<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Highlights........................ 4
Portfolio Management Review................. 5
Portfolio of Investments.................... 7
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>
HAR SAR 8/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
August 1, 1996
Dear Shareholder,
As you may be aware, an agreement was reached in late June for VK/AC
Holding, Inc., the parent company of Van Kampen AmericanCapital, Inc., to be
acquired by the MorganStanley Group Inc. While this announcement may appear
commonplace in an ever-changing financial industry, we believe it represents
an exciting opportunity for shareholders of our investment products.
With Morgan Stanley's global leadership in investment banking and asset man-
agement and Van Kampen American Capital's reputation for competitive long-term
performance and superior investor services, together we will offer a broader
range of investment opportunities and expertise.
The new ownership will not affect our commitment to pursuing excellence in
all aspects of our business. And, we expect very little change in the way your
mutual fund account is maintained and serviced.
A proxy will be mailed to you shortly explaining the acquisition and asking
for your vote of approval. Please read it carefully and return your response
for inclusion in the shareholder vote. We value our relationship with you and
look forward to communicating more details of this transaction, which is an-
ticipated to be completed in November.
ECONOMIC REVIEW
The economy demonstrated an acceleration in growth during the six-month re-
porting period. After a nominal 0.3 percent growth rate in the last quarter of
1995, GDP (the nation's gross domestic product) rose by 2.0 percent in this
year's first quarter. And, as anticipated, the economy grew 4.2 percent in the
second quarter, partly reflecting a recovery from the effects of labor strikes
earlier in the year and extreme weather conditions across the country. Upward
momentum has been assisted by consumer spending, as indicated by a 5.6 percent
rise in retail sales in the first five months of this year versus the compara-
ble 1995 period.
In the manufacturing sector, economic reports, such as the National Associa-
tion of Purchasing Managers Index, suggested a continued rebound in production
from last winter's lower levels. In June, this index reached its highest level
since early 1995. Strong levels of exports and a replenishing of inventories
have helped support this momentum.
Surprisingly healthy economic activity led to concerns that inflation may
rise and the Federal Reserve Board might tighten monetary policy. Inflation
remains modest, however, with consumer prices rising at about a 3 percent an-
nual rate over the past year. Meanwhile, the closely watched "core" Consumer
Price Index, which excludes volatile food and energy components, has risen
year over year at rates between 2.7 and 3.0 percent per year, with mid-1996
readings at a moderate 2.7 percent. In general, recent reports have suggested
an upward creep in labor-related costs, while indicating that prices of many
commodities have begun to decline.
Continued on page two
1
<PAGE>
MARKET REVIEW
The stock market averages posted attractive gains for the six-month period
ended June 30, 1996, with most major averages posting all-time highs. The Dow
Jones Industrial Average rose 10.9 percent from 5095 to 5654, and the NASDAQ
Composite Index rose 12.6 percent from 1052 to 1185.
Corporate earnings, which were an important contributor to last year's
strong stock market, continued to move ahead during the reporting period. Un-
expectedly strong economic activity helped lift reported profits above expec-
tations for the period. Through the rest of 1996, we expect earnings will be
supportive, but perhaps not the primary factor in the movement of the major
stock market averages.
In the fixed-income market, interest rates trended lower in the last half of
1995. However, during the first half of 1996 interest rates rose sharply, and
U.S. Treasury yields increased by 1.00 to 1.25 percent. Benchmark 10-year U.S.
Treasuries declined in value by 7.8 percent. Signs of increasing economic mo-
mentum, as discussed above, were a major factor contributing to this decline.
OUTLOOK
We anticipate that reasonably strong economic growth will continue during
the balance of 1996, albeit at more moderate rates than the second quarter's
swift pace. While we expect rates of inflation to remain near current levels,
the Fed may begin to lean toward greater restraint in its monetary policy in
the coming months. That suggests an upward bias for short-term interest rates
and for yields on long-term bonds to remain steady at current levels. In the
fixed-income market, we expect 10-year Treasury yields to remain within a
trading range of 6.50 and 7.25 percent.
Additional details about your Fund, including a question and answer section
with your portfolio management team, is provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.
Sincerely,
SIGNATURE LOGO SIGNATURE LOGO
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 JUNE 30, 1996
VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return based on NAV/1/.............. 6.10% 5.64% 5.61%
Six-month total return/2/........................... (.01%) .64% 4.61%
One-year total return/2/............................ 9.38% 10.02% 14.10%
Five-year average annual total return/2/............ 10.17% N/A N/A
Ten-year average annual total return/2/............. 8.45% N/A N/A
Life-of-Fund average annual total return/2/......... 9.64% 9.41% 7.13%
Commencement Date................................... 11/15/56 12/20/91 10/26/93
</TABLE>
N/A = Not Applicable
/1/Assumes reinvestment of all distributions for the period and does not in-
clude payment of the maximum sales charge (5.75% for A shares) or contingent
deferred sales charge for early withdrawal (5% 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 con-
tingent deferred sales charge for early withdrawal (B and C shares).
