<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Highlights........................ 4
Portfolio Management Review................. 5
Portfolio of Investments.................... 8
Statement of Assets and Liabilities......... 9
Statement of Operations..................... 10
Statement of Changes in Net Assets.......... 11
Financial Highlights........................ 12
Notes to Financial Statements............... 15
</TABLE>
GIT SAR 5/97
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
April 25, 1997
Dear Shareholder,
As mentioned in your previous report, VK/AC Holding, Inc., the parent com-
pany of Van Kampen American Capital, Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset management and investment banking. The
transaction was completed in October, and we look forward to exploring the op-
portunities it creates for investors. As part of the acquisition, Van Kampen
American Capital became the distributor of Morgan Stanley retail funds on Jan-
uary 2, 1997.
More recently, on February 5, 1997, it was announced that Morgan Stanley
Group Inc. and Dean Witter, Discover & Co. agreed to merge. A proxy was mailed
to you at the end of April that explained the transaction and asked for your
vote of approval. The combined company will be a preeminent global financial
services firm, with leading market positions in securities, asset management,
and credit services. As the financial industry continues to witness unprece-
dented consolidations and new partnerships, we believe those firms that want
to offer investors the greatest opportunities and services in the next century
must be market leaders in all facets of their business.
ECONOMIC REVIEW
During the six-month reporting period, inflation remained low and the pace
of economic growth moderated. Wholesale prices fell during the first quarter
of 1997, and the producer price index grew over the six and 12 months ended in
March by 0.3 and 1.6 percent, respectively. Excluding the volatile food and
energy sectors, however, inflation at the wholesale level began to accelerate
late in the reporting period.
Several other indicators also signaled continuing economic growth. Retail
sales and consumer confidence rose sharply, while the housing and manufactur-
ing sectors rebounded after slowing late in 1996. Unemployment remained low at
5.2 percent in March, which led to the reemergence of mild upward pressure on
wages.
Strong consumer demand and the inflationary implications of higher labor
costs led the Federal Reserve Board to raise its target for a key lending rate
by 0.25 percent in March, the first hike in short-term interest rates in two
years. This action is intended to deter potential inflation in the price of
goods and services, which is intended to slow the pace of economic growth.
MARKET REVIEW
Changing inflationary expectations and the Federal Reserve's boost in short-
term interest rates moved bond yields in a moderate up-and-down pattern over
the past six months. At the
1 Continued on page two
<PAGE>
height of investor concerns about inflation in July, the yield on the
Treasury's benchmark 30-year bond reached 7.2 percent. As the economy slowed
and inflation remained benign, long-term yields gradually fell back to 6.64
percent by year-end. The Fed's move to raise interest rates in March, along
with renewed signs of economic vitality, pushed the yield on 30-year Treasury
bonds back up to 7.09 percent by the end of the reporting period.
Reflecting mixed signals on inflation and interest rates, returns from the
fixed-income market were lackluster. The Merrill Lynch Domestic Master Bond In-
dex and the Merrill Lynch Intermediate-Term Government Index realized a 4.74
percent and 4.65 percent change, respectively, over the 12-month period ended
March 31, 1997, with intermediate-term bonds outperforming longer-term issues.
Lower-rated corporate bonds also outperformed other fixed-income investments,
as investors felt comfortable enough to stretch for yield given the overall
strength of the economy. For the year, long-term Treasury bonds gained approxi-
mately 2.5 percent on a total-return basis. Treasury-bond losses might have
been larger, but heavy foreign buying, especially among Japanese investors,
helped control losses.
OUTLOOK
We expect that renewed momentum in the U.S. economy will lead to additional
but modest interest-rate hikes by the Federal Reserve. We do not believe that
the threat of inflation is a serious concern. However, the presence of some
warning signs, including strong job growth, high consumer confidence, and a
mild upturn in employment costs, may indicate otherwise. In this environment, a
moderate rise in interest rates is likely.
In addition to the possibility of higher domestic rates, the risk of external
shocks to the fixed-income market is growing. Monetary policy has been unusu-
ally accommodative in many foreign countries. If these economies catch fire in
1997, the resulting demand for capital could divert buying power from the U.S.
credit market. Because foreign investors have become the marginal buyers of
American bonds, we believe that increased competition for the global fixed-in-
come dollar also could exert mild downward pressure on bond prices over the
year.
Additional details about your Fund, including a question and answer section
with your portfolio management team, are provided in this report. We appreciate
your continued confidence in your investment with Van Kampen American Capital.
