<PAGE>
Van Kampen American Capital
INCOME TRUST
Semi-Annual Report
June 30, 1998
[ARTWORK APPEARS HERE]
Van Kampen
Funds
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders............................................... 1
Glossary of Terms.................................................... 4
Performance Results.................................................. 6
Portfolio of Investments............................................. 7
Statement of Assets and Liabilities.................................. 15
Statement of Operations.............................................. 16
Statement of Changes in Net Assets................................... 17
Financial Highlights................................................. 18
Notes to Financial Statements........................................ 20
</TABLE>
ACD SAR 8/98
<PAGE>
Letter to Shareholders
[PHOTO APPEARS HERE]
Dennis J. McDonnell and Don G. Powell
July 27, 1998
Dear Shareholder,
Recently, we decided to consolidate all Van Kampen American Capital mutual
funds under the single name of Van Kampen Funds. This move accompanies the
change in the legal name of our firm to Van Kampen Funds Inc. Consequently, your
trust's name will be changing to Van Kampen Income Trust on August 28. You can
be assured that the change in your Trust's name will not affect its management
or daily operations, and your Trust will continue to trade under its current
ticker symbol. If you have any questions regarding your Trust or our new name,
please contact your financial adviser.
Economic Review
In the first six months of 1998, the U.S. economy continued to expand at a
robust pace despite the deepening recession in Asia. For the first quarter
alone, GDP growth was measured at 5.4 percent, a rate considered by many
economists to be virtually unsustainable without leading to inflation. Despite
the generally solid pace of economic activity, however, inflation remained
benign. Consumer prices rose by only 1.17 percent over the six months through
June, while producer prices actually declined over the same period. Falling
commodity prices and a strong dollar helped offset the inflationary implications
of a tight labor market and active consumer spending.
Although the Federal Reserve Board declined to raise short-term interest rates
during the period, minutes of the Central Bank's May policy meeting indicated a
growing sentiment for tightening monetary policy in the event that the Asian
financial crisis fails to moderate domestic economic growth. By the end of the
reporting period, indications showed no increase in domestic growth for two
consecutive months, while unemployment rose to 4.7 percent in June from a 28-
year low in May.
Domestic fixed-income securities benefited from a global "flight to quality"
caused by turmoil in Asia and by the growing perception that the domestic
economy was slowing. After starting the year at 5.92 percent, the yield on the
30-year Treasury benchmark bond rose to over 6 percent during the spring amid
signs that some Asian economies were beginning to recover. When weakness in the
Japanese yen undercut that recovery, U.S. bond prices surged, causing long-term
government yields to fall to 5.62 percent by the end of the reporting period.
Portfolio Strategy
The Van Kampen American Capital Income Trust invests in a portfolio comprised
primarily of high-yield corporate bonds and U.S. government securities. At the
end of the period, approximately 55.7 percent of the Trust's long-term
investments were allocated to high-yield investments, and 42.4 percent were
invested in Treasury and agency securities. As discussed in the economic review,
Continued on page two
1
<PAGE>
[PIE CHART APPEARS HERE]
Portfolio Composition by Credit Quality as of June 30, 1998*
BBB 0.5%
AAA, U.S. Govt. and Govt. Agency 42.4%
B 40.5%
BB 7.8%
Non-Rated 4.1%
Other 1.8%
CCC 2.9%
* As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's
or Moody's.
the 30-year Treasury declined in response to high demand for Treasuries in the
wake of instability in Asia. As rates dropped, a flood of new issuance in the
high-yield market followed. By the end of the period, the level of newly issued
high-yield bonds was on track to break last year's record high. Although cash
flows into high-yield investments continued to move at a record pace, the
initial supply was met with decreased demand. As a result, the spread between
high-yield bonds and Treasuries widened during the period, indicating that high-
yield investments underperformed Treasuries at this time.
The portfolio's allocation of high-yield securities and Treasuries represents
our balanced approach to interest rate sensitivity; the high-yield component
tended to move somewhat independently of interest rates, whereas the Treasury
and agency securities in the portfolio worked to the Trust's advantage in this
declining interest rate environment. If the Fed were to raise rates, which we
expect is a possibility by the end of the year, we might decrease the Trust's
Treasury position in favor of more high-yield investments.
Examining the portfolio composition, we largely maintained the Trust's credit
quality profile and our focus on B-rated bonds, which provide a yield advantage
over higher-quality investments. We also made relatively few changes in the
portfolio's sector exposure. Once again, media and cable companies dominated the
new issues released during the period; accordingly, the consumer services
sector, including several broadcasting companies, made up one of the largest
sector positions in the portfolio. Another significant sector position,
utilities, consisted primarily of telecommunications companies, which also
benefited from increased investor interest in the new generation of
communications created by the computer age. The remainder of the Trust's assets
are invested in a diverse group of companies, which are carefully selected to
allow the Trust to participate in a very strong economic environment.
