VAN KAMPEN GOVERNMENT SECURITIES FUND, 485APOS, 1998-11-23

VAN KAMPEN GOVERNMENT SECURITIES FUND
485APOS, 1998-11-23

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 23, 1998

REGISTRATION NOS. 2-90482

811-4003

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 24 [X]
REGISTRATION STATEMENT UNDER THE

INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 25 [X]
</TABLE>

VAN KAMPEN GOVERNMENT SECURITIES FUND

(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)

1 PARKVIEW PLAZA, OAKBROOK TERRACE, IL 60181-5555

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(630) 684-6000
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

RONALD A. NYBERG, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY

VAN KAMPEN INVESTMENTS INC.

1 PARKVIEW PLAZA

OAKBROOK TERRACE, IL 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, IL 60606
(312) 407-0700
---------------------

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

It is proposed that this filing will become effective:

[ ] immediately upon filing pursuant to paragraph (b)

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

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

[X] on January 28, 1999 pursuant to paragraph (a)(i)

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

[ ] on (date) pursuant to paragraph (a)(ii) of Rule 285.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

TITLE OF SECURITIES BEING REGISTERED SHARES OF BENEFICIAL INTEREST, PAR VALUE
$0.01 PER SHARE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE FUND
MAY NOT SELL THESE SECURITIES UNTIL THE POST-EFFECTIVE AMENDMENT TO THE
REGISTRATION STATEMENT RELATING TO THESE SECURITIES FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES.

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

VAN KAMPEN

GOVERNMENT SECURITIES FUND

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

Van Kampen Government Securities Fund is a mutual fund with an investment
objective to provide investors high current return consistent with preservation
of capital. The Fund's management seeks to achieve the investment objective by
investing substantially all of its total assets in debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, including
mortgage-related securities issued or guaranteed by 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 regulators, and neither the SEC nor
any state regulator has ruled on the accuracy or adequacy of this prospectus. It
is a criminal offense to state otherwise.

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

THIS PROSPECTUS IS DATED JANUARY , 1999.

<PAGE> 3

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

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk/Return Summary......................................... 3
Fees and Expenses of the Fund............................... 7
Investment Objective and Policies........................... 9
Investment Advisory Services................................ 15
Purchase of Shares.......................................... 16
Redemption of Shares........................................ 21
Distributions from the Fund................................. 23
Shareholder Services........................................ 24
Federal Income Taxation..................................... 25
Financial Highlights........................................ 27
</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.

2
<PAGE> 4

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

RISK/RETURN SUMMARY

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

INVESTMENT OBJECTIVE

The Fund is a mutual fund that with investment objective to provide
investors high current return consistent with preservation of capital. There can
be no assurance the Fund will achieve its investment objective.

INVESTMENT STRATEGIES

The Fund's management seeks to achieve the investment objective by
investing substantially all (at least 80% under normal market conditions) of its
total assets in debt securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, including mortgage-related securities issued or
guaranteed by instrumentalities of the U.S. Government.

INVESTMENT RISKS

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

- - MARKET RISK. The prices of debt securities tend to fall as interest rates
rise. This "market risk" is usually greater among debt securities with longer
maturities or longer durations. Although the Fund has no policy governing the
maturities of its investments, the Fund's investment adviser seeks to
moderate market risk by normally maintaining a portfolio duration of three to
eight years. This means that the Fund will be subject to greater market risk
than a fund investing solely in shorter-term securities (see box for an
explanation of maturities and durations). The yields and market prices of
U.S. Government securities may move differently and adversely compared to the
yields and market prices of the overall securities markets and such
securities, while backed by the U.S. Government, are not guaranteed against
declines in their market prices.

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

UNDERSTANDING MATURITIES

A debt security can be categorized according to its maturity, which is the
length of time before the issuer must repay the principal.

<TABLE>
<CAPTION>
Term Maturity Level
- ----------------------------------------------------------------------------
<S> <C>
1-3 years................................................... Short
4-10 years.................................................. Intermediate
More than 10 years.......................................... Long
- ----------------------------------------------------------------------------
</TABLE>

3
<PAGE> 5

UNDERSTANDING DURATION

Duration provides an alternative approach to assessing a security's market
risk. Duration measures the expected life of a security by incorporating the
security's yield, coupon interest payments, final maturity and call features
into one measure. Whereas maturity focuses only on the final principal repayment
date of a security, duration looks at the timing and present value of all of a
security's principal, interest or other payments. Typically, a debt security
with interest payments due prior to maturity has a duration less than maturity.
A zero-coupon bond, which does not make interest payments prior to maturity,
would have the same duration and maturity.

- - 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 substantially all of its assets in U.S. Government
securities.

- - 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 would drop as well.

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

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

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

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

INVESTOR PROFILE

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

- - Seek current return.

- - Wish to diversify their personal investment portfolios with a fund that
invests substantially all of its total assets in debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.

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

4
<PAGE> 6

Fund. An investment in the Fund is intended to be a long-term investment and
should not be used as a trading vehicle.

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Fund is to look at how its
performance varies from year to year. The following chart shows the annual
returns of the Fund's Class A Shares over the past ten calendar years, as well
as its best and worst quarter during that period. 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]

ANNUAL RETURN FOR CLASS A SHARES
<TABLE>
<CAPTION>

Years Annual Return
<S> <C>
1989 14.91%
1990 8.71%
1991 16.28%
1992 6.56%
1993 8.15%
1994 -4.26%
1995 16.77%
1996 1.90%
1997 9.16%
1998* 8.62%
</TABLE>

*The return for 1998 is for the nine month period ended September 30, 1998.

The 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 differ from
the annual returns shown for the Fund's Class A Shares reflecting differences in
the expenses borne by each class of shares.

During the ten-year period shown in the bar chart, the highest quarterly
return was 8.98% (for the quarter ended June 30, 1989) and the lowest quarterly
return was -3.52% (for the quarter ended March 31, 1994).

5
<PAGE> 7

COMPARATIVE PERFORMANCE

This table shows how the Fund's performance compares with two broad-based
market indices that the Fund's management believes are applicable benchmarks for
the Fund: the Merrill Lynch Intermediate Term Index and the U.S. Government
Index. Average annual total returns are shown for the one-, five-, and ten-year
periods ended December 31, 1997 (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.

AVERAGE ANNUAL TOTAL RETURNS FOR

THE PERIODS ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
PAST
10 YEARS
PAST PAST OR SINCE
1 YEAR 5 YEARS INCEPTION
------ ------- ---------
<S> <C> <C> <C>
Van Kampen Government Securities Fund
Class A Shares........................... 9.16% 6.11% 8.33%
Class B Shares........................... 8.27% 5.31% 5.50%(1)
Class C Shares........................... 8.28% -- 4.74%(2)
Merrill Lynch Intermediate Term Index......
U.S. Government Index......................
</TABLE>

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

Inception Dates (1) 12/20/91 (2) 3/10/93.

The current yield for the thirty day period ended September 30, 1998 is
4.60% for Class A Shares, 4.07% for Class B Shares and 3.93% for Class C Shares.
Investors can obtain the current yield of the Fund for each class of shares by
calling (800) 341-2911.