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 MARCH 31, 1997
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return
based on NAV/1/....... 2.05% 1.80% 1.80%
Six-month total
return/2/............. (2.75%) (2.15%) 0.81%
One-year total return
based on NAV/1/....... 3.68% 3.05% 3.05%
One-year total return2.. (1.23%) (0.83%) 2.08%
Life-of-Fund average
annual total return2.... 3.45%/3/ 3.52%/3/ 2.96%
Commencement Date....... 10/06/92 10/06/92 04/12/93
DISTRIBUTION RATE AND
YIELD
Distribution Rate4...... 6.61% 6.19% 6.19%
SEC Yield5.............. 5.65% 5.13% 5.12%
</TABLE>
1Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (4.75% for A shares) or contingent
deferred sales charge for early withdrawal (4% for B shares and 1% for C
shares).
2Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).
3Total return from November 2, 1992 (date the Fund's investment strategy was
implemented) through the period end.
4Distribution rate represents the monthly annualized distributions of the Fund
at the end of the period and not the earnings of the Fund.
5SEC 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, 1997.
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.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
PORTFOLIO HIGHLIGHTS
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
COUPON DISTRIBUTION AS OF MARCH 31, 1997
[GRAPH APPEARS HERE]
Coupon Rate Percentage of Long-Term Investments
6-7 10.8%
7-8 30.7%
8-9 13.2%
9-10 20.0%
10 or More 25.3%
PORTFOLIO COMPOSITION BY SECTOR AS A PERCENTAGE OF LONG-TERM INVESTMENTS
[PIE CHARTS APPEAR HERE]
As of March 31, 1997
. GNMA........................................ 20.2%
. FNMA........................................ 16.4%
. Treasury/Agency............................. 44.2%
. CMO......................................... 9.7%
. FHLMC....................................... 9.5%
As of September 30, 1996
. GNMA........................................ 17.6%
. FNMA........................................ 10.4%
. Treasury/Agency............................. 48.0%
. CMO......................................... 13.8%
. FHLMC....................................... 10.2%
DURATION
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997 AS OF SEPTEMBER 30, 1996
<S> <C> <C>
Duration 3.6 years 4.2 years
</TABLE>
4
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
We recently spoke with the management team of the Van Kampen American Capital
U.S. Government Trust for Income about the key events and economic forces that
shaped the markets during the first half of the Fund's fiscal year. The team
includes Ted V. Mundy, portfolio manager, and Peter W. Hegel, chief investment
officer for fixed-income investments. The following excerpts reflect their
views on the Fund's performance during the six-month period ended March 31,
1997.
THE FOLLOWING TERMS ARE LISTED IN THE ORDER IN WHICH YOU WILL FIND THEM IN
THIS REPORT.
MORTGAGE-BACKED SECURITIES: Securities backed by pools of similar mortgages.
Investors receive interest payments and partial repayment of the principal
passed through from the underlying mortgages (agencies pass on what they re-
ceive from homeowners paying off their mortgages). These securities are gener-
ally issued by agencies of the U.S. government, such as Federal Home Loan
Mortgage Corporation (FHLMC or "Freddie Mac"), Federal National Mortgage Asso-
ciation (FNMA or "Fannie Mae"), and Government National Mortgage Association
(GNMA or "Ginnie Mae").
DURATION: Duration, which is expressed in years, is a measurement of a portfo-
lio's price sensitivity to changes in interest rates. The longer a fund's du-
ration, the greater the effect of interest rate movements on net asset value
(NAV). Typically, funds with shorter durations have performed better in rising
rate environments, while funds with longer durations have performed better
when rates are declining.
BASIS POINT: A measure used in quoting yields on bonds. One hundred basis
points is equal to one percent. For example, if a bond's yield changes from
7.00 to 6.65 percent, it would be considered a 35 basis point move.
YIELD CURVE: The relationship of yields to maturity for bonds of similar qual-
ity but different maturities. For example, the yields of U.S. Treasury securi-
ties maturing in 1, 5, 10, and 30 years, viewed together, will often reflect a
pattern of increasing yield as maturity extends--Creating an upward sloping
"curve." A "flat" yield curve represents little difference between short- and
long-term interest rates.
Q WHAT WERE THE KEY FACTORS AFFECTING THE FUND'S PERFORMANCE OVER THE PAST
SIX MONTHS?
A The mortgage-backed sector of the market did very well. For much of the
period, there were no clear, sustained interest rate trends in either di-
rection, which tends to be a favorable environment for mortgage-backed securi-
ties.
Five-year Treasury yields drifted downward through the third quarter of 1996
and into the fourth quarter, reaching 5.84 percent. We maintained a longer du-
ration, which benefited the Fund, until yields began an upward trend in early
December. And, as yields began to rise, the Fund's duration was shortened. The
five-year Treasury yield at the beginning of the reporting period was 6.45
percent and ended the period at 6.75 percent.
5
<PAGE>
Much of the movement in rates can be attributed to the market's reaction to
comments by Federal Reserve Board Chairman Alan Greenspan and to signs of
strength in key economic indicators, such as job growth, personal income,
wages, and consumer spending. The market reacted negatively to the Fed's 25-
basis point increase in short-term interest rates on March 25, seeing it as
the first step in the "preemptive tightening" alluded to earlier by Greenspan,
and the market clearly expects further tightening to occur.
Q HOW DID YOU REACT TO THESE CONDITIONS IN MANAGING THE FUND?
To take advantage of the strength in the mortgage sector, we moved to an
overweighted position in mortgage-backed pass-through securities, such as
Ginnie Maes and Fannie Maes. By the end of March, approximately 56 percent of
the portfolio's long-term investments were in mortgages.
Also, in response to a flattening yield curve, we reduced our exposure to
shorter-term Treasury securities. Within the Treasury component of the portfo-
lio--which represents roughly 44 percent of long-term investments as of March
31, 1997--we underweighted the one- to five-year sector and overweighted the
30-year sector.
The Fund's duration has been shortened steadily over the period to 3.6 years
as of March 31, 1997, which is down from the period's high of 4.4 years in
late November. Looking back, we could have moved more quickly to reduce the
portfolio duration. When interest rates started moving back up in early Decem-
ber, we shortened the duration to approximately 4.1 years. In response to the
continued bearish tone, duration was reduced to 3.6 years by the end of Janu-
ary. For additional Fund portfolio highlights, please refer to page four.
Q HOW DID THE FUND PERFORM WITHIN THIS MARKET ENVIRONMENT?
A The Fund generated a total return of 2.05 percent/1/ (Class A shares at
NAV) for the six months ended March 31, 1997. By comparison, the Merrill
Lynch Intermediate-Term Government Index posted a total return of 2.29 percent
for the same period. This broad-based index attempts to measure the market
performance of government securities with maturities between one and ten
years. Please keep in mind that this index, which is unmanaged, does not re-
flect in its performance any commissions or fees that would be paid by an in-
vestor purchasing the securities it represents. In terms of current income,
the Fund's distribution rate was 6.61 percent/3/ based upon the maximum offer-
ing price of $8.40 as of March 31, 1997. Please refer to the chart on page
three for additional Fund performance results.
Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A We maintain a cautious stance and have positioned the portfolio with the
expectation that we will see higher rates in the not-too-distant future.
We expect to see another 25-basis point rate hike by the Fed in the months
ahead. Until gross domestic product growth and job growth show signs of slow-
ing, the market should exert upward pressure on interest rates.
6
<PAGE>
Inflation remains low, which is unusual at such a late stage of the business
cycle, yet U.S. interest rates are much higher than those found in many foreign
markets. The two-year U.S. government bond, for example, yields around 6.4 per-
cent, while the equivalent security in Japan yields just 0.6 percent. This is an
extreme example, of course, but a continuation of the differential between
domestic and foreign yields should lend support to our market, which remains
attractive to foreign investors. In this environment, we anticipate maintaining
a defensive, shortened duration, and, if warranted, Treasury holdings will be
reduced in favor of mortgage-backed issues. As always, our focus is to seek to
provide investors with a high level of current income through all market
conditions.
/s/ Peter W. Hegel /s/ Ted V. Mundy
Peter W. Hegel Ted V. Mundy
Chief Investment Officer Portfolio Manager
Fixed Income Investments
7 Please see footnotes on page three
<PAGE>
PORTFOLIO OF INVESTMENTS
March 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS 9.6%
$ 3,054 Capstead Mortgage CMO,
Series
93-2CA3 (b)............. 9.713% 08/25/23 $ 3,109,396
4,896 Prudential Home Mortgage
Securities,
Series 93-23A7 (b)...... 10.000 06/25/08 5,070,688
10,000 Salomon Brothers
Mortgage Securities,
Series 93-5A3 (b)....... 7.364 10/25/23 9,978,100
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS............ 18,158,184
------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 45.8%
9,762 Federal Home Loan
Mortgage Corp. Gold 30
Year Pool............... 6.500 02/01/26 to 05/01/26 9,090,946
8,970 Federal Home Loan
Mortgage Corp. Gold 30
Year Pool............... 7.500 02/01/26 8,824,080
8,224 Federal National
Mortgage Association 15
Year Pool (b)........... 7.000 10/01/09 8,100,587
11,164 Federal National
Mortgage Association
CMO, Series 94-87F (b).. 6.106 03/25/09 11,171,162
9,833 Federal National
Mortgage Association
Pool.................... 7.000 10/01/25 to 03/01/26 9,402,448
1,987 Federal National
Mortgage Association
Pool.................... 8.500 01/01/22 to 09/01/24 2,035,948
9,351 Government National
Mortgage Association
Pool.................... 7.500 01/15/26 9,164,155
15,939 Government National
Mortgage Association
Pool.................... 8.000 10/15/21 to 08/15/24 16,031,981
6,482 Government National
Mortgage Association
Pool (b)................ 8.500 12/15/17 6,761,835
5,645 Government National
Mortgage Association
Pool.................... 9.000 03/15/18 to 12/15/19 5,982,169
------------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS.... 86,565,311
------------
UNITED STATES TREASURY OBLIGATIONS 44.0%
12,500 United States Treasury
Bonds (b)............... 10.750 08/15/05 15,482,375
11,500 United States Treasury
Bonds (b)............... 7.625 02/15/25 12,082,245
22,000 United States Treasury
Bonds (b)............... 11.625 11/15/02 26,926,020
27,500 United States Treasury
Bonds (b)............... 9.250 08/15/98 28,557,100
------------
TOTAL UNITED STATES TREASURY OBLIGATIONS............. 83,047,740
------------
TOTAL LONG-TERM INVESTMENTS 99.4%
(Cost $193,508,557) (a)........................................ 187,771,235
REPURCHASE AGREEMENT 0.3%
BankAmerica Securities ($490,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated
03/31/97, to be sold on 04/01/97 at $490,086).................. 490,000
OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%...................... 623,496
------------
NET ASSETS 100.0%............................................... $188,884,731
------------
</TABLE>
(a) At March 31, 1997, cost for federal income tax purposes is $193,508,557;
the aggregate gross unrealized appreciation is $848,941 and the aggregate
gross unrealized depreciation is $6,609,764; resulting in net unrealized
depreciation including open forward and futures contracts of $5,760,823.
