VAN KAMPEN EQUITY TRUST II, 485APOS, 1999-12-27

VAN KAMPEN EQUITY TRUST II
485APOS, 1999-12-27

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 27, 1999

REGISTRATION NOS. 333-75493
811-9279
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 2 [X]
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 3 [X]
</TABLE>

VAN KAMPEN EQUITY TRUST II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
1 PARKVIEW PLAZA, PO BOX 5555, OAKBROOK TERRACE, ILLINOIS 60181-5555
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(630) 684-6000
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

A. THOMAS SMITH III
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN INVESTMENTS INC.
1 PARKVIEW PLAZA
PO BOX 5555
OAKBROOK TERRACE, ILLINOIS 60181-5555
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------

COPIES TO:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700

Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.

It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)

[X] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of Securities Being Registered: Shares of Beneficial Interest, par value
$0.01 per share

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<PAGE> 2

The information in this prospectus is not complete and may be changed. The
Fund may not sell these securities until the post-effective amendment to
the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities.

[VAN KAMPEN FUNDS LOGO]

SUBJECT TO COMPLETION -- DATED DECEMBER 27, 1999

VAN KAMPEN
TAX-MANAGED EQUITY GROWTH FUND

Van Kampen Tax-Managed Equity Growth Fund is a mutual fund with an investment
objective to seek to provide long-term capital appreciation on an after-tax
basis. The Fund's investment adviser seeks to achieve the Fund's investment
objective by investing primarily in growth-oriented equity securities while
attempting to minimize the impact of federal income taxes on shareholder
returns.
Shares of the Fund have not been approved or disapproved by the Securities and
Exchange Commission (SEC) or any state regulator, and neither the SEC nor any
state regulator has passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

This prospectus is dated MARCH , 2000.
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 4
Investment Objective, Policies and Risks........... 5
Investment Advisory Services....................... 9
Purchase of Shares................................. 11
Redemption of Shares............................... 17
Distributions from the Fund........................ 18
Shareholder Services............................... 19
Federal Income Taxation............................ 20
</TABLE>

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus, in connection with the offer contained in this prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, the Fund's investment adviser or the
Fund's distributor. This prospectus does not constitute an offer by the Fund or
by the Fund's distributor to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the Fund to make such an offer in such jurisdiction.
<PAGE> 4

RISK/RETURN SUMMARY

INVESTMENT OBJECTIVE

The Fund is a mutual fund with an investment objective to seek to provide
long-term capital appreciation on an after-tax basis.

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's investment adviser seeks to achieve
the Fund's investment objective by investing primarily in a portfolio of
growth-oriented equity securities while attempting to minimize the impact of
federal income taxes on shareholder returns.

The Fund's investment adviser seeks to minimize the impact of federal income
taxes on shareholder returns by employing certain tax sensitive investment
strategies such as maintaining a disciplined long-term investment focus to
minimize capital gain producing portfolio turnover, minimizing taxable income
and dividend receipts, minimizing net capital gains from sales of portfolio
securities, offsetting capital gains by recognizing capital losses when
considered advantageous and selectively using derivative instruments to manage
certain portfolio transactions in a more tax sensitive manner.

The Fund invests primarily in a portfolio of equity securities of
growth-oriented companies that exhibit strong or accelerating earnings growth.
The Fund emphasizes individual security selection and may focus its investments
in a smaller number of companies within the limits permissible for a diversified
fund. Portfolio securities are typically sold when the Fund's investment
adviser's assessments for growth of such securities materially change.

The Fund invests in equity securities including common and preferred stocks,
convertible securities, rights and warrants to purchase common stocks,
depository receipts, equity-related futures and options and other specialty
securities having equity features. The Fund may invest up to 25% of its total
assets in securities of foreign issuers. The Fund may purchase and sell certain
derivative instruments (such as options, futures, options on futures and forward
contracts), which may subject the Fund to additional risks.

INVESTMENT RISKS

An investment in the Fund is subject to investment risks, and you could lose
money on your investment in the Fund. There can be no assurance that the Fund
will achieve its investment objective.

MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Investments in equity
securities generally are affected by changes in the stock markets, which
fluctuate substantially over time, sometimes suddenly and sharply. The Fund
emphasizes securities of growth-oriented companies. The market values of such
securities may be more volatile than those of other types of investments. The
returns on growth securities may or may not move in tandem with the returns on
other styles of investing or the overall stock markets. Different types of
stocks tend to shift in and out of favor depending on market and economic
conditions. Thus, the value of the Fund's investments will vary and at times may
be lower or higher than that of other types of funds. During an overall stock
market decline, stock prices of smaller companies (in which the Fund may invest)
often fluctuate more and may fall more than the prices of larger companies.

TAX-MANAGED INVESTING. Managing for after-tax returns may negatively impact the
Fund's performance. The Fund utilizes an active management style and may realize
capital gains. Since the Fund balances investment and tax considerations when
deciding whether to buy or sell securities, its pre-tax return may be lower than
that of a similar fund that is not tax managed. The Fund is therefore not a
suitable investment for individual retirement accounts ("IRAs"), other
tax-exempt or tax-deferred accounts or for investors who are not sensitive to
the federal income tax consequences of their investments.

FOREIGN RISKS. Because the Fund may own securities of foreign issuers, it may be
subject to risks not usually associated with owning securities of U.S. issuers.
These risks can include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading, and foreign
taxation issues.

RISKS OF USING DERIVATIVE INVESTMENTS. In general terms, a derivative investment
is one whose value depends on (or is derived from) the value of an

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underlying asset, interest rate or index. Options, futures, options on futures
and forward contracts are examples of derivatives. Derivative investments
involve risks different from direct investment in underlying securities. These
risks include imperfect correlation between the value of the instruments and the
underlying assets; risks of default by the other party to certain transactions;
risks that the transactions may result in losses that partially or completely
offset gains in portfolio positions; risks that the transactions may not be
liquid; and manager risk.

MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities or investment techniques
and the Fund's performance may lag behind that of similar funds.
INVESTOR PROFILE

In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:

- - Seek capital appreciation over the long term

- - Seek lower taxable distributions than a traditional equity growth fund (the
Fund is not an appropriate investment for IRAs, other tax-exempt or tax-
deferred accounts or for investors who are not sensitive to the federal income
tax consequences of their investments)

- - Do not seek current income from their investment

- - Can withstand substantial volatility in the value of their Fund shares

- - Wish to add to their investment portfolio a fund that emphasizes a growth
style of investing primarily in equity securities while attempting to minimize
the impact of federal income taxes on shareholder returns (including investors
who have already contributed the maximum to IRAs or other tax-deferred
accounts, investors saving for childrens' educational expenses or investors
seeking more liquidity than that offered by variable annuities)

An investment in the Fund is not a deposit of any bank or other insured
depository institution. Your investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

An investment in the Fund may not be appropriate for all investors. The Fund is
not intended to be a complete investment program, and investors should consider
their long-term investment goals and financial needs when making an investment
decision about the Fund. An investment in the Fund is intended to be a long-term
investment, and the Fund should not be used as a trading vehicle.

FEES AND EXPENSES
OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
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<S> <C> <C> <C> <C>

SHAREHOLDER FEES

(fees paid directly from your investment)
- ----------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 5.75%(1) None None
................................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 5.00%(3) 1.00%(4)
................................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
................................................................
Redemption fees None None None
................................................................
Exchange fee None None None
................................................................
</TABLE>

ANNUAL FUND OPERATING EXPENSES

(expenses that are deducted from Fund assets)

<TABLE>
<S> <C> <C> <C> <C>
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Management fees
................................................................
Distribution and/or
service (12b-1)
fees(5)
................................................................
Other expenses(7)
................................................................
Total annual fund
operating expenses
................................................................
</TABLE>

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(1) Reduced for purchases of $50,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a deferred sales charge of 1.00% may be imposed on
certain redemptions made within one year of the purchase. See "Purchase of
Shares -- Class A Shares."
(3) The maximum deferred sales charge is 5.00% in the first year after purchase,
declining thereafter as follows:
Year 1-5.00%
Year 2-4.00%
Year 3-3.00%
Year 4-2.50%
Year 5-1.50%
After-None
See "Purchase of Shares -- Class B Shares."
(4) The maximum deferred sales charge is 1.00% in the first year after purchase
and 0.00% thereafter. See "Purchase of Shares -- Class C Shares."
(5) Class A Shares are subject to an annual service fee of up to 0.25% of the
average daily net assets attributable to such class of shares. Class B
Shares and Class C Shares are each subject to a combined annual distribution
and service fee of up to 1.00% of the average daily net assets attributable
to such class of shares. See "Purchase of Shares."
(6) Because distribution and/or service (12b-1) fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.
(7) Other expenses are based on estimated amounts for the current fiscal year.

Example:

The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
One Three
Year Years
- --------------------------------------------------
<S> <C> <C> <C>
Class A Shares
..................................................
Class B Shares
..................................................
Class C Shares
..................................................
</TABLE>

You would pay the following expenses if you did not redeem your shares:

INVESTMENT OBJECTIVE,
POLICIES AND RISKS

The Fund's investment objective is to seek to provide long-term capital
appreciation on an after-tax basis. The Fund's investment objective may be
changed by the Fund's Board of Trustees without shareholder approval, but no
change is anticipated. If there is a change in the investment objective of the
Fund, shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial positions and needs. There
are risks inherent in all investments in securities; accordingly, there can be
no assurance that the Fund will achieve its investment objective.

In managing the Fund, the investment adviser seeks to employ investment
strategies that attempt to achieve high after-tax returns by balancing
investment and tax considerations when deciding whether to buy or sell
securities. The Fund is designed to minimize income distributions and the
distributions of capital gains. The Fund may use, but is not limited to, the
following tax management techniques and strategies:

- Maintain a long-term investment focus to minimize capital gain producing
portfolio turnover

- Minimize taxable income and dividend receipts to the extent possible without
subjecting the portfolio to undue risk

- Reduce the impact of realized gains by selecting the most tax-favored share
lots

- Recognize capital losses on depreciated securities, when appropriate, to
offset capital gains

- - Selectively use derivative instruments to manage certain portfolio
transactions in a more tax sensitive manner.

The Fund's tax managed strategy can generally be expected to lead to lower
distributions of income and realized capital gains than funds managed without
regard to tax considerations. The Fund is actively managed, however, and there
can be no assurance that taxable distributions can always be avoided.

5
<PAGE> 7

The Fund invests primarily in a portfolio of growth-oriented companies that
exhibit strong or accelerating earnings growth. The Fund's investment adviser
emphasizes a "bottom-up" stock selection process, seeking attractive growth
investments on an individual company basis. In selecting securities for
investment, the Fund's investment adviser seeks those companies with the
potential for consistent or rising earnings growth and compelling business
strategies. Investments in growth-oriented equity securities may have
above-average volatility of price movement. Because prices of equity securities
fluctuate, the value of an investment in the Fund will vary based upon the
Fund's investment performance. The Fund attempts to reduce overall exposure to
risk by adhering to a disciplined program of intensive research, careful
security selection and the continual monitoring of the Fund's investments.

The Fund generally follows a flexible investment program seeking attractive
growth opportunities on an individual company basis. Fundamental research drives
the investment process. The Fund emphasizes companies that the Fund's investment
adviser believes are positioned to deliver surprisingly strong earnings growth
relative to consensus expectations. The Fund's investment adviser continually
and rigorously studies company developments including business strategy,
management focus and financial results, and closely monitors analysts' consensus
expectations in seeking to identify such companies. The Fund's investment
adviser expects that many of the companies in which the Fund invests will, at
the time of investment, be experiencing high rates of earnings growth. The
securities of such companies may trade at higher price to earnings ratios
relative to more established companies and rates of earnings growth may be
volatile. Valuation is of secondary importance in the Fund's investment program
and is viewed in context of prospects for sustainable earnings growth and the
potential for positive earnings surprises in relation to consensus expectations.

The Fund focuses its investments in a smaller number of companies within the
limits permissible for a diversified fund. While the Fund invests its assets in
a number of issuers, the Fund may invest between 5% and 10% of its assets in
selected issuers. The Fund's investment adviser believes that an effective way
to maximize return and reduce the risks associated with its focused investment
approach is through a program of intensive research, careful selection of
individual securities and continual supervision of the Fund's portfolio.

The Fund invests primarily in common stocks. Common stocks are shares of a
corporation or other entity that entitle the holder to a pro rata share of the
profits of the corporation, if any, without preference over any other class of
securities, including such entity's debt securities, preferred stock and other
senior equity securities. Common stock usually carries with it the right to vote
and frequently an exclusive right to do so.

While the Fund invests primarily in common stocks, it also may invest in other
equity securities including preferred stocks, convertible securities, rights and
warrants to purchase common stocks, depositary receipts, equity-related futures
and options and other specialty securities having equity features. Preferred
stock generally has a preference as to dividends and liquidation over an
issuer's common stock but ranks junior to debt securities in an issuer's capital
structure. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.

A convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock or other equity security of the same or a different issuer or into
cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt securities or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities generally have characteristics similar to
both debt and equity securities. The value of convertible securities tends to
decline as interest rates rise and, because of the conversion feature, tends to
vary with fluctuations in the market value of the underlying equity securities.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity securities although the
market prices of the convertible securities may be affected by any dividend
changes or other changes in the underlying equity securities.

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<PAGE> 8

Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights typically have a substantially
shorter duration than do warrants. Rights and warrants may be considered more
speculative and less liquid than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any rights in the assets of the
issuing company. Rights and warrants may lack a secondary market.

The Fund may invest in companies of any size. The securities of medium- and
smaller-sized companies may be subject to more abrupt or erratic market
movements and may have lower trading volumes or more erratic trading than
securities of large-sized companies or the market averages in general. To the
extent the Fund invests in medium- and smaller-sized companies, it will be
subject to greater investment risk than that assumed through investment in the
securities of large-sized companies.

RISKS OF INVESTING IN

SECURITIES OF FOREIGN ISSUERS

The Fund may invest up to 25% of its total assets in securities of foreign
issuers. Securities of foreign issuers may be denominated in U.S. dollars or in
currencies other than U.S. dollars. Investments in foreign securities present
certain risks not ordinarily associated with investments in securities of U.S.
issuers. These risks include fluctuations in foreign currency exchange rates,
political, economic or legal developments (including war or other instability,
expropriation of assets, nationalization and confiscatory taxation), the
imposition of foreign exchange limitations (including currency blockage),
withholding taxes on dividend or interest payments or capital transactions or
other restrictions, higher transaction costs (including higher brokerage,
custodial and settlement costs and currency conversion costs) and possible
difficulty in enforcing contractual obligations or taking judicial action. Also,
foreign securities may not be as liquid and may be more volatile than comparable
domestic securities.

In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive, auditing, accounting, financial reporting and
disclosure requirements than domestic issuers. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the U. S., and, with respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of exchanges, brokers and
dealers than there is in the U.S., the Fund may experience settlement
difficulties or delays not usually encountered in the U.S.

Delays in making trades in foreign securities relating to volume constraints,
limitations or restrictions, clearance or settlement procedures, or otherwise
could impact returns and result in temporary periods when assets of the Fund are
not fully invested or attractive investment opportunities are foregone.

The Fund's investments in securities of developing or emerging market countries
are subject to greater risks than the Fund's investments in securities of
developed countries since emerging market countries tend to have economic
structures that are less diverse and mature and political systems that are less
stable than developed countries.

In addition to the increased risks of investing in foreign securities, there are
often increased transactions costs associated with investing in foreign
securities including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.

Investors should carefully consider the risks of foreign investments before
investing in the Fund.

DERIVATIVE INSTRUMENTS

The Fund may, but is not required to, use various investment strategic
transactions described below to earn income, facilitate portfolio management and
mitigate risks. Although the Fund's investment adviser seeks to use the
practices to further the Fund's investment objective, no assurance can be given
that the use of these practices will achieve this result.

The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity, fixed-income and interest rate indices, and other financial instruments,
futures contracts and options thereon (including but not limited to securities
index futures, foreign currency exchange

7
<PAGE> 9

futures, interest rate futures and other financial futures), structured notes,
swaps, caps, floors or collars and enter into various currency transactions such
as currency forward contracts, currency futures contracts, currency swaps or
options on currency or currency futures. In addition, the Fund may invest in
other derivative instruments that are developed over time if their use would be
consistent with the objective of the Fund. Collectively, all of the above are
referred to as "Strategic Transactions." The Fund generally seeks to use
Strategic Transactions as a portfolio management or hedging technique to seek to
protect against possible adverse changes in the market value of securities held
in or to be purchased for the Fund's portfolio, protect the Fund's unrealized
gains, facilitate the sale of certain securities for investment purposes,
protect against changes in currency exchange rates or to adjust the exposure to
a particular currency, manage the effective maturity or duration of the Fund's
portfolio, establish positions in the derivatives markets as a substitute for
purchasing or selling particular securities, including, for example, when the
Fund adjusts its exposure to a market in response to changes in investment
strategy, when doing so provides more liquidity than the direct purchase of the
securities underlying such derivatives, when the Fund is restricted from
directly owning the underlying securities due to foreign investment restrictions
or other reasons, or when doing so provides a price advantage over purchasing
the underlying securities directly, either because of a pricing differential
between the derivatives and securities markets or because of lower transaction
costs associated with the derivatives transaction.

Strategic Transactions have risks including the imperfect correlation between
the value of such instruments and the underlying assets, the possible default of
the other party to the transaction or illiquidity of the derivative instruments.
Furthermore, the ability to successfully use Strategic Transactions depends on
the Fund's investment adviser's ability to predict pertinent market movements,
which cannot be assured. Thus, the use of Strategic Transactions may result in
losses greater than if they had not been used, may require the Fund to sell or
purchase portfolio securities at inopportune times or for prices other than
current market values, may limit the amount of appreciation the Fund can
otherwise realize on an investment, or may cause the Fund to hold a security
that it might otherwise sell. The use of currency transactions can result in the
Fund incurring losses because of the imposition of exchange controls, suspension
of settlements or the inability of the Fund to deliver or receive a specified
currency. In addition, amounts paid as premiums or cash or other assets held in
margin accounts with respect to Strategic Transactions are not otherwise
available to the Fund for investment purposes.

A more complete discussion of Strategic Transactions and their risks is
contained in the Fund's Statement of Additional Information. The Statement of
Additional Information can be obtained by investors free of charge as described
on the back cover of this prospectus.

OTHER INVESTMENTS AND RISK FACTORS

For cash management purposes, the Fund may engage in repurchase agreements with
broker-dealers, banks and other financial institutions in order to earn a return
on temporarily available cash. Such transactions are subject to the risk of
default by the other party.

The Fund may lend its portfolio securities to broker-dealers, banks or other
recognized institutional borrowers of securities in order to generate income on
the loaned security and any collateral received. The Fund may incur lending fees
and other costs in connection with securities lending, and securities lending is
subject to the risk of default by the other party.

The Fund may from time to time sell securities short. A short sale is a
transaction in which the Fund sells a security in anticipation that the market
price of such security will decline. The Fund may sell securities it owns or has
the right to acquire at no added cost (i.e., "against the box") or it does not
own. When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale in
order to satisfy its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral of cash or liquid securities. Depending on arrangements made with the
broker-dealer from which it borrowed the security regarding payment over of any
payments received by the Fund on such security, the Fund may not receive any
payments (including interest) on its collateral deposited with such
broker-dealer. If the price of the security sold short increases between the
time of the short sale and the time the Fund replaces

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<PAGE> 10

the borrowed security, the Fund will incur a capital loss; conversely, if the
price declines, the Fund will realize a capital gain. Any gain will be
decreased, and any loss increased, by the transaction costs described above.
Although the Fund's gain is limited to the price at which it sold the security
short, its potential loss is theoretically unlimited.

The Fund may invest up to 15% of the Fund's net assets in illiquid and certain
restricted securities. Such securities may be difficult or impossible to sell at
the time and the price that the Fund would like. Thus, the Fund may have to sell
such securities at a lower price, sell other securities instead to obtain cash
or forego other investment opportunities.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Statement of
Additional Information.

The Fund balances investment and tax considerations when deciding whether to buy
and sell securities. A strategy of the Fund is to minimize capital gain
producing portfolio turnover. Notwithstanding the foregoing, the Fund may sell
securities and recognize gains when the investment adviser deems it advisable in
order to take advantage of new investment opportunities, or when the Fund's
investment adviser believes the potential for capital appreciation has lessened,
or for other reasons. The Fund's portfolio turnover rate may vary from year to
year. A high portfolio turnover rate (100% or more) increases a fund's
transactions costs (including brokerage commissions or dealer costs) and may
result in the realization of more short-term capital gains than if a fund had a
lower portfolio turnover rate. Increases in a fund's transactions costs would
adversely impact the fund's performance.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may on a temporary basis hold cash or invest a
portion or all of its assets in money-market instruments including obligations
of the U.S. government, its agencies or instrumentalities, obligations of
foreign sovereignties, other high-quality debt securities, including prime
commercial paper, repurchase agreements and bank obligations, such as bankers'
acceptances and certificates of deposit (including Eurodollar certificates of
deposit). Under normal market conditions, the potential for capital appreciation
on these securities will tend to be lower than the potential for capital growth
on other securities that may be owned by the Fund. In taking such a defensive
position, the Fund would not be pursuing and may not achieve its investment
objective.

