VAN KAMPEN U S GOVERNMENT TRUST, 485APOS, 1999-03-01

VAN KAMPEN U S GOVERNMENT TRUST
485APOS, 1999-03-01

Previous: VANGUARD STAR FUND, 485APOS, 1999-03-01

Next: PROVIDENT MUTUAL VARIABLE GROWTH SEPARATE ACCOUNT, NT-NSAR, 1999-03-01

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1999

REGISTRATION NOS. 2-89190

811-3950

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 31 [X]
AND
REGISTRATION STATEMENT UNDER THE

INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 32 [X]
</TABLE>

VAN KAMPEN

U.S. GOVERNMENT TRUST

(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)

DENNIS J. McDONNELL

EXECUTIVE VICE PRESIDENT

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:

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

[ ] immediately upon filing pursuant to paragraph (b)

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

[X] on April 30, 1999 pursuant to paragraph (a)(1)

[ ] 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.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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.

SUBJECT TO COMPLETION--DATED MARCH 1, 1999

VAN KAMPEN

U.S. GOVERNMENT FUND

Van Kampen U.S. Government Fund is a mutual
fund with an investment objective to provide a
high level of current income, with liquidity
and safety of principal. The Fund's management
seeks to achieve the investment objective by
investing primarily in obligations issued or
guaranteed by the U.S. government or by its
agencies or its instrumentalities.

Shares of the Fund have not been approved or
disapproved by the Securities and Exchange
Commission (SEC) or any state regulators, and
neither the SEC nor any state regulator has
passed upon the accuracy or adequacy of this
prospectus. It is a criminal offense to state
otherwise.

This prospectus is dated APRIL , 1999.

[VAN KAMPEN FUNDS LOGO]
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 6
Investment Objective and Policies.................. 7
Investment Advisory Services....................... 11
Purchase of Shares................................. 12
Redemption of Shares............................... 19
Distributions from the Fund........................ 20
Shareholder Services............................... 21
Federal Income Taxation............................ 23
Financial Highlights............................... 24
</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 provide a high level
of current income, with liquidity and safety of principal. There can be no
assurance that the Fund will achieve its investment objective.

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's management seeks to achieve the
investment objective by investing at least 65% of the Fund's total assets in
obligations issued or guaranteed by the U.S. government or by its agencies or
its 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 United States 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 instrumentality. The Fund may purchase or sell
securities on a when-issued or delayed delivery basis. The Fund may borrow money
for investment purposes. The Fund may purchase or sell certain derivative
instruments (such as options, futures and options on futures, and interest rate
swaps or other interest rate related transactions) for various risk management
and hedging purposes.

INVESTMENT RISKS
Because of the following risks, you could lose money on your investment in the
Fund over the short or long term:

MARKET RISK. The prices of debt securities tend to fall as interest rates rise.
This "market risk" is usually greater among debt securities with longer
maturities or longer durations. The Fund has no policy limiting the maturities
of its investments. To the extent the Fund invests in securities with longer
maturities, the Fund will be subject to greater market risk than a fund
investing solely in shorter-term securities. The yields and market prices of
U.S. government securities may move differently and adversely compared to the
yields and market prices of the overall securities markets. These securities,
while backed by the U.S. government, are not guaranteed against declines in
their market prices.

Like traditional debt securities, the prices of mortgage-backed securities tend
to fall as interest rates rise. However, mortgage-backed securities may benefit
less than traditional debt securities from declining interest rates because
prepayment of mortgages tends to accelerate during periods of declining interest
rates.

Market risk is often greater among certain types of debt securities, such as
zero-coupon bonds, which do not make regular interest payments but are instead
bought at a discount to their face values and paid in full upon maturity. As
interest rates change, these bonds often fluctuate more in price than bonds that
make regular interest payments. Because the Fund invests in zero-coupon bonds,
it may be subject to greater market risk than a fund that does not own this type
of bond.

When-issued and delayed delivery transactions are subject to changes in market
conditions from the time of the commitment until settlement. This may adversely
affect the prices or yields of the securities being purchased, as well as any
portfolio securities held for payment of such commitments. The greater the
Fund's outstanding commitments for these securities, the greater the Fund's
exposure to market price fluctuation.

3
<PAGE> 5

CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Credit risk should be low for the Fund because it
invests primarily in obligations issued or guaranteed by the U.S. government or
by its agencies or its instrumentalities.

INCOME RISK. The income you receive from the Fund is based primarily on interest
rates, which can vary widely over the short and long term. If interest rates
drop, your income from the Fund may drop as well. The more the Fund invests in
variable or floating rate securities or in securities susceptible to prepayment
risk, the greater the Fund's income risk.

PREPAYMENT RISK. If interest rates fall, the principal on debt securities held
by the Fund may be paid earlier than expected. If this happens, the proceeds
from a prepaid security would be reinvested by the Fund in securities bearing
the new, lower interest rates, resulting in a possible decline in the Fund's
income and distributions to shareholders.

The Fund may invest in pools of mortgages issued or guaranteed by private
organizations on U.S. government agencies. These mortgage-related securities are
especially sensitive to prepayment risk because borrowers often refinance their
mortgages when interest rates drop.

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 underlying
asset, interest rate or index. Options, futures and options on futures, interest
rate swaps and other interest-rate related transactions are examples of
derivatives. Such transactions involve risks different from the direct
investment in underlying securities such as 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 incur
losses that partially or completely offset gains in portfolio positions; risks
that the transactions may not be liquid; and manager risk.

BORROWING RISKS. The Fund may borrow money from banks, and engage in reverse
repurchase agreements or dollar rolls, for investment purposes, which is known
as "leverage." The Funds may use leverage to seek to enhance the income to
shareholders but the use of leverage creates the likelihood of greater
volatility in the net asset value of the shares of the Fund and the risk that
fluctuations in interest rates on leverage may adversely affect the return to
shareholders and the Fund's ability to make dividend payments. To the extent the
income from investments made with such borrowed money exceeds the interest
payable and other expenses of the leverage, the Fund's net income will be less
than if the Fund did not use leverage and the amount available for distributions
to shareholders of the Fund will be reduced. The Fund's use of leverage also may
impair the ability of the Fund to maintain its qualification for federal income
tax purposes as a regulated investment company.

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

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.

INVESTOR PROFILE
In light of its objective and investment strategies, the Fund may be appropriate
for investors who:

- - Seek current income.

- - Wish to add to their personal investment portfolio a fund that invests
primarily in obligations issued or guaranteed by the U.S. government or by its
agencies or its instrumentalities.

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.

4
<PAGE> 6

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance varies from year to year. The following chart shows the annual
returns of the Fund's Class A Shares over the past ten calendar years prior to
the date of this prospectus. Sales loads are not reflected in this chart. If
these sales loads had been included, the returns shown below would have been
lower. Remember that the past performance of the Fund is not indicative of its
future performance.

BAR GRAPH

<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
'1989' 13.88
'1990' 9.62
'1991' 15.80
'1992' 6.27
'1993' 7.95
'1994' -5.1
'1995' 17.61
'1996' 4.10
'1997' 8.57
'1998' 5.77
</TABLE>

The annual return variability of the Fund's Class B Shares and Class C Shares
would be substantially similar to that shown for the Class A Shares because all
of the Fund's shares are invested in the same portfolio of securities; however,
the actual annual returns of the Class B Shares and Class C Shares would be
lower than the annual returns shown for the Fund's Class A Shares because of
differences in the expenses borne by each class of shares.

During the ten-year period shown in the bar chart, the highest quarterly return
was 7.95% (for the quarter ended June 30, 1989) and the lowest quarterly return
was -4.14% (for the quarter ended March 31, 1994).

COMPARATIVE PERFORMANCE

This table shows how the Fund's performance compares with the Merrill Lynch 1 to
10 Year U.S. Treasury Index, a broad-based market index that the Fund's
management believes is an applicable benchmark for the Fund. Average annual
total returns, assuming payment of the maximum sales charge, are shown for the
one-, five and ten-year periods ended December 31, 1998 (the most recently
completed calendar year prior to the date of this prospectus). Remember that the
past performance of the Fund is not indicative of its future performance.

<TABLE>
<CAPTION>
Average Annual
Total Returns Past 10
for the Years
Periods Ended Past Past or Since
December 31, 1998 1 Year 5 Years Inception
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen U.S.
Government Fund
.......................................................
Class A Shares 0.74% 4.91% 7.74%
.......................................................
Class B Shares 0.92% 4.85% 5.36%(1)
.......................................................
Class C Shares 3.88% 5.10% 4.81%(2)
.......................................................
Merrill Lynch 1
to 10 Year U.S.
Treasury Index % % %
.......................................................
</TABLE>

Inception dates: (1) 8/24/92, (2) 8/13/93.

The current yield for the thirty-day period ended December 31, 1998 is 5.61% for
Class A Shares, 5.04% for Class B Shares and 5.06% for Class C Shares. Investors
can obtain the current yield of the Fund for each class of shares by calling
(800) 341-2911.

5
<PAGE> 7

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.

SHAREHOLDER FEES

(fees paid directly from your investment)

<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of 4.75%(1) None None
offering price)
..................................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
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
..................................................................
Maximum sales charge
(load) imposed on
reinvested dividends
(as a percentage of None None None
offering price)
..................................................................
Redemption fees (as a
percentage of amount None None None
redeemed)
..................................................................
Exchange fee None None None
..................................................................
</TABLE>

(1) Reduced for purchases of $100,000 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."

ANNUAL FUND

OPERATING EXPENSES

(expenses that are deducted from Fund assets)

<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.51% 0.51% 0.51%
..............................................................
Distribution and/or 0.19% 1.00%(2) 1.00%(2)
Service (12b-1)
Fees(1)
..............................................................
Other Expenses 0.20% 0.21% 0.21%
..............................................................
Total Annual Fund 0.90% 1.72% 1.72%
Operating Expenses
..............................................................
</TABLE>

(1) 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."

(2) 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. Long-term shareholders may pay more than the economic equivalent of
the maximum front-end sales charges permitted by National Association of
Securities Dealers, Inc. rules.

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% annual return each year and
that the Fund's operating expenses remain the same each year (except for the ten
year amounts for Class B Shares which reflect the conversion of Class B Shares
to Class A Shares after eight years). Although your actual costs may be higher
or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $562 $748 $950 $1,530
......................................................................
Class B Shares $575 $892 $1,083 $1,813*
......................................................................
Class C Shares $275 $542 $933 $2,030
......................................................................
</TABLE>

6
<PAGE> 8

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

<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $562 $748 $950 $1,530
.....................................................................
Class B Shares $175 $542 $933 $1,813*
.....................................................................
Class C Shares $175 $542 $933 $2,030
.....................................................................
</TABLE>

* Based on conversion to Class A Shares after eight years.

To simplify comparison among funds, all funds are required by the SEC to assume
a 5% annual return. Class B Shares of the Fund acquired through the exchange
privilege are subject to the contingent deferred sales charge schedule of the
fund from which the shareholder's purchase of Class B Shares was originally
made. Accordingly, future expenses as projected could be higher than those
determined in the above table if the investor's Class B Shares were exchanged
from a fund with a higher contingent deferred sales charge. The Fund's actual
annual return and actual expenses for future periods may be greater or less than
those shown.

INVESTMENT OBJECTIVE
AND POLICIES

The Fund's investment objective is to provide a high level of current income,
with liquidity and safety of principal. The Fund's investment objective is a
fundamental policy and may not be changed without shareholder approval of the
holders of a majority of the Fund's outstanding voting securities, as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"). There are risks
inherent in all investments in securities; accordingly there can be no assurance
that the Fund will achieve its investment objective.

Under normal market conditions, the Fund's management seeks to achieve the
investment objective by investing at least 65% of the Fund's total assets in
obligations issued or guaranteed by the U.S. government, its agencies or its
instrumentalities. This is a fundamental policy of the Fund which, like the
Fund's investment objective, may not be changed without shareholder approval of
the holders of a majority of the Fund's outstanding voting securities as defined
in the 1940 Act. 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 generally will not affect investment
income from those securities. The Fund historically has invested substantially
all of its assets in mortgage-backed securities issued or guaranteed by agencies
or instrumentalities of the U.S. government. While securities purchased for the
Fund's portfolio may be issued or guaranteed by the U.S. government, its
agencies or its instrumentalities, the shares issued by the Fund to investors
are not insured or guaranteed by the U.S. government, its agencies or its
instrumentalities or any other person or entity.

U.S. GOVERNMENT SECURITIES

U.S. government securities include: (1) U.S. Treasury obligations, which differ
in their interest rates, maturities and times of issuance, (2) obligations
issued or guaranteed by U.S. government agencies and instrumentalities 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 its agencies and its instrumentalities or; (d) the credit of the
instrumentality, (3) real estate mortgage investment conduits ("REMICs"),
collateralized mortgage obligations ("CMOs") and other mortgage-backed
securities ("Mortgage-Backed Securities") issued or guaranteed by U.S.
government agencies or instrumentalities, (4) "when-issued" commitments relating
to any of the foregoing and (5) repurchase agreements 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.

MORTGAGE-BACKED 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

7
<PAGE> 9

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 U.S. government. 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 U.S. government, 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. Prepayments shorten the life of the security and shorten the
time over which the Fund receives income at the higher rate. Additionally, when
mortgage loans underlying Mortgage-Backed Securities held by the Fund are
prepaid, the Fund then 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 by decreasing interest
rates and the extent that prepayments occur which must be reinvested in
securities which have lower yields. Any decline in the Fund's income in turn
adversely affects the Fund's dividend payments and distribution to shareholders.

The Fund may invest in REMICs and CMOs. REMICs are private entities formed for
the purpose of holding a fixed pool of mortgages secured by an interest in real
property. CMOs are debt obligations collateralized by mortgage loans or mortgage
pass-through securities held under an indenture issued by financial institutions
or other mortgage lenders or issued or guaranteed by agencies or
instrumentalities of the U.S. government. REMICs and CMOs are issued in a number
of classes or series with different maturities. The classes or series are
retired in sequence as the underlying mortgages are repaid. Prepayment may
shorten the stated maturity of the obligation and can result in a loss of
premium, if any has been paid. Certain of these securities may have variable or
floating interest rates and others may be stripped (securities which provide
only the principal or interest feature of the underlying security).

Additional information regarding U.S. government securities, Mortgage-Backed
Securities, REMICs and CMOs is contained in the Fund's Statement of Additional
Information.

ZERO COUPON AND STRIPPED SECURITIES

The Fund may invest in zero coupon securities or in the interest only or
principal only components of debt securities described above.

"Zero coupon" securities include U.S. Treasury bills which are initially sold at
a discount to par value, and U.S. Treasury notes and bonds which have been
stripped of their unmatured interest coupons, and similar obligations, receipts
or certificates representing the principal only portion of debt or stripped debt
obligations. A "zero coupon" security pays no interest in cash to its holder
during its life although interest is accrued during that period. The price for a
zero coupon security is generally an amount significantly less than its face
value (sometimes referred to as a "deep discount" price) and the investment
return is based on the difference between the face value (or resale value prior
to maturity) and the investor's price to purchase the security.

Currently the principal Treasury security issued without coupons is the U.S.
Treasury bill. The Treasury also has wire transferable "zero coupon" Treasury
securities available. In the last few years agencies or instrumentalities of the
U.S. government

8
<PAGE> 10

and a number of banks and brokerage firms have separated ("stripped") the
principal portions from the coupon portions of the U.S. Treasury bonds and notes
and sold them separately in the form of receipts or certificates representing
undivided interests in these instruments (which instruments are often held by a
bank in a custodial or trust account).

"Zero coupon" securities usually trade at a deep discount from their face or par
value and will be subject to greater fluctuations of market value in response to
changing interest rates than debt obligations of comparable maturities which
make periodic distributions of interest. Such securities do not entitle the
holder to any periodic payments of interest prior to maturity which prevents the
reinvestment of such interest payments if prevailing interest rates rise. On the
other hand, because there are no periodic interest payments to be reinvested
prior to maturity, "zero coupon" securities eliminate the reinvestment risk and
may lock in a favorable rate of return to maturity if interest rates drop.
Current federal tax law requires that a holder (such as the Fund) of a "zero
coupon" security accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no interest payment
in cash on the security during the year. The Fund is required to distribute
substantially all of its investment company taxable income each year and in
order to generate sufficient cash to make distributions of such income, 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.

The Fund may invest in stripped securities which may be issued by agencies or
instrumentalities of the U.S. Government or by private originators, including
stripped mortgage-backed related securities. Such stripped securities are often
structured with two classes that receive different proportions of the interest
and principal distributions on a pool of underlying assets. In the most extreme
case, one class will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying assets, and a rapid rate of principal payments may have a
material adverse effect on such security's yield to maturity. If the underlying
assets experience greater than anticipated prepayments of principal, the Fund
may fail to fully recoup its initial investment in these securities. PO
securities usually trade at a deep discount from their face or par value and 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. Furthermore, if the underlying assets experience less
than anticipated prepayments of principal, the yield of POs could be materially
adversely affected. The market values of IOs and POs are subject to greater risk
of fluctuation in response to changes in market rates of interest than many
other types of government securities and, to the extent the Fund invests in IOs
and POs, increases the risk of fluctuations in the net asset value of the Fund.
Although the market for stripped securities is increasingly liquid, certain of
such securities may not be readily marketable and will be considered illiquid
for purposes of the Fund's limitation on investments in illiquid securities.

OTHER INVESTMENTS AND RISK FACTORS

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 risk management or 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 imperfect correlation between
the value of such instruments and the underlying assets or 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

9
<PAGE> 11

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.

A more complete discussion of Strategic Transactions, and other risks is
contained in the Fund's Statement of Additional Information.

The Fund may purchase and sell securities on a "when-issued" and "delayed
delivery" basis. 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.

For cash management and investment purposes, the Fund may engage in repurchase
agreements collateralized by U.S. government securities with banks and
broker-dealers. Such transactions are subject to the risk of default by the
other party. The Fund may invest up to 25% of its net assets at the time of
purchase in securities subject to repurchase agreements with a duration of seven
days or less. Investments in repurchase agreement of more than seven days may be
limited in conjunction with the Fund's limitation in illiquid securities.

The Fund is authorized to borrow money from banks and engage in reverse
repurchase agreements and dollar rolls in an aggregate amount up to 33 1/3% of
the Fund's total assets (including amount borrowed) with no more than 5% of such
amount from 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
in which 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 such securities. Dollar rolls are transactions in which 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 forgoes 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.

In order to generate additional income, the Fund may lend its portfolio
securities in an amount up to 25% of its total assets to broker-dealers, major
banks or other recognized domestic institutional borrowers of securities. Such
loans must be callable at any time and the borrower at all times during the loan
must maintain cash or liquid securities as collateral or provide to the Fund an
irrevocable letter of credit equal in value to at least 100% of the value of the
securities loaned. During the time portfolio securities are on loan, the Fund
receives any dividends or interest paid on such securities and may invest the
collateral itself or receive an agreed-upon amount of interest income from the
borrower who has delivered the collateral or a letter of credit. There are risks
of delay in recovery and in some cases even loss of rights in the collateral
should the borrower of the securities fail financially.

The Fund may invest up to 15% of its total assets in illiquid securities and
repurchase agreements that have a maturity of longer than seven days. Such

10
<PAGE> 12

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 Fund's Statement of
Additional Information which can be obtained by investors free of charge as
described on the back cover of this prospectus.

Although the Fund does not intend to engage in substantial short-term trading,
it may sell securities without regard to the length of time they have been held
in order to take advantage of new investment opportunities or yield
differentials or otherwise. The Fund's portfolio turnover is shown under the
heading "Financial Highlights." The portfolio turnover rate may be expected to
vary from year to year. A high portfolio turnover rate (100% or more) increases
the Fund's transactions costs, including brokerage commissions or dealer costs,
and may result in the realization of more short-term capital gains than if the
Fund had a lower portfolio turnover. The turnover rate will not be a limiting
factor, however, if the Fund's investment adviser considers portfolio changes
appropriate.

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 investment adviser and other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Fund's investment adviser is taking steps that it believes are
reasonably designed to address the Year 2000 Problem with respect to computer
systems that it uses and to obtain reasonable assurances that comparable steps
are being taken by the Fund's other major service providers. At this time, there
can be no assurances that these steps will be sufficient to avoid any adverse
impact to the Fund. In addition, the Year 2000 Problem may adversely affect the
markets and the issuers of securities in which the Fund may invest which, in
turn, may adversely affect the net asset value of the Fund. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies or issuers and overall
economic uncertainty. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported inconsistently
in U.S. and foreign financial statements. Accordingly, the Fund's investments
may be adversely affected. The statements above are subject to the Year 2000
Information and Readiness Disclosure Act which Act may limit the legal rights
regarding the use of such statements in the case of a dispute.

INVESTMENT ADVISORY SERVICES

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 $75 billion under management or supervision. 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 financial
advisers 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

11
<PAGE> 13

fee computed based upon an annual rate applied to the Fund's average daily net
assets as follows:

<TABLE>
<CAPTION>
% Per
Average Daily Net Assets Annum
- ----------------------------------------
<S> <C> <C> <C>
First $500 million 0.550%
........................................
Next $500 million 0.525%
........................................
Next $2 billion 0.500%
........................................
Next $2 billion 0.475%
........................................
Next $2 billion 0.450%
........................................
Next $2 billion 0.425%
........................................
Over $9 billion 0.400%
........................................
</TABLE>

Applying this fee schedule, the Fund paid the Adviser an advisory fee at the
effective rate of 0.51% of the Fund's average daily net assets for the Fund's
fiscal year ended December 31, 1998.

Under the Advisory Agreement, the Fund also 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. Other operating expenses
paid by the Fund include service fees, distribution fees, custodial fees, legal
and accounting fees, the costs of reports and proxies to shareholders, trustees'
fees (other than those who are affiliated persons of the Adviser, Distributor or
Van Kampen Investments) and all other business expenses not specifically assumed
by the Adviser.

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

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").

PERSONAL INVESTMENT 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 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 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.

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 $500 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 (described below) pursuant to which its
distribution

12
<PAGE> 14

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 price of the Fund's shares is based upon the Fund's net asset value per
share. 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 generally is
determined once daily as of 5:00 p.m. 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. 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 by the
Fund's Board of Trustees. Securities for which market quotations are not readily
available are valued at a fair value under a method approved by the Board of
Trustees. Short-term investments with a maturity of 60 days or less when
purchased are valued at cost plus interest earned (amortized cost), 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. The net income attributable to a class of shares and the
dividends payable on such class of shares will be reduced by the amount of the
distribution fees and other expenses 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 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 National Association of Securities Dealers, Inc. ("NASD") who are
acting as securities dealers ("dealers") and NASD members or eligible non-NASD
members who are acting as brokers or agents or 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 price paid for shares purchased is based on 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 are priced
based on the date of receipt provided such order is transmitted to Investor
Services prior to the Investor Services' close of business on such date. Orders
received by authorized dealers 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

13
<PAGE> 15

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. Orders of less than $500 generally are mailed by the
authorized dealer and processed at the offering price next calculated after
receipt by Investor Services.

Shares of the Fund may be sold in foreign countries where permissible. 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.

Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gains
distributions, 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 418256, Kansas City, MO 64141-9256.

CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 4.75% of the offering price (or 4.99% of the net amount
invested), reduced on investments of $100,000 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 $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 imposes 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.

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 Service Plan. From such amount, the Fund may spend up to
0.25% per year of the Fund's average daily net assets attributable to the Class
A 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. The rates in this paragraph are 0.00% per year of the
Fund's average daily net assets attributable to Class A Shares with respect to
accounts existing before July 1, 1987.

CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
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 4.00%
......................................................
Second 3.75%
......................................................
Third 3.50%
......................................................
Fourth 2.50%
......................................................
Fifth 1.50%
......................................................
Sixth 1.00%
......................................................
Seventh 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 gains distributions.
It is presently the policy of the Distributor not to accept any order for Class
B Shares

14
<PAGE> 16

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 aggregated and deemed to have been made on the last
day of the month.

In determining whether a contingent deferred sales charge is applicable to a
redemption, it is assumed that the redemption is first of any shares in the
shareholder's Fund account that are not subject to a contingent deferred sales
charge and then of shares held the longest in the shareholder's account.

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.

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

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. 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.

CONVERSION FEATURE

Class B Shares purchased on or after June 1, 1996, 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. Class B Shares purchased before June 1, 1996, and any dividend
reinvestment plan Class B Shares received on such shares, 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 Class C Shares received on such shares, automatically
convert to Class A Shares ten years after the end of the calendar month in which
such 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 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 distributions 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

15
<PAGE> 17

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) in
connection with required minimum distributions from an individual retirement
account ("IRA") or certain other retirement plan distributions, (iii) pursuant
to the Fund's systematic withdrawal plan but limited to 12% annually of the
initial value of the account, (iv) in circumstances under which no commission or
transaction fee is paid to authorized dealers at the time of purchase of such
shares and (v) effected pursuant to the right of the Fund to involuntarily
liquidate a shareholder's account as described under the heading "Redemption of
Shares." The contingent deferred sales charge also is waived on redemptions of
Class C Shares as it relates to the reinvestment of redemption proceeds in
shares of the same class of the Fund within 180 days after 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 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 receive 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 which have been previously purchased and are
still owned.

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating the 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 also 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 back-dating provisions, an adjustment will be
made at the time of expiration of the Letter of Intent to give effect to the
lower charge. Such adjustment in sales charge will be used to purchase
additional shares for the shareholder at the applicable discount category. 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 period, the investor
must pay the difference between the sales charge applicable to the purchases
made and the reduced sales charge

16
<PAGE> 18

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 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 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.

As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without 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 such shares will not be resold except through redemption by
the Fund, by:

(1) Current or retired trustees or directors of funds advised by Asset
Management or Advisory Corp. 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.

(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.

17
<PAGE> 19

(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 non-profit 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. Prior to February 1, 1997, a commission will be paid to
authorized dealers who initiate and are responsible for such purchases
within a rolling twelve-month period as follows: 1.00% on sales to $5
million, plus 0.50% on the next $5 million, plus 0.25% on the excess over
$10 million. 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
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 on
purchases made as described in (3) through (9) above. The Fund may terminate, or
amend the terms of, offering shares of

18
<PAGE> 20

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
acceptance by Investor Services of the request and any other necessary documents
in proper order. 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. If the shares to be redeemed have been recently purchased by check,
Investor Services may delay the redemption 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 418256, Kansas City, MO 64141-9256. 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. In some cases, however,
other documents may be necessary. In the case of shareholders holding
certificates, the certificates for the shares being redeemed properly endorsed
for transfer 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 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

19
<PAGE> 21

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) 341-2911 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 Investments, 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, neither Van Kampen Investments, Investor
Services nor 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 which 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 two kinds of return from the Fund: dividends and
capital gains distributions. Investors will be entitled to begin receiving
dividends on their shares on the business day after Investor Services receives
payment for such shares. However, shares become entitled to dividends on the day
Investor Services receives payment for the shares either through a fed wire or
NSCC settlement. Shares remain entitled to dividends through the day such shares
are processed for payment on redemption.

DIVIDENDS. Interest earned from investments is the Fund's main source of income.
Under the Fund's present policy, which may be changed at any time by the Fund's
Board of Trustees, distributions of all or substantially all of this income,
less expenses, are declared daily and paid monthly 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 GAINS. 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 realized capital gains represent the total
profit from sales of securities minus total losses from sales of securities
including

20
<PAGE> 22

losses carried forward from prior years. The Fund distributes any taxable net
realized capital gains to shareholders at least annually. As in the case of
dividends, capital gains distributions are automatically reinvested in
additional shares of the Fund at 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 gains distributions 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 gains
distribution. 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 gains
distributions be reinvested at net asset value, or that both dividends and
capital gains distributions 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 pre-determined amounts in the Fund. Additional
information is available from the Distributor or your authorized dealer.

CHECK WRITING PRIVILEGE. A Class A shareholder holding shares of the Fund for
which certificates have not been issued and which are in a non-escrow status may
appoint Investor Services as agent by completing the Authorization for
Redemption by Check form and the appropriate section of the application and
returning the form and the application to Investor Services. Once the form is
properly completed, signed and returned to the agent, a supply of checks drawn
on State Street Bank and Trust Company (the "Bank") will be sent to the Class A
shareholder. These checks may be made payable by the Class A shareholder to the
order of any person in any amount of $100 or more.

When a check is presented to the Bank for payment, full and fractional Class A
Shares required to cover the amount of the check are redeemed from the
shareholder's Class A account by Investor Services at the next determined net
asset value per share. Check writing redemptions represent the sale of Class A
Shares. Any gain or loss realized on the sale of shares is a taxable event.

Checks will not be honored for redemption of Class A Shares held less than 15
calendar days, unless such Class A Shares have been paid for by bank wire. Any
Class A Shares for which there are outstanding certificates may not be redeemed
by check. If the amount of the check is greater than the proceeds of all
uncertificated shares held in the shareholder's Class A account, the check will
be returned and the shareholder may be subject to additional charges. A Class A
shareholder may not liquidate the entire account by means of a check. The check
writing privilege may be terminated or suspended at any time by the Fund or the
Bank. Retirement plans and accounts that are subject to backup withholding are
not eligible for the privilege.

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.

When Class B Shares and Class C Shares 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. If such Class B Shares or Class C Shares are redeemed and
not exchanged for shares of another Participating Fund, Class B Shares and Class
C Shares

21
<PAGE> 23

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 and may result in a gain or loss for federal
income tax purposes. If the shares exchanged 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 (800)
421-5684. A shareholder automatically has telephone exchange privileges unless
otherwise designated in 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, neither Van Kampen Investments, Investor Services nor
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 gains 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 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 his 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 in the fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new fund into
which the shareholder is investing 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.

A prospectus of any of these Participating Funds may be obtained from any
authorized dealer or the Distributor. An investor considering an exchange to one
of such funds should refer to the prospectus for additional information
regarding such fund prior to investing.

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, 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, neither Van Kampen Investments, Investor Services nor the Fund will be
liable for following instructions 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.

22
<PAGE> 24

FEDERAL INCOME TAXATION

Distributions of the Fund's net investment income (consisting generally of
taxable income and net short-term capital gains) 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 gains (which are the excess of net long-term capital gains over net
short-term capital losses) 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 long the shares of the Fund have been
held by such shareholders. Such capital gain dividends may be taxed at different
rates depending on how long the Fund held the securities. 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 and the amount received. If such 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 its 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 United States 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. Accordingly, investment in the Fund is likely to be
appropriate for such shareholders only if they can utilize a foreign tax credit
or corresponding tax benefit in respect of such federal withholding taxes.
Prospective foreign investors should consult their United States tax advisers
concerning the tax consequences to them of an investment in shares.

The Fund intends to qualify as a regulated investment company under the 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 distributed to
shareholders. If the Fund distributes less than 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, exchanging or selling
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.

23
<PAGE> 25

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, independent accountants, whose report,
along with the Fund's financial statements, is included in the Statement of
Additional Information and may be obtained by shareholders without charge by
calling the telephone number on the back cover of this Prospectus. This
information should be read in conjunction with the financial statements and
notes thereto included in the Statement of Additional Information.

<TABLE>
<CAPTION>
Class A Shares Class B Shares
Year Ended December 31, Year Ended December 31,
1998 1997 1996 1995 1994 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $ 14.624 $ 14.459 $ 14.950 $ 13.698 $ 15.662 $14.609 $14.447 $14.948
-------- -------- -------- -------- -------- ------- ------- -------
Net Investment Income......... .941 1.039 1.069 1.111 1.177 .816 .916 .947
Net Realized and Unrealized
Gain/Loss................... (.127) .158 (.495) 1.233 (1.965) (.121) .162 (.494)
-------- -------- -------- -------- -------- ------- ------- -------

Total from Investment
Operations.................... .814 1.197 .574 2.344 (.788) .695 1.078 .453
-------- -------- -------- -------- -------- ------- ------- -------

Less Distributions from and in
Excess of Net Investment
Income........................ .979 1.032 1.065 1.092 1.176 .864 .916 .954

Net Asset Value, End of the
Period........................ $ 14.459 $ 14.624 $ 14.459 $ 14.950 $ 13.698 $14.440 $14.609 $14.447
======== ======== ======== ======== ======== ======= ======= =======

Total Return(a)................. 5.77% 8.57% 4.10% 17.61% (5.10%) 4.87% 7.71% 3.24%
Net Assets at End of the Period
(In millions)................. $2,079.6 $2,264.8 $2,560.1 $2,962.9 $2,924.4 $ 284.2 $ 359.0 $ 414.8
Ratio of Operating Expenses to
Average Net Assets(b)......... .90% .90% .90% .93% .92% 1.72% 1.72% 1.73%
Ratio of Net Investment Income
to Average Net Assets......... .04% .08% .02% .27% .08% .04% .08% .02%
Ratio of Net Investment Income
to Average Net Assets(b)...... 6.45% 7.26% 7.38% 7.68% 8.13% 5.63% 6.44% 6.55%
Portfolio Turnover (Excluding
Dollar Rolls and Forward
Commitment Transactions)...... 82% 104% 64% 63% 44% 82% 104% 64%

<CAPTION>
Class B Shares Class C Shares
Year Ended December 31, Year Ended December 31,
1995 1994 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................... $13.694 $15.643 $14.608 $14.448 $14.948 $13.693 $15.626
------- ------- ------- ------- ------- ------- ------- ---
Net Investment Income......... .991 1.055 .822 .910 .943 .996 1.063
Net Realized and Unrealized
Gain/Loss................... 1.241 (1.964) (.130) .166 (.489) 1.237 (1.956)
------- ------- ------- ------- ------- ------- ------- ---
Total from Investment
Operations.................... 2.232 (.909) .692 1.076 .454 2.233 (.893)
------- ------- ------- ------- ------- ------- ------- ---
Less Distributions from and in
Excess of Net Investment
Income........................ .978 1.040 .864 .916 .954 .978 1.040
Net Asset Value, End of the
Period........................ $14.948 $13.694 $14.436 $14.608 $14.448 $14.948 $13.693
======= ======= ======= ======= ======= ======= ======= ===
Total Return(a)................. 16.78% (5.93%) 4.87% 7.71% 3.24% 16.78% (5.86%)
Net Assets at End of the Period
(In millions)................. $466.7 $ 436.3 $ 18.0 $ 14.2 $ 14.3 $ 13.3 $ 11.4
Ratio of Operating Expenses to
Average Net Assets(b)......... 1.75% 1.74% 1.72% 1.72% 1.72% 1.75% 1.74%
Ratio of Net Investment Income
to Average Net Assets......... .27% .09% .04% .08% .02% .27% .10%
Ratio of Net Investment Income
to Average Net Assets(b)...... 6.85% 7.29% 5.63% 6.41% 6.55% 6.86% 7.29%
Portfolio Turnover (Excluding
Dollar Rolls and Forward
Commitment Transactions)...... 63% 44% 82% 104% 64% 63% 44%
</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 Van Kampen's reimbursement of
certain expenses was less than 0.01%.

24
<PAGE> 26

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

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

WEB SITE
www.vankampen.com

VAN KAMPEN U.S. GOVERNMENT 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

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 418256
Kansas City, MO 64141-9256

Attn: Van Kampen U.S. Government Fund

Custodian

STATE STREET BANK AND TRUST COMPANY
225 West Franklin Street, PO 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 LLP

303 East Wacker Drive

Chicago, IL 60601
<PAGE> 27

VAN KAMPEN

U.S. GOVERNMENT FUND

PROSPECTUS

APRIL , 1999

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,
which explain the market conditions and
investment strategies affecting the Fund's
recent performance.

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 Public
Reference Room in Washington, DC or online at
the SEC's web site (http://www.sec.gov). For
more information, please call the SEC at (800)
SEC-0330. You can also request these materials
by writing the Public Reference Section of the
SEC, Washington DC, 20549-6009, and paying a
duplication fee.

[VAN KAMPEN FUNDS LOGO]

Investment Company Act File No. 811-3950.
USGF PRO 4/99

<PAGE> 28

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 MARCH 1, 1999

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN

U.S. GOVERNMENT FUND

Van Kampen U.S. Government Fund (the "Fund") is a mutual fund with an
investment objective to provide a high level of current income, with liquidity
and safety of principal. The Fund's management seeks to achieve the investment
objective by investing primarily in obligations issued or guaranteed by the U.S.
government or by its agencies or its instrumentalities.

The Fund is organized as a diversified series of the Van Kampen U.S.
Government Trust, 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 and Policies........................... B-4
Investment Restrictions..................................... B-18
Trustees and Officers....................................... B-19
Investment Advisory Agreement............................... B-28
Distribution and Service.................................... B-30
Transfer Agent.............................................. B-33
Portfolio Transactions and Brokerage Allocation............. B-34
Shareholder Services........................................ B-36
Redemption of Shares........................................ B-38
Contingent Deferred Sales Charge-Class A.................... B-38
Waiver of Class B and Class C Contingent Deferred Sales
Charge.................................................... B-39
Taxation.................................................... B-41
Fund Performance............................................ B-45
Other Information........................................... B-48
Report of Independent Accountants........................... F-
Financial Statements........................................ F-
Notes to Financial Statements............................... F-
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL , 1999.

<PAGE> 29

GENERAL INFORMATION

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 May 10, 1995. The Declaration of Trust permits the Trustees to
create one or more separate investment portfolios and issue a series of shares
for each portfolio. The Trustees can further sub-divide each series of shares
into one or more classes of shares for each portfolio. The Trust was originally
organized in 1988 under the name Van Kampen Merritt U.S. Government Trust as a
Massachusetts business trust (the "Massachusetts Trust"). The Massachusetts
Trust was reorganized into the Trust under the name Van Kampen American Capital
U.S. Government Trust on July 31, 1995. The Trust was created for the purpose of
facilitating the Massachusetts Trust reorganization into a Delaware business
trust. On July 14, 1998, the Trust adopted its current name.

The Fund was originally organized in 1984 as a Maryland corporation under
the name Van Kampen Merritt U.S. Government Fund Inc. and was reorganized in
1988 under the name Van Kampen Merritt U.S. Government Fund as a sub-trust of
the Massachusetts Trust. The Fund was reorganized as a series of the Trust under
the name Van Kampen American Capital Tax Free High Income Fund on July 31, 1995.
On July14, 1998, the Fund adopted its current name.

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. 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 & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Dean Witter Investment 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 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.

B-2
<PAGE> 30

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.

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.

B-3
<PAGE> 31

As of April , 1999, no person was known by the Fund to own beneficially
or to hold of record 5% or more of the outstanding Class A Shares, Class B
Shares or Class C Shares of the Fund, except as follows:

<TABLE>
<CAPTION>
Amount of
Ownership at Class Percentage
Name and Address of Holder April , 1999 of Shares Ownership
-------------------------- ------------- --------- ----------
<S> <C> <C> <C>
Van Kampen Trust Company........................
2800 Post Oak Blvd.
Houston, TX 77056
</TABLE>

Van Kampen Trust Company acts as custodian for certain employee benefit
plans
and independent retirement accounts.

INVESTMENT OBJECTIVE AND POLICIES

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.

U.S. GOVERNMENT SECURITIES

U.S. Treasury Securities. The Fund may invest in U.S. Treasury securities,
including bills, notes and bonds issued by the U.S. Treasury. These instruments
are direct obligations of the U.S. government and, as such, are backed by the
full faith and credit of the United States. They differ primarily in their
interest rates, the lengths of their maturities and the dates of their
issuances.

Obligations Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. The Fund may invest in obligations issued by agencies of the
U.S. government or instrumentalities established or sponsored by the U.S.
government. These obligations, including those that are guaranteed by federal
agencies or instrumentalities, may or may not be backed by the full faith and
credit of the United States. Obligations of the Government National Mortgage
Association ("GNMA"), the Farmers Home Administration and the Export-Import Bank
are backed by the full faith and credit of the United States. Securities in
which the Fund may invest that are not backed by the full faith and credit of
the United States include, among others, obligations issued by the Tennessee
Valley Authority, the Resolution Trust Corporation, the Federal National
Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") and the United States Postal Service, each of which has the right to
borrow from the United States Treasury to meet its obligations, and obligations
of the Federal Farm Credit Bank and the Federal Home Loan Bank, the obligations
of which may be satisfied only by the individual credit of the issuing agency.
Investments in FHLMC, FNMA and other obligations may include collateralized
mortgage obligations and real estate mortgage investment conduits issued or
guaranteed by such entities. In the case of securities not backed by the full
faith and credit of the United States, the Fund must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment and may not
be able to assert a claim against the United States if the agency or
instrumentality does not meet its commitments.

B-4
<PAGE> 32

Mortgage-Backed Securities Issued or Guaranteed by U.S. Government
Instrumentalities. The Fund may invest in mortgage-backed securities issued or
guaranteed by U.S. government agencies such as GNMA, FNMA or FHLMC and
representing undivided ownership interests in pools of mortgages. The mortgages
backing these securities may include conventional 30-year fixed rate mortgages,
15-year fixed rate mortgages and adjustable rate mortgages. The U.S. government
or the issuing agency guarantees the payment of the interest on and principal of
these securities. However, the guarantees do not extend to the securities' yield
or value, which are likely to vary inversely with fluctuations in interest
rates, nor do the guarantees extend to the yield or value of the Fund's shares.
These securities are in most cases "pass-through" instruments, through which the
holders receive a share of all interest and principal payments from the
mortgages underlying the securities, net of certain fees. Because the principal
amounts of such underlying mortgages may generally be prepaid in whole or in
part by the mortgagees at any time without penalty and the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through securities.
Mortgage-backed securities are subject to more rapid repayment than their stated
maturity date would indicate as a result of the pass-through of prepayments of
principal on the underlying mortgage obligations. The remaining maturity of a
mortgage-backed security will be deemed to be equal to the average maturity of
the mortgages underlying such security determined by the Adviser on the basis of
assumed prepayment rates with respect to such mortgages. The remaining expected
average life of a pool of mortgages underlying a mortgage-backed security is a
prediction of when the mortgages will be repaid and is based upon a variety of
factors such as the demographic and geographic characteristics of the borrowers
and the mortgaged properties, the length of time that each of the mortgages has
been outstanding, the interest rates payable on the mortgages and the current
interest rate environment. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities can be expected to
accelerate. When the mortgage obligations are prepaid, the Fund reinvests the
prepaid amounts in other income producing securities, the yields of which
reflect interest rates prevailing at the time. Therefore, the Fund's ability to
maintain a portfolio of high-yielding mortgage- backed securities will be
adversely affected to the extent that prepayments of mortgages must be
reinvested in securities which have lower yields than the prepaid
mortgage-backed securities. Moreover, prepayments of mortgages which underlie
securities purchased by the Fund at a premium would result in capital losses.

Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities. The Fund may invest in collateralized mortgage obligations ("CMOs").
CMOs are debt obligations collateralized by mortgage loans or mortgage
pass-through securities. Typically, CMOs are collateralized by GNMA, FNMA or
FHLMC certificates, but also may be collateralized by whole loans or private
pass-through securities (such collateral collectively hereinafter referred to as
"Mortgage Assets"). Multiclass pass-through securities are equity interests in a
trust composed of Mortgage Assets. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal of 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. CMOs deemed to be U.S.
government securities are those issued or guaranteed as to principal and
interest by a person controlled or supervised by and acting as an agency or
instrumentality of the U.S. government. The issuer of a

B-5
<PAGE> 33

series of CMOs may elect to be treated as a Real Estate Mortgage Investment
Conduit (a "REMIC").

In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semi-annual basis. The principal of and interest on the Mortgage
Assets may be allocated among the several classes of a series of a CMO in
innumerable ways.

The Fund may invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes. Substantially
all of the CMOs in which the Fund invests are PAC Bonds.

Stripped Mortgage-Backed Securities. The Fund also may invest in stripped
mortgage-backed securities ("SMBS") An SMBS is a derivative multiclass mortgage
security. SMBS usually are structured with two classes that receive different
proportions of the interest and principal distribution on a pool of Mortgage
Assets. In the most extreme case, one class will receive all of the interest
(the interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). The yield to maturity on an IO
class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on such security's yield
to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities. Conversely, if the underlying mortgage
assets experience less than anticipated prepayments of principal, the yield of
POs could be materially adversely affected. The market values of IOs and POs are
subject to greater risk of fluctuation in response to changes in market rates of
interest than many other types of government securities and, to the extent the
Fund invests in IOs and POs, increases the risk of fluctuations in the net asset
value of the Fund. The Adviser will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and through the use of
Strategic Transactions (described below).

ADDITIONAL INVESTMENT CONSIDERATIONS

The Fund may also engage in strategic transactions, purchase and sell
securities on a "when issued" and "delayed delivery" basis, enter into
repurchase and reverse repurchase agreements, and lend its portfolio securities
in certain circumstances, in each case subject to the limitations set forth
below. These investments entail risks.

B-6
<PAGE> 34

Strategic Transactions. The Fund may, but is not required to, utilize
various investment strategies as described below to hedge various market risks
(such as interest rates and broad or specific market movements), to manage the
effective maturity or duration of the Fund's fixed-income securities or to
enhance potential gain. Such strategies are generally accepted by modern
portfolio managers and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.

In the course of pursuing these investment strategies, the Fund may
purchase and sell derivative securities such as exchange-listed and
over-the-counter put and call options on securities, fixed-income indices and
other financial instruments, purchase and sell financial futures contracts and
options thereon, enter into various interest rate transactions such as swaps,
caps, floors or collars (collectively, all the above are called "Strategic
Transactions"). Strategic Transactions may be used to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets fluctuations, to
protect the Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of the Fund's portfolio, or to establish a
position in the derivatives markets as a temporary substitute for purchasing or
selling particular securities.

Some Strategic Transactions may also be used to enhance potential gain
although no more than 25% of the Fund's assets will be committed to Strategic
Transactions entered into for non-hedging purposes. When the Fund sells an
option, if the underlying securities do not increase (in the case of a call
option) or decrease (in the case of a put option) to a price level that would
make the exercise of the option profitable to the holder of the option, the
option generally will expire without being exercised and the Fund will realize
as profit the premium received for such option. When a call option of which the
Fund is the writer is exercised, the option holder purchases the underlying
security at the strike price and the Fund does not participate in any increase
in the price of such securities above the strike price. In addition, the Fund
would need to replace the underlying securities at prices which may not be
advantageous to the Fund. When a put option of which the Fund is the writer is
exercised, the Fund will be required to purchase the underlying securities at
the strike price, which may be in excess of the market value of such securities.

Any or all of these investment techniques may be used at any time and there
is no particular strategy that dictates the use of one technique rather than
another, as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of the Fund to utilize these Strategic
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. The Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial futures
and options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not for
speculative purposes.

Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to the
Fund, force the sale or purchase of portfolio securities at

B-7
<PAGE> 35

inopportune times or for prices other than current market values, limit the
amount of appreciation the Fund can realize on its investments or cause the Fund
to hold a security it might otherwise sell. The use of options and futures
transactions entails certain other risks. In particular, the variable degree of
correlation between price movements of futures contracts and price movements in
the related portfolio position of the Fund creates the possibility that losses
on the hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time they
tend to limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of Strategic Transactions would reduce
net asset value, and possibly income, and such losses can be greater than if the
Strategic Transactions had not been utilized. Income earned or deemed to be
earned, if any, by the Fund from its Strategic Transactions will generally be
taxable. See "Taxation."

General Characteristics of Options. Put options and call options typically
have similar structural characteristics and operational mechanics regardless of
the underlying instrument on which they are purchased or sold. Thus, the
following general discussion relates to each of the particular types of options
discussed in greater detail below. In addition, many Strategic Transactions
involving options require segregation of Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."

A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, or other instrument at the exercise price. For
instance, the Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the Fund
the right to sell such instrument at the option exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to buy,
and the seller the obligation to sell, the underlying instrument at the exercise
price. The Fund's purchase of a call option on a security, financial future,
index, or other instrument might be intended to protect the Fund against an
increase in the price of the underlying instrument that it intends to purchase
in the future by fixing the price at which it may purchase such instrument. An
American style put or call option may be exercised at any time during the option
period while a European style put or call option may be exercised only upon
expiration or during a fixed period prior thereto. The Fund is authorized to
purchase and sell exchange listed options and over-the-counter options ("OTC
options"). Exchange listed options are issued by a regulated intermediary such
as the Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. The discussion below uses the
OCC as a paradigm, but is also applicable to other financial intermediaries.

With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash

B-8
<PAGE> 36

settlement may become available. Index options and Eurodollar instruments are
cash settled for the net amount, if any, by which the option is "in-the-money"
(i.e., where the value of the underlying instrument exceeds, in the case of a
call option, or is less than, in the case of a put option, the exercise price of
the option) at the time the option is exercised. Frequently, rather than taking
or making delivery of the underlying instrument through the process of
exercising the option, listed options are closed by entering into offsetting
purchase or sale transactions that do not result in ownership of the new option.

The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options that are subject to a buy-back provision
permitting the Fund to require the Counterparty to sell the option back to the
Fund at a formula price within seven days. The Fund expects generally to enter
into OTC options that have cash settlement provisions, although it is not
required to do so.

Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, 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 or credit enhancement of the Counterparty's credit
to determine the likelihood that the terms of the OTC option will be satisfied.
The Fund will engage in OTC option transactions only with U.S. government
securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers", or broker dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of "A-1"

B-9
<PAGE> 37

from Standard & Poor's ("S&P") or "P-1" from Moody's Investor Services, Inc.
("Moody's") or an equivalent rating from any other nationally recognized
statistical rating organization ("NRSRO"). The staff of the SEC currently takes
the position that, in general, OTC options on securities other than U.S.
government securities purchased by the Fund, and portfolio securities "covering"
the amount of the Fund's obligation pursuant to an OTC option sold by it (the
cost of the sell-back plus the in-the-money amount, if any) are illiquid, and
are subject to the Fund's limitation on investing no more than 15% of its total
assets in illiquid securities.

If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.

The Fund may purchase and sell call options on securities, including U.S.
Treasury and agency securities, municipal obligations, mortgage-backed
securities and Eurodollar instruments that are traded on U.S. and foreign
securities exchanges and in the over-the-counter markets. All calls sold by the
Fund must be "covered" (i.e., the Fund must own the securities or futures
contract subject to the call) or must meet the asset segregation requirements
described below as long as the call is outstanding. Even though the Fund will
receive the option premium to help protect it against loss, a call sold by the
Fund exposes the Fund during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security or instrument and may require the Fund to hold a security or instrument
which it might otherwise have sold.

The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, municipal
obligations and Eurodollar instruments (whether or not it holds the above
securities in its portfolio.) The Fund will not sell put options if, as a
result, more than 50% of the Fund's assets would be required to be segregated to
cover its potential obligations under such put options other than those with
respect to futures and options thereon. In selling put options, there is a risk
that the Fund may be required to buy the underlying security at a
disadvantageous price above the market price.

General Characteristics of Futures. The Fund may enter into financial
futures contracts or purchase or sell put and call options on such futures as a
hedge against anticipated interest rate or fixed-income market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The purchase of a futures
contract creates a firm obligation by the Fund, as purchaser, to take delivery
from the seller the specific type of financial instrument called for in the
contract at a specific future time for a specified price (or, with respect index
futures and Eurodollar instruments, the net cash amount). The sale of a futures
contract creates a firm obligation by the Fund, as seller, to deliver to the
buyer the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such option.

B-10
<PAGE> 38

The Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission ("CFTC") and
will be entered into only for bona fide hedging, risk management (including
duration management) or other portfolio management purposes. Typically,
maintaining a futures contract or selling an option thereon requires the Fund to
deposit with a financial intermediary as security for its obligations an amount
of cash or other specified assets (initial margin) which initially is typically
1% to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets (variation margin) may be required to
be deposited thereafter on a daily basis as the mark to market value of the
contract fluctuates. The purchase of options on financial futures involves
payment of a premium for the option without any further obligation on the part
of the Fund. If the Fund exercises an option on a futures contract it will be
obligated to post initial margin (and potential subsequent variation margin) for
the resulting futures position just as it would for any position. Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can be
offset prior to settlement at an advantageous price nor that delivery will
occur.

The Fund will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of the Fund's total assets (taken at current value); however, in
the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.

Options on Securities Indices and Other Financial Indices. The Fund also
may purchase and sell call and put options on securities indices and other
financial indices and in so doing can achieve many of the same objectives it
would achieve through the sale or purchase of options on individual securities
or other instruments. Options on securities indices and other financial indices
are similar to options on a security or other instrument except that, rather
than settling by physical delivery of the underlying instrument, they settle by
cash settlement, i.e., an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an OTC option, physical delivery is specified). This amount of cash
is equal to the excess of the closing price of the index over the exercise price
of the option, which also may be multiplied by a formula value. The seller of
the option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.

Combined Transactions. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple interest rate transactions and any combination of futures, options and
interest rate transactions ("component" transactions), instead of a single
Strategic Transaction, as part of a single or combined strategy when, in the
opinion of the Adviser, it is in the best interests of the

B-11
<PAGE> 39

Fund to do so. A combined transaction will usually contain elements of risk that
are present in each of its component transactions. Although combined
transactions are normally entered into based on the Adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase such risks or hinder achievement of the portfolio management
objective.

Swaps, Caps, Floors and Collars. Among the Strategic Transactions into
which the Fund may enter are interest rate and index swaps and the purchase or
sale of related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. An index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.

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. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least "A" by S&P or Moody's or has an equivalent
equity rating from an NRSRO or is determined to be of equivalent credit quality
by the Adviser. If there is a default by the Counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. A
large number of banks and investment banking firms now act both as principals
and 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.

Use of Segregated and Other Special Accounts. Many Strategic Transactions,
in addition to other requirements, require that the Fund segregate liquid
high-grade assets with its custodian to the extent Fund obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either

B-12
<PAGE> 40

the full amount of any obligation by the Fund to pay or deliver securities or
assets must be covered at all times by the securities, instruments or currency
required to be delivered, or, subject to any regulatory restrictions, an amount
of cash or liquid high-grade securities at least equal to the current amount of
the obligation must be segregated with the custodian. The segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to segregate them. For example, a call option
written by the Fund will require the Fund to hold the securities subject to the
call (or securities convertible into the needed securities without additional
consideration) or to segregate liquid high-grade securities sufficient to
purchase and deliver the securities if the call is exercised. A call option sold
by the Fund on an index will require the Fund to own portfolio securities which
correlate with the index or to segregate liquid high-grade assets equal to the
excess of the index value over the exercise price on a current basis. A put
option written by the Fund requires the Fund to segregate liquid, high-grade
assets equal to the exercise price.

OTC options entered into by the Fund, including those on securities,
financial instruments or indices and OCC issued and exchange listed index
options, will generally provide for cash settlement. As a result, when the Fund
sells these instruments it will only segregate an amount of assets equal to its
accrued net obligations, as there is no requirement for payment or delivery of
amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, and the Fund will segregate an
amount of assets equal to the full value of the option. OTC options settling
with physical delivery, or with an election of either physical delivery or cash
settlement, will be treated the same as other options settling with physical
delivery.

In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.

With respect to swaps, the Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high-grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.

Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund also may enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund

B-13
<PAGE> 41

held a futures or forward contract, it could purchase a put option on the same
futures or forward contract with a strike price as high or higher than the price
of the contract held. Other Strategic Transactions also may be offset in
combinations. If the offsetting transaction terminates at the time of or after
the primary transaction no segregation is required, but if it terminates prior
to such time, assets equal to any remaining obligation would need to be
segregated.

The Fund's activities involving Strategic Transactions may be limited by
the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company.

"WHEN-ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS

The Fund may purchase and sell portfolio securities on a "when-issued" and
"delayed delivery" basis. No income accrues to the Fund on securities in
connection with such purchase transactions prior to the date 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, and yields generally available on comparable securities
when delivery occurs may be higher or lower than yields on the securities
obtained pursuant to such transactions. Because the Fund relies on the buyer or
seller, as the case may be, 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. When the Fund is
the buyer in such a transaction, however, it will maintain, in a segregated
account with its custodian, cash or portfolio securities having an aggregate
value equal to the amount of such purchase commitments until payment is made.
The Fund will make commitments to purchase securities on such basis only with
the intention of actually acquiring these securities, but the Fund may sell such
securities prior to the settlement date if such sale is considered to be
advisable. To the extent the Fund engages in "when-issued" and "delayed
delivery" transactions, it will do so for the purpose of acquiring securities
for the Fund's portfolio consistent with the Fund's investment objective and
policies and not for the purpose of investment leverage.

REPURCHASE AGREEMENTS

The Fund may engage in repurchase agreements with banks or broker-dealers.
The Fund may invest an amount up to 25% of its net assets at the time of
purchase in securities subject to repurchase agreements with a duration of seven
days or less. Investments in repurchase agreements of more than seven days may
be limited in conjunction with the Fund's limitation on illiquid securities. A
repurchase agreement is a short-term investment in which the purchaser (i.e.,
the Fund) acquires ownership of a debt 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 banks or broker-dealers deemed to be creditworthy by the Adviser
under guidelines approved by the 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 below. 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

B-14
<PAGE> 42

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 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 authorizing 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 debt
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 and 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.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

In order to seek a high level of current income, the Fund may enter into
reverse repurchase agreements with respect to securities which could otherwise
be sold by the Fund. Reverse repurchase agreements involve sales by the Fund of
portfolio assets concurrently with an agreement by the Fund to repurchase the
same assets 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.

In order to seek a high level of current income, the Fund may enter into
dollar rolls in which the Fund sells securities for delivery in the current
month and simultaneously contracts to repurchase, typically in 30 or 60 days,
substantially similar (same type, coupon and maturity) securities on a specified
future date. During the roll period, the Fund forgoes principal and interest
paid on such securities. The Fund is compensated by the difference between the
current sales price and the forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. A "covered roll" is a specific type of dollar roll
for which there is an offsetting cash position or cash equivalent security
position which matures on or before the forward settlement date of the dollar
roll transaction.

The Fund will establish a segregated account with its custodian in which it
will maintain cash or liquid securities equal in value to its obligations in
respect of reverse repurchase agreements and dollar rolls and, accordingly, the
Fund will not treat such obligations as senior securities for purposes of the
1940 Act. "Covered rolls" are not

B-15
<PAGE> 43

subject to these segregation requirements. 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. In the event the buyer of
securities under a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement
may be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.

The Fund is authorized to borrow money from banks or otherwise in an amount
up to 33 1/3% of the Fund's total assets (after giving effect to any such
borrowing). The Fund considers reverse repurchase agreements and dollar rolls to
be borrowings for purposes of such percentage limitation. No more than 5% of the
Fund's total assets may be invested in bank borrowings and reverse repurchase
agreements. The Fund will borrow only when the Adviser believes that such
borrowings will benefit the Fund.

Borrowing by the Fund creates an opportunity for increased net income but,
at the same time, increases the risk of the Fund's portfolio. Leveraging by the
Fund will generally increase the volatility of the Fund's net asset value in
response to fluctuations in market interest rates and accordingly may increase
the risk of the Fund's portfolio. Although the principal of such borrowings will
be fixed, the Fund's assets may change in value during the time the borrowing is
outstanding. Borrowing will create interest expenses for the Fund which can
exceed the income from the assets retained. To the extent the income derived
from securities purchased with borrowed funds exceeds the interest the Fund will
have to pay, the Fund's net income will be greater than if borrowing were not
used. Conversely, if the income from the assets retained with borrowed funds is
not sufficient to cover the cost of borrowing, the net income of the Fund will
be less than if borrowing were not used, and therefore the amount available for
distribution to stockholders as dividends will be reduced.

LENDING OF PORTFOLIO SECURITIES

Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to banks or broker-dealers, to a maximum of 25% of the
assets of the Fund, where such loans are callable at any time and are
continuously secured by collateral consisting of cash or of securities issued or
guaranteed by the U.S. government or its agencies, which collateral is equal at
all times to at least 100% of the value of the securities loaned, including
accrued interest. The Fund will receive amounts equal to earned income for
having made the loan. Any cash collateral pursuant to these loans will be
invested in short-term instruments. The Fund is the beneficial owner of the
loaned securities in that any gain or loss in the market price during the loan
inures to the Fund and its shareholders. Thus, when the loan is terminated, the
value of the securities may be more or less than their value at the beginning of
the loan. In determining whether to lend its portfolio securities to a bank or
broker-dealer, the Fund will take into account the credit-worthiness of such
borrower and will monitor such credit-worthiness on an ongoing basis inasmuch as
default by the other party may cause delays or other collection difficulties.
The Fund may pay finders' fees in connection with loans of its portfolio
securities.

B-16
<PAGE> 44

PORTFOLIO TURNOVER

The Fund may experience a high rate of 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 (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)
is shown in the table of "Financial Highlights" in the Prospectus. A high
portfolio turnover rate (100% or more) increases the Fund's transaction costs,
including brokerage commissions, and may result in the realization of more
short-term capital gains than if the Fund had a lower portfolio turnover. The
turnover rate will not be a limiting factor, however, if the Adviser deems
portfolio changes appropriate.

ILLIQUID SECURITIES

The Fund may invest up to 15% of its total 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 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 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. Such 144A Securities are subject to
monitoring and may become illiquid to the 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. For purposes
hereof, investments by the Fund in securities of other investment companies will
not be considered investments in restricted securities 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 from the provisions of the 1940 Act.

B-17
<PAGE> 45

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 securities present at the meeting, if the holders
of more than 50% of the outstanding voting securities are present or represented
by proxy; or (ii) more than 50% of the outstanding voting securities. The
percentage limitations contained in the restrictions and policies set forth
herein apply at the time of purchase of securities. These restrictions provide
that the Fund shall not:

1. Purchase any securities (other than obligations issued or guaranteed by
the U.S. government or by its agencies or instrumentalities), if, as a
result, more than 5% of the Fund's total assets (taken at current
value) would then be invested in securities of a single issuer or, if,
as a result, the Fund would hold more than 10% of the outstanding
voting securities of an issuer, except that the Fund may purchase
securities of other investment companies 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 from the provisions
of the 1940 Act. (There is no limit on the amount of the Fund's assets
which may be invested in the securities of any one issuer of
obligations issued or guaranteed by the U.S. government or by its
agencies or instrumentalities.)

2. Issue senior securities, borrow money or enter into reverse repurchase
agreements or dollar rolls in the aggregate in excess of 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
Fund will not mortgage, pledge or hypothecate any assets other than in
connection with issuances, borrowings, hedging transactions and risk
management techniques.

3. Buy any securities "on margin" or sell any securities "short."

4. Make investments for the purpose of exercising control or management,
except that the Fund may purchase securities of other investment
companies 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 from the provisions of the 1940 Act.

5. Write, purchase or sell puts, calls or combinations thereof, or
purchase or sell interest rate futures contracts or related options,
except that the Fund may purchase or sell puts, calls or combinations
thereof and may purchase or sell commodities futures contracts on
related put and call options on such contracts for hedging purposes, in
accordance with applicable requirements of the SEC and the CFTC.

6. Invest in securities issued by other investment companies, except as
part of a merger, reorganization or other acquisition and except to the
extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations

B-18
<PAGE> 46

promulgated by the SEC under the 1940 Act, as amended from time to
time, or (iii) an exemption or other relief from the provisions of the
1940 Act.

7. Invest in interests in oil, gas or other mineral exploration or
development programs.

8. Purchase or retain securities of any company if, to the knowledge of
the Fund, its officers and directors and officers and directors of the
Adviser who individually own more than 1/2 of 1% of the securities of
such company together own beneficially more than 5% of such securities.

9. Make loans, except that the Fund may purchase or hold debt obligations
in accordance with the investment restrictions set forth in paragraph 1
above, may enter into repurchase agreements, and may lend its portfolio
securities against collateral consisting of cash or of securities
issued or guaranteed by the U.S. government or its agencies, which
collateral is equal at all times to at least 100% of the value of the
securities loaned, including accrued interest.

10. Act as an underwriter of securities, except to the extent the Fund may
be deemed to be an underwriter in connection with the sale of
securities held in its portfolio.

11. Purchase or sell real estate, commodities or commodity contracts,
except as set forth in 5 above.

12. Purchase or retain securities of issuers having a record of less than
three years continuous operation (such period of three years may
include the operation of predecessor companies or enterprises if the
issuer came into existence as a result of merger, consolidation or
reorganization, or the purchase of substantially all of the assets of
the predecessor companies or enterprises), except that the Fund may
purchase securities of other investment companies 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 from
the provisions of the 1940 Act.

13. Invest more than 25% of its assets in a single industry, except that
the Fund may purchase securities of other investment companies 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 from the provisions of the 1940 Act. (Neither the U.S.
government nor any of its agencies or instrumentalities will be
considered an industry for purposes of this restriction.)

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

B-19
<PAGE> 47

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. Co-founder, and prior to
1632 Morning Mountain Road August 1996, Chairman, Chief Executive Officer
Raleigh, NC 27614 and President, MDT Corporation (now known as
Date of Birth: 07/14/32 Getinge/Castle, Inc., a subsidiary of Getinge
Industrier AB), a company which develops,
manufactures, markets and services medical and
scientific equipment. Trustee/Director of each
of the funds in the Fund Complex.
Richard M. DeMartini*..................... Chairman and Chief Executive Officer of
Two World Trade Center International Private Client Group, a division
66th Floor of Morgan Stanley Dean Witter & Co. Chairman of
New York, NY 10048 Dean Witter Futures & Currency Management Inc.
Date of Birth: 10/12/52 and Demeter Management Corporation. Director of
Dean Witter Reynolds Inc. Chairman and Director
of Dean Witter Capital Corporation. Chairman,
Chief Executive Officer, President and a
Director of Dean Witter Alliance Capital
Corporation, Director of the National
Healthcare Resources, Inc., Morgan Stanley Dean
Witter Distributors, Inc., Dean Witter Realty
Inc., Dean Witter Reynolds Venture Equities
Inc., DW Window Covering Holding, Inc., and is
a member of the Morgan Stanley Dean Witter
Management Committee. Prior to December of
1998, Mr. DeMartini was President and Chief
Operating Officer of Morgan Stanley Dean Witter
Individual Asset Management and a Director of
Morgan Stanley Dean Witter Trust FSB. Formerly
Vice Chairman of the Board of the National
Association of Securities Dealers, Inc. and
Chairman of the Board of the Nasdaq Stock
Market, Inc. Trustee of the TCW/ DW Funds,
Director of the Morgan Stanley Dean Witter
Funds and Trustee/Director of each of the funds
in the Fund Complex.
</TABLE>

B-20
<PAGE> 48

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Prior to 1997, Partner,
233 South Wacker Drive Ray & Berndtson, Inc., an executive recruiting
Suite 7000 and management consulting firm. Formerly,
Chicago, IL 60606 Executive Vice President of ABN AMRO, N.A., a
Date of Birth: 06/03/48 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. Trustee/Director of each of the
funds in the Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund of
11 DuPont Circle, N.W. the United States. Formerly, advisor to the
Washington, D.C. 20036 Dennis Trading Group Inc. Prior to 1992,
Date of Birth: 02/29/52 President and Chief Executive Officer, Director
and Member of the Investment Committee of the
Joyce Foundation, a private foundation.
Trustee/Director of each of the funds in the
Fund Complex.
Jack E. Nelson............................ President, Nelson Investment Planning Services,
423 Country Club Drive Inc., a financial planning company and
Winter Park, FL 32789 registered investment adviser. President,
Date of Birth: 02/13/36 Nelson Ivest Brokerage Services Inc., a member
of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors
Protection Corp. ("SIPC"). Trustee/Director of
each of the funds in the Fund Complex.
Don G. Powell*............................ Currently a member of the board of governors
3 Wexford Court and executive committee for the Investment
Houston, TX 77024 Company Institute, and a member of the Board of
Date of Birth: 10/19/39 Trustees of the Houston Museum of Natural
Science. Immediate past Chairman of the
Investment Company Institute. Prior to January
1999, Chairman and a Director of Van Kampen
Investments, the Advisers, the Distributor and
Investor Services and Director or officer of
certain other subsidiaries of Van Kampen
Investments. Prior to July of 1998, Director
and Chairman of VK/AC Holding, Inc. Prior to
November 1996, President, Chief Executive
Officer and a Director of VK/AC Holding, Inc.
Trustee/Director of each of the funds in the
Fund Complex and Trustee of other funds advised
by the Advisers or Van Kampen Management Inc.
</TABLE>

B-21
<PAGE> 49

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Phillip B. Rooney......................... Vice Chairman and Director of The ServiceMaster
One ServiceMaster Way Company, a business and consumer services
Downers Grove, IL 60515 company. Director of Illinois Tool Works, Inc.,
Date of Birth: 07/08/44 a manufacturing company and the Urban Shopping
Centers Inc., a retail mall management company.
Trustee, University of Notre Dame. Prior to
1998, Director of Stone Smurfit Container
Corp., a paper manufacturing company. Formerly,
President, Chief Executive Officer and Chief
Operating Officer of Waste Management, Inc., an
environmental services company.
Trustee/Director of each of the funds in the
Fund Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of
155 Hickory Lane the Graduate School, Stevens Institute of
Closter, NJ 07624 Technology. Director, Dynalysis of Princeton, a
Date of Birth: 08/02/24 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 counsel
Chicago, IL 60606 to the funds in the Fund Complex, and other
Date of Birth: 08/22/39 open-end and closed-end funds 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 open-end and closed-end funds
advised by the Advisers or Van Kampen
Management Inc.
Paul G. Yovovich.......................... Private investor. Prior to April 1996,
Sears Tower President of Advance Ross Corporation. Director
233 South Wacker Drive of 3Com Corporation, APAC Teleservices, Inc.,
Suite 9700 and COMARCO, Inc. Trustee/Director of each of
Chicago, IL 60606 the Funds in the Fund Complex.
Date of Birth: 10/29/53
</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. DeMartini and
Powell are interested persons of the Fund and the Advisers by reason of their
current or former positions with Morgan Stanley Dean Witter & Co. or its
affiliates.

B-22
<PAGE> 50

OFFICERS

Messrs. McDonnell, Hegel, Nyberg, Sullivan, Wood, Dalmaso, Martin,
Wetherell and Hill 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.................. Executive Vice President and a Director of Van
Date of Birth: 05/20/42 Kampen Investments. President, Chief Operating
President Officer and a Director of the Advisers, Van Kampen
Advisors Inc., and Van Kampen Management Inc. Prior
to July of 1998, Director and Executive Vice
President of VK/AC Holding, Inc. Prior to April of
1998, President and a Director of Van Kampen
Merritt Equity Advisors Corp. Prior to April of
1997, Mr. McDonnell was a Director of Van Kampen
Merritt Equity Holdings Corp. Prior to September of
1996, Mr. McDonnell was Chief Executive Officer and
Director of MCM Group, Inc., McCarthy, Crisanti &
Maffei, Inc. and Chairman and Director of MCM Asia
Pacific Company, Limited and MCM (Europe) Limited.
Prior to July of 1996, Mr. McDonnell was President,
Chief Operating Officer and Trustee of VSM Inc. and
VCJ Inc. President of each of the funds in the Fund
Complex. President, Chairman of the Board and
Trustee/Managing General Partner of other
investment companies advised by the Advisers or
their affiliates.

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

John L. Sullivan..................... First Vice President of Van Kampen Investments and
Date of Birth: 08/20/55 the Advisers. Treasurer, Vice President and Chief
Treasurer, Vice President and Chief Financial Officer of each of the funds in the Fund
Financial Officer 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.
</TABLE>

B-23
<PAGE> 51

<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Paul R. Wolkenberg................... Executive Vice President and Director of Van Kampen
Date of Birth: 11/10/44 Investments. Executive Vice President of Asset
Vice President Management and the Distributor. President and a
Director of Investor Services. President and Chief
Operating Officer of Van Kampen Recordkeeping
Services Inc. Prior to July of 1998, Director and
Executive Vice President of VK/AC Holding, Inc.
Vice President of each of the funds in the Fund
Complex and certain other 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.

Nicholas Dalmaso..................... Associate General Counsel and Assistant Secretary
Date of Birth: 03/01/65 of Van Kampen Investments. Vice President,
Assistant Secretary Associate General Counsel and Assistant Secretary
of the Advisers, the Distributor, Van Kampen
Advisors Inc. and Van Kampen Management Inc.
Assistant Secretary of each of the funds in the
Fund Complex and other investment companies advised
by the Advisers or their affiliates.

Scott E. Martin...................... Senior Vice President, Deputy General Counsel and
Date of Birth: 08/20/56 Assistant Secretary of Van Kampen Investments.
Assistant Secretary Senior Vice President, Deputy General Counsel and
Secretary of the Advisers, the Distributor,
Investor Services, American Capital Contractual
Services, Inc., Van Kampen Management Inc., Van
Kampen Exchange Corp., Van Kampen Advisors Inc.,
Van Kampen Insurance Agency of Illinois Inc., Van
Kampen System Inc. and Van Kampen Recordkeeping
Services Inc. Prior to July of 1998, Senior Vice
President, Deputy General Counsel and Assistant
Secretary of VK/AC Holding, Inc. Prior to April of
1998, Van Kampen Merritt Equity Advisors Corp.
Prior to April of 1997, Senior Vice President,
Deputy General Counsel and Secretary of Van Kampen
American Capital Services, Inc. and Van Kampen
Merritt Holdings Corp. Prior to September of 1996,
Mr. Martin was Deputy General Counsel and Secretary
of McCarthy, Crisanti & Maffei, Inc., and prior to
July of 1996, he was Senior Vice President, Deputy
General Counsel and Secretary of VSM Inc. and VCJ
Inc. Assistant Secretary of each of the funds in
the Fund Complex and other investment companies
advised by the Advisers or their affiliates.
</TABLE>

B-24
<PAGE> 52

<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Weston B. Wetherell.................. Vice President, Associate General Counsel and
Date of Birth: 06/15/56 Assistant Secretary of Van Kampen Investments, the
Assistant Secretary Advisers, the Distributor, Van Kampen Management
Inc. and Van Kampen Advisors Inc. Prior to
September of 1996, Mr. Wetherell was Assistant
Secretary of McCarthy, Crisanti & Maffei, Inc.
Assistant Secretary of each of the funds in the
Fund Complex and other investment companies advised
by the Advisers or their affiliates.

Steven M. Hill....................... Vice President of Van Kampen Investments and the
Date of Birth: 10/16/64 Advisers. Assistant Treasurer of each of the funds
Assistant Treasurer in the Fund Complex and other investment companies
advised by the Advisers or their affiliates.

Michael Robert Sullivan.............. Assistant Vice President of the Advisers. Assistant
Date of Birth: 03/30/33 Controller of each of the funds in the Fund Complex
Assistant Controller 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 (except the money market series of the Van Kampen Series Fund Inc.)
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 (except the money market series of the Van Kampen
Series Fund Inc.) 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.

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 (except the money
market series of the Van Kampen Series Fund Inc.) 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 (except the money market series of the
Van Kampen Series Fund Inc.) 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

B-25
<PAGE> 53

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.

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
Year First Compensation Benefits Benefits from before
Appointed or before Accrued as the Fund Deferral from
Elected to Deferral from Part of Upon Fund
Name the Board the Fund(2) Expenses(3) Retirement(4) Complex(5)
---- ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan 1995 $ $ $60,000 $
Linda Hutton Heagy 1995 60,000
R. Craig Kennedy 1993 60,000
Jack E. Nelson 1988 60,000
Phillip B. Rooney 1997 60,000
Dr. Fernando Sisto 1995 60,000
Wayne W. Whalen 1988 60,000
Paul G. Yovovich (1) 1998 60,000 $
</TABLE>

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

(1) Mr. Yovovich joined the Board of Trustees on October 22, 1998 and therefore
does not have a full fiscal year of information to report. Trustees not
eligible for compensation are not included in the Compensation Table.

(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended December 31, 1998. The
following trustees deferred compensation from the Fund during the fiscal
year ended

B-26
<PAGE> 54

December 31, 1998: Mr. Branagan, $ ; Ms. Heagy, $ ; Mr. Kennedy,
$ ; Mr. Nelson, $ ; Mr. Rooney, $ ; Dr. Sisto, $ ; Mr.
Whalen, $ ; and Mr. Yovovich, $ . 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. The cumulative
deferred compensation (including interest) accrued with respect to each
trustee, including former trustees, from the Fund as of December 31, 1998 is
as follows: Mr. Branagan, $ ; Dr. Caruso, $ ; Mr. Gaughan, $ ;
Ms. Heagy, $ ; Mr. Kennedy, $ ; Mr. Miller, $ ; Mr. Nelson,
$ ; Mr. Rees, $ ; Mr. Rooney, $ ; Dr. Sisto, $ ; Mr. Whalen,
$ ; and Mr. Yovovich, $ . The deferred compensation plan is
described above the Compensation Table.

(3) The amounts shown in this column represent the sum of the retirement
benefits expected to be accrued by the operating investment companies in the
Fund Complex for their respective fiscal years ended in 1999. The retirement
plan is described above the Compensation Table.

(4) For each trustee, this is the sum of the estimated maximum annual benefits
payable by the operating investment companies 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.

(5) The amounts shown in this column represent the aggregate compensation paid
by all operating investment companies 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
$ during the calendar year ended December 31, 1998.

As of April , 1999, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.

B-27
<PAGE> 55

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 the
services of the Fund's President and such other executive and clerical personnel
as are necessary to prepare the various reports and statements and conduct the
Fund's day-to-day operations. The Fund, however, bears the cost of its
accounting services, which include maintaining its financial books and records
and calculating its daily net asset value. The costs of such accounting services
include the salaries and overhead expenses of the Fund's Treasurer and the
personnel operating under his direction. Charges are allocated among the
investment companies advised or subadvised by the Adviser or its affiliates. A
portion of these amounts is paid to the Adviser or its affiliates in
reimbursement of personnel, office space, facilities and equipment costs
attributable to the provision of accounting services to the Fund. The Fund also
pays distribution fees, service fees, custodian fees, legal and auditing fees,
the costs of 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, 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 payable computed based upon the annual rate applied to the average
daily net assets of the Fund as follows: 0.550% on the first $500 million of
average daily net assets; 0.525% on the next $500 million of average daily net
assets; 0.500% on the next $2 billion of average daily net assets; 0.475% on the
next $2 billion of average daily net assets; 0.450% on the next $2 billion of
average daily net assets; 0.425% on the next $2 billion of average daily net
assets and 0.400% on the average daily net assets over $9 billion.

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 fee payable to the Adviser is reduced by any commissions, tender
solicitation and other fees, brokerage or similar payments received by the
Adviser or any other direct or indirect majority owned subsidiary of Van Kampen
Investments in connection with the purchase and sale of portfolio investments
less any direct expenses incurred by such subsidiary of Van Kampen Investments,
in connection with obtaining such commissions, fees, brokerage or similar
payments. The Adviser agrees to use its best efforts to recapture tender
solicitation fees and exchange offer fees for the Fund's benefit and to advise
the Trustees of the Fund of any other commissions, fees, brokerage or similar
payments which may be possible for the Adviser or any other direct or indirect
majority owned subsidiary of Van Kampen Investments Inc. to receive in
connection with the Fund's portfolio transactions or other arrangements which
may benefit the Fund.

The Advisory Agreement also provides that, in the event the ordinary
business 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

B-28
<PAGE> 56

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. Ordinary business expenses include the investment
advisory fee and other operating costs paid by the Fund except (1) interest and
taxes, (2) brokerage commissions, (3) certain litigation and indemnification
expenses as described in the Advisory Agreement and (4) payments made by the
Fund pursuant to the distribution plans.

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 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.

During the fiscal years ended December , 1998, 1997 and 1996, the Adviser
received $ , $14,229,642 and $16,225,091, respectively, in advisory fees
from the Fund.

OTHER AGREEMENTS

Accounting Services Agreement. The Fund has entered into an accounting
services agreement pursuant to which the Adviser provides accounting services to
the Fund. 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 cost based proportionally on their respective net assets
per fund.

During the fiscal years ended December 31, 1998, 1997 and 1996, Advisory
Corp. received $ , $288,100 and $123,700, respectively, in accounting services
fees from the 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 Fund 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 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.

B-29
<PAGE> 57

During the fiscal years ended December 31, 1998, 1997 and 1996, Van Kampen
Investments received $--, $69,400 and $57,000, respectively, in legal services
fees from the Fund.

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. Total underwriting commissions on the sale of shares of the Fund
for the last three fiscal periods are shown in the chart below.

<TABLE>
<CAPTION>
Total Amounts
Underwriting Retained by
Commissions Distributor
------------ -----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998..................... $ $
Fiscal Year Ended December 31, 1997..................... $ $
Fiscal Year Ended December 31, 1996..................... $ $
</TABLE>

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 $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 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

B-30
<PAGE> 58

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.

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. 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.

Banks are currently prohibited under the Glass-Steagall Act from providing
certain underwriting or distribution services. If banking firms were 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 bank
would result in any material adverse consequences to the Fund. State securities
laws regarding registration of banks and other financial institutions may

B-31
<PAGE> 59

differ from the interpretations of federal law expressed herein, and banks and
other financial institutions may be required to register as dealers pursuant to
certain state laws.

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, 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."

For shares sold prior to the implementation date of the Distribution Plan,
the financial intermediary was not eligible to receive compensation pursuant to
such Distribution and Service Agreement or Selling Agreement. To the extent that
there remain outstanding shares of the Fund that were purchased prior to the
implementation date of the Distribution Plan, the percentage of the total
average daily net asset value of a class of shares that may be utilized pursuant
to the Distribution and Service Agreement will be less than the maximum
percentage amount permissible with respect to such class of shares under the
Distribution and Service Agreement.

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 contingent
deferred sales charges it

B-32
<PAGE> 60

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. As of
December 31, 1998, there were $ and $ of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing % and % of the Fund's average daily net
assets attributable to Class B Shares and Class C Shares, respectively. If the
Plans were 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.

For the fiscal year ended December 31, 1998, the Fund's aggregate expenses
paid under the Plans for Class A Shares were $ or % of the Class A
Shares' average daily net assets. Such expenses were paid to reimburse the
Distributor for payments made to financial intermediaries for servicing Fund
shareholders and for administering the Plans. For the fiscal period ended
December 31, 1998, the Fund's aggregate expenses paid under the Class B Plans
were $ or % of the Class B Shares' average daily net assets. Such
expenses were paid to reimburse the Distributor for the following payments:
$ for commissions and transaction fees paid to financial intermediaries in
respect of sales of Class B Shares of the Fund and $ for fees paid to
financial intermediaries for servicing Class B shareholders and administering
the Plans. For the fiscal period ended December 31, 1998, the Fund's aggregate
expenses paid under the Plans for Class C Shares were $ or % of the
Class C Shares' average daily net assets. Such expenses were paid to reimburse
the Distributor for the following payments; $ for commissions and
transaction fees paid to financial intermediaries in respect of sales of Class C
Shares of the Fund and $ for fees paid to financial intermediaries for
servicing Class C shareholders and administering the Class C Plans.

TRANSFER AGENT

The Fund's transfer agent is Van Kampen Investor Services Inc., PO Box
418256, Kansas City, MO 64141-9256. During the fiscal years ending December 31,
1998, 1997 and 1996, Investor Services, shareholder service agent and dividend
disbursing agent for the Fund, received fees aggregating $ , $ and
$ , respectively for these services. Prior to 1998, these services were
provided at cost plus a profit. Beginning in 1998, the transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive benchmarks.

B-33
<PAGE> 61

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.

As most transactions made by the Fund are principal transactions at net
prices, the Fund generally incurs little or no brokerage costs. The portfolio
securities in which the Fund invests are normally purchased directly from the
issuer or in the over-the-counter market from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers include a spread or markup to the dealer
between the bid and asked price. Sales to dealers are effected at bid prices.
The Fund may also purchase certain money market instruments directly from an
issuer, in which case no commissions or discounts are paid, or may purchase and
sell listed bonds on a exchange, which are effected through brokers who charge a
commission for their services.

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

B-34
<PAGE> 62

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 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 Group Inc. ("Morgan Stanley")
became an affiliate of the Adviser. Effective May 31, 1997, Dean Witter Discover
& Co. ("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.

The Fund paid the following commissions to all brokers and affiliated
brokers during the periods shown:

<TABLE>
<CAPTION>
Affiliated Brokers
----------------------
Morgan Dean
Brokers Stanley Witter
------- ------- ------
<S> <C> <C> <C>
Commissions Paid:
Fiscal year Ended December 31, 1998................. $ $ $
Fiscal year Ended December 31, 1997................. $ $ $
Fiscal year Ended December 31, 1996................. $ $ $
Fiscal year 1998 Percentages:
Commissions with affiliate to total commissions... -- --
Value of brokerage transactions with affiliate to
total transactions............................. -- --
</TABLE>

B-35
<PAGE> 63

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 will receive statements quarterly from Investor Services
showing any reinvestments of dividends and capital gains distributions and any
other activity in the account since the preceding statement. Such shareholders
also will receive separate confirmations for each purchase or sale transaction
other than reinvestment of dividends and capital gains distributions and
systematic purchases or redemptions. Additions to an investment account may be
made at any time by purchasing shares 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 redemption
thereof. In addition, if such certificates are lost the shareholder must write
to Van Kampen Funds, c/o Investor Services, PO Box 418256, Kansas City, MO
64141-9256, 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 a 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.

B-36
<PAGE> 64

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS

Holders of Class A Shares can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemptions 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 redemptions 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 distributions 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

Any investor whose shares in a single account total $10,000 or more at the
offering price next computed after receipt of instructions may establish a
monthly, quarterly, semi-annual or annual withdrawal plan. Any investor whose
shares in a single account total $5,000 or more at the offering price next
computed after receipt of instructions 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 withdrawal
constitutes a redemption of shares on which any capital gain or loss will be
recognized. The planholder may arrange for monthly, quarterly, semi-annual 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 withdrawal
plan may redeem up to 12% annually of the shareholder's initial account balance
without incurring a CDSC. Initial account balance means the amount of the
shareholder's investment at the time the election to participate in the plan is
made.

B-37
<PAGE> 65

Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plans are reinvested in additional shares
at the next determined net asset value per share. If periodic withdrawals
continuously exceed reinvested dividends and capital gains distributions, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Withdrawals 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 on 30 days' notice to its shareholders.

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 CDSC 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 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 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) trading on the Exchange is
restricted; (c) 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 upon the sale of portfolio securities so received in
payment of redemptions.

CONTINGENT DEFERRED SALES CHARGE-CLASS A

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.

B-38
<PAGE> 66

In determining whether a CDSC-Class A is payable, it is assumed that shares held
the longest are the first to be redeemed.

WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("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 CDSC. 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 charge 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), or from the death or disability of the employee
(see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In addition, the charge will be
waived on any minimum distribution required to be distributed in accordance with
Code Section 401(a)(9).

B-39
<PAGE> 67

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 A 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 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 plan. The CDSC-Class B and C will be waived on redemptions
made under the plan.

The amount of the shareholder's investment in a Fund at the time the
election to participate in the 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 plan and the ability to offer the 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.

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 account up
to the required minimum balance. The Fund will waive the CDSC-Class B and C upon
such involuntary redemption.

REINVESTMENT OF REDEMPTION PROCEEDS

A shareholder who has redeemed Class C Shares of a 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.

B-40
<PAGE> 68

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

The Fund has elected and qualified, 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 gains, which is the excess of net
long-term capital gains over net short-term capital losses), it will not be
required to pay federal income taxes on any income distributed 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 gains 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

B-41
<PAGE> 69

realized by the Fund. These provisions may also require the Fund to recognize
income or 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.

DISTRIBUTIONS

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 gains ("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. Fund distributions
generally will not qualify for the dividends received deduction for
corporations.

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.

B-42
<PAGE> 70

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.

Under Code Section 988, foreign currency gains or losses from certain
forward contracts not traded in the interbank market as well as certain other
gains or losses attributable to currency exchange rate fluctuations are
typically 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 or, in
some circumstances, as capital gain. 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, 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. A special 28% tax rate may
apply to a portion of the capital gain dividends paid by the Fund with respect
to its taxable year ended December 31, 1998. 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

B-43
<PAGE> 71

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.
Accordingly, investment in the Fund is likely to be appropriate for a Non-U.S.
Shareholder only if such person can utilize a foreign tax credit or
corresponding tax benefit in respect of such United States withholding tax.

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 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.

The United States Treasury Department has issued Treasury regulations
generally effective for payments made after December 31, 1999 concerning the
withholding of tax and reporting for certain amounts paid to nonresident alien
individuals and foreign corporations (the "Final Withholding Regulations").
Among other things, the Final Withholding Regulations may require Non-U.S.
Shareholders to furnish new certification of their foreign status after December
31, 1999. Prospective investors should consult their tax advisors concerning the
applicability and effect of the Final Withholding 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 Internal Revenue Service ("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.

B-44
<PAGE> 72

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

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.

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.

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 the maximum sales charge for Class A Shares);
that all income dividends or capital gains distributions during the period are
reinvested in Fund shares at net asset value; and that any applicable CDSC 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 distributions paid by the Fund or to
reflect the fact 12b-1 fees have changed over time.

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

B-45
<PAGE> 73

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 with respect to the CDSC imposed at the time of redemption were
reflected, it would reduce the performance quoted.

In addition to total return information, the Fund may also advertise its
current "yield." Yield figures are based on historical earnings and are not
intended to indicate future performance. Yield is determined by analyzing the
Fund's net income per share for a 30-day (or one-month) period (which period
will be stated in the advertisement) and dividing by the maximum offering price
per share on the last day of the period. A "bond equivalent" annualization
method is used to reflect a semiannual compounding.

For purposes of calculating yield quotations, net income is determined by a
standard formula prescribed by the SEC to facilitate comparison with yields
quoted by other investment companies. Net income computed for this formula
differs from net income reported by the Fund in accordance with generally
accepted accounting principles and from net income computed for federal income
tax reporting purposes. Thus the yield computed for a period may be greater or
less than the Fund's then current dividend rate.

The Fund's yield is not fixed and will fluctuate in response to prevailing
interest rates and the market value of portfolio securities, and as a function
of the type of securities owned by the Fund, portfolio maturity and the Fund's
expenses.

Yield quotations should be considered relative to changes in the net asset
value of the Fund's shares, the Fund's investment policies, and the risks of
investing in shares of the Fund. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.

Yield and total return are 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 CDSC. 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
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

B-46
<PAGE> 74

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 or discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sectors, ten largest holdings and other Fund asset
structures, such as duration, maturity, coupon, NAV, rating breakdown, AMT
exposure and number of issues in the portfolio. 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 of if shareholders purchased their funds 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 indexes, 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
of different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return.

The Fund's Annual Report and Semi-Annual Report contain additional
performance information. A copy of the Annual Report or Semi-Annual Report may
be obtained

B-47
<PAGE> 75

without charge by calling or writing the Fund at the telephone number and
address printed on the cover of this Prospectus.

The Fund's average annual total return (computed in the manner described in
the Prospectus) assuming payment of the maximum sales charge, for Class A Shares
of the Fund for (i) the one-year period ended December 31, 1998 was %, (ii)
the five-year period ended December 31, 1998 was % and (iii) the ten-year
period ended December 31, 1998 was %. The Fund's average annual total
return (computed in the manner described in the Prospectus) assuming payment of
the contingent deferred sales charge, for Class B Shares of the Fund for (i) the
one-year period ended December 31, 1998 was %, (ii) the five-year period
ended December 31, 1998 was % and (iii) the approximately six-year,
four-month period since August 24, 1992, the commencement of distribution for
Class B Shares of the Fund through December 31, 1998 was %. The Fund's
average annual total return (computed in the manner described in the Prospectus)
assuming payment of the contingent deferred sales charge, for Class C Shares of
the Fund for (i) the one-year period ended December 31, 1998 was %, (ii)
the five-year period ended , 1998 was % and (iii) the approximately
five-year, four-month period since August 13, 1993, the commencement of
distribution for Class C Shares of the Fund, through December 31, 1998 was
%. These results are based on historical earnings and asset value
fluctuations and are not intended to indicate future performance. Such
information should be considered in light of the Fund's investment objectives
and policies as well as the risks incurred in the Fund's investment practices.

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 State Street Bank and Trust Company, 225 West Franklin Street,
Boston, Massachusetts 02110, as Custodian.

SHAREHOLDER REPORTS

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

INDEPENDENT ACCOUNTANTS

KPMG LLP, 303 East Wacker Drive, Chicago, Illinois 60601, 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).

