<PAGE> 1
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VAN KAMPEN U.S. GOVERNMENT FUND
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Van Kampen U.S. Government Fund (the "Fund") is a diversified series of Van
Kampen U.S. Government Trust (the "Trust"), an open-end management investment
company. The Fund's investment objective is to provide a high level of current
income, with liquidity and safety of principal. The Fund invests primarily in
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities. The Fund may invest a substantial portion of its assets in
mortgage-backed securities issued by agencies of the U.S. Government, some of
which are backed by the full faith and credit of the U.S. Government and others
of which are backed only by the right of the issuer to borrow from the U.S.
Treasury or the credit of the issuer. The Fund may engage in strategic
transactions including borrowing for investment purposes and utilizing financial
derivative instruments, subject to the limitations set forth in this Prospectus.
Such transactions may entail certain risks, which are described under "How the
Fund Seeks Its Investment Objective." The net asset value and the return of the
Fund will fluctuate depending on market conditions and other factors. The Fund
is managed by Van Kampen Investment Advisory Corp. (the "Adviser") and
distributed by Van Kampen Funds Inc. (the "Distributor").
Investors may elect to purchase Class A Shares, Class B Shares or Class C
Shares, each with different sales charges and expenses. The different classes of
shares permit an investor to choose the method of purchasing shares that is more
beneficial to the investor, taking into account the amount of the purchase, the
length of time the investor expects to hold the shares and other circumstances.
See "How to Buy Shares."
Additional information about the Fund is contained in a Statement of
Additional Information dated April 30, 1998, as supplemented on July 14, 1998,
which has been filed with the Securities and Exchange Commission ("SEC"), a copy
of which may be obtained without charge by calling: (800) 421-5666 (or (800)
421-2833 for the hearing impaired) and is available along with other related
materials at the SEC's Internet web site (http://www.sec.gov). This Prospectus,
which incorporates by reference the entire Statement of Additional Information,
concisely sets forth certain information about the Fund that a prospective
shareholder should know before investing in the Fund. Shareholders should read
this Prospectus carefully and retain it for future reference.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
[VAN KAMPEN FUNDS LOGO]
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(800) 421-5666
APRIL 30, 1998, AS SUPPLEMENTED
ON JULY 14, 1998 AND OCTOBER 27, 1998.
<PAGE> 2
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder Transaction Expenses.......................................... 3
Annual Fund Operating Expenses and Example................................ 4
Financial Highlights...................................................... 5
The Fund's Investment Objective........................................... 7
How the Fund Seeks its Investment Objective............................... 7
How the Fund is Managed................................................... 9
How to Buy Shares......................................................... 11
How to Sell Shares........................................................ 14
Distribution and Service Plans............................................ 15
Distributions and Taxes................................................... 16
Fund Performance.......................................................... 17
Fund Organization......................................................... 17
Additional Information.................................................... 18
</TABLE>
NO DEALER, SALESMAN 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 ADVISER, OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE 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.
2
<PAGE> 3
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SHAREHOLDER TRANSACTION EXPENSES
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<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Maximum sales load imposed on purchases (as a percentage of
the offering price)........................................ 4.75% (1) None None
Maximum sales load imposed on reinvested dividends (as a
percentage of the offering price).......................... None None(3) None(3)
Deferred sales load (as a percentage of the lesser of the
original purchase price or redemption proceeds)............ None (2) Year 1--4.00% Year 1--1.00%
Year 2--3.75% After--None
Year 3--3.50%
Year 4--2.50%
Year 5--1.50%
Year 6--1.00%
After--None
Redemption fees (as a percentage of amount redeemed)........ None None None
Exchange fees............................................... None None None
</TABLE>
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(1) Reduced on investments of $100,000 or more. See "How to Buy Shares-- Class A
Shares."
(2) Investments of $1 million or more are not subject to an initial sales
charge, but a contingent deferred sales charge of 1.00% may be imposed on
redemptions made within one year of the purchase.
(3) Subject to a 12b-1 fee, a portion of which may indirectly pay for the
initial sales commission incurred on behalf of the investor. See
"Distribution and Service Plans."
3
<PAGE> 4
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ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
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<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management fees (as a percentage of average daily net
assets)................................................... 0.51 0.51 0.51
12b-1 fees (as a percentage of average daily
net assets)(1)............................................ 0.18 1.00(3) 1.00(3)
Other expenses (as a percentage of average daily net
assets):
Miscellaneous other expenses.............................. 0.21 0.21 0.21
Interest expenses......................................... 0.08 0.08 0.08
---- ---- ----
Total other expenses (as a percentage of average daily net
assets)................................................... 0.29 0.29 0.29
---- ---- ----
Total expenses (as a percentage of average daily
net assets)(2)............................................ 0.98 1.80 1.80
</TABLE>
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(1) Such fees are being phased-in and it is anticipated that such fees will
increase over time to the maximum aggregate amount of 0.25% of the net
assets attributable to the Class A Shares. See "Distribution and Service
Plans."
(2) The Fund incurred financing expenses related to borrowings for investment
purposes. Borrowings provide the opportunity for increased net income, but
may increase the Fund's investment risk. "Total expenses" without regard to
the "Interest expenses" would have been 0.90%, 1.72% and 1.72% for each of
the Class A Shares, Class B Shares and Class C Shares, respectively. See
"Financial Highlights" and "How the Fund Seeks Its Investment Objective."
(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.
EXAMPLE:
A $1,000 investment would have the following transaction costs and operating
expenses assuming a 5% annual return. This example should not be considered
indicative of actual or expected Fund performance or expenses, both of which
will vary.
<TABLE>
<CAPTION>
WITH REDEMPTION AT
THE END OF PERIOD: ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
------------------ -------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class A Shares.............................................. $57 $77 $ 99 $162
Class B Shares.............................................. $58 $92 $112 $188
Class C Shares.............................................. $28 $57 $ 97 $212
</TABLE>
<TABLE>
<CAPTION>
WITHOUT
REDEMPTION AT
THE END OF PERIOD:
------------------
<S> <C> <C> <C> <C>
Class A Shares.............................................. $57 $77 $ 99 $162
Class B Shares.............................................. $18 $57 $ 97 $188
Class C Shares.............................................. $18 $57 $ 97 $212
</TABLE>
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* Class B Shares convert to Class A Shares at the end of eight years after
purchase; ten-year amounts reflect lower expenses applicable to such shares
after conversion.
