<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............... 13
</TABLE>
GTI SAR 5/95
<PAGE>
LETTER TO SHAREHOLDERS
DON G. POWELL
May 5, 1995
Dear Shareholder:
During the six-month period covered by this report, October 1, 1994 through
March 31, 1995, we saw the close of a challenging and difficult year in the fi-
nancial markets--and the beginning of a new year, with renewed optimism and
strength on many fronts.
MARKET OVERVIEW
In an effort to moderate economic growth and keep inflation under control,
the Federal Reserve Board (the "Fed") raised the federal funds rate (the rate
banks charge each other for overnight loans) seven times since February 1994.
As a result, the fed funds rate doubled from 3 percent to 6 percent, its high-
est level in three years. Intermediate- and long-term interest rates quickly
followed the Fed's lead and moved significantly higher as well. The yield on
30-year Treasury securities, for example, began 1994 at 6.35 percent and in-
creased to a high of 8.16 percent, before retreating to 7.89 percent at the end
of the year. However, since yields and prices move in opposite directions, this
had a negative impact on prices of fixed-income securities, including municipal
bonds.
Stock market investors did not fare much better during this rising interest
rate environment, despite the robust economy and stronger corporate earnings.
Concerned that higher interest rates and the prospect for continued rate hikes
might altogether extinguish the economic expansion, the equity market sputtered
for most of 1994. The S&P 500 Index, for example, produced a 1.36 percent total
return for 1994, while the average share price change for the year for all
stocks listed on the New York Stock Exchange was down 9.22 percent.
In contrast, 1995 began more positively as the bond market got a boost from
growing sentiment that the Fed had stabilized economic growth while keeping in-
flation under control, and that it may be near the end of its tightening cycle.
Subsequently, the yield on 30-year Treasury securities fell to 7.43 percent at
the end of March--down nearly three quarters of a percentage point--from its
November 1994 high of 8.16 percent. The stock market responded in late February
with the Dow Jones Industrial Average breaking through the 4000 mark, setting a
new record high and raising expectations for a stronger market in 1995. At the
same time, almost all other major stock indexes rose, including the S&P 500 In-
dex, the New York Stock Exchange Composite Index, and the Nasdaq Composite In-
dex. The first quarter ended with the Dow Jones Industrial Average up 8.4
percent year-to-date, and the S&P 500 and Nasdaq Composite Indexes gaining 9
percent and 8.7 percent, respectively.
Additionally, at the end of March, the Van Kampen American Capital Index of
Investor Intentions reached 431 among self-described "knowledgeable" investors,
an increase of 5 percent over the previous month of 411. The index, computed
from an independently conducted survey and published by Van Kampen American
Capital, measures the investment climate (investors' confidence) by asking
1,000 investors about what they intend to do with
(Continued on page two)
1
<PAGE>
their money over the next 60-90 days. Among "knowledgeable" investors, a total
of 56.6 percent said the next 60-90 days would be a "good" time to invest.
"Knowledgeable" investors are those respondents who rate their investment
knowledge at five or higher on a seven-point scale, and who own stocks, bonds,
or mutual funds.
On the following pages, you can read about your Fund's performance during the
past six months, as well as portfolio management's outlook for 1995. We hope
that you will find the information contained in the question-and-answer section
helpful.
CORPORATE NEWS
As you may have already noticed, we have adopted a new design for our share-
holder reports that reflects our new identity as Van Kampen American Capital.
Going forward, we will continue to look for new ways to improve upon the pre-
sentation of information in your Fund's report.
In addition, we have developed a new corporate ad campaign introducing Van
Kampen American Capital. Full page ads appeared in The Wall Street Journal in
the first quarter of 1995--watch for more advertising throughout the year.
We look forward to communicating with you on a regular basis, providing in-
formation about your Fund's performance, new investment opportunities, and our
newly created company. We appreciate your continued confidence in your Fund and
Van Kampen American Capital.
