<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Performance in Perspective....................... 4
Portfolio Management Review...................... 5
Glossary of Terms................................ 8
Portfolio Highlights............................. 9
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 19
Report of Independent Accountants................ 29
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the Asian crisis appears to be behind us, new concerns are always
emerging. In the coming months, we'll likely hear more about how the year 2000
computer problem may affect the markets or that we're overdue for a correction.
While the markets could undoubtedly suffer as a result of these or any number of
other events, we encourage you to focus on your long-term investment goals.
Although nothing is certain, history has shown us that over time, the markets
tend to recover--and most investors want to be positioned to take advantage of
any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Asset Management Inc.
[SIG]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree, keeping the economy growing at a
healthy pace. High levels of consumer confidence fueled this heavy retail
purchasing activity, pushing the personal savings rate down to a record low as
spending rates outpaced income growth. Although we experienced a slowdown during
the second quarter of 1999, economic growth accelerated toward the end of the
reporting period. The growth rate of the nation's gross domestic product (GDP)
dipped to 1.6 percent for the second quarter of 1999, but climbed back up to 4.8
percent in the third quarter.
EMPLOYMENT SITUATION
The strong job market helped to support the health of the economy. During
the reporting period, the unemployment rate reached its lowest level in almost
30 years, and wages continued to climb. The wage pressures were balanced
somewhat by productivity gains, but they ultimately pushed the cost of labor
higher, as evidenced by the sharp jump in the Employment Cost Index in the
second quarter of 1999.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index (CPI) report. The Federal Reserve remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
two of its interest rate cuts from the fall of 1998, raising rates in June and
August 1999 to keep the economy from overheating.
INTEREST RATES AND INFLATION
September 30, 1997, through September 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Sep 1997 5.5 2.2
6.25 2.2
5.75 2.1
Dec 1997 5.6875 1.8
6.5 1.7
5.5625 1.6
Mar 1998 5.625 1.4
6.125 1.4
5.625 1.4
Jun 1998 5.6875 1.7
6 1.7
5.5625 1.7
Sep 1998 5.9375 1.6
5.75 1.5
5.25 1.5
Dec 1998 4.875 1.5
4 1.6
4.8125 1.7
Mar 1999 4.875 1.6
5.125 1.7
4.9375 2.3
Jun 1999 4.5 2.1
4 2
4.75 2.1
Sep 1999 5.4375 2.3
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
VAN KAMPEN GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV(1).... (2.71%) (3.49%) (3.50%)
One-year total return(2)................. (7.33%) (7.15%) (4.41%)
Five-year average annual total
return(2)................................ 5.59% 5.58% 5.80%
Ten-year average annual total
return(2)................................ 6.59% N/A N/A
Life-of-Fund average annual total
return(2)................................ 7.60% 4.98% 4.12%
Commencement date........................ 07/16/84 12/20/91 03/10/93
DISTRIBUTION RATE AND YIELD
Distribution Rate(3)..................... 5.88% 5.44% 5.45%
SEC Yield(4)............................. 5.37% 4.87% 4.89%
</TABLE>
N/A = Not Applicable
(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) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
(4) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending September 30, 1999.
See the Comparative Performance section of the current prospectus. Past
performance does not guarantee future results. U.S. Government securities are
backed by the full faith and credit of the U.S. Government, its agencies or
instrumentalities. The government backing applies only to the timely payment of
principal and interest when due, on specific securities in the Fund's portfolio,
not to shares of the Fund. Fund shares when redeemed, may be worth more or less
than their original cost. The value of debt securities will fluctuate with
changes in market conditions and interest rates, which will effect the value of
Fund shares. Securities which are issued by private issuers involve greater risk
than those issued directly by the U.S. Government.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment performance at regular intervals. A
comparison of your Fund's performance to an applicable benchmark can:
- Illustrate the market environment in which your Fund is being managed
- Reflect the impact of favorable market trends or difficult market
conditions
- Help you evaluate how your Fund's management team has responded to
opportunities and challenges
The following graph compares your Fund's performance to that of the Lehman
Brothers Mutual Fund U.S. Government Index over time.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen Government Securities Fund vs. the Lehman Brothers Mutual Fund
Government/Mortgage Index (September 30, 1989 through September 30, 1999)
[INVESTMENT PERFORMANCE GRAPH]
- ----------------------------
Fund's Total Return
1 Year Total Return = -7.33%
5 Year Avg. Annual = 5.59%
10 Year Avg. Annual = 6.59%
- ----------------------------
<TABLE>
<CAPTION>
VAN KAMPEN GOVERNMENT SECURITIES LEHMAN BROTHERS MUTUAL FUND
FUND GOVERNMENT/MORTGAGE INDEX
-------------------------------- ---------------------------
<S> <C> <C>
Sep1989 9526.00 10000.00
9783.00 10248.80
9873.00 10352.20
9887.00 10384.40
9681.00 10263.00
9686.00 10297.30
9662.00 10304.80
9548.00 10213.50
9851.00 10509.50
10006.00 10675.50
10182.00 10829.30
10075.00 10691.40
Sep1990 10162.00 10788.70
10311.00 10945.60