4
<PAGE> 5
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FINANCIAL HIGHLIGHTS (for a share outstanding throughout the periods)
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The following schedule presents financial highlights for one Class A Share, one
Class B Share and one Class C Share of the Fund outstanding throughout each of
the periods indicated. The financial highlights have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, for each of the periods
indicated and their report thereon appears in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and related notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 14.459 $ 14.950 $ 13.698 $ 15.662 $ 15.720 $ 16.130
-------- -------- -------- -------- -------- --------
Net Investment Income................................. 1.039 1.069 1.111 1.177 1.286 1.365
Net Realized and Unrealized Gain/Loss................. .158 (.495) 1.233 (1.965) (0.060) (0.407)
-------- -------- -------- -------- -------- --------
Total from Investment Operations........................ 1.197 0.574 2.344 (0.788) 1.226 0.958
-------- -------- -------- -------- -------- --------
Less:
Distributions from and in Excess of Net Investment
Income.............................................. 1.032 1.065 1.092 1.176 1.284 1.368
Distributions from Net Realized Gain on Investments... -- -- -- -- -- --
Return of Capital Distribution........................ -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions..................................... 1.032 1.065 1.092 1.176 1.284 1.368
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 14.624 $ 14.459 $ 14.950 $ 13.698 $ 15.662 $ 15.720
======== ======== ======== ======== ======== ========
Total Return(a)......................................... 8.57% 4.10% 17.61% (5.10%) 7.95% 6.27%
Net Assets at End of Period (in millions)............... $2,264.8 $2,560.1 $2,962.9 $2,924.4 $3,653.6 $3,571.7
Ratio of Operating Expenses to Average Net Assets(b).... .90% 0.90% 0.93% 0.92% 0.87% 0.77%
Ratio of Interest Expense to Average Net Assets......... .08% 0.02% 0.27% 0.08% N/A N/A
Ratio of Net Investment Income to Average Net
Assets(b)............................................. 7.26% 7.38% 7.68% 8.13% 8.08% 8.64%
Portfolio Turnover (excluding dollars rolls and forward
commitment transactions).............................. 104% 64% 63% 44% 67% 111%
<CAPTION>
CLASS A SHARES
-----------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------
1991 1990 1989 1988
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 15.253 $ 15.280 $ 14.695 $ 15.046
-------- -------- -------- --------
Net Investment Income................................. 1.390 1.407 1.404 1.319
Net Realized and Unrealized Gain/Loss................. 0.897 (0.024) 0.558 (0.221)
-------- -------- -------- --------
Total from Investment Operations........................ 2.287 1.383 1.962 1.098
-------- -------- -------- --------
Less:
Distributions from and in Excess of Net Investment
Income.............................................. 1.410 1.410 1.377 1.319
Distributions from Net Realized Gain on Investments... -- -- -- .081
Return of Capital Distribution........................ -- -- .130 .161
-------- -------- -------- --------
Total Distributions..................................... 1.410 1.410 1.377 1.449
-------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 16.130 $ 15.253 $ 15.280 $ 14.695
======== ======== ======== ========
Total Return(a)......................................... 15.80% 9.62% 13.88% 7.50%
Net Assets at End of Period (in millions)............... $3,505.9 $3,329.0 $3,550.5 $3,825.6
Ratio of Operating Expenses to Average Net Assets(b).... 0.68% 0.72% 0.65% 0.71%
Ratio of Interest Expense to Average Net Assets......... N/A N/A N/A N/A
Ratio of Net Investment Income to Average Net
Assets(b)............................................. 8.97% 9.38% 9.37% 8.85%
Portfolio Turnover (excluding dollars rolls and forward
commitment transactions).............................. 27% 56% 101% 167%
</TABLE>
- ---------------
(a)Total return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b)For the year ended 1996, the impact on the Ratios of Expenses and Net
Investment Income to Average Net Assets due to the Adviser's reimbursement of
certain expenses was less than 0.01%.
N/A -- Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.
See Financial Statements and Notes Thereto
5
<PAGE> 6
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FINANCIAL HIGHLIGHTS -- continued (for a share outstanding throughout the
periods)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------------------------------------------------ -----------------
AUGUST 24, 1992
YEAR ENDED (COMMENCEMENT YEAR ENDED
DECEMBER 31, OF DISTRIBUTION) DECEMBER 31,
----------------------------------------------- TO DECEMBER 31, -----------------
1997 1996 1995 1994 1993 1992 1997 1996
---- ---- ---- ---- ---- ---------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $14.447 $14.948 $13.694 $15.643 $15.709 $ 15.983 $14.448 $14.948
------- ------- ------- ------- ------- -------- ------- -------
Net Investment Income............. .916 0.947 0.991 1.055 1.149 0.425 .910 0.943
Net Realized and Unrealized
Gain/Loss....................... .162 (0.494) 1.241 (1.964) (0.063) (0.263) .166 (0.489)
------- ------- ------- ------- ------- -------- ------- -------
Total from Investment Operations... 1.078 0.453 2.232 (0.909) 1.086 0.162 1.076 0.454
Less Distributions from and in
Excess of Net Investment Income... .916 0.954 0.978 1.04 1.152 0.436 .916 0.954
------- ------- ------- ------- ------- -------- ------- -------
Net Asset Value, End of Period..... $14.609 $14.447 $14.948 $13.694 $15.643 $ 15.709 $14.608 $14.448
======= ======= ======= ======= ======= ======== ======= =======
Total Return(a).................... 7.71% 3.24% 16.78% (5.93%) 7.01% 1.64%* 7.71% 3.24%
Net Assets at End of Period (in
millions)......................... $ 359.0 $ 414.8 $ 466.7 $ 436.3 $ 474.7 $ 103.1 $ 14.2 $ 14.3
Ratio of Operating Expenses to
Average Net Assets(b)............. 1.72% 1.73% 1.75% 1.74% 1.73% 1.61% 1.72% 1.72%
Ratio of Interest Expense to
Average Net Assets................ .08% 0.02% 0.27% 0.09% N/A N/A .08% 0.02%
Ratio of Net Investment Income to
Average Net Assets(b)............. 6.44% 6.55% 6.85% 7.29% 7.00% 6.16% 6.41% 6.55%
Portfolio Turnover (excluding
dollar rolls and forward
commitment transactions).......... 104% 64% 63% 44% 67% 111% 104% 64%
<CAPTION>
CLASS C SHARES
------------------------------------
AUGUST 13, 1993
YEAR ENDED (COMMENCEMENT
DECEMBER 31, OF DISTRIBUTION)
----------------- TO DECEMBER 31,
1995 1994 1993
---- ---- ----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $13.693 $15.626 $ 16.000
------- ------- --------
Net Investment Income............. 0.996 1.063 0.433
Net Realized and Unrealized
Gain/Loss....................... 1.237 (1.956) (0.364)
------- ------- --------
Total from Investment Operations... 2.233 (0.893) 0.069
Less Distributions from and in
Excess of Net Investment Income... 0.978 1.040 0.443
------- ------- --------
Net Asset Value, End of Period..... $14.948 $13.693 $ 15.626
======= ======= ========
Total Return(a).................... 16.78% (5.86%) 0.46%*
Net Assets at End of Period (in
millions)......................... $ 13.3 $ 11.4 $ 9.6
Ratio of Operating Expenses to
Average Net Assets(b)............. 1.75% 1.74% 1.71%
Ratio of Interest Expense to
Average Net Assets................ 0.27% 0.10% N/A
Ratio of Net Investment Income to
Average Net Assets(b)............. 6.86% 7.29% 6.42%
Portfolio Turnover (excluding
dollar rolls and forward
commitment transactions).......... 63% 44% 67%
</TABLE>
- ---------------
*Non-Annualized
(a)Total return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b)For the year ended 1996, the impact on the Ratios of Expenses and Net
Investment Income to Average Net Assets due to the Adviser's reimbursement of
certain expenses was less than 0.01%.
