<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 11
Statement of Operations.......................... 12
Statement of Changes in Net Assets............... 13
Financial Highlights............................. 14
Notes to Financial Statements.................... 17
</TABLE>
LTMG SAR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG.]
Richard F. Powers, III
Chairman
Van Kampen Asset Management Inc.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1).... 0.75% 0.35% 0.43%
Six-month total return(2)................. (2.54%) (2.59%) (0.55%)
One-year total return(2).................. 0.23% (0.07%) 1.89%
Five-year average annual total
return(2)............................... 4.50% 4.41% 4.43%
Ten-year average annual total return(2)... 5.19% N/A N/A
Life-of-Fund average annual total
return(2)............................... 5.37% 3.52% 3.60%
Commencement date......................... 06/16/86 11/05/91 05/10/93
DISTRIBUTION RATE AND YIELD
Distribution rate(3)...................... 5.36% 4.72% 4.72%
SEC Yield(4).............................. 4.43% 3.80% 3.81%
</TABLE>
N/A = Not Applicable
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (3.25% for A shares) or contingent
deferred sales charge for early withdrawal (3% for B shares and 1% for C
shares).
(2) Standardized 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).
(3) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
(4) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending June 30, 1999.
See the Comparative Performance section of the current prospectus. Past
performance does not guarantee future results. U.S. Government securities are
backed by the full faith and credit of the U.S. Government, its agencies or
instrumentalities. The government backing applies only to the timely payment of
principal and interest when due, on specific securities in the Fund's portfolio,
not to shares of the Fund. Fund shares when redeemed, may be worth more or less
than their original cost. The value of debt securities will fluctuate with
changes in market conditions and interest rates, which will effect the value of
Fund shares. Securities which are issued by private issuers involve greater risk
than those issued directly by the U.S. Government.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
We recently spoke with the management team of the Van Kampen Limited Maturity
Government Fund about the key events and economic forces that shaped the markets
during the past six months. The team is led by Ted V. Mundy, portfolio manager,
who has managed the Fund since June 1994 and worked in the investment industry
since 1987. He is joined by Peter W. Hegel, chief investment officer for
fixed-income investments. The following excerpts reflect their views on the
Fund's performance for the six months ended June 30, 1999.
Q HOW WOULD YOU DESCRIBE THE MARKET IN WHICH THE FUND OPERATED DURING THE
REPORTING PERIOD?
A The first quarter of 1999 marked a recovery in the fixed-income market
from the October 1998 meltdown, as investors grew confident in the
strength of the economy and continued modest inflation. Consequently,
yield spreads narrowed between Treasuries and other fixed-income products (such
as government, mortgage-backed, and high-yield securities). However, this good
news for fixed-income products was quelled in the second quarter by a slight
surge in inflation and warnings of interference from the Federal Reserve Board.
This prompted yield spreads to widen once again, although not to the record-high
levels seen last fall.
As interest rates climbed steadily during the period, the Treasury yield
curve began to flatten, indicating a moderation in the yield difference between
long- and short-term Treasuries. This change became more pronounced as yields on
short-term Treasuries rose to reflect the potential for an increase--or perhaps
a series of increases--in the federal funds rate. At the end of the reporting
period, the Fed approved a 0.25 percent hike while reassuring fixed-income
investors that additional action seemed unnecessary.
Q HOW DID THESE CONDITIONS AFFECT THE FUND'S EXPOSURE TO MORTGAGE-BACKED
SECURITIES?
A Mortgage-backed securities--and the Fund's allocation to this sector,
which accounted for over half of the portfolio--performed well during the
period. As interest rates rose and spreads narrowed, the risk of mortgage
refinancing and prepayment waned. During this time, mortgage-backed securities
equaled or bettered the performance of Treasury securities, although volatility
at the end of the period dampened mortgage returns.
At the end of the period, approximately 54 percent of the Fund's assets were
allocated to mortgage- and asset-backed securities, with the remainder invested
in Treasuries and cash. This allocation to mortgage-backed securities was
relatively unchanged during the period and benefited the Fund during the time
that spreads were tightening. Within this position, we focused on structured
agency mortgage securities because these relatively stable securities pose less
risk in a rising rate environment than other mortgage-backed securities. We also
held private-label and asset-backed securities,
4
<PAGE> 6
which performed well during the market's recovery and contributed to the Fund's
income stream.