10555.00 11183.90
10749.00 11362.20
10890.00 11501.70
10969.00 11578.00
11029.00 11644.00
11153.00 11764.70
11212.00 11831.00
11207.00 11824.10
11367.00 11985.80
11639.00 12242.30
Sep1991 11868.00 12489.40
12031.00 12634.20
12116.00 12747.80
12498.00 13118.60
12309.00 12932.80
12407.00 13009.40
12332.00 12930.90
12420.00 13028.70
12638.00 13267.00
12764.00 13444.90
12969.00 13704.10
13103.00 13850.00
Sep1992 13238.00 14014.20
13068.00 13840.70
13119.00 13840.70
13318.00 14054.20
13557.00 14311.60
13767.00 14547.00
13788.00 14609.80
13887.00 14708.90
13922.00 14728.50
14124.00 14977.80
14199.00 15058.10
14391.00 15300.20
Sep1993 14410.00 15343.10
14456.00 15396.20
14344.00 15276.10
14404.00 15357.60
14585.00 15547.80
14296.00 15294.50
13897.00 14931.70
13756.00 14816.90
13764.00 14825.00
13716.00 14791.50
13932.00 15071.80
13954.00 15090.20
Sep1994 13738.00 14877.00
13703.00 14866.90
13655.00 14832.80
13791.00 14933.00
14086.00 15225.30
14469.00 15574.10
14492.00 15663.20
14693.00 15874.10
15159.00 16465.40
15215.00 16580.50
15167.00 16550.10
15329.00 16736.50
Sep1995 15445.00 16892.80
15639.00 17113.10
15878.00 17355.40
16104.00 17591.30
16193.00 17707.90
15897.00 17421.90
15738.00 17305.70
15610.00 17217.40
15544.00 17180.90
15730.00 17408.10
15727.00 17458.60
15707.00 17433.80
Sep1996 15961.00 17724.00
16329.00 18098.50
16614.00 18393.00
16409.00 18238.90
16451.00 18301.10
16476.00 18339.30
16284.00 18153.20
16510.00 18425.10
16636.00 18591.90
16847.00 18803.40
17331.00 19270.50
17135.00 19133.50
Sep1997 17384.00 19404.20
17651.00 19694.90
17730.00 19782.20
17913.00 19978.80
18202.00 20240.50
18123.00 20222.30
18150.00 20291.10
18194.00 20390.50
18364.00 20572.00
18498.00 20753.00
18539.00 20811.10
18960.00 21214.80
Sep1998 19457.00 21662.50
19333.00 21718.80
19338.00 21766.60
19398.00 21831.90
19495.00 21969.40
19108.00 21622.30
19206.00 21732.60
19211.00 21802.10
18969.00 21640.80
18821.00 21582.30
18711.00 21500.30
18658.00 21500.30
Sep1999 18930.00 21751.90
</TABLE>
The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (4.75% for A shares).
While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.
4
<PAGE> 6
PORTFOLIO MANAGEMENT REVIEW
GOVERNMENT SECURITIES FUND
We recently spoke with the portfolio managers of the Van Kampen Government
Securities Fund about the key events and economic forces that shaped the markets
during the past 12 months. The managers are led by John R. Reynoldson, portfolio
manager, who has managed the Fund since June 1988 and worked in the investment
industry since 1981. He is joined by Peter W. Hegel, chief investment officer
for fixed-income investments. The following excerpts reflect their views on the
Fund's performance for the fiscal year ended September 30, 1999.
Q DESCRIBE THE ENVIRONMENT IN WHICH THE FUND OPERATED DURING THE REPORTING
PERIOD.
A The last quarter of 1998 was marked by a series of interest-rate cuts by
the Federal Reserve Board, implemented to restore order to a volatile
market. This intervention paved the way for recovery in the first quarter
of 1999, as investors gained confidence in the strength of the economy and
inflation remained moderate. Consequently, yield spreads narrowed between
Treasuries and other types of bonds, including mortgage-backed securities.
However, the good news for the fixed-income market was quelled in the second
quarter, as investors became distracted by expectations of rising inflation,
warnings of additional action by the Fed, and concerns relating to the year 2000
problem. These developments prompted interest rates to rise and yield spreads to
widen, although not to the record-high levels seen last fall. The market
breathed a sigh of relief at the end of the second quarter, as the Fed announced
a 0.25 percent rate hike.
By the beginning of August, rumblings of another rate hike were again
triggered by indications of a further increase in inflation and a strengthening
economy. At its late August meeting, the Fed boosted the federal funds rate a
second time, to 5.25 percent. Bond prices grew erratic at the possibility of a
third increase by the end of the year, and declined for most of September.
However, a slide in the stock market and reports of slowing economic growth
provided a boost for bonds in the final days of the reporting period.
Q WHAT HAPPENED TO MORTGAGE-BACKED SECURITIES DURING THIS TIME?
A As described above, yield spreads between mortgage-backed securities and
Treasuries began widening in the second quarter, indicating that
mortgage-backed securities were underperforming Treasuries. As the summer
unfolded, this trend accelerated due to growing concerns about the impact of the
year 2000 problem. In the middle of the third quarter, investors widely expected
issuers to bring record-high levels of new corporate and high-yield bonds to the
market in September in an effort to preclude any problems with liquidity or
investor demand toward the end of the year. However, the
5
<PAGE> 7
actual level of new issuance did not meet expectations; consequently, investor
fears subsided, spreads narrowed, and mortgage-backed securities began to
recuperate.
Despite the volatility between mortgage-backed securities and Treasuries
during the summer months, general yield spreads were contained in a range of
approximately 125 to 185 basis points. In addition, low prices for
mortgage-backed securities, reflecting lower mortgage prepayment rates,
presented excellent opportunities to investors interested in the sector. The
sector was further encouraged by a Fed announcement that, through April of next
year, mortgage-backed securities will be accepted as collateral to facilitate
liquidity into the year 2000. As a result, we expect to see higher demand for
these securities in the coming months.
Q WHAT WERE YOUR STRATEGIES FOR MANAGING THE PORTFOLIO DURING THIS PERIOD?
