<Table>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
SIX-MONTH DIVIDEND HISTORY 6
ASSET ALLOCATION 6
COUPON DISTRIBUTION 6
Q&A WITH YOUR PORTFOLIO MANAGERS 7
GLOSSARY OF TERMS 10
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 11
FINANCIAL STATEMENTS 15
NOTES TO FINANCIAL STATEMENTS 21
VAN KAMPEN INVESTMENTS
THE VAN KAMPEN FAMILY OF FUNDS 32
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES 33
</Table>
Promising economic signs have appeared on the horizon.
This report must be preceded or accompanied by a prospectus for the fund being
offered.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
OVERVIEW
LETTER TO SHAREHOLDERS
April 19, 2002
Dear Shareholder,
In recent months, promising economic signs have appeared on the horizon. While
it may be too soon to declare an end to the recession, it's never too soon to
discuss diversification and long-term investment strategies.
Over the years, we've used our generations of experience to help investors like
you pursue their financial goals. Whether you're planning for your future, or
for your family's, we encourage you to consider including a variety of stock and
fixed-income funds in your portfolio. We believe an appropriately diversified
portfolio, one which includes a balanced mix of investments, may help smooth out
the effects of the market's fluctuations--and, as such, may help improve your
portfolio's long-term performance.
While no portfolio is immune to volatility, your advisor can help you structure
a portfolio designed to address your long-term financial goals. Be sure to
discuss your situation with your advisor before investing.
Thank you for your continued trust in Van Kampen. We
appreciate the opportunity to help you and your loved ones
enjoy life's true wealth--family, friends and life's daily pleasures.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Asset Management Inc.
1
ECONOMIC SNAPSHOT
THE ECONOMY
THE ECONOMIC DATA RELEASED IN MARCH WAS UNAMBIGUOUS--THE U.S. ECONOMY SEEMED
BETTER POSITIONED TO RESUME TREND GROWTH THAN MOST FORECASTERS HAD PREDICTED.
SURPRISINGLY STRONG DATA, RANGING FROM PAYROLL GROWTH TO INVENTORY RESTOCKING,
GENERATED A CHORUS OF UPWARD REVISIONS TO PROJECTIONS OF FIRST-QUARTER GROWTH IN
THE GROSS DOMESTIC PRODUCT.
ON THE HEELS OF THIS INCREASINGLY OPTIMISTIC NEWS, THE CAPITAL MARKETS REACTED
POSITIVELY--STOCK AND COMMODITY PRICES ROSE WHILE BOND PRICES FELL.
THE FEDERAL RESERVE BOARD'S OPEN MARKET COMMITTEE (FOMC) ACKNOWLEDGED IN ITS
MARCH 19 MONETARY POLICY DIRECTIVE, "INFORMATION THAT HAS BECOME AVAILABLE SINCE
THE LAST MEETING OF THE COMMITTEE INDICATES THAT THE ECONOMY, BOLSTERED BY A
MARKED SWING IN INVENTORY INVESTMENT, IS EXPANDING AT A SIGNIFICANT PACE."
FOLLOWING THIS STATEMENT, IT CAME AS NO SURPRISE TO MOST INVESTORS WHEN THE FOMC
ANNOUNCED IT WOULD NOT CHANGE INTEREST RATES DURING ITS MARCH MEETING. DURING
2001, THE FED CUT INTEREST RATES 11 TIMES--BRINGING THE FEDERAL FUNDS RATE TO
1.75 PERCENT, A 40-YEAR LOW.
2
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(March 31, 2000--March 31, 2002)
[BAR GRAPH]
<Table>
<Caption>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Mar 00 4.80
Jun 00 5.70
Sep 00 1.30
Dec 00 1.90
Mar 01 1.30
Jun 01 0.30
Sep 01 -1.30
Dec 01 1.70
Mar 02 5.80
</Table>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(March 31, 2000--March 31, 2002)
[LINE GRAPH]
<Table>
<Caption>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Mar 00 6.00 3.80
6.00 3.10
6.50 3.20
Jun 00 6.50 3.70
6.50 3.70
6.50 3.40
Sep 00 6.50 3.50
6.50 3.40
6.50 3.40
Dec 00 6.50 3.40
5.50 3.70
5.50 3.50
Mar 01 5.00 2.90
4.50 3.30
4.00 3.60
Jun 01 3.75 3.20
3.75 2.70
3.50 2.70
Sep 01 3.00 2.60
2.50 2.10
2.00 1.90
Dec 01 1.75 1.60
1.75 1.10
1.75 1.10
Mar 02 1.75 1.50
</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 percentage
change of the Consumer Price Index for all urban consumers at the end of each
month.
Source: Bloomberg
3
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of March 31, 2002)
<Table>
<Caption>
A SHARES B SHARES C SHARES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six-month total return based on
NAV(1) -0.37% -0.81% -0.71%
-------------------------------------------------------------------------
Six-month total return(2) -5.11% -4.68% -1.68%
-------------------------------------------------------------------------
One-year total return(2) -0.62% -0.49% 2.59%
-------------------------------------------------------------------------
Five-year average annual total
return(2) 5.66% 5.65% 5.91%
-------------------------------------------------------------------------
Ten-year average annual total
return(2) 5.69% 5.73%(3) N/A
-------------------------------------------------------------------------
Life-of-Fund average annual total
return(2) 7.54% 5.51%(3) 4.75%
-------------------------------------------------------------------------
Commencement date 07/16/84 12/20/91 03/10/93
-------------------------------------------------------------------------
Distribution Rate(4) 4.30% 3.76% 3.77%
-------------------------------------------------------------------------
SEC Yield(5) 5.56% 5.08% 5.10%
-------------------------------------------------------------------------
</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 Class A Shares) or
contingent deferred sales charge (CDSC) for Class B and Class C Shares. 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 the first and second years of
purchase and declining 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. These returns include combined
Rule 12b-1 fees and service fees of up to .25% for Class A Shares and 1% for
Class B and Class C Shares and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
4
(2) Assumes reinvestment of all distributions for the period and includes
payment of the maximum sales charge (4.75% for Class A Shares) or CDSC for
Class B and Class C Shares and combined Rule 12b-1 fees and service fees. 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 the first and second years of
purchase and declining 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. The combined Rule
12b-1 fees and service fees for Class A Shares is up to .25% and for Class B
and Class C Shares is 1%. The returns above do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption
of Fund shares.