Sincerely,
LOGO
Don G. Powell
President
Van Kampen American Capital
Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED MARCH 31, 1995
AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return based on NAV1............... 4.62% 4.21% 4.21%
Six-month total return2............................ (0.38%) 0.21% 3.21%
One-year total return2............................. (1.06%) (0.78%) 2.10%
Life-of-Fund average annual total return2.......... 1.48% 1.62% 0.81%
Commencement Date.................................. 11/02/92 11/02/92 04/12/93
DISTRIBUTION RATE AND YIELD
Distribution Rate3................................. 7.48% 7.13% 7.13%
SEC Yield4......................................... 5.46% 4.93% 4.93%
</TABLE>
1Assumes reinvestment of all distributions for the period ended March 31, 1995,
and does not include payment of the maximum sales charge (4.75% for A shares)
or contingent deferred sales charge (4% for B shares and 1% for C shares).
2Standardized total return for the period ended March 31, 1995.
3Distribution rate (based on maximum sales charge) represents the monthly
annualized distributions of the Fund at the end of March 1995, and not the
earnings of the Fund.
4SEC 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 March 31, 1995.
See the Fund Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Investor's shares, when redeemed, may be
worth more or less than their original cost.
3
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
The following are excerpts from a recent interview with the management team of
American Capital U.S. Government Trust for Income. The team is led by Ted
Mundy, portfolio manager, and Robert C. Peck, Jr., executive vice president
for fixed-income investments.
Q. WHAT WERE THE KEY EVENTS OR MARKET CONDITIONS WHICH SIGNIFICANTLY
AFFECTED THE FUND DURING THE SIX-MONTH PERIOD ENDED MARCH 31, 1995?
A. Throughout the fourth quarter of 1994 and the first quarter of 1995, the
Federal Reserve Board (the "Fed") continued to show increasing restraint
in terms of monetary policy, raising the target federal funds rate by a full
percentage point over the period. At the same time, market participants began
to reassess their positions relative to their expectations for the future path
of economic growth and interest rates.
The yield on 10-year Treasuries peaked at 8.03 percent in early November and
ended the period at 7.20 percent, some quarter of a percentage point lower
than at the start of the period, while the yield on two-year Treasury notes
reached a high of 7.73 percent in late December and ended at 6.78 percent, or
about one-fifth of a percentage point higher than at the start of the period.
This trend, where the difference between shorter-term and longer-term rates
begins to narrow (known as a "flattening yield curve"), is a result of the
Fed's efforts to rein in economic growth with its continued tightening of mon-
etary policy. What is unusual about our current environment is that we have
not yet seen an appreciable increase in the rate of inflation.
The bond market, responding to perceptions of slower economic growth and re-
strained inflation, rallied decisively during the first quarter of 1995. Of
the two major types of securities held by the Fund, mortgage-backed securities
outperformed Treasury securities by more than three-quarters of a percentage
point (based on the Merrill Lynch Mortgage Master Index and Government Master
Index).
Q. HOW DID THE INVESTMENT TEAM RESPOND TO THESE MARKET CONDITIONS?
A. We started the period with a somewhat defensive posture, as we were an-
ticipating the rate changes initiated by the Fed. For most of the fourth
quarter of 1994, we maintained a "barbelled" portfolio structure (emphasizing
securities with relatively short and relatively long maturities, with few of
intermediate maturity) to take advantage of the flattening yield curve.
Late in the fourth quarter and early in 1995 we began to re-position the
portfolio in expectation of a steeper yield curve (a wider spread between the
yields on short-term and long-term securities), altering the mix of securities
held by the Fund.
The Fund's duration (a measure of a bond's sensitivity to interest rate
changes) ended the period at 4.53 years, down from 4.67 years as of September
30, 1994 (the lower a fund's duration, the less its net asset value should be
affected by a change in interest rates).
4
<PAGE>
Q. HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED MARCH 31, 1995?
A. The Fund was able to provide shareholders with a very competitive level
of current income throughout the period. As of March 31, 1995, the dis-
tribution rate stood at 7.48 percent/3/ (Class A Shares).
The Fund's six-month total return, based on net asset value, was 4.62 per-
cent/1/ (Class A Shares). Its one-year total return through March 31, 1995 was
3.91 percent/1/ (see the chart on page three for additional measures of the
Fund's performance).