6
<PAGE> 8

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

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
-------- ------------ ------------
<S> <C> <C> <C>
Shareholder Fees
(fees paid directly from your
investment):
Maximum sales charge (load) imposed on
purchases (as a percentage of
offering price)..................... 4.75% (1) None None
Maximum deferred sales charge (load)
(as a percentage of the lesser of
original purchase price or
redemption proceeds)................ None (2) Year Year
1--4.00% 1--1.00%
Year After--None
2--4.00%
Year
3--3.00%
Year
4--2.50%
Year
5--1.50%
After--None
Maximum sales charge (load) imposed
reinvested dividends (as a
percentage of offering price)....... None None None
Redemption fees (as a percentage of
amount redeemed).................... None None None
Exchange fee.......................... None None None
</TABLE>

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

(1) Reduced for purchases of $100,000 and over. See "Purchase of Shares--Class A
Shares."

(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a deferred sales charge of 1.00% may be imposed on
redemptions made within one year of the purchase. See "Purchase of
Shares--Class A Shares."

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-------- -------- --------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from Fund
assets):
Management Fees............................ 0.53% 0.53% 0.53%
Distribution and/or Service (12b-1)
Fees(1).................................. 0.25% 1.00%(2) 1.00%(2)
Other Expenses............................. 0.24% 0.25% 0.25%
----- ----- -----
Total Annual Fund Operating Expenses....... 1.02% 1.78% 1.78%
</TABLE>

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

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

7
<PAGE> 9

1.00% of the average daily net assets attributable to such class of shares.
See "Distribution and Service Plans."

(2) Because Distribution and/or Service (12b-1) Fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges. Long-term shareholders may pay more than the economic equivalent of
the maximum front-end sales charges permitted by National Association of
Securities Dealers, Inc. Rules.

Example:

This Example is intended to help you compare the cost of investing in the
Fund with the costs of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% annual return
each year and that the Fund's operating expenses remain the same each year
(except for the ten year amounts for Class B Shares which reflect the conversion
of Class B Shares to Class A Shares after eight years). Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ------ ------
<S> <C> <C> <C> <C>
Class A Shares........................... $574 $784 $1,011 $1,664
Class B Shares........................... $581 $860 $1,114 $1,894*
Class C Shares........................... $281 $560 $ 964 $2,095
</TABLE>

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>
Class A Shares........................... $574 $784 $1,011 $1,664
Class B Shares........................... $181 $560 $ 964 $1,894*
Class C Shares........................... $181 $560 $ 964 $2,095
</TABLE>

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

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

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

8
<PAGE> 10

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

INVESTMENT OBJECTIVE AND POLICIES

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

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

The Fund's management seeks to achieve the investment objective by
investing substantially all of the Fund's total assets in debt securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities,
including mortgage-related securities issued or guaranteed by instrumentalities
of the U.S. Government. Under normal circumstances, at least 80% of the Fund's
total assets are invested in such securities. Under normal market conditions,
the Fund may invest up to 20% of its total assets in certain government-related
securities, including privately issued mortgage-related and mortgage-backed
securities not directly guaranteed by instrumentalities of the U.S. Government,
privately issued certificates representing "stripped" U.S. Government or
mortgage-related securities and repurchase agreements fully collateralized by
U.S. Government securities.

The prices of debt securities generally vary inversely with interest rates.
If interest rates rise, debt security prices generally fall; if interest rates
fall, debt security prices generally rise. Debt securities with longer
maturities generally offer higher yields than debt securities with shorter
maturities assuming all other factors, including credit quality, being equal.
For a given change in interest rates, the market prices of longer-maturity debt
securities generally fluctuate more than the market prices of shorter-maturity
debt securities. This potential for a decline in prices of debt securities due
to rising interest rates is referred to herein as "market risk." While the Fund
has no policy limiting the maturities of the individual debt securities in which
it may invest, the Fund's investment adviser seeks to moderate market risk by
generally maintaining a portfolio duration of three to eight years. Duration is
a measure of the expected life of a debt security that was developed as an
alternative to the concept of "term to maturity." Duration incorporates a debt
security's yield, coupon interest payments, final maturity and call features
into one measure. A duration calculation looks at the present value of
security's entire payment stream whereas term to maturity is based solely on the
date of a security's final principal repayment.

The Fund may purchase debt securities at a premium over the principal or
face value in order to obtain higher current income. The amount of any premium
declines during the term of the security to zero at maturity. Such decline
generally is reflected in the market price of the security and thus in the
Fund's net asset value. Any such decline is realized for accounting purposes as
a capital loss at maturity or upon resale. Prior to maturity or resale, such
decline in value could be offset, in whole or part, or increased by changes in
the value of the security due to changes in interest rate levels.

In order to hedge against changes in interest rates, the Fund may purchase
or sell options and engage in transactions involving futures contracts and
options on such contracts. By using such securities, the Fund seeks to limit its
exposure to adverse interest

9
<PAGE> 11

rate changes, but the Fund also reduces its potential for capital appreciation
on debt securities if interest rates decline. The purchase and sale of
securities may result in a higher portfolio turnover rate than if the Fund had
not purchased or sold securities. See "Using Options, Futures Contracts and
Related Options" and the Statement of Additional Information for discussion of
options, futures contracts and related options. The Fund may also purchase or
sell debt securities on a forward commitment basis and enter into interest rate
swaps or other interest rate transactions, such as interest rate caps, floors
and collars. See "Other Investments and Risk Factors."

U.S. GOVERNMENT SECURITIES

Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities include: (1) U.S. Treasury obligations, which differ in their
interest rates, maturities and times of issuance: U.S. Treasury bills (maturity
of one year or less), U.S. Treasury notes (maturity of one to ten years), and
U.S. Treasury bonds (generally maturities of greater than ten years), including
the principal components or the interest components issued by the U.S.
Government under the Separate Trading of Registered Interest and Principal
Securities program (i.e. "STRIPS"), all of which are backed by the full faith
and credit of the United States; and (2) obligations issued or guaranteed by
U.S. Government agencies or instrumentalities, including government guaranteed
mortgage-related securities, some of which are backed by the full faith and
credit of the U.S. Treasury, some of which are supported by the right of the
issuer to borrow from the U.S. Government and some of which are backed only by
the credit of the issuer itself.

Mortgage loans made by banks, savings and loan institutions, and other
lenders are often assembled into pools. Interests in such pools may then be
issued by private entities or also may be issued or guaranteed by an agency or
instrumentality of the U.S. Government. Interests in such pools are what this
Prospectus calls "mortgage-related securities." Mortgage-related securities
include, but are not limited to, obligations issued or guaranteed by the
Government National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
GNMA is a wholly owned corporate instrumentality of the United States whose
securities and guarantees are backed by the full faith and credit of the United
States. FNMA, a federally chartered and privately owned corporation, and FHLMC,
a federal corporation, are instrumentalities of the United States. The
securities and guarantees of FNMA and FHLMC are not backed, directly or
indirectly, by the full faith and credit of the United States. Although the
Secretary of the Treasury of the United States has discretionary authority to
lend amounts to FNMA up to certain specified limits, neither the United States
nor any agency thereof is obligated to finance FNMA's or FHLMC's operations or
to assist FNMA or FHLMC in any other manner. Securities of FNMA and FHLMC
include those issued in principal only or interest only components.