(3) 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.
(4) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
(5) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ended March 31, 2002.
See the Comparative Performance section of the current prospectus. An
investment in the Fund is subject to investment risks, and you could lose
money on your investment in the Fund. Please review the Risk/Return Summary
of the Prospectus for further details on investment risks. Past performance
is no guarantee of future results. Investment returns and principal value
will fluctuate and fund shares, when redeemed, may be worth more or less
than their original cost. As a result of recent market activity, current
performance may vary from the figures shown. For more up-to-date
information, please visit vankampen.com or speak with your financial
advisor.
Fund shares are neither insured nor guaranteed by the U.S. Government.
Market forecasts provided in this report may not necessarily come to pass.
5
PORTFOLIO AT A GLANCE
SIX-MONTH DIVIDEND HISTORY
(for the six months ending March 31, 2002)
[BAR GRAPH]
<Table>
<Caption>
DIVIDENDS SPECIAL INCOME DIVIDENDS
--------- ------------------------
<S> <C> <C>
10/01 0.0425
11/01 0.0425
12/01 0.0425 0.0275
1/02 0.0425
2/02 0.0380
3/02 0.0380
</Table>
The dividend history represents dividends that were paid on the fund's Class A
shares and is no guarantee of the fund's future dividends.
ASSET ALLOCATION
(as a percentage of long-term investments)
[BAR GRAPH]
<Table>
<Caption>
MARCH 31, 2002 SEPTEMBER 30, 2001
-------------- ------------------
<S> <C> <C>
U.S. Treasuries 70.00 39.00
FNMA 16.00 31.00
GNMA 9.00 10.00
FHLMC 5.00 18.00
FHL Bank 0.00 2.00
</Table>
COUPON DISTRIBUTION
(as a percentage of long-term investments--March 31, 2002)
[BAR GRAPH]
<Table>
<Caption>
COUPON DISTRIBUTION
-------------------
<S> <C>
less than 6.0% 2.60
6-6.9% 57.20
7-7.9% 12.90
8-8.9% 15.00
9-9.9% 5.40
10% or more 6.90
</Table>
6
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGEMENT TEAM FOR THE VAN KAMPEN
GOVERNMENT SECURITIES FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED
THE MARKETS AND INFLUENCED THE FUND'S RETURN DURING THE SIX-MONTH PERIOD ENDED
MARCH 31, 2002. THE FUND IS MANAGED BY THE ADVISER'S HIGH GRADE TEAM. CURRENT
MEMBERS OF THE TEAM(1) INCLUDE W. DAVID ARMSTRONG, MANAGING DIRECTOR; PAUL F.
O'BRIEN, EXECUTIVE DIRECTOR; AND DAVID HOROWITZ, VICE PRESIDENT. THE FOLLOWING
DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE.
(1) Team members may change at any time without notice.
Q WHAT WAS THE MARKET
ENVIRONMENT OF THE PAST SIX MONTHS, AND HOW DID THE FUND PERFORM IN THAT
ENVIRONMENT?
A The period was marked by a
return to more normal conditions following the market chaos that ensued after
September. This was particularly true for the high-quality paper in which the
fund invests, since it isn't typically affected by concerns of credit quality.
Investors' initial reaction in the first part of the period was to seek out the
perceived safety of U.S. Treasury bonds. This flight to quality drove interest
rates down, particularly in the short end of the yield curve, and took the yield
on the 10-year note down to a low of 4.18 percent in early November.
Shortly after that, the market began to be more optimistic about the future
path of the economy. The yield curve, which had been aggressively steepened by
the flight to quality earlier in the period, began to flatten as investors
unwound their longer-term Treasury positions. This drove interest rates up at
the intermediate and long portions of the yield curve, with the greatest change
occurring in the intermediate area.
Mortgage-backed securities turned in a strong performance over the period.
Their performance was driven by a number of factors, including increased
investor demand for high-quality paper without credit risk. The sector was also
helped by a sustained decline in volatility in the fixed-income market over the
period to more normal levels. We believe this drop in volatility helped to make
mortgage securities, which often suffer adverse effects from volatility, more
attractive. Finally, rising interest rates helped reduce homeowners' incentives
to refinance their mortgages. This reduced incentive provided further stability
to the mortgage-backed securities market.
Agency paper continued to be highly priced over the period. Like mortgage
bonds, agencies experienced increased demand from investors who
7
wanted to earn more yield than they could with Treasuries without having to be
exposed to credit risk.
The fund continued to provide shareholders with what we believe is an
attractive level of income, as its monthly dividend of $0.0380 per Class A share
translates to a distribution rate of 4.30 percent based on the fund's maximum
offering price as of March 31, 2002. For the six-month period ended March 31,
2002, the fund generated a total return of -0.37 percent.
Performance information for the fund reflects Class A shares at net asset
value including combined Rule 12b-1 fees and service fees of up to 0.25 percent
and excluding a maximum sales charge of 4.75 percent; if the maximum sales
charge were included, the return would be lower. The return above does not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Of course, past performance is
no guarantee of future results. Performance of other share classes will vary.
Investment return and principal value will fluctuate and fund shares, when
redeemed, may be worth more or less than their original cost. As a result of
recent market activity, current performance may vary from the figures shown. For
more up-to-date information, please visit vankampen.com or speak with your
financial advisor.
By comparison, the Lehman Brothers Mutual Fund Government/Mortgage Index
posted a total return of -0.05 percent for the same period. This index is a
broad-based, unmanaged index comprised of U.S. government treasuries and agency
mortgage-backed securities. Index returns do not include any sales charges or
fees that would be paid by an investor purchasing the securities they represent.