Q. WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A. On a long-term, fundamental basis, we believe the economy is in the
later stages of the expansion phase of the business cycle. Typically,
this is followed by an easing of monetary policy and lower interest rates--and
we expect that will be the case at some point during the next year. Still, we
remain ready to adopt a more defensive posture should the market prove unable
to rally further.
Over the near term, we believe the market has rallied a long way and may be
at risk of giving up some ground if summertime activity buoys economic growth.
In particular, we see the possibility that short-term interest rates might
move upward once again if the Fed reacts with another rate increase.
At year-end, we expect to be in a lower interest rate environment, and we
will continue to position the Fund to take advantage of the current market
scenario.
LOGO
LOGO
Robert C. Peck, Jr. Ted Mundy
Executive Vice PresidentPortfolio Manager
Fixed Income Investments
Please see footnotes on page three.
5
<PAGE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS
March 31, 1995 (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES TREASURY
OBLIGATIONS 70.0%
$25,000 United States Treasury
Notes....................... 5.875% 02/15/04 $ 22,777,250
31,000 United States Treasury
Notes....................... 8.500% 08/15/95 31,261,640
18,000 United States Treasury
Notes....................... 8.875% 02/15/99 19,102,500
*95,500 United States Treasury
Notes....................... 11.250% 05/15/95 96,037,665
*45,000 United States Treasury
Notes....................... 11.500% 11/15/95 46,406,250
----------------
Total United States Treasury
Obligations
(Cost $219,096,797)......... 215,585,305
----------------
UNITED STATES AGENCY AND
GOVERNMENT OBLIGATIONS 14.6%
*45,270 Government National Mortgage
Association, Pools
(Cost $44,364,572)......... 8.000% 10/19 to 12/24 44,831,305
----------------
COLLATERALIZED MORTGAGE
OBLIGATIONS 9.3%
5,051 Capstead Security Corp.,
Series 93-2C................ 9.757% 08/25/23 5,157,866
Prudential Home Mortgage
Securities
5,327 Series 93-23 A7............. 10.000% 06/25/08 5,569,568
7,939 Series 93-30 A7............. 10.000% 08/25/23 8,397,796
10,000 Salomon Brothers Mortgage
Securities, Series 93-5 A3.. 7.374% 10/25/23 9,509,400
----------------
Total Collateralized
Mortgage Obligations
(Cost $30,540,251).......... 28,634,630
----------------
REPURCHASE AGREEMENT 3.1%
9,735 Salomon Brothers, Inc.,
dated 3/31/95
(Collateralized by U.S.
Government obligations in a
pooled cash account)
repurchase proceeds
$9,740,086 (Cost
$9,735,000)................ 6.270% 04/03/95 9,735,000
----------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
TOTAL
INVESTMENTS
(Cost
$303,736,620)
97.0%.......... 298,786,240
Other assets
and
liabilities,
net 3.0%....... 9,082,423
----------------
NET
ASSETS 100%.... $ 307,868,663
----------------
</TABLE>
*Securities with a market value of approximately $154.2 million were placed as
collateral for a forward commitments (Note 1B).
6
<PAGE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $303,736,620)............. $ 298,786,240
Receivable for investments sold.............................. 78,892,418
Interest receivable.......................................... 7,171,752
Unrealized appreciation of forward commitments............... 3,065,238
Receivable for Fund shares sold.............................. 163,334
Other assets................................................. 9,222
----------------
Total Assets................................................ 388,088,204
----------------
LIABILITIES
Payable for investments purchased............................ 76,951,114
Payable for Fund shares redeemed............................. 1,351,978
Dividends payable............................................ 1,233,955
Due to Distributor........................................... 330,175
Due to Adviser............................................... 155,127
Due to shareholder service agent............................. 46,153
Deferred trustee compensation................................ 7,109
Accrued expenses............................................. 143,930
----------------
Total Liabilities........................................... 80,219,541
----------------
NET ASSETS, equivalent to $8.21 per share for Class A, Class
B and Class C shares........................................ $ 307,868,663
----------------
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 8,722,927 Class A,
25,031,076 Class B and 3,761,772 Class C shares outstanding. $ 375,158
Capital surplus.............................................. 358,248,955
Accumulated net realized loss on securities.................. (49,425,657)
Net unrealized appreciation (depreciation) of securities
Investments................................................. (4,950,380)
Forward commitments......................................... 3,065,238
Undistributed net investment income.......................... 555,349
----------------
NET ASSETS at March 31, 1995................................. $ 307,868,663
----------------
</TABLE>
7
<PAGE>
See Notes to Financial Statements
STATEMENT OF OPERATIONS
Six Months Ended March 31, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest..................................................... $ 14,321,327
----------------
EXPENSES
Management fees.............................................. 951,722
Service fees--Class A........................................ 87,738
Distribution and service fees--Class B....................... 1,059,602
Distribution and service fees--Class C....................... 165,803
Shareholder service agent's fees and expenses................ 241,143
Registration and filing fees................................. 78,929
Accounting services.......................................... 43,960
Audit fees................................................... 22,600
Reports to shareholders...................................... 15,600
Trustees' fees and expenses.................................. 8,999
Legal fees................................................... 3,093
Custodian fees............................................... 2,790
Organization expenses........................................ 1,500
Miscellaneous................................................ 7,863
----------------
Total expenses.............................................. 2,691,342
----------------
NET INVESTMENT INCOME........................................ 11,629,985
----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized loss on securities
Investments................................................. (9,405,703)
Forward commitments......................................... (10,505,156)
Futures contracts........................................... (20,146)
Net unrealized appreciation of securities during the period
Investments................................................. 15,541,051
Forward commitments......................................... 5,622,540
----------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES............... 1,232,586
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 12,862,571
----------------
</TABLE>
8
<PAGE>
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1995 September 30, 1994
--------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period.......... $339,482,495 $373,038,429
------------ ------------
Operations
Net investment income................... 11,629,985 27,950,419
Net realized loss on securities......... (19,931,005) (27,238,375)
Net unrealized appreciation (deprecia-
tion) of securities during the period.. 21,163,591 (18,866,958)
------------ ------------
Increase (decrease) in net assets re-
sulting from operations................ 12,862,571 (18,154,914)
------------ ------------
Distributions to shareholders from
Net investment income
Class A................................. (2,875,981) (6,697,256)
Class B................................. (7,613,223) (17,450,058)
Class C................................. (1,192,190) (3,082,877)
------------ ------------
(11,681,394) (27,230,191)
------------ ------------
Excess of book-basis net realized gain
on securities (Note 1F)
Class A................................. (44,467) (813,341)
Class B................................. (131,320) (2,362,620)
Class C................................. (20,769) (426,336)
------------ ------------
(196,556) (3,602,297)