Mortgage-related securities are characterized by monthly payments to the
holder, reflecting the monthly payments made by the borrowers who received the
underlying mortgage loans less fees paid to the guarantor and the servicer of
such mortgage loans. The payments to the holders of mortgage-related securities
(such as the Fund), like the payments on the underlying mortgage loans,
represent both principal and interest. Although the underlying mortgage loans
are for specified periods of time, such as 20 or 30 years, the borrowers can,
and typically do, pay them off sooner. Thus, the holders of

10
<PAGE> 12

mortgage-related securities frequently receive prepayments of principal, in
addition to the principal which is part of the regular monthly payment. A
borrower is more likely to prepay a mortgage which bears a relatively high rate
of interest. This means that in times of declining interest rates, some of the
Fund's higher yielding securities might be converted to cash, and the Fund will
be forced to accept lower interest rates when that cash is used to purchase
additional securities. The increased likelihood of prepayment when interest
rates decline also limits market price appreciation of mortgage-related
securities. If the Fund buys mortgage-related securities at a premium, mortgage
foreclosures or mortgage prepayments may result in a loss to the Fund of up to
the amount of the premium paid since only timely payment of principal and
interest is guaranteed.

Collateralized mortgage obligations ("CMOs") are debt obligations
collateralized by a pool of mortgage loans or mortgaged-related 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.
Real estate mortgage investment conduits ("REMICs") are private entities formed
for the purpose of holding a fixed pool of mortgages secured by an interest in
real property. CMOs and REMICs are issued in a number of classes or series with
different maturities. The classes or series are retired in sequence as the
underlying mortgages are repaid. Prepayment may shorten the stated maturity of
the obligation and can result in a loss of premium, if any has been paid.
Certain of these securities may have variable or floating interest rates and
others may be stripped (securities which provide only the principal or interest
feature of the underlying security). U.S. Government securities may include CMOs
or REMICs issued or guaranteed by agencies or instrumentalities of the U.S.
Government.

OTHER GOVERNMENT RELATED SECURITIES.

The Fund may invest up to 20% of its assets in other government related
securities, including privately issued mortgage-related and mortgage-backed
securities not directly guaranteed by instrumentalities of the U.S. Government,
privately issued certificates representing stripped U.S. Government or
mortgage-related securities and repurchase agreements fully collateralized by
U.S. Government securities.

The Fund may invest in private mortgage-related securities ("Private Pass-
Throughs") as opposed to mortgage-related securities issued or guaranteed by
GNMA, FNMA, and FHLMC only if such Private Pass-Throughs are rated at the time
of purchase in the two highest grades by a nationally recognized statistical
rating agency ("NRSRO") or in any unrated debt security considered by the Fund's
investment adviser to be of comparable quality. CMOs and REMICs issued by
private entities and not directly guaranteed by any government agency or
instrumentality are secured by the underlying collateral of the private issuer.
The Fund will invest in such privately issued securities only if they are 100%
collateralized at the time of issuance by securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. The Fund intends to invest
in privately issued CMOs and REMICs only if they are rated at the time of
purchase in the two highest grades by a NRSRO.

The Fund may invest in the principal only or interest only components of
U.S. Government securities. In the last few years a number of banks and
brokerage firms have separated ("stripped") the principal portions from the
coupon portions of the U.S. Treasury bonds and notes and sold them separately in
the form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held

11
<PAGE> 13

by a bank in a custodial or trust account). Such custodial receipts or
certificates are not considered by the Fund to be U.S. Government securities.
Such securities usually trade at a deep discount from their face or par value
and will be subject to greater fluctuations of market value in response to
changing interest rates than debt obligations of comparable maturities which
make periodic distributions of interest. Current federal tax law requires that a
holder (such as the Fund) of a principal only security accrue a portion of the
discount at which the security was purchased as income each year even though the
Fund received no interest payment in cash on the security during the year. 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-related securities (hereinafter referred to as "Stripped
Mortgage Securities") are derivative multiclass mortgage securities. Stripped
Mortgage Securities may be issued by agencies or instrumentalities of the U.S.
Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
Mortgage Securities usually are structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of Stripped Mortgage Securities will have one
class receiving some of the interest and most of the principal from the mortgage
assets, while the other class will receive 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 effect 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 even if the security is rated the highest
quality by a NRSRO. Holders of PO securities are not entitled to any periodic
payments of interest prior to maturity. Accordingly, such 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. Current federal tax law requires that a holder (such as the Fund) of
principal only securities accrue a portion of the discount at which the security
was purchased as income each year even though the holder receives no interest
payment in cash on the certificate during the year. Such securities may involve
greater risk than securities issued directly by the U.S. Government, its
agencies or instrumentalities.

Although the market for government-issued IO and PO securities backed by
fixed-rate mortgages 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. The trustees of the Fund will
establish guidelines and standards for determining whether a particular
government-issued IO or PO backed by fixed-rate mortgages is liquid. Generally,
such a security may be deemed liquid if it can be disposed of promptly in the
ordinary course of business at a value reasonably close to that used in the
calculation of the net asset value per share. Stripped Mortgage Securities,
other than government-issued IO and PO securities backed by fixed-rate
mortgages, are presently

12
<PAGE> 14

considered by the staff of the SEC to be illiquid securities and thus subject to
the Fund's limitation on investment in illiquid securities.

USING OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS

The Fund presently expects to utilize options, futures contracts and
options thereon in several different ways, depending upon the status of a Fund's
portfolio and the investment adviser's expectations concerning the securities
markets.

In certain cases, the options and futures markets provide investment or
risk management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed with greater ease and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities. However, the purchase and sale of
options, futures contracts and related options involve risks different from
those involved with direct investments in underlying securities, such as
imperfect correlation between the value of the instrument and the underlying
assets. The Fund is authorized to purchase and sell listed and over-the-counter
options ("OTC Options"). OTC options are subject to certain additional risks
including default by the other party to the transaction and the liquidity of the
transaction. While utilization of options, futures contracts and related options
may be advantageous to the Fund, if the Fund's investment adviser is not
successful in employing such instruments in managing the Fund's investments, the
Fund's performance will be worst than if the Fund did not make such investments.
In addition, the Fund would pay commissions and other costs in connection with
such investments, which may increase the Fund's expenses and reduce its return.

A more complete discussion of the potential risks involved in transactions
in options, futures contracts and related options, is contained in the Statement
of Additional Information.

