VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TR, N-30D, 1998-02-26

VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TR
N-30D, 1998-02-26

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<PAGE> 1

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 6
Portfolio of Investments......................... 7
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 18
Report of Independent Accountants................ 21
Dividend Reinvestment Plan....................... 22
</TABLE>

VIT ANR 2/98
<PAGE> 2

LETTER TO SHAREHOLDERS

February 3, 1998

Dear Shareholder,
The new year ushers in what
promises to be an exciting and
challenging time for investors. The
Taxpayer Relief Act of 1997 signed [PHOTO]
into law by President Clinton in
August creates many new opportunities
for you and your family to take a
more active role in achieving your
long-term financial goals.
Most Americans will benefit from
the bill's $95 billion in tax cuts
over the next five years. The DENNIS J. MCDONNELL AND DON G. POWELL
so-called Kiddie Credit gives parents
$400 in immediate tax relief for every child under age 17, and families will
find it easier to save for their children's college expenses through the new
Education IRA. The bill also cuts capital gains tax rates for the first time in
over a decade and loosens restrictions on tax-deductible IRA contributions.
Perhaps the most exciting feature of all is the new Roth IRA, which allows
investment earnings to grow tax free, not just tax deferred.
This year more than ever, it could be important for you to talk to your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll help you locate the many benefits hidden among the changing tax
landscape.

ECONOMIC REVIEW

The bond market advanced during 1997, but its ascension was not a smooth
ride. Bond prices fell early in the period as economic growth soared, fueling
concerns about rising inflation and a potential interest rate hike by the
Federal Reserve Board. When the Fed did raise interest rates a modest 0.25
percent in late March, bond prices fell further, sending the yield of the
30-year U.S. Treasury bond above 7.00 percent for the first time in six months.
By mid-April, however, the market's mood had changed. With few signs of
inflation despite the economy's strength, the 30-year Treasury bond's yield
slipped below 7.00 percent.
In addition to a benign inflation scenario, bonds reaped the benefits of an
improved supply-and-demand balance. Foreign investors continued to be heavy
purchasers of U.S. Treasury securities throughout the year, while U.S. investors
shifted more assets into bonds during the second half of 1997 amid growing
concern that the stock market rally was nearing an end. The 7.00 percent slump
in the Dow Jones Industrial Average on October 27 reinforced the benefit of
owning bonds for diversification. On the supply side, bonds were helped by a
dramatic decline in the federal budget deficit, which reduced the

Continued on page two

1
<PAGE> 3

supply of new Treasury issues. By the end of December, the yield for the 30-year
Treasury bond had dropped to 5.92 percent.
Throughout most of 1997, high yield bonds outperformed Treasury securities
and investment-grade corporate bonds. A robust economy enhanced the ability of
issuing companies to service their high yield debt, which helped to maintain an
extremely low default rate. High yield bonds also benefited from heavy purchases
among retail and institutional investors seeking the additional income these
bonds generate. These purchases more than compensated for the potentially
negative effects of a sharp buildup in new issue supply. Beginning in October,
however, the demand for high yield U.S. corporate securities declined from
earlier lofty levels, due to the spillover effect from the financial crisis in
Southeast Asia. As a result, the difference between the yields of U.S.
noninvestment-grade securities and intermediate Treasury bonds widened by
approximately 50 basis points between late October and late November, and U.S.
high yield bonds underperformed Treasury securities during that time.

[CREDIT QUALITY GRAPH]

Portfolio Composition by Credit Quality*
as of December 31, 1997

<TABLE>
<S> <C>
A to AAA............................. 1.9%
BBB.................................. 6.4%
BB................................... 28.0%
B.................................... 62.9%
Non-Rated............................ 0.8%

</TABLE>

*As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's
or Moody's

TRUST STRATEGY

In managing the Trust, we used the following strategies:
We maintained a portfolio comprised primarily of noninvestment-grade U.S.
corporate bonds. Noninvestment-grade securities tend to pay higher yields than
investment-grade bonds, but carry greater risks. During periods of rising
interest rates, the additional income these bonds generate may help offset a
decline in principal. If rates are rising because economic growth is advancing,
the potential for these bonds to appreciate in price may also increase, due to
an improved credit outlook.
Within the noninvestment-grade category, we emphasized B-rated bonds because
they tend to pay higher yields than BB-rated securities. At the same time, we
maintained a sizable holding in BB-rated bonds in order to help limit the
portfolio's exposure to credit risk. Reducing credit risk helps to offset
potential market risk the Trust might face as a result of its leveraged
structure. Using leverage, which involves borrowing short-term funds in order to
purchase long-term securities, we are able to provide above-market levels of