Q WHAT OTHER STRATEGIES DID YOU USE TO MANAGE THE FUND?
A We concentrated the Fund's Treasury allocation in the short end of the
curve--primarily in 18-month to two-year Treasury securities. As the
market began to prepare for the Fed tightening, the yield of the two-year
Treasury rose slightly, so our weighting in this area benefited the Fund during
this time.
From a duration standpoint, we maintained a short to neutral level for much
of the period, reflecting our cautious perspective on the market and our belief
that interest rates would continue to rise. This was an effective strategy for
the Fund at the end of the reporting period. Moving forward, we plan to move to
a longer duration as a reflection of our growing confidence in the
mortgage-backed market. For additional Fund portfolio highlights, please refer
to page 8.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A For the six-month period ended June 30, 1999, the Limited Maturity
Government Fund generated a total return of 0.75 percent(1) (Class A
shares at net asset value). By comparison, the Lehman Brothers Mutual Fund
One- to Two-Year Government Index posted a total return of 1.46 percent for the
same period. This broad-based index reflects the general performance of U.S.
government securities. Please keep in mind that it does not reflect any
commissions or fees that would be paid by an investor purchasing the securities
it represents. Of course, past performance is no guarantee of comparable future
results.
Additionally, the Fund's Class A shares provided shareholders with a
competitive distribution rate of 5.36 percent, based upon the maximum offering
price as of June 30, 1999, and a monthly dividend of $0.055 per share. Please
note that the Fund's monthly dividend will be reduced from $.055 to $.047 per
Class A share in July due to lingering effects from last year's low
interest-rate environment. The subsequent rise in homeowner prepayments and
mortgage refinancing forced the Fund to reinvest proceeds from those prepayments
into securities yielding lower interest rates. As a result, it became
increasingly difficult for the Fund to maintain its previous dividend level. For
additional Fund performance results, please refer to the chart and footnotes on
page 3.
Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A We expect a continuation of the current low-inflation environment coupled
with moderate or slower economic growth due to the possibility of year
2000 computer complications near the end of the year. This environment
supports the continued recovery of the fixed-income markets, which are still
unwinding from their upheaval late last year. Ultimately, we believe these
markets are in a transition to more normal conditions, in
5
<PAGE> 7
which the yield for the two-year Treasury might settle into a trading range of
5.00 to 5.75 percent.
Taking this perspective, we see value in the mortgage market and hope to
take advantage of opportunities to add attractively priced mortgages to the
portfolio. We'll continue to emphasize mortgages with reliable structure in
order to support the Fund's income stream without risking our ability to
participate in market rallies.
[SIG]
Ted. V. Mundy
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest rate
movements on net asset value. Typically, funds with shorter durations
perform better in rising rate environments, while funds with longer
durations perform better when rates decline.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
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
receive from homeowners paying off their mortgages).These securities are
generally issued by agencies of the U.S. government, such as Government
National Mortgage Association (GNMA, or "Ginnie Mae") and Federal Home Loan
Mortgage Corporation (FHLMC, or "Freddie Mac").
YIELD: The annual rate of return on an investment, expressed as a percentage.
For bonds and notes, the yield is the annual interest divided by the market
price.
YIELD CURVE: A result of viewing the yields of U.S. Treasury securities maturing
in 1, 5, 10, and 30 years. When grouped together and graphed, a pattern of
increasing yield is often reflected as the time to maturity extends. This
pattern creates an upward sloping "curve." A "flat" yield curve represents
little difference between short- and long-term interest rates.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
DIVIDEND HISTORY
FOR THE PERIOD ENDED JUNE 30, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
DISTRIBUTION PER CLASS A SHARE
------------------------------
<S> <C>
'Jan 1999' 0.055
'Feb 1999' 0.055
'Mar 1999' 0.055
'Apr 1999' 0.055
'May 1999' 0.055
'Jun 1999' 0.055
</TABLE>
The dividend history represents past performance of the Fund and does not
predict the Fund's future distributions.
