<PAGE> 1
- ---------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
Statement of Assets and Liabilities.............. 9
Statement of Operations.......................... 10
Statement of Changes in Net Assets............... 11
Financial Highlights............................. 12
Notes to Financial Statements.................... 14
</TABLE>
VLT 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 [PHOTO]
fourth quarter of 1995, GDP rose 2.0
percent in the first quarter of 1996 DENNIS J. MCDONNELL AND DON G. POWELL
and 4.2 percent in the second
quarter. The strengthening economic
growth was spurred by consumer
spending, as retail sales rose more
than 5 percent in the first five
months of this year versus the
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 Limited 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 (June 1, 2001) 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]
BBB - 2.8% BBB - 0.7%
BB - 38.1% BB - 39.2%
B - 57.0% B - 57.5%
CCC - 0.3% CCC - 0.1%
Non-Rated - 1.8% Non-Rated - 2.5%
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 5.41 percent(1). The Trust's performance reflects a
market price per common share on the New York Stock Exchange of $8.750 on June
30, 1996 -- the same closing stock price noted at the beginning of the period on
December 31, 1995. Additionally attractive, the Trust's current annualized
dividend of $0.96 per common share represents a distribution rate of 10.97
percent (3) based on the closing common stock price on June 30, 1996.
Longer-term, the one-year total return at market price was 12.82 percent(1),
including reinvestment of dividends totaling $0.96 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.
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.
Continued on page three
2
<PAGE> 4
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 LIMITED TERM HIGH INCOME TRUST
(NYSE TICKER SYMBOL--VLT)
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return on market price(1)................... 5.41%
Six-month total return based on NAV(2)...................... 3.73%
</TABLE>
DISTRIBUTION RATE
<TABLE>
<S> <C>
Distribution rate as a % of closing common stock price(3)... 10.97%
</TABLE>
SHARE VALUATIONS
<TABLE>
<S> <C>
Net asset value............................................. $ 7.94
Closing common stock price.................................. $8.750
Six-month high common stock price (02/01/96)................ $9.500
Six-month low common stock price (06/27/96)................. $8.625
Preferred share rate(4)..................................... 5.175%
</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 2.2%
$1,800 Sequa Corp. ................................... 9.625% 10/15/99 $ 1,813,500
600 Sequa Corp. ................................... 9.375 12/15/03 579,000
------------
2,392,500
------------
AUTOMOBILE 0.8%
900 Exide Corp. ................................... 10.750 12/15/02 920,250
------------
BUILDINGS & REAL ESTATE 6.1%
1,900 American Standard Inc. ........................ 10.875 05/15/99 2,014,000
1,300 Chelsea GCA Realty Inc. ....................... 7.750 01/26/01 1,267,500
1,600 Doman Industries Ltd. ......................... 8.750 03/15/04 1,448,000
1,450 Schuller International Group Inc. ............. 10.875 12/15/04 1,566,000
350 Southdown Inc. ................................ 14.000 10/15/01 374,500
------------
6,670,000
------------
CHEMICALS, PLASTICS & RUBBER 1.5%
1,694 G. I. Holdings Inc. ........................... 10.000 02/15/06 1,651,650
------------
CONSUMER NON-DURABLES 2.8%
1,050 Playtex Family Products Corp. ................. 9.000 12/15/03 987,000
1,700 Revlon Consumer Products Corp. ................ 9.375 04/01/01 1,670,250
450 Revlon Consumer Products Corp. ................ 10.875 07/15/10 461,250
------------
3,118,500
------------
CONTAINERS, PACKAGING & GLASS 5.7%
250 Anchor Glass Container Corp. .................. 10.250 06/30/02 175,000
500 Owens Illinois Inc. ........................... 10.250 04/01/99 508,750
2,000 Owens Illinois Inc. ........................... 11.000 12/01/03 2,150,000
700 S.D. Warren Co. ............................... 12.000 12/15/04 742,000
919 Silgan Holdings Inc. .......................... 13.250 12/15/02 923,595
1,650 Stone Consolidated Corp. ...................... 10.250 12/15/00 1,699,500
------------
6,198,845
------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING 4.1%
150 Communications & Power Industries Inc. ........ 12.000 08/01/05 158,625
2,100 Jordan Industries Inc. ........................ 10.375 08/01/03 2,000,250
600 Republic Engineered Steels Inc. ............... 9.875 12/15/01 561,000
1,650 Talley Manufacturing & Technology Inc. ........ 10.750 10/15/03 1,716,000
------------
4,435,875
------------
ECOLOGICAL 0.4%
400 Norcal Waste Systems Inc. ..................... 12.750 11/15/05 423,000
------------
ELECTRONICS 3.0%
1,850 Bell & Howell Co. (d) ......................... 0/11.500 03/01/05 1,267,250
1,000 Computervision................................. 11.375 08/15/99 1,035,000
1,100 Exide Electronics Group Inc. .................. 11.500 03/15/06 1,020,000
------------
3,322,250
------------
FARMING & AGRICULTURE 0.9%
350 AGCO Corp. .................................... 8.500 03/15/06 343,000
</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>
FARMING & AGRICULTURE (CONTINUED)
$ 650 Trans Resources Inc. .......................... 11.875% 07/01/02 $ 624,000
------------
967,000
------------
FINANCE 2.4%
2,450 American Annuity Group Inc. ................... 11.125 02/01/03 2,633,750
------------
GROCERY 4.0%
190 Pantry Inc. ................................... 12.000 11/15/00 167,200
900 Pathmark Stores Inc. .......................... 11.625 06/15/02 897,750
1,050 Pathmark Stores Inc. .......................... 9.625 05/01/03 987,000
1,625 Purity Supreme Inc. ........................... 11.750 08/01/99 1,763,125
500 Vons Cos. Inc. ................................ 9.625 04/01/02 525,000
------------
4,340,075
------------
HEALTHCARE 4.1%
1,000 Merit Behavioral Care Corp. ................... 11.500 11/15/05 1,050,000
200 Ornda Healthcorp............................... 12.250 05/15/02 216,500
1,200 Ornda Healthcorp............................... 11.375 08/15/04 1,323,000
1,750 Tenet Healthcare Corp. ........................ 10.125 03/01/05 1,855,000
------------
4,444,500
------------
HOTEL, MOTEL, INNS & GAMING 6.5%
350 Argosy Gaming Co. ............................. 13.250 06/01/04 355,250
1,850 California Hotel Finance Corp. ................ 11.000 12/01/02 1,951,750
150 Coast Hotels & Casino.......................... 13.000 12/15/02 163,125
1,000 Grand Casino Inc. ............................. 10.125 12/01/03 1,027,500
750 Hollywood Casino Inc. ......................... 12.750 11/01/03 746,250
1,025 MGM Grand Hotel Finance Corp. ................. 11.750 05/01/99 1,086,500
700 Showboat Marina................................ 13.500 03/15/03 763,000
1,000 Trump Atlantic City Associates................. 11.250 05/01/06 1,005,000
------------
7,098,375
------------
LEISURE 2.3%
2,300 Viacom International Inc. ..................... 10.250 09/15/01 2,512,750
------------
MINING, STEEL, IRON & NON-PRECIOUS METAL 3.8%
1,050 Armco Inc. .................................... 11.375 10/15/99 1,084,125
450 Carbide/Graphite Group Inc. ................... 11.500 09/01/03 487,125
2,500 Easco Corp. ................................... 10.000 03/15/01 2,537,500
------------
4,108,750
------------
OIL & GAS 11.3%
1,150 Clark R & M Holdings Inc. ..................... * 02/15/00 787,750
1,050 Coda Energy Inc. .............................. 10.500 04/01/06 1,044,750
1,300 Giant Industries Inc. ......................... 9.750 11/15/03 1,274,000
2,800 Global Marine Inc. ............................ 12.750 12/15/99 3,038,000
700 KCS Energy Inc. ............................... 11.000 01/15/03 740,250
900 Mesa Capital Corp. ............................ 12.750 06/30/98 902,250
1,350 Petroleum Heat & Power Inc. ................... 12.250 02/01/05 1,485,000
200 Triton Energy Corp. ........................... * 11/01/97 180,500
3,000 Triton Energy Corp. (d)........................ 0/9.750 12/15/00 2,910,000
------------
12,362,500
------------
</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>
PRINTING, PUBLISHING & BROADCASTING 16.6%
$2,000 Cablevision Systems Corp. ..................... 10.750% 04/01/04 $ 2,060,000
400 Cablevision Systems Corp. ..................... 10.500 05/15/16 389,000
2,400 Century Communications Corp. (c)............... 9.750 02/15/02 2,388,000
400 Century Communications Corp. .................. 11.875 10/15/03 427,000
1,150 Comcast Corp. ................................. 9.375 05/15/05 1,115,500
1,100 Continental Cablevision Inc. .................. 8.300 05/15/06 1,138,500
500 Heritage Media Services........................ 11.000 06/15/02 530,000
2,600 Insight Communications Co. .................... 11.250 03/01/00 2,613,000
450 International Cabletel Inc. (d)................ 0/11.500 02/01/06 252,000
1,900 K-III Communications Corp. .................... 10.625 05/01/02 1,976,000
1,900 SCI Television Inc. ........................... 11.000 06/30/05 1,980,750
2,100 Storer Communications Inc. .................... 10.000 05/15/03 2,105,250
400 Young Broadcasting Inc. ....................... 10.125 02/15/05 386,000
850 Young Broadcasting Inc. ....................... 9.000 01/15/06 758,625
------------
18,119,625
------------
RETAIL 4.6%
750 Hosiery Corp. America Inc. (Including 750
common stock warrants)......................... 13.750 08/01/02 821,250
800 Loehmann's Inc. ............................... 11.875 05/15/03 832,000
2,070 Thrifty Payless................................ 12.250 04/15/04 2,287,350
1,075 Waban Inc. .................................... 11.000 05/15/04 1,118,000
------------
5,058,600
------------
TELECOMMUNICATIONS 6.4%
1,000 Centennial Cellular Corp. ..................... 10.125 05/15/05 965,000
200 Intercel Inc. ................................. * 05/01/06 109,000
450 Intermedia Communications of Florida, Inc.
(d)............................................ 0/12.500 05/15/06 252,000
400 Intermedia Communications of Florida, Inc.
(Including 400 common stock warrants).......... 13.500 06/01/05 464,000
950 IXC Communications Inc. ....................... 12.500 10/01/05 997,500
150 Metrocall Inc. ................................ 10.375 10/01/07 139,500
1,300 Mobilemedia Communications Inc. (d)............ 0/10.500 12/01/03 923,000
1,500 Panamsat L.P. ................................. 9.750 08/01/00 1,552,500
450 Pricellular Wireless Corp. (d)................. 0/12.250 10/01/03 355,500
1,250 Teleport Communications Group (b) (d).......... 0/11.125 07/01/07 728,125
850 Telewest PLC................................... 0/11.000 10/01/07 503,625
------------
6,989,750
------------
TEXTILES 0.8%
950 Dan River Inc. ................................ 10.125 12/15/03 914,375
------------
TRANSPORTATION 0.7%
750 U.S. Air Inc. ................................. 8.625 09/01/98 735,000
------------
UTILITIES 5.3%
1,300 AES Corp. (b).................................. 10.250 07/15/06 1,306,500
675 California Energy Inc. ........................ 9.875 06/30/03 686,813
1,200 El Paso Electric Co. .......................... 8.900 02/01/06 1,185,000
</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>
UTILITIES (CONTINUED)
$2,575 Midland Funding Corp........................... 10.330% 07/23/02 $ 2,671,890
------------
5,850,203
------------
TOTAL LONG-TERM INVESTMENTS 96.3%
(Cost $104,996,481) (a)..................................................... 105,268,123
REPURCHASE AGREEMENT 4.5%
J.P. Morgan Securities, U.S. T-Note, $4,259,000 par, 8.750% coupon, due
05/15/17, dated 06/28/96, to be sold on 07/01/96 at $4,944,224.............. 4,942,000
LIABILITIES IN EXCESS OF OTHER ASSETS (0.8%)................................. (856,453)
------------
NET ASSETS 100%.............................................................. $109,353,670
============
*Zero coupon bond
</TABLE>
(a) At June 30, 1996, cost for federal income tax purposes is $104,996,481; the
aggregate gross unrealized appreciation is $1,520,241 and the aggregate
gross unrealized depreciation is $1,248,599, resulting in net unrealized
appreciation of $271,642.
(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
8
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $104,996,481) (Note 1)............... $105,268,123
Repurchase Agreements (Note 1).......................................... 4,942,000
Cash.................................................................... 421
Receivables:
Interest.............................................................. 2,358,699
Securities Sold....................................................... 581,074
Other................................................................... 2,603
------------
Total Assets...................................................... 113,152,920
------------
LIABILITIES:
Payables:
Securities Purchased.................................................. 3,398,678
Income Distributions - Common and Preferred Shares.................... 143,034
Investment Advisory Fee (Note 2)...................................... 67,222
Distributor and Affiliates (Note 2)................................... 16,077
Accrued Expenses........................................................ 128,950
Deferred Compensation and Retirement Plans (Note 2)..................... 45,289
------------
Total Liabilities................................................. 3,799,250
------------
NET ASSETS.............................................................. $109,353,670
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, 100,000,000 shares authorized, 900
outstanding with liquidation preference of $50,000 per share) (Note
4).................................................................... $ 45,000,000
------------
Common Shares ($.01 par value with an unlimited number of shares
authorized,
8,109,000 shares issued and outstanding).............................. 81,090
Paid in Surplus......................................................... 84,320,585
Accumulated Undistributed Net Investment Income......................... 1,413,099
Net Unrealized Appreciation on Securities............................... 271,642
Accumulated Net Realized Loss on Securities............................. (21,732,746)
------------
Net Assets Applicable to Common Shares............................ 64,353,670
------------
NET ASSETS.............................................................. $109,353,670
============
NET ASSET VALUE PER COMMON SHARE ($64,353,670 divided by 8,109,000
shares outstanding)................................................... $ 7.94
============
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................ $ 5,529,255
Other................................................................... 32,000
------------
Total Income...................................................... 5,561,255
------------
EXPENSES:
Investment Advisory Fee (Note 2)........................................ 412,722
Preferred Share Maintenance (Note 4).................................... 59,741
Shareholder Services (Note 2)........................................... 35,490
Trustees Fees and Expenses (Note 2)..................................... 12,014
Legal (Note 2).......................................................... 7,280
Other................................................................... 90,905
------------
Total Expenses.................................................... 618,152
------------
NET INVESTMENT INCOME................................................... $ 4,943,103
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments........................................ $ 1,142,494
------------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................... 2,743,836
End of the Period:
Investments......................................................... 271,642
------------
Net Unrealized Depreciation on Securities During the Period............. (2,472,194)
------------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.......................... $ (1,329,700)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $ 3,613,403
============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
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............................... $ 4,943,103 $ 10,318,943
Net Realized Gain on Securities..................... 1,142,494 660,883
Net Unrealized Appreciation/Depreciation on
Securities During the Period...................... (2,472,194) 5,878,915
------------ ------------
Change in Net Assets from Operations................ 3,613,403 16,858,741
------------ ------------
Distributions from Net Investment Income:
Common Shares..................................... (3,891,939) (7,783,987)
Preferred Shares.................................. (1,189,388) (2,614,443)
------------ ------------
Total Distributions................................. (5,081,327) (10,398,430)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES........................................ (1,467,924) 6,460,311
NET ASSETS:
Beginning of the Period............................. 110,821,594 104,361,283
------------ ------------
End of the Period (Including undistributed net
investment income of $1,413,099 and $1,551,323,
respectively)..................................... $109,353,670 $110,821,594
============ ============
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
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)........ $8.117 $7.320 $8.982
------ ------ ------
Net Investment Income............................. .610 1.273 1.283
Net Realized and Unrealized Gain/Loss on
Securities...................................... (.164) .806 (1.530)
------ ------ ------
Total from Investment Operations.................... .446 2.079 (.247)
------ ------ ------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders..................... .480 .960 1.180
Common Share Equivalent of Distributions Paid to
Preferred Shareholders........................ .147 .322 .235
Return of Capital Paid to Common Shareholders..... -0- -0- -0-
------ ------ ------
Total Distributions................................. .627 1.282 1.415
------ ------ ------
Net Asset Value, End of the Period.................. $7.936 $8.117 $7.320
====== ====== ======
Market Price Per Share at End of the Period......... $8.750 $8.750 $7.500
Total Investment Return at Market Price (b)......... 5.41%* 30.33% (12.94%)
Total Return at Net Asset Value (c)................. 3.73%* 25.19% (5.70%)
Net Assets at End of the Period (In millions)....... $109.4 $110.8 $104.4
Ratio of Expenses to Average Net Assets Applicable
to Common Shares.................................. 1.89% 1.96% 1.97%
Ratio of Expenses to Average Net Assets............. 1.12% 1.15% 1.17%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d)................... 11.49% 12.09% 12.87%
Portfolio Turnover.................................. 48%* 124% 125%
</TABLE>
(a) Net asset value at April 28, 1989 of $11.160 is adjusted for common and
preferred share offering costs of $.395 per share. Net asset value at
December 31, 1991 of $7.619 is adjusted for redemption costs associated with
the 9.5% cumulative preferred shares and offering costs associated with the
auction preferred shares of $.332 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 upon NAV.
(d) Net investment income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
* Non-Annualized
N/A = Not Applicable
12
<PAGE> 14
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 28, 1989
(Commencement
Year Ended December 31 of Investment
- ------------------------------------------------ Operations) to
1993 1992 1991 1990 December 31, 1989
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$7.916 $7.287 $5.884 $9.307 $10.765
------ ------ ------ ------ -------
1.422 1.691 1.512 1.908 1.283
1.021 .415 1.686 (3.410) (1.461)
------ ------ ------ ------ -------
2.443 2.106 3.198 (1.502) (0.178)
------ ------ ------ ------ -------
1.200 .975 .920 1.238 .909
.177 .502 .543 .666 .371
-0- -0- -0- .017 -0-
------ ------ ------ ------ -------
1.377 1.477 1.463 1.921 1.280
------ ------ ------ ------ -------
$8.982 $7.916 $7.619 $5.884 $ 9.307
====== ====== ====== ====== =======
$9.750 $9.375 $7.500 $5.250 $9.000
17.01% 39.58% 62.27% (30.57%) (18.34%)*
30.08% 16.92% 46.26% (24.92%) (15.21%)*
$117.8 $109.2 $108.2 $94.1 $135.5
1.72% 1.73% 2.73% 2.12% 1.57%
1.05% 1.02% 1.52% 1.11% N/A
14.41% 14.49% 13.59% 15.99% 12.91%
140% 145% 97% 65% * 31%
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Limited 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 April 28, 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 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.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
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, 1995, the Trust had an accumulated capital loss
carryforward of $22,875,240, of which $8,476,712, $11,048,002, $902,225 and
$2,448,301 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 $8,500 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
15
<PAGE> 17
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 $57,754,912 and $49,783,757, respectively.
4. AUCTION PREFERRED SHARES
The Trust has outstanding 900 shares of Auction Preferred Shares ("APS").
Dividends are cumulative and the rate is currently reset every 28 days through
an auction process. The rate in effect on June 30, 1996, was 5.175%. During the
six months ended June 30, 1996, the rates ranged from 5.160% to 5.774%.
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 APS are redeemable at the option of the Trust in whole or in part at a
price of $50,000 per share plus accumulated and unpaid dividends. The Trust is
subject to certain asset coverage tests, and the APS are subject to mandatory
redemption if the tests are not met.
16
<PAGE> 18
VAN KAMPEN AMERICAN CAPITAL LIMITED 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.
17
