<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
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>
GTI SAR 5/99
<PAGE> 2
LETTER TO SHAREHOLDERS
April 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning, and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
The U.S. economy continued to grow at a robust pace, despite financial
problems abroad. In the fourth quarter, the nation's gross domestic product
(GDP) rose at an astounding 6.0 percent annual rate, surprising most economists,
whose estimates had been much more conservative. GDP remained strong through the
first quarter of 1999, posting a 4.5 percent annual growth rate. However, the
economy began to show signs of slowing down early in 1999, as corporate profits
and wage growth declined.
A series of interest rate cuts by the Federal Reserve helped the U.S.
economy avoid the economic slump that plagued many global markets. The Fed's
0.25 percent interest rate cut in September was followed by additional cuts in
October and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to foster continued growth.
In addition, the outlook for troubled areas such as Asia and Latin America
improved significantly, and most experts agree that these economies are on the
slow road to recovery.
Despite the improvements abroad and record economic growth in the United
States, inflation remained at bay as commodity prices tumbled. This low
inflationary environment--only a 1.7 percent increase in the consumer price
index over the past 12 months--contributed to the strong domestic economy and
kept inflation-adjusted interest rates attractive. A low level of unemployment,
vibrant consumer spending, and an active housing market also supported the
positive economic conditions.
Continued on page 2
1
<PAGE> 3
MARKET REVIEW
Most areas of the bond market were quite active during the reporting period,
with U.S. Treasury bonds experiencing the greatest price appreciation. Intense
demand, decreasing supply, and a flight to quality that included investors
around the globe pushed the 30-year Treasury bond to its lowest yield ever in
October 1998.
At the same time, investors shied away from lower-rated securities, causing
the prices of high-yield bonds to plummet. This lack of demand for lower-rated
bonds led to unusually high yields in the marketplace as investors required
significant premiums in exchange for purchasing these out-of-favor securities.
The difference in yields between U.S. Treasury bonds and high-yield bonds of
comparable maturity widened to as much as 7.79 percent in mid-October. The
high-yield market rebounded late in 1998 as investors saw that the economy was
performing well and that the global financial crisis was on its way to recovery.
The prices of most investment-grade bonds experienced similar, though much less
dramatic, movement during this period. Investors' preference for quality also
held true for international bonds, although there was some renewed interest in
lower-rated foreign bonds in recent months.
OUTLOOK
Our outlook for the domestic economy remains positive, although the pattern
of reduced growth may continue into the second half of the year. We look for a
slow but steady rise in inflation throughout 1999 to more normal, but certainly
not alarming levels. Internationally, low interest rates and improving financial
conditions should continue to support the economic improvements we've witnessed
in Asia and Latin America.
We believe the markets may still favor higher-quality securities such as
large-company stocks and investment-grade bonds in the near term. In addition,
we anticipate continued day-to-day volatility in the markets, although we
probably won't see sustained high or low periods during the next six months.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG]
Richard F. Powers III
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED MARCH 31, 1999
VAN KAMPEN 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)... (0.80%) (1.17%) (1.17%)
Six-month total return(2)................ (5.52%) (5.00%) (2.12%)
One-year total return(2)................. 0.02% 0.32% 3.27%
Five-year average annual total
return(2)................................ 5.07% 5.06% 5.29%
Life-of-Fund average annual total
return(2)................................ 4.68%(3) 4.66%(3) 4.16%
Commencement date........................ 10/06/92 10/06/92 04/12/93
DISTRIBUTION RATE AND YIELD
Distribution rate(4)..................... 6.37% 5.95% 5.95%
SEC Yield(5)............................. 4.31% 3.73% 3.73%
</TABLE>
(1) Assumes 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).
(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) Total return from November 2, 1992 (date the Fund's investment strategy was
implemented) through the end of the period.
(4) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
(5) 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 March 31, 1999.
See the Fund Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth more
or less than their original cost.
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. 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
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to 1 percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis-point move.
COUPON RATE: The stated rate of interest the bond pays on an annual basis,
expressed as a percentage of the face value.
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.
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.
YIELD CURVE: A result of viewing the yields of 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.
4
<PAGE> 6
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
We recently spoke with the management team of the Van Kampen U.S. Government
Trust for Income about the key events and economic forces that shaped the
markets during the past six months. 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, 1999.
Q DESCRIBE THE ENVIRONMENT IN WHICH THE FUND OPERATED DURING THE REPORTING
PERIOD.
