<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 17
Statement of Operations.......................... 18
Statement of Changes in Net Assets............... 19
Financial Highlights............................. 20
Notes to Financial Statements.................... 22
Dividend Reinvestment Plan....................... 25
</TABLE>
VIT SAR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory
Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory
Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
VAN KAMPEN HIGH INCOME TRUST
(NYSE TICKER SYMBOL--VIT)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
Six-month total return based on market price(1)............ 5.26%
Six-month total return based on NAV(2)..................... (0.63%)
DISTRIBUTION RATE
Distribution rate as a % of closing common stock
price(3)................................................... 10.54%
SHARE VALUATIONS
Net asset value............................................ $ 5.49
Closing common stock price................................. $6.375
Six-month high common stock price (02/09/99)............... $6.6875
Six-month low common stock price (06/22/99)................ $6.1250
Preferred share rate(4).................................... 5.03%
</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.
Investing in high-yield, lower-rated securities involves certain risks, which
may include the potential for greater sensitivity to general economic downturns
and greater market price volatility.
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.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN HIGH INCOME TRUST
We recently spoke with the management team of the Van Kampen High Income Trust
about the key events and economic forces that shaped the markets during the past
six months. The team includes Peter Ehret, portfolio manager, and Peter W.
Hegel, chief investment officer for fixed-income investments. Mr. Ehret assumed
management responsibilities for the Trust on June 1, 1999. The following
comments reflect their views on the Trust's performance during the six months
ended June 30, 1999.
Q WHAT HAPPENED IN THE HIGH-YIELD MARKET DURING THE REPORTING PERIOD?
A The most important theme marking the first six months of the year was
cautious recovery. The high-yield market continued to make progress from
last fall's lows, when growing concerns about the global economy sparked a
flight to quality that created one of the most difficult periods on record for
high-yield bonds. During the current reporting period, the Fed's interest-rate
cuts, a vibrant domestic economy, and strong consumer confidence all played
critical roles in the turnaround. While greatly diminished, some of the concerns
surrounding the direction of interest rates and high-yield defaults continued
into 1999. Accordingly, interest rates on high-yield bonds have fallen but still
remain relatively high compared to U.S. Treasury bonds.
Q HOW DID HIGH YIELD BONDS PERFORM COMPARED TO TREASURY BONDS?
A Although we experienced bumps in February and again in May due to concerns
about inflation and interest rates, the high-yield market comfortably
outperformed Treasury bonds as interest rates increased. High-yield bonds
generally perform better than higher-quality bonds during a rising interest-rate
environment because they are less sensitive to rate changes and offer attractive
yields to compensate bondholders for their increased credit risk.
Q DID SOME AREAS OF THE HIGH-YIELD MARKET RECOVER BETTER THAN OTHERS?
A Yes. Once again, the telecommunications sector saw heavy issuance and
outperformed many other sectors. Deregulation and technological changes
have helped this sector grow much faster than the broader economy, and the
high-yield market is often a source of capital for the industry's development.
The swift pace of merger activity within the industry has also led to some
increases in credit quality, as a number of high-yield issuers were bought by
higher-rated companies. Other good performers during 1999 included some issues
in basic materials and consumer cyclicals.
4
<PAGE> 6
Q WHERE WERE THE DISAPPOINTMENTS?
A Within telecommunications, satellite companies such as Iridium were unable
to keep pace with technological advances and performed poorly. In
addition, the health-care sector suffered from increasing financial
pressures, especially in the hospital and long-term care industries. Although
many health-care issuers remain attractive, the challenges imposed by managed
care and changing Medicare reimbursement policies for skilled nursing homes have
led us to look to other areas of the market in recent months. The energy sector
also performed poorly in the early part of the reporting period, but was revived
by a sharp increase in oil prices in recent months.
Q WHAT STRATEGIES WERE USED TO MANAGE THE TRUST IN THIS ENVIRONMENT?
A Improving the Trust's credit quality was a focus over the past six months.
We found attractive-yielding BB credits that we felt were backed by
financially strong companies, so we replaced some of our B rated holdings
with these higher-rated bonds. With the rising interest-rate environment, these
higher-rated bonds hindered the Trust's short-term performance because they are
more sensitive to changes in interest rates than comparable lower-rated bonds.
However, this negative factor was balanced by positive returns from our
substantial weighting in the chemicals sector, which picked up momentum as
cyclical companies returned to favor. Chemical holdings such as Huntsman and
Equistar performed well for the Trust.
In addition, we took advantage of the Trust's new ability to purchase a
limited proportion of foreign issues. As of April 1, 1999, the management team
had the ability to invest up to 35 percent of the Trust's assets in foreign
securities. Although we currently do not plan to invest such a large percentage
in foreign bonds, we did find a limited number of attractive overseas issues.