------------ ------------
Total distributions to shareholders..... (11,877,950) (30,832,488)
------------ ------------
Capital transactions
Proceeds from shares sold
Class A................................. 4,867,776 27,679,417
Class B................................. 5,697,778 82,370,435
Class C................................. 2,740,284 27,429,633
------------ ------------
13,305,838 137,479,485
------------ ------------
Proceeds from shares issued for distri-
butions reinvested
Class A................................. 1,176,752 3,247,416
Class B................................. 3,136,414 8,823,558
Class C................................. 623,975 2,028,264
------------ ------------
4,937,141 14,099,238
------------ ------------
Cost of shares redeemed
Class A................................. (10,006,234) (37,008,105)
Class B................................. (30,775,873) (75,285,723)
Class C................................. (10,059,325) (23,853,427)
------------ ------------
(50,841,432) (136,147,255)
------------ ------------
Increase (decrease) in net assets
resulting from capital transactions.... (32,598,453) 15,431,468
------------ ------------
DECREASE IN NET ASSETS................... (31,613,832) (33,555,934)
------------ ------------
NET ASSETS, end of period................ $307,868,663 $339,482,495
------------ ------------
</TABLE>
9
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
----------------------------------------------
October 6, 1992(1)
Six Months Year Ended through
Ended September 30, September 30,
March 31, 1994 1993(4)
1995
------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFOR-
MANCE
Net asset value, beginning of
period....................... $8.17 $9.26 $9.43
------ ------- ------
Income from investment opera-
tions
Investment income............ .37 .76 .91
Expenses..................... (.05) (.09) (.11)
Expense reimbursement(5)..... -- -- .01
------ ------- ------
Net investment income......... .32 .67 .81
Net realized and unrealized
gains or losses on
securities................... .0475 (1.0085) (.1795)
------ ------- ------
Total from investment opera-
tions........................ .3675 (.3385) .6305
------ ------- ------
Less distributions from
Net investment income........ (.3225) (.674) (.8005)
Excess of book-basis net re-
alized gains on securities.. (.005) (.0775) --
------ ------- ------
Total distributions........... (.3275) (.7515) (.8005)
------ ------- ------
Net asset value, end of peri-
od........................... $8.21 $8.17 $9.26
------ ------- ------
TOTAL RETURN (3).............. 4.62% (3.82%) 8.07%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the period
(millions)................... $71.6 $75.3 $92.4
Average net assets (millions). $72.2 $86.5 $50.9
Ratios to average net assets
(annualized) (5)
Expenses..................... 1.11% 1.07% 1.07%
Expenses, without expense re-
imbursement................. 1.11% 1.07% 1.15%
Net investment income........ 7.93% 7.89% 8.71%
Net investment income, with-
out expense reimbursement... 7.93% 7.89% 8.64%
Portfolio turnover rate....... 107% 122% 281%
</TABLE>
(1) Commencement of operations.
(2) Total return from November 2, 1992 (date the Fund's investment strategy was
implemented) through September 30, 1993.
(3) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
(4) Based on average month-end shares outstanding.
(5) See Note 2.
10
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-----------------------------------------------
Six Months October 6, 1992(1)
Ended Year Ended through
March 31, September 30, September 30,
1995 1994 1993(4)
-----------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period.......................... $8.17 $9.26 $9.43
------ ------- ------
Income from investment operations
Investment income............... .37 .76 .86
Expenses........................ (.08) (.15) (.17)
Expense reimbursement(5)........ -- -- .01
------ ------- ------
Net investment income............ .29 .61 .70
Net realized and unrealized
gains or losses on
securities...................... .0455 (1.0205) (.1475)
------ ------- ------
Total from investment operations. .3355 (.4105) .5525
------ ------- ------
Less distributions from
Net investment income........... (.2905) (.602) (.7225)
Excess of book-basis net re-
alized gains on securities..... (.005) (.0775) --
------ ------- ------
Total distributions.............. (.2955) (.6795) (.7225)
------ ------- ------
Net asset value, end of period... $ 8.21 $8.17 $9.26
------ ------- ------
TOTAL RETURN (3)................. 4.21% (4.61%) 7.24%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the period
(millions)...................... $205.4 $226.7 $242.8
Average net assets (millions).... $211.9 $252.4 $108.6
Ratios to average net assets
(annualized)(5)
Expenses........................ 1.87% 1.82% 1.81%
Expenses, without expense re-
imbursement.................... 1.87% 1.82% 1.89%
Net investment income........... 7.18% 7.11% 7.70%
Net investment income, with-
out expense reimbursement...... 7.18% 7.11% 7.62%
Portfolio turnover rate.......... 107% 122% 281%
</TABLE>
(1) Commencement of operations.
(2) Total return from November 2, 1992 (date the Fund's investment strategy was
implemented) through September 30, 1993.
(3) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
(4) Based on average month-end shares outstanding.
(5) See Note 2.