N/A -- Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.
See Financial Statements and Notes Thereto
6
<PAGE> 7
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THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide a high level of current income,
with liquidity and safety of principal. This objective is fundamental and cannot
be changed without shareholder approval. There are risks inherent in all
securities investments and there can be no assurance that the Fund will achieve
its objective. 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 with respect to the Fund. An investment in
the Fund is intended to be a long-term investment and should not be used as a
trading vehicle.
- --------------------------------------------------------------------------------
HOW THE FUND SEEKS ITS INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
The Fund seeks to achieve its investment objective by investing at least 65%
of its assets in obligations issued or guaranteed by the U.S. Government or in
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government (collectively, "U.S. Government Securities"). This policy is
fundamental and cannot be changed without shareholder approval. U.S. Government
Securities are considered among the most creditworthy of fixed income
investments; however, the yields on U.S. Government securities generally are
lower than yields available from corporate debt securities. The value of U.S.
Government Securities (as with most fixed income securities) generally varies
inversely with changes in prevailing interest rates. The magnitude of these
fluctuations generally is greater for securities with longer maturities. The
fluctuating value of U.S. Government Securities affects the Fund's net asset
value but will not affect investment income from those securities.
U.S. Government Securities include: (1) U.S. Treasury obligations and (2)
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities ("Agencies") which are supported by: (a) the full faith and
credit of the U.S. Government; (b) the right of the issuer or guarantor to
borrow an amount from a line of credit with the U.S. Treasury; (c) discretionary
power of the U.S. Government to purchase obligations of the Agencies or (d) the
credit of the Agencies. U.S. Government Securities also may include: (1) real
estate mortgage investment conduits ("REMICs"), collateralized mortgage
obligations ("CMOs") and other mortgage-backed securities ("Mortgage-Backed
Securities") issued or guaranteed by an Agency, (2) "when-issued" commitments
relating to the foregoing and (3) repurchase agreements ("Repos") collateralized
by U.S. Government Securities. The Fund invests in U.S. Government Securities of
varying maturities and interest rates, including investments in obligations
issued or guaranteed in zero coupon securities ("Zero Coupon Securities").
The Fund historically has invested substantially all of its assets in
Mortgage-Backed Securities that directly or indirectly represent a participation
in, or are secured by and payable from, mortgage loans secured by real property.
Mortgage Backed Securities are issued or guaranteed by U.S. Government agencies
or instrumentalities, such as certificates issued by the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
Mortgage-Backed Securities also include mortgage pass-through certificates
representing participation interests in pools of mortgage loans originated by
the U.S. Government or private lenders and guaranteed by U.S. Government
agencies such as GNMA, FNMA or FHLMC. Guarantees by GNMA are backed by the full
faith and credit of the United States. Guarantees by other agencies or
instrumentalities of the U.S. Government, such as FNMA or FHLMC, are not backed
by the full faith and credit of the United States, although FNMA and FHLMC are
authorized to borrow from the U.S. Treasury to meet their obligations.
The yield and payment characteristics of Mortgage-Backed Securities differ
from traditional debt securities. Interest and principal payments are made
regularly and frequently, usually monthly, over the life of the mortgage loans
unlike traditional debt securities and principal may be prepaid at any time
because the underlying mortgage loans generally may be prepaid at any time.
Faster or slower prepayments than expected on underlying mortgage loans can
dramatically alter the yield to maturity of a Mortgage-Backed Security. The
value of most Mortgage-Backed Securities, like traditional debt securities,
tends to vary inversely with changes in interest rates (i.e., as interest rates
increase, the value of such securities decrease). Mortgage-Backed Securities,
however, may benefit less than traditional debt securities from declining
interest rates because prepayment of mortgages tends to accelerate during
periods of declining interest rates. When mortgage loans underlying
Mortgage-Backed Securities held by the Fund are prepaid, the Fund reinvests the
prepaid amounts in other income-producing securities, the yields of which will
reflect interest rates prevailing at the time. Therefore, the Fund's ability to
maintain a portfolio of higher-yielding Mortgage-Backed Securities will be
adversely affected to the extent that
7
<PAGE> 8
prepayments must be reinvested in securities which have lower yields. A more
complete description of Mortgage-Backed Securities is contained in the Statement
of Additional Information.
The Fund may invest in CMOs, which are debt obligations collateralized by
mortgage loans or mortgage pass-through securities and multiclass pass-through
securities, which are equity interests in a trust composed of mortgage assets.
Payments of principal and interest on the mortgage assets, and any reinvestment
income thereon, provide the funds to pay debt service on the CMOs or make
scheduled distributions on the multiclass pass-through securities. A more
complete description of CMOs is contained in the Statement of Additional
Information.
The Fund may invest in Zero Coupon Securities. Zero Coupon Securities are U.S.
Treasury notes and bonds which are stripped of their unmatured interest coupons
and therefore pay no interest to its holder during the life thereof. Because
Zero Coupon Securities do not pay interest prior to maturity, such securities
usually trade at a deep discount from their face or par value and such
securities are subject to greater fluctuations of market value in response to
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest. Even though the holder of a Zero Coupon
Security does not receive interest payments prior to maturity, a portion of the
purchase price discount must be accrued as income each year under current
federal tax law. A more complete description of Zero Coupon Securities is
contained in the Statement of Additional Information. In order to generate
sufficient cash to make distributions, the Fund may have to dispose of
securities that it would otherwise continue to hold, which, in some cases, may
be disadvantageous to the Fund. See "Distributions and Taxes."
The Fund may engage in strategic transactions, purchase and sell securities on
a "when issued" and "delayed delivery" basis, enter into Repos and reverse
repurchase agreements, and lend portfolio securities in certain circumstances,
in each case subject to the limitations set forth below.
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 and fixed-income indices, and other financial instruments, purchase and
sell financial futures contracts and options thereon, and enter into various
interest rate transactions such as swaps, caps, floors or collars. Collectively,
all of the above are referred to as "Strategic Transactions". The Fund generally
seeks to use Strategic Transactions as a hedging technique to seek to protect
against possible adverse changes in the market value of the Fund's securities,
protect the Fund's unrealized gains, facilitate the sale of certain securities
for investment purposes, manage the effective maturity or duration of the Fund's
portfolio, or establish positions in the derivatives markets as a temporary
substitute for purchasing or selling particular securities. The Fund may use
some Strategic Transactions to seek to enhance income, although no more than 25%
of the Fund's assets will be committed to Strategic Transactions entered into
for non-hedging purposes.
Strategic Transactions have risks including the possible default or
illiquidity of the other party to the transaction. Furthermore, the ability to
successfully use Strategic Transactions depends on the Adviser's ability to
predict pertinent market movements, which cannot be assured. Thus, the use of
such Strategic Transactions may result in losses greater than if they had not
been used, require the Fund to sell or purchase portfolio securities at
inopportune times or for prices other than current market values, limit the
amount of appreciation the Fund can realize on an investment, or cause the Fund
to hold a security it might otherwise sell. Money paid by the Fund as premium
and money or other assets placed in margin accounts in connection with entering
into Strategic Transactions are not otherwise available to the Fund for
investment purposes. The Strategic Transactions that the Fund may use and some
of their risks are described more fully in the Fund's Statement of Additional
Information.
The Fund may purchase and sell "when issued" and "delayed delivery"
securities. The Fund accrues no income on such securities until the Fund
actually takes delivery of such securities. These transactions are subject to
market fluctuation; the value of the securities at delivery may be more or less
than their purchase price. The yields generally available on comparable
securities when delivery occurs may be higher than yields on the securities
obtained pursuant to such transactions. Because the Fund relies on the buyer or
seller to consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. The Fund will engage in when issued and
delayed delivery transactions for the purpose of acquiring securities consistent
with the Fund's investment objective and policies and not for the purpose of
investment leverage.
The Fund may enter into Repos whereby the Fund acquires securities and agrees
to resell the securities at an agreed upon time and at an agreed upon price. The
difference between the purchase amount and resale amount is accrued as
8
<PAGE> 9
interest in the Fund's net income. Failure of the seller to repurchase the
securities may cause losses for the Fund. Thus, the Fund must consider the
credit-worthiness of such party. In the event of default by such party, the Fund
may not have a right to the underlying security and there may be possible delays
and expenses in liquidating the security purchased, resulting in a decline in
its value and loss of interest. The Fund will use Repos for short-term
investments. The Fund generally will not invest more than 15% of its total
assets in Repos with a term of seven days or more.
The Fund is authorized to borrow money from banks and to engage in reverse
repurchase agreements and dollar rolls in an aggregate amount up to 33 1/3% of
the Fund's total assets (after giving effect to any such borrowing); provided,
however, that with respect to such amount no more than 5% may be invested in
bank borrowings and reverse repurchase agreements. The use of such transactions
to purchase additional securities is known as "leverage". Leverage transactions
create an opportunity for increased net income but, at the same time, may
increase the volatility of the Fund's net asset value as a result of
fluctuations in market interest rates and increase the risk of the Fund's
portfolio. The principal amount of these transactions is fixed when the
transaction is opened, but the Fund's assets may change in value during the time
these transactions are outstanding. As a result, interest expenses and other
costs from these transactions may exceed the interest income and other revenues
earned from portfolio assets, and the net income of the Fund may be less than if
these transactions were not used. Reverse repurchase agreements are transactions
whereby the Fund sells certain securities concurrently with an agreement to
repurchase the same securities at a later date at a fixed price. During the
reverse repurchase agreement period, the Fund continues to receive principal and
interest payments on these securities. Dollar rolls are transactions whereby the
Fund sells securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar securities on a specified future
date. During the roll period, the Fund foregoes principal and interest paid on
such securities. Reverse repurchase agreements and dollar rolls involve the risk
that the market value of the securities retained by the Fund may decline below
the price of the securities the Fund has sold but is obligated to repurchase
under the agreement.
The Fund may lend its portfolio securities to banks or broker-dealers, to a
maximum of 25% of the total assets of the Fund, provided such loans are callable
at any time and are continuously secured by collateral consisting of cash or
U.S. Government Securities equal to at least 100% of the value of the securities
loaned, including accrued interest. The Fund will receive income for having made
the loan. The Fund is the beneficial owner of the loaned securities so that any
gain or loss in the market price during the loan inures to the Fund and its
shareholders.
YEAR 2000 RISKS. Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by the Fund's Adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem". The Adviser
is taking steps that they believe are reasonably designed to address the Year
2000 Problem with respect to computer systems that it uses and to obtain
reasonable assurances that comparable steps are being taken by the Fund's other
major service providers. At this time, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund. In addition,
the Year 2000 Problem may adversely affect the issuers of securities in which
the Fund may invest which, in turn, may adversely affect the net asset value of
the Fund.