While it is too early to assess the overall impact of this strategy, some
holdings such as Coca-Cola Femsa, which is partially owned by the U.S. soft
drink company, benefited the Trust during the period. Others such as Disco, an
Argentinean supermarket company, detracted from performance. For additional
Trust highlights, please refer to page 8.
Q HOW DID THE TRUST PERFORM DURING THE YEAR?
A Although in a recovery phase, the Trust was restrained by interest rate
and inflation concerns in the latter part of the reporting period. In
addition, some holdings in the underperforming health-care and energy
sectors hurt the Trust's returns.
Despite these challenges, the Trust generated a 5.26 percent(1) total return
at market price for the six-month period ended June 30, 1999. This reflects a
steady market price of $6.375 per share. The monthly dividend of $0.056 per
share translates to a distribution rate of 10.54 percent(3) based on the closing
common stock price on June 30, 1999. The chart and footnotes on page 3 provide
additional performance information.
5
<PAGE> 7
Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A We expect to see moderately reduced growth in the economy in the months
ahead, but it should not have a negative effect on the high-yield market
unless it becomes a significant downturn. We believe strong high-yield
issuance will continue over the next few months as issuers catch up from the
relatively quiet market of last fall. However, we are anticipating a slowdown in
issuance toward the end of the year.
Q WHAT STRATEGIES WILL YOU USE TO MANAGE THE PORTFOLIO GOING FORWARD?
A Our focus going forward remains the same: fundamental, in-depth research
and assessment of high-yield bonds. We will look beyond the sector, credit
rating, or structure of a bond to identify those issuers that we believe
will remain financially sound and perform well in a range of market conditions.
We plan to continue to search the foreign markets for opportunities to
contribute to the Trust's performance. Also, we will be searching for value in
out-of-favor areas of the market to help diversify the Trust's holdings.
[SIG]
Peter Ehret
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
BOND: A debt security issued by a government or corporation that pays a
bondholder a stated rate of interest and repays the principal at the
maturity date.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while 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.
CYCLICAL INDUSTRIES: Industries where earnings tend to rise quickly when the
economy strengthens and fall quickly when the economy weakens. Examples of
cyclical industries include housing, automobiles, and paper. Noncyclical
industries are typically less sensitive to changes in the economy. These
include utilities, grocery stores, and pharmaceutical companies.
FLIGHT TO QUALITY: The flow of funds toward safer investments in times of
marketplace uncertainty or fear.
INFLATION: A persistent and measurable rise in the general level of 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.
NET ASSET VALUE (NAV): The value of a trust share, calculated by deducting a
trust's liabilities from the total assets applicable to common shareholders
in its portfolio and dividing this amount by the number of common shares
outstanding.
YIELD: The annual rate of return on an investment, expressed as a percentage.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN HIGH INCOME TRUST
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Chemical 10.70 4.50
Telecommunications 9.50 14.40
Printing, Publishing, & Broadcasting 9.00 8.30
Oil & Gas 6.70 8.10
Automobile 4.90 1.40
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
JUNE 1989 THROUGH JUNE 1999
[GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Jun 1989 9.5000 8.9600
9.3750 8.8100
9.5000 8.6400
9.0000 8.3300
7.7500 7.8200
8.1250 7.8100
7.3750 7.4900
7.6250 7.3800
6.5000 6.7200
7.2500 6.7900
6.8750 6.6200
6.1250 6.6600
Jun 1990 6.7500 6.6500
7.1250 6.7300
6.0000 6.0700
4.8750 5.3600
4.2500 4.7100
4.2500 4.6900
4.1250 4.6200
4.2500 4.6400
5.1250 5.0900
5.3750 5.4300
5.8750 5.6100
5.3750 5.5600
Jun 1991 5.6250 5.6900
6.0000 5.8100
6.0000 5.8400
6.2500 5.8900
6.2500 6.0100
6.1250 5.9600
6.8750 5.9200
7.1250 6.2100
7.1250 6.3000
7.3750 6.3200
7.7500 6.4100
7.6250 6.3800
Jun 1992 8.0000 6.3400
7.8750 6.4300
7.8750 6.4300
7.8750 6.4300
7.5000 6.2400
7.5000 6.2300
7.2500 6.2300
7.7500 6.3800
8.1250 6.5100
8.0000 6.6300
8.0000 6.6000
8.1250 6.5600
Jun 1993 8.3750 6.7600
8.3750 6.7500
8.3750 6.7000
8.3750 6.6600
8.6250 6.7300
8.2500 6.7100
8.1250 6.7400
8.5000 6.8200
8.5000 6.7500
7.6250 6.3300
7.7500 6.1900
7.8750 6.1400
Jun 1994 8.0000 6.0600
7.3750 5.9700
7.6250 5.9000
7.0000 5.8500
6.8750 5.7900
6.3750 5.5800
5.5000 5.6200
5.7500 5.6300
6.0000 5.8200
6.1250 5.8400
6.1250 5.9900
6.7500 6.1000
Jun 1995 6.6250 6.0700
6.5000 6.1400
6.6250 6.1000
6.3750 6.1200
6.5000 6.1400
6.7500 6.1300
6.3750 6.1900
6.6250 6.2900
6.6250 6.2700
6.7500 6.1600
6.5000 6.1200
6.6250 6.1100
Jun 1996 6.5000 6.0500
6.6250 6.0300
6.7500 6.1000
6.8750 6.2000
6.7500 6.2100
6.7500 6.2900
6.7500 6.3500
6.8750 6.3400
7.0000 6.4200
6.7500 6.2200
6.8750 6.2100
7.0000 6.3200
Jun 1997 7.3130 6.3600
7.4380 6.4600
7.3750 6.4100
7.3130 6.4900
7.4380 6.4200
7.3750 6.4400
7.3750 6.4700
7.5000 6.5500
7.4380 6.5100
7.3130 6.5300
6.8750 6.4900
7.2500 6.4700
Jun 1998 7.0000 6.4400
6.9380 6.4500
5.7500 5.9600
6.3130 5.8900
6.6250 5.6600
6.8750 5.9700
6.3750 5.8600
6.4375 5.8700
6.5000 5.6800
6.4375 5.7000
6.5000 5.7200
6.3750 5.6000
Jun 1999 6.3750 5.4900
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the Trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN HIGH INCOME TRUST
CREDIT QUALITY*
AS OF JUNE 30, 1999
[PIE CHART]
<TABLE>
<CAPTION>
BBB/BAA BB/BA B/B CCC/CAA AND BELOW
------- ----- --- -----------------
<S> <C> <C> <C> <C>
As of June 30, 1999 8.40 39.80 50.30 1.50
</TABLE>
AS OF DECEMBER 31, 1998
[PIE CHART]
<TABLE>
<CAPTION>
A/A TO CCC/CAA AND
AAA/AAA BBB/BAA BB/BA B/B BELOW
------- ------- ----- --- -----------
<S> <C> <C> <C> <C> <C>
As of December 31, 1999 2.50 7.40 33.70 54.50 0.40
<CAPTION>
NON-RATED
---------
<S> <C>
As of December 31, 1999 1.50
</TABLE>
* As a percentage of long-term debt securities.
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED JUNE 30, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
MONTHLY DIVIDEND
----------------
<S> <C>
Jan 1999 0.0560
Feb 1999 0.0560
Mar 1999 0.0560
Apr 1999 0.0560
May 1999 0.0560
Jun 1999 0.0560
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS 91.4%
AEROSPACE & DEFENSE 3.7%
$1,700 DynCorp. ............................ 9.500% 03/01/07 $ 1,674,500
2,800 Sequa Corp. ......................... 9.625 10/15/99 2,835,000
500 Sequa Corp. ......................... 9.375 12/15/03 515,000
------------
5,024,500
------------
AUTOMOBILE 4.4%
400 Aetna Industries, Inc. .............. 11.875 10/01/06 405,000
1,115 JPS Automotive Products Corp. ....... 11.125 06/15/01 1,145,663
2,750 Lear Seating Corp. .................. 8.250 02/01/02 2,719,062
500 Venture Holdings, Inc. .............. 9.750 04/01/04 524,375
900 Venture Holdings, Inc. .............. 9.500 07/01/05 859,500
300 Venture Holdings, Inc., 144A Private
Placement (b)........................ 11.000 06/01/07 305,250
------------
5,958,850
------------
BEVERAGE, FOOD & TOBACCO 3.5%
700 Chiquita Brands International,
Inc. ................................ 10.000 06/15/09 706,125
1,100 Coca Cola Femsa S.A. (Mexico) ....... 8.950 11/01/06 1,097,250
2,200 Pepsi Gemex S.A. (Mexico) ........... 9.750 03/30/04 2,200,000
675 Vlasic Foods International, Inc.,
144A
Private Placement (b)................ 10.250 07/01/09 667,406
------------
4,670,781
------------
BUILDINGS & REAL ESTATE 1.0%
525 Engle Homes, Inc. ................... 9.250 02/01/08 475,125
305 Webb (Del E.) Corp. ................. 9.375 05/01/09 294,325
520 Webb (Del E.) Corp. ................. 10.250 02/15/10 514,800
------------
1,284,250
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CHEMICAL 9.8%
$ 975 Acetex Corp. (Canada) ............... 9.750% 10/01/03 $ 901,875
2,240 Agriculture Minerals & Chemicals,
Inc. ................................ 10.750 09/30/03 2,206,400
660 American Pacific Corp. .............. 9.250 03/01/05 676,500
2,240 Equistar Chemical L.P., 144A
Private Placement (b)................ 8.500 02/15/04 2,284,800
2,891 Huntsman Polymers Corp. ............. 11.750 12/01/04 3,035,550