Top Five Portfolio Industry Holdings by Sector*
As of
June 30, 1998
Utilities 14.1%
Consumer Services 13.3%
Raw Materials/Processing Industries 7.7%
Producer Manufacturing 4.4%
Transportation 3.8%
*As a Percentage of Long-Term Investments
Continued on page three
2
<PAGE>
Performance Summary
For the six-month period ended June 30, 1998, the Trust generated a total
return of 1.60 percent/1/ at market price and 5.65 percent/2/ at net asset
value. This performance reflects a decrease in market price per common share
from $8.00 on December 31, 1997 to $7.8125 on June 30, 1998, and includes
reinvestment of dividends totaling $0.3225 per share. The dividend represents a
distribution rate of 8.26 percent based on the closing common stock price on
June 30, 1998. By comparison, the Lehman Brothers High Yield Index posted a
total return of 4.50 percent for the same period, and the Lehman Brothers
Government Index posted a 4.18 percent total return. These indices are broad-
based, unmanaged measures that reflect the general performance of high yield
bond securities and government securities. They do not include any commissions
or fees that an investor would actually have to pay in order to purchase the
securities it represents. Please refer to the chart on page six for additional
performance numbers.
[BAR CHART APPEARS HERE]
Six-month Dividend History
For the Period Ended June 30, 1998
Dividend
<TABLE>
<CAPTION>
Dividend per
Common Share
- ------------
<S> <C> <C> <C> <C> <C>
$.05375 $.05375 $.05375 $.05375 $.05375 $.05375
Jan 98 Feb 98 Mar 98 Apr 98 May 98 Jun 98
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
Outlook
Economic growth is likely to slow in coming months as the impact of the Asian
crisis becomes more evident. A return to the "Goldilocks" economy -- not too
hot, not too cold -- should allow long-term interest rates to fall modestly from
current levels. If fallout from Asia does not temper economic activity enough to
counteract the inflationary pressures building in the economy, we would expect
the Fed to raise short-term interest rates by the end of the year. At that time,
we might reposition the Trust's portfolio to more fully take advantage of a
rising rate environment. Until then, we will continue to seek a balance between
the Trust's total return and its dividend income, and look to add value through
careful security selection. Thank you for your continued confidence and trust in
Van Kampen.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen Asset Management Inc. Van Kampen Asset Management Inc.
Please see footnotes on page six
3
<PAGE>
Glossary of Terms
Basis point: A measure used in quoting bond yields. 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.
Call feature: Allows the issuer to buy back a bond on specific call dates
before maturity. Call dates and prices are set when the bond is issued. To
compensate the bondholder for loss of income and ownership, the call price is
usually higher than the face value of the bond. Bonds are usually called when
interest rates drop so significantly that the issuer can save money by issuing
new bonds at lower rates.
A callable bond is "priced to call" when it is selling at a premium, because
it is assumed that the issuer will redeem the bond at its call date, rather
than at maturity.
Coupon rate: The stated rate of interest a bond pays until maturity, expressed
as a percentage of its face value.
Credit rating: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Services are two
companies that assign bond credit ratings. Standard & Poor's ratings range
from a high of AAA to a low of D; Moody's ratings range from a high of Aaa to
a low of C.
Credit spread: Also called quality spread, the difference in yield between
higher-quality issues (such as Treasury securities) and lower-quality issues.
Normally, lower-quality issues provide higher yields to compensate investors
for the additional credit risk.
Discount bond: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has more
potential to appreciate in price than a par bond does.
Duration: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. 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 Reserve Board (the "Fed"): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its policy-
making committee, called the Federal Open Market Committee, meets eight times
a year to establish monetary policy and monitor the economic pulse of the U.S.
Inflation: An economic state in which the money supply and business activity
dramatically increase, accompanied by sharply rising prices. Inflation is
widely measured by the Consumer Price Index, an economic indicator that
measures the change in the cost of purchased goods and services.
Insured bond: A bond that is insured against default by the bond insurer. If the
issuer defaults, the insurance company will step in and take over payments of
interest and principal. As a result of this protection against credit risk,
most insured bonds are AAA-rated.
4
<PAGE>
Recently, an A-rated insurer has started to insure lower-quality municipal
bonds, and those bonds are A-rated. Insurance on the bonds does not relate to
mutual fund shares, which will fluctuate in price.
Investment grade bonds: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investors Service. Bonds rated below BBB or Baa are
noninvestment grade.
Market price: The price of a share of a closed-end fund trading on a stock
exchange. When the price is less than a fund's net asset value, the fund is
trading at a discount. When the price is more than the NAV, the fund is
trading at a premium.
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 common shares outstanding. The NAV does not include any initial or
contingent deferred sales charge.
Prerefunding: A process whereby new bonds are issued to refinance an outstanding
bond issue. This typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
Premium bond: A bond whose market price is above its face value (or "par
value"). Because bonds usually mature at face value, a premium bond has less
potential to appreciate in price than a par bond does.
Yield spread: The difference between the yields of different bonds, due to their
different credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the lower-
quality bond. When yield spreads between bonds of different maturities are
narrow, there is less incentive to own the bond with the longer maturity. In
both cases, the investor is not being compensated for the additional risk.
Zero coupon bonds: A corporate or debt security that trades at a deep discount
to face value and pays no interest. It may be redeemed at maturity for full
face value.