A Heading into this six-month period, a lingering cloud of global volatility
overshadowed the domestic fixed-income markets. As investors flocked to
the relative safety of U.S. Treasury securities, the yield for the
benchmark five-year Treasury dropped to a low of 3.97 percent. This occurred in
response to international economic developments and in anticipation of
short-term interest rate cuts initiated by the Federal Reserve Board. As
investors grew less dependent on the relative safety of Treasuries, the yield
for the five-year Treasury bond -- which, like all bond yields, moves in the
opposite direction of its price -- settled into a trading range of 4.30 to 4.70
percent.
The new year ushered in a new optimism for risk-sensitive investments,
including corporate bonds, high-yield securities, and mortgage-backed
securities. In contrast to the latter half of 1998, investors began to view this
group more favorably as it became clear that the U.S. economy continued to
expand despite concerns to the contrary. Because these securities were priced at
very attractive levels after being slashed in the third quarter of 1998,
investors had additional incentive to add them to their portfolio holdings.
Consequently, the yield spreads between these securities and Treasuries
tightened, indicating an improvement in their performance during this time
period. This was certainly the case for mortgage-backed securities, which became
less vulnerable to refinancing as interest rates gradually moved upward.
Q CONSIDERING THESE FACTORS, HOW DID YOU POSITION THE FUND?
A In the last reporting period, we took advantage of attractively priced
mortgage-backed securities and incrementally increased the portfolio
allocation to this sector. As a result, we had slightly more exposure in
the mortgage sector than we would have preferred, with mortgage spreads widening
in the beginning of the period. As spreads reached historically high levels, we
decided to maintain this position and selectively looked for opportunities to
increase it. In addition to agency-backed securities, we added some structured,
non-agency product. These longer-term securities have benefited from spread
tightening more than agency-issued pass-through mortgages. This allocation
served the Fund well as mortgage spreads recovered through the first three
months of this year. By the beginning of March, we determined that much of the
yield spread and performance had been captured in this sector. Consequently, we
balanced the portfolio a little more
5
<PAGE> 7
evenly by once again increasing the Fund's Treasury exposure. At the end of the
period, approximately 61 percent of the Fund's long-term investments were
invested in mortgage-backed securities and government agencies, with 39 percent
in Treasuries.
Against the backdrop of market volatility through the third quarter of 1998,
we held a moderately high portfolio duration, which was also a reflection of the
portfolio's higher weighting in mortgage-backed securities. As we began to
rebalance the portfolio in the first part of 1999, we reduced the duration to
more neutral levels and held it relatively stable. At the end of the period, the
Fund's duration was 3.9 years. Please refer to page 8 for additional Fund
portfolio highlights.
Q WHERE DID YOU FIND VALUE ALONG THE YIELD CURVE?
A The Fund's Treasury exposure was concentrated at both ends of the yield
curve (two- and 30-year Treasuries). In October, the yield spread between
the two- and 10-year Treasury expanded dramatically, moving from 18 to 60
basis points. From that point, however, spreads moved back toward 15 to 20 basis
points. The Fund's initial underweighting in the 10-year Treasury benefited the
portfolio during this time because of its relative underperformance. More
recently, the yield curve has assumed a slightly positive slope, and we believe
it is fairly priced. As a result, the portfolio's Treasury allocation is now
relatively neutral, with a slight bias toward the short end of the yield curve,
where we believe the best value opportunities lie.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A For the six-month period ended March 31, 1999, the U.S. Government Trust
for Income generated a total return of -0.80 percent(1) (Class A shares at
net asset value). Additionally, the Fund's Class A shares provided
shareholders with a competitive distribution rate of 6.37 percent(4), based upon
the maximum offering price as of March 31, 1999, and a monthly dividend of
$0.04500 per Class A share. By comparison, the Merrill Lynch Intermediate-Term
Government Index posted a total return of -0.12 percent for the same period.
This broad-based index measures the market performance of government securities
with maturities between one and ten years. Please keep in mind that this
unmanaged index does not reflect any commissions or fees that would be paid by
an investor purchasing the securities it represents. Past performance does not
guarantee future results. For additional Fund performance results, please refer
to the chart and footnotes on page 3.
Q WHAT IS YOUR OUTLOOK FOR THE MARKET AND THE FUND IN THE MONTHS AHEAD?
A Although investors have expected an economic slowdown in the United States
for some time, we do not see signs that this might materialize in the near
future. We also continue to see low inflation numbers, backed by
indications of a taut job market and high consumer confidence. With continuing
difficulties in many foreign economies, we cannot rule out the possibility that,
at some point, domestic GDP growth could lag. At the
6
<PAGE> 8
same time, the fundamentals currently underpinning the U.S. bond market are as
healthy as at any time in recent memory, and we expect the market to remain
strong in the months ahead.