2,404 ISP Holdings, Inc. .................. 9.750 02/15/02 2,440,060
1,850 Pioneer Americas Acquisition
Corp. ............................... 9.250 06/15/07 1,563,250
------------
13,108,435
------------
CONTAINERS, PACKAGING & GLASS 4.4%
1,400 Fonda Group, Inc. ................... 9.500 03/01/07 1,225,000
1,130 Printpack, Inc. ..................... 10.625 08/15/06 1,056,550
1,400 Radnor Holdings, Inc. ............... 10.000 12/01/03 1,414,000
1,350 S.D. Warren Co. ..................... 12.000 12/15/04 1,449,562
735 Sweetheart Cup, Inc. ................ 9.625 09/01/00 720,300
------------
5,865,412
------------
DIVERSIFIED/CONGLOMERATE
MANUFACTURING 1.0%
1,350 Communications & Power Industries,
Inc. ................................ 12.000 08/01/05 1,393,875
------------
ECOLOGICAL 0.4%
600 Envirosource, Inc. .................. 9.750 06/15/03 381,000
200 Norcal Waste Systems, Inc. .......... 13.500 11/15/05 220,000
------------
601,000
------------
ELECTRONICS 1.5%
1,925 Advanced Micro Devices, Inc. ........ 11.000 08/01/03 1,944,250
1,300 DecisionOne Corp. ................... 9.750 08/01/07 71,500
------------
2,015,750
------------
FINANCE 4.4%
2,050 Americredit Corp. ................... 9.250 02/01/04 2,080,750
1,200 Contifinancial Corp. ................ 8.375 08/15/03 930,000
3,050 Vicap S.A. (Mexico) ................. 10.250 05/15/02 2,867,000
------------
5,877,750
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GROCERY 4.4%
$1,160 Disco S.A (Argentina)................ 9.125% 05/15/03 $ 1,044,000
350 Fleming Cos., Inc. .................. 10.625 12/15/01 353,500
1,550 Fleming Cos., Inc. .................. 10.500 12/01/04 1,464,750
1,400 Jitney Jungle Stores America,
Inc. ................................ 12.000 03/01/06 1,162,000
1,200 Pantry, Inc. ........................ 10.250 10/15/07 1,212,000
565 Shoppers Food Warehouse, Inc. ....... 9.750 06/15/04 614,437
------------
5,850,687
------------
HEALTHCARE 3.5%
1,650 Columbia HCA Healthcare Corp. ....... 6.910 06/15/05 1,515,938
650 Fisher Scientific International,
Inc. ................................ 7.125 12/15/05 601,250
1,500 Fresenius Medical Care Capital
Trust................................ 9.000 12/01/06 1,492,500
1,100 Tenet Healthcare Corp. .............. 8.625 01/15/07 1,078,000
------------
4,687,688
------------
HOTEL, MOTEL, INNS & GAMING 3.7%
175 Argosy Gaming Co., 144A Private
Placement (b)........................ 10.750 06/01/09 179,156
350 Booth Creek Ski Holdings, Inc. ...... 12.500 03/15/07 309,750
848 Boyd Gaming Corp. ................... 9.250 10/01/03 864,960
825 Casino Magic Louisiana Corp. ........ 13.000 08/15/03 952,875
675 Majestic Star Casino, 144A Private
Placement (b)........................ 10.875 07/01/06 671,625
1,960 Mohegan Tribal Gaming Authority...... 8.125 01/01/06 1,920,800
------------
4,899,166
------------
LEISURE/ENTERTAINMENT 2.5%
475 Premier Parks, Inc. ................. 9.750 06/15/07 482,125
2,750 Selmer, Inc. ........................ 11.000 05/15/05 2,928,750
------------
3,410,875
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MINING, STEEL, IRON & NON-PRECIOUS
METAL 3.8%
$1,100 GS Technologies Operating, Inc. ..... 12.250% 10/01/05 $ 915,750
1,130 Kaiser Aluminum & Chemical, Inc. .... 10.875 10/15/06 1,180,850
350 Renco Steel Holdings, Inc. .......... 10.875 02/01/05 304,500
2,650 WCI Steel, Inc. ..................... 10.000 12/01/04 2,709,625
------------
5,110,725
------------
OIL & GAS 6.1%
1,550 Benton Oil & Gas, Inc. .............. 11.625 05/01/03 1,028,813
1,000 Frontier Oil Corp. .................. 9.125 02/15/06 960,000
1,507 Giant Industries, Inc. .............. 9.750 11/15/03 1,480,627
1,950 Giant Industries, Inc. .............. 9.000 09/01/07 1,813,500
2,270 KCS Energy, Inc. .................... 11.000 01/15/03 1,384,700
1,000 Pride Petroleum Services, Inc. ...... 9.375 05/01/07 1,000,000
850 Universal Compression, Inc. (a)...... 0/9.875 02/15/08 527,000
------------
8,194,640
------------
PAPER 1.2%
1,680 Repap New Brunswick Inc. (Canada) ... 9.000 06/01/04 1,570,800
------------
PRINTING, PUBLISHING &
BROADCASTING 8.2%
1,200 CSC Holdings, Inc. .................. 10.500 05/15/16 1,350,000
1,100 Grupo Televisa, Inc., S.A.