Continued on page three

2
<PAGE> 4

dividend income to common shareholders. An increase in short-term interest
rates, however, would increase borrowing costs and have an unfavorable impact on
the Trust's dividend-paying ability and price of its common shares.
For most of the year, the average book yield of bonds in the Trust was
substantially above average market yields. In addition, the supply of
noninvestment-grade bonds was tight, due to strong demand from institutional
buyers. As a result of these factors, it was difficult to find bonds that could
be added to the portfolio without negatively affecting the Trust's
dividend-paying ability and average credit quality.
After the Asian financial crisis spilled over into U.S. markets in October
and November, we were able to purchase some new bonds at attractive levels. By
that time, the yield differential between high yield securities and Treasuries
had widened dramatically and the demand for noninvestment-grade bonds had
declined. Bonds were available at reasonable prices, and we bought several new
issues that our research team identified as bonds with the potential to
outperform other securities. Among the purchases were Scovill Fasteners, a
zipper manufacturer; Paragon Health, a long-term health care company; and
Northland Cable, a cable operator. All three bonds were bought at face value,
also known as par. We sold only one issue during the second half of 1997 -
Pathmark - due to a substantial negative shift in its credit outlook. During the
volatile fall season, the Trust performed better than its peer group average as
a result of its asset structure. The Trust remains well-diversified in terms of
its exposure to industry sectors. Leading sectors include printing, publishing,
and broadcasting, oil and gas, and telecommunications.

TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR

AS OF DECEMBER 31, 1997*

<TABLE>
<S> <C>
Printing, Publishing, & Broadcasting............... 15.1%
Oil & Gas.......................................... 10.5%
Telecommunications................................. 9.8%
Health Care........................................ 6.5%
Leisure/Entertainment.............................. 6.0%
</TABLE>

*As a Percentage of Long-Term Investments

PERFORMANCE SUMMARY

For the one-year period ended December 31, 1997, the Trust generated a total
return of 20.29 percent(1). This reflects a gain in market price per common
share from $6.750 on December 31, 1996 to $7.375 on December 31, 1997, plus
reinvestment of dividends that totaled $0.702 per common share. Based on the
monthly dividend of $0.0585 per share and the closing common stock price on
December 31, 1997, the Trust generated a

Continued on page four

3
<PAGE> 5

distribution rate of 9.52 percent(3). Please refer to the chart on page six for
additional performance results.
As of December 31, the duration of the Trust, which is a measure of its
sensitivity to changing interest rates, was 2.93 years, compared with 4.41 years
for the Lehman Brothers High Yield Bond Index. The average maturity of Trust
investments was 6.3 years. We aim to lengthen both the duration and maturity
gradually as opportunities arise, in order to seek to enhance the Trust's
income-earning ability.

Twelve-month Dividend History
For the Period Ended December 31, 19997

<TABLE>
<CAPTION>
Distribution per Common Share
<S> <C>
Jan 1997 .............$.0585
Feb 1997..............$.0585
Mar 1997 .............$.0585
Apr 1997..............$.0585
May 1997 .............$.0585
Jun 1997..............$.0585
Jul 1997 .............$.0585
Aug 1997..............$.0585
Sep 1997 .............$.0585
Oct 1997..............$.0585
Nov 1997 .............$.0585
Dec 1997..............$.0585
</TABLE>

The dividend history represents past performance of the Trust
and does not predict the Trust's future distribution.

ECONOMIC OUTLOOK

We expect the economy to remain strong going into 1998, although its growth
rate is likely to slow from current levels. The financial crisis in Southeast
Asia is expected to slow U.S. exports to the region, which could trim the
earnings of many U.S. companies and reduce overall U.S. growth. As a result of
these factors, we believe there is little chance that the Fed will raise
interest rates in the near term, although a rate hike remains a possibility if
inflation picks up or if growth continues at its brisk pace. We anticipate the
yield on the 30-year Treasury bond to remain at current levels in the coming
months, possibly declining further later in 1998.
We believe that the Trust's heavy weighting in B- and BB-rated bonds and its
relatively short average maturity should help to limit any further volatility
stemming from the crisis in Asia. In addition, we believe that the Trust's
emphasis on high yield bonds will position the portfolio to perform well if
interest rates drop sharply from current levels. A sharp decline in rates would
not only boost the prices of the portfolio's long-term assets, but would also
positively affect its leveraged structure.
We will continue to monitor events in Asia and other market developments in
order to assess their effects on the portfolio. At this time, we do not
anticipate making any major

Continued on page five

4
<PAGE> 6

changes to the portfolio until market conditions shift more dramatically. We
will continue to seek a balance between the Trust's total return and its
dividend income, and look to add value through careful security selection. Thank
you for your continued confidence and trust in Van Kampen American Capital and
in your Trust's manager.

Sincerely,

[SIG]
Don G. Powell

Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen American Capital
Investment Advisory Corp.

Please see footnotes on page six

5
<PAGE> 7

PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1997

VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
(NYSE TICKER SYMBOL--VIT)

<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS

One-year total return based on market price(1)............. 20.29%
One-year total return based on NAV(2)...................... 13.69%

DISTRIBUTION RATE

Distribution rate as a % of closing common stock
price(3)................................................. 9.52%

SHARE VALUATIONS

Net asset value............................................ $ 6.47
Closing common stock price................................. $7.375
One-year high common stock price (12/10/97)................ $7.625
One-year low common stock price (04/24/97)................. $6.625
Preferred share rate(4).................................... 5.700%
</TABLE>

(1)Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing stock price at the end of the period indicated.

(2)Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.

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

(4)See "Notes to Financial Statements" footnote #4, for more information
concerning Preferred Share reset periods.

Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.

6
<PAGE> 8
PORTFOLIO OF INVESTMENTS

December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS 86.4%
AEROSPACE & DEFENSE 4.8%

$ 1,700 Dyncorp......................................... 9.500% 03/01/07 $ 1,734,000
2,800 Sequa Corp...................................... 9.625 10/15/99 2,905,000
500 Sequa Corp...................................... 9.375 12/15/03 518,750
1,770 Talley Manufacturing & Technology, Inc. ........ 10.750 10/15/03 1,924,875
------------
7,082,625
------------
AUTOMOBILE 2.8%

400 Aetna Industries, Inc. ......................... 11.875 10/01/06 360,000
600 Collins & Aikman Products Co. .................. 11.500 04/15/06 678,000
550 Delco Remy International, Inc. ................. 8.625 12/15/07 558,250
700 Exide Corp. .................................... 10.750 12/15/02 738,500
800 Insilco Corp. .................................. 10.250 08/15/07 840,000
1,000 Venture Holdings, Inc. ......................... 9.750 04/01/04 965,000
------------
4,139,750
------------
BUILDINGS & REAL ESTATE 3.4%

3,050 American Standard, Inc. ........................ 10.875 05/15/99 3,210,125
1,050 Johns Manville International Group, Inc. ....... 10.875 12/15/04 1,168,125
550 Kevco, Inc., 144A Private Placement (b)......... 10.375 12/01/07 561,000
------------
4,939,250
------------
CHEMICAL 2.9%

2,404 ISP Holdings, Inc. ............................. 9.750 02/15/02 2,548,240
1,650 Pioneer Amers Acquisition Corp. ................ 9.250 06/15/07 1,666,500
------------
4,214,740
------------
CONTAINERS, PACKAGING & GLASS 2.2%

1,400 Fonda Group, Inc. .............................. 9.500 03/01/07 1,337,000
1,350 S.D. Warren Co. ................................ 12.000 12/15/04 1,505,250
425 Sweetheart Cup, Inc. ........................... 9.625 09/01/00 421,813
------------
3,264,063
------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING 1.0%

1,350 Communications & Power Industries, Inc. ........ 12.000 08/01/05 1,518,750
------------
</TABLE>

See Notes to Financial Statements

7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1997
- --------------------------------------------------------------------------------

$ 600 Envirosource, Inc. ............................. 9.750% 06/15/03 $ 606,000
200 Norcal Waste Systems, Inc. ..................... 13.000 11/15/05 230,000
------------
836,000
------------
ELECTRONICS 1.6%

550 Decisionone Corp. .............................. 9.750 08/01/07 566,500
1,500 Exide Electronics Group, Inc. (Including 1,300
common stock warrants).......................... 11.500 03/15/06 1,785,000
------------
2,351,500
------------
FINANCE 5.0%

2,900 American Annuity Group, Inc. ................... 11.125 02/01/03 3,001,500
1,750 Americredit Corp. .............................. 9.250 02/01/04 1,745,625
1,200 Contifinancial Corp. ........................... 8.375 08/15/03 1,242,000
1,250 Trizec Finance.................................. 10.875 10/15/05 1,406,250
------------
7,395,375
------------
GROCERY 3.4%

1,250 Fleming Cos., Inc., 144A Private Placement
(b)............................................. 10.500 12/01/04 1,315,625
300 Fleming Cos., Inc., 144A Private Placement
(b)............................................. 10.625 07/31/07 318,000
1,400 Jitney Jungle Stores America, Inc. ............. 12.000 03/01/06 1,589,000
857 Pantry, Inc. ................................... 12.500 11/15/00 919,133
900 Pantry, Inc. ................................... 10.250 10/15/07 922,500
------------
5,064,258
------------
HEALTHCARE 5.7%

1,500 Fresenius Medical Care Capital Trust............ 9.000 12/01/06 1,575,000
675 Imagyn Medical Technologies, Inc. .............. 12.500 04/01/04 642,937
1,050 Merit Behavioral Care Corp. .................... 11.500 11/15/05 1,212,750
650 Paragon Health Network, Inc., 144A Private
Placement (b)................................... 9.500 11/01/07 650,000
1,950 Sun Healthcare Group, Inc., 144A Private
Placement (b)................................... 9.500 07/01/07 2,013,375
1,300 Tenet Healthcare Corp. ......................... 8.625 12/01/03 1,358,500
900 Tenet Healthcare Corp. ......................... 10.125 03/01/05 983,250
------------
8,435,812
------------
HOTEL, MOTEL, INNS & GAMING 4.2%

1,800 Argosy Gaming Co. .............................. 13.250 06/01/04 1,890,000
1,075 Coast Hotels & Casinos, Inc. ................... 13.000 12/15/02 1,217,437
</TABLE>

See Notes to Financial Statements

8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1997
- --------------------------------------------------------------------------------

$1,550 Grand Casino, Inc. ............................. 10.125% 12/01/03 $ 1,677,875
1,500 Trump Atlantic City Associates.................. 11.250 05/01/06 1,462,500
------------
6,247,812
------------
LEISURE/ENTERTAINMENT 5.3%

1,300 Cobblestone Golf Group, Inc. ................... 11.500 06/01/03 1,410,500
500 Neodata Services, Inc. ......................... 12.000 05/01/03 538,750
1,900 Samsonite Corp. ................................ 11.125 07/15/05 2,137,500
2,200 Selmer, Inc. ................................... 11.000 05/15/05 2,420,000
1,185 Viacom International, Inc. ..................... 10.250 09/15/01 1,297,575
------------
7,804,325
------------
MACHINERY 0.4%

500 Terex Corp. .................................... 13.250 05/15/02 571,250
------------
MINING, STEEL, IRON & NON-PRECIOUS METAL 0.9%

425 LTV Corp., 144A Private Placement (b)........... 8.200 09/15/07 412,250
950 WCI Steel, Inc. ................................ 10.000 12/01/04 973,750
------------
1,386,000
------------
OIL & GAS 9.2%

1,300 Dawson Production Services, Inc. ............... 9.375 02/01/07 1,365,000
1,750 DI Industries, Inc. ............................ 8.875 07/01/07 1,820,000
250 Falcon Drilling................................. 9.750 01/15/01 261,250
1,000 Falcon Drilling................................. 12.500 03/15/05 1,146,250
500 Giant Industries, Inc. ......................... 9.750 11/15/03 516,250
1,950 Giant Industries, Inc., 144A Private
Placement (b)................................... 9.000 09/01/07 1,945,125
1,100 KCS Energy, Inc. ............................... 11.000 01/15/03 1,207,250
1,650 National Energy Group, Inc. .................... 10.750 11/01/06 1,732,500
1,900 Petroleum Heat & Power, Inc. ................... 12.250 02/01/05 1,871,500
1,250 Pride Petroleum Services, Inc. ................. 9.375 05/01/07 1,350,000
380 Wainoco Oil Co. ................................ 12.000 08/01/02 393,300
------------
13,608,425
------------
</TABLE>

See Notes to Financial Statements

9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1997
- --------------------------------------------------------------------------------