ASSET ALLOCATION AS A PERCENTAGE OF LONG-TERM INVESTMENTS
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Treasury Notes 40.1 28.4
FHLMC 15.0 14.5
Asset-Backed Securities 12.7 20.8
FNMA 11.9 11.7
GNMA 10.0 10.3
ARMs 5.2 5.3
CMOs 5.1 9.0
</TABLE>
COUPON DISTRIBUTION AS A PERCENTAGE OF LONG-TERM INVESTMENTS
[BAR GRAPH]
<TABLE>
<S> <C>
5.9 OR LESS 17.7
6-6.9 14.2
7-7.9 47.3
8-8.9 13.2
9-9.9 4.8
10 or more 2.8
</TABLE>
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES 4.8%
$ 43 Federal Home Loan Mortgage Corp.
Pools........................... 9.925% 02/01/18 $ 43,109
701 Federal National Mortgage
Association Pools............... 7.532 03/01/19 722,958
1,481 Federal National Mortgage
Association Pools............... 7.561 09/01/19 1,531,827
-----------
TOTAL ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES............... 2,297,894
-----------
ASSET BACKED SECURITIES 11.5%
3,000 First USA Credit Card Master
Trust........................... 5.733 04/15/03 3,005,400
2,565 PacificAmerica Home Equity
Loan............................ 5.916 12/25/27 2,559,762
-----------
TOTAL ASSET BACKED SECURITIES.................................. 5,565,162
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS 4.6%
704 Federal Home Loan Mortgage Corp.
(Variable Rate Coupon).......... 5.500 04/15/20 705,957
1,567 Saxon Mortgage Securities
Corp. .......................... 5.680 11/25/23 1,525,390
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS...................... 2,231,347
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS 33.5%
5,000 Federal Home Loan Mortgage Corp.
(PAC)........................... 6.250 07/15/18 4,981,100
498 Federal Home Loan Mortgage Corp.
15 Year Pools................... 9.500 12/01/01 519,698
1,042 Federal Home Loan Mortgage Corp.
30 Year Pools................... 9.250 12/01/15 1,111,890
1,293 Federal National Mortgage
Association 30 Year Pools (15
Year Dwarf)..................... 6.500 11/01/09 to 01/01/03 1,276,373
2,077 Federal National Mortgage
Association (PAC)............... 7.000 01/25/03 2,097,907
1,021 Federal National Mortgage
Association 30 Year Pools....... 8.500 05/01/21 to 04/01/25 1,069,192
256 Federal National Mortgage
Association 30 Year Pools....... 9.500 07/01/11 to 08/01/21 273,004
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
$ 487 Federal National Mortgage
Association 30 Year Pools....... 10.000% 05/01/21 $ 528,687
3,431 Government National Mortgage
Association 30 Year Pools....... 7.500 06/15/28 to 09/15/28 3,471,948
53 Government National Mortgage
Association 30 Year Pools....... 8.500 06/15/16 to 01/15/17 55,941
139 Government National Mortgage
Association 30 Year Pools....... 9.500 03/15/16 to 01/15/19 150,690
353 Government National Mortgage
Association 30 Year Pools....... 10.000 03/15/16 to 04/15/19 387,298
131 Government National Mortgage
Association 30 Year Pools....... 10.500 05/15/13 to 02/15/18 145,311
155 Government National Mortgage
Association 30 Year Pools....... 11.000 11/15/18 174,565
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 33.5%................ 16,243,604
-----------
U.S. GOVERNMENT OBLIGATIONS 36.3%
12,500 United States Treasury
Notes (a)....................... 7.750 02/15/01 12,936,625
4,500 United States Treasury Notes.... 8.750 08/15/00 4,664,295
-----------
17,600,920
-----------
TOTAL LONG-TERM INVESTMENTS 90.7%
(Cost $44,023,927)..................................................... 43,938,927
REPURCHASE AGREEMENT 8.4%
Donaldson Lufkin Jennerette ($4,095,000 par, collateralized by U.S.
Government obligations in a pooled cash account, dated 06/30/99, to be
sold on 07/01/99 at $4,095,546)
(Cost $4,095,000)...................................................... 4,095,000
-----------
TOTAL INVESTMENTS 99.1%
(Cost $48,118,927)..................................................... 48,033,927
OTHER ASSETS IN EXCESS OF LIABILITIES 0.9%.............................. 425,401
-----------
NET ASSETS 100.0%....................................................... $48,459,328
===========
</TABLE>
(a) Assets segregated as collateral for open futures transactions.