OTHER INVESTMENTS AND RISK FACTORS

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

The Fund may purchase or sell debt securities on a "when-issued" or
"delayed-delivery" basis ("Forward Commitments"). These transactions occur when
securities are purchased or sold by the Fund with payment and delivery taking
place in the future, frequently a month or more after such transaction. The
price is fixed on the date of the commitment, and the seller continues to accrue
interest on the securities covered by the Forward Commitment until delivery and
payment take place. At the time of settlement, the market value of the
securities may be more or less than the purchase or sale price. The Fund may
either settle a Forward Commitment by taking delivery of the securities or may
either resell or repurchase a Forward Commitment on or before the settlement
date in which event the Fund may reinvest the proceeds in another Forward
Commitment. When engaging in Forward Commitments, the Fund relies on the other
party to complete the transaction, should the other party fail to do so, the
Fund might lose a purchase or sale opportunity that could be more advantageous
than alternative opportunities at the time of the failure. The Fund maintains
segregated account (which is marked to market daily) of

13
<PAGE> 15

cash or liquid portfolio securities with the Fund's custodian in an aggregate
amount equal to the amount of its commitment as long as the obligation to
purchase or sell continues.

The Fund may invest up to 10% of its net assets in illiquid securities and
repurchase agreements that mature in more 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.

The Fund may lend its portfolio securities to broker/dealers and other
financial institutions in an amount up to 10% of the Fund's total assets in
order to generate income on the loaned security and any collateral received. The
Fund may incur lending fees and other costs in connection with securities
lending and securities lending is subject to the risk of default by the other
party.

Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information which can be obtained by investors free of charge as
described on the back cover of this prospectus.

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

Like other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the Fund's investment adviser and other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Fund's investment adviser is taking steps that it believes are
reasonably designed to address the Year 2000 Problem with respect to computer
systems that it uses and to obtain reasonable assurances that comparable steps
are being taken by the Fund's other major service providers. At this time, there
can be no assurances that these steps will be sufficient to avoid any adverse
impact to the Fund. In addition, the Year 2000 Problem may adversely affect the
markets and the issuers of securities in which the Fund may invest which, in
turn, may adversely affect the net asset value of the Fund. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing

14
<PAGE> 16

errors may result in production problems for individual companies or issuers and
overall economic uncertainty. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported inconsistently
in U.S. and foreign financial statements. Accordingly, the Fund's investments
may be adversely affected.

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

INVESTMENT ADVISORY SERVICES
---------------------------------------------

THE ADVISER. Van Kampen Asset Management Inc. is the Fund's investment
adviser (the "Adviser"). 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 $50 billion under management or supervision. Van Kampen Investments' more
than 60 open-end and more than 35 closed-end funds and more than 2,500 unit
investment trusts are professionally distributed by leading financial advisers
nationwide. Van Kampen Funds Inc., the distributor of the Fund (the
"Distributor") and the sponsor of the funds mentioned above, is also a wholly
owned subsidiary of Van Kampen Investments. Van Kampen Investments is an
indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at 1 Parkview Plaza, 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 average daily net assets of the
Fund as follows:

AVERAGE DAILY NET ASSETS % PER ANNUM
- ------------------------------------------------------------------------------
<S> <C>
First $1 billion........................................... 0.540%
Next $1 billion............................................ 0.515%
Next $1 billion............................................ 0.490%
Next $1 billion............................................ 0.440%
Next $1 billion............................................ 0.390%
Next $1 billion............................................ 0.340%
Next $1 billion............................................ 0.290%
Over $7 billion............................................ 0.240%
- ------------------------------------------------------------------------------
</TABLE>

Applying this fee schedule, the Fund paid the Adviser an advisory fee at the
effective rate of % of the Fund's average net assets for the Fund's fiscal
period ended September 30, 1998.

Under the Advisory Agreement, the Fund also reimburses the Adviser for the
cost of the Fund's accounting services, which include maintaining its financial
books and records and calculating its daily net asset value. Other operating
expenses paid by the Fund include service fees, distribution fees, custodial
fees, legal and accounting fees, the costs of reports and proxies to
shareholders, trustees' fees (other than those who are affiliated persons of the
Adviser, Distributor or Van Kampen Investments) and all other business expenses
not specifically assumed by the Adviser.

15
<PAGE> 17

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
reimbursing 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 Investment
Advisory Corp. ("Advisory Corp.").

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

PORTFOLIO MANAGEMENT. Mr. John R. Reynoldson has been primarily responsible
for the day-to-day management of the Fund's investment portfolio since June
1988. Mr. Reynoldson has been Senior Investment Vice President of the Adviser
since July 1991 and Senior Vice President of Advisory Corp. since June 1995. He
was previously an Investment Vice President with the Adviser.

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

PURCHASE OF SHARES
---------------------------------------------

GENERAL

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

Initial investments must be at least $500 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. Both
minimums may be waived by the Distributor for plans involving periodic
investments.

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

The price of the Fund's shares is based upon the Fund's net asset value per
share. The net asset values per share of the Class A Shares, Class B Shares and
Class C Shares are generally expected to be substantially the same. In certain
circumstances, however, the per share net asset values of the classes of shares
may differ from one another, reflecting the daily expense accruals of the higher
distribution fees and transfer agency costs

16
<PAGE> 18

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. 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. U.S. Government securities and related forward
commitments are valued at the mean between the last reported bid and asked
prices. Listed options are valued at the last reported sale price on the
exchange on which such option is traded, or, if no sales are reported, at the
mean between the last reported bid and asked prices. Options and forward
commitments for which market quotations are not readily available are valued at
a fair value by the Adviser based on procedures approved by the Trustees of the
Fund. 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. Short-term investments with a maturity of more than 60 days when
purchased are valued based on market quotations until the remaining days to
maturity become less than 61 days. See the notes to financial statements in the
Statement of Additional Information.

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 Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund also has adopted a
service plan (the "Service Plan") with respect to each class of its shares. The
Distribution Plan and the Service Plan provide that the Fund may pay
distribution fees in connection with the sale and distribution of its shares and
service fees in connection with the provision of ongoing services to
shareholders of each class.

The amount of distribution and service fees varies among the classes
offered by the Fund. Because these fees are paid out of the Fund's assets on an
ongoing basis, these fees will increase the cost of your investment in the Fund.
By purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. The net income attributable to a class of shares and the
dividends payable on such class of shares will be reduced by the amount of the
distribution fees and other expenses associated with such class of shares. To
assist investors in comparing classes of shares, the tables under "Fees and
Expenses of the Fund" set forth a summary of sales charges and expenses and an
example of the sales charges and expenses applicable to each class of shares.

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

Shares may be purchased on any business day through authorized dealers.
Shares also may be purchased by completing the application accompanying this
Prospectus and

17
<PAGE> 19

forwarding the application, through the authorized dealer, to the shareholder
service agent, Van Kampen Investor Services Inc. ("Investor Services"), a wholly
owned subsidiary of Van Kampen Investments. When purchasing shares of the Fund,
investors must specify whether the purchase is for Class A Shares, Class B
Shares or Class C Shares. Sales personnel of authorized dealers distributing the
Fund's shares and other persons entitled to receive compensation for selling
such shares may receive differing compensation for selling Class A Shares, Class
B Shares or Class C Shares.

The price paid for shares purchased is based on the next calculation of net
asset value per share (plus sales charges, where applicable) after an order is
received by an authorized dealer provided such order is transmitted to the
Distributor prior to the Distributor's close of business on such day. Orders
received by authorized dealers after the close of the Exchange are priced based
on the day of the next computed net asset value per share provided they are
received by the Distributor prior to the Distributor's close of business on such
day. It is the responsibility of authorized dealers to transmit orders received
by them to the Distributor so they will be received prior to such time. Orders
of less than $500 generally are mailed by the authorized dealer and processed at
the offering price next calculated after receipt by Investor Services.

