<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 3
PORTFOLIO AT A GLANCE
SIX-MONTH DISTRIBUTION HISTORY 5
ASSET ALLOCATION 5
COUPON DISTRIBUTION 5
Q&A WITH YOUR PORTFOLIO MANAGERS 6
GLOSSARY OF TERMS 9
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 10
FINANCIAL STATEMENTS 12
NOTES TO FINANCIAL STATEMENTS 18
FUND OFFICERS AND IMPORTANT ADDRESSES 28
RESULTS OF SHAREHOLDER VOTES 29
</TABLE>
One of the greatest shifts we've seen is the increasing importance of investing
for many Americans.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
April 20, 2000
Dear Shareholder,
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all
mutual fund shareholders earmarked retirement as their primary
financial goal in 1998.
Through all the changes in the investment environment over the
past century, the general principles that have made
generations of investors successful remain the same. Some that have stood the
test of time include:
- - Investing for the long term
- - Basing investment decisions on sound research
- - Building a diversified portfolio
- - Acting on the value of professional investment advice
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[SIG]
Richard F. Powers, III
Chairman
Van Kampen
Asset Management Inc.
</TABLE>
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED VIBRANT DURING THE REPORTING PERIOD, PRIMARILY DUE TO
STRONG CONSUMER SPENDING. GROSS DOMESTIC PRODUCT (GDP), THE PRIMARY MEASURE OF
ECONOMIC GROWTH, INCREASED AT AN ANNUALIZED RATE OF 7.3 PERCENT IN THE FOURTH
QUARTER OF 1999, ITS FASTEST GROWTH RATE SINCE 1984. WITH GDP MEASURING 4.4
PERCENT FOR 1999, THIS WAS THE THIRD SUCCESSIVE YEAR IN WHICH GDP EXCEEDED 4
PERCENT.
CONSUMER SPENDING AND EMPLOYMENT
INFLATION CONCERNS MOUNTED DURING THE REPORTING PERIOD BECAUSE OF STRONG
CONSUMER SPENDING AND THE TIGHT LABOR MARKET. RISING INTEREST RATES HAVE DONE
LITTLE TO CURB CONSUMER SPENDING--RETAIL SALES GROWTH SOARED AS SHOPPERS SPENT
SOME OF THEIR STOCK-MARKET PROFITS.
IN ADDITION, UNEMPLOYMENT HOVERED NEAR A 30-YEAR LOW. THE LABOR SHORTAGE BEGAN
TO PUSH WAGES UPWARD, AS EMPLOYERS RAISED WAGES TO ATTRACT SKILLED WORKERS. WAGE
PRESSURE, IN TURN, BEGAN TO AFFECT PRICES, AS COMPANIES STARTED TO RAISE THE
COST OF GOODS AND SERVICES TO COMPENSATE FOR THEIR HIGHER LABOR COSTS.
INTEREST RATES AND INFLATION
STRONG GDP DATA, CONSUMER SPENDING, AND EMPLOYMENT PROMPTED THE FEDERAL RESERVE
BOARD TO MAINTAIN ITS ACTIVE STANCE IN TEMPERING ECONOMIC GROWTH TO WARD OFF
INFLATION. THE FED HAS INCREASED THE FEDERAL FUNDS RATE FIVE TIMES SINCE JUNE
1999. DESPITE THE FED'S ACTIONS, INFLATION BEGAN TO ACCELERATE, DRIVEN
PRINCIPALLY BY ESCALATING ENERGY PRICES. THE CONSUMER PRICE INDEX, A MEASURE OF
INFLATION, ROSE 3.7 PERCENT DURING THE 12 MONTHS ENDED MARCH 31, 2000--A NOTABLE
INCREASE OVER RECENT MONTHS. GIVEN THIS RECENT SURGE, FURTHER FED INTEREST-RATE
HIKES ARE WIDELY ANTICIPATED.