PAC -- Planned Amortization Class
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $48,118,927)........................ $48,033,927
Cash........................................................ 3,411
Receivables:
Interest.................................................. 654,777
Investments Sold.......................................... 81,124
Variation Margin on Futures............................... 55,452
Fund Shares Sold.......................................... 34,302
Other....................................................... 49,071
-----------
Total Assets.......................................... 48,912,064
-----------
LIABILITIES:
Payables:
Income Distributions...................................... 95,420
Fund Shares Repurchased................................... 92,980
Distributor and Affiliates................................ 36,310
Investment Advisory Fee................................... 20,085
Trustees' Deferred Compensation and Retirement Plans........ 151,950
Accrued Expenses............................................ 55,991
-----------
Total Liabilities..................................... 452,736
-----------
NET ASSETS.................................................. $48,459,328
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $58,374,234
Net Unrealized Depreciation................................. (71,046)
Accumulated Distributions in Excess of Net Investment
Income.................................................... (144,764)
Accumulated Net Realized Loss............................... (9,699,096)
-----------
NET ASSETS.................................................. $48,459,328
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $35,079,362 and 2,943,302 shares of
beneficial interest issued and outstanding)............. $ 11.92
Maximum sales charge (3.25%* of offering price)......... .40
-----------
Maximum offering price to public........................ $ 12.32
===========
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $10,132,325 and 847,183 shares of
beneficial interest issued and outstanding)............. $ 11.96
===========
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $3,247,641 and 271,886 shares of
beneficial interest issued and outstanding)............. $ 11.94
===========
</TABLE>
*On sales of $25,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $1,640,013
----------
EXPENSES:
Investment Advisory Fee..................................... 125,856
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $44,372, $57,033 and $16,237,
respectively)............................................. 117,642
Shareholder Services........................................ 50,968
Registration and Filing Fees................................ 26,307
Accounting.................................................. 25,883
Trustees' Fees and Related Expenses......................... 25,677
Custody..................................................... 14,699
Legal....................................................... 1,070
Other....................................................... 20,699
----------
Total Expenses.......................................... 408,801
Less Credits Earned on Cash Balances.................... 2,774
----------
Net Expenses............................................ 406,027
==========
NET INVESTMENT INCOME....................................... $1,233,986
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (179,226)
Futures................................................... (247,358)
----------
Net Realized Loss........................................... (426,584)
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 411,092
----------
End of the Period:
Investments............................................. (85,000)
Futures................................................. 13,954
----------
(71,046)
----------
Net Unrealized Depreciation During the Period............... (482,138)
----------
NET REALIZED AND UNREALIZED LOSS............................ $ (908,722)
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 325,264
==========
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1999 and
the Year Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 1,233,986 $ 2,618,207
Net Realized Loss................................ (426,584) (112,021)
Net Unrealized Depreciation During the Period.... (482,138) (42,667)
----------- -----------
Change in Net Assets from Operations............. 325,264 2,463,519
----------- -----------
Distributions from Net Investment Income......... (1,187,736) (2,577,038)
Distributions in Excess of Net Investment
Income......................................... (144,764) -0-
----------- -----------
Distributions from and in Excess of Net
Investment Income*............................. (1,332,500) (2,577,038)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (1,007,236) (113,519)
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 25,510,194 33,962,320
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................... 805,116 1,577,636
Cost of Shares Repurchased....................... (27,815,222) (44,219,999)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... (1,499,912) (8,680,043)
----------- -----------
TOTAL DECREASE IN NET ASSETS..................... (2,507,148) (8,793,562)
NET ASSETS:
Beginning of the Period.......................... 50,966,476 59,760,038
----------- -----------
End of the Period (Including accumulated
distributions in excess of net investment
income of ($144,764) and ($46,250),
respectively).................................. $48,459,328 $50,966,476
=========== ===========
*Distribution by Class
- --------------------------------------------------------------------------------------
Distributions from and in Excess of Net
Investment Income:
Class A Shares................................. $ (987,128) $(1,789,709)
