<PAGE>
Van Kampen American Capital
HIGH INCOME
CORPORATE BOND FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1998
[COVER ART APPEARS HERE]
A Wealth of Knowledge . A Knowledge of Wealth(TM)
VAN KAMPEN AMERICAN CAPITAL
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders...................................................... 1
Performance Results......................................................... 3
Glossary of Terms........................................................... 4
Portfolio Management Review................................................. 6
Portfolio Highlights........................................................ 8
Portfolio of Investments.................................................... 9
Statement of Assets and Liabilities......................................... 18
Statement of Operations..................................................... 19
Statement of Changes in Net Assets.......................................... 20
Financial Highlights........................................................ 21
Notes to Financial Statements............................................... 24
</TABLE>
HYI SAR 4/98
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Dennis J. McDonnell and Don G. Powell
[Photo of Dennis J. McDonnell and Don G. Powell APPEARS HERE]
March 27, 1998
Dear Shareholder,
We have begun what promises to be an exciting and challenging year for
investors. The Taxpayer Relief Act of 1997, signed into law by President Clinton
in August, creates many new opportunities for you and your family to take a more
active role in achieving your long-term financial goals.
Most Americans will benefit from the bill's $95 billion in tax cuts over
five years. The so-called Kiddie Credit gives parents $400 in immediate tax
relief for every child under age 17, and families will find it easier to save
for their children's college expenses through the new Education IRA. The bill
also cuts capital gains tax rates for the first time in over a decade and
loosens restrictions on tax-deductible IRA contributions. Perhaps the most
exciting feature is the new Roth IRA, which allows investment earnings to grow
tax free, not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll work with you to locate the many benefits hidden among the
changing tax landscape.
Economic Overview
The nation's economic report card continues to register nearly perfect
grades. Growth is strong, unemployment is low, the budget is headed for surplus,
and the dollar is rising around the world. With the economy running on all
cylinders, consumer confidence soared to a 30-year high in February.
Despite the strength in the economy, inflation remained under control. The
producer price index actually fell by 1.6 percent during the 12 months through
February. Inflation at the consumer level also was virtually nonexistent, with
the consumer price index rising by only 1.4 percent during the same period. A
strong dollar and significant productivity gains helped offset inflationary
pressures caused by rising wages.
The Federal Reserve Board left monetary policy unchanged during the six-
month reporting period. In addition to signs that the economy was slowing
modestly from its breakneck pace of early 1997, Fed policy-makers were concerned
about the impact that higher U.S. interest rates might have on the struggling
economies of Southeast Asia. Generally, higher U.S. interest rates cause the
dollar to rise relative to other currencies. With nearly all Asian currencies
already down significantly, a hike in U.S. rates would force monetary
authorities in Asia to choose between letting their currencies decline further
or matching the rate increase, thereby slowing their already-sluggish economies.
As the reporting period ended, there was little evidence that the Asian
crisis had negatively impacted the U.S. economy. The nation's total output of
goods and services (gross domestic product) grew at a rate of 3.9 percent in the
fourth quarter of 1997, and corporate profits remained strong. A modest pickup
in bond yields in mid-January indicated that global investors were
1 Continued on page two
<PAGE>
increasingly confident that the U.S. economy would escape significant damage
from the slowdown in Asia.
Market Overview
Aided by benign inflation at home and an economic crisis overseas, all
sectors of the fixed-income market posted solid returns. In particular, a global
"flight to quality" amid the turmoil in Asia pushed long-term interest rates
sharply lower during the later stages of the reporting period. In the six months
through February, the Merrill Lynch Domestic Master Index gained 5.77 percent.
The yield on the Treasury's benchmark 30-year bond declined from 6.60
percent at the end of August to 5.66 percent in mid-January as global investors
sought safety in the highly-liquid Treasury market. Demand for fixed-income
securities also increased as investors believed that fallout from the Asian
crisis would slow the U.S. economy enough to keep inflation from rising. But as
evidence indicated that economic growth remained strong, yields on long-term
Treasury bonds rebounded to close the reporting period at 5.91 percent.
Favorable news about inflation and concerns about Asia combined to make
high-quality long-term bonds the top-performing sector of the fixed-income
market during the reporting period. Long-term Treasury securities gained 10.86
percent for the six months ended in February, compared to 8.04 percent for long-
term corporate issues. Meanwhile, worries that the Asian crisis could lead to an
economic slump in the United States caused modest underperformance among high-
yield bonds, especially during the last quarter of 1997.
Outlook
We believe that reduced demand for American exports to Asia and intense
price competition from imports will exert a mild drag on the U.S. economy in
coming months. But while corporate profits could suffer in the near term, slower
economic growth should help to mitigate the inflationary pressures caused by the
tight domestic labor market. That scenario is good for fixed-income investments.
However, if bond yields continue to drift lower, economic growth in the
U.S. could reaccelerate later in 1998. In recent years, each significant decline
in long-term interest rates has ignited economic growth by making houses, cars,
and other big-ticket consumer goods more affordable. We believe the Federal
Reserve would respond to any significant pickup in economic activity with a
modest increase in short-term interest rates. We also expect the healthy economy
to keep credit spreads relatively tight in coming months.
As we noted earlier, the Taxpayer Relief Act of 1997 provides attractive
new vehicles through which investors can save for a variety of goals, including
higher education and retirement. We encourage you to work with your financial
adviser to consider how the tax changes can work to your benefit.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to serve you through our diverse menu of
quality investments.
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 28, 1998
- --------------------------------------------------------------------------------
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/......... 6.92% 6.53% 6.40%
Six-month total return/2/...................... 1.79% 2.53% 5.40%
One-year total return/2/....................... 7.70% 8.18% 11.06%
Five-year average annual total return/2/....... 10.23% 10.23% N/A
Ten-year average annual total return/2/........ 8.15% N/A N/A
Life-of-Fund average annual total return/2/.... 9.53% 10.64% 9.41%
Commencement date.............................. 10/02/78 07/02/92 07/06/93
Distribution Rate and Yield
Distribution Rate/3/........................... 8.57% 8.26% 8.31%
SEC Yield/4/................................... 8.03% 7.67% 7.73%
</TABLE>
N/A = Not Applicable
/1/ Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for A shares) or
contingent deferred sales charge for early withdrawal (4% for B shares and
1% for C shares).
/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 February 28,
1998.
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. This performance was achieved during
generally rising stock prices. Fund shares, when redeemed, may be worth more
or less than their original cost.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
- --------------------------------------------------------------------------------
Glossary of Terms
- --------------------------------------------------------------------------------
Basis point:
A measure used in quoting yields on bonds. One hundred basis points is equal
to one percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis point move. Sometimes referred to as a percentage
point.
Credit spread:
Also called quality spread, the difference in yield between higher-quality
issues (such as Treasury securities) and lower-quality issues. Under normal
circumstances, lower-quality issues provide higher yields in order to
compensate investors for the additional credit risk.
Duration:
A measure of a bond's sensitivity to changes in interest rates, expressed in
years. The longer a fund's duration, the greater the effect of interest rate
movements on net asset value. Typically, funds with shorter durations have
performed better in rising rate environments, while funds with longer
durations have performed better when rates decline.
Federal funds rate:
The interest rate charged by one institution lending federal funds to another.
This overnight rate is used to meet banks' daily reserve requirements. The
Federal Reserve Board uses the federal funds rate to affect the direction of
interest rates.
Federal Reserve Board (Fed):
A seven-member group that oversees the operations of the Federal Reserve
System, the central bank system of the United States. Currently led by
Chairman Alan Greenspan, the Fed meets eight times a year to establish
monetary policy and monitor the country's economic pulse.