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 HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
TOP TEN HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF JUNE 30, % OF FUND
1996 SIX MONTHS AGO
<S> <C> <C>
United States Treasury Note................................ 2.7%.......... N/A
SFP Pipeline Holdings, Inc. ............................... 2.3%.......... 2.3%
Prime Hospitality Corp. ................................... 2.1%.......... 0.9%
SCI Finance LLC............................................ 2.0%.......... 2.0%
Morgan Stanley............................................. 1.8%.......... N/A
Freeport McMoran Copper & Gold............................. 1.7%.......... 1.6%
Consolidated Natural Gas Co. .............................. 1.7%.......... 1.6%
Turner Broadcasting System, Inc. .......................... 1.6%.......... 1.5%
Rogers Communications...................................... 1.5%.......... 0.8%
Worldcom, Inc. ............................................ 1.5%.......... 0.5%
</TABLE>
N/A = Not Applicable
TOP FIVE PORTFOLIO HOLDINGS BY SECTOR
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
<S> <C>
Consumer Services..... 15%
Finance............... 10%
Energy................ 9%
Utilities............. 9%
Producer
Manufacturing....... 9%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
<S> <C>
Finance............... 14%
Consumer Services..... 13%
Technology............ 11%
Energy................ 10%
Utilities............. 7%
</TABLE>
ASSET ALLOCATION
[PIE CHARTS APPEAR HERE]
As of June 30, 1996
Stocks..................... 19%
U.S. Government............ 3%
Convertibles............... 72%
Other...................... 6%
As of December 31, 1995
Stocks..................... 20%
Convertibles............... 75%
Other...................... 5%
4
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
We recently spoke with the management team of the Van Kampen American Capital
Harbor Fund about the key events and economic forces that shaped the markets
during the past six months. The team includes James Behrmann, portfolio
manager, and Alan T. Sachtleben, executive vice president, equity investments.
The following excerpts reflect their views on the Fund's performance during
the six months ended June 30, 1996.
WHAT MAJOR FACTORS AFFECTED THE FUND DURING THE FIRST HALF OF 1996?
Q
A During most of the first half of the year, interest rates on intermedi-
ate and long-term bonds rose steadily. Rising interest rates reduce the
value of bonds, including convertible securities. However, the stock market
was relatively strong for most of the period, particularly for small capital-
ization stocks, and many convertible bonds in the first half of the year were
issued by small cap companies. So, through the period, we had the counteract-
ing forces of rising interest rates and a strong stock market.
Q GIVEN THE ENVIRONMENT, WHAT WAS YOUR STRATEGY DURING THE PERIOD?
A Because interest rates continued to rise, we liquidated interest-rate
sensitive issues early on and purchased cyclical issues that we would
expect would be more responsive to the economy in general. Cyclical issues in-
clude airline companies where seat availability has become tight and demand
has increased, pushing fares higher and increasing corporate profits. We added
Continental and Delta Airlines to the portfolio.
We increased the Fund's exposure in the telecommunications sector, including
radio broadcasters such as Jacor Communications, SFX Broadcasting and Westing-
house. Telecommunications laws have changed recently and companies are now al-
lowed to own up to seven stations in one market, rather than one or two. This
should lead to economies of scale and pricing control in this sector.
In addition, we have overweighted our position in the energy industry, and
believe yields on international oil convertible securities, such as Exxon and
Texaco, are particularly attractive. Among the Fund's top holdings are SFP
Pipeling Holdings (energy), Prime Hospitality Inns(a lodging chain), and SCI
Finance (consumer service). The Fund's portfolio remains well diversified
across the major industries and no issue comprises more than 3 percent of the
Fund's total assets. Please refer to page four for Fund portfolio highlights.
HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED JUNE 30, 1996?
Q
A Class A shares of the Fund achieved a total return at net asset value of
6.10 percent/1/, including reinvestment of dividends totaling $0.28 per
share and capital gains distributions of $0.224 per share. By comparison, the
Lipper Convertible Securities Fund Index generated a total return of 7.14 per-
cent, while the Standard & Poor's 500-Stock Index returned 10.08 percent for
the same six-month period. The Fund's performance reflects a portfolio that
currently consists of higher-quality securities than other convertible bond
funds.
5
<PAGE>
The Lipper index represents the average performance of the largest convert-
ible securities funds and does not reflect any sales charges that would be paid
by an investor purchasing the funds. The S&P 500 Index is a broad-based, unman-
aged index that reflects the general stock market performance and does not re-
flect any commissions or fees that would be paid by an investor purchasing the
securities it represents. Additionally, funds invested in convertible securi-
ties typically realize a lower total return than stock funds in a strong mar-
ket, but a higher return in a weak market.
The Fund sustained a slight reduction in its quarterly dividend from $0.15 to
$0.13 per common share, effective June 14, 1996 and first payable June 28,
1996. This was due to older, high-coupon convertible bonds being "called" (re-
deemed prior to the stated maturity) from the portfolio and replaced by the
market's current lower-yielding convertible securities. Please refer to the
chart on page three for additional Fund performance results.
Q HOW HAS THE FUND'S CREDIT QUALITY CHANGED DURING THE PERIOD?
A It has declined slightly, primarily because the new issue market--which
during the first half of the year was comprised of primarily low-grade se-
curities--has been very strong. At the same time, many high-quality bonds have
been called out of the market. Relative to other convertible bond funds, the
Harbor Fund maintains a larger percentage of bonds rated BBB or better, so the
Fund is still one of the higher-grade funds of this kind available to investors.
Q WHAT IS YOUR OUTLOOK FOR THE FUND?