Such costs would lower performance. It is not possible to invest directly in an
index. For additional performance results, please refer to the chart and
footnotes on page 4.
Q WHAT STRATEGIES DID YOU PURSUE
IN THIS ENVIRONMENT?
A We believed that apparent investor
preference for the relative safety of government bonds drove interest rates too
low during the earlier part of the period. As a result, we kept the fund's
duration significantly shorter than that of its benchmark index (the Lehman
Brothers Mutual Fund Government/Mortgage Index) until interest rates began to
rise. As that process unfolded, we systematically lengthened the fund's duration
to take advantage of rising yields. By the end of the period, the fund's
duration approximated that of its benchmark.
In order to keep the fund's duration short during the early part of the
period, we emphasized the intermediate part of the yield curve. We slowly
reduced the portfolio's exposure to that part of the curve as we shortened its
duration. We believe this move helped to insulate the fund from much of the
negative impact of rising intermediate rates.
At the sector level, the fund maintained a consistent overweighting to
mortgage-backed securities throughout the period relative to its benchmark. Our
strategy within the sector was to emphasize both lower-coupon paper as well as
higher-coupon paper in order to keep its exposure balanced. We underweighted
bonds
8
with coupons that we believed put them at greatest risk of refinancing. Our
strongest preference was for paper backed by FNMA (Federal National Mortgage
Association). While we maintained the fund's overall overweight in
mortgage-backed securities, we did move to capture the sector's outperformance
by selling some positions. This reduced the portfolio's position to a modest
overweighting by the end of the period.
Q WHAT IS YOUR OUTLOOK FOR
THE MARKET?
A Our outlook for the economy is
constructive, and we expect the recovery to continue to gather steam in 2002. As
a result, we agree with the market's prediction that interest rates are likely
to rise. The curve traditionally flattens in such times, with yields rising most
rapidly on the short end as the Federal Reserve raises rates, and we expect that
pattern to hold true in the coming months.
At the sector level, we believe that mortgage-backed securities still offer
reasonable value. That said, we don't feel that the sector offers as compelling
a value as it did in the fall of 2001. For the time being, we plan to maintain
the fund's barbell structure between higher and lower coupons in the belief that
this structure should provide the fund with the potential for a healthy yield as
well as reasonable price stability.
ANNUAL HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate mailings to
the same address. The fund delivers a single copy of certain shareholder
documents to investors who share an address, even if the accounts are registered
under different names. The fund's prospectuses and shareholder reports will be
delivered to you in this manner indefinitely unless you instruct us otherwise.
You can request multiple copies of these documents by either calling (800)
341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O.
Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your
instructions, we will begin sending individual copies for each account within 30
days.
9
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest-rate
movements on 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 at least eight times
a year to establish monetary policy and monitor the economic pulse of the United
States.
FLIGHT TO QUALITY: The flow of funds toward potentially "safer" investments in
times of marketplace uncertainty or fear.
MORTGAGE-BACKED SECURITIES: Securities backed by pools of similar mortgages.
These securities are generally issued by agencies of the U.S. government, such
as Government National Mortgage Association (GNMA, or "Ginnie Mae") and Federal
Home Loan Mortgage Corporation (FHLMC, or "Freddie Mac").
YIELD: The annual rate of return on an investment, expressed as a percentage.
YIELD CURVE: The pattern that results from 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,
while a "negative" yield curve represents decreasing yields as the time to
maturity extends.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower credit 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.
10
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
March 31, 2002 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS 4.5%
$25,627 Federal Home Loan Mortgage
Corp. (REMIC).................. 5.500% 04/15/15 to 06/15/15 $ 26,145,989
9,000 Federal National Mortgage
Association Pools.............. 6.000 02/25/22 9,221,078
20,250 Federal National Mortgage
Association Pools.............. 6.022 11/25/10 20,157,358
9,160 Government National Mortgage
Association Pools.............. 5.500 02/16/23 9,343,606
--------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS.................... 64,868,031
--------------
MORTGAGE BACKED SECURITIES 20.8%
3,854 Federal Home Loan Mortgage
Corp. Gold 30 Year Pools....... 6.000 04/01/31 to 06/01/31 3,743,067
18,843 Federal Home Loan Mortgage
Corp. Gold 30 Year Pools....... 7.500 01/01/22 to 11/01/30 19,559,742
523 Federal Home Loan Mortgage
Corp. Gold 30 Year Pools....... 8.000 07/01/24 to 09/01/24 555,572
0 Federal Home Loan Mortgage
Corp. Non-Gold 30 Year Pools... 11.000 02/01/14 216
9,042 Federal National Mortgage
Association 15 Year Dwarf
Pools.......................... 6.000 01/01/09 to 01/01/10 9,221,299
9,664 Federal National Mortgage
Association 15 Year Dwarf
Pools.......................... 6.500 12/01/07 to 06/01/12 9,938,427
2,910 Federal National Mortgage
Association 15 Year Dwarf
Pools.......................... 7.000 03/01/15 to 07/01/15 3,015,780
10,449 Federal National Mortgage
Association 15 Year Dwarf