(b) Assets segregated as collateral for open futures and forwards transactions.
See Notes to Financial Statements
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $193,508,557) (Note
1)............................................................... $187,771,235
Short-Term Investments (Note 1).................................. 490,000
Cash............................................................. 625
Receivables:
Securities Sold................................................. 26,639,334
Interest........................................................ 1,822,185
Fund Shares Sold................................................ 88,195
Variation Margin on Futures (Note 5)............................ 1,094
Unamortized Organizational Expenses (Note 1)..................... 1,500
Other............................................................ 98
------------
Total Assets.................................................... 216,814,266
------------
LIABILITIES:
Payables:
Securities Purchased............................................ 26,379,423
Income Distributions............................................ 638,932
Fund Shares Repurchased......................................... 439,192
Distributor and Affiliates (Notes 2 and 6)...................... 192,055
Forward Commitments (Note 5).................................... 108,919
Investment Advisory Fee (Note 2)................................ 97,986
Accrued Expenses................................................. 52,799
Deferred Compensation and Retirement Plans (Note 2).............. 20,229
------------
Total Liabilities............................................... 27,929,535
------------
NET ASSETS....................................................... $188,884,731
------------
NET ASSETS CONSIST OF:
Capital (Note 3)................................................. $243,463,098
Accumulated Distributions in Excess of Net Investment Income..... (142,996)
Net Unrealized Depreciation on Securities........................ (5,760,823)
Accumulated Net Realized Loss on Securities...................... (48,674,548)
------------
NET ASSETS....................................................... $188,884,731
------------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $41,273,218 and 5,156,643 shares of beneficial
interest issued and outstanding) (Note 3)....................... $ 8.00
Maximum sales charge (4.75%* of offering price)................. .40
------------
Maximum offering price to public................................ $ 8.40
------------
Class B Shares:
Net asset value and offering price per share (Based on net
assets of $132,541,094 and 16,569,623 shares of beneficial
interest issued and outstanding) (Note 3)....................... $ 8.00
------------
Class C Shares:
Net asset value and offering price per share (Based on net
assets of $15,070,419 and 1,884,235 shares of beneficial
interest issued and outstanding) (Note 3)....................... $ 8.00
------------
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
9
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.......................................................... $ 8,059,436
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes A, B
and C of $52,528, $713,464 and $84,494, respectively) (Note 6)... 850,486
Investment Advisory Fee (Note 2).................................. 610,085
Shareholder Services (Note 2)..................................... 182,348
Legal (Note 2).................................................... 13,767
Custody........................................................... 12,824
Trustees Fees and Expenses (Note 2)............................... 9,369
Amortization of Organizational Expenses (Note 1).................. 1,500
Other ............................................................ 149,290
-----------
Total Expenses................................................... 1,829,669
Less Expenses Reimbursed......................................... 1,300
-----------
Net Expenses..................................................... 1,828,369
-----------
NET INVESTMENT INCOME............................................. $ 6,231,067
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments ..................................................... $ (682,469)
Futures.......................................................... 113,825
Forward Commitments.............................................. (40,648)
-----------
Net Realized Loss on Securities................................... (609,292)
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.......................................... (4,183,278)
-----------
End of the Period:
Investments...................................................... (5,737,322)
Futures.......................................................... 85,418
Forward Commitments.............................................. (108,919)
-----------
(5,760,823)
-----------
Net Unrealized Depreciation on Securities During the Period....... (1,577,545)
-----------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.................... $(2,186,837)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................ $ 4,044,230