(Mexico) ............................ 11.375 05/15/03 1,133,000
1,100 Grupo Televisa, Inc., S.A.
(Mexico) ............................ 11.875 05/15/06 1,141,250
1,130 Helicon Group, Inc. ................. 11.000 11/01/03 1,197,800
1,000 International Cabletel, Inc. (a)..... 0/12.750 04/15/05 955,000
750 International Cabletel, Inc. (a)..... 0/11.500 02/01/06 658,125
675 James Cable Partners L.P............. 10.750 08/15/04 702,000
1,500 K-III Communications Corp. .......... 10.250 06/01/04 1,567,500
700 Northland Cable Television, Inc. .... 10.250 11/15/07 733,250
550 Valassis Communications, Inc. ....... 9.550 12/01/03 596,750
950 Young Broadcasting, Inc. ............ 11.750 11/15/04 1,007,000
------------
11,041,675
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PRODUCER MANUFACTURING 4.0%
$ 200 Associated Materials, Inc. .......... 9.250% 03/01/08 $ 201,500
500 Carpenter W. R., Inc. ............... 10.625 06/15/07 477,500
1,000 Cemex S.A., 144A Private Placement
(Mexico) (b)......................... 9.250 06/17/02 990,000
1,680 Federal Mogul Corp. ................. 7.500 07/01/04 1,625,400
265 Juno Lighting, Inc., 144A Private
Placement (b)........................ 11.875 07/01/09 268,975
250 Numatics, Inc. ...................... 9.625 04/01/08 203,750
1,550 Ucar Global Enterprises Inc. ........ 12.000 01/15/05 1,652,688
------------
5,419,813
------------
RETAIL 4.1%
200 Big 5 Corp. ......................... 10.875 11/15/07 203,000
600 Community Distributors, Inc. ........ 10.250 10/15/04 531,000
500 Hosiery Corp. of America, Inc. ...... 13.750 08/01/02 542,500
1,100 K Mart Corp.......................... 8.250 11/21/06 1,116,500
825 Musicland Group, Inc. ............... 9.875 03/15/08 804,375
2,090 United Stationers Supply Co.......... 12.750 05/01/05 2,299,000
------------
5,496,375
------------
TELECOMMUNICATIONS 8.7%
1,200 Capstar Broadcasting Partners........ 9.250 07/01/07 1,230,000
1,100 EZ Communications, Inc. ............. 9.750 12/01/05 1,177,000
1,300 Gray Communications Systems, Inc. ... 10.625 10/01/06 1,373,125
600 Intermedia Communications of Florida,
Inc. ................................ 13.500 06/01/05 681,750
250 Intermedia Communications, Inc. ..... 8.875 11/01/07 235,000
1,230 Intermedia Communications, Inc. ..... 8.600 06/01/08 1,137,750
1,100 McLeod USA, Inc. .................... 9.250 07/15/07 1,089,000
1,230 Pegasus Communications Corp. ........ 9.625 10/15/05 1,223,850
2,750 Sprint Spectrum L.P.................. 11.000 08/15/06 3,131,562
325 Telefonica De Argentina S.A., 144A
Private Placement (Argentina) (b).... 9.875 07/01/02 322,969
------------
11,602,006
------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXTILES 2.7%
$1,350 Dan River, Inc. ..................... 10.125% 12/15/03 $ 1,383,750
1,905 Pillowtex Corp....................... 10.000 11/15/06 1,919,288
550 Scovill Fasteners, Inc. ............. 11.250 11/30/07 305,250
------------
3,608,288
------------
TRANSPORTATION 1.7%
1,220 Greyhound Lines, Inc. ............... 11.500 04/15/07 1,384,700
825 International Shipholding Corp....... 9.000 07/01/03 829,125
------------
2,213,825
------------
UTILITIES 2.7%
1,475 AES Corp............................. 9.500 06/01/09 1,519,250
450 El Paso Electric Co.................. 8.250 02/01/03 466,875
1,050 El Paso Electric Co.................. 8.900 02/01/06 1,124,813
150 Midland Cogeneration Venture......... 10.330 07/23/02 157,734
1,100 National Energy Group, Inc. (c)...... 10.750 11/01/06 407,000
------------
3,675,672
------------
TOTAL CORPORATE BONDS 91.4%.......................................... 122,582,838
------------
EQUITIES 0.1%
Hosiery Corp. of America, Inc., (500 common shares) 144A Private
Placement (b)....................................................... 26,250
Intermedia Communications of Florida, Inc., (600 common stock
warrants) 144A Private Placement (b)................................ 66,212
NTL, Inc., (1,662 common stock warrants) 144A Private
Placement (b)....................................................... 21,606
Star Gas Partners L. P. (264 limited partnership units)............. 4,538
Urohealth Systems, Inc., (675 common stock warrants) 144A Private
Placement (b)....................................................... 7
------------
TOTAL EQUITIES........................................................ 118,613
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- --------------------------------------------------------------------------------------
<S> <C>
TOTAL LONG-TERM INVESTMENTS 91.5%
(Cost $130,205,002)................................................. $122,701,451
SHORT-TERM INVESTMENTS 8.4%
Federal Home Loan Bank Consolidated Discount Note
( 11,292,000 par, yielding 4.601%, 07/01/99 maturity )
(Cost $11,290,557).................................................. 11,290,557
------------
TOTAL INVESTMENTS 99.9%
(Cost $141,495,559)................................................. 133,992,008
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1%........................... 97,461
------------
NET ASSETS 100.0%.................................................... $134,089,469