5
<PAGE>
Performance Results for the Six Months Ended June 30, 1998
Van Kampen American Capital Income Trust
NYSE Ticker Symbol -- ACD
<TABLE>
<S> <C>
Common Share Total Returns
Six-month total return based on market price/1/........................... 1.60%
Six-month total return based on NAV/2/.................................... 5.65%
Distribution Rate
Distribution rate as a % of closing common stock price/3/................. 8.26%
Share Valuations
Net asset value........................................................... $ 8.18
Closing common stock price................................................ $7.8125
Six-month high common stock price (06/15/98).............................. $8.3125
Six-month low common stock price (05/13/98)............................... $7.5625
</TABLE>
/1/ Total return based on market price assumes an investment at the market
price at the beginning of the period indicated, reinvestment of all
distributions for the period in accordance with the Fund's dividend
reinvestment plan, and sale of all shares at the closing stock price at the
end of the period indicated.
/2/ Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for
the period, and sale of all shares at the end of the period, all at NAV.
/3/ Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. This
performance was achieved during generally rising stock prices. Fund shares, when
sold, may be worth more or less than their original cost.
6
<PAGE>
Portfolio of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
========================================================================================================
Par
Amount
in Local
Currency
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic Corporate Bonds 46.2%
Consumer Distribution 2.7%
500 Big 5 Corp., Ser B............................... 10.875% 11/15/07 $ 515,000
300 Iron Age Corp., 144A - Private Placement (b)..... 9.875 05/01/08 300,750
250 Pantry, Inc...................................... 10.250 10/15/07 254,375
239 Pantry, Inc...................................... 12.500 11/15/00 259,315
1,250 Pathmark Stores, Inc. (a)........................ 0/10.750 11/01/03 1,053,125
500 Pathmark Stores, Inc............................. 12.625 06/15/02 507,500
500 Southern Foods Group LP,
144A - Private Placement (b)..................... 9.875 09/01/07 522,500
----------
3,412,565
----------
Consumer Durables 1.6%
900 Aetna Industries, Inc............................ 11.875 10/01/06 976,500
500 MCII Holdings USA, Inc. (a)...................... 0/12.000 11/15/02 473,750
300 Venture Holdings, Inc., Ser B.................... 9.500 07/01/05 304,500
200 Venture Holdings, Inc............................ 9.750 04/01/04 201,500
----------
1,956,250
----------
Consumer Non-Durables 2.4%
850 Consoltex Group, Inc., Ser B..................... 11.000 10/01/03 898,875
510 Curtice-Burns Foods, Inc......................... 12.250 02/01/05 559,725
800 Del Monte Corp.,
144A - Private Placement (a) (b)................. 0/12.500 12/15/07 524,000
250 Galey & Lord, Inc................................ 9.125 03/01/08 241,250
500 Outsourcing Services Group,
144A - Private Placement (b)..................... 10.875 03/01/06 515,000
250 UDC Homes Inc., Ser B............................ 12.500 05/01/00 256,250
----------
2,995,100
----------
Consumer Services 10.3%
1,000 Booth Creek Ski Holdings, Inc., Ser B............ 12.500 03/15/07 1,087,500
250 Booth Creek Ski Holdings, Inc.,
144A - Private Placement (b)..................... 12.500 03/15/07 271,875
250 Busse Broadcasting Corp.......................... 11.625 10/15/00 267,500
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
=====================================================================================
Par
Amount
in Local
Currency Market
(000) Description Coupon Maturity Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Consumer Services (Continued)
750 Capstar Broadcasting Partners (a)....... 0/12.750% 02/01/09 $ 573,750
600 Casino Magic--Louisiana Corp., Ser B.... 13.000 08/15/03 702,000
500 Echostar Communications Corp. (a)....... 0/12.875 06/01/04 488,750
1,250 Frontiervision Holdings LP (a).......... 0/11.875 09/15/07 990,625
500 Hollywood Casino Corp................... 12.750 11/01/03 547,500
500 Hollywood Theaters, Inc................. 10.625 08/01/07 520,000
250 Horseshoe Gaming LLC, Ser B............. 9.375 06/15/07 267,500
1,000 IHF Holdings, Inc. (a).................. 0/15.000 11/15/04 752,500
250 NTL, Inc., Ser A (a).................... 0/12.750 04/15/05 220,625
1,000 NTL, Inc., Ser B (a).................... 0/11.500 02/01/06 817,500
1,225 Majestic Star Casino L.L.C.............. 12.750 05/15/03 1,341,376
1,000 Marcus Cable Co (a)..................... 0/14.250 12/15/05 932,500
1,000 Park & View, Inc.,
144A - Private Placement (b)............ 13.000 05/15/08 990,000
375 Premier Parks, Inc...................... 9.250 04/01/06 387,188
500 SFX Broadcasting, Inc., Ser B........... 10.750 05/15/06 555,000
500 Tele-Communications, Inc................ 9.250 01/15/23 583,185
500 United International Hldgs, Ser B (a)... 0/10.750 02/15/08 311,250
250 Young America Corp,
144A - Private Placement (b)............ 11.625 02/15/06 251,250
-----------
12,859,374
-----------
Energy 1.6%
500 Hurricane Hydrocarbons,
144A - Private Placement (b)............ 11.750 11/01/04 490,000
500 KCS Energy, Inc., Ser B................. 11.000 01/15/03 537,500
500 Kelley Oil & Gas Partners............... 7.875 12/15/99 492,500
200 Moll Industries, 144A - Private
Placement (b)........................... 10.500 07/01/08 204,000
325 Petroleum Heat & Power, Inc............. 12.250 02/01/05 322,563
-----------
2,046,563
-----------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
========================================================================================
Par
Amount
in Local
Currency Market
(000) Description Coupon Maturity Value
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Finance 1.9%
1,250 Americo Life, Inc. (f)...................... 9.250% 06/01/05 $1,287,500
750 Americredit Corp............................ 9.250 02/01/04 765,000
250 Superior National Capital Trust I........... 10.750 12/01/17 268,750
----------
2,321,250
----------
Healthcare 1.4%
500 Maxxim Medical, Inc......................... 10.500 08/01/06 545,000
550 Oxford Health Plans,
144A - Private Placement (b)................ 11.000 05/15/05 566,500
1,000 Paragon Health Networks (a)................. 0/10.500 11/01/07 667,500
----------
1,779,000
----------
Producer Manufacturing 4.2%
500 Communications Instruments, Ser B........... 10.000 09/15/04 512,500
200 Compass Aerospace Corp.,
144A - Private Placement (b)................ 10.125 04/15/05 204,000
250 Eagle-Picher Industries,
144A - Private Placement (b)................ 9.375 03/01/08 251,875
750 GS Technologies Operating, Inc.............. 12.000 09/01/04 813,750
810 IMO Industries, Inc......................... 11.750 05/01/06 913,275
250 Interlake Corp.............................. 12.000 11/15/01 271,250
1,000 Interlake Corp.............................. 12.125 03/01/02 1,032,500
500 International Knife & Saw, Inc.............. 11.375 11/15/06 543,750
250 Kevco, Inc.................................. 10.375 12/01/07 260,625
250 Waxman Industries, Inc., Ser B (a).......... 0/12.750 06/01/04 236,250
250 W. R. Carpenter North America............... 10.625 06/15/07 263,750
----------
5,303,525
----------
Raw Materials/Processing Industries 7.1%
1,000 Acetex Corp................................. 9.750 10/01/03 1,030,000
250 American Architecture Products.............. 11.750 12/01/07 515,000
250 American Pacific Corp.,
144A - Private Placement (b)................ 9.250 03/01/05 258,750
500 Doe Run Resources Corp.,
144A - Private Placement (b)................ 11.250 03/15/05 505,000
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
================================================================================================
Par
Amount
in Local
Currency Market
(000) Description Coupon Maturity Value
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Raw Materials/Processing Industries (Continued)
500 Dyersburg Corp., Ser B........................ 9.750% 09/01/07 $ 480,000
250 Hydromchem Industrial Service, Ser B.......... 10.375 08/01/07 255,000
750 Insilco Corp.................................. 10.250 08/15/07 787,500
1,000 Northland Cable Television.................... 10.250 11/15/07 1,070,000
500 Pioneer Americas Acquisition, Ser B........... 9.250 06/15/07 386,100
1,000 Printpack, Inc., Ser B........................ 10.625 08/15/06 1,050,000
750 Radnor Holdings Corp., Ser B.................. 10.000 12/01/03 783,750
500 Scoville Fasteners, Inc., Ser B............... 11.250 11/30/07 516,250
667 United Stationers Supply Co................... 12.750 05/01/05 760,380
450 WHX Corp...................................... 10.500 04/15/05 452,250
----------
8,849,980
----------
Technology 1.0%
1,000 Crown Castle International Corp.(a).......... 0/10.625 11/15/07 685,000
500 Dictaphone Corp............................... 11.750 08/01/05 505,000
----------
1,190,000
----------
Transportation 2.1%
200 Atlas Air, Inc., 144A - Private Placement(b). 9.250 04/15/08 199,500
500 Atlas Air, Inc................................ 10.750 08/01/05 535,000
1,000 Greyhound Lines Inc., Ser B................... 11.500 04/15/07 1,112,500
250 Moran Transportation Co....................... 11.750 07/15/04 276,250
250 Sea Containers Ltd., Ser B.................... 12.500 12/01/04 278,750
200 Trans World Airlines.......................... 11.500 12/15/04 210,500
----------
2,612,500
----------
Utilities 9.9%
250 Crown Central Petroleum....................... 10.875 02/01/05 264,375
55 GST Telecommuncations, Inc.,
144A - Private Placement(a)(b).............. 0/13.875 12/15/05 71,500
940 GST USA, Inc.(a)............................. 0/13.875 12/15/05 763,750
1,040 Intermedia Communication,
144A - Private Placement(b).................. 8.600 06/01/08 1,055,600
See Notes to Financial Statements
</TABLE>
10
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
===================================================================================================
Par
Amount
in Local
Currency Market
(000) Description Coupon Maturity Value
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities (Continued)
500 Metronet Communications,
144A - Private Placement(a)(b).................. 0/9.950% 06/15/08 $ 312,500
250 Metronet Communications......................... 12.000 08/15/07 282,500
400 MJD Communications, Inc.,
144A - Private Placement(b)..................... 9.500 05/01/08 410,000
500 NTL, Inc., 144A - Private Placement(a)(b)....... 0/9.750 04/01/08 322,500
500 Optel, Inc., 144A - Private Placement(b)(e)..... 11.500 07/01/08 502,500
500 Optel, Inc., Ser B.............................. 13.000 02/15/05 545,000
500 Pegasus Communications, Ser B................... 9.625 10/15/05 515,000
500 Pinnacle Hldgs, Inc.,
144A - Private Placement(a)(b).................. 0/10.000 03/15/08 328,750
1,000 Price Communications Cellular Unit, Ser B(a).... 0/13.500 08/01/07 702,500
1,250 Price Communications Wireless, Inc.............. 11.750 07/15/07 1,375,000
175 Primus Telecommunications Group................. 11.750 08/01/04 186,375
500 Primus Telecommunications Group,