Class B Shares................................. (268,767) (626,148)
Class C Shares................................. (76,605) (161,181)
----------- -----------
$(1,332,500) $(2,577,038)
=========== ===========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended -------------------------------------
Class A Shares June 30, 1999(a) 1998(a) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $12.160 $12.191 $12.151 $ 12.41 $ 11.90
------- ------- ------- ------- -------
Net Investment Income........................... .306 .685 .685 .627 .67
Net Realized and Unrealized Gain/Loss........... (.218) (.043) .015 (.226) .4888
------- ------- ------- ------- -------
Total from Investment Operations................. .088 .642 .700 .401 1.1588
Less Distributions from and in Excess of
Net Investment Income........................... .330 .673 .660 .660 .6488
------- ------- ------- ------- -------
Net Asset Value, End of the Period............... $11.918 $12.160 $12.191 $12.151 $ 12.41
======= ======= ======= ======= =======
Total Return* (b)................................ 0.75%** 5.40% 5.92% 3.34% 9.96%
Net Assets at End of the Period (In millions).... $ 35.1 $ 35.2 $ 39.4 $ 40.2 $ 45.4
Ratio of Expenses to Average Net Assets* (c)..... 1.40% 1.42% 1.32% 1.45% 1.45%
Ratio of Net Investment Income to Average Net
Assets*......................................... 5.12% 5.61% 5.68% 5.23% 5.47%
Portfolio Turnover............................... 39%** 249% 175% 260% 187%
* If certain expenses had not been
reimbursed by Van Kampen, Total
Return would have been lower
and the ratios would have been
as follows:
Ratio of Expenses to Average Net Assets.......... N/A N/A N/A 1.47% 1.50%
Ratio of Net Investment Income to Average Net
Assets.......................................... N/A N/A N/A 5.21% 5.42%
</TABLE>
** Non-Annualized
(a) Based on average 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) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratio would decrease by .01% for the six months ended June
30, 1999.
N/A--Not Applicable.
See Notes to Financial Statements
14
<PAGE> 16
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 December 31,
Six Months Ended -------------------------------------
Class B Shares June 30, 1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $12.197 $12.220 $12.174 $ 12.43 $ 11.91
------- ------- ------- ------- -------
Net Investment Income........................... .262 .590 .598 .550 .57
Net Realized and Unrealized Gain/Loss........... (.217) (.036) .012 (.242) .5028
------- ------- ------- ------- -------
Total from Investment Operations................. .045 .554 .610 .308 1.0728
Less Distributions from and in Excess of
Net Investment Income........................... .282 .577 .564 .564 .5528
------- ------- ------- ------- -------
Net Asset Value, End of the Period............... $11.960 $12.197 $12.220 $12.174 $ 12.43
======= ======= ======= ======= =======
Total Return* (b)................................ 0.35%** 4.65% 5.08% 2.69% 9.09%
Net Assets at End of the Period (In millions).... $ 10.1 $ 12.4 $ 16.2 $ 22.5 $ 30.3
Ratio of Expenses to Average Net Assets* (c)..... 2.17% 2.19% 2.11% 2.19% 2.24%
Ratio of Net Investment Income to Average Net
Assets*......................................... 4.37% 4.82% 4.92% 4.50% 4.63%
Portfolio Turnover............................... 39%** 249% 175% 260% 187%
* If certain expenses had not been
reimbursed by Van Kampen, Total
Return would have been lower
and the ratios would have been
as follows:
Ratio of Expenses to Average Net Assets.......... N/A N/A N/A 2.22% 2.29%
Ratio of Net Investment Income to Average Net
Assets.......................................... N/A N/A N/A 4.47% 4.59%
</TABLE>
** Non-Annualized
(a) Based on average 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) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratio would decrease by .02% for the six months ended June
30, 1999.
N/A--Not Applicable
See Notes to Financial Statements
15
<PAGE> 17
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 December 31,
Six Months Ended -------------------------------------
Class C Shares June 30, 1999(a) 1998(a) 1997 1996 1995(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.... $12.182 $12.206 $12.162 $ 12.42 $ 11.90
------- ------- ------- ------- -------
Net Investment Income...................... .262 .582 .597 .554 .57
Net Realized and Unrealized Gain/Loss...... (.218) (.029) .011 (.248) .5028
------- ------- ------- ------- -------
Total from Investment Operations............ .044 .553 .608 .306 1.0728
Less Distributions from and in Excess of Net
Investment Income.......................... .282 .577 .564 .564 .5528
------- ------- ------- ------- -------
Net Asset Value, End of the Period.......... $11.944 $12.182 $12.206 $12.162 $ 12.42
======= ======= ======= ======= =======
Total Return* (b)........................... 0.43%** 4.57% 5.17% 2.62% 9.10%
Net Assets at End of the Period (In
millions).................................. $ 3.3 $ 3.3 $ 4.2 $ 4.7 $ 6.2
Ratio of Expenses to Average Net Assets*
(c)........................................ 2.17% 2.19% 2.10% 2.20% 2.23%
Ratio of Net Investment Income to Average
Net Assets*................................ 4.38% 4.76% 4.92% 4.48% 4.71%
Portfolio Turnover.......................... 39%** 249% 175% 260% 187%
* If certain expenses had not been
reimbursed by Van Kampen, Total
Return would have been lower
and the ratios would have been
as follows:
Ratio of Expenses to Average Net Assets..... N/A N/A N/A 2.22% 2.27%
Ratio of Net Investment Income to Average
Net Assets................................. N/A N/A N/A 4.45% 4.67%
</TABLE>
**Non-Annualized
(a) Based on average 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) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratio would decrease by .01% for the six months ended June
30, 1999.
