<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
Statement of Assets and Liabilities.............. 11
Statement of Operations.......................... 12
Statement of Changes in Net Assets............... 13
Financial Highlights............................. 14
Notes to Financial Statements.................... 16
</TABLE>
VIT SAR 8/96
<PAGE> 2
LETTER TO SHAREHOLDERS
August 9, 1996
Dear Shareholder,
After an anemic 0.3 percent rise
in gross domestic product in the
fourth quarter of 1995, GDP rose 2.0
percent in the first quarter of 1996
and 4.2 percent in the second
quarter. The strengthening economic
growth was spurred by consumer [PHOTO]
spending, as retail sales rose more
than 5 percent in the first five
months of this year versus the DENNIS J. MCDONNELL AND DON G. POWELL
comparable 1995 period. This brisk
activity generated concerns of
inflation, which had been running at about 3 percent for several years.
Investors began to suspect that the Federal Reserve might tighten monetary
policy in order to ward off inflation.
The first six months of 1996 were relatively favorable for high yield bonds,
compared to other fixed-income securities. High yield bonds tend to outperform
U.S. Treasuries and investment-grade corporate bonds during periods of strong
economic growth and a rising interest rate environment. This is because their
high coupon payments serve as a buffer to rising interest rates, and because a
strengthening economy improves their credit prospects.
PORTFOLIO STRATEGY
The Intermediate Term High Income Trust invests primarily in a portfolio of
relatively high-grade securities (within the non-investment grade category) with
relatively shorter-term maturities. Currently, the Trust holds more than 38
percent in securities rated BB, the highest quality rating within the
non-investment grade category. Single B-rated securities, which currently
represent more than half of the Trust's portfolio, provided a strong total
return for the period.
In general, bonds issued by companies involved in merger activity, or those
that were able to issue equity, outperformed other bonds of similar credit
quality for the six-month period ended June 30, 1996. For example, as part of a
financial restructuring, Donald Trump took his Atlantic City casino company
public, and the Trump Plaza bonds held by the Trust were tendered at a
substantial premium. Also, the announcement of a merger between Continental
Cable and US West helped Continental bonds to outperform their investment
category.
The Board of Trustees of your Trust have recently approved a proposal to
remove the termination date (February 1, 1999) of the Trust and adopt an
indefinite period of existence. This proposal, which is subject to shareholder
approval, would allow portfolio management to invest in longer-term securities
in order to continue seeking to provide shareholders with high current income
and preservation of capital. Shareholders of the Trust will receive a proxy in
the coming weeks explaining the proposal in more detail.
Continued on page two
1
<PAGE> 3
PORTFOLIO COMPOSITION BY CREDIT QUALITY
AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995
[PIE CHART] [PIE CHART]
A - 0.4% BBB - 0.7%
BBB - 2.5% BB - 36.1%
BB - 38.5% B - 60.2%
B - 56.5% Non-Rated - 3.0%
CCC - 0.3%
Non-Rated - 1.8%
Based upon credit quality ratings issued by Standard & Poor's. For securities
not rated by Standard & Poor's, the Moody's rating is used.
PERFORMANCE SUMMARY
For the six-month period ended June 30, 1996, the Trust generated a total
return at market price of 7.40 percent(1). The Trust's performance reflects a
gain in market price per common share on the New York Stock Exchange from $6.375
on December 31, 1995 to $6.50 on June 30, 1996. Additionally attractive, the
Trust's current annualized dividend of $0.702 per common share represents a
distribution rate of 10.80 percent (3) based on the closing common stock price
on June 30, 1996. Longer-term, the one-year total return at market price was
8.93 percent(1), including reinvestment of dividends totaling $0.702 per share.
The Trust's leveraged capital structure has been beneficial for shareholders
of common shares, providing a high level of current income and strong total
returns, over time. However, this type of structure could place pressure on the
Trust's earnings should interest rates escalate.
MARKET 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 particular,
we expect 10-year Treasury yields to remain within a trading range of 6.50 and
7.25 percent.
Continued on page three
2
<PAGE> 4
CORPORATE NEWS
As you may be aware, an agreement was reached in late June for VK/AC
Holding, Inc., the parent company of Van Kampen American Capital, Inc., to be
acquired by the Morgan Stanley 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
management 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.
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
closed-end 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 anticipated
to be completed in November.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
3
<PAGE> 5
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996
VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TRUST
(NYSE TICKER SYMBOL--VIT)
<TABLE>
<S> <C>
TOTAL RETURNS
Six-month total return based on market price(1)............. 7.40%
Six-month total return based on NAV(2)...................... 3.44%
DISTRIBUTION RATE
Distribution rate as a % of closing common stock price(3)... 10.80%
SHARE VALUATIONS
Net asset value............................................. $6.05
Closing common stock price.................................. $6.500
Six-month high common stock price (05/13/96)................ $6.875
Six-month low common stock price (03/08/96)................. $6.250
Preferred share rate(4)..................................... 5.375%
</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 Trust'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
Trust at the end of the period and not the earnings of the Trust.
(4)See "Notes to Financial Statements" footnote #4, for more information
concerning Preferred Share reset periods.
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS
AEROSPACE & DEFENSE 2.3%
$2,600 Sequa Corp. .................................... 9.625% 10/15/99 $ 2,619,500
700 Sequa Corp. .................................... 9.375 12/15/03 675,500
------------
3,295,000
------------
AUTOMOBILE 0.9%
1,200 Exide Corp...................................... 10.750 12/15/02 1,227,000
------------
BUILDINGS & REAL ESTATE 6.9%
3,050 American Standard Inc. ......................... 10.875 05/15/99 3,233,000
1,700 Chelsea GCA Realty Inc.......................... 7.750 01/26/01 1,657,500
2,100 Doman Industries Ltd. .......................... 8.750 03/15/04 1,900,500
1,800 Schuller International Group Inc................ 10.875 12/15/04 1,944,000
975 Southdown Inc................................... 14.000 10/15/01 1,043,250
------------
9,778,250
------------
CHEMICALS, PLASTICS & RUBBER 1.6%
2,404 G. I. Holdings Inc.............................. 10.000 02/15/06 2,343,900
------------
CONSUMER NON-DURABLES 2.8%
1,300 Playtex Family Products Corp. .................. 9.000 12/15/03 1,222,000
2,160 Revlon Consumer Products Corp................... 9.375 04/01/01 2,122,200
550 Revlon Consumer Products Corp................... 10.875 07/15/10 563,750
------------
3,907,950
------------
CONTAINERS, PACKAGING & GLASS 4.9%
460 Anchor Glass Container Corp..................... 10.250 06/30/02 322,000
500 Owens Illinois Inc.............................. 10.250 04/01/99 508,750
3,000 Owens Illinois Inc.............................. 11.000 12/01/03 3,225,000
1,000 S.D. Warren Co. ................................ 12.000 12/15/04 1,060,000
1,850 Stone Consolidated Corp......................... 10.250 12/15/00 1,905,500
------------
7,021,250
------------
</TABLE>
See Notes to Financial Statements
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DIVERSIFIED/CONGLOMERATE MANUFACTURING 4.5%
$ 250 Communications & Power Industries Inc........... 12.000% 08/01/05 $ 264,375
3,000 Jordan Industries Inc........................... 10.375 08/01/03 2,857,500
1,000 Republic Engineered Steels Inc. ................ 9.875 12/15/01 935,000
2,270 Talley Manufacturing & Technology Inc........... 10.750 10/15/03 2,360,800
------------
6,417,675
------------
ECOLOGICAL 0.3%
400 Norcal Waste Systems Inc........................ 12.750 11/15/05 423,000
------------
ELECTRONICS 3.0%
2,300 Bell & Howell Co. (d)........................... 0/11.500 03/01/05 1,575,500
1,250 Computervision.................................. 11.375 08/15/99 1,293,750
1,300 Exide Electronics Group Inc..................... 11.500 03/15/06 1,326,000
------------
4,195,250
------------
FARMING & AGRICULTURE 0.8%
450 AGCO Corp....................................... 8.500 03/15/06 441,000
750 Trans Resources Inc............................. 11.875 07/01/02 720,000
------------
1,161,000
------------
FINANCE 2.2%
2,900 American Annuity Group Inc...................... 11.125 02/01/03 3,117,500
------------
GROCERY 3.8%
230 Pantry Inc...................................... 12.000 11/15/00 202,400
1,100 Pathmark Stores Inc............................. 11.625 06/15/02 1,097,250
1,250 Pathmark Stores Inc............................. 9.625 05/01/03 1,175,000
2,000 Purity Supreme Inc.............................. 11.750 08/01/99 2,170,000
650 Vons Cos. Inc................................... 9.625 04/01/02 682,500
------------
5,327,150
------------
HEALTHCARE 4.2%
1,250 Merit Behavioral Care Corp...................... 11.500 11/15/05 1,312,500
300 Ornda Healthcorp................................ 12.250 05/15/02 324,750
1,700 Ornda Healthcorp................................ 11.375 08/15/04 1,874,250
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HEALTHCARE (CONTINUED)
$2,250 Tenet Healthcare Corp........................... 10.125% 03/01/05 $ 2,385,000
------------
5,896,500
------------
HOTEL, MOTEL, INNS & GAMING 7.5%
450 Argosy Gaming Co................................ 13.250 06/01/04 456,750
2,550 California Hotel Finance Corp................... 11.000 12/01/02 2,690,250
250 Coast Hotels & Casino........................... 13.000 12/15/02 271,875
1,350 Grand Casino Inc................................ 10.125 12/01/03 1,387,125
950 Hollywood Casino Inc............................ 12.750 11/01/03 945,250
2,500 MGM Grand Hotel Finance Corp.................... 11.750 05/01/99 2,650,000
800 Showboat Marina................................. 13.500 03/15/03 872,000
1,350 Trump Atlantic City Associates.................. 11.250 05/01/06 1,356,750
------------
10,630,000
------------
LEISURE 2.1%
2,685 Viacom International Inc........................ 10.250 09/15/01 2,933,363
------------
MINING, STEEL, IRON & NON-PRECIOUS METAL 4.0%
1,350 Armco Inc....................................... 11.375 10/15/99 1,393,875
650 Carbide/Graphite Group Inc...................... 11.500 09/01/03 703,625
3,000 Easco Corp...................................... 10.000 03/15/01 3,045,000
500 Magma Copper Co................................. 12.000 12/15/01 542,500
------------
5,685,000
------------
OIL & GAS 10.8%
1,150 Clark R & M Holdings Inc........................ * 02/15/00 787,750
1,350 Coda Energy Inc................................. 10.500 04/01/06 1,343,250
1,450 Giant Industries Inc............................ 9.750 11/15/03 1,421,000
3,650 Global Marine Inc............................... 12.750 12/15/99 3,960,250
800 KCS Energy Inc.................................. 11.000 01/15/03 846,000
1,100 Mesa Capital Corp............................... 12.750 06/30/98 1,102,750
1,700 Petroleum Heat & Power Inc...................... 12.250 02/01/05 1,870,000
400 Triton Energy Corp.............................. * 11/01/97 361,000
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OIL & GAS (CONTINUED)
$3,700 Triton Energy Corp. (d)......................... 0/9.750% 12/15/00 $ 3,589,000
------------
15,281,000
------------
PRINTING, PUBLISHING & BROADCASTING 18.4%
2,450 Cablevision Systems Corp........................ 10.750 04/01/04 2,523,500
600 Cablevision Systems Corp........................ 10.500 05/15/16 583,500
3,400 Century Communications Corp. (c)................ 9.750 02/15/02 3,383,000
600 Century Communications Corp..................... 11.875 10/15/03 640,500
1,450 Comcast Corp.................................... 9.375 05/15/05 1,406,500
1,250 Continental Cablevision Inc..................... 8.300 05/15/06 1,293,750
500 Heritage Media Services......................... 11.000 06/15/02 530,000
4,000 Insight Communications Co....................... 11.250 03/01/00 4,020,000
550 International Cabletel Inc. (d)................. 0/11.500 02/01/06 308,000
2,600 K-III Communications Corp....................... 10.625 05/01/02 2,704,000
2,100 Rogers Communications Inc....................... 10.875 04/15/04 2,131,500
2,400 SCI Television Inc.............................. 11.000 06/30/05 2,502,000
2,500 Storer Communications Inc....................... 10.000 05/15/03 2,506,250
550 Young Broadcasting Inc.......................... 10.125 02/15/05 530,750
1,100 Young Broadcasting Inc.......................... 9.000 01/15/06 981,750
------------
26,045,000
------------
RETAIL 4.7%
1,000 Hosiery Corp. America Inc. (Including 1,000
common stock warrants).......................... 13.750 08/01/02 1,095,000
1,100 Loehmann's Inc.................................. 11.875 05/15/03 1,144,000
2,485 Thrifty Payless................................. 12.250 04/15/04 2,745,925
1,600 Waban Inc....................................... 11.000 05/15/04 1,664,000
------------
6,648,925
------------
TELECOMMUNICATIONS 6.0%
1,275 Centennial Cellular Corp. ...................... 10.125 05/15/05 1,230,375
250 Intercel Inc.................................... * 05/01/06 136,250
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
$ 550 Intermedia Communications of Florida, Inc.
(d)............................................. 0/12.500% 05/15/06 $ 308,000
600 Intermedia Communications of Florida, Inc.
(Including 600 common stock warrants)........... 13.500 06/01/05 696,000
1,200 IXC Communications Inc.......................... 12.500 10/01/05 1,260,000
150 Metrocall Inc. ................................. 10.375 10/01/07 139,500
1,600 Mobilemedia Communications Inc. (d)............. 0/10.500 12/01/03 1,136,000
1,700 Panamsat L.P. .................................. 9.750 08/01/00 1,759,500
550 Pricellular Wireless Corp. (d).................. 0/12.250 10/01/03 434,500
1,500 Teleport Communications Group (b) (d)........... 0/11.125 07/01/07 873,750
1,000 Telewest PLC (d)................................ 0/11.000 10/01/07 592,500
------------
8,566,375
------------
TEXTILES 0.7%
1,100 Dan River Inc................................... 10.125 12/15/03 1,058,750
------------
TRANSPORTATION 0.9%
1,350 U.S. Air Inc. .................................. 8.625 09/01/98 1,323,000
------------
UTILITIES 2.8%
1,600 AES Corp. (b)................................... 10.250 07/15/06 1,608,000
825 California Energy Inc........................... 9.875 06/30/03 839,437
1,500 El Paso Electric Co............................. 8.900 02/01/06 1,481,250
-----------
3,928,687
-----------
TOTAL LONG-TERM INVESTMENTS 96.1%
(Cost $135,327,959) (a)...................................................... 136,211,525
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT 4.6%
J.P. Morgan Securities, U.S. T-Bond, $5,186,000 par, 9.875% coupon, due
11/15/15, dated 06/28/96, to be sold on 07/01/96 at $6,611,974............... $ 6,609,000
LIABILITIES IN EXCESS OF OTHER ASSETS (0.7%).................................. (1,049,940)
------------
NET ASSETS 100%............................................................... $141,770,585
============
</TABLE>
*Zero coupon bond
(a) At June 30, 1996, cost for federal income tax purposes is $135,327,959; the
aggregate gross unrealized appreciation is $2,362,008 and the aggregate
gross unrealized depreciation is $1,478,442, resulting in net unrealized
appreciation of $883,566.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
(d) Bond is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $135,327,959) (Note 1)............... $136,211,525
Repurchase Agreements (Note 1).......................................... 6,609,000
Cash.................................................................... 303
Receivables:
Interest.............................................................. 3,007,446
Securities Sold....................................................... 791,289
Miscellaneous........................................................... 3,385
------------
Total Assets...................................................... 146,622,948
------------
LIABILITIES:
Payables:
Securities Purchased.................................................. 4,253,444
Income Distributions--Common and Preferred Shares..................... 276,487
Investment Advisory Fee (Note 2)...................................... 87,135
Distributor and Affiliates (Note 2)................................... 11,677
Accrued Expenses........................................................ 177,628
Deferred Compensation and Retirement Plans (Note 2)..................... 45,992
------------
Total Liabilities................................................. 4,852,363
------------
NET ASSETS.............................................................. $141,770,585
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, 1,000,000 shares authorized, 588
shares outstanding with liquidation preference of $100,000 per share)
(Note 4).............................................................. $ 58,800,000
------------
Common Shares ($.01 par value with an unlimited number of shares
authorized, 13,710,760 shares issued and outstanding)................. 137,108
Paid in Surplus......................................................... 124,474,385
Accumulated Undistributed Net Investment Income......................... 1,038,500
Net Unrealized Appreciation on Securities............................... 883,566
Accumulated Net Realized Loss on Securities............................. (43,562,974)
------------
Net Assets Applicable to Common Shares............................ 82,970,585
------------
NET ASSETS.............................................................. $141,770,585
============
NET ASSET VALUE PER COMMON SHARE ($82,970,585 divided by 13,710,760
shares outstanding)................................................... $ 6.05
============
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................ $ 7,195,952
Other................................................................... 43,600
------------
Total Income........................................................ 7,239,552
------------
EXPENSES:
Investment Advisory Fee (Note 2)........................................ 534,778
Preferred Share Maintenance (Note 4).................................... 96,140
Shareholder Services (Note 2)........................................... 39,858
Trustees Fees and Expenses (Note 2)..................................... 12,014
Legal (Note 2).......................................................... 9,100
Other................................................................... 101,227
------------
Total Expenses...................................................... 793,117
------------
NET INVESTMENT INCOME................................................... $ 6,446,435
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments........................................ $ 1,190,020
------------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................... 3,969,365
End of the Period:
Investments......................................................... 883,566
------------
Net Unrealized Depreciation on Securities During the Period............. (3,085,799)
------------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.......................... $ (1,895,779)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $ 4,550,656
============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996
and the Year Ended December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 6,446,435 $ 13,467,671
Net Realized Gain on Securities....................... 1,190,020 1,199,409
Net Unrealized Appreciation/Depreciation on
Securities During the Period........................ (3,085,799) 6,158,150
------------ ------------
Change in Net Assets from Operations.................. 4,550,656 20,825,230
------------ ------------
Distributions from Net Investment Income:
Common Shares....................................... (4,812,300) (9,624,657)
Preferred Shares.................................... (1,582,032) (3,476,603)
------------ ------------
Total Distributions................................... (6,394,332) (13,101,260)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (1,843,676) 7,723,970
NET ASSETS:
Beginning of the Period............................... 143,614,261 135,890,291
------------ ------------
End of the Period (Including undistributed net
investment income of $1,038,500 and $986,397,
respectively)....................................... $141,770,585 $143,614,261
============ ============
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended -----------------------
June 30, 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period (a)................................. $6.186 $5.623 $6.735
------ ------ ------
Net Investment Income........................ .470 .982 1.002
Net Realized and Unrealized Gain/Loss on
Securities................................. (.139) .537 (.975)
------ ------ ------
Total from Investment Operations............. .331 1.519 .027
------ ------ ------
Less Distributions from Net Investment
Income:
Paid to Common Shareholders................ .351 .702 .954
Common Share Equivalent of Distributions
Paid to Preferred Shareholders........... .115 .254 .185
------ ------ ------
Total Distributions.......................... .466 .956 1.139
------ ------ ------
Net Asset Value, End of the Period........... $6.051 $6.186 $5.623
====== ====== ======
Market Price Per Share at End of the
Period..................................... $6.500 $6.375 $5.500
Total Investment Return at Market
Price (b).................................. 7.40%* 29.17% (23.22%)
Total Return at Net Asset Value (c).......... 3.44%* 23.70% (2.54%)
Net Assets at End of the Period (In
millions).................................. $141.8 $143.6 $135.9
Ratio of Expenses to Average Net Assets
Applicable to Common Shares................ 1.89% 1.92% 1.96%
Ratio of Expenses to Average Net Assets...... 1.11% 1.12% 1.16%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)..... 11.56% 12.16% 13.31%
Portfolio Turnover........................... 48%* 119% 110%
</TABLE>
(a) Net asset value at January 26, 1989 of $9.300 is adjusted for common and
preferred share offering costs of $.198 per share.
(b) 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 Trust's dividend reinvestment plan.
(c) Total return at net asset value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based on NAV.
(d) Net investment income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
* Non-Annualized
N/A = Not Applicable
14
<PAGE> 16
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 26, 1989
(Commencement
Year Ended December 31 of Investment
- --------------------------------------------------- Operations) to
1993 1992 1991 1990 December 31, 1989
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6.228 $5.924 $4.603 $7.488 $9.102
------ ------ ------ ------ ------
1.109 1.206 1.150 1.566 1.387
.526 .174 1.282 (2.866) (1.653)
------ ------ ------ ------ ------
1.635 1.380 2.432 (1.300) (.266)
------ ------ ------ ------ ------
.990 .908 .840 1.083 1.020
.138 .168 .271 .502 .328
------ ------ ------ ------ ------
1.128 1.076 1.111 1.585 1.348
------ ------ ------ ------ ------
$6.735 $6.228 $5.924 $4.603 $7.488
====== ====== ====== ====== ======
$8.125 $7.250 $6.875 $4.125 $7.375
26.12% 18.67% 92.24% (32.91%) (17.27%)*
25.46% 21.36% 48.77% (26.20%) (15.58%)*
$151.1 $144.2 $140.0 $121.9 $187.7
1.72% 1.87% 2.51% 2.10% 1.56%
1.04% 1.11% 1.42% 1.90% N/A
14.66% 16.48% 15.86% 17.24% 13.20%
99% 109% 78% 57% 33%*
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Intermediate Term High Income Trust (the "Trust") is
registered as a diversified closed-end management investment company under the
Investment Company Act of 1940, as amended. The Trust's investment objective is
to provide high current income, consistent with preservation of capital, by
investing in a portfolio of medium or lower grade fixed-income securities, or
non-rated securities of comparable quality. The Trust commenced investment
operations on January 26, 1989.
The following is a summary of significant accounting policies consistently
followed by the Trust 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--Investments are stated at value using market quotations,
prices provided by market makers or estimates obtained from yield data relating
to instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities and repurchase agreements with remaining maturities of less than 60
days are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust 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 Trust 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.
A repurchase agreement is a short-term investment in which the Trust
acquires ownership of a debt security and the seller agrees to repurchase the
security at a future time and specified price. Repurchase agreements are
collateralized by the underlying debt security. The Trust 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 Trust.
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
discount is amortized over the expected life of each applicable security.
D. FEDERAL INCOME TAXES--It is the Trust'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 Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At December 31, 1995, the Trust had an accumulated capital loss carry
forward for tax purposes of $44,752,994, of which $22,627,301, $19,427,104,
$1,670,578 and $1,028,011 will expire on December 31, 1998, 1999, 2002 and 2003,
respectively. 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.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from
net investment income to common shareholders monthly. Net realized gains, if
any, are distributed annually to common shareholders.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") will provide
investment advice and facilities to the Trust for an annual fee payable monthly
of .75% of the average net assets of the Trust.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.
For the six months ended June 30, 1996, the Trust recognized expenses of
approximately $9,700 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting,
legal and certain shareholder services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.
The Trust has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
portion of their compensation to a later date. The retirement plan covers those
trustees who are not officers of VKAC.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $75,114,929 and $63,710,649,
respectively.
4. AUCTION MARKET PREFERRED SHARES
The Trust has outstanding 588 shares of Auction Market Preferred Shares ("AMPS")
at a liquidation value of $100,000 per share. Dividends are cumulative and the
rate is currently reset through an auction process every 28 days. The rate in
effect on June 30, 1996, was 5.375%. During the six months ended June 30, 1996,
the rates ranged from 5.199% to 5.890%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The AMPS are redeemable at the option of the Trust in whole or in part at a
price of $100,000 per share plus accumulated and unpaid dividends. The Trust is
subject to certain asset coverage tests, and the AMPS are subject to mandatory
redemption if the tests are not met.
18
<PAGE> 20
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.
19
<PAGE> 21
VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TRUST
OFFICERS AND TRUSTEES
DON G. POWELL*
Chairman and Trustee
DENNIS J. MCDONNELL*
President and Trustee
DAVID C. ARCH
Trustee
ROD DAMMEYER
Trustee
HOWARD J KERR
Trustee
THEODORE A. MYERS
Trustee
HUGO F. SONNENSCHEIN
Trustee
WAYNE W. WHALEN*
Trustee
PETER W. HEGEL*
Vice President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Treasurer
SCOTT E. MARTIN*
Assistant Secretary
WESTON B. WETHERELL*
Assistant Secretary
NICHOLAS DALMASO*
Assistant Secretary
JOHN L. SULLIVAN*
Controller
STEVEN M. HILL*
Assistant Treasurer
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in the
Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1996
All rights reserved.
(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.
20