Inflation:
An economic state in which the amount of money supply and business activity
dramatically increases, accompanied by sharply rising prices. Inflation is
widely measured by the Consumer Price Index, a leading economic indicator that
measures the change in the cost of purchased goods and services.
Net asset value (NAV):
The value of a mutual fund share, calculated by deducting a fund's liabilities
from its total assets and dividing this amount by the number of shares
outstanding. The NAV does not include any initial or contingent deferred sales
charge.
Premium redemption:
The redemption of a bond at a dollar amount above a stated par value, or the
redemption of a bond by the issuer prior to its maturity date.
Yankee bonds:
U.S. dollar-denominated bonds issued in the United States by foreign
governments, banks, and corporations.
4
<PAGE>
Yield:
The annual rate of return on an investment, expressed as a percentage. For
bonds and notes, the yield is the annual interest divided by the market price.
Yield curve:
A result of viewing the yields of U.S. Treasury securities maturing in 1, 5,
10, and 30 years, grouped together, which often reflects a pattern of
increasing yield as maturity extends. This pattern creates an upward sloping
"curve." A "flat" yield curve represents little difference between short- and
long-term interest rates.
Yield spread:
The difference in yields between low-quality fixed-income investments and
high-quality fixed-income investments. To compensate investors for the added
risk, low-quality fixed-income securities typically offer investors higher
yields than high-quality fixed-income securities. The resulting spread is
commonly expressed in basis points.
5
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Management Review
- --------------------------------------------------------------------------------
Van Kampen American Capital 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 that
shaped the markets during the past six months. The team includes Ellis S.
Bigelow, portfolio manager, and Peter W. Hegel, chief investment officer for
fixed-income investments. The following excerpts reflect their views on the
Fund's performance during the six-month period ended February 28, 1998.
Q How would you characterize the market conditions in which the Fund operated
during the reporting period?
A In the past six months, the bond market was most significantly affected by
a single event: the Asian currency crisis. Although Southeast Asian markets
began to show weakness in August, currency volatility reached a point of chaos
in late October. This situation negatively affected emerging market debt and
caused domestic yields to fall. By the last week of October, the difference in
yield between high yield paper and Treasuries had expanded dramatically, as many
foreign and U.S. investors sought the relative safety and liquidity of U.S.
Treasuries. Spreads narrowed somewhat by the end of the year but were still
wider than they were in August, due to concerns that Asian weakness would
precipitate a slowdown in the U.S. economy.
For the six-month period ended February 28, 1998, the yield of the
benchmark 10-year Treasury declined 72 basis points, ending the period with a
5.62 percent yield. At the same time, the three-month Treasury yield actually
increased from 5.22 percent on August 31, 1997, to 5.31 percent on February 28,
1998. This produced a considerable flattening of the yield curve--a narrowing of
the difference between long- and short-term bond yields. This scenario often
occurs when market sentiment believes that interest rates could fall, which in
this case was a response to an economic slowdown resulting from the Asian
crisis.
The high yield market has continued to benefit from relatively strong
technical conditions against this backdrop of volatility. By the end of 1997,
the market boasted record levels of new issuance, and more than $22 billion in
new high yield bonds was issued in the first few months of this year. This
growth in supply has been met with continued high demand. As a result, the high
yield market has nearly doubled in size between 1994 and 1997.
Q How did you manage the Fund in light of these conditions?
A The investment policy changes that we instituted last year have enabled us
to better address current trends in the marketplace. As stated in your
prospectus, those changes allow us to expand the portfolio's holdings in
investments issued by overseas corporations. More than approximately 20 percent
of all 1997 new issues were non-domestic, reflecting a continuing increase in
international debt. We added several attractive new issues from South America,
Mexico, and Poland to the Fund's portfolio. We also increased the Fund's
holdings in British cable companies, which have performed quite well. In spite
of these additions, the Fund's non-domestic component was slightly smaller than
its August percentage, because we eliminated the Fund's holdings in Southeast
Asia during the reporting period. We continue to watch emerging markets for new
investment opportunities.
Nearly half of all new issues in 1997 were contained in the media and
communications industries, and this growth is reflected in the Fund's portfolio.
Aside from the increased exposure in this
6
<PAGE>
sector, however, our industry line-up remained fairly steady during the period.
We have maintained a high level of exposure in the raw materials and processing
industry, as well as the consumer services sector. We did reduce the Fund's
exposure to energy issues when we began to see signs of weakness in the sector.
Six months ago, energy accounted for approximately 9 percent of long-term
investments, and it's now approximately 4 percent.
We continued to overweight the Fund's B-rated sector, although the current
percentage is slightly higher than its level in August. The Fund's BB-rated
holdings have decreased, but CCC-rated securities are relatively unchanged.
Noninvestment-grade bonds tend to generate higher yields than investment-grade
bonds and have performed better than high-quality securities when interest rates
rise. The additional income they generate compensates for some of the decline in
principal value due to rising rates. At the same time, when economic growth
accelerates, prospects for credit upgrades improve, which also helps
performance.
We were pleased with the Fund's surge in new assets during the reporting
period. The Fund's market value of investments at the end of this period was
$814 million, up from $677 million just six months earlier. The majority of new
assets have been invested in new high yield securities, allowing us to maintain
the Fund's cash position at just 4.2 percent. For additional Fund portfolio
highlights, please refer to page eight.
Q How did the Fund perform during the reporting period?
A The Fund posted a total return of 6.92 percent/1/ (Class A shares at net
asset value) for the six-month period ended February 28, 1998. By comparison,
the Credit Suisse First Boston High Yield Index returned 6.21 percent for the
same period. The First Boston High Yield Index is a broad-based index that
reflects the general performance of a wide range of selected bonds within the
public high yield debt market. It does not reflect any commissions or sales
charges 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 What is your outlook for the market over the coming months?
A The market continues to be driven by a strong domestic economy, a benign
rate of inflation, and tight labor markets. Nearly six months after the
Asian crisis, it's still unclear whether the weakness in Southeast Asia will
provoke a domestic economic slowdown that requires Federal Reserve Board
intervention. Either the Asian crisis will prove to be a small event in a self-
contained domestic economy, or its impact is large enough to slow domestic
activity and keep rates at a non-inflationary level. With the direction unclear,
we expect the spread between Treasuries and high yields to widen slightly, as
Treasury bonds are favored in light of market uncertainty. However, the
technical aspects that have steered the high yield market upward for the past
year remain strong, and high demand for attractive issues creates a tight
supply-and-demand scenario. We will continue to monitor future market and
economic factors and position the Fund accordingly.
/s/ Peter W. Hegel /s/ Ellis S. Bigelow
Peter W. Hegel Ellis S. Bigelow
Chief Investment Officer Portfolio Manager
Fixed Income Investments
7 Please see footnotes on page three.
<PAGE>
- -------------------------------------------------------------------------------
Portfolio Highlights
- -------------------------------------------------------------------------------
Van Kampen American Capital High Income Corporate Bond Fund
- -------------------------------------------------------------------------------
Top Ten Issuers as of February 28, 1998
- -------------------------------------------------------------------------------
Percentage of Fund's
Long-Term Investments
Printpack, Inc.................................. 1.4%
Majestic Star Casino L.L.C...................... 1.4%
Carpenter W R North America, Inc................ 1.3%
Price Communications Wireless................... 1.3%
Vicap S.A....................................... 1.3%
Northland Cable Television, Inc................. 1.3%
Consoltex Group, Inc............................ 1.2%
Venture Holdings, Inc........................... 1.2%
Satelites Mexicanos S.A. (Mexico)............... 1.2%
IMO Industries, Inc............................. 1.1%
- -------------------------------------------------------------------------------
Credit Quality as a Percentage of Corporate Obligations
- -------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
As of February 28, 1998 As of August 31, 1997
BBB......... 1.3% BBB......... 1.8%
BB..........11.1% BB..........16.8%
B...........74.7% B...........67.2%
CCC......... 3.7% CCC......... 5.3%
Non-Rated... 9.2% Non-Rated... 8.9%
Based upon the highest credit quality ratings as determined by Standard & Poor's
or Moody's.