N/A--Not Applicable
See Notes to Financial Statements
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Limited Maturity Government Fund (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 to provide a high current return and
relative safety of capital by primarily investing in mortgage-related securities
issued or guaranteed by an agency or instrumentality of the U.S. Government. The
Fund commenced investment operations on June 16, 1986. The distribution of the
Fund's Class B and Class C shares commenced on November 5, 1991 and May 10,
1993, respectively.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments are stated at value using market quotations
or indications of value obtained from an independent pricing service based upon
the mean of the bid and asked prices. 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 trades certain securities under the terms of forward commitments,
whereby the settlement for payment and delivery occurs at a specified future
date. Forward commitments are privately negotiated transactions between the Fund
and dealers. Upon executing a forward commitment and during the period of
obligation, the Fund maintains collateral of cash or securities in a segregated
account with its custodian in an amount sufficient to relieve the obligation. If
the intent of the Fund is to accept delivery of a security traded under a
forward purchase commitment, the commitment is recorded as a long-term purchase.
For forward purchase commitments for which security settlement is not intended
by the Fund, changes in the value of the commitment are recognized by
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
marking the commitment to market on a daily basis. Certain forward commitments
are entered into with the intent of recognizing fee income which results from
the difference between the price of a forward settlement security versus the
current cash settlement price of the same security. Upon the closing of these
forward commitments, this income is recognized and is shown as fee income on the
Statement of Operations.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES--Interest income is recorded on an accrual basis.
Discounts are amortized over the expected life of each applicable security.
Premiums on debt securities are not amortized. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At December 31, 1998, the Fund had an accumulated capital loss
carryforward for tax purposes of $8,815,097 which will expire between December
31, 1999 and December 31, 2004. Of this amount, $12,348 will expire on December
31, 1999. Net realized loss may differ for financial and tax reporting purposes
primarily as a result of post October 31 losses which are not recognized for tax
purposes until the first day of the following fiscal year, the deferral of
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
losses for tax purposes resulting from wash sales and gains recognized for tax
purposes on open futures positions at December 31, 1998.
At June 30, 1999, for federal income tax purposes the cost of long- and
short-term investments is $48,118,927, the aggregate gross unrealized
appreciation is $316,953 and the aggregate gross unrealized depreciation is
$401,953, resulting in unrealized depreciation on long- and short-term
investments of $85,000.
E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually.