$ 250 Doman Industries, Ltd. ......................... 8.750% 03/15/04 $ 242,500
850 Doman Industries, Ltd., 144A Private
Placement (b)................................... 9.250 11/15/07 833,000
------------
1,075,500
------------
PERSONAL & NON-DURABLE 1.4%

2,060 Revlon Consumer Products Corp. ................. 9.375 04/01/01 2,121,800
------------
PRINTING, PUBLISHING & BROADCASTING 12.0%

1,000 Cablevision Systems Corp. ...................... 7.875 12/15/07 1,020,000
1,200 Cablevision Systems Corp. ...................... 10.500 05/15/16 1,398,000
1,200 Capstar Broadcasting Partners................... 9.250 07/01/07 1,233,000
600 Century Communications Corp. ................... 9.500 03/01/05 636,000
1,300 Century Communications Corp. ................... 8.875 01/15/07 1,339,000
1,100 EZ Communications, Inc. ........................ 9.750 12/01/05 1,215,500
750 Gray Communications Systems, Inc. .............. 10.625 10/01/06 815,625
500 Heritage Media Services......................... 11.000 06/15/02 522,500
1,000 International Cabletel, Inc. (a)................ 0/12.750 04/15/05 830,000
750 International Cabletel, Inc. (a)................ 0/11.500 02/01/06 585,000
1,500 K-III Communications Corp. ..................... 10.250 06/01/04 1,627,500
700 Northland Cable Television, Inc., 144A Private
Placement (b)................................... 10.250 11/15/07 738,500
1,200 Pegasus Commerce................................ 9.625 10/15/05 1,233,000
2,750 SCI Television, Inc. ........................... 11.000 06/30/05 2,839,375
950 Young Broadcasting, Inc. ....................... 11.750 11/15/04 1,054,500
550 Young Broadcasting, Inc. ....................... 8.750 06/15/07 544,500
------------
17,632,000
------------
RETAIL 3.2%

1,300 Barnes & Noble, Inc. ........................... 11.875 01/15/03 1,381,250
1,950 Cole National Group, Inc. ...................... 9.875 12/31/06 2,081,625
700 Community Distributors, Inc., 144A Private
Placement (b)................................... 10.250 10/15/04 717,500
500 Hosiery Corp. America, Inc. (Including 500
common stock warrants).......................... 13.750 08/01/02 542,500
------------
4,722,875
------------
TELECOMMUNICATIONS 8.6%

1,625 Centennial Cellular Corp. ...................... 8.875 11/01/01 1,657,500
1,075 Centennial Cellular Corp. ...................... 10.125 05/15/05 1,169,062
</TABLE>

See Notes to Financial Statements

10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1997
- --------------------------------------------------------------------------------

$1,500 Echostar Communications Corp. (a)............... 0/12.875% 06/01/04 $ 1,376,250
750 Intermedia Communications of Florida,
Inc. (a)........................................ 0/12.500 05/15/06 590,625
600 Intermedia Communications of Florida, Inc.
(Including 600 common stock warrants)........... 13.500 06/01/05 733,500
1,150 Intermedia Communications, Inc. ................ * 07/15/07 822,250
250 Intermedia Communications, Inc., 144A Private
Placement (b)................................... 8.875 11/01/07 257,500
1,950 IXC Communications, Inc. ....................... 12.500 10/01/05 2,252,250
350 Pricellular Wireless Corp. (a).................. 0/12.250 10/01/03 358,750
1,500 Pricellular Wireless Corp. ..................... 10.750 11/01/04 1,638,750
1,300 Teleport Communications Group................... 9.875 07/01/06 1,462,500
350 Teleport Communications Group (a)............... 0/11.125 07/01/07 285,250
------------
12,604,187
------------
TEXTILES 2.8%

700 Anvil Knitwear, Inc. ........................... 10.875 03/15/07 721,000
1,750 Dan River, Inc. ................................ 10.125 12/15/03 1,868,125
350 Pillowtex Corp. ................................ 10.000 11/15/06 372,750
600 Pillowtex Corp., 144A Private Placement (b)..... 9.000 12/15/07 613,500
550 Scovill Fasteners, Inc., 144A Private
Placement (b)................................... 11.250 11/30/07 562,375
------------
4,137,750
------------
TRANSPORTATION 1.2%

1,700 U.S. Air, Inc. ................................. 8.625 09/01/98 1,721,250
------------
UTILITIES 3.1%

2,150 AES Corp. ...................................... 10.250 07/15/06 2,338,125
400 AES Corp. ...................................... 8.375 08/15/07 401,000
1,500 El Paso Electric Co. ........................... 8.250 02/01/03 1,578,750
188 Midland Cogeneration Venture.................... 10.330 07/23/02 201,084
------------
4,518,959
------------
TOTAL CORPORATE BONDS.......................................................... 127,394,256
------------
</TABLE>

See Notes to Financial Statements

11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1997
- --------------------------------------------------------------------------------

Description Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITIES 1.3%

Time Warner, Inc. (1,692 preferred shares)................................... $ 1,867,545
Urohealth Systems, Inc., 144A Private Placement (675 common stock
warrants) (b)................................................................ 1,688
Hosiery Corp. America, Inc., 144A Private Placement (500 common
shares) (b).................................................................. 35,000
Intermedia Communications of Florida, Inc., 144A Private Placement (600
common stock warrants) (b)................................................... 66,000
------------
TOTAL EQUITIES................................................................. 1,970,233
------------
TOTAL LONG-TERM INVESTMENTS 87.7%

(Cost $125,416,258).......................................................... 129,364,489

REPURCHASE AGREEMENTS 11.0%

J.P. Morgan Securities (U.S. Treasury Note, $16,204,000 par, 8.875% coupon,
due 02/15/19, dated 12/31/97, to be sold on 01/02/98 at $16,209,626)
(Cost $16,204,000)........................................................... 16,204,000
------------
TOTAL INVESTMENTS 98.7%

(Cost $141,620,258).......................................................... 145,568,489

OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%.................................... 1,931,491
------------
NET ASSETS 100.0%............................................................. $147,499,980
------------
</TABLE>

* Zero coupon bond

(a) Security bond 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. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.

See Notes to Financial Statements

12
<PAGE> 14

STATEMENT OF ASSETS AND LIABILITIES

December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments, including repurchase agreements of
$16,204,000 (Cost $141,620,258)........................... $145,568,489
Cash........................................................ 762
Interest Receivable ........................................ 2,904,816
Other....................................................... 1,122
------------
Total Assets.......................................... 148,475,189
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 459,788
Income Distributions--Common and Preferred Shares......... 191,921
Investment Advisory Fee................................... 93,394
Affiliates................................................ 7,402
Accrued Expenses............................................ 142,295
Trustees' Deferred Compensation and Retirement Plans........ 80,409
------------
Total Liabilities..................................... 975,209
------------
NET ASSETS.................................................. $147,499,980
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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............................................. 124,484,705
Net Unrealized Appreciation................................. 3,948,231
Accumulated Undistributed Net Investment Income............. 1,047,581
Accumulated Net Realized Loss............................... (40,917,645)
------------
Net Assets Applicable to Common Shares................ 88,699,980
------------
NET ASSETS.................................................. $147,499,980
============
NET ASSET VALUE PER COMMON SHARE ($88,699,980 divided by
13,710,760 shares outstanding)............................ $ 6.47
============
</TABLE>

See Notes to Financial Statements

13
<PAGE> 15

STATEMENT OF OPERATIONS

For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 13,879,803
Dividends................................................... 48,142
Other....................................................... 356,206
------------
Total Income............................................ 14,284,151
------------
EXPENSES:
Investment Advisory Fee..................................... 1,096,194
Preferred Share Maintenance................................. 182,435
Trustees' Fees and Expenses................................. 27,151
Custody..................................................... 18,661
Legal....................................................... 11,625
Other....................................................... 198,132
------------
Total Expenses.......................................... 1,534,198
------------
NET INVESTMENT INCOME....................................... $ 12,749,953
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 2,448,838
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 4,600,766
End of the Period......................................... 3,948,231
------------
Net Unrealized Depreciation During the Period............... (652,535)
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 1,796,303
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 14,546,256
============
</TABLE>

See Notes to Financial Statements

14
<PAGE> 16

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 12,749,953 $ 12,970,396
Net Realized Gain.................................... 2,448,838 1,386,511
Net Unrealized Appreciation/Depreciation
During the Period.................................. (652,535) 631,401
------------ -------------
Change in Net Assets from Operations................. 14,546,256 14,988,308
------------ -------------
Distributions from Net Investment Income:
Common Shares...................................... (9,624,454) (9,624,578)
Preferred Shares................................... (3,230,780) (3,169,033)
------------ -------------
Total Distributions.................................. (12,855,234) (12,793,611)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... 1,691,022 2,194,697
NET ASSETS:
Beginning of the Period.............................. 145,808,958 143,614,261
------------ -------------
End of the Period (Including accumulated
undistributed net investment income of $1,047,581
and $1,183,220, respectively)...................... $147,499,980 $145,808,958
============ ============
</TABLE>