A We maintained a substantial position in mortgage-backed securities during
the past 12 months. We slightly reduced this allocation by approximately
10 percent in the early days of summer 1999, but replenished our
mortgage-backed holdings in late August when these securities reached low price
levels not seen since October 1998. By the end of the reporting period,
mortgage-backed securities represented approximately 72 percent of the
portfolio, a position that benefited the Fund. Within this sector, we primarily
held large positions in GNMA 6.5 and 7.0 percent issues, which were perceived to
have low price levels and negligible risk to homeowner refinancing.
In addition to our position in mortgage-backed securities, we also
maintained a 27 percent weighting in Treasury and government agency debentures.
These holdings were distributed in a barbell pattern, with our heaviest
weightings on the short and long ends of the yield curve. The "belly" of the
curve was occupied by mortgage paper. We felt that this strategy was effective,
given the flatness of the curve and the yield benefit of mortgage-backed
securities.
Finally, we kept a modestly higher portfolio duration of 6.1 years,
approximately 1.5 years longer than that of the benchmark. Rising interest
rates, due to the surprisingly vigorous economy, partially undermined the
portfolio's performance in the second quarter of 1999. However, the Fund's
returns rebounded during the third quarter, and, at this juncture, we are
pleased with the portfolio's profile. For additional Fund portfolio highlights,
please refer to page 9.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A For the 12-month period ended September 30, 1999, the Government
Securities Fund generated a total return of -2.71 percent(1) (Class A
shares at net asset value). By comparison, the Lehman Brothers Mutual Fund
Government/Mortgage Index posted a total return of -0.10 percent for the same
period. This broad-based, unmanaged index attempts to measure the market
performance of Treasury, agency, and mortgage-backed securities with maturities
of between one and 30 years.
Although the Fund's dividend was decreased in early September 1999, the Fund
continues to provide shareholders with a competitive monthly dividend of $0.050
per
6
<PAGE> 8
Class A share. The Fund's current distribution rate of 5.88 percent(3) is based
upon the maximum offering price as of September 30, 1999. Please refer to the
chart and footnotes on page 3 for additional Fund performance results. Past
performance does not guarantee future performance.
Q WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A It's still unclear how the end of the year--and any problems associated
with the year 2000 computer bug--will affect the markets. Anticipating a
somewhat bearish sentiment, we'll keep a close eye out for indications of
a slowdown in the economy. If this materializes, investors may be lured away
from the stock market by the relative stability of Treasuries and other
fixed-income products.
We continue to see value in the mortgage market and believe that the sector
will be buoyed by increased demand from banks and other interested investors
around the end of the year. We will continue to keep a close eye on the changing
yield spreads between Treasuries and other fixed-income securities, but we
expect a favorable trend in the movement of yield spreads. Our ongoing
evaluation of the relationship between mortgages and Treasuries should help us
maintain an optimal balance between the two sectors in the Fund's portfolio.
[SIG]
John R. Reynoldson
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
7
<PAGE> 9
GLOSSARY OF TERMS
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates (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.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a
year to establish monetary policy and monitor the economic pulse of the
United States.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
MORTGAGE-BACKED SECURITIES: Securities backed by pools of similar mortgages.
Investors receive interest payments and partial repayment of the principal
passed through from the underlying mortgages (agencies pass on what they
receive from homeowners paying off their mortgages). These securities are
generally issued by agencies of the U.S. government, such as Government
National Mortgage Association (GNMA, or "Ginnie Mae") and Federal Home Loan
Mortgage Corporation (FHLMC, or "Freddie Mac").
YIELD: The annual rate of return on an investment, expressed as a percentage.
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.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS
VAN KAMPEN GOVERNMENT SECURITIES FUND
DIVIDEND HISTORY
FOR THE PERIOD ENDED SEPTEMBER 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
DISTRIBUTION PER CLASS A SHARE
------------------------------
<S> <C>
'Oct 1998' 0.0525
'Nov 1998' 0.0525
'Dec 1998' 0.0525
'Jan 1999' 0.0525
'Feb 1999' 0.0525
'Mar 1999' 0.0525
'Apr 1999' 0.0525
'May 1999' 0.0525
'Jun 1999' 0.0525
'Jul 1999' 0.0525
'Aug 1999' 0.0525
'Sep 1999' 0.0500
</TABLE>
The dividend history represents past performance of the Fund and does not
predict the Fund's future distributions.