Pools.......................... 7.500 01/01/07 to 09/01/12 11,029,792
36,053 Federal National Mortgage
Association 30 Year Pools...... 6.000 02/01/28 to 07/01/29 35,239,577
</Table>
See Notes to Financial Statements
11
YOUR FUND'S INVESTMENTS
March 31, 2002 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES (CONTINUED)
$77,202 Federal National Mortgage
Association 30 Year Pools...... 6.500% 05/01/23 to 11/01/28 $ 77,398,552
15,498 Federal National Mortgage
Association 30 Year Pools...... 7.500 03/01/22 to 11/01/30 16,105,554
33 Federal National Mortgage
Association 30 Year Pools...... 8.000 09/01/24 to 11/01/24 34,693
74 Federal National Mortgage
Association 30 Year Pools...... 11.500 02/01/15 to 05/01/19 83,152
1,053 Federal National Mortgage
Association 30 Year Pools...... 12.000 03/01/13 to 01/01/16 1,191,522
5,794 Government National Mortgage
Association 30 Year Pools...... 6.000 12/15/28 5,651,984
21,417 Government National Mortgage
Association 30 Year Pools...... 6.500 06/15/23 to 02/15/29 21,453,751
26,485 Government National Mortgage
Association 30 Year Pools...... 7.000 12/15/22 to 12/15/27 27,161,959
19,329 Government National Mortgage
Association 30 Year Pools...... 7.500 02/15/07 to 08/15/24 20,342,284
13,665 Government National Mortgage
Association 30 Year Pools...... 8.000 07/15/07 to 10/15/25 14,646,089
8,553 Government National Mortgage
Association 30 Year Pools...... 8.500 09/15/04 to 12/15/21 9,298,177
2,342 Government National Mortgage
Association 30 Year Pools...... 9.000 12/15/17 2,574,398
34 Government National Mortgage
Association 30 Year Pools...... 11.000 01/15/10 to 11/15/20 38,669
1,433 Government National Mortgage
Association 30 Year Pools...... 12.000 06/15/11 to 06/15/15 1,656,283
811 Government National Mortgage
Association 30 Year Pools...... 12.500 05/15/10 to 07/15/18 943,137
1,186 Government National Mortgage
Association 30 Year Pools
(FHA/VA)....................... 7.000 04/15/24 1,224,156
1,872 Government National Mortgage
Association II 30 Year Pools... 6.000 04/20/29 1,809,696
3,579 Government National Mortgage
Association II 30 Year Pools... 6.500 11/20/28 3,563,398
--------------
TOTAL MORTGAGE BACKED SECURITIES 20.8%...................... 297,480,926
--------------
</Table>
See Notes to Financial Statements
12
YOUR FUND'S INVESTMENTS
March 31, 2002 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 4.4%
$ 500 Federal Home Loan Mortgage
Corp. Pools.................... 5.750% 07/15/03 $ 514,793
23,000 Federal Home Loan Mortgage
Corp. Pools.................... 7.375 05/15/03 24,086,037
35,000 Federal National Mortgage
Association Pools.............. 6.250 05/15/29 33,650,995
4,500 Federal National Mortgage
Association Pools.............. 7.250 05/15/30 4,896,886
--------------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS............ 63,148,711
--------------
UNITED STATES TREASURY OBLIGATIONS 69.3%
35,000 United States Treasury Bonds
(a)............................ 6.125 11/15/27 35,407,340
83,600 United States Treasury Bonds
(a)............................ 8.000 11/15/21 102,390,588
70,000 United States Treasury Bonds
(a)............................ 8.125 08/15/19 85,722,574
34,000 United States Treasury Bonds
(a)............................ 9.250 02/15/16 44,704,645
25,000 United States Treasury Bonds
(a)............................ 9.375 02/15/06 29,126,855
7,000 United States Treasury Bonds
(a)............................ 10.375 11/15/12 8,751,089
10,000 United States Treasury Bonds
(a)............................ 10.750 08/15/05 11,939,062
27,000 United States Treasury Bonds
(a)............................ 10.750 02/15/03 28,887,786
1,000 United States Treasury Bonds... 10.750 05/15/03 1,085,782
27,000 United States Treasury Bonds
(a)............................ 11.625 11/15/02 28,563,044
11,000 United States Treasury Bonds
(a)............................ 12.000 08/15/13 14,923,026
27,350 United States Treasury Notes
(a)............................ 6.000 08/15/09 28,458,881
50,000 United States Treasury Notes... 6.250 07/31/02 50,726,310
95,000 United States Treasury Notes... 6.250 08/31/02 96,632,699
140,150 United States Treasury Notes
(a)............................ 6.250 02/15/03 144,485,722
20,000 United States Treasury Notes
(a)............................ 6.250 02/15/07 21,128,124
</Table>
See Notes to Financial Statements
13
YOUR FUND'S INVESTMENTS
March 31, 2002 (Unaudited)
<Table>
<Caption>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (CONTINUED)
$75,000 United States Treasury Notes
(a)............................ 6.375% 06/30/02 $ 75,855,465
50,000 United States Treasury Notes
(a)............................ 6.375 08/15/02 50,831,890
20,000 United States Treasury Notes
(a)............................ 6.500 10/15/06 21,315,600
9,500 United States Treasury Notes
(a)............................ 6.625 05/15/07 10,196,124
41,900 United States Treasury Notes
(a)............................ 6.750 05/15/05 44,790,442
55,000 United States Treasury Notes
(a)............................ 7.500 05/15/02 55,386,441
--------------
TOTAL UNITED STATES TREASURY OBLIGATIONS 69.3%.............. 991,309,489
--------------
TOTAL LONG-TERM INVESTMENTS 99.0%
(Cost $1,386,828,732)................................................. 1,416,807,157
REPURCHASE AGREEMENT 0.2%
State Street Bank & Trust Co. ($2,964,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 03/28/02, to be
sold on 04/01/02 at $2,964,586)
(Cost $2,964,000)................................................... 2,964,000
--------------
TOTAL INVESTMENTS 99.2%
(Cost $1,389,792,732)................................................. 1,419,771,157
OTHER ASSETS IN EXCESS OF LIABILITIES 0.8%............................. 11,106,660
--------------
NET ASSETS 100.0%...................................................... $1,430,877,817
==============
</Table>
(a) Assets segregated as collateral for open futures and forward transactions.