See Notes to Financial Statements

15
<PAGE> 17

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
----------------------------------------
1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a)................... $6.346 $6.186 $5.623 $6.735
------- ------- ------- -------
Net Investment Income.......................... .930 .946 .982 1.002
Net Realized and Unrealized Gain/Loss.......... .131 .147 .537 (.975)
------- ------- ------- -------
Total from Investment Operations............... 1.061 1.093 1.519 .027
------- ------- ------- -------
Less
Distributions from Net Investment Income:
Paid to Common Shareholders................. .702 .702 .702 .954
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.................... .236 .231 .254 .185
------- ------- ------- -------
Total Distributions............................ .938 .933 .956 1.139
------- ------- ------- -------
Net Asset Value, End of the Period............. $6.469 $6.346 $6.186 $5.623
======= ======= ======= =======
Market Price Per Share at End of the Period.... $7.375 $6.750 $6.375 $5.500
Total Investment Return at Market Price (b).... 20.29% 17.34% 29.17% (23.22%)
Total Return at Net Asset Value (c)........... 13.69% 14.86% 23.70% (2.54%)
Net Assets at End of the Period
(In millions).................................. $147.5 $145.8 $143.6 $135.9
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**.................. 1.76% 1.87% 1.92% 1.96%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common Shares (d)............... 10.90% 11.58% 12.16% 13.31%
Portfolio Turnover.............................. 102% 92% 119% 110%
* Non-Annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares................... 1.05% 1.11% 1.12% 1.16%
</TABLE>

(a) Net Asset Value at January 26, 1989 of $9.300 is adjusted for common and
preferred share offering costs of $.198 per share.

(b) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.

(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based on NAV.

(d) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.

N/A = Not Applicable

16
<PAGE> 18

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
January 26, 1989
(Commencement
Year Ended December 31, of Investment
- ------------------------------------------- Operations) to
1993 1992 1991 1990 December 31, 1989
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
$6.228 $5.924 $4.603 $7.488 $9.102
----- ----- ----- ----- -----
1.109 1.206 1.150 1.566 1.387
.526 .174 1.282 (2.866) (1.653)
----- ----- ----- ----- -----
1.635 1.380 2.432 (1.300) (.266)
----- ----- ----- ----- -----
.990 .908 .840 1.083 1.020
.138 .168 .271 .502 .328
----- ----- ----- ----- -----
1.128 1.076 1.111 1.585 1.348
----- ----- ----- ----- -----
$6.735 $6.228 $5.924 $4.603 $7.488
===== ===== ===== ===== =====
$8.125 $7.250 $6.875 $4.125 $7.375
26.12% 18.67% 92.24% (32.91%) (17.27%)*
25.46% 21.36% 48.77% (26.20%) (15.58%)*
$151.1 $144.2 $140.0 $121.9 $187.7
1.72% 1.87% 2.51% 2.10% 1.56%
14.66% 16.48% 15.86% 17.24% 13.20%
99% 109% 78% 57% 33%*
1.04% 1.11% 1.42% 1.90% N/A
</TABLE>

See Notes to Financial Statements

17
<PAGE> 19

NOTES TO FINANCIAL STATEMENTS

December 31, 1997
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital High Income Trust (the "Trust," formerly known as
Van Kampen American Capital Intermediate Term High Income Trust) is registered
as a diversified closed-end management investment company under the Investment
Company Act of 1940, as amended. The Trust's investment objective is to provide
high current income, consistent with preservation of capital, by investing in a
portfolio of medium or lower grade fixed-income securities, or non-rated
securities of comparable quality. The Trust commenced investment operations on
January 26, 1989.

The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

A. SECURITY VALUATION--Investments are stated at value using market quotations,
prices provided by market makers or estimates obtained from yield data relating
to instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities and repurchase agreements with remaining maturities of 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 December 31, 1997, 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 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

18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1997
- --------------------------------------------------------------------------------

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. Bond
discount is amortized over the expected life of each applicable security.

D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.

The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At December 31, 1997, the Trust had an accumulated capital loss carry
forward for tax purposes of $40,889,857 which expires between December 31, 1998
and December 31, 2003. Of this amount $18,764,165 will expire in 1998. Net
realized gains or losses differ for financial reporting and tax purposes as a
result of losses from wash sales.

At December 31, 1997, for federal income tax purposes, cost for long- and
short-term investments is $141,648,046 the aggregate gross unrealized
appreciation is $4,356,682 and the aggregate gross unrealized depreciation is
$436,239, resulting in net unrealized appreciation of $3,920,443.

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.
Permanent book and tax basis differences relating to the recognition of expenses
which are not deductible for tax purposes totaling $30,358 were reclassified
from accumulated undistributed net investment income to capital.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, 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 year ended December 31, 1997, the Trust recognized expenses of
approximately $4,200 representing legal services provided by Skadden, Arps,
Slate,

19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1997
- --------------------------------------------------------------------------------

Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.

For the year ended December 31, 1997, the Trust recognized expenses of
approximately $59,300 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting,
legal and certain shareholder services to the Trust.

Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.

The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 equal to the trustees' annual retainer
fee, which is currently $2,500.

3. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $132,052,839 and $144,319,560,
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 December 31, 1997, was 5.700%. During the year ended December 31,
1997, the rates ranged from 5.088% to 5.700%.

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.

20
<PAGE> 22

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders of
Van Kampen American Capital High Income Trust:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital High Income Trust (the "Trust"), including the portfolio
of investments, as of December 31, 1997, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and broker. 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital High Income Trust as of December 31, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Chicago, Illinois
February 10, 1998

21
<PAGE> 23

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:

2800 Post Oak Blvd., Houston, TX 77056, Attn: Closed-End Funds

22
<PAGE> 24

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International/Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
VKAC Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American

FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
Capital Preservation
VKAC Limited Maturity Government
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money

To find out more about any of these funds, ask your financial adviser 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 American Capital or Morgan Stanley fund
prospectus or to receive additional fund information, choose from one of the
following:

- visit our web site at WWW.VKAC.COM -- to view prospectuses, select
Investors' Place, then Download a 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.VKAC.COM and selecting Investors' Place

23
<PAGE> 25

VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST

BOARD OF TRUSTEES

DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*

OFFICERS

DENNIS J. MCDONNELL*
President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

PETER W. HEGEL*
Vice President

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

CUSTODIAN AND TRANSFER AGENT

STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

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

(SM)denotes a service mark of
Van Kampen American Capital Distributors, Inc.

<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> High Income Trust
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 141,568,489
<INVESTMENTS-AT-VALUE> 145,568,489
<RECEIVABLES> 2,904,816
<ASSETS-OTHER> 1,122
<OTHER-ITEMS-ASSETS> 762
<TOTAL-ASSETS> 148,475,189
<PAYABLE-FOR-SECURITIES> 459,788
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 515,421
<TOTAL-LIABILITIES> 975,209
<SENIOR-EQUITY> 58,800,000
<PAID-IN-CAPITAL-COMMON> 124,621,813
<SHARES-COMMON-STOCK> 13,710,760
<SHARES-COMMON-PRIOR> 13,710,760
<ACCUMULATED-NII-CURRENT> 1,047,581
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40,917,645)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,948,231
<NET-ASSETS> 147,499,980
<DIVIDEND-INCOME> 48,142
<INTEREST-INCOME> 13,879,803
<OTHER-INCOME> 356,206
<EXPENSES-NET> (1,534,198)
<NET-INVESTMENT-INCOME> 12,749,953
<REALIZED-GAINS-CURRENT> 2,448,838
<APPREC-INCREASE-CURRENT> (652,535)
<NET-CHANGE-FROM-OPS> 14,546,256
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,855,234)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,691,022
<ACCUMULATED-NII-PRIOR> 1,183,220
<ACCUMULATED-GAINS-PRIOR> (43,366,483)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,096,194
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,534,198
<AVERAGE-NET-ASSETS> 87,347,547
<PER-SHARE-NAV-BEGIN> 6.346
<PER-SHARE-NII> 0.930
<PER-SHARE-GAIN-APPREC> 0.131
<PER-SHARE-DIVIDEND> (0.938)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 6.469
<EXPENSE-RATIO> 1.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>