- -------------------------------------------------------------------------------
Top Five Portfolio Sectors as a Percentage of Long-Term Investments
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of February 28, 1998 As of August 31, 1997
<S> <C>
Raw Materials/Processing Industries. 27.6% Raw Materials/Processing Industries..19.1%
Consumer Services................... 20.2% Consumer Services....................18.6%
Utilities........................... 12.6% Producer Manufacturing............... 9.1%
Producer Manufacturing.............. 8.0% Energy............................... 8.7%
Transportation...................... 6.7% Utilities............................ 8.3%
</TABLE>
- -------------------------------------------------------------------------------
Duration
- -------------------------------------------------------------------------------
As of February 28, 1998 As of August 31, 1997
Duration 3.9 years 3.6 years
8
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Portfolio of Investments
- ---------------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- ---------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Corporate Obligations 92.0%
Consumer Distribution 4.5%
$ 2,250 Big 5 Corp. ............................ 10.875% 11/15/07 $ 2,295,000
4,810 Brylane Capital Corp. .................. 10.000 09/01/03 5,110,625
2,000 Community Distributors, Inc. ........... 10.250 10/15/04 2,060,000
12,700 Del Monte Foods Co.,
144A-Private Placement (a) (b) ......... 0/12.500 12/15/07 8,096,250
5,500 Finlay Enterprises, Inc. (a) ........... 0/12.000 05/01/05 5,390,000
3,492 Pantry, Inc. ........................... 12.500 11/15/00 3,736,440
6,000 Pathmark Stores, Inc. (a) .............. 0/10.750 11/01/03 4,020,000
3,735 Pathmark Stores, Inc. .................. 12.625 06/15/02 3,641,625
2,500 Southern Foods Warehouse Corp.,
144A-Private Placement (b) ............. 9.875 09/01/07 2,668,750
-----------
37,018,690
-----------
Consumer Durables 3.6%
7,400 Aetna Industries, Inc. ................. 11.875 10/01/06 7,030,000
5,000 MCII Holdings USA, Inc. (Mexico) (a) ... 0/12.000 11/15/02 4,687,500
3,250 MDC Holdings, Inc. ..................... 11.125 12/15/03 3,575,000
1,750 UDC Homes, Inc., Ser A ................. 12.500 05/01/00 1,793,750
2,829 UDC Homes, Inc., Ser B ................. 12.500 05/01/00 2,899,725
9,140 Venture Holdings, Inc. ................. 9.750 04/01/04 9,231,400
-----------
29,217,375
-----------
Consumer Non-Durables 3.5%
1,000 Anchor Advanced Products, Inc. ......... 11.750 04/01/04 1,100,000
8,900 Consoltex Group, Inc. .................. 11.000 10/01/03 9,434,000
4,500 Curtice Burns Foods, Inc. .............. 12.250 02/01/05 4,950,000
4,770 Dan River, Inc. ........................ 10.125 12/15/03 5,103,900
1,500 French Fragrances, Inc. ................ 10.375 05/15/07 1,605,000
2,250 Signature Brands, Inc. ................. 13.000 08/15/02 2,430,000
4,000 Signature Brands, Inc., Ser Units ...... 13.000 08/15/02 4,380,000
-----------
29,002,900
-----------
</TABLE>
9 See Notes to Financial Statements
<PAGE>
- -------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Consumer Services 18.5%
$ 1,500 AFC Enterprises, Inc., .......................... 10.250% 05/15/07 $ 1,588,125
2,250 Americredit Corp. ............................... 9.250 02/01/04 2,250,000
4,500 Americredit Corp., 144A-Private Placement (b) ... 9.250 02/01/04 4,455,000
1,250 Booth Creek Ski Holdings, Inc.,
144A-Private Placement (b) ...................... 12.500 03/15/07 1,275,000
8,500 Booth Creek Ski Holdings, Inc., Ser B ........... 12.500 03/15/07 8,670,000
2,750 Busse Broadcasting Corp. ........................ 11.625 10/15/00 2,976,875
3,000 Cablevision Systems Corp. ....................... 9.875 02/15/13 3,300,000
7,770 Capstar Broadcast Partners (a) .................. 0/12.750 02/01/09 5,808,075
4,610 Casino America, Inc. ............................ 12.500 08/01/03 5,117,100
6,900 Casino Magic Corp. .............................. 13.000 08/15/03 7,969,500
5,500 Citadel Broadcasting Co. ........................ 10.250 07/01/07 6,050,000
7,500 Diamond Cable Co. (United Kingdom) (a) .......... 0/13.250 09/30/04 6,853,125
3,000 Diamond Cable Commerce PLC
(United Kingdom) (a) ............................ 0/10.750 02/15/07 1,998,750
5,980 Echostar Communications Corp. (a) ............... 0/12.875 06/01/04 5,666,050
5,250 FrontierVision Operating Partnership L.P. (a) ... 0/11.875 09/15/07 4,042,500
3,500 Gray Communications Systems, Inc. ............... 10.625 10/01/06 3,850,000
6,500 Grupo Televisa (Mexico) ......................... * 05/15/08 5,070,000
2,000 Grupo Televisa (Mexico) ......................... 11.875 05/15/06 2,315,000
5,796 Helicon Group L.P. (Variable Rate Coupon) ....... 11.000 11/01/03 6,230,700
3,500 Hollywood Theaters, Inc.,
144A-Private Placement (b) ...................... 10.625 08/01/07 3,775,625
6,750 Horseshoe Gaming L.L.C., Ser B .................. 9.375 06/15/07 7,273,125
7,000 IHF Holdings, Inc. (a) .......................... 0/15.000 11/15/04 6,020,000
1,750 International Cabletel, Inc. (a) ................ 0/12.750 04/15/05 1,489,688
3,500 Krystal Co. ..................................... 10.250 10/01/07 3,605,000
3,000 Louisiana Casino Cruises, Inc. .................. 11.500 12/01/98 3,003,750
9,750 Majestic Star Casino L.L.C. ..................... 12.750 05/15/03 10,530,000
5,500 Mohegan Tribal Gaming Authority of CT ........... 13.500 11/15/02 7,095,000
7,500 Multicanal Participacoes, Ser B (Brazil) ........ 12.625 06/18/04 8,025,000
4,500 SFX Broadcasting, Inc., Ser B ................... 10.750 05/15/06 5,011,875
</TABLE>
10 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- -----------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Services (Continued)
$ 8,000 Telewest PLC (United Kingdom) (a)...... 0/11.000% 10/01/07 $ 6,400,000
5,000 UIH Australia/Pacific, Inc., Ser B (a). 0/14.000 05/15/06 3,500,000
------------
151,214,863
------------
Energy 3.8%
5,750 Deeptech International................. 12.000 12/15/00 6,109,375
5,500 KCS Energy, Inc........................ 11.000 01/15/03 6,022,500
5,236 Kelley Oil & Gas Partners Ltd.......... 7.875 12/15/99 5,131,280
8,250 Pacalta Resources Ltd. (Canada)........ 10.750 06/15/04 8,332,500
2,750 Panaco, Inc............................ 10.625 10/01/04 2,750,000
2,766 Petroleum Heat & Power, Inc............ 12.250 02/01/05 2,627,700
------------
30,973,355
------------
Finance 1.9%
4,750 Americo Life, Inc...................... 9.250 06/01/05 4,892,500
6,000 Chatwins Group, Inc.