FHA/VA--Federal Housing Administration/Department of Veterans Affairs
REMIC--Real Estate Mortgage Investment Conduits
See Notes to Financial Statements
14
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2002 (Unaudited)
<Table>
<S> <C>
ASSETS:
Total Investments (Cost $1,389,792,732)..................... $1,419,771,157
Receivables:
Interest.................................................. 18,022,569
Fund Shares Sold.......................................... 5,163,988
Other....................................................... 378,807
--------------
Total Assets............................................ 1,443,336,521
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 6,023,536
Income Distributions...................................... 1,789,969
Distributor and Affiliates................................ 893,251
Custodian Bank............................................ 728,170
Investment Advisory Fee................................... 651,820
Variation Margin on Futures............................... 50,813
Forward Commitments......................................... 1,543,994
Trustees' Deferred Compensation and Retirement Plans........ 391,144
Accrued Expenses............................................ 386,007
--------------
Total Liabilities....................................... 12,458,704
--------------
NET ASSETS.................................................. $1,430,877,817
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,910,373,892
Net Unrealized Appreciation................................. 29,105,942
Accumulated Undistributed Net Investment Income............. (8,400,995)
Accumulated Net Realized Loss............................... (500,201,022)
--------------
NET ASSETS.................................................. $1,430,877,817
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,295,581,470 and 128,271,376 shares of
beneficial interest issued and outstanding)............. $ 10.10
Maximum sales charge (4.75%* of offering price)......... .50
--------------
Maximum offering price to public........................ $ 10.60
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $110,122,667 and 10,921,529 shares of
beneficial interest issued and outstanding)............. $ 10.08
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $25,173,680 and 2,503,405 shares of
beneficial interest issued and outstanding)............. $ 10.06
==============
</Table>
* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
15
Statement of Operations
For the Six Months Ended March 31, 2002 (Unaudited)
<Table>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 36,488,454
------------
EXPENSES:
Investment Advisory Fee..................................... 3,899,220
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,606,095, $551,335 and $127,504,
respectively)............................................. 2,284,934
Shareholder Services........................................ 1,124,746
Custody..................................................... 111,048
Legal....................................................... 22,818
Trustees' Fees and Related Expenses......................... 17,082
Other....................................................... 318,417
------------
Total Expenses............................................ 7,778,265
Less Credits Earned on Cash Balances...................... 25,894
------------
Net Expenses.............................................. 7,752,371
------------
NET INVESTMENT INCOME....................................... $ 28,736,083
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 22,579,250
Futures................................................... (591,112)
Forward Commitments....................................... 3,860,684
------------
Net Realized Gain........................................... 25,848,822
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 89,407,587
------------
End of the Period:
Investments............................................. 29,978,425
Futures................................................. (321,985)
Forward Commitments..................................... (550,498)
------------
29,105,942
------------
Net Unrealized Depreciation During the Period............... (60,301,645)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(34,452,823)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (5,716,740)
============
</Table>
See Notes to Financial Statements
16
Statement of Changes in Net Assets
(Unaudited)
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2002 SEPTEMBER 30, 2001
--------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 28,736,083 $ 78,495,845
Net Realized Gain................................ 25,848,822 12,896,537
Net Unrealized Appreciation/Depreciation During
the Period..................................... (60,301,645) 73,567,948
-------------- --------------
Change in Net Assets from Operations............. (5,716,740) 164,960,330
-------------- --------------
Distributions from Net Investment Income:
Class A Shares................................. (35,342,877) (69,265,808)
Class B Shares................................. (2,555,632) (3,409,433)
Class C Shares................................. (594,043) (960,268)
-------------- --------------
Total Distributions.............................. (38,492,552) (73,635,509)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (44,209,292) 91,324,821
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 109,889,262 450,933,598
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................... 25,144,659 45,367,572
Cost of Shares Repurchased....................... (152,305,183) (558,005,453)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... (17,271,262) (61,704,283)
-------------- --------------
TOTAL INCREASE/DECREASE IN NET ASSETS............ (61,480,554) 29,620,538
NET ASSETS:
Beginning of the Period.......................... 1,492,358,371 1,462,737,833
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
($8,400,995) and $5,617,558, respectively)..... $1,430,877,817 $1,492,358,371
============== ==============
</Table>
See Notes to Financial Statements
17
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX NINE
MONTHS MONTHS YEAR
CLASS A SHARES ENDED YEAR ENDED SEPTEMBER 30, ENDED ENDED
MARCH 31, ------------------------------ SEPT. 30, DEC. 31,
2002 (A)(B) 2001 2000 1999 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $ 10.41 $ 9.77 $ 9.72 $ 10.64 $ 10.26 $ 10.05
-------- -------- -------- -------- -------- --------
Net Investment Income....... .21 .54 .56 .61 .48 .66
Net Realized and Unrealized
Gain/Loss................. (.25) .61 .05 (.90) .39 .21
-------- -------- -------- -------- -------- --------
Total from
Investment Operations....... (.04) 1.15 .61 (.29) .87 .87
Less Distributions from Net
Investment Income........... .27 .51 .56 .63 .49 .66
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
THE PERIOD.................. $ 10.10 $ 10.41 $ 9.77 $ 9.72 $ 10.64 $ 10.26
======== ======== ======== ======== ======== ========
Total Return (c)............. -0.37%* 12.07% 6.53% -2.71% 8.62%* 9.16%
Net Assets at End of the
Period (In millions)........ $1,295.6 $1,361.8 $1,389.6 $1,688.8 $1,933.8 $1,930.4
Ratio of Expenses to Average
Net Assets.................. .99% 1.02% 1.00% 1.02% 1.02% 1.03%
Ratio of Net Investment
Income to Average Net
Assets...................... 3.99% 5.41% 5.91% 6.01% 6.30% 6.62%
Portfolio Turnover........... 37%* 65% 100% 94% 180%* 114%
</Table>
* Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on fixed income securities and presenting paydown gains
and losses on mortgage- and asset-backed securities as interest income. The
effect of these changes for the six months ended March 31, 2002 was to
decrease net investment income per share by $.02, increase net realized and
unrealized gains and losses per share by $.02, and decrease the ratio of net
investment income to average net assets from 4.51% to 3.99%. Per share,
ratios, and supplemental data for periods prior to March 31, 2002 have not
been restated to reflect this change in presentation.