-----------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1997 and the Year Ended September 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1997 September 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................... $ 6,231,067 $ 15,824,780
Net Realized Loss on Securities......... (609,292) (3,776,806)
Net Unrealized Depreciation on
Securities During the Period........... (1,577,545) (4,230,410)
------------ ------------
Change in Net Assets from Operations.... 4,044,230 7,817,564
------------ ------------
Distributions from Net Investment
Income:
Class A Shares......................... (1,497,847) (3,792,860)
Class B Shares......................... (4,354,732) (10,629,590)
Class C Shares......................... (516,438) (1,389,674)
------------ ------------
(6,369,017) (15,812,124)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.............................. (2,324,787) (7,994,560)
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold............... 4,113,351 14,763,888
Net Asset Value of Shares Issued Through
Dividend Reinvestment................... 2,607,669 6,411,519
Cost of Shares Repurchased.............. (30,136,348) (97,053,619)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................ (23,415,328) (75,878,212)
------------ ------------
TOTAL DECREASE IN NET ASSETS............ (25,740,115) (83,872,772)
NET ASSETS:
Beginning of the Period................. 214,624,846 298,497,618
------------ ------------
End of the Period (Including accumulated
distributions in excess of net
investment income of $142,996 and
$5,046, respectively).................. $188,884,731 $214,624,846
------------ ------------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 6, 1992
Year Ended September (Commencement
Six Months Ended 30, of Investment
March 31, ---------------------- Operations) to
Class A Shares 1997 1996 1995 1994 September 30, 1993 (a)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period................. $8.108 $8.38 $8.17 $9.26 $9.43
------ ------ ------ ------- ------
Net Investment Income.. .273 .565 .63 .67 .81
Net Realized and
Unrealized Gain/Loss
on Securities......... (.099) (.274) .23 (1.0085) (.1795)
------ ------ ------ ------- ------
Total from Investment
Operations.............. .174 .291 .86 (.3385) .6305
------ ------ ------ ------- ------
Less:
Distributions from Net
Investment Income..... .278 .563 .645 .674 .8005
Distributions from Net
Realized Gain on
Securities............ -0- -0- .005 .0775 -0-
------ ------ ------ ------- ------
Total Distributions..... .278 .563 .65 .7515 .8005
------ ------ ------ ------- ------
Net Asset Value, End of
the Period.............. $8.004 $8.108 $8.38 $8.17 $9.26
------ ------ ------ ------- ------
Total Return (b)........ 2.05%* 3.57% 10.97% (3.82%) 8.07%(c)
Net Assets at End of the
Period (In millions)... $41.3 $45.2 $70.2 $75.3 $92.4
Ratio of Expenses to
Average Net Assets (d). 1.18% 1.13% 1.09% 1.07% 1.07%
Ratio of Net Investment
Income to Average Net
Assets (d)............. 6.69% 6.83% 7.67% 7.89% 8.71%
Portfolio Turnover...... 18%* 282% 262% 122% 281%*
</TABLE>
*Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) Total return from November 2, 1992 (date the Fund's investment strategy was
implemented) through September 30, 1993 without annualization.
(d) For the six months ended March 31, 1997, the impact of expenses reimbursed
by VKAC was less than 0.01% of average net assets. For the period ended
September 30, 1993, the ratios of expenses and net investment income to
average net assets would have been 1.15% and 8.64%, respectively, had VKAC
not reimbursed certain expenses of the Fund.
See Notes to Financial Statements
12
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 6, 1992
Year Ended September (Commencement
Six Months Ended 30, of Investment
March 31, ---------------------- Operations) to
Class B Shares 1997 1996 1995 1994 September 30, 1993 (a)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period. $8.104 $8.38 $8.17 $9.26 $9.43
------ ------ ------ ------- ------
Net Investment Income.. .241 .504 .57 .61 .70
Net Realized and
Unrealized Gain/Loss
on Securities......... (.099) (.277) .228 (1.0205) (.1475)
------ ------ ------ ------- ------
Total from Investment
Operations.............. .142 .227 .798 (.4105) .5525
------ ------ ------ ------- ------
Less:
Distributions from Net
Investment Income..... .247 .503 .583 .602 .7225
Distributions from Net
Realized Gain on
Securities............ -0- -0- .005 .0775 -0-
------ ------ ------ ------- ------
Total Distributions..... .247 .503 .588 .6795 .7225
------ ------ ------ ------- ------
Net Asset Value, End of
the Period.............. $7.999 $8.104 $8.38 $8.17 $9.26
------ ------ ------ ------- ------
Total Return (b)........ 1.80%* 2.70% 10.14% (4.61%) 7.24%(c)
Net Assets at End of the
Period (In millions).... $132.5 $150.8 $200.2 $226.7 $242.8
Ratio of Expenses to
Average Net Assets (d).. 1.95% 1.89% 1.85% 1.82% 1.81%
Ratio of Net Investment
Income to Average Net
Assets (d).............. 5.92% 6.08% 6.92% 7.11% 7.70%
Portfolio Turnover...... 18%* 282% 262% 122% 281%*
</TABLE>
*Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) Total return from November 2, 1992 (date the Fund's investment strategy was
implemented) through September 30, 1993 without annualization.