ASSET ALLOCATION AS A PERCENTAGE OF LONG-TERM INVESTMENTS
[GRAPH]
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
GNMA 43.00 36.00
U.S. Treasuries 27.00 38.00
FNMA 27.00 24.00
FHLMC 3.00 2.00
</TABLE>
COUPON DISTRIBUTION AS A PERCENTAGE OF LONG-TERM INVESTMENTS
[GRAPH]
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
less than 6.0 1.30
6-6.9 41.80
7-7.9 35.30
8-8.9 19.20
9-9.9 1.90
10 or more 0.50
</TABLE>
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS 71.6%
$ 25,000 Federal Home Loan
Mortgage Corp............ 5.750% 03/15/09 $ 23,389,500
0 Federal Home Loan
Mortgage Corp. Pool...... 11.000 02/01/14 253
27,772 Federal Home Loan
Mortgage Corp. Gold 30
Year Pools............... 7.000 02/01/23 to 09/01/24 27,388,577
4,426 Federal Home Loan
Mortgage Corp. Gold 30
Year Pools............... 7.500 01/01/22 to 06/01/24 4,457,576
1,017 Federal Home Loan
Mortgage Corp. Gold 30
Year Pools............... 8.000 07/01/24 to 09/01/24 1,041,260
25,000 Federal National Mortgage
Association.............. 6.375 06/15/09 24,475,500
0 Federal National Mortgage
Association 7 Year
Balloon Pool............. 7.000 12/01/99 114
64,124 Federal National Mortgage
Association 15 Year Dwarf
Pools.................... 6.000 01/01/09 to 04/01/13 61,928,710
59,579 Federal National Mortgage
Association 15 Year Dwarf
Pools.................... 6.500 12/01/07 to 12/01/12 58,532,956
21,184 Federal National Mortgage
Association 15 Year Dwarf
Pools.................... 7.500 03/01/02 to 09/01/12 21,505,743
96,843 Federal National Mortgage
Association Pools........ 6.000 02/01/28 to 07/01/29 90,348,707
161,509 Federal National Mortgage
Association Pools........ 6.500 05/01/23 to 11/01/28 155,259,287
54,939 Federal National Mortgage
Association Pools........ 7.000 12/01/24 to 05/01/25 54,035,361
8,447 Federal National Mortgage
Association Pools........ 7.500 03/01/22 to 10/01/24 8,491,243
98 Federal National Mortgage
Association Pools........ 8.000 09/01/24 to 11/01/24 100,320
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT
AGENCY OBLIGATIONS
(CONTINUED)
$ 172 Federal National Mortgage
Association Pools........ 11.500% 02/01/13 to 05/01/19 $ 193,878
2,254 Federal National Mortgage
Association Pools........ 12.000 03/01/13 to 01/01/16 2,574,601
98,531 Government National
Mortgage Association
Pools.................... 6.000 11/15/28 to 01/15/29 91,513,434
272,697 Government National
Mortgage Association
Pools (a)................ 6.500 06/15/23 to 09/15/29 261,424,211
290,051 Government National
Mortgage Association
Pools.................... 7.000 12/15/22 to 09/15/29 285,192,319
35,505 Government National
Mortgage Association
Pools.................... 7.500 02/15/07 to 11/15/24 35,697,590
26,006 Government National
Mortgage Association
Pools.................... 8.000 07/15/07 to 10/15/25 26,803,371
16,433 Government National
Mortgage Association
Pools.................... 8.500 09/15/04 to 12/15/21 17,221,965
31,329 Government National
Mortgage Association
Pools.................... 9.000 11/15/17 to 12/15/19 33,193,265
111 Government National
Mortgage Association
Pools.................... 11.000 01/15/10 to 11/15/20 124,451
3,043 Government National
Mortgage Association
Pools.................... 12.000 06/15/11 to 08/15/15 3,497,675
1,317 Government National
Mortgage Association
Pools.................... 12.500 05/15/10 to 07/15/18 1,527,416
--------------
TOTAL UNITED STATES GOVERNMENT AGENCY
OBLIGATIONS 71.6%......................................... 1,289,919,283
--------------
UNITED STATES TREASURY OBLIGATIONS 27.1%
120,000 United States Treasury
Bonds.................... 8.125 08/15/19 142,087,200
185,000 United States Treasury
Notes (a)................ 7.500 11/15/01 191,669,250
150,000 United States Treasury
Notes.................... 8.500 11/15/00 154,833,000
--------------
TOTAL UNITED STATES TREASURY OBLIGATIONS................... 488,589,450
--------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FORWARD PURCHASE COMMITMENTS 9.3%
$ 50,000 Federal National Mortgage
Association--October
Forward.................. 7.000% TBA $ 49,132,750
100,000 United States Treasury
Note--November Forward... 8.000 TBA 118,118,500
--------------
TOTAL FORWARD PURCHASE COMMITMENTS......................... 167,251,250
--------------
TOTAL LONG-TERM INVESTMENTS 108.0%
(Cost $1,980,102,316)............................................... $1,945,759,983
REPURCHASE AGREEMENT 1.2%
State Street Bank & Trust Co. ($21,190,000 par collateralized by
U.S. Government obligations in a pooled cash account, dated 09/30/99,
to be sold on 10/01/99 at $21,192,943)
(Cost $21,190,000).................................................... 21,190,000
--------------
TOTAL INVESTMENTS 109.2%
(Cost $2,001,292,316)............................................... 1,966,949,983
LIABILITIES IN EXCESS OF OTHER ASSETS (9.2%)......................... (165,647,270)
--------------
NET ASSETS 100.0%.................................................... $1,801,302,713
==============
</TABLE>
(a) Assets segregated as collateral for open forward and open futures
transactions.