With regard to mortgage-backed securities, we believe this sector has moved
back to a fair value that we feel still provides attractive yield. We expect to
see the evolution of a favorable trading range in the coming months for these
securities, so we plan to maintain the portfolio's bias toward mortgages over
Treasuries. Going forward, we will continue to evaluate the relationship between
mortgages and Treasuries in order to maintain an optimal balance.
[SIG]
Ted V. Mundy
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
COUPON DISTRIBUTION AS OF MARCH 31, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
COUPON RATE 5-5.99 6-6.99 7-7.99 8-8.99 9-9.99 10 OR MORE
- ----------- ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Percentage of Long-Term
Investments 8.6% 24.5% 13.2% 12.2% 7.6% 33.9%
</TABLE>
PORTFOLIO COMPOSITION BY SECTOR AS A PERCENTAGE OF LONG-TERM INVESTMENTS
[PIE CHART]
<TABLE>
<CAPTION>
GNMA FNMA TREASURY/AGENCY CMO FHLMC
---- ---- --------------- --- -----
<S> <C> <C> <C> <C> <C>
March 31, 1999 17.7% 14.4% 39.7% 11.1% 9.2%
<CAPTION>
ASSET-BACKED
SECURITIES
------------
<S> <C>
March 31, 1999 7.9%
</TABLE>
[PIE CHART]
<TABLE>
<CAPTION>
GNMA FNMA TREASURY/AGENCY CMO FHLMC
---- ---- --------------- --- -----
<S> <C> <C> <C> <C> <C>
September 30, 1998 19.2% 14.4% 45.8% 3.1% 11.4%
<CAPTION>
ASSET-BACKED
SECURITIES
------------
<S> <C>
September 30, 1998 6.1%
</TABLE>
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES 7.8%
$ 3,469 Norwest Asset Securities Corp.,
Series 1997-19..................... 7.250% 12/25/27 $ 3,413,263
7,214 Pacific America Home Equity Loan... 5.916 12/25/27 7,180,392
------------
TOTAL ASSET-BACKED SECURITIES............................... 10,593,655
------------
COLLATERALIZED MORTGAGE OBLIGATIONS 10.9%
6,967 Residential Funding Mortgage
Securities Investment, Series
1998-S20 M1 (a).................... 6.750 09/25/28 6,885,184
7,388 Residential Funding Mortgage
Securities Investment, Series
1999-S2 M1......................... 6.500 01/25/29 7,166,319
829 Salomon Brothers Mortgage
Securities, Series 93-5A3.......... 7.346 10/25/23 841,246
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS................... 14,892,749
------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 40.5%
7,983 Federal Home Loan Mortgage Corp. 02/01/26 to
Gold 30 Year Pool (a).............. 6.500 05/01/26 7,959,126
4,290 Federal Home Loan Mortgage Corp.
CMO, Series 1992-FB (a)............ 5.400 09/15/27 4,296,446
6,333 Federal National Mortgage
Association CMO, Series 94-87F..... 6.138 03/25/09 6,349,442
11,000 Federal National Mortgage
Association Medium Term Note....... 11.875 05/19/00 11,813,340
1,016 Federal National Mortgage 01/01/22 to
Association Pool................... 8.500 09/01/24 1,068,684
13,052 Government National Mortgage 06/15/28 to
Association Pool................... 7.500 09/15/28 13,451,169
2,964 Government National Mortgage 11/15/21 to
Association Pool................... 8.000 08/15/24 3,086,009
3,531 Government National Mortgage
Association Pool (a)............... 8.500 12/15/17 3,772,725
3,117 Government National Mortgage 03/15/18 to
Association Pool................... 9.000 12/15/19 3,360,781
------------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS........... 55,157,722
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS 39.0%
$ 6,000 United States Treasury Bonds (a)... 13.125% 05/15/01 $ 6,962,520
5,000 United States Treasury Bonds (a)... 9.000 11/15/18 6,783,900
4,000 United States Treasury Bonds (a)... 6.625 02/15/27 4,410,680
8,000 United States Treasury Notes (a)... 8.000 05/15/01 8,469,120
22,000 United States Treasury Notes (a)... 11.625 11/15/02 26,558,400
------------
TOTAL UNITED STATES TREASURY OBLIGATIONS.................... 53,184,620
------------
TOTAL LONG-TERM INVESTMENTS 98.2%
(Cost $136,028,406)................................................. 133,828,746
REPURCHASE AGREEMENT 0.3%
DLJ Mortgage Acceptance Corp. ($480,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 03/31/99, to be
sold on 04/01/99 at $480,066) (Cost $480,000)......................... 480,000
------------
TOTAL INVESTMENTS 98.5%
(Cost $136,508,406)................................................. 134,308,746
OTHER ASSETS IN EXCESS OF LIABILITIES 1.5%........................... 1,990,531
------------
NET ASSETS 100.0%.................................................... $136,299,277
------------
</TABLE>
(a) Assets segregated as collateral for open futures and forwards transactions.