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

Investor accounts will automatically be credited with additional shares of
the Fund after any Fund distributions, such as dividends and capital gains
distributions, unless the investor instructs the Fund otherwise. Investors
wishing to receive cash instead of additional shares should contact the Fund at
(800) 341-2911 or writing to the Fund, c/o Van Kampen Investors Services Inc.,
PO Box 418256, Kansas City, MO 64141-9256.

CLASS A SHARES

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

Class A Shares Sales Charge Schedule

<TABLE>
<CAPTION>
As % of
As % of Net
Size of Offering Amount
Investment Price Invested
- -----------------------------------------------------------------------------------
<S> <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>

18
<PAGE> 20

deferred sales charge is assessed on an amount equal to the lesser of the then
current market value or the cost of the shares being redeemed. Accordingly, no
sales charge is imposed on increases in net asset value above the initial
purchase price.

The Fund may spend an aggregate amount up to 0.25% per year of the average
daily net assets attributable to the Class A Shares of the Fund pursuant to the
Distribution Plan and Service Plan. From such amount, the Fund may spend up to
0.25% per year of the Fund's average daily net assets attributable to the Class
A Shares pursuant to the Service Plan in connection with the ongoing provision
of services to holders of such shares by the Distributor and by brokers, dealers
or financial intermediaries and in connection with the maintenance of such
shareholders' accounts.

The Fund's Statement of Additional Information contains more detailed
information about quantity discount options (such as volume discounts,
cumulative discounts and letters of intent) and other purchase programs (such as
unit investment trust reinvestments and net asset value purchase options)
available to purchasers of Class A Shares. Interested investors should contact
their authorized dealers or obtain a copy of the Statement of Additional
Information free of charge as described on the back cover of this prospectus.

CLASS B SHARES

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

Class B Shares Sales Charge Schedule

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

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

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

19
<PAGE> 21

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

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

CLASS C SHARES

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

The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gains distributions.
It is presently the policy of the Distributor not to accept any order for Class
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 is applicable to
a redemption, it is assumed that the redemption is first of any shares in the
share holder's Fund account that are not subject to a contingent deferred sales
charge and then of shares held the longest in the shareholder's account.

The Fund may spend up to 0.75% per year of the average daily net assets
attributable to the Class C Shares of the Fund pursuant to the Distribution
Plan. In addition, the Fund may spend up to 0.25% per year of the Fund's average
daily net assets attributable to the Class C Shares pursuant to the Service Plan
in connection with the ongoing provision of services to holders of such shares
by the Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts.

CONVERSION FEATURE

Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan shares received thereon, automatically convert to Class A
Shares eight years after the end of the calendar month in which the shares were
purchased. Class B Shares purchased before June 1, 1996, and any dividend
reinvestment plan shares received thereon, automatically convert to Class A
Shares six years after the end of the calendar month in which the shares were
purchased. Class C Shares purchased before January 1, 1997, and any dividend
reinvestment plan shares received thereon, automatically convert to Class A
Shares ten years after the end of the calendar month in which such shares were
purchased. 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

20
<PAGE> 22

fund is determined by reference to the Van Kampen fund from which such share was
originally purchased.

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

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge is waived on redemptions of Class B
Shares and Class C Shares (i) within one year following the death or disability
(as disability is defined by federal income tax law) of a shareholder, (ii) in
connection with required minimum distributions from an individual retirement
account (IRA) or certain other retirement plan distributions, (iii) pursuant to
the Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) in circumstances under which no commission or
transaction fee is paid to authorized dealers at the time of purchase of such
shares and (v) effected pursuant to the right of the Fund to involuntarily
liquidate a shareholder's account as described herein under "Redemption of
Shares." The contingent deferred sales charge also is waived on redemptions of
Class C Shares as it relates to the reinvestment of redemption proceeds in
shares of the same class of the Fund within 180 days after redemption. For a
more complete description of contingent deferred sales charge waivers, please
refer to the Statement of Additional Information or contact your authorized
dealer.

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

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 above under "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 though an authorized dealer or a custodian of a retirement
plan account may involve additional fees charged by the dealer or custodian.

Except as specified below under "Telephone Redemptions," payment for shares
redeemed generally will be made by check mailed within seven days after
acceptance by Investor Services of the request and any other necessary documents
in proper order. Such payment may be postponed or the right of redemption
suspended as provided by the rules of the SEC. If the shares to be redeemed have
been recently purchased by check, Investor Services may delay the redemption
until it confirms the purchase check has cleared, which may take up to 15 days.
A taxable gain or loss will be recognized by the shareholder upon redemption of
shares.

21
<PAGE> 23

WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of
shares by written request in proper form sent directly to Van Kampen Investor
Services Inc., P.O. Box 418256, Kansas City, Missouri 64141-9256. The request
for redemption should indicate the number of shares to be redeemed, the class
designation of such shares and the shareholder's account number. The redemption
request must be signed by all persons in whose names the shares are registered.
Signatures must conform exactly to the account registration. If the proceeds of
the redemption exceed $50,000, or if the proceeds are not to be paid to the
record owner at the record address, or if the record address has changed within
the previous 30 days, signature(s) must be guaranteed by one of the following: a
bank or trust company; a broker-dealer; a credit union; a national securities
exchange, registered securities association or clearing agency; a savings and
loan association; or a federal savings bank.

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

In the case of written redemption requests sent directly to Investor
Services, the redemption price is the net asset value per share next determined
after the request in proper form is received by Investor Services.

AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. Orders sent through authorized dealers
must be at least $500 unless transmitted via the FUNDSERV network. The
redemption price for such shares is the net asset value 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. To establish
such privilege, a shareholder must complete the appropriate section of the
application form accompanying this Prospectus or call the Fund at (800) 341-2911
to request that a copy of the Telephone Redemption Authorization form be sent to
them for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Van Kampen Investments, Investor Services and the Fund employ
procedures considered by them to be reasonable to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring certain
personal identification information prior to acting upon

22
<PAGE> 24

telephone instructions, tape recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither Van Kampen Investments, Investor Services nor
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Telephone redemptions may not be available if the
shareholder cannot reach Investor Services by telephone, whether because all
telephone lines are busy or for any other reason; in such case, a shareholder
would have to use the Fund's other redemption procedure previously described.
Requests received by Investor Services prior to 4:00 p.m., New York time, will
be processed at the next determined net asset value per share. These privileges
are available for all accounts other than retirement accounts or accounts with
shares represented by certificates. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.

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

OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account
with 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 given and the
shareholder will be given an opportunity to purchase the required value of
additional shares at the next determined net asset value without sales charge.
Any involuntary redemption may only occur if the shareholder account is less
than the minimum initial investment due to shareholder redemptions.

