-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Evv/fRIwe+da4uWUoVDtYEyWIwMgU+KOuPmx2fB00KLSmLUzxjD+0QOgWay7Kiam 8EwHL5g2c6fA0tQn3+yLGg== 0000950137-96-001583.txt : 19960829 0000950137-96-001583.hdr.sgml : 19960829 ACCESSION NUMBER: 0000950137-96-001583 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960828 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TR CENTRAL INDEX KEY: 0000843506 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 363616859 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05707 FILM NUMBER: 96622099 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLZ CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 7086846000 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT INTERMEDIATE TERM HIGH INCOME TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 SEMI ANNUAL REPORT FOR 6-30-96 1 TABLE OF CONTENTS Letter to Shareholders........................... 1 Performance Results.............................. 4 Portfolio of Investments......................... 5 Statement of Assets and Liabilities.............. 11 Statement of Operations.......................... 12 Statement of Changes in Net Assets............... 13 Financial Highlights............................. 14 Notes to Financial Statements.................... 16
VIT SAR 8/96 2 LETTER TO SHAREHOLDERS August 9, 1996 Dear Shareholder, After an anemic 0.3 percent rise in gross domestic product in the fourth quarter of 1995, GDP rose 2.0 percent in the first quarter of 1996 and 4.2 percent in the second quarter. The strengthening economic growth was spurred by consumer [PHOTO] spending, as retail sales rose more than 5 percent in the first five months of this year versus the DENNIS J. MCDONNELL AND DON G. POWELL comparable 1995 period. This brisk activity generated concerns of inflation, which had been running at about 3 percent for several years. Investors began to suspect that the Federal Reserve might tighten monetary policy in order to ward off inflation. The first six months of 1996 were relatively favorable for high yield bonds, compared to other fixed-income securities. High yield bonds tend to outperform U.S. Treasuries and investment-grade corporate bonds during periods of strong economic growth and a rising interest rate environment. This is because their high coupon payments serve as a buffer to rising interest rates, and because a strengthening economy improves their credit prospects. PORTFOLIO STRATEGY The Intermediate Term High Income Trust invests primarily in a portfolio of relatively high-grade securities (within the non-investment grade category) with relatively shorter-term maturities. Currently, the Trust holds more than 38 percent in securities rated BB, the highest quality rating within the non-investment grade category. Single B-rated securities, which currently represent more than half of the Trust's portfolio, provided a strong total return for the period. In general, bonds issued by companies involved in merger activity, or those that were able to issue equity, outperformed other bonds of similar credit quality for the six-month period ended June 30, 1996. For example, as part of a financial restructuring, Donald Trump took his Atlantic City casino company public, and the Trump Plaza bonds held by the Trust were tendered at a substantial premium. Also, the announcement of a merger between Continental Cable and US West helped Continental bonds to outperform their investment category. The Board of Trustees of your Trust have recently approved a proposal to remove the termination date (February 1, 1999) of the Trust and adopt an indefinite period of existence. This proposal, which is subject to shareholder approval, would allow portfolio management to invest in longer-term securities in order to continue seeking to provide shareholders with high current income and preservation of capital. Shareholders of the Trust will receive a proxy in the coming weeks explaining the proposal in more detail. Continued on page two 1 3 PORTFOLIO COMPOSITION BY CREDIT QUALITY AS OF JUNE 30, 1996 AS OF DECEMBER 31, 1995 [PIE CHART] [PIE CHART] A - 0.4% BBB - 0.7% BBB - 2.5% BB - 36.1% BB - 38.5% B - 60.2% B - 56.5% Non-Rated - 3.0% CCC - 0.3% Non-Rated - 1.8% Based upon credit quality ratings issued by Standard & Poor's. For securities not rated by Standard & Poor's, the Moody's rating is used. PERFORMANCE SUMMARY For the six-month period ended June 30, 1996, the Trust generated a total return at market price of 7.40 percent(1). The Trust's performance reflects a gain in market price per common