VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST, N-30D, 2000-10-25

VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
N-30D, 2000-10-25

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<PAGE> 1

<TABLE>
<S> <C>
Table of Contents

OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2

PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
GROWTH OF A $10,000 INVESTMENT 6

PORTFOLIO AT A GLANCE
CREDIT QUALITY 7
TWELVE-MONTH DIVIDEND HISTORY 7
TOP FIVE SECTORS 7
Q&A WITH YOUR PORTFOLIO MANAGERS 8
GLOSSARY OF TERMS 11

BY THE NUMBERS
YOUR FUND'S INVESTMENTS 12
FINANCIAL STATEMENTS 21
NOTES TO FINANCIAL STATEMENTS 27
REPORT OF INDEPENDENT AUDITORS 35

VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 36
FUND OFFICERS AND IMPORTANT ADDRESSES 37
</TABLE>

It is times like these when money- management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2

OVERVIEW

LETTER TO SHAREHOLDERS
September 20, 2000

Dear Shareholder,

Whether you have held your fund for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your fund is being managed in this
environment.

It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the
value of investing for the long term.

As we move through the second half of 2000, count on us to
continue to draw on the wisdom of our 74 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is the theme of a
national advertising campaign that we recently kicked off. The message
emphasizes our depth of investment-management history, as well as our firm
belief that with the right investments, anyone can realize life's true wealth.

Sincerely,

[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments

1
<PAGE> 3

ECONOMIC SNAPSHOT

ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED STRONG, UNDERPINNED BY LOW UNEMPLOYMENT AND RISING
PRODUCTIVITY, YET THERE WERE SIGNS THAT A HEALTHY SLOWDOWN HAD BEGUN. GROSS
DOMESTIC PRODUCT, THE PRIMARY MEASURE OF ECONOMIC GROWTH, INCREASED AT A 5.3
PERCENT ANNUALIZED RATE FOR THE SECOND QUARTER OF 2000. WHILE THIS FIGURE
REPRESENTS A MODEST INCREASE FROM THE PREVIOUS QUARTER, IT SUGGESTS THAT GROWTH
MIGHT BE SETTLING INTO A MORE MODERATE AND SUSTAINABLE PACE THAN ITS RAPID RATE
IN LATE 1999.

CONSUMER SPENDING AND EMPLOYMENT
TOWARD THE END OF THE REPORTING PERIOD, INFLATION FEARS BEGAN TO SUBSIDE DUE TO
A SLOWDOWN IN CONSUMER SPENDING AND A SLACKENING OF THE LABOR MARKET. RISING
INTEREST RATES FINALLY BEGAN TO TEMPER RETAIL SALES, WHICH IN AUGUST POSTED THE
WEAKEST MONTHLY GROWTH SINCE SPRING. ALTHOUGH THE TREND HAS BEEN DOWNWARD THIS
YEAR, CONSUMER SPENDING REMAINS SOUND.

THE JOBLESS RATE CONTINUED TO BE LOW BY HISTORICAL STANDARDS, BUT A RECENT
LEVELING-OFF OF PAYROLL FIGURES AND A SLIGHT RISE IN AUGUST UNEMPLOYMENT SUGGEST
THE LABOR MARKET IS EASING. WHILE EMPLOYER COSTS SUCH AS WAGES AND BENEFITS HAVE
BEEN ON THE RISE OVER THE PAST YEAR, THE LATEST SHIFT IN THE LABOR MARKET HAS
STARTED TO REVERSE THIS TREND--THE EMPLOYMENT COST INDEX SHOWED A MARKED
DECELERATION BETWEEN THE FIRST AND SECOND QUARTERS OF 2000.

INTEREST RATES AND INFLATION
THE FEDERAL RESERVE BOARD (THE FED) RAISED INTEREST RATES FOUR TIMES DURING THE
REPORTING PERIOD IN AN EFFORT TO WARD OFF INFLATION BY CURBING ECONOMIC GROWTH.
OVER THE SAME PERIOD, THE CONSUMER PRICE INDEX ROSE A MODERATE 3.2 PERCENT,
WHICH INDICATED THAT INFLATION GENERALLY REMAINED UNDER CONTROL.

GIVEN THE STRONG YET SUSTAINABLE PACE OF ECONOMIC GROWTH AND THE FAVORABLE
INFLATIONARY ENVIRONMENT, THE FED MAY HOLD INTEREST RATES STEADY IN THE SHORT
TERM, WHICH COULD HELP TO STABILIZE THE STOCK AND BOND MARKETS.

2
<PAGE> 4

U.S. GROSS DOMESTIC PRODUCT

SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998--June 30, 2000)
[BAR GRAPH]

<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Jun 98 2.10
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.30
</TABLE>

Source: Bureau of Economic Analysis

INTEREST RATES AND INFLATION

(August 31, 1998--August 31, 2000)

[LINE GRAPH]

<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Aug 98 5.50 1.60
5.25 1.50
5.00 1.50
Nov 98 4.75 1.50
4.75 1.60
4.75 1.70
Feb 99 4.75 1.60
4.75 1.70
4.75 2.30
May 99 4.75 2.10
5.00 2.00
5.00 2.10
Aug 99 5.25 2.30
5.25 2.60
5.25 2.60
Nov 99 5.50 2.60
5.50 2.70
5.50 2.70
Feb 00 5.75 3.20
6.00 3.70
6.00 3.00
May 00 6.50 3.10
6.50 3.70
6.50 3.60
Aug 00 6.50 3.20
</TABLE>

Interest rates are represented by the closing midline federal funds target 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.

3
<PAGE> 5

PERFORMANCE SUMMARY

RETURN HIGHLIGHTS

(as of August 31, 2000)

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One-year total return based on
NAV(1) 3.09% 2.43% 2.45%
-------------------------------------------------------------------------
One-year total return(2) -1.75% -1.27% 1.53%
-------------------------------------------------------------------------
Five-year average annual total
return(2) 6.08% 6.10% 6.29%
-------------------------------------------------------------------------
Ten-year average annual total
return(2) 9.78% N/A N/A
-------------------------------------------------------------------------
Life-of-Fund average annual total
return(2) 8.46% 7.52%(3) 6.10%
-------------------------------------------------------------------------
Commencement date 10/02/78 07/02/92 07/06/93
-------------------------------------------------------------------------
Distribution rate(4) 10.56% 10.27% 10.33%
-------------------------------------------------------------------------
SEC Yield(5) 11.23% 10.97% 11.04%
-------------------------------------------------------------------------
</TABLE>

N/A = Not Applicable

(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for Class A Shares) or
contingent deferred sales charge ("CDSC") for Class B and C Shares. On
purchases of Class A Shares of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. Returns for
Class B Shares are calculated without the effect of the maximum 4% CDSC,
charged on certain redemptions made within the first and second year of
purchase and declining thereafter to 0% after the fifth year. Returns for
Class C Shares are calculated without the effect of the maximum 1% CDSC,
charged on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower.

(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (4.75% for Class A
Shares) or contingent deferred sales charge ("CDSC") for Class B and C
Shares. On purchases of Class A Shares of $1 million or more, a CDSC of 1%
may be imposed on certain redemptions made within one year of purchase.
Returns for Class B Shares are calculated with the effect of the maximum 4%
CDSC, charged on certain redemptions made within the first and second year
of purchase and declining thereafter to 0% after the fifth year. Returns for
Class C Shares are calculated with the effect of the maximum 1% CDSC,
charged on certain redemptions made within one year of purchase.

(3) The total return reflects the conversion of Class B Shares into Class A
Shares six years after the end of the calendar month in which the shares
were purchased. See footnote 3 in the Notes to Financial Statements for
additional information.

(4) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.

4
<PAGE> 6

(5) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ending August 31, 2000.

An investment in the Fund is subject to investment risks, and you could lose
money on your investment in the Fund. Please review the Risk/Return Summary
of the Prospectus for further details on investment risks. Fund shares, when
redeemed, may be worth more or less than their original cost. Past
performance is no guarantee of future results. Investment return and net
asset value will fluctuate with market conditions.

Market forecasts provided in this report may not necessarily come to pass.

