<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Management Review................. 4
Portfolio of Investments.................... 6
Statement of Assets and Liabilities......... 7
Statement of Operations..................... 8
Statement of Changes in Net Assets.......... 9
Financial Highlights........................ 10
Notes to Financial Statements............... 11
</TABLE>
GTS SAR 4/96
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO APPEARS HERE]
DENNIS J. MCDONNELL AND DON G. POWELL
April 15, 1996
Dear Shareholder,
We are pleased to report continued positive results for the Van Kampen Amer-
ican Capital Government Target Fund. For the six months ended February 29,
1996, shareholders of the Fund achieved a total return at net asset value of
2.36 percent/1/. Longer term, the Fund's one-year total return at net asset
value was 6.22 percent/1/ for the same ending period.
With experience in money management
dating back to 1926, Van Kampen American Capital has weathered widely ranging
market conditions and emerged with a successful investment record. Today, we
manage over $6.8 billion in government securities. A central part of our in-
vestment philosophy has always been a disciplined, value-oriented approach
that includes in-depth research, both qualitative and quantitative. We believe
this approach serves our investors well, as we seek to provide a high level of
current income and superior long-term performance in our fixed-income portfo-
lios.
You can read more about your Fund's performance on the following pages, in-
cluding a recent interview with the portfolio management team.
ECONOMIC OVERVIEW
The slowdown in the economy continued through the end of 1995, reflected in
weak consumer demand and disappointing retail sales during the holiday season.
Severe winter weather in many parts of the country further dampened retail ac-
tivity and hindered distribution and manufacturing. These conditions helped to
keep inflation in check, prompting the Federal Reserve Board to continue eas-
ing short-term interest rates. In turn, long-term interest rates declined,
causing the price of bonds to increase.
The beginning of 1996 was marked by an increase in market volatility, which
effectively ended the decline in bond yields. This volatility was triggered in
part by three factors: fiscal uncertainty caused by two unprecedented shut-
downs of the federal government, presidential primary debates about impending
tax reform, and an unexpected reversal in a number of key economic indicators,
which consequently sent the market mixed signals on the direction of the econ-
omy.
Still, due to the government shutdowns and the unusually harsh weather, the
market remained skeptical of the predictive value of economic statistics
issued for January and February. Interest rates have fluctuated as the market
attempts to determine whether the economy will remain slow throughout 1996.
Continued on page two
1
<PAGE>
ECONOMIC OUTLOOK
In general, we anticipate a pickup in economic activity during the first half
of the year, with possibilities of an increase in inflation and an economic
slowdown toward the end of the year. We believe the Federal Reserve Board will
be cautious in its monetary policy toward short-term interest rates, as mixed
economic news continues to be reported.
The Fed is expected to maintain its focus on growing the economy at an annual
rate of 2 to 3 percent, while striving to keep inflation at bay. Interest rates
are expected to remain within the range experienced over the past several
years, with a continuation of historically low rates.
LONG-TERM PERFORMANCE
Throughout the life of the Fund, the support of our shareholders and our com-
mitment to a disciplined investment approach have been important to our long-
term performance record. Thank you for your continued confidence in Van Kampen
American Capital and in your Fund's management team.
Sincerely,
/s/ Don G. Powell /s/ Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED FEBRUARY 29, 1996
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/............................... 2.36%
Six-month total return/2/............................................ (.70%)
One-year total return/2/............................................. 3.02%
Five-year average annual total return/2/............................. 6.28%
Life-of-Fund average annual total return/2/.......................... 6.69%
Commencement Date.................................................... 09/11/90
</TABLE>
/1/Assumes reinvestment of all distributions for the period.
/2/Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge of 3.00% when the Fund
was offered for sale.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND
We recently spoke with the management team of the Van Kampen American Capital
Government Target Fund about the key events and economic forces which shaped
the markets during the first half of the Fund's fiscal year. The team includes
John R. Reynoldson, portfolio manager, and Robert C. Peck, Jr., executive vice
president for fixed-income investments. The following excerpts reflect their
views on the Fund's performance during the six-month period ended February 29,
1996.
Q WHAT MARKET EVENTS INFLUENCED THE FUND OVER THE SIX-MONTH PERIOD ENDED
FEBRUARY 29, 1996?
A Overall, the fixed-income environment throughout this reporting period
was constructive. Interest rates fell throughout the first five months of
the period. For example, from September through January, the yield on 5-year
Treasury notes fell from 6.10 percent to 5.20 percent. As bond prices rose and
the economy continued to grow at a slow rate, the Federal Reserve Board cut
its key lending rate (the federal funds rate) twice, for a total of one-half
of one percent. In February, however, the market experienced a sharp reversal,
as key indicators suggested the economy was gaining strength. Further easing
by the fed appeared unlikely. As market direction shifted, the yield on 5-year
Treasury notes rose to 5.70 percent as of February 1996.
Because your Fund maintains a strict policy of not extending its duration
beyond the Fund's maturity, it has progressively become less sensitive to in-
terest rate changes, such as those we experienced during this period. As of
February 29, the Fund had an approximate remaining life to maturity of 27
months and a duration of 2.0 years. Duration is a measure used to evaluate a
bond's sensitivity to changes in interest rates. (Please refer to the chart on
page three for additional Fund performance results.)
Q WHAT IS YOUR INVESTMENT STRATEGY AND HOW HAS IT AFFECTED THE FUND'S
PERFORMANCE?
A We continually strive to add incremental return to the portfolio's value
by actively managing the assets and reducing the Fund's duration as it
approaches its maturity date. To do this, we have taken a relatively conserva-
tive approach by limiting our investments to predominately U.S. Treasury obli-
gations, while also including some fixed-rate mortgage-backed securities.
For the six-month period, the Fund achieved a total return of 2.36 per-
cent/1/, based on net asset value. The Fund's average annual total return
since inception (September 11, 1990) through February 29, 1996, was 7.29 per-
cent/1/, based on net asset value.
4
<PAGE>
[PIE CHART PORTFOLIO HOLDINGS AS A PERCENTAGE OF NET ASSETS AS OF FEBRUARY 29,
1996 APPEARS HERE]
Federal National Mortgage Securities 53%
U.S. Treasury Notes 32%
Other 15%
Q HOW DID THE FUND PERFORM RELATIVE TO A COMPARATIVE INDEX?
A The Lehman Brothers Short U.S. Government Index achieved a total return of
3.68 percent, for the six-months ended February 29, 1996. This is a broad-
based index which attempts to measure the performance of all U.S. Government
agency and Treasury securities with maturities of one to five years. This in-
dex, which is unmanaged, does not reflect any commissions or fees that would be
paid by an investor purchasing the securities it represents.
Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A We believe there will be moderate economic growth and inflation will re-
main under control for the remainder of 1996. This environment should
prove constructive for bonds--with long-term bonds continuing to yield between
6 and 7 percent, and short-term instruments, as measured by the 2-year Treasury
note, yielding between 4.5 and 6 percent. Overall, we will manage the Fund
within the duration constraints previously described, while seeking securities
we believe represent value.
/s/ Robert C. Peck, Jr. /s/ John R. Reynoldson
Robert C. Peck, Jr. John R. Reynoldson
Executive Vice President Portfolio Manager
Fixed Income Investments
Please see footnotes on page three.
5
<PAGE>
PORTFOLIO OF INVESTMENTS
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT
OBLIGATIONS 84.6%
$8,721 Federal National Mortgage Association,
Pools................................... 8.00% various $ 9,001,646
5,500 United States Treasury Notes............ 5.50 12/31/00 5,445,000
-----------
TOTAL UNITED STATES GOVERNMENT
OBLIGATIONS
(Cost $14,070,699)...................... 14,446,646
-----------
REPURCHASE AGREEMENT 15.2%
2,600 SBC Capital Markets, Inc., dated
02/29/96 (collateralized by U.S.
Government obligations in a pooled cash
account) repurchase proceeds $2,600,394
(Cost $2,600,000)....................... 5.45 03/01/96 2,600,000
-----------
TOTAL INVESTMENTS (Cost $16,670,699) 99.8%...................... 17,046,646
OTHER ASSETS AND LIABILITIES, NET 0.2%.......................... 34,430
-----------
NET ASSETS 100%................................................. $17,081,076
-----------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $16,670,699)................... $17,046,646
Interest receivable............................................... 104,335
Other assets...................................................... 16,973
-----------
Total Assets..................................................... 17,167,954
-----------
LIABILITIES
Payable for fund shares redeemed.................................. 26,477
Due to Distributor................................................ 9,011
Due to Adviser.................................................... 6,462
Deferred Trustees' compensation................................... 6,312
Due to shareholder service agent.................................. 1,971
Due to Trustees................................................... 1,680
Accrued expenses.................................................. 34,965
-----------
Total Liabilities................................................ 86,878
-----------
Net Assets, equivalent to $14.33 per share........................ $17,081,076
-----------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, par value $.01 per share; unlimited
number of shares authorized; 1,191,820 shares outstanding........ $ 11,918
Capital surplus................................................... 18,227,496
Accumulated net realized loss on investments...................... (1,789,593)
Net unrealized appreciation of investments........................ 375,947
Undistributed net investment income............................... 255,308
-----------
NET ASSETS........................................................ $17,081,076
-----------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest............................................................. $578,695
--------
EXPENSES
Management fees...................................................... 42,939
Shareholder service agent's fees and expenses........................ 8,799
Accounting services.................................................. 20,614
Service fees......................................................... 21,469
Trustees' fees and expenses.......................................... 6,405
Audit fees........................................................... 13,353
Custodian fees....................................................... 1,344
Legal fees........................................................... 1,556
Reports to shareholders.............................................. 7,200
Registration and filing fees......................................... 1,360
Organization expenses................................................ 119
Miscellaneous........................................................ 698
Management fee waiver (see Note 3)................................... (4,294)
--------
Total expenses...................................................... 121,562
--------
NET INVESTMENT INCOME................................................ 457,133
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized gain on investments..................................... 19,576
Net unrealized depreciation of investments during the period......... (86,032)
--------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES....................... (66,456)
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $390,677
--------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
February 29, August 31,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period.................... $17,109,406 $17,990,012
----------- -----------
OPERATIONS
Net investment income............................. 457,133 804,785
Net realized gain (loss) on securities............ 19,576 (256,496)
Net unrealized appreciation (depreciation) of
securities during the period...................... (86,032) 375,726
----------- -----------
Increase in net assets resulting from operations.. 390,677 924,015
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM (see Note 2F)
Net investment income............................. (887,813) (695,962)
----------- -----------
CAPITAL TRANSACTIONS
Proceeds from shares issued for distributions
reinvested........................................ 873,599 686,289
Cost of shares redeemed........................... (404,793) (1,794,948)
----------- -----------
Increase (decrease) in net assets from capital
transactions...................................... 468,806 (1,108,659)
----------- -----------
DECREASE IN NET ASSETS............................. (28,330) (880,606)
----------- -----------
NET ASSETS, end of period (including undistributed
net investment income of $255,308 and $685,988,
respectively)...................................... $17,081,076 $17,109,406
----------- -----------
CHANGE IN SHARES OUTSTANDING
Shares issued for distributions reinvested........ 64,542 54,554
Reverse share splits (see Note 4)................. (65,536) (55,292)
Shares redeemed................................... (28,450) (133,106)
----------- -----------
Decrease in shares outstanding.................... (29,444) (133,844)
----------- -----------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months September 11,
Ended Year Ended August 31 1990(/2/) to
February 29, ------------------------------------ August 31,
1996 1995 1994 1993(/1/) 1992(/1/) 1991(/1/)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE(/3/)
Net asset value,
beginning of period..... $14.78 $14.59 $15.75 $17.89 $17.06 $15.48
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Investment income...... .50 .93 1.06 1.15 1.11 1.21
Expenses............... (.11) (.23) (.26) (.25) (.30) (.31)
------ ------ ------ ------ ------ ------
Net investment income... .39 .70 .80 .90 .81 .90
Net realized and
unrealized gain (loss)
on securities.......... (.10) .045 (1.03) .155 1.80 .84
------ ------ ------ ------ ------ ------
Total from investment
operations.............. .29 .745 (.23) 1.055 2.61 1.74
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM
(see Note 2F)
Net investment income.. (.74) (.555) (.70) (1.065) (.96) (.16)
Net realized gain on
securities............ -- -- -- (2.13) (.82) --
Excess of book-basis
net realized gain..... -- -- (.23) -- -- --
------ ------ ------ ------ ------ ------
Total distributions..... (.74) (.555) (.93) (3.195) (1.78) (.16)
------ ------ ------ ------ ------ ------
Net asset value, end of
period.................. $14.33 $14.78 $14.59 $15.75 $17.89 $17.06
------ ------ ------ ------ ------ ------
TOTAL RETURN(/4/)....... 2.36% 5.40% (1.64%) 6.87% 16.48% 11.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (millions)....... $17.1 $17.1 $18.0 $23.0 $15.0 $15.0
Average net assets
(millions).............. $17.2 $17.4 $19.9 $17.6 $14.6 $12.6
Ratios to average net
assets (annualized)(/5/)
Expenses............... 1.42% 1.56% 1.58% 1.62% 1.72% 1.95%
Expenses, without
waiver................. 1.47% 1.61% 1.63% 1.63% -- --
Net investment income.. 5.32% 4.63% 4.91% 5.62% 4.82% 5.37%
Net investment income,
without waiver......... 5.27% 4.58% 4.86% 5.60% -- --
Portfolio turnover rate. 8% 51% 82% 283% 321% 418%
</TABLE>
(1) Based on average month-end shares outstanding.
(2) Commencement of operations. Beginning net asset value, without adjustments
for reverse share splits, was $9.70.
(3) Computations with regard to per share information have been adjusted to
reflect reverse share splits (see Note 4).
(4) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales charges.
(5) See Note 3.
See Notes to Financial Statements
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION
Van Kampen American Capital Government Target Fund (the "Fund," ) is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-
end management investment company. The Fund seeks to provide the highest rate
of return consistent with safety and liquidity.
The Fund plans to liquidate on December 16, 1997 and distribute the proceeds
pro rata to shareholders.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Fund in the preparation of its financial statements. The prepara-
tion of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that effect
the amounts reported. Actual amounts may differ from the estimates.
A. INVESTMENT VALUATIONS-All debt securities are valued at the last reported
bid price. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Fund.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations until the remaining days to maturity become less than 61
days. From such time, until maturity, the investments are valued at amortized
cost.
B. FORWARD COMMITMENTS-Transactions in forward commitments are utilized in
strategies to manage the market risk of the Fund's investments. The purchase of
a forward commitment increases the impact on net asset value of changes in the
market price of investments. Forward commitments have a risk of loss due to
nonperformance of counterparties. There is also a risk that the market movement
of such instruments may not be in the direction forecasted.
The Fund trades certain securities under the terms of forward commitments,
whereby the settlement for payment and delivery occurs at a specified future
date. Forward commitments are privately negotiated transactions between the
Fund and dealers. Upon executing a forward commitment and during the period of
obligation, the Fund maintains collateral of cash or securities in a segregated
account with its custodian in an amount sufficient to relieve the obligation.
If the intent of the Fund is to accept delivery of a security traded under a
forward purchase commitment, the commitment is recorded as a long-term pur-
chase. For forward
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
purchase commitments for which security settlement is not intended by the Fund
and all forward sale commitments, changes in the value of the commitment are
recognized by marking the commitment to market on a daily basis. During the
commitment, the Fund may either resell or repurchase the forward commitment
and enter into a new forward commitment, the effect of which is to extend the
settlement date. In addition, the Fund may occasionally close such forward
commitments prior to delivery. Gains and losses are realized upon the ultimate
closing or cash settlement of forward commitments.
C. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment 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 in-
vest independently in repurchase agreements, or transfer uninvested cash bal-
ances into a pooled cash account along with other investment companies advised
by Van Kampen American Capital Asset Management, Inc. (the "Adviser"), the
daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund makes
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.
D. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized capital gains to its shareholders. It is anticipated that no distri-
butions of capital gains will be made until tax basis capital loss
carryforwards expire or are offset by net realized gains.
At August 31, 1995, the Fund carried forward approximately $1.5 million in
capital losses for federal income tax purposes, which may be utilized to off-
set current or future capital gains until the liquidation of the Fund. Addi-
tionally, approximately $356,000 in post October losses are being deferred for
tax purposes to the 1996 fiscal year.
E. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on in-
vestments are determined on the basis of identified cost. Interest income is
accrued daily.
F. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
minimum distribution requirements of the Internal Revenue Code which may dif-
fer from generally accepted accounting principles. Such dividends or distribu-
tions may exceed financial statement earnings.
G. DEBT DISCOUNT AND PREMIUM-The Fund accounts for discounts and premiums on
the same basis as is used for federal income tax reporting. Accordingly, orig-
inal issue discounts on debt securities purchased are amortized over the life
of the security. Premiums on debt securities are not amortized. Market dis-
counts are recognized at the time of sale as realized gains for book purposes
and ordinary income for tax purposes.
H. ORGANIZATION COSTS-Organization expenses were deferred and amortized over a
five year period that ended October, 1995.
NOTE 3--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are paid
monthly, based on the average daily net assets of the Fund at an annual rate
of .50%. The Adviser has voluntarily agreed to waive all management fees in
excess of .45% of the Fund's average daily net assets.
Accounting services include the salaries and overhead expenses of the Fund's
Chief Accounting Officer and the personnel operating under his direction.
Charges are allocated among investment companies advised by the Adviser. For
the period these charges included $2,419 as the Fund's share of the employee
costs attributable to the Fund's accounting officers. A portion of accounting
services expense was paid to the Adviser in reimbursement of personnel, facil-
ities and equipment costs attributable to the provision of accounting services
to the Fund. The services provided by the Adviser are at cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. For the period, such fees aggregated $6,886.
Under a Distribution Plan, up to .25% per annum of the average net assets of
the Fund is paid to Van Kampen American Capital Distributors, Inc. (the "Dis-
tributor") for expenses and service fees incurred.
Legal fees during the period were for services rendered by former counsel of
the Fund, O'Melveny & Myers. A former trustee was of counsel to that firm.
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor, and the shareholder service agent.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 4--REVERSE SHARE SPLITS
The Fund, at the discretion of the Board of Trustees, intends to declare a re-
verse share split immediately after the payment of each annual dividend and
any other distribution. The purpose is to maintain in the account of each
shareholder who reinvests dividends and distributions the same number of
shares as immediately preceding the dividend or distribution. The effect of
this reverse share split is intended to exactly offset the shares issued for
reinvestment. Although the dividends and distributions are taxable to share-
holders, a reverse share split will not give rise to a gain or loss for fed-
eral income tax purposes. On December 15, 1995, the shares of the Fund were
split .9481 of a share for each 1 share outstanding.
NOTE 5--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments and forward commitments, were
$5,529,649 and $931,639, respectively.
The cost of investments owned at the end of the period was the same for fed-
eral income tax and financial reporting purposes. Gross unrealized apprecia-
tion of investments aggregated $460,595 and gross unrealized depreciation of
investments aggregated $84,648.
NOTE 6--TRUSTEE COMPENSATION
Trustees who are not affiliated with the Adviser are compensated by the Fund
at the annual rate of $625 plus a fee of $18 per day for Board and Committee
meetings attended. During the period, such fees aggregated $6,122.
The Fund has in effect a deferred compensation plan for its trustees not af-
filiated with the Adviser. The plan is not funded and its obligation under the
plan will be paid solely out of the Fund's general accounts. The Fund will not
reserve or set aside funds for the payment of its obligation under the plan by
any form of trust or escrow. Under the plan, trustees may elect to defer all
or a portion of their compensation to a later date. Each trustee covered under
the plan elects to earn on the deferred balances an amount equal to the total
return of the Fund or equal to the income earned by the Fund on its short-term
investments.
14
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
15
<PAGE>
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
ROGER HILSMAN
R. CRAIG KENNEDY
DENNIS J. MCDONNELL
DONALD C. MILLER
JACK E. NELSON
DON G. POWELL
JEROME L. ROBINSON
FERNANDO SISTO*
WAYNE W. WHALEN
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President and Chief Executive Officer
DENNIS J. MCDONNELL
Executive Vice 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
WILLIAM N. BROWN
PETER W. HEGEL
ROBERT C. PECK, JR.
ALAN T. SACHLIEBEN
PAUL R. WOLKENBERG
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
One Parkview Plaza Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256 Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive Chicago, Illinois 60606
(C) Van Kampen American Capital Distributors, Inc., 1996
All rights reserved.
SM denotes a service mark of
Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors un-
less 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 charge, and other pertinent data.
16