- --------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------
THE ADVISER. Van Kampen Investment Advisory Corp. (the "Adviser") is the
investment adviser for the Fund. The Adviser is a wholly owned subsidiary of Van
Kampen Investments Inc. ("Van Kampen"). Van Kampen is a diversified asset
management company with more than two million retail investor accounts,
extensive capabilities for managing institutional portfolios, and more than $65
billion under management or supervision. Van Kampen's more than 50 open-end and
39 closed-end funds and more than 2,500 unit investment trusts are
professionally distributed by leading financial advisers nationwide. Van Kampen
Funds Inc., the distributor of the Fund and the sponsor of the funds mentioned
above, is also a wholly owned subsidiary of Van Kampen. Van Kampen is an
indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
Morgan Stanley Dean Witter & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Asset Management Inc., an
investment adviser, 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
9
<PAGE> 10
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, financial and
investing; and securities lending.
ADVISORY AGREEMENT. The business and affairs of the Fund will be managed under
the direction of the Board of Trustees of the Trust, of which the Fund is a
series. Subject to the Trustees' authority, the Adviser and the Fund's officers
supervise and implement the Fund's investment activities. The Fund pays the
Adviser a fee (accrued daily and paid monthly) equal to a percentage of the
average daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY
NET ASSETS
(MILLIONS) % PER ANNUM
------------- -----------
<S> <C>
First $500.................................................. 0.550%
Next $500................................................... 0.525%
Next $2,000................................................. 0.500%
Next $2,000................................................. 0.475%
Next $2,000................................................. 0.450%
Next $2,000................................................. 0.425%
Thereafter.................................................. 0.400%
</TABLE>
Under its investment advisory agreement, the Fund has agreed to assume and pay
the charges and expenses of the Fund's operations, including the compensation of
the Trustees of the Trust (other than those who are affiliated persons, as
defined in the Investment Company Act of 1940 (the "1940 Act"), of the Adviser,
the Distributor, Van Kampen Investor Services Inc. ("Investor Services"), Van
Kampen or Morgan Stanley Dean Witter & Co.), the charges and expenses of
independent accountants, legal counsel, transfer agent, or dividend disbursing
agent and the custodian (including fees for safekeeping of securities), costs of
calculating net asset value, costs of acquiring and disposing of portfolio
securities, interest (if any) on obligations incurred by the Fund, costs of
share certificates, membership dues in the Investment Company Institute or any
similar organization, reports and notices to shareholders, costs of registering
shares of the Fund under the federal securities laws, miscellaneous expenses and
all taxes and fees to federal, state or other governmental agencies.
PERSONAL INVESTING POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes 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 preclearance and other procedures designed to prevent conflicts of
interest.
PORTFOLIO MANAGER. The Fund is managed by a management team headed by Peter W.
Hegel. Mr. Hegel, an Executive Vice President of the Adviser, has been primarily
responsible for the day to day management of the Fund's portfolio since April 1,
1998. Mr. Hegel has been employed by the Adviser since April, 1983. Barbara
Downey and Kelly Gilbert are responsible as Associate Portfolio Managers for the
day-to-day management of the Fund's investment portfolio. Ms. Downey has been a
Vice President of the Adviser since 1996. Prior to that time, Ms. Downey was
Vice President and Senior Portfolio Manager at CSI Asset Management, Inc. and
Harris Investment Management, Inc. From 1984 to 1990 Ms. Downey was Vice
President of Merrill Lynch Capital Services. Ms. Gilbert has been an Assistant
Vice President of the Adviser since 1995. Prior to that time, Ms. Gilbert was a
corporate trader for ABN AMRO, N.A.
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. The securities in which the Fund invests are traded
principally in the over-the-counter market. Over-the-counter securities
generally are traded on a net basis with dealers acting as principal for their
own accounts without a stated commission, although the price of the security
usually includes a mark-up to the dealer. Securities purchased in underwritten
offerings generally include, in the price, a fixed amount of compensation for
the advisers, underwriters and dealers. The Fund may also purchase certain money
market instruments directly from an issuer, in which case no commissions or
discounts are paid. Purchases and sales of securities on a stock exchange are
effected through brokers who charge a commission for their services.
10
<PAGE> 11
The Adviser's primary considerations in selecting the manner of executing
securities transactions for the Fund will be prompt execution of orders, the
size and breadth of the market for the security, the reliability, integrity and
financial condition and execution capability of the firm, 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 is
given to those firms which supply research and other services in addition to
execution services. The Adviser is authorized to 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 shares of the Fund if it reasonably believes that the quality of
the execution and the commission are comparable to that available from other
qualified brokerage firms. For more information, see "Portfolio Transactions and
Brokerage Allocation" in the Statement of Additional Information.
In effecting purchases and sales of the Fund's portfolio securities, the
Adviser and the Fund may place orders with and pay brokerage commissions to
brokers, including brokers which may be affiliated with the Fund, the Adviser
and the Distributor or dealers participating in the offering of the Fund's
shares.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
The Fund currently offers three classes of shares, designated Class A Shares,
Class B Shares and Class C Shares. Shares of each class are offered at a price
equal to their net asset value per share plus a sales charge which, at the
election of the purchaser, may be imposed (a) at the time of purchase ("Class A
Shares") or (b) on a contingent deferred basis (Class A Share accounts over $1
million, "Class B Shares" and "Class C Shares"). The three classes of shares
permit an investor to choose the method of purchasing shares that is most
beneficial to the investor, taking into account the amount of the purchase, the
length of time the investor expects to hold the shares, whether the investor
wishes to receive dividends in cash or to reinvest them in additional shares of
the Fund, and other circumstances. Class A Share accounts over $1 million; Class
B Shares and Class C Shares sometimes are referred to herein collectively as
"Contingent Deferred Sales Charge Shares" or "CDSC Shares." The minimum initial
investment with respect to each class of shares is $500 and the minimum
subsequent investment with respect to each class of shares is $25. It is
presently the policy of the Distributor not to accept any order in an amount of
$500,000 or more for Class B Shares or any order of Class C Shares in an amount
in excess of $1 million or more because it ordinarily will be more advantageous
for an investor making such an investment to purchase Class A Shares.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except each class of shares
has: (i) distribution fees, service fees and administrative expenses unique to
its respective class of shares, (ii) exclusive voting rights on certain
provisions of the Fund's Rule 12b-1 distribution plan which relate only to such
class and (iii) different exchange privileges. Furthermore, the Class B Shares
have a conversion feature (discussed below).
The Fund offers its three classes of shares to the public on a continuous
basis through Van Kampen Funds Inc. (the "Distributor"), as principal
underwriter, which is located at One Parkview Plaza, Oakbrook Terrace, Illinois
60181. Shares also are offered through members of the National Association of
Securities Dealers, Inc. ("NASD") acting as securities dealers ("dealers") and
through NASD members acting as brokers for investors ("brokers") or eligible
non-NASD members acting as agents for investors ("financial intermediaries").