11
<PAGE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
----------------------------------------------
Six Months April 12, 1993(1)
Ended Year Ended through
March 31, September 30, September 30,
1995 1994 1993(3)
----------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.. $8.17 $9.25 $9.41
------ ------- ------
Income from investment operations
Investment income.................... .37 .79 .41
Expenses............................. (.08) (.16) (.083)
Expense reimbursement(4)............. -- -- .003
------ ------- ------
Net investment income................. .29 .63 .33
Net realized and unrealized gains
or losses on securities.............. .0455 (1.0305) (.1561)
------ ------- ------
Total from investment operations...... .3355 (.4005) .1739
------ ------- ------
Less distributions from
Net investment income................ (.2905) (.602) (.3339)
Excess of book-basis net realized
gains on securities................. (.005) (.0775) --
------ ------- ------
Total distributions................... (.2955) (.6795) (.3339)
------ ------- ------
Net asset value, end of period........ $8.21 $8.17 $9.25
------ ------- ------
TOTAL RETURN (2)...................... 4.21% (4.51%) 2.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions).. $30.9 $37.5 $37.8
Average net assets (millions)......... $33.2 $44.8 $19.2
Ratios to average net assets
(annualized)(4)
Expenses............................. 1.88% 1.82% 1.76%
Expenses, without expense reim-
bursement........................... 1.88% 1.82% 1.83%
Net investment income................ 7.19% 7.08% 7.26%
Net investment income, without
expense reimbursement............... 7.19% 7.08% 7.18%
Portfolio turnover rate............... 107% 122% 281%
</TABLE>
(1) Commencement of operations.
(2) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
(3) Based on average month-end shares outstanding.
(4) See Note 2.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1995 (Unaudited)
-------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital U.S. Government Trust for Income (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a diversified open-
end management investment company. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements.
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 becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
costs.
B. FUTURE CONTRACTS AND FORWARD COMMITMENTS-Transactions in futures contracts
and forward commitments are utilized in strategies to manage the market risk
of the Fund's investments. The purchase of a futures contract or forward com-
mitment 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 in-
struments may not be in the direction forecasted. Note 3--Investment activity
contains additional information.
Futures Contracts--Upon entering into futures contracts, the Fund maintains,
in a segregated account with its custodian, securities with a value equal to
its obligation under the futures contracts. A portion of these funds is held
as collateral in an account in the name of the broker, the Fund's agent in ac-
quiring the futures position. During the period the futures contract is open,
changes in the value of the contract ("variation margin") are recognized by
marking the contract to market on a daily basis. As unrealized gains or losses
are incurred, variation margin payments are received from or made to the bro-
ker. Upon the closing or cash settlement of a contract, gains or losses are
realized. The cost of securities acquired through delivery under a contract is
adjusted by the unrealized gain or loss on the contract.
Forward Commitments--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 transac-
tions between the Fund and dealers. Upon executing a forward commitment and
during the period of obligation, the Fund maintains collateral of cash or se-
curities 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
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1995 (Unaudited)
-------------------------------------------------------------------------------
security traded under a forward purchase commitment, the commitment is re-
corded as a long-term purchase. For forward purchase commitments and for for-
ward sale commitments which security settlement is not intended by the Fund,
changes in the value of the commitment are recognized by marking the commit-
ment 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 com-
mitment, 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
or subadvised by Van Kampen American Capital Asset Management, Inc. (the "Ad-
viser"), the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are collateralized by the underlying debt security. The
Fund will make payment for such securities only upon physical delivery or evi-
dence 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 on investments to its shareholders. It is anticipated
that no distributions of capital gains will be made until tax basis capital
loss carryforwards, if any, expire or are offset by net realized capital
gains. Approximately $29 million of financial statement losses are deferred
for tax purposes to the 1995 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 minimum distribution requirements of the Internal Revenue Code
which may differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1995 (Unaudited)
-------------------------------------------------------------------------------
G. DEBT DISCOUNT AND PREMIUM-For financial reporting purposes, discounts or
premiums are accounted for on the same basis as is used for federal income tax
reporting. Accordingly, original issue discounts on debt securities purchased
are amortized over the life of a security. Premiums on debt securities are not
amortized. Market discounts are recognized at the time of sale as realized
gains for book purposes and ordinary income for tax purposes.
H. ORGANIZATION COSTS-Organization expenses of approximately $15,000 were de-
ferred and are being amortized over a five year period ending September, 1997.
NOTE 2--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 .60%. From time to time, the Adviser may voluntarily elect to reimburse a
portion of the Fund's expenses. Such reimbursement may be discontinued at any
time without prior notice.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allo-
cated among investment companies advised or sub-advised by the Adviser. For
the period ended March 31, 1995, these charges included $5,157 as the Fund's
share of the employee costs attributable to the Fund's accounting officers. A
portion of the accounting services expense was paid to the Adviser in reim-
bursement of personnel, facilities and equipment costs attributable to the
provision of accounting services to the Fund. The services provided by the Ad-
viser 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 ended March 31, 1995, the fees for these services ag-
gregated $198,184.
The Fund has been advised that Van Kampen American Capital Distributors,
Inc. (the "Distributor") and Advantage Capital Corp. (the "Retail Dealer"),
both affiliates of the Adviser, received $12,937 and $8,128, respectively, as
their portion of the commissions charged on sales of Fund shares during the
period.
Under the Distribution Plans, each class of shares pays up to .25% per annum
of its average net assets to reimburse the Distributor for expenses and serv-
ice fees incurred. Class B shares and Class C shares pay an additional distri-
bution fee of up to .75% per annum of their average net assets to reimburse
the Distributor for its distribution expenses. Actual distribution expenses
incurred by the Distributor for Class B shares and Class C shares may exceed
the amounts reimbursed to the Distributor by the Fund. At March 31, 1995, the
unreimbursed expenses incurred by the Distributor under the Class B and Class
C plans aggregated approximately $10.1 million and $681,000, respectively, and
may be carried forward and reimbursed through either the collection of the
contingent deferred sales charges from share redemptions
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1995 (Unaudited)
--------------------------------------------------------------------------------
or, subject to the annual renewal of the plans, future Fund reimbursements of
distribution fees.
Legal fees were for services rendered by O'Melveny & Myers, counsel for the
Fund. Lawrence J. Sheehan, of counsel to that firm, is a trustee of the Fund.
Certain officers and trustees of the Fund are officers and trustees of the
Adviser, the Distributor, the Retail Dealer and the shareholder service agent.
NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments and forward purchase commitments, were
$310,039,492 and $398,774,274, respectively.
For federal income tax purposes, the identified cost of investments owned at
March 31, 1995 was the same for federal income tax and financial reporting pur-
poses. Gross unrealized depreciation of investments aggregated $5,835,840 and
gross unrealized appreciation aggregated $885,460.
At March 31, 1995, the Fund held the following forward purchase commitments:
<TABLE>
<CAPTION>
PAR UNREALIZED
AMOUNT MARKET VALUE AT APPRECIATION
(000) SECURITY MARCH 31, 1995 (DEPRECIATION)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
Federal National Mtg Assoc.
$20,000 7.50%, settlement 4/95 $ 19,318,800 $ 360,988
40,000 8.00%, settlement 4/95 39,550,000 1,469,375
Government National Mtg Assoc.
25,000 7.50%, settlement 4/95 24,117,250 539,125
50,000 8.50%, settlement 5/95 50,547,000 915,750
Federal Home Loan Mtg Corp.
22,000 7.00%, settlement 5/95 20,680,000 (220,000)
------------ ----------
$154,213,050 $3,065,238
============ ==========
</TABLE>
NOTE 4--TRUSTEE COMPENSATION
Trustees who are not affiliated with the Adviser are compensated by the Fund at
the annual rate of $1,200 plus a fee of $30 per day for Board and Committee
meetings attended. The Chairman receives additional fees from the Fund at the
annual rate of $450. During the period, such fees aggregated $7,346.
The trustees may participate in a voluntary Deferred Compensation Plan (the
"Plan"). The Plan is not funded, and obligations 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 obligations under the Plan by any form of
trust or escrow. Each trustee covered by the Plan elects to be credited
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1995 (Unaudited)
--------------------------------------------------------------------------------
with an earnings component on amounts deferred equal to the income earned by
the Fund on its short-term investments or equal to the total return of the
Fund.
NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(the Class A shares) or at the time of redemption on a contingent deferred ba-
sis (the Class B shares and Class C shares). All classes of shares have the
same rights, except that Class B shares and Class C shares bear the cost of
distribution fees and certain other class specific expenses. Realized and
unrealized gains or losses, investment income and expenses (other than class
specific expenses) are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Class B shares and Class C
shares automatically convert to Class A shares six years and ten years after
purchase, respectively, subject to certain conditions.
The Fund has an unlimited number of shares of $.01 par value beneficial in-
terest authorized. Transactions in shares of beneficial interest were as fol-
lows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
1995 1994
--------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A............................................. 599,147 3,145,165
Class B............................................. 702,215 9,201,638
Class C............................................. 338,103 3,059,847
---------- -----------
1,639,465 15,406,650
---------- -----------
Shares issued for distributions reinvested
Class A............................................. 145,203 373,042
Class B............................................. 387,028 1,013,538
Class C............................................. 77,025 233,058
---------- -----------
609,256 1,619,638
---------- -----------
Shares redeemed
Class A............................................. (1,236,083) (4,290,195)
Class B............................................. (3,808,275) (8,702,305)
Class C............................................. (1,245,271) (2,781,050)
---------- -----------
(6,289,629) (15,773,550)
---------- -----------
Increase (decrease) in shares outstanding............ (4,040,908) 1,252,738
---------- -----------
</TABLE>
17
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Govett Emerging Markets Fund
AC Global Equity Fund
Govett Global Government Income Fund
AC Global Government Securities
AC Global Managed Assets Fund
Govett International Equity Fund
Govett Latin America Fund
Govett Pacific Strategy Fund
EQUITY
Growth
AC Emerging Growth Fund
AC Enterprise Fund
AC Pace Fund
Govett Smaller Companies Fund
Growth & Income
VKM Balanced Fund
AC Comstock Fund
AC Equity Income Fund
AC Growth and Income Fund
VKM Growth and Income Fund
AC Harbor Fund
AC Real Estate Securities Fund
VKM Utility Fund
AC Utilities Income Fund
FIXED INCOME
VKM Adjustable Rate U.S. Government Fund
AC Corporate Bond Fund
AC Federal Mortgage Trust
AC Government Securities
VKM High Yield Fund
AC High Yield Investments
VKM Money Market Fund
VKM Prime Rate Income Trust
AC Reserve Fund
VKM Short-Term Global Income Fund
VKM Strategic Income Fund
VKM U.S. Government Fund
AC U.S. Government Trust for Income
TAX-FREE
VKM California Insured Tax Free Fund
VKM Florida Insured Tax Free Income Fund
VKM Insured Tax Free Income Fund
VKM Limited Term Municipal Income Fund
AC Municipal Bond Fund
VKM Municipal Income Fund
VKM New Jersey Tax Free Income Fund
VKM New York Tax Free Income Fund
VKM Pennsylvania Tax Free Income Fund
AC Tax-Exempt Trust
--High Yield Municipal Portfolio
--Insured Municipal Portfolio
VKM Tax Free High Income Fund
VKM Tax Free Money Fund
AC Texas Municipal Securities
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.
18
<PAGE>
AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
TRUSTEES
J. MILES BRANAGAN
RICHARD E. CARUSO
ROGER HILSMAN
DON G. POWELL
DAVID REES
LAWRENCE J. SHEEHAN
FERNANDO SISTO*
WILLIAM S. WOODSIDE
*Chairman of the Board
OFFICERS
DON G. POWELL
President
CURTIS W. MORELL
Vice President and Treasurer
DENNIS J. MCDONNELL
TED MUNDY
RONALD A. NYBERG
ROBERT C. PECK, JR.
JOHN R. REYNOLDSON
PAUL R. WOLKENBERG
Vice Presidents
TANYA M. LODEN
Vice President and Controller
NORI L. GABERT
Vice President and Secretary
J. DAVID WISE
Vice President and Assistant Secretary
PERRY F. FARRELL
M. ROBERT SULLIVAN
Assistant Treasurers
HUEY P. FALGOUT, JR.
Assistant Secretary
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd., Houston, Texas 77056
DISTRIBUTOR
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
2800 Post Oak Blvd., Houston, Texas 77056
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256, Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street, Boston, Massachusetts 02110
COUNSEL
O'MELVENY & MYERS
400 South Hope Street
Los Angeles, California 90071
(CVan)Kampen American Capital Distributors, Inc., 1995All rights reserved.
SM denotes a service mark ofVan 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.
19
<PAGE>
AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
THIS PAGE INTENTIONALLY LEFT BLANK
20