A The Fund's portfolio is comprised of investments designed to maintain a
high relative yield without incurring undue risk. This defensive nature
has helped the Fund perform competitively in up markets and has helped minimize
the negative impact of down markets. Therefore, although we may experience ad-
ditional volatility in the stock and bond markets, we anticipate that the
Fund's defensive structure will allow it to weather this market environment fa-
vorably.
We believe that the second half of the year will be at least as beneficial
for the Harbor Fund as the first half. Finally, our long-term outlook remains
positive, and we expect the Fund to perform well on a total return basis and,
over time, provide competitive returns with other investment categories.
SIGNATURE LOGO SIGNATURE LOGO
Alan T. Sachtleben James Behrmann
Executive Vice President Portfolio Manager
Equity Investments
Please see footnotes on page three.
6
<PAGE>
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE
OBLIGATIONS 48.4%
CONSUMER DISTRIBUTION 4.4%
$ 3,000 Corporate Express.................... 4.500% 07/01/00 $ 2,977,500
2,200 Danka Business Systems............... 6.750 04/01/02 2,568,500
4,500 Federated Department Stores Inc...... 5.000 10/01/03 5,152,500
2,500 InaCom Corp.......................... 6.000 06/15/06 2,512,500
2,500 Nine West Group...................... 5.500 07/15/03 2,506,250
2,975 U S Office Products.................. 5.500 02/01/01 4,384,208
------------
20,101,458
------------
CONSUMER DURABLES 2.2%
5,150 Gencorp Inc.......................... 8.000 08/01/02 5,510,500
4,675 Pacific Dunlop....................... 6.750 07/02/97 4,675,000
------------
10,185,500
------------
CONSUMER SERVICES 10.8%
7,800 ADT Operations Inc, LYON............. ** 07/06/10 4,231,500
1,700 HFS Inc.............................. 4.750 03/01/03 2,082,500
2,125 Hilton Hotels........................ 5.000 05/15/06 2,252,500
3,400 International Cabletel............... 7.000 06/15/08 3,332,000
4,250 Jacor Communication.................. 5.500 06/12/11 1,965,625
8,400 Marriott International, LYON......... ** 03/25/11 4,546,500
6,038 Prime Hospitality Corp............... 7.000 04/15/02 9,057,000
5,025 Tele-Communications Inc.............. 4.500 02/15/06 4,340,344
8,950 Time Warner Inc, LYON................ ** 12/17/12 3,132,500
14,500 Time Warner Inc, LYON................ ** 06/22/13 5,963,125
15,150 Turner Broadcasting System Inc, LYON. ** 02/13/07 7,082,625
2,000 UBS Finance.......................... 2.000 12/15/00 2,000,000
------------
49,986,219
------------
ENERGY 5.2%
6,850 Consolidated Natural Gas Co.......... 7.250 12/15/15 7,329,500
1,500 Nabors Industries Inc................ 5.000 05/15/06 1,680,000
2,000 Pogo Producing Co.................... 5.500 06/15/06 2,135,000
2,200 Pride Petroleum Services............. 6.250 02/15/06 2,816,000
8,200 SFP Pipeline Holdings Inc............ 11.163 08/15/10 9,884,607
------------
23,845,107
------------
FINANCE 2.9%
1,275 Aames Financial Corp................. 5.500 03/15/06 1,721,250
1,560 American Travellers Corp............. 6.500 10/01/05 2,453,100
47 Merrill Lynch, STRYPES............... 6.000 06/01/99 1,041,044
68 Merrill Lynch, STRYPES............... 7.250 06/15/99 3,835,345
1,460 Trenwick Group Inc................... 6.000 12/15/99 1,591,400
3,600 Zurich Insurance..................... 1.000 04/15/03 2,808,000
------------
13,450,139
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HEALTH CARE 6.8%
$ 2,200 Alza Corp............................ 5.000% 05/01/06 $ 2,139,500
11,750 Alza Corp, LYON...................... ** 07/14/14 4,935,000
2,500 Chiron Corp.......................... 1.900 11/17/00 2,356,250
1,313 Omnicare Inc......................... 5.750 10/01/03 4,923,750
4,250 Renal Treatment Centers.............. 5.625 07/15/06 4,276,562
1,700 Rotech Medical Corp.................. 5.250 06/01/03 1,606,500
3,400 Tenet Healthcare Corp................ 6.000 12/01/05 3,400,000
2,000 U S Diagnostic Labs.................. 9.000 03/31/03 2,940,000
3,500 United Technologies Corp, PEN........ ** 09/08/97 5,022,500
------------
31,600,062
------------
PRODUCER MANUFACTURING 6.6%
280 Cooper Industries Inc, DECKS......... 6.000 01/01/99 4,689,384
5,100 Hanson America Inc................... 2.390 03/01/01 4,360,500
2,550 Sanifill Inc......................... 5.000 03/01/06 2,983,500
5,000 Thermo Electron Corp................. 4.250 01/01/03 6,125,000
3,150 Thermo Electron Corp................. 5.000 04/15/01 6,300,000
1,000 U S Filter Corp...................... 6.000 09/15/05 1,350,000
5,900 Valhi Inc, LYON...................... ** 10/20/07 2,559,125
2,417 WMX Technologies Inc................. 2.000 01/24/05 2,175,300
------------
30,542,809
------------
RAW MATERIALS/PROCESSING
INDUSTRIES 1.5%
2,150 Essar Steel.......................... 5.500 08/05/98 2,107,000
4,675 Repap Enterprises Inc................ 8.500 08/01/97 4,581,500
------------
6,688,500
------------
TECHNOLOGY 4.0%
2,500 Cyrix Corp........................... 5.500 06/01/01 1,875,000
3,500 First Financial Management........... 5.000 12/15/99 6,562,500
51 Salomon Inc, ELKS.................... 5.000 11/01/96 5,492,810
2,500 Sanmina Corp......................... 5.500 08/15/02 2,806,250
1,985 Unisys Corp.......................... 8.250 08/01/00 1,940,337
------------
18,676,897
------------
TRANSPORTATION 0.7%