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISER

THE ADVISER. Van Kampen Investment Advisory Corp. is the Fund's investment
adviser (the "Adviser" or "Advisory Corp."). The Adviser is a wholly owned
subsidiary of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
Investments is a diversified asset management company with more than two million
retail investor accounts, extensive capabilities for managing institutional
portfolios, and more than $79 billion under management or supervision as of
September 30, 1999. Van Kampen Investments' more than 50 open-end and 39
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading authorized dealers nationwide. Van Kampen Funds Inc., the
distributor of the Fund (the "Distributor") and the sponsor of the funds
mentioned above, is also a wholly owned subsidiary of Van Kampen Investments.
Van Kampen Investments is an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co. The Adviser's principal office is located at 1 Parkview Plaza,
PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.

ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of its
assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based upon an annual rate applied to the average daily net assets of
the Fund as follows:

<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
- -----------------------------------------------
<S> <C> <C> <C>
...............................................
...............................................
...............................................
...............................................
</TABLE>

The Adviser furnishes offices, necessary facilities and equipment and provides
administrative services to the

9
<PAGE> 11

Fund. The Fund reimburses the Adviser for the cost of the Fund's accounting
services, which include maintaining its financial books and records and
calculating its daily net asset value. The Fund also pays all charges and
expenses of its day-to-day operations, including the compensation of trustees of
the Fund (other than those who are affiliated persons of the Adviser,
Distributor or Van Kampen Investments), the charges and expenses of legal
counsel and independent accountants, distribution fees, service fees, custodian
fees, the costs of providing reports to shareholders, and all other ordinary
business expenses not specifically assumed by the Adviser.

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").

INVESTMENT SUBADVISER

Morgan Stanley Dean Witter Investment Management Inc. (the "Subadviser") is the
Subadviser of the Fund. The Subadviser is a wholly owned subsidiary of Morgan
Stanley Dean Witter & Co., and is an affiliate of the Adviser. The Subadviser
conducts a worldwide portfolio management business and provides a broad range of
portfolio management services to customers in the United States and abroad. At
September 30, 1999, the Subadviser, together with its affiliated institutional
asset management companies, managed assets of approximately $173.5 billion,
including assets under fiduciary advice. The Subadviser's principal office is
located at 1221 Avenue of the Americas, New York, New York 10020. On December 1,
1998, Morgan Stanley Asset Management Inc. changed its name to Morgan Stanley
Dean Witter Investment Management Inc. but continues to do business in certain
instances using the name Morgan Stanley Asset Management.

SUBADVISORY AGREEMENT. The Adviser has entered into a subadvisory agreement with
the Subadviser to assist the Adviser in performing its investment advisory
functions. The Adviser pays the Subadviser on a monthly basis a portion of the
net advisory fees the Adviser receives from the Fund.

GENERAL

From time to time, the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce the Fund's expenses by reducing the fees payable
to them or by reducing other expenses of the Fund in accordance with such
limitations as the Adviser, the Subadviser or Distributor may establish.

PERSONAL INVESTMENT POLICIES. The Fund, the Adviser and the Subadviser have
adopted Codes of Ethics designed to recognize the fiduciary relationship among
the Fund, the Adviser and the Subadviser and their respective employees. The
Codes of Ethics permit directors, trustees, officers and employees to buy and
sell securities for their personal accounts subject to certain restrictions.
Persons with access to certain sensitive information are subject to pre-
clearance and other procedures designed to prevent conflicts of interest.

PORTFOLIO MANAGEMENT. The Fund's portfolio managers are Margaret K. Johnson,
Philip W. Friedman and William S. Auslander.

Ms. Johnson is a Managing Director of the Subadviser and Morgan Stanley & Co.
Incorporated and a Fund Manager in the Institutional Equity Group. She joined
the Subadviser in 1984 and worked as an Analyst in the Marketing and Fiduciary
Advisor areas. Ms. Johnson became an Equity Analyst in 1986 and a Fund Manager
in 1989. She holds a B.A. degree from Yale College and holds the Chartered
Financial Analyst designation.

Mr. Friedman is a Managing Director of the Subadviser and of Morgan Stanley &
Co. Incorporated and leads its Institutional Equity Group. Prior to joining the
Subadviser in 1997, he was the North American Director of Equity Research at
Morgan Stanley & Co. Incorporated. From 1990 to 1995, he was a member of Morgan
Stanley & Co. Incorporated's Equity Research team. Mr. Friedman graduated from
Rutgers University with a B.A. (Phi Beta Kappa; Summa Cum Laude) in Economics.
He also holds an M.B.A. from J.L. Kellogg School of Management at Northwestern
University.

Mr. Auslander is a Principal of the Subadviser and Morgan Stanley & Co.
Incorporated and a Portfolio Manager in the Subadviser's Institutional Equity
Group. He joined the Subadviser in 1995 as an equity analyst in the
Institutional Equity Group. Prior to joining the Subadviser he worked at Icahn &
Co. for nine years as an equity analyst. He graduated from the University of
Wisconsin at Madison with a B.A. in Economics and received an M.B.A. from
Columbia University in 1993.

10
<PAGE> 12

PURCHASE OF SHARES

GENERAL

The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares. By offering three classes of shares, the Fund permits
each investor to choose the class of shares that is most beneficial given the
amount to be invested and the length of time the investor expects to hold the
shares.

Initial investments must be at least $1,000 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. Both
minimums may be waived by the Distributor for plans involving periodic
investments.

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares bear the sales charge expenses at the time of redemption and any
expenses (including higher distribution fees and transfer agency costs)
resulting from such deferred sales charge arrangement, (ii) generally, each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and service plan (each as described below) under
which its distribution fee or service fee is paid, (iii) each class of shares
has different exchange privileges, (iv) certain classes of shares are subject to
a conversion feature and (v) certain classes of shares have different
shareholder service options available.

The offering price of the Fund's shares is based upon the Fund's net asset value
per share (plus sales charges, where applicable). The net asset values per share
of the Class A Shares, Class B Shares and Class C Shares are generally expected
to be substantially the same. In certain circumstances, however, the per share
net asset values of the classes of shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fees and
transfer agency costs applicable to the Class B Shares and Class C Shares and
the differential in the dividends that may be paid on each class of shares.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Trustees reserves the right to calculate the net
asset value per share and adjust the offering price based thereon more
frequently than once daily if deemed desirable. Net asset value per share for
each class is determined by dividing the value of the Fund's portfolio
securities, cash and other assets (including accrued interest) attributable to
such class, less all liabilities (including accrued expenses) attributable to
such class, by the total number of shares of the class outstanding. Such
computation is made by using prices as of the close of trading on the Exchange
and (i) valuing securities listed or traded on a national securities exchange at
the closing price, or if no closing price is available, at the last reported
sale price, and if there has been no sale that day, at the mean between the last
reported bid and asked prices, (ii) valuing over-the-counter securities at the
last reported sale price from the National Association of Securities Dealers
Automated Quotations ("NASDAQ"), (iii) valuing unlisted securities and any
securities for which market quotations are not readily available at the average
of the mean between the current reported bid and asked prices obtained from
reputable brokers and (iv) valuing any other assets at fair value as determined
in good faith by the Adviser in accordance with procedures established by the
Fund's Board of Trustees. Debt securities with remaining maturities of 60 days
or less are valued on an amortized cost basis, which approximates market value.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements.

11
<PAGE> 13

Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the rules of the National Association of
Securities Dealers, Inc. ("NASD"). The net income attributable to a class of
shares will be reduced by the amount of the distribution fees and other expenses
of the Fund associated with such class of shares. To assist investors in
comparing classes of shares, the tables under the heading "Fees and Expenses of
the Fund" provide a summary of sales charges and expenses and an example of the
sales charges and expenses of the Fund applicable to each class of shares.

The shares are offered to the public on a continuous basis through the
Distributor as principal underwriter, which is located at 1 Parkview Plaza, PO
Box 5555, Oakbrook Terrace, Illinois 60181-5555. Shares also are offered through
members of the NASD who are acting as securities dealers ("dealers") and NASD
members or eligible non-NASD members who are acting as brokers or agents for
investors ("brokers"). "Dealers" and "brokers" are sometimes referred to herein
as "authorized dealers."

Shares may be purchased on any business day by completing the application
accompanying this prospectus and forwarding the application, directly or through
an authorized dealer, to the Fund's shareholder service agent, Van Kampen
Investor Services Inc. ("Investor Services"), a wholly owned subsidiary of Van
Kampen Investments. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A Shares, Class B Shares or Class C Shares.
Sales personnel of authorized dealers distributing the Fund's shares are
entitled to receive compensation for selling such shares and may receive
differing compensation for selling Class A Shares, Class B Shares or Class C
Shares.

The offering price for shares is based upon the next calculation of net asset
value per share (plus sales charges, where applicable) after an order is
received by Investor Services. Orders received by authorized dealers prior to
the close of the Exchange are priced based on the date of receipt provided such
order is transmitted to Investor Services prior to Investor Services' close of
business on such date. Orders received by authorized dealers after the close of
the Exchange or transmitted to Investor Services after its close of business are
priced based on the date of the next computed net asset value per share provided
they are received by Investor Services prior to Investor Services' close of
business on such date. It is the responsibility of authorized dealers to
transmit orders received by them to Investor Services so they will be received
in a timely manner.

The Fund and the Distributor reserve the right to refuse any order for the
purchase of shares. The Fund also reserves the right to suspend the sale of the
Fund's shares in response to conditions in the securities markets or for other
reasons. Shares of the Fund may be sold in foreign countries where permissible.

Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gain dividends,
unless the investor instructs the Fund otherwise. Investors wishing to receive
cash instead of additional shares should contact the Fund at (800) 341-2911 or
by writing to the Fund, c/o Van Kampen Investors Services Inc., PO Box 218256,
Kansas City, MO 64121-8256.

CLASS A SHARES

Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 5.75% of the offering price (or 6.10% of the net amount
invested), reduced on investments of $50,000 or more as follows:

CLASS A SHARES

SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
As % of As % of
Size of Offering Net Amount
Investment Price Invested
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10%
..........................................................
$50,000 but less than
$100,000 4.75% 4.99%
..........................................................
$100,000 but less than
$250,000 3.75% 3.90%
..........................................................
$250,000 but less than
$500,000 2.75% 2.83%
..........................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
..........................................................
$1,000,000 or more * *
..........................................................
</TABLE>

* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund may impose a
contingent deferred sales charge of 1.00% on certain redemptions made within
one year of the purchase. The contingent deferred sales charge is assessed on
an amount equal to the lesser of the then current market value or the cost of
the shares being redeemed. Accordingly, no sales charge is imposed on
increases in net asset value above the initial purchase price.

No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.

12
<PAGE> 14

Under the Distribution Plan and Service Plan, the Fund may spend up to a total
of 0.25% per year of the Fund's average daily net assets with respect to the
Class A Shares of the Fund. From such amount, under the Service Plan, the Fund
may spend up to 0.25% per year of the Fund's average daily net assets with
respect to the Class A Shares for the ongoing provision of services to Class A
shareholders by the Distributor and by brokers, dealers or financial
intermediaries and for the maintenance of such shareholders' accounts.

CLASS B SHARES

Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:

CLASS B SHARES

SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
as a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- ------------------------------------------------
<S> <C> <C> <C>
First 5.00%
................................................
Second 4.00%
................................................
Third 3.00%
................................................
Fourth 2.50%
................................................
Fifth 1.50%
................................................
Sixth and After None
................................................
</TABLE>

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class B
Shares in an amount of $500,000 or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

The amount of the contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B Shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of shares, all
payments during a month are totaled and deemed to have been made on the last day
of the month.

In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed shares being redeemed first are any shares in the
shareholder's Fund account that are not subject to a contingent deferred sales
charge followed by shares held the longest in the shareholder's account.

Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to the Class B Shares of the Fund.
In addition, under the Service Plan, the Fund may spend up to 0.25% per year of
the Fund's average daily net assets with respect to the Class B Shares for the
ongoing provision of services to Class B shareholders by the Distributor and by
brokers, dealers or financial intermediaries and for the maintenance of such
shareholders' accounts.

CLASS C SHARES

Class C Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge of 1.00% of the dollar amount subject to charge
if redeemed within one year of purchase.

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the shareholder's Fund account that are not subject to a contingent deferred
sales charge followed by shares held the longest in the shareholder's account.

Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to the Class C Shares of the Fund.
In addition, under the Service Plan, the Fund may

13
<PAGE> 15

spend up to 0.25% per year of the Fund's average daily net assets with respect
to the Class C Shares for the ongoing provision of services to Class C
shareholders by the Distributor and by brokers, dealers or financial
intermediaries and for the maintenance of such shareholders' accounts.

CONVERSION FEATURE

Class B Shares and any dividend reinvestment plan Class B Shares received on
such shares, automatically convert to Class A Shares eight years after the end
of the calendar month in which the shares were purchased. Such conversion will
be on the basis of the relative net asset values per share, without the
imposition of any sales load, fee or other charge. The conversion schedule
applicable to a share of the Fund acquired through the exchange privilege from
another Van Kampen fund participating in the exchange program is determined by
reference to the Van Kampen fund from which such share was originally purchased.

The conversion of such shares to Class A Shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or capital gain dividends
constituting "preferential dividends" under the federal income tax law and (ii)
the conversion of shares does not constitute a taxable event under federal
income tax law. The conversion may be suspended if such an opinion is no longer
available and such shares might continue to be subject to the higher aggregate
fees applicable to such shares for an indefinite period.

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by
involuntary liquidation by the Fund of a shareholder's account as described
under the heading "Redemption of Shares." Subject to certain limitations, a
shareholder who has redeemed Class C Shares of the Fund may reinvest in Class C
Shares at net asset value with credit for any contingent deferred sales charge
if the reinvestment is made within 180 days after the redemption. For a more
complete description of contingent deferred sales charge waivers, please refer
to the Fund's Statement of Additional Information or contact your authorized
dealer.

QUANTITY DISCOUNTS

Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced or no sales charges. Investors, or their
authorized dealers, must notify the Fund at the time of the purchase order
whenever a quantity discount is applicable to purchases. Upon such notification,
an investor will pay the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.

A person eligible for a reduced sales charge includes an individual, his or her
spouse and children under 21 years of age and any corporation, partnership or
sole proprietorship which is 100% owned, either alone or in combination, by any
of the foregoing; a trustee or other fiduciary purchasing for a single trust or
for a single fiduciary account, or a "company" as defined in Section 2(a)(8) of
the 1940 Act.

As used herein, "Participating Funds" refers to certain open-end investment
companies advised by Asset Management or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.

VOLUME DISCOUNTS. The size of investment shown in the Class A Shares sales
charge table applies to the total dollar amount being invested by any person in
shares of the Fund, or in any combination of shares of the Fund and shares of
other Participating Funds, although other Participating Funds may have different
sales charges.

CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the Class A Shares
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds currently owned.

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales

14
<PAGE> 16

charge by aggregating investments over a 13-month period to determine the sales
charge as outlined in the Class A Shares sales charge table. The size of
investment shown in the Class A Shares sales charge table includes purchases of
shares of the Participating Funds over a 13-month period based on the total
amount of intended purchases plus the value of all shares of the Participating
Funds previously purchased and still owned. An investor may elect to compute the
13-month period starting up to 90 days before the date of execution of a Letter
of Intent. Each investment made during the period receives the reduced sales
charge applicable to the total amount of the investment goal. The initial
purchase must be for an amount equal to at least 5% of the minimum total
purchase amount of the level selected. If trades not initially made under a
Letter of Intent subsequently qualify for a lower sales charge through the
90-day backdating provisions, an adjustment will be made at the time of the
expiration of the Letter of Intent to give effect to the lower sales charge.
Such adjustment in sales charge will be used to purchase additional shares for
the shareholder with the applicable sales charge. The Fund initially will escrow
shares totaling 5% of the dollar amount of the Letter of Intent to be held by
Investor Services in the name of the shareholder. In the event the Letter of
Intent goal is not achieved within the specified period, the investor must pay
the difference between the sales charge applicable to the purchases made and the
reduced sales charge previously paid. Such payments may be made directly to the
Distributor or, if not paid, the Distributor will liquidate sufficient escrowed
shares to obtain the difference.

OTHER PURCHASE PROGRAMS

Purchasers of Class A Shares may be entitled to reduced or no initial sales
charges in connection with the unit investment trust reinvestment program and
purchases by registered representatives of selling firms or purchases by persons
affiliated with the Fund or the Distributor. The Fund reserves the right to
modify or terminate these arrangements at any time.

UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund at net asset value per share and with no minimum initial or
subsequent investment requirement, if the administrator of an investor's unit
investment trust program meets certain uniform criteria relating to cost savings
by the Fund and the Distributor. The total sales charge for all other
investments made from unit investment trust distributions will be 1.00% of the
offering price (1.01% of net asset value). Of this amount, the Distributor will
pay to the authorized dealer, if any, through which such participation in the
qualifying program was initiated 0.50% of the offering price as a dealer
concession or agency commission. Persons desiring more information with respect
to this program, including the terms and conditions that apply to the program,
should contact their authorized dealer or the Distributor.

The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide Investor Services with appropriate
backup data for each investor participating in the program in a computerized
format fully compatible with Investor Services' processing system.

In order to obtain these special benefits, all dividends and other distributions
by the Fund must be reinvested in additional shares and there can not be any
systematic withdrawal program. There will be no minimum for reinvestments from
unit investment trusts. The Fund will send account activity statements to such
participants on a quarterly basis only, even if their investments are made more
frequently. The Fund reserves the right to modify or terminate this program at
any time.

NET ASSET VALUE PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at
net asset value, upon written assurance that the purchase is made for investment
purposes and that the shares will not be resold except through redemption by the
Fund, by:

(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families and
their beneficial accounts.

(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.

15
<PAGE> 17

(3) Directors, officers, employees and, when permitted, registered
representatives, of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21 years
of age when purchasing for any accounts they beneficially own, or, in the
case of any such financial institution, when purchasing for retirement plans
for such institution's employees; provided that such purchases are otherwise
permitted by such institutions.

(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers through
which purchases are made an amount up to 0.50% of the amount invested, over
a 12-month period.

(5) Trustees and other fiduciaries purchasing shares for retirement plans which
invest in multiple fund families through broker-dealer retirement plan
alliance programs that have entered into agreements with the Distributor and
which are subject to certain minimum size and operational requirements.
Trustees and other fiduciaries should refer to the Statement of Additional
Information for further details with respect to such alliance programs.

(6) Beneficial owners of shares of Participating Funds held by a retirement plan
or held in a tax-advantaged retirement account who purchase shares of the
Fund with proceeds from distributions from such a plan or retirement account
other than distributions taken to correct an excess contribution.

(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.

(8) Trusts created under pension, profit sharing or other employee benefit plans
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), or custodial accounts held by a bank created pursuant
to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code and assets held by an employer
or trustee in connection with an eligible deferred compensation plan under
Section 457 of the Code. Such plans will qualify for purchases at net asset
value provided, for plans initially establishing accounts with the
Distributor in the Participating Funds after February 1, 1997, that (1) the
initial amount invested in the Participating Funds is at least $500,000 or
(2) such shares are purchased by an employer sponsored plan with more than
100 eligible employees. Such plans that have been established with a
Participating Fund or have received proposals from the Distributor prior to
February 1, 1997 based on net asset value purchase privileges previously in
effect will be qualified to purchase shares of the Participating Funds at
net asset value for accounts established on or before May 1, 1997. Section
403(b) and similar accounts for which Van Kampen Trust Company serves as
custodian will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible employees,
except under certain uniform criteria established by the Distributor from
time to time. For purchases on February 1, 1997 and thereafter, a commission
will be paid as follows: 1.00% on sales to $2 million, plus 0.80% on the
next $1 million, plus 0.50% on the next $47 million, plus 0.25% on the
excess over $50 million.

(9) Individuals who are members of a "qualified group." For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the Fund
and Participating Funds, (iv) has a membership that the authorized dealer
can certify as to the group's members and (v) satisfies other uniform
criteria established by the Distributor for the purpose of realizing
economies of scale in distributing such shares. A qualified group does not
include one whose sole organizational nexus, for example, is that its
participants are credit card holders of the same institution, policy holders
of an insurance company, customers of a bank or broker-dealer, clients of an
investment adviser or other similar groups. Shares purchased in each group's
participants account in connection with this privilege will be subject to a
contingent deferred sales charge of 1.00% in the event of redemption within
one year of purchase, and a commission will be paid to authorized dealers
who initiate and are responsible for such sales to each individual as

16
<PAGE> 18

follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million and
0.50% on the excess over $3 million.

The term "families" includes a person's spouse, children under 21 years of age
and grandchildren, parents, and a person's spouse's parents.

Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal funds for the purchase by the close of
business on the next business day following acceptance of the order. An
authorized dealer may charge a transaction fee for placing an order to purchase
shares pursuant to this provision or for placing a redemption order with respect
to such shares. Authorized dealers will be paid a service fee as described above
on purchases made under options (3) through (9) above. The Fund may terminate,
or amend the terms of, offering shares of the Fund at net asset value to such
groups at any time.

REDEMPTION OF
SHARES

Generally shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the heading "Purchase of Shares," redemptions of Class B Shares
and Class C Shares may be subject to a contingent deferred sales charge. In
addition, certain redemptions of Class A Shares for shareholder accounts of $1
million or more may be subject to a contingent deferred sales charge.
Redemptions completed through an authorized dealer or a custodian of a
retirement plan account may involve additional fees charged by the dealer or
custodian.

Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the request and any other necessary documents in
proper form as described below. Such payment may be postponed or the right of
redemption suspended as provided by the rules of the SEC. Such payment may,
under certain circumstances, be paid wholly or in part by a distribution-in-kind
of portfolio securities which may result in brokerage costs and a gain or loss
for federal income tax purposes when such securities are sold. If the shares to
be redeemed have been recently purchased by check, Investor Services may delay
the payment of redemption proceeds until it confirms the purchase check has
cleared, which may take up to 15 days. A taxable gain or loss will be recognized
by the shareholder upon redemption of shares.

WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares to be redeemed, the class designation of
such shares and the shareholder's account number. The redemption request must be
signed by all persons in whose names the shares are registered. Signatures must
conform exactly to the account registration. If the proceeds of the redemption
exceed $50,000, or if the proceeds are not to be paid to the record owner at the
record address, or if the record address has changed within the previous 30
days, signature(s) must be guaranteed by one of the following: a bank or trust
company; a broker-dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; a savings and loan
association; or a federal savings bank.

Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption to be in proper form. In some
cases, however, additional documents may be necessary. In the case of
shareholders holding certificates, the certificates for the shares being
redeemed must be properly endorsed for transfer and must accompany the
redemption request. In the event the redemption is requested by a corporation,
partnership, trust, fiduciary, executor or administrator, and the name and title
of the individual(s) authorizing such redemption is not shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 120 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to Investor Services. Contact the IRA custodian
for further information.

In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined

17
<PAGE> 19

after the request in proper form is received by Investor Services.

AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. Orders sent through authorized dealers
must be at least $500 (unless transmitted by your authorized dealer via the
FUNDSERV network). The redemption price for such shares is the net asset value
per share next calculated after an order in proper form is received by an
authorized dealer provided such order is transmitted to the Distributor prior to
the Distributor's close of business on such day. It is the responsibility of
authorized dealers to transmit redemption requests received by them to the
Distributor so they will be received prior to such time. Redemptions completed
through an authorized dealer may involve additional fees charged by the dealer.

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the application form
accompanying the prospectus. For accounts that are not established with
telephone redemption privileges, a shareholder may call the Fund at (800)
341-2911 to request that a copy of the Telephone Redemption Authorization form
be sent to the shareholder for completion. To redeem shares, contact the
telephone transaction line at (800) 421-5684. Van Kampen Investment and its
subsidiaries, including Investor Services, and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring certain personal
identification information prior to acting upon telephone instructions, tape-
recording telephone communications and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
none of Van Kampen Investments, Investor Services or the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine.
Telephone redemptions may not be available if the shareholder cannot reach
Investor Services by telephone, whether because all telephone lines are busy or
for any other reason; in such case, a shareholder would have to use the Fund's
other redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, will be processed at the next
determined net asset value per share. These privileges are available for all
accounts other than retirement accounts or accounts with shares represented by
certificates. If an account has multiple owners, Investor Services may rely on
the instructions of any one owner.

For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.

OTHER REDEMPTION INFORMATION. The Fund may redeem shares of any shareholder
account that has a value on the date of the notice of redemption less than the
minimum initial investment as specified in this prospectus. At least 60 days'
advance written notice of any such involuntary redemption will be provided to
the shareholder and such shareholder will be given an opportunity to purchase
the required value of additional shares at the next determined net asset value
without sales charge. Any involuntary redemption may only occur if the
shareholder account is less than the minimum initial investment due to
shareholder redemptions.

DISTRIBUTIONS FROM THE FUND

In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of income. The Fund's present policy, which may be

18
<PAGE> 20

changed at any time by the Board of Trustees, is to distribute all, or
substantially all of this income, less expenses, at least annually as dividends
to shareholders. Dividends are automatically applied to purchase additional
shares of the Fund at the next determined net asset value unless the shareholder
instructs otherwise.

The per share dividends on Class B Shares and Class C Shares may be lower than
the per share dividends on Class A Shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.

CAPITAL GAIN DIVIDENDS. The Fund may realize capital gains or losses when it
sells securities, depending on whether the sales prices for the securities are
higher or lower than purchase prices. Net capital gain represents the total
profits from sales of securities minus total losses from sales of securities
(including any losses carried forward from prior years), other than net
short-term capital gain from sales of securities held for one year or less. The
Fund distributes any taxable net capital gain to shareholders as capital gain
dividends at least annually. As in the case of dividends, capital gain dividends
are automatically reinvested in additional shares of the Fund at the next
determined net asset value unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Statement of Additional Information or contact your
authorized dealer.

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gain dividend.
Unless the shareholder instructs otherwise, the reinvestment plan is automatic.
This instruction may be made by telephone by calling (800) 341-2911 ((800)
421-2833 for the hearing impaired) or by writing to Investor Services. The
investor may, on the initial application or prior to any declaration, instruct
that dividends be paid in cash and capital gain dividends be reinvested at net
asset value, or that both dividends and capital gain dividends be paid in cash.

AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to charge a bank account on a
regular basis to invest predetermined amounts in the Fund. Additional
information is available from the Distributor or your authorized dealer.

EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of a
Participating Fund. Shareholders seeking an exchange into a Participating Fund
should obtain and read the current prospectus for such fund prior to
implementing an exchange. A prospectus of any of the Participating Funds may be
obtained from any authorized dealer or the Distributor.

When shares that are subject to a contingent deferred sales charge are exchanged
among Participating Funds, the holding period for purposes of computing the
contingent deferred sales charge is based upon the date of the initial purchase
of such shares from a Participating Fund. When such shares are redeemed and not
exchanged for shares of another Participating Fund, the shares are subject to
the contingent deferred sales charge schedule imposed by the Participating Fund
from which such shares were originally purchased.

Exchanges of shares are sales of shares of one Participating Fund and purchases
of shares of another Participating Fund. The sale may result in a gain or loss
for federal income tax purposes. If the shares sold have been held for less than
91 days, the sales charge paid on such shares is carried over and included in
the tax basis of the shares acquired.

A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services or by contacting the telephone transaction line at

19
<PAGE> 21

(800) 421-5684. A shareholder automatically has telephone exchange privileges
unless the shareholder indicates otherwise by checking the applicable box on the
application form accompanying the prospectus. Van Kampen Investments and its
subsidiaries, including, Investor Services, and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring certain personal
identification information prior to acting upon telephone instructions,
tape-recording telephone communications, and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
none of Van Kampen Investments, Investor Services or the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine. If
the exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital gain dividend options (except dividend diversification) and
authorized dealer of record as the account from which shares are exchanged,
unless otherwise specified by the shareholder. In order to establish a
systematic withdrawal plan for the new account or reinvest dividends from the
new account into another fund, however, an exchanging shareholder must submit a
specific request. The Fund reserves the right to reject any order to acquire its
shares through exchange. In addition, the Fund and other Participating Funds may
restrict exchanges by shareholders engaged in excessive trading by limiting or
disallowing the exchange privileges to such shareholders. For further
information on these restrictions see the Statement of Additional Information.
The Fund may modify, restrict or terminate the exchange privilege at any time on
60 days' notice to its shareholders of any termination or material amendment.

For purposes of determining the sales charge rate previously paid on Class A
Shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of such shareholder's securities, the
security upon which the highest sales charge rate was previously paid is deemed
exchanged first.

Exchange requests received on a business day prior to the time shares of the
funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares of the fund which the
shareholder is redeeming will be redeemed at the net asset value per share next
determined on the date of receipt. Shares of the fund that the shareholder is
purchasing will also normally be purchased at the net asset value per share,
plus any applicable sales charge, next determined on the date of receipt.
Exchange requests received on a business day after the time shares of the funds
involved in the request are priced will be processed on the next business day in
the manner described herein.

INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.vankampen.com for further instruction. Van Kampen Investments and its
subsidiaries, including Investor Services, and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated
through the internet are genuine. Such procedures include requiring use of a
personal identification number prior to acting upon internet instructions and
providing written confirmation of instructions communicated through the
internet. If reasonable procedures are employed, none of Van Kampen Investments,
Investor Services or the Fund will be liable for following instructions received
through the internet which it reasonably believes to be genuine. If an account
has multiple owners, Investor Services may rely on the instructions of any one
owner.

FEDERAL INCOME TAXATION

Distributions of the Fund's net investment income (consisting generally of
taxable income and net short-term capital gain) are taxable to shareholders as
ordinary income to the extent of the Fund's earnings and profits, whether paid
in cash or reinvested in additional shares. Distributions of the Fund's net
capital gain (which is the excess of net long-term capital gain over net
short-term capital loss) as capital gain dividends, if any, are taxable to
shareholders as long-term capital gains, whether paid in cash or reinvested in
additional shares, and regardless of how

20
<PAGE> 22

long the shares of the Fund have been held by such shareholders. The Fund
expects that its distributions will consist primarily of ordinary income and
capital gain dividends. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of a holder's shares and, after
such adjusted tax basis is reduced to zero, will constitute capital gains to
such holder (assuming such shares are held as a capital asset). Although
distributions generally are treated as taxable in the year they are paid,
distributions declared in October, November or December, payable to shareholders
of record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year.

The sale or exchange of shares is a taxable transaction for federal income tax
purposes. Shareholders who sell their shares will generally recognize gain or
loss in an amount equal to the difference between their adjusted tax basis in
the shares sold and the amount received. If the shares are held as a capital
asset, the gain or loss will be a capital gain or loss. Any capital gains may be
taxed at different rates depending on how long the shareholder held such shares.

The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders who do not
furnish to the Fund their correct taxpayer identification number (in the case of
individuals, their social security number) and certain required certifications
or who are otherwise subject to backup withholding.

Foreign shareholders, including shareholders who are non-resident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by an
applicable treaty. Prospective foreign investors should consult their tax
advisers concerning the tax consequences to them of an investment in shares.

The Fund intends to qualify as a regulated investment company under federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its net investment income, the Fund will not be
required to pay federal income taxes on any income it distributes to
shareholders. If the Fund distributes less than an amount equal to the sum of
98% of its ordinary income and 98% of its capital gain net income, then the Fund
will be subject to a 4% excise tax on the undistributed amounts.

The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding, disposing, exchanging
or selling of shares, as well as the effects of state, local and foreign tax law
and any proposed tax law changes.

21
<PAGE> 23

BOARD OF TRUSTEES
AND OFFICERS

BOARD OF TRUSTEES

<TABLE>
<S> <C>
J. Miles Branagan Richard F. Powers*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson Paul G. Yovovich
</TABLE>

OFFICERS

Richard F. Powers, III*
President

Dennis J. McDonnell*
Executive Vice President & Chief Investment Officer

A. Thomas Smith III*
Vice President and Secretary

Edward C. Wood III*
Vice President

Michael H. Santo*
Vice President

Peter W. Hegel*
Vice President

Stephen L. Boyd*
Vice President

John L. Sullivan*
Vice President, Chief Financial Officer & Treasurer

Curtis W. Morell*
Vice President & Chief Accounting Officer

Tanya M. Loden*
Controller

* "Interested Persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday

DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666

TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833

FUNDINFO(R)
For automated telephone services, call (800) 847-2424

WEB SITE
www.vankampen.com

VAN KAMPEN TAX-MANAGED EQUITY GROWTH FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

Investment Adviser
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

Investment Subadviser
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Tax-Managed Equity Growth Fund

Custodian
[TO COME]

Legal Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606

Independent Accountants
[TO COME]
<PAGE> 24

VAN KAMPEN
TAX-MANAGED EQUITY GROWTH FUND

PROSPECTUS
MARCH , 2000

A Statement of Additional Information, which
contains more details about the Fund, is
incorporated by reference in its entirety into
this prospectus.

You will find additional information about the
Fund in its annual and semiannual reports to
shareholders. The annual report explains the
market conditions and investment strategies
affecting the Fund's performance during its
last fiscal year.

You can ask questions or obtain a free copy of
the Fund's reports or its Statement of
Additional Information by calling (800)
341-2911 from 7:00 a.m. to 7:00 p.m., Central
time, Monday through Friday.
Telecommunications Device for the Deaf users
may call (800) 421-2833. A free copy of the
Fund's reports can also be ordered from our
web site at www.vankampen.com.

Information about the Fund, including its
reports and Statement of Additional
Information, has been filed with the
Securities and Exchange Commission (SEC). It
can be reviewed and copied at the SEC's Public
Reference Room in Washington, DC or on the
EDGAR Database on the SEC's internet site
(http://www.sec.gov). Information on the
operation of the SEC's Public Reference Room
may be obtained by calling the SEC at
1-202-942-8090. You can also request copies of
these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail
address ([email protected]) or by writing the
Public Reference Section of the SEC,
Washington, DC, 20549-0102.

[VAN KAMPEN FUNDS LOGO]

The Fund's Investment Company Act
File No. is 811-9279 .
TMCG PRO 03/00
<PAGE> 25

The information in this statement of additional information is
not complete and may be changed. The Fund may not sell these
securities until the post- effective amendment to the
registration statement filed with the Securities and Exchange
Commission is effective. This statement of additional
information is not a prospectus. This statement of additional
information is not an offer to sell these securities and is not
soliciting an offer to buy these securities.

SUBJECT TO COMPLETION--DATED DECEMBER 27, 1999

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN
TAX-MANAGED EQUITY GROWTH FUND

Van Kampen Tax-Managed Equity Growth Fund (the "Fund") is a mutual fund
with an investment objective to seek to provide long-term capital appreciation
on an after-tax basis. The Fund's investment adviser seeks to achieve the Fund's
investment objective by investing primarily in growth-oriented equity securities
while attempting to minimize the impact of federal income taxes on shareholder
returns.

The Fund is organized as a diversified series of the Van Kampen Equity
Trust II, an open-end, management investment company (the "Trust").

This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Fund's prospectus (the "Prospectus") dated as of the same date as this Statement
of Additional Information. This Statement of Additional Information does not
include all the information that a prospective investor should consider before
purchasing shares of the Fund. Investors should obtain and read the Prospectus
prior to purchasing shares of the Fund. A Prospectus may be obtained without
charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 341-2911 (or (800) 421-2833
for the hearing impaired).

---------------------------------------------

TABLE OF CONTENTS
---------------------------------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective, Policies and Risks.................... B-3
Strategic Transactions...................................... B-15
Investment Restrictions..................................... B-22
Trustees and Officers....................................... B-25
Investment Advisory Agreement............................... B-34
Other Agreements............................................ B-35
Distribution and Service.................................... B-36
Transfer Agent.............................................. B-39
Portfolio Transactions and Brokerage Allocation............. B-39
Shareholder Services........................................ B-40
Redemption of Shares........................................ B-43
Contingent Deferred Sales Charge-Class A.................... B-43
Waiver of Class B and Class C Contingent Deferred Sales
Charges................................................... B-44
Taxation.................................................... B-46
Fund Performance............................................ B-51
Other Information........................................... B-53
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MARCH , 2000.
<PAGE> 26

GENERAL INFORMATION

The Fund is a series of the Trust. The Trust is an unincorporated business
trust established under the laws of the State of Delaware by an Agreement and
Declaration of Trust (the "Declaration of Trust") dated as of April 1, 1999. The
Declaration of Trust permits the Trustees to create one or more separate
investment portfolios and issue a series of shares for each portfolio, such as
the Fund. The Trustees can further sub-divide each series of shares into one or
more classes of shares for each portfolio.

Van Kampen Investment Advisory Corp. (the "Adviser" or "Advisory Corp."),
Van Kampen Funds Inc. (the "Distributor") and Van Kampen Investor Services Inc.
("Investor Services") are wholly owned subsidiaries of Van Kampen Investments
Inc. ("Van Kampen Investments"), which is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. ("Morgan Stanley Dean Witter"). The principal
office of the Fund, the Adviser, the Distributor and Van Kampen Investments is
located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.

Morgan Stanley Dean Witter and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley Dean Witter Investment Management Inc.,
an investment adviser ("MSDWIM" or the "Subadviser"), Morgan Stanley & Co.
Incorporated, a registered broker-dealer and investment adviser, and Morgan
Stanley International, are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; credit
services; asset management; trading of futures, options, foreign exchange,
commodities and swaps (involving foreign exchange, commodities, indices and
interest rates); real estate advice, financing and investing; and securities
lending.

The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest, par value $0.01 per share, which can be
divided into series, such as the Fund, and further subdivided into classes of
each series. Each share represents an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.

The Fund currently offers three classes of shares, designated Class A
Shares, Class B Shares and Class C Shares. Other classes may be established from
time to time in accordance with provisions of the Declaration of Trust. Each
class of shares of the Fund generally are identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee. Shares of the Trust entitle their holders
to one vote per share; however, separate votes are taken by each series on
matters affecting an individual series and separate votes are taken by each
class of a series on matters affecting an individual class of such series. For
example, a change in investment policy for a series would be voted upon by
shareholders of only the series involved and a change in the distribution fee
for a class of a series would be voted upon by shareholders of only the class of
such series involved. Except as otherwise described in the Prospectus or herein,
shares do not have cumulative voting rights, preemptive rights or any
conversion, subscription or exchange rights.

B-2
<PAGE> 27

The Trust does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of two-thirds of the shares then outstanding cast
in person or by proxy at such meeting. The Fund will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or rules or
regulations promulgated by the Securities and Exchange Commission ("SEC").

In the event of liquidation, each of the shares of the Fund is entitled to
its portion of all of the Fund's net assets after all debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be lower than to holders of
Class A Shares.

The Trustees may amend the Declaration of Trust (including with respect to
any series) in any manner without shareholder approval, except that the Trustees
may not adopt any amendment adversely affecting the rights of shareholders of
any series without approval by a majority of the shares of each affected series
present at a meeting of shareholders (or such higher vote as may be required by
the 1940 Act or other applicable law) and except that the Trustees cannot amend
the Declaration of Trust to impose any liability on shareholders, make any
assessment on shares or impose liabilities on the Trustees without approval from
each affected shareholder or Trustee, as the case may be.

Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.

As of the date of this statement of additional information, there were no
shares of the Fund issued or outstanding.

INVESTMENT OBJECTIVE, POLICIES AND RISKS

The following disclosures supplement disclosures set forth under the same
caption in the Prospectus and do not, standing alone, present a complete or
accurate explanation of the matters disclosed. Readers must refer also to this
caption in the Prospectus for a complete presentation of the matters disclosed
below.

BORROWING AND LEVERAGE

To the extent allowed by the Fund's investment restrictions described
herein, the Fund may engage in borrowing for temporary or emerging purposes. To
the extent allowed by the Fund's investment restrictions described herein, the
Fund may engage in borrowing for investment purposes, also known as leverage.
Leveraging will magnify declines as well as increases in the net asset value of
the Fund's shares and in the return on the Fund's investments. The extent to
which the Fund may borrow will depend upon the availability of credit. No
assurance can be given that the Fund will be able to borrow on terms acceptable
to the Fund and the Adviser. Borrowing by the Fund will create the opportunity
for increased net income but, at the same time, will involve special risk
considerations.

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<PAGE> 28

Borrowing will create interest expenses for the Fund which can exceed the income
from the assets obtained with the proceeds. To the extent the income derived
from securities purchased with funds obtained through borrowing exceeds the
interest and other expenses that the Fund will have to pay in connection with
such borrowing, the Fund's net income will be greater than if the Fund did not
borrow. Conversely, if the income from the assets obtained through borrowing is
not sufficient to cover the cost of borrowing, the net income of the Fund will
be less than if the Fund did not borrow, and therefore the amount available for
distribution to shareholders will be reduced. The Fund's use of leverage may
impair the ability of the Fund to maintain its qualification for federal income
tax purposes as a regulated investment company. The rights of any lenders to the
Fund to receive payments of interest on and repayments of principal of
borrowings will be senior to the rights of the Fund's shareholders, and the
terms of the Fund's borrowings may contain provisions that limit certain
activities of the Fund and could result in precluding the purchase of securities
and instruments that the Fund would otherwise purchase.

CONVERTIBLE SECURITIES, RIGHTS AND WARRANTS

The Fund may invest in convertible securities, rights and warrants. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock or other equity security of the same or a different issuer or into
cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt securities or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities generally have characteristics similar to
both debt and equity securities. The value of convertible securities tends to
decline as interest rates rise and, because of the conversion feature, tends to
vary with fluctuations in the market value of the underlying equity securities.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity security although the
market prices of convertible securities may be affected by any such dividend
changes or other changes in the underlying equity securities. Rights and
warrants are instruments giving holders the right, but not the obligation, to
buy shares of a company at a given price during a specified period. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative and less liquid than
certain other types of investments in that they do not entitle a holder to
dividends or voting rights with respect to the underlying securities nor do they
represent any rights in the assets of the issuing company and may lack a
secondary market. Equity-linked securities are convertible instruments whose
value is based upon the value of one or more underlying equity securities, a
reference rate or an index. Equity-linked securities come in many forms and may
include features, among others, such as the following: (i) may be issued by the
issuer of the underlying equity security or by a company other than the one to
which the instrument is linked (usually an investment bank), (ii) may convert
into equity securities, such as common stock, within a stated period from the
issue date or may be redeemed for cash or some combination of cash and the
linked security at a value based upon the value of the underlying equity

B-4
<PAGE> 29

security within a stated period from the issue date, (iii) may have various
conversion features prior to maturity at the option of the holder or the issuer
or both, (iv) may limit the appreciation value with caps or collars of the value
of underlying equity security and (v) may have fixed, variable or no interest
payments during the life of the security which reflect the actual or a
structured return relative to the underlying dividends of the linked equity
security. Investments in equity-linked securities may subject the Fund to
additional risks not ordinarily associated with investments in other equity
securities. Because equity-linked securities are sometimes issued by a third
party other than the issuer of the linked security, the Fund is subject to risks
if the underlying stock underperforms and if the issuer defaults on the payment
of the dividend or the common stock at maturity. In addition, the trading market
for particular equity-linked securities may be less liquid, making it difficult
for the Fund to dispose of a particular security when necessary and reduced
liquidity in the secondary market for any such securities may make it more
difficult to obtain market quotations for valuing the Fund's portfolio.

DEPOSITARY RECEIPTS

The Fund may invest in American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), European Depositary Receipts ("EDRs") and other
depositary receipts, to the extent that such depositary receipts become
available. ADRs are securities, typically issued by a U.S. financial institution
(a "depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer (the "underlying issuer") and deposited
with the depositary. ADRs include American Depositary Shares and New York Shares
and may be "sponsored" or "unsponsored." Sponsored ADRs are established jointly
by a depositary and the underlying issuer, whereas unsponsored ADRs may be
established by a depositary without participation by the underlying issuer.
GDRs, EDRs and other types of depositary receipts are typically issued by
foreign depositories, although they may also be issued by U.S. depositories, and
evidence ownership interests in a security or pool of securities issued by
either a foreign or a U.S. corporation.

Holders of unsponsored depositary receipts generally bear all the costs
associated with establishing the unsponsored depositary receipt. The depositary
of an unsponsored depositary receipt is under no obligation to distribute
shareholder communications received from the underlying issuer or to pass
through to the holders of the unsponsored depositary receipt voting rights with
respect to the deposited securities or pool of securities. Depositary receipts
are not necessarily denominated in the same currency as the underlying
securities to which they may be connected. Generally, depositary receipts in
registered form are designed for use in the U.S. securities market and
depositary receipts in bearer form are designed for use in securities markets
outside the U.S. For purposes of the Fund's investment policies, the Fund's
investments in depositary receipts will be deemed to be investments in the
underlying securities.

EURODOLLAR AND YANKEE OBLIGATIONS

Eurodollar bank obligations are dollar-denominated certificates of deposit
and time deposits issued outside the U.S. capital markets by foreign branches of
banks and by foreign banks. Yankee bank obligations are dollar-denominated
obligations issued in the U.S. capital markets by foreign banks.

B-5
<PAGE> 30

Eurodollar and Yankee obligations are subject to the same risks that
pertain to domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, Eurodollar (and to a limited extent, Yankee) obligations are
subject to certain sovereign risks. One such risk is the possibility that a
sovereign country might prevent capital, in the form of dollars, from flowing
across its borders. Other risks include: adverse political and economic
developments; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes, and the
expropriation or nationalization of foreign issuers.

FOREIGN INVESTING

The Fund may invest in securities of foreign issuers. Such securities may
be denominated in U.S. dollars and in currencies other than U.S. dollars. The
percentage of assets invested in securities of a particular country or
denominated in a particular currency will vary in accordance with the Adviser's
assessment of the relative yield, appreciation potential and the relationship of
a country's currency to the U.S. dollar, which is based upon such factors as
fundamental economic strength, credit quality and interest rate trends.
Investments in foreign securities present certain risks not ordinarily
associated with investments in securities of U.S. issuers. These risks include
fluctuations in foreign currency exchange rates, political, economic or legal
developments (including war or other instability, expropriation of assets,
nationalization and confiscatory taxation), the imposition of foreign exchange
limitations (including currency blockage), withholding taxes on dividend or
interest payments or capital transactions or other restrictions, higher
transaction costs (including higher brokerage, custodial and settlement costs
and currency translation costs) and possible difficulty in enforcing contractual
obligations or taking judicial action. Also, foreign securities may not be as
liquid and may be more volatile than comparable domestic securities.

In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive, auditing, accounting, financial reporting and
disclosure requirements than domestic issuers. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the U.S., and, with respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of exchanges, brokers and
dealers than there is in the U.S., the Fund may experience settlement
difficulties or delays not usually encountered in the U.S.

Delays in making trades in foreign securities relating to volume
constraints, limitations or restrictions, clearance or settlement procedures, or
otherwise could impact yields and result in temporary periods when assets are
not fully invested or attractive investment opportunities are foregone.

In addition to the increased risks of investing in foreign issuers, there
are often increased transactions costs associated with investing in foreign
securities including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.

B-6
<PAGE> 31

The governments of some countries have been engaged in programs of selling
part or all of their stakes in government owned or controlled enterprises
("privatization"). The Adviser believes that privatization may offer investors
opportunities for significant capital appreciation and intends to invest assets
of the Fund in privatization in appropriate circumstances. In certain countries,
the ability of foreign entities, such as the Fund, to participate in
privatization may be limited by local law, or the terms on which the Fund may be
permitted to participate may be less advantageous than those for local
investors. There can be no assurance that governments will continue to sell
companies currently owned or controlled by them or that any privatization
programs in which the Fund participates will be successful.

Foreign Currency Exchange Risks. To the extent the Fund invests in
securities denominated or quoted in currencies other than the U.S. dollar, the
Fund will be affected by changes in foreign currency exchange rates (and
exchange control regulations) which affect the value of investments in the Fund
and the accrued income and unrealized appreciation or depreciation of the
investments. Changes in foreign currency exchange ratios relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and the Fund's yield on such assets as well as any temporary
uninvested reserves in bank deposits in foreign currencies. In addition, the
Fund will incur costs in connection with conversions between various currencies.
The Fund does not intend to invest in any security in a country where the
currency is not freely convertible to U.S. dollars, unless the Fund has obtained
the necessary governmental licensing to convert such currency or other
appropriately licensed or sanctioned contractual guarantee to protect such
investment against loss of that currency's external value, or the Fund has a
reasonable expectation at the time the investment is made that such governmental
licensing or other appropriately licensed or sanctioned guarantee would be
obtained or that the currency in which the security is quoted would be freely
convertible at the time of any proposed sale of the security by the Fund.

The Fund's foreign currency exchange transactions may be conducted on a
spot basis (that is, cash basis) at the spot rate for purchasing or selling
currency prevailing in the foreign currency exchange market. The Fund also may
enter into contracts with banks, brokers or dealers to purchase or sell
securities or foreign currencies at a future date ("forward contracts"). A
foreign currency forward contract is a negotiated agreement between the
contracting parties to exchange a specified amount of currency at a specified
future time at a specified rate. The rate can be higher or lower than the spot
rate between the currencies that are the subject of the contract. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for such trades.

The Fund may attempt to protect against adverse changes in the value of the
U.S. dollar in relation to a foreign currency by entering into a forward
contract for the purchase or sale of the amount of foreign currency invested or
to be invested, or by buying or selling a foreign currency option or futures
contract for such amount. Such strategies may be employed before the Fund
purchases a foreign security traded in the currency which the Fund anticipates
acquiring or between the date the foreign security is purchased or sold and the
date on which payment therefor is made or received. Seeking to protect against a
change in the value of a foreign currency in the foregoing manner does not
eliminate

B-7
<PAGE> 32

fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such transactions reduce or
preclude the opportunity for gain if the value of the currency should move in
the direction opposite to the position taken. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such contracts. The Fund generally will not enter into a forward
contract with a term of greater than one year. At the maturity of a forward
contract, the Fund may either accept or make delivery of the currency specified
in the contract or, prior to maturity, enter into a closing purchase transaction
involving the purchase or sale of an offsetting contract. Closing purchase
transactions with respect to forward contracts are usually effected with the
currency trader who is a party to the original forward contract. The Fund will
only enter into such a forward contract if it is expected that there will be a
liquid market in which to close out such contract. There can, however, be no
assurance that such a liquid market will exist in which to close a forward
contract, in which case the Fund may suffer a loss.

It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for the Fund to purchase additional foreign currency on the
spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency that the Fund is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. If the Fund engages in an offsetting transaction, the Fund
will incur a gain or a loss to the extent that there has been movement in
forward contract prices. Should forward prices decline during the period between
the Fund entering into a forward contract for the sale of a foreign currency and
the date it enters into an offsetting contract for the purchase of the foreign
currency, the Fund will realize a gain to the extent that the price of the
currency it has agreed to sell exceeds the price of the currency it has agreed
to purchase. Should forward prices increase, the Fund would suffer a loss to the
extent that the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.

The Fund is not required to enter into such transactions with regard to its
foreign currency-denominated securities. It also should be realized that this
method of protecting the value of portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange which one can achieve
at some future point in time. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result
should the value of such currency increase.

In addition, the Fund may cross-hedge currencies by entering into a
transaction to purchase or sell one or more currencies that are expected to
decline in value relative to other currencies to which a portfolio has or
expects to have portfolio exposure. The Fund may also engage in proxy hedging,
which is defined as entering into positions in one currency to hedge investments
denominated in another currency, where two currencies are economically linked.
The Fund's entry into forward contracts, as well as any use of proxy or cross
hedging techniques, will generally require the Fund to hold liquid securities or
cash equal to the Fund's obligations in a segregated account throughout the
duration of the contract. The Fund may combine forward contracts with
investments in securities denominated in other currencies in order to achieve
desired security and currency

B-8
<PAGE> 33

exposures. Such combinations are generally referred to as synthetic securities.
For example, in lieu of purchasing a foreign bond, the Fund may purchase a U.S.
dollar-denominated security and at the same time enter into a forward contract
to exchange U.S. dollars for the contract's underlying currency at a future
date. By matching the amount of U.S. dollars to be exchanged with the
anticipated value of the U.S. dollar-denominated security, the Fund may be able
to lock in the foreign currency value of the security and adopt a synthetic
position reflecting the credit quality of the U.S. dollar-denominated security.

To the extent required by the rules and regulations of the Securities and
Exchange Commission ("SEC"), the Fund will earmark or place cash or other liquid
assets into a segregated account in an amount equal to the value of the Fund's
total assets committed to the consummation of forward foreign currency exchange
contracts. If the value of the securities placed in the segregated account
declines, additional cash or liquid assets will be placed in the account on a
daily basis so that the value of the account will be at least equal to the
amount of the Fund's commitments with respect to such contracts. See also
"Strategic Transactions".

Foreign Currency Exchange-Related Securities. Foreign currency warrants are
warrants which entitle the holder to receive from their issuer an amount of cash
(generally, for warrants issued in the United States, in U.S. dollars) which is
calculated pursuant to a predetermined formula and based on the exchange rate
between a specified foreign currency and the U.S. dollar as of the exercise date
of the warrant. Foreign currency warrants generally are exercisable upon their
issuance and expire as of a specified date and time. Foreign currency warrants
have been issued in connection with U.S. dollar-denominated debt offerings by
major corporate issuers in an attempt to reduce the foreign currency exchange
risk which, from the point of view of prospective purchasers of the securities,
is inherent in the international fixed-income marketplace. Foreign currency
warrants may attempt to reduce the foreign exchange risk assumed by purchasers
of a security by, for example, providing for a supplemental payment in the event
that the U.S. dollar depreciates against the value of a major foreign currency
such as the Japanese Yen or German Deutschmark. The formula used to determine
the amount payable upon exercise of a foreign currency warrant may make the
warrant worthless unless the applicable foreign currency exchange rate moves in
a particular direction (e.g., unless the U.S. dollar appreciates or depreciates
against the particular foreign currency to which the warrant is linked or
indexed). Foreign currency warrants are severable from the debt obligations with
which they may be offered, and may be listed on exchanges. Foreign currency
warrants may be exercisable only in certain minimum amounts, and an investor
wishing to exercise warrants who possesses less than the minimum number required
for exercise may be required either to sell the warrants or to purchase
additional warrants, thereby incurring additional transaction costs. In the case
of any exercise of warrants, there may be a time delay between the time a holder
of warrants gives instructions to exercise and the time the exchange rate
relating to exercise is determined, during which time the exchange rate could
change significantly, thereby affecting both the market and cash settlement
values of the warrants being exercised. The expiration date of the warrants may
be accelerated if the warrants should be delisted from an exchange or if their
trading should be suspended permanently, which would result in the loss of any
remaining "time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case where the
warrants were "out-of-the-money," in a total loss of the purchase price of the
warrants. Warrants are generally

B-9
<PAGE> 34

unsecured obligations of their issuers and are not standardized foreign currency
options issued by the Options Clearing Corporation ("OCC"). Unlike foreign
currency options issued by the OCC, the terms of foreign exchange warrants
generally will not be amended in the event of governmental or regulatory actions
affecting exchange rates or in the event of the imposition of other regulatory
controls affecting the international currency markets. The initial public
offering price of foreign currency warrants is generally considerably in excess
of the price that a commercial user of foreign currencies might pay in the
interbank market for a comparable option involving significantly larger amounts
of foreign currencies. Foreign currency warrants are subject to complex
political or economic factors.

Principal exchange rate linked securities are debt obligations the
principal on which is payable at maturity in an amount that may vary based on
the exchange rate between the U.S. dollar and a particular foreign currency at
or about that time. The return on "standard" principal exchange rate linked
securities is enhanced if the foreign currency to which the security is linked
appreciates against the U.S. dollar, and is adversely affected by increases in
the foreign exchange value of the U.S. dollar; "reverse" principal exchange rate
linked securities are like the "standard" securities, except that their return
is enhanced by increases in the value of the U.S. dollar and adversely impacted
by increases in the value of foreign currency. Interest payments on the
securities are generally made in U.S. dollars at rates that reflect the degree
of foreign currency risk assumed or given up by the purchaser of the notes
(i.e., at relatively higher interest rates if the purchaser has assumed some of
the foreign exchange risk, or relatively lower interest rates if the issuer has
assumed some of the foreign exchange risk, based on the expectations of the
current market). Principal exchange rate linked securities may in limited cases
be subject to acceleration of maturity (generally, not without the consent of
the holders of the securities), which may have an adverse impact on the value of
the principal payment to be made at maturity.

Performance indexed paper is U.S. dollar-denominated commercial paper the
yield of which is linked to certain foreign exchange rate movements. The yield
to the investor on performance indexed paper is between the U.S. dollar and a
designated currency as of or about that time (generally, the index maturity two
days prior to maturity). The yield to the investor will be within a range
stipulated at the time of purchase of the obligation, generally with a
guaranteed minimum rate of return that is below, and a potential maximum rate of
return that is above, market yields on U.S. dollar-denominated commercial paper,
with both the minimum and maximum rates of return on the investment
corresponding to the minimum and maximum values of the spot exchange rate two
business days prior to maturity.

Investing in Emerging Market Countries. The risks of foreign investment are
heightened when the issuer is from an emerging market country. The extent of
economic development, political stability and market depth of such countries
varies widely and investments in the securities of issuers in such countries
typically involve greater potential gain or loss than investments in securities
of issuers in more developed countries. Emerging market countries tend to have
economic structures that are less diverse and mature and political systems that
are less stable than developed markets. Emerging market countries may be more
likely to experience political turmoil or rapid changes in economic conditions
than more developed markets and the financial condition of issuers in emerging
market countries may be more precarious than in other countries. Certain
countries depend to a

B-10
<PAGE> 35

larger degree upon international trade or development assistance and, therefore,
are vulnerable to changes in trade or assistance which, in turn, may be affected
by a variety of factors. The Fund may be particularly sensitive to changes in
the economies of certain countries resulting from any reversal of economic
liberalization, political unrest or the imposition of sanctions by the U.S. or
other countries.

The Fund's purchase and sale of portfolio securities in emerging market
countries may be constrained by limitations as to daily changes in the prices of
listed securities, periodic or sporadic trading or settlement or limitations on
aggregate holdings by foreign investors. Such limitations may be computed based
on the aggregate trading volume by or holdings of the Fund, the Fund's
investment adviser, its affiliates or their respective clients or other service
providers. The Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached. Foreign
investment in the securities markets of certain emerging market countries is
restricted or controlled to varying degrees which may limit investment in such
countries or increase the administrative costs of such investments. For example,
certain countries may require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by the Fund. The repatriation of both investment income and capital
from certain emerging market countries is subject to restrictions such as the
need for governmental consents. Due to restrictions on direct investment in
securities in certain countries, it is anticipated that the Fund may invest in
such countries through other investment funds in such countries.

Many emerging market countries have experienced currency devaluations and
substantial (and, in some cases, extremely high) rates of inflation, which have
had a negative effect on the economies and securities markets of such countries.
Economies in emerging market countries generally are dependent heavily upon
commodity prices and international trade and, accordingly, have been and may
continue to be affected adversely by the economies of their trading partners,
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures or negotiated by the countries with
which they trade.

Many emerging market countries are subject to a substantial degree of
economic, political and social instability. Governments of some emerging
countries are authoritarian in nature or have been installed or removed as a
result of military coups, while governments in other emerging market countries
have periodically used force to suppress civil dissent. Disparities of wealth,
the pace and success of political reforms, and ethnic, religious and racial
disaffection, among other factors, have also led to social unrest, violence
and/or labor unrest in some emerging markets countries. Unanticipated political
or social developments may result in sudden and significant investment losses.

Settlement procedures in emerging market countries are frequently less
developed and reliable than those in developed markets. In addition, significant
delays are common in certain markets in registering the transfer of securities.
Settlement or registration problems may make it more difficult for the Fund to
value its portfolio securities and could cause

B-11
<PAGE> 36

the Fund to miss attractive investment opportunities, to have a portion of its
assets uninvested or to incur losses due to the failure of a counterparty to pay
for securities the Fund has delivered or the Fund's inability to complete its
contractual obligations. The creditworthiness of the local securities firms used
by the Fund in emerging market countries may not be as sound as the
creditworthiness of firms used in more developed countries. As a result, the
Fund may be subject to a greater risk of loss if a securities firm defaults in
the performance of its responsibilities.

The small size and inexperience of the securities markets in certain
emerging market countries and the limited volume of trading in securities in
those countries may make the Fund's investments in such countries less liquid
and more volatile than investments in countries with more developed securities
markets. The Fund's investments in emerging market countries are subject to the
risk that the liquidity of a particular investment, or investments generally, in
such countries will shrink or disappear suddenly and without warning as a result
of adverse economic, market or political conditions or adverse investor
perceptions, whether or not accurate. Because of the lack of sufficient market
liquidity, the Fund may incur losses because it will be required to effect sales
at a disadvantageous time and only then at a substantial drop in price.
Investments in emerging market countries may be more difficult to price
precisely because of the characteristics discussed above and lower trading
volumes.

The Fund's use of foreign currency management techniques in emerging market
countries may be limited. Due to the limited market for these instruments in
emerging market countries, the Fund's investment adviser does not currently
anticipate that a significant portion of the Fund's currency exposure in
emerging market countries, if any, will be covered by such instruments.

ILLIQUID SECURITIES

The Fund may invest up to 15% its net assets in illiquid securities, which
includes securities that are not readily marketable, repurchase agreements which
have a maturity of longer than seven days and generally includes securities that
are restricted from sale to the public without registration under the Securities
Act of 1933, as amended (the "1933 Act"). The sale of such securities often
requires more time and results in higher brokerage charges or dealer discounts
and other selling expenses than does the sale of liquid securities trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities are often purchased at a discount from the market price of
unrestricted securities of the same issuer reflecting the fact that such
securities may not be readily marketable without some time delay. Investments in
securities which have no ready market are valued at fair value as determined in
good faith by the Adviser in accordance with procedures approved by the Fund's
Board of Trustees. Ordinarily, the Fund would invest in restricted securities
only when it receives the issuer's commitment to register the securities without
expense to the Fund. However, registration and underwriting expenses (which
typically may range from 7% to 15% of the gross proceeds of the securities sold)
may be paid by the Fund. Restricted securities which can be offered and sold to
qualified institutional buyers under Rule 144A under the 1933 Act ("144A
Securities") and are determined to be liquid under guidelines adopted by and
subject to the supervision of the Fund's Board of Trustees are not subject to
the limitation on illiquid securities. 144A Securities initially deemed liquid
are subject to monitoring and may become illiquid to the

B-12
<PAGE> 37

extent qualified institutional buyers become, for a time, uninterested in
purchasing such securities. Factors used to determine whether 144A Securities
are liquid include, among other things, a security's trading history, the
availability of reliable pricing information, the number of dealers making
quotes or making a market in such security and the number of potential
purchasers in the market for such security.

INVESTMENT COMPANY SECURITIES

The Fund may invest in securities of other open-end or closed-end
investment companies, by purchase in the open market involving only customary
brokers' commissions or in connection with mergers, acquisitions of assets or
consolidations or as may otherwise be permitted by the 1940 Act.

Some emerging market countries have laws and regulations that currently
preclude direct foreign investment in the securities of their companies.
However, indirect foreign investment in the securities of companies listed and
traded on the stock exchanges in these countries is permitted by certain
emerging market countries through investment funds which have been specifically
authorized. The Fund may invest in these investment funds, including those
advised by the Adviser or its affiliates, subject to applicable provisions of
the 1940 Act, and other applicable laws.

If the Fund invests in such investment companies or investment funds, the
Fund's shareholders will bear not only their proportionate share of the expenses
of the Fund (including operating expenses and the fees of the Adviser), but also
will indirectly bear similar expenses of the underlying investment companies or
investment funds.

REPURCHASE AGREEMENTS

The Fund may engage in repurchase agreements with broker-dealers, banks or
other financial intermediaries in order to earn a return on temporarily
available cash. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the holding period. Repurchase agreements involve
certain risks in the event of default by the other party. The Fund may enter
into repurchase agreements with broker-dealers, banks or other financial
intermediaries deemed to be creditworthy by the Adviser under guidelines
approved by the Board of Trustees. The Fund will not invest in repurchase
agreements maturing in more than seven days if any such investment, together
with any other illiquid securities held by the Fund, would exceed the Fund's
limitation on illiquid securities described herein. In the event of the
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and losses
including: (a) possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible lack
of access to income on the underlying security during this period; and (c)
expenses of enforcing its rights.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account

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<PAGE> 38

produces efficiencies and economies of scale that may contribute to reduced
transaction costs, higher returns, higher quality investments and greater
diversity of investments for the Fund than would be available to the Fund
investing separately. The manner in which the joint account is managed is
subject to conditions set forth in an exemptive order from the SEC permitting
this practice, which conditions are designed to ensure the fair administration
of the joint account and to protect the amounts in that account.

Repurchase agreements are fully collateralized by the underlying securities
and are considered to be loans under the 1940 Act. The Fund pays for such
securities only upon physical delivery or evidence of book entry transfer to the
account of a custodian or bank acting as agent. The seller under a repurchase
agreement will be required to maintain the value of the underlying securities
marked-to-market daily at not less than the repurchase price. The underlying
securities (normally securities of the U.S. government, or its agencies or
instrumentalities) may have maturity dates exceeding one year. The Fund does not
bear the risk of a decline in value of the underlying security unless the seller
defaults under its repurchase obligation.

SECURITIES LENDING

The Fund may lend investment securities to qualified institutional
investors who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, the Fund attempts to increase its net investment income through the
receipt of interest on the loan. Any gain or loss in the market price of the
securities loaned that might occur during the term of the loan would be for the
account of the Fund. The Fund may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, structure and the aggregate amount of such loans are not
inconsistent with the 1940 Act, or the rules and regulations or interpretations
of the SEC thereunder, which currently require that (a) the borrower pledge and
maintain with the Fund collateral consisting of cash, an irrevocable letter of
credit issued by a domestic U.S. bank, or liquid securities having a value at
all times not less than 100% of the value of the securities loaned, including
accrued interest, (b) the borrower add to such collateral whenever the price of
the securities loaned rises (i.e., the borrower "marks to the market" on a daily
basis), (c) the loan be made subject to termination by the Fund at any time, and
(d) the Fund receive reasonable interest on the loan (which may include the Fund
investing any cash collateral in interest bearing short-term investments), any
distributions on the loaned securities and any increase in their market value.
There may be risks of delay in recovery of the securities or even loss of rights
in the collateral should the borrower of the securities fail financially.
However, loans will only be made to borrowers deemed by the Adviser to be of
good standing and when, in the judgment of the Adviser, the consideration which
can be earned currently from such securities loans justifies the attendant risk.
All relevant facts and circumstances, including the creditworthiness of the
broker, dealer or institution, will be considered in making decisions with
respect to the lending of securities, subject to review by the Fund's Board of
Trustees.

At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such fees are set forth in a written contract and approved by the
investment company's Board of

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<PAGE> 39

Trustees. In addition, voting rights may pass with the loaned securities, but if
a material event will occur affecting an investment on loan, the loan must be
called and the securities voted.

PORTFOLIO TURNOVER

The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of the Fund's portfolio securities during such fiscal year. The
turnover rate may vary greatly from year to year as well as within a year. The
Fund's portfolio turnover rate is the lesser of the value of the securities
purchased or securities sold divided by the average value of the securities held
in the Fund's portfolio excluding all securities whose maturities at acquisition
were one year or less.

STRATEGIC TRANSACTIONS

The Fund may, but is not required to, use various Strategic Transactions
(as defined in the prospectuses) to earn income, facilitate portfolio management
and mitigate risks. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur. Although
the Fund's Adviser seeks to use such transactions to further the Fund's
investment objective(s), no assurance can be given that the use of these
transactions will achieve this result.

Futures Contracts. Futures contracts provide for the future sale by one
party and purchase by another party of a specified amount of a specific security
or a specific currency at a specified future time and at a specified price.
Futures contracts, which are standardized as to maturity date and underlying
financial instrument, index or currency, traded in the United States are traded
on national futures exchanges. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC"),
a U.S. government agency. Although futures contracts by their terms call for
actual delivery or acceptance of the underlying securities or currencies, in
most cases the contracts are closed out before the settlement date without the
making or taking of delivery. Closing out an open futures position is done by
taking an opposite position ("buying" a contract which has previously been
"sold" or "selling" a contract previously "purchased") in an identical contract
to terminate the position. Brokerage commissions are incurred when a futures
contract is bought or sold.

The Fund may sell indexed financial futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of
securities in its portfolio that might otherwise result. An index futures
contract is an agreement to take or make delivery of an amount of cash equal to
the difference between the value of the index at the beginning and at the end of
the contract period. Successful use of index futures will be subject to the
Adviser's ability to predict correctly movements in the direction of the
relevant securities market. No assurance can be given that the Adviser's
judgment in this respect will be correct.

The Fund may purchase indexed financial futures contracts in anticipation
of or during a market advance to attempt to capture the increase in market value
of securities not currently held in its portfolio. For example, if the Adviser
believes that a portion of the Fund's assets should be invested in emerging
market country securities but such

B-15
<PAGE> 40

investments have not been fully made and the Adviser anticipates a significant
market advance, the Fund may purchase index futures in order to gain rapid
market exposure that may in part or entirely offset increases in the cost of
securities that it intends to purchase. In a substantial majority of these
transactions, the Fund will purchase such securities upon termination of the
futures position but, under certain market conditions, a futures position may be
terminated without the corresponding purchase of such securities.

Futures traders are required to make a good faith margin deposit in cash or
liquid securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold for prices that
may range upward from less than 5% of the value of the contract being traded.

After a futures contract position is opened, the value of the contract is
marked-to-market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of an
additional "variation" margin will be required. Conversely, a change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.

Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the underlying securities with futures contracts that they trade, and use
futures contracts with the expectation of realizing profits from market
fluctuations.

Regulations of the CFTC applicable to the Fund require generally that all
futures transactions constitute bona fide hedging transactions. The Fund may
engage in futures transactions for other purposes so long as the aggregate
initial margin and premiums required for such transaction will not exceed 5% of
the liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into.

Although techniques other than the sale and purchase of futures contracts
could be used to control the Fund's exposure to market fluctuations, the use of
futures contracts may be a more effective means of hedging this exposure. While
the Fund will incur commission expenses in both opening and closing out futures
positions, these costs are lower than transaction costs incurred in the purchase
and sale of the underlying securities.

Risk Factors in Futures Transactions. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the Fund would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet its daily margin

B-16
<PAGE> 41

requirement at a time when it may be disadvantageous to do so. In addition, the
Fund may be required to make delivery of the instruments underlying futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on the Fund's ability to effectively hedge.

The Fund will minimize the risk that they will be unable to close out a
futures contract by generally entering into futures which are traded on
recognized international or national futures exchanges and for which there
appears to be a liquid secondary market, however, the Fund may enter into
over-the-counter futures transactions to the extent permitted by applicable law.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if, at the time of
purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. The Fund would presumably have
sustained comparable losses if, instead of the futures contract, the Fund had
invested in the underlying security or currency and sold it after the decline.

Utilization of futures transactions by the Fund does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the underlying portfolio securities or
currencies. It is also possible that the Fund could both lose money on futures
contracts and also experience a decline in value of its portfolio securities.
There is also the risk of loss by the Fund of margin deposits in the event of
bankruptcy of a broker with whom the Fund has an open position in a futures
contract or related option.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.

Options Transactions. The Fund may write (i.e., sell) covered call options
which give the purchaser the right to buy the underlying security covered by the
option from the Fund at the stated exercise price. A "covered" call option means
that so long as the Fund is obligated as the writer of the option, it will own
(i) the underlying securities subject to the option, or (ii) securities
convertible or exchangeable without the payment of any consideration into the
securities subject to the option.

B-17
<PAGE> 42

The Fund will receive a premium from writing call options, which increases
the Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. By writing a call, the Fund will limit
its opportunity to profit from an increase in the market value of the underlying
security above the exercise price of the option for as long as the Fund's
obligation as writer of the option continues. Thus, in some periods the Fund
will receive less total return and in other periods greater total return from
writing covered call options than it would have received from its underlying
securities had it not written call options.

The Fund may sell put options to receive the premiums paid by purchasers
and to close out a long put option position. In addition, when the Adviser
wishes to purchase a security at a price lower than its current market price,
the Fund may write a covered put at an exercise price reflecting the lower
purchase price sought.

The Fund may purchase call options to close out a covered call position or
to protect against an increase in the price of a security it anticipates
purchasing. The Fund may purchase put options on securities which it holds in
its portfolio to protect itself against a decline in the value of the security.
If the value of the underlying security were to fall below the exercise price of
the put purchased in an amount greater than the premium paid for the option, the
Fund would incur no additional loss. The Fund may also purchase put options to
close out written put positions in a manner similar to call option closing
purchase transactions. There are no other limits on the Fund's ability to
purchase call and put options.

Unless the parties provide for it, there is no central clearing or guaranty
function in an over-the-counter option ("OTC Option"). As a result, if the
counterparty fails to make or take delivery of the security, currency or other
instrument underlying an OTC Option it has entered into with the Fund or fails
to make a cash settlement payment due in accordance with the terms of that
option, the Fund will lose any premium it paid for the option as well as any
anticipated benefit of the transaction. Accordingly, the Adviser must assess the
creditworthiness of each such counterparty or any guarantor of credit
enhancement of the counterparty's credit to determine the likelihood that the
terms of the OTC Options will be satisfied. The staff of the SEC currently takes
the position that OTC Options purchased by the Fund or sold by it (the cost of
the sell-back plus the in-the-money amount, if any) are illiquid unless the Fund
has entered into a special arrangement to dispose of the security, and are
subject to the Fund's limitation on investing in illiquid securities.

Investments in options involve some of the same considerations that are
involved in connection with investments in futures contracts (e.g., the
existence of a liquid secondary market). In addition, the purchase of an option
also entails the risk that changes in the value of the underlying security or
contract will not be fully reflected in the value of the option purchased.
Depending on the pricing of the option compared to either the futures contract
or securities, an option may or may not be less risky than ownership of the
futures contract or actual securities. In general, the market prices of options
can be expected to be more volatile than the market prices on the underlying
futures contract or securities. In the opinion of the Adviser, the risk that the
Fund will be unable to close out an options contract will be minimized by only
entering into options transactions for which there appears to be a liquid
secondary market.

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<PAGE> 43

Options on Foreign Currencies. The Fund may attempt to accomplish
objectives similar to those described herein with respect to forward foreign
currency exchange contracts and futures contracts for currency by means of
purchasing put or call options on foreign currencies on exchanges. A put option
gives the Fund the right to sell a currency at the exercise price until the
expiration of the option. A call option gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option.

The Fund may purchase and write options on foreign currencies in a manner
similar to that in which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the dollar value of a
foreign currency in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminution in the value of
portfolio securities, the Fund may purchase put options on the foreign currency.
If the value of the currency does decline, the Fund will have the right to sell
such currency for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on their portfolios which otherwise would have
resulted. Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund derived from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Fund could sustain losses on transactions in
foreign currency options which would require them to forego a portion or all of
the benefits of advantageous changes in such rates.

The Fund may write options on foreign currencies for the same purposes. For
example, where the Fund anticipates a decline in the dollar value of foreign
currency denominated securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put option, write a call option on the relevant
currency. If the anticipated decline occurs, the option will most likely not be
exercised, and the diminution in value of portfolio securities will be offset by
the amount of the premium received. Similarly, instead of purchasing a call
option to hedge against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant currency
which, if rates move in the manner projected, will expire unexercised and allow
the portfolio to hedge such increased cost up to the amount of the premium. As
in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the Fund would be required to purchase or
sell the underlying currency at a loss which may not be offset by the amount of
the premium. Through the writing of options on foreign currencies, the Fund also
may be required to forego all or a portion of the benefits which might otherwise
have been obtained from favorable movements in exchange rates.

Call options on foreign currencies written by the Fund must be "covered". A
call option written on a foreign currency by the portfolio is "covered" if the
Fund owns the underlying foreign currency covered by the call, an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by the Custodian) or upon conversion or

B-19
<PAGE> 44

exchange of other foreign currency held in its portfolio. A written call option
is also covered if the Fund has a call on the same foreign currency and in the
same principal amount as the call written where the exercise price of the call
held (a) is equal to or less than the exercise price of the call written or (b)
is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash or other liquid securities in a segregated
account with the custodian, or (c) maintains in a segregated account cash or
other liquid securities in an amount not less than the value of the underlying
foreign currency in U.S. dollars, marked-to-market daily.

The Fund may also write call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for cross-hedging
purposes if it is designed to provide a hedge against a decline in the U.S.
dollar value of a security which the portfolio owns or has the right to acquire
due to an adverse change in the exchange rate and which is denominated in the
currency underlying the option. In such circumstances, the Fund will either
"cover" the transaction as described above or collateralize the option by
maintaining in a segregated account with the Fund's custodian, cash or other
liquid securities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.

Caps, Floors and Collars. The Fund may invest in caps, floors and collars,
which are instruments analogous to options transactions described above. In
particular, a cap is the right to receive the excess of a reference rate over a
given rate and is analogous to a put option. A floor is the right to receive the
excess of a given rate over a reference rate and is analogous to a call option.
Finally, a collar is an instrument that combines a cap and a floor. That is, the
buyer of a collar buys a cap and writes a floor, and the writer of a collar
writes a cap and buys a floor. The risks associated with caps, floors and
collars are similar to those associated with options. In addition, caps, floors
and collars are subject to risk of default by the counterparty because they are
privately negotiated instruments.

Combined Transactions. The Fund may enter into multiples of the forwards,
futures and options transactions described above, including multiple options
transactions, multiple futures transactions, multiple foreign currency
transactions (including forward foreign currency exchange contracts) and any
combination of futures, options and foreign currency transactions, instead of a
single transaction, as part of a single portfolio management or hedging strategy
when, in the opinion of the Adviser, it is in the best interest of the Fund to
do so. A combined transaction, while part of a single strategy, may contain
elements of risk that are present in each of its component transactions and will
be structured in accordance with applicable SEC regulations and SEC staff
guidelines.

Risks of Options on Futures Contracts, Forward Contracts and Options on
Foreign Currencies. Options on foreign currencies and forward contracts are not
traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchase of an option cannot

B-20
<PAGE> 45

lose more than the amount of the premium plus related transaction costs, this
entire amount could be lost. Moreover, the option writer and a trader of forward
contracts could lose amounts substantially in excess of their initial
investments.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the OCC, thereby reducing the risk of
counterparty default. Furthermore, a liquid secondary market in options traded
on a national securities exchange may be more readily available than in the
over-the-counter market, potentially permitting the Fund to liquidate open
positions at a profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options of foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.

In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decision, (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during non
business hours in the United States, (iv) the imposition of different exercise
and settlement terms and procedures and margin requirements than in the United
States, and (v) lesser trading volume.

Swap Contracts. A swap contract is an agreement to exchange the return
generated by one instrument for the return generated by another instrument. The
payment streams are calculated by reference to a specified index and agreed upon
notional amount. The term "specified index" may include, but is not limited to,
currencies, fixed interest rates, prices, total return on interest rate indices,
fixed income indices, stock indices and commodity indices (as well as amounts
derived from arithmetic operations on these indices). For example, the Fund may
agree to swap the return generated by a fixed-income index for the return
generated by a second fixed-income index. The currency swaps in which the Fund
may enter will generally involve an agreement to pay interest streams in one
currency based on a specified index in exchange for receiving interest streams

B-21
<PAGE> 46

denominated in another currency. Such swaps may involve initial and final
exchanges that correspond to the agreed upon notional amount.

The swaps in which the Fund may engage also include rate caps, floors and
collars under which one party pays a single or periodic fixed amount(s) (or
premium), and the other party pays periodic amounts based on the movement of a
specified index. Swaps do not involve the delivery of securities, other
underlying assets, or principal. Accordingly, the risk of loss with respect to
swaps is limited to the net amount of payments that the Fund is contractually
obligated to make. If the other party to a swap defaults, the Fund's risk of
loss consists of the net amount of payments that the Fund is contractually
entitled to receive. Currency swaps usually involve the delivery of the entire
principal value of one designated currency in exchange for the other designated
currency. Therefore, the entire principal value of a currency swap is subject to
the risk that the other party to the swap will default on its contractual
delivery obligations. If there is a default by the counterparty, the Fund may
have contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors, and collars are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. The Fund's obligations under a swap
agreement will be accrued daily (offset against any amounts owing to the
portfolio) and any accrued but unpaid net amounts owed to a swap counterparty
will be covered by the maintenance of a segregated account consisting of cash or
liquid securities, to avoid any potential leveraging of the Fund. To the extent
that these swaps, caps, floors, and collars are entered into for hedging
purposes, the Adviser believes such obligations do not constitute "senior
securities" under the 1940 Act and, accordingly, will not treat them as being
subject to the Fund's borrowing restrictions. The Fund may enter into OTC
derivatives transactions (swaps, caps, floors, puts, etc., but excluding foreign
exchange contracts) with counterparties that are approved by the Adviser in
accordance with guidelines established by the Board of Trustees. These
guidelines provide for a minimum credit rating for each counterparty and various
credit enhancement techniques (for example, collateralization of amounts due
from counterparties) to limit exposure to counterparties with ratings below AA.

The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Adviser is incorrect in its forecasts of market
values, interest rates, and currency exchange rates, the investment performance
of the portfolio would be less favorable than it would have been if this
investment technique were not used.

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental investment restrictions
which may not be changed without approval by the vote of a majority of its
outstanding voting securities which is defined by the 1940 Act as the lesser of
(i) 67% or more of the voting

B-22
<PAGE> 47

securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy;
or (ii) more than 50% of the Fund's outstanding voting securities. The
percentage limitations contained in the restrictions and policies set forth
herein apply at the time of purchase of securities. With respect to the
limitation on borrowings, the percentage limitations apply at the time of
purchase and on an ongoing basis. These restrictions provide that the Fund shall
not:

1. Invest in a manner inconsistent with its classification as a
"diversified company" as provided by (i) the 1940 Act, as amended from
time to time, (ii) the rules and regulations promulgated by the SEC
under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief applicable to the Funds from the provisions of the 1940
Act, as amended from time to time.

2. Issue senior securities nor borrow money, except the Fund may issue
senior securities or borrow money to the extent permitted by (i) the
1940 Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to time,
or (iii) an exemption or other relief applicable to the Fund from the
provisions of the 1940 Act, as amended from time to time.

3. Act as an underwriter of securities issued by others, except to the
extent that, in connection with the disposition of portfolio securities,
it may be deemed to be an underwriter under applicable securities laws.

4. Invest in any security if, as a result, more than 25% of the value of
the Fund's total assets, taken at market value at the time of each
investment, are in the securities of issuers in any particular industry
(excluding securities issued or guaranteed by the U.S. government and
its agencies and instrumentalities or securities of state and municipal
governments or their political subdivisions), or when the Fund has taken
a temporary defensive position, or as otherwise provided by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to time,
or (iii) an exemption or other relief applicable to the Fund from the
provisions of the 1940 Act, as amended from time to time.

5. Purchase or sell real estate except that the Fund may: (a) acquire or
lease office space for its own use, (b) invest in securities of issuers
that invest in real estate or interests therein or that are engaged in
or operate in the real estate industry, (c) invest in securities that
are secured by real estate or interests therein, (d) purchase and sell
mortgage-related securities, (e) hold and sell real estate acquired by
the Fund as a result of the ownership of securities and (f) as otherwise
permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief
applicable to the Fund from the provisions of the 1940 Act, as amended
from time to time.

7. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; provided that this
restriction shall not prohibit the Fund from purchasing or selling
options, futures contracts and related options thereon, forward
contracts, swaps, caps, floors, collars and any other financial
instruments or from investing in securities or other instruments backed
by physical

B-23
<PAGE> 48

commodities or as otherwise permitted by (i) the 1940 Act, as amended
from time to time, (ii) the rules and regulations promulgated by the SEC
under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief applicable to the Fund from the provisions of the 1940
Act, as amended from time to time.

8. Make loans of money or property to any person, except (a) to the extent
that securities or interests in which the Fund may invest are considered
to be loans, (b) through the loan of portfolio securities, (c) to the
extent that the Fund may lend money or property in connection with the
maintenance of the value of, or the Fund's interest with respect to, the
securities owned by the Fund, (d) by engaging in repurchase agreements
or (e) as may otherwise be permitted by (i) the 1940 Act, as amended
from time to time, (ii) the rules and regulations promulgated by the SEC
under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief applicable to the Fund from the provisions of the 1940
Act, as amended from time to time.

B-24
<PAGE> 49

TRUSTEES AND OFFICERS

The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and officers of the Fund and
executive officers of the Fund's investment adviser and their principal
occupations for the last five years and their affiliations, if any, with Van
Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment
Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset
Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Inc., Van Kampen Insurance Agency of Illinois Inc.,
Van Kampen Insurance Agency of Texas Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company, Van Kampen Exchange Corp. and Van Kampen Investor Services
Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are
referred to herein collectively as the "Advisers". For purposes hereof, the term
"Fund Complex" includes each of the open-end investment companies advised by the
Advisers (excluding Van Kampen Exchange Fund).

TRUSTEES

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder,
Raleigh, NC 27614 and prior to August 1996, Chairman, Chief
Date of Birth: 07/14/32 Executive Officer and President, MDT
Corporation (now known as Getinge/Castle,
Inc., a subsidiary of Getinge Industrier AB),
a company which develops, manufactures,
markets and services medical and scientific
equipment.

Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
Barrington Place, Building 4 company. Trustee/Director of each of the
18 E. Dundee Road, Suite 101 funds in the Fund Complex. Prior to January
Barrington, IL 60010 1999, Chairman and Chief Executive Officer of
Date of Birth: 09/16/38 The Allstate Corporation ("Allstate") and
Allstate Insurance Company. Prior to January
1995, President and Chief Executive Officer
of Allstate. Prior to August 1994, Mr. Choate
held various management positions at
Allstate.

Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Trustee/Director of
233 South Wacker Drive each of the funds in the Fund Complex. Prior
Suite 7000 to 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management
Date of Birth: 06/03/48 consulting firm. Formerly, Executive Vice
President of ABN AMRO, N.A., a Dutch bank
holding company. Prior to 1992, Executive
Vice President of La Salle National Bank.
Trustee on the University of Chicago
Hospitals Board, Vice Chair of the Board of
The YMCA of Metropolitan Chicago and a member
of the Women's Board of the University of
Chicago. Prior to 1996, Trustee of The
International House Board.
</TABLE>

B-25
<PAGE> 50

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
R. Craig Kennedy.......................... President and Director, German Marshall Fund
11 DuPont Circle, N.W. of the United States, an independent U.S.
Washington, D.C. 20016 foundation created to deepen understanding,
Date of Birth: 02/29/52 promote collaboration and stimulate exchanges
of practical experience between Americans and
Europeans. Trustee/Director of each of the
funds in the Fund Complex. Formerly, advisor
to the Dennis Trading Group Inc, a managed
futures and option company that invests money
for individuals and institutions. Prior to
1992, President and Chief Executive Officer,
Director and Member of the Investment
Committee of the Joyce Foundation, a private
foundation.

Mitchell M. Merin*........................ President and Chief Operating Officer of
Two World Trade Center Asset Management of Morgan Stanley Dean
66th Floor Witter since December 1998. President and
New York, NY 10048 Director since April 1997 and Chief Executive
Date of Birth: 08/13/53 Officer since June 1998 of Morgan Stanley
Dean Witter Advisors Inc. and Morgan Stanley
Dean Witter Services Company Inc. Chairman,
Chief Executive Officer and Director of
Morgan Stanley Dean Witter Distributors Inc.
since June 1998. Chairman and Chief Executive
Officer since June 1998, and Director since
January 1998, of Morgan Stanley Dean Witter
Trust FSB. Director of various Morgan Stanley
Dean Witter subsidiaries. President of the
Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series since May 1999.
Trustee of each of the funds in the Fund
Complex, and Vice President of other
investment companies advised by the Advisers
and their affiliates. Previously Chief
Strategic Officer of Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean
Witter Services Company Inc. and Executive
Vice President of Morgan Stanley Dean Witter
Distributors Inc. April 1997-June 1998, Vice
President of the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series May
1997-April 1999, and Executive Vice President
of Dean Witter, Discover & Co.

Jack E. Nelson............................ President and owner, Nelson Investment
423 Country Club Drive Planning Services, Inc., a financial planning
Winter Park, FL 32789 company and registered investment adviser in
Date of Birth: 02/13/36 the State of Florida. President and owner,
Nelson Ivest Brokerage Services Inc., a
member of the National Association of
Securities Dealers, Inc. and Securities
Investors Protection Corp. Trustee/Director
of each of the funds in the Fund Complex.
</TABLE>

B-26
<PAGE> 51

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Richard F. Powers, III*................... Chairman, President and Chief Executive
1 Parkview Plaza Officer of Van Kampen Investments. Chairman,
P.O. Box 5555 Director and Chief Executive Officer of the
Oakbrook Terrace, IL 60181-5555 Advisers, the Distributor, Van Kampen
Date of Birth: 02/02/46 Advisors Inc. and Van Kampen Management Inc.
Director and officer of certain other
subsidiaries of Van Kampen Investments.
Trustee and President of each of the funds in
the Fund Complex. Trustee, President and
Chairman of the Board of other investment
companies advised by the Advisers and their
affiliates, and Chief Executive Officer of
Van Kampen Exchange Fund. Prior to May 1998,
Executive Vice President and Director of
Marketing at Morgan Stanley Dean Witter and
Director of Dean Witter Discover & Co. and
Dean Witter Realty. Prior to 1996, Director
of Dean Witter Reynolds Inc.

Phillip B. Rooney......................... Vice Chairman (since April 1997) and Director
One ServiceMaster Way (since 1994) of The ServiceMaster Company, a
Downers Grove, IL 60515 business and consumer services company.
Date of Birth: 07/08/44 Director of Illinois Tool Works, Inc., a
manufacturing company and the Urban Shopping
Centers Inc., a retail mall management
company. Trustee, University of Notre Dame.
Trustee/Director of each of the funds in the
Fund Complex. Prior to 1998, Director of
Stone Smurfit Container Corp., a paper
manufacturing company. From May 1996 through
February 1997 he was President, Chief
Executive Officer and Chief Operating Officer
of Waste Management, Inc., an environmental
services company, and from November 1984
through May 1996 he was President and Chief
Operating Officer of Waste Management, Inc.

Fernando Sisto............................ Professor Emeritus. Prior to August 1996, a
155 Hickory Lane George M. Bond Chaired Professor with Stevens
Closter, NJ 07624 Institute of Technology, and prior to 1995,
Date of Birth: 08/02/24 Dean of the Graduate School, Stevens
Institute of Technology. Director, Dynalysis
of Princeton, a firm engaged in engineering
research. Trustee/Director of each of the
funds in the Fund Complex.

Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the funds in the Fund Complex, and
Date of Birth: 08/22/39 other investment companies advised by the
Advisers or Van Kampen Management Inc.
Trustee/Director of each of the funds in the
Fund Complex, and Trustee/Managing General
Partner of other investment companies advised
by the Advisers or Van Kampen Management Inc.
</TABLE>

B-27
<PAGE> 52

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Suzanne H. Woolsey........................ Chief Operating Officer of the National
2101 Constitution Ave., N.W. Academy of Sciences/National Research
Room 206 Council, an independent, federally chartered
Washington, D.C. 20418 policy institution, since 1993. Director of
Date of Birth: 12/27/41 Neurogen Corporation, a pharmaceutical
company, since January 1998. Director of the
German Marshall Fund of the United States,
Trustee of Colorado College, and Vice Chair
of the Board of the Council for Excellence in
Government. Trustee/Director of each of the
funds in the Fund Complex. Prior to 1993,
Executive Director of the Commission on
Behavioral and Social Sciences and Education
at the National Academy of Sciences/National
Research Council. From 1980 through 1989,
Partner of Coopers & Lybrand.

Paul G. Yovovich.......................... Private investor. Director of 3Com
Sears Tower Corporation, which provides information
233 South Wacker Drive access products and network system solutions,
Suite 9700 COMARCO, Inc., a wireless communications
Chicago, IL 60606 products company and APAC Customer Services,
Date of Birth: 10/29/53 Inc., a provider of outsourced customer
contact services. Trustee/Director of each of
the funds in the Fund Complex. Prior to May
1996, President of Advance Ross Corporation,
an international transaction services and
pollution control equipment manufacturing
company.
</TABLE>

- ------------------------------------

* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. Merin and
Powers are interested persons of the Fund and the Advisers by reason of their
positions with Morgan Stanley Dean Witter or its affiliates.

B-28
<PAGE> 53

OFFICERS

Messrs. McDonnell, Smith, Santo, Hegel, Sullivan and Wood, are located at 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL 60181-5555. The Fund's other
officers are located at 2800 Post Oak Blvd., Houston, TX 77056.

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Dennis J. McDonnell.................. Currently Executive Vice President and Director
Date of Birth: 05/20/42 of Van Kampen Investments, and employed by Van
Executive Vice President and Chief Kampen Investments since March 1983. President,
Investment Officer Chief Operating Officer and Director of the
Advisers, Van Kampen Advisors Inc., and Van
Kampen Management Inc. Executive Vice President
and Chief Investment Officer of each of the funds
in the Fund Complex, since 1998. Chief Investment
Officer, Executive Vice President and
Trustee/Managing General Partner of other
investment companies advised by the Advisers or
Van Kampen Management Inc. ("Management Inc."),
since the inception of funds advised by Advisory
Corp. and Management Inc. and since 1998 for
funds advised by Asset Management. Director of
Global Decisions Group LLC, a financial research
firm, and its affiliates MCM Asia Pacific and MCM
Europe. Prior to 1998, President, Chief Operating
Officer and a Director of the Advisers, Van
Kampen American Capital Management, Inc.;
Director of Van Kampen American Capital, Inc.;
and President, Chief Executive Officer and
Trustee of each of the funds advised by Advisory
Corp. Prior to July 1998, Director and Executive
Vice President of VK/AC Holding, Inc.
(predecessor of Van Kampen Investments). Prior to
April 1998, President and Director of Van Kampen
Merritt Equity Advisors Corp. Prior to April
1997, Director of Van Kampen Merritt Equity
Holdings Corp. Prior to September 1996, Chief
Executive Officer and Director of MCM Group, Inc.
and McCarthy, Crisanti & Maffei, Inc., a
financial research firm, and Chairman of MCM Asia
Pacific Company, Limited and MCM (Europe)
Limited. Prior to December 1991, Senior Vice
President of Van Kampen Merritt Inc.
</TABLE>

B-29
<PAGE> 54

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
A. Thomas Smith III.................. Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Secretary and Director of Van Kampen Investments,
Vice President and Secretary the Advisers, Van Kampen Advisors Inc., Van
Kampen Management Inc., the Distributor, American
Capital Contractual Services, Inc., Van Kampen
Exchange Corp., Van Kampen Recordkeeping Services
Inc., Investor Services, Van Kampen Insurance
Agency of Illinois Inc. and Van Kampen System
Inc. Vice President and Secretary/Vice President,
Principal Legal Officer and Secretary of other
investment companies advised by the Advisers or
their affiliates. Vice President and Secretary of
each of the funds in the Fund Complex. Prior to
January 1999, Vice President and Associate
General Counsel to New York Life Insurance
Company ("New York Life"), and prior to March
1997, Associate General Counsel of New York Life.
Prior to December 1993, Assistant General Counsel
of The Dreyfus Corporation. Prior to August 1991,
Senior Associate, Willkie Farr & Gallagher. Prior
to January 1989, Staff Attorney at the Securities
and Exchange Commission, Division of Investment
Management, Office of Chief Counsel.

Michael H. Santo..................... Executive Vice President, Chief Operations and
Date of Birth: 10/22/55 Technology Officer and Director of Van Kampen
Vice President Investments, the Advisers, the Distributor, Van
Kampen Advisors Inc., Van Kampen Management Inc.
and Van Kampen Investor Services Inc., and serves
as a Director or officer of certain other
subsidiaries of Van Kampen Investments. Vice
President of each of the funds in the Fund
Complex and certain other investment companies
advised by the Advisers and their affiliates.
Prior to 1998, Senior Vice President and Senior
Planning Officer for Individual Asset Management
of Morgan Stanley Dean Witter and its predecessor
since 1994. From 1990-1994 First Vice President
and Assistant Controller in Dean Witter's
Controller's Department.

Peter W. Hegel....................... Executive Vice President of the Advisers, Van
Date of Birth: 06/25/56 Kampen Management Inc. and Van Kampen Advisors
Vice President Inc. Vice President of each of the funds in the
Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates. Prior to September 1996, Director of
McCarthy, Crisanti & Maffei, Inc, a financial
research company.
</TABLE>

B-30
<PAGE> 55

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Stephen L. Boyd...................... Vice President and Chief Investment Officer for
Date of Birth: 11/16/40 Equity Investments of the Advisers. Vice
Vice President President of each of the funds in the Fund
Complex and certain other investment companies
advised by the Advisers or their affiliates.
Prior to October 1998, Vice President and Senior
Portfolio Manager with AIM Capital Management,
Inc. Prior to February 1998, Senior Vice
President of Van Kampen American Capital Asset
Management, Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American
Capital Management, Inc.

John L. Sullivan..................... Senior Vice President of Van Kampen Investments
Date of Birth: 08/20/55 and the Advisers. Vice President, Chief Financial
Vice President, Chief Financial Officer and Treasurer of each of the funds in the
Officer and Treasurer Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.

Curtis W. Morell..................... Senior Vice President of the Advisers, Vice
Date of Birth: 08/04/46 President and Chief Accounting Officer of each of
Vice President and Chief Accounting the funds in the Fund Complex and certain other
Officer investment companies advised by the Advisers or
their affiliates.

Edward C. Wood III................... Senior Vice President of the Advisers, Van Kampen
Date of Birth: 01/11/56 Investments and Van Kampen Management Inc. Senior
Vice President Vice President and Chief Operating Officer of the
Distributor. Vice President of each of the funds
in the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.

Tanya M. Loden....................... Vice President of Van Kampen Investments and the
Date of Birth: 11/19/59 Advisers. Controller of each of the funds in the
Controller Fund Complex and other investment companies
advised by the Advisers or their affiliates.
</TABLE>

Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 65 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated person of Van Kampen Investments, the Advisers or the Distributor
(each a "Non-Affiliated Trustee") is compensated by an annual retainer and
meeting fees for services to the funds in the Fund Complex. Each fund in the
Fund Complex provides a deferred compensation plan to its Non-Affiliated
Trustees that allows trustees/directors to defer receipt of their compensation
and earn a return on such deferred amounts. Deferring compensation has the
economic effect as if the Non-Affiliated Trustee reinvested his or her
compensation into the funds. Each fund in the Fund Complex provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.

B-31
<PAGE> 56

The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex on the basis of the
relative net assets of each fund as of the last business day of the preceding
calendar quarter. The compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex in the amount of $200 per
quarterly or special meeting attended by the Non-Affiliated Trustee, due on the
date of the meeting, plus reasonable expenses incurred by the Non-Affiliated
Trustee in connection with his or her services as a trustee, provided that no
compensation will be paid in connection with certain telephonic special
meetings.

Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to the return on the
common shares of such Fund or other funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.

Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from such Fund. Each
trustee/director has served as a member of the Board of Trustees of the Fund
since he or she was first appointed or elected in the year set forth below. The
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.

B-32
<PAGE> 57

Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.

COMPENSATION TABLE

<TABLE>
<CAPTION>
Fund Complex
-----------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Aggregate Retirement Annual Compensation
Compensation Benefits Benefits from before
before Accrued as the Fund Deferral from
Deferral from Part of Upon Fund
Name(1) the Trust(2) Expenses(3) Retirement(4) Complex(5)
------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
J. Miles Branagan $ (2) $35,691 $60,000 $125,200
Jerry D. Choate(1) (2) 0 60,000 0
Linda Hutton Heagy (2) 3,861 60,000 112,800
R. Craig Kennedy (2) 2,652 60,000 125,200
Jack E. Nelson (2) 18,385 60,000 125,200
Phillip B. Rooney (2) 6,002 60,000 125,200
Fernando Sisto (2) 68,615 60,000 125,200
Wayne W. Whalen (2) 12,658 60,000 125,200
Suzanne H. Woolsey(1) (2) 0 60,000 0
Paul G. Yovovich(1) (2) 0 60,000 25,300
</TABLE>

- ------------------------------------

(1) Trustees not eligible for compensation are not included in the Compensation
Table. Mr. Yovovich became a member of the Board of Trustees for the Fund
and other funds in the Fund Complex on October 22, 1998 and therefore does
not have a full year of information to report. Mr. Choate and Ms. Woolsey
became members of the Board of Trustees for the Fund and other funds in the
Fund Complex on May 26, 1999 and therefore do not have a full year
information to report.

(2) For the Fund's first fiscal year, the estimated aggregate compensation from
the Fund per trustee is anticipated to be approximately $1,000-$2,000. The
trustees may defer compensation from the Fund. Amounts deferred are retained
by the Fund and earn a rate of return determined by reference to either the
return on the common shares of the Fund or other funds in the Fund Complex
as selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds
in the Fund Complex. To the extent permitted by the 1940 Act, each Fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match the deferred compensation obligation.

(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the trustees for the Funds' respective fiscal years ended in
1998.

(4) For each trustee, this is the sum of the estimated maximum annual benefits
payable by the funds in the Fund Complex for each year of the 10-year period
commencing in the year of such trustee's anticipated retirement. The
Retirement Plan is described above the Compensation Table.

B-33
<PAGE> 58

(5) The amounts shown in this column represent the aggregate compensation paid
by all funds in the Fund Complex as of December 31, 1998 before deferral by
the trustees under the deferred compensation plan. Because the funds in the
Fund Complex have different fiscal year ends, the amounts shown in this
column are presented on a calendar year basis. Certain trustees deferred all
or a portion of their aggregate compensation from the Fund Complex during
the calendar year ended December 31, 1998. The deferred compensation earns a
rate of return determined by reference to the return on the shares of the
funds in the Fund Complex as selected by the respective Non-Affiliated
Trustee, with the same economic effect as if such Non-Affiliated Trustee had
invested in one or more funds in the Fund Complex. To the extent permitted
by the 1940 Act, the Fund may invest in securities of those investment
companies selected by the Non-Affiliated Trustees in order to match the
deferred compensation obligation. The Advisers and their affiliates also
serve as investment adviser for other investment companies; however, with
the exception of Mr. Whalen, the Non-Affiliated Trustees were not trustees
of such investment companies. Combining the Fund Complex with other
investment companies advised by the Advisers and their affiliates, Mr.
Whalen received Total Compensation of $285,825 during the calendar year
ended December 31, 1998.

As of the date of this Statement of Additional Information, no trustees or
officers of the Fund owned shares of the Fund.

INVESTMENT ADVISORY AGREEMENT

The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate and
implement the Fund's investment objectives. The Adviser also furnishes offices,
necessary facilities and equipment, provides administrative services, and
permits its officers and employees to serve without compensation as trustees of
the Trust or officers of the Fund if elected to such positions. The Fund pays
all charges and expenses of its day-to-day operations, including the
compensation of trustees of the Trust (other than those who are affiliated
persons of the Adviser, Distributor or Van Kampen Investments), the cost of the
Fund's accounting services, including the compensation of the Fund's treasurer
and other accounting personnel, the charges and expenses of legal counsel and
independent accountants, distribution fees, service fees, custodian fees, the
costs of providing reports to shareholders, and all other ordinary business
expenses not specifically assumed by the Adviser. The Advisory Agreement also
provides that the Adviser shall not be liable to the Fund for any actions or
omissions if it acted without willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations.

Under the Advisory Agreement, the Fund pays to the Adviser, as compensation
for the services rendered, facilities furnished, and expenses paid by it, a
monthly fee computed based upon an annual rate applied to the average daily net
assets of the Fund as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
------------------------ -----------
<S> <C>
</TABLE>

B-34
<PAGE> 59

The Fund's average daily net assets are determined by taking the average of
all of the determinations of the net assets during a given calendar month. Such
fee is payable for each calendar month as soon as practicable after the end of
that month.

The Advisory Agreement also provides that, in the event the expenses of the
Fund for any fiscal year exceed the most restrictive expense limitation
applicable in the states where the Fund's shares are qualified for sale, the
compensation due the Adviser will be reduced by the amount of such excess and
that, if a reduction in and refund of the advisory fee is insufficient, the
Adviser will pay the Fund monthly an amount sufficient to make up the
deficiency, subject to readjustment during the year.

The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Trustees or (ii) by a vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the Trustees who are not parties to the agreement or
interested persons of any such party by votes cast in person at a meeting called
for such purpose. The Advisory Agreement provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party on 60 days' written notice.

MSDWIM is the investment subadviser of the Fund. The Subadviser provides
investment advice and portfolio management services pursuant to investment
subadvisory agreements and, subject to the supervision of the Adviser and the
Fund's Board of Trustees makes the Fund's investment decisions, arranges for the
execution of portfolio transactions and generally manages the Fund's
investments.

The Subadviser is entitled to receive subadvisory fees computed daily and
paid monthly [TO COME]

OTHER AGREEMENTS

Accounting Services Agreement. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
to the Fund, which include, maintaining the books and records of the Fund,
calculating the Fund's net asset value and coordinating tax compliance and other
regulatory issues. The Fund pays all costs and expenses related to such
services, including all salary and related benefits of accounting personnel, as
well as the overhead and expenses of office space and the equipment necessary to
render such services. The Fund shares together with the other Van Kampen funds
in the cost of providing such services with 25% of such costs shared
proportionately based on the respective number of classes of securities issued
per fund and the remaining 75% of such costs based proportionally on their
respective net assets per fund.

Legal Services Agreement. The Fund and each of the other Van Kampen funds
advised by the Adviser and distributed by the Distributor have entered into
legal services agreements pursuant to which Van Kampen Investments provides
legal services, including without limitation: accurate maintenance of the fund's
minute books and records, preparation and oversight of the fund's regulatory
reports, and other information provided to shareholders, as well as responding
to day-to-day legal issues on behalf of the funds. Payment by the Funds for such
services is made on a cost basis for the salary and salary related benefits,
including but not limited to bonuses, group insurance and other regular

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wages for the employment of personnel, as well as overhead and the expenses
related to the office space and the equipment necessary to render the legal
services. Other funds distributed by the Distributor also receive legal services
from Van Kampen Investments. Of the total costs for legal services provided to
funds distributed by the Distributor, one half of such costs are allocated
equally to each fund and the remaining one half of such costs are allocated to
specific funds based on monthly time records.

DISTRIBUTION AND SERVICE

The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers on a continuous basis. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of the Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain other costs including the cost of
supplemental sales literature and advertising. The Distribution and Service
Agreement is renewable from year to year if approved (a)(i) by the Fund's
Trustees or (ii) by a vote of a majority of the Fund's outstanding voting
securities and (b) by the affirmative vote of a majority of Trustees who are not
parties to the Distribution and Service Agreement or interested persons of any
party, by votes cast in person at a meeting called for such purpose. The
Distribution and Service Agreement provides that it will terminate if assigned,
and that it may be terminated without penalty by either party on 90 days'
written notice.

With respect to sales of Class A Shares of the Fund, the total sales
charges and concessions reallowed to authorized dealers at the time of purchase
are as follows:

CLASS A SHARES SALES CHARGE TABLE

<TABLE>
<CAPTION>
Total Sales Charge
------------------------- Reallowed
As % of As % of Net To Dealers
Size of Offering Amount As a % of
Investment Price Invested Offering Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000........................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............. 3.75% 3.90% 3.00%
$250,000 but less than $500,000............. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........... 2.00% 2.04% 1.75%
$1,000,000 or more.......................... * * *
- ------------------------------------------------------------------------------------------------
</TABLE>

* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund may impose a
contingent deferred sales charge of 1.00% on certain redemptions made within
one year of the purchase. A commission or transaction fee will be paid by the
Distributor at the time of purchase directly out of the Distributor's assets
(and not out of the Fund's assets) to authorized dealers who initiate and are
responsible for purchases of $1 million or more computed based on a percentage
of the dollar value of such shares sold as follows: 1.00% on sales to $2
million, plus 0.80% on the next $1 million and 0.50% on the excess over $3
million.

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<PAGE> 61

With respect to sales of Class B Shares and Class C Shares of the Fund, a
commission or transaction fee generally will be paid by the Distributor at the
time of purchase directly out of the Distributor's assets (and not out of the
Fund's assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 4.00% on Class B Shares and 1.00% on Class C Shares.

Proceeds from any contingent deferred sales charge and any distribution
fees on Class B Shares and Class C Shares of the Fund are paid to the
Distributor and are used by the Distributor to defray its distribution related
expenses in connection with the sale of the Fund's shares, such as the payment
to authorized dealers for selling such shares. With respect to Class C Shares,
the authorized dealers generally are paid the ongoing commission and transaction
fees of up to 0.75% of the average daily net assets of the Fund's Class C Shares
annually commencing in the second year after purchase.

In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any authorized dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the authorized dealer at the public offering price during such programs.
Other programs provide, among other things and subject to certain conditions,
for certain favorable distribution arrangements for shares of the Fund. Also,
the Distributor in its discretion may from time to time, pursuant to objective
criteria established by the Distributor, pay fees to, and sponsor business
seminars for, qualifying authorized dealers for certain services or activities
which are primarily intended to result in sales of shares of the Fund or other
Van Kampen funds. Fees may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its sales of shares and increases in assets under
management. All of the foregoing payments are made by the Distributor out of its
own assets. Such fees paid for such services and activities with respect to the
Fund will not exceed in the aggregate 1.25% of the average total daily net
assets of the Fund on an annual basis. These programs will not change the price
an investor will pay for shares or the amount that a Fund will receive from such
sale.

The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans". The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
respectively. The Distribution Plan and the Service Plan are being implemented
through the Distribution and Service Agreement with the Distributor of each
class of the Fund's shares

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<PAGE> 62

and sub-agreements between the Distributor and members of the NASD who are
acting as securities dealers and NASD members or eligible non-members who are
acting as brokers or agents and similar agreements between the Fund and
financial intermediaries who are acting as brokers (collectively, "Selling
Agreements") that may provide for their customers or clients certain services or
assistance, which may include, but not be limited to, processing purchase and
redemption transactions, establishing and maintaining shareholder accounts
regarding the Fund, and such other services as may be agreed to from time to
time and as may be permitted by applicable statute, rule or regulation. Brokers,
dealers and financial intermediaries that have entered into sub-agreements with
the Distributor and sell shares of the Fund are referred to herein as "financial
intermediaries."

Certain financial intermediaries may be prohibited under law from providing
certain underwriting or distribution services. If a financial intermediary was
prohibited from acting in any capacity or providing any of the described
services, the Distributor would consider what action, if any, would be
appropriate. The Distributor does not believe that termination of a relationship
with a financial intermediary would result in any material adverse consequences
to the Fund.

The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by the disinterested
Trustees. Each of the Plans may be terminated with respect to any class of
shares at any time by a vote of a majority of the disinterested Trustees or by a
vote of a majority of the outstanding voting shares of such class.

The Plans generally provide for the Fund to reimburse the lesser of (i) the
distribution and service fees at the rates specified in the Prospectus or (ii)
the amount of the Distributor's actual expenses incurred less any deferred sales
charges it received. For Class A Shares, to the extent the Distributor is not
fully reimbursed in a given year, there is no carryover of such unreimbursed
amounts to succeeding years. For each of the Class B Shares and Class C Shares,
to the extent the Distributor is not fully reimbursed in a given year, any
unreimbursed expenses for such class will be carried forward and paid by the
Fund in future years so long as such Plans are in effect. Except as mandated by
applicable law, the Fund does not impose any limit with respect to the number of
years into the future that such unreimbursed expenses may be carried forward (on
a Fund level basis). Because such expenses are accounted for on a Fund level
basis, in periods of extreme net asset value fluctuation such amounts with
respect to a particular Class B Share or Class C Share may be greater or less
than the amount of the initial commission (including carrying cost) paid by the
Distributor with respect to such share. In such circumstances, a shareholder of
a share may be deemed to incur expenses attributable to other shareholders of
such class. If the Plans were terminated or not continued, the Fund

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<PAGE> 63

would not be contractually obligated to pay the Distributor for any expenses not
previously reimbursed by the Fund or recovered through contingent deferred sales
charges.

TRANSFER AGENT

The Fund's transfer agent, shareholder service agent and divided disbursing
agent is Van Kampen Investor Services Inc., PO Box 218256, Kansas City, MO
64121-8256. The transfer agency prices are determined through negotiations with
the Fund's Board of Trustees and are based on competitive benchmarks.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of the Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Trustees of the Fund.

The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker/dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser to the Fund and still must be analyzed
and reviewed by its staff, the receipt of research information is not expected
to reduce its expenses materially. The investment advisory fee is not reduced as
a result of the Adviser's receipt of such research services. Services provided
may include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). Research
services furnished by firms through which the Fund effects its securities
transactions may be used by the Adviser in servicing all of its advisory
accounts; not all of such services may be used by the Adviser in connection with
the Fund. The Adviser also may place portfolio transactions, to the extent
permitted by law, with brokerage firms affiliated with the Fund, the Adviser or
the Distributor and with brokerage firms participating in the distribution of
the Fund's shares if it reasonably believes that the quality of execution and
the commission are comparable to that available from other

B-39
<PAGE> 64

qualified firms. Similarly, to the extent permitted by law and subject to the
same considerations on quality of execution and comparable commission rates, the
Adviser may direct an executing broker to pay a portion or all of any
commissions, concessions or discounts to a firm supplying research or other
services or to a firm participating in the distribution of the Fund's shares.

The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for the Fund and another advisory account.
In some cases, this procedure could have an adverse effect on the price or the
amount of securities available to the Fund. In making such allocations among the
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.

Effective October 31, 1996, Morgan Stanley & Co. Incorporated ("Morgan
Stanley") became an affiliate of the Adviser. Effective May 31, 1997, Dean
Witter Reynolds, Inc. ("Dean Witter") became an affiliate of the Adviser. The
Trustees have adopted certain policies incorporating the standards of Rule 17e-1
issued by the SEC under the 1940 Act which requires that the commissions paid to
affiliates of the Fund must be reasonable and fair compared to the commissions,
fees or other remuneration received or to be received by other brokers in
connection with comparable transactions involving similar securities during a
comparable period of time. The rule and procedures also contain review
requirements and require the Adviser to furnish reports to the Trustees and to
maintain records in connection with such reviews. After consideration of all
factors deemed relevant, the Trustees will consider from time to time whether
the advisory fee for the Fund will be reduced by all or a portion of the
brokerage commission given to affiliated brokers.

SHAREHOLDER SERVICES

The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. The following information supplements the section
in the Fund's Prospectus captioned "Shareholder Services."

INVESTMENT ACCOUNT

Each shareholder has an investment account under which the investor's
shares of the Fund are held by Investor Services, the Fund's transfer agent.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in any of the
Participating Funds (as defined in the Prospectus) will receive statements
quarterly from Investor Services showing any reinvestments of dividends and
capital gain dividends and any other activity in the account since the preceding
statement. Such

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<PAGE> 65

shareholders also will receive separate confirmations for each purchase or sale
transaction other than reinvestment of dividends and capital gain dividends and
systematic purchases or redemptions. Additional shares may be purchased at any
time through authorized dealers or by mailing a check directly to Investor
Services.

SHARE CERTIFICATES

Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon an exchange or
redemption of the shares represented by the certificate. In addition, if such
certificates are lost the shareholder must write to Van Kampen Funds Inc., c/o
Investor Services, PO Box 218256, Kansas City, MO 64121-8256, requesting an
"Affidavit of Loss" and obtain a Surety Bond in a form acceptable to Investor
Services. On the date the letter is received, Investor Services will calculate
the fee for replacing the lost certificate equal to no more than 2.00% of the
net asset value of the issued shares, and bill the party to whom the replacement
certificate was mailed.

RETIREMENT PLANS

Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations; or other pension or profit
sharing plans. Documents and forms containing detailed information regarding
these plans are available from the Distributor. Van Kampen Trust Company serves
as custodian under the IRA, 403(b)(7) and Keogh plans. Details regarding fees,
as well as full plan administration for profit sharing, pension and 401(k)
plans, are available from the Distributor.

AUTOMATED CLEARING HOUSE("ACH") DEPOSITS

Holders of Class A Shares can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemptions proceeds transferred to a
bank account via the ACH plan are available to be credited to the account on the
second business day following normal payment. In order to utilize this option,
the shareholder's bank must be a member of ACH. In addition, the shareholder
must fill out the appropriate section of the account application. The
shareholder must also include a voided check or deposit slip from the bank
account into which redemption proceeds are to be deposited together with the
completed application. Once Investor Services has received the application and
the voided check or deposit slip, such shareholder's designated bank account,
following any redemption, will be credited with the proceeds of such redemption.
Once enrolled in the ACH plan, a shareholder may terminate participation at any
time by writing Investor Services.

DIVIDEND DIVERSIFICATION

A shareholder may upon written request, or by completing the appropriate
section of the application form accompanying the Prospectus or by calling (800)
341-2911 ((800) 421-2833 for the hearing impaired), elect to have all dividends
and other capital

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<PAGE> 66

gain dividends paid on a class of shares of the Fund invested into shares of the
same class of any Participating Fund so long as the investor has a pre-existing
account for such class of shares of the other fund. Both accounts must be of the
same type, either non-retirement or retirement. If the accounts are retirement
accounts, they must both be for the same class and of the same type of
retirement plan (e.g. IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the
same individual. If a qualified, pre-existing account does not exist, the
shareholder must establish a new account subject to minimum investment and other
requirements of the fund into which distributions would be invested.
Distributions are invested into the selected fund at its net asset value per
share as of the payable date of the distribution.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder may establish a monthly, quarterly, semiannual or annual
withdrawal plan if the shareholder owns shares in a single account valued at
$10,000 or more at the next determined net asset value per share at the time the
plan is established. If a shareholder owns shares in a single account valued at
$5,000 or more at the next determined net asset value per share at the time the
plan is established, the shareholder may establish a quarterly, semiannual or
annual withdrawal plan. This plan provides for the orderly use of the entire
account, not only the income but also the capital, if necessary. Each payment
represents the proceeds of a redemption of shares on which any capital gain or
loss will be recognized. The planholder may arrange for monthly, quarterly,
semiannual or annual checks in any amount, not less than $25. Such a systematic
withdrawal plan may also be maintained by an investor purchasing shares for a
retirement plan established on a form made available by the Fund. See
"Shareholder Services -- Retirement Plans."

Class B Shareholders and Class C Shareholders who establish a systematic
withdrawal plan may redeem up to 12% annually of the shareholder's initial
account balance without incurring a contingent deferred sales charge. Initial
account balance means the amount of the shareholder's investment at the time the
election to participate in the plan is made.

Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic payment. Dividends and capital gain dividends on shares
held in accounts with systematic withdrawal plans are reinvested in additional
shares at the next determined net asset value per share. If periodic withdrawals
continuously exceed reinvested dividends and capital gain dividends, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Redemptions made concurrently with the purchase of additional shares
ordinarily will be disadvantageous to the shareholder because of the duplication
of sales charges. Any gain or loss realized by the shareholder upon redemption
of shares is a taxable event. The Fund reserves the right to amend or terminate
the systematic withdrawal program upon 30 days' notice to its shareholders.

EXCHANGE PRIVILEGE

All shareholders are limited to eight exchanges per fund during a rolling
365-day period.

Exchange privileges will be suspended on a particular fund if more than
eight exchanges out of that fund are made during a rolling 365-day period. If
exchange

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<PAGE> 67

privileges are suspended, subsequent exchange requests for redemptions out of
that fund during the stated period will not be processed. Exchange privileges
will be restored when the account history shows fewer than eight exchanges in
the rolling 365-day period.

This policy change does not apply to money market funds, systematic
exchange plans, or employer-sponsored retirement plans.

REINSTATEMENT PRIVILEGE

A Class A Shareholder or Class B Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class A Shares of the Fund. A Class C Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class C Shares of the Fund with credit given for any contingent deferred sales
charge paid upon such redemption. Such reinstatement is made at the net asset
value per share (without sales charge) next determined after the order is
received, which must be made within 180 days after the date of the redemption.
Reinstatement at net asset value per share is also offered to participants in
those eligible retirement plans held or administered by Van Kampen Trust Company
for repayment of principal (and interest) on their borrowings on such plans.

REDEMPTION OF SHARES

Redemptions are not made on days during which the New York Stock Exchange
(the "Exchange") is closed. The right of redemption may be suspended and the
payment therefor may be postponed for more than seven days during any period
when (a) the Exchange is closed for other than customary weekends or holidays;
(b) the SEC determines trading on the Exchange is restricted; (c) the SEC
determines an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.

Additionally, if the Board of Trustees determines that payment wholly or
partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. Shareholders may
incur brokerage charges and a gain or loss for federal income tax purposes upon
the sale of portfolio securities so received in payment of redemptions.

CONTINGENT DEFERRED SALES CHARGE-CLASS A ("CDSC-CLASS A")

As described in the Prospectus under "Purchase of Shares -- Class A
Shares," there is no sales charge payable on Class A Shares at the time of
purchase on investments of $1 million or more, but a contingent deferred sales
charge ("CDSC -- Class A") may be imposed on certain redemptions made within one
year of purchase. For purposes of the CDSC-Class A, when shares of one fund are
exchanged for shares of another fund, the purchase date for the shares of the
fund exchanged into will be assumed to be the date on which shares were
purchased in the fund from which the exchange was made. If the exchanged shares
themselves are acquired through an exchange, the purchase date is assumed to
carry over from the date of the original election to purchase shares subject to
a CDSC-Class A rather than a front-end load sales charge. In determining whether
a

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<PAGE> 68

CDSC-Class A is payable, it is assumed that shares being redeemed first are any
shares in the shareholder's account not subject to a contingent deferred sales
charge followed by shares held the longest in the shareholder's account.

WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGES ("CDSC-CLASS B
AND C")

As described in the Prospectus under "Redemption of Shares," redemptions of
Class B Shares and Class C Shares will be subject to a contingent deferred sales
charge. The CDSC-Class B and C is waived on redemptions of Class B Shares and
Class C Shares in the circumstances described below:

REDEMPTION UPON DEATH OR DISABILITY

The Fund will waive the CDSC-Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), which in pertinent part defines a person as disabled if
such person "is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite duration."
While the Fund does not specifically adopt the balance of the Code's definition
which pertains to furnishing the Secretary of Treasury with such proof as he or
she may require, the Distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC-Class B and C.

In cases of death or disability, the CDSC-Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC-Class B and C applies to a total or partial redemption,
but only to redemptions of shares held at the time of the death or initial
determination of disability.

REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS

The Fund will waive the CDSC-Class B and C when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The CDSC-Class B and C will be waived upon the tax-free rollover or
transfer of assets to another retirement plan invested in one or more
Participating Funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held on to the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any, CDSC-Class B and C is applicable in the event that such acquired shares are
redeemed following the transfer or rollover. The charge also will be waived on
any redemption which results from the return of an excess contribution pursuant
to Section 408(d)(4) or (5) of the Code, the return of excess deferral amounts
pursuant to Code Section 401(k)(8) or 402(g)(2), the financial hardship of the
employee pursuant to United States Treasury Regulation Section 401(k)-1(d)(2),
or from the death or disability of the employee (see Code Section 72(m)(7) and
72(t)(2)(A)(ii)). In addition, the

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<PAGE> 69

charge will be waived on any minimum distribution required to be distributed in
accordance with Code Section 401(a)(9).

The Fund does not intend to waive the CDSC-Class B and C for any
distributions from IRAs or other retirement plans not specifically described
above.

REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN

A shareholder may elect to participate in a systematic withdrawal plan with
respect to the shareholder's investment in the Fund. Under the systematic
withdrawal plan, a dollar amount of a participating shareholder's investment in
the Fund will be redeemed systematically by the Fund on a periodic basis, and
the proceeds mailed to the shareholder. The amount to be redeemed and frequency
of the systematic withdrawals will be specified by the shareholder upon his or
her election to participate in the systematic withdrawal plan. The CDSC-Class B
and C will be waived on redemptions made under the systematic withdrawal plan.

The amount of the shareholder's investment in a Fund at the time the
election to participate in the systematic withdrawal plan is made with respect
to the Fund is hereinafter referred to as the "initial account balance." The
amount to be systematically redeemed from the Fund without the imposition of a
CDSC-Class B and C may not exceed a maximum of 12% annually of the shareholder's
initial account balance. The Fund reserves the right to change the terms and
conditions of the systematic withdrawal plan and the ability to offer the
systematic withdrawal plan.

NO INITIAL COMMISSION OR TRANSACTION FEE

The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares.

REINVESTMENT OF REDEMPTION PROCEEDS

A shareholder who has redeemed Class C Shares of the Fund may reinvest at
net asset value, with credit for any CDSC-Class C paid on the redeemed shares,
any portion or all of his or her redemption proceeds (plus that amount necessary
to acquire a fractional share to round off his or her purchase to the nearest
full share) in Class C Shares of the Fund, provided that the reinvestment is
effected within 180 days after such redemption and the shareholder has not
previously exercised this reinvestment privilege with respect to Class C Shares
of the Fund. Shares acquired in this manner will be deemed to have the original
cost and purchase date of the redeemed shares for purposes of applying the
CDSC-Class C to subsequent redemptions.

INVOLUNTARY REDEMPTIONS OF SHARES

The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the value of the
account up to the required minimum balance. The Fund will waive the CDSC-Class B
and C upon such involuntary redemption.

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<PAGE> 70

REDEMPTION BY ADVISER

The Fund may waive the CDSC-Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.

TAXATION

FEDERAL INCOME TAXATION OF THE FUND

The Fund intends to elect and to qualify, and intends to continue to
qualify each year, to be treated as a regulated investment company under
Subchapter M of the Code. To qualify as a regulated investment company, the Fund
must comply with certain requirements of the Code relating to, among other
things, the source of its income and diversification of its assets.

If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including taxable income and net
short-term capital gain, but not net capital gain, which is the excess of net
long-term capital gain over net short-term capital loss) and meets certain other
requirements, it will not be required to pay federal income taxes on any income
it distributes to shareholders. The Fund intends to distribute at least the
minimum amount of net investment income necessary to satisfy the 90%
distribution requirement. The Fund will not be subject to federal income tax on
any net capital gain distributed to shareholders.

In order to avoid a 4% excise tax, the Fund will be required to distribute,
by December 31st of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income for such year and (ii) 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.

If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order to qualify as
a regulated investment company in a subsequent year.

Some of the Fund's investment practices are subject to special provisions
of the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to recognize income or

B-46
<PAGE> 71

gain without receiving cash with which to make distributions in amounts
necessary to satisfy the 90% distribution requirement and the distribution
requirements for avoiding income and excise taxes. The Fund will monitor its
transactions and may make certain tax elections in order to mitigate the effect
of these rules and prevent disqualification of the Fund as a regulated
investment company.

Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year in order to maintain its qualification
as a regulated investment company and to avoid income and excise taxes. In order
to generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold.

