VAN KAMPEN U S GOVERNMENT TRUST, 485BPOS, 2000-04-28

VAN KAMPEN U S GOVERNMENT TRUST
485BPOS, 2000-04-28

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000

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. 33 [X]
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 34 [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)

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

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

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

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

It is proposed that this filing will become effective:

[X] immediately upon filing pursuant to paragraph (b)

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

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

VAN KAMPEN
U.S. GOVERNMENT FUND

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

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

This prospectus is dated APRIL 28, 2000.

[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, Policies and Risks........... 7
Investment Advisory Services....................... 11
Purchase of Shares................................. 12
Redemption of Shares............................... 18
Distributions from the Fund........................ 20
Shareholder Services............................... 20
Federal Income Taxation............................ 22
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 the investment objective to provide a high level
of current income, with liquidity and safety of principal.

INVESTMENT STRATEGIES

INVESTMENT RISKS

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

MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. The prices of debt securities tend to fall as
interest rates rise, and such declines tend to be 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 debt securities markets. These
securities, while backed by the U.S. government, are not guaranteed against
declines in their market prices.

The prices of mortgage-backed securities, like those of traditional debt
securities, tend to fall as interest rates rise. Mortgage-backed securities may
be more susceptible to further price declines than traditional debt securities
in periods of rising interest rates because of extension risk (described below).
In addition, mortgage-backed securities may benefit less than traditional debt
securities during periods of declining interest rates because of prepayment risk
(described below).

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 securities often fluctuate more in price than
securities that make regular interest payments and therefore subject the Fund to
greater market risk than a fund that does not own these types of securities.

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 fluctuations.

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
adjustable, 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 likely 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 a substantial portion of its assets in pools of mortgages
issued or guaranteed by agencies or instrumentalities of the U.S. government.
These mortgage-backed securities are especially sensitive to prepayment risk
because borrowers often refinance their mortgages when interest rates drop.

EXTENSION RISK. The prices of debt securities tend to fall as interest rates
rise. For mortgage-backed securities, if interest rates rise, borrowers may
prepay mortgages more slowly than originally expected. This may further reduce
the market value of the securities and lengthen their durations.

RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, options on futures and interest
rate swaps and other interest rate-related transactions are examples of
derivatives. Derivative instruments involve risks different from direct
investment in the underlying securities. These risks include imperfect
correlation between the value of the instruments and the underlying assets;
risks of default by the other party to certain transactions; risks that the
transactions may result in losses that partially or completely offset gains in
portfolio positions; and risks that the transactions may not be liquid.

BORROWING RISKS. The Fund may borrow money for investment purposes, which is
known as "leverage." The Fund may use leverage to seek to enhance income to
shareholders, but the use of leverage creates the likelihood of greater
volatility in the net asset value of the Fund's shares. Leverage also creates
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 that 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 investment adviser may not be
successful in selecting the best-performing securities or investment techniques,
and the Fund's performance may lag behind that of similar funds.

INVESTOR PROFILE

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

- - Seek current income

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

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

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

4
<PAGE> 6

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the 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>
1990 9.62
1991 15.8
1992 6.27
1993 7.95
1994 -5.1
1995 17.61
1996 4.1
1997 8.57
1998 5.77
1999 -0.11
</TABLE>

The Fund's return for the three-month period ended March 31, 2000 was 1.32%.

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
for Class A Shares was 5.74% (for the quarter ended June 30, 1995) and the
lowest quarterly return was -4.14% (for the quarter ended March 31, 1994).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with two broad-based market indices
that the Fund's investment adviser believes are appropriate benchmarks for the
Fund: the Merrill Lynch 1 to 10 Year U.S. Treasury Index* and the Lehman
Brothers Mortgage Index**. The Fund's performance figures include the maximum
sales charges paid by investors. The indices' performance figures do not include
any commissions or sales charges that would be paid by investors purchasing the
securities represented by these indices. An investment can not be made directly
in the indices. Average annual returns are shown for the periods ended December
31, 1999 (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, 1999 1 Year 5 Years Inception
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen U.S.
Government Fund
-- Class A Shares -4.85% 5.99% 6.34%
Merrill Lynch 1
to 10 Year U.S.
Treasury Index 0.55% 6.98% 7.11%
Lehman Brothers
Mortgage Index 1.86% 7.98% 7.78%
.......................................................
Van Kampen U.S.
Government Fund
-- Class B Shares -4.66% 5.94% 4.63%(1)***
Merrill Lynch 1
to 10 Year U.S.
Treasury Index 0.55% 6.98% 5.78%(1)
Lehman Brothers
Mortgage Index 1.86% 7.98% 6.34%(1)
.......................................................
Van Kampen U.S.
Government Fund
-- Class C Shares -1.85% 6.18% 3.89%(2)
Merrill Lynch 1
to 10 Year U.S.
Treasury Index 0.55% 6.98% 5.39%(2)
Lehman Brothers
Mortgage Index 1.86% 7.98% 6.09%(2)
.......................................................
</TABLE>

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

* The Merrill Lynch 1 to 10 Year U.S. Treasury Index is an unmanaged index of
fixed rate coupon bearing U.S. Treasury securities with a maturity range of 1
to 10 years.

**The Lehman Brothers Mortgage Index is an unmanaged, total return index made up
of all fixed-rate securities backed by pools of the Government National
Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation
(FHLMC) and the Federal National Mortgage Association (FNMA).

***The "Since Inception" performance for Class B Shares reflects the conversion
of such shares into Class A Shares six years after the end of the calendar
month in which shares were purchased. Class B Shares purchased on or after
June 1, 1996 will convert to Class A Shares eight years after purchase. See
"Purchase of Shares."

5
<PAGE> 7

The current yield for the thirty-day period ended December 31, 1999 is 5.93% for
Class A Shares, 5.33% for Class B Shares and 5.33% for Class C Shares. Investors
can obtain the current yield of the Fund for each class of shares by calling
(800) 341-2911.

FEES AND EXPENSES

OF THE FUND

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

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

SHAREHOLDER FEES
(fees paid directly from your investment)
- -----------------------------------------------------
<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) 4.00%(3) 1.00%(4)
.....................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
.....................................................
Redemption fees None None None
.....................................................
Exchange fee None None None
.....................................................
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
- -----------------------------------------------------
Management fees 0.52% 0.52% 0.52%
.....................................................
Distribution and/or
service (12b-1) 0.20% 1.00%(6) 1.00%(6)
fees(5)
.....................................................
Other expenses:
Miscellaneous other
expenses 0.12% 0.12% 0.13%
Interest expenses 0.07% 0.07% 0.07%
(7)
.....................................................
Total annual fund
operating expenses(7) 0.91% 1.71% 1.72%
.....................................................
</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."

(3) The maximum deferred sales charge is 4.00% in the first year after purchase
declining thereafter as follows:

Year 1-4.00%

Year 2-3.75%

Year 3-3.50%

Year 4-2.50%

Year 5-1.50%

Year 6-1.00%

After-None

See "Purchase of Shares--Class B Shares."

(4) The maximum deferred sales charge is 1.00% in the first year after purchase
and 0.00% thereafter. See "Purchase of Shares--Class C Shares."

(5) Class A Shares are subject to an annual service fee of up to 0.25% of the
average daily net assets attributable to such class of shares. Class B
Shares and Class C Shares are each subject to a combined annual distribution
and service fee of up to 1.00% of the average daily net assets attributable
to such class of shares. See "Purchase of Shares."

(6) Because distribution and/or service (12b-1) fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.

(7) The Fund incurred financing expenses related to borrowings for investment
purposes. Borrowings provide the opportunity for increased net income, but
may increase the Fund's investment risk. "Total annual fund operating
expenses" without regard to interest expenses would have been .84%, 1.64%
and 1.65% for Class A Shares, Class B Shares and Class C Shares,
respectively. See "Financial Highlights" and "Investment Objectives,
Policies and Risks."

Example:

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

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year (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 $563 $751 $955 $1,541
......................................................................
Class B Shares $574 $889 $1,078 $1,807(1)
......................................................................
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 $563 $751 $955 $1,541
......................................................................
Class B Shares $174 $539 $928 $1,807(1)
......................................................................
Class C Shares $175 $542 $933 $2,030
......................................................................
</TABLE>

(1) Based on conversion to Class A Shares after eight years.

INVESTMENT OBJECTIVE,

POLICIES AND RISKS

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 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 investment adviser seeks to achieve
the Fund's 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. 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. The Fund's investment adviser purchases and sells
securities for the Fund's portfolio based on the adviser's analysis and
expectations regarding prevailing interest rates and yield spreads between types
of securities. Particular attention is given to the relative value of each
security considered, its potential yield advantage and its interest rate
sensitivity in light of current and expected economic conditions. In selecting
securities for investment, the Fund's investment adviser generally seeks to
enhance the yield of the Fund by blending mortgage-backed securities with U.S.
Treasury obligations. 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 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 values of mortgage-backed securities tend to
vary inversely with changes in prevailing interest rates, but also are more
susceptible to prepayment risk and extension risk than other U.S. government
securities.

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"). The Fund invests in
mortgage-backed securities issued or guaranteed by U.S. government agencies or
instrumentalities, including 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 valuation and 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 prevailing 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. This means some of the Fund's higher
yielding securities may be converted to cash, and the Fund will be forced to
accept lower interest rates when that cash is used to purchase new securities at
prevailing interest rates. Prepayments shorten the life of the security and
shorten the time over which the Fund receives income at the higher rate.
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.
Alternatively, during periods of rising interest rates, mortgage-backed
securities are often more susceptible to extension risk (i.e. rising interest
rates could cause property owners to prepay their mortgages more slowly than
expected when the security was purchased by the Fund which may further reduce
the market value of such security and lengthen the duration of such security)
than traditional debt securities.

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 generally 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. Such
securities are subject to market risk, prepayment risk and extension risk.
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 and "stripped securities."

"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

8
<PAGE> 10

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. Certain agencies or instrumentalities of the U.S.
government and a number of banks and brokerage firms separate ("strip") the
principal portions from the coupon portions of the U.S. Treasury bonds and notes
and sell 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 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. 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.

Stripped mortgage-backed securities (referred to as "stripped mortgage
securities") are derivative multi-class mortgage securities. Stripped mortgage
securities usually are structured with two classes that receive different
proportions of the interest and principal distributions on a pool of underlying
assets. A common type of stripped mortgage security will have one class
receiving some of the interest and most of the principal from the mortgage
assets, while the other class receives most of the interest and the remainder of
the principal. 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 affect on the securities'
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. 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 mortgage assets experience less than the anticipated volume of
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, such investments increase 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.

DERIVATIVE INSTRUMENTS

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

The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity 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
securities held in or to be purchased for the

9
<PAGE> 11

Fund's portfolio, 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 invest up to 25% of the Fund's total assets in
Strategic Transactions 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 Fund's investment
adviser's ability to predict pertinent market movements, which cannot be
assured. Thus, the use of such Strategic Transactions may result in losses
greater than if they had not been used, require the Fund to sell or purchase
portfolio securities at inopportune times or for prices other than current
market values, may limit the amount of appreciation the Fund can otherwise
realize on an investment, or may cause the Fund to hold a security it might
otherwise sell. In addition, amounts paid as premiums or cash or other assets
held in margin accounts with respect to Strategic Transactions are not otherwise
available to the Fund for investment purposes.

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

OTHER INVESTMENTS AND RISK FACTORS

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 broker-dealers,
banks and other financial institutions. 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 are 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.

10
<PAGE> 12

The Fund may lend its portfolio securities in an amount up to 25% of its total
assets to broker-dealers, banks or other recognized institutional borrowers of
securities in order to generate additional income. The Fund may incur lending
fees and other costs in connection with securities lending, and securities
lending is subject to the risk of default by the other party to the transaction.

The Fund may invest up to 15% of its net assets in illiquid securities and
repurchase agreements that have a maturity of longer than seven days. Such
securities may be difficult or impossible to sell at the time and the price that
the Fund would like. Thus, the Fund may have to sell such securities at a lower
price, sell other securities instead to obtain cash or forego other investment
opportunities.

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

The Fund 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 for other reasons. The Fund's portfolio turnover is shown
under the Prospectus heading "Financial Highlights." The portfolio turnover rate
may vary from year to year. A high portfolio turnover rate (100% or more)
increases a fund's transactions costs (including brokerage commissions or dealer
costs) and a higher portfolio turnover rate may result in the realization of
more short-term capital gains than if a fund had a lower portfolio turnover
rate. Increases in a fund's transaction costs would adversely impact that fund's
performance. The turnover rate will not be a limiting factor, however, if the
Fund's investment adviser considers portfolio changes appropriate.

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 $100 billion under management or supervision as of
March 31, 2000. Van Kampen Investments' more than 50 open-end and 39 closed-end
funds and more than 2,700 unit investment trusts are professionally distributed
by leading authorized dealers nationwide. Van Kampen Funds Inc., the distributor
of the Fund (the "Distributor") and the sponsor of the funds mentioned above, is
also a wholly owned subsidiary of Van Kampen Investments. Van Kampen Investments
is an indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555.

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

<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
- -----------------------------------------------------
<S> <C> <C> <C>
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 effective advisory fee rate was 0.52% of the
Fund's average daily net assets for the Fund's fiscal year ended December 31,
1999. 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.

Under the Advisory Agreement, the Adviser furnishes offices, necessary
facilities and equipment and provides administrative services to the Fund. The
Fund pays all charges and expenses of its day-to-day operations, including
service fees, distribution fees, custodian fees, legal and independent
accountant fees, the costs of providing reports and proxies to shareholders, the
compensation of trustees of the Trust (other than those

11
<PAGE> 13

who are affiliated persons of the Adviser, Distributor or Van Kampen
Investments) and all other ordinary 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, the Adviser and the Distributor have
adopted Codes of Ethics designed to recognize the fiduciary relationship among
the Fund, the Adviser, the Distributor and their respective employees. The Codes
of Ethics permit directors, trustees, officers and employees to buy and sell
securities for their personal accounts subject to certain restrictions. Persons
with access to certain sensitive information are subject to pre-clearance and
other procedures designed to prevent conflicts of interest.

PORTFOLIO MANAGEMENT. John R. Reynoldson, Barbara M. Downey and Ted V. Mundy III
are co-managers responsible for the day-to-day management of the Fund's
investment portfolio. Mr. Reynoldson has been Senior Vice President of Asset
Management since July 1991 and Senior Vice President of the Adviser since June
1995. Mr. Reynoldson has been a co-manager of the Fund since January 2000.

Barbara M. Downey has been Vice President of the Adviser since 1996. Prior to
1996, Ms. Downey spent about two years as a Vice President and Senior Portfolio
Manager at CSI Asset Management, Inc. Ms. Downey has been a co-manager of the
Fund since April 1998.

Ted V. Mundy III has been Vice President of Asset Management since September
1994 and Vice President of the Adviser since June 1995. Mr. Mundy has been a
co-manager of the Fund since January 2000.

PURCHASE OF SHARES

GENERAL

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

Initial investments must be at least $1,000 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. Minimum
investment amounts 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 generally 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) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which its distribution fee and/or service fee is paid, (iii) each class of
shares has different exchange privileges, (iv) certain classes of shares are
subject to a conversion feature and (v) certain classes of shares have different
shareholder service options available.

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

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on

12
<PAGE> 14

any day on which no purchase or redemption orders are received or there is not a
sufficient degree of trading in the Fund's portfolio securities such that the
Funds' net asset value per share might be materially affected. The Fund's Board
of Trustees reserves the right to calculate the net asset value per share and
adjust the offering price based thereon more frequently than once daily if
deemed desirable. Net asset value per share for each class is determined by
dividing the value of the Fund's portfolio securities, cash and other assets
(including accrued interest) attributable to such class, less all liabilities
(including accrued expenses) attributable to such class, by the total number of
shares of the class outstanding. 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 as determined in good faith by the Adviser in accordance
with procedures established 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. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution and service fees and other expenses of the Fund associated with
such class of shares. To assist investors in comparing classes of shares, the
tables under the Prospectus heading "Fees and Expenses of the Fund" provide a
summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.

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

Shares may be purchased on any business day by completing the account
application form and forwarding the account 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 by
selecting the correct Fund number on the account application. Sales personnel of
authorized dealers distributing the Fund's shares are entitled to receive
compensation for selling such shares and may receive differing compensation for
selling Class A Shares, Class B Shares or Class C Shares.

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

13
<PAGE> 15

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

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

CLASS A SHARES

Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 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 may impose a
contingent deferred sales charge of 1.00% on certain redemptions made within
one year of the purchase. The contingent deferred sales charge is assessed on
an amount equal to the lesser of the then current market value or the cost of
the shares being redeemed. Accordingly, no sales charge is imposed on
increases in net asset value above the initial purchase price.

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

Under the Distribution Plan and the Service Plan, the Fund may spend up to a
total of 0.25% per year of the Fund's average daily net assets with respect to
Class A Shares of the Fund. From such amount, under the Service Plan, the Fund
may spend up to 0.25% per year of the Fund's average daily net assets with
respect to Class A Shares of the Fund. 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
contingent deferred sales charge if redeemed within six years of purchase as
shown in the table as follows:

CLASS B SHARES

SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
Contingent Deferred Sales
Charges as a Percentage
of Dollar Amount
Year Since Purchase Subject to Change
- -----------------------------------------------------------
<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 gain dividends. It
is presently the policy of the Distributor not to accept any order for Class B
Shares in an amount of $500,000 or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.

The amount of the contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for each purchase of Class B Shares
until the time of redemption of such shares.

14
<PAGE> 16

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

Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to Class B Shares of the Fund. In
addition, under the Service Plan, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets with respect to Class B Shares of the Fund.

CLASS C SHARES

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

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

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

Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to Class C Shares of the Fund. In
addition, under the Service Plan, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets with respect to Class C Shares of the Fund.

CONVERSION FEATURE

Class B Shares purchased on or after June 1, 1996, including Class B Shares
received from reinvestment of distributions through the dividend reinvestment
plan, 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, including Class B Shares received from reinvestment of
distributions through the dividend reinvestment plan, 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, including Class
C Shares received from reinvestment of distributions through the dividend
reinvestment plan, 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 participating in the exchange program is determined by
reference to the Van Kampen fund from which such share was originally purchased.

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

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by
involuntary liquidation by the Fund of a shareholder's account as described
under the prospectus heading "Redemption of Shares." Subject to certain
limitations, a shareholder who has redeemed Class C Shares

15
<PAGE> 17

of the Fund may reinvest in Class C Shares at net asset value with credit for
any contingent deferred sales charge if the reinvestment is made within 180 days
after the redemption. For a more complete description of contingent deferred
sales charge waivers, please refer to the Fund's Statement of Additional
Information or contact your authorized dealer.

QUANTITY DISCOUNTS

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

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

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

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

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

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating investments over a 13-month period
to determine the sales charge as outlined in the Class A Shares sales charge
table. The size of investment shown in the Class A Shares sales charge table
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 backdating provisions, an adjustment will be made at
the time of expiration of the Letter of Intent to give effect to the lower sales
charge. Such adjustment in sales charge will be used to purchase additional
shares. The Fund initially will escrow shares totaling 5% of the dollar amount
of the Letter of Intent to be held by Investor Services in the name of the
shareholder. In the event the Letter of Intent goal is not achieved within the
specified period, the investor must pay the difference between the sales charge
applicable to the purchases made and the reduced sales charges previously paid.
Such payments may be made directly to the Distributor or, if not paid, the
Distributor will liquidate sufficient escrowed shares to obtain the difference.

OTHER PURCHASE PROGRAMS

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

UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund, at net asset value per share and with no minimum initial or
subsequent investment requirement, if the administrator of an investor's unit
investment trust program meets certain uniform criteria relating to cost savings
by the Fund and the Distributor. The total sales charge for all other
investments made from unit investment trust

16
<PAGE> 18

distributions will be 1.00% of the offering price (1.01% of net asset value). Of
this amount, the Distributor will pay to the authorized dealer, if any, through
which such participation in the qualifying program was initiated 0.50% of the
offering price as a dealer concession or agency commission. Persons desiring
more information with respect to this program, including the terms and
conditions that apply to the program, should contact their authorized dealer or
the Distributor.

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

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

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

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

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

(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 such 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 Fund's Statement of
Additional Information for further details with respect to such alliance
programs.

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

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

(8) Trusts created under pension, profit sharing or other employee benefit plans
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), or custodial accounts held by a bank created pursuant
to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code and assets held by an employer
or trustee in connection with an eligible deferred compensation plan under
Section 457 of the Code. Such plans will qualify

17
<PAGE> 19

for purchases at net asset value provided, for plans initially establishing
accounts with the Distributor in the Participating Funds after January 1,
2000, that (1) the total plan assets are at least $1 million 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
January 1, 2000 based on net asset value purchase privileges previously in
effect will be qualified to purchase shares of the Participating Funds at
net asset value. Section 403(b) and similar accounts for which Van Kampen
Trust Company serves as custodian will not be eligible for net asset value
purchases based on the aggregate investment made by the plan or the number
of eligible employees, except under certain uniform criteria established by
the Distributor from time to time. For purchases on February 1, 1997 and
thereafter, a commission will be paid on purchases 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 and grandchildren under
21 years of age, parents, and a person's spouse's parents.

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

REDEMPTION OF
SHARES

Generally shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the Prospectus 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/trustee of a retirement plan account may involve additional fees
charged by the dealer or custodian/trustee.

Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the redemption request and any other necessary
documents in proper form as described below. Such payment may be postponed or
the right of redemption suspended as provided by the rules of the SEC. Such
payment may, under certain circum-

18
<PAGE> 20

stances, be paid wholly or in part by a distribution-in-kind of portfolio
securities. A distribution-in-kind will result in recognition by a shareholder
of a gain or loss for federal income tax purposes when such securities are
distributed, and shareholders may have brokerage costs and a gain or loss for
federal income tax purposes upon a shareholders' subsequent disposition of such
securities. If the shares to be redeemed have been recently purchased by check,
Investor Services may delay the payment of redemption proceeds until it confirms
that the purchase check has cleared, which may take up to 15 days. A taxable
gain or loss may be recognized by the shareholder upon redemption of shares.

WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares or dollar amount to be redeemed, the Fund
name and 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 request to be in proper form.
In some cases, however, additional documents may be necessary. In the case of
shareholders holding certificates, the certificates for the shares being
redeemed must be properly endorsed for transfer and must accompany the
redemption request. In the event a redemption is requested by and registered to
a corporation, partnership, trust, fiduciary, estate or other legal entity
owning shares of the Fund, generally 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. Retirement plan
distribution requests should be sent to the custodian/ trustee to be forwarded
to Investor Services. Contact the custodian/trustee 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. The redemption price for such shares is
the net asset value per share next calculated after an order in proper form is
received by an authorized dealer provided such order is transmitted to the
Distributor prior to the Distributor's close of business on such day. It is the
responsibility of authorized dealers to transmit redemption requests received by
them to the Distributor so they will be received prior to such time. Redemptions
completed through an authorized dealer may involve additional fees charged by
the dealer.

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Shares may also be redeemed by phone through FundInfo(R)
(automated phone system), which is accessible 24 hours a day, seven days a week
at (800) 847-2424. Van Kampen Investments and its subsidiaries, including
Investor Services, and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape-recording telephone
communications and providing written confirmation of instructions communicated
by telephone. If reasonable procedures are employed, none of Van Kampen
Investments, Investor Services or the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. 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

19
<PAGE> 21

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 most
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 the shareholder(s)
predesignated bank account. This privilege is not available if the address of
record has been changed within 30 days prior to a telephone redemption request.
Proceeds from redemptions payable by wire transfer are expected to be wired on
the next business day following the date of redemption. The Fund reserves the
right at any time to terminate, limit or otherwise modify this redemption
privilege.

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

DISTRIBUTIONS FROM
THE FUND

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

DIVIDENDS. Interest earned from investments is the Fund's main source of net
investment income. The Fund's present policy, which may be changed at any time
by the Fund's Board of Trustees is to declare daily and distribute monthly all
or substantially all of its net investment income as dividends to shareholders.
Dividends are automatically applied to purchase additional shares of the Fund at
the next determined net asset value unless the shareholder instructs otherwise.

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

CAPITAL GAIN DIVIDENDS. The Fund may realize capital gains or losses when it
sells securities, depending on whether the sales prices for the securities are
higher or lower than purchase prices. The Fund distributes any capital gains to
shareholders at least annually. As in the case of dividends, capital gain
dividends are automatically reinvested in additional shares of the Fund at the
next determined net asset value unless the shareholder instructs otherwise.

SHAREHOLDER SERVICES

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

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gain
dividends. 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 account application or prior to any declaration,
instruct that dividends and/or capital gain dividends be paid in

20
<PAGE> 22

cash, be reinvested in the Fund at the next determined net asset value, or be
invested in another Participating Fund at the next determined net asset value.

AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to debit the shareholder's bank
account on a regular basis to invest predetermined 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 not in escrow may write
checks against such shareholder's account by completing the Authorization for
Redemption by Check form and the appropriate section of the account application
and returning the form and the account application to Investor Services. Once
the form is properly completed, signed and returned, a supply of checks
(redemption drafts) will be sent to the Class A shareholder. Checks can be
written to the order of any person in any amount of $100 or more.

When a check is presented to the custodian bank, State Street Bank and Trust
Company (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
Share 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 redemption 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 Share 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 by the Bank and neither shall incur any liability for such amendment or
termination or for effecting redemptions to pay checks reasonably believed to be
genuine or for returning or not paying on checks which have not been accepted
for any reason. 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 prior to
implementing an exchange. A prospectus of any of the Participating Funds may be
obtained from any authorized dealer or the Distributor.

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

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

A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, by contacting the telephone transaction line at (800)
421-5684, through FundInfo(R) (automated phone system) at (800) 847-2424 or
through the internet at www.vankampen.com. A shareholder automatically has these
exchange privileges unless the shareholder indicates otherwise by checking the
applicable box on the account application form. 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

21
<PAGE> 23

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

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

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

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

FEDERAL INCOME TAXATION

Distributions of the Fund's investment company taxable income (consisting
generally of taxable income and net short-term capital gain) are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain (which is the excess of net long-term capital
gain over net short-term capital loss) as capital gain dividends, if any, are
taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of how long the shares of the
Fund have been held by such shareholders. The Fund expects that its
distributions will consist primarily of ordinary income and capital gain
dividends. Distributions in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of a shareholder's shares and, after such adjusted
tax basis is reduced to zero, will constitute capital gains to such shareholder

22
<PAGE> 24

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

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

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

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

The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding and disposing of
shares, as well as the effect 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,
1999 1998 1997 1996 1995 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period......................... $ 14.459 $ 14.624 $ 14.459 $ 14.950 $ 13.698 $14.440 $14.609 $14.447
-------- -------- -------- -------- -------- ------- ------- -------
Net Investment Income.......... .899 .941 1.039 1.069 1.111 .750 .816 .916
Net Realized and Unrealized
Gain/Loss.................... (.914) (.127) .158 (.495) 1.233 (.880) (.121) .162
-------- -------- -------- -------- -------- ------- ------- -------

Total from Investment
Operations..................... (.015) .814 1.197 .574 2.344 (.130) .695 1.078

Less Distributions from and in
Excess of Net Investment
Income......................... .924 .979 1.032 1.065 1.092 .811 .864 .916
-------- -------- -------- -------- -------- ------- ------- -------

Net Asset Value, End of the
Period......................... $ 13.520 $ 14.459 $ 14.624 $ 14.459 $ 14.950 $13.499 $14.440 $14.609
======== ======== ======== ======== ======== ======= ======= =======

Total Return(a).................. (.11%) 5.77% 8.57% 4.10% 17.61% (.92%) 4.87% 7.71%
Net Assets at End of the Period
(In millions).................. $1,817.0 $2,079.6 $2,264.8 $2,560.1 $2,962.9 $ 130.4 $ 284.2 $ 359.0
Ratio of Operating Expenses to
Average Net Assets(b).......... .91% .90% .90% .90% .93% 1.71% 1.72% 1.72%
Ratio of Interest Expense to
Average Net Assets............. .07% .04% .08% .02% .27% .07% .04% .08%
Ratio of Net Investment Income to
Average Net Assets(b).......... 6.50% 6.45% 7.26% 7.38% 7.68% 5.73% 5.63% 6.44%
Portfolio Turnover (Excluding
Dollar Rolls and Forward
Commitment Transactions)....... 112% 82% 104% 64% 63% 112% 82% 104%

<CAPTION>
Class B Shares Class C Shares
Year Ended December 31, Year Ended December 31,
1996 1995 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period......................... $14.948 $13.694 $14.436 $14.608 $14.448 $14.948 $13.693
------- ------- ------- ------- ------- ------- -------
Net Investment Income.......... .947 .991 .784 .822 .910 .943 .996
Net Realized and Unrealized
Gain/Loss.................... (.494) 1.241 (.914) (.130) .166 (.489) 1.237
------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations..................... .453 2.232 (.130) .692 1.076 .454 2.233
Less Distributions from and in
Excess of Net Investment
Income......................... .954 .978 .811 .864 .916 .954 .978
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period......................... $14.447 $14.948 $13.495 $14.436 $14.608 $14.448 $14.948
======= ======= ======= ======= ======= ======= =======
Total Return(a).................. 3.24% 16.78% (.92%) 4.87% 7.71% 3.24% 16.78%
Net Assets at End of the Period
(In millions).................. $ 414.8 $ 466.7 $ 19.3 $ 18.0 $ 14.2 $ 14.3 $ 13.3
Ratio of Operating Expenses to
Average Net Assets(b).......... 1.73% 1.75% 1.72% 1.72% 1.72% 1.72% 1.75%
Ratio of Interest Expense to
Average Net Assets............. .02% .27% .07% .04% .08% .02% .27%
Ratio of Net Investment Income to
Average Net Assets(b).......... 6.55% 6.85% 5.66% 5.63% 6.41% 6.55% 6.86%
Portfolio Turnover (Excluding
Dollar Rolls and Forward
Commitment Transactions)....... 64% 63% 112% 82% 104% 64% 63%
</TABLE>

(a) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) For the year ended 1996, the impact on the Ratios of Expenses and Net
Investment Income to Average Net Assets due to the Adviser's reimbursement of
certain expenses was less than 0.01%.

24
<PAGE> 26

BOARD OF TRUSTEES
AND OFFICERS

BOARD OF TRUSTEES

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

OFFICERS

Richard F. Powers, III*

President

Stephen L. Boyd*

Executive Vice President and Chief Investment Officer

A. Thomas Smith III*

Vice President and Secretary

John H. Zimmermann, III*

Vice President

Michael H. Santo*

Vice President

Peter W. Hegel*

Vice President

John L. Sullivan*

Vice President, Chief Financial Officer and Treasurer

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

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS

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

DEALERS

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

TELECOMMUNICATIONS DEVICE FOR THE DEAF

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

FUNDINFO(R)

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

WEB SITE

www.vankampen.com

VAN KAMPEN 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 218256

Kansas City, MO 64121-8256

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

<PAGE> 27

VAN KAMPEN
U.S. GOVERNMENT FUND

PROSPECTUS

APRIL 28, 2000

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

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

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

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

[VAN KAMPEN FUNDS LOGO]

The Fund's Investment Company Act
File No. is 811-3950.
USGF PRO 4/00

<PAGE> 28

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN
U.S. GOVERNMENT FUND

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

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, Oakbrook
Terrace, Illinois 60181-5555 or (800) 341-2911 (or (800) 421-2833 for the
hearing impaired).

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

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

<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective, Policies and Risks.................... B-4
Strategic Transactions...................................... B-10
Investment Restrictions..................................... B-18
Trustees and Officers....................................... B-20
Investment Advisory Agreement............................... B-30
Other Agreements............................................ B-30
Distribution and Service.................................... B-31
Transfer Agent.............................................. B-35
Portfolio Transactions and Brokerage Allocation............. B-36
Shareholder Services........................................ B-38
Redemption of Shares........................................ B-40
Contingent Deferred Sales Charge-Class A.................... B-41
Waiver of Class B and Class C Contingent Deferred Sales
Charges................................................... B-41
Taxation.................................................... B-43
Fund Performance............................................ B-47
Other Information........................................... B-51
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-13
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL 28, 2000.

<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, such as the Fund. The Trustees may create one or more
classes of shares for each such series.

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 reorganization
of the Massachusetts Trust 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 U.S. Government Fund on July 31, 1995. On
July 14, 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. ("Morgan Stanley Dean Witter"). The principal
office of the Trust, the Fund, the Adviser, the Distributor and Van Kampen
Investments is located at 1 Parkview Plaza, Oakbrook Terrace, Illinois
60181-5555. The principal office of Investor Services is located at 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153.

Morgan Stanley Dean Witter is a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.

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

The Fund currently offers three classes of shares, designated Class A
Shares, Class B Shares and Class C Shares. Other classes may be established from
time to time in accordance with provisions of the Declaration of Trust. Each
class of shares of the Fund generally is identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee.

B-2
<PAGE> 30

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 less 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
outstanding and entitled to vote (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 3, 2000, 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 Record Holder April 3, 2000 of Shares Ownership
--------------------------------- ------------- --------- ----------
<S> <C> <C> <C>
Van Kampen Trust Company........................ 15,094,825 A 11.83%
2800 Post Oak Blvd. 608,820 B 8.00%
Houston, TX 77056
Edward Jones & Co. ............................. 9,808,511 A 7.69%
Attn: Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts, MO 63043-3009
</TABLE>

Van Kampen Trust Company acts as custodian for certain employee benefit
plans

and individual retirement accounts.

INVESTMENT OBJECTIVE, POLICIES AND RISKS

The following disclosure supplements the disclosure set forth under the
same caption in the Prospectus and does 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

B-4
<PAGE> 32

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.

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

B-5
<PAGE> 33

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 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).

B-6
<PAGE> 34

"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 liquid 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 broker-dealers, banks and
other recognized financial institutions. 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 broker-dealers, banks and other
recognized financial institutions deemed to be creditworthy by the Adviser under
guidelines approved by the Fund's Board of Trustees. The Fund will not invest in
repurchase agreements maturing in more than seven days if any such investment,
together with any other illiquid securities held by the Fund, would exceed the
Fund's limitation on illiquid securities described herein. The Fund does not
bear the risk of a decline in the value of the underlying security unless the
seller defaults under its repurchase obligation. In the event of the bankruptcy
or other default of a seller of a repurchase agreement, the Fund could
experience both delays in liquidating the underlying securities and losses
including: (a) possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible lack
of access to income on the underlying security during this period; and (c)
expenses of enforcing its rights.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is

B-7
<PAGE> 35

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 permitting this practice, which conditions are designed to ensure the
fair administration of the joint account and to protect the amounts in that
account.

Repurchase agreements are fully collateralized by the underlying 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, its agencies
or instrumentalities) may have maturity dates exceeding one year.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

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.

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 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

B-8
<PAGE> 36

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, in an amount up to 25% of the assets of the Fund, to
broker-dealers, banks and other recognized institutional borrowers of securities
provided 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, its agencies or instrumentalities, which collateral is equal at all
times to at least 100% of the value of the securities loaned, including accrued
interest. Any cash collateral pursuant to these loans will be invested in
short-term instruments. The Fund is the beneficial owner of the loaned
securities and 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
broker-dealer, banks and other recognized institutional borrowers of securities,
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, administration fees and custodial fees in connection with loans
of its portfolio securities.

When voting or consent rights, if any, which accompany loaned securities
pass to the borrower, the Fund will follow the policy of calling the loan, in
whole or in part as may be appropriate to permit the exercise of such rights if
the matters involved would have a material effect on the Fund's investment in
the securities which are the subject of the loan.

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.

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<PAGE> 37

ILLIQUID SECURITIES

The Fund may invest up to 15% of its net assets in illiquid securities,
which includes securities that are not readily marketable, repurchase agreements
which have a maturity of longer than seven days and generally includes
securities that are restricted from sale to the public without registration
under the Securities Act of 1933, as amended (the "1933 Act"). The sale of such
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of liquid
securities trading on national securities exchanges or in the over-the-counter
markets. Restricted securities are often purchased at a discount from the market
price of unrestricted securities of the same issuer reflecting the fact that
such securities may not be readily marketable without some time delay.
Investments in securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Adviser in
accordance with procedures approved by the Fund's Board of Trustees. Ordinarily,
the Fund would invest in restricted securities only when it receives the
issuer's commitment to register the securities without expense to the Fund.
However, registration and underwriting expenses (which typically 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 (such as "no-action" letters issued by the staff of the SEC
interpreting or providing guidance on the 1940 Act or regulations thereunder)
from the provisions of the 1940 Act, as amended from time to time.

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.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur. Although the Fund's
Adviser seeks to use such transactions to further the Fund's investment
objective, no assurance can be given that the use of these transactions will
achieve this result.

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

B-10
<PAGE> 38

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 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

B-11
<PAGE> 39

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.

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 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

B-12
<PAGE> 40

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" from Standard &
Poor's ("S&P") or "P-1" from Moody's Investors Service, 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 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

B-13
<PAGE> 41

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.

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

B-14
<PAGE> 42

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 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

B-15
<PAGE> 43

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 cash or
liquid securities 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 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 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 cash or
liquid 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 cash
or liquid securities equal to the excess of the index value over the exercise
price on a current basis. A put

B-16
<PAGE> 44

option written by the Fund requires the Fund to segregate cash or liquid
securities 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 or liquid
securities.

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 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 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.

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<PAGE> 45

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental investment restrictions
which may not be changed without shareholder 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 Fund's voting securities present at the
meeting, if the holders of more than 50% of the Fund's outstanding voting
securities of the Fund are present or represented by proxy; or (ii) more than
50% of the Fund's outstanding voting securities. The percentage limitations
contained in the restrictions and policies set forth herein apply at the time of
purchase of securities. With respect to the limitations on illiquid securities
and borrowings, the percentage limitations apply at the time of purchase and on
an ongoing basis. 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.

B-18
<PAGE> 46

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 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.)

B-19
<PAGE> 47

TRUSTEES AND OFFICERS

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

TRUSTEES

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder,
Raleigh, NC 27614 and prior to August 1996, Chairman, Chief
Date of Birth: 07/14/32 Executive Officer and President, MDT
Age: 67 Corporation (now known as Getinge/Castle,
Inc., a subsidiary of Getinge Industrier AB),
a company which develops, manufactures,
markets and services medical and scientific
equipment.
Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
53 Monarch Bay Drive company. Trustee/Director of each of the
Dana Point, CA 92629 funds in the Fund Complex. Prior to January
Date of Birth: 09/16/38 1999, Chairman and Chief Executive Officer of
Age: 61 The Allstate Corporation ("Allstate") and
Allstate Insurance Company. Prior to January
1995, President and Chief Executive Officer
of Allstate. Prior to August 1994, various
management positions at Allstate.
</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. Trustee/Director of
233 South Wacker Drive each of the funds in the Fund Complex. Prior
Suite 7000 to 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management
Date of Birth: 06/03/48 consulting firm. Formerly, Executive Vice
Age: 51 President of ABN AMRO, N.A., a Dutch bank
holding company. Prior to 1992, Executive
Vice President of La Salle National Bank.
Trustee on the University of Chicago
Hospitals Board, Vice Chair of the Board of
The YMCA of Metropolitan Chicago and a member
of the Women's Board of the University of
Chicago. Prior to 1996, Trustee of The
International House Board, a fellowship and
housing organization for international
graduate students.
R. Craig Kennedy.......................... President and Director, German Marshall Fund
11 DuPont Circle, N.W. of the United States, an independent U.S.
Washington, D.C. 20016 foundation created to deepen understanding,
Date of Birth: 02/29/52 promote collaboration and stimulate exchanges
Age: 48 of practical experience between Americans and
Europeans. Trustee/Director of each of the
funds in the Fund Complex. Formerly, advisor
to the Dennis Trading Group Inc., a managed
futures and option company that invests money
for individuals and institutions. Prior to
1992, President and Chief Executive Officer,
Director and Member of the Investment
Committee of the Joyce Foundation, a private
foundation.
</TABLE>

B-21
<PAGE> 49

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Mitchell M. Merin*........................ President and Chief Operating Officer of
Two World Trade Center Asset Management of Morgan Stanley Dean
66th Floor Witter since December 1998. President and
New York, NY 10048 Director since April 1997 and Chief Executive
Date of Birth: 08/13/53 Officer since June 1998 of Morgan Stanley
Age: 46 Dean Witter Advisors Inc. and Morgan Stanley
Dean Witter Services Company Inc. Chairman,
Chief Executive Officer and Director of
Morgan Stanley Dean Witter Distributors Inc.
since June 1998. Chairman and Chief Executive
Officer since June 1998, and Director since
January 1998, of Morgan Stanley Dean Witter
Trust FSB. Director of various Morgan Stanley
Dean Witter subsidiaries. President of the
Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series since May 1999.
Trustee/Director of each of the funds in the
Fund Complex. Previously Chief Strategic
Officer of Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter
Services Company Inc. and Executive Vice
President of Morgan Stanley Dean Witter
Distributors Inc. April 1997-June 1998, Vice
President of the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series May
1997-April 1999, and Executive Vice President
of Dean Witter, Discover & Co.
Jack E. Nelson............................ President and owner, Nelson Investment
423 Country Club Drive Planning Services, Inc., a financial planning
Winter Park, FL 32789 company and registered investment adviser in
Date of Birth: 02/13/36 the State of Florida. President and owner,
Age: 64 Nelson Ivest Brokerage Services Inc., a
member of the National Association of
Securities Dealers, Inc. and Securities
Investors Protection Corp. Trustee/Director
of each of the funds in the Fund Complex.
</TABLE>

B-22
<PAGE> 50

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Richard F. Powers, III*................... Chairman, President and Chief Executive
1 Parkview Plaza Officer of Van Kampen Investments. Chairman,
P.O. Box 5555 Director and Chief Executive Officer of the
Oakbrook Terrace, IL 60181-5555 Advisers, the Distributor, Van Kampen
Date of Birth: 02/02/46 Advisors Inc. and Van Kampen Management Inc.
Age: 54 Director and officer of certain other
subsidiaries of Van Kampen Investments.
Trustee/Director and President of each of the
funds in the Fund Complex. Trustee, President
and Chairman of the Board of other investment
companies advised by the Advisers and their
affiliates, and Chief Executive Officer of
Van Kampen Exchange Fund. Prior to May 1998,
Executive Vice President and Director of
Marketing at Morgan Stanley Dean Witter and
Director of Dean Witter Discover & Co. and
Dean Witter Realty. Prior to 1996, Director
of Dean Witter Reynolds Inc.
Phillip B. Rooney......................... Vice Chairman (since April 1997) and Director
One ServiceMaster Way (since 1994) of The ServiceMaster Company, a
Downers Grove, IL 60515 business and consumer services company.
Date of Birth: 07/08/44 Director of Illinois Tool Works, Inc., a
Age: 55 manufacturing company and the Urban Shopping
Centers Inc., a retail mall management
company. Trustee, University of Notre Dame.
Trustee/Director of each of the funds in the
Fund Complex. Prior to 1998, Director of
Stone Smurfit Container Corp., a paper
manufacturing company. From May 1996 through
February 1997 he was President, Chief
Executive Officer and Chief Operating Officer
of Waste Management, Inc., an environmental
services company, and from November 1984
through May 1996 he was President and Chief
Operating Officer of Waste Management, Inc.

Fernando Sisto............................ Professor Emeritus. Prior to August 1996, a
155 Hickory Lane George M. Bond Chaired Professor with Stevens
Closter, NJ 07624 Institute of Technology, and prior to 1995,
Date of Birth: 08/02/24 Dean of the Graduate School, Stevens
Age: 75 Institute of Technology. Director, Dynalysis
of Princeton, a firm engaged in engineering
research. Trustee/Director of each of the
funds in the Fund Complex.
</TABLE>

B-23
<PAGE> 51

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the funds in the Fund Complex, and
Date of Birth: 08/22/39 other investment companies advised by the
Age: 60 Advisers or Van Kampen Management Inc.
Trustee/Director of each of the funds in the
Fund Complex, and Trustee/Managing General
Partner of other investment companies advised
by the Advisers or Van Kampen Management Inc.

Suzanne H. Woolsey........................ Chief Operating Officer of the National
2101 Constitution Ave., N.W. Academy of Sciences/National Research
Room 206 Council, an independent, federally chartered
Washington, D.C. 20418 policy institution, since 1993. Director of
Date of Birth: 12/27/41 Neurogen Corporation, a pharmaceutical
Age: 58 company, since January 1998. Director of the
German Marshall Fund of the United States,
Trustee of Colorado College, and Vice Chair
of the Board of the Council for Excellence in
Government. Trustee/Director of each of the
funds in the Fund Complex. Prior to 1993,
Executive Director of the Commission on
Behavioral and Social Sciences and Education
at the National Academy of Sciences/National
Research Council. From 1980 through 1989,
Partner of Coopers & Lybrand.
</TABLE>

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

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

B-24
<PAGE> 52

OFFICERS

Messrs. Smith, Santo, Hegel, Sullivan and Zimmerman are located at 1
Parkview Plaza, Oakbrook Terrace, IL 60181-5555. Mr. Boyd is 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>
A. Thomas Smith III.................. Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Secretary and Director of Van Kampen Investments,
Vice President and Secretary the Advisers, Van Kampen Advisors Inc., Van
Age: 43 Kampen Management Inc., the Distributor, American
Capital Contractual Services, Inc., Van Kampen
Exchange Corp., Van Kampen Recordkeeping Services
Inc., Investor Services, Van Kampen Insurance
Agency of Illinois Inc. and Van Kampen System
Inc. Vice President and Secretary/Vice President,
Principal Legal Officer and Secretary of other
investment companies advised by the Advisers or
their affiliates. Vice President and Secretary of
each of the funds in the Fund Complex. Prior to
January 1999, Vice President and Associate
General Counsel to New York Life Insurance
Company ("New York Life"), and prior to March
1997, Associate General Counsel of New York Life.
Prior to December 1993, Assistant General Counsel
of The Dreyfus Corporation. Prior to August 1991,
Senior Associate, Willkie Farr & Gallagher. Prior
to January 1989, Staff Attorney at the Securities
and Exchange Commission, Division of Investment
Management, Office of Chief Counsel.

Michael H. Santo..................... Executive Vice President, Chief Administrative
Date of Birth: 10/22/55 Officer and Director of Van Kampen Investments,
Vice President the Advisers, the Distributor, Van Kampen
Age: 44 Advisors Inc., Van Kampen Management Inc. and Van
Kampen Investor Services Inc., and serves as a
Director or Officer of certain other subsidiaries
of Van Kampen Investments. Vice President of each
of the funds in the Fund Complex and certain
other investment companies advised by the
Advisers and their affiliates. Prior to 1998,
Senior Vice President and Senior Planning Officer
for Individual Asset Management of Morgan Stanley
Dean Witter and its predecessor since 1994. From
1990-1994, First Vice President and Assistant
Controller in Dean Witter's Controller's
Department.

Peter W. Hegel....................... Executive Vice President of the Advisers, Van
Date of Birth: 06/25/56 Kampen Management Inc. and Van Kampen Advisors
Vice President Inc. Vice President of each of the funds in the
Age: 43 Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates. Prior to September 1996, Director of
McCarthy, Crisanti & Maffei, Inc, a financial
research company.
</TABLE>

B-25
<PAGE> 53

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Stephen L. Boyd...................... Executive Vice President and Chief Investment
Date of Birth: 11/16/40 Officer of Van Kampen Investments, and President
Executive Vice President and and Chief Operating Officer of the Advisers.
Chief Investment Officer Executive Vice President and Chief Investment
Age: 59 Officer of each of the funds in the Fund Complex
and certain other investment companies advised by
the Advisers or their affiliates. Prior to April
2000, Vice President and Chief Investment Officer
of the Advisers. Prior to October 1998, Vice
President and Senior Portfolio Manager with AIM
Capital Management, Inc. Prior to February 1998,
Senior Vice President and Portfolio Manager of
Van Kampen American Capital Asset Management,
Inc., Van Kampen American Capital Investment
Advisory Corp. and Van Kampen American Capital
Management, Inc.

John H. Zimmermann, III.............. Senior Vice President and Director of Van Kampen
Date of Birth: 11/25/57 Investments, President and Director of the
Vice President Distributor and President of Van Kampen Insurance
Age: 42 Agency of Illinois Inc. Vice President of each of
the funds in the Fund Complex. From November 1992
to December 1997, Senior Vice President of the
Distributor.

John L. Sullivan..................... Senior Vice President of Van Kampen Investments
Date of Birth: 08/20/55 and the Advisers. Vice President, Chief Financial
Vice President, Chief Financial Officer and Treasurer of each of the funds in the
Officer and Treasurer Fund Complex and certain other investment
Age: 44 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 63 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated person of Van Kampen Investments, the Advisers or the Distributor
(each a "Non-Affiliated Trustee") is compensated by an annual retainer and
meeting fees for services to the funds in the Fund Complex. Each fund in the
Fund Complex provides a deferred compensation plan to its Non-Affiliated
Trustees that allows trustees/directors to defer receipt of their compensation
and earn a return on such deferred amounts. Deferring compensation has the
economic effect as if the Non-Affiliated Trustee reinvested his or her
compensation into the funds. Each fund in the Fund Complex provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.

The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex on the basis of the
relative net assets of each fund as of the last business day of the preceding
calendar quarter. The compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex in the amount of

B-26
<PAGE> 54

$200 per quarterly or special meeting attended by the Non-Affiliated Trustee,
due on the date of the meeting, plus reasonable expenses incurred by the
Non-Affiliated Trustee in connection with his or her services as a trustee,
provided that no compensation will be paid in connection with certain telephonic
special meetings.

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

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

B-27
<PAGE> 55

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
Retirement Annual Compensation
Year First Aggregate Benefits Benefits from before
Appointed or Compensation Accrued as the Fund Deferral from
Elected to from the Part of Upon Fund
Name(1) the Board Fund(2) Expenses(3) Retirement(4) Complex(5)
------- ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan 1995 $ 4,220 $40,303 $60,000 $126,000
Jerry D. Choate(1) 1999 2,985 0 60,000 88,700
Linda Hutton Heagy 1995 4,220 5,045 60,000 126,000
R. Craig Kennedy 1993 4,220 3,571 60,000 125,600
Jack E. Nelson 1988 4,220 21,664 60,000 126,000
Phillip B. Rooney 1997 4,020 7,787 60,000 113,400
Fernando Sisto 1995 4,220 72,060 60,000 126,000
Wayne W. Whalen 1988 4,220 15,189 60,000 126,000
Suzanne H. Woolsey(1) 1999 2,985 0 60,000 88,700
</TABLE>

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

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

(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended December 31, 1999. The
following trustees deferred compensation from the Fund during the fiscal
year ended December 31, 1999: Mr. Branagan, $4,220; Mr. Choate, $1,988; Ms.
Heagy, $4,220; Mr. Kennedy, $2,110; Mr. Nelson, $4,220; Mr. Rooney, $4,020;
Mr. Sisto, $2,110 and Mr. Whalen, $4,220. 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, 1999 is
as follows: Mr. Branagan, $19,927; Mr. Choate, $2,708; Mr. Gaughan, $1,104;
Ms. Heagy, $19,000; Mr. Kennedy, $28,219; Mr. Miller, $13,736; Mr. Nelson,
$43,180; Mr. Rees, $3,172; Mr. Robinson, $24,802; Mr. Rooney, $19,863; Mr.
Sisto, $9,591; Mr. Whalen, $33,278; and Mr. Yovovich, $5,035. The deferred
compensation plan is described above the Compensation Table.

B-28
<PAGE> 56

(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the trustees for the funds' respective fiscal years ended in
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 funds in the Fund Complex for each year of the 10-year period
commencing in the year of such trustee's anticipated retirement. The
retirement plan is described above the Compensation Table.

(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1999 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, 1999. 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 $279,250 during the calendar year
ended December 31, 1999.

The Fund, the Adviser and the Distributor have adopted Codes of Ethics
(collectively, the "Code of Ethics") that set forth general and specific
standards relating to the securities trading activities of their employees. The
Code of Ethics does not prohibit employees from acquiring securities that may be
purchased or held by the Fund, but is intended to ensure that all employees
conduct their personal transactions in a manner that does not interfere with the
portfolio transactions of the Fund or other Van Kampen funds, or that such
employees take unfair advantage of their relationship with the Fund. Among other
things, the Code of Ethics prohibits certain types of transactions absent prior
approval, imposes various trading restrictions (such as time periods during
which personal transactions may or may not be made) and requires quarterly
reporting of securities transactions and other matters. All reportable
securities transactions and other required reports are to be reviewed by
appropriate personnel for compliance with the Code of Ethics. Additional
restrictions apply to portfolio managers, traders, research analysts and others
who may have access to nonpublic information about the trading activities of the
Fund or other Van Kampen funds or who otherwise are involved in the investment
advisory process. Exceptions to these and other provisions of the Code of Ethics
may be granted in particular circumstances after review by appropriate
personnel.

As of April 3, 2000, the trustees and officers of the Fund as a group owned
less than 1% of the shares of the Fund.

B-29
<PAGE> 57

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
strategy and implement the Fund's investment objectives. The Adviser also
furnishes offices, necessary facilities and equipment, provides administrative
services to the Fund, renders periodic reports to the Board of Trustees and
permits its officers and employees to serve without compensation as trustees of
the Trust or officers of the Fund if elected to such positions. The Fund,
however, bears the cost of its day-to-day operations, including service fees,
distribution fees, custodian fees, legal and independent accountant fees, the
costs of reports and proxies to shareholders, compensation of trustees of the
Trust (other than those who are affiliated persons of the Adviser, Distributor
or Van Kampen Investments) 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 errors of judgment or of
law, or for any loss suffered by the Fund in connection with the matters to
which the agreement relates, except a loss resulting from willful misfeasance,
bad faith, or gross negligence on the part of the Adviser in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under the agreement.

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

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

During the fiscal years ended December 31, 1999, 1998 and 1997, the Adviser
received approximately $11,376,700, $12,925,800 and $14,229,600, respectively,
in advisory fees from the Fund.

OTHER AGREEMENTS

Accounting Services Agreement. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
supplementary to those provided by the custodian. Such services are expected to
enable the Fund to more closely monitor and maintain its accounts and records.
The Fund pays all costs and expenses related to such services, including all
salary and related benefits of accounting personnel, as well as the overhead and
expenses of office space and the equipment

B-30
<PAGE> 58

necessary to render such services. The Fund shares together with the other Van
Kampen funds in the cost of providing such services with 25% of such costs
shared proportionately based on the respective number of classes of securities
issued per fund and the remaining 75% of such costs based proportionately on
their respective net assets per fund.

During the fiscal years ended December 31, 1999, 1998 and 1997, Advisory
Corp. received approximately $587,200, $255,500 and $288,100, 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.

During the fiscal years ended December 31, 1999, 1998 and 1997, Van Kampen
Investments received approximately $42,700, $39,800, and $69,400, 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

B-31
<PAGE> 59

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

<TABLE>
<CAPTION>
Total Amounts
Underwriting Retained by
Commissions Distributor
------------ -----------
<S> <C> <C>
Fiscal Year Ended December 31, 1999..................... $1,271,586 $ 81,391
Fiscal Year Ended December 31, 1998..................... $1,279,575 $117,071
Fiscal Year Ended December 31, 1997..................... $ 846,433 $ 90,856
</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 the Fund may impose a contingent deferred sales
charge of 1.00% on certain redemptions made within one year of the purchase. A
commission or transaction fee will be paid by the Distributor at the time of
purchase directly out of the Distributor's assets (and not out of the Fund's
assets) to authorized dealers who initiate and are responsible for purchases
of $1 million or more computed 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. For single purchases of
$20 million or more by an individual retail investor the Distributor will pay,
at the time of purchase and directly out of the Distributor's assets (and not
out of the Fund's assets), a commission or transaction fee of 1.00% to
authorized dealers who initiate and are responsible for such purchases. The
commission or transaction fee of 1.00% will be computed on a percentage of the
dollar value of such shares sold.

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

B-32
<PAGE> 60

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.
Also, the Distributor in its discretion may from time to time, pursuant to
objective criteria established by the Distributor, pay fees to, and sponsor
business seminars for, qualifying authorized dealers for certain services or
activities which are primarily intended to result in sales of shares of the Fund
or other Van Kampen funds. Fees may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its quarterly sales of shares of the Fund and other Van
Kampen funds and increases in net assets of the Fund and other Van Kampen funds
over specified thresholds. All of the foregoing payments are made by the
Distributor out of its own assets. Such fees paid for such services and
activities with respect to the Fund will not exceed in the aggregate 1.25% of
the average total daily net assets of the Fund on an annual basis. These
programs will not change the price an investor will pay for shares or the amount
that a Fund will receive from such sale.

The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans." The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
respectively. The Distribution Plan and the Service Plan are being implemented
through the Distribution and Service Agreement with the Distributor of each
class of the Fund's shares and sub-agreements between the Distributor and
members of the NASD who are acting as securities dealers and NASD members or
eligible non-members who are acting as brokers or agents and similar agreements
between the Fund and financial intermediaries who are acting as brokers
(collectively, "Selling Agreements") that may provide for their customers or
clients certain services or assistance, which may include, but not be limited
to, processing purchase and redemption transactions, establishing and
maintaining shareholder accounts regarding the Fund, and such other services as
may be agreed to from time to time and as may be permitted by applicable
statute, rule or regulation. Brokers, dealers and financial intermediaries that
have entered into sub-agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."

B-33
<PAGE> 61

Certain financial intermediaries may be prohibited under law from providing
certain underwriting or distribution services. If a financial intermediary 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 financial intermediary would result in any material adverse consequences
to the Fund.

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

For Class A Shares in any given year in which the Plans are in effect, the
Plans generally provide for the Fund to pay the Distributor the lesser of (i)
the amount of the Distributor's actual expenses incurred during such year less
any deferred sales charges (if any) it received during such year (the "actual
net expenses") or (ii) the distribution and service fees at the rates specified
in the Prospectus (the "plan fees"). Therefore, to the extent the Distributor's
actual net expenses in a given year are less than the plan fees for such year,
the Fund only pays the actual net expenses. Alternatively, to the extent the
Distributor's actual net expenses in a given year exceed the plan fees for such
year, the Fund only pays the plan fees for such year. For Class A Shares, there
is no carryover of any unreimbursed actual net expenses to succeeding years.

The Plans for Class B Shares and Class C Shares are similar to the Plans
for Class A Shares, except that any actual net expenses which exceed plan fees
for a given year are carried forward and are eligible for payment in future
years by the Fund so long as the Plans remain in effect. Thus, for each of the
Class B Shares and Class C Shares, in any given year in which the Plans are in
effect, the Plans generally provide for the fund to pay the Distributor the
lesser of (i) the applicable amount of the Distributor's actual net expenses
incurred during such year for such class of shares plus any actual net expenses
from prior years that are still unpaid by the Fund for such class of shares or
(ii) the applicable plan fees for such class of shares. Except as may be
mandated by applicable law, the Fund does not impose any limit with respect to
the number of years into the future that such unreimbursed actual net expenses
may be carried forward (on a Fund level basis). These unreimbursed actual net
expenses may or may not be recovered through plan fees or contingent deferred
sales charges in future years.

Because of fluctuation in net asset value, the plan fees 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

B-34
<PAGE> 62

such circumstances, a shareholder of a share may be deemed to incur expenses
attributable to other shareholders of such class.

As of December 31, 1999, there were $7,799,944 and $199,001 of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing 5.98% and 1.03% 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, 1999, the Fund's aggregate expenses
paid under the Plans for Class A Shares were $3,993,722 or 0.20% 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 Class A
shareholders and for administering the Class A Share Plans. For the fiscal year
ended December 31, 1999, the Fund's aggregate expenses paid under the Plans for
Class B Shares were $2,170,067 or 1.00% of the Class B Shares' average daily net
assets. Such expenses were paid to reimburse the Distributor for the following
payments: $1,579,437 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class B Shares of the Fund and $590,630
for fees paid to financial intermediaries for servicing Class B shareholders and
administering the Class B Share Plans. For the fiscal year ended December 31,
1999, the Fund's aggregate expenses paid under the Plans for Class C Shares were
$197,805 or 1.00% of the Class C Shares' average daily net assets. Such expenses
were paid to reimburse the Distributor for the following payments; $121,313 for
commissions and transaction fees paid to financial intermediaries in respect of
sales of Class C Shares of the Fund and $76,492 for fees paid to financial
intermediaries for servicing Class C shareholders and administering the Class C
Share Plans.

The Distributor has entered into agreements with the following firms: (1)
GreatWest Life & Annuity Insurance Company/BenefitsCorp Equities, Inc., (2)
Hewitt Associates, LLC, (3) Huntington Bank, (4) Invesco Retirement and Benefit
Services, Inc., (5) Lincoln National Life Insurance Company, (6) Merrill Lynch
Pierce, Fenner & Smith, Incorporated, (7) Dean Witter Reynolds, Inc., (8)
National Deferred Compensation, Inc., (9) Norwest Bank Minnesota, N.A./Wells
Fargo Bank, N.A., (10) The Prudential Insurance Company of America and (11)
Union Bank of California, N.A. Shares of the Fund shall be offered pursuant to
such firm's retirement plan alliance program(s). Trustees and other fiduciaries
of retirement plans seeking to invest in multiple fund families through
broker-dealer retirement plan alliance programs should contact the firms
mentioned above for further information concerning the program(s) including, but
not limited to, minimum investment and operational requirements.

TRANSFER AGENT

The Fund's transfer agent, shareholder service agent and dividend
disbursing agent is Van Kampen Investor Services Inc. The transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive benchmarks.

B-35
<PAGE> 63

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 Board of 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-36
<PAGE> 64

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 objective, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.

Effective October 31, 1996, Morgan Stanley & Co. Incorporated ("Morgan
Stanley") became an affiliate of the Adviser. Effective May 31, 1997, Dean
Witter Reynolds, Inc. ("Dean Witter") became an affiliate of the Adviser. The
Fund's Board of Trustees has adopted certain policies incorporating the
standards of Rule 17e-1 issued by the SEC under the 1940 Act which require 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 years shown:

<TABLE>
<CAPTION>
Affiliated Brokers
----------------------
Morgan Dean
Brokers Stanley Witter
Commissions Paid: ------- ------- ------
<S> <C> <C> <C>
Fiscal year ended December 31, 1999................. $218,880 $-0- $-0-
Fiscal year ended December 31, 1998................. $251,773 $-0- $-0-
Fiscal year ended December 31, 1997................. $ -0- $-0- $-0-
Fiscal year 1999 Percentages:
Commissions with affiliate to total commissions... -- --
Value of brokerage transactions with affiliate to
total transactions............................. -- --
</TABLE>

B-37
<PAGE> 65

During the fiscal year ended December 31, 1999, the Fund paid no brokerage
commissions to brokers selected primarily on the basis of research services
provided to the Adviser.

SHAREHOLDER SERVICES

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

INVESTMENT ACCOUNT

Each shareholder has an investment account under which the investor's
shares of the Fund are held by Investor Services, the Fund's transfer agent.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in any of the
Participating Funds (as defined in the Prospectus) will receive statements
quarterly from Investor Services showing any reinvestments of dividends and
capital gain dividends and any other activity in the account since the preceding
statement. Such shareholders also will receive separate confirmations for each
purchase or sale transaction other than reinvestment of dividends and capital
gain dividends and systematic purchases or redemptions. Additional shares may be
purchased at any time through authorized dealers or by mailing a check and
detailed instructions directly to Investor Services.

SHARE CERTIFICATES

Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon an exchange or
redemption of the shares represented by the certificate. In addition, if such
certificates are lost the shareholder must write to Van Kampen Funds Inc., c/o
Investor Services, PO Box 218256, Kansas City, MO 64121-8256, requesting an
"Affidavit of Loss" and obtain a Surety Bond in a form acceptable to Investor
Services. On the date the letter is received, Investor Services will calculate
the fee for replacing the lost certificate equal to no more than 1.50% 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)

B-38
<PAGE> 66

and Money Purchase and Profit Sharing Keogh plans. Details regarding fees, as
well as full plan administration for profit sharing, pension and 401(k) plans,
are available from the Distributor.

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS

Shareholders can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemption proceeds transferred to a
bank account via the ACH plan are available to be credited to the account on the
second business day following normal payment. In order to utilize this option,
the shareholder's bank must be a member of ACH. In addition, the shareholder
must fill out the appropriate section of the account application. The
shareholder must also include a voided check or deposit slip from the bank
account into which redemption proceeds are to be deposited together with the
completed application. Once Investor Services has received the application and
the voided check or deposit slip, such shareholder's designated bank account,
following any redemption, will be credited with the proceeds of such redemption.
Once enrolled in the ACH plan, a shareholder may terminate participation at any
time by writing Investor Services or by calling (800) 341-2911 ((800) 421-2833
for the hearing impaired).

DIVIDEND DIVERSIFICATION

A shareholder may upon written request, by completing the appropriate
section of the account application form or by calling (800) 341-2911 ((800)
421-2833 for the hearing impaired), elect to have all dividends and capital gain
dividends paid on a class of shares of the Fund invested into shares of the same
class of any Participating Fund so long as the investor has a pre-existing
account for such class of shares of the other fund. Both accounts must be of the
same type, either non-retirement or retirement. If the accounts are retirement
accounts, they must both be for the same class and of the same type of
retirement plan (e.g. IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the
same individual. If a qualified, pre-existing account does not exist, the
shareholder must establish a new account subject to minimum investment and other
requirements of the fund into which distributions would be invested.
Distributions are invested into the selected fund at its net asset value per
share as of the payable date of the distribution.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder may establish a monthly, quarterly, semiannual or annual
withdrawal plan if the shareholder owns shares in a single account valued at
$10,000 or more at the next determined net asset value per share at the time the
plan is established. If a shareholder owns shares in a single account valued at
$5,000 or more at the next determined net asset value per share at the time the
plan is established, the shareholder may establish a quarterly, semiannual or
annual withdrawal plan. This plan provides for the orderly use of the entire
account, not only the income but also the capital, if necessary. Each payment
represents the proceeds of a redemption of shares on which any capital gain or
loss will be recognized. The planholder may arrange for regular 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."

B-39
<PAGE> 67

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

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

EXCHANGE PRIVILEGE

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

Exchange privileges will be suspended on a particular fund if more than
eight exchanges out of that fund are made during a rolling 365-day period. If
exchange privileges are suspended, subsequent exchange requests during the
stated period will not be processed. Exchange privileges will be restored when
the account history shows fewer than eight exchanges in the rolling 365-day
period.

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

REINSTATEMENT PRIVILEGE

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

REDEMPTION OF SHARES

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

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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.

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

CONTINGENT DEFERRED SALES CHARGE-CLASS A

As described in the Prospectus under "Purchase of Shares-Class A Shares,"
there is no sales charge payable on Class A Shares at the time of purchase on
investments of $1 million or more, but a contingent deferred sales charge
("CDSC-Class A") may be imposed on certain redemptions made within one year of
purchase. For purposes of the CDSC-Class A, when shares of one fund are
exchanged for shares of another fund, the purchase date for the shares of the
fund exchanged into will be assumed to be the date on which shares were
purchased in the fund from which the exchange was made. If the exchanged shares
themselves are acquired through an exchange, the purchase date is assumed to
carry over from the date of the original election to purchase shares subject to
a CDSC-Class A rather than a front-end load sales charge. In determining whether
a CDSC-Class A is payable, it is assumed that shares being redeemed first are
any shares in the shareholder's account not subject to a contingent deferred
sales charge, followed by shares held the longest in the shareholder's account.
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends.

WAIVER OF CLASS B AND CLASS C CONTINGENT
DEFERRED SALES CHARGES

As described in the Prospectus under "Redemption of Shares," redemptions of
Class B Shares and Class C Shares will be subject to a contingent deferred sales
charge ("CDSC-Class B and C"). 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

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she may require, the Distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC-Class B and C.

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

REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS

The Fund will waive the CDSC-Class B and C when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The CDSC-Class B and C will be waived upon the tax-free rollover or
transfer of assets to another retirement plan invested in one or more
Participating Funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held on to the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any, CDSC-Class B and C is applicable in the event that such acquired shares are
redeemed following the transfer or rollover. The charge also will be waived on
any redemption which results from the return of an excess contribution pursuant
to Section 408(d)(4) or (5) of the Code, the return of excess deferral amounts
pursuant to Code Section 401(k)(8) or 402(g)(2), the financial hardship of the
employee pursuant to U.S. Treasury Regulations Section 1.401(k)-1(d)(2) or from
the death or disability of the employee (see Code Section 72(m)(7) and
72(t)(2)(A)(ii)). In addition, the charge will be waived on any minimum
distribution required to be distributed in accordance with Code Section
401(a)(9).

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

REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN

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

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

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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. See "Purchase of Shares -- Waiver of Contingent Deferred
Sales Charge" in the Prospectus.

INVOLUNTARY REDEMPTIONS OF SHARES

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

REINVESTMENT OF REDEMPTION PROCEEDS

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

REDEMPTION BY ADVISER

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

TAXATION

FEDERAL INCOME TAXATION OF THE FUND

The Fund 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 investment company taxable income (generally including taxable
income and net short-term capital gain, but not net capital gain, which is the
excess of net long-term capital gain over net short-term capital loss), and
meets certain other requirements, it will not be required to pay federal income
taxes on any income it distributes to shareholders. The Fund intends to
distribute at least the minimum amount of investment company taxable

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income necessary to satisfy the 90% distribution requirement. The Fund will not
be subject to federal income tax on any net capital gain distributed to
shareholders.

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

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

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

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DISTRIBUTIONS TO SHAREHOLDERS

Distributions of the Fund's investment company taxable income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain as capital gain dividends, if any, are taxable to
shareholders as long-term capital gains regardless of the length of time shares
of the Fund have been held by such shareholders. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). For a summary of the maximum 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.

SALE OF SHARES

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

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CAPITAL GAINS RATES

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

NON-U.S. SHAREHOLDERS

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

United States Treasury regulations, generally effective for payments made
after December 31, 2000, modify the withholding, back-up withholding and
information reporting rules, including the procedures to be followed by foreign
investors in establishing foreign status. Prospective foreign investors should
consult their tax advisers concerning the applicability and effect of such
Treasury regulations on an investment in shares of the Fund.

The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their

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<PAGE> 74

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 (the "IRS") notifies the Fund that the
shareholder has failed to properly report certain interest and dividend income
to the IRS and to respond to notices to that effect or (iii) when required to do
so, the shareholder fails to certify that he or she is not subject to backup
withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above.

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

INFORMATION REPORTING

The Fund must report annually to the IRS and to each shareholder (other
than a 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. In the case of a Non-U.S. Shareholder, the Fund
must report to the IRS and such shareholder the aggregate amount of dividends
paid that are subject to backup withholding (if any) and the amount of tax
withheld with respect to such dividends pursuant to the backup withholding
rules. This information may also be made available to the tax authorities in the
Non-U.S. Shareholder's country of residence. Generally, dividends paid to
Non-U.S. Shareholders that are subject to the 30% federal income tax withholding
described above under "Non-U.S. Shareholders" are not subject to backup
withholding.

GENERAL

The federal income tax discussion set forth above is for general
information only. Prospective investors and shareholders should consult their
advisers 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

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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 gain dividends during the period are reinvested in Fund shares at net
asset value; and that any applicable contingent deferred sales charge has been
paid. The Fund's total return will vary depending on market conditions, the
securities comprising the Fund's portfolio, the Fund's operating expenses and
unrealized net capital gains or losses during the period. Total return is based
on historical earnings and asset value fluctuations and is not intended to
indicate future performance. No adjustments are made to reflect any income taxes
payable by shareholders on capital gain dividends paid by the Fund or to reflect
the fact 12b-1 fees have changed over time.

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

The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of shares of the Fund from a given date to a subsequent given date.
Cumulative non-standardized total return is calculated by measuring the value of
an initial investment in a given class of shares of the Fund at a given time,
deducting the maximum initial sales charge, if any, determining the value of all
subsequent reinvested distributions, and dividing the net change in the value of
the investment as of the end of the period by the amount of the initial
investment and expressing the result as a percentage. Non-standardized total
return will be calculated separately for each class of shares. Non-standardized
total return calculations do not reflect the imposition of a contingent deferred
sales charge, and if any such contingent deferred sales charge imposed at the
time of redemption were reflected, it would reduce the performance quoted.

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

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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 of the Fund. 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 gains 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 engaged in by
the Fund. Distribution rates will be computed separately for each class of the
Fund's shares.

From time to time marketing materials may provide a portfolio manager
update, an Adviser update and discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top sector holdings and largest holdings. Materials may also
mention how the Distributor believes the Fund compares relative to other Van
Kampen funds. Materials may also discuss the Dalbar Financial Services study
from 1984 to 1994 which studied investor cash flow into and out of all types of
mutual funds. The ten-year study found that investors who bought mutual fund
shares and held such shares outperformed investors who bought and sold. The
Dalbar study conclusions were consistent regardless of whether purchased their
fund shares in direct or sales force distribution channels. The study showed
that investors working with a professional representative have tended over time
to earn higher returns than those who invested directly. The performance of the
funds purchased in the Dalbar study and the conclusions based thereon are not
necessarily indicative of future performance of such funds or conclusions that
may result from similar studies in the future. The Fund will also be marketed on
the internet.

In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds, with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index,
other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking or rating 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

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current period. In each case, such total return and yield information, if any,
will be calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. For these purposes, the
performance of the Fund, as well as the performance of other mutual funds or
indices, do not reflect sales charges, the inclusion of which would reduce the
Fund's performance. The Fund will include performance data for each class of
shares of the Fund in any advertisement or information including performance
data of the Fund.

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

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

CLASS A SHARES

The Fund's average annual total return, assuming payment of the maximum
sales charge, for Class A Shares of the Fund for (i) the one-year period ended
December 31, 1999 was -4.85%, (ii) the five-year period ended December 31, 1999
was 5.99% and (iii) the ten-year period ended December 31, 1999 was 6.34%.

The Fund's cumulative non-standardized total return, including payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to December 31, 1999 was 260.94%.

The Fund's cumulative non-standardized total return, excluding payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to December 31, 1999 was 278.87%.

CLASS B SHARES

The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class B Shares of the Fund for (i) the one-year
period ended December 31, 1999 was -4.66%, (ii) the five-year period ended
December 31, 1999 was 5.94%, and (iii) the approximately seven-year, five-month
period since August 24, 1992, the commencement of distribution for Class B
Shares of the Fund, through December 31, 1999 was 4.63%.

The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class B Shares from
August 24, 1992 (commencement of distribution of Class B Shares) to December 31,
1999 was 39.53%.

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The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class B Shares from
August 24, 1992 (commencement of distribution of Class B Shares) to December 31,
1999 was 39.53%.

CLASS C SHARES

The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class C Shares of the Fund for (i) the one-year
period ended December 31, 1999 was -1.85%, (ii) the five-year period ended
December 31, 1999 was 6.18%, and (iii) the approximately six-year, five-month
period since August 13, 1993, the commencement of distribution for Class C
Shares of the Fund, through December 31, 1999 was 3.89%.

The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class C Shares from
August 13, 1993 (commencement of distribution of Class C Shares) to December 31,
1999 was 27.62%.

The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class C Shares from
August 13, 1993 (commencement of distribution of Class C Shares) to December 31,
1999 was 27.62%.

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 objective 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. The custodian also provides
accounting services to the Fund.

SHAREHOLDER REPORTS

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

INDEPENDENT ACCOUNTANTS

The independent accountants for the Fund perform an annual audit of the
Fund's financial statements. KPMG LLP, located at 303 East Wacker Drive,
Chicago, IL 60601, has ceased being the Fund's independent accountants effective
April 14, 2000. The Board of Trustees and management of the Fund are in the
process of engaging new independent accountants for the audits of the Fund's
financial statements.

LEGAL COUNSEL

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

B-51
<PAGE> 79

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders of
Van Kampen U.S. Government Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen U.S. Government Fund (the "Fund"), including the portfolio of
investments, as of December 31, 1999, the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the U.S. Government Fund management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen U.S. Government Fund as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.

[KPMG LLP SIG]

Chicago, Illinois
February 11, 2000

F-1
<PAGE> 80

PORTFOLIO OF INVESTMENTS

December 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES 81.1%
$ 49,769 Federal Home Loan
Mortgage Pools........... 6.000% 09/01/2006 to 10/01/2006 $ 47,918,307
61,404 Federal Home Loan
Mortgage Pools........... 6.500 07/01/2014 to 10/01/2029 59,070,588
18,187 Federal Home Loan
Mortgage Pools........... 8.500 01/01/2016 to 09/01/2019 18,715,610
11,836 Federal Home Loan
Mortgage Pools........... 10.000 12/01/2008 to 09/01/2021 12,704,674
304 Federal Home Loan
Mortgage Pools........... 10.250 11/01/2009 326,597
10,752 Federal Home Loan
Mortgage Pools........... 11.000 12/01/2001 to 01/01/2021 11,800,329
83 Federal Home Loan
Mortgage Pools........... 11.250 09/01/2015 90,570
11,854 Federal Home Loan
Mortgage REMIC
Pools (a)................ 8.250 12/15/2020 12,077,317
3,955 Federal Home Loan
Mortgage REMIC
Pools (a)................ 9.000 02/15/2021 4,162,415
4,177 Federal Home Loan
Mortgage REMIC
Pools (a)................ 9.250 11/15/2005 4,236,464
18,599 Federal National Mortgage
Association Pools
(Principal Only)......... * 02/01/2028 12,083,882
202,042 Federal National Mortgage
Association Pools (a).... 6.000 07/01/2012 to 09/01/2029 186,772,182
21,555 Federal National Mortgage
Association Pools
(Floating Rate).......... 6.223 05/25/2018 21,450,717
255,148 Federal National Mortgage
Association Pools (a).... 6.500 06/01/2022 to 07/01/2029 240,948,093
155,985 Federal National Mortgage
Association Pools (a).... 7.000 09/01/2023 to 08/01/2028 151,115,546
72,950 Federal National Mortgage
Association Pools (a).... 7.500 12/01/2021 to 12/01/2028 72,177,715
20,567 Federal National Mortgage
Association Pools........ 8.000 12/01/2016 to 12/01/2022 20,779,343
</TABLE>

See Notes to Financial Statements

F-2
<PAGE> 81
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES (CONTINUED)
$ 25,601 Federal National Mortgage
Association Pools........ 8.500% 08/01/2014 to 06/01/2021 $ 26,403,959
6,788 Federal National Mortgage
Association Pools........ 9.000 03/01/2008 to 02/01/2021 7,093,601
827 Federal National Mortgage
Association Pools........ 9.500 05/01/2020 874,829
3,270 Federal National Mortgage
Association Pools........ 10.500 06/01/2010 to 09/01/2019 3,566,169
2,678 Federal National Mortgage
Association Pools........ 11.000 12/01/2003 to 11/01/2019 2,963,101
811 Federal National Mortgage
Association Pools........ 11.500 12/01/2009 to 01/01/2016 901,512
29 Federal National Mortgage
Association Pools........ 12.500 03/01/2015 33,110
1,098 Federal National Mortgage
Association Pools........ 13.000 06/01/2015 1,244,848
11,090 Federal National Mortgage
Association Pools
(Grantor Trust).......... 7.500 01/19/2039 10,971,916
8,871 Federal National Mortgage
Association REMIC Pools
(Principal Only)......... * 02/25/2023 4,972,926
5,013 Federal National Mortgage
Association REMIC
Pools (a)................ 7.500 12/25/2019 4,947,478
6,354 Federal National Mortgage
Association REMIC
Pools (a)................ 11.000 01/25/2019 6,442,238
49,005 Government National
Mortgage Association
Pools (a)................ 6.000 01/15/2028 to 04/15/2029 44,609,462
24,395 Government National
Mortgage Association
Pools (Floating Rate).... 6.223 09/16/2019 24,374,400
170,113 Government National
Mortgage Association
Pools (a)................ 6.500 04/15/2026 to 06/15/2029 159,866,114
106,965 Government National
Mortgage Association
Pools (a)................ 7.000 08/15/2022 to 08/15/2029 103,402,523
</TABLE>

See Notes to Financial Statements

F-3
<PAGE> 82
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES (CONTINUED)
$ 60,576 Government National
Mortgage Association
Pools.................... 7.500% 01/15/2017 to 10/15/2029 $ 59,974,961
111,041 Government National
Mortgage Association
Pools.................... 8.000 12/15/2000 to 08/15/2029 113,423,051
22,187 Government National
Mortgage Association
Pools.................... 8.500 04/15/2006 to 06/15/2023 22,921,708
67,584 Government National
Mortgage Association
Pools.................... 9.000 10/15/2001 to 12/31/2099 71,431,383
20,519 Government National
Mortgage Association
Pools.................... 9.500 06/15/2009 to 11/15/2022 21,959,507
4,904 Government National
Mortgage Association
Pools.................... 10.000 09/15/2015 to 05/15/2019 5,340,323
6,391 Government National
Mortgage Association
Pools.................... 10.500 09/15/2010 to 02/15/2020 6,992,143
1,025 Government National
Mortgage Association
Pools.................... 11.000 03/15/2010 to 12/15/2018 1,134,041
1,283 Government National
Mortgage Association
Pools.................... 11.500 10/15/2010 to 03/15/2018 1,429,353
949 Government National
Mortgage Association
Pools.................... 12.000 07/15/2011 to 08/15/2015 1,070,234
418 Government National
Mortgage Association
Pools.................... 12.250 09/15/2013 to 07/15/2015 475,144
1,087 Government National
Mortgage Association
Pools.................... 12.500 04/15/2010 to 08/15/2015 1,238,396
586 Government National
Mortgage Association
Pools.................... 13.000 01/15/2011 to 06/15/2015 671,558
77 Government National
Mortgage Association II
Pools.................... 8.500 05/20/2002 to 02/20/2017 78,925
2,799 Government National
Mortgage Association II
Pools.................... 10.500 01/20/2014 to 05/20/2019 3,038,463
1,802 Government National
Mortgage Association II
Pools.................... 11.000 07/20/2013 to 08/20/2019 1,975,841
</TABLE>

See Notes to Financial Statements

F-4
<PAGE> 83
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES (CONTINUED)
$ 801 Government National
Mortgage Association II
Pools.................... 11.500% 08/20/2013 to 07/20/2019 $ 887,776
1,024 Government National
Mortgage Association II
Pools.................... 12.000 08/20/2013 to 12/20/2015 1,149,125
503 Government National
Mortgage Association II
Pools.................... 12.500 10/20/2013 to 09/20/2015 570,244
--------------
TOTAL MORTGAGE BACK SECURITIES 81.1%........................ 1,594,860,711
--------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 7.2%
15,000 Federal Home Loan
Bank (a)................. 5.875 09/17/2001 14,858,250
22,000 Federal Home Loan
Mortgage Corp. .......... 5.000 01/15/2004 20,580,120
25,000 Federal Home Loan
Mortgage Corp. .......... 6.250 10/15/2002 24,754,500
30,800 Federal Home Loan
Mortgage Corp. .......... 6.780 06/23/2004 30,248,987
25,000 Federal National Mortgage
Association.............. 6.375 06/15/2009 23,823,750
29,000 Federal National Mortgage
Association (a).......... 6.740 08/25/2007 27,859,140
--------------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS............ 142,124,747
--------------
UNITED STATES TREASURY OBLIGATIONS 6.1%
10,000 United States Treasury
Bond..................... 6.375 08/15/2027 9,603,500
40,000 United States Treasury
Bond..................... 7.250 08/15/2022 42,140,800
70,000 United States Treasury
Note..................... 6.000 08/15/2009 68,501,300
--------------
120,245,600
--------------
</TABLE>

See Notes to Financial Statements

F-5
<PAGE> 84
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

* Zero coupon bond

(a) Assets segregated as collateral for open forward transactions, futures or
borrowings of the Fund.

TBA--To be announced, maturity date has not been established. Upon settlement
and delivery of the mortgage pools, maturity dates will be assigned.

See Notes to Financial Statements

F-6
<PAGE> 85

STATEMENT OF ASSETS AND LIABILITIES

December 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $2,088,459,138)..................... $2,032,745,961
Cash........................................................ 19,927,054
Receivables:
Investments Sold.......................................... 48,514,226
Interest.................................................. 13,917,299
Fund Shares Sold.......................................... 1,722,189
Variation Margin on Futures............................... 353,687
Fee Income................................................ 81,390
Other....................................................... 306,024
--------------
Total Assets.......................................... 2,117,567,830
--------------
LIABILITIES:
Payables:
Reverse Repurchase Agreements............................. 71,137,500
Investments Purchased..................................... 67,207,676
Income Distributions...................................... 4,489,967
Forward Commitments....................................... 3,192,710
Fund Shares Repurchased................................... 2,451,967
Investment Advisory Fee................................... 877,985
Distributor and Affiliates................................ 694,004
Accrued Expenses............................................ 1,219,597
Trustees' Deferred Compensation and Retirement Plans........ 236,406
--------------
Total Liabilities....................................... 151,507,812
--------------
NET ASSETS.................................................. $1,966,060,018
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $2,330,318,893
Accumulated Distributions in Excess of Net Investment
Income.................................................... (1,840,241)
Net Unrealized Depreciation................................. (56,870,655)
Accumulated Net Realized Loss............................... (305,547,979)
--------------
NET ASSETS.................................................. $1,966,060,018
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,816,436,756 and 134,355,169 shares of
beneficial interest issued and outstanding)............. $ 13.52
Maximum sales charge (4.75%* of offering price)......... .67
--------------
Maximum offering price to public........................ $ 14.19
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $130,376,064 and 9,657,861 shares of
beneficial interest issued and outstanding)............. $ 13.50
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $19,247,198 and 1,426,215 shares of
beneficial interest issued and outstanding)............. $ 13.50
==============
</TABLE>

* On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements

F-7
<PAGE> 86

STATEMENT OF OPERATIONS

For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 155,302,339
Fee Income.................................................. 7,500,714
-------------
Total Income............................................ 162,803,053
-------------
EXPENSES:
Investment Advisory Fee..................................... 11,376,989
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $3,848,324, $2,106,569 and $197,849,
respectively)............................................. 6,152,742
Shareholder Services........................................ 2,536,127
Custody..................................................... 426,075
Legal....................................................... 165,070
Trustees' Fees and Related Expenses......................... 88,610
Other....................................................... 1,046,864
-------------
Total Operating Expenses................................ 21,792,477
Less Credits Earned on Cash Balances.................... 146,721
-------------
Net Operating Expenses.................................. 21,650,756
Interest Expense........................................ 1,455,749
-------------
NET INVESTMENT INCOME....................................... $ 139,696,548
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (33,985,701)
Forward Commitments....................................... (13,763,918)
Options................................................... 350,813
Futures................................................... 8,176,960
-------------
Net Realized Loss........................................... (39,221,846)
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 48,093,284
-------------
End of the Period:
Investments............................................. (55,713,177)
Forward Commitments..................................... (3,195,249)
Futures................................................. 2,037,771
-------------
(56,870,655)
-------------
Net Unrealized Depreciation During the Period............... (104,963,939)
-------------
NET REALIZED AND UNREALIZED LOSS............................ $(144,185,785)
=============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (4,489,237)
=============
</TABLE>

See Notes to Financial Statements

F-8
<PAGE> 87

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................... $ 139,696,548 $ 158,890,618
Net Realized Gain/Loss...................... (39,221,846) 13,000,725
Net Unrealized Depreciation During the
Period.................................... (104,963,939) (34,005,601)
-------------- --------------
Change in Net Assets from Operations........ (4,489,237) 137,885,742
-------------- --------------
Distributions from Net Investment Income.... (141,807,974) (166,226,903)
Distributions in Excess of Net Investment
Income.................................... (1,840,241) -0-
-------------- --------------
Total Distributions from and in Excess of
Net Investment income*.................... (143,648,215) (166,226,903)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................ (148,137,452) (28,341,161)
-------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................... 652,849,316 227,696,473
Net Asset Value of Shares Issued Through
Dividend Reinvestment..................... 76,741,229 83,888,683
Cost of Shares Repurchased.................. (997,199,101) (539,408,924)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.............................. (267,608,556) (227,823,768)
-------------- --------------
TOTAL DECREASE IN NET ASSETS................ (415,746,008) (256,164,929)
NET ASSETS:
Beginning of the Period..................... 2,381,806,026 2,637,970,955
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
$(1,840,241) and $2,111,426,
respectively)............................. $1,966,060,018 $2,381,806,026
============== ==============
*Distributions by Class
- -----------------------------------------------------------------------------------
Distributions from and in Excess of Net
Investment Income:
Class A Shares............................ $ (130,258,197) $ (145,479,133)
Class B Shares............................ (12,244,365) (19,836,275)
Class C Shares............................ (1,145,653) (911,495)
-------------- --------------
$ (143,648,215) $ (166,226,903)
============== ==============
</TABLE>

See Notes to Financial Statements

F-9
<PAGE> 88

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
Class A Shares 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period...... $ 14.459 $ 14.624 $ 14.459 $ 14.950 $ 13.698
-------- -------- -------- -------- --------
Net Investment Income.......... .899 .941 1.039 1.069 1.111
Net Realized and Unrealized
Gain/Loss.................... (.914) (.127) .158 (.495) 1.233
-------- -------- -------- -------- --------
Total from Investment
Operations................... (.015) .814 1.197 .574 2.344
Less Distributions from and in
Excess of Net Investment
Income....................... .924 .979 1.032 1.065 1.092
-------- -------- -------- -------- --------
Net Asset Value, End of the
Period....................... $ 13.520 $ 14.459 $ 14.624 $ 14.459 $ 14.950
======== ======== ======== ======== ========
Total Return (a)............... (.11%) 5.77% 8.57% 4.10% 17.61%
Net Assets at End of the Period
(In millions)................ $1,817.0 $2,079.6 $2,264.8 $2,560.1 $2,962.9
Ratio of Operating Expenses to
Average Net Assets (b)....... .91% .90% .90% .90% .93%
Ratio of Interest Expense to
Average Net Assets........... .07% .04% .08% .02% .27%
Ratio of Net Investment Income
to Average Net Assets (b).... 6.50% 6.45% 7.26% 7.38% 7.68%
Portfolio Turnover
(Excluding Dollar Rolls and
Forward Commitment
Transactions)................ 112% 82% 104% 64% 63%
</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%.

See Notes to Financial Statements

F-10
<PAGE> 89
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class B Shares 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $14.440 $14.609 $14.447 $14.948 $13.694
------- ------- ------- ------- -------
Net Investment Income........ .750 .816 .916 .947 .991
Net Realized and Unrealized
Gain/Loss.................. (.880) (.121) .162 (.494) 1.241
------- ------- ------- ------- -------
Total from Investment
Operations................... (.130) .695 1.078 .453 2.232
------- ------- ------- ------- -------
Less Distributions from and in
Excess of Net Investment
Income....................... .811 .864 .916 .954 .978
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $13.499 $14.440 $14.609 $14.447 $14.948
======= ======= ======= ======= =======
Total Return (a)............... (.92%) 4.87% 7.71% 3.24% 16.78%
Net Assets at End of the Period
(In millions)................ $ 130.4 $ 284.2 $ 359.0 $ 414.8 $ 466.7
Ratio of Operating Expenses to
Average Net Assets (b)....... 1.71% 1.72% 1.72% 1.73% 1.75%
Ratio of Interest Expense to
Average Net Assets........... .07% .04% .08% .02% .27%
Ratio of Net Investment Income
to Average Net Assets (b).... 5.73% 5.63% 6.44% 6.55% 6.85%
Portfolio Turnover
(Excluding Dollar Rolls and
Forward Commitment
Transactions)................ 112% 82% 104% 64% 63%
</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%.

See Notes to Financial Statements

F-11
<PAGE> 90
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class C Shares 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $14.436 $14.608 $14.448 $14.948 $13.693
------- ------- ------- ------- -------
Net Investment Income.......... .784 .822 .910 .943 .996
Net Realized and Unrealized
Gain/Loss.................... (.914) (.130) .166 (.489) 1.237
------- ------- ------- ------- -------
Total from Investment
Operations................... (.130) .692 1.076 .454 2.233
Less Distributions from and in
Excess of Net Investment
Income....................... .811 .864 .916 .954 .978
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $13.495 $14.436 $14.608 $14.448 $14.948
======= ======= ======= ======= =======
Total Return (a)............... (.92%) 4.87% 7.71% 3.24% 16.78%
Net Assets at End of the Period
(In millions)................ $ 19.3 $ 18.0 $ 14.2 $ 14.3 $ 13.3
Ratio of Operating Expenses to
Average Net Assets (b)....... 1.72% 1.72% 1.72% 1.72% 1.75%
Ratio of Interest Expense to
Average Net Assets........... .07% .04% .08% .02% .27%
Ratio of Net Investment Income
to Average Net Assets (b).... 5.66% 5.63% 6.41% 6.55% 6.86%
Portfolio Turnover
(Excluding Dollar Rolls and
Forward Commitment
Transactions)................ 112% 82% 104% 64% 63%
</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%.

See Notes to Financial Statements

F-12
<PAGE> 91

NOTES TO FINANCIAL STATEMENTS

December 31, 1999
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen U.S. Government Fund (the "Fund") is organized as a series of Van
Kampen U.S. Government Trust (the "Trust"), a Delaware business trust and is
registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to provide a high level of current income, with liquidity and safety of
principal. The Fund commenced investment operations on May 31, 1984. The
distribution of the Fund's Class B and Class C shares commenced on August 24,
1992 and August 13, 1993, respectively.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

A. SECURITY VALUATION--Investments are stated at value using market quotations
or indications of value obtained from an independent pricing service. If such
valuations are not available, then estimates are obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain

F-13
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

the value of the underlying security at not less than the repurchase proceeds
due to the Fund.
The Fund trades certain securities under the terms of forward commitments,
whereby the settlement for payment and delivery occurs at a specified future
date. Forward commitments are privately negotiated transactions between the Fund
and dealers. Upon executing a forward commitment and during the period of
obligation, the Fund maintains collateral of cash or securities in a segregated
account with its custodian in an amount sufficient to relieve the obligation. If
the intent of the Fund is to accept delivery of a security traded under a
forward purchase commitment, the commitment is recorded as a long-term purchase.
For forward purchase commitments for which security settlement is not intended
by the Fund, changes in the value of the commitment are recognized by marking
the commitment to market on a daily basis. During the term of the commitment,
the Fund may resell the forward commitment and enter into a new forward
commitment, the effect of which is to extend the settlement date. In connection
with this extension, the Fund receives a fee, which is included in fee income on
the date of the extension. In addition, the Fund may occasionally close such
forward commitments prior to delivery.
The Fund may also invest in reverse repurchase agreements. In a reverse
repurchase agreement, the Fund sells securities and agrees to repurchase them at
a mutually agreed upon date and price. During the reverse repurchase agreement
period, the Fund continues to receive principal and interest payments on these
securities but pays interest to the counter-party based upon a short-term
interest rate. The average daily balance of reverse repurchase agreements during
the period was approximately $38.4 million with an average interest rate of
3.81%.

C. INCOME AND EXPENSES--Interest income is recorded on an accrual basis.
Original issue discount is amortized over the expected life of each applicable
security. Income and expenses of the Fund are allocated on a pro rata basis to
each class of shares, except for distribution and service fees and transfer
agency costs which are unique to each class of shares.

D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of loss and offset

F-14
<PAGE> 93
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

such losses against any future realized capital gains. At December 31, 1999, the
Fund had an accumulated capital loss carryforward for tax purposes of
$303,209,426 which will expire between December 31, 2000 and December 31, 2007.
Of this amount, $910,777 will expire on December 31, 2000. Net realized gains or
losses may differ for financial reporting and tax purposes primarily as a result
of the deferral of losses relating to wash sale transactions and the gains
recognized for tax purposes on open futures contracts at December 31, 1999.
At December 31, 1999, for federal income tax purposes the cost of long- and
short-term investments is $2,088,759,919, the aggregate gross unrealized
appreciation is $14,312,750 and the aggregate gross unrealized depreciation is
$70,326,708, resulting in net unrealized depreciation on long- and short-term
investments of $56,013,958.

E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually.

F. EXPENSE REDUCTIONS--During the year ended December 31, 1999, the Fund's
custody fee was reduced by $141,721 as a result of credits earned on overnight
cash balances.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $500 million.................................... .550 of 1%
Next $500 million..................................... .525 of 1%
Next $2 billion....................................... .500 of 1%
Next $2 billion....................................... .475 of 1%
Next $2 billion....................................... .450 of 1%
Next $2 billion....................................... .425 of 1%
Thereafter............................................ .400 of 1%
</TABLE>

For the year ended December 31, 1999, the Fund recognized expenses of
approximately $122,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

F-15
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

For the year ended December 31, 1999, the Fund recognized expenses of
approximately $629,900 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal services to
the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent of the Fund. For the year ended December 31,
1999, the Fund recognized expenses of approximately $1,997,500. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.

3. CAPITAL TRANSACTIONS
At December 31, 1999, capital aggregated $2,123,172,913, $185,648,374 and
$21,497,606 for Classes A, B and C, respectively. For the year ended December
31, 1999, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 41,019,965 $ 579,248,096
Class B.................................. 2,312,115 32,424,964
Class C.................................. 2,895,380 41,176,256
----------- -------------
Total Sales................................ 46,227,460 $ 652,849,316
=========== =============
Dividend Reinvestment:
Class A.................................. 5,012,768 $ 69,919,838
Class B.................................. 444,278 6,205,393
Class C.................................. 44,258 615,998
----------- -------------
Total Dividend Reinvestment................ 5,501,304 $ 76,741,229
=========== =============
</TABLE>

F-16
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Repurchases:
Class A.................................. (55,503,423) $(779,758,069)
Class B.................................. (12,781,310) (178,274,905)
Class C.................................. (2,757,904) (39,166,127)
----------- -------------
Total Repurchases.......................... (71,042,637) $(997,199,101)
=========== =============
</TABLE>

At December 31, 1998, capital aggregated $2,253,763,048, $325,292,922 and
$18,871,479 for Classes A, B and C, respectively. For the year ended December
31, 1998, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 12,318,462 $ 178,967,243
Class B.................................... 2,614,449 38,018,032
Class C.................................... 737,549 10,711,198
----------- -------------
Total Sales.................................. 15,670,460 $ 227,696,473
=========== =============
Dividend Reinvestment:
Class A.................................... 5,072,364 $ 73,854,456
Class B.................................... 657,222 9,560,132
Class C.................................... 32,619 474,095
----------- -------------
Total Dividend Reinvestment.................. 5,762,205 $ 83,888,683
=========== =============
Repurchases:
Class A.................................... (28,427,934) $(413,723,630)
Class B.................................... (8,161,261) (118,456,887)
Class C.................................... (497,580) (7,228,407)
----------- -------------
Total Repurchases............................ (37,086,775) $(539,408,924)
=========== =============
</TABLE>

Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996, 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 are 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 are

F-17
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

purchased. For the year ended December 31, 1999, 8,143,395 Class B shares
automatically converted to Class A shares and are shown in the above table as
sales of Class A shares and repurchases of Class B shares. Class C shares
purchased before January 1, 1997, and any dividend reinvestment plan C shares
received thereon, automatically convert to Class A shares ten years after the
end of the calendar month in which the shares are purchased. Class C shares
purchased on or after January 1, 1997 do not possess a conversion feature. For
the year ended December 31, 1999, no Class C shares converted to Class A shares.
The CDSC will be imposed on most redemptions made within six years of the
purchase for Class B and one year of the purchase for Class C as detailed in the
following schedule.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALE CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ---------------------------------------------------------------------------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 3.75% None
Third........................................ 3.50% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Sixth........................................ 1.00% None
Seventh and Thereafter....................... None None
</TABLE>

For the year ended December 31, 1999, Van Kampen, as Distributor for the
Fund, received commissions on sales of the Fund's Class A shares of
approximately $80,900 and CDSC on redeemed shares of approximately $458,600.
Sales charges do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales on investments,
including principal paydowns, excluding forward commitment transactions and
short-term investments, were $2,372,034,641 and $2,528,247,004, respectively.

5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.

F-18
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Fund's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising a call option contract or taking
delivery of a security underlying a futures contract or forward commitment. In
these instances the recognition of gain or loss is postponed until the disposal
of the security underlying the option, futures or forward contract.
Summarized below are the specific types of derivative financial instruments
used by the Fund.

A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period.
Transactions in options for the year ended December 31, 1999, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1998.............. -0- $ -0-
Options Written and Purchased (Net)......... 2,000 1,139,438
Options Terminated in Closing Transactions
(Net).................................... (2,000) (1,139,438)
Options Expired (Net)....................... -0- -0-
------ -----------
Outstanding at December 31, 1999.............. -0- $ -0-
====== ===========
</TABLE>

B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures on U.S. Treasury Bonds and
notes and typically closes the contract prior to the delivery date.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities.

F-19
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

Transactions in futures contracts, each with a par value of $100,000, for
the year ended December 31, 1999, were as follows:

<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1998.......................... 1,837
Futures Opened.......................................... 18,025
Futures Closed.......................................... (19,064)
-------
Outstanding at December 31, 1999.......................... 798
=======
</TABLE>

The futures contracts outstanding as of December 31, 1999, and the
descriptions and unrealized appreciation/depreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C>
Long Contracts:
US Treasury Note Futures, Mar. 2000
(Current Notional Value $98,594 per
contract)................................ 50 $ (136,719)
Short Contracts:
US Treasury Bond Futures, Mar. 2000
(Current Notional Value $93,863 per
contract)................................ 748 2,174,490
--- ----------
798 $2,037,771
=== ==========
</TABLE>

C. FORWARD COMMITMENTS--The Fund trades certain securities under the terms of
forward commitments, as described in Note 1. The change in value of these items
is reflected as a component of unrealized appreciation/depreciation on forward
commitments. The Fund has segregated assets for these open commitments totaling
$461.0 million.
The following forward purchase commitments were outstanding as of December
31, 1999:

<TABLE>
<CAPTION>
UNREALIZED
PAR AMOUNT SETTLEMENT APPRECIATION/
(000) DESCRIPTION DATE CURRENT VALUE DEPRECIATION
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$100,000 FHLMC Gold, 7.50% coupon.... 01/19/00 $ 99,031,000 $(1,234,625)
60,000 FHLMC Gold, 8.00% coupon.... 01/19/00 60,581,400 (299,850)
110,000 FNMA, 7.00% coupon.......... 01/24/00 108,831,800 (839,684)
75,000 FNMA, 7.50% coupon.......... 01/19/00 74,179,500 (797,062)
14,000 GNMA, 7.00% coupon.......... 01/25/00 13,523,160 (24,028)
------------ -----------
$356,146,860 $(3,195,249)
============ ===========
</TABLE>

F-20
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

D. CLOSED BUT UNSETTLED FORWARD COMMITMENTS--In certain situations, the Fund has
entered into offsetting transactions for outstanding forward commitments prior
to the settlement of the obligation. In doing so, the Fund realizes a gain or
loss on the transaction at the time the forward commitment is closed. Risks may
result as a result of the potential inability of counterparties to meet the
terms of their contracts.
The following closed but unsettled forward transactions were outstanding at
December 31, 1999:

<TABLE>
<CAPTION>
SETTLEMENT NET
DESCRIPTION DATE RECEIVABLE PAYABLE RECEIVABLE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FHLMC Gold ($45,000,000 par,
7.50% coupon,
12/01/2099)............... 01/19/00 $44,657,227 $44,654,688 $2,539
</TABLE>

6. MORTGAGE BACKED SECURITIES
A Mortgage Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participations in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies--Government National Mortgage Association (GNMA), Federal
National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC).
A Collateralized Mortgage Obligation (CMO) is a bond which is collateralized
by a pool of MBS's. The Fund also invests in REMIC's (Real Estate Mortgage
Investment Conduit) which are simply another form of CMO. These MBS pools are
divided into classes or tranches with each class having its own characteristics.
For instance, a PAC (Planned Amortization Class) is a specific class of
mortgages which over its life will generally have the most stable cash flows and
the lowest prepayment risk.

7. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended December 31,1999, are payments retained by Van Kampen of
approximately $1,847,600.

F-21
<PAGE> 100
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1999
- --------------------------------------------------------------------------------

8. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered in to a $650,000,000 committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each Fund is permitted to
utilize the facility in accordance with the restrictions of its prospectus. In
the event the demand for the credit facility meets or exceeds $650 million on a
complex-wide basis, each Fund will be limited to its pro-rata percentage based
on the net assets of each participating fund. Interest on borrowings is charged
under the agreement at a rate of 0.50% above the federal funds rate per annum.
An annual commitment fee of 0.09% per annum is charged on the unused portion of
the credit facility, which each Fund incurs based on its pro-rata percentage of
quarterly net assets. The Fund has not borrowed against the credit facility
during the period.

F-22
<PAGE> 101

PART C: OTHER INFORMATION

ITEM 23. EXHIBITS:

<TABLE>
<S> <C> <C>
(a)(1) Agreement and Declaration of Trust(2)
(2) Certificate of Amendment(7)
(3) Amended and Restated Certificate of Designation(5)
(4) Second Amended and Restated Certificate of Designation(7)
(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) Form of Trustee Deferred Compensation Plan(8)
(2) Form of Trustee Retirement Plan(8)
(g)(1) Custodian Agreement(4)
(2) Transfer Agency and Service Agreement(5)
(h)(1) Fund Accounting Agreement(5)
(2) Legal Services Agreement(5)
(i)(1) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(3)
(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)+
(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) Not Applicable
(o) Amended Multi-Class Plan(3)
(p) Form of Code of Ethics+
(q) 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 Van
Kampen American Capital Growth & Income Fund's Registration Statement on
Form N-1A, 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.

(7) Incorporated herein by reference to Post-Effective Amendment No. 31 to
Registrant's Registration Statement, File No. 2-89190, filed March 1, 1999.

(8) Incorporated herein by reference to Post-Effective Amendment No. 81 to Van
Kampen Harbor Fund's Registration Statement on Form N-1A, File Nos. 811-734
and 2-12685, filed April 29, 1999.

+ Filed herewith.

C-1
<PAGE> 102

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

None.

ITEM 25. INDEMNIFICATION:

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

Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust, as amended. 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 such person's 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 such person's
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent legal counsel in a written
opinion or a majority of a quorum of 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 there is reason to believe such person 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 "1933 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
1933 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 1933 Act and
will be governed by the final adjudication of such issue.

Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees) arising by reason of any person
acquiring any shares, based upon the ground that the Registration Statement,
prospectus, shareholder reports

C-2
<PAGE> 103

or other information filed or made public by the Registrant (as from time to
time amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make the
statements not misleading under the 1933 Act, or any other statute or the common
law. The Registrant does not agree to indemnify the Distributor or hold it
harmless to the extent that the statement or omission was made in reliance upon,
and in conformity with information furnished to the Registrant by or on behalf
of the Distributor. In no case is the indemnity of the Registrant in favor of
the Distributor or any person indemnified to be deemed to protect the
Distributor or any person against any liability to the Fund or its security
holders to which the Distributor or such person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under the agreement.

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

(1) the performance of Investor Services under the agreement provided that
Investor Services acted in good faith with due diligence and without negligence
or willful misconduct.

(2) reliance by Investor Services on, or reasonable use by, Investor
Services of information, records and documents which have been prepared on
behalf of, or have been furnished by, the Fund, or the carrying out by Investor
Services of any instructions or requests of the Fund.

(3) the offer or sale of the Fund's shares in violation of any federal or
state law or regulation or ruling by any federal agency unless such violation
results from any failure by Investor Services to comply with written
instructions from the Fund that such offers or sales were not permitted under
such law, rule or regulation.

(4) the refusal of the Fund to comply with terms of the agreement or the
Fund's lack of good faith, negligence or willful misconduct or breach of any
representation or warranty made by the Fund under the agreement provided that if
the reason for such failure is attributable to any action of the Fund's
investment adviser or distributor or any person providing accounting or legal
services to the Fund, Investor Services only will be entitled to indemnification
if such entity is otherwise entitled to the indemnification from the Fund.

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

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:

See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" and "Investment Advisory Agreement" 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.

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

C-3
<PAGE> 104

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:

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

ITEM 29. MANAGEMENT SERVICES:

Not applicable.

ITEM 30. UNDERTAKINGS:

Not applicable.

C-4
<PAGE> 105

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant,
VAN KAMPEN U.S. GOVERNMENT TRUST, certifies that it meets all of the
requirements for effectiveness of this Amendment to the Registration Statement
pursuant to Rule 485(b) under the 1933 Act and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Oakbrook Terrace and State of Illinois,
on the 28th day of April, 2000.

VAN KAMPEN U.S. GOVERNMENT TRUST

By: /s/ A. THOMAS SMITH III

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

A. Thomas Smith III, Secretary

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed on April 28, 2000 by the following
persons in the capacities indicated:

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

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

Principal Financial Officer:

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

Trustees:

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

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

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

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

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

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

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

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

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

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

* Signed by A. Thomas Smith III pursuant to a power of attorney filed herewith.

/s/ A. THOMAS SMITH III April 28, 2000
- -----------------------------------------------------
A. Thomas Smith III
Attorney-in-Fact
</TABLE>

<PAGE> 106

VAN KAMPEN U.S. GOVERNMENT TRUST

SCHEDULE OF EXHIBITS TO POST-EFFECTIVE

AMENDMENT 33 TO FORM N-1A

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
(i)(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
(j) Consent of KPMG LLP
(p) Form of Code of Ethics
(q) Power of Attorney
(z)(i) 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>

<PAGE> 1

EXHIBIT (i)(2)

[Letterhead of Skadden, Arps, Slate, Meagher & Flom (Illinois)]

April 28, 2000

Van Kampen U.S. Government Trust
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555

Re: Post-Effective Amendment No. 33 to the
Registration Statement on Form N-1A for
the Van Kampen U.S. Government Trust
(the "Registration Statement")
(File Nos. 2-89190 and 811-3950)
------------------------------

We hereby consent to the reference to our firm under the heading "Legal
Counsel" in the Registration Statement. In giving this consent, we do not
hereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder.

Very truly yours,

/s/ Skadden, Arps, Slate,
Meagher & Flom (Illinois)

<PAGE> 1
EXHIBIT (j)

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders
Van Kampen U.S. Government Fund:

We consent to the use of our report included in the Statement of Additional
Information which is incorporated by reference into the Prospectus and to the
reference to our Firm under the headings "Financial Highlights" in the
Prospectus and "Other Information" in the Statement of Additional Information.

/s/ KPMG LLP
- ------------
KPMG LLP

Chicago, Illinois
April 28, 2000

<PAGE> 1

EXHIBIT(p)

FORM OF

CODE OF ETHICS

I. INTRODUCTION

Each of the Van Kampen Open-End Funds listed on Schedule 1 attached hereto
(each a "Fund" and collectively the "Funds"), Van Kampen Asset Management Inc.
("Asset Management"), Van Kampen Investment Advisory Corp. ("Advisory Corp.")
(each of Asset Management and Advisory Corp. are sometimes referred herein as
the "Adviser" or collectively as the "Advisers") and Van Kampen Funds Inc. (the
"Distributor") (the Advisers and the Distributor are collectively referred to
as "Van Kampen") has adopted this Code of Ethics. The Advisers are fiduciaries
that provide investment advisory services to the Funds and private investment
management accounts, and the Distributor acts as the principal underwriter for
the Funds.

II. GENERAL PRINCIPLES

A. Shareholder and Client Interests Come First

Every trustee/director, officer and employee of a Fund and every
director, officer and employee of Van Kampen owes a fiduciary duty to
the investment account and the respective investors of such Fund or
private investment management account (collectively, the "Clients").
This means that in every decision relating to investments, such
persons must recognize the needs and interests of the Clients and be
certain that at all times the Clients' interests are placed ahead of
any personal interest of such person.

B. Avoid Actual and Potential Conflicts of Interest

The restrictions and requirements of this Code are designed to
prevent behavior which conflicts, potentially conflicts or raises the
appearance of an actual or potential conflict with the interests of
Clients. It is of the utmost importance that the personal securities
transactions of trustee/directors, officers and employees of a Fund
and directors,

1
<PAGE> 2

officers and employees of Van Kampen be conducted in a manner
consistent with both the letter and spirit of the Code, including
these principles, to avoid any actual or potential conflict of
interest or any abuse of such person's position of trust and
responsibility.

C. Avoiding Personal Benefit

Trustee/directors, officers and employees of the Funds and directors,
officers and employees of Van Kampen should ensure that they do not
acquire personal benefit or advantage as a result of the performance
of their normal duties as they relate to Clients. Consistent with the
principle that the interests of Clients must always come first is the
fundamental standard that personal advantage deriving from management
of Clients' money is to be avoided.

III. OBJECTIVE

Section 17(j) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), makes it unlawful for certain persons associated
investment companies to engage in conduct which is deceitful, fraudulent or
manipulative, or which involves false or misleading statements, in connection
with the purchase or sale of a security held or proposed to be acquired by an
investment company. In addition, Section 204A of the Investment Advisers Act of
1940, as amended (the "Investment Advisers Act"), requires investment advisers
to establish, maintain and enforce written policies and procedures designed to
prevent misuse of material non-public information. The objective of this Code
is to require trustee/directors, officers and employees of the Funds and
directors, officers and employees of Van Kampen to conduct themselves in
accordance with the general principles set forth above, as well as to prevent
trustee/directors, officers and employees of the Funds or the Distributor from
engaging in conduct prohibited by the Investment Company Act and directors,
officers and employees of the Advisers from engaging in conduct prohibited by
the Investment Company Act and the Investment Advisers Act.

IV. DEFINITIONS

A. "Access Person" means (i) any trustee/director or officer of a
Fund, (ii) any director or officer of a Fund's Adviser, (iii) any
employee of a Fund or the Fund's Adviser (or any company in a control
relationship

2
<PAGE> 3

to the Fund or Adviser) who, in connection with such person's regular
functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a Covered Security by a Client, or
whose functions relate to the making of any recommendations with
respect to such purchases or sales; (iv) any natural person in a
control relationship to the Fund or the Fund's Adviser who obtains
information concerning recommendations made to a Client with regard to
the purchase or sale of a Covered Security by such Client, and (v) any
director or officer of the Distributor, who, in the ordinary course of
business, makes, participates in or obtains information regarding, the
purchase or sale of a Covered Security by a Client for which it acts
as principal underwriter, or whose functions relate to the making of
any recommendations with respect to such purchases or sales.

B. "Beneficial Ownership" is interpreted in the same manner as it is
under Rule 16a-1(a)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in determining whether a person is the
beneficial owner of a security for purposes of Section 16 of the 1934
Act and the rules and regulations thereunder, which includes "any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in" a security. The term "pecuniary
interest" is further defined to mean "the opportunity, directly or
indirectly, to profit or share in any profit derived from a
transaction in the subject securities." "Beneficial ownership"
includes (i) securities held by members of a person's immediate family
sharing the same household and includes any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law" and includes adoptive relationships
and (ii) aright to acquire securities through the exercise or
conversion of any derivative security, whether or not presently
exercisable.

Any report required to be made by this Code may contain a statement
that the report shall not be construed as an admission by the person
making such report that he has any direct or indirect Beneficial
Ownership in the security to which the report relates.

C. "Chief Compliance Officer" is the individual set forth in Exhibit A.

3
<PAGE> 4

D. "Code of Ethics Review Committee" consists of the individuals set
forth in Exhibit A.

E. "Control" has the same meaning as in Section 2(a)(9) of the Investment
Company Act.

F. "Covered Security" refers not only to the instruments set forth in
Section 2(a)(36) of the Investment Company Act but to any instrument
into which such instrument may be converted or exchanged, any warrant
of any issuer that has issued the instrument and any option written
relating to such instrument, provided, however, that it does not
include: (a) any direct obligation of the United States Government,
(b) banker's acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements, and (c) shares issued by any open-end
investment companies registered under the Investment Company Act.

G. "Disinterested Trustee/Director" means a trustee or director of an
Fund who is not an "interested person" of such Fund within the meaning
of Section 2(a)(19) of the Investment Company Act.

H. "Employee Account" means any brokerage account or unit investment
trust account in which the Van Kampen Employee has any direct or
indirect beneficial ownership.

I. "General Counsel" is the individual set forth in Exhibit A.

J. "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, as amended (the
"Securities Act"), the issuer of which, immediately before the
registration, was not subject to the reporting requirements of
sections 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").

K. "Investment Personnel" means (i) any employee of a Fund (or of any
company in a control relationship to the Fund), (ii) Portfolio
Managers, security analysts, traders and any other employees of a
Fund's Adviser (or of any company in a control relationship to the
Fund's Adviser) who, in connection with his or her regular functions
or

4
<PAGE> 5

duties, makes or participates in making investment recommendations
regarding the purchase or sale of securities by the Fund or other
Clients; and (iii) any natural person who controls a Fund or Adviser
and who obtains information concerning recommendations made to such
Fund or other Client regarding the purchase or sale of securities.

L. "Limited Offering" is an offering that is exempt from registration
under the Securities Act pursuant to Section 4(2) or Section 4(6) of
the Securities Act or pursuant to Rule 504, Rule 505 or Rule 506 under
the Securities Act.

M. "Portfolio Manager" means any person who exercises investment
discretion on behalf of an Adviser for a Client.

N. "Van Kampen Employee" includes any director, officer or employee of
Van Kampen.

V. STANDARDS OF CONDUCT FOR PERSONAL SECURITIES TRANSACTIONS

A. Van Kampen Employee Brokerage Accounts

1. All brokerage accounts of Van Kampen Employees must be maintained
through Morgan Stanley Dean Witter & Co. ("MSDW") and/or Morgan
Stanley Dean Witter Online ("MSDWO"). No other brokerage accounts
are permitted unless permission is granted by the Chief
Compliance Officer or General Counsel.

If any Van Kampen Employee maintains accounts outside MSDW or
MSDWO, such person must transfer such accounts to a MSDW branch
or MSDWO within 120 days from his or her date of hire.

a. Each Van Kampen Employee must inform the appropriate person
in the compliance department as set forth in Exhibit A, in
writing, of their MSDW and MSDWO brokerage accounts, or, if
applicable, their outside

5
<PAGE> 6

brokerage accounts. The Van Kampen compliance department
shall direct the brokerage firm to provide duplicate
confirmations and account statements to the Van Kampen
compliance department.

1) Van Kampen Employees shall notify the appropriate
persons in the Van Kampen compliance department as set
forth in Exhibit A when opening a brokerage account.

B. Pre-Clearance

1. Except as set forth below, all Van Kampen Employees must
pre-clear purchases or sales of Covered Securities in their
Employee Accounts with the appropriate person in the Van Kampen
compliance department as set forth in Exhibit A.

2. Exceptions from the Pre-Clearance Requirement.

a. Persons otherwise subject to pre-clearance are not required
to pre-clear the acquisition of the following Covered
Securities:

1) Covered Securities acquired through automatic
reinvestment plans.

2) Covered Securities acquired through employee
purchase plans.

3) Covered Securities acquired through the exercise of
rights issued by an issuer pro-rata to all holders of a
class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so
acquired.

4) Morgan Stanley Dean Witter & Co. common stock
(including exercise of stock option grants),

6
<PAGE> 7

a) The restrictions imposed by the Firm on senior
management and other persons in connection with
transactions in such stock are not affected by
this exemption.

5) Units in unit investment trusts.

3. Pre-cleared securities transactions must be effected timely.

a. All approved Covered Securities transactions must take place
on the same day that the authorization is obtained. If the
transaction is not completed on the date of clearance, a new
clearance must be obtained.

b. Purchases through an issuer direct purchase plan must be
pre-cleared on the date the purchaser writes the check to
the issuer's agent

1) Authorization for purchases through an issuer direct
purchase plan are effective until the issuer's agent
purchases the Covered Securities.

4. Pre-Clearance Procedure

a. Van Kampen Employees shall pre-clear their transactions by
submitting a Trade Authorization Form (a copy of which is
attached as Exhibit B) to the appropriate persons in the
compliance department as set forth in Exhibit A.

1) The compliance department shall pre-clear the purchase
or sale of a Covered Security if the transaction does
not violate the Code.

7
<PAGE> 8

a) The compliance department shall verify that the
transaction is in compliance with the Code.

b) The compliance department shall sign the Trade
Authorization Form.

c) The compliance department shall communicate
authorization of the trade to the Van Kampen
Employee.

d) The time at which the trade authorization is
communicated to the Van Kampen Employee shall be
documented on the Trade Authorization Form.

e) The compliance department shall maintain the
originally executed Trade Authorization Form. A
copy of the executed Trade Authorization Form will
be forwarded to the Van Kampen Employee.

f) The compliance department shall review Van Kampen
Employee duplicate confirmations and statements to
verify that all personal transactions in Covered
Securities have been properly pre-cleared.

C. Other Restrictions

1. Van Kampen Employee trades for which pre-clearance has been
obtained, including short sales and permissible option trades,
are subject to 30-day holding period from the trade date.

2. Van Kampen Employees are prohibited from trading in futures,
options on futures, and forward contacts. Van Kampen

8
<PAGE> 9

Employees may trade listed equity and index options and equity
warrants, however, there is a 30-day holding period from the
trade date. In addition, Van Kampen Employees are also prohibited
from trading in warrants or options (with the exception of listed
warrants or options) on physical commodities and currencies.

3. Van Kampen Employees shall not purchase Covered Securities during
an initial or secondary public offering.

4. Van Kampen Employees shall not enter into limit orders which
extend beyond one day.

5. Van Kampen Employees shall not participate in an investment club.

6. Van Kampen Employees shall not purchase shares of an investment
company that is managed by Van Kampen if such investment company
is not generally available to the public.

7. Van Kampen Employees shall not purchase shares of an open end
investment company that is managed by Van Kampen if as a result
of such purchase the Van Kampen Employee shall own 1% or more of
the assets of such investment company.

8. Van Kampen Employees are prohibited from the following activities
unless they have obtained prior written approval from the Code of
Ethics Review Committee:

a. Van Kampen Employees may not purchase a Covered Security in
a private placement or any other Limited Offering.

b. Van Kampen Employees may not serve on the boards of
directors of a public or private company. Requests to serve
on the board of a religious, charitable or educational
organization as set forth in Section 503(c) of the IRS Code
will generally be approved.

9
<PAGE> 10

D. Additional Responsibilities of Access Persons

In addition to the requirements set forth above, the following
prohibitions and reporting obligations are applicable to Access
Persons.

1. Access Persons shall not purchase or sell a Covered Security on a
day during which a Client has a pending purchase or sale order in
that same Covered Security.

2. Initial/Annual Reporting: Within ten days after becoming an
Access Person and thereafter, annually, each Access Person must
furnish a report to the Chief Compliance Officer showing (i) the
date of the report, (ii) the title, number of shares and
principal amount of each Covered Security owned directly or
indirectly by the Access Person on the date such person become an
Access Person (for initial reports) or as of a date no more than
30 prior to the date of the report (for annual reports) and (iii)
the name of any broker, dealer or bank with an account holding
any securities for the direct or indirect benefit of the Access
Person as of the date such person became an Access Person (for
initial reports) or as of a date no more than 30 prior to the
date of the report (for annual reports).

a. Exclusion: A Disinterested Trustee/Director who would be
required to make this report solely by reason of being a
Fund trustee/director is excluded from the initial and
annual reporting requirement for Access Persons.

3. Quarterly Reporting: On a calendar quarterly basis, each Access
Persons must furnish a report to the Chief Compliance Officer
within ten days after the end of each calendar quarter, on forms
sent to the Access Person each quarter:

a. With respect to any transactions in Covered Securities in
which the Access Person had direct or indirect Beneficial
Ownership, a report showing (i) the date of the report; (ii)
the date of the transaction, the title, the interest rate
and maturity date (if applicable), the num-

10
<PAGE> 11

ber of shares, and the principal amount of each Covered
Security involved; (iii) the nature of the transaction
(i.e., purchase, sale or any other type of acquisition or
disposition); (iv) the price at which the transaction was
effected; and (v) the name of the broker, dealer or bank
with or through which the transaction was effected; and

b. With respect to any account established by the Access Person
in which any securities were held during the quarter for
direct or indirect benefit of the Access Person, a report
showing (i) the date of the report; (ii) the name of the
broker, dealer or bank with which established the account;
and (iii) the date the account was established.

c. Exclusion: A Disinterested Trustee/Director who would be
required to make this report solely by reason of being a
Fund trustee/director is excluded from the quarterly
reporting requirement for Access Persons unless the
trustee/director knew or, in the ordinary course of
fulfilling his or her official duties as a Fund
trustee/director, should have known that during the 15-day
period immediately before or after the trustee/director's
transaction in a Covered Security, the Fund purchased or
sold the Covered Security, or the Fund or its investment
adviser considered purchasing or selling the Covered
Security.

d. Exclusion: An Access Person need not make a quarterly
transaction report if the report would duplicate information
contained in broker trade confirmations or account
statements received by the Fund, the Adviser and the
Distributor with respect to the Access Person in the time
period required above if all of the information required by
that paragraph is contained in the broker trade
confirmations or account statements, or in the records of
the Fund, the Adviser and the Distributor.

11
<PAGE> 12

E. Additional Responsibilities of Investment Personnel

In addition to the requirements set forth above, the following
prohibitions and reporting obligations are applicable to Investment
Personnel.

1. Investment Personnel shall not sell a Covered Security purchased
within the previous 60 calendar days from the trade date, except
that a Covered Security held for at least 30 days from the trade
date may be sold at a loss or no gain. Any profits realized on
trades executed within the 60-day holding period shall be
disgorged to the Client or a charitable organization as
determined by the Chief Compliance Officer.

2. All Investment Personnel shall disclose all personal and
beneficial Covered Securities holdings upon the commencement of
employment and thereafter on an annual basis to the compliance
department.

3. Investment Personnel of a Fund or its investment adviser must
obtain approval from the Fund or the Fund's investment adviser
before directly or indirectly acquiring beneficial ownership in
any securities in an Initial Public Offering or in a Limited
Offering.

F. Additional Responsibilities of Portfolio Managers

In addition to the requirements set forth above for Van Kampen
Employees, Access Persons and Investment Personnel, the following
additional requirements are applicable to Portfolio Managers.

12
<PAGE> 13

1. A Portfolio Manager may not buy or sell a Covered Security within
7 calendar days before or after any Client, over which such
Portfolio Manager exercises investment discretion, trades in such
Covered Security.

2. A Portfolio Manager may not purchase shares of a closed-end
investment company over which such Portfolio Manager exercises
investment discretion.

G. Insiders

1. Each Van Kampen Employee shall comply with all laws and
regulations, and prohibitions against insider trading. Trading on
or communicating material non-public information, or "inside
information," of any sort, whether obtained in the course of
research activities, through a Client relationship or otherwise,
is strictly prohibited.

2. Van Kampen Employees shall not disclose any non-public
information relating to a Client's account portfolio or
transactions or to the investment recommendations of Van Kampen,
nor shall any Van Kampen Employee disclose any non-public
information relating to the business or operations of the members
of Van Kampen, unless properly authorized to do so.

3. No Van Kampen Employee who is required to file a statement of
ownership pursuant to Section 16 of the Exchange Act may purchase
or sell or sell and purchase a company-sponsored closed-end
investment company within a six month period and realize a profit
on such transaction.

H. Exceptions

1. Notwithstanding the foregoing, the Chief Compliance Officer or
his or her designee, in keeping with the general principles and
objectives of this Code, may refuse to grant clearance of a
personal transaction in their sole discretion without being
required to specify any reason for the refusal.

13
<PAGE> 14

2. Upon proper request by a Van Kampen Employee, a Code of Ethics
Review Committee (the "Committee") will consider for relief or
exemption from any restriction, limitation or procedure contained
herein, which restriction, limitation or procedure is claimed to
cause a hardship for such Van Kampen Employee. The Chief
Compliance Officer will in his sole discretion determine whether
the request is appropriate for consideration by the Committee.
The Committee shall meet on an ad hoc basis, as deemed necessary
upon the Van Kampen Employee's written request outlining the
basis for his or her request for relief. The decision is within
the sole discretion of the Committee.

VI. ADMINISTRATION OF THE CODE

A. The administration of this Code shall be the responsibility of the
Chief Compliance Officer or his or her designee whose duties shall
include:

1. Continuously maintaining a list of all Access Persons who are
under a duty to make reports or pre-clear transactions under this
Code.

2. Providing each such person with a copy of this Code and informing
them of their duties and obligations hereunder.

3. Reviewing all quarterly securities transactions and holdings
reports required to be filed pursuant to this Code, and
maintaining a record of such review, including the name of the
compliance personnel performing the review.

4. Reviewing all initial and annual securities position reports
required to be filed pursuant to this Code, and maintaining a
record of such review, including the name of the compliance
personnel performing the review.

5. Preparing listings of all transactions effected by persons
subject to reporting requirements under the Code and comparing
all reported personal securities transactions with completed

14
<PAGE> 15

portfolio transactions of the Clients and securities being
considered for purchase or sale by Clients to determine whether a
violation of this Code may have occurred.

6. Conducting such inspections or investigations as shall reasonably
be required to detect and report any apparent violations of this
Code to any person or persons appointed by Van Kampen to deal
with such information and to the Fund's Board of
Directors/Trustees.

7. Submitting a written report, no less frequently than annually, to
the Board of Directors/Trustees of each Fund containing a
description of issues arising under the Code or procedures since
the last report, including, but not limited to, material
violations of the Code or procedures and sanctions imposed in
response to material violations.

8. Submitting a certification, no less frequently than annually, to
the Board of Directors/Trustees of each Fund from the Fund, the
respective Adviser and the Distributor that it has adopted
procedures reasonably necessary to prevent Access Persons from
violating the Code.

VII. RECORDS

The Fund, the Advisers and the Distributor shall, at its principal place
of business, maintain records of the following:

A. A copy of any code of ethics adopted by the such entity which is or
has been in effect during the past five years must be maintained in an
easily accessible place;

B. A copy of any record or report of any violation of the code of ethics
of such entity and any action taken thereon maintained in an easily
accessible place for at least five years after the end of the fiscal
year in which the violation occurs;

15
<PAGE> 16

C. A copy of each report made by an Access Person as required by this
Code, including any information provided in lieu of the reports,
must be maintained for at least five years after the end of the
fiscal year in which the report is made or the information is
provided, the first two years in an easily accessible place;

D. A record of all persons, currently or within the past five years,
who are or were required to make reports under this Code, or who are
or were responsible for reviewing these reports, must be maintained
in an easily accessible place; and

E. A copy of each written report required to be provided to the Board
of Directors/Trustees of each Fund containing a description of
issues arising under the Code or procedures since the last report,
including, but not limited to, material violations of the Code or
procedures and sanctions imposed in response to material violations
must be maintained for at least five years after the end of the
fiscal year in which it is made, the first two years in an
easily accessible place.

F. A Fund or investment adviser must maintain a record of any
decision, and the reasons supporting the decision, to approve the
acquisition by Investment Personnel of securities in an Initial
Public Offering or in a Limited Offering.

G. A copy of any decision and reasons supporting such decision to
approve a pre-clearance transaction pursuant to this Code, made
within the past five years after the end of the fiscal year in which
such approval is granted.

VIII. SANCTIONS

Upon discovering a violation of this Code, Van Kampen may impose such
sanctions as it deems appropriate, including, but not limited to, a reprimand
(orally or in writing), demotion, and suspension or termination of employment.
The General Counsel of Van Kampen, in his sole discretion, is authorized to
determine the choice of sanctions to be imposed in specific cases, including
termination of employment of any employee.

16
<PAGE> 17

IX. APPROVAL OF CODE OF ETHICS

A. Van Kampen shall provide to the Board of Directors/Trustees of each
Fund the following:

1. A copy of the Fund's Code, the Adviser's Code and the
Distributor's Code for such Board's review and approval.

2. Promptly, a copy of any amendments to such Codes.

3. Upon request, copies of any reports made pursuant to the Code by
any person as to an investment company client.

4. Immediately, without request by an investment company client, all
material information regarding any violation of the Code by any
person as to such investment company client.

5. Certification, no less frequently than annually, to the Board of
Directors/Trustees of each Fund from the Fund, the respective
Adviser and the Distributor that it has adopted procedures
reasonably necessary to prevent Access Persons from violating the
Code.

B. Prior to adopting this Code, the Board of Trustees/Directors of
each Fund, including a majority of Disinterested Trustee/Directors,
reviewed and approved this Code with respect to the Fund, each adviser
of the Fund and the principal underwriter of the Fund, including all
procedures or provisions related to the enforcement of this Code. The
Board based its approval of this Code on, among other things, (i)
certifications from the Fund, the respective Adviser and the
Distributor that it has adopted procedures reasonably necessary to
prevent violations of the Code and (ii) a determination that such Code
is adequate and contains provisions reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by Rule
17j-1(b).

17
<PAGE> 18

X. EFFECTIVE DATE

All Van Kampen Employees are required to sign a copy of this Code
indicating their agreement to abide by the terms of the Code.

In addition, Van Kampen Employees will be required to certify
annually that (i) they have read and understand the terms of this Code and
recognize the responsibilities and obligations incurred by their being subject
to this Code, and (ii) they are in compliance with the requirements of the Code.

Approved this _____ day of _______________.

<PAGE> 1
EXHIBIT (q)

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 trust, and
being Officers and Directors of Van Kampen Series Fund, Inc. (the
"Corporation"), a Maryland corporation, do hereby, in the capacities shown
below, appoint Richard F. Powers, III, Stephen L. Boyd and A. Thomas Smith III,
each of Oakbrook Terrace, Illinois, as agents and attorneys-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 28, 2000

Signature Title
--------- -----

/s/ Richard F. Powers, III President, Trustee/Director
- ---------------------------------------
Richard F. Powers, III

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

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

/s/ Jerry D. Choate Trustee/Director
- ---------------------------------------
Jerry D. Choate

/s/ Linda Hutton Heagy Trustee/Director
- ---------------------------------------
Linda Hutton Heagy

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

/s/ Mitchell M. Merin Trustee/Director
- ---------------------------------------
Mitchell M. Merin

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

/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
- ---------------------------------------
Wayne W. Whalen

/s/ Suzanne H. Woolsey Trustee/Director
- ---------------------------------------
Suzanne H. Woolsey

/s/ Paul G. Yovovich Trustee/Director
- ---------------------------------------
Paul G. Yovovich

<PAGE> 2

SCHEDULE 1

VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN TRUST
VAN KAMPEN EQUITY TRUST
VAN KAMPEN EQUITY TRUST II
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 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 LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN PACE FUND
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE 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 U.S. Government Trust
Van Kampen U.S. Government Fund
Van Kampen Tax Free Trust
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Trust
Van Kampen High Yield Fund
Van Kampen Managed Short Term Income Fund*
Van Kampen Strategic Income Fund
Van Kampen Equity Trust
Van Kampen Aggressive Growth Fund
Van Kampen Growth Fund
Van Kampen Select Growth Fund
Van Kampen Small Company Growth Fund*
Van Kampen Small Cap Growth Fund*
Van Kampen Small Cap Value Fund
Van Kampen Utility Fund
Van Kampen Equity Trust II
Van Kampen Tax Managed Equity Growth Fund
Van Kampen Technology Fund
Van Kampen Pennsylvania Tax Free Income Fund
Van Kampen Tax Free Money Fund
Van Kampen Prime Rate Income Trust
Van Kampen Senior Floating Rate 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 Exchange Fund
<PAGE> 2

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 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
Strategic Stock Portfolio
Morgan Stanley Real Estate Securities Portfolio
Van Kampen Pace Fund
Van Kampen Real Estate Securities Fund
Van Kampen Reserve Fund
Van Kampen Tax Exempt Trust
Van Kampen High Yield Municipal Fund
Van Kampen U.S. Government Trust for Income
Van Kampen World Portfolio Series Trust
Van Kampen Global Government Securities Fund
Van Kampen Series Fund, Inc.
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 Focus Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity Fund
Van Kampen Global Fixed Income 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
Van Kampen Tax Managed Global Franchise Fund
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund

* Funds that have not commenced investment operations.
<PAGE> 3

<TABLE>
<S> <C>
Insured Municipals Income Trust Series 419
FLORIDA INSURED MUNICIPALS INCOME TRUST SERIES 129
MICHIGAN INSURED MUNICIPALS INCOME TRUST SERIES 160
New York Insured Municipals Income Trust Series 149
THE DOW(SM) STRATEGIC 10 TRUST February 2000
SERIES
THE DOW(SM) STRATEGIC 10 TRUST February 2000
TRADITIONAL
SERIES
THE DOW(SM) STRATEGIC 5 TRUST February 2000
SERIES
THE DOW(SM) STRATEGIC 5 TRUST February 2000
TRADITIONAL
SERIES
EAFE STRATEGIC 20 TRUST February 2000
SERIES
STRATEGIC PICKS OPPORTUNITY TRUST February 2000
SERIES
NASDAQ Strategic 10 Trust February 2000 Series
Dow 30 Index Trust Series 9
Dow & Tech Strategic 10 Trust Series 3/00
Global Energy Trust Series 12
Financial Institutions Trust Series 3a
Financial Institutions Trust Series 3b
Edward Jones Select Growth Trust February 2000
Series
Internet Trust Series 19A
Internet Trust Series 19B
Morgan Stanley High-Technology 35 Index Trust Series 11A
Morgan Stanley High-Technology 35 Index Trust Series 11B
Pharmaceutical Trust Series 9A
Pharmaceutical Trust Series 9B
Telecommunications & Bandwidth Trust Series 9A
Telecommunications and Bandwidth Trust Series 9B
Semi-Conductor Trust Series 1A
Semi-Conductor Trust Series 1B
Global Wireless Trust Series 2A
Global Wireless Trust Series 2B
Roaring 2000s Trust Series 5a
Roaring 2000s Trust Series 5b
Roaring 2000s Trust Traditional Series 4
Morgan Stanley Multinational Index Trust Series 2a
Morgan Stanley Multinational Index Trust Series 2b
Software Trust Series 2A
Software Trust Series 2B
Baird Economic Outlook Trust
Natcity - Great American Equities Trust Series 3
Natcity - Great American Value Trust Series 1
Josephthal - The New Millennium Consumer Trust, Retail.com Portfolio II
</TABLE>

<PAGE> 1
EXHIBIT (z)(2)

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

<TABLE>

<S> <C> <C>
Richard F. Powers III Chairman & Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman III President Oakbrook Terrace, IL
A. Thomas Smith III Executive Vice President, General Oakbrook Terrace, IL
Counsel & Secretary;
Vice President and Secretary of the Funds
William R. Rybak Executive Vice President, Chief
Financial Officer & Treasurer Oakbrook Terrace, IL
Michael H. Santo Executive Vice President & Chief
Operations & Technology Officer Oakbrook Terrace, IL
Colette M. Saucedo Executive Vice President & Houston, TX
Chief Administrative Officer
Steven M. Massoni Executive Vice President Oakbrook Terrace, IL
David M. Swanson Executive Vice President and Chief
Marketing Officer Oakbrook Terrace, IL
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
Don J. Andrews Sr. Vice President & Chief Compliance Oakbrook Terrace, IL
Officer
Sara L. Badler Sr. Vice President, Deputy Oakbrook Terrace, IL
General Counsel & Assistant Secretary;
Assistant Secretary of the Funds
James J. Boyne Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Glenn M. Cackovic Senior Vice President Laguna Niguel, CA
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
John E. Doyle Sr. Vice President Oakbrook Terrace, IL
Richard G. Golod Sr. Vice President Annapolis, MD
Eric J. Hargens Senior Vice President Orlando, FL
Dominic C. Martellaro Senior Vice President Oakbrook Terrace, IL
Carl Mayfield Senior Vice President Oakbrook Terrace, IL
Mark R. McClure Senior Vice President Oakbrook Terrace, IL
Robert F. Muller, Jr. Senior Vice President Oakbrook Terrace, IL
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
James J. Ryan Sr. Vice President Oakbrook Terrace, IL
Frederick Shepherd Sr. Vice President Houston, TX
Patrick J. Woelfel Senior Vice President Oakbrook Terrace, IL
Weston B. Wetherell Senior Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Asst. Secretary;
Assistant Secretary of the Funds
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Edward C. Wood, III Sr. Vice President,
Chief Operating Officer; Oakbrook Terrace. IL
Vice President of the Funds

James R. Yount Senior Vice President Mercer Island, WA
Patricia A. Bettlach 1st Vice President Chesterfield, MO
Gregory Heffington 1st Vice President Ft. Collins, CO
David S. Hogaboom 1st Vice President Oakbrook Terrace, IL
Maura A. McGrath 1st Vice President New York, NY
Thomas Rowley 1st Vice President St. Louis, MO
Andrew J. Scherer 1st Vice President Oakbrook Terrace, IL
James D. Stevens 1st Vice President North Andover, MA
</TABLE>

James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Timothy R. Armstrong Vice President Wellington, FL
Leslie Ann Ashton Vice President Salt Lake City, UT
Matthew T. Baker Vice President Oakbrook Terrace, IL
Shakeel Anwar Barkat Vice President Annapolis, MD
Scott C. Bernstiel Vice President Plainsboro, NJ
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
William Edwin Bond Vice President New York, NY
Michael P. Boos Vice President Oakbrook Terrace, IL
Robert C. Brooks Vice President Oakbrook Terrace, IL
Elizabeth M. Brown Vice President Houston, TX
Michael Winston Brown Vice President Colleyville, TX
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Juanita E. Buss Vice President Kennesaw, GA
Christine Cleary Byrum Vice President Tampa, FL
Richard J. Charlino Vice President Oakbrook Terrace, IL
Deanne Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
German Clavijo Vice President Atlanta, GA
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Kevin J. Connors Vice President Oakbrook Terrace, IL
Gina Costello Vice President Oakbrook Terrace, IL
Suzanne Cummings Vice President Oakbrook Terrace, IL
Michael E. Eccleston Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Charles Friday Vice President Gibsonia, PA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John G. Hansen Vice President Oakbrook Terrace, IL
Michael D. Hibsch Vice President Oakbrook Terrace, IL
Susan J. Hill Vice President Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
Bryn M. Hoggard Vice President Houston, TX
Michelle Huber Vice President Oakbrook Terrace, IL
Michael B. Hughes Vice President Oakbrook Terrace, IL
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Laurie L. Jones Vice President Oakbrook Terrace, IL
Robert Daniel Kendall Vice President Oakbrook Terrace, IL
Michael C. Kinney Vice President Oakbrook Terrace, IL
Dana R. Klein Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Daphne, AL
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
S. William Lehew III Vice President Charlotte, NC
Ivan R. Lowe Vice President Houston, TX
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Linda S. MacAyeal Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
John Mills Vice President Kenner, LA
Stuart R. Moehlman Vice President Houston, TX
Carin Elizabeth Morgan Vice President Oakbrook Terrace, IL
Ted Morrow Vice President Plano, TX
Lance O'Brian Murphy Vice President Houston, TX
Peter Nicholas Vice President Beverly, MA
James A. O'Brien Vice President New York, NY
Allyn O' Connor Vice President & Assoc. General Counsel Oakbrook Terrace, IL
Gregory S. Parker Vice President Houston, TX
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Richard J. Poli Vice President Philadelphia, PA
Ronald E. Pratt Vice President Marietta, GA
Theresa Marie Renn Vice President Oakbrook Terrace, IL
Kevin Wayne Reszel Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
Jeffrey L. Rose Vice President Houston, TX
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, VA
Brett Van Bortel Vice President Oakbrook Terrace, IL
Diane Saxon Vice President & Assistant Treasurer Oakbrook Terrace, IL
Stephanie Scarlata Vice President Bedford Corners, NY
Timothy M. Scholten Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey M. Scott Vice President Oakbrook Terrace, IL
Gwen L. Shaneyfelt Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorenson Vice President Oakbrook Terrace, IL
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Richard Stefanec Vice President Los Angles, CA
William C. Strafford Vice President Granger, IN
Charles S. Thompson Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Thomas J. Sauerborn Vice President New York, NY
Larry Brian Vickrey Vice President Houston, TX
Daniel B. Waldron Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Robert A. Watson Vice President Oakbrook Terrace, IL
Sharon Wells Coicou Vice President Oakbrook Terrace, IL
Frank L. Wheeler Vice President Oakbrook Terrace, IL
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Joel John Wilczewski Vice President Oakbrook Terrace, IL
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
John Wyckoff Vice President Santa Monica, CA
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
David M. Wynn Vice President Phoenix, AZ
Patrick M. Zacchea Vice President Oakbrook Terrace, IL

Scott F. Becker Asst. Vice President Oakbrook Terrace, IL
Brian E. Binder Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Lynn Chadderton Asst. Vice President Oakbrook Terrace, IL
Phillip Ciulla Asst. Vice President Oakbrook Terrace, IL
Amy Cooper Asst. Vice President Oakbrook Terrace, IL
Paula Duerr Asst. Vice President Oakbrook Terrace, IL
Tammy Echevarria-Davis Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Nancy Johannsen Asst. Vice President Oakbrook Terrace, IL
Thomas Johnson Asst. Vice President New York NY
Tara Jones Asst. Vice President Oakbrook Terrace, IL
Holly Lieberman Asst. Vice President Oakbrook Terrace, IL
Gregory Mino Asst. Vice President Oakbrook Terrace, IL
Barbara Novak Asst. Vice President Oakbrook Terrace, IL
Christopher Perozek Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Leah Richardson Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Regina Rosen Asst. Vice President Oakbrook Terrace, IL
Pamela S. Salley Asst. Vice President Houston, TX
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Katherine Scherer Asst. Vice President Oakbrook Terrace, IL
Heather Schmitt Asst. Vice President Oakbrook Terrace, IL
Lisa Schultz Asst. Vice President Oakbrook Terrace, IL
Laurel Shipes Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Scott Stevens Asst. Vice President Oakbrook Terrace, IL
Kristen L. Transier Asst. Vice President Houston, TX
Michael Trizil Asst. Vice President Oakbrook Terrace, IL
Damienne Trippiedi Asst. Vice President Oakbrook Terrace, IL
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Judy Wooley Asst. Vice President Houston, TX

Cathy Napoli Assistant Secretary Oakbrook Terrace, IL
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
John Yovanovic Officer Houston, TX
Richard F. Powers III Director Oakbrook Terrace, IL
Michael H. Santo Director Oakbrook Terrace, IL
A. Thomas Smith III Director Oakbrook Terrace, IL
William R. Rybak Director Oakbrook Terrace, IL
John H. Zimmerman III Director Oakbrook Terrace, IL
</TABLE>