F. EXPENSE REDUCTIONS--During the six months ended June 30, 1999, the Fund's
custody fee was reduced by $2,774 as a result of credits earned on overnight
cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee, payable
monthly as follows:
<TABLE>
<CAPTION>
% PER
AVERAGE DAILY NET ASSETS ANNUM
- -----------------------------------------------------------------------
<S> <C>
First $1 billion........................................ .500 of 1%
Next $1 billion......................................... .475 of 1%
Next $1 billion......................................... .450 of 1%
Next $1 billion......................................... .400 of 1%
Over $4 billion......................................... .350 of 1%
</TABLE>
For the six months ended June 30, 1999, the Fund recognized expenses of
approximately $1,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended June 30, 1999, the Fund recognized expenses of
approximately $25,900 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended June 30,
1999, the Fund recognized expenses of approximately $31,000. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At June 30, 1999, capital aggregated $46,248,685, $9,207,939 and $2,917,610
for Classes A, B and C, respectively. For the six months ended June 30, 1999,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 1,795,292 $ 21,665,104
Class B...................................... 257,218 3,108,311
Class C...................................... 61,162 736,779
---------- ------------
Total Sales.................................... 2,113,672 $ 25,510,194
========== ============
Dividend Reinvestment:
Class A...................................... 51,085 $ 614,163
Class B...................................... 10,985 132,588
Class C...................................... 4,844 58,365
---------- ------------
Total Dividend Reinvestment.................... 66,914 $ 805,116
========== ============
Repurchases:
Class A...................................... (1,799,462) $(21,696,075)
Class B...................................... (440,828) (5,326,962)
Class C...................................... (65,691) (792,185)
---------- ------------
Total Repurchases.............................. (2,305,981) $(27,815,222)
========== ============
</TABLE>
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At December 31, 1998, capital aggregated $45,665,493, $11,294,002 and
$2,914,651 for Classes A, B and C, respectively. For the year ended December 31,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 1,449,715 $ 17,709,670
Class B...................................... 521,188 6,401,373
Class C...................................... 805,325 9,851,277
---------- ------------
Total Sales.................................... 2,776,228 $ 33,962,320
========== ============
Dividend Reinvestment:
Class A...................................... 92,435 $ 1,128,107
Class B...................................... 27,879 341,146
Class C...................................... 8,863 108,383
---------- ------------
Total Dividend Reinvestment.................... 129,177 $ 1,577,636
========== ============
Repurchases:
Class A...................................... (1,875,249) $(22,928,861)
Class B...................................... (852,542) (10,436,057)
Class C...................................... (888,221) (10,855,081)
---------- ------------
Total Repurchases.............................. (3,616,012) $(44,219,999)
========== ============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC will be imposed on most redemptions made within four years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
-------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------
<S> <C> <C>
First........................................... 3.00% 1.00%
Second.......................................... 2.50% None
Third........................................... 2.00% None
Fourth.......................................... 1.00% None
Fifth and Thereafter............................ None None
</TABLE>
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended June 30, 1999, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $3,700 and CDSC on redeemed shares of approximately $17,500. Sales
charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $17,849,883 and $22,142,854,
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 to generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except in instances where the
Fund accepts delivery of a security underlying a futures contract. In these
situations, the recognition of gain or loss is postponed until the disposal of
the security underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. 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 contracts
are generally used to manage the portfolio's effective maturity and duration.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or liquid 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). The risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities.
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in futures contracts for the six months ended June 30, 1999,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1998............................ 44
Futures Opened............................................ 288
Futures Closed............................................ (256)
------
Outstanding at June 30, 1999................................ 76
======
</TABLE>
The futures contracts outstanding as of June 30, 1999, and the description
and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C>
Long Contracts--5 Year U.S. Treasury Note
Futures September 1999 (Current notional
value $109,000 per contract)................ 76 $13,954
== =======
</TABLE>
6. MORTGAGE BACKED SECURITIES
A Mortgage Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participations in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies--Government National Mortgage Association (GNMA), Federal
National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC).
A Collateralized Mortgage Obligation (CMO) is a bond which is collateralized
by a pool of MBS's. These MBS pools are divided into classes or tranches with
each class having its own characteristics. For instance, a PAC (Planned
Amortization Class) is a specific class of mortgages which over its life will
generally have the most stable cash flows and the lowest prepayment risk.
7. 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 (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A 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 June 30, 1999, are payments retained by Van Kampen of
approximately $55,700.
23
<PAGE> 25
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
(C) Van Kampen Funds Inc., 1999
All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After November 30, 1999, the report, if used with
prospective investors, must be accompanied by a monthly performance update.