The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (i) at least 75% of its gross income is passive income or (ii)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a regulated investment company
that holds stock of a PFIC will be subject to federal income tax on (i) a
portion of any "excess distribution" received on such stock or (ii) any gain
from a sale or disposition of such stock (collectively, "PFIC income"), plus
interest on such amounts, even if the regulated investment company distributes
the PFIC income as a taxable dividend to its shareholders. The balance of the
PFIC income will be included in the regulated investment company's investment
company taxable income and, accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders. If the Fund invests in a PFIC
and elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain, which most likely would have to be
distributed to satisfy the 90% distribution requirement and the distribution
requirement for avoiding income and excise taxes. In most instances it will be
very difficult to make this election due to certain requirements imposed with
respect to the election.

As an alternative to making the above-described election to treat the PFIC
as a qualified electing fund, the Fund may make an election to annually
mark-to-market PFIC stock that it owns (a "PFIC Mark-to-Market Election").
"Marking-to-market," in this context, means recognizing as ordinary income or
loss each year an amount equal to the difference between the Fund's adjusted tax
basis in such PFIC stock and its fair market value. Losses will be allowed only
to the extent of net mark-to-market gain previously included by the Fund
pursuant to the election for prior taxable years. The Fund may be required to
include in its taxable income for the first taxable year in which it makes a
PFIC Mark-to-Market Election an amount equal to the interest charge that would
otherwise accrue with respect to distributions on, or dispositions of, the PFIC
stock. This amount would not be deductible from the Fund's taxable income. The
PFIC Mark-to-Market Election applies to the taxable year for which made and to
all subsequent taxable years, unless the Internal Revenue Service (the "IRS")
consents to revocation of the election. By making the PFIC Mark-to-Market
Election, the Fund could ameliorate the

B-47
<PAGE> 72

adverse tax consequences arising from its ownership of PFIC stock, but in any
particular year may be required to recognize income in excess of the
distributions it receives from the PFIC and proceeds from the dispositions of
PFIC stock.

DISTRIBUTIONS TO SHAREHOLDERS

Distributions of the Fund's net investment income are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain as capital gain dividends, if any, are taxable to
shareholders as long-term capital gains regardless of the length of time shares
of the Fund have been held by such shareholders. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). For a summary of the tax rates applicable to capital gains
(including capital gain dividends), see "Capital Gains Rates" below. Tax-exempt
shareholders not subject to federal income tax on their income generally will
not be taxed on distributions from the Fund.

Shareholders receiving distributions in the form of additional shares
issued by the Fund will be treated for federal income tax purposes as receiving
a distribution in an amount equal to the fair market value of the shares
received, determined as of the distribution date. The basis of such shares will
equal the fair market value on the distribution date.

The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Distributions from
the Fund may be eligible for the dividends received deduction for corporations
if the Fund receives qualifying dividends during the year and if certain other
requirements of the Code are satisfied.

Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
In addition, certain other distributions made after the close of a taxable year
of the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.

Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.

Certain foreign currency gains or losses attributable to currency exchange
rate fluctuations are treated as ordinary income or loss. Such income or loss
may increase or decrease (or possibly eliminate) the Fund's income available for
distribution. If, under the rules governing the tax treatment of foreign
currency gains and losses, the Fund's income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital

B-48
<PAGE> 73

or, in some circumstances, as capital gains. Generally, a shareholder's tax
basis in Fund shares will be reduced to the extent that an amount distributed to
such shareholder is treated as a return of capital.

SALE OF SHARES

The sale of shares (including transfers in connection with a redemption or
repurchase of shares) will be a taxable transaction for federal income tax
purposes. Selling shareholders will generally recognize gain or loss in an
amount equal to the difference between their adjusted tax basis in the shares
and the amount received. If such shares are held as a capital asset, the gain or
loss will be a capital gain or loss. For a summary of the tax rates applicable
to capital gains (including capital gain dividends), see "Capital Gains Rates"
below. Any loss recognized upon a taxable disposition of shares held for six
months or less will be treated as a long-term capital loss to the extent of any
capital gain dividends received with respect to such shares. For purposes of
determining whether shares have been held for six months or less, the holding
period is suspended for any periods during which the shareholder's risk of loss
is diminished as a result of holding one or more other positions in
substantially similar or related property or through certain options or short
sales.

CAPITAL GAINS RATES

The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers is (i) the same as the maximum
ordinary income tax rate for capital assets held for one year or less or (ii)
20% for capital assets held for more than one year. The maximum long-term
capital gains rate for corporations is 35%.

NON-U.S. SHAREHOLDERS

A shareholder who is not (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized under the laws of the
United States or any state thereof, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States fiduciaries who have
the authority to control all substantial decisions of the trust (a "Non-U.S.
Shareholder") generally will be subject to withholding of United States federal
income tax at a 30% rate (or lower applicable treaty rate) on dividends from the
Fund (other than capital gain dividends) that are not "effectively connected"
with a United States trade or business carried on by such shareholder.

Non-effectively connected capital gain dividends and gains realized from
the sale of shares will not be subject to United States federal income tax in
the case of (i) a Non-U.S. Shareholder that is a corporation and (ii) a Non-U.S.
Shareholder that is not present in the United States for more than 182 days
during the taxable year (assuming that certain other conditions are met).
However, certain Non-U.S. Shareholders may nonetheless be subject to backup
withholding on capital gain dividends and gross proceeds paid to them upon the
sale of their shares. See "Backup Withholding" below.

If income from the Fund or gains realized from the sale of shares is
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such

B-49
<PAGE> 74

amounts will be subject to United States federal income tax on a net basis at
the tax rates applicable to United States citizens or domestic corporations.
Non-U.S. Shareholders that are corporations may also be subject to an additional
"branch profits tax" with respect to income from the Fund that is effectively
connected with a United States trade or business.

Final United States Treasury Regulations, effective for payments made after
December 31, 2000, modify the withholding, backup withholding and information
reporting rules, including the procedures to be followed by Non-U.S.
Shareholders in establishing foreign status. Prospective investors should
consult their tax advisors concerning the applicability and effect of such
Treasury Regulations on an investment in shares of the Fund.

The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their tax advisers with respect to the
tax implications of purchasing, holding and disposing of shares of the Fund.

BACKUP WITHHOLDING

The Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to
non-corporate shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to furnish the Fund with its correct taxpayer identification
number, (ii) the IRS notifies the Fund that the shareholder has failed to
properly report certain interest and dividend income to the IRS and to respond
to notices to that effect or (iii) when required to do so, the shareholder fails
to certify that he or she is not subject to backup withholding. Redemption
proceeds may be subject to withholding under the circumstances described in (i)
above.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a shareholder may be refunded or
credited against such shareholder's United States federal income tax liability,
if any, provided that the required information is furnished to the IRS.

INFORMATION REPORTING

The Fund must report annually to the IRS and to each shareholder the amount
of dividends paid to such shareholder and the amount, if any, of tax withheld
with respect to such dividends. In the case of a Non-U.S. Shareholder, this
information may also be made available to the tax authorities in such Non-U.S.
Shareholder's country of residence.

GENERAL

The federal income tax discussion set forth above is for general
information only. Prospective investors should consult their advisors regarding
the specific federal tax consequences of purchasing, holding and disposing of
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.

B-50
<PAGE> 75

FUND PERFORMANCE

From time to time the Fund may advertise its total return for prior
periods. Any such advertisement would include at least average annual total
return quotations for one year, five-year and ten-year periods. Other total
return quotations, aggregate or average, over other time periods may also be
included.

The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the end of the period. Total return is calculated by
subtracting the value of the initial investment from the ending value and
showing the difference as a percentage of the initial investment; the
calculation assumes the initial investment is made at the current maximum public
offering price (which includes a maximum sales charge for Class A Shares); that
all income dividends or capital gain dividends during the period are reinvested
in Fund shares at net asset value; and that any applicable contingent deferred
sales charge has been paid. The Fund's total return will vary depending on
market conditions, the securities comprising the Fund's portfolio, the Fund's
operating expenses and unrealized net capital gains or losses during the period.
Total return is based on historical earnings and asset value fluctuations and is
not intended to indicate future performance. No adjustments are made to reflect
any income taxes payable by shareholders on dividends and capital gain dividends
paid by the Fund.

Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.

The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of shares of the Fund from a given date to a subsequent given date.
Cumulative non-standardized total return is calculated by measuring the value of
an initial investment in a given class of shares of the Fund at a given time,
deducting the maximum initial sales charge, if any, determining the value of all
subsequent reinvested distributions, and dividing the net change in the value of
the investment as of the end of the period by the amount of the initial
investment and expressing the result as a percentage. Non-standardized total
return will be calculated separately for each class of shares.

Non-standardized total return calculations do not reflect the imposition of
a contingent deferred sales charge, and if any such contingent deferred sales
charge imposed at the time of redemption were reflected, it would reduce the
performance quoted.

Total return is calculated separately for Class A Shares, Class B Shares
and Class C Shares. Total return figures for Class A Shares include the maximum
sales charge; total return figures for Class B Shares and Class C Shares include
any applicable contingent deferred sales charge. Because of the differences in
sales charges and distribution fees, the total returns for each class of shares
will differ.

From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return

B-51
<PAGE> 76

which is a measure of the income actually earned by the Fund's investments plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield since, for instance, it may not include the
effect of amortization of bond premiums, and may include non-recurring
short-term capital gains and premiums from futures transactions engaged in by
the Fund. Distribution rates will be computed separately for each class of the
Fund's shares.

From time to time marketing materials may provide a portfolio manager
update, an adviser update and discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sector holdings and ten largest holdings. Materials
may also mention how the Distributor believes the Fund compares relative to
other Van Kampen funds. Materials may also discuss the Dalbar Financial Services
study from 1984 to 1994 which studied investor cash flow into and out of all
types of mutual funds. The ten-year study found that investors who bought mutual
fund shares and held such shares outperformed investors who bought and sold. The
Dalbar study conclusions were consistent regardless if shareholders purchased
their funds shares in direct or sales force distribution channels. The study
showed that investors working with a professional representative have tended
over time to earn higher returns than those who invested directly. The Fund will
also be marketed on the internet.

In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index,
other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking services and by nationally
recognized financial publications. Such comparative performance information will
be stated in the same terms in which the comparative data or indices are stated.
Such advertisements and sales material may also include a yield quotation as of
a current period. In each case, such total return and yield information, if any,
will be calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. For these purposes, the
performance of the Fund, as well as the performance of other mutual funds or
indices, do not reflect sales charges, the inclusion of which would reduce the
Fund's performance. The Fund will include performance data for each class of
shares of the Fund in any advertisement or information including performance
data of the Fund.

The Fund may also utilize performance information in hypothetical
illustrations. For example, the Fund may, from time to time: (1) illustrate the
benefits of tax-deferral by comparing taxable investments to investments made
through tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications

B-52
<PAGE> 77

to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return.

The Fund's Annual Report and Semiannual Report contain additional
performance information. A copy of the Annual Report or Semiannual Report may be
obtained without charge by calling or writing the Fund at the telephone number
and address printed on the back cover of the Prospectus.

OTHER INFORMATION

CUSTODY OF ASSETS

All securities owned by the Fund and all cash, including proceeds from the
sale of shares of the Fund and of securities in the Fund's investment portfolio,
are held by [TO COME] as Custodian.

SHAREHOLDER REPORTS

Semiannual statements are furnished to shareholders, and annually such
statements are audited by the independent accountants.

INDEPENDENT ACCOUNTANTS

[To come], the independent accountants for the Fund, performs an annual
audit of the Fund's financial statements.

LEGAL COUNSEL

Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois).

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<PAGE> 78

PART C: OTHER INFORMATION

ITEM 23. EXHIBITS.

<TABLE>
<C> <C> <S>
(a)(1) -- Declaration of Trust(1)
(2) -- Certificate of Designation for:
(i) Van Kampen Technology Fund (1)
(ii) Van Kampen Tax Managed Equity Growth Fund+
(b) -- Bylaws(1)
(c)(1) -- Specimen Class A Share Certificate(2)
(2) -- Specimen Class B Share Certificate(2)
(3) -- Specimen Class C Share Certificate(2)
(d) -- Investment Advisory Agreement for:
(1) -- Van Kampen Technology Fund (2)
(2) -- Van Kampen Tax Managed Equity Growth Fund+
(e)(1) -- Distribution and Service Agreement for:
(i) Van Kampen Technology Fund (2)
(ii) Van Kampen Tax Managed Equity Growth Fund+
(2) -- Form of Dealer Agreement(2)
(3) -- Form of Broker Fully Disclosed Selling Agreement(2)
(4) -- Form of Bank Fully Disclosed Selling Agreement(2)
(f)(1) -- Form of Trustee Deferred Compensation Plan(3)
(2) -- Form of Trustee Retirement Plan(3)
(g)(1) -- Custodian Contract(2)
(2) -- Transfer Agency and Service Agreement(2)
(h)(1) -- Data Access Services Agreement(2)
(2) -- Fund Accounting Agreement(2)
(3) -- Amended and Restated Legal Services Agreement(2)
(i) -- Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois) for:
(1) -- Van Kampen Technology Fund(2)
(2) -- Van Kampen Tax Managed Equity Growth Fund+
(j) -- Consent of PricewaterhouseCoopers LLP for:
(1) -- Van Kampen Technology Fund(3)
(2) -- Van Kampen Tax Managed Equity Growth Fund+
(k) -- Not applicable
(l) -- Investment Letter(2)
(m)(1) -- Plan of Distribution pursuant to Rule 12b-1 for:
(i) Van Kampen Technology Fund (2)
(ii) Van Kampen Tax Managed Equity Growth Fund+
(2) -- Form of Shareholder Assistance Agreement(2)
(3) -- Form of Administrative Services Agreement(2)
(4) -- Service Plan for:
(i) Van Kampen Technology Fund (2)
(ii) Van Kampen Tax Managed Equity Growth Fund+
(n) -- Not applicable
(o) -- Amended Multi-Class Plan(2)
(p) -- Power of Attorney(3)
(z)(1) -- List of certain investment companies in response to Item
27(a)(3)
(2) -- List of Officers and Directors of Van Kampen Funds Inc. in
response to Item 27(b)(3)
</TABLE>

- -------------------------
(1) Incorporated herein by reference to the Registrant's initial
Registration Statement on Form N-1A, File No. 333-75493, filed April 1,
1999.

(2) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File No. 333-75493,
filed June 4, 1999.

(3) Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File No. 333-75493,
filed December 23, 1999.

+ To be filed by amendment.

C-1
<PAGE> 79

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

See the Statement of Additional Information.

ITEM 25. INDEMNIFICATION.

Pursuant to Del. Code Ann. Title 12 Section 3817, a Delaware business trust
may provide in its governing instrument for the indemnification of its officers
and trustees from and against any and all claims and demands whatsoever.

Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust. Article 8, Section 8.4 of the Agreement and
Declaration of Trust provides that each officer and trustee of the Registrant
shall be indemnified by the Registrant against all liabilities incurred in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which the officer or trustee may be or
may have been involved by reason of being or having been an officer or trustee,
except that such indemnity shall not protect any such person against a liability
to the Registrant or any shareholder thereof to which such person would
otherwise be subject by reason of (i) not acting in good faith in the reasonable
belief that such person's actions were not in the best interests of the Trust,
(ii) willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office or (iii) for a criminal
proceeding, not having a reasonable cause to believe that such conduct was
unlawful (collectively, "Disabling Conduct"). Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of Disabling Conduct in the conduct of his or her office, the decision by
the Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of Disabling
Conduct in the conduct of his or her office.

The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officer or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.

Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by the trustee, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the Securities
Act of 1933 (the "1933 Act") against any loss, liability, claim, damages or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, claim, damages, or expense and reasonable counsel fees) arising
by reason of any person acquiring any shares, based upon the ground that the
registration statement, prospectus, shareholder reports or other information
filed or made public by the Registrant (as from time to time amended) included
an untrue statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the statements not
misleading under the 1933 Act, or any other statute or the common law. The
Registrant does not agree to indemnify the Distributor or hold it harmless to
the extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Registrant by or on behalf of the
Distributor. In no case is the indemnity of the Registrant in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor or
any person against any liability to the Fund or its security holders to which
the Distributor or such person would otherwise

C-2
<PAGE> 80

be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under the agreement.

Pursuant to the agreement by which Van Kampen Investor Services Inc.
("Investor Services") is appointed transfer agent of the Fund, the Registrant
agrees to indemnify and hold Investor Services harmless against any losses,
damages, costs, charges, payments, liabilities and expenses (including
reasonable counsel fees) arising out of or attributable to:

(1) the performance of Investor Services under the agreement provided
that Investor Services acted in good faith with due diligence and
without negligence or willful misconduct.
(2) reliance by Investor Services on, or reasonable use by, Investor
Services of information, records and documents which have been
prepared on behalf of, or have been furnished by, the Fund, or the
carrying out by Investor Services of any instructions or requests
of the Fund.
(3) the offer or sale of the Fund's shares in violation of any federal
or state law or regulation or ruling by any federal agency unless
such violation results from any failure by Investor Services to
comply with written instructions from the Fund that such offers or
sales were not permitted under such law, rule or regulation.
(4) the refusal of the Fund to comply with terms of the agreement, or
the Fund's lack of good faith, negligence or willful misconduct or
breach of any representation or warranty made by the Fund under
the agreement provided that if the reason for such failure is
attributable to any action of the Fund's investment adviser or
distributor or any person providing accounting or legal services
to the Fund, Investor Services only will be entitled to
indemnification if such entity is otherwise entitled to the
indemnification from the Fund.

See also "Investment Advisory Agreement" in the Statement of Additional
Information.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

See "Investment Advisory Services" in the Prospectus and "Investment
Advisory Agreement," "Other Agreements" and "Trustees and Officers" in the
Statement of Additional Information for information regarding the business of
Van Kampen Asset Management Inc. (the "Adviser"). For information as to the
business, profession, vocation and employment of a substantial nature of
directors and officers of the Adviser, reference is made to the Adviser's
current Form ADV (File No. 801-1669) filed under the Investment Advisers Act of
1940, as amended, incorporated herein by reference.

ITEM 27. PRINCIPAL UNDERWRITERS.

(a) The sole principal underwriter is Van Kampen Funds Inc., which acts as
principal underwriter for certain investment companies and unit
investment trusts. See Exhibit (z)(1).

(b) Van Kampen Funds Inc. is an affiliated person of an affiliated person
of the Registrant, and is the only principal underwriter for Registrant.
The name, principal business address and positions and offices with Van
Kampen Funds Inc. of each of its directors and officers are disclosed in
Exhibit (z)(2). Except as disclosed under the heading, "Trustees and
Officers" in Part B of this Registration Statement, none of such persons
has any position or office with Registrant.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents of the Registrant required by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder to be maintained (i) by the Registrant will be maintained at its
offices, located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois
60181-5555 or at Van Kampen Investor Services Inc., 7501 Tiffany Springs
Parkway, Kansas City, Missouri 64153 or at the State Street Bank and Trust
Company, 1776 Heritage Drive, North Quincy, Massachusetts 02171; (ii) by the
Adviser will be maintained at its offices, located at 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555; and (iii) by Van Kampen Funds Inc.,
the principal underwriter, will be maintained at its offices located at 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.

ITEM 29. MANAGEMENT SERVICES.

Not applicable.

ITEM 30. UNDERTAKINGS.

Not applicable.

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<PAGE> 81

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant,
VAN KAMPEN EQUITY TRUST II, has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oakbrook Terrace and State of Illinois, on the 27th
day of December, 1999.

VAN KAMPEN EQUITY TRUST II

By: /s/ A. THOMAS SMITH III
------------------------------------
A. Thomas Smith III Secretary

Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement has been signed on December 27, 1999 by the following
persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<C> <S>
Principal Executive Officer:

/s/ RICHARD F. POWERS, III* Trustee and President
- -----------------------------------------------------
Richard F. Powers, III

Principal Financial Officer:

/s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and
- ----------------------------------------------------- Treasurer
John L. Sullivan

Trustees:

/s/ J. MILES BRANAGAN* Trustee
- -----------------------------------------------------
J. Miles Branagan

/s/ JERRY D. CHOATE* Trustee
- -----------------------------------------------------
Jerry D. Choate

/s/ LINDA HUTTON HEAGY* Trustee
- -----------------------------------------------------
Linda Hutton Heagy

/s/ R. CRAIG KENNEDY* Trustee
- -----------------------------------------------------
R. Craig Kennedy

/s/ MITCHELL M. MERIN* Trustee
- -----------------------------------------------------
Mitchell M. Merin

/s/ JACK E. NELSON* Trustee
- -----------------------------------------------------
Jack E. Nelson

/s/ PHILLIP B. ROONEY* Trustee
- -----------------------------------------------------
Phillip B. Rooney

/s/ FERNANDO SISTO* Trustee
- -----------------------------------------------------
Fernando Sisto

/s/ WAYNE W. WHALEN* Trustee
- -----------------------------------------------------
Wayne W. Whalen

/s/ SUZANNE H. WOOLSEY* Trustee
- -----------------------------------------------------
Suzanne H. Woolsey

/s/ PAUL G. YOVOVICH* Trustee
- -----------------------------------------------------
Paul G. Yovovich
- ---------------
* Signed by A. Thomas Smith III pursuant to a power of attorney previously filed with Post-Effective
Amendment Number 1 to Registrant's Registration Statement on Form N1-A, File No. 333-75493, filed
December 23, 1999.
/s/ A. THOMAS SMITH III
- -----------------------------------------------------
A. Thomas Smith III
Attorney-in-Fact December 27, 1999
</TABLE>

<PAGE> 82

SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 2 TO FORM N-1A

AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <C> <S>
</TABLE>