share on the New York Stock Exchange from $6.375 on December 31, 1995 to $6.50 on June 30, 1996. Additionally attractive, the Trust's current annualized dividend of $0.702 per common share represents a distribution rate of 10.80 percent (3) based on the closing common stock price on June 30, 1996. Longer-term, the one-year total return at market price was 8.93 percent(1), including reinvestment of dividends totaling $0.702 per share. The Trust's leveraged capital structure has been beneficial for shareholders of common shares, providing a high level of current income and strong total returns, over time. However, this type of structure could place pressure on the Trust's earnings should interest rates escalate. MARKET OUTLOOK We anticipate that reasonably strong economic growth will continue during the balance of 1996, albeit at more moderate rates than the second quarter's swift pace. While we expect rates of inflation to remain near current levels, the Fed may begin to lean toward greater restraint in its monetary policy in the coming months. That suggests an upward bias for short-term interest rates and for yields on long-term bonds to remain steady at current levels. In particular, we expect 10-year Treasury yields to remain within a trading range of 6.50 and 7.25 percent. Continued on page three 2 4 CORPORATE NEWS As you may be aware, an agreement was reached in late June for VK/AC Holding, Inc., the parent company of Van Kampen American Capital, Inc., to be acquired by the Morgan Stanley Group Inc. While this announcement may appear commonplace in an ever-changing financial industry, we believe it represents an exciting opportunity for shareholders of our investment products. With Morgan Stanley's global leadership in investment banking and asset management and Van Kampen American Capital's reputation for competitive long-term performance and superior investor services, together we will offer a broader range of investment opportunities. The new ownership will not affect our commitment to pursuing excellence in all aspects of our business. And, we expect very little change in the way your closed-end fund account is maintained and serviced. A proxy will be mailed to you shortly explaining the acquisition and asking for your vote of approval. Please read it carefully and return your response for inclusion in the shareholder vote. We value our relationship with you and look forward to communicating more details of this transaction, which is anticipated to be completed in November. Sincerely, [SIG] Don G. Powell Chairman Van Kampen American Capital Investment Advisory Corp. [SIG] Dennis J. McDonnell President Van Kampen American Capital Investment Advisory Corp. 3 5 PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1996 VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TRUST (NYSE TICKER SYMBOL--VIT) TOTAL RETURNS Six-month total return based on market price(1)............. 7.40% Six-month total return based on NAV(2)...................... 3.44% DISTRIBUTION RATE Distribution rate as a % of closing common stock price(3)... 10.80% SHARE VALUATIONS Net asset value............................................. $6.05 Closing common stock price.................................. $6.500 Six-month high common stock price (05/13/96)................ $6.875 Six-month low common stock price (03/08/96)................. $6.250 Preferred share rate(4)..................................... 5.375%
(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 6 PORTFOLIO OF INVESTMENTS June 30, 1996 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - --------------------------------------------------------------------------------------------- CORPORATE BONDS AEROSPACE & DEFENSE 2.3% $2,600 Sequa Corp. .................................... 9.625% 10/15/99 $ 2,619,500 700 Sequa Corp. .................................... 9.375 12/15/03 675,500 ------------ 3,295,000 ------------ AUTOMOBILE 0.9% 1,200 Exide Corp...................................... 10.750 12/15/02 1,227,000 ------------ BUILDINGS & REAL ESTATE 6.9% 3,050 American Standard Inc. ......................... 10.875 05/15/99 3,233,000 1,700 Chelsea GCA Realty Inc.......................... 7.750 01/26/01 1,657,500 2,100 Doman Industries Ltd. .......................... 8.750 03/15/04 1,900,500 1,800 Schuller International Group Inc................ 10.875 12/15/04 1,944,000 975 Southdown Inc................................... 14.000 10/15/01 1,043,250 ------------ 9,778,250 ------------ CHEMICALS, PLASTICS & RUBBER 1.6% 2,404 G. I. Holdings Inc.............................. 10.000 02/15/06 2,343,900 ------------ CONSUMER NON-DURABLES 2.8% 1,300 Playtex Family Products Corp. .................. 