(Variable Rate Coupon)................. 13.000 05/01/03 6,390,000
1,500 Sig Capital Trust 1.................... 9.500 08/15/27 1,537,500
2,250 Superior National Capital Trust 1,
144A-Private Placement (b)............. 10.750 12/01/17 2,385,000
------------
15,205,000
------------
Healthcare 1.7%
4,000 Alliance Imaging....................... 9.625 12/15/05 4,130,000
4,750 Imagyn Medical Technology.............. 12.500 04/01/04 2,945,000
2,380 Maxxim Medical, Inc.................... 10.500 08/01/06 2,638,825
6,500 Paragon Health,
144A-Private Placement (a) (b)......... 0/10.500 11/01/07 4,192,500
------------
13,906,325
------------
Producer Manufacturing 7.6%
9,750 Carpenter W R North America, Inc....... 10.625 06/15/07 10,432,500
3,500 Communications Instrument,
144A-Private Placement (b)............. 10.000 09/15/04 3,640,000
4,950 GS Technologies Operating, Inc......... 12.000 09/01/04 5,432,625
8,000 IMO Industries, Inc.................... 11.750 05/01/06 8,960,000
1,750 Interlake Corp......................... 12.000 11/15/01 1,933,750
</TABLE>
11 See Notes to Financial Statements
<PAGE>
- -------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Producer Manufacturing (Continued)
$ 7,000 Interlake Corp. .................................... 12.125% 03/01/02 $ 7,227,500
3,500 International Knife & Saw, Inc. .................... 11.375 11/15/06 3,815,000
7,000 Marcus Cable Co., L.P. (a) ......................... 0/14.250 12/15/05 6,247,500
7,064 Terex Corp., Ser B ................................. 13.250 05/15/02 8,317,860
6,750 Waxman Industries, Inc. (a) ........................ 0/12.750 06/01/04 6,159,375
----------
62,166,110
----------
Raw Materials/Processing Industries 26.3%
5,000 AEP Industries, Inc., 144A-Private Placement (b) ... 9.875 11/15/07 5,287,500
2,750 Altos Hornos De Mexico S.A.,
144A-Private Placement (Mexico) (b) ................ 11.375 04/30/02 2,842,813
5,500 American Architecture Products,
144A-Private Placement (b) ......................... 11.750 12/01/07 5,733,750
6,000 Anchor Lamina, Inc., 144A-Private Placement (b) .... 9.875 02/01/08 6,045,000
4,540 Aracruz Celulose S.A.,
144A-Private Placement (Brazil) (b) ................ 10.375 01/31/02 4,664,850
3,000 Associated Materials, Inc. ......................... 9.250 03/01/08 3,015,000
4,250 Associated Materials, Inc. ......................... 11.500 08/15/03 4,547,500
1,750 ATC Group Services, 144A-Private Placement (b) ..... 12.000 01/15/08 1,771,875
1,500 Brand Scaffold Services Holdings Corp.,
144A-Private Placement (b) ......................... 10.250 02/15/08 1,526,250
4,000 Duane Reade, Inc. .................................. 9.250 02/15/08 4,040,000
3,000 Dyersburg Corp. .................................... 9.750 09/01/07 3,157,500
1,500 Eagle-Picher Industries,
144A-Private Placement (b) ......................... 9.375 03/01/08 1,507,500
4,500 Fisher Scientific, 144A-Private Placement (b) ...... 9.000 02/01/08 4,578,750
1,750 Galey & Lord, Inc., 144A-Private Placement (b) ..... 9.125 03/01/08 1,754,375
1,250 Grupo Industrial Durango S.A. (Mexico) ............. 12.625 08/01/03 1,415,625
5,000 Hollywood Casino Corp. ............................. 12.750 11/01/03 5,525,000
8,500 Hurricane Hydrocarbon Ltd.,
144A-Private Placement (b) ......................... 11.750 11/01/04 8,330,000
3,750 Hydrochem Industrial Services, Inc. ................ 10.375 08/01/07 3,900,000
2,100 ICO, Inc. .......................................... 10.375 06/01/07 2,226,000
</TABLE>
12 See Notes to Financial Statements
<PAGE>
- -------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Raw Materials/Processing Industries (Continued)
$ 5,850 Insilco Corp...................................... 10.250% 08/15/07 $ 6,252,188
6,500 Intermedia Communications, Inc., Ser B (a)........ 0/11.250 07/15/07 4,761,250
5,500 International Cabletel, Inc. (a).................. 0/11.500 02/01/06 4,372,500
5,500 IXC Communications, Inc........................... 12.500 10/01/05 6,366,250
3,125 Kevco, Inc., 144A-Private Placement (b)........... 10.375 12/01/07 3,250,000
5,750 Mail-Well Envelope Corp........................... 10.500 02/15/04 6,174,063
9,300 Northland Cable Television, Inc.,
144A-Private Placement (b)........................ 10.250 11/15/07 9,927,750
4,250 Oshkosh Trucking Corp.,
144A-Private Placement (b)........................ 8.750 03/01/08 4,287,188
2,250 Outsourcing Services Group,
144A-Private Placement (b)........................ 10.875 03/01/06 2,306,250
4,750 Pantry, Inc., 144A-Private Placement (b).......... 10.250 10/15/07 4,963,750
8,254 Pioneer Americas Acquisition Holdings, Inc........ 9.250 06/15/07 8,377,810
3,260 Plastic Specialties & Technologies, Inc........... 11.250 12/01/03 3,553,400
10,025 Printpack, Inc., Ser B............................ 10.625 08/15/06 10,877,125
3,250 Radnor Holdings, Inc.............................. 10.000 12/01/03 3,412,500
3,250 Radnor Holdings, Inc.,
144A-Private Placement (b)........................ 10.000 12/01/03 3,412,500
2,000 RBX Corp., 144A-Private Placement (b)............. 12.000 01/15/03 2,060,000
5,000 Renco Steel Holdings, Inc.,
144A-Private Placement (b)........................ 10.875 02/01/05 5,062,500
3,000 RSL Communications Co. PLC (Bermuda).............. 12.250 11/15/06 3,375,000
4,000 RSL Communications Co. PLC,
144A-Private Placement (Bermuda) (b).............. 12.250 03/01/08 2,430,000
9,000 Satelites Mexicanos S.A.,
144A-Private Placement (Mexico) (b)............... 10.125 11/01/04 9,180,000
4,500 Scovill Fastners, Inc.,
144A-Private Placement (b)........................ 11.250 11/30/07 4,702,500
2,500 Sealy Mattress Co.,
144A-Private Placement (a) (b).................... 0/10.875 12/15/07 1,631,250
1,500 Sealy Mattress Co., 144A-Private Placement (b).... 9.875 12/15/07 1,580,625
3,500 Tekni-Plex, Inc., 144A-Private Placement (b)...... 9.250 03/01/08 3,543,750
8,500 United International Holdings, Inc.,
144A-Private Placement (a) (b).................... 0/10.750 02/15/08 5,163,750
</TABLE>
13 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Raw Materials/Processing Industries (Continued)
$ 3,700 United Stationers, Inc............................. 12.750% 05/01/05 $ 4,273,500
6,000 Universal Compression Holdings Inc.,
144A-Private Placement (a) (b)..................... 0/9.875 02/15/08 3,735,000
1,000 Universal Compression Holdings Inc.,
144A-Private Placement (a) (b)..................... 0/11.375 02/15/09 592,500
9,000 Vicap S.A., 144A-Private Placement (Mexico) (b).... 11.375 05/15/07 10,001,250
3,750 Young America Corp.,
144A-Private Placement (b)......................... 11.625 02/15/06 3,787,500
------------
215,282,937
------------
Technology 2.8%
7,700 Crown Castle International Corp.,
144A-Private Placement (a) (b)..................... 0/10.625 11/15/07 5,120,500
1,500 DecisionOne Holdings Corp.......................... 11.500 08/01/08 926,250
7,050 Dictaphone Corp.................................... 11.750 08/01/05 7,191,000
7,250 Esprit Telecommunications Group PLC................ 11.500 12/15/07 7,884,375
2,000 L 3 Communications Corp............................ 10.375 05/01/07 2,205,000
------------
23,327,125
------------
Transportation 6.4%
3,750 Alpha Shipping, 144A-Private Placement (b)......... 9.500 02/15/08 3,656,250
7,500 Atlas Air, Inc..................................... 10.750 08/01/05 8,006,250
7,250 Greyhound Lines, Inc............................... 11.500 04/15/07 8,156,250
4,250 Moran Transport Co................................. 11.750 07/15/04 4,728,125
5,950 MRS Logistica S.A.,
144A-Private Placement (Brazil) (b)................ 10.625 08/15/05 5,712,000
6,250 Pegasus Shipping Hellas Ltd.,
144A-Private Placement (b)......................... 11.875 11/15/04 6,312,500
2,500 Sea Containers Ltd., Ser A (Bermuda)............... 12.500 12/01/04 2,825,000
2,750 Sea Containers Ltd., Ser B (Bermuda)............... 12.500 12/01/04 3,100,625
4,500 Stena AB (Sweden).................................. 10.500 12/15/05 4,938,750
1,800 Trans World Airlines, Inc.,
144A-Private Placement (b)......................... 11.500 12/15/04 1,908,000
3,700 Trism, Inc......................................... 10.750 12/15/00 3,145,000
------------
52,488,750
------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- -----------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
<CAPTION>
- -----------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities 11.4%
$6,800 Barak I.T.C., 144A-Private
Placement (a)(b)...................... 0/12.500% 11/15/07 $ 3,995,000
4,250 Crown Central Petroleum............... 10.875 02/01/05 4,526,250
3,000 Fonorola, Inc. (Canada)............... 12.500 08/15/02 3,322,500
568 GST Telecommunications, Inc.,
144A-Private Placement (a)(b)......... 0/13.875 12/15/05 734,822
9,544 GST USA, Inc. (a)..................... 0/13.875 12/15/05 7,587,480
2,815 Intermedia Communications of Florida,
Inc. (a).............................. 0/12.500 05/15/06 2,273,113
1,500 Metronet Communications Corp.,
144A-Private Placement (a)(b)......... 0/10.750 11/01/07 978,750
5,750 Metronet Communications Corp.,
144A-Private Placement (b)............ 12.000 08/15/07 6,641,250
9,000 Millicom International Cellular S.A.
(Luxembourg) (a)...................... 0/13.500 06/01/06 6,896,250
9,250 Netia Holdings, Inc., 144A-Private
Placement (Poland) (a)(b)............. 0/11.250 11/01/07 6,151,250
4,000 Nextlink Communications............... 9.625 10/01/07 4,240,000
4,150 Optel, Inc., Ser B.................... 13.000 02/15/05 4,523,500
4,500 Pegasus Communications Corp.,
144A-Private Placement (b)............ 9.625 10/15/05 4,747,500
3,000 Price Communications Cellular,
144A-Private Placement (a)(b)......... 0/13.500 08/01/07 2,077,500
9,250 Price Communications Wireless......... 11.750 07/15/07 10,175,000
5,750 Pricellular Wireless Corp. (a)........ 0/12.250 10/01/03 6,008,750
500 Pricellular Wireless Corp., Ser B..... 14.000 11/15/01 553,125
2,000 Primus Telecommunications Group....... 11.750 08/01/04 2,270,000
4,400 Primus Telecommunications Group, Ser
Units................................. 11.750 08/01/04 4,884,000
5,500 SBA Communication Corp.,
144A-Private Placement (a)(b)......... 0/12.000 03/01/08 3,080,000
5,750 Teleport Communications Group, Inc.
(a)................................... 0/11.125 07/01/07 4,959,375
3,000 Transtel S.A., 144A-Private Placement
(Columbia) (b)........................ 12.500 11/01/07 2,846,250
-----------
93,471,665
-----------
Total Corporate Obligations 92.0%......................... 753,275,095
-----------
</TABLE>
15 See Notes to Financial Statements
<PAGE>
- -------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign Government Obligations 1.3%
$ 2,000 Republic of Argentina (Argentina)....... 11.375% 01/30/17 $ 2,272,500
4,000 United Mexican States Debt (Mexico)..... 11.500 05/15/26 4,892,500
3,681 Venezuela Global Bonds (Venezuela)...... 9.250 09/15/27 3,285,703
------------
Total Foreign Government Obligations....................... 10,450,703
------------
</TABLE>
<TABLE>
<CAPTION>
Description Market Value
- -----------------------------------------------------------------------------------
<S> <C>
Equities 2.0%
American Telecasting, Inc. (1,750 Common Stock Warrants) (c).......... $ 17,500
Dairy Mart Convenience Stores (14,998 Common Stock Warrants) (c)...... 7,499
Finlay Enterprises, Inc. (6,333 Common Shares) (c).................... 149,617
Kelley Oil & Gas Corp. (50,000 Preferred Shares, 2.625% coupon, $25
par) (c)............................................................ 1,225,000
Metronet, 144A-Private Placement (5,750 Common Stock Warrants) (b)(c) 34,500
Nextlink Communications, Inc. (78,687 Preferred Shares, 14.00% coupon,
$50 par) (c)(d)..................................................... 4,819,579
Optel, Inc. (4,150 Common Shares) (c)................................. 42
Supermarkets General Holdings Corp. (151,101 Preferred Shares, 3.52%
coupon, $25 par) (c)(d)............................................. 2,644,268
Terex Corp. (28,000 Common Stock Rights) (c).......................... 448,000
Time Warner, Inc. (5,570 Preferred Shares, 10.25% coupon, $1,000 par)
(c)................................................................. 6,328,912
Total Renal Care Holdings, Inc. (10,000 Common Shares) (c)............ 321,875
Urohealth Systems, Inc., 144A-Private Placement (4,750 Common Stock
Warrants) (b)(c).................................................... 48
Wright Medical Technology, Inc. (4,118 Common Stock Warrants) (c)..... 41,172
------------
Total Equities.................................................... 16,038,012
------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Total Long-Term Investments 95.3%
(Cost $745,247,908)................................................ $779,763,810
Commercial Paper 4.2%
General Electric Capital Corp. ($34,530,000 par, yielding 5.683%,
03/02/98 maturity) (Cost $34,513,653).............................. 34,513,653
------------
Total Investments 99.5%
(Cost $779,761,561)................................................ 814,277,463
Other Assets in Excess of Liabilities 0.5%........................... 4,181,576
------------
Net Assets 100.0%.................................................... $818,459,039
============
*Zero coupon bond
</TABLE>
(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(c) Non-income producing security.
(d) Payment-in-kind security.
17 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total Investments (Cost $779,761,561)............................. $ 814,277,463
Cash.............................................................. 2,064
Receivables:
Investments Sold................................................ 15,481,385
Interest........................................................ 14,333,829
Fund Shares Sold................................................ 4,812,829
Other............................................................. 66,097
--------------
Total Assets................................................. 848,973,667
--------------
Liabilities:
Payables:
Investments Purchased........................................... 24,734,482
Income Distributions............................................ 2,817,153
Fund Shares Repurchased......................................... 1,836,203
Distributor and Affiliates...................................... 458,950
Investment Advisory Fee......................................... 328,551
Accrued Expenses.................................................. 182,488
Trustees' Deferred Compensation and Retirement Plans.............. 156,801
--------------
Total Liabilities............................................ 30,514,628
--------------
Net Assets........................................................ $ 818,459,039
==============
Net Assets Consist of:
Capital........................................................... $1,000,700,454
Net Unrealized Appreciation....................................... 34,515,902
Accumulated Undistributed Net Investment Income................... 821,809
Accumulated Net Realized Loss..................................... (217,579,126)
--------------
Net Assets........................................................ $ 818,459,039
==============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share
(Based on net assets of $527,830,849 and 79,154,986 shares of
beneficial interest issued and outstanding)..................... $ 6.67
Maximum sales charge (4.75%* of offering price).............. .33
--------------
Maximum offering price to public............................. $ 7.00
==============
Class B Shares:
Net asset value and offering price per share
(Based on net assets of $246,492,096 and 36,919,707 shares of
beneficial interest issued and outstanding)..................... $ 6.68
==============
Class C Shares:
Net asset value and offering price per share
(Based on net assets of $44,136,094 and 6,642,247 shares of
beneficial interest issued and outstanding)..................... $ 6.64
==============
*On sales of $100,000 or more, the sales charge will be reduced.
</TABLE>
18 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Statement of Operations
- ----------------------------------------------------------------------------------------
For the Six Months Ended February 28, 1998 (Unaudited)
- ----------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest........................................................................ $36,991,701
Dividends....................................................................... 895,062
Other Income.................................................................... 748,638
-----------
Total Income............................................................... 38,635,401
-----------
Expenses:
Investment Advisory Fee......................................................... 1,998,119
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of
$551,075, $1,080,252 and $176,992, respectively).............................. 1,808,319
Shareholder Services............................................................ 636,191
Trustees' Fees and Expenses..................................................... 20,596
Legal........................................................................... 19,352
Custody......................................................................... 4,039
Other........................................................................... 221,643
-----------
Net Expenses............................................................... 4,708,259
-----------
Net Investment Income........................................................... $33,927,142
===========
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments................................................................... $ 7,010,374
Futures....................................................................... (8,506)
-----------
Net Realized Gain............................................................... 7,001,868
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period....................................................... 26,232,513
End of the Period:
Investments................................................................ 34,515,902
-----------
Net Unrealized Appreciation During the Period................................... 8,283,389
-----------
Net Realized and Unrealized Gain................................................ $15,285,257
===========
Net Increase in Net Assets from Operations...................................... $49,212,399
===========
</TABLE>
19 See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------
For the Six Months Ended February 28, 1998 and
the Year Ended August 31, 1997 (Unaudited)
- ------------------------------------------------------------------------------------------
Six Months Ended Year Ended
February 28, 1998 August 31, 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.................................... $ 33,927,142 $ 57,118,179
Net Realized Gain........................................ 7,001,868 10,679,453
Net Unrealized Appreciation During the Period............ 8,283,389 14,770,464
------------ -------------
Change in Net Assets from Operations..................... 49,212,399 82,568,096
------------ -------------
Distributions from Net Investment Income:
Class A Shares....................................... (24,496,226) (43,009,717)
Class B Shares....................................... (9,851,125) (13,729,638)
Class C Shares....................................... (1,619,846) (1,962,490)
------------ -------------
Total Distributions................................. (35,967,197) (58,701,845)
------------ -------------
Net Change in Net Assets from Investment Activities...... 13,245,202 23,866,251
------------ -------------
From Capital Transactions:
Proceeds from Shares Sold................................ 166,843,750 290,139,308
Net Asset Value of Shares Issued Through
Dividend Reinvestment.................................. 20,328,913 33,996,355
Cost of Shares Repurchased............................... (79,363,231) (204,011,022)
------------ -------------
Net Change in Net Assets from
Capital Transactions................................... 107,809,432 120,124,641
------------ -------------
Total Increase in Net Assets............................. 121,054,634 143,990,892
Net Assets:
Beginning of the Period.................................. 697,404,405 553,413,513
------------ -------------
End of the Period
(Including accumulated undistributed net investment
income of $821,809 and $2,861,864, respectively)..... $818,459,039 $ 697,404,405
============ =============
</TABLE>
20 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31,
Six Months Ended -------------------------------
Class A Shares February 28, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period........................ $6.548 $6.298 $ 6.15 $ 6.12 $ 6.61
------ ------ ------ ------ ------
Net Investment Income........................ .303 .604 .607 .55 .63
Net Realized and Unrealized Gain/Loss........ .140 .267 .139 .0515 (.47)
------ ------ ------ ------ ------
Total from Investment Operations............... .443 .871 .746 .6015 .16
Less Distributions from Net Investment
Income......................................... .323 .621 .598 .5715 .65
------ ------ ------ ------ ------
Net Asset Value, End of the Period............. $6.668 $6.548 $6.298 $ 6.15 $ 6.12
====== ====== ====== ====== ======
Total Return (a)............................... 6.92%* 14.44% 12.66% 10.48% 2.34%
Net Assets at End of
the Period (In millions)....................... $527.8 $468.6 $421.4 $411.9 $364.2
Ratio of Expenses to
Average Net Assets (b)......................... 1.00% 1.08% 1.08% 1.12% 1.10%
Ratio of Net Investment Income to
Average Net Assets (b)......................... 9.34% 9.37% 9.65% 9.23% 9.03%
Portfolio Turnover............................. 52%* 75% 76% 49% 66%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC
reimbursement of certain expenses was less than 0.01%.
* Non-annualized
21 See Notes to Financial Statements
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended August 31,
Six Months Ended --------------------------------
Class B Shares February 28, 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period................... $ 6.558 $6.310 $ 6.16 $ 6.14 $ 6.63
------- ------ ------ ------ ------
Net Investment Income...................... .282 .559 .559 .51 .58
Net Realized and Unrealized Gain/Loss...... .135 .262 .141 .0335 (.468)
------- ------ ------ ------ ------
Total from Investment Operations............. .417 .821 .700 .5435 .112
Less Distributions from Net Investment
Income.................................... .299 .573 .550 .5235 .602
------- ------ ------ ------ ------
Net Asset Value, End of the Period........... $ 6.676 $6.558 $6.310 $ 6.16 $ 6.14
======= ====== ====== ====== ======
Total Return (a)............................. 6.53%* 13.58% 11.78% 9.41% 1.59%
Net Assets at End of the Period
(In millions)............................. $ 246.5 $198.0 $114.6 $ 89.9 $ 71.0
Ratio of Expenses to Average
Net Assets (b)............................ 1.78% 1.86% 1.87% 1.93% 1.90%
Ratio of Net Investment Income to Average
Net Assets (b)............................... 8.52% 8.60% 8.86% 8.42% 8.25%
Portfolio Turnover........................... 52%* 75% 76% 49% 66%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC
reimbursement of certain expenses was less than 0.01%.
* Non-annualized
22 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31,
Six Months Ended --------------------------------
Class C Shares February 28, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period.......................... $ 6.528 $ 6.14 $ 6.11 $ 6.61 $ 6.63
------- ------- ------ ------ ------
Net Investment Income............................ .283 .561 .557 .51 .53
Net Realized and Unrealized Gain/Loss............ .132 .256 .137 .0435 (.428)
------- ------- ------ ------ -----
Total from Investment Operations................... .415 .817 .694 .5535 .102
Less Distributions from Net Investment
Income............................................. .299 .573 .550 .5235 .602
------- ------- ------ ------ ------
Net Asset Value, End of the Period................. $ 6.644 $ 6.528 $6.284 $ 6.14 $ 6.11
======= ======= ====== ====== ======
Total Return (a)................................... 6.40%* 13.64% 11.66% 9.63% 1.43%
Net Assets at End of the Period
(In millions).................................... $ 44.1 $ 30.8 $ 17.5 $ 15.7 $ 13.2
Ratio of Expenses to
Average Net Assets (b)........................... 1.77% 1.86% 1.87% 1.93% 1.91%
Ratio of Net Investment Income to
Average Net Assets (b)........................... 8.48% 8.57% 8.86% 8.42% 8.25%
Portfolio Turnover................................. 52%* 75% 76% 49% 66%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC
reimbursement of certain expenses was less than 0.01%.
* Non-annualized
23 See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Van Kampen American Capital High Income Corporate Bond Fund (the "Fund"), a
Delaware business trust, is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to provide maximum current income through
investment in high yielding, high risk fixed-income securities. The Fund
commenced investment operations on October 2, 1978. The Fund commenced
distribution of its Class B and Class C shares on July 2, 1992 and July 6, 1993,
respectively.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuation-Fixed income investments and preferred stock are stated at
value using market quotations. Investments in securities listed on a securities
exchange are valued at the sale price as of the close of such securities
exchange. Unlisted securities and listed securities for which the last sales
price is not available are valued at the last reported bid price. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the Board
of Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost.
Fund investments include lower-rated debt securities which may be more
susceptible 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 99%
of the investment portfolio. At February 28, 1998, approximately 15% of the
Fund's long-term investments were in non-U.S. issuers, of which the largest
geographic exposure was 5%.
B. Security Transactions-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At February 28, 1998, there were no
when issued or delayed delivery purchase commitments.
24
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Fund may invest in repurchase agreements, which are short-term investments
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
invest independently in repurchase agreements, or transfer uninvested cash
balances into a pooled cash account along with other investment companies
advised by Van Kampen American Capital Asset Management, Inc. (the "Adviser") or
its affiliates, the daily aggregate of which is invested in repurchase
agreements. Repurchase agreements are fully collateralized by the underlying
debt security. The Fund will make payment for such securities only upon physical
delivery or evidence of book entry transfer to 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. Income and Expenses-Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Original issue discounts on
debt securities purchased are amortized over the life of the respective
security. Premiums on debt securities are not amortized. Expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. Federal Income Taxes-It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At August 31, 1997, the Fund had an accumulated capital loss carryforward
for tax purposes of $224,476,411 which expires between August 31, 1998 and
August 31, 2004. Of this amount, $36,374,534 will expire in 1998. Net realized
gains or losses may differ for financial reporting and tax purposes primarily as
a result of the deferral of losses for tax purposes resulting from wash sales.
At February 28, 1998, for federal income tax purposes, cost of long- and
short-term investments is $779,851,561, the aggregate gross unrealized
appreciation is $38,908,572 and the aggregate gross unrealized depreciation is
$4,482,670, resulting in net unrealized appreciation of $34,425,902.
E. Distribution of Income and Gains-The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included in ordinary income for
tax purposes.
25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
Average Net Assets % Per Annum
- --------------------------------------------------------------------------------
First $150 million................................................ .625 of 1%
Next $150 million................................................. .550 of 1%
Over $300 million................................................. .500 of 1%
For the six months ended February 28, 1998, the Fund recognized expenses of
approximately $19,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended February 28, 1998, the Fund recognized expenses of
approximately $62,900 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting
services to the Fund.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser, serves
as the shareholder servicing agent of the Fund. For the six months ended
February 28, 1998, the Fund recognized expenses of approximately $455,300,
representing ACCESS' cost of providing transfer agency and shareholder
services plus a profit.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund provides deferred compensation and retirement plans for its trustees
who are not officers of VKAC. Under the deferred compensation plan, trustees may
elect to defer all or a portion of their compensation to a later date. Benefits
under the retirement plan are payable for a ten-year period and are based upon
each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is equal to $2,500.
26
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
At February 28, 1998, capital aggregated $733,665,733, $225,249,549 and
$41,785,172 for Class A, B and C shares, respectively. For the six months ended
February 28, 1998, transactions were as follows:
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
Sales:
<S> <C> <C>
Class A.................................... 12,595,336 $ 83,383,985
Class B.................................... 10,316,697 68,361,592
Class C.................................... 2,288,550 15,098,173
----------- ------------
Total Sales.................................. 25,200,583 $166,843,750
=========== ============
Dividend Reinvestment:
Class A.................................... 2,220,448 $ 14,648,888
Class B.................................... 723,866 4,782,353
Class C.................................... 136,482 897,672
----------- ------------
Total Dividend Reinvestment.................. 3,080,796 $ 20,328,913
=========== ============
Repurchases:
Class A.................................... (7,222,247) $(47,613,514)
Class B.................................... (4,312,354) (28,458,471)
Class C.................................... (500,108) (3,291,246)
----------- ------------
Total Repurchases............................ (12,034,709) $(79,363,231)
=========== ============
</TABLE>
27
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
At August 31, 1997, capital aggregated $683,246,374, $180,564,075 and
$29,080,573 for Class A, B and C shares, respectively. For the year ended August
31, 1997, transactions were as follows:
<TABLE>
Shares Value
==============================================================================
<S> <C> <C>
Sales:
Class A....................................... 25,421,874 $ 163,679,383
Class B....................................... 16,738,565 108,268,484
Class C....................................... 2,815,626 18,191,441
----------- -------------
Total Sales..................................... 44,976,065 $ 290,139,308
=========== =============
Dividend Reinvestment:
Class A....................................... 4,028,534 $ 25,967,824
Class B....................................... 1,069,455 6,908,909
Class C....................................... 174,005 1,119,622
----------- -------------
Total Dividend Reinvestment..................... 5,271,994 $ 33,996,355
=========== =============
Repurchases:
Class A....................................... (24,797,705) $(159,884,130)
Class B....................................... (5,774,518) (37,359,396)
Class C....................................... (1,052,510) (6,767,496)
----------- -------------
Total Repurchases............................... (31,624,733) $(204,011,022)
=========== =============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
-------------------
Year of Redemption Class B Class C
=============================================================================
<S> <C> <C>
First................................................ 4.00% 1.00%
Second............................................... 4.00% None
Third................................................ 3.00% None
Fourth............................................... 2.50% None
Fifth................................................ 1.50% None
Sixth and Thereafter................................. None None
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
================================================================================
For the six months ended February 28, 1998, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$114,500 and CDSC on redeemed shares of approximately $206,800. Sales charges do
not represent expenses of the Fund.
4. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $490,908,433 and $363,895,635,
respectively.
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived'' from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In this instance,
the recognition of gain or loss is postponed until the disposal of the security
underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in futures on U.S. Treasury Notes. These contracts are
generally used to manage the portfolio's effective maturity and duration.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin).
Transactions in futures contracts for the six months ended February 28, 1998,
were as follows:
Contracts
===============================================================================
Outstanding at August 31, 1997........................................... -0-
Futures Opened........................................................... 40
Futures Closed........................................................... (40)
----
Outstanding at February 28, 1998......................................... -0-
====
29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
6. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A average net assets and
1.00% each for Class B and Class C average net assets are accrued daily.
Included in these fees for the six months ended February 28, 1998, are payments
retained by VKAC of approximately $903,800.
30
<PAGE>
- -------------------------------------------------------------------------------
Funds Distributed by Van Kampen American Capital
- -------------------------------------------------------------------------------
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
VKAC Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Limited Maturity Government
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term
Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen American Capital or Morgan Stanley fund prospectus
or to receive additional fund information, choose from one of the following:
/./ visit our web site at www.vkac.com -- to view prospectuses, select
Investors' Place, then Download a Prospectus
/./ call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
/./ e-mail us by visiting www.vkac.com and selecting Investors' Place
31
<PAGE>
- -------------------------------------------------------------------------------
Van Kampen American Capital High Income Corporate Bond Fund
- -------------------------------------------------------------------------------
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen* - Chairman
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya M. Loden*
Controller
Peter W. Hegel*
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 Servicing Agent
ACCESS Investor
Services, Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank
and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
Price Waterhouse LLP
200 E. Randolph Drive
Chicago, IL 60601
* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
/(C)/ Van Kampen American Capital Distributors, Inc., 1998
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 unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After June 30, 1998, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
32
<PAGE>
----------------
Van Kampen American Capital Distributors, Inc. Bulk Rate
One Parkview Plaza U.S. Postage
Oakbrook Terrace, Illinois 60181 PAID
VAN KAMPEN
AMERICAN CAPITAL
----------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> HIGH INC CORP END
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 779,761,561
<INVESTMENTS-AT-VALUE> 814,277,463
<RECEIVABLES> 34,628,043
<ASSETS-OTHER> 66,097
<OTHER-ITEMS-ASSETS> 2,064
<TOTAL-ASSETS> 848,973,667
<PAYABLE-FOR-SECURITIES> 24,734,482
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,780,146
<TOTAL-LIABILITIES> 30,514,628
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 733,665,733
<SHARES-COMMON-STOCK> 79,154,986
<SHARES-COMMON-PRIOR> 71,561,449
<ACCUMULATED-NII-CURRENT> 821,809
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (217,579,126)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34,515,902
<NET-ASSETS> 527,830,849
<DIVIDEND-INCOME> 895,062
<INTEREST-INCOME> 36,991,701
<OTHER-INCOME> 748,638
<EXPENSES-NET> (4,708,259)
<NET-INVESTMENT-INCOME> 33,927,142
<REALIZED-GAINS-CURRENT> 7,001,868
<APPREC-INCREASE-CURRENT> 8,283,389
<NET-CHANGE-FROM-OPS> 49,212,399
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (24,496,226)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,595,336
<NUMBER-OF-SHARES-REDEEMED> (7,222,247)
<SHARES-REINVESTED> 2,220,448
<NET-CHANGE-IN-ASSETS> 59,224,231
<ACCUMULATED-NII-PRIOR> 2,861,864
<ACCUMULATED-GAINS-PRIOR> (224,580,994)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,998,119
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,708,259
<AVERAGE-NET-ASSETS> 500,888,111
<PER-SHARE-NAV-BEGIN> 6.548
<PER-SHARE-NII> 0.303
<PER-SHARE-GAIN-APPREC> 0.140
<PER-SHARE-DIVIDEND> (0.323)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 6.668
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> HIGH INC CORP BND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 779,761,561
<INVESTMENTS-AT-VALUE> 814,277,463
<RECEIVABLES> 34,628,043
<ASSETS-OTHER> 66,097
<OTHER-ITEMS-ASSETS> 2,064
<TOTAL-ASSETS> 848,973,667
<PAYABLE-FOR-SECURITIES> 24,734,482
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,780,146
<TOTAL-LIABILITIES> 30,514,628
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 225,249,549
<SHARES-COMMON-STOCK> 36,919,707
<SHARES-COMMON-PRIOR> 30,191,498
<ACCUMULATED-NII-CURRENT> 821,809
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (217,579,126)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34,515,902
<NET-ASSETS> 246,492,096
<DIVIDEND-INCOME> 895,062
<INTEREST-INCOME> 36,991,701
<OTHER-INCOME> 748,638
<EXPENSES-NET> (4,708,259)
<NET-INVESTMENT-INCOME> 33,927,142
<REALIZED-GAINS-CURRENT> 7,001,868
<APPREC-INCREASE-CURRENT> 8,283,389
<NET-CHANGE-FROM-OPS> 49,212,399
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,851,125)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,316,697
<NUMBER-OF-SHARES-REDEEMED> (4,312,354)
<SHARES-REINVESTED> 723,866
<NET-CHANGE-IN-ASSETS> 48,490,812
<ACCUMULATED-NII-PRIOR> 2,861,864
<ACCUMULATED-GAINS-PRIOR> (224,580,994)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,998,119
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,708,259
<AVERAGE-NET-ASSETS> 218,136,065
<PER-SHARE-NAV-BEGIN> 6.558
<PER-SHARE-NII> 0.282
<PER-SHARE-GAIN-APPREC> 0.135
<PER-SHARE-DIVIDEND> (0.299)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 6.676
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> HIGH INC CORP BND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 779,761,561
<INVESTMENTS-AT-VALUE> 814,277,463
<RECEIVABLES> 34,628,043
<ASSETS-OTHER> 66,097
<OTHER-ITEMS-ASSETS> 2,064
<TOTAL-ASSETS> 848,973,667
<PAYABLE-FOR-SECURITIES> 24,734,482
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,780,146
<TOTAL-LIABILITIES> 30,514,628
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,785,172
<SHARES-COMMON-STOCK> 6,642,247
<SHARES-COMMON-PRIOR> 4,717,323
<ACCUMULATED-NII-CURRENT> 821,809
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (217,579,126)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34,515,902
<NET-ASSETS> 44,136,094
<DIVIDEND-INCOME> 895,062
<INTEREST-INCOME> 36,991,701
<OTHER-INCOME> 748,638
<EXPENSES-NET> (4,708,259)
<NET-INVESTMENT-INCOME> 33,927,142
<REALIZED-GAINS-CURRENT> 7,001,868
<APPREC-INCREASE-CURRENT> 8,283,389
<NET-CHANGE-FROM-OPS> 49,212,399
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,619,846)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,288,550
<NUMBER-OF-SHARES-REDEEMED> (500,108)
<SHARES-REINVESTED> 136,482
<NET-CHANGE-IN-ASSETS> 13,339,591
<ACCUMULATED-NII-PRIOR> 2,861,864
<ACCUMULATED-GAINS-PRIOR> (224,580,994)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,998,119
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,708,259
<AVERAGE-NET-ASSETS> 35,769,206
<PER-SHARE-NAV-BEGIN> 6.528
<PER-SHARE-NII> 0.283
<PER-SHARE-GAIN-APPREC> 0.132
<PER-SHARE-DIVIDEND> (0.299)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 6.644
<EXPENSE-RATIO> 1.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
