/Distribution rate represents the monthly annualized distributions of the Fund
at the end of February 1995, and not the earnings of the Fund.

/4/SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ending February 28, 1995.

See the Fund Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Investor's shares, when redeemed, may be
worth more or less than their original cost.

3
<PAGE>

PORTFOLIO MANAGER COMMENTS

AMERICAN CAPITAL HIGH YIELD INVESTMENTS

The following is an interview with the management team of American Capital High
Yield Investments. The team is lead by Ellis S. Bigelow, portfolio manager, and
Robert C. Peck, Jr., executive vice president for fixed-income investments.

Q WHAT MARKET EVENTS SIGNIFICANTLY INFLUENCED THE FUND OVER THE SIX-MONTH
PERIOD ENDED FEBRUARY 28, 1995?

A As interest rates increased throughout 1994, the bond market decreased in
value. Although high yield bonds were affected to a lesser extent, declin-
ing values left most high yield funds ending 1994 on a negative note.
Acting to counter inflation fears, the Federal Reserve Board (the "Fed")
raised short-term interest rates several times, including two increases during
this six-month period. As short-term interest rates increased, bond prices de-
clined and the gap between interest rates on high grade and low grade issues
narrowed. As a result, high yield issues became less attractive because they
were not providing enough incremental yield to compensate for their added in-
vestment risk. Therefore, many high yield bonds declined in value, including
some of the Fund's holdings.
Although 1994 was a tough year for the bond market, 1995 is starting to show
preliminary signs of recovery. During January and February we saw the strongest
performance in high yield bonds since 1991. In addition, high yield new issu-
ance for 1995 has decreased from 1994 levels. This is a good technical sign be-
cause a lower supply should help to strengthen prices. Further, the default
rate on high yield bonds still remains very low when compared to historical
norms, which has helped to reduce investment risk.

Q HOW DID YOU POSITION THE FUND IN RESPONSE TO THESE EVENTS?
A We began by analyzing the expected cash flow of sectors in which the Fund
invests. We reduced our holdings within the consumer durable goods indus-
try, which includes home builders and building material companies, because
higher interest rates could decrease this industry's earnings. Conversely, we
increased the Fund's exposure to areas we believe will remain relatively
strong, even as interest rates rise and inflation moderately increases. These
sectors include health care, paper, steel, and chemicals.

[PERFORMANCE CHART APPEARS HERE]

PORTFOLIO HOLDINGS BY INDUSTRY AS OF FEBRUARY 28, 1995

Finance=6.1%
Energy=8.2%
Consumer Services=11.3%
Consumer Non-Durables=6.1%
Consumer Durables=3.0%
Consumer Distribution=10.3%
Health Care=6.9%
Producer Manufacturing=7.7%
Raw Materials/Processing Industries=16.5%
Technology=3.9%
Transportation=3.5%
Utilities=0.6%
Other=15.9%

4
<PAGE>

Additionally, rating upgrades on several issues and acquisitions of higher
grade bonds have helped to increase the Fund's quality. Another positive note
was that the portfolio had no bond defaults over the past six months.

Q WHAT TYPE OF INVESTMENT STRATEGY DO YOU ADHERE TO AND HOW HAS IT
AFFECTED THE FUND'S PERFORMANCE?

A Traditionally, our philosophy has been to invest in companies with posi-
tive year-over-year cash flow comparisons. This strategy has led us into
cyclically strong industries. Additionally, we tend to remain invested in
credits which should outperform on the basis of improving fundamentals.
The Fund's (Class A Shares) six-month total return at net asset value was
2.17 percent./1/ Its long-term performance remains strong. The Fund (Class A
Shares) reported a ten-year average annual total return, at net asset value,
of 8.09 percent./1/ Additionally, shareholders have enjoyed an attractive 9.11
percent/3/ annualized distribution rate. (To view the Fund's six-month, five-,
and ten-year average annual total returns please see page three.)

Q HOW DID THE FUND PERFORM RELATIVE TO A COMPARATIVE INDEX?
A The Salomon Brothers Long-Term High Yield Index achieved a six-month to-
tal return of 6.09 percent. This is a broad-based index which reflects
the performance of high yield corporate bonds. The index is unmanaged and does
not reflect any commissions or fees that would be paid by an investor purchas-
ing the securities it represents.

Q WHAT IS YOUR OUTLOOK FOR THE MARKET IN 1995 AND, MORE SPECIFICALLY, FOR
HIGH YIELD BONDS?

A Over the long run, we believe significant value exists in the fixed-in-
come marketplace. Aggressive Fed interest rate tightening during 1994
should produce moderating economic growth during 1995 and into the following
year. Longer-term evidence suggests that inflation should increase, but still
within a range of tolerance. Also, real (inflation-adjusted) interest rates are
still above long-term norms.
A gradual slowdown in the economy with a moderate increase in inflation
should be good for high yield bonds. We have seen comparatively good growth in
corporate earnings and relatively favorable fundamentals. As a result, high
yield companies should be able to further improve their balance sheets. In
fact, in an environment of slightly higher inflation, most businesses find it
easier to operate, because they have more flexibility to increase their reve-
nue and cash flow.

LOGO LOGO
Robert C. Peck, Jr. Ellis S. Bigelow
Executive Vice President Portfolio Manager
Fixed Income Investments

Please see footnotes on page three.