(b) Based on average month-end shares outstanding.
(c) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or 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. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
See Notes to Financial Statements
18
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX NINE
MONTHS MONTHS YEAR
ENDED YEAR ENDED SEPTEMBER 30, ENDED ENDED
MARCH 31, ------------------------------ SEPT. 30, DEC. 31,
2002 (A)(B) 2001 (B) 2000 (B) 1999 (B) 1998 (B) 1997 (B)
CLASS B SHARES -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $10.40 $ 9.76 $9.71 $10.63 $10.26 $10.05
------ ------ ----- ------ ------ ------
Net Investment Income....... .17 .47 .49 .53 .42 .59
Net Realized and Unrealized
Gain/Loss................. (.25) .61 .05 (.89) .38 .21
------ ------ ----- ------ ------ ------
Total from Investment
Operations.................. (.08) 1.08 .54 (.36) .80 .80
Less Distributions from Net
Investment Income........... .24 .44 .49 .56 .43 .59
------ ------ ----- ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD...................... $10.08 $10.40 $9.76 $ 9.71 $10.63 $10.26
====== ====== ===== ====== ====== ======
Total Return (c)............. -0.81%* 11.35% 5.76% -3.49% 8.05%* 8.27%
Net Assets at End of the
Period (In millions)........ $110.1 $104.9 $59.5 $ 93.9 $153.2 $199.2
Ratio of Expenses to Average
Net Assets.................. 1.76% 1.77% 1.75% 1.78% 1.78% 1.78%
Ratio of Net Investment
Income to Average Net
Assets...................... 3.23% 4.66% 5.16% 5.24% 5.55% 5.87%
Portfolio Turnover........... 37%* 65% 100% 94% 180%* 114%
</Table>
* Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on fixed income securities and presenting paydown gains
and losses on mortgage- and asset-backed securities as interest income. The
effect of these changes for the six months ended March 31, 2002 was to
decrease net investment income per share by $.02, increase net realized and
unrealized gains and losses per share by $.02, and decrease the ratio of net
investment income to average net assets from 3.74% to 3.23%. Per share,
ratios, and supplemental data for periods prior to March 31, 2002 have not
been restated to reflect this change in presentation.
(b) Based on average month-end shares outstanding.
(c) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain redemptions
made within the first and second years of purchase and declining to 0% after
the fifth year. If the sales charge was included, total returns would be
lower. These returns include combined Rule 12b-1 fees and service fees of 1%
and do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
See Notes to Financial Statements
19
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX NINE
MONTHS MONTHS YEAR
CLASS C SHARES ENDED YEAR ENDED SEPTEMBER 30, ENDED ENDED
MARCH 31, ------------------------------ SEPT. 30, DEC. 31,
2002 (A)(B) 2001 (B) 2000 (B) 1999 (B) 1998 (B) 1997 (B)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD......................... $10.37 $ 9.74 $9.69 $10.61 $10.24 $10.03
------ ------ ----- ------ ------ ------
Net Investment Income.............. .17 .47 .49 .53 .42 .59
Net Realized and Unrealized
Gain/Loss........................ (.24) .60 .05 (.89) .38 .21
------ ------ ----- ------ ------ ------
Total from
Investment Operations.............. (.07) 1.07 .54 (.36) .80 .80
Less Distributions from Net
Investment Income.................. .24 .44 .49 .56 .43 .59
------ ------ ----- ------ ------ ------
NET ASSET VALUE, END OF
THE PERIOD......................... $10.06 $10.37 $9.74 $ 9.69 $10.61 $10.24
====== ====== ===== ====== ====== ======
Total Return (c).................... -0.71%* 11.27% 5.78% -3.50% 8.07%* 8.28%
Net Assets at End of the
Period (In millions)............... $ 25.2 $ 25.6 $13.6 $ 18.7 $ 19.3 $ 16.4
Ratio of Expenses to Average Net
Assets............................. 1.76% 1.76% 1.75% 1.78% 1.78% 1.79%
Ratio of Net Investment
Income to Average
Net Assets......................... 3.23% 4.67% 5.16% 5.25% 5.51% 5.87%
Portfolio Turnover.................. 37%* 65% 100% 94% 180%* 114%
</Table>
* Non-Annualized
(a) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on fixed income securities and presenting paydown gains
and losses on mortgage- and asset-backed securities as interest income. The
effect of these changes for the six months ended March 31, 2002 was to
decrease net investment income per share by $.02, increase net realized and
unrealized gains and losses per share by $.02, and decrease the ratio of net
investment income to average net assets from 3.74% to 3.23%. Per share,
ratios, and supplemental data for periods prior to March 31, 2002 have not
been restated to reflect this change in presentation.
(b) Based on average month-end shares outstanding.
(c) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
See Notes to Financial Statements
20
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
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 (the "1940 Act"), as
amended. The Fund's investment objective is to seek to provide high current
return consistent with preservation of capital. 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 accounting principles
generally accepted in the United States of America 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 and forwards 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. Futures
contracts are valued at the settlement price established each day on the
exchange on which they are traded. 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 March 31, 2002, 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 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
21
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
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. Discount
is accreted and premium is amortized over the expected life of each applicable
security. 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.
As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on fixed income securities. Prior to October 1, 2001, the
Fund did not amortize premiums on fixed income securities. The cumulative effect
of this accounting change had no impact on total net assets of the Fund, but
resulted in a $4,262,084 reduction in cost of securities and a corresponding
$4,262,084 increase in net unrealized appreciation, based on securities held by
the Fund on October 1, 2001.
The effect of this change for the six months ended March 31, 2002 was to
decrease net investment income by $4,357,224; increase net unrealized
appreciation by $4,351,988 and increase net realized gain by $5,236. The
Statement of Changes in Net Assets and Financial Highlights for prior periods
have not been restated to reflect this change in presentation.
