<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Management Review................. 4
Portfolio of Investments.................... 6
Statement of Assets and Liabilities......... 12
Statement of Operations..................... 13
Statement of Changes in Net Assets.......... 14
Financial Highlights........................ 15
Notes to Financial Statements............... 18
</TABLE>
HYI SAR 4/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO APPEARS HERE]
DENNIS J. MCDONNELL AND DON G. POWELL
April 15, 1996
Dear Shareholder,
We are pleased to report continued positive results for the Van Kampen Amer-
ican Capital High Income Corporate Bond Fund. For the six months ended Febru-
ary 29, 1996, shareholders of Class A shares achieved a total return at net
asset value of 7.88 percent/1/. Longer term, the Fund's Class A share one-year
total return at net asset value was 16.65 percent/1/ for the same ending peri-
od.
With experience in money management dating back to 1926, Van Kampen American
Capital has weathered widely ranging market conditions and emerged with a suc-
cessful investment record. Today, we manage over $2 billion in corporate
bonds. A central part of our investment philosophy has always been a disci-
plined, value-oriented approach that includes in-depth research, both qualita-
tive and quantitative. We believe this approach serves our investors well, as
we seek to provide a high level of current income and superior long-term per-
formance in our fixed-income portfolios.
You can read more about your Fund's performance on the following pages, in-
cluding a recent interview with the portfolio management team.
ECONOMIC OVERVIEW
The slowdown in the economy continued through the end of 1995, reflected in
weak consumer demand and disappointing retail sales during the holiday season.
Severe winter weather in many parts of the country further dampened retail ac-
tivity and hindered distribution and manufacturing. These conditions helped to
keep inflation in check, prompting the Federal Reserve Board to continue eas-
ing short-term interest rates. In turn, long-term interest rates declined,
causing the price of many bonds to increase.
The beginning of 1996 was marked by an increase in market volatility, which
effectively ended the decline in bond yields. This volatility was triggered in
part by three factors: fiscal uncertainty caused by two unprecedented shut-
downs of the federal government, presidential primary debates about impending
tax reform, and an unexpected reversal in a number of key economic indicators,
which consequently sent the market mixed signals on the direction of the econ-
omy.
Still, due to the government shutdowns and the unusually harsh weather, the
market remained skeptical of the predictive value of economic statistics is-
sued for January and February. Interest rates have fluctuated as the market
attempts to determine whether the economy will remain slow throughout 1996.
Continued on page two
1
<PAGE>
During the period, high-income corporate bonds, which generally move in par-
allel with stocks, were among the few bond sectors to show significant
strength. The sector continued to benefit from corporate takeover activity,
some of which has improved the balance sheets of highly leveraged companies.
ECONOMIC OUTLOOK
In general, we anticipate a pickup in economic activity during the first half
of the year, with possibilities of an increase in inflation and an economic
slowdown toward the end 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 reported.
The Fed is expected to maintain its focus on growing the economy at an annual
rate of 2 to 3 percent, while striving to keep inflation at bay. Interest rates
are expected to remain within the range experienced over the past several
years, with a continuation of historically low rates.
LONG-TERM PERFORMANCE
Throughout the life of the Fund, the support of our shareholders and our com-
mitment 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 FEBRUARY 29, 1996
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV/1/.............. 7.88% 7.45% 7.31%
Six-month total return/2/........................... 2.70% 3.45% 6.31%
One-year total return/2/............................ 11.06% 11.72% 13.77%
Five-year average annual total return/2/............ 15.17% N/A N/A
Ten-year average annual total return/2/............. 6.88% N/A N/A
Life-of-Fund average annual total return/2/......... 9.13% 9.26% 7.08%
Commencement Date................................... 10/02/78 07/02/92 07/06/93
DISTRIBUTION RATE AND YIELD
Distribution Rate/3/................................ 8.86% 8.53% 8.57%
SEC Yield/4/........................................ 9.19% 8.85% 8.92%
</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).
/2/Standardized total return. Assumes reinvestment of all distributions for
the period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).
/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/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 as shown above.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN HIGH INCOME CORPORATE BOND FUND
We recently spoke with the management team of the Van Kampen American Capital
High Income Corporate Bond Fund about the key events and economic forces which
shaped the markets during the first half of the Fund's fiscal year. The team
includes Ellis Bigelow, portfolio manager, and Robert C. Peck, Jr., executive
vice president for fixed-income investments. The following excerpts reflect
their views on the Fund's performance during the six-month period ended
February 29, 1996.
Q WHAT MARKET CONDITIONS AFFECTED THE FUND MOST SIGNIFICANTLY OVER THE PAST
SIX MONTHS?
A In the first part of this period, interest rates fell rather steadily.
The yield on 10-year Treasury notes began the period at 6.27 percent and
fell to a low of 5.55 percent in January of this year. After that, however,
the market experienced a dramatic reversal, with the 10-year Treasury yield
climbing by more than half a percentage point to 6.15 percent at the end of
the period. Although yields declined only slightly over this six-month period,
the market had to endure a great deal of volatility along the way. Fortunate-
ly, high yield bond funds in general managed to hold up better than higher
credit quality fixed-income funds during the correction.