TBA--To be announced, maturity date has not been established. Upon settlement
and delivery of the mortgage pools, maturity dates will be assigned.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $2,001,292,316)..................... $1,966,949,983
Receivables:
Interest.................................................. 22,938,305
Fund Shares Sold.......................................... 9,601,638
Variation Margin on Futures............................... 874,996
Other....................................................... 222,145
--------------
Total Assets.......................................... 2,000,587,067
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 170,930,111
Fund Shares Repurchased................................... 20,434,097
Income Distributions...................................... 4,727,187
Distributor and Affiliates................................ 1,343,627
Investment Advisory Fee................................... 785,680
Custodian Bank............................................ 1,829
Accrued Expenses............................................ 661,014
Trustees' Deferred Compensation and Retirement Plans........ 400,809
--------------
Total Liabilities..................................... 199,284,354
--------------
NET ASSETS.................................................. $1,801,302,713
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. 2,331,103,036
Accumulated Distributions in Excess of Net Investment
Income.................................................... (1,607,656)
Net Unrealized Depreciation................................. (34,165,641)
Accumulated Net Realized Loss............................... (494,027,026)
--------------
NET ASSETS.................................................. $1,801,302,713
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,688,780,537 and 173,726,449 shares of
beneficial interest issued and outstanding)............. $ 9.72
Maximum sales charge (4.75%* of offering price)......... .48
--------------
Maximum offering price to public........................ $ 10.20
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $93,865,314 and 9,664,052 shares of
beneficial interest issued and outstanding)............. $ 9.71
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $18,656,862 and 1,926,152 shares of
beneficial interest issued and outstanding)............. $ 9.69
==============
</TABLE>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 136,009,762
-------------
EXPENSES:
Investment Advisory Fee..................................... 10,218,247
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $4,477,019, $1,161,274 and $184,773,
respectively)............................................. 5,823,066
Shareholder Services........................................ 3,388,057
Custody..................................................... 310,686
Legal....................................................... 118,603
Trustees' Fees and Related Expenses......................... 76,595
Other....................................................... 883,040
-------------
Total Expenses.......................................... 20,818,294
Less Credits Earned on Cash Balances.................... 90,585
-------------
Net Expenses............................................ 20,727,709
-------------
NET INVESTMENT INCOME....................................... $ 115,282,053
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (3,257,086)
Futures................................................... (16,515,643)
Forward Commitments....................................... (34,367,258)
-------------
Net Realized Loss........................................... (54,139,987)
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 84,160,417
-------------
End of the Period:
Investments............................................. (34,342,333)
Futures................................................. 176,692
-------------
(34,165,641)
-------------
Net Unrealized Depreciation During the Period............... (118,326,058)
-------------
NET REALIZED AND UNREALIZED LOSS............................ $(172,466,045)
=============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (57,183,992)
=============
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended September 30, 1999, the Nine Months Ended
September 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
September 30, 1999 September 30, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................ $ 115,282,053 $ 97,389,307 $ 146,884,848
Net Realized Gain/Loss............... (54,139,987) 58,627,517 (27,878,030)
Net Unrealized
Appreciation/Depreciation
During the Period.................. (118,326,058) 16,859,993 71,602,438
-------------- -------------- --------------
Change in Net Assets from
Operations......................... (57,183,992) 172,876,817 190,609,256
-------------- -------------- --------------
Distributions from Net Investment
Income............................. (115,469,267) (97,665,107) (146,949,682)
Distributions in Excess of Net
Investment Income.................. (3,445,052) (523,301) -0-
-------------- -------------- --------------
Distributions from and in Excess of
Net Investment Income*............. (118,914,319) (98,188,408) (146,949,682)
-------------- -------------- --------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES.............. (176,098,311) 74,688,409 43,659,574
-------------- -------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............ 673,923,927 430,405,741 132,259,259
Net Asset Value of Shares Issued
Through Dividend Reinvestment...... 68,040,278 55,571,884 82,009,897
Cost of Shares Repurchased........... (870,866,313) (600,313,098) (526,704,317)
-------------- -------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS....................... (128,902,108) (114,335,473) (312,435,161)
-------------- -------------- --------------
TOTAL DECREASE IN NET ASSETS......... (305,000,419) (39,647,064) (268,775,587)
NET ASSETS:
Beginning of the Period.............. 2,106,303,132 2,145,950,196 2,414,725,783
-------------- -------------- --------------
End of the Period (Including
accumulated undistributed net
investment income of ($1,607,656),
$187,214 and
$275,800, respectively)............ $1,801,302,713 $2,106,303,132 $2,145,950,196
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
*Distribution by Class
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Distributions from and in Excess of
Net Investment Income:
Class A Shares...................... $(111,541,874) $(90,081,411) $(133,143,951)
Class B Shares...................... (6,353,822) (7,423,591) (12,711,171)
Class C Shares...................... (1,018,623) (683,406) (1,094,560)
------------- ------------ -------------
$(118,914,319) $(98,188,408) $(146,949,682)
============= ============ =============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended Year Ended December 31,
September 30, September 30, -----------------------------------------
Class A Shares 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............. $ 10.637 $ 10.259 $ 10.045 $ 10.55 $ 9.67 $ 10.80
-------- -------- -------- -------- -------- --------
Net Investment
Income............. .608 .483 .659 .689 .67 .66
Net Realized and
Unrealized
Gain/Loss.......... (.896) .383 .215 (.504) .8985 (1.1145)
-------- -------- -------- -------- -------- --------
Total from
Investment
Operations......... (.288) .866 .874 .185 1.5685 (.4545)
Less Distributions
from and in Excess
of Net Investment
Income............. .628 .488 .660 .690 .6885 .6755
-------- -------- -------- -------- -------- --------
Net Asset Value, End
of the Period...... $ 9.721 $ 10.637 $ 10.259 $ 10.045 $ 10.55 $ 9.67
======== ======== ======== ======== ======== ========
Total Return (a)..... (2.71%) 8.62%* 9.16% 1.90% 16.77% (4.26%)
Net Assets at End of
the Period (In
millions).......... $1,688.8 $1,933.8 $1,930.4 $2,156.4 $2,544.5 $2,578.7
Ratio of Expenses to
Average Net
Assets (b)......... 1.02% 1.02% 1.03% 1.06% 1.01% 1.02%
Ratio of Net
Investment Income
to Average Net
Assets (b)......... 6.01% 6.30% 6.62% 6.88% 6.62% 6.96%
Portfolio Turnover... 94% 180%* 114% 271% 231% 306%
</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.
(b) For the year ended December 31, 1996, the impact on the Ratios of Expenses
and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
16
<PAGE> 18
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended Year Ended December 31,
September 30, September 30, --------------------------------------
Class B Shares 1999(a) 1998(a) 1997(a) 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............. $10.634 $10.261 $10.050 $ 10.56 $ 9.68 $ 10.80
------- ------- ------- ------- ------- --------
Net Investment
Income............. .533 .427 .588 .635 .60 .60
Net Realized and
Unrealized
Gain/Loss.......... (.898) .380 .211 (.527) .8965 (1.1275)
------- ------- ------- ------- ------- --------
Total from
Investment
Operations......... (.365) .807 .799 .108 1.4965 (.5275)
Less Distributions
from and in
Excess of Net
Investment
Income............. .556 .434 .588 .618 .6165 .5925
------- ------- ------- ------- ------- --------
Net Asset Value, End
of the Period...... $ 9.713 $10.634 $10.261 $10.050 $ 10.56 $ 9.68
======= ======= ======= ======= ======= ========
Total Return (b)..... (3.49%) 8.05%* 8.27% 1.17% 15.93% (4.95%)
Net Assets at End of
the Period (In
millions).......... $ 93.9 $ 153.2 $ 199.2 $ 236.7 $ 285.5 $ 278.7
Ratio of Expenses to
Average Net
Assets (c)......... 1.78% 1.78% 1.78% 1.82% 1.77% 1.78%
Ratio of Net
Investment Income
to Average Net
Assets (c)......... 5.24% 5.55% 5.87% 6.13% 5.86% 6.20%
Portfolio Turnover... 94% 180%* 114% 271% 231% 306%
</TABLE>
* Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the year ended December 31, 1996, the impact on the Ratios of Expenses
and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended Year Ended December 31,
September 30, September 30, ------------------------------------
Class C Shares 1999(a) 1998(a) 1997(a) 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............... $10.609 $10.239 $10.031 $ 10.54 $ 9.66 $ 10.79
------- ------- ------- ------- ------ -------
Net Investment
Income............... .530 .423 .587 .623 .60 .60
Net Realized and
Unrealized
Gain/Loss............ (.897) .381 .209 (.514) .8965 (1.1375)
------- ------- ------- ------- ------ -------
Total from Investment
Operations........... (.367) .804 .796 .109 1.4965 (.5375)
Less Distributions from
and in Excess of Net
Investment Income.... .556 .434 .588 .618 .6165 .5925
------- ------- ------- ------- ------ -------
Net Asset Value, End of
the Period........... $ 9.686 $10.609 $10.239 $10.031 $10.54 $ 9.66
======= ======= ======= ======= ====== =======
Total Return (b)....... (3.50%) 8.07%* 8.28% 1.18% 15.96% (5.05%)
Net Assets at End of
the Period (In
millions)............ $ 18.7 $ 19.3 $ 16.4 $ 21.6 $ 26.8 $ 32.0
Ratio of Expenses to
Average Net
Assets (c)........... 1.78% 1.78% 1.79% 1.82% 1.77% 1.78%
Ratio of Net Investment
Income to Average Net
Assets (c)........... 5.25% 5.51% 5.87% 6.12% 5.86% 6.24%
Portfolio Turnover..... 94% 180%* 114% 271% 231% 306%
</TABLE>
*Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) For the year ended December 31, 1996, the impact on the Ratios of Expenses
and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Government Securities Fund (the "Fund") is organized as a Delaware
business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek 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 July
16, 1984. The distribution of the Fund's Class B and C shares commenced on
December 20, 1991 and March 10, 1993, respectively.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments are stated at value using market quotations
or indications of value obtained from an independent pricing service based upon
the mean of the bid and asked prices. For those securities where quotations or
prices are not available, valuations are determined in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost 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 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 September 30, 1999, there were no
when issued or delayed delivery purchase commitments.
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
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
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 September 30, 1999, for federal income tax purposes the cost of long- and
short-term investments is $2,001,619,075, the aggregate gross unrealized
appreciation is $12,797,041 and the aggregate gross unrealized depreciation is
$47,466,133, resulting in net unrealized depreciation on long- and short-term
investments of $34,669,092.
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, 1999, the Fund had an accumulated capital loss
carryforward for tax purposes of $428,642,286 which will expire between
September 30, 2002 and September 30, 2005. Net realized gains or losses may
differ for financial and tax reporting purposes primarily as a result of the
deferral of losses for tax purposes resulting from wash sales.
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
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
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. In January, 2000 the Fund will provide tax information to shareholders
for the 1999 calendar year.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
have been identified and appropriately reclassified. During 1999, permanent book
and tax basis differences relating to the recognition of net realized gain/loss
on paydowns of mortgage pool obligations totaling $1,837,396 were reclassified
from accumulated net realized loss to accumulated distributions in excess of net
investment income. During 1998, permanent book and tax basis differences
relating to the recognition of net realized gain/loss on paydowns of mortgage
pool obligations totaling $710,515 were reclassified from accumulated net
realized loss to accumulated undistributed net investment income. Additionally,
$152,796,171 of the capital loss carryforward for tax purposes expired during
1998 and was reclassified from accumulated net realized loss to capital.
F. EXPENSE REDUCTIONS--During the year ended September 30, 1999, the Fund's
custody fee was reduced by $90,585 as a result of credits earned on overnight
cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee, payable
monthly, as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $1 billion......................................... .540 of 1%
Next $1 billion.......................................... .515 of 1%
Next $1 billion.......................................... .490 of 1%
Next $1 billion.......................................... .440 of 1%
Next $1 billion.......................................... .390 of 1%
Next $1 billion.......................................... .340 of 1%
Next $1 billion.......................................... .290 of 1%
Over $7 billion.......................................... .240 of 1%
</TABLE>
For the year ended September 30, 1999, the Fund recognized expenses of
approximately $118,600 representing legal services provided by Skadden, Arps,
Slate,
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
For the year ended September 30, 1999, the Fund recognized expenses of
approximately $411,900 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended September 30,
1999, the Fund recognized expenses of approximately $2,543,100. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based upon competitive market 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.
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $2,281,866,439, $34,901,597 and
$14,335,000 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.................................... 60,813,307 $ 613,643,155
Class B.................................... 4,897,452 49,553,022
Class C.................................... 1,062,446 10,727,750
----------- -------------
Total Sales.................................. 66,773,205 $ 673,923,927
=========== =============
Dividend Reinvestment:
Class A.................................... 6,243,513 $ 63,009,646
Class B.................................... 433,204 4,376,618
Class C.................................... 65,022 654,014
----------- -------------
Total Dividend Reinvestment.................. 6,741,739 $ 68,040,278
=========== =============
Repurchases:
Class A.................................... (75,125,808) $(758,074,693)
Class B.................................... (10,073,200) (102,455,589)
Class C.................................... (1,023,964) (10,336,031)
----------- -------------
Total Repurchases............................ (86,222,972) $(870,866,313)
=========== =============
</TABLE>
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
At September 30, 1998, capital aggregated $2,363,288,331, $83,427,546 and
$13,289,267 for Classes A, B and C, respectively. For the nine months ended
September 30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 38,209,773 $ 392,629,272
Class B.................................... 2,981,950 30,757,165
Class C.................................... 679,207 7,019,304
----------- -------------
Total Sales.................................. 41,870,930 $ 430,405,741
=========== =============
Dividend Reinvestment:
Class A.................................... 4,901,780 $ 50,467,666
Class B.................................... 449,273 4,624,075
Class C.................................... 46,713 480,143
----------- -------------
Total Dividend Reinvestment.................. 5,397,766 $ 55,571,884
=========== =============
Repurchases:
Class A.................................... (49,480,517) $(508,314,040)
Class B.................................... (8,433,459) (86,819,263)
Class C.................................... (502,069) (5,179,795)
----------- -------------
Total Repurchases............................ (58,416,045) $(600,313,098)
=========== =============
</TABLE>
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
At December 31, 1997, capital aggregated $2,568,785,271, $145,979,134 and
$12,372,383 for Classes A, B and C, respectively. For the year ended December
31, 1997, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 11,053,580 $ 111,167,157
Class B.................................... 1,797,284 17,946,215
Class C.................................... 314,437 3,145,887
----------- -------------
Total Sales.................................. 13,165,301 $ 132,259,259
=========== =============
Dividend Reinvestment:
Class A.................................... 7,387,982 $ 73,655,314
Class B.................................... 769,452 7,676,933
Class C.................................... 68,029 677,650
----------- -------------
Total Dividend Reinvestment.................. 8,225,463 $ 82,009,897
=========== =============
Repurchases:
Class A.................................... (44,948,129) $(450,176,664)
Class B.................................... (6,711,644) (67,148,668)
Class C.................................... (939,038) (9,378,985)
----------- -------------
Total Repurchases............................ (52,598,811) $(526,704,317)
=========== =============
</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 purchased
on or after June 1, 1996 will automatically convert to Class A shares after the
eighth year following purchase. Class B shares purchased before June 1, 1996
automatically convert to Class A shares after the sixth year following purchase.
For the year ended September 30, 1999, 5,247,496 Class B shares automatically
converted to Class A shares and are shown in the above table as purchases of A
shares and sales of B shares. The CDSC will be imposed
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
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>
For the year ended September 30, 1999, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $95,800 and CDSC on redeemed shares of approximately $235,200.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the year ended September 30, 1999, the cost of purchases and proceeds from
sales of government securities, including paydowns on mortgage-backed securities
and excluding short-term investments and forward commitment transactions, were
$1,806,367,963 and $2,049,984,277, 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 and to manage the portfolio's effective yield, maturity and duration.
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 this instance, the recognition of
gain or loss is postponed until the disposal of the security underlying the
futures contract or forward commitment.
26
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
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.
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 for the year ended September 30, 1999,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at September 30, 1998......................... 1,200
Futures Opened............................................ 49,205
Futures Closed............................................ (49,005)
-------
Outstanding at September 30, 1999......................... 1,400
=======
</TABLE>
The futures contracts outstanding as of September 30, 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 Futures December 1999
(Current Notional Value of $113,938 per
contract)................................... 600 $213,169
U.S. Treasury Note 10-Year Futures December
1999
(Current Notional Value $110,125 per
contract)................................... 800 (36,477)
----- --------
1,400 $176,692
===== ========
</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
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999
- --------------------------------------------------------------------------------
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 do not 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.
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 year ended September 30, 1999 are payments retained by Van Kampen of
approximately $1,126,200.
28
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen Government Securities Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Government Securities
Fund (the "Fund") at September 30, 1999 and the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
November 5, 1999
29
<PAGE> 31
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Pace
Small Cap Value
Technology
GROWTH AND INCOME
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income
Global Franchise
Global Government Securities
Global Managed Assets
International Magnum
Latin American
Short-Term Global Income*
Strategic Income
Worldwide High Income
INCOME
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
TAX FREE
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
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 ongoing 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
* Closed to new investors
30
<PAGE> 32
VAN KAMPEN GOVERNMENT SECURITIES FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*--Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
STEPHEN L. BOYD*
PETER W. HEGEL*
MICHAEL H. SANTO*
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 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After February 29, 2000, the report, if used with
prospective investors, must be accompanied by a monthly performance update.