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

DISTRIBUTIONS FROM THE FUND
---------------------------------------------

In addition to any increase in the value of shares which the Fund may
achieve, shareholders may receive two kinds of return from the Fund: dividends
and capital gains distributions. Investors will be entitled to begin receiving
dividends on their shares on the business day after Investor Services receives
payment for such shares. However, shares become entitled to dividends on the day
Investor Services receives payment for the shares either through a fed wire or
NSCC settlement. Shares remain entitled to dividends through the day such shares
are processed for payment on redemption.

DIVIDENDS. Interest earned from investments is the Fund's main source of
income. Under the Fund's present policy, which may be charged at any time by the
Fund's Board of Trustees distributions of all or substantially all of this
income, less expenses, are declared daily and paid monthly as dividends to
shareholders. Dividends are automatically applied to purchase additional shares
of the Fund at the next determined net asset value unless the shareholder
instructs otherwise.

23
<PAGE> 25

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

CAPITAL GAINS. The Fund may realize capital gains or losses when it sells
securities, depending on whether the sales prices for the securities are higher
or lower than purchase prices. Net realized capital gains represent the total
profit from sales of securities minus total losses from sales of securities
including losses carried forward from prior years. The Fund distributes any
taxable net realized capital gains to shareholders at least annually. As in the
case of dividends, capital gains distributions are automatically reinvested in
additional shares of the Fund at net asset value unless the shareholder
instructs otherwise.

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

SHAREHOLDER SERVICES
---------------------------------------------

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

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

AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize Investor Services to charge a bank account on
a regular basis to invest 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 in a non-escrow status
may appoint Investor Services as agent by completing the Authorization for
Redemption by Check form and the appropriate section of the application and
returning the form and the application to Investor Services. Once the form is
properly completed, signed and returned to the agent, a supply of checks drawn
on State Street Bank and Trust Company (the "Bank") will be sent to the Class A
shareholder. These checks may be made payable by the Class A shareholder to the
order of any person in any amount of $100 or more.

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

24
<PAGE> 26

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

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

FEDERAL INCOME TAXATION
---------------------------------------------

Distributions of the Fund's net investment income (consisting generally of
taxable income and net short-term capital gains) are taxable to shareholders as
ordinary income to the extent of the Fund's earnings and profits, whether paid
in cash or reinvested in additional shares. Distributions of the Fund's net
capital gains (which are the excess of net long-term capital gains over net
short-term capital losses), if any, are taxable to shareholders as long-term
capital gains, whether paid in cash or reinvested in additional shares, and
regardless of how long the shares of the Fund have been held by such
shareholders. Such capital gain dividends may be taxed at different rates
depending on how long the Fund held the securities. The Fund expects that its
distributions will consist primarily of ordinary income and capital gain
dividends. Distributions in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of a holder's shares and, after such adjusted tax
basis is reduced to zero, will constitute capital gains to such holder (assuming
such shares are held as a capital asset). Although distributions generally are
treated as taxable in the year they are paid, distributions declared in October,
November or December, payable to shareholders of record on a specified date in
such month and paid during January of the following year will be treated as
having been distributed by the Fund and received by the shareholders on the
December 31st prior to the date of payment. The Fund will inform shareholders of
the source and tax status of all distributions promptly after the close of each
calendar year.

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

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

Foreign shareholders, including shareholders who are non-resident aliens,
may be subject to United States withholding tax on certain distributions
(whether received in cash or in shares) at a rate of 30% or such lower rate as
prescribed by an applicable treaty.

25
<PAGE> 27

Prospective foreign investors should consult their United States tax advisers
concerning the tax consequences to them of an investment in shares.

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

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

26
<PAGE> 28

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

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 PricewaterhouseCoopers 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 Year Ended September 30
------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period...........................
------ ------ ------ ------ ------
Net Investment Income..............
Net Realized and Unrealized
Gain/Loss........................
------ ------ ------ ------ ------
Total from Investment Operations...
------ ------ ------ ------ ------
Less Distributions from and in
Excess of Net Investment
Income...........................
------ ------ ------ ------ ------
Net Asset Value, End of the
Period...........................
====== ====== ====== ====== ======
Total Return(a)....................
Net Assets at End of the Period (In
millions)........................
Ratio of Expenses to Average Net
Assets(b)........................
Ratio of Net Investment Income to
Average Net Assets(b)............
Portfolio Turnover.................
- ---------------------------------------------------------------------------------------------
</TABLE>

(Table and footnotes continued on following page)

27
<PAGE> 29

<TABLE>
<CAPTION>
Class B Shares Year Ended September 30
------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period...........................
------ ------ ------ ------ ------
Net Investment Income..............
Net Realized and Unrealized
Gain/Loss........................
------ ------ ------ ------ ------
Total from Investment Operations...
------ ------ ------ ------ ------
Less Distributions from and in
Excess of Net Investment
Income...........................
------ ------ ------ ------ ------
Net Asset Value, End of the
Period...........................
====== ====== ====== ====== ======
Total Return(a)....................
Net Assets at End of the Period (In
millions)........................
Ratio of Expenses to Average Net
Assets(b)........................
Ratio of Net Investment Income to
Average Net Assets(b)............
Portfolio Turnover.................
- ---------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Class C Shares Year Ended September 30
------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period...........................
------ ------ ------ ------ ------
Net Investment Income..............
Net Realized and Unrealized
Gain/Loss........................
------ ------ ------ ------ ------
Total from Investment Operations...
------ ------ ------ ------ ------
Less Distributions from and in
Excess of Net Investment
Income...........................
------ ------ ------ ------ ------
Net Asset Value, End of the
Period...........................
====== ====== ====== ====== ======
Total Return(a)....................
Net Assets at End of the Period (In
millions)........................
Ratio of Expenses to Average Net
Assets(b)........................
Ratio of Net Investment Income to
Average Net Assets(b)............
Portfolio Turnover.................
- ---------------------------------------------------------------------------------------------
</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 years ended December 31, 1997 and 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%.

28
<PAGE> 30

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE
CALL THE FUND'S TOLL-FREE
NUMBER--(800) 341-2911

PROSPECTIVE INVESTORS--CALL

YOUR BROKER OR (800) 341-2911

DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666

FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)--
(800) 421-2833

FOR AUTOMATED TELEPHONE
SERVICES--(800) 847-2424

VAN KAMPEN GOVERNMENT

SECURITIES FUND

1 Parkview Plaza

Oakbrook Terrace, IL 60181-5555

Investment Adviser:
VAN KAMPEN ASSET
MANAGEMENT INC.

1 Parkview Plaza

Oakbrook Terrace, IL 60181-5555

Distributor:
VAN KAMPEN FUNDS INC.

1 Parkview Plaza

Oakbrook Terrace, IL 60181-5555

Transfer Agent:
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 418256
Kansas City, MO 64141-9256

Attn: Van Kampen Government

Securities Fund

Custodian:
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street, P.O. Box 1713
Boston, MA 02105-1713

Attn: Van Kampen Government

Securities Fund

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

Independent Accountants:
PRICEWATERHOUSECOOPERS LLP
200 East Randolph Drive
Chicago, IL 60601
<PAGE> 31

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

GOVERNMENT SECURITIES FUND

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

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

You will find additional information about the Fund in its annual and
semiannual reports, which explain the market conditions and investment
strategies affecting the Fund's recent performance.