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $136,508,406)....................... $134,308,746
Cash........................................................ 2,527
Receivables:
Interest.................................................. 2,587,779
Fund Shares Sold.......................................... 394,026
Investments Sold.......................................... 89,733
Other..................................................... 5,888
Forward Commitments......................................... 66,904
Other....................................................... 15,724
------------
Total Assets.......................................... 137,471,327
------------
LIABILITIES:
Payables:
Income Distributions...................................... 487,733
Fund Shares Repurchased................................... 302,690
Distributor and Affiliates................................ 135,845
Investment Advisory Fee................................... 70,817
Variation Margin on Futures............................... 22,000
Accrued Expenses............................................ 78,127
Trustees' Deferred Compensation and Retirement Plans........ 74,838
------------
Total Liabilities..................................... 1,172,050
------------
NET ASSETS.................................................. $136,299,277
============
NET ASSETS CONSIST OF:
Capital..................................................... $188,449,099
Accumulated Undistributed Net Investment Income............. 199,622
Net Unrealized Depreciation................................. (2,076,876)
Accumulated Net Realized Loss............................... (50,272,568)
------------
NET ASSETS.................................................. $136,299,277
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $48,551,766 and 6,005,843 shares of
beneficial interest issued and outstanding)........... $ 8.08
Maximum sales charge (4.75%* of offering price)......... .40
------------
Maximum offering price to public........................ $ 8.48
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $76,331,584 and 9,455,694 shares of
beneficial interest issued and outstanding)........... $ 8.07
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $11,415,927 and 1,414,036 shares of
beneficial interest issued and outstanding)........... $ 8.07
============
</TABLE>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 5,570,904
Fee Income.................................................. 156,172
-----------
Total Income............................................ 5,727,076
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $49,415, $464,177 and $57,652,
respectively)............................................. 571,244
Investment Advisory Fee..................................... 436,760
Shareholder Services........................................ 108,247
Custody..................................................... 10,738
Trustees' Fees and Expenses................................. 9,449
Legal....................................................... 2,730
Other....................................................... 105,860
-----------
Total Expenses.......................................... 1,245,028
-----------
NET INVESTMENT INCOME....................................... $ 4,482,048
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (19,222)
Futures................................................... (136,991)
Forward Commitments....................................... (545,758)
-----------
Net Realized Loss........................................... (701,971)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 3,283,548
-----------
End of the Period:
Investments............................................. (2,199,660)
Futures................................................. 55,880
Forward Commitments..................................... 66,904
-----------
(2,076,876)
-----------
Net Unrealized Depreciation During the Period............... (5,360,424)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(6,062,395)
===========
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(1,580,347)
===========
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1999
and the Year Ended September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1999 September 30, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income........................... $ 4,482,048 $ 10,645,851
Net Realized Loss............................... (701,971) (234,373)
Net Unrealized Appreciation/Depreciation During
the Period.................................... (5,360,424) 3,694,028
------------ ------------
Change in Net Assets from Operations............ (1,580,347) 14,105,506
------------ ------------
Distributions from Net Investment Income:
Class A Shares................................ (1,373,110) (2,579,681)
Class B Shares................................ (2,746,181) (6,583,547)
Class C Shares................................ (341,877) (742,528)
------------ ------------
(4,461,168) (9,905,756)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................... (6,041,515) 4,199,750
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold....................... 31,838,277 21,122,925
Net Asset Value of Shares Issued Through