5
<PAGE>

See Notes to Financial Statements

PORTFOLIO OF INVESTMENTS

February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
................................................................................
<C> <S> <C>
CORPORATE OBLIGATIONS 84.1%
CONSUMER DISTRIBUTION 10.3%
$ 5,500,000 Big 5 Holdings, 13.625%, 9/15/02............... $ 5,733,750
3,000,000 Big V Supermarkets, Inc., 11.00%, 2/15/04...... 2,475,000
2,250,000 Bradlees, Inc., 11.00%, 8/1/02................. 2,053,125
5,310,000 Brylane Capital, 10.00%, 9/1/03................ 5,230,350
3,250,000 Dairy Mart Convenience Stores, Inc., 10.25%,
3/15/04........................................ 2,453,750
3,301,142 F F Holdings Corp., 14.25%, Payment-In-Kind,
10/1/02........................................ 1,650,571
2,050,000 Farm Fresh, Inc., 12.25%, 10/1/00.............. 1,906,500
4,750,000 Finlay Enterprises, Inc., Step Bonds (0% to
12.00% at 5/1/98), 5/1/05...................... 2,945,000
2,500,000 Finlay Fine Jewelry Corp., 10.625%, 5/1/03..... 2,312,500
5,355,000 Food 4 Less Supermarkets, Inc., 13.75%,
6/15/01........................................ 5,676,300
4,250,000 Levitz Furniture Corp., 9.625%, 7/15/03........ 3,208,750
Pathmark Stores, Inc.
3,000,000 11.625%, 6/15/02............................... 3,037,500
3,500,000 Step Bonds (0% to 10.75% at 11/1/99), 11/1/03.. 1,903,125
2,500,000 Smitty's Supervalue, 12.75%, 6/15/04........... 2,312,500
Specialty Retailers, Inc.
2,000,000 10.00%, 8/15/00............................... 1,855,000
1,750,000 11.00%, 8/15/03............................... 1,610,000
3,605,000 Wickes Lumber Co., 11.625%, 12/15/03........... 3,388,700
----------------
TOTAL CONSUMER DISTRIBUTION.................... 49,752,421
----------------
CONSUMER DURABLES 3.0%
3,000,000 Aftermarket Tech Corp., 12.00%, 8/1/04......... 3,127,500
2,000,000 Exide Corp., 10.75%, 12/15/02.................. 2,060,000
1,250,000 Lear Seating, Inc., 8.25%, 2/1/02.............. 1,143,750
2,595,000 Oriole Homes Corp., 12.50%, 1/15/03............ 2,283,600
1,525,000 Truck Components, 12.25%, 6/30/01.............. 1,582,188
1,300,000 UDC Homes, Inc., 11.75%, 4/30/03............... 897,000
4,000,000 Venture Holdings, Inc., 9.75%, 4/1/04.......... 3,460,000
----------------
TOTAL CONSUMER DURABLES........................ 14,554,038
----------------
CONSUMER NON-DURABLES 6.1%
5,400,000 Consoltex Group, Inc., 11.00%, 10/1/03......... 4,779,000
4,870,000 Dan River, Inc., 10.125%, 12/15/03............. 4,650,850
3,125,000 Dr Pepper Bottle Holdings, Inc., Step Bonds
(0% to 11.625% at 2/15/98), 2/15/03............ 2,171,875
4,750,000 Fieldcrest Cannon, Inc., 11.25%, 6/15/04....... 4,868,750
4,000,000 Health O Meter, Inc., 13.00%, 8/15/02.......... 3,560,000
5,277,000 Synthetic Industries, Inc., 12.75%, 12/1/02.... 5,013,150
4,500,000 Westpoint Stevens, 9.375%, 12/15/05............ 4,207,500
----------------
TOTAL CONSUMER NON-DURABLES.................... 29,251,125
----------------
</TABLE>

6
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Principal
Amount Market Value
................................................................................
<C> <S> <C>
CONSUMER SERVICES 11.3%
$ 1,250,000 Act III Broadcasting, 9.625%, 12/15/03......... $ 1,193,750
1,500,000 Act III Theatres, Inc., 11.875%, 2/1/03........ 1,556,250
3,200,000 AMC Entertainment, Inc., 12.625%, 8/1/02....... 3,456,000
3,560,000 American Restaurant Group Corp., 12.00%,
9/15/98........................................ 3,382,000
1,750,000 Bally Grand, Inc., 10.375%, 12/15/03........... 1,649,375
4,000,000 Bell Cablemedia, Step Bonds (0% to 11.95% at
7/16/99), 7/15/04.............................. 2,405,000
3,420,000 Cablevision Industries Co., 9.25%, 4/1/08...... 3,351,600
4,000,000 California Hotel Finance Corp., 11.00%,
12/1/02........................................ 3,910,000
3,750,000 Carrols Corp., 11.50%, 8/15/03................. 3,459,375
Continental Cablevision, Inc.
2,750,000 9.50%, 8/1/13................................. 2,640,000
1,100,000 11.00%, 6/1/07................................ 1,167,375
2,300,000 El Commandante Capital Corp., 11.75%, 12/15/03. 2,001,000
4,500,000 Flagstar Corp., 11.25%, 11/1/04................ 3,836,250
1,250,000 Louisiana Casino, 11.50%, 12/1/98.............. 1,050,000
3,000,000 News America Holdings, Inc., 10.125%, 10/15/12. 3,203,700
3,125,000 Outlet Broadcasting, Inc., 10.875%, 7/15/03.... 3,125,000
4,000,000 PRT Funding Corp., 11.625%, 4/15/04............ 3,320,000
3,000,000 Petro PSC Properties, 12.50%, 6/1/02........... 2,970,000
4,250,000 Resorts International, Inc., Variable Rate
Notes
(7.89% at 2/28/95), 6/30/00.................... 3,465,503
2,000,000 SFX Broadcasting, Inc., 11.375%, 10/1/00....... 2,025,000
1,150,000 Videotron Group, Ltd., 10.625%, 2/15/05........ 1,185,938
----------------
TOTAL CONSUMER SERVICES........................ 54,353,116
----------------
ENERGY 8.2%
4,500,000 Clark (R&M) Holdings, Inc., Zero Coupon,
2/15/00........................................ 2,598,750
3,750,000 Dual Drilling Co., 9.875%, 1/15/04............. 2,925,000
350,000 Energy Ventures, Inc., 10.25%, 3/15/04......... 336,875
4,000,000 Forest Oil Corp., 11.25%, 9/1/03............... 3,420,000
3,500,000 Giant Industries, Inc., 9.75%, 11/15/03........ 3,185,000
3,500,000 Global Marine, Inc., 12.75%, 12/15/99.......... 3,780,000
4,995,000 HS Resource, Inc., 9.875%, 12/1/03............. 4,657,837
4,730,000 Maxus Energy Corp., 11.50%, 11/15/15........... 4,588,100
3,292,000 Mesa Capital Corp., Step Bonds (0% to 12.75% at
6/30/95), 6/30/98.............................. 3,069,790
4,000,000 Petroleum Heat & Power, Inc., 12.25%, 2/1/05... 4,150,000
1,000,000 Tuboscope Vetco International, Inc., 10.75%,
4/15/03........................................ 1,000,000
2,825,000 Wainoco Oil Corp., 12.00%, 8/1/02.............. 2,881,500
3,000,000 Wilrig, 11.25%, 3/15/04........................ 2,745,000
----------------
TOTAL ENERGY................................... 39,337,852
----------------
</TABLE>