24
<PAGE> 26
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000783743
<NAME> LTD MAT GOVT A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 48,118,927<F1>
<INVESTMENTS-AT-VALUE> 48,033,927<F1>
<RECEIVABLES> 825,655<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 52,482<F1>
<TOTAL-ASSETS> 48,912,064<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 452,736<F1>
<TOTAL-LIABILITIES> 452,736<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,248,685
<SHARES-COMMON-STOCK> 2,943,302
<SHARES-COMMON-PRIOR> 2,896,387
<ACCUMULATED-NII-CURRENT> (144,764)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,699,096)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (71,046)<F1>
<NET-ASSETS> 35,079,362
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 1,640,013<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (406,027)<F1>
<NET-INVESTMENT-INCOME> 1,233,986<F1>
<REALIZED-GAINS-CURRENT> (426,584)<F1>
<APPREC-INCREASE-CURRENT> (482,138)<F1>
<NET-CHANGE-FROM-OPS> 325,264<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (987,128)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,795,292
<NUMBER-OF-SHARES-REDEEMED> (1,799,462)
<SHARES-REINVESTED> 51,085
<NET-CHANGE-IN-ASSETS> (139,660)
<ACCUMULATED-NII-PRIOR> (46,250)<F1>
<ACCUMULATED-GAINS-PRIOR> (9,272,512)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 125,856<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 408,801<F1>
<AVERAGE-NET-ASSETS> 35,980,117
<PER-SHARE-NAV-BEGIN> 12.160
<PER-SHARE-NII> 0.306
<PER-SHARE-GAIN-APPREC> (0.218)
<PER-SHARE-DIVIDEND> (0.330)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.918
<EXPENSE-RATIO> 1.40
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000783743
<NAME> LTD MAT GOVT B
<SERIES>
<NUMBER> 12
<NAME> LTD MAT GOVT B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 48,118,927<F1>
<INVESTMENTS-AT-VALUE> 48,033,927<F1>
<RECEIVABLES> 825,655<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 52,482<F1>
<TOTAL-ASSETS> 48,912,064<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 452,736<F1>
<TOTAL-LIABILITIES> 452,736<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,207,939
<SHARES-COMMON-STOCK> 847,183
<SHARES-COMMON-PRIOR> 1,019,808
<ACCUMULATED-NII-CURRENT> (144,764)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,699,096)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (71,046)<F1>
<NET-ASSETS> 10,132,325
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 1,640,013<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (406,027)<F1>
<NET-INVESTMENT-INCOME> 1,233,986<F1>
<REALIZED-GAINS-CURRENT> (426,584)<F1>
<APPREC-INCREASE-CURRENT> (482,138)<F1>
<NET-CHANGE-FROM-OPS> 325,264<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (268,767)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 257,218
<NUMBER-OF-SHARES-REDEEMED> (440,828)
<SHARES-REINVESTED> 10,985
<NET-CHANGE-IN-ASSETS> (2,306,720)
<ACCUMULATED-NII-PRIOR> (46,250)<F1>
<ACCUMULATED-GAINS-PRIOR> (9,272,512)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 125,856<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 408,801<F1>
<AVERAGE-NET-ASSETS> 11,481,693
<PER-SHARE-NAV-BEGIN> 12.197
<PER-SHARE-NII> 0.262
<PER-SHARE-GAIN-APPREC> (0.217)
<PER-SHARE-DIVIDEND> (0.282)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.960
<EXPENSE-RATIO> 2.17
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> LTD MAT GOVT C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 48,118,927<F1>
<INVESTMENTS-AT-VALUE> 48,033,927<F1>
<RECEIVABLES> 825,655<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 52,482<F1>
<TOTAL-ASSETS> 48,912,064<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 452,736<F1>
<TOTAL-LIABILITIES> 452,736<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,917,610
<SHARES-COMMON-STOCK> 271,886
<SHARES-COMMON-PRIOR> 271,571
<ACCUMULATED-NII-CURRENT> (144,764)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,699,096)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (71,046)<F1>
<NET-ASSETS> 3,247,641
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 1,640,013<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (406,027)<F1>
<NET-INVESTMENT-INCOME> 1,233,986<F1>
<REALIZED-GAINS-CURRENT> (426,584)<F1>
<APPREC-INCREASE-CURRENT> (482,138)<F1>
<NET-CHANGE-FROM-OPS> 325,264<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (76,605)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 61,162
<NUMBER-OF-SHARES-REDEEMED> (65,691)
<SHARES-REINVESTED> 4,844
<NET-CHANGE-IN-ASSETS> (60,768)
<ACCUMULATED-NII-PRIOR> (46,250)<F1>
<ACCUMULATED-GAINS-PRIOR> (9,272,512)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 125,856<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 408,801<F1>
<AVERAGE-NET-ASSETS> 3,270,316
<PER-SHARE-NAV-BEGIN> 12.182
<PER-SHARE-NII> 0.262
<PER-SHARE-GAIN-APPREC> (0.218)
<PER-SHARE-DIVIDEND> (0.282)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.944
<EXPENSE-RATIO> 2.17
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