31
<PAGE> 33
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.
32
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> GOV'T SECS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 2,001,292,316<F1>
<INVESTMENTS-AT-VALUE> 1,966,949,983<F1>
<RECEIVABLES> 33,414,939<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 222,145<F1>
<TOTAL-ASSETS> 2,000,587,067<F1>
<PAYABLE-FOR-SECURITIES> 170,930,111<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 28,354,243<F1>
<TOTAL-LIABILITIES> 199,284,354<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,281,866,439
<SHARES-COMMON-STOCK> 173,726,449
<SHARES-COMMON-PRIOR> 181,795,437
<ACCUMULATED-NII-CURRENT> (1,607,656)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (494,027,026)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (34,165,641)<F1>
<NET-ASSETS> 1,688,780,537
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 136,009,762<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (20,727,709)<F1>
<NET-INVESTMENT-INCOME> 115,282,053<F1>
<REALIZED-GAINS-CURRENT> (54,139,987)<F1>
<APPREC-INCREASE-CURRENT> (118,326,058)<F1>
<NET-CHANGE-FROM-OPS> (57,183,992)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (111,541,874)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,813,307
<NUMBER-OF-SHARES-REDEEMED> (75,125,808)
<SHARES-REINVESTED> 6,243,513
<NET-CHANGE-IN-ASSETS> (244,984,291)
<ACCUMULATED-NII-PRIOR> 187,214<F1>
<ACCUMULATED-GAINS-PRIOR> (438,049,643)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 10,218,247<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 20,818,294<F1>
<AVERAGE-NET-ASSETS> 1,800,305,425
<PER-SHARE-NAV-BEGIN> 10.637
<PER-SHARE-NII> 0.608
<PER-SHARE-GAIN-APPREC> (0.896)
<PER-SHARE-DIVIDEND> (0.628)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.721
<EXPENSE-RATIO> 1.02
<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> GOV'T SECS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 2,001,292,316<F1>
<INVESTMENTS-AT-VALUE> 1,966,949,983<F1>
<RECEIVABLES> 33,414,939<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 222,145<F1>
<TOTAL-ASSETS> 2,000,587,067<F1>
<PAYABLE-FOR-SECURITIES> 170,930,111<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 28,354,243<F1>
<TOTAL-LIABILITIES> 199,284,354<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,901,597
<SHARES-COMMON-STOCK> 9,664,052
<SHARES-COMMON-PRIOR> 14,406,596
<ACCUMULATED-NII-CURRENT> (1,607,656)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (494,027,026)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (34,165,641)<F1>
<NET-ASSETS> 93,865,314
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 136,009,762<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (20,727,709)<F1>
<NET-INVESTMENT-INCOME> 115,282,053<F1>
<REALIZED-GAINS-CURRENT> (54,139,987)<F1>
<APPREC-INCREASE-CURRENT> (118,326,058)<F1>
<NET-CHANGE-FROM-OPS> (57,183,992)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (6,353,822)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,897,452
<NUMBER-OF-SHARES-REDEEMED> (10,073,200)
<SHARES-REINVESTED> 433,204
<NET-CHANGE-IN-ASSETS> (59,335,762)
<ACCUMULATED-NII-PRIOR> 187,214<F1>
<ACCUMULATED-GAINS-PRIOR> (438,049,643)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 10,218,247<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 20,818,294<F1>
<AVERAGE-NET-ASSETS> 116,065,692
<PER-SHARE-NAV-BEGIN> 10.634
<PER-SHARE-NII> 0.533
<PER-SHARE-GAIN-APPREC> (0.898)
<PER-SHARE-DIVIDEND> (0.556)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.713
<EXPENSE-RATIO> 1.78
<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> GOV'T SECS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 2,001,292,316<F1>
<INVESTMENTS-AT-VALUE> 1,966,949,983<F1>
<RECEIVABLES> 33,414,939<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 222,145<F1>
<TOTAL-ASSETS> 2,000,587,067<F1>
<PAYABLE-FOR-SECURITIES> 170,930,111<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 28,354,243<F1>
<TOTAL-LIABILITIES> 199,284,354<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,335,000
<SHARES-COMMON-STOCK> 1,926,152
<SHARES-COMMON-PRIOR> 1,822,648
<ACCUMULATED-NII-CURRENT> (1,607,656)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (494,027,026)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (34,165,641)<F1>
<NET-ASSETS> 18,656,862
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 136,009,762<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (20,727,709)<F1>
<NET-INVESTMENT-INCOME> 115,282,053<F1>
<REALIZED-GAINS-CURRENT> (54,139,987)<F1>
<APPREC-INCREASE-CURRENT> (118,326,058)<F1>
<NET-CHANGE-FROM-OPS> (57,183,992)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,018,623)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,062,446
<NUMBER-OF-SHARES-REDEEMED> (1,023,964)
<SHARES-REINVESTED> 65,022
<NET-CHANGE-IN-ASSETS> (680,366)
<ACCUMULATED-NII-PRIOR> 187,214<F1>
<ACCUMULATED-GAINS-PRIOR> (438,049,643)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 10,218,247<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 20,818,294<F1>
<AVERAGE-NET-ASSETS> 18,469,338
<PER-SHARE-NAV-BEGIN> 10.609
<PER-SHARE-NII> 0.530
<PER-SHARE-GAIN-APPREC> (0.897)
<PER-SHARE-DIVIDEND> (0.556)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.686
<EXPENSE-RATIO> 1.78
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