9.000 12/15/03 1,222,000 2,160 Revlon Consumer Products Corp................... 9.375 04/01/01 2,122,200 550 Revlon Consumer Products Corp................... 10.875 07/15/10 563,750 ------------ 3,907,950 ------------ CONTAINERS, PACKAGING & GLASS 4.9% 460 Anchor Glass Container Corp..................... 10.250 06/30/02 322,000 500 Owens Illinois Inc.............................. 10.250 04/01/99 508,750 3,000 Owens Illinois Inc.............................. 11.000 12/01/03 3,225,000 1,000 S.D. Warren Co. ................................ 12.000 12/15/04 1,060,000 1,850 Stone Consolidated Corp......................... 10.250 12/15/00 1,905,500 ------------ 7,021,250 ------------
See Notes to Financial Statements 5 7 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - --------------------------------------------------------------------------------------------- DIVERSIFIED/CONGLOMERATE MANUFACTURING 4.5% $ 250 Communications & Power Industries Inc........... 12.000% 08/01/05 $ 264,375 3,000 Jordan Industries Inc........................... 10.375 08/01/03 2,857,500 1,000 Republic Engineered Steels Inc. ................ 9.875 12/15/01 935,000 2,270 Talley Manufacturing & Technology Inc........... 10.750 10/15/03 2,360,800 ------------ 6,417,675 ------------ ECOLOGICAL 0.3% 400 Norcal Waste Systems Inc........................ 12.750 11/15/05 423,000 ------------ ELECTRONICS 3.0% 2,300 Bell & Howell Co. (d)........................... 0/11.500 03/01/05 1,575,500 1,250 Computervision.................................. 11.375 08/15/99 1,293,750 1,300 Exide Electronics Group Inc..................... 11.500 03/15/06 1,326,000 ------------ 4,195,250 ------------ FARMING & AGRICULTURE 0.8% 450 AGCO Corp....................................... 8.500 03/15/06 441,000 750 Trans Resources Inc............................. 11.875 07/01/02 720,000 ------------ 1,161,000 ------------ FINANCE 2.2% 2,900 American Annuity Group Inc...................... 11.125 02/01/03 3,117,500 ------------ GROCERY 3.8% 230 Pantry Inc...................................... 12.000 11/15/00 202,400 1,100 Pathmark Stores Inc............................. 11.625 06/15/02 1,097,250 1,250 Pathmark Stores Inc............................. 9.625 05/01/03 1,175,000 2,000 Purity Supreme Inc.............................. 11.750 08/01/99 2,170,000 650 Vons Cos. Inc................................... 9.625 04/01/02 682,500 ------------ 5,327,150 ------------ HEALTHCARE 4.2% 1,250 Merit Behavioral Care Corp...................... 11.500 11/15/05 1,312,500 300 Ornda Healthcorp................................ 12.250 05/15/02 324,750 1,700 Ornda Healthcorp................................ 11.375 08/15/04 1,874,250
See Notes to Financial Statements 6 8 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - --------------------------------------------------------------------------------------------- HEALTHCARE (CONTINUED) $2,250 Tenet Healthcare Corp........................... 10.125% 03/01/05 $ 2,385,000 ------------ 5,896,500 ------------ HOTEL, MOTEL, INNS & GAMING 7.5% 450 Argosy Gaming Co................................ 13.250 06/01/04 456,750 2,550 California Hotel Finance Corp................... 11.000 12/01/02 2,690,250 250 Coast Hotels & Casino........................... 13.000 12/15/02 271,875 1,350 Grand Casino Inc................................ 10.125 12/01/03 1,387,125 950 Hollywood Casino Inc............................ 12.750 11/01/03 945,250 2,500 MGM Grand Hotel Finance Corp.................... 11.750 05/01/99 2,650,000 800 Showboat Marina................................. 13.500 03/15/03 872,000 1,350 Trump Atlantic City Associates.................. 11.250 05/01/06 1,356,750 ------------ 10,630,000 ------------ LEISURE 2.1% 2,685 Viacom International Inc........................ 10.250 09/15/01 2,933,363 ------------ MINING, STEEL, IRON & NON-PRECIOUS METAL 4.0% 1,350 Armco Inc....................................... 11.375 10/15/99 1,393,875 650 Carbide/Graphite Group Inc...................... 11.500 09/01/03 703,625 3,000 Easco Corp...................................... 10.000 03/15/01 3,045,000 500 Magma Copper Co................................. 12.000 12/15/01 542,500 ------------ 5,685,000 ------------ OIL & GAS 10.8% 1,150 Clark R & M Holdings Inc........................ * 02/15/00 787,750 1,350 Coda Energy Inc................................. 10.500 04/01/06 1,343,250 1,450 Giant Industries Inc............................ 9.750 11/15/03 1,421,000 3,650 Global Marine Inc............................... 12.750 12/15/99 3,960,250 800 KCS Energy Inc.................................. 11.000 01/15/03 846,000 1,100 Mesa Capital Corp............................... 12.750 06/30/98 1,102,750 1,700 Petroleum Heat & Power Inc...................... 12.250 02/01/05 1,870,000 400 Triton Energy Corp.............................. * 11/01/97 361,000