2,550 Continental Airlines Inc............. 6.750 04/15/06 3,028,125
------------
UTILITIES 3.3%
3,435 LDDS Communications.................. 5.000 08/15/03 4,929,225
4,798 Potomac Electric Power Co............ 5.000 09/01/02 4,270,220
791 Potomac Electric Power Co............ 7.000 01/15/18 804,842
43 Sprint Corp, DECKS................... 8.250 03/31/00 1,710,018
10,200 U S Cellular Corp, LYON.............. ** 06/15/15 3,468,000
------------
15,182,305
------------
TOTAL DOMESTIC CONVERTIBLE CORPORATE
OBLIGATIONS
(Cost $197,800,061)................. 223,287,121
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FOREIGN CONVERTIBLE CORPORATE OBLIGATIONS 6.1%
$ 3,450 Amer Group (Finland)................ 6.250% 06/15/03 $ 3,018,750
3,000 HD Finance (Hong Kong).............. 6.750 06/01/00 3,390,000
5,100 Hollinger Inc, LYON (Canada)........ ** 10/05/13 1,632,000
2,100 IMAX Corp (Canada).................. 5.750 04/01/03 2,163,000
3,500 Magna International Inc (Canada).... 5.000 10/15/02 3,640,000
2,300 MBL International (Sweden).......... 3.000 11/30/02 2,676,625
Roche Holdings Inc, LYON
7,250 (Switzerland)....................... ** 04/20/10 3,072,188
Rogers Communications, LYON
18,725 (Canada)............................ ** 05/20/13 6,741,000
Swiss Re Finance Bermuda Ltd
1,700 (Switzerland)....................... 2.000 07/06/00 1,793,500
------------
TOTAL FOREIGN CONVERTIBLE CORPORATE
OBLIGATIONS
(Cost $26,964,530)................. 28,127,063
------------
UNITED STATES GOVERNMENT OBLIGATIONS 2.6%
12,000 Treasury Notes (Cost $12,354,375)... 6.125 07/01/96 11,868,720
------------
<CAPTION>
Number
of Shares
(000)
---------
<C> <S> <C> <C> <C>
COMMON STOCK 19.2%
CONSUMER DISTRIBUTION 0.2%
15 Tiffany & Co......................................... 1,114,491
------------
CONSUMER DURABLES 1.0%
72 Chrysler Corp........................................ 4,464,000
------------
CONSUMER NON-DURABLES 1.7%
50 Philip Morris Companies Inc.......................... 5,200,000
72 Quaker Oats Co....................................... 2,457,000
------------
7,657,000
------------
CONSUMER SERVICES 0.3%
*54 Penske Motorsports Inc............................... 1,433,650
------------
ENERGY 2.3%
34 Amoco Corp........................................... 2,460,750
30 Exxon Corp........................................... 2,606,250
64 Phillips Petroleum Co................................ 2,680,000
33 Texaco Inc........................................... 2,767,875
------------
10,514,875
------------
FINANCE 2.7%
34 Aetna Life & Casualty Co............................. 2,431,000
43 Cigna Corp........................................... 5,068,625
63 Citicorp............................................. 5,205,375
------------
12,705,000
------------
HEALTH CARE 1.0%
200 ICN Pharmaceuticals Inc.............................. 4,650,000
------------
PRODUCER MANUFACTURING 0.5%
60 Cooper Industries Inc................................ 2,490,000
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Market Value
- --------------------------------------------------
<C> <S> <C> <C> <C>
RAW MATERIALS/PROCESSING
INDUSTRIES 1.7%
Champion International
96 Corp...................... $ 4,008,000
Freeport-McMoRan, Inc,
121 Copper and Gold, Class B.. 3,848,332
------------
7,856,332
------------
TECHNOLOGY 2.1%
*120 General Instrument Corp... 3,465,000
*36 HCIA Inc.................. 2,280,600
International Business
27 Machines Corp............. 2,673,000
34 Lucent Technologies Inc... 1,287,750
------------
9,706,350
------------
TRANSPORTATION 0.6%
32 Delta Air Lines Inc....... 2,631,183
------------
UTILITIES 5.1%
40 AT&T Corp................. 2,480,000
38 Cincinnati Bell Inc....... 1,980,750
112 GTE Corp.................. 5,012,000
100 NYNEX Corp................ 4,750,000
58 Texas Utilities Co........ 2,479,500
*120 WorldCom Inc.............. 6,645,000
------------
23,347,250
------------
TOTAL COMMON STOCK (Cost
$75,368,611).............. 88,570,131
------------
DOMESTIC CONVERTIBLE
PREFERRED STOCK 15.4%
CONSUMER
DISTRIBUTION 0.5%
*38 Kmart Financing, 7.75%.... 2,061,500
------------
CONSUMER DURABLES 0.4%
76 Beazer Homes, $2.00....... 2,033,000
------------
CONSUMER SERVICES 3.5%
SCI Finance, NV, LLC,
90 6.250%.................... 8,734,900
*26 SFX Broadcast, Series D... 1,326,000
TCI Communication,
85 $2.125.................... 3,750,625
261 Triathlon Broadcasting.... 2,515,012
------------
16,326,537
------------
ENERGY 1.8%
47 Enron Corp, ACES, 6.25%... 1,209,656
MCN Finance, PRIDES,
92 8.75%, 04/30/99........... 2,322,299
Williams Companies Inc,
62 $3.50..................... 4,820,200
------------
8,352,155
------------
FINANCE 4.6%
American General Corp,
41 MIPS, 6.00%............... 2,142,000
Conseco Inc, Series D,
48 $3.25..................... 3,018,000
Conseco Inc, PRIDES,
77 7.00%..................... 5,928,750
Jefferson Pilot Corp,
35 ACES, $7.25............... 2,852,500
</TABLE>
See Notes to Financial Statements
10
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
85 Sovereign Bancorp, $3.125............................. $ 4,823,750
63 Union Planters Corp, $2.00............................ 2,394,000
------------
21,159,000
------------
PRODUCER MANUFACTURING 1.6%
51 Corning Glass Works, MIPS, 6.00%...................... 2,913,375
250 Westinghouse, PEPS, $1.30............................. 4,312,500
------------