(d) For the six months ended March 31, 1997, the impact of expenses reimbursed
by VKAC was less than 0.01% of average net assets. For the period ended
September 30, 1993, the ratios of expenses and net investment income to
average net assets would have been 1.89% and 7.62%, respectively, had VKAC
not reimbursed certain expenses of the Fund.
See Notes to Financial Statements
13
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September April 12, 1993
Six Months Ended 30, (Commencement
March 31, ---------------------- of Distribution) to
Class C Shares 1997 1996 1995 1994 September 30, 1993 (a)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period................. $8.104 $8.38 $8.17 $9.25 $9.41
------ ------ ------ ------- ------
Net Investment Income.. .240 .502 .57 .63 .33
Net Realized and
Unrealized Gain/Loss
on Securities......... (.099) (.275) .228 (1.0305) (.1561)
------ ------ ------ ------- ------
Total from Investment
Operations.............. .141 .227 .798 (.4005) .1739
------ ------ ------ ------- ------
Less:
Distributions from Net
Investment Income..... .247 .503 .583 .602 .3339
Distributions from Net
Realized Gain on
Securities............ -0- -0- .005 .0775 -0-
------ ------ ------ ------- ------
Total Distributions..... .247 .503 .588 .6795 .3339
------ ------ ------ ------- ------
Net Asset Value, End of
the Period.............. $7.998 $8.104 $8.38 $8.17 $9.25
------ ------ ------ ------- ------
Total Return (b)........ 1.80%* 2.70% 10.14% (4.51%) 2.10%*
Net Assets at End of the
Period (In millions)... $15.1 $18.6 $28.1 $37.5 $37.8
Ratio of Expenses to
Average Net Assets (c). 1.95% 1.89% 1.85% 1.82% 1.76%
Ratio of Net Investment
Income to Average Net
Assets (c)............. 5.92% 6.08% 6.94% 7.08% 7.26%
Portfolio Turnover...... 18%* 282% 262% 122% 281%*
</TABLE>
*Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) For the six months ended March 31, 1997, the ratios of expenses and net
investment income to average net assets would have been 1.95% and 5.93%,
respectively, had VKAC not reimbursed certain expenses of the fund. For the
period ended September 30, 1993, the ratios of expenses and net investment
income to average net assets would have been 1.83% and 7.18%, respectively,
had VKAC not reimbursed certain expenses of the Fund.
See Notes to Financial Statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital U.S. Government Trust for Income (the "Fund") is
organized as a Delaware business trust, and is registered as a diversified
open-end management investment company under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek a high level of
income by primarily investing in debt securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. The Fund commenced invest-
ment operations on October 6, 1992 with two classes of common shares, Class A
and Class B shares. The distribution of the Fund's Class C shares commenced on
April 12, 1993.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prep-
aration of financial statements in conformity with generally accepted account-
ing principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of con-
tingent 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.
For those securities where quotations or prices are not available, valuations
are determined in accordance with procedures established in good faith by the
Board of Trustees. Short-term securities with remaining maturities of 60 days
or less are valued at amortized cost.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may purchase and sell securities on a "when issued" or "delayed de-
livery" basis, with settlement to occur at a later date. The value of the se-
curity so purchased is subject to market fluctuations during this period. The
Fund 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 March 31, 1997, there
were no when issued or delayed delivery purchase commitments.
The Fund invests in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees
to repurchase the security at a future time and specified price. The Fund may
invest independently in repurchase agreements, or transfer uninvested cash
balances into a pooled cash account along with other investment companies ad-
vised by Van Kampen American Capital Asset Management, Inc. (the "Adviser") or
its affiliates, the daily aggregate of which is invested in repurchase agree-
ments. Repurchase agreements are fully collateralized by the underlying debt
security. The Fund will make payment for such securities only upon physical
delivery or evidence of book entry
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------
transfer to the account of the custodian bank. The seller is required to main-
tain the value of the underlying security at not less than the repurchase pro-
ceeds due the Fund.
C. INVESTMENT INCOME-Interest income is recorded on an accrual basis. Original
issue discount is amortized over the expected life of each applicable securi-
ty. Premiums on debt securities are not amortized. Market discounts are recog-
nized at the time of sale as realized gains for book purposes and ordinary
income for tax purposes.
D. ORGANIZATIONAL EXPENSES-The Fund has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred
in connection with the Fund's organization in the amount of $15,000. These
costs are being amortized on a straight line basis over the 60 month period
ending September 30, 1997. The Adviser has agreed that in the event any of the
initial shares of the Fund originally purchased by VKAC are redeemed during
the amortization period, the Fund will be reimbursed for any unamortized orga-
nizational expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES-It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment compa-
nies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following
the year of the loss and offset these losses against any future realized capi-
tal gains. At September 30, 1996, the Fund had an accumulated capital loss
carryforward for tax purposes of $45,290,497 which will expire between Septem-
ber 30, 2003 and September 30, 2004. Net realized loss differs for financial
and tax reporting purposes as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following fiscal year
and gains recognized for tax purposes on open futures positions at September
30, 1996.
F. DISTRIBUTION OF INCOME AND GAINS-The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are distrib-
uted annually. Distributions from net realized gains for book purposes may in-
clude short-term capital gains and gains on futures transactions. All short-
term capital gains and a portion of futures gains are included in ordinary
income for tax purposes.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee, pay-
able monthly, of .60% of the Fund's average daily net assets.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom (Il-
linois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person.
For the six months ended March 31, 1997, the Fund recognized expenses of ap-
proximately $21,500 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months
ended March 31, 1997, the Fund recognized expenses of approximately $134,700,
representing ACCESS' cost of providing transfer agency and shareholder serv-
ices plus a profit.
Additionally, for the six months ended March 31, 1997, the Fund paid VKAC
approximately $17,500 related to the direct cost of consolidating the VKAC
open-end fund complex. Payment was contingent upon the realization by the Fund
of cost efficiencies in shareholder servicing resulting from the consolida-
tion.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer
all or a portion of their compensation to a later date. The retirement plan
covers those trustees who are not officers of VKAC. During the year ended Sep-
tember 30, 1996, VKAC reimbursed the Fund for expenses related to the retire-
ment plan.
At March 31, 1997, VKAC owned 5,302 shares each of Classes A and B, respec-
tively, and 53 shares of Class C.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of shares of beneficial interest, Clas-
ses A, B and C, each with a par value of $.01 per share. There are an unlim-
ited number of shares of each class authorized.
At March 31, 1997, capital aggregated $53,546,114, $168,578,884 and
$21,338,100 for Classes A, B and C, respectively. For the six months ended
March 31, 1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A............................................. 228,623 $ 1,870,121
Class B............................................. 246,303 2,013,789
Class C............................................. 28,041 229,441
---------- ------------
Total Sales.......................................... 502,967 $ 4,113,351
---------- ------------
Dividend Reinvestment:
Class A............................................. 75,177 $ 613,549
Class B............................................. 213,955 1,744,687
Class C............................................. 30,577 249,433
---------- ------------
Total Dividend Reinvestment.......................... 319,709 $ 2,607,669
---------- ------------
Repurchases:
Class A............................................. (723,353) $ (5,910,195)
Class B............................................. (2,499,581) (20,399,333)
Class C............................................. (469,065) (3,826,820)
---------- ------------
Total Repurchases.................................... (3,691,999) $(30,136,348)
---------- ------------
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------
At September 30, 1996, capital aggregated $56,972,639, $185,219,741 and
$24,686,046 for Classes A, B and C, respectively. For the year ended September
30, 1996, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A............................................ 549,325 $ 4,588,334
Class B............................................ 953,675 7,950,236
Class C............................................ 266,808 2,225,318
----------- ------------
Total Sales......................................... 1,769,808 $ 14,763,888
----------- ------------
Dividend Reinvestment:
Class A............................................ 182,960 $ 1,516,218
Class B............................................ 509,206 4,213,922
Class C............................................ 82,271 681,379
----------- ------------
Total Dividend Reinvestment......................... 774,437 $ 6,411,519
----------- ------------
Repurchases:
Class A............................................ (3,531,939) $(29,385,104)
Class B............................................ (6,746,410) (55,996,788)
Class C............................................ (1,403,810) (11,671,727)
----------- ------------
Total Repurchases................................... (11,682,159) $(97,053,619)
----------- ------------
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales ar-
rangements, including higher distribution and service fees and incremental
transfer agency costs.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C>
First........................................................... 4.00% 1.00%
Second.......................................................... 4.00% None
Third........................................................... 3.00% None
Fourth.......................................................... 2.50% None
Fifth........................................................... 1.50% None
Sixth and Thereafter............................................ None None
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------
For the six months ended March 31, 1997, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$2,700 and CDSC on redeemed shares of approximately $267,300. Sales charges do
not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments and forward purchase commitments, were
$35,517,792 and $57,537,786, respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of
its portfolio or generate potential gain. All of the Fund's portfolio hold-
ings, including derivative instruments, are marked to market each day with the
change in value reflected in the unrealized appreciation/depreciation on secu-
rities. Upon disposition, a realized gain or loss is recognized accordingly,
except in instances where the Fund accepts delivery of a security underlying a
forward commitment. In these situations, the recognition of gain or loss is
postponed until the disposal of this underlying security.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. FUTURES CONTRACTS-A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures contracts on U.S. Treasury
Bonds and typically closes the contract prior to the delivery date. These con-
tracts are generally used to manage the portfolio's effective maturity and du-
ration.
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. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the
value of the contract (the variation margin).
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------
Transactions in futures contracts, each with a par value of $100,000, for
the six months ended March 31, 1997, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at September 30, 1996.................................... 150
Futures Opened....................................................... 1,796
Futures Closed....................................................... (1,711)
------
Outstanding at March 31, 1997........................................ 235
------
</TABLE>
The futures contracts outstanding as of March 31, 1997, and the descriptions
and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Long Bond Future
June 1997--Buys to Open............................. 40 $(133,004)
5-Year U.S. Treasury Note Future
June 1997--Sells to Open............................ 155 146,800
10-Year U.S. Treasury Note Future
June 1997--Sells to Open............................ 40 71,622
--- ---------
235 $ 85,418
--- ---------
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------
B. FORWARD COMMITMENTS-The Fund trades certain securities under the terms of
forward commitments, whereby the settlement occurs at a specific future date.
Forward commitments are privately negotiated transactions between the Fund and
dealers. While forward commitments are outstanding, the Fund maintains suffi-
cient collateral of cash or securities in a segregated account with its custo-
dian. The following forward commitments were outstanding as of March 31, 1997:
<TABLE>
<CAPTION>
Par Amount Expiration Original Current Unrealized
(000) Description Date Value Value Appreciation/Depreciation
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Buys to Open
$50,000 U.S. T-Note, 8.625%,
08/15/97 maturity 04/24/97 $50,486,328 $50,429,500 $(56,828)
5,000 FHLMC Gold, 15 Yr.,
7.50%, 12/31/23 maturity 04/15/97 5,040,625 5,010,950 (29,675)
5,000 FHLMC Gold, 15 Yr.,
6.00%, 12/31/23 maturity 04/15/97 4,825,000 4,709,400 (115,600)
5,000 FNMA Balloon, 7 Yr.,
7.00%, 12/31/23 maturity 04/21/97 4,993,750 4,954,700 (39,050)
Sells to Open
28,000 U.S. T-Note, 5.625%,
01/31/98 maturity 04/24/97 27,921,250 27,891,360 29,890
5,000 FHLMC Gold, 30 Yr.,
7.50%, 12/31/23 maturity 04/10/97 4,960,156 4,918,750 41,406
5,000 FNMA, 7.00%, 12/31/23
maturity 04/10/97 4,842,188 4,781,250 60,938
---------
$(108,919)
---------
</TABLE>
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 and a service plan (col-
lectively the "Plans"). The Plans govern payments for the distribution of the
Fund's shares, ongoing shareholder services and maintenance of shareholder ac-
counts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these
fees for the six months ended March 31, 1997, are payments to VKAC of approxi-
mately $547,300.
22
<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
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
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
Intermediate 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
MORGAN STANLEY FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
Worldwide High Income 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 weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds, or
1-800-282-4404 for Morgan Stanley retail funds.
23
<PAGE>
RESULTS OF SHAREHOLDER VOTES
A Special Meeting of Shareholders of the Fund was held on October 25, 1996
where shareholders voted on a new investment advisory agreement, changes to
investment policies and the ratification of Price Waterhouse LLP as indepen-
dent public accountants. With regard to the approval of a new investment advi-
sory agreement between Van Kampen American Capital Asset Management, Inc. and
the Fund, 18,984,376 shares voted for the proposal, 306,432 shares voted
against and 1,356,430 shares abstained. With regard to the approval of certain
changes to the Fund's fundamental investment policies with respect to invest-
ment in other investment companies, 13,225,134 shares voted for the proposal,
426,447 shares voted against and 1,395,858 shares abstained. With regard to
the ratification of Price Waterhouse LLP as independent public accountants for
the Fund, 19,068,912 shares voted for the proposal, 233,791 shares voted
against and 1,344,534 shares abstained.
24
<PAGE>
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
BOARD OF TRUSTEES
J. MILES BRANAGAN
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
DENNIS J. MCDONNELL*
JACK E. NELSON
JEROME L. ROBINSON
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
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*
ALAN T. SACHTLEBEN*
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 SERVICING AGENT
ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
*"Interested" persons of the Fund, as de-
fined in the
Investment Company Act of 1940.
(C)Van Kampen American Capital Distribu-
tors, Inc., 1997
All rights reserved.
SMdenotes 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. After June 30, 1997, the report must
be accompanied by a quarterly performance update, if applicable.
25