The revised version of the Guide also requires that paydown gains and losses
on mortgage- and asset-backed securities be presented as interest income.
Previously, paydown gains and losses on mortgage- and asset-backed securities
were shown as a component of realized gain/loss. The effect of this change for
the six months ended March 31, 2002 was to increase net investment income and
decrease realized gain/loss by $589,318.
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, 2002, for federal income tax purposes, the cost of long- and
short-term investments is $1,403,778,799, the aggregate gross unrealized
appreciation is $21,000,002 and the aggregate gross unrealized depreciation is
$5,007,644,
22
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
resulting in net unrealized appreciation on long- and short-term investments of
$15,992,358.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At September 30, 2001, the Fund had an accumulated capital loss
carryforward for tax purposes of $519,680,716 which will expire between
September 30, 2002 and September 30, 2009. Of this amount, $355,498,467 will
expire on September 30, 2002. Net realized gains or losses may differ for
financial and tax reporting purposes primarily as a result of the deferral of
losses relating to wash sale transactions, straddle positions, and gains or
losses recognized for tax purposes on open futures and forward transactions.
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.
F. EXPENSE REDUCTIONS During the six months ended March 31, 2002, the Fund's
custody fee was reduced by $25,894 as a result of credits earned on 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 DAILY NET ASSETS % PER ANNUM
<S> <C>
First $1 billion............................................ .540%
Next $1 billion............................................. .515%
Next $1 billion............................................. .490%
Next $1 billion............................................. .440%
Next $1 billion............................................. .390%
Next $1 billion............................................. .340%
Next $1 billion............................................. .290%
Over $7 billion............................................. .240%
</Table>
For the six months ended March 31, 2002, the Fund recognized expenses of
approximately $22,800 representing legal services provided by Skadden, Arps,
Slate,
23
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
Under an Accounting Services agreement, the Adviser provides accounting
services to the Fund. The Adviser allocates the cost of such services to each
fund. For the six months ended March 31, 2002, the Fund recognized expenses of
approximately $44,600 representing Van Kampen Investments Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing accounting services to
the Fund, which are reported as part of "Other" expenses on the Statement of
Operations.
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,
2002, the Fund recognized expenses of approximately $919,100. 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. Amounts deferred are retained by the Fund and to the extent
permitted by the 1940 Act, as amended, may be invested in the common shares of
those funds selected by the trustees. Investments in such funds of $251,815 are
included in "Other" assets on the Statement of Assets and Liabilities at March
31, 2002. Appreciation/depreciation and distributions received from these
investments are recorded with an offsetting increase/decrease in the deferred
compensation obligation and do not affect the net asset value of the Fund.
Benefits under the retirement plan are payable upon retirement 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.
24
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
3. CAPITAL TRANSACTIONS
At March 31, 2002, capital aggregated $1,839,308,039, $50,535,513 and
$20,530,340 for Classes A, B and C, respectively. For the six months ended March
31, 2002, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 6,957,666 $ 71,708,589
Class B............................................... 3,042,694 31,425,282
Class C............................................... 655,799 6,755,391
----------- -------------
Total Sales............................................. 10,656,159 $ 109,889,262
=========== =============
Dividend Reinvestment:
Class A............................................... 2,198,107 $ 22,653,215
Class B............................................... 200,977 2,067,734
Class C............................................... 41,277 423,710
----------- -------------
Total Dividend Reinvestment............................. 2,440,361 $ 25,144,659
=========== =============
Repurchases:
Class A............................................... (11,704,426) $(120,679,589)
Class B............................................... (2,412,357) (24,775,613)
Class C............................................... (666,023) (6,849,981)
----------- -------------
Total Repurchases....................................... (14,782,806) $(152,305,183)
=========== =============
</Table>
25
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
At September 30, 2001, capital aggregated $1,865,625,824, $41,818,110 and
$20,201,220 for Classes A, B and C, respectively. For the year ended September
30, 2001, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 32,587,470 $ 330,395,518
Class B............................................... 8,942,042 90,932,923
Class C............................................... 2,930,802 29,605,157
----------- -------------
Total Sales............................................. 44,460,314 $ 450,933,598
=========== =============
Dividend Reinvestment:
Class A............................................... 4,159,799 $ 42,099,704
Class B............................................... 260,046 2,632,391
Class C............................................... 62,880 635,477
----------- -------------
Total Dividend Reinvestment............................. 4,482,725 $ 45,367,572
=========== =============
Repurchases:
Class A............................................... (48,111,210) $(486,125,771)
Class B............................................... (5,207,554) (52,520,003)
Class C............................................... (1,920,985) (19,359,679)
----------- -------------
Total Repurchases....................................... (55,239,749) $(558,005,453)
=========== =============
</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, 2002 and the year
ended September 30, 2001, 296,433 and 868,715 Class B Shares converted to Class
A Shares, respectively 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, 2002 and the year ended September 30, 2001, 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 on most redemptions made within five years of the
purchase
26
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
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
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO 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, 2002, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A Shares of
approximately $75,400 and CDSC on redeemed shares of approximately $147,700.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, 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 $517,225,928
and $455,204,192, 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.
27
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. FUTURES CONTRACTS During the period, the Fund invested in futures contracts,
a type of derivative. A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures contracts on U.S. Treasury
Bonds and typically closes the contract prior to the delivery date. Futures
contracts are valued at the settlement price established each day on the
exchange on which they are traded.