5
<PAGE> 7

GROWTH OF A $10,000 INVESTMENT

(August 31, 1990--August 31, 2000)

[INVESTMENT PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
HIGH INCOME CORPORATE CREDIT SUISSE FIRST BOSTON LIPPER HIGH YIELD BOND
BOND FUND GLOBAL HIGH YIELD INDEX FUND INDEX
--------------------- -------------------------- ----------------------
<S> <C> <C> <C>
8/90 9522.00 10000.00 10000.00
8900.00 9238.00 9457.00
8421.00 9230.00 9113.00
9531.00 10939.00 10544.00
10294.00 11750.00 11322.00
11197.00 12649.00 12145.00
12/91 11897.00 13269.00 12778.00
12975.00 14355.00 13935.00
13418.00 14707.00 14385.00
13915.00 15238.00 14954.00
12/92 13970.00 15479.00 15125.00
14883.00 16559.00 16175.00
15705.00 17202.00 16951.00
15898.00 17629.00 17267.00
12/93 16642.00 18406.00 18126.00
16546.00 18211.00 17933.00
16401.00 17948.00 17694.00
16222.00 18235.00 17689.00
12/94 16040.00 18227.00 17459.00
16795.00 19085.00 18311.00
17595.00 20191.00 19276.00
18279.00 20798.00 19941.00
12/95 18836.00 21396.00 20494.00
19434.00 21859.00 21017.00
19955.00 22204.00 21366.00
20779.00 23037.00 22378.00
12/96 21408.00 24053.00 23154.00
21707.00 24408.00 23261.00
22706.00 25461.00 24493.00
23763.00 26659.00 25814.00
12/97 24029.00 27090.00 26204.00
25211.00 27904.00 27356.00
25435.00 28257.00 27459.00
23349.00 26520.00 25386.00
12/98 24140.00 27248.00 26185.00
24810.00 27696.00 27020.00
24736.00 28016.00 27193.00
24577.00 27567.00 26719.00
12/99 25082.00 28141.00 27438.00
24979.00 27779.00 27020.00
25196.00 27905.00 26913.00
8/00 25421.00 28356.00 27102.00
</TABLE>

This chart compares your fund's performance to that of the Credit Suisse
First Boston High Yield Index and the Lipper High Yield Bond Fund Index
over time.

These indexes are unmanaged broad-based, statistical composites that do
not include any commissions or fees that would be paid by an investor
purchasing the securities they represent. Such costs would lower the
performance of these indexes. The historical performance of the indexes is
shown for illustrative purposes only; it is not meant to forecast, imply,
or guarantee the future performance of any investment vehicle. It is not
possible to invest directly in an index.

The above chart reflects the performance of Class A shares of the fund. The
performance of Class A shares will differ from that of other share classes of
the fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The fund's performance
assumes reinvestment of all distributions, and includes payment of the maximum
sales charge (4.75% for Class A shares).

While past performance is no guarantee of future results, the above information
provides a broader vantage point from which to evaluate the discussion of the
fund's performance found in the following pages.

6
<PAGE> 8

PORTFOLIO AT A GLANCE

CREDIT QUALITY

(as a percentage of corporate debt obligations)

[PIE CHART]
<TABLE>
<CAPTION>
As of August 31, 2000
<S> <C>
- BBB/Baa............ 0.3%
- BB/Ba.............. 8.7%
- B/B................ 80.0%
- CCC/Caa............ 4.5%
- CC/Ca.............. 1.0%
- C/C................ 0.1%
- Non-Rated.......... 5.4%
<CAPTION>
[PIE CHART]

As of August 31, 1999
<S> <C>
- BBB/Baa............ 2.1%
- BB/Ba.............. 9.4%
- B/B................ 75.9%
- CCC/Caa............ 6.0%
- CC/Ca.............. 0.1%
- C/C................ 0.3%
- Non-Rated.......... 6.2%
</TABLE>

Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.

TWELVE-MONTH DIVIDEND HISTORY

(for the period ended August 31, 2000)
[BAR GRAPH]

<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C>
9/99 0.0512
10/99 0.0512
11/99 0.0512
12/99 0.0512
1/00 0.0512
2/00 0.0485
3/00 0.0485
4/00 0.0485
5/00 0.0485
6/00 0.0485
7/00 0.0485
8/00 0.0485
</TABLE>

The dividend history represents past performance of the fund's Class A shares
and is no guarantee of the fund's future dividends.

TOP FIVE SECTORS

(as a percentage of long-term investments)
[BAR GRAPH]

<TABLE>
<CAPTION>
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ---------------
<S> <C> <C>
Utilities 27.9 28.0
Consumer Services 19.8 23.2
Raw Materials/Processing Industries 9.5 10.2
Consumer Distribution 7.5 9.9
Technology 6.1 10.2
</TABLE>

7
<PAGE> 9

[PHOTO]
[PHOTO]

Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN
KAMPEN HIGH INCOME CORPORATE BOND FUND ABOUT THE KEY
EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND
INFLUENCED THE FUND'S RETURN DURING THE 12 MONTHS ENDED
AUGUST 31, 2000. THE TEAM IS LED BY ROBERT J. HICKEY,
PORTFOLIO MANAGER, WHO HAS MANAGED THE FUND SINCE JUNE 1999 AND WORKED IN THE
INVESTMENT INDUSTRY SINCE 1988. HE IS JOINED BY PORTFOLIO MANAGER PETER E.
EHRET. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE.

Q HOW WOULD YOU CHARACTERIZE
THE MARKET CONDITIONS IN WHICH THE FUND OPERATED DURING THE PAST 12 MONTHS,
AND HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?

A During the first few months of the
reporting period, yield spreads between Treasuries and other types of bonds
(such as corporate, high-yield, and mortgage-backed securities) narrowed
slightly, which had a positive effect on the corporate bond market. This trend
continued until year-end 1999, when investors became concerned about the
potential effects of year 2000 (Y2K) computer problems on new bond issuance and
liquidity. Heading into the new year, yield spreads widened considerably. This
widening, coupled with general credit concerns, an investor preference for
stocks, and the corresponding reduced demand for fixed-income securities,
resulted in reduced asset flows into the high-yield market. As a result, bonds
generally underperformed throughout most of the remaining period.

Despite the weakness in the high-yield market, the fund turned in strong
performance during the reporting period. For the 12-month period ended August
31, 2000, the fund posted a total return of 3.09 percent (Class A shares at net
asset value; if the maximum sales charge of 4.75 percent were included, the
return would have been lower). By comparison, the Credit Suisse First Boston
High Yield Index returned 0.76 percent for the same period. This broad-based,
unmanaged index reflects the general performance of a wide range of selected
bonds within the public high-yield debt market, but it does not reflect any
commissions or fees that would be paid by an investor purchasing the securities
it represents. Such costs would lower its performance. It is not possible to
invest directly in an index. Of course, past performance is no guarantee of
future results. As a result of recent market activity, current performance may
vary from the figures shown. Please refer to the chart and footnotes on page 4
for additional fund performance results.

8
<PAGE> 10

Q WHAT WAS THE EFFECT OF
THESE CONDITIONS ON THE HIGH-YIELD MARKET?

A In the rising interest-rate
environment of the last 12 months, we have seen average yields on high-yield/
high-risk bonds rise accordingly. These higher yields have made it
cost-prohibitive for many companies to issue new debt, leading to a lower supply
of high-yield bonds in the marketplace. This reduced supply of high-yield
securities, combined with a lower demand for fixed-income securities in general,
had a negative impact on our market.

Although we saw more widespread defaults across all sectors during the
period, default rates in general were down from their peak levels in June 1999.
In our opinion, the current yields of high-yield/high-risk bonds more than
compensate investors for potential credit and default risk.

Q HOW DID YOU MANAGE THE FUND
IN LIGHT OF THESE CONDITIONS?

A Our investment strategy remained
focused on fundamental credit analysis, which proved to be successful. We
continued to maintain the fund's credit-quality profile with a focus on B rated
bonds, which we believe provide the best combination of risk and return in the
market, as well as a historical yield advantage over higher-quality investments.

We continued to hold a normal position in cash and cash equivalents--
between 3 and 4 percent of the fund's assets--as of the end of the reporting
period, with the exception of a temporary increase at year-end as a
precautionary measure against Y2K-driven redemptions. The fund held this
slightly higher cash allocation for a shorter period of time than many of its
peers, which enabled the fund to participate more actively in the new issue
market.

Finally, the fund's return was boosted by its very small but high-
performing equity portfolio. These positions were acquired by purchasing new
bond issues with attached equity warrants.

Q WHAT SECTORS DID YOU FAVOR
DURING THIS TIME?

A The largest single component of
the fund continued to be the telecommunications segment, which had very strong
performance through the first nine months of the reporting period. Wireline,
wireless, and broadcasting companies in particular were standouts within this
sector. In the last three months of the period, performance slipped slightly as
many companies in the telecommunications sector missed their earning estimates
and caused concern about whether their business plans were fully funded, leading
to a general devaluation of the sector by the marketplace.

The fund remained moderately weighted in the health-care industry, as we did
not see strong investment opportunities in this arena. We also modestly weighted
the financial and basic industrials sectors, which were some of the weaker
market sectors during the period. The fund also benefited from its minimal
weighting in the retail and steel sectors, which

9
<PAGE> 11

underperformed toward the end of the reporting period.

We were optimistic about the energy sector, which served the fund well with
impressive earnings streams. The fund's exposure to emerging markets, while kept
to under 5 percent of the portfolio's assets, has provided impressive overall
performance and proved to be an excellent complement to the fund. Keep in mind
that there is no guarantee that these sectors will continue to perform well or
continue to be held by the fund in the future. For additional portfolio
highlights, please refer to page 7.

Q LOOKING FORWARD, WHAT IS YOUR
OUTLOOK FOR THE MARKET AND THE FUND IN THE MONTHS AHEAD?

A We anticipate a continued solid
economy with moderate growth and rising interest rates. In light of this
outlook, we believe that the high-yield market will continue to outperform other
fixed-income investments in the coming months. With the possible exception of
the telecommunications sector, the supply of new bonds coming to market is
expected to remain low.

We will continue to favor the telecommunications sector, which has been
driving the performance of the portfolio and the market despite its recent
setback, as well as the energy sector, at least through the first quarter of
2001. We may reevaluate the fund's limited weighting of the health-care sector
as health-care companies restructure and reenter the marketplace as stronger,
more viable businesses. Overall, however, we don't anticipate altering the
fund's sector allocation to any measurable degree.

We will continue to focus on fundamental, in-depth research and assessment
of high-yield bonds, evaluating each on a case-by-case basis to find those that
we believe will add the most value to the portfolio. We will strive to continue
to make good credit decisions--identifying those issuers that may have positive
events on the horizon, are financially sound, and have the potential to
contribute to the fund's performance.

10
<PAGE> 12

GLOSSARY OF TERMS

A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.

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.

CLASS A SHARES: Mutual fund shares are generally divided into three groupings,
called Class A, Class B, and Class C shares, each with varying fees and sales
charges.

CREDIT RATING: An evaluation of a bond issuer's credit history and capability of
repaying debt obligations. Standard & Poor's Ratings Group and Moody's Investors
Service are two companies that assign credit 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.

DEFAULT: The failure to make required debt payments on time.

LIQUIDITY: The ease with which an investor can buy or sell a security at a
reasonable price.

NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing this
amount by the number of shares outstanding. The NAV does not include any initial
or contingent deferred sales charge.

SECTOR: A group of securities that are similar with respect to industry,
maturity, type, credit rating, or coupon.

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 credit 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.

11
<PAGE> 13

BY THE NUMBERS

YOUR FUND'S INVESTMENTS

August 31, 2000
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CORPORATE BONDS 90.2%
CONSUMER DISTRIBUTION 7.1%
$4,650 Agrilink Foods, Inc. .................... 11.875% 11/01/08 $ 3,627,000
2,000 American Tissue, Inc. ................... 12.500 07/15/06 1,960,000
4,250 Big 5 Corp., Ser B....................... 10.875 11/15/07 3,888,750
1,500 Building One Services Corp. ............. 10.500 05/01/09 1,305,000
5,915 Chiquita Brands International, Inc. ..... 10.000 06/15/09 4,406,675
9,000 CHS Electronics, Inc. (f)................ 9.875 04/15/05 270,000
3,200 Community Distributors, Inc. ............ 10.250 10/15/04 2,512,000
3,250 Disco SA (Argentina)..................... 9.125 05/15/03 2,981,875
3,825 Duane Reade, Inc. ....................... 9.250 02/15/08 3,385,125
3,000 Fleming Cos., Inc. ...................... 10.500 12/01/04 2,745,000
2,000 Gruma SA (Mexico)........................ 7.625 10/15/07 1,730,000
1,200 Jitney Jungle Stores America, Inc. (f)... 12.000 03/01/06 48,000
5,500 King Pharmaceuticals, Inc. .............. 10.750 02/15/09 5,843,750
4,000 Luiginos, Inc. .......................... 10.000 02/01/06 3,180,000
1,350 Musicland Group, Inc. ................... 9.000 06/15/03 1,255,500
8,255 Musicland Group, Inc. ................... 9.875 03/15/08 6,934,200
7,250 Pantry, Inc. ............................ 10.250 10/15/07 7,123,125
5,640 Pathmark Stores, Inc. (f)................ 11.625 06/15/02 1,635,600
1,095 Pathmark Stores, Inc. (f)................ 12.625 06/15/02 317,550
6,000 Pathmark Stores, Inc. (f)................ 10.750 11/01/03 300,000
945 Phar Mor, Inc. .......................... 11.720 09/11/02 652,050
------------
56,101,200
------------
CONSUMER DURABLES 3.6%
9,710 Aetna Industries, Inc. .................. 11.875 10/01/06 8,544,800
1,725 Cambridge Industries, Inc., Ser B (f).... 10.250 07/15/07 517,500
1,000 Fonda Group, Inc., Ser B................. 9.500 03/01/07 835,000
6,000 Oxford Automotive, Inc., Ser D........... 10.125 06/15/07 5,490,000
3,850 Pillowtex Corp., Ser B................... 9.000 12/15/07 731,500
4,000 Sleepmaster LLC.......................... 11.000 05/15/09 3,760,000
6,430 Talon Automotive Group, Inc., Ser B...... 9.625 05/01/08 2,636,300
6,300 Webb (Del E.) Corp. ..................... 10.250 02/15/10 6,048,000
------------
28,563,100
------------
CONSUMER NON-DURABLES 4.6%
575 Anvil Knitwear, Inc. .................... 10.875 03/15/07 506,000
6,000 Cluett American Corp., Ser B............. 10.125 05/15/08 4,950,000
</TABLE>

See Notes to Financial Statements

12
<PAGE> 14

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CONSUMER NON-DURABLES (CONTINUED)
$3,500 CMI Industries, Inc. .................... 9.500% 10/01/03 $ 1,750,000
8,900 Consoltex Group, Inc. (Canada)........... 11.000 10/01/03 7,164,500
4,625 Del Monte Corp. ......................... 12.250 04/15/07 4,844,687
1,750 Delta Mills Insurance, Ser B............. 9.625 09/01/07 1,596,875
1,300 French Fragrances, Inc., Ser B........... 10.375 05/15/07 1,277,250
5,000 French Fragrances, Inc., Ser D........... 10.375 05/15/07 4,912,500
4,750 Globe Manufacturing Corp. ............... 10.000 08/01/08 498,750
6,000 Outsourcing Services Group, Inc., Ser
B........................................ 10.875 03/01/06 4,830,000
3,850 Supreme International, 144A--Private
Placement (b)............................ 12.250 04/01/06 3,619,000
1,750 United Industries Corp., Ser B........... 9.875 04/01/09 796,250
------------
36,745,812
------------
CONSUMER SERVICES 18.4%
6,510 Agrosy Gaming Co. ....................... 10.750 06/01/09 6,851,775
2,225 Amazon.com, Inc. (a)..................... 0/10.000 05/01/08 1,179,250
2,800 American Plumbing & Mechanical........... 11.625 10/15/08 2,758,000
3,300 Americredit Corp. ....................... 9.250 02/01/04 3,250,500
1,900 Avis Group Holdings, Inc. ............... 11.000 05/01/09 2,080,500
9,750 Booth Creek Ski Holdings, Inc., Ser B.... 12.500 03/15/07 7,507,500
2,500 Cadmus Communications Corp. ............. 9.750 06/01/09 2,437,500
10,020 Capstar Broadcasting Partners (a)........ 12.750 02/01/09 9,418,800
6,250 Cathay International Ltd., 144A--Private
Placement (Japan) (b).................... 13.000 04/15/08 3,250,000
8,360 Charter Communications Holdings.......... 8.250 04/01/07 7,733,000
4,500 Charter Communications Holdings (a)...... 0/11.750 01/15/10 2,700,000
5,500 Citadel Broadcasting Co., Ser B.......... 10.250 07/01/07 5,761,250
1,375 Classic Cable, Inc. ..................... 9.375 08/01/09 1,079,375
4,600 Coaxial Commerce Central Ohio, Inc. ..... 10.000 08/15/06 4,531,000
1,750 Diamond Cable Co. (United Kingdom) (a)... 0/11.750 12/15/05 1,653,750
2,250 Frontiervision Holdings L.P. (a)......... 0/11.875 09/15/07 1,982,812
2,875 Frontiervision Holdings L.P., Ser B
(a)...................................... 0/11.875 09/15/07 2,533,594
1,975 Globix Corp. ............................ 12.500 02/01/10 1,520,750
2,195 Globo Communicacoes Participation,
144A--Private Placement (Brazil) (b)..... 10.625 12/05/08 1,948,062
3,745 Gray Communications Systems, Inc. ....... 10.625 10/01/06 3,759,044
6,100 Hollywood Casino Corp. .................. 11.250 05/01/07 6,366,875
3,120 Horseshoe Gaming LLC..................... 8.625 05/15/09 3,042,000
1,050 Intrawest Corp. ......................... 10.500 02/01/10 1,097,250
4,500 Isle Capri Casinos, Inc. ................ 8.750 04/15/09 4,230,000
3,150 James Cable Partners L.P. ............... 10.750 08/15/04 2,756,250
765 Majestic Star Casino LLC, Ser B.......... 10.875 07/01/06 669,375
3,425 Multicanal Participacoes, Ser B
(Brazil)................................. 12.625 06/18/04 3,493,500
</TABLE>

See Notes to Financial Statements

13
<PAGE> 15

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CONSUMER SERVICES (CONTINUED)
$4,500 Muzak LLC................................ 9.875% 03/15/09 $ 3,960,000
5,700 Northland Cable Television, Inc. ........ 10.250 11/15/07 4,560,000
5,500 NTL Inc., Ser B (a)...................... 0/11.500 02/01/06 5,204,375
3,000 Park N View, Inc., Ser B................. 13.000 05/15/08 930,000
1,500 Park Place Entertainment Corp. .......... 7.875 12/15/05 1,458,750
3,950 Port Arthur Finance Corp., Ser A, 144A--
Private Placement (b).................... 12.500 01/15/09 4,019,125
7,400 Premier Parks, Inc. (a).................. 0/10.000 04/01/08 5,050,500
7,000 Radio Unica Corp. (a).................... 0/11.750 08/01/06 4,865,000
1,350 Sinclair Broadcast Group, Inc. .......... 8.750 12/15/07 1,248,750
7,190 Telewest Communications PLC (United
Kingdom) (a)............................. 0/11.000 10/01/07 6,902,400
2,000 Telewest Communications PLC,
144A--Private Placement (United Kingdom)
(a) (b).................................. 0/9.250 04/15/09 1,150,000
5,000 UIH Australia/Pacific, Inc., Ser B (a)... 0/14.000 05/15/06 4,675,000
5,255 United International Holdings, Inc.
(a)...................................... 0/10.750 02/15/08 3,757,325
6,250 Young America Corp., Ser B............... 11.625 02/15/06 3,000,000
------------
146,372,937
------------
ENERGY 5.4%
7,325 Chesapeake Energy Corp. ................. 9.625 05/01/05 7,379,938
4,385 Frontier Oil Corp. ...................... 11.750 11/15/09 4,538,475
2,800 Grey Wolf Inc. .......................... 8.875 07/01/07 2,723,000
5,935 Houston Exploration Co. ................. 8.625 01/01/08 5,786,625
3,809 Hurricane Hydrocarbons Ltd., 144A--
Private Placements (Canada) (b).......... 16.000 12/31/01 3,770,725
6,250 Hydrochem Industrial Services, Inc., Ser
B........................................ 10.375 08/01/07 4,781,250
6,675 KCS Energy, Inc. (f)..................... 11.000 01/15/03 6,474,750
3,500 Pride Petroleum Services, Inc. .......... 9.375 05/01/07 3,570,000
4,500 Universal Compression, Inc. (a).......... 0/9.875 02/15/08 3,386,250
------------
42,411,013
------------
FINANCE 1.1%
4,750 Americo Life, Inc........................ 9.250 06/01/05 4,441,250
2,000 DLJ Secured Loan Trust, Class A, 144A--
Private Placement (b).................... 10.125 07/07/07 2,100,000
3,000 Madison River Capital/Madison River
Financial Ser, 144A--Private Placement
(b)...................................... 13.250 03/01/10 2,505,000
------------
9,046,250
------------
HEALTHCARE 2.0%
1,120 HCA Healthcare Co. ...................... 8.750 09/01/10 1,125,600
3,675 Iasis Healthcare Corp. .................. 13.000 10/15/09 3,766,875
3,000 Mediq, Inc. (f) ......................... 11.000 06/01/08 240,000
</TABLE>

See Notes to Financial Statements

14
<PAGE> 16

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
HEALTHCARE (CONTINUED)
$8,265 Oxford Health Plans, Inc. ............... 11.000% 05/15/05 $ 8,719,575
2,225 Tenet Healthcare Corp. .................. 8.000 01/15/05 2,191,625
------------
16,043,675
------------
PRODUCER MANUFACTURING 4.9%
300 Cemex International Capital, Inc. ....... 9.660 11/29/49 307,500
3,355 Compass Aerospace Corp. ................. 10.125 04/15/05 335,500
4,500 Eagle Picher Industries, Inc. ........... 9.375 03/01/08 3,757,500
4,450 Filtronic PLC (United Kingdom)........... 10.000 12/01/05 4,027,250
2,000 Flowserve Corp., 144A--Private Placement
(b)...................................... 12.250 08/15/10 2,040,000
5,255 GS Technologies Operating, Inc. ......... 12.000 09/01/04 683,150
8,000 IMO Industries, Inc. .................... 11.750 05/01/06 8,040,000
2,000 Numatics, Inc., Ser B.................... 9.625 04/01/08 1,590,000
4,500 St John Knits International Inc. ........ 12.500 07/01/09 4,275,000
3,000 Terex Corp. ............................. 8.875 04/01/08 2,760,000
4,500 Terex Corp., Ser D....................... 8.875 04/01/08 4,140,000
5,970 Venture Holdings, Inc. .................. 12.000 06/01/09 3,999,900
6,750 Waxman Industries, Inc., Ser B (f)....... 12.750 06/01/04 3,037,500
------------
38,993,300
------------
RAW MATERIALS/PROCESSING INDUSTRIES 8.7%
2,175 Acetex Corp. (Canada).................... 9.750 10/01/03 2,088,000
3,000 AEP Industries, Inc. .................... 9.875 11/15/07 2,580,000
4,200 Anchor Lamina, Inc. (Canada)............. 9.875 02/01/08 2,478,000
4,540 Aracruz Celulose SA, 144A--Private
Placement (Brazil) (b)................... 10.375 01/31/02 4,698,900
4,500 Doe Run Resources Corp., Ser B........... 11.250 03/15/05 2,475,000
3,285 Doman Industries Ltd. (Canada)........... 12.000 07/01/04 3,391,762
1,400 Georgia Gulf Corp. ...................... 10.375 11/01/07 1,459,500
1.2
units Intersil Corp. (e)....................... 13.250 08/15/09 1,276,275
1,300 ISP Holdings, Inc. ...................... 9.000 10/15/03 1,248,000
2,095 Kappa Beheer BV (Netherlands)............ 10.625 07/15/09 2,157,850
1,555 Kappa Beheer BV (Netherlands)............ 10.625 07/15/09 1,439,121
3,725 Pacifica Papers, Inc. ................... 10.000 03/15/09 3,799,500
5,054 Pioneer Americas Acquisition Corp., Ser
B........................................ 9.250 06/15/07 2,880,780
6,500 Printpack, Inc., Ser B................... 10.625 08/15/06 6,272,500
3,250 Radnor Holdings, Inc., Ser B............. 10.000 12/01/03 3,006,250
5,000 Renco Steel Holdings, Inc. .............. 10.875 02/01/05 4,025,000
2,235 Repap New Brunswick, Inc. (Canada)....... 9.000 06/01/04 2,290,875
7.3
units Republic Technologies International,
144A--Private Placement (b) (e).......... 13.750 07/15/09 1,418,625
1,417 Reunion Inds Inc. ....................... 13.000 05/01/03 1,360,320
2,250 Scovill Fasteners, Inc. ................. 11.250 11/30/07 1,057,500
</TABLE>

See Notes to Financial Statements

15
<PAGE> 17

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES (CONTINUED)
$2,625 Tekni-Plex Inc., Ser B................... 12.750% 06/15/10 $ 2,661,094
2,250 TeleCorp PCS, Inc. ...................... 10.625 07/15/10 2,334,375
5,585 TeleCorp PCS, Inc. (a)................... 0/11.625 04/15/09 3,881,575
2,750 Vicap SA (Mexico)........................ 10.250 05/15/02 2,722,500
3,100 Vicap SA (Mexico)........................ 11.375 05/15/07 2,859,750
4,625 WHX Corp. ............................... 10.500 04/15/05 3,515,000
------------
69,378,052
------------
TECHNOLOGY 6.9%
2,800 360 Networks Inc......................... 13.000 05/01/08 2,373,844
2,660 360 Networks Inc., 144A--Private
Placement (b)............................ 13.000 05/01/08 2,586,850
1,430 Autotote Corp., 144A--Private Placement
(b)...................................... 12.500 08/15/10 1,437,150
2,750 Exodus Communications, Inc. ............. 11.375 07/15/08 2,477,933
3,930 Exodus Communications, Inc., 144A--
Private Placement (b).................... 11.625 07/15/10 3,979,125
7,500 Fairchild Semiconductor Corp. ........... 10.375 10/01/07 7,696,875
4,000 Global Crossing Holdings Ltd.
(Bermuda) ............................... 9.125 11/15/06 4,000,000
1,950 Global Telesystems Europe BV
(Luxembourg)............................. 11.000 12/01/09 1,125,223
4,300 Globenet Communications Group............ 13.000 07/15/07 4,353,750
4,100 Intermedia Communications, Inc. (a)...... 0/11.250 07/15/07 2,829,000
1,125 Intermedia Communications, Inc., Ser B
(a)...................................... 0/12.250 03/01/09 562,500
1,925 MGC Communications, Inc., Ser B.......... 13.000 10/01/04 2,059,750
1,750 PSINet, Inc. ............................ 10.500 12/01/06 1,320,528
10,225 PSINet, Inc. ............................ 10.500 12/01/06 8,793,500
7,790 Viatel, Inc. ............................ 11.500 03/15/09 4,479,250
3,100 Williams Communications Corp., 144A
Private Placement (b).................... 11.700 08/01/08 3,115,500
3,500 Winstar Communications, Inc., 144A--
Private Placement (a) (b)................ 0/14.750 04/15/10 1,382,500
------------
54,573,278
------------
TRANSPORTATION 4.2%
4,000 American Commercial Lines LLC............ 10.250 06/30/08 3,420,000
7,500 Atlas Air, Inc. ......................... 10.750 08/01/05 7,753,125
4,750 Atlas Air, Inc. ......................... 9.375 11/15/06 4,767,813
675 Atlas Air, Inc. ......................... 9.250 04/15/08 675,000
2,700 Cenargo International PLC (United
Kingdom)................................. 9.750 06/15/08 2,133,000
7,355 Greyhound Lines, Inc. ................... 11.500 04/15/07 5,295,600
1,170 MRS Logistica SA, Ser B, 144A--Private
Placement (Brazil) (b)................... 10.625 08/15/05 1,044,225
</TABLE>

See Notes to Financial Statements

16
<PAGE> 18

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
TRANSPORTATION (CONTINUED)
$6,250 Pegasus Shipping Hellas Ltd., Ser A
(Bermuda) (f)............................ 11.875% 11/15/04 $ 2,281,250
4,500 Stena AB (Sweden)........................ 10.500 12/15/05 4,387,500
1,800 Transport World Airlines, Inc. .......... 11.500 12/15/04 1,278,000
------------
33,035,513
------------
UTILITIES 23.3%
7.3
units Airgate PCS, Inc. (a) (e)................ 0/13.500 10/01/09 4,653,750
2,000 Alamosa PCS Holdings, Inc. (a)........... 0/12.875 02/15/10 1,165,000
6,250 Centennial Cellular Operating Co. ....... 10.750 12/15/08 6,140,625
9,750 Clearnet Communications, Inc. (Canada)
(a)...................................... 0/14.750 12/15/05 10,237,500
2,000 Compania De Transporte Energia, 144A--
Private Placement (Argentina) (b)........ 9.250 04/01/08 1,847,500
3,100 Crown Castle International Corp. (a)..... 0/10.625 11/15/07 2,418,000
2,800 Crown Castle International Corp. ........ 10.750 08/01/11 2,922,500
5,500 CTI Holdings SA (Argentina) (a).......... 0/11.500 04/15/08 3,025,000
2,625 Dobson Communications Corp., 144A--
Private Placement (b).................... 10.875 07/01/10 2,615,156
8,040 E. Spire Communications, Inc. (a)........ 0/13.000 11/01/05 4,180,800
5,305 GST Network Funding, Inc. (a) (f)........ 0/10.500 05/01/08 2,732,075
568 GST Telecommunications, Inc., 144A--
Private Placement (Canada) (a) (b) (f)... 0/13.875 12/15/05 11,360
12,010 GT Group Telecom, Inc., 144A--Private
Placement (Canada) (a) (b)............... 0/13.250 02/01/10 6,275,225
9,675 ICG Holdings, Inc. (a)................... 0/13.500 09/15/05 5,418,000
2,500 ICG Holdings, Inc. (a)................... 0/12.500 05/01/06 1,275,000
6,515 Intermedia Communications of Florida,
Inc. (a)................................. 0/12.500 05/15/06 5,765,775
3,150 IPCS, Inc. (a)........................... 0/14.000 07/15/10 1,811,250
3,400 Jazztel PLC (United Kingdom)............. 13.250 12/15/09 2,550,506
3,450 Jazztel PLC (United Kingdom)............. 14.000 07/15/10 2,894,288
8,300 KMC Telecommunications Holdings, Inc.
(a)...................................... 0/12.500 02/15/08 3,154,000
4,900 Level 3 Communications Inc. (a).......... 0/12.875 03/15/10 2,768,500
2,235 Metromedia Fiber Network, Inc. .......... 10.000 12/15/09 2,184,713
10,210 Microcell Telecommunications, Ser B
(a)...................................... 0/14.000 06/01/06 9,801,600
9,000 Millicom International Cellular SA
(Luxemburg) (a).......................... 0/13.500 06/01/06 8,010,000
2,030 Netia Holdings, Inc. (Netherlands)....... 13.750 06/15/10 1,844,934
2,950 Netia Holdings, Inc., Ser B
(Netherlands)............................ 10.250 11/01/07 2,492,750
5,065 Netia Holdings, Inc., Ser B (Netherlands)
(a)...................................... 0/11.250 11/01/07 3,596,150
3,750 Nextel Communications, Inc. (a).......... 0/9.750 10/31/07 2,878,125
1,000 Nextel Communications, Inc. ............. 12.000 11/01/08 1,082,500
3,270 Nextel Communications, Inc. ............. 9.375 11/15/09 3,204,600
</TABLE>

See Notes to Financial Statements

17
<PAGE> 19

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
UTILITIES (CONTINUED)
$4,420 Nextlink Communications, Inc. ........... 10.500% 12/01/09 $ 4,221,100
2,865 Nextlink Communications, Inc. (a)........ 0/12.125 12/01/09 1,590,075
4,500 NTL, Inc. (a)............................ 0/9.750 04/01/08 2,868,750
3,500 PF Net Communications, Inc., 144A--
Private Placement (b).................... 13.750 05/15/10 3,482,500
1,175 Philippine Long Distance Telephone
(Philippines)............................ 10.500 04/15/09 1,094,160
10,574 Pinnacle Holdings, Inc. (a).............. 0/10.000 03/15/08 7,692,585
4,450 Price Communications Wireless............ 11.750 07/15/07 4,806,000
6,400 Primus Telecommunications Group.......... 11.750 08/01/04 4,224,000
830 Primus Telecommunications Group.......... 11.250 01/15/09 531,200
3,750 Rural Cellular Corp. .................... 9.625 05/15/08 3,609,375
2,250 Satelites Mexicanos SA (Mexico).......... 10.125 11/01/04 1,485,000
8,250 SBA Communications Corp. (a)............. 0/12.000 03/01/08 6,249,375
8,100 Startec Global Communications............ 12.000 05/15/08 6,520,500
6,690 Triton Communications LLC (a)............ 0/11.000 05/01/08 5,084,400
6,345 United Pan-Europe Communication NV, Ser B
(Netherlands) (a)........................ 0/12.500 08/01/09 3,093,187
3,500 United Pan-Europe Communication NV, Ser B
(Netherlands)............................ 10.875 08/01/09 2,992,500
1,060 United Pan-Europe Communication NV, Ser B
(Netherlands)............................ 11.250 02/01/10 935,450
1,350 United Pan-Europe Communication NV, Ser B
(Netherlands) (a)........................ 0/13.750 02/01/10 627,750
3,945 US Unwired Inc., Ser B (a)............... 0/13.375 11/01/09 2,219,063
1,460 Verio, Inc. ............................. 13.500 06/15/04 1,715,500
4,015 Verio, Inc. ............................. 10.375 04/01/05 4,416,500
5,800 Worldwide Fiber, Inc. ................... 12.000 08/01/09 5,365,000
------------
183,781,152
------------
TOTAL CORPORATE BONDS 90.2%............................................ 715,045,282
------------
FOREIGN GOVERNMENT OBLIGATIONS 1.0%
1,540 Republic of Brazil (Brazil).............. 10.125 05/15/27 1,243,165
1,500 Republic of Colombia (Colombia).......... 9.750 04/23/09 1,365,000
2,750 Republic of Germany (Germany)............ 3.250 09/15/00 2,440,093
</TABLE>

See Notes to Financial Statements

18
<PAGE> 20

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 125 United Mexican States Debt (Mexico)...... 9.875% 02/01/10 $ 134,656
2,000 United Mexican States Debt (Mexico)...... 11.500 05/15/26 2,486,500
------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS 1.0%.............................. 7,669,414
------------
EQUITIES 2.9%
Airgate PCS, Inc. (4,906 Common Shares) (c)............................. 333,915
Anvil Holdings, Inc. (165,908 Preferred Shares, 13.00% coupon, $1,000
par per share) (c) (d)................................................ 2,654,528
AT + T Canada Inc. (31,718 ADR Common shares) (Canada) (c).............. 1,052,641
Contour Energy Co. (75,000 Common Shares) (c)........................... 194,531
Crown Castle International Corp. (3,934 Preferred Shares, 12.75% coupon,
$1,000 par per share) (c) (d)......................................... 3,973,884
Dairy Mart Convenience Stores (14,998 Common Stock Warrants) (c)........ 12,748
Day International Group, Inc. (1,965 Preferred Shares, 12.25% coupon,
$1,000 par per share) (c) (d)......................................... 1,503,225
DecisionOne Corp. (14,612 Common Stock Warrants Class B) (c)............ 13,803
DecisionOne Corp. (14,661 Common Shares) (c)............................ 9,750
DecisionOne Corp. (8,219 Common Stock Warrants Class A) (c)............. 8,010
DecisionOne Corp. (8,400 Common Stock Warrants Class C) (c)............. 8,187
Firstworld Communications, Inc. 144A--Private Placement (1,255 Common
Stock Warrants), (b) (c).............................................. 24,500
HF Holdings, Inc. (36,820 Common Stock Warrants) (c).................... 40,502
Intermedia Communications, Inc. (16,500 Common Shares) (c).............. 342,375
Intersil Holding Corp., 144A--Private Placement (1,700 Common Stock
Warrants) (b) (c)..................................................... 1,560,600
KMC Telecommunications Holdings, Inc., 144A--Private Placement (9,555
Common Stock Warrants) (b) (c)........................................ 668,850
McLoedUSA, Inc. (59,106 Common Shares) (c).............................. 934,614
NTL, Inc. (6,889 Common Stock Warrants) (c)............................. 319,133
Optel, Inc. (3,275 Common Shares) (c)................................... 3,275
Park N View, Inc., 144A--Private Placement (3,000 Common Stock Warrants)
(b) (c)............................................................... 750
PF Net Communications, Inc., 144A--Private Placement (3,500 Common Stock
Warrants) (b) (c)..................................................... 35
Price Communications Corp. (55,114 Common Shares) (c)................... 1,129,837
Primus Telecommunications Group (2,000 Common Stock Warrants) (c)....... 31,500
Republic Technologies International, Inc., 144A--Private Placement
(7,275 Common Stock Warrants) (b) (c)................................. 73
Rural Cellular Corp. (7,882 Preferred Shares, 11.375% coupon, $1,000 par
per share) (c) (d).................................................... 7,331,165
Signature Brands, Inc. (4,000 Common Stock Warrants) (c)................ 86,000
Star Gas Partners, L.P. (1,219 Units of Limited Partnership
Interests)............................................................ 20,875
</TABLE>

See Notes to Financial Statements

19
<PAGE> 21

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION VALUE
<C> <S> <C> <C> <C>
EQUITIES (CONTINUED)
Startec Global Communications $(8,100 Common Stock Warrants) (c)........ $ 32,400
Superior National Capital Trust 1 (22,500 Preferred Shares, 10.75%
coupon, $1,000 par per share) (c) (d)................................. 157,500
Terex Corp. (28,000 Common Stock Rights) (c)............................ 504,000
Total Renal Care Holdings, Inc. (10,000 Common Shares) (c).............. 70,000
UIH Australia Pacific, Inc. (5,000 Common Stock Warrants) (c)........... 130,000
Wright Medical Technology, Inc. (4,118 Common Stock Warrants) (c)....... 41,176
------------

TOTAL EQUITIES 2.9%.................................................... 23,194,382
------------

TOTAL LONG-TERM INVESTMENTS 94.1%
(Cost $879,637,922)................................................... 745,909,078

SHORT-TERM INVESTMENTS 4.0%
BA Securities ($31,775,000 par collateralized by U.S. Government
Obligations in a pooled cash account, dated 08/31/00, to be sold on
09/01/00 at $31,780,843) (Cost $31,775,000)........................... 31,775,000
------------

TOTAL INVESTMENTS 98.1%
(Cost $911,412,922)................................................... 777,684,078

OTHER ASSETS IN EXCESS OF LIABILITIES 1.9%............................. 15,348,129
------------

NET ASSETS 100.0%...................................................... $793,032,207
============
</TABLE>

(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.

(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally
transactions with qualified institutional buyers.

(d) Payment-in-kind security.

(e) One unit represents one million par of senior notes and one warrant.

(f) Non-income producing as this bond is currently in default.

See Notes to Financial Statements

20
<PAGE> 22

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2000

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $911,412,922)....................... $777,684,078
Receivables:
Interest.................................................. 19,831,918
Fund Shares Sold.......................................... 1,971,098
Dividends................................................. 124,882
Other....................................................... 68,753
------------
Total Assets............................................ 799,680,729
------------
LIABILITIES:
Payables:
Income Distributions...................................... 3,004,954
Fund Shares Repurchased................................... 1,940,707
Distributor and Affiliates................................ 436,015
Investment Advisory Fee................................... 357,505
Custodian Bank............................................ 276,978
Investments Purchased..................................... 124,882
Accrued Expenses............................................ 266,040
Trustees' Deferred Compensation and Retirement Plans........ 241,441
------------
Total Liabilities....................................... 6,648,522
------------
NET ASSETS.................................................. $793,032,207
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $990,602,448
Accumulated Undistributed Net Investment Income............. 138,274
Accumulated Net Realized Loss............................... (63,953,200)
Net Unrealized Depreciation................................. (133,755,315)
------------
NET ASSETS.................................................. $793,032,207
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $464,982,437 and 88,671,103 shares of
beneficial interest issued and outstanding)............. $ 5.24
Maximum sales charge (4.75%* of offering price)......... .26
------------
Maximum offering price to public........................ $ 5.50
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $268,673,760, and 51,146,923 shares of
beneficial interest issued and outstanding)............. $ 5.25
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $59,376,010 and 11,372,239 shares of
beneficial interest issued and outstanding)............. $ 5.22
============
</TABLE>

* On sales of $100,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

21
<PAGE> 23

Statement of Operations
For the Year Ended August 31, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 95,823,798
Dividends................................................... 1,444,696
Other....................................................... 1,899,344
-------------
Total Income............................................ 99,167,838
-------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B, and C of $1,153,785, $2,891,115 and $616,972,
respectively)............................................. 4,661,872
Investment Advisory Fee..................................... 4,421,601
Shareholder Services........................................ 1,384,343
Custody..................................................... 102,035
Trustees' Fees and Related Expenses......................... 81,999
Legal....................................................... 49,840
Other....................................................... 505,662
-------------
Total Expenses.......................................... 11,207,352
Less Credits Earned on Cash Balances.................... 21,670
-------------
Net Expenses............................................ 11,185,682
-------------
NET INVESTMENT INCOME....................................... $ 87,982,156
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (22,759,731)
Foreign Currency Transactions............................. (45,535)
-------------
Net Realized Loss......................................... (22,805,266)
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (91,388,777)
-------------
End of the Period:
Investments............................................. (133,728,844)
Foreign Currency Translation............................ (26,471)
-------------
(133,755,315)
-------------
Net Unrealized Depreciation During the Period............... (42,366,538)
-------------
NET REALIZED AND UNREALIZED LOSS............................ $ (65,171,804)
=============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 22,810,352
=============
</TABLE>

See Notes to Financial Statements

22
<PAGE> 24

Statement of Changes in Net Assets
For the Years Ended August 31, 2000, and 1999

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999
----------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 87,982,156 $ 92,687,034
Net Realized Loss..................................... (22,805,266) (26,018,022)
Net Unrealized Depreciation During the Period......... (42,366,538) (27,887,022)
------------- -------------
Change in Net Assets from Operations.................. 22,810,352 38,781,990
------------- -------------

Distributions from Net Investment Income:
Class A Shares...................................... (52,483,280) (56,432,461)
Class B Shares...................................... (29,126,910) (31,245,715)
Class C Shares...................................... (6,247,936) (6,424,163)
------------- -------------
Total Distributions................................. (87,858,126) (94,102,339)
------------- -------------

NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (65,047,774) (55,320,349)
------------- -------------

FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................. 256,212,226 377,609,982
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................ 49,156,292 50,110,723
Cost of Shares Repurchased............................ (325,168,979) (332,658,016)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.... (19,800,461) 95,062,689
------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS................. (84,848,235) 39,742,340
NET ASSETS:
Beginning of the Period............................... 877,880,442 838,138,102
------------- -------------
End of the Period (Including accumulated undistributed
net investment income of $138,274 and $944,173,
respectively)....................................... $ 793,032,207 $ 877,880,442
============= =============
</TABLE>

See Notes to Financial Statements

23
<PAGE> 25

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
CLASS A SHARES ----------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................. $ 5.68 $ 6.06 $ 6.55 $ 6.30 $ 6.15
------ ------ ------ ------ ------
Net Investment Income.............. .59 .63 .61 .60 .61
Net Realized and Unrealized
Gain/Loss........................ (.43) (.37) (.48) .27 .14
------ ------ ------ ------ ------
Total from Investment Operations..... .16 .26 .13 .87 .75
Less Distributions from Net
Investment Income.................. .60 .64 .62 .62 .60
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD... $ 5.24 $ 5.68 $ 6.06 $ 6.55 $ 6.30
====== ====== ====== ====== ======

Total Return (a)..................... 3.09% 4.41% 1.66% 14.44% 12.66%
Net Assets at End of the Period (In
millions).......................... $465.0 $492.4 $499.3 $468.6 $421.4
Ratio of Expenses to Average Net
Assets (b)......................... 1.03% 1.03% 1.00% 1.08% 1.08%
Ratio of Net Investment Income to
Average Net Assets (b)............. 10.90% 10.65% 9.33% 9.37% 9.65%
Portfolio Turnover................... 68% 51% 90% 75% 76%
</TABLE>

(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent deferred
sales charge ("CDSC"). On purchases of $1 million or more, a CDSC of 1% may
be imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower.

(b) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.

See Notes to Financial Statements

24
<PAGE> 26

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
CLASS B SHARES ----------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD.............................. $ 5.68 $ 6.06 $ 6.56 $ 6.31 $ 6.16
------ ------ ------ ------ ------
Net Investment Income............... .55 .58 .57 .56 .56
Net Realized and Unrealized
Gain/Loss......................... (.43) (.37) (.49) .26 .14
------ ------ ------ ------ ------
Total from Investment Operations...... .12 .21 .08 .82 .70
Less Distributions from Net Investment
Income.............................. .55 .59 .58 .57 .55
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.... $ 5.25 $ 5.68 $ 6.06 $ 6.56 $ 6.31
====== ====== ====== ====== ======

Total Return (a)...................... 2.43% 3.57% 0.77% 13.58% 11.78%
Net Assets at End of the Period (In
millions)........................... $268.7 $318.2 $283.1 $198.0 $114.6
Ratio of Expenses to Average Net
Assets (b).......................... 1.78% 1.79% 1.79% 1.86% 1.87%
Ratio of Net Investment Income to
Average Net Assets (b).............. 10.15% 9.88% 8.52% 8.60% 8.86%
Portfolio Turnover.................... 68% 51% 90% 75% 76%
</TABLE>

(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 4%,
charged on certain redemptions made within the first and second year of
purchase and declining thereafter to 0% after the fifth year. If the sales
charge was included, total returns would be lower.

See Notes to Financial Statements

25
<PAGE> 27

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
CLASS C SHARES --------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD.............................. $ 5.65 $6.04 $6.53 $ 6.28 $ 6.14
------ ----- ----- ------ ------
Net Investment Income............... .55 .58 .57 .56 .55
Net Realized and Unrealized
Gain/Loss......................... (.43) (.38) (.49) .26 .14
------ ----- ----- ------ ------
Total from Investment Operations...... .12 .20 .08 .82 .69
Less Distributions from Net Investment
Income.............................. .55 .59 .57 .57 .55
------ ----- ----- ------ ------
NET ASSET VALUE, END OF THE PERIOD.... $ 5.22 $5.65 $6.04 $ 6.53 $ 6.28
====== ===== ===== ====== ======

Total Return (a)...................... 2.45% 3.42% 0.93% 13.64% 11.66%
Net Assets at End of the Period (In
millions)........................... $ 59.4 $67.3 $55.8 $ 30.8 $ 17.5
Ratio of Expenses to Average Net
Assets (b).......................... 1.78% 1.79% 1.79% 1.86% 1.87%
Ratio of Net Investment Income to
Average Net Assets (b).............. 10.15% 9.87% 8.49% 8.57% 8.86%
Portfolio Turnover.................... 68% 51% 90% 75% 76%
</TABLE>

(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 1%,
charged on certain redemptions made within one year of purchase. If the
sales charge was included, total returns would be lower.

See Notes to Financial Statements

26
<PAGE> 28

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen High Income Corporate Bond Fund (the "Fund"), a Delaware business
trust, is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective is to provide maximum current income through investment in high
yielding, high risk fixed-income securities. The Fund commenced investment
operations on October 2, 1978. The Fund commenced distribution of its Class B
and Class C shares on July 2, 1992 and July 6, 1993, respectively.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 Fixed income investments and preferred stock are stated at
value using market quotations or indications of value obtained from an
independent pricing service. Investments in securities listed on a securities
exchange are valued at the sale price as of the close of such securities
exchange. Unlisted securities and listed securities for which the last sales
price is not available are valued at the mean of the bid and asked prices. For
those securities where quotations or prices are not available as noted above,
valuations are determined 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, which approximates market
value.

Fund investments include lower-rated debt securities which may be more
susceptible to adverse economic conditions than other investment grade holdings.
These securities are often subordinated to the prior claims of other senior
lenders and uncertainties exist as to an issuer's ability to meet principal and
interest payments. At the end of the period, debt securities rated below
investment grade and comparable unrated securities represented approximately 99%
of the investment portfolio.

B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund 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 Fund will
maintain, in a

27
<PAGE> 29

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

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 August 31, 2000, there were no when-issued or delayed
delivery purchase commitments.

The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates (collectively, "Van Kampen"), the daily aggregate of which is
invested in repurchase agreements. Repurchase agreements are fully
collateralized by the underlying debt security. The Fund 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 Fund.

C. INCOME AND EXPENSES Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts on debt
securities purchased are accreted over the life of the respective security.
Premiums on debt securities are not amortized. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.

D. FEDERAL INCOME TAXES It is the Fund'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 Fund 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 August 31, 2000, the Fund had an accumulated capital loss carryforward
for tax purposes of $42,452,246 which expires between August 31, 2003 and August
31, 2008. Net realized gains or losses may differ for financial reporting and
tax purposes primarily as a result of market discount from bonds sold, post
October 31 losses which are not realized for tax purposes until the first day of
the following fiscal year and the deferral of losses relating to wash sales
transactions.

At August 31, 2000, for federal income tax purposes, cost of long- and
short-term investments is $912,828,814, the aggregate gross unrealized
appreciation is $16,693,775 and the aggregate gross unrealized depreciation is
$151,838,511,

28
<PAGE> 30

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

resulting in net unrealized depreciation on long- and short-term investments of
$135,144,736.

E. DISTRIBUTION OF INCOME AND GAINS The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included in ordinary income for
tax purposes.

Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between financial and tax basis
reporting for the August 31, 2000 fiscal year have been identified and
appropriately reclassified.