B-48
<PAGE> 76

PART C: OTHER INFORMATION

ITEM 23. EXHIBITS:

<TABLE>
<S> <C> <C>
(a)(1) Agreement and Declaration of Trust(2)
(2) Certificate of Amendment+
(3) Amended and Restated Certificate of Designation(5)
(4) Second Amended and Restated Certificate of Designation+
(b) By-Laws(2)
(c)(1) Specimen Class A Shares Certificate(2)
(2) Specimen Class B Shares Certificate(2)
(3) Specimen Class C Shares Certificate(2)
(d) Investment Advisory Agreement(5)
(e)(1) Distribution and Service Agreement(5)
(2) Form of Dealer Agreement(1)
(3) Form of Broker Agreement(1)
(4) Form of Bank Agreement(1)
(f)(1) Trustees Deferred Compensation Plan++
(2) Trustee Retirement Plan++
(g)(1) Custodian Agreement(4)
(2) Transfer Agency and Service Agreement(5)
(h)(1) Fund Accounting Agreement(5)
(2) Legal Services Agreement(5)
(i) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(3)
(j) Consent of KPMG LLP++
(k) Not applicable
(l) Letter of understand relating to initial capital(6)
(m)(1) Plan of Distribution Pursuant to Rule 12b-1(2)
(2) Form of Shareholder Assistance Agreement(1)
(3) Form of Administrative Services Agreement(1)
(4) Service Plan(2)
(n) Financial Data Schedules++
(o) Amended Multi-Class Plan(3)
(p) Power of Attorney+
(z)(1) List of Certain Investment Companies in Response to Item 27(a)+
(2) List of Officers and Directors of Van Kampen Funds Inc. in Response
to Item 27(b)+
</TABLE>

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

(1) Incorporated herein by reference to Post-Effective Amendment No. 27 to
Registrant's Registration Statement, File No. 2-89190, filed August 2,
1995.

(2) Incorporated herein by reference to Post-Effective Amendment No. 28 to
Registrant's Registration Statement, File No. 2-89190, filed April 24,
1996.

(3) Incorporated herein by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement, File No. 2-89190, filed April 30,
1997.

(4) Incorporated herein by reference to Post-Effective Amendment No. 75 to the
Registration Statement on Form N-1A of Van Kampen American Capital Growth &
Income Fund, File No. 2-21657, filed March 27, 1998.

(5) Incorporated herein by reference to Post-Effective Amendment No. 30 to
Registrant's Registration Statement, File No. 2-89190, filed April 29,
1998.

(6) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement, File No. 2-89190, filed April 6, 1984.

+ Filed herewith.

++ To be filed by further amendment.

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

None.

C-1
<PAGE> 77

ITEM 25. INDEMNIFICATION:

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 (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 officers 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 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.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:

See "How the Fund is Managed" in the Prospectus and "Trustees and Officers"
and "Investment Advisory and Other Services" in the Statement of Additional
Information for information regarding the business of the Adviser. For
information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of Van Kampen
Investment Advisory Corp., reference is made to the Adviser's current Form ADV
filed under the Investment Advisers Act of 1940, incorporated herein by
reference.

C-2
<PAGE> 78

ITEM 27. PRINCIPAL UNDERWRITERS

(a) The sole principal underwriter is Van Kampen Funds Inc., ("the
Distributor") which acts as a principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit (z)(1) hereto.

(b) Van Kampen Funds Inc., which is an affiliated person of an affiliated
person of the Registrant and is the sole principal underwriter for Registrant.
The name, principal business address and positions and offices with Van Kampen
Funds Inc. of each of the 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 required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at 1 Parkview Plaza, PO
Box 5555, Oakbrook Terrace, Illinois 60181-5555, 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, MA; (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 the Distributor,
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.

C-3
<PAGE> 79

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN U.S. GOVERNMENT TRUST
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 the State of Illinois, on the 1st day of March, 1999.

VAN KAMPEN U.S. GOVERNMENT TRUST

By: /s/ DENNIS J. McDONNELL

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

Dennis J. McDonnell, President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed on March 1, 1999 by the following
persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S> <C>

Principal Executive Officer:

/s/ DENNIS J. McDONNELL President
- -----------------------------------------------------------
Dennis J. McDonnell

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/ RICHARD M. DEMARTINI* Trustee
- -----------------------------------------------------------
Richard M. DeMartini

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

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

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

/s/ DON G. POWELL* Trustee
- -----------------------------------------------------------
Don G. Powell

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

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

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

/s/ PAUL G. YOVOVICH* Trustee
- -----------------------------------------------------------
Paul G. Yovovich
- ------------
* Signed by Dennis J. McDonnell pursuant to a power of attorney.

DENNIS J. McDONNELL March 1, 1999
- -----------------------------------------------------------
Dennis J. McDonnell
Attorney-in-Fact
</TABLE>

C-4
<PAGE> 80

VAN KAMPEN U.S. GOVERNMENT TRUST

SCHEDULE OF EXHIBITS TO POST-EFFECTIVE

AMENDMENT 31 TO FORM N-1A SUBMITTED TO THE

SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1999

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
(a)(2) Certificate of Amendment
(a)(4) Second Amended and Restated Certificate of Designation
(p) Power of Attorney
(z)(1) List of Certain Investment Companies in Response to Item
27(a)
(z)(2) List of Officers and Directors of Van Kampen Funds Inc in
Response to Item 27(b)
</TABLE>

<PAGE> 1
Exhibit (a)(2)

CERTIFICATE OF AMENDMENT DATED JULY 14, 1998
TO
AGREEMENT AND DECLARATION OF TRUST DATED MAY 10, 1995

WHEREAS, the Trustees of Van Kampen American Capital U.S. Government
Trust, a Delaware business trust (the "Trust") have approved the amendment
of the Trust's Agreement and Declaration of Trust dated May 10, 1995
("Declaration of Trust") in accordance with Section 9.5 thereof;

WHEREAS, the Trustees have authorized the proper officers of the
Trust, including the officer whose name appears below, to effect such
amendment;

NOW, THEREFORE, the Declaration of Trust is amended as follows:

1. The first sentence of Section 1.1 is amended and restated in its
entirety to read as follows:

1.1 NAME. The name of the Trust shall be

"VAN KAMPEN U.S. GOVERNMENT TRUST"

and so far as may be practicable, the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever used
in this Agreement and Declaration of Trust, except where the
context otherwise requires) shall refer to the Trustees in their
capacity as Trustees, and not individually or personally, and
shall not refer to the officers, agents or employees of the Trust
or of such Trustees, or to the holders of the Shares of
Beneficial Interest of the Trust or any Series. If the Trustees
determine that the use of such name is not practicable, legal or
convenient at any time or in any jurisdiction, or if the Trust is
required to discontinue the use of such name pursuant to Section
10.7 hereof, then subject to that Section, the Trustees may use
such other designation, or they may adopt such other name for the
Trust as they deem proper, and the Trust may hold property and
conduct its activities under such designation or name.

EXECUTED, to be effective as of July 14, 1998

/s/ Ronald A. Nyberg
__________________________________
Ronald A. Nyberg,
Secretary

<PAGE> 1
Exhibit (a)(4)

VAN KAMPEN U.S. GOVERNMENT TRUST
Second Amended and Restated Certificate of Designation
of
Van Kampen U.S. Government Fund

The undersigned, being the Secretary of Van Kampen U.S. Government Trust, a
Delaware business trust (the "Trust"), pursuant to the authority conferred upon
the Trustees of the Trust by Section 6.1 of the Trust's Agreement and
Declaration of Trust ("Declaration"), and by the affirmative vote of a Majority
of the Trustees does hereby amend and restate in its entirety the Amended and
Restated Certificate of Designation of the Van Kampen American Capital U.S.
Government Fund Series of the Trust dated December 12, 1996 by redesignating
such Series as the Van Kampen U.S. Government Fund Series (the "Fund") with the
following rights, preferences and characteristics:

1. SHARES. The beneficial interest in the Fund shall be divided into Shares
having a nominal or par value of $0.01 per Share, of which an unlimited number
may be issued, which Shares shall represent interests only in the Fund. The
Trustees shall have the authority from time to time to authorize separate Series
of Shares for the Trust as they deem necessary or desirable.

2. CLASSES OF SHARES. The Shares of the Fund shall be initially divided into
three classes-Class A, Class B and Class C. The Trustees shall have the
authority from time to time to authorize additional Classes of Shares of the
Fund.

3. SALES CHARGES. Each Class A, Class B and Class C Share shall be subject to
such sales charges, if any, as may be established from time to time by the
Trustees in accordance with the Investment Company Act of 1940 (the "1940 Act")
and applicable rules and regulations of the National Association of Securities
Dealers, Inc., all as set forth in the Fund's prospectus.

4. CONVERSION. Each Class B Share and certain Class C Shares of the Fund shall
be converted automatically, and without any action or choice on the part of the
Shareholder thereof, into Class A Shares of the Fund at such times and pursuant
to such terms, conditions and restrictions as may be established by the Trustees
and as set forth in the Fund's Prospectus.

5. ALLOCATION OF EXPENSES AMONG CLASSES. Expenses related solely to a
particular Class (including, without limitation, distribution expenses under an
administrative or service agreement, plan or other arrangement, however
designated) shall be borne by that Class and shall be appropriately reflected
(in a manner determined by the Trustees) in the net asset value, dividends,
distribution and liquidation rights of the Shares of that Class.

<PAGE> 2
6. SPECIAL MEETINGS. A special meeting of Shareholders of a Class of the Fund
may be called with respect to the Rule 12b-1 distribution plan applicable to
such Class or with respect to any other proper purpose affecting only holders of
shares of such Class at any time by a Majority of the Trustees.

7. OTHER RIGHTS GOVERNED BY DECLARATION. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust or with respect to any Class of Shares set forth in the
Declaration shall apply to Shares of the Fund unless otherwise specified in this
Certificate of Designation, in which case this Certificate of Designation shall
govern.

8. AMENDMENTS, ETC. Subject to the provisions and limitations of Section 9.5
of the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
any officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Fund outstanding and entitled to
vote or, if such amendment affects the Shares of one or more but not all of the
Classes of the Fund, the holders of a majority of all the Shares of the affected
Classes outstanding and entitled to vote.

9. INCORPORATION OF DEFINED TERMS. All capitalized terms which are not defined
herein shall have the same meaning as ascribed to those terms in the
Declaration.

July 14, 1998

/s/ Ronald A. Nyberg
____________________________
Ronald A. Nyberg, Secretary

<PAGE> 1
EXHIBIT (p)

POWER OF ATTORNEY

The undersigned, being officers and trustees of each of the Van Kampen
Open End Trusts (individually, a "Trust") as indicated on Schedule 1 attached
hereto and incorporated by reference, each a Delaware business trust except for
the Van Kampen Pennsylvania Tax Free Income Fund being a Pennsylvania business
trust (individually, a "Trust"), and being officers and directors of the Van
Kampen Series Fund, Inc. (the "Corporation"), a Maryland corporation, do hereby,
in the capacities shown below, appoint Dennis J. McDonnell of Oakbrook Terrace,
Illinois, as agent and attorney-in-fact with full power of substitution and
resubstitution, for each of the undersigned, to execute and deliver, for and on
behalf of the undersigned, any and all amendments to the Registration Statement
filed by each Trust or the Corporation with the Securities and Exchange
Commission pursuant to the provisions of the Securities Act of 1933 and the
Investment Company Act of 1940.

This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.

Dated: January 12, 1999

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ DENNIS J. MCDONNELL President
----------------------------------
Dennis J. McDonnell

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

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

/s/ RICHARD M. DEMARTINI Trustee/Director
----------------------------------
Richard M. DeMartini

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

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

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

/s/ DON G. POWELL Trustee/Director
----------------------------------
Don G. Powell

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

/s/ FERNANDO SISTO, SC.D. Trustee/Director
----------------------------------
Fernando Sisto, Sc. D.

/s/ WAYNE W. WHALEN Trustee/Director and Chairman
----------------------------------
Wayne W. Whalen

/s/ PAUL G. YOVOVICH Trustee/Director
----------------------------------
Paul G. Yovovich
</TABLE>

<PAGE> 2

SCHEDULE 1

VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN TRUST
VAN KAMPEN EQUITY TRUST
VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN TAX FREE MONEY FUND
VAN KAMPEN COMSTOCK FUND
VAN KAMPEN CORPORATE BOND FUND
VAN KAMPEN EMERGING GROWTH FUND
VAN KAMPEN ENTERPRISE FUND
VAN KAMPEN EQUITY INCOME FUND
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
VAN KAMPEN GOVERNMENT SECURITIES FUND
VAN KAMPEN GROWTH AND INCOME FUND
VAN KAMPEN HARBOR FUND
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN LIFE INVESTMENT TRUST
VAN KAMPEN PACE FUND
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN SMALL CAPITALIZATION FUND
VAN KAMPEN TAX-EXEMPT TRUST
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST

<PAGE> 1
EXHIBIT(z)(1)

Item 27(a)
- ----------
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST II
VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
VAN KAMPEN BOND FUND
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST
VAN KAMPEN CALIFORNIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN COMSTOCK FUND
VAN KAMPEN CONVERTIBLE SECURITIES FUND
VAN KAMPEN CORPORATE BOND FUND
VAN KAMPEN EMERGING GROWTH FUND
VAN KAMPEN ENTERPRISE FUND
VAN KAMPEN EQUITY TRUST
VAN KAMPEN AGGRESSIVE GROWTH FUND
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
VAN KAMPEN GROWTH FUND
VAN KAMPEN MID CAP VALUE FUND
VAN KAMPEN PROSPECTOR FUND
VAN KAMPEN UTILITY FUND
VAN KAMPEN EQUITY INCOME FUND
THE EXPLORER INSTITUTIONAL TRUST
EXPLORER INSTITUTIONAL ACTIVE CORE FUND
EXPLORER INSTITUTIONAL LIMITED DURATION FUND
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
VAN KAMPEN FLORIDA MUNICIPAL OPPORTUNITY TRUST
VAN KAMPEN FLORIDA QUALITY MUNICIPAL TRUST
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
VAN KAMPEN GOVERNMENT SECURITIES FUND
VAN KAMPEN GROWTH AND INCOME FUND
VAN KAMPEN HARBOR FUND
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN HIGH INCOME TRUST
VAN KAMPEN HIGH INCOME TRUST II
VAN KAMPEN INCOME TRUST
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
VAN KAMPEN LIFE INVESTMENT TRUST
on behalf of its Series
ASSET ALLOCATION PORTFOLIO
COMSTOCK PORTFOLIO
DOMESTIC INCOME PORTFOLIO
EMERGING GROWTH PORTFOLIO
ENTERPRISE PORTFOLIO
GLOBAL EQUITY PORTFOLIO
GOVERNMENT PORTFOLIO
GROWTH AND INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
STRATEGIC STOCK PORTFOLIO
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN MUNICIPAL INCOME TRUST
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST

<PAGE> 2

VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
VAN KAMPEN MUNICIPAL TRUST
VAN KAMPEN NEW JERSEY VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN NEW YORK QUALITY MUNICIPAL TRUST
VAN KAMPEN NEW YORK VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN OHIO QUALITY MUNICIPAL TRUST
VAN KAMPEN OHIO VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN PACE FUND
VAN KAMPEN PENNSYLVANIA QUALITY MUNICIPAL TRUST
VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN PRIME RATE INCOME TRUST
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST
VAN KAMPEN SENIOR FLOATING RATE FUND
VAN KAMPEN SENIOR INCOME TRUST
VAN KAMPEN SERIES FUND, INC.
VAN KAMPEN AGGRESSIVE EQUITY FUND
VAN KAMPEN AMERICAN VALUE FUND
VAN KAMPEN ASIAN GROWTH FUND
VAN KAMPEN EMERGING MARKETS DEBT FUND*
VAN KAMPEN EMERGING MARKETS FUND
VAN KAMPEN EQUITY GROWTH FUND*
VAN KAMPEN EUROPEAN EQUITY FUND*
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
VAN KAMPEN GLOBAL EQUITY FUND
VAN KAMPEN GLOBAL FIXED INCOME FUND
VAN KAMPEN GLOBAL FRANCHISE FUND*
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
VAN KAMPEN GROWTH AND INCOME FUND II*
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
VAN KAMPEN INTERNATIONAL MAGNUM FUND
VAN KAMPEN JAPANESE EQUITY FUND*
VAN KAMPEN LATIN AMERICAN FUND
VAN KAMPEN MID CAP GROWTH FUND*
MORGAN STANLEY MONEY MARKET FUND
MORGAN STANLEY TAX-FREE MONEY MARKET FUND*
VAN KAMPEN VALUE FUND
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
VAN KAMPEN STRATEGIC SECTOR MUNICIPAL TRUST
VAN KAMPEN TAX-EXEMPT TRUST
on behalf of its Series
HIGH YIELD MUNICIPAL FUND
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
VAN KAMPEN CALIFORNIA TAX FREE INCOME FUND*
VAN KAMPEN FLORIDA INSURED TAX FREE INCOME FUND
VAN KAMPEN INSURED TAX FREE INCOME FUND
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND

<PAGE> 3

VAN KAMPEN MICHIGAN TAX FREE INCOME FUND*
VAN KAMPEN MISSOURI TAX FREE INCOME FUND*
VAN KAMPEN MUNICIPAL INCOME FUND
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
VAN KAMPEN OHIO TAX FREE INCOME FUND*
VAN KAMPEN TAX FREE HIGH INCOME FUND
VAN KAMPEN TAX FREE MONEY FUND
VAN KAMPEN TRUST
VAN KAMPEN HIGH YIELD FUND
VAN KAMPEN SHORT-TERM GLOBAL INCOME FUND
VAN KAMPEN STRATEGIC INCOME FUND
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS
VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN U.S. GOVERNMENT FUND
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
on behalf of its Series
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND

* Funds have not commenced investment operations.
<PAGE> 4

<TABLE>
<S> <C>
Insured Municipals Income Trust Series 404
California Insured Municipals Income Trust Series 177
Colorado Insured Municipals Income Trust Series 87
Connecticut Insured Municipals Income Trust Series 38
Florida Insured Municipals Income Trust Series 123
Georgia Insured Municipals Income Trust Series 88
Maryland Investors' Quality Tax-Exempt Trust Series 87
Michigan Insured Municipals Income Trust Series 152
Minnesota Insured Municipals Income Trust Series 62
Missouri Insured Municipals Income Trust Series 108
New Jersey Insured Municipals Income Trust Series 124
New York Insured Municipals Income Trust Series 147
North Carolina Investors' Quality Tax-Exempt Trust Series 96
Ohio Insured Municipals Income Trust Series 110
Pennsylvania Insured Municipals Income Trust Series 239
South Carolina Investors' Quality Tax-Exempt Trust Series 86
Tennessee Insured Municipals Income Trust Series 41
Virginia Investors' Quality Tax-Exempt Trust Series 82
Van Kampen American Capital Insured Income Trust Series 72
Internet Trust Series 12
The Dow SM Strategic 10 Trust November 1998
Series
The Dow SM Strategic 10 Trust November 1998
Traditional
Series
The Dow SM Strategic 5 Trust November 1998
Series
The Dow SM Strategic 5 Trust November 1998
Traditional
Series
EAFE Strategic 20 Trust November 1998
Series
EURO Strategic 20 Trust November 1998
Series
Strategic Picks Opportunity Trust November 1998
Series
Great International Firms Trust Series 5
Dow 30 Index Trust Series 5
Dow 30 Index and Treasury Trust Series 7
Baby Boomer Opportunity Trust Series 5
Global Energy Trust Series 7
Brand Name Equity Trust Series 7
Edward Jones Select Growth Trust July 1998
Series
Banking Trust Series 4
Morgan Stanley High-Technology 35 Index Trust Series 4
Health Care Trust Series 4
Telecommunications Trust Series 4
Utility Trust Series 4
Financial Services Trust Series 4
Morgan Stanley Euro Tec Trust Series 1
Natcity Investments, Inc. Great American Equities Trust Series 1
Gruntal Global Transport Trust Series 1
Josepthal Financial Institutions Growth & Consolidation Trust Series 2001
Northern Illinois Equity Value Trust Series
Euro/Pacific Strategy Series 1
</TABLE>

<PAGE> 1
EXHIBIT (z)(2)

Item 27(b)
- ----------

<TABLE>
<S> <C> <C>
Powers, Richard F. III Chairman & Chief Executive Officer Oakbrook Terrace, IL
Zimmermann, III, John H. President Oakbrook Terrace, IL
Gehman, Douglas B. Executive Vice President Houston, TX
Rybak, William R. Executive Vice President & Chief Financial Officer Oakbrook Terrace, IL
Santo, Michael H. Executive Vice President & Chief Administrative
Officer Oakbrook Terrace, IL
Wolkenberg, Paul R. Executive Vice President Oakbrook Terrace, IL
Althoff, Laurence Joseph Senior Vice President & Controller Oakbrook Terrace, IL
DeMoss, Gary R. Senior Vice President Oakbrook Terrace, IL
Doyle, John E. Senior Vice President Oakbrook Terrace, IL
Golod, Richard G. Senior Vice President Annapolis, MD
Martin, Scott Evan Sen. V.P., Deputy Gen. Coun. and Sec. Oakbrook Terrace, IL
Millington, Charles G. Senior Vice President and Treasurer Oakbrook Terrace, IL
Rein, Walter E. Senior Vice President Oakbrook Terrace, IL
Saucedo, Colette M. Senior Vice President Houston, TX
Shepherd, Frederick Senior Vice President Houston, TX
Sorenson, Steven P. Senior Vice President Oakbrook Terrace, IL
Stallard, Michael L. Senior Vice President Oakbrook Terrace, IL
West, Robert Scott Senior Vice President Oakbrook Terrace, IL
Wood, Edward C, III Senior Vice President & Chief Operating Officer Oakbrook Terrace, IL
Cackovic, Glenn M. First Vice President Laguna Nigel, CA
Hargens, Eric J. First Vice President Orlando, FL
Hogaboom, David S. First Vice President Oakbrook Terrace, IL
Martellaro, Dominic C. First Vice President Danville, CA
Mayfield, Carl First Vice President Lakewood, CO
McClure, Mark R. First Vice President Oakbrook Terrace, IL
Ryan, James J. First Vice President Oakbrook Terrace, IL
Vogel, George J. First Vice President Oakbrook Terrace, IL
Woelfel, Patrick J. First Vice President Oakbrook Terrace, IL
Abreu, Robert J. Vice President New York, NY
Ambrosio, James K. Vice President Massapequa, NY
Arcara, Brian P. Vice President Buffalo, NY
Bemstiel, Scott C. Vice President Plainsboro, NJ
Bettlach, Patricia A. Vice President Chesterfield, Mo
Biegel, Carol S. Vice President Oakbrook Terrace, IL
Bisaillon, Chistopher M. Vice President Oakbrook Terrace, IL
Boos, Michal P. Vice President Oakbrook Terrace, IL
Boyne, James Joseph V.P., Associate Gen. Coun. & Asst. Sec. Oakbrook Terrace, IL
Brooks, Robert C. Vice President Oakbrook Terrace, IL
Burke, Jr., William F. Vice President Mendham, NJ
Burket, Loren Vice President Plymouth, MN
Byrum, Christine Cleary Vice President Tampa, FL
Chambers, Daniel R. Vice President Austin, TX
</TABLE>

<PAGE> 2
[CAPTION]
<TABLE>

<S> <C> <C>
Charlino, Richard J. Vice President Houston, TX
Chiaro, Deanne Margaret Vice President Oakbrook Terrace, IL
Chriske, Scott A. Vice President Plano, TX
Clavijo, German Vice President Atlanta, GA
Cloud, Eleanor M. Vice President Oakbrook Terrace, IL
Cogliandro, Dominick Vice President and Assistant Treasurer New York, NY
Colston, Michael Vice President Louisville, KY
Cummings, Suzanne Vice President Oakbrook Terrace, IL
Dalmaso, Nicholas V.P., Associate Gen. Coun. & Asst. Sec. Oakbrook Terrace, IL
Eccleston, Michael E. Vice President Oakbrook Terrace, IL
Egan, Christopher J. Vice President Oakbrook Terrace, IL
Fow, William J. Vice President Redding, CT
Foxhoven, Nicholas J. Vice President Englewood, CO
Friday, Charles Vice President Gibsonia, PA
Griffith, Timothy D. Vice President Kirkland, WA
Haas, Kyle D. Vice President Oakbrook Terrace, IL
Hamilton, Daniel Vice President Austin, TX
Hansen, John G. Vice President Oakbrook Terrace, IL
Hays, Joseph Vice President Cherry Hill, NJ
Heffington, Gregory Vice President Ft. Collins, CO
Hill, Susan Jean Vice President and Senior Attorney Oakbrook Terrace, IL
Hindelang, Thomas R. Vice President Gilbert, AZ
Hoggard, Bryn M. Vice President Houston, TX
Hughes, Michael B. Vice President Oakbrook Terrace, IL
Hunt, Robert S. Vice President Phoenix, MD
Jackson, Lowell Vice President Norcross, GA
Jajuga, Kevin G. Vice President Baltimore, MD
Johnson, Steven T. Vice President Oakbrook Terrace, IL
Klein, Dana R. Vice President Oakbrook Terrace, IL
Kohly, Frederick Vice President Miami, FL
Kowalski, David Richard Vice President & Director of Compliance Oakbrook Terrace, IL
Kozlowski, Richard D. Vice President Atlanta, GA
Lathrop, Patricia D. Vice President Tampa, FL
Laux, Brian Vice President Staten Island, NY
Leal, Tony E. Vice President Daphne, AL
Lehew III, S. William Vice President Charlotte, NC
Levinson, Eric Vice President San Francisco, CA
Linstra, Jonathan Vice President Oakbrook Terrace, IL
Lundgren, Richard M. Vice President Oakbrook Terrace, IL
Lynn, Walter Vice President Flower Mound, TX
MacAyeal, Linda S. Vice President and Senior Attorney Oakbrook Terrace, IL
Marsh, Kevin S. Vice President Bellevue, WA

</TABLE>
<PAGE> 3
[CAPTION]
<TABLE>
<S> <C> <C>
McCartney, Brooks D. Vice President Puyallup, WA
McGrath, Anne Therese Vice President Los Gatos, CA
McGrath, Maura A. Vice President New York, NY
Mills, John Vice President Kenner, LA
Morrow, Ted Vice President Dallas, TX
Muller, Jr. Robert F. Vice President Cypress, TX
Nicolas, Peter Vice President Beverly, MA
Page, Todd W. Vice President Oakbrook Terrace, IL
Parker, Gregory S. Vice President Houston, TX
Petrungaro, Christopher Vice President Oakbrook Terrace, IL
Poli, Richard J. Vice President Philadelphia, PA
Pratt, Ronald E. Vice President Marletta, GA
Prichard, Craig S. Vice President Fairlawn, OH
Reams, Daniel D. Vice President Royal Oak, MI
Rohr, Michael W. Vice President Oakbrook Terrace, IL
Rose, Jeffrey L. Vice President Houston, TX
Rothberg, Suzette N. Vice President Plymouth, MN
Rourke, Jeffrey Vice President Oakbrook Terrace, IL
Rowley, Thomas Vice President St. Louis, MO
Sabo, Heather R. Vice President Richmond, VA
Scarlata, Stephanie Vice President Bedford Corners, NY
Scherer, Andrew J. Vice President Oakbrook Terrace, IL
Schuster, Ronald J. Vice President Tampa, FL
Shaneyfelt, Gwen L. Vice President Oakbrook Terrace, IL
Shirk, Jefferey C. Vice President Swampscott, MA
Sorensen, Traci T. Vice President Oakbrook Terrace, IL
Spangler, Kimberly M. Vice President Fairfax, VA
Stabler, Darren D. Vice President Phoenix, AZ
Staniforth, Christopher Vice President Leawood, KS
Stefanec, Richard Vice President Los Angeles, CA
Stevens, James D. Vice President North Andover, MA
Strafford, William C. Vice President Granger, IN
Syswerda, Mark A. Vice President Oakbrook Terrace, IL
Tierney, John F. Vice President Oakbrook Terrace, IL
Ulvestad, Curtis L. Vice President Red Wing, MN
Volkman, Todd A. Vice President Austin, TX
Waldron, Daniel B. Vice President Oakbrook Terrace, IL
Warland, Jeff Vice President Oakbrook Terrace, IL
Wetherell, Weston B. V.P., Associate Gen. Coun. & Asst. Sec Oakbrook Terrace, IL
Wheeler, Frank L. Vice President Oakbrook Terrace, IL
Whitworth III, Harold Vice President Oakbrook Terrace, IL
Wilson, Thomas M. Vice President Oakbrook Terrace, IL
Withers, Barbara A. Vice President Oakbrook Terrace, IL
Wynn, David M. Vice President Phoenix, AZ
Yount, James R. Vice President Mercer Island, WA

</TABLE>

<PAGE> 4
[CAPTION]
<TABLE>
<S> <C> <C>

Zacchea, Patrick M. Vice President Oakbrook Terrace, IL
Becker, Scott F. Assistant Vice President Oakbrook Terrace, IL
Binder, Brian E. Assistant Vice President Oakbrook Terrace, IL
Blackwood, Joan E. Assistant Vice President Oakbrook Terrace, IL
Bronaugh, Billie J. Assistant Vice President Houston, TX
Brunk, Gregory T. Assistant Vice President Oakbrook Terrace, IL
Costello, Gina Assistant Vice President & Assistant Secretary Oakbrook Terrace, IL
Gieser, Sarah K. Assistant Vice President Oakbrook Terrace, IL
Gray, Walter C. Assistant Vice President Houston, TX
Jones, Laurie L. Assistant Vice President Houston, TX
Jordan, Robin R. Assistant Vice President Oakbrook Terrace, IL
Lowe, Ivan R. Assistant Vice President Houston, TX
Moehlman, Stuart R. Assistant Vice President Houston, TX
Norvid, Steven R. Assistant Vice President Oakbrook Terrace, IL
Putong, Christine K. Assistant Vice President & Assistant Secretary Oakbrook Terrace, IL
Robbins, David P. Assistant Vice President Oakbrook Terrace, IL
Rosen, Regina Assistant Vice President Oakbrook Terrace, IL
Salley, Pamela S. Assistant Vice President Houston, TX
Sanchez, Vanessa M. Assistant Vice President Oakbrook Terrace, IL
Sauerborn, Thomas J. Assistant Vice President New York, NY
Saxon, Bruce Assistant Vice President Oakbrook Terrace, IL
Saylor, David T. Assistant Vice President Oakbrook Terrace, IL
Schmieder, Christina L. Assistant Vice President Oakbrook Terrace, IL
Sinai, Lauren B. Assistant Vice President Oakbrook Terrace, IL
Transier, Kristen L. Assistant Vice President Houston, TX
Villarreal, David H. Assistant Vice President Oakbrook Terrace, IL
Wells, Sharon M.C. Assistant Vice President Oakbrook Terrace, IL
Napoli, Cathy Assistant Secretary Oakbrook Terrace, IL
Brown, Elizabeth M. Officer Houston, TX
Browning, John Officer Oakbrook Terrace, IL
George, Leticia Officer Houston, TX
McLaughlin, William D. Officer Houston, TX
Newman, Rebecca Officer Houston, TX
Renn, Theresa M. Officer Oakbrook Terrace, IL
Vickrey, Larry Officer Houston, TX
Yovanovic, John Officer Houston, TX
Powers, Richard F. III Director
Rybak, William R. Director
Zimmermann, III, John H. Director

</TABLE>