You can ask questions or obtain a free copy of the Fund's reports or its
Statement of Additional Information by calling 1-800-341-2911 from 7:00 a.m. to
7:00 p.m., Central time, Monday through Friday. Telecommunications Device for
the Deaf users may call 1-800-421-2833. A free copy of the Fund's reports can
also be ordered from our web site at www.vankampen.com.

Information about the Fund, including its reports and Statement of
Additional Information, has been filed with the Securities and Exchange
Commission (SEC). It can be reviewed and copied at the SEC Public Reference Room
in Washington, DC or online at the SEC's web site (http://www.sec.gov). For more
information, please call the SEC at 1-800-SEC-0330. You can also request these
materials by writing the Public Reference Section of the SEC, Washington DC,
20549-6009, and paying a duplication fee.

VAN KAMPEN FUNDS LOGO

Investment Company Act File No. 811-4003

<PAGE> 32

THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND
MAY BE CHANGED. THE FUND MAY NOT SELL THESE SECURITIES UNTIL THE POST-EFFECTIVE
AMENDMENT TO THE REGISTRATION STATEMENT RELATING TO THESE SECURITIES FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS STATEMENT OF
ADDITIONAL INFORMATION DOES NOT CONSTITUTE A PROSPECTUS. THIS STATEMENT OF
ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES.

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN

GOVERNMENT SECURITIES FUND

The Fund is organized as a diversified series of the Van Kampen Government
Securities Fund, 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) 421-2533 for the
hearing impaired).

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

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

<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective and Policies........................... B-4
Options, Futures Contracts and Related Options.............. B-12
Investment Restrictions..................................... B-18
Trustees and Officers....................................... B-22
Investment Advisory Agreement............................... B-32
Distribution and Service.................................... B-34
Transfer Agent.............................................. B-38
Portfolio Transactions and Brokerage Allocation............. B-38
Share Purchase Programs..................................... B-40
Shareholder Services........................................ B-44
Redemption of Shares........................................ B-48
Contingent Deferred Sales Charge-Class A.................... B-48
Waiver of Class B and Class C Contingent Deferred Sales
Charge.................................................... B-48
Taxation.................................................... B-50
Fund Performance............................................ B-55
Other Information........................................... B-58
Report of Independent Accountants........................... F-
Financial Statements........................................ F-
Notes to Financial Statements............................... F-
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED JANUARY , 1999.

<PAGE> 33

GENERAL INFORMATION

The Fund was originally incorporated under the name American Capital
Government Securities Fund, Inc. as a Maryland corporation on March 5, 1984. As
of August 5, 1995, the Fund was renamed Van Kampen American Capital Government
Securities Fund and was reorganized as a series of the Trust, a business trust
organized under the laws of the State of Delaware. On July 14, 1998, the Fund
adopted its present name and the Trust adopted the name Van Kampen Government
Securities Fund.

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

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

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

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

Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series and separate votes are taken by each class of a series on matters
affecting an individual class of such series. For example, a change in
investment policy for a series would be voted upon by shareholders of only the
series involved and a change in the distribution fee for a class of a series
would be voted upon by shareholders of only the class of such series involved.
Except as

B-2
<PAGE> 34

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 pay higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be lower than to holders of
Class A Shares.

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

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

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

<TABLE>
<CAPTION>
Amount of
Ownership at
January Class Percentage
Name and Address of Holder , 1999 of Shares Ownership
- -------------------------- ------------ --------- ----------
<S> <C> <C> <C>
Merrill Lynch Pierce Fenner & Smith Inc.........
For the Sole benefit of its customers
Attn: Fund Administration
4800 Dear Lake Dr. East 3rd Fl
Jacksonville, FL 32246-6484
Van Kampen Trust Company........................
2800 Post Oak Blvd.
Houston, TX 77056
</TABLE>

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

B-3
<PAGE> 35

INVESTMENT OBJECTIVE AND POLICIES

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

The following investment techniques, subject to the Investment Restrictions
below, may be employed by the Fund. These techniques inherently involve the
assumption of a higher degree of risk than normal and the possibility of more
volatile price fluctuations. Investment in the Fund should not be viewed as a
complete investment program and prospective investors are advised to give full
consideration to the risks inherent in the investment techniques used by the
Fund.

While the Fund has no policy limiting the maturities of the debt securities
in which it may invest, the Adviser seeks to moderate market risk by generally
maintaining a portfolio duration within a range of three to eight years.
Duration is a measure of the expected life of a debt security that was developed
as an alternative to the concept of "term to maturity." Duration incorporates a
debt security's yield, coupon interest payments, final maturity and call
features into one measure. Traditionally a debt security's "term to maturity"
has been used as a proxy for the sensitivity of the security's price to changes
in interest rates (which is the "interest rate risk" or "price volatility" of
the security). However, "term to maturity" measures only the time until a debt
security provides its final payment taking no account of the pattern of the
security's payments of interest or principal prior to maturity. Duration is a
measure of the expected life of a debt security on a present value basis
expressed in years. It measures the length of the time interval between the
present and the time when the interest and principal payments are scheduled (or
in the case of a callable bond, expected to be received), weighing them by the
present value of the cash to be received at each future point in time. For any
debt security with interest payments occurring prior to the payment of
principal, duration is always less than maturity, and for zero coupon issues,
duration and term to maturity are equal. In general, the lower the coupon rate
of interest or the longer the maturity, or the lower the yield-to-maturity of a
debt security, the longer its duration; conversely, the higher the coupon rate
of interest, the shorter the maturity or the higher the yield-to-maturity of a
debt security, the shorter its duration. There are some situations where even
the standard duration calculation does not properly reflect the interest rate
exposure of a security. For example, floating and variable rate securities often
have final maturities of ten or more years; however, their interest rate
exposure corresponds to the frequency of the coupon reset. Another example where
the interest rate exposure is not properly captured by duration is the case of
mortgage pass-through securities. The stated final maturity of such securities
is generally 30 years, but current prepayment rates are more critical in
determining the securities' interest rate exposure. In these and other similar
situations, the Adviser will use more sophisticated analytical techniques that
incorporate the economic life of a security into the determination of its
interest rate exposure.

One type of mortgage-related security in which the Fund invests is that
which is issued or guaranteed by an agency or instrumentality of the U.S.
Government, though not necessarily by the U.S. Government itself. One such type
of mortgage-related security is a Government National Mortgage Association
("GNMA") Certificate. GNMA Certificates are backed as to principal and interest
by the full faith and credit of the U.S. Government.

B-4
<PAGE> 36

Another type is a Federal National Mortgage Association ("FNMA") Certificate.
Principal and interest payments of FNMA Certificates are guaranteed only by FNMA
itself, not by the full faith and credit of the U.S. Government. A third type of
mortgage-related security in which the Fund may invest is a Federal Home Loan
Mortgage Association ("FHLMC") Participation Certificate. This type of security
is backed by FHLMC as to payment of principal and interest but, like a FNMA
security, it is not backed by the full faith and credit of the U.S. Government.