The Fund reserves the right to suspend or terminate the continuous public
offering at any time and without prior notice. Investor Services, transfer agent
for the Fund and a wholly owned subsidiary of Van Kampen, performs bookkeeping,
data processing and administration services related to the maintenance of
shareholder accounts.
CLASS A SHARES
The public offering price of Class A Shares is equal to the net asset value
per share plus an initial sales charge which varies depending upon the total
amount of the sale. The table below shows sales charges and the aggregate amount
of the sales charges which are paid as dealer concessions or broker agency
commissions on sales of Class A Shares. The sales charges collected from the
investor are allocated between the investor's broker, dealer or financial
intermediary and the Distributor.
11
<PAGE> 12
SALES CHARGE TABLE
<TABLE>
<CAPTION>
DEALER
CONCESSIONS
OR AGENCY
TOTAL SALES CHARGE COMMISSION
--------------------------------- --------------
SIZE OF TRANSACTION PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AT OFFERING PRICE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000.......................................... 4.75% 4.99% 4.25%
$100,000 but less than $250,000............................. 3.75 3.90 3.25
$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 imposes a CDSC of
1.00% on redemptions made within one year of the purchase. See "How to Buy
Shares -- Deferred Sales Charge Alternatives" for additional information.
QUANTITY DISCOUNTS AND OTHER PURCHASE PROGRAMS. The Fund's Statement of
Additional Information contains more detailed information about quantity
discounts and other purchase programs available to purchasers of Class A Shares.
Interested investors may obtain a free copy of the Fund's Statement of
Additional Information by calling (800) 421-5666 (or (800) 421-2833 for the
hearing impaired).
DEFERRED SALES CHARGE ALTERNATIVES
Investors choosing the deferred sales charge alternative generally may
purchase Class A Shares in an amount of $1 million or more, Class B Shares or
Class C Shares. The public offering price of these CDSC Shares is equal to the
net asset value per share. The investor incurs no initial sales charge at the
time of purchase. However, as discussed below, the investor may be subject to a
contingent deferred sales charge upon disposition of such shares depending on
the length of time the investor holds such shares. The Distributor compensates
brokers, dealers and financial intermediaries for participating in the
continuous public offering of the CDSC Shares but does so out of its own assets
and not out of the assets of the Fund. The amount paid to brokers, dealers and
financial intermediaries varies as a percentage of the dollar value of the CDSC
Shares purchased from the Fund by such brokers, dealers and financial
intermediaries. The percentage rate equals: (i) with respect to Class A Shares,
1.00% on sales to $2 million, plus 0.80% on the next $1 million and 0.50% on the
excess over $3 million; (ii) 4.00% with respect to the Class B Shares and (iii)
1.00% with respect to the Class C Shares. When an investor sells its CDSC
Shares, any applicable CDSC is paid to the Distributor and used by the
Distributor to defray its expenses related to providing distribution-related
services to the Fund in connection with the sale of such CDSC Shares, including
the payment of compensation to dealers and agents for selling such shares. The
discussions of Class A Shares, Class B Shares and Class C Shares below summarize
an investor's contingent deferred sales charge ("CDSC"). The CDSC and the
distribution and service fees (see "Distribution and Service Plans" below)
enable the Fund to sell such CDSC Shares without an initial sales charge.
CLASS A SHARE PURCHASES OF $1 MILLION OR MORE. No sales charge is payable at
the time of purchase on investments in Class A Shares of $1 million or more,
although for such investments the Fund imposes a CDSC of 1.00% on redemptions
made within one year of the purchase.
CLASS B SHARES. Class B Shares redeemed within eight years of purchase
generally will generally be subject to a CDSC at the rates set forth below,
charged as a percentage of the dollar amount redeemed:
12
<PAGE> 13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- -----------------------------------------------------------------------------------------------
<S> <C>
First....................................................... 4.00%
Second...................................................... 3.75%
Third....................................................... 3.50%
Fourth...................................................... 2.50%
Fifth....................................................... 1.50%
Sixth....................................................... 1.00%
Seventh and after........................................... 0.00%
</TABLE>
- --------------------------------------------------------------------------------
CLASS C SHARES. Class C Shares redeemed within the first twelve months of
purchase generally will be subject to a CDSC of 1.00% of the dollar amount
subject thereto. Class C Shares redeemed thereafter will not be subject to a
CDSC.
CONVERSION FEATURE. Class B Shares purchased on or after June 1, 1996, and any
dividend reinvestment plan shares received thereon automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A Shares six years after the end of the calendar month in which the shares
were purchased. Class C Shares purchased before January 1, 1997, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A Shares ten years after the end of the calendar month in which such
shares were purchased. The conversion feature is subject to the continuing
availability of an opinion of counsel to the Fund regarding certain tax matters
and the Fund may suspend such conversion feature in the absence of such opinion.
WAIVERS OF CONTINGENT DEFERRED SALES CHARGE. The Fund's Statement of
Additional Information contains more detailed information about waivers of CDSCs
available to purchasers of CDSC Shares. Interested investors may obtain a free
copy of the Fund's Statement of Additional Information by calling (800) 421-5666
(or (800) 421-2833 for the hearing impaired).
NET ASSET VALUE
The net asset value per share of the Fund will be determined separately for
each class of shares. The net asset value per share of a given class of shares
of the Fund is determined by calculating the total value of the Fund's assets
attributable to such class of shares, deducting the total liabilities
attributable to such class of shares, and dividing the result by the number of
shares of such class outstanding. Generally, the net asset value for the Fund is
computed once daily as of 5:00 p.m. Eastern time Monday through Friday.
Portfolio securities are valued by using market quotations, prices provided by
market makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Board of Trustees of the Trust, of
which the Fund is a series.
OTHER PURCHASE INFORMATION
Purchases of a Fund's shares will be made in full and fractional shares. In
the interest of economy and convenience, certificates for shares generally will
not be issued.
The Distributor may from time to time implement special programs or contests
which are intended to result in sales of shares of the Fund. Such programs,
which will be conducted pursuant to objective criteria established by the
Distributor, generally will result in brokers, dealers and financial
intermediaries being paid additional amounts than those described above with
respect to sales of shares of the Fund. 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.
Such payments to brokers, dealers and financial intermediaries for such programs
are made by the Distributor out of its own assets and not out of the assets of
the Fund. These programs will not change the price an investor pays for shares
or the amount the Fund will receive from such sale.
13
<PAGE> 14
DIVIDEND REINVESTMENT PROGRAM
The Fund automatically will credit monthly and annual distributions to a
shareholder's account in additional shares of the Fund, without a sales charge,
unless a shareholder instructs otherwise. This instruction may be made by
telephone by calling (800) 421-5666 (or (800) 421-2833 for the hearing impaired)
or in writing to Van Kampen Funds, c/o Van Kampen Investor Services Inc., P.O.
Box 418256, Kansas City, MO 64141-9256.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
Shareholders may redeem for cash some or all of their shares without charge by
the Fund (other than, with respect to CDSC Shares, the applicable contingent
deferred sales charge) at any time by sending a written request in proper form
directly to Van Kampen Investor Services Inc., P. O. Box 418256, Kansas City, MO
64141-9256, by placing the redemption request through an authorized dealer or by
calling the Fund.
WRITTEN REDEMPTION REQUESTS. In the case of redemption requests sent directly
to Investor Services, the redemption request should indicate the number of
shares to be redeemed, the class designation of such shares, the account number
and be signed exactly as the shares are registered. Signatures must conform
exactly to the account registration. If the proceeds of the redemption would
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. If certificates are held for the shares
being redeemed, such certificates must be endorsed for transfer or accompanied
by an endorsed stock power and sent with 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 60 days must accompany the redemption
request. The redemption price is the net asset value per share next determined
after the request is received by Investor Services in proper form. Payment for
shares redeemed (less any sales charge, if applicable) will ordinarily be made
by check mailed within three business days after acceptance by Investor Services
of the request and any other necessary documents in proper order. Such payments
may be postponed or the right of redemption suspended as provided by the rules
of the Securities and Exchange Commission ("SEC"). If the shares to be redeemed
have been recently purchased by check, Investor Services may delay mailing a
redemption check until it confirms that the purchase check has cleared, usually
a period of up to 15 days. Any gain or loss realized on the redemption of shares
is a taxable event.
DEALER REDEMPTION REQUESTS. Shareholders may sell shares through their
securities dealer, who will telephone the request to the Distributor. Orders
received from dealers must be at least $500 unless transmitted via the FUNDSERV
network. The redemption price for such shares is the net asset value next
calculated after an order is received by a 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 dealers to transmit redemption requests
received by them to the Distributor so they will be received prior to such time.
Any change in the redemption price due to failure of the Distributor to receive
a sell order prior to such time must be settled between the shareholder and
dealer. Shareholders must submit a written redemption request in proper form (as
described above under "Written Redemption Requests") to the dealer within three
business days after calling the dealer with the sell order. Payment for shares
redeemed (less any sales charge, if applicable) ordinarily will be made by check
mailed within three business days to 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. To establish
such privilege, a shareholder must complete the appropriate section of the
application form accompanying this Prospectus or call the Fund at (800) 421-5666
(or (800) 421-2833 for the hearing impaired) to request that a copy of the
Telephone Redemption Authorization form be sent to them for completion. To
redeem shares, contact the telephone transaction line at (800) 421-5684. Van
Kampen 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, a shareholder agrees that
14
<PAGE> 15
neither VK nor the Fund will be liable for following instructions which it
reasonably believes to be genuine. VK and the Fund may be liable for any losses
due to unauthorized or fraudulent instructions if reasonable procedures are not
followed. 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 procedures previously described. Requests received by
Investor Services prior to 4:00 p.m., New York time, on a regular business day
will be processed at the net asset value per share determined that day. These
privileges are available for all accounts other than retirement accounts. The
telephone redemption privilege is not available for shares represented by
certificates. If the shares to be redeemed have been recently purchased by
check, Investor Services may delay mailing a redemption check or wiring
redemption proceeds until it confirms that the purchase check has cleared,
usually a period of up to 15 days. 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 sent to the shareholders'
address of record and amounts of at least $1,000 and up to $1 million may be
redeemed daily if the proceeds are to be paid by wire sent to the shareholder's
bank account of record. The proceeds must be payable to the shareholder(s) of
record. Proceeds from redemptions to be paid by check will ordinarily be mailed
within three business days to the shareholder's address of record. Proceeds from
redemptions to be paid by wire will ordinarily be wired on the next business day
to the shareholder's bank account of record. This privilege is not available if
the address of record has been changed within 30 days prior to a telephone
redemption request. The Fund reserves the right at any time to terminate, limit
or otherwise modify this telephone redemption privilege.
GENERAL REDEMPTION INFORMATION. The Fund may redeem any shareholder account
with a net asset value on the date of the notice of redemption less than the
minimum investment as specified by the Trustees. At least 60 days advance
written notice of any such involuntary redemption is required and the
shareholder is given an opportunity to purchase the required value of additional
shares at the next determined net asset value without sales charge. Any
applicable contingent deferred sales charge will be deducted from the proceeds
of this redemption. Any involuntary redemption may only occur if the shareholder
account is less than the minimum investment due to shareholder redemptions.
Further information regarding redemptions from the Fund is contained in the
Fund's Statement of Additional Information.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS
- --------------------------------------------------------------------------------
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 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 each class. The Fund may spend up to 0.25% per year
of the Fund's average daily net assets attributable to each class of shares
pursuant to the Service Plan in connection with the ongoing provision of
services to holders of such shares by the Distributor and brokers, dealers or
financial intermediaries in connection with the maintenance of such
shareholders' accounts. The Distribution Plan and the Service Plan are
implemented through an agreement with the Distributor and sub-agreements between
the Distributor and brokers, dealers or financial intermediaries (collectively,
"Selling Agreements") that may provide customers certain services or assistance.
CLASS A SHARES. The Fund may spend an aggregate amount up to 0.25% per year of
the average daily net assets attributable to the Class A Shares of the Fund
pursuant to the Distribution Plan and the Service Plan. The Fund pays the
Distributor the lesser of the balance of the 0.25% not paid to brokers, dealers
or financial intermediaries or the amount of the Distributor's actual
distribution-related expenses.
CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B Shares of the Fund pursuant to the
Distribution Plan. In addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B Shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
15
<PAGE> 16
CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C Shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C Shares up to 0.75% of the Fund's average daily
net assets attributable to Class C Shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of 0.75% not paid to such
brokers, dealers or financial intermediaries or the amount of the Distributor's
actual distribution-related expense attributable to the Class C Shares. In
addition, the Fund may spend up to 0.25% per year of the Fund's average daily
net assets attributable to the Class C Shares pursuant to the Service Plan in
connection with the ongoing provision of services to holders of such shares by
the Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts.
OTHER INFORMATION. Amounts payable to the Distributor with respect to the
Class A Shares under the Distribution Plan in a given year may not fully
reimburse the Distributor for its actual distribution-related expenses during
such year. In such event, there is no carryover of such reimbursement
obligations to succeeding years.
The Distributor's expenses with respect to a class of CDSC Shares (for
purposes of this paragraph excluding any Class A Shares that may be subject to a
CDSC) for any given year may exceed the amounts payable to the Distributor with
respect to such class of CDSC Shares under the Distribution Plan, the Service
Plan and payments received pursuant to the contingent deferred sales charge. Any
unreimbursed expenses will be carried forward and paid by the Fund (up to the
amount of the actual expenses incurred) in future years so long as such
Distribution Plan is 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. Because such expenses
are accounted on a Fund level basis, in periods of extreme net asset value
fluctuation, amounts paid to the Distributor with respect to a particular CDSC
Share may be greater or less than the amount of the initial commission
(including carrying cost) paid by the Distributor with respect to such CDSC
Share. In such circumstances, the holder of such CDSC Share may be deemed to
incur expenses attributable to other shareholders of such class. As of December
31, 1997, there were $11,027,863 and $134,396 of unreimbursed distribution
expenses with respect to Class B Shares and Class C Shares, respectively,
representing 3.07% and 0.95% of the Fund's net assets attributable to Class B
Shares and Class C Shares, respectively. If the Distribution Plan was terminated
or not continued, the Fund 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.
The Distributor will not use the proceeds from the contingent deferred sales
charge applicable to a particular class of CDSC Shares to defray
distribution-related expenses attributable to any other class of CDSC Shares.
Various federal and state laws prohibit national banks and some state-chartered
commercial banks from underwriting or dealing in the Fund's shares. In addition,
state securities laws on this issue may differ from the interpretations of
federal law, and banks and financial institutions may be required to register as
dealers pursuant to state law. In the unlikely event that a court were to find
that these laws prevent such banks from providing the services described above,
the Fund would seek alternate providers and expects that shareholders would not
experience any disadvantage.
- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund will declare distributions on a daily basis and will pay such
distributions from net investment income and net realized short-term capital
gains on a monthly basis. The Fund will distribute annually any remaining
short-term capital gains together with long-term capital gains, if any.
Distributions with respect to each class of shares will be calculated in the
same manner on the same day and will be in the same amount, except that the
different distribution and service fees and any incremental administrative
expenses relating to each class of shares will be borne exclusively by the
respective class and may cause the distributions relating to the different
classes of shares to differ.
In order to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended, the Fund intends to distribute substantially
all of its net investment income and capital gains at least annually. Any
distributions in excess of the Fund's net investment income and capital gains
will be a return of principal, which will reduce the investor's tax basis in the
shares. Distributions of the Fund's net investment income are taxable to
shareholders as ordinary income whether received in shares or in cash.
Distributions of the Fund's net capital gains ("capital gain dividends") are
taxable
16
<PAGE> 17
to shareholders as long-term capital gains regardless of the length of time the
shares of the Fund have been held by such shareholders.
Redemption or resale of shares of the Fund will be a taxable transaction for
federal income tax purposes. For further information with respect to taxes, see
the Statement of Additional Information.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
From time to time advertisements and other sales materials for the Fund may
include information concerning the historical performance of the Fund. Any such
information will include the average total return of the Fund calculated on a
compounded basis for specified periods of time. 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.
Further information about the Fund's performance is contained in the Fund's
Annual Report and the Fund's Statement of Additional Information, each of which
can be obtained without charge by calling (800) 421-5666 (or (800) 421-2833 for
the hearing impaired).
- --------------------------------------------------------------------------------
FUND ORGANIZATION
- --------------------------------------------------------------------------------
The Fund is a diversified, open-end management investment company. The Fund is
a series of Van Kampen U.S. Government Trust, a Delaware business trust which
was organized as of May 10, 1995 (the "Trust") and which adopted its current
name on July 14, 1998. To date, the Fund is the only series of the Trust,
although the Trustees of the Trust are empowered to organize and designate other
series in the future. 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. 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. More detailed information concerning
the Trust is set forth in the Statement of Additional Information.
The authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, par value $0.01 per share, divided into classes.
The Fund currently offers three classes of shares, designated Class A Shares,
Class B Shares and Class C Shares. Each class of shares represents an interest
in the same assets of the Fund and are identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee.
The Fund issues multiple classes of shares pursuant to a plan adopted under
Rule 18f-3 of the 1940 Act. Each class of shares is equal as to earnings, assets
and voting privileges, except as noted herein, and each class bears the expenses
related to the distribution of its shares. There are no conversion, preemptive
or other subscription rights, except with respect to the conversion of Class B
Shares into Class A Shares as described above. 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 debt and expenses of the Fund have been paid. Since Class B
Shares and Class C Shares pay higher distribution expenses, the liquidation
proceeds to holders of Class B Shares and Class C Shares are likely to be lower
than to other shareholders. The fiscal year end of the Fund is December 31.
17
<PAGE> 18
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration Statement
may be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
Shareholder inquiries should be directed to: Van Kampen U.S. Government Fund,
One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attn: Correspondence. The
telephone number is (800) 421-5666 (or (800) 421-2833 for the hearing impaired).
For Automated Telephone Service which provides 24-hour direct dial access to
Fund facts and shareholder account information dial (800) 847-2424.
18
<PAGE> 19
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE
CALL THE FUND'S TOLL-FREE
NUMBER--(800) 341-2911.
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666.
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666.
FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 421-2833.
FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424.
VAN KAMPEN U.S. GOVERNMENT FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen U.S. Government Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street, P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen U.S. Government Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601
<PAGE> 20
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
FUND
- --------------------------------------------------------------------------------
P R O S P E C T U S
APRIL 30, 1998, AS SUPPLEMENTED
ON JULY 14, 1998 AND OCTOBER 27, 1998
[VAN KAMPEN FUNDS LOGO]
USGF PRO 10/98