7,225,875
------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.5%
136 Boise Cascade Corp., $1.58............................ 4,148,000
275 Freeport McMoRan Inc., Copper and Gold, $1.25......... 7,493,750
------------
11,641,750
------------
UTILITIES 0.5%
*54 Nortel Invesora, MEDS................................. 2,461,000
------------
TOTAL DOMESTIC CONVERTIBLE PREFERRED STOCK (Cost
$65,513,051).......................................... 71,260,817
------------
FOREIGN CONVERTIBLE PREFERRED STOCK 2.6%
*85 Banco Comercial Portugues, 8.00% (Portugal)........... 4,228,750
128 Morgan Stanley, PERQS, 6.00%, 02/16/99 (Brazil)....... 7,610,330
------------
TOTAL FOREIGN CONVERTIBLE PREFERRED STOCK (Cost
$11,462,601).......................................... 11,839,080
------------
<CAPTION>
Par
Amount
(000)
---------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS 4.4%
COMMERCIAL PAPER 3.2%
$ 15,000 General Electric Capital Corp........ 5.623% 07/01/96 14,993,050
REPURCHASE AGREEMENT 1.2%
5,400 BA Securities, dated 06/28/96
(collateralized by U.S. Government
obligations in a pooled cash account)
repurchase proceeds $5,402,453....... 5.450 07/01/96 5,400,000
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $20,393,050)....... 20,393,050
------------
TOTAL INVESTMENTS (Cost $409,856,279) 98.7%..................... 455,345,982
OTHER ASSETS AND LIABILITIES, NET 1.3%.......................... 6,032,422
------------
NET ASSETS 100%................................................. $461,378,404
------------
</TABLE>
*Non-income producing security
**Zero coupon bond
ACES--automatically convertible PEN--pharmaceutical exchange
equity securities note
PEPS--participation equity
preferred shares
DECKS--debt exchangeable for
common stock, traded in PERQS--preferred equity linked
shares redeemable quarterly
security
ELKS--equity linked securities,
traded in shares PRIDES--preferred redeemable
increased dividend equity
LYON--liquid yield option note security, traded in shares
MEDS--mandatorially STRYPES--structured yield
exchangeable debt security product exchangeable for
stock, traded in shares
MIPS--monthly income preferred
shares
See Notes to Financial Statements
11
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Investments, at market value (Cost $409,856,279).................. $455,345,982
Cash.............................................................. 7,645
Receivable for investments sold................................... 4,313,166
Dividends and interest receivable................................. 3,451,731
Receivable for Fund shares sold................................... 131,759
Other assets and receivables...................................... 37,676
------------
Total Assets..................................................... 463,287,959
------------
LIABILITIES
Payable for Fund shares redeemed.................................. 789,822
Dividends payable................................................. 478,303
Due to Adviser.................................................... 208,382
Due to Distributor................................................ 178,754
Due to shareholder service agent.................................. 88,017
Deferred Trustees' compensation................................... 68,003
Payable for investments purchased................................. 38,400
Accrued expenses and liabilities.................................. 59,874
------------
Total Liabilities................................................ 1,909,555
------------
Net assets, equivalent to $15.44 per share for Class A , $15.38
per share for Class B, and $15.46 per share for Class C shares... $461,378,404
------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 24,548,288, Class A,
5,123,567 Class B, and 233,906
Class C shares outstanding....................................... $ 299,058
Capital surplus................................................... 400,948,797
Undistributed net realized gain on securities..................... 14,248,673
Net unrealized appreciation of securities......................... 45,489,703
Undistributed net investment income............................... 392,173
------------
NET ASSETS........................................................ $461,378,404
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $7,681,410
Dividends......................................................... 2,833,996
-----------
Investment income................................................ 10,515,406
-----------
EXPENSES
Management fees................................................... 1,257,042
Shareholder service agent's fees and expenses..................... 469,490
Accounting services............................................... 80,844
Service fees--Class A............................................. 385,260
Distribution and service fees--Class B............................ 394,932
Distribution and service fees--Class C............................ 17,852
Trustees' fees and expenses....................................... 21,114
Audit fees........................................................ 19,303
Custodian fees.................................................... 12,369
Legal fees........................................................ 2,711
Reports to shareholders........................................... 40,200
Registration and filing fees...................................... 29,624
Miscellaneous..................................................... 38,502
Retirement plan expense reimbursement (see Note 4)................ (7,500)
-----------
Total expenses................................................... 2,761,743
-----------
NET INVESTMENT INCOME............................................. 7,753,663
-----------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities................................... 14,319,342
Net unrealized appreciation of securities during the period....... 5,184,276
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.................... 19,503,618
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $27,257,281
-----------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period.......... $476,222,152 $444,133,746
------------ ------------
OPERATIONS
Net investment income.................... 7,753,663 20,781,614
Net realized gain on securities.......... 14,319,342 21,378,933
Net unrealized appreciation of securities
during the period........................ 5,184,276 51,124,986
------------ ------------
Increase in net assets resulting from
operations.............................. 27,257,281 93,285,533
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A................................. (6,902,536) (18,346,652)
Class B................................. (1,123,058) (3,002,348)
Class C................................. (50,292) (135,698)
------------ ------------
(8,075,886) (21,484,698)
------------ ------------
Net realized gain on securities
Class A................................. (5,551,984) (10,616,133)
Class B................................. (1,142,230) (2,113,555)
Class C................................. (50,437) (97,782)
------------ ------------
(6,744,651) (12,827,470)
------------ ------------
Total distributions..................... (14,820,537) (34,312,168)
------------ ------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A................................. 26,459,707 32,538,812
Class B................................. 5,381,196 9,004,646
Class C................................. 474,780 893,158
------------ ------------
32,315,683 42,436,616
------------ ------------
Proceeds from shares issued for
distributions reinvested
Class A................................. 9,930,610 23,099,241
Class B................................. 1,909,683 4,226,608
Class C................................. 79,408 169,766
------------ ------------
11,919,701 27,495,615
------------ ------------
Cost of shares redeemed
Class A................................. (62,196,082) (79,892,008)
Class B................................. (8,616,656) (15,835,156)
Class C................................. (703,138) (1,090,026)
------------ ------------
(71,515,876) (96,817,190)
------------ ------------
Decrease in net assets resulting from
capital transactions.................... (27,280,492) (26,884,959)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS........ (14,843,748) 32,088,406
------------ ------------
NET ASSETS, end of period (including
undistributed net investment income of
$392,173 and $714,396, respectively).... $461,378,404 $476,222,152
------------ ------------
</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 December 31
June 30, ----------------------------------------
1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PER-
FORMANCE
Net asset value, begin-
ning of period.......... $15.05 $13.24 $ 15.12 $14.95 $ 14.92 $12.93
------ ------ ------- ------ ------- ------
INCOME FROM OPERATIONS
Investment income....... .35 .83 .78 .85 .90 .955
Expenses................ (.08) (.15) (.15) (.16) (.15) (.13)
------ ------ ------- ------ ------- ------
Net investment income.... .27 .68 .63 .69 .75 .825
Net realized and
unrealized gain (loss)
on securities........... .624 2.25 (1.5625) 1.365 .6275 2.085
------ ------ ------- ------ ------- ------
Total from investment op-
erations................ .894 2.93 (.9325) 2.055 1.3775 2.91
------ ------ ------- ------ ------- ------
LESS DISTRIBUTIONS FROM
(see Note 1F)
Net investment income... (.28) (.7025) (.62) (.66) (.84) (.92)
Net realized gain on se-
curities............... (.224) (.4175) (.108) (1.225) (.5075) --
Excess of book-basis net
realized gain on
securities............. -- -- (.2195) -- -- --
------ ------ ------- ------ ------- ------
Total distributions...... (.504) (1.12) (.9475) (1.885) (1.3475) (.92)
------ ------ ------- ------ ------- ------
Net asset value, end of
period.................. $15.44 $15.05 $ 13.24 $15.12 $ 14.95 $14.92
------ ------ ------- ------ ------- ------
TOTAL RETURN(/1/)........ 6.10% 22.46% (6.43%) 13.56% 9.63% 23.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions).............. $379.0 $394.5 $ 369.7 $432.3 $ 394.1 $385.5
Average net assets (mil-
lions).................. $385.2 $384.9 $ 402.1 $419.1 $ 381.6 $356.4
Ratios to average net as-
sets (annualized)(/2/)
Expenses................ 1.04% 1.00% 1.04% 1.02% .99% .91%
Expenses, without ex-
pense reimbursement.... 1.04% -- -- -- -- --
Net investment income... 3.46% 4.62% 4.39% 4.37% 5.00% 5.86%
Net investment income,
without expense
reimbursement.......... 3.46% -- -- -- -- --
Portfolio turnover rate.. 67% 130% 105% 134% 85% 91%
Average commission rate
per common stock traded. $0.026 -- -- -- -- --
</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.
(2) See Note 4.
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(/1/)
-------------------------------------------------
Six Months
Ended Year Ended December 31
June 30, -------------------------------------
1996 1995 1994 1993(/2/) 1992(/2/)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $14.99 $13.20 $15.07 $14.90 $14.91
------ ------ ------- ------ ------
INCOME FROM OPERATIONS
Investment income.......... .35 .83 .77 .83 .87
Expenses................... (.14) (.27) (.26) (.27) (.275)
------ ------ ------- ------ ------
Net investment income....... .21 .56 .51 .56 .595
Net realized and unrealized
gain (loss) on securities.. .624 2.23 (1.5505) 1.375 .63
------ ------ ------- ------ ------
Total from investment
operations................. .834 2.79 (1.0405) 1.935 1.225
------ ------ ------- ------ ------
LESS DISTRIBUTIONS FROM (see
Note 1F)
Net investment income...... (.22) (.5825) (.502) (.54) (.7275)
Net realized gain on secu-
rities.................... (.224) (.4175) (.108) (1.225) (.5075)
Excess of book-basis net
realized gain on securi-
ties ..................... -- -- (.2195) -- --
------ ------ ------- ------ ------
Total distributions......... (.444) (1.00) (.8295) (1.765) (1.235)
------ ------ ------- ------ ------
Net asset value, end of
period..................... $15.38 $14.99 $13.20 $15.07 $14.90
------ ------ ------- ------ ------
TOTAL RETURN(/3/)........... 5.64% 21.46% (7.11%) 12.68% 8.56%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)................. $78.8 $78.1 $71.1 $60.1 $20.0
Average net assets
(millions)................. $79.0 $75.5 $69.7 $40.1 $7.9
Ratios to average net assets
(annualized)(/4/)
Expenses................... 1.84% 1.81% 1.84% 1.73% 1.88%
Expenses, without expense
reimbursement............. 1.84% -- -- -- --
Net investment income...... 2.65% 3.81% 3.63% 3.62% 4.08%
Net investment income,
without expense
reimbursement............. 2.65% -- -- -- --
Portfolio turnover rate..... 67% 130% 105% 134% 85%
Average commission rate per
common stock traded........ $0.026 -- -- -- --
</TABLE>
(1) Sales of Class B shares commenced on December 20, 1991 at a net asset value
of $14.32 per share. At December 31, 1991, there were 15,738 Class B shares
outstanding with a per share net asset value of $14.91. The increase in net
asset value was due principally to unrealized appreciation; there were no
dividends or distributions paid during the period. Other financial
highlights for the Class B shares for this short period are not presented
as they are not meaningful.
(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.
(4) See Note 4.
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
-----------------------------------------
October 26,
Six Months Year Ended 1993(/1/)
Ended December 31 through
June 30, --------------- December 31,
1996 1995 1994 1993(/2/)
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $15.07 $13.25 $ 15.13 $ 16.14
------ ------ ------- -------
INCOME FROM OPERATIONS
Investment income.................. .35 .83 .78 .22
Expenses........................... (.14) (.27) (.26) (.07)
------ ------ ------- -------
Net investment income............... .21 .56 .52 .15
Net realized and unrealized gain
(loss) on securities............... .624 2.26 (1.5705) (.0325)
------ ------ ------- -------
Total from investment operations.... .834 2.82 (1.0505) .1175
------ ------ ------- -------
LESS DISTRIBUTIONS FROM (see Note
1F)
Net investment income.............. (.22) (.5825) (.502) (.125)
Net realized gain on securities.... (.224) (.4175) (.108) (1.0025)
Excess of book-basis net realized
gain on securities ............... -- -- (.2195) --
------ ------ ------- -------
Total distributions................. (.444) (1.00) (.8295) (1.1275)
------ ------ ------- -------
Net asset value, end of period...... $15.46 $15.07 $13.25 $15.13
------ ------ ------- -------
TOTAL RETURN (/3/).................. 5.61% 21.52% (7.14%) .93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)......................... $3.6 $3.6 $3.3 $1.1
Average net assets (millions)....... $3.6 $3.5 $2.8 $0.7
Ratios to average net assets
(annualized) (/4/)
Expenses........................... 1.85% 1.80% 1.84% 1.90%
Expenses, without expense
reimbursement..................... 1.85% -- -- --
Net investment income.............. 2.65% 3.80% 3.72% 3.88%
Net investment income, without
expense reimbursement............. 2.65% -- -- --
Portfolio turnover rate............. 67% 130% 105% 134%
Average commission rate per common
stock traded....................... $0.026 -- -- --
</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.
(4) See Note 4.
See Notes to Financial Statements
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The Van Kampen American Capital Harbor Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified open-end man-
agement investment company. The Fund seeks to provide income, capital appreci-
ation, and conservation of capital by investing primarily in convertible bonds
and preferred stocks.
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
affect the amounts reported. Actual amounts may differ from the estimates.
A. INVESTMENT VALUATIONS-Securities listed or traded on a national securities
exchange are valued at the last sale price. Unlisted securities and listed se-
curities for which the last sale price is not available are valued at the most
recent bid price, except unlisted convertible securities, which are valued at
the higher of their bid price or the value of the securities issuable on con-
version.
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. Debt securities rated below investment grade and compa-
rable unrated securities represented approximately 33% of the investment port-
folio at the end of the period.
B. FUTURES CONTRACTS-Transactions in futures contracts are utilized in strate-
gies to manage the market risk of the Fund's investments. The purchase of a
futures contract increases the impact on net asset value of changes in the
market price of investments. There is also a risk that the market movement of
such instruments may not be in the direction forecasted.
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. A portion of these funds are held as collateral
in an account in the name of the broker, the Fund's agent in acquiring the
futures position. During the period the futures contract is open, changes in
the
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
value of the contract ("variation margin") are recognized by marking the con-
tract to market on a daily basis. As unrealized gains or losses are incurred,
variation margin payments are received from or made to the broker. Upon the
closing or cash settlement of a contract, gains or losses are realized. The
cost of securities acquired through delivery under a contract is adjusted by
the unrealized gain or loss on the contract.
C. 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 such securities only upon physical delivery or evidence of
book entry transfer to the account of the custodian bank. The seller is re-
quired to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.
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.
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.
F. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.
G. DEBT DISCOUNT OR PREMIUM-The Fund accounts for discounts and premiums on
the same basis as is used for federal income tax reporting. Accordingly, orig-
inal issue debt discounts are amortized over the life of the security. Premi-
ums on debt securities are not
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
amortized. Market discounts are recognized at the time of sale as realized
gains for book purposes and ordinary 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 .55% of the first $350 million, .50% of the next $350 million, .45% of the
next $350 million, and .40% of the amount in excess of $1.05 billion.
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 $3,867 as the Fund's share of the employee
costs attributable to the Fund's accounting officers. A portion of the ac-
counting services expense was paid to the Adviser in reimbursement of person-
nel, facilities, and equipment costs attributable to the provision of
accounting services to the Fund. The services provided by the Adviser are at
cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. For the period, the fees for these services aggregated $391,655.
The Fund has been advised that Van Kampen American Capital Distributors,
Inc. (the "Distributor"), an affiliate of the Adviser, received $180,811 as
its portion of the commissions charged on sales of Fund shares during the pe-
riod.
Under the Distribution Plans, each class of shares pays up to .25% per annum
of their average net assets to reimburse the Distributor for expenses and
service fees incurred. The Class B and C shares pay an additional fee of up to
.75% per annum of their average daily net assets to reimburse the Distributor
for its distribution expenses. Actual distribution expenses incurred by the
Distributor for Class B and C shares may exceed the amounts reimbursed to the
Distributor by the Fund. At the end of the period, the unreimbursed expenses
incurred by the Distributor under the Class B and C plans aggregated approxi-
mately $2.8 million and $32,000, respectively, and may be carried forward and
reimbursed through either the collection of the contingent deferred sales
charges from share redemptions or, subject to the annual renewal of the plans,
future Fund reimbursements of distribution fees.
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor and the shareholder service agent.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $296,893,262 and $338,958,532,
respectively.
The identified cost of investments owned at the end of the period was the
same for federal income tax and financial reporting purposes. Net unrealized
appreciation of investments aggregated $45,489,703, gross unrealized apprecia-
tion of investments aggregated $52,411,356 and gross unrealized depreciation
of investments aggregated $6,921,653.
NOTE 4--TRUSTEE COMPENSATION
Fund Trustees who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $1,184 plus a fee of $68 per day for Board and Com-
mittee meetings attended. During the period, such fees aggregated $11,560.
The Fund has 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 $7,500. During the calendar year 1996,
the Adviser has agreed to reimburse the Fund for these plan expenses.
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(Class A) or at the time of redemption on a contingent deferred basis (Class B
and C). All classes of shares have the same rights, except that Class B and C
shares bear the cost of distribution fees and certain other class specific ex-
penses. Class B and C shares automatically convert to Class A shares six years
and ten years after purchase, respectively, subject to certain conditions. Re-
alized and unrealized gains or losses, investment income and expenses (other
than class specific expenses) are allocated daily to each class of shares
based upon the relative proportion of net assets of each class.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
The Fund has an unlimited number of shares of $.01 par value beneficial in-
terest authorized. Transactions in shares of beneficial interest were as fol-
lows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
- --------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A................. 1,717,868 2,212,572
Class B................. 352,554 623,004
Class C................. 30,766 60,362
---------- ----------
2,101,188 2,895,938
---------- ----------
Shares issued for
distributions
reinvested
Class A................. 656,482 1,573,866
Class B................. 126,766 288,403
Class C................. 5,243 11,512
---------- ----------
788,491 1,873,781
---------- ----------
Shares redeemed
Class A................. (4,043,650) (5,489,901)
Class B................. (563,232) (1,095,295)
Class C................. (45,594) (74,811)
---------- ----------
(4,652,476) (6,660,007)
---------- ----------
Decrease in shares
outstanding............ (1,762,797) (1,890,288)
---------- ----------
</TABLE>
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
Aggressive Growth Fund
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
Intermediate 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 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
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VAN KAMPEN AMERICAN CAPITAL HARBOR 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
*Co-Chairman of the Board
OFFICERS
DON G. POWELL
President and Chief Executive Officer
DENNIS J. MCDONNELL
Executive Vice President
RONALD A. NYBERG
Vice President and Secretary
EDWARD C. WOOD, III
Vice President and Chief Financial Officer
CURTIS W. MORELL
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN
Treasurer
TANYA M. LODEN
Controller
WILLIAM N. BROWN
PETER W. HEGEL
ROBERT C. PECK, JR.
ALAN T. SACHTLEBEN
PAUL R. WOLKENBERG
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC.
One Parkview Plaza Oakbrook Terrace, 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 COMPANY
225 Franklin Street Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
(C)VanKampen American Capital Distribu-
tors, 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.
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