Traditionally, the first quarter of the year is a strong period for high
yield bonds. To protect gains until year end, investors often seek more con-
servative investments in the latter part of the year. In the first few months
of a new year, however, investors become more aggressive, and moved back into
the high yield market. This behavior helped the high yield market to post pos-
itive returns in the first two months of 1996, compared with negative returns
in general for the higher quality portion of the bond market.
Q HOW HAS THE FUND PERFORMED DURING THIS REPORTING PERIOD?
A Your Fund performed well through January, but experienced a small decline
in February. Still, we were able to protect a portion of our gains de-
spite the market's rough spots. For the first two months of 1996, the Fund
Class A shares posted a total return of 3.19 percent/1/ and for the first half
of the fiscal year (August 31, 1995 through February 29, 1996), the Fund's to-
tal return was 7.88 percent/1/ (Class A shares at NAV). The Fund's monthly
dividend remained steady at $.049 per share.
The Fund's performance compared well to that of its peers. For the same six-
month period, the average total return for all funds in the Lipper High Cur-
rent Yield category was 7.26 percent. The six-month total return for the CS
First Boston High Yield Index was 6.60 percent, which reflects the overall
return of the high yield market. The return of this index, which is unmanaged,
does not reflect any commissions or fees that would be paid by an investor
purchasing the securities it represents. (Please refer to the chart on page
three for additional Fund performance results.)
Q HOW ARE YOU POSITIONING THE FUND TO ACHIEVE THE BEST PERFORMANCE GOING
FORWARD?
A We prefer to focus on selecting individual securities, rather than de-
pending on "top-down" macroeconomic models. We look for companies that
are likely to improve their balance sheets, either by increasing their cash
flow or by paying down debt.
4
<PAGE>
For example, we hold a position in the hospital management and healthcare
sector, because these companies have tended to show reliable growth in their
year-to-year cash flow. On the other hand, we also favor companies such as
Stone Container, which have been using its cash flow to reduce its debt levels.
Recently, we purchased prefered stock issued by Panamsat Corp., the second
largest leaser of telecommunications satellite lines. The company just added a
new satellite, and demand for satellite space is high, so their cash flow is
likely to show strong improvement. We expect media companies, like broadcast-
ing, to show real improvements in cash flow over the next year, as the presi-
dential election and the Olympics boost advertising revenues.
Our largest investment holdings have been in the telecommunications and media
sectors. In addition to the reasons just mentioned, we also think that the new
telecommunications deregulation bill will improve the fundamentals for many of
these firms.
[PIE CHART PORTFOLIO HOLDINGS BY SECTOR AS A PERCENTAGE OF NET ASSETS AS OF
FEBRUARY 29, 1996 APPEARS HERE]
Consumer Distribution 12%
Energy 7%
Raw Materials/Processing Industries 17%
Transportation 4%
Consumer Non-Durables 6%
Finance 4%
Health Care 5%
Utilities 4%
Consumer Services 17%
Producer Manufacturing 7%
Other 17%
Q WHAT IS YOUR OUTLOOK FOR THE MARKET IN THE MONTHS AHEAD?
A We expect to see further volatility in the market, especially in the
months leading up to the November election. In fact, this has already been
a volatile year, with the 10-year Treasury fluctuating more than the stock mar-
ket. For example in the first quarter of 1996, 10-year Treasuries have declined
5.71 percent in price, while the stock market, as represented by the S&P 500,
has appreciated in value 3.84 percent. We believe, however, that investors who
hold on through this period of volatility will be rewarded.
The current environment is very strong in terms of technical factors. The
lower absolute level of interest rates over the past three years, has pushed
more insurance companies and pension funds into the high yield market. As a re-
sult, money is coming into the high yield market.
Ultimately, however, the high yield market is driven by the strength of the
economy. The news here also looks positive, especially because the market is
not seriously concerned about a significant increase in the inflation rate. We
believe there may be some weakness in the market during the first half of the
year, but that high yield investors will eventually recognize the economy's
firm underlying tone.
/s/ Robert C. Peck, Jr. /s/ Ellis S. Bigelow
Robert C. Peck, Jr. Ellis S. Bigelow
Executive Vice President Portfolio Manager
Fixed Income Investments
Please see footnotes on page three
5
<PAGE>
PORTFOLIO OF INVESTMENTS
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS 87.8%
CONSUMER DISTRIBUTION 11.7%
$ 5,000 Alliance Enterprises................. 11.250% 07/15/05 $ 5,025,000
5,160 Americold Corp....................... 15.000 05/01/07 5,185,800
3,800 Big 5 Holdings....................... 13.625 09/15/02 2,318,000
2,800 Big V Supermarkets Inc., Series B.... 11.000 02/15/04 2,520,000
4,810 Brylane Capital...................... 10.000 09/01/03 4,304,950
#2,000 Carr Gottstein Foods, Private
Placement, purchased 11/9/95......... 12.000 11/15/05 2,070,000
4,650 Cole National Group Inc.............. 11.250 10/01/01 4,679,063
4,750 CompUSA Inc.......................... 9.500 06/15/00 4,809,375
3,000 Dairy Mart Convenience Stores Inc.... 10.250 03/15/04 2,595,000
1,750 Doane Products....................... 10.625 03/01/06 1,780,625
3,788 F F Holdings Corp, Payment in Kind... 14.250 10/01/02 1,856,272
5,500 Finlay Enterprises Inc, Step Bonds to
12% at 5/01/98....................... 0.000 05/01/05 3,685,000
2,500 Mothers Work Inc..................... 12.625 08/01/05 2,600,000
2,500 Pathmark Stores Inc, Step Bonds to
10.75% at 11/01/99................... 0.000 11/01/03 1,525,000
1,000 Pathmark Stores Inc.................. 11.625 06/15/02 997,500
2,000 Pathmark Stores Inc.................. 12.625 06/15/02 2,050,000
3,150 Phar-Mor Inc......................... 11.720 09/11/02 3,055,500
1,855 Ralph's Grocery...................... 13.750 06/15/05 1,970,938
1,250 Smitty's Supervalue, Series B........ 12.750 06/15/04 1,350,000
1,750 Specialty Retailers Inc.............. 11.000 08/15/03 1,710,625
#2,250 Thrifty Payless, Payment in Kind,
Private Placement, purchased 11/8/95. 11.625 04/15/06 2,295,000
3,250 Thrifty Payless...................... 12.250 04/15/04 3,640,000
------------
62,023,648
------------
CONSUMER DURABLES 2.2%
3,000 Aftermarket Tech Corp................ 12.000 08/01/04 3,262,500
3,250 MDC Holdings Inc..................... 11.125 12/15/03 3,176,875
1,995 Oriole Homes Corp.................... 12.500 01/15/03 1,755,600
4,000 Venture Holdings Inc................. 9.750 04/01/04 3,280,000
------------
11,474,975
------------
CONSUMER NON-DURABLES 6.0%
4,400 Consoltex Group Inc.................. 11.000 10/01/03 3,960,000
4,850 Curtice Burns Foods.................. 12.250 02/01/05 4,777,250
4,870 Dan River Inc........................ 10.125 12/15/03 4,650,850
3,125 Dr Pepper Bottling Holdings, Step
Bonds to 11.625% at 2/15/98.......... 0.000 02/15/03 2,687,500
3,600 Fieldcrest Cannon Inc................ 11.250 06/15/04 3,564,000
4,000 Health O Meter Inc., each unit
consists of a $1,000 face amount note
and one warrant (expiring 2/15/97)... 13.000 08/15/02 3,760,000
</TABLE>
See Notes to Financial Statements
6
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,000 Revlon Worldwide, Series B........... ** 03/15/98 $ 3,210,000
5,277 Synthetic Industries Inc............. 12.750% 12/01/02 5,435,310
------------
32,044,910
------------
CONSUMER SERVICES 16.7%
1,500 Act III Theatres Inc................. 11.875 02/01/03 1,627,500
#1,750 American Telecasting, each unit
consists of a $1,000 face amount note
and one warrant (expiring 8/10/00),
Step Bonds to 14.50% at 8/15/00,
Private Placement, purchased 9/28/95. 0.000 08/15/05 1,168,125
4,750 Australis Media Ltd, Step Bonds to
14% at 5/15/00....................... 0.000 05/15/03 3,372,500
4,565 Bally Grand Inc...................... 10.375 12/15/03 4,793,250
#2,250 Busse Broadcasting, Private
Placement, purchased 10/19/95........ 11.625 10/15/00 2,227,500
3,420 Cablevision Industries Co............ 9.250 04/01/08 3,757,725
4,000 California Hotel Finance Corp........ 11.000 12/01/02 4,300,000
2,184 Carrols Corp......................... 11.500 08/15/03 2,260,440
4,750 Casino America 1st Mtg............... 11.500 11/15/01 4,666,875
1,750 Chancellor Broadcast................. 9.375 10/01/04 1,715,000
3,500 Coast Hotel & Casino, 1st Mtg........ 13.000 12/15/02 3,535,000
#1,000 Cobb Theatres LLC, Private Placement,
purchased 2/29/96.................... 10.625 03/01/03 1,000,000
2,000 Comcast UK Cable, Step Bonds to
11.20% at 11/15/00................... 0.000 11/15/07 1,185,000
3,600 Continental Cablevision Inc.......... 11.000 06/01/07 4,176,000
1,250 Courtyard By Marriott................ 10.750 02/01/08 1,262,500
2,000 Diamond Cable Co., Step Bonds to
11.75% at 12/15/00................... 0.000 12/15/05 1,220,000
3,250 Fundy Cable Ltd...................... 11.000 11/15/05 3,396,250
2,250 Galaxy Telecom LP.................... 12.375 10/01/05 2,441,250
3,100 Granite Broadcasting Corp............ 12.750 09/01/02 3,456,500
1,750 Hollinger International.............. 9.250 02/01/06 1,758,750
#3,250 International Cabletel, Step Bonds to
11.50% at 2/01/01, Private Placement,
purchased 1/25/96.................... 0.000 02/01/06 1,917,500
2,500 International Cabletel, Step Bonds to
12.75% at 4/15/00.................... 0.000 04/15/05 1,631,250
#4,750 Mohegan Tribal Game, Private
Placement, purchased 9/22/95, 10/3/95
and 1/4/96........................... 13.500 11/15/02 5,700,000
3,000 News America Holdings Inc............ 10.125 10/15/12 3,488,100
4,750 Petro PSC Properties................. 12.500 06/01/02 4,583,750
3,100 Resorts International Hotel Finance.. 11.000 09/15/03 3,092,250
4,500 SC International..................... 13.000 10/01/05 4,927,500
4,000 Tele Communications Inc.............. 9.250 01/15/23 4,187,600
4,250 Trump Taj Mahal Funding, Inc., each
unit consists of a $1,000 face amount
note, two Class A and one Class B
shares of common stock, Payment in
Kind................................. 11.350 11/15/99 4,277,517
1,150 Videotron Groupe Ltd................. 10.625 02/15/05 1,265,000
------------
88,390,632
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ENERGY 7.2%
$ 3,000 Bridas Corp.......................... 12.500% 11/15/99 $ 3,127,500
5,250 Clark (R&M) Holdings Inc............. ** 02/15/00 3,543,750
4,250 Falcon Drilling Co., Inc............. 9.750 01/15/01 4,398,750
3,000 Forest Oil Corp...................... 11.250 09/01/03 3,105,000
2,250 Giant Industries Inc................. 9.750 11/15/03 2,283,750
3,500 Global Marine Inc.................... 12.750 12/15/99 3,863,125
4,995 HS Resources Inc..................... 9.875 12/01/03 4,920,075
4,730 Maxus Energy Corp.................... 11.500 11/15/15 4,907,375
2,600 Petroleum Heat & Power Inc........... 12.250 02/01/05 2,951,000
4,000 Transportadora De Gas SA............. 7.750 12/23/98 3,840,000
1,250 Vintage Petroleum.................... 9.000 12/15/05 1,262,500
------------
38,202,825
------------
FINANCE 3.9%
3,000 American Life Holding Co............. 11.250 09/15/04 3,187,500
4,750 Americo Life Inc..................... 9.250 06/01/05 4,678,750
593 Blue Bell Funding Inc................ 11.850 05/01/99 575,210
2,750 GPA Delaware/Holland................. 9.750 06/10/96 2,750,000
3,000 GPA Delaware/Holland................. 8.500 03/03/97 2,985,000
1,570 Phoenix Re Corp...................... 9.750 08/15/03 1,687,750
2,000 Reliance Group Holdings.............. 9.750 11/15/03 2,080,000
2,750 Trizec Finance....................... 10.875 10/15/05 2,853,125
------------
20,797,335
------------
HEALTH CARE 5.5%
2,103 Amerisource Distribution Corp........ 11.250 07/15/05 2,312,994
1,750 Community Health Systems Inc......... 10.250 11/30/03 1,881,250
4,000 Magellan Health Services, Series A... 11.250 04/15/04 4,490,000
#2,000 Merit Behavioral, Private Placement,
purchased 11/20/95 and 11/28/95...... 11.500 11/15/05 2,170,000
6,650 OrNda Healthcorp..................... 12.250 05/15/02 7,298,375
4,000 Paracelsus Hlthcare Corp............. 9.875 10/15/03 4,060,000
2,000 Quorum Health Group.................. 11.875 12/15/02 2,240,000
3,800 Tenet Healthcare..................... 10.125 03/01/05 4,189,500
650 Total Renal Care, Step Bonds to 12%
at 8/15/97........................... 0.000 08/15/04 646,750
------------
29,288,869
------------
PRODUCER MANUFACTURING 7.2%
3,348 Fairchild Corp....................... 13.000 03/01/07 3,322,890
55 Fairchild Corp....................... 13.125 03/15/06 54,794
4,500 Figgie International Inc............. 9.875 10/01/99 4,578,750
3,450 GS Technologies Operations Inc....... 12.000 09/01/04 3,450,000
4,150 ICF Kaiser International, each unit
consists of a $1,000 face amount note
and five warrants (expiring
12/31/98)............................ 12.000 12/31/03 3,963,250
</TABLE>
See Notes to Financial Statements
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 910 IMO Industries Inc.................... 12.250% 08/15/97 $ 912,275
2,250 IMO Industries Inc.................... 12.000 11/01/01 2,295,000
1,750 Interlake Corp........................ 12.000 11/15/01 1,791,563
2,750 Interlake Corp........................ 12.125 03/01/02 2,543,750
4,962 Robertson Ceco Corp., Payment in Kind. 12.000 11/30/99 4,602,316
1,450 Spreckles Industries Inc.............. 11.500 09/01/00 1,493,500
#6,000 Terex Corp., each unit consists of a
$1,000 face amount note and four
common stock rights (expiring
5/15/02), Private Placement, purchased
9/29/95 and 10/11/95.................. 13.750 05/15/02 5,775,000
3,284 Thermadyne Holdings Corp.............. 10.250 05/01/02 3,251,160
------------
38,034,248
------------
RAW MATERIALS / PROCESSING
INDUSTRIES 16.7%
4,250 Associated Materials Inc.............. 11.500 08/15/03 3,527,500
4,250 Calmar Inc............................ 11.500 08/15/05 4,250,000
2,728 Carbide/Graphite Group Inc............ 11.500 09/01/03 2,980,340
2,500 Crown Packaging, Series B............. 10.750 11/01/00 2,350,000
5,150 Harris Chemical North America......... 10.250 07/15/01 5,175,750
4,850 IMC Fertilizer Group Inc.............. 9.450 12/15/11 5,310,750
5,500 Indah Kiat International Finance...... 11.875 06/15/02 5,692,500
4,000 INDSPEC Chemical Corp., Step Bonds to
11.50% at 12/01/98.................... 0.000 12/01/03 3,400,000
4,665 Klabin Fabricadora SA................. 12.125 12/28/02 4,781,625
5,750 Mail-Well Envelope Corp............... 10.500 02/15/04 5,606,250
4,000 NL Industries Inc., Step Bonds to 13%
at 10/15/98........................... 0.000 10/15/05 3,120,000
3,250 Plastic Specialty & Technology Corp... 11.250 12/01/03 3,103,750
1,900 Republic Engineered Steel, 1st Mtg.... 9.875 12/15/01 1,795,500
6,600 SD Warren Co.......................... 12.000 12/15/04 7,029,000
3,750 Sherritt Inc.......................... 10.500 03/31/14 4,218,750
1,450 Silgan Corp........................... 11.750 06/15/02 1,551,500
4,000 Stone Container Corp.................. 12.625 07/15/98 4,180,000
6,000 Sweetheart Cup Inc.................... 10.500 09/01/03 6,180,000
4,500 Tjiwi Kimia........................... 13.250 08/01/01 4,961,250
855 UCAR Global Enterprises Inc........... 12.000 01/15/05 1,000,350
2,000 US Can Co............................. 13.500 01/15/02 2,160,000
5,500 United Stationers..................... 12.750 05/01/05 6,215,000
------------
88,589,815
------------
TECHNOLOGY 3.1%
1,375 Computervision........................ 11.375 08/15/99 1,457,500
3,100 MFS Communications Co., Inc., Step
Bonds to 9.375% at 1/15/04............ 0.000 01/15/04 2,433,500
3,600 Mobile Telecom Inc.................... 13.500 12/15/02 3,897,000
8,424 Unisys Corp........................... 15.000 07/01/97 8,824,140
------------
16,612,140
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------
<C> <S> <C> <C> <C>
TRANSPORTATION 3.8%
$ 1,500 International Shipholding
Corp...................... 9.000% 07/01/03 $ 1,526,250
2,500 Sea Containers Ltd........ 12.500 12/01/04 2,718,750
2,750 Sea Containers Ltd........ 12.500 12/01/04 2,976,875
1,500 Southern Pacific Rail
Corp...................... 9.375 08/15/05 1,616,250
4,500 Stena AB.................. 10.500 12/15/05 4,612,500
4,500 Trism Inc................. 10.750 12/15/00 4,320,000
1,250 USAir Inc................. 10.000 07/01/03 1,168,750
750 USAir Inc................. 9.625 02/01/01 701,250
790 USAir Inc., pass thru
certificate, Series 1989
A1........................ 9.330 01/01/06 726,954
------------
20,367,579
------------
UTILITIES 3.8%
1,750 A+ Network................ 11.875 11/01/05 1,811,250
#1,500 Brooks Fiber, Step Bonds
to 10.875% at 3/01/01,
Private Placement,
purchased 2/16/96......... 0.000 03/01/06 900,000
2,500 California Energy......... 9.875 06/30/03 2,625,000
750 El Paso Electric, 1st
Mtg....................... 8.900 02/01/06 765,000
1,750 El Paso Electric, 1st
Mtg....................... 9.400 05/01/11 1,789,375
1,250 Fonorola Inc.............. 12.500 08/15/02 1,368,750
#335 GST Telecom, each unit
consist of $9,000 face
amount notes 335 with
$8,000 in Sr. Disc Notes
and $1,000 in Convertible
Sr. Step Notes of 13.875%
at 12/15/00, Private
Placement, purchased
12/14/95.................. 0.000 12/15/05 1,959,750
2,500 Paging Network Service.... 10.125 08/01/07 2,687,500
500 Pricellular Wireless, Step
Bonds to 14% at 11/15/97.. 0.000 11/15/01 450,000
2,500 Pricellular Wireless, Step
Bonds to 12.25% at
10/1/98................... 0.000 10/01/03 2,000,000
750 USA Mobile Communications. 9.500 02/01/04 744,375
2,750 USA Mobile Communications. 14.000 11/01/04 3,210,625
------------
20,311,625
------------
TOTAL CORPORATE
OBLIGATIONS (Cost
$450,078,187)............... 466,138,601
------------
FOREIGN GOVERNMENT
OBLIGATIONS 2.5%
6,000 Federative Republic of
Brazil.................... 6.813 04/15/06 4,323,750
9,000 Republic of Argentina..... 6.813 03/31/05 6,440,580
2,000 United Mexican States..... 6.250 12/31/19 1,243,750
1,000 United Mexican States..... 9.750 02/06/01 965,000
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $ 12,622,623)....... 12,973,080
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCK, PREFERRED STOCK, AND WARRANTS 2.8%
$ *2 American Telecasting, Warrants expiring 8/10/00...... $ 52,500
22 Arcadian Corp. Co., Common Stock..................... 474,527
*3 Capital Gaming, Warrants expiring 2/01/99............ 31
#40 F F Holdings, Common Stock, Private Placement,
purchased 10/6/92 & 1/13/94.......................... 80,000
*6 Finlay Enterprises Inc., Common Stock................ 77,579
6 PanAmSat Corp., 12.75% Preferred Stock, Payment in
Kind................................................. 7,172,200
*231 Supermarkets General Holdings Corp., $3.52 Preferred
Stock, Payment in Kind............................... 6,355,277
*6 Total Renal Care Holdings, Common Stock.............. 177,000
#*84 Triangle Wire & Cable Inc., Common Stock, Private
Placement, purchased 1/13/92......................... 337,780
#*4 Wright Medical Technology Inc., Warrants expiring
6/30/03, Private Placements, purchased 6/14/93....... 67,941
------------
TOTAL COMMON STOCK, PREFERRED STOCK, AND WARRANTS
(Cost $13,314,629)................................... 14,794,835
------------
<CAPTION>
Par
Amount
(000)
- -------
<C> <S> <C> <C> <C>
SHORT-TERM GOVERNMENT AGENCY 5.3%
$28,030 Federal Home Loan Banks (Cost $
28,025,873)......................... 5.300% 03/01/96 28,025,873
------------
TOTAL INVESTMENTS (Cost $504,041,312) 98.4%.................... 521,932,389
OTHER ASSETS AND LIABILITIES, NET 1.6%......................... 8,751,905
------------
NET ASSETS 100%................................................ $530,684,294
------------
</TABLE>
*Non-income producing security.
**Zero coupon bond.
#See Note 1C.
See Notes to Financial Statements
11
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $504,041,312)................ $ 521,932,389
Cash............................................................ 2,347
Interest receivable............................................. 12,253,033
Receivable for investments sold................................. 3,253,154
Receivable for Fund shares sold................................. 968,014
Other assets.................................................... 29,932
-------------
TOTAL ASSETS................................................... 538,438,869
-------------
LIABILITIES
Payable for investments purchased............................... 3,202,500
Payable for Fund shares redeemed................................ 2,068,534
Dividends payable............................................... 1,791,365
Due to Adviser.................................................. 248,595
Due to Distributor.............................................. 139,750
Due to shareholder service agent................................ 122,841
Deferred Trustees' compensation................................. 66,709
Accrued expenses and other payables............................. 114,281
-------------
TOTAL LIABILITIES.............................................. 7,754,575
-------------
NET ASSETS, equivalent to $6.32 per share for Class A, $6.33 per
share for Class B
and $6.30 per share for Class C shares......................... $ 530,684,294
-------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 64,572,087 Class A,
16,931,408 Class B, and
2,484,233 Class C shares outstanding........................... $ 839,877
Capital surplus................................................. 782,734,680
Accumulated net realized loss on securities..................... (271,258,929)
Net unrealized appreciation of securities....................... 17,891,077
Undistributed net investment income............................. 477,589
-------------
NET ASSETS...................................................... $ 530,684,294
-------------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest........................................................... $28,129,792
Dividends.......................................................... 42,402
-----------
Investment income................................................. 28,172,194
-----------
EXPENSES
Management fees.................................................... 1,462,605
Shareholder service agent's fees and expenses...................... 587,791
Accounting services................................................ 49,021
Service fees--Class A.............................................. 432,495
Distribution and service fees--Class B............................. 490,216
Distribution and service fees--Class C............................. 79,713
Trustees' fees and expenses........................................ 15,564
Audit fees......................................................... 15,403
Custodian fees..................................................... 12,373
Legal fees......................................................... 2,783
Reports to shareholders............................................ 41,400
Registration and filing fees....................................... 22,781
Miscellaneous...................................................... 10,952
-----------
Total expenses.................................................... 3,223,097
-----------
NET INVESTMENT INCOME.............................................. 24,949,097
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities.................................... 4,148,915
Net unrealized appreciation of securities during the period........ 10,641,468
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... 14,790,383
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $39,739,480
-----------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
February 29, August 31,
1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period..................... $517,466,391 $448,357,715
------------ ------------
OPERATIONS
Net investment income.............................. 24,949,097 43,337,244
Net realized gain (loss) on securities............. 4,148,915 (23,341,168)
Net unrealized appreciation of securities during
the period......................................... 10,641,468 28,730,355
------------ ------------
Increase in net assets resulting from operations... 39,739,480 48,726,431
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME
Class A............................................ (20,204,167) (36,718,606)
Class B............................................ (4,425,436) (6,737,098)
Class C............................................ (713,071) (1,165,362)
------------ ------------
(25,342,674) (44,621,066)
------------ ------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A............................................ 25,693,656 98,814,673
Class B............................................ 23,138,991 36,865,960
Class C............................................ 2,899,012 6,641,834
------------ ------------
51,731,659 142,322,467
------------ ------------
Proceeds from shares issued for distributions
reinvested
Class A............................................ 12,585,785 22,048,994
Class B............................................ 2,299,514 3,266,577
Class C............................................ 436,215 707,612
------------ ------------
15,321,514 26,023,183
------------ ------------
Cost of shares redeemed
Class A............................................ (53,731,306) (76,453,840)
Class B............................................ (10,710,492) (21,944,541)
Class C............................................ (3,790,278) (4,943,958)
------------ ------------
(68,232,076) (103,342,339)
------------ ------------
Increase (decrease) in net assets resulting from
capital transactions............................. (1,178,903) 65,003,311
------------ ------------
INCREASE IN NET ASSETS.............................. 13,217,903 69,108,676
------------ ------------
NET ASSETS, end of period (including undistributed
net investment income of $477,589 and $871,166,
respectively)..................................... $530,684,294 $517,466,391
------------ ------------
</TABLE>
See Notes to Financial Statements
14
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
----------------------------------------------------
Six Months
Ended Year Ended August 31
February 29, --------------------------------------
1996 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period...... $6.15 $6.12 $6.61 $6.40 $5.71 $5.78
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Investment income....... .33 .62 .71 .71 .79 .86
Expenses................ (.03) (.07) (.08) (.07) (.065) (.06)
------ ------ ------ ------ ------ ------
Net investment income.... .30 .55 .63 .64 .725 .80
Net realized and
unrealized gain (loss)
on securities........... .174 .0515 (.47) .27 .6775 (.055)
------ ------ ------ ------ ------ ------
Total from investment
operations............... .474 .6015 .16 .91 1.4025 .745
------ ------ ------ ------ ------ ------
DISTRIBUTIONS FROM NET
INVESTMENT INCOME........ (.304 ) (.5715) (.65) (.70) (.7125) (.815)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................... $6.32 $6.15 $6.12 $6.61 $6.40 $5.71
------ ------ ------ ------ ------ ------
TOTAL RETURN (/1/)....... 7.88% 10.48% 2.34% 15.20% 25.82% 15.66%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the
period (millions)........ $407.9 $411.9 $364.2 $452.4 $435.1 $341.9
Average net assets
(millions)............... $418.6 $386.8 $419.8 $426.8 $390.7 $298.2
Ratios to average net
assets (annualized)
Expenses................ 1.04% 1.12% 1.10% 1.09% 1.05% 1.06%
Net investment income... 9.54% 9.23% 9.03% 10.10% 11.77% 15.20%
Portfolio turnover rate.. 39% 49% 66% 75% 73% 114%
</TABLE>
(1) 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>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
--------------------------------------------------
July 2,
Six Months 1992(/1/)
Ended Year Ended August 31 through
February 29, ------------------------ August 31,
1996 1995 1994 1993(/2/) 1992(/2/)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period........................ $6.16 $6.14 $6.63 $6.41 $6.33
------ ------ ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS
Investment income............. .33 .63 .71 .70 .11
Expenses...................... (.06) (.12) (.13) (.12) (.02)
------ ------ ----- ----- -----
Net investment income.......... .27 .51 .58 .58 .09
Net realized and unrealized
gain (loss) on securities..... .18 .0335 (.468) .292 .097
------ ------ ----- ----- -----
Total from investment
operations.................... .45 .5435 .112 .872 .187
------ ------ ----- ----- -----
DISTRIBUTIONS FROM NET INVEST-
MENT INCOME................... (.28) (.5235) (.602) (.652) (.107)
------ ------ ----- ----- -----
Net asset value, end of period. $6.33 $6.16 $6.14 $6.63 $6.41
------ ------ ----- ----- -----
TOTAL RETURN (/3/)............. 7.45% 9.41% 1.59% 14.49% 2.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the period
(millions).................... $107.1 $89.9 $71.0 $37.7 $3.1
Average net assets (millions).. $98.0 $77.4 $56.8 $18.0 $1.1
Ratios to average net assets
(annualized)
Expenses...................... 1.84% 1.93% 1.90% 1.90% 2.08%
Net investment income......... 8.74% 8.42% 8.25% 9.10% 10.30%
Portfolio turnover rate........ 39% 49% 66% 75% 73%
</TABLE>
(1) Commencement of offering of sales
(2) Based on average month-end shares outstanding
(3) 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
16
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-------------------------------------------
July 6,
Six Months Year Ended 1993(/1/)
Ended August 31 through
February 29, ----------------- August 31,
1996 1995 1994(/2/) 1993(/2/)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of peri-
od................................ $6.14 $6.11 $6.61 $6.63
----- ------ ----- ------
INCOME FROM INVESTMENT OPERATIONS
Investment income................. .33 .63 .65 .08
Expenses.......................... (.06) (.12) (.12) (.02)
----- ------ ----- ------
Net investment income.............. .27 .51 .53 .06
Net realized and unrealized gain
(loss) on securities.............. .17 .0435 (.428) .0195
----- ------ ----- ------
Total from investment operations... .44 .5535 .102 .0795
----- ------ ----- ------
DISTRIBUTIONS FROM NET INVESTMENT
INCOME............................ (.28) (.5235) (.602) (.0995)
----- ------ ----- ------
Net asset value, end of period..... $6.30 $6.14 $6.11 $6.61
----- ------ ----- ------
TOTAL RETURN (/3/)................. 7.31% 9.63% 1.43% 1.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the period (mil-
lions)............................ $15.7 $15.7 $13.2 $1.0
Average net assets (millions)...... $15.9 $13.3 $8.4 $0.3
Ratios to average net assets
(annualized)
Expenses.......................... 1.84% 1.93% 1.91% 2.34%
Net investment income............. 8.73% 8.42% 8.25% 8.05%
Portfolio turnover rate............ 39% 49% 66% 75%
</TABLE>
(1) Commencement of offering of sales
(2) Based on average month-end shares outstanding
(3) 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
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital High Income Corporate Bond Fund (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as a diversi-
fied open-end management investment company. The Fund seeks maximum current
income by primarily investing in high yielding, high risk fixed-income securi-
ties.