See Notes to Financial Statements 7 9 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - --------------------------------------------------------------------------------------------- OIL & GAS (CONTINUED) $3,700 Triton Energy Corp. (d)......................... 0/9.750% 12/15/00 $ 3,589,000 ------------ 15,281,000 ------------ PRINTING, PUBLISHING & BROADCASTING 18.4% 2,450 Cablevision Systems Corp........................ 10.750 04/01/04 2,523,500 600 Cablevision Systems Corp........................ 10.500 05/15/16 583,500 3,400 Century Communications Corp. (c)................ 9.750 02/15/02 3,383,000 600 Century Communications Corp..................... 11.875 10/15/03 640,500 1,450 Comcast Corp.................................... 9.375 05/15/05 1,406,500 1,250 Continental Cablevision Inc..................... 8.300 05/15/06 1,293,750 500 Heritage Media Services......................... 11.000 06/15/02 530,000 4,000 Insight Communications Co....................... 11.250 03/01/00 4,020,000 550 International Cabletel Inc. (d)................. 0/11.500 02/01/06 308,000 2,600 K-III Communications Corp....................... 10.625 05/01/02 2,704,000 2,100 Rogers Communications Inc....................... 10.875 04/15/04 2,131,500 2,400 SCI Television Inc.............................. 11.000 06/30/05 2,502,000 2,500 Storer Communications Inc....................... 10.000 05/15/03 2,506,250 550 Young Broadcasting Inc.......................... 10.125 02/15/05 530,750 1,100 Young Broadcasting Inc.......................... 9.000 01/15/06 981,750 ------------ 26,045,000 ------------ RETAIL 4.7% 1,000 Hosiery Corp. America Inc. (Including 1,000 common stock warrants).......................... 13.750 08/01/02 1,095,000 1,100 Loehmann's Inc.................................. 11.875 05/15/03 1,144,000 2,485 Thrifty Payless................................. 12.250 04/15/04 2,745,925 1,600 Waban Inc....................................... 11.000 05/15/04 1,664,000 ------------ 6,648,925 ------------ TELECOMMUNICATIONS 6.0% 1,275 Centennial Cellular Corp. ...................... 10.125 05/15/05 1,230,375 250 Intercel Inc.................................... * 05/01/06 136,250
See Notes to Financial Statements 8 10 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - --------------------------------------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) $ 550 Intermedia Communications of Florida, Inc. (d)............................................. 0/12.500% 05/15/06 $ 308,000 600 Intermedia Communications of Florida, Inc. (Including 600 common stock warrants)........... 13.500 06/01/05 696,000 1,200 IXC Communications Inc.......................... 12.500 10/01/05 1,260,000 150 Metrocall Inc. ................................. 10.375 10/01/07 139,500 1,600 Mobilemedia Communications Inc. (d)............. 0/10.500 12/01/03 1,136,000 1,700 Panamsat L.P. .................................. 9.750 08/01/00 1,759,500 550 Pricellular Wireless Corp. (d).................. 0/12.250 10/01/03 434,500 1,500 Teleport Communications Group (b) (d)........... 0/11.125 07/01/07 873,750 1,000 Telewest PLC (d)................................ 0/11.000 10/01/07 592,500 ------------ 8,566,375 ------------ TEXTILES 0.7% 1,100 Dan River Inc................................... 10.125 12/15/03 1,058,750 ------------ TRANSPORTATION 0.9% 1,350 U.S. Air Inc. .................................. 8.625 09/01/98 1,323,000 ------------ UTILITIES 2.8% 1,600 AES Corp. (b)................................... 10.250 07/15/06 1,608,000 825 California Energy Inc........................... 9.875 06/30/03 839,437 1,500 El Paso Electric Co............................. 8.900 02/01/06 1,481,250 ----------- 3,928,687 ----------- TOTAL LONG-TERM INVESTMENTS 96.1% (Cost $135,327,959) (a)...................................................... 136,211,525
See Notes to Financial Statements 9 11 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - --------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT 4.6% J.P. Morgan Securities, U.S. T-Bond, $5,186,000 par, 9.875% coupon, due 11/15/15, dated 06/28/96, to be sold on 07/01/96 at $6,611,974............... $ 6,609,000 LIABILITIES IN EXCESS OF OTHER ASSETS (0.7%).................................. (1,049,940) ------------ NET ASSETS 100%............................................................... $141,770,585 ============
*Zero coupon bond (a) At June 30, 1996, cost for federal income tax purposes is $135,327,959; the aggregate gross unrealized appreciation is $2,362,008 and the aggregate gross unrealized depreciation is $1,478,442, resulting in net unrealized appreciation of $883,566. (b) Securities purchased on a when issued or delayed delivery basis. (c) Assets segregated as collateral for when issued or delayed delivery purchase commitments. (d) Bond is a "step-up" bond where the coupon increases or steps up at a predetermined date. See Notes to Financial Statements 10 12 STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (Unaudited) - -------------------------------------------------------------------------------- ASSETS: Investments, at Market Value (Cost $135,327,959) (Note 1)............... $136,211,525 Repurchase Agreements (Note 1).......................................... 6,609,000 Cash.................................................................... 303 Receivables: Interest.............................................................. 3,007,446 Securities Sold....................................................... 791,289 Miscellaneous........................................................... 3,385 ------------ Total Assets...................................................... 146,622,948 ------------ LIABILITIES: Payables: Securities Purchased.................................................. 4,253,444 Income Distributions--Common and Preferred Shares..................... 276,487 Investment Advisory Fee (Note 2)...................................... 87,135 Distributor and Affiliates (Note 2)................................... 11,677 Accrued Expenses........................................................ 177,628 Deferred Compensation and Retirement Plans (Note 2)..................... 45,992 ------------ Total Liabilities................................................. 4,852,363 ------------ NET ASSETS.............................................................. $141,770,585 ============ NET ASSETS CONSIST OF: Preferred Shares ($.01 par value, 1,000,000 shares authorized, 588 shares outstanding with liquidation preference of $100,000 per share) (Note 4).............................................................. $ 58,800,000 ------------ Common Shares ($.01 par value with an unlimited number of shares authorized, 13,710,760 shares issued and outstanding)................. 137,108 Paid in Surplus......................................................... 124,474,385 Accumulated Undistributed Net Investment Income......................... 1,038,500 Net Unrealized Appreciation on Securities............................... 883,566 Accumulated Net Realized Loss on Securities............................. (43,562,974) ------------ Net Assets Applicable to Common Shares............................ 82,970,585 ------------ NET ASSETS.............................................................. $141,770,585 ============ NET ASSET VALUE PER COMMON SHARE ($82,970,585 divided by 13,710,760 shares outstanding)................................................... $ 6.05 ============
See Notes to Financial Statements 11 13 STATEMENT OF OPERATIONS For the Six Months Ended June 30, 1996 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest................................................................ $ 7,195,952 Other................................................................... 43,600 ------------ Total Income........................................................ 7,239,552 ------------ EXPENSES: Investment Advisory Fee (Note 2)........................................ 534,778 Preferred Share Maintenance (Note 4).................................... 96,140 Shareholder Services (Note 2)........................................... 39,858 Trustees Fees and Expenses (Note 2)..................................... 12,014 Legal (Note 2).......................................................... 9,100 Other................................................................... 101,227 ------------ Total Expenses...................................................... 793,117 ------------ NET INVESTMENT INCOME................................................... $ 6,446,435 ============ REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES: Net Realized Gain on Investments........................................ $ 1,190,020 ------------ Unrealized Appreciation/Depreciation on Securities: Beginning of the Period............................................... 3,969,365 End of the Period: Investments......................................................... 883,566 ------------ Net Unrealized Depreciation on Securities During the Period............. (3,085,799) ------------ NET REALIZED AND UNREALIZED LOSS ON SECURITIES.......................... $ (1,895,779) ============ NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $ 4,550,656 ============
See Notes to Financial Statements 12 14 STATEMENT OF CHANGES IN NET ASSETS For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995 (Unaudited) - --------------------------------------------------------------------------------
Six Months Ended Year Ended June 30, 1996 December 31, 1995 - ------------------------------------------------------------------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................. $ 6,446,435 $ 13,467,671 Net Realized Gain on Securities....................... 1,190,020 1,199,409 Net Unrealized Appreciation/Depreciation on Securities During the Period........................ (3,085,799) 6,158,150 ------------ ------------ Change in Net Assets from Operations.................. 4,550,656 20,825,230 ------------ ------------ Distributions from Net Investment Income: Common Shares....................................... (4,812,300) (9,624,657) Preferred Shares.................................... (1,582,032) (3,476,603) ------------ ------------ Total Distributions................................... (6,394,332) (13,101,260) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (1,843,676) 7,723,970 NET ASSETS: Beginning of the Period............................... 143,614,261 135,890,291 ------------ ------------ End of the Period (Including undistributed net investment income of $1,038,500 and $986,397, respectively)....................................... $141,770,585 $143,614,261 ============ ============
See Notes to Financial Statements 13 15 FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for one common share of the Trust outstanding throughout the periods indicated. (Unaudited) - --------------------------------------------------------------------------------
Six Months Ended ----------------------- June 30, 1996 1995 1994 - ------------------------------------------------------------------------------------------ Net Asset Value, Beginning of the Period (a)................................. $6.186 $5.623 $6.735 ------ ------ ------ Net Investment Income........................ .470 .982 1.002 Net Realized and Unrealized Gain/Loss on Securities................................. (.139) .537 (.975) ------ ------ ------ Total from Investment Operations............. .331 1.519 .027 ------ ------ ------ Less Distributions from Net Investment Income: Paid to Common Shareholders................ .351 .702 .954 Common Share Equivalent of Distributions Paid to Preferred Shareholders........... .115 .254 .185 ------ ------ ------ Total Distributions.......................... .466 .956 1.139 ------ ------ ------ Net Asset Value, End of the Period........... $6.051 $6.186 $5.623 ====== ====== ====== Market Price Per Share at End of the Period..................................... $6.500 $6.375 $5.500 Total Investment Return at Market Price (b).................................. 7.40%* 29.17% (23.22%) Total Return at Net Asset Value (c).......... 3.44%* 23.70% (2.54%) Net Assets at End of the Period (In millions).................................. $141.8 $143.6 $135.9 Ratio of Expenses to Average Net Assets Applicable to Common Shares................ 1.89% 1.92% 1.96% Ratio of Expenses to Average Net Assets...... 1.11% 1.12% 1.16% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (d)..... 11.56% 12.16% 13.31% Portfolio Turnover........................... 48%* 119% 110%
(a) Net asset value at January 26, 1989 of $9.300 is adjusted for common and preferred share offering costs of $.198 per share. (b) Total investment return at market price reflects the change in market value of the common shares for the period indicated with reinvestment of dividends in accordance with the Trust's dividend reinvestment plan. (c) Total return at net asset value (NAV) reflects the change in value of the Trust's assets with reinvestment of dividends based on NAV. (d) Net investment income is adjusted for the common share equivalent of distributions paid to preferred shareholders. * Non-Annualized N/A = Not Applicable 14 16 - --------------------------------------------------------------------------------
January 26, 1989 (Commencement Year Ended December 31 of Investment - --------------------------------------------------- Operations) to 1993 1992 1991 1990 December 31, 1989 - --------------------------------------------------------------------------------- $6.228 $5.924 $4.603 $7.488 $9.102 ------ ------ ------ ------ ------ 1.109 1.206 1.150 1.566 1.387 .526 .174 1.282 (2.866) (1.653) ------ ------ ------ ------ ------ 1.635 1.380 2.432 (1.300) (.266) ------ ------ ------ ------ ------ .990 .908 .840 1.083 1.020 .138 .168 .271 .502 .328 ------ ------ ------ ------ ------ 1.128 1.076 1.111 1.585 1.348 ------ ------ ------ ------ ------ $6.735 $6.228 $5.924 $4.603 $7.488 ====== ====== ====== ====== ====== $8.125 $7.250 $6.875 $4.125 $7.375 26.12% 18.67% 92.24% (32.91%) (17.27%)* 25.46% 21.36% 48.77% (26.20%) (15.58%)* $151.1 $144.2 $140.0 $121.9 $187.7 1.72% 1.87% 2.51% 2.10% 1.56% 1.04% 1.11% 1.42% 1.90% N/A 14.66% 16.48% 15.86% 17.24% 13.20% 99% 109% 78% 57% 33%*
See Notes to Financial Statements 15 17 NOTES TO FINANCIAL STATEMENTS June 30, 1996 (Unaudited) - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen American Capital Intermediate Term High Income Trust (the "Trust") is registered as a diversified closed-end management investment company under the Investment Company Act of 1940, as amended. The Trust's investment objective is to provide high current income, consistent with preservation of capital, by investing in a portfolio of medium or lower grade fixed-income securities, or non-rated securities of comparable quality. The Trust commenced investment operations on January 26, 1989. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION--Investments are stated at value using market quotations, prices provided by market makers or estimates obtained from yield data relating to instruments or securities with similar characteristics in accordance with procedures established in good faith by the Board of Trustees. Short-term securities and repurchase agreements with remaining maturities of less than 60 days are valued at amortized cost. B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Trust may purchase and sell securities on a "when issued" or "delayed delivery" basis with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Trust will maintain, in a segregated account with its custodian, assets having an aggregate value at least equal to the amount of the when issued or delayed delivery purchase commitments until payment is made. A repurchase agreement is a short-term investment in which the Trust acquires ownership of a debt security and the seller agrees to repurchase the security at a future time and specified price. Repurchase agreements are collateralized by the underlying debt security. The Trust will make payment for such securities only upon physical delivery or evidence of book entry transfer to the account of the custodian bank. The seller is required to maintain the value of the underlying security at not less than the repurchase proceeds due the Trust. 16 18 NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 1996 (Unaudited) - -------------------------------------------------------------------------------- C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond discount is amortized over the expected life of each applicable security. D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. The Trust intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At December 31, 1995, the Trust had an accumulated capital loss carry forward for tax purposes of $44,752,994, of which $22,627,301, $19,427,104, $1,670,578 and $1,028,011 will expire on December 31, 1998, 1999, 2002 and 2003, respectively. Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of post October 31 losses which are not recognized for tax purposes until the first day of the following fiscal year. E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from net investment income to common shareholders monthly. Net realized gains, if any, are distributed annually to common shareholders. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Trust's Investment Advisory Agreement, Van Kampen American Capital Investment Advisory Corp. (the "Adviser") will provide investment advice and facilities to the Trust for an annual fee payable monthly of .75% of the average net assets of the Trust. Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom, counsel to the Trust, of which a trustee of the Trust is an affiliated person. For the six months ended June 30, 1996, the Trust recognized expenses of approximately $9,700 representing Van Kampen American Capital Distributors, Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting, legal and certain shareholder services to the Trust. Certain officers and trustees of the Trust are also officers and directors of VKAC. The Trust does not compensate its officers or trustees who are officers of VKAC. The Trust has implemented deferred compensation and retirement plans for its trustees. Under the deferred compensation plan, trustees may elect to defer all or a 17 19 NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 1996 (Unaudited) - -------------------------------------------------------------------------------- portion of their compensation to a later date. The retirement plan covers those trustees who are not officers of VKAC. 3. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $75,114,929 and $63,710,649, respectively. 4. AUCTION MARKET PREFERRED SHARES The Trust has outstanding 588 shares of Auction Market Preferred Shares ("AMPS") at a liquidation value of $100,000 per share. Dividends are cumulative and the rate is currently reset through an auction process every 28 days. The rate in effect on June 30, 1996, was 5.375%. During the six months ended June 30, 1996, the rates ranged from 5.199% to 5.890%. The Trust pays annual fees equivalent to .25% of the preferred share liquidation value for the remarketing efforts associated with the preferred auctions. These fees are included as a component of Preferred Share Maintenance expense. The AMPS are redeemable at the option of the Trust in whole or in part at a price of $100,000 per share plus accumulated and unpaid dividends. The Trust is subject to certain asset coverage tests, and the AMPS are subject to mandatory redemption if the tests are not met. 18 20 FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL GLOBAL AND INTERNATIONAL Global Equity Fund Global Government Securities Fund Global Managed Assets Fund Short-Term Global Income Fund Strategic Income Fund EQUITY Growth Aggressive Growth Fund Emerging Growth Fund Enterprise Fund Pace Fund Growth & Income Balanced Fund Comstock Fund Equity Income Fund Growth and Income Fund Harbor Fund Real Estate Securities Fund Utility Fund FIXED INCOME Corporate Bond Fund Government Securities Fund High Income Corporate Bond Fund High Yield Fund Limited Maturity Government Fund Prime Rate Income Trust Reserve Fund U.S. Government Fund U.S. Government Trust for Income TAX-FREE California Insured Tax Free Fund Florida Insured Tax Free Income Fund High Yield Municipal Fund Insured Tax Free Income Fund Intermediate Term Municipal Income Fund Municipal Income Fund New Jersey Tax Free Income Fund New York Tax Free Income Fund Pennsylvania Tax Free Income Fund Tax Free High Income Fund Tax Free Money Fund Texas Tax Free Income Fund THE GOVETT FUNDS Emerging Markets Fund Global Income Fund International Equity Fund Latin America Fund Pacific Strategy Fund Smaller Companies Fund Ask your investment representative for a prospectus containing more complete information, including sales charges and expenses. Please read it carefully before you invest or send money. Or call us direct at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time. 19 21 VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TRUST OFFICERS AND TRUSTEES DON G. POWELL* Chairman and Trustee DENNIS J. MCDONNELL* President and Trustee DAVID C. ARCH Trustee ROD DAMMEYER Trustee HOWARD J KERR Trustee THEODORE A. MYERS Trustee HUGO F. SONNENSCHEIN Trustee WAYNE W. WHALEN* Trustee PETER W. HEGEL* Vice President RONALD A. NYBERG* Vice President and Secretary EDWARD C. WOOD, III* Vice President and Treasurer SCOTT E. MARTIN* Assistant Secretary WESTON B. WETHERELL* Assistant Secretary NICHOLAS DALMASO* Assistant Secretary JOHN L. SULLIVAN* Controller STEVEN M. HILL* Assistant Treasurer INVESTMENT ADVISER VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. One Parkview Plaza Oakbrook Terrace, Illinois 60181 CUSTODIAN AND TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02105 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT ACCOUNTANTS KPMG PEAT MARWICK LLP Peat Marwick Plaza 303 East Wacker Drive Chicago, Illinois 60601 * "Interested" persons of the Trust, as defined in the Investment Company Act of 1940. (C) Van Kampen American Capital Distributors, Inc., 1996 All rights reserved. (SM) denotes a service mark of Van Kampen American Capital Distributors, Inc. 20 -----END PRIVACY-ENHANCED MESSAGE-----