============
</TABLE>
(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined rate.
(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) Interest is accruing at less than the stated coupon.
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $141,495,559)....................... $133,992,008
Cash........................................................ 1,690
Receivables:
Interest.................................................. 2,792,384
Investments Sold.......................................... 106,715
Other....................................................... 7,144
------------
Total Assets.......................................... 136,899,941
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,413,646
Investment Advisory Fee................................... 82,896
Income Distributions--Common and Preferred Shares......... 54,979
Affiliates................................................ 13,088
Accrued Expenses............................................ 143,452
Trustees' Deferred Compensation and Retirement Plans........ 102,411
------------
Total Liabilities..................................... 2,810,472
------------
NET ASSETS.................................................. $134,089,469
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, 1,000,000 shares
authorized, 588 shares outstanding with liquidation
preference of $100,000 per share)......................... $ 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............................................. 106,631,828
Accumulated Undistributed Net Investment Income............. 339,435
Net Unrealized Depreciation................................. (7,503,551)
Accumulated Net Realized Loss............................... (24,315,351)
------------
Net Assets Applicable to Common Shares................ 75,289,469
------------
NET ASSETS.................................................. $134,089,469
============
NET ASSET VALUE PER COMMON SHARE ($75,289,469 divided by
13,710,760
shares outstanding)....................................... $ 5.49
============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 6,660,884
Dividends................................................... 152
Other....................................................... 305,958
-----------
Total Income............................................ 6,966,994
-----------
EXPENSES:
Investment Advisory Fee..................................... 509,155
Preferred Share Maintenance................................. 85,171
Trustees' Fees and Related Expenses......................... 11,959
Custody..................................................... 8,421
Legal....................................................... 8,145
Other....................................................... 117,127
-----------
Total Expenses.......................................... 739,978
-----------
NET INVESTMENT INCOME....................................... $ 6,227,016
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $(2,172,096)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (4,368,777)
End of the Period......................................... (7,503,551)
-----------
Net Unrealized Depreciation During the Period............... (3,134,774)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(5,306,870)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 920,146
===========
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1999 and
the Year Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income........................... $ 6,227,016 $ 12,475,409
Net Realized Gain/Loss.......................... (2,172,096) 416,102
Net Unrealized Depreciation During the Period... (3,134,774) (8,317,008)
------------ ------------
Change in Net Assets from Operations............ 920,146 4,574,503
------------ ------------
Distributions from Net Investment Income:
Common Shares................................. (4,606,529) (9,624,412)
Preferred Shares.............................. (1,428,687) (3,245,532)
------------ ------------
Total Distributions............................. (6,035,216) (12,869,944)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................... (5,115,070) (8,295,441)
NET ASSETS:
Beginning of the Period......................... 139,204,539 147,499,980
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$339,435 and $147,635, respectively).......... $134,089,469 $139,204,539
============ ============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
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, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $5.864 $6.469 $6.346 $6.186 $5.623
------ ------ ------ ------ ------
Net Investment Income....... .454 .910 .930 .946 .982
Net Realized and Unrealized
Gain/Loss................. (.387) (.576) .131 .147 .537
------ ------ ------ ------ ------
Total from Investment
Operations.................. .067 .334 1.061 1.093 1.519
------ ------ ------ ------ ------
Less Distributions from Net
Investment Income:
Paid to Common
Shareholders.............. .336 .702 .702 .702 .702
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.... .104 .237 .236 .231 .254
------ ------ ------ ------ ------
Total Distributions........... .440 .939 .938 .933 .956
------ ------ ------ ------ ------
Net Asset Value, End of the
Period...................... $5.491 $5.864 $6.469 $6.346 $6.186
====== ====== ====== ====== ======
Market Price Per Share at End
of the Period............... $6.375 $6.375 $7.375 $6.750 $6.375
Total Investment Return at
Market Price (a)............ 5.26%* (4.33%) 20.29% 17.34% 29.17%
Total Return at Net Asset
Value (b)................... (0.63%)* 1.35% 13.69% 14.86% 23.70%
Net Assets at End of the
Period (In millions)........ $134.1 $139.2 $147.5 $145.8 $143.6
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares**............. 1.91% 1.85% 1.76% 1.87% 1.92%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common
Shares (c).................. 12.39% 10.77% 10.90% 11.58% 12.16%
Portfolio Turnover............ 28%* 65% 102% 92% 119%
* Non-Annualized
** Ratio of Expenses to
Average Net Assets
Including Preferred
Shares..................... 1.09% 1.09% 1.05% 1.11% 1.12%
</TABLE>
(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 Trust's dividend reinvestment plan.
(b) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based on NAV.
(c) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
20
<PAGE> 22
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
- --------------------------------------------------
1994 1993 1992 1991 1990
- --------------------------------------------------
<S> <C> <C> <C> <C>
$ 6.735 $6.228 $5.924 $4.603 $ 7.488
------- ------ ------ ------ -------
1.002 1.109 1.206 1.150 1.566
(.975) .526 .174 1.282 (2.866)
------- ------ ------ ------ -------
.027 1.635 1.380 2.432 (1.300)
------- ------ ------ ------ -------
.954 .990 .908 .840 1.083
.185 .138 .168 .271 .502
------- ------ ------ ------ -------
1.139 1.128 1.076 1.111 1.585
------- ------ ------ ------ -------
$ 5.623 $6.735 $6.228 $5.924 $ 4.603
======= ====== ====== ====== =======
$ 5.500 $8.125 $7.250 $6.875 $ 4.125
(23.22%) 26.12% 18.67% 92.24% (32.91%)
(2.54%) 25.46% 21.36% 48.77% (26.20%)
$ 135.9 $151.1 $144.2 $140.0 $ 121.9
1.96% 1.72% 1.87% 2.51% 2.10%
13.31% 14.66% 16.48% 15.86% 17.24%
110% 99% 109% 78% 57%
1.16% 1.04% 1.11% 1.42% 1.90%
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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. As of April 1, 1999, through a resolution approved by the
Board of Trustees, the Trust may invest up to 35 percent of its total assets in
securities of foreign issuers. 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
or indications of value obtained from an independent pricing service. For those
securities where quotations or prices are not available, valuations are 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 with remaining maturities of 60 days or
less 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. At June 30, 1999, there were no when
issued or delayed delivery purchase commitments.
The Trust may invest in repurchase agreements, which are short-term
investments 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 fully
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Discounts
are 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, 1998, the Trust had an accumulated capital loss carry
forward for tax purposes of $22,125,692 which expires between December 31, 1999
and December 31, 2003. Of this amount $19,427,104 will expire in 1999. Net
realized gains or losses may differ for financial reporting and tax purposes as
a result of the deferral of losses relating to wash sale transactions.
At June 30, 1999, for federal income tax purposes, cost of long- and
short-term investments is $141,497,622; the aggregate gross unrealized
appreciation is $979,743 and the aggregate gross unrealized depreciation is
$8,485,357, resulting in net unrealized depreciation on long- and short-term
investments of $7,505,614.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. 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
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.
For the six months ended June 30, 1999, the Trust recognized expenses of
approximately $1,200 representing legal services provided by Skadden, Arps,
Slate,
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
For the six months ended June 30, 1999, the Trust recognized expenses of
approximately $36,200 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal services to
the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust 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 Trust. 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 $36,427,939 and $34,599,549,
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, 1999, was 5.030%. During the six months ended June 30, 1999,
the rates ranged from 4.640% to 5.250%.
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.
24
<PAGE> 26
DIVIDEND REINVESTMENT PLAN
The Trust offers a Dividend Reinvestment Plan (the "Plan") in which Common
Shareholders may elect to have dividends and capital gains distributions
automatically reinvested in Common Shares of the Trust. The service is entirely
voluntary and you may join or withdraw at any time.
HOW TO PARTICIPATE
If you wish to elect to participate in the Plan and your shares are held in your
own name, call 1-800-341-2929 for more information and a brochure. If your
shares are held in the name of a brokerage firm, bank, or other nominee, you
should contact your nominee to see if it would participate in the Plan on your
behalf. If you wish to participate in the Plan, but your brokerage firm, bank,
or nominee is unable to participate on your behalf, you should request that your
shares be re-registered in your own name which will enable your participation in
the Plan.
HOW THE PLAN WORKS
State Street Bank and Trust Company, as your Plan Agent, serves as agent for the
Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Common Shares in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts. The Trust will not issue any new Common Shares
in connection with the Plan. All reinvestments are in full and fractional Common
Shares, carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or capital gains distribution paid subsequent to written
notice of the change sent to all Common Shareholders of the Trust at least 90
days before the record date for the dividend or distribution. The Plan also may
be amended or terminated by the Plan Agent, with the written consent of the
Trust, by providing at least 90 days written notice to all Participants in the
Plan.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or capital gains distributions.
RIGHT TO WITHDRAW
You may withdraw from the Plan at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company. If you withdraw, you will receive,
without charge, a share certificate issued in your name for all full Common
Shares credited to your account under the Plan, and a cash payment will be made
for any fractional Common Share credited to your account under the Plan. You may
again elect to participate in the Plan at any time by calling 1-800-341-2929 or
writing to the Trust at:
Attn: Closed-End Funds
2800 Post Oak Blvd.,
Houston, TX 77056
25
<PAGE> 27
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
Small Cap Value
Technology
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
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
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial advisor 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.VANKAMPEN.COM--to view a prospectus, select Download
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.VANKAMPEN.COM and selecting Contact Us
26
<PAGE> 28
VAN KAMPEN HIGH 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
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer,
and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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 (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
27
<PAGE> 29
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 16, 1999, where
shareholders voted on the election of trustees, the selection of independent
public accountants and the approval of the Preferred Share split and
simultaneous reduction of the liquidation preference per Preferred Share of the
Trust.
1) With regard to the election of the following trustees by the common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
----------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------
<S> <C> <C>
David C. Arch.................................... 11,667,810 124,368
Howard J Kerr.................................... 11,667,710 124,468
Dennis J. McDonnell.............................. 11,067,110 125,068
</TABLE>
The other trustees of the Trust whose terms did not expire in 1999 are Rod
Dammeyer, Steven Muller, Theodore A. Myers, Don G. Powell, Hugo F. Sonnenschein
and Wayne W. Whalen.
2) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 11,622,706 shares voted in favor of the proposal,
55,980 shares voted against and 114,035 shares abstained.
3) With regards to the proposal to approve the Preferred Share split and
simultaneous reduction of the liquidation preference per Preferred Share, the
Meeting was adjourned until July 7, 1999 and further adjourned until July 28,
1999.
28
<PAGE> 30
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> HIGH INCOME TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 141,495,559
<INVESTMENTS-AT-VALUE> 133,992,008
<RECEIVABLES> 2,899,099
<ASSETS-OTHER> 7,144
<OTHER-ITEMS-ASSETS> 1,690
<TOTAL-ASSETS> 136,899,941
<PAYABLE-FOR-SECURITIES> 2,413,646
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 396,826
<TOTAL-LIABILITIES> 2,810,472
<SENIOR-EQUITY> 58,800,000
<PAID-IN-CAPITAL-COMMON> 106,768,936
<SHARES-COMMON-STOCK> 13,710,760
<SHARES-COMMON-PRIOR> 13,710,760
<ACCUMULATED-NII-CURRENT> 339,435
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (24,315,351)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (7,503,551)
<NET-ASSETS> 134,089,469
<DIVIDEND-INCOME> 152
<INTEREST-INCOME> 6,660,884
<OTHER-INCOME> 305,958
<EXPENSES-NET> (739,978)
<NET-INVESTMENT-INCOME> 6,227,016
<REALIZED-GAINS-CURRENT> (2,172,096)
<APPREC-INCREASE-CURRENT> (3,134,774)
<NET-CHANGE-FROM-OPS> 920,146
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,035,216)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,115,070)
<ACCUMULATED-NII-PRIOR> 147,635
<ACCUMULATED-GAINS-PRIOR> (22,143,255)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 509,155
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 739,978
<AVERAGE-NET-ASSETS> 78,077,802
<PER-SHARE-NAV-BEGIN> 5.864
<PER-SHARE-NII> 0.454
<PER-SHARE-GAIN-APPREC> (0.387)
<PER-SHARE-DIVIDEND> (0.440)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 5.491
<EXPENSE-RATIO> 1.91
</TABLE>