Dividend Reinvestment......................... 1,745,114 3,832,141
Cost of Shares Repurchased...................... (40,950,312) (53,196,413)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.................................. (7,366,921) (28,241,347)
------------ ------------
TOTAL DECREASE IN NET ASSETS.................... (13,408,436) (24,041,597)
NET ASSETS:
Beginning of the Period......................... 149,707,713 173,749,310
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$199,622 and $178,742, respectively).......... $136,299,277 $149,707,713
============ ============
</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>
Six Months Year Ended September 30,
Ended ---------------------------------
Class A Shares March 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................. $ 8.422 $8.193 $8.108 $ 8.38 $ 8.17
------- ------ ------ ------ ------
Net Investment Income...... .270 .595 .567 .565 .63
Net Realized and Unrealized
Gain/Loss................ (.335) .184 .073 (.274) .23
------- ------ ------ ------ ------
Total from Investment
Operations................. (.065) .779 .640 .291 .86
------- ------ ------ ------ ------
Less:
Distributions from Net
Investment Income........ .273 .550 .555 .563 .645
Distributions from Net
Realized Gain............ -0- -0- -0- -0- .005
------- ------ ------ ------ ------
Total Distributions.......... .273 .550 .555 .563 .65
------- ------ ------ ------ ------
Net Asset Value, End of the
Period..................... $ 8.084 $8.422 $8.193 $8.108 $ 8.38
======= ====== ====== ====== ======
Total Return (a)............. (0.80%)* 9.87% 8.09% 3.57% 10.97%
Net Assets at End of the
Period (In millions)....... $ 48.6 $ 37.2 $ 38.3 $ 45.2 $ 70.2
Ratio of Expenses to Average
Net Assets................. 1.17% 1.16% 1.18% 1.13% 1.09%
Ratio of Net Investment
Income to Average Net
Assets..................... 6.70% 7.19% 6.95% 6.83% 7.67%
Portfolio Turnover........... 50%* 217% 82% 282% 262%
</TABLE>
* Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
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>
Six Months Year Ended September 30,
Ended ---------------------------------
Class B Shares March 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $ 8.412 $8.187 $8.104 $ 8.38 $ 8.17
-------------- ------ ------ ------ ------
Net Investment Income.............. .247 .529 .505 .504 .57
Net Realized and Unrealized
Gain/Loss........................ (.343) .186 .073 (.277) .228
-------------- ------ ------ ------ ------
Total from Investment Operations..... (.096) .715 .578 .227 .798
-------------- ------ ------ ------ ------
Less:
Distributions from Net Investment
Income........................... .243 .490 .495 .503 .583
Distributions from Net Realized
Gain............................. -0- -0- -0- -0- .005
-------------- ------ ------ ------ ------
Total Distributions.................. .243 .490 .495 .503 .588
-------------- ------ ------ ------ ------
Net Asset Value, End of the Period... $ 8.073 $8.412 $8.187 $8.104 $ 8.38
============== ====== ====== ====== ======
Total Return (a)..................... (1.17%)* 8.96% 7.43% 2.70% 10.14%
Net Assets at End of the Period
(In millions)...................... $ 76.3 $101.2 $121.7 $150.8 $200.2
Ratio of Expenses to Average Net
Assets............................. 1.93% 1.93% 1.94% 1.89% 1.85%
Ratio of Net Investment Income to
Average Net Assets................. 5.95% 6.40% 6.20% 6.08% 6.92%
Portfolio Turnover................... 50%* 217% 82% 282% 262%
</TABLE>
* Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or a contingent deferred sales charge.
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>
Six Months Year Ended September 30,
Ended ---------------------------------
Class C Shares March 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period......................... $ 8.412 $8.186 $8.104 $ 8.38 $ 8.17
-------------- ------ ------ ------ ------
Net Investment Income.............. .243 .529 .503 .502 .57
Net Realized and Unrealized
Gain/Loss........................ (.339) .187 .074 (.275) .228
-------------- ------ ------ ------ ------
Total from Investment Operations..... (.096) .716 .577 .227 .798
-------------- ------ ------ ------ ------
Less:
Distributions from Net Investment
Income........................... .243 .490 .495 .503 .583
Distributions from Net Realized
Gain............................. -0- -0- -0- -0- .005
-------------- ------ ------ ------ ------
Total Distributions.................. .243 .490 .495 .503 .588
-------------- ------ ------ ------ ------
Net Asset Value, End of the Period... $ 8.073 $8.412 $8.186 $8.104 $ 8.38
============== ====== ====== ====== ======
Total Return (a)..................... (1.17%)* 8.96% 7.43% 2.70% 10.14%
Net Assets at End of the Period (In
millions).......................... $ 11.4 $ 11.3 $ 13.7 $ 18.6 $ 28.1
Ratio of Expenses to Average Net
Assets............................. 1.93% 1.93% 1.94% 1.89% 1.85%
Ratio of Net Investment Income to
Average Net Assets................. 5.94% 6.41% 6.20% 6.08% 6.94%
Portfolio Turnover................... 50%* 217% 82% 282% 262%
</TABLE>
* Non-Annualized
(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or a contingent deferred sales charge.
See Notes to Financial Statements
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 investment 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
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 on
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 may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The 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, 1999, there were no when issued or delayed delivery purchase
commitments.
The Fund trades certain securities under the terms of forward commitments,
whereby the settlement for payment and delivery occurs at a specified future
date. Forward
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 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.
Original issue discount is amortized over the expected life of each applicable
security. 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.
At March 31, 1999, for federal income tax purposes, cost of long- and
short-term investments is $136,532,104, the aggregate gross unrealized
appreciation is $1,072,186
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
and the aggregate gross unrealized depreciation is $3,295,544, resulting in net
unrealized depreciation on long- and short-term investments of $2,223,358.
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 September 30, 1998, the Fund had an accumulated capital loss
carryforward for tax purposes of $49,113,277 which will expire between September
30, 2003 and September 30, 2006. Net realized loss differs 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 and
losses recognized for tax purposes on open futures positions at September 30,
1998.
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. Distributions from net realized gains for book purposes
may include 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.
Due to inherent differences in the recognition of distributions from income
under generally accepted accounting principles and federal income tax purposes,
the amount of distributable net investment income may differ between book and
federal income tax purposes for a particular period. These differences are
temporary in nature, but may result in distributions in excess of net investment
income for certain periods.
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, of .60% of the Fund's average daily net assets.
For the six months ended March 31, 1999, the Fund recognized expenses of
approximately $2,700 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 March 31, 1999, the Fund recognized expenses of
approximately $25,100 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. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
March 31, 1999, the
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Fund recognized expenses of approximately $71,300. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees and are based
on competitive benchmarks.
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
The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 1999, capital aggregated $60,478,459, $110,480,131 and
$17,490,509 for Classes A, B and C, respectively. For the six months ended March
31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 2,648,551 $ 21,649,733
Class B...................................... 973,061 8,051,093
Class C...................................... 259,313 2,137,451
---------- ------------
Total Sales.................................... 3,880,925 $ 31,838,277
========== ============
Dividend Reinvestment:
Class A...................................... 58,254 $ 477,694
Class B...................................... 133,431 1,094,779
Class C...................................... 21,065 172,641
---------- ------------
Total Dividend Reinvestment.................... 212,750 $ 1,745,114
========== ============
Repurchases:
Class A...................................... (1,121,808) $ (9,161,194)
Class B...................................... (3,682,205) (30,096,648)
Class C...................................... (206,224) (1,692,470)
---------- ------------
Total Repurchases.............................. (5,010,237) $(40,950,312)
========== ============
</TABLE>
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At September 30, 1998, capital aggregated $47,512,226, $131,430,907 and
$16,872,887 for Classes A, B and C, respectively. For the year ended September
30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 1,317,193 $ 10,837,724
Class B...................................... 1,103,881 9,096,177
Class C...................................... 144,333 1,189,024
---------- ------------
Total Sales.................................... 2,565,407 $ 21,122,925
========== ============
Dividend Reinvestment:
Class A...................................... 106,644 $ 880,219
Class B...................................... 315,137 2,598,342
Class C...................................... 42,886 353,580
---------- ------------
Total Dividend Reinvestment.................... 464,667 $ 3,832,141
========== ============
Repurchases:
Class A...................................... (1,678,538) $(13,853,819)
Class B...................................... (4,256,983) (35,039,788)
Class C...................................... (522,127) (4,302,806)
---------- ------------
Total Repurchases.............................. (6,457,648) $(53,196,413)
========== ============
</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 five 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........................................ 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>
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended March 31, 1999, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $2,100 and CDSC on redeemed shares of approximately $32,900. 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 and forward commitment transactions, were
$71,317,867 and $78,806,700, 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 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 when taking delivery of
a security underlying a futures contract or forward commitment. In these
instances, the recognition of gain or loss is postponed until the disposal of
the security underlying the futures contract or forward commitment.
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
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 potential risk of loss
associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in futures contracts, each with a par value of $100,000, for
the six months ended March 31, 1999, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at September 30, 1998......................... 52
Futures Opened............................................ 1,986
Futures Closed............................................ (1,819)
------
Outstanding at March 31, 1999............................. 219
======
</TABLE>
The futures contracts outstanding as of March 31, 1999, and the descriptions
and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C>
LONG CONTRACTS
U.S. Treasury Bond Future, June 1999--
(Current Notional Value of $120,563 per
contract)................................. 40 $(76,258)
5-Year U.S. Treasury Note Future, June
1999--
(Current Notional Value of $111,437 per
contract)................................. 109 44,650
SHORT CONTRACTS
10-Year U.S. Treasury Note Future, June
1999--
(Current Notional Value of $114,688 per
contract)................................. 70 87,488
--- --------
219 $ 55,880
=== ========
</TABLE>
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
sufficient collateral of cash or securities in a segregated account with its
custodian. Forward commitments are marked to market on a daily basis with
changes in value reflected as a component of unrealized
appreciation/depreciation. Purchasing securities on a forward commitment
involves a risk that the market value at the time of delivery may be lower than
the agreed upon purchase price resulting in an unrealized loss. This potential
for loss may be greater than the amount shown on the Statement of Assets and
Liabilities. Selling securities on a forward commitment involves different risks
and can result in losses more significant than those arising from the purchase
of such securities. The Fund's market exposure from these
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
positions is equal to the Current Value noted below. The following forward
commitments were outstanding as of March 31, 1999:
<TABLE>
<CAPTION>
UNREALIZED
PAR AMOUNT APPRECIATION/
(000) DESCRIPTION CURRENT VALUE DEPRECIATION
- -------------------------------------------------------------------------
<C> <S> <C> <C>
Long Contracts
$ 7,000 U.S. T-Note April Forward,
4.875% $ 6,986,350 $ 1,389
5,000 FNMA April Forward, 6.00% 4,858,600 22,662
8,000 FNMA May Forward, 6.50% 7,948,440 33,440
5,000 FNMA Dwarf May Forward, 15
Yr., 6.00% 4,954,725 9,413
----------- ---------
$24,748,115 $ 66,904
=========== =========
</TABLE>
C. CLOSED BUT UNSETTLED FORWARD COMMITMENTS--In certain situations, the Fund has
entered into offsetting transactions for outstanding forward commitments prior
to settlement of the obligation. In doing so, the Fund realizes a gain or loss
on the transactions at the time the forward commitment is closed. Risks may
result from the potential inability of counterparties to meet the terms of their
contracts.
As of March 31, 1999, there were no closed but unsettled forward commitments
outstanding.
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 (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 March 31, 1999, are payments retained by Van Kampen of
approximately $409,100.
25
<PAGE> 27
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these
funds, ask your financial advisor for
a prospectus, which contains more
complete information, including sales
charges, risks, and expenses. Please
read it carefully before you invest
or send money.
To view a current Van Kampen fund
prospectus or to receive additional
fund information, choose from one of
the following:
- - visit our Web site at www.vankampen.com--to view a prospectus, select Download
Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting www.vankampen.com and selecting Contact Us
26
<PAGE> 28
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
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, IL 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN 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
PRICEWATERHOUSECOOPERS LLP
203 N. LaSalle
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 August 31, 1999, the report, if used with
prospective investors, must be accompanied by a monthly performance update.
27
<PAGE> 29
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
<SERIES>
<NUMBER> 11
<NAME> U.S. GOV'T TR FOR INC A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999<F1>
<PERIOD-START> OCT-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 136,508,406<F1>
<INVESTMENTS-AT-VALUE> 138,308,746<F1>
<RECEIVABLES> 3,077,426<F1>
<ASSETS-OTHER> 15,724<F1>
<OTHER-ITEMS-ASSETS> 69,431<F1>
<TOTAL-ASSETS> 137,471,327<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,752,050<F1>
<TOTAL-LIABILITIES> 1,752,050<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 60,478,459
<SHARES-COMMON-STOCK> 6,005,843
<SHARES-COMMON-PRIOR> 4,420,846
<ACCUMULATED-NII-CURRENT> 199,622<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (50,272,568)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (2,076,876)<F1>
<NET-ASSETS> 48,551,766
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,570,904<F1>
<OTHER-INCOME> 156,172<F1>
<EXPENSES-NET> (1,245,028)<F1>
<NET-INVESTMENT-INCOME> 4,482,048<F1>
<REALIZED-GAINS-CURRENT> (701,971)<F1>
<APPREC-INCREASE-CURRENT> (5,360,424)<F1>
<NET-CHANGE-FROM-OPS> (1,580,347)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,373,110)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,648,551
<NUMBER-OF-SHARES-REDEEMED> (1,121,808)
<SHARES-REINVESTED> 58,254
<NET-CHANGE-IN-ASSETS> 11,319,489
<ACCUMULATED-NII-PRIOR> 178,742<F1>
<ACCUMULATED-GAINS-PRIOR> (49,570,597)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 436,760<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,245,028<F1>
<AVERAGE-NET-ASSETS> 41,286,161
<PER-SHARE-NAV-BEGIN> 8.422
<PER-SHARE-NII> 0.270
<PER-SHARE-GAIN-APPREC> (0.335)
<PER-SHARE-DIVIDEND> (0.273)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.084
<EXPENSE-RATIO> 1.17
<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> 12
<NAME> U.S. GOV'T TR FOR INC B
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999<F1>
<PERIOD-START> OCT-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 136,508,406<F1>
<INVESTMENTS-AT-VALUE> 134,308,746<F1>
<RECEIVABLES> 3,077,426<F1>
<ASSETS-OTHER> 15,724<F1>
<OTHER-ITEMS-ASSETS> 69,431<F1>
<TOTAL-ASSETS> 137,471,327<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,172,050<F1>
<TOTAL-LIABILITIES> 1,172,050<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 110,480,131
<SHARES-COMMON-STOCK> 9,455,694
<SHARES-COMMON-PRIOR> 12,031,407
<ACCUMULATED-NII-CURRENT> 199,622<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (50,272,568)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (2,076,876)<F1>
<NET-ASSETS> 76,331,584
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,570,904<F1>
<OTHER-INCOME> 156,172<F1>
<EXPENSES-NET> (1,245,028)<F1>
<NET-INVESTMENT-INCOME> 4,482,048<F1>
<REALIZED-GAINS-CURRENT> (701,971)<F1>
<APPREC-INCREASE-CURRENT> (5,360,424)<F1>
<NET-CHANGE-FROM-OPS> (1,580,347)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,746,181)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 973,061
<NUMBER-OF-SHARES-REDEEMED> (3,682,205)
<SHARES-REINVESTED> 133,431
<NET-CHANGE-IN-ASSETS> (24,873,043)
<ACCUMULATED-NII-PRIOR> 178,742<F1>
<ACCUMULATED-GAINS-PRIOR> (49,570,597)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 436,760<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,245,028<F1>
<AVERAGE-NET-ASSETS> 92,995,867
<PER-SHARE-NAV-BEGIN> 8.412
<PER-SHARE-NII> 0.247
<PER-SHARE-GAIN-APPREC> (0.343)
<PER-SHARE-DIVIDEND> (0.243)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.073
<EXPENSE-RATIO> 1.93
<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> U.S. GOV'T TR FOR INC C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999<F1>
<PERIOD-START> OCT-01-1998<F1>
<PERIOD-END> MAR-31-1999<F1>
<INVESTMENTS-AT-COST> 136,508,406<F1>
<INVESTMENTS-AT-VALUE> 134,308,746<F1>
<RECEIVABLES> 3,077,426<F1>
<ASSETS-OTHER> 15,724<F1>
<OTHER-ITEMS-ASSETS> 69,431<F1>
<TOTAL-ASSETS> 137,471,327<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,172,050<F1>
<TOTAL-LIABILITIES> 1,172,050<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 17,490,509
<SHARES-COMMON-STOCK> 1,414,036
<SHARES-COMMON-PRIOR> 1,339,882
<ACCUMULATED-NII-CURRENT> 199,622<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (50,272,568)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (2,076,876)<F1>
<NET-ASSETS> 11,415,927
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 5,570,904<F1>
<OTHER-INCOME> 156,172<F1>
<EXPENSES-NET> (1,245,028)<F1>
<NET-INVESTMENT-INCOME> 4,482,048<F1>
<REALIZED-GAINS-CURRENT> (701,971)<F1>
<APPREC-INCREASE-CURRENT> (5,360,424)<F1>
<NET-CHANGE-FROM-OPS> (1,580,347)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (341,877)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 259,313
<NUMBER-OF-SHARES-REDEEMED> (206,224)
<SHARES-REINVESTED> 21,065
<NET-CHANGE-IN-ASSETS> 145,118
<ACCUMULATED-NII-PRIOR> 178,742<F1>
<ACCUMULATED-GAINS-PRIOR> (49,570,597)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 436,760<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,245,028<F1>
<AVERAGE-NET-ASSETS> 11,556,815
<PER-SHARE-NAV-BEGIN> 8.412
<PER-SHARE-NII> 0.243
<PER-SHARE-GAIN-APPREC> (0.339)
<PER-SHARE-DIVIDEND> (0.243)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.073
<EXPENSE-RATIO> 1.93
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