144A - Private Placement(b)..................... 9.875 05/15/08 492,500
1,000 PSINET, Inc., Ser B............................. 10.000 02/15/05 1,017,500
1,000 RSL Communications PLC,
144A - Private Placement(a)(b).................. 0/10.125 03/01/08 595,000
700 Rural Cellular Corp.,
144A - Private Placement(b)..................... 9.625 05/15/08 696,500
250 SBA Communications Corp,
144A - Private Placement(a)(b).................. 0/12.000 03/01/08 158,750
1,000 Spectrasite Hldgs, Inc.,
144A - Private Placement(a)(b).................. 0/12.000 07/15/08 555,000
1,000 Startec Global Communications,
144A - Private Placement(b)..................... 12.000 05/15/08 975,000
500 Triton Communications LLC,
144A - Private Placement(a)(b).................. 0/11.000 05/01/08 282,500
-----------
12,410,600
-----------
Total Domestic Corporate Bond 46.2%.......................... 57,736,707
-----------
See Notes to Financial Statements
</TABLE>
11
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
===================================================================================================
Par
Amount
in Local
Currency Market
(000) Description Coupon Maturity Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign Bonds and Debt Securities 7.9%
Bermuda 0.6%
750 Pegasus Shipping Hellas,
144A - Private Placement (US $)(b).......... 11.875% 11/15/04 $ 761,250
---------
Brazil 1.1%
500 Globo Communications Partnership,
144A - Private Placement (US $)(b).......... 10.625 12/05/08 445,000
500 Mrs Logistica SA, Ser B,
144A - Private Placement (US $)(b).......... 10.625 08/15/05 430,000
500 Multicanal Participacoes, Ser B (US $)...... 12.625 06/18/04 507,500
---------
1,382,500
---------
Canada 0.7%
500 Fonorola, Inc. (US $)....................... 12.500 08/15/02 553,750
400 Pacalta Resources Ltd. (US $)............... 10.750 06/15/04 409,000
---------
962,750
---------
China 0.7%
1,000 Cathay International, LTD,
144A - Private Placement (US $)(b).......... 13.000 04/15/08 860,000
---------
Israel 0.1%
300 Barak I.T.C., Ser B (US $)(a)(b)............ 0/12.500 11/15/07 176,250
---------
South Korea 0.1%
200 Republic of Korea (US $).................... 8.750 04/15/03 189,500
---------
Luxembourg 0.6%
1,000 Millicom International Cellular (US $)(a)... 0/13.500 06/01/06 772,500
---------
Mexico 1.1%
250 Grupo Industrial Durango (US $)............. 12.625 08/01/03 270,000
500 Grupo Televisa SA (US $)(a)................. 0/13.250 05/15/08 407,500
500 Satelites Mexicanos SA,
144A - Private Placement (US $)(b).......... 10.125 11/01/04 490,000
250 Vicap SA, 144A - Private
Placement (US $)(b)......................... 11.375 05/15/07 260,000
---------
1,427,500
---------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
===================================================================================================
Par
Amount
in Local
Currency Market
(000) Description Coupon Maturity Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Netherlands 0.4%
750 Netia Holdings BV, Ser B (US $)(a)....... 0/11.250% 11/01/07 $ 500,625
-----------
Sweden 0.4%
500 Stena AB (US $).......................... 10.500 12/15/05 545,000
-----------
United Kingdom 2.1%
300 Cenargo International, PLC,
144A - Private Placement (US $)(b)....... 9.750 06/15/08 297,000
1,000 Diamond Cable Co. (US $)(a).............. 0/13.250 09/30/04 945,000
750 Esprit Telecom Group, PLC,
144A - Private Placement (US $)(b)....... 10.875 06/15/08 746,250
250 Esprit Telecom Group, PLC (US $)......... 11.500 12/15/07 258,125
500 Telewest PLC (US $)(a)................... 0/11.000 10/01/07 412,500
-----------
2,658,875
-----------
Total Foreign Bonds and Debt Securities......................... 10,236,750
-----------
U.S. Government and Government Agency Obligations 41.3%
5,000 Federal Farm Credit Banks
Medium Term Note......................... 6.375 08/06/07 5,150,000
5,077 Government National Mortgage
Association Pool......................... 7.500 07/15/23 - 08/15/23 5,222,433
4,782 Government National Mortgage
Association Pool......................... 8.000 03/15/17 - 10/15/22 4,968,671
1,831 Government National Mortgage
Association Pool......................... 8.500 01/15/23 - 12/15/24 1,934,742
3,301 Government National Mortgage
Association Pool......................... 9.000 05/15/16 - 12/15/24 3,554,009
733 Government National Mortgage
Association Pool......................... 9.500 11/15/09 - 06/15/19 802,081
2,500 U.S. T-Bonds............................. 7.250 05/15/16 2,930,075
3,000 U.S. T-Bonds............................. 7.500 11/15/16 3,601,590
11,500 U.S. T-Bonds............................. 8.875 02/15/19 15,848,955
7,000 U.S. T-Notes............................. 7.000 07/15/06 7,647,640
-----------
Total U.S. Government and
Government Agency Obligations.................................... 51,660,196
-----------
See Notes to Financial Statements
</TABLE>
13
<PAGE>
Portfolio of Investments (Continued)
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
==========================================================================================
Description Market Value
- ------------------------------------------------------------------------------------------
<S> <C>
Equities 1.7%
American Telecasting, Inc. (250 Common Stock Warrants) (c)................ $ 2,500
Dairy Mart Convenience Stores, Inc. (1,666 Common Stock Warrants) (c)..... 833
Metronet Communications (250 Common Stock Warrants) (c)................... 10,250
Nextlink Communications (11,086 Preferred Shares) (c) (d)................. 662,389
Optel, Inc. (500 Common Shares) (c)....................................... 1,000
Price Communications (3,440 Common Stock Warrants) (c).................... 1,720