INTEREST RATES AND INFLATION
(March 31, 1998 - March 31, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Mar 98 5.50 1.40
5.50 1.40
5.50 1.70
Jun 98 5.50 1.70
5.50 1.70
5.50 1.60
Sep 98 5.25 1.50
5.00 1.50
4.75 1.50
Dec 98 4.75 1.60
4.75 1.70
4.75 1.60
Mar 99 4.75 1.70
4.75 2.30
4.75 2.10
Jun 99 5.00 2.00
5.00 2.10
5.25 2.30
Sep 99 5.25 2.60
5.25 2.60
5.50 2.60
Dec 99 5.50 2.70
5.50 2.70
5.75 3.20
Mar 00 6.00 3.70
</TABLE>
Interest rates are represented by the closing midline federal funds target 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 SUMMARY
RETURN HIGHLIGHTS
(as of March 31, 2000)
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six-month total return based on NAV(1) 2.13% 1.74% 1.74%
- --------------------------------------------------------------------------
Six-month total return(2) (2.75%) (2.21%) .75%
- --------------------------------------------------------------------------
One-year total return(2) (3.21%) (2.99%) (.15%)
- --------------------------------------------------------------------------
Five-year average annual total
return(2) 4.60% 4.60% 4.83%
- --------------------------------------------------------------------------
Life-of-Fund average annual total 4.25%(3,
return(2) 4.26%(3) 4) 3.67%
- --------------------------------------------------------------------------
Commencement date 10/06/92 10/06/92 04/12/93
- --------------------------------------------------------------------------
Distribution rate(5) 6.48% 6.03% 6.03%
- --------------------------------------------------------------------------
SEC Yield(6) 7.10% 6.67% 6.64%
- --------------------------------------------------------------------------
</TABLE>
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for Class A shares) or
contingent deferred sales charge ("CDSC"). On purchases of Class A shares of $1
million or more, a CDSC of 1% may be imposed on certain redemptions made within
one year of purchase. Returns for Class B shares are calculated without the
effect of the maximum 4% CDSC, charged on certain redemptions made within one
year of purchase and declining thereafter to 0% after the fifth year. Returns
for Class C shares are calculated without the effect of the maximum 1% CDSC,
charged on certain redemptions made within one year of purchase. If the sales
charges were included, total returns would be lower.
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (4.75% for Class A
shares) or contingent deferred sales charge ("CDSC"). On purchases of Class A
shares of $1 million or more, a CDSC of 1% may be imposed on certain redemptions
made within one year of purchase. Returns for Class B shares are calculated with
the effect of the maximum 4% CDSC, charged on certain redemptions made within
one year of purchase and declining thereafter to 0% after the fifth year.
Returns for Class C shares are calculated with the effect of the maximum 1%
CDSC, charged on certain redemptions made within one year of purchase.
(3) Total return from November 2, 1992 (date the Fund's investment strategy was
implemented) through the end of the period.
(4) The total return reflects the conversion of Class B shares into Class A
shares six years after the end of the calendar month in which the shares were
purchased. See Footnote 3 in the Notes to Financial Statements for additional
information.
(5) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
For additional Performance Summary disclosure, see Page 4.
3
<PAGE> 5
Continued from Page 3.
(6) 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, 2000.
See the Comparative Performance section of the current prospectus. Past
performance is no guarantee of 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. Investments in derivative securities will subject the Fund to
greater risks.
Market forecasts provided in this report may not necessarily come to pass.
4
<PAGE> 6
PORTFOLIO AT A GLANCE
SIX-MONTH DISTRIBUTION HISTORY
(for the period ended March 31, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C>
10/99 0.0435
11/99 0.0435
12/99 0.0435
1/00 0.0435
2/00 0.0435
3/00 0.0435
</TABLE>
The distribution history represents past performance of the Fund's Class A
shares and does not predict or guarantee the Fund's future distributions.
ASSET ALLOCATION
(as a percentage of long-term investments)
[BAR GRAPH]
<TABLE>
<CAPTION>
MARCH 31, 2000 SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
GNMA 14.50 15.60
FNMA 18.50 13.80
Treasury/Agency 40.40 46.30
CMO 12.10 10.20
FHLMC 7.90 7.30
Asset Backed 6.60 6.80
</TABLE>
COUPON DISTRIBUTION
(as a percentage of long-term investments)
[BAR GRAPH]
<TABLE>
<CAPTION>
COUPON DISTRIBUTION
-------------------
<S> <C>
5-5.9 0.00
6-6.9 39.10
7-7.9 20.70
8-8.9 6.90
9-9.9 7.60
10 or more 25.70
</TABLE>
5
<PAGE> 7
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE ADVISER 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. TED V. MUNDY, PORTFOLIO MANAGER, HAS
MANAGED THE FUND SINCE JUNE 1994 AND HAS WORKED IN THE INVESTMENT INDUSTRY SINCE
1987. HE IS JOINED BY PETER W. HEGEL, CHIEF INVESTMENT OFFICER FOR FIXED-INCOME
INVESTMENTS. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S
PERFORMANCE FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2000.
Q DESCRIBE THE ENVIRONMENT IN
WHICH THE FUND OPERATED DURING THE LAST SIX MONTHS.
A Several factors affected prices
within the government securities market during the six months ended March 31,
2000. As the period began, concerns about potential Y2K computer problems were
receding, causing credit spreads to contract. In the view of investors, fewer
Y2K computer difficulties meant more economic stability, thus reducing the risk
of holding non-Treasury securities. At the same time, the U.S. economy was
picking up speed, prompting the Federal Reserve Board to continue raising
interest rates. Higher short-term interest rates and concerns about inflation
caused the yield on 10-year Treasury bonds to rise from 5.89 percent on
September 30, 1999, to 6.8 percent in mid-January 2000. Because the price of a
bond is inversely related to its interest rate, bond prices declined as interest
rates rose.
In mid-January, a new dynamic entered the government securities market: a
Treasury buyback program. The robust pace of economic growth in recent years has
overflowed the Treasury Department's coffers. As a result, the U.S. government
has not only been able to run a budgetary surplus, but has started to pay down
the national debt through the repurchase of Treasury securities. When it became
clear early in the first quarter that the pace of the debt pay-down would exceed
expectations, bond investors scurried to buy 30-year Treasury bonds while such
securities were still available. This caused the yield on 30-year Treasuries to
plummet, which in turn pulled down yields on 10-year Treasury notes as well.
When the dust settled, the combination of Fed rate hikes and the perceived
shortage of 30-year Treasury bonds created an "inverted" yield curve, in which
longer-term yields were actually lower than their short-term counterparts.
Historically, such a configuration is highly unusual.
6
<PAGE> 8
Q WHAT HAPPENED TO MORTGAGE-
BACKED SECURITIES DURING THIS TIME?
A As the reporting period began,
GNMAs with a 7 percent coupon were yielding 145 basis points more than 10-year
Treasury notes, modestly above historical norms. This level was reached only
after investors began to surmise in mid-1999 that the Y2K computer bug might be
less problematic than previously believed. Spreads contracted further during the
fourth quarter of 1999 as Y2K computer fears evaporated entirely, ultimately
bottoming at 113 basis points in mid-January. Clearly, mortgage-backed
securities outperformed the Treasury sector during the first half of the
reporting period. Since then, however, strong demand for longer-term Treasuries
has caused mortgage-backed securities to underperform.
Q WHAT WERE YOUR STRATEGIES FOR
MANAGING THE PORTFOLIO DURING THIS PERIOD?
A We entered the reporting period
with a constructive outlook on mortgage securities. As a result, the portfolio
was positioned to benefit when credit spreads narrowed and mortgages
outperformed Treasuries. When spreads did in fact tighten during the fourth
quarter of 1999, we subsequently reduced the Fund's exposure to mortgage-backed
securities. Late in the year, we also increased the Fund's weighting in
securities with longer maturities, in anticipation of a drop in long-term
interest rates. The subsequent inversion of the yield curve worked to the
benefit of the Fund. As the reporting period ended, the Fund had a modestly
longer than neutral duration posture relative to its benchmark, in anticipation
of further declines in long-term interest rates. The Fund also ended the period
with a neutral weighting in mortgage products.
Q HOW DID THE FUND PERFORM AS
A RESULT?
A For the six-month period ended
March 31, 2000, the U.S. Government Trust for Income generated a total return of
2.13 percent (Class A shares at net asset value; if the maximum sales charge of
4.75 percent were included, the return would have been lower). By comparison,
the Merrill Lynch Intermediate-Term Government Index posted a total return of
1.58 percent for the same period. This broad-based, unmanaged index measures the
market performance of government securities with maturities between one and ten
years, and it does not reflect any commissions or fees that would be paid by an
investor purchasing the securities it represents. Such costs would lower the
performance of the index. An investment cannot be made directly in an index. Of
course, past performance is no guarantee of future results. For additional
performance results, please refer to the chart and footnotes on page 3.
7
<PAGE> 9
Q WHAT IS YOUR OUTLOOK FOR THE
MONTHS AHEAD?
A Federal Reserve policy makers
have made it clear that the nation's central bank will continue to raise
interest rates until economic activity slows markedly from current levels. While
such rate increases may put upward pressure on short-term interest rates over
the near term, we believe that the rate hikes will eventually slow economic
growth without causing a recession. In that environment, short-term interest
rates could begin to decline and mortgage-backed securities could outperform as
economic uncertainty recedes. Accordingly, we will look for opportunities to
accumulate mortgage securities in the portfolio and increase the Fund's exposure
to the short end of the yield curve.
8
<PAGE> 10
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
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.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues (such as Treasury securities) and lower-quality issues.
Normally, lower-quality issues provide higher yields to compensate investors for
the additional credit risk.
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 (i.e., a 5-year duration means the bond will fall about 5 percent in value
if interest rates rise by 1 percent). The longer a bond's duration, the greater
the effect of interest-rate movements on its price. Typically, funds with
shorter durations perform better in rising rate environments, while funds with
longer durations perform better when rates decline.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond. For corporate bonds, short-term bonds
usually mature in five years or less, intermediate-term bonds mature in five to
ten years, and long-term bonds mature after ten years.
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 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.
9
<PAGE> 11
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
March 31, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR FUND AT THE END OF THE
REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES 7.2%
$3,441 Norwest Asset Securities Corp.,
Series 1997-19 (a)............. 7.250% 12/25/27 $ 3,321,039
3,823 Merrill Lynch Mortgage
Investments, Inc. (a) ......... 6.385 12/25/27 3,811,290
------------
TOTAL ASSET-BACKED SECURITIES.................................. 7,132,329
------------
COLLATERALIZED MORTGAGE OBLIGATIONS 13.2%
6,907 Residential Funding Mortgage
Securities Investment, Series
1998-S20 M1 (a)................ 6.750 09/25/28 6,408,956
7,308 Residential Funding Mortgage
Securities Investment, Series
1999-S2 M1 (a)................. 6.500 01/25/29 6,641,363
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS...................... 13,050,319
------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 44.6%
7,086 Federal Home Loan Mortgage
Corp. Gold 30 Year Pool (a).... 6.500 02/01/26 to 05/01/26 6,702,434
1,737 Federal Home Loan Mortgage
Corp. CMO, Series
1992-FB (a).................... 6.462 09/15/27 1,738,997
4,768 Federal National Mortgage
Association, CMO, Series
94-87F (a)..................... 6.575 03/25/09 4,774,172
8,000 Federal National Mortgage
Association Medium Term
Note (a)....................... 11.875 05/19/00 8,056,880
6,499 Federal National Mortgage
Association Pool............... 7.000 11/01/29 to 02/01/30 6,246,108
841 Federal National Mortgage
Association Pool (a)........... 8.500 01/01/22 to 09/01/24 859,165
11,029 Government National Mortgage
Association Pool............... 7.500 06/15/28 to 09/15/28 10,936,403
2,362 Government National Mortgage
Association Pool (a)........... 8.000 11/15/21 to 08/15/24 2,393,419
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
YOUR FUND'S INVESTMENTS
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
$2,199 Government National Mortgage
Association Pool (a)........... 9.000% 05/15/09 to 12/15/19 $ 2,294,875
------------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 44.6%....... 44,002,453
------------
UNITED STATES TREASURY OBLIGATIONS 44.1%
1,500 United States Treasury Bonds... 7.625 2/15/25 1,788,600
3,300 United States Treasury Bonds
(a)............................ 8.750 05/15/17 4,170,078
4,500 United States Treasury Bonds... 9.000 11/15/18 5,872,005
17,000 United States Treasury Bonds
(a)............................ 11.625 11/15/02 to 11/15/04 19,640,480
12,000 United States Treasury Notes... 6.500 02/28/02 11,994,240
------------
TOTAL UNITED STATES TREASURY OBLIGATIONS....................... 43,465,403
------------
TOTAL LONG-TERM INVESTMENTS 109.1%
(Cost $111,665,082).................................................... 107,650,504
REPURCHASE AGREEMENT 2.4%
Goldman Sachs ($2,410,000 par collateralized by
U.S. Government obligations in a pooled cash account,
dated 03/31/00, to be sold on 04/03/00 at $2,411,245)
(Cost $2,410,000)...................................................... 2,410,000
------------
TOTAL INVESTMENTS 111.5%
(Cost $114,075,082).................................................... 110,060,504
LIABILITIES IN EXCESS OF OTHER ASSETS (11.5%)........................... (11,377,366)
------------
NET ASSETS 100.0%....................................................... $ 98,683,138
============
</TABLE>
(a) Assets segregated as collateral for open futures and forwards transactions.
See Notes to Financial Statements
11
<PAGE> 13
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $114,075,082)....................... $110,060,504
Cash........................................................ 628
Receivables:
Interest.................................................. 2,006,016
Fund Shares Sold.......................................... 15,274
Variation Margin on Futures............................... 12,922
Other....................................................... 19,220
------------
Total Assets............................................ 112,114,564
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 12,120,285
Fund Shares Repurchased................................... 589,580
Income Distributions...................................... 394,433
Distributor and Affiliates................................ 53,378
Investment Advisory Fee................................... 51,058
Trustees' Deferred Compensation and Retirement Plans........ 109,152
Accrued Expenses............................................ 100,301
Forward Commitments......................................... 13,239
------------
Total Liabilities....................................... 13,431,426
------------
NET ASSETS.................................................. $ 98,683,138
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $157,652,835
Accumulated Undistributed Net Investment Income............. 244,167
Net Unrealized Depreciation................................. (3,942,518)
Accumulated Net Realized Loss............................... (55,271,346)
------------
NET ASSETS.................................................. $ 98,683,138
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $70,979,547 and 9,257,463 shares of
beneficial interest issued and outstanding)............. $ 7.67
Maximum sales charge (4.75%* of offering price)......... .38
------------
Maximum offering price to public........................ $ 8.05
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $18,998,193 and 2,479,048 shares of
beneficial interest issued and outstanding)............. $ 7.66
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $8,705,398 and 1,136,373 shares of
beneficial interest issued and outstanding)............. $ 7.66
============
</TABLE>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
12
<PAGE> 14
Statement of Operations
For the Six Months Ended March 31, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 4,523,672
-----------
EXPENSES:
Investment Advisory Fee..................................... 326,579
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $85,274, $142,009 and $46,729,
respectively)............................................. 274,012
Shareholder Services........................................ 86,623
Trustees' Fees and Related Expenses......................... 29,491
Custody..................................................... 12,714
Legal....................................................... 4,150
Other....................................................... 96,506
-----------
Total Expenses.......................................... 830,075
Less Credits Earned on Cash Balances.................... 2,642
-----------
Net Expenses............................................ 827,433
-----------
NET INVESTMENT INCOME....................................... $ 3,696,239
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(3,441,314)
Futures................................................... 34,572
Forward Commitments....................................... (215,644)
-----------
Net Realized Loss........................................... (3,622,386)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (5,872,538)
-----------
End of the Period:
Investments............................................. (4,014,578)
Futures................................................. 85,299
Forward Commitments..................................... (13,239)
-----------
(3,942,518)
-----------
Net Unrealized Appreciation During the Period............... 1,930,020
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(1,692,366)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 2,003,873
===========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
Statement of Changes in Net Assets
For the Six Months Ended March 31, 2000 and
the Year Ended September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
--------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 3,696,239 $ 8,715,590
Net Realized Loss................................ (3,622,386) (2,295,907)
Net Unrealized Appreciation/Depreciation During
the Period..................................... 1,930,020 (9,156,086)
------------ -------------
Change in Net Assets from Operations............. 2,003,873 (2,736,403)
------------ -------------
Distributions from Net Investment Income:
Class A Shares................................. (2,455,701) (3,378,179)
Class B Shares................................. (860,700) (4,495,665)
Class C Shares................................. (282,804) (655,811)
------------ -------------
(3,599,205) (8,529,655)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (1,595,332) (11,266,058)
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 30,046,611 81,626,150
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................... 1,526,446 3,442,192
Cost of Shares Repurchased....................... (51,027,493) (103,777,091)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... (19,454,436) (18,708,749)
------------ -------------
TOTAL DECREASE IN NET ASSETS..................... (21,049,768) (29,974,807)
NET ASSETS:
Beginning of the Period.......................... 119,732,906 149,707,713
------------ -------------
End of the Period (Including accumulated
undistributed net investment income of $244,167
and $147,133, respectively).................... $ 98,683,138 $ 119,732,906
============ =============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS A SHARES MARCH 31, ------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $7.768 $8.422 $8.193 $8.108 $ 8.38
------ ------ ------ ------ ------
Net Investment Income............. .265 .540 .595 .567 .565
Net Realized and Unrealized
Gain/Loss....................... (.105) (.656) .184 .073 (.274)
------ ------ ------ ------ ------
Total from Investment Operations.... .160 (.116) .779 .640 .291
------ ------ ------ ------ ------
Less Distributions from Net
Investment Income................. .261 .538 .550 .555 .563
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.. $7.667 $7.768 $8.422 $8.193 $8.108
====== ====== ====== ====== ======
Total Return (a).................... 2.13%* (1.34%) 9.87% 8.09% 3.57%
Net Assets at End of the Period (In
millions)......................... $ 71.0 $ 69.2 $ 37.2 $ 38.3 $ 45.2
Ratio of Expenses to Average Net
Assets (b)........................ 1.27% 1.22% 1.16% 1.18% 1.13%
Ratio of Net Investment Income to
Average Net Assets................ 7.07% 6.88% 7.19% 6.95% 6.83%
Portfolio Turnover.................. 89%* 85% 217% 82% 282%
</TABLE>
* Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% of contingent deferred
sales charge ("CDSC"). On purchases of $1 million or more, a CDSC of 1% may
be imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower.
(b) 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 period ended September
30, 1999.
See Notes to Financial Statements
15
<PAGE> 17
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS B SHARES MARCH 31, --------------------------------------
2000 (C) 1999 (C) 1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $7.758 $8.412 $8.187 $8.104 $ 8.38
------ ------ ------ ------ ------
Net Investment Income............. .239 .490 .529 .505 .504
Net Realized and Unrealized
Gain/Loss....................... (.102) (.666) .186 .073 (.277)
------ ------ ------ ------ ------
Total from Investment Operations.... .137 (.176) .715 .578 .227
------ ------ ------ ------ ------
Less Distributions from Net
Investment Income................. .231 .478 .490 .495 .503
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.. $7.664 $7.758 $8.412 $8.187 $8.104
====== ====== ====== ====== ======
Total Return (a).................... 1.74%* (2.07%) 8.96% 7.43% 2.70%
Net Assets at End of the Period (In
millions)......................... $ 19.0 $ 40.4 $101.2 $121.7 $150.8
Ratio of Expenses to Average Net
Assets (b)........................ 2.02% 1.96% 1.93% 1.94% 1.89%
Ratio of Net Investment Income to
Average Net Assets................ 6.32% 6.05% 6.40% 6.20% 6.08%
Portfolio Turnover.................. 89%* 85% 217% 82% 282%
</TABLE>
* Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 4%,
charged on certain redemptions made within one year of purchase and
declining thereafter to 0% after the fifth year. If the sales charge was
included, total returns would be lower.
(b) 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 period ended September
30, 1999.
(c) Based on average shares outstanding.
See Notes to Financial Statements
16
<PAGE> 18
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
CLASS C SHARES MARCH 31, --------------------------------------
2000 1999 (C) 1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $7.758 $8.412 $8.186 $8.104 $ 8.38
------ ------ ------ ------ ------
Net Investment Income............. .241 .489 .529 .503 .502
Net Realized and Unrealized
Gain/Loss....................... (.107) (.665) .187 .074 (.275)
------ ------ ------ ------ ------
Total from Investment Operations.... .134 (.176) .716 .577 .227
------ ------ ------ ------ ------
Less Distributions from Net
Investment Income................. .231 .478 .490 .495 .503
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.. $7.661 $7.758 $8.412 $8.186 $8.104
====== ====== ====== ====== ======
Total Return (a).................... 1.74%* (2.07%) 8.96% 7.43% 2.70%
Net Assets at End of the Period (In
millions)......................... $ 8.7 $ 10.1 $ 11.3 $ 13.7 $ 18.6
Ratio of Expenses to Average Net
Assets (b)........................ 2.02% 1.97% 1.93% 1.94% 1.89%
Ratio of Net Investment Income to
Average Net Assets................ 6.32% 6.08% 6.41% 6.20% 6.08%
Portfolio Turnover.................. 89%* 85% 217% 82% 282%
</TABLE>
* Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 1%,
charged on certain redemptions made within one year of purchase. If the
sales charge was included, total returns would be lower.
(b) 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 period ended September
30, 1999.
(c) Based on average shares outstanding.
See Notes to Financial Statements
17
<PAGE> 19
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (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, which approximates market value.
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
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, 2000, 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 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
18
<PAGE> 20
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
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.
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.
At March 31, 2000, for federal income tax purposes, cost of long- and short-
term investments is $114,075,082, the aggregate gross unrealized appreciation is
$470,683 and the aggregate gross unrealized depreciation is $4,485,261,
resulting in net unrealized depreciation on long- and short-term investments of
$4,014,578.
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
19
<PAGE> 21
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
the loss and offset these losses against any future realized capital gains. At
September 30, 1999, the Fund had an accumulated capital loss carryforward for
tax purposes of $49,043,409 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,
1999.
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 forwards and 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.
F. EXPENSE REDUCTIONS During the six months ended March 31, 2000, the Fund's
custody fee was reduced by $2,642 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, of .60% of the Fund's average daily net assets.
Effective April 17, 2000, the Fund's Board of Trustees approved a change to
the Fund's Investment Advisory Agreement. Under the new terms of the Agreement,
the Adviser will provide investment advice and facilities to the Fund for an
annual fee payable monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS $ PER ANNUM
<S> <C>
First $500 million.......................................... .60 of 1%
Next $500 million........................................... .55 of 1%
Over $1 billion............................................. .50 of 1%
</TABLE>
For the six months ended March 31, 2000, the Fund recognized expenses of
approximately $4,200 representing legal services provided by Skadden, Arps,
Slate,
20
<PAGE> 22
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
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, 2000, the Fund recognized expenses of
approximately $18,100 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., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended March 31,
2000, the Fund recognized expenses of approximately $59,400. 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.
21
<PAGE> 23
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
3. CAPITAL TRANSACTIONS
At March 31, 2000, capital aggregated $86,155,966, $56,163,672 and $15,333,197
for Classes A, B and C, respectively. For the six months ended March 31, 2000,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A................................................ 3,451,995 $ 26,348,604
Class B................................................ 375,439 2,870,582
Class C................................................ 108,782 827,425
---------- ------------
Total Sales.............................................. 3,936,216 $ 30,046,611
========== ============
Dividend Reinvestment:
Class A................................................ 132,941 $ 1,015,399
Class B................................................ 47,504 362,843
Class C................................................ 19,418 148,204
---------- ------------
Total Dividend Reinvestment.............................. 199,863 $ 1,526,446
========== ============
Repurchases:
Class A................................................ (3,235,010) $(24,672,743)
Class B................................................ (3,157,462) (24,119,747)
Class C................................................ (293,099) (2,235,003)
---------- ------------
Total Repurchases........................................ (6,685,571) $(51,027,493)
========== ============
</TABLE>
22
<PAGE> 24
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
At September 30, 1999, capital aggregated $83,464,706, $77,049,994 and
$16,592,571 for Classes A, B and C, respectively. For the year ended September
30, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 8,393,826 $ 66,973,779
Class B............................................... 1,471,020 12,001,267
Class C............................................... 324,468 2,651,104
----------- -------------
Total Sales............................................. 10,189,314 $ 81,626,150
=========== =============
Dividend Reinvestment:
Class A............................................... 165,012 $ 1,314,796
Class B............................................... 222,640 1,795,593
Class C............................................... 41,347 331,803
----------- -------------
Total Dividend Reinvestment............................. 428,999 $ 3,442,192
=========== =============
Repurchases:
Class A............................................... (4,072,147) $ (32,336,095)
Class B............................................... (8,511,500) (68,177,773)
Class C............................................... (404,425) (3,263,223)
----------- -------------
Total Repurchases....................................... (12,988,072) $(103,777,091)
=========== =============
</TABLE>
Class B shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B shares received thereon, automatically convert to
Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B shares received thereon, automatically
convert to Class A shares six years after the end of the calendar month in which
the shares were purchased. For the six months ended March 31, 2000 and the year
ended September 30, 1999, 1,620,319 and 4,729,905 Class B shares converted to
Class A shares, and are shown in the above tables as sales of Class A shares and
repurchase of Class B shares. Class C shares purchased before January 1, 1997,
and any dividend reinvestment plan Class C shares received thereon,
automatically convert to Class A shares ten years after the end of the calendar
month in which such shares were purchased. Class C shares purchased on or after
January 1, 1997 do not possess a conversion feature. For the six months ended
March 31, 2000 and the year ended September 30, 1999, no Class C shares
converted to Class A shares.
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
23
<PAGE> 25
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
on most redemptions made within five years of the purchase for Class B shares
and one year of the purchase for Class C shares 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>
For the six months ended March 31, 2000, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $3,100 and CDSC on redeemed shares of approximately $33,500. 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,
including paydowns on mortgage backed securities, and excluding short-term
investments and forward commitment transactions, were $104,805,698 and
$125,313,576, 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.
24
<PAGE> 26
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
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.
Transactions in futures contracts, each with a par value of $100,000, for
the six months ended March 31, 2000, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
<S> <C>
Outstanding at September 30, 1999........................... 38
Futures Opened.............................................. 275
Futures Closed.............................................. (200)
----
Outstanding at March 31, 2000............................... 113
====
</TABLE>
The futures contracts outstanding as of March 31, 2000, and the descriptions
and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS (DEPRECIATION)
<S> <C> <C>
LONG CONTRACTS
30-Year U.S. Treasury Bond Future, June 2000--(Current
Notional Value of $94,320 per contract)................... 20 $ 67,340
5-Year U.S. Treasury Note Future, June 2000--(Current
Notional Value of $97,297 per contract)................... 68 81,831
--- ---------
88 $ 149,171
--- ---------
SHORT CONTRACTS
10-Year U.S. Treasury Note Future, June 2000--(Current
Notional Value of $95,523 per contract)................... 25 $ (63,872)
--- ---------
113 $ 85,299
=== =========
</TABLE>
B. FORWARD COMMITMENTS The Fund trades certain securities under the terms of
forward commitments, whereby the settlement occurs at a specific future date.
25
<PAGE> 27
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
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 for forwards that don't intend to settle. 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 positions is equal to the Current Value noted below.
The following forward commitments were outstanding as of March 31, 2000:
<TABLE>
<CAPTION>
UNREALIZED
PAR AMOUNT CURRENT APPRECIATION/
(000) DESCRIPTION VALUE DEPRECIATION
<C> <S> <C> <C>
LONG CONTRACTS
$4,000 FNMA April Forward, 6.00%..................... $3,762,480 $ 13,730
SHORT CONTRACTS
6,500 GNMA April Forward, 7.50%..................... 6,441,110 (26,969)
--------
$(13,239)
========
</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, 2000, the Fund has net realized losses on closed but
unsettled forward contracts of $89,453 scheduled to settle on April 19, 2000.
This amount is owed to two counterparties.
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, as amended, 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
26
<PAGE> 28
NOTES TO
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
the six months ended March 31, 2000, are payments retained by Van Kampen of
approximately $137,600.
7. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered in to a $650,000,000 committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each fund is permitted to
utilize the facility in accordance with the restrictions of its prospectus. In
the event the demand for the credit facility meets or exceeds $650 million on a
complex-wide basis, each fund will be limited to its pro-rata percentage based
on the net assets of each participating fund. Interest on borrowings is charged
under the agreement at a rate of 0.50% above the federal funds rate per annum.
An annual commitment fee of 0.09% per annum is charged on the unused portion of
the credit facility, which each fund incurs based on its pro-rata percentage of
quarterly net assets. The Fund has not borrowed against the credit facility
during the period.
27
<PAGE> 29
FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*(1)
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
PETER W. HEGEL*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, 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 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
203 N. LaSalle
Chicago, Illinois 60601
(1) Appointed Executive Vice President and Chief Investment Officer effective
April 3, 2000.
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
(C) Van Kampen Funds Inc., 2000. 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,
2000, the report, if used with prospective investors, must be accompanied by a
monthly performance update.
28
<PAGE> 30
RESULTS OF
SHAREHOLDER VOTES
A Joint Special Meeting of the Shareholders of the Fund was held on December 15,
1999, where shareholders voted on the election of trustees, and the ratification
of PricewaterhouseCoopers LLP as the independent public accountants.
1) With regard to the election of the following trustees:
<TABLE>
<CAPTION>
# OF SHARES
-----------------------------
IN FAVOR WITHHELD
<S> <C> <C>
J. Miles Branagan...................................... 9,377,842 63,811
Jerry D. Choate........................................ 9,377,842 63,811
Linda Hutton Heagy..................................... 9,381,990 59,663
R. Craig Kennedy....................................... 9,382,816 58,837
Mitchell M. Merin...................................... 9,377,533 64,120
Jack E. Nelson......................................... 9,378,934 62,719
Richard F. Powers, III................................. 9,382,782 58,871
Phillip B. Rooney...................................... 9,382,816 58,837
Fernando Sisto......................................... 9,378,934 62,719
Wayne W. Whalen........................................ 9,378,934 62,719
Suzanne H. Woolsey..................................... 9,381,724 59,929
Paul G. Yovovich*...................................... 9,382,816 58,837
</TABLE>
2) With regard to the ratification of PricewaterhouseCoopers LLP as independent
public accountants for the Fund, 9,344,353 shares voted in favor of the
proposal, 10,070 shares voted against, and 87,229 shares abstained.
* Effective April 14, 2000, Paul G. Yovovich resigned from the Board of
Trustees.
29