7
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Principal
Amount Market Value
................................................................................
<C> <S> <C>
FINANCE 6.1%
$ 4,130,000 American Annuity Group, Inc., 11.125%, 2/1/03.. $ 4,212,600
American Financial Corp.
4,550,000 12.00%, 9/3/99................................ 4,595,500
1,636,000 12.25%, 9/15/03............................... 1,676,900
3,000,000 American Life Holding Co., 11.25%, 9/15/04..... 3,015,000
4,000,000 Americo Life, Inc., 9.25%, 6/1/05.............. 3,460,000
4,800,000 Blue Bell Funding, Inc., 11.85%, 5/1/99........ 4,944,000
2,750,000 GPA Delaware/Holland, 9.75%, 6/10/96........... 2,598,750
1,500,000 GPA Delaware, Inc., 8.75%, 12/15/98............ 1,185,000
1,750,000 Phoenix Re Corp., 9.75%, 8/15/03............... 1,771,875
2,000,000 Reliance Group Holdings, 9.75%, 11/15/03....... 1,830,000
----------------
TOTAL FINANCE.................................. 29,289,625
----------------
HEALTH CARE 6.9%
Amerisource Distribution Corp., 11.25%,
4,205,446 7/15/05........................................ 4,478,800
5,000,000 Charter Medical Corp., 11.25%, 4/15/04......... 5,250,000
Community Health Systems, Inc., 10.25%,
1,750,000 11/30/03....................................... 1,774,062
4,000,000 Healthtrust, Inc., 8.75%, 3/15/05.............. 4,045,000
3,600,000 Hillhaven Corp., 10.125%, 9/1/01............... 3,654,000
1,800,000 National Medicine Enterprises, 10.125%, 3/1/05. 1,838,250
OrNda HealthCorp.
2,000,000 11.375%, 8/15/04.............................. 2,115,000
2,000,000 12.25%, 5/15/02............................... 2,170,000
4,000,000 Paracelsus Healthcare Corp., 9.875%, 10/15/03.. 3,830,000
2,000,000 Quorum Health Group, 11.875%, 12/15/02......... 2,180,000
Total Renal Care, Step Bonds (0% to 12.00% at
1,000,000 2/15/98) 8/15/04............................... 860,000
1,000,000 Wright Medical Technology, Inc., 10.75%, 7/1/00 982,500
----------------
TOTAL HEALTH CARE.............................. 33,177,612
----------------
PRODUCER MANUFACTURING 7.7%
750,000 American Standard, Inc., 10.875%, 5/15/99...... 795,000
2,000,000 Envirosource, Inc., 9.75%, 6/15/03............. 1,730,000
3,503,000 Fairchild Corp., 13.00%, 3/1/07................ 2,732,340
3,500,000 Federal Industries, Ltd., 10.25%, 6/15/00...... 3,255,000
GS Technologies Operations, Inc., 12.00%,
3,450,000 9/1/04......................................... 3,531,937
IMO Industries, Inc.
4,500,000 12.00%, 11/1/01............................... 4,590,000
1,950,000 12.25%, 8/15/97............................... 1,967,062
Jordan Industries, Inc., Step Bonds (0% to
4,150,000 11.75% at 8/1/98) 8/1/05....................... 2,282,500
Robertson-Ceco Corp., 10.00%, Payment-In-Kind,
4,681,193 11/30/99....................................... 3,744,955
Schuller International Group, 10.875%,
3,500,000 12/15/04....................................... 3,696,875
1,500,000 Spreckles Industries, 11.50%, 9/1/00........... 1,455,000
</TABLE>