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-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 Trustees.
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 the end of the period, debt securities rated below
investment grade and comparable unrated securities represented approximately
90% 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
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), 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
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
such securities only upon physical delivery or evidence 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.
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.
At the end of the period, private placement securities comprised 5.2% of the
Fund's net assets with an aggregated market value and cost of $27,668,596 and
$26,464,091, respectively. 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 $259 million at August 31, 1995 may be utilized to offset
current or future gains until expiration in 1997 through 2003. Additionally,
approximately $16.4 million of post October losses are deferred for federal
income tax purposes to the 1996 fiscal year.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. 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
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- --------------------------------------------------------------------------------
generally accepted accounting principles. Such dividends or distributions may
exceed financial statement earnings.
G. DEBT DISCOUNT AND PREMIUM-The Fund accounts for discounts and premiums on
the same basis as is used for federal income tax reporting. Accordingly, origi-
nal issue discounts on 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 or-
dinary income for tax purposes.
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
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 $4,944 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 $473,347.
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 $48,626 and $48,699 respectively, as their
portion of the commissions charged on sales of Fund shares during the period.
As of January 2, 1996, Advantage Capital Corp. was no longer an affiliate of
the Adviser.
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 daily net assets to reimburse the Distributor for its dis-
tribution costs. 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 $2.9 million
and $122,000, respectively, and may be carried forward and reimbursed through
either the collection of the contin-
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
gent deferred sales charges from share redemptions or, subject to the annual
renewal of the plans, future Fund reimbursements of distribution fees.
Legal fees during the period 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, 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 $188,453,494 and $191,974,118,
respectively.
For federal income tax purposes, the identified cost of investments owned at
the end of the period was $504,121,152. Net unrealized appreciation of invest-
ments aggregated $17,811,237, gross unrealized appreciation of investments ag-
gregated $29,217,867, and gross unrealized depreciation of investments
aggregated $11,406,630.
NOTE 4--TRUSTEE COMPENSATION
Trustees who are not affiliated with the Adviser are compensated by the Fund
at the annual rate of $1,255 plus a fee of $36 per day for Board and Committee
meetings attended. During the period, such fees aggregated $15,023.
The Fund has in effect a deferred compensation plan and a defined benefits
retirement plan for its trustees not affiliated with the Adviser. These plans
are not funded, and obligations under the plans 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 plans by any form of trust or escrow.
Under the deferred compensation plan, trustees may elect to defer all or a
portion of their compensation to a later date. Each trustee covered under the
plan elects to earn on the deferred balances an amount equal to the total re-
turn of the Fund or equal to the income earned by the Fund on its short-term
investments.
Under the retirement plan which became effective in January, 1996, benefits
which are based on years of service will be received by the trustee for a ten
year period. The maximum annual benefit for each trustee is $2,500. Retirement
plan expenses for the period aggregated $1,600. During the calendar year 1996,
the Adviser has agreed to reimburse the Fund for these plan expenses.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(the Class A shares) or at the time of redemption on a contingent deferred ba-
sis (the Class B and C shares). All classes of shares have the same rights,
except that Class B and C shares bear the cost of distribution fees and cer-
tain other class specific expenses. Realized and unrealized gains or losses,
investment income, and expenses (other than class specific expenses) are allo-
cated 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 cer-
tain conditions.
The Fund has an unlimited number of shares of each class of $.01 par value
beneficial interest authorized. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
February 29, 1996 August 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A................................... 4,106,319 16,572,778
Class B................................... 3,690,502 6,107,591
Class C................................... 464,258 1,098,850
----------- -----------
8,261,079 23,779,219
----------- -----------
Shares issued for distributions invested
Class A................................... 2,018,043 3,668,661
Class B................................... 367,819 542,047
Class C................................... 70,083 117,949
----------- -----------
2,455,945 4,328,657
----------- -----------
Shares redeemed
Class A................................... (8,544,313) (12,716,368)
Class B................................... (1,708,314) (3,633,222)
Class C................................... (606,648) (823,734)
----------- -----------
(10,859,275) (17,173,324)
----------- -----------
Increase (decrease) in Fund shares out-
standing................................ (142,251) 10,934,552
----------- -----------
</TABLE>
NOTE 6--SUBSEQUENT DIVIDEND
The Board of Trustees of the Fund declared dividends from net investment in-
come of $.049 per share for Class A, and $.045 per share for Class B and C
shares, payable April 15, 1996 to shareholders of record on March 29, 1996.
22
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
23
<PAGE>
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND 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. MORRELL
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, Illinois 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.
24