Permanent book and tax basis differences relating to the expiration of a
portion of the capital loss carryforward totaling $45,375,504 were reclassified
from net realized gain/loss to capital. Permanent book and tax basis differences
relating to the recognition of market discount on bonds sold totaling $152,712
were reclassified from net realized gain/loss to accumulated undistributed net
investment income. Additionally, permanent book and tax basis differences of
$1,027,000 related to consent fee income and net realized currency gains
totaling $55,641 were reclassified from accumulated undistributed net investment
income to accumulated net realized gain/loss.

F. EXPENSE REDUCTIONS During the year ended August 31, 2000, the Fund's custody
fee was reduced by $21,670 as a result of credits earned on overnight cash
balances.

G. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the mean of the quoted bid and ask prices of
such currencies against the U.S. dollar. Purchases and sales of portfolio
securities are translated at the rate of exchange prevailing when such
securities were acquired or sold. Income and expenses are translated at rates
prevailing when accrued.

29
<PAGE> 31

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

2. INVESTMENT ADVISORY AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
<S> <C>
First $150 million.......................................... .625 of 1%
Next $150 million........................................... .550 of 1%
Over $300 million........................................... .500 of 1%
</TABLE>

For the year ended August 31, 2000, the Fund recognized expenses of
approximately $49,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

For the year ended August 31, 2000, the Fund recognized expenses of
approximately $54,000 representing Van Kampen's cost of providing accounting
services to the Fund.

Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent of the Fund. For the year ended August 31, 2000,
the Fund recognized expenses of approximately $1,038,800. Transfer agency fees
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive market benchmarks.

Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.

The Fund 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 Fund. The maximum
annual benefit per trustee under the plan is $2,500.

30
<PAGE> 32

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

3. CAPITAL TRANSACTIONS

At August 31, 2000, capital aggregated $681,626,644, $251,448,825 and
$57,526,979 for Class A, B and C shares, respectively. For the year ended August
31, 2000, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 26,793,420 $ 148,906,408
Class B............................................... 14,987,458 81,925,971
Class C............................................... 4,670,036 25,379,847
----------- -------------
Total Sales............................................. 46,450,914 $ 256,212,226
=========== =============
Dividend Reinvestment:
Class A............................................... 5,919,292 $ 31,780,906
Class B............................................... 2,611,973 14,226,849
Class C............................................... 581,316 3,148,537
----------- -------------
Total Dividend Reinvestment............................. 9,112,581 $ 49,156,292
=========== =============
Repurchases:
Class A............................................... (30,783,802) $(170,548,452)
Class B............................................... (22,445,680) (123,101,736)
Class C............................................... (5,783,018) (31,518,791)
----------- -------------
Total Repurchases....................................... (59,012,500) $(325,168,979)
=========== =============
</TABLE>

31
<PAGE> 33

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

At August 31, 1999, capital aggregated $698,093,022, $293,770,644 and
$63,914,747 for Class A, B and C shares, respectively. For the year ended August
31, 1999, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 32,072,403 $ 188,609,487
Class B............................................... 25,472,343 150,618,753
Class C............................................... 6,517,433 38,381,742
----------- -------------
Total Sales............................................. 64,062,179 $ 377,609,982
=========== =============
Dividend Reinvestment:
Class A............................................... 5,422,970 $ 31,977,983
Class B............................................... 2,538,917 14,977,036
Class C............................................... 538,024 3,155,704
----------- -------------
Total Dividend Reinvestment............................. 8,499,911 $ 50,110,723
=========== =============
Repurchases:
Class A............................................... (33,140,278) $(196,504,687)
Class B............................................... (18,690,883) (110,387,970)
Class C............................................... (4,391,924) (25,765,359)
----------- -------------
Total Repurchases....................................... (56,223,085) $(332,658,016)
=========== =============
</TABLE>

Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received thereon, automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received thereon, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the years ended August 31, 2000 and 1999,
3,340,979 and 11,279,092 Class B Shares converted to Class A Shares,
respectively and are shown in the above tables as sales of Class A Shares and
repurchases of Class B Shares. Class C Shares purchased before January 1, 1997,
and any dividend reinvestment plan Class C Shares received thereon,
automatically convert to Class A Shares ten years after the end of the calendar
month in which such shares were purchased. Class C Shares purchased on or after
January 1, 1997 do not possess a conversion feature. For the years ended August
31, 2000 and 1999, no Class C Shares converted to Class A Shares. Class B and C
Shares are offered without a front end sales charge, but are subject to a
contingent deferred sales charge (CDSC). The CDSC will be imposed on most
redemptions made within five years of the purchase

32
<PAGE> 34

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

for Class B Shares and one year of the purchase for Class C Shares as detailed
in the following schedule.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First...................................................... 4.00% 1.00%
Second..................................................... 4.00% None
Third...................................................... 3.00% None
Fourth..................................................... 2.50% None
Fifth...................................................... 1.50% None
Sixth and Thereafter....................................... None None
</TABLE>

For the year ended August 31, 2000, Van Kampen, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$163,500 and CDSC on redeemed shares of approximately $1,027,900. Sales charges
do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $534,923,104 and $588,060,152,
respectively.

5. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
the Fund's shares, ongoing shareholder services and maintenance of shareholder
accounts.

Annual fees under the Plans of up to .25% of Class A average net assets and
1.00% each for Class B and Class C average net assets are accrued daily.
Included in these fees for the year ended August 31, 2000, are payments retained
by Van Kampen of approximately $2,470,000.

6. BORROWINGS

In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered in to a $650,000,000 committed line of credit
facility

33
<PAGE> 35

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

with a group of banks which expires on November 28, 2000, but is renewable with
the consent of the participating banks. Each fund is permitted to utilize the
facility in accordance with the restrictions of its prospectus. In the event the
demand for the credit facility meets or exceeds $650 million on a complex-wide
basis, each fund will be limited to its pro-rata percentage based on the net
assets of each participating fund. Interest on borrowings is charged under the
agreement at a rate of 0.50% above the federal funds rate per annum. An annual
commitment fee of 0.09% per annum is charged on the unused portion of the credit
facility, which each fund incurs based on its pro-rate percentage of quarterly
net assets. The Fund has not borrowed against the credit facility during the
period.

34
<PAGE> 36

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Trustees of Van Kampen High Income Corporate
Bond Fund

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Van Kampen High Income Corporate Bond Fund (the
"Fund"), as of August 31, 2000, and the related statement of operations, changes
in net assets and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The statement of changes in net assets of the
Fund for the year ended August 31, 1999, and the financial highlights for each
of the four years in the period then ended were audited by other auditors whose
report dated October 6, 1999, expressed an unqualified opinion on those
statements.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosure in
the financial statements. Our procedures included confirmation of securities
owned as of August 31, 2000, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the 2000 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of August 31, 2000, and the results of its operations,
changes in its net assets and its financial highlights for the year then ended,
in conformity with accounting principles generally accepted in the United
States.

/s/ Ernst & Young LLP

Chicago, Illinois
October 13, 2000

35
<PAGE> 37

VAN KAMPEN FUNDS

THE VAN KAMPEN
FAMILY OF FUNDS

Growth

Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Value
Tax Managed Equity Growth
Technology

Growth and Income

Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value

Global/International

Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income*
Tax Managed Global Franchise
Worldwide High Income

Income

Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income

Capital Preservation

Reserve
Tax Free Money

Senior Loan

Prime Rate Income Trust
Senior Floating Rate

Tax Free

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

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 ongoing 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 [COMPUTER ICON]

- 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.

[PHONE ICON]

- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us

[MAIL ICON]

* Closed to new investors

** Open to new investors for a limited time

36
<PAGE> 38

FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY

OFFICERS

RICHARD F. POWERS, III*
President

STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer

A. THOMAS SMITH III*
Vice President and Secretary

JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer

RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents

INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555

SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256

CUSTODIAN

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 AUDITORS(1)
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606

TAX NOTICE TO CORPORATE SHAREHOLDERS
For the fiscal year ended August 31, 2000, 2% of the dividends taxable as
ordinary income qualified for the 70% dividends received deduction for
corporations.

(1) Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Board of Trustees has engaged Ernst & Young LLP
to be the Fund's independent auditors.

PricewaterhouseCoopers LLP ceased being the Fund's independent auditors
effective May 18, 2000. The cessation of the client-auditor relationship
between the Fund and PricewaterhouseCoopers was based solely on a possible
future business relationship by PricewaterhouseCoopers with an affiliate of
the Fund's investment adviser.

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

(SM) denotes a service mark of Van Kampen Funds Inc.

This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charges on
shares of the Fund, and other
pertinent data. After January 31, 2001, the report if used with prospective
investors, must be accompanied by a monthly performance update.