8
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Principal
Amount Market Value
................................................................................
<C> <S> <C>
Thermadyne Industries, Inc.
$ 3,284,000 10.25%, 5/1/02................................ $ 3,218,320
1,572,300 10.75%, 11/1/03............................... 1,540,854
2,750,000 USG Corp., 10.25%, 12/15/02.................... 2,787,813
----------------
TOTAL PRODUCER MANUFACTURING................... 37,327,656
----------------
RAW MATERIALS/PROCESSING INDUSTRIES 16.5%
2,500,000 Associated Materials, Inc., 11.50%, 8/15/03.... 2,287,500
4,350,000 Buckeye Cellulose Corp., 10.25%, 5/15/01....... 4,263,000
3,000,000 Carbide/Graphite, 11.50%, 9/1/03............... 3,120,000
1,000,000 Container Corp. of America, 11.25%, 5/1/04..... 1,050,000
3,500,000 Crown Packaging, Series B, 10.75%, 11/1/00..... 3,456,250
2,250,000 Florida Steel Corp., 11.50%, 12/15/00.......... 2,272,500
5,500,000 Fort Howard Corp., 14.125%, 11/1/04............ 5,541,250
Gaylord Container Corp.
4,750,000 11.50%, 5/15/01............................... 4,951,875
750,000 Step Bonds (0% to 12.75% at 5/15/96), 5/15/05. 690,937
4,650,000 Harris Chemical North America, Inc., Step Bonds
(0% to 10.25% at 1/15/96) 7/15/01.............. 4,126,875
4,100,000 IMC Fertilizer Group, Inc., 9.45%, 12/15/11.... 3,936,000
Indspec Chemical Corp., Step Bonds (0% to
4,000,000 11.50% at 12/1/98), 12/1/03.................... 2,340,000
4,000,000 Mail-Well Corp., 10.50%, 2/15/04............... 3,580,000
NL Industries, Inc., Step Bonds (0% to 13.00%
4,000,000 at 10/15/98), 10/15/05......................... 2,580,000
Plastic Specialty & Technology Corp., 11.25%,
3,250,000 12/1/03........................................ 2,876,250
1,250,000 Rainy River Forest Products, 10.75%, 10/15/01.. 1,282,813
3,100,000 Republic Engineered Steel, 9.875%, 12/15/01.... 2,883,000
Riverwood International Corp.
500,000 10.375%, 6/30/04.............................. 511,250
4,000,000 11.25%, 6/15/02............................... 4,200,000
3,750,000 Sherritt, Inc., 10.50%, 3/31/14................ 3,693,750
1,450,000 Silgan Corp., 11.75%, 6/15/02.................. 1,522,500
Silgan Holdings, Inc., Step Bonds (0% to 13.25%
5,000,000 at 6/15/96), 12/15/02.......................... 4,400,000
Stone Container Corp.
1,000,000 9.875%, 2/1/01................................ 978,750
2,000,000 10.75%, 10/1/02............................... 2,065,000
2,000,000 12.625%, 7/15/98.............................. 2,150,000
3,000,000 Sweetheart Cup, Inc., 10.50%, 9/1/03........... 2,880,000
4,000,000 UCC Investors Holdings, Inc., 11.00%, 5/1/03... 3,980,000
2,000,000 U.S. Can Co., 13.50%, 1/15/02.................. 2,200,000
----------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES...... 79,819,500
----------------
</TABLE>

9
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Principal Amount
/Number of Shares Market Value
................................................................................
<C> <S> <C>
TECHNOLOGY 3.9%
$ 3,500,000 Harmon International Industries, Inc.,
12.00%, 8/1/02........................... $ 3,850,000
3,100,000 MFS Communications Co. Inc., Step Bonds
(0% to 9.375% at 11/15/99), 1/15/04...... 1,964,625
4,500,000 Mobile Telecom, 13.50%, 12/15/02......... 4,635,000
4,000,000 Tele Communications, Inc., 9.25%,
1/15/23.................................. 3,838,000
4,258,000 Unisys Corp., 13.50%, 7/1/97............. 4,641,220
----------------
TOTAL TECHNOLOGY......................... 18,928,845
----------------
TRANSPORTATION 3.5%
1,500,000 International Shipholding Corp., 9.00%,
7/1/03................................... 1,398,750
Sea Containers, Ltd.
2,750,000 9.50%, 7/1/03........................... 2,530,000
1,000,000 12.50%, 12/1/04......................... 1,050,000
2,750,000 12.50%, 12/1/04......................... 2,873,750
2,500,000 Southern Pacific Rail Corp., 9.375%,
8/15/05.................................. 2,500,000
4,500,000 Trism, Inc., 10.75%, 12/15/00............ 4,432,500
USAir, Inc.
750,000 9.625%, 2/1/01.......................... 549,375
1,250,000 10.00%, 7/1/03.......................... 912,500
824,954 Series 1989-A1, 9.33%, 1/1/06............ 684,711
----------------
TOTAL TRANSPORTATION..................... 16,931,586
----------------
UTILITIES 0.6%
4,500,000 PanAmSat L.P., Step Bonds (0% to 11.375%
at 8/1/98), 8/1/03....................... 2,970,000
----------------
TOTAL CORPORATE OBLIGATIONS (Cost
$416,157,731)............................ 405,693,376
----------------
COMMON STOCK 0.6%
7,357 Arcadian Corp............................ 132,426
*14,000 Dr Pepper/Seven-Up Companies, Inc........ 460,250
*9,500 Finlay Enterprises, Inc.................. 95,000
*14,663 Kash N Karry Food Stores, Inc............ 249,271
*607,107 Robertson-Ceco Corp...................... 1,897,209
*2,500 Smitty's Supermarket..................... 27,750
*13,617 Thermadyne Industries, Inc............... 197,447
----------------
TOTAL COMMON STOCK (Cost $4,138,231)..... 3,059,353
----------------
PREFERRED STOCK 1.2%
*229,101 Supermarkets General Holdings Corp.,
$3.52, Payment-In-Kind
(Cost $4,604,192)........................ 5,727,525
----------------
</TABLE>

10
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<CAPTION>
Number of Units/Warrants/Shares
Principal Amount Market Value
................................................................................
<C> <S> <C>
UNITS 1.3%
1,000 Casino America, Inc., each unit consists of a
$1,000 bond,
11.50%, 11/15/01 and 3 warrants (expiring
11/15/98)...................................... $ 960,000
1,715 ICF Kaiser International, each unit consists of
a $1,000 par note,
12.00%, 12/31/03 and 5 warrants (expiring
12/31/98)...................................... 1,569,225
3,250 MVE, Inc., each unit consists of a $1,000 par
note,
12.50%, 2/15/02 and 1 warrant (expiring
02/15/02)...................................... 3,298,750
750 Santa Fe, Inc., each unit consists of a $1,000
par bond,
11.00%, 12/15/00 and 1 warrant (expiring
12/15/96)...................................... 708,750
----------------
TOTAL UNITS (Cost $6,681,019).................. 6,536,725
----------------
WARRANTS 0.0%
*3,125 Capital Gaming, expiring 2/1/99................ 3,906
*2,300 HDA Management Corp., expiring 12/15/98........ 13,800
*3,750 Louisiana Casino, expiring 12/1/98............. 37,500
*200 Trump Plaza, expiring 6/15/96.................. 10,000
----------------
TOTAL WARRANTS (Cost $106,444)................. 65,206
----------------
PRIVATE PLACEMENTS 2.4%
CORPORATE OBLIGATIONS 2.0%
3,637,770 Hemmeter Enterprises, Inc., 12.00%, Payment-In-
Kind,
12/15/00 (purchased 2/1/94).................... 2,400,928
5,100,000 S.D. Warren Co., 12.00%, 12/15/04
(purchased 12/13/94 through 12/20/94).......... 5,367,750
1,600,000 UCAR Global Enterprises, Inc., 12.00%, 1/15/05
(purchased 1/20/95)............................ 1,682,000
----------------
TOTAL CORPORATE OBLIGATIONS (Cost $9,673,063).. 9,450,678
----------------
UNITS 0.3%
2,250 Hemmeter Enterprises, Inc., each unit consists
of a $1,000 par
Payment-In-Kind note, 12.00%, 12/15/00 and 15
warrants
(expiring 12/15/99) (purchased 12/14/93) (Cost
$2,250,000).................................... 1,541,250
----------------
COMMON STOCK 0.1%
*40,000 F F Holdings Corp., purchased 10/6/92.......... 80,000
*84,445 Triangle Wire & Cable, Inc., purchased 1/13/92. 337,780
----------------
TOTAL COMMON STOCK (Cost $2,162,180)........... 417,780
----------------
WARRANT 0.0%
*412 Wright Medical Technology, Inc., expiring
6/30/03 (Cost $80)............................. 61,765
----------------
TOTAL PRIVATE PLACEMENTS (Cost $14,085,323).... 11,471,473
----------------
</TABLE>

11
<PAGE>

PORTFOLIO OF INVESTMENTS (CONTINUED)

February 28, 1995 (Unaudited)

12
<PAGE>

See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES

February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $489,420,233)................ $ 474,711,521
Cash............................................................ 592
Interest receivable............................................. 11,344,888
Receivable for investments sold................................. 10,494,539
Receivable for Fund shares sold................................. 730,931
Other assets.................................................... 42,054
-------------
TOTAL ASSETS................................................... 497,324,525
-------------
LIABILITIES
Payable for investments purchased............................... 10,370,660
Dividends payable............................................... 1,745,020
Payable for Fund shares redeemed................................ 1,569,082
Due to Distributor.............................................. 225,244
Due to Adviser.................................................. 220,124
Due to shareholder service agent................................ 141,093
Deferred directors' compensation................................ 62,687
Accrued expenses and other payables............................. 432,443
-------------
TOTAL LIABILITIES.............................................. 14,766,353
-------------
NET ASSETS, equivalent to $5.96 per share for Class A shares,
$5.97 per share for Class B shares and $5.95 per share for
Class C shares................................................. $ 482,558,172
-------------
NET ASSETS WERE COMPRISED OF:
Capital stock, at par; 66,081,843 Class A, 12,705,278 Class B
and 2,195,522 Class C Shares outstanding....................... $ 809,826
Capital surplus................................................. 764,765,749
Accumulated net realized loss on securities..................... (268,233,238)
Net unrealized depreciation of securities....................... (14,708,712)
Accumulated deficit............................................. (75,453)
-------------
NET ASSETS at February 28, 1995................................. $ 482,558,172
-------------
</TABLE>

13
<PAGE>

See Notes to Financial Statements
STATEMENT OF OPERATIONS

Six Months Ended February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME
Interest......................................................... $ 23,257,592
Dividends........................................................ 16,553
------------
Investment income............................................... 23,274,145
------------
EXPENSES
Management fees.................................................. 1,261,377
Shareholder service agent's fees and expenses.................... 679,165
Service fees--Class A............................................ 375,527
Distribution and service fees--Class B........................... 354,861
Distribution and service fees--Class C........................... 64,076
Registration and filing fees..................................... 70,949
Accounting services.............................................. 49,845
Reports to shareholders.......................................... 46,172
State franchise taxes............................................ 31,618
Audit fees....................................................... 19,150
Directors' fees and expenses..................................... 11,954
Custodian fees................................................... 7,831
Legal fees....................................................... 4,818
Miscellaneous.................................................... 12,930
------------
Total expenses.................................................. 2,990,273
------------
NET INVESTMENT INCOME............................................ 20,283,872
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized loss on securities.................................. (17,280,599)
Net unrealized appreciation of securities during the period...... 6,772,034
------------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES................... (10,508,565)
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $ 9,775,307
------------
</TABLE>

14
<PAGE>

See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS

(Unaudited)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six Months Ended Year Ended
February 28, 1995 August 31, 1994
................................................................................
<S> <C> <C>
NET ASSETS, beginning of period............. $448,357,715 $ 491,103,694
------------ -------------
Operations
Net investment income....................... 20,283,872 43,286,631
Net realized gain (loss) on securities...... (17,280,599) 12,147,682
Net unrealized appreciation (depreciation)
of securities during the period............. 6,772,034 (43,219,168)
------------ -------------
Increase in net assets resulting from
operations.................................. 9,775,307 12,215,145
------------ -------------
Dividends to shareholders from net
investment income
Class A.................................... (17,716,372) (41,922,518)
Class B.................................... (3,121,933) (5,284,881)
Class C.................................... (561,970) (784,158)
------------ -------------
(21,400,275) (47,991,557)
------------ -------------
Net equalization credits.................... -- 5,389
------------ -------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold
Class A.................................... 71,727,196 135,925,898
Class B.................................... 17,586,755 57,873,861
Class C.................................... 2,830,261 16,675,131
------------ -------------
92,144,212 210,474,890
------------ -------------
Proceeds from shares issued for dividends
reinvested
Class A.................................... 10,329,049 23,629,016
Class B.................................... 1,449,681 2,576,495
Class C.................................... 338,688 504,457
------------ -------------
12,117,418 26,709,968
------------ -------------
Cost of shares redeemed
Class A.................................... (43,181,915) (218,294,071)
Class B.................................... (12,273,271) (21,997,246)
Class C.................................... (2,981,019) (3,868,497)
------------ -------------
(58,436,205) (244,159,814)
------------ -------------
Increase (decrease) in net assets resulting
from Fund share transactions................ 45,825,425 (6,974,956)
------------ -------------
Increase (decrease) in net assets........... 34,200,457 (42,745,979)
------------ -------------
NET ASSETS, end of period................... $482,558,172 $ 448,357,715
------------ -------------
</TABLE>

15
<PAGE>

See Notes to Financial Statements
FINANCIAL HIGHLIGHTS

Selected data for a share of capital stock outstanding throughout each of the
periods indicated (Unaudited).

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------
Six Months
Ended Year Ended August 31
February 28, --------------------------------------
1995 1994 1993 1992 1991 1990
................................................................................
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period..... $ 6.12 $ 6.61 $ 6.40 $ 5.71 $ 5.78 $ 7.96
------ ------ ------ ------ ------ ------
Income from investment
operations
Investment income...... .30 .71 .71 .79 .86 1.00
Expenses............... (.03) (.08) (.07) (.065) (.06) (.07)
------ ------ ------ ------ ------ ------
Net investment income.. .27 .63 .64 .725 .80 .93
Net realized and
unrealized gain or
loss on securities.... (.145) (.47) .27 .6775 (.055) (2.165)
------ ------ ------ ------ ------ ------
Total from investment
operations.............. .125 .16 .91 1.4025 .745 (1.235)
------ ------ ------ ------ ------ ------
Dividends from net
investment income....... (.285) (.65) (.70) (.7125) (.815) (.945)
------ ------ ------ ------ ------ ------
Net asset value, end of
period.................. $ 5.96 $ 6.12 $ 6.61 $ 6.40 $ 5.71 $ 5.78
------ ------ ------ ------ ------ ------
TOTAL RETURN (1)........ 2.17% 2.34% 15.20% 25.82% 15.66% (15.88)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the
period (millions)....... $393.7 $364.2 $452.4 $435.1 $341.9 $331.4
Average net assets
(millions).............. $368.3 $419.8 $426.8 $390.7 $298.2 $408.2
Ratios to average net
assets..................
Expenses............... 1.18%(2) 1.10% 1.09% 1.05% 1.06% 1.02%
Net investment income.. 9.20%(2) 9.03% 10.10% 11.77% 15.20% 14.23%
Portfolio turnover rate. 22% 66% 75% 73% 114% 59%
</TABLE>
(1) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
(2) Annualized.

16
<PAGE>

See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (CONTINUED)

Selected data for a share of capital stock outstanding throughout each of the
periods indicated (Unaudited).

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
------------------------------------------- ---------------------------------------
July 2, July 6,
Six Months Year Ended 1992(1) Six Months 1993(1)
Ended August 31 through Ended Year Ended through
February 28, -------------- August 31, February 28, August 31, August 31,
1995 1994 1993(2) 1992(2) 1995 1994(2) 1993(2)
........................................................................................................................
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period........................ $6.14 $6.63 $6.41 $6.33 $6.11 $6.61 $6.63
----- ----- ----- ----- ----- ----- ------
Income from investment
operations
Investment income............. .31 .71 .70 .11 .31 .65 .08
Expenses...................... (.06) (.13) (.12) (.02) (.06) (.12) (.02)
----- ----- ----- ----- ----- ----- ------
Net investment income......... .25 .58 .58 .09 .25 .53 .06
Net realized and unrealized
gain or loss on securities... (.159) (.468) .292 .097 (.149) (.428) .0195
----- ----- ----- ----- ----- ----- ------
Total from investment
operations.................... .091 .112 .872 .187 .101 .102 .0795
----- ----- ----- ----- ----- ----- ------
Dividends from net investment
income........................ (.261) (.602) (.652) (.107) (.261) (.602) (.0995)
----- ----- ----- ----- ----- ----- ------
Net asset value, end of period. $5.97 $6.14 $6.63 $6.41 $5.95 $6.11 $6.61
----- ----- ----- ----- ----- ----- ------
TOTAL RETURN (3)............... 1.59% 1.59% 14.49% 2.97% 1.76% 1.43% 1.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the period
(millions).................... $75.8 $71.0 $37.7 $3.1 $13.1 $13.2 $1.0
Average net assets (millions).. $71.0 $56.8 $18.0 $1.1 $12.8 $8.4 $0.3
Ratios to average net assets
Expenses...................... 1.99%(4) 1.90% 1.90% 2.08%(4) 1.99%(4) 1.91% 2.34%(4)
Net investment income......... 8.38%(4) 8.25% 9.10% 10.30%(4) 8.38%(4) 8.25% 8.05%(4)
Portfolio turnover rate........ 22% 66% 75% 73% 22% 66% 75%
</TABLE>
(1) Commencement of offering of sales
(2) Based on average month-end shares outstanding
(3) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
(4) Annualized

17
<PAGE>

NOTES TO FINANCIAL STATEMENTS

February 28, 1995 (Unaudited)

- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital High Yield Investments, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified open-end man-
agement investment company. The following is a summary of significant account-
ing policies consistently followed by the Fund in the preparation of its
financial statements.

A. INVESTMENT VALUATIONS-Securities actively traded in the over-the-counter
market, including listed securities for which the primary market is believed
to be over-the-counter, are valued at the most recently quoted bid price. Se-
curities and options for which the primary market is on an exchange or NASDAQ
are valued at the last reported sale price, or if no sale is reported at the
last reported bid price. If no sale or bid price is reported, securities are
valued at the most recent sale price. Private placements are valued at fair
value under a method approved by the Board of Directors.
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.
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 exist as to an issuer's ability to meet principal
and interest payments. At February 28, 1995, debt securities rated below in-
vestment grade and comparable unrated securities represented approximately 89%
of the investment portfolio.

B. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
or sub-advised by Van Kampen American Capital Asset Management, Inc. (the "Ad-
viser"), the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are collateralized by the underlying debt security. The
Fund will make payment for such securities only upon physical delivery or evi-
dence of book entry transfer in the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.

18
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- -------------------------------------------------------------------------------

C. PRIVATE PLACEMENTS-The Fund owns securities purchased in private placement
transactions, which have not been registered under the Securities Act of 1933.
Such securities generally may be resold only in a privately negotiated trans-
action with a limited number of purchasers or in a public offering after they
have been registered under the Securities Act of 1933. The issuers of pri-
vately placed debt securities held by the Fund generally have agreed to regis-
ter the securities within specified time periods or increase the interest paid
on such securities. The Fund may not invest more than 15% of its net assets
(determined at the time of purchase) in private placements and other illiquid
securities.

D. 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 gains to its shareholders. It is anticipated that no distributions of
capital gains will be made until tax basis capital loss carryforwards expire
or are offset by net realized capital gains.
The net realized capital loss carryforward for federal income tax purposes
of approximately $251 million at August 31, 1994, may be utilized to offset
current or future gains until expiration in 1997 through 2000.

E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date. Interest income is accrued daily. Issuers of
Payment-in-Kind (PIK) securities may make dividend or interest payments by is-
suing additional stocks or bonds in lieu of cash payments.

F. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. 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
or distributions may exceed financial statement earnings.

G. DEBT DISCOUNT AND PREMIUM-The Fund accounts for original issue discounts
and premiums on the same basis as is used for federal income tax reporting.
Accordingly, original issue discounts on long-term debt securities purchased
are amortized over the life of the security. Premiums on debt securities are
not amortized. Market discounts are recognized at the time of sale as realized
gains for book purposes and ordinary income for tax purposes.

19
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- --------------------------------------------------------------------------------

H. EQUALIZATION-At September 1, 1994, the Fund discontinued the accounting
practice of equalization, which it had used since its inception. Equalization
is a practice whereby a portion of the proceeds from sales and costs of redemp-
tions of Fund shares, equivalent on a per-share basis to the amount of the un-
distributed net investment income, is charged or credited to undistributed net
investment income.
The balance of equalization included in undistributed net investment income
at the date of change, which was $283,820, was reclassified to capital surplus.
Such reclassification had no effect on net assets, results of operations, or
net asset value per share of the Fund.

NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
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
.625% of the first $150 million, .55% of the next $150 million, and .50% of the
amount in excess of $300 million.
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 all investment companies advised or sub-advised by the Adviser. For
the period ended February 28, 1995, these charges included $6,262 as the Fund's
share of the employee costs attributable to the Fund's accounting officers. A
portion of the accounting services expense was paid to the Adviser in reim-
bursement of personnel, facilities and equipment costs attributable to the pro-
vision 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 ended February 28, 1995, the fees for such services were
$559,968.
The Fund has been advised that Van Kampen American Capital Distributors, Inc.
(the "Distributor") and Advantage Capital Corp. (the "Retail Dealer"), both af-
filiates of the Adviser, received $5,067 and $13,938 respectively, as their
portion of the commissions charged on sales of Fund shares during the period.
Under the Distribution Plans, the Fund pays up to .25% per annum of its aver-
age net assets to the Distributor for expenses and service fees incurred. Class
B shares and Class C shares pay an additional fee of up to .75% per annum of
their average daily net assets to reimburse the Distributor for its distribu-
tion costs. Actual distribution expenses incurred by the Distributor for Class
B shares and Class C shares may exceed the amounts reimbursed to the Distribu-
tor by the Fund. At February 28, 1995, the unreimbursed expenses incurred by
the Distributor under the Class B plan and Class C plan aggregated approxi-
mately $2.4 million and $175,000, 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.

20
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- -------------------------------------------------------------------------------
Legal fees were for services rendered by O'Melveny & Myers, counsel for the
Fund. Lawrence J. Sheehan, of counsel to that firm, is a director of the Fund.
Certain officers and directors of the Fund are officers and directors of the
Adviser, the Distributor, the Retail Dealer and the shareholder service agent.

NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $123,772,237 and $91,328,513,
respectively.
For federal income tax purposes, the identified cost of investments owned at
February 28, 1995 was $489,433,611. Net unrealized depreciation of investments
aggregated $14,722,090, gross unrealized appreciation of investments aggre-
gated $10,320,908 and gross unrealized depreciation of investments aggregated
$25,042,998.

NOTE 4--DIRECTOR COMPENSATION
Fund directors who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $1,420 plus a fee of $35 per day for Board and Com-
mittee meetings attended. The Chairman receives additional fees from the Fund
at the annual rate of $530. During the period, such fees aggregated $10,405.
The directors may participate in a voluntary Deferred Compensation Plan (the
"Plan"). The Plan is not funded, and obligation 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 director covered under the Plan elects to be credited
with an earnings component on amounts deferred equal to the income earned by
the Fund or 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 shares and Class C shares). All classes of shares have the
same rights, except that Class B shares 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 shares and Class C
shares automatically convert to Class A shares six years and ten years after
purchase, respectively, subject to certain conditions.

21
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

February 28, 1995 (Unaudited)

- -------------------------------------------------------------------------------
The Fund has 400 million Class A and 300 million each of Class B and Class C
shares of $.01 par value capital stock authorized. Transactions in shares of
capital stock were as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A............................................. 12,119,448 21,000,805
Class B............................................. 2,947,071 8,862,056
Class C............................................. 476,277 2,547,363
---------- -----------
15,542,796 32,410,224
---------- -----------
Shares issued for dividends reinvested
Class A............................................. 1,744,889 3,647,442
Class B............................................. 244,412 400,994
Class C............................................. 57,287 79,079
---------- -----------
2,046,588 4,127,515
---------- -----------
Shares redeemed
Class A............................................. (7,249,461) (33,625,821)
Class B............................................. (2,051,190) (3,395,061)
Class C............................................. (501,517) (608,555)
---------- -----------
(9,802,168) (37,629,437)
---------- -----------
Increase (decrease) in Fund shares outstanding....... 7,787,216 (1,091,698)
---------- -----------
</TABLE>

NOTE 6--SUBSEQUENT DIVIDEND
The Board of Directors of the Fund declared dividends from net investment in-
come of $.0475 per share for Class A shares and $.0435 per share for Class B
shares and Class C shares, payable April 17, 1995 to shareholders of record on
March 31, 1995.

22
<PAGE>

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

GLOBAL AND INTERNATIONAL
Govett Emerging Markets Fund
AC Global Equity Fund
Govett Global Government Income Fund
AC Global Government Securities
AC Global Managed Assets Fund
Govett International Equity Fund
Govett Latin America Fund
Govett Pacific Strategy Fund

EQUITY
GROWTH
AC Emerging Growth Fund
AC Enterprise Fund
AC Pace Fund
Govett Smaller Companies Fund
GROWTH & INCOME
VKM Balanced Fund
AC Comstock Fund
AC Equity Income Fund
AC Growth and Income Fund
VKM Growth and Income Fund
AC Harbor Fund
AC Real Estate Securities Fund
VKM Utility Fund
AC Utilities Income Fund

FIXED INCOME
VKM Adjustable Rate U.S. Government Fund
AC Corporate Bond Fund
AC Federal Mortgage Trust
AC Government Securities
VKM High Yield Fund
AC High Yield Investments
VKM Money Market Fund
VKM Prime Rate Income Trust
AC Reserve Fund
VKM Short-Term Global Income Fund
VKM Strategic Income Fund
VKM U.S. Government Fund
AC U.S. Government Trust for Income

TAX-FREE
VKM California Insured Tax Free Fund
VKM Florida Insured Tax Free Income Fund
VKM Insured Tax Free Income Fund
VKM Limited Term Municipal Income Fund
AC Municipal Bond Fund
VKM Municipal Income Fund
VKM New Jersey Tax Free Income Fund
VKM New York Tax Free Income Fund
VKM Pennsylvania Tax Free Income Fund
AC Tax-Exempt Trust
--High Yield Municipal Portfolio
--Insured Municipal Portfolio
VKM Tax Free High Income Fund
VKM Tax Free Money Fund
AC Texas Municipal Securities

Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.

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AMERICAN CAPITAL HIGH YIELD INVESTMENTS, INC.

BOARD OF DIRECTORS
J. MILES BRANAGAN
RICHARD E. CARUSO
ROGER HILSMAN
DON G. POWELL
DAVID REES
LAWRENCE J. SHEEHAN
FERNANDO SISTO*
WILLIAM S. WOODSIDE
*Chairman of the Board

OFFICERS
DON G. POWELL
President

CURTIS W. MORELL
Vice President and Treasurer

ELLIS S. BIGELOW
PETER G. KAPOUNELOS
DENNIS J. MCDONNELL
RONALD A. NYBERG
ROBERT C. PECK, JR.
PAUL R. WOLKENBERG
Vice Presidents

TANYA M. LODEN
Vice President and Controller

NORI L. GABERT
Vice President and Secretary

J. DAVID WISE
Vice President and Assistant Secretary

PERRY F. FARRELL
M. ROBERT SULLIVAN
Assistant Treasurers

HUEY P. FALGOUT, JR.
Assistant Secretary
INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd. Houston, Texas 77056

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
2800 Post Oak Blvd. Houston, Texas 77056

SHAREHOLDER SERVICE AGENT

ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256 Kansas City, Missouri 64141-9256

CUSTODIAN

STATE STREET BANK AND TRUST CO.
225 Franklin Street Boston, Massachusetts 02110

COUNSEL

O'MELVENY & MYERS
400 South Hope Street Los Angeles, California 90071

SM denotes a service mark of
Van Kampen Armerican 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.

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