GNMA CERTIFICATES

Government National Mortgage Association. The Government National Mortgage
Association is a wholly owned corporate instrumentality of the United States
within the U.S. Department of Housing and Urban Development. GNMA's principal
programs involve its guarantees of privately issued securities backed by pools
of mortgages.

Nature of GNMA Certificates. GNMA Certificates are mortgage-backed
securities. The Certificates evidence part ownership of a pool of mortgage
loans. The Certificates which the Fund purchases are of the modified
pass-through type. Modified pass-through Certificates entitle the holder to
receive all interest and principal payments owned on the mortgage pool, net of
fees paid to the GNMA Certificate issuer and GNMA, regardless of whether or not
the mortgagor actually makes the payment.

GNMA Certificates are backed by mortgages and, unlike most bonds, their
principal amount is paid back by the borrower over the length of the loan rather
than in a lump sum at maturity. Principal payments received by the Fund will be
reinvested in additional GNMA Certificates or in other permissible investments.

GNMA Guarantee. The National Housing Act authorizes GNMA to guarantee the
timely payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or the Farmers
Home Administration or guaranteed by the Veterans Administration ("VA"). The
GNMA guarantee is backed by the full faith and credit of the United States. GNMA
is also empowered to borrow without limitation from the U.S. Treasury if
necessary to make any payments required under its guarantee.

Life of GNMA Certificates. The average life of a GNMA Certificate is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will result in the return of a portion of principal invested before
the maturity of the mortgages in the pool.

As prepayment rates of individual mortgage pools will vary widely, it is
not possible to predict accurately the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA are normally used as
an indicator of the expected average life of GNMA Certificates. These statistics
indicate that the average life of single-family dwelling mortgages with 25-30
year maturities (the type of mortgages backing the vast majority of GNMA
Certificates) is approximately twelve years. For this reason, it is customary
for pricing purposes to consider GNMA Certificates as 30-year mortgage-backed
securities which prepay fully in the twelfth year.

Yield Characteristics of GNMA Certificates. The coupon rate of interest of
GNMA Certificates is lower than the interest rate paid on the VA-guaranteed or
FHA-insured

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<PAGE> 37

mortgages underlying the Certificates, but only by the amount of the fees paid
to GNMA and the GNMA Certificate issuer.

The coupon rate by itself, however, does not indicate the yield which will
be earned on the Certificates for the following reasons:

1. Certificates are usually issued at a premium or discount, rather than at
par.

2. After issuance, Certificates usually trade in the secondary market at a
premium or discount.

3. Interest is paid monthly rather than semi-annually as is the case for
traditional bonds. Monthly compounding has the effect of raising the
effective yield earned on GNMA Certificates.

4. The actual yield of each GNMA Certificate is influenced by the
prepayment experience of the mortgage pool underlying the Certificate.
If mortgagors prepay their mortgages, the principal returned to
Certificate holders may be reinvested at higher or lower rates.

In quoting yields for GNMA Certificates, the customary practice is to
assume that the Certificates will have a twelve-year life. Compared on this
basis, GNMA Certificates have historically yielded roughly 1/4 of 1.00% more
than high grade corporate bonds and 1/2 of 1.00% more than U.S. Government and
U.S. Government agency bonds. As the life of individual pools may vary widely,
however, the actual yield earned on any issue of GNMA Certificates may differ
significantly from the yield estimated on the assumption of a twelve-year life.

Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA Certificates
outstanding has grown rapidly. The size of the market and the active
participation in the secondary market by securities dealers and many types of
investors make GNMA Certificates highly liquid instruments. Quotes for GNMA
Certificates are readily available from securities dealers and depend on, among
other things, the level of market rates, the Certificate's coupon rate and the
prepayment experience of the pool of mortgages backing each Certificate.

FNMA SECURITIES

The Federal National Mortgage Association ("FNMA") was established in 1938
to create a secondary market in mortgages insured by the FHA. FNMA issues
guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble GNMA Certificates in that each FNMA Certificate represents
a pro rata share of all principal and interest payments made and owed on the
underlying pool. FNMA guarantees timely payment of interest and principal on
FNMA Certificates. The FNMA guarantee is not backed by the full faith and credit
of the United States.

FHLMC SECURITIES

The Federal Home Loan Mortgage Corporation ("FHLMC") was created in 1970 to
promote development of a nationwide secondary market in conventional residential
mortgages. The FHLMC issues two types of mortgage pass-through securities
("FHLMC

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<PAGE> 38

Certificates"): mortgage participation certificates ("PCs") and guaranteed
mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. The FHLMC guarantees timely monthly payment of interest
on PCs and the ultimate payment of principal. GMCs also represent a pro rata
interest in a pool of mortgages. However, these instruments pay interest
semi-annually and return principal once a year in guaranteed minimum payments.
The expected average life of these securities is approximately ten years. The
FHLMC guarantee is not backed by the full faith and credit of the United States.

COLLATERALIZED MORTGAGE OBLIGATIONS

Collateralized mortgage obligations are debt obligations issued generally
by agencies or instrumentalities of the U.S. Government, or by private
originators of, or investors in, mortgages which are secured by mortgage-related
securities, including GNMA Certificates, FHLMC Certificates and FNMA
Certificates, together with certain funds and other collateral. Scheduled
distributions on the mortgage-related securities pledged to secure the
collateralized mortgage obligations, together with certain funds and other
collateral and reinvestment income thereon at an assumed reinvestment rate, will
be sufficient to make timely payments of interest on the obligations and to
retire the obligations not later than their stated maturity. Since the rate of
payment of principal of any collateralized mortgage obligation will depend on
the rate of payment (including prepayments) of the principal of the mortgage
loans underlying the mortgage-related securities, the actual maturity of the
obligation could occur significantly earlier than its stated maturity.
Collateralized mortgage obligations may be subject to redemption under certain
circumstances. The rate of interest borne by collateralized mortgage obligations
may be either fixed or floating. In addition, certain collateralized mortgage
obligations do not bear interest and are sold at a substantial discount (i.e., a
price less than the principal amount). Purchases of collateralized mortgage
obligations at a substantial discount involves a risk that the anticipated yield
on the purchase may not be realized if the underlying mortgage loans prepay at a
slower than anticipated rate, since the yield depends significantly on the rate
of prepayment of the underlying mortgages. Conversely, purchases of
collateralized mortgage obligations at a premium involve additional risk of loss
of principal in the event of unanticipated prepayments of the mortgage loans
underlying the mortgage-related securities since the premium may not have been
fully amortized at the time the obligation is repaid. The market value of
collateralized mortgage obligations purchased at a substantial premium of
discount is extremely volatile and the effects of prepayments on the underlying
mortgage loans may increase such volatility.

Although payment of the principal and interest on the mortgage-backed
certificates pledged to secure collateralized mortgage obligations may be
guaranteed by GNMA, FHLMC or FNMA, the collateralized mortgage obligations
represent obligations solely of their issuers and generally are not insured or
guaranteed by GNMA, FHLMC, FNMA or any other governmental agency or
instrumentality, or by any other person or entity. The issuers of collateralized
mortgage obligations typically have no significant assets other than those
pledged as collateral for the obligations.

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<PAGE> 39

LENDING OF SECURITIES

Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities, