-----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, PDHZEDzQkrR64hzfwQLnOLMX/mMEErCRYSs0Sx01ZtklTkb7z8XUmsPUnjfuZxAu /QsgXJJFFtJeSEoAZFcDMw== 0000950137-99-003208.txt : 19990826 0000950137-99-003208.hdr.sgml : 19990826 ACCESSION NUMBER: 0000950137-99-003208 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990825 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN HIGH INCOME TRUST 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: SEC FILE NUMBER: 811-05707 FILM NUMBER: 99699048 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLZ STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC STREET 2: ONE PARKVIEW PLAZA CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TR DATE OF NAME CHANGE: 19960102 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT INTERMEDIATE TERM HIGH INCOME TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 SEMIANNUAL REPORT 1 TABLE OF CONTENTS 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
VIT SAR 8/99 NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. 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 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]
INTEREST RATES INFLATION -------------- --------- 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
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 4 PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999 VAN KAMPEN HIGH INCOME TRUST (NYSE TICKER SYMBOL--VIT) 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%
(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 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 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 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 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 9 PORTFOLIO HIGHLIGHTS VAN KAMPEN HIGH INCOME TRUST TOP FIVE PORTFOLIO INDUSTRIES* [BAR GRAPH]
JUNE 30, 1999 DECEMBER 31, 1998 ------------- ----------------- 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
* As a percentage of long-term investments NET ASSET VALUE AND MARKET PRICE (BASED UPON MONTH-END VALUES) JUNE 1989 THROUGH JUNE 1999 [GRAPH]
MARKET PRICE NET ASSET VALUE ------------ --------------- 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
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 10 PORTFOLIO HIGHLIGHTS (CONTINUED) VAN KAMPEN HIGH INCOME TRUST CREDIT QUALITY* AS OF JUNE 30, 1999 [PIE CHART]
BBB/BAA BB/BA B/B CCC/CAA AND BELOW ------- ----- --- ----------------- As of June 30, 1999 8.40 39.80 50.30 1.50
AS OF DECEMBER 31, 1998 [PIE CHART]
A/A TO CCC/CAA AND AAA/AAA BBB/BAA BB/BA B/B BELOW ------- ------- ----- --- ----------- As of December 31, 1999 2.50 7.40 33.70 54.50 0.40 NON-RATED --------- As of December 31, 1999 1.50
* 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]
MONTHLY DIVIDEND ---------------- Jan 1999 0.0560 Feb 1999 0.0560 Mar 1999 0.0560 Apr 1999 0.0560 May 1999 0.0560 Jun 1999 0.0560
The dividend history represents past performance of the Trust and does not predict the Trust's future distributions. 9 11 PORTFOLIO OF INVESTMENTS June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - -------------------------------------------------------------------------------------- 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 ------------
See Notes to Financial Statements 10 12 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - -------------------------------------------------------------------------------------- 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 ------------
See Notes to Financial Statements 11 13 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - -------------------------------------------------------------------------------------- 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 ------------
See Notes to Financial Statements 12 14 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - -------------------------------------------------------------------------------------- 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 ------------
See Notes to Financial Statements 13 15 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - -------------------------------------------------------------------------------------- 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 ------------
See Notes to Financial Statements 14 16 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
Par Amount (000) Description Coupon Maturity Market Value - -------------------------------------------------------------------------------------- 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 ------------
See Notes to Financial Statements 15 17 PORTFOLIO OF INVESTMENTS (CONTINUED) June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
Description Market Value - -------------------------------------------------------------------------------------- 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 ============
(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 18 STATEMENT OF ASSETS AND LIABILITIES June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 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 ============
See Notes to Financial Statements 17 19 STATEMENT OF OPERATIONS For the Six Months Ended June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 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 ===========
See Notes to Financial Statements 18 20 STATEMENT OF CHANGES IN NET ASSETS For the Six Months Ended June 30, 1999 and the Year Ended December 31, 1998 (Unaudited) - --------------------------------------------------------------------------------
Six Months Ended Year Ended June 30, 1999 December 31, 1998 - ------------------------------------------------------------------------------------- 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 ============ ============
See Notes to Financial Statements 19 21 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, 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------- 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%
(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 22 - --------------------------------------------------------------------------------
Year Ended December 31, - -------------------------------------------------- 1994 1993 1992 1991 1990 - -------------------------------------------------- $ 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%
See Notes to Financial Statements 21 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 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 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 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 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 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 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:
# OF SHARES ---------------------- IN FAVOR WITHHELD - ------------------------------------------------------------------------ David C. Arch.................................... 11,667,810 124,368 Howard J Kerr.................................... 11,667,710 124,468 Dennis J. McDonnell.............................. 11,067,110 125,068
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 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. EX-27 2 FDS
6 11 HIGH INCOME TRUST 1 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 141,495,559 133,992,008 2,899,099 7,144 1,690 136,899,941 2,413,646 0 396,826 2,810,472 58,800,000 106,768,936 13,710,760 13,710,760 339,435 0 (24,315,351) 0 (7,503,551) 134,089,469 152 6,660,884 305,958 (739,978) 6,227,016 (2,172,096) (3,134,774) 920,146 0 (6,035,216) 0 0 0 0 0 (5,115,070) 147,635 (22,143,255) 0 0 509,155 0 739,978 78,077,802 5.864 0.454 (0.387) (0.440) 0.000 0.000 5.491 1.91
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