Signature Brand (500 Common Stock Warrants) (c)........................... 10,950
Supermarkets General Holdings Corp. (26,550 Preferred Shares)(c) (d)...... 796,500
Time Warner, Inc. (597 Preferred Shares) (c).............................. 667,147
------------
Total Equities............................................................ 2,153,289
------------
Total Long-Term Investments 97.1%
(Cost $117,075,769).................................................. 121,786,942
Repurchase Agreement 2.0%
BA Securities ($2,510,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/98, to be sold on
07/01/98 at $2,510,422).............................................. 2,510,000
------------
Total Investments 99.1%
(Cost $119,585,769).................................................. 124,296,942
Other Assets in Excess of Liabilities 0.9%............................... 699,286
------------
Net Assets 100.0%........................................................ $124,996,228
------------
</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.
(e) Securities purchased on a when issued or delayed delivery basis.
(f) Assets segregated as collateral for when issued or delayed delivery
purchase commitments.
See Notes to Financial Statements
14
<PAGE>
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total Investments (Cost $119,585,769)............................... $124,296,942
Interest Receivable................................................. 2,135,510
Other............................................................... 88,432
------------
Total Assets................................................... 126,520,884
------------
Liabilities:
Payables:
Investments Purchased............................................. 1,334,444
Income Distributions.............................................. 70,412
Investment Advisory Fee........................................... 66,847
Administrative Fee................................................ 10,284
Affiliates........................................................ 9,753
Custodian Bank.................................................... 137
Trustees' Deferred Compensation and Retirement Plans................ 21,308
Accrued Expenses.................................................... 11,471
------------
Total Liabilities.............................................. 1,524,656
------------
Net Assets.......................................................... $124,996,228
============
Net Assets Consist of:
Common Shares (no par value with unlimited shares authorized,
15,290,019 shares issued and outstanding)......................... $141,133,309
Net Unrealized Appreciation......................................... 4,711,173
Accumulated Undistributed Net Investment Income..................... 314,056
Accumulated Net Realized Loss....................................... (21,162,310)
------------
Net Assets.......................................................... $124,996,228
============
Net Asset Value Per Common Share
($124,996,228 divided by 15,290,019 shares outstanding)........... $ 8.18
============
</TABLE>
See Notes to Financial Statements
15
<PAGE>
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
================================================================================
<TABLE>
Investment Income:
<S> <C>
Interest.................................................... $5,504,828
Dividends................................................... 76,789
----------
Total Income........................................... 5,581,617
----------
Expenses:
Investment Advisory Fee..................................... 402,368
Administrative Fee.......................................... 61,903
Shareholder Services........................................ 13,512
Legal....................................................... 7,812
Trustees' Fees and Expenses................................. 3,688
Custody..................................................... 2,810
Other....................................................... 57,800
----------
Total Expenses......................................... 549,893
----------
Net Investment Income....................................... $5,031,724
==========
Realized and Unrealized Gain/Loss:
Net Realized Gain........................................... $ 660,453
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 3,558,549
End of the Period......................................... 4,711,173
----------
Net Unrealized Appreciation During the Period............... 1,152,624
----------
Net Realized and Unrealized Gain............................ $1,813,077
==========
Net Increase in Net Assets From Operations.................. $6,844,801
==========
</TABLE>
See Notes to Financial Statements
16
<PAGE>
Statement of Changes in Net Assets
For the Six Months Ended
June 30, 1998 and the Year Ended December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
==================================================================================================
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income......................................... $ 5,031,724 $ 10,138,473
Net Realized Gain............................................. 660,453 2,352,790
Net Unrealized Appreciation
During the Period........................................... 1,152,624 442,703
------------ ------------
Change in Net Assets from Operations.......................... 6,844,801 12,933,966
Distributions from Net Investment Income...................... (4,930,835) (11,047,048)
------------ ------------
Net Change in Net Assets from Investment Activities........... 1,913,966 1,886,918
Net Assets:
Beginning of the Period....................................... 123,082,262 121,195,344
------------ ------------
End of the Period (Including accumulated undistributed net
investment income of $314,056 and $213,167 respectively).... $124,996,228 $123,082,262
============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE>
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
===============================================================================================================
Six Months Ended Year Ended December 31,
June 30, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of the Period................... $ 8.050 $ 7.926 $ 7.94 $ 7.28 $ 8.15
------- ------- ------- ------- -------
Net Investment Income..................... .329 .663 .658 .65 .65
Net Realized and
Unrealized Gain/Loss................... .118 .183 (.011) .655 (.8577)
------- ------- ------- ------- -------
Total from Investment Operations............ .447 .846 .647 1.035 (.2077)
------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income...................... .322 .722 .661 .645 .6623
Distributions from Net
Realized Gains......................... -- -- -- -- --
------- ------- ------- ------- -------
Total Distributions......................... .322 .722 .661 .645 (.6623)
------- ------- ------- ------- -------
Net Asset Value, End of the Period.......... $ 8.175 $ 8.050 $ 7.926 $ 7.94 $ 7.28
======= ======= ======= ======= =======
Market Price Per Share at End of
the Period............................... $7.8125 $ 8.000 $ 7.500 $ 7.250 $ 6.500
Total Investment Return at Market
Price (a)(c)............................. 1.60%* 16.97% 12.95% 21.83% (8.06%)
Total Return at Net Asset Value (b)(c)...... 5.65%* 11.32% 8.61% 19.13% (2.08%)
Net Assets at End of the Period
(In millions)........................... $ 125.0 $ 123.1 $ 121.2 $ 121.4 $ 111.4
Ratio of Operating Expenses to
Average Net Assets (b).................. .89% .91% 1.00% .94% .96%
Ratio of Net Investment Income to
Average Net Assets...................... 8.13% 8.32% 8.40% 8.50% 7.94%
Portfolio Turnover......................... 32%* 55% 36% 34% 45%
</TABLE>
* Non-Annualized
(a) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of
dividends in accordance with the Fund's dividend reinvestment plan.
(b) Total Return at Net Asset Value (NAV) reflects the change in value of the
Fund's assets with reinvestment of dividends based upon NAV.
(c) Prior to fiscal year end 1992, this was not a required disclosure.
18
<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 December 31,
- ----------------------------------------------------------
1993 1992 1991 1990 1989
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
$ 7.85 $ 7.70 $ 6.66 $ 7.90 $ 9.06
------ ------- ------ ------- -------
.78 .845 .88 .974 1.06
.285 .1625 1.05 (1.242) (1.116)
------ ------- ------ ------- -------
1.065 1.0075 1.93 (.268) (.056)
------ ------- ------ ------- -------
.765 .8575 .89 .972 1.078
x
-- -- -- -- .026
------ ------- ------ ------- -------
.765 .8575 .89 .972 1.104
------ ------- ------ ------- -------
$ 8.15 $ 7.85 $ 7.70 $ 6.66 $ 7.90
====== ======= ====== ======= =======
$7.750 $ 7.625 $7.375 $ 5.625 $ 7.500
11.82% 15.22% -- -- --
14.36% 13.61% -- -- --
$124.7 $ 119.6 $116.3 $ 100.6 $ 119.4
1.00% .99% 1.03% 1.00% .97%
8.99% 10.71% 12.11% 13.25% 12.18%
53% 54% 50% 29% 20%
</TABLE>
19 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
June 30, 1998 (Unaudited)
===============================================================================
1. Significant Accounting Policies
Van Kampen American Capital Income Trust (the "Fund") is registered as a
diversified closed-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to provide
current income through investing in a portfolio of debt securities.
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 are stated at value using market
quotations. Investments in securities listed on a securities exchange are valued
at their sales 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 June 30, 1998, debt securities rated below investment
grade and comparable unrated securities represented approximately 55% of the
long-term investment portfolio.
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.
The Fund may invest in repurchase agreements, which are short-term
investments whereby 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
20
<PAGE>
Notes to Financial Statements (Continued)
June 30, 1998 (Unaudited)
===============================================================================
transfer uninvested cash balances into a pooled cash account along with other
investment companies advised by Van Kampen 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. Investment Income--Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Original issue discount is
amortized over the expected life of each applicable security. Premiums on debt
securities are not amortized.
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 these losses against any future realized capital
gains. At December 31, 1997, the Fund had an accumulated capital loss
carryforward for tax purposes of $20,007,721 which will expire between December
31, 1998 and December 31, 2003. Of this amount, $7,854,715 will expire on
December 31, 1998. Net realized gains or losses may differ for financial and tax
reporting purposes primarily as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following fiscal year.
At June 30, 1998, for federal income tax purposes, cost of long- and short-
term investments is $119,585,769, the aggregate gross unrealized appreciation is
$5,658,419 and the aggregate gross unrealized depreciation is $947,246,
resulting in net unrealized appreciation of $4,711,173.
E. Distribution of Income and Gains--The Fund declares and pays monthly
dividends from net investment income to shareholders. Net realized gains, if
any, are distributed annually. Distributions from net realized gains for book
purposes may include short-term capital gains. All short-term capital gains are
included in ordinary income for tax purposes.
21
<PAGE>
Notes to Financial Statements (Continued)
June 30, 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 of .65% of the average weekly net assets of the Fund. In addition, the
Fund will pay a monthly administrative fee to Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen"), the Fund's Administrator, at an annual
rate of .10% of the first $250 million and .05% of the amount in excess of $250
million of the average weekly net assets of the Fund. The administrative
services provided by the Administrator include record keeping and reporting
responsibilities with respect to the Fund's portfolio and providing certain
services to shareholders.
For the six months ended June 30, 1998, the Fund recognized expenses of
approximately $24,300 representing Van Kampen's cost of providing accounting
services to the Fund.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. 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 $2,500.
3. Investment Transactions
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $38,439,659 and $39,503,294,
respectively.
22
<PAGE>
Van Kampen Funds
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation and
Senior Loan Funds
Prime Rate Income Trust
Reserve
Senior Floating Rate
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 fund prospectus or to receive additional fund
information, choose from one of the following:
. visit our web site at www.van-kampen.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.van-kampen.com and selecting Investors' Place
23
<PAGE>
Van Kampen American Capital Income Trust
Board of Trustees
David C. Arch
Rod Dammeyer
Howard J Kerr
Dennis J. McDonnell*--Chairman
Steven Muller
Theodore A. Myers
Don G. Powell*
Hugo F. Sonnenschein
Wayne W. Whalen
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*
Vice President
Investment Adviser
Van Kampen
Asset Management Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Custodian
State Street Bank and Trust Co.
225 Franklin Street
Boston, Massachusetts 02105
Shareholder Servicing Agent
Boston EquiServe LP
P.O. Box 8200
Boston, Massachusetts 02266-8200
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
Ernst & Young LLP
1221 McKinney Suite 2400
Houston, Texas 77010
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen Funds Inc., 1998
All rights reserved.
/SM/ denotes a service mark of
Van Kampen Funds Inc.
Inquiries about an investor's account should be
referred to the fund's transfer agent:
Boston EquiServe LP
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: (800) 821-1238
Alaska and Hawaii
Call Collect: (781) 575-2000
Ask for closed end fund account services
24
<PAGE>
------------
Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
FUNDS
------------
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> INCOME TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 119,585,769 <F1>
<INVESTMENTS-AT-VALUE> 124,296,942 <F1>
<RECEIVABLES> 2,135,510 <F1>
<ASSETS-OTHER> 0 <F1>
<OTHER-ITEMS-ASSETS> 88,432 <F1>
<TOTAL-ASSETS> 126,520,884 <F1>
<PAYABLE-FOR-SECURITIES> 1,334,444 <F1>
<SENIOR-LONG-TERM-DEBT> 0 <F1>
<OTHER-ITEMS-LIABILITIES> 190,212 <F1>
<TOTAL-LIABILITIES> 1,524,656 <F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 141,133,309
<SHARES-COMMON-STOCK> 15,290,019
<SHARES-COMMON-PRIOR> 15,290,019
<ACCUMULATED-NII-CURRENT> 314,056 <F1>
<OVERDISTRIBUTION-NII> 0 <F1>
<ACCUMULATED-NET-GAINS> (21,162,310) <F1>
<OVERDISTRIBUTION-GAINS> 0 <F1>
<ACCUM-APPREC-OR-DEPREC> 4,711,173 <F1>
<NET-ASSETS> 124,996,228
<DIVIDEND-INCOME> 76,789 <F1>
<INTEREST-INCOME> 5,504,828 <F1>
<OTHER-INCOME> 0 <F1>
<EXPENSES-NET> (549,893) <F1>
<NET-INVESTMENT-INCOME> 5,031,724 <F1>
<REALIZED-GAINS-CURRENT> 660,453 <F1>
<APPREC-INCREASE-CURRENT> 1,152,624 <F1>
<NET-CHANGE-FROM-OPS> 6,844,801 <F1>
<EQUALIZATION> 0 <F1>
<DISTRIBUTIONS-OF-INCOME> (4,930,835)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,913,966
<ACCUMULATED-NII-PRIOR> 213,167 <F1>
<ACCUMULATED-GAINS-PRIOR> (21,822,763) <F1>
<OVERDISTRIB-NII-PRIOR> 0 <F1>
<OVERDIST-NET-GAINS-PRIOR> 0 <F1>
<GROSS-ADVISORY-FEES> 402,368 <F1>
<INTEREST-EXPENSE> 0 <F1>
<GROSS-EXPENSE> 549,893 <F1>
<AVERAGE-NET-ASSETS> 124,877,622
<PER-SHARE-NAV-BEGIN> 8.050
<PER-SHARE-NII> 0.329
<PER-SHARE-GAIN-APPREC> 0.118
<PER-SHARE-DIVIDEND> (0.322)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.175
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0 <F1>
<AVG-DEBT-PER-SHARE> 0 <F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class
basis
</FN>
</TABLE>