Upon entering into futures contracts, the Fund maintains an amount of cash
or liquid securities with a value equal to a percentage of the contract amount
with either a futures commission merchant pursuant to rules and regulations
promulgated under the 1940 Act, as amended, or with its custodian in an account
in the broker's name. This amount is known as initial margin. During the period
the futures contract is open, payments are received from or made to the broker
based upon changes in the value of the contract (the variation margin). The risk
of loss associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended March 31, 2002
were as follows:
<Table>
<Caption>
CONTRACTS
<S> <C>
Outstanding at September 30, 2001........................... 421
Futures Opened.............................................. 9,171
Futures Closed.............................................. (8,784)
------
Outstanding at March 31, 2002............................... 808
======
</Table>
28
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
The futures contracts outstanding as of March 31, 2002, and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
<S> <C> <C>
LONG CONTRACTS:
U.S. Treasury Notes 2-Year Futures June 2002
(Current Notional Value of $206,594 per contract)....... 250 $(558,703)
U.S. Treasury Notes 5-Year Futures June 2002
(Current Notional Value of $103,734 per contract)....... 422 (47,794)
SHORT CONTRACTS:
U.S. Treasury Bonds Futures June 2002
(Current Notional Value of $98,156 per contract)........ 80 292,784
U.S. Treasury Notes 10-Year Futures June 2002
(Current Notional Value of $102,453 per contract)....... 56 (8,272)
--- ---------
808 $(321,985)
=== =========
</Table>
B. FORWARD COMMITMENTS The Fund trades certain securities under the terms of
forward commitments, whereby the settlement occurs at a specific future date.
Forward commitments are privately negotiated transactions between the Fund and
dealers. While forward commitments are outstanding, the Fund maintains
sufficient collateral of cash or securities in a segregated account with its
custodian. Forward commitments are marked-to-market on a daily basis with
changes in value reflected as a component of unrealized
appreciation/depreciation. Purchasing securities on a forward commitment
involves a risk that the market value at the time of delivery may be lower than
the agreed upon purchase price resulting in an unrealized loss. This potential
for loss may be greater than the amount shown on the Statement of Assets and
Liabilities 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.
29
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
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, 2002:
<Table>
<Caption>
PAR UNREALIZED
AMOUNT CURRENT APPRECIATION/
(000) DESCRIPTION VALUE DEPRECIATION
<C> <S> <C> <C>
$ 21,500 FNMA April Forward, 6.00% coupon............. $ 21,419,375 $ (60,469)
74,000 FNMA April Forward, 6.50% coupon............. 73,607,060 (901,690)
144,000 FNMA April Forward, 7.00% coupon............. 149,084,640 449,640
35,250 FNMA April Forward, 7.50% coupon............. 36,494,677 66,005
74,000 FNMA May Forward, 6.50% coupon............... 73,260,000 (115,625)
37,250 FNMA May Forward, 7.50% coupon............... 38,414,063 11,641
------------ ---------
$392,279,815 $(550,498)
============ =========
</Table>
C. CLOSED BUT UNSETTLED FORWARD COMMITMENTS In certain situations, the Fund has
entered into offsetting transactions for outstanding forward commitments prior
to the settlement of the obligation. In doing so, the Fund realizes a gain or
loss on the transaction at the time the forward commitment is closed. Risks may
result as a result of the potential inability of counterparties to meet the
terms of their contracts. As of March 31, 2002, the Fund has net realized losses
on closed but unsettled forward contracts of $993,496 which are scheduled to
settle on April 11, 2002.
6. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively, the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and the maintenance of shareholder
accounts with respect to such classes of shares.
Annual fees under the Plans of up to .25% of Class A average net assets and
1.00% each of Class B and Class C average net assets are accrued daily. Included
in these fees for the six months ended March 31, 2002 are payments retained by
Van Kampen of approximately $526,400 and payments made to Morgan Stanley DW
Inc., an affiliate of the Adviser, of approximately $73,600.
30
NOTES TO
FINANCIAL STATEMENTS
March 31, 2002 (Unaudited)
7. FUND MERGER
On March 12, 2002, the Trustees of Van Kampen U.S. Government Trust for Income
("Target Fund") announced its intention to merge the Target Fund into the Van
Kampen Government Securities Fund ("Acquiring Fund"). The Trustees of each of
the funds have approved in principle an agreement and plan of reorganization
between the funds providing for a transfer of assets and liabilities of the
Target Fund to the Acquiring Fund in exchange for shares of beneficial interest
of the Acquiring Fund (the "Reorganization"). The Reorganization is subject to
the approval by the shareholders of the Target Fund.
31
VAN KAMPEN INVESTMENTS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Growth
Small Cap Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity and Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Value Opportunities
Global/International
Asian Equity
Emerging Markets
European Value Equity
Global Equity Allocation
Global Franchise
Global Value Equity
International Advantage
International Magnum
Latin American
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
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
Strategic Municipal Income
For more complete information, including risk considerations, fees, sales
charges and ongoing expenses, please contact your financial advisor for a
prospectus. 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
VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- call us at (800) 341-2911
Telecommunications Device
for the Deaf (TDD) users,
call (800) 421-2833.
[PHONE ICON]
- e-mail us by visiting
VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
32
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN GOVERNMENT SECURITIES FUND
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*
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
33
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you make with us,
our affiliates, or third parties. We may also collect information you provide
when using our web site, and text files (a.k.a. "cookies") may be placed on your
computer to help us to recognize you and to facilitate transactions you
initiate. We do not disclose any nonpublic personal information about you or any
of our former customers to anyone, except as permitted by law. For instance, so
that we may continue to offer you Van Kampen investment products and services
that meet your investing needs, and to effect transactions that you request or
authorize, we may disclose the information we collect to companies that perform
services on our behalf, such as printers and mailers that assist us in the
distribution of investor materials. These companies will use this information
only for the services for which we hired them, and are not permitted to use or
share this information for any other purpose. To protect your nonpublic personal
information internally, we permit access to it only by authorized employees, and
maintain physical, electronic and procedural safeguards to guard your nonpublic
personal information.
* Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp.,
Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen
Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van
Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as
well as the many Van Kampen mutual funds and Van Kampen unit investment
trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
vankampen.com
[VAN KAMPEN INVESTMENTS LOGO]
Copyright (C)2002 Van Kampen Funds Inc. All rights reserved.
29, 129, 229 Member NASD/SIPC.
GOVT SAR 5/02 5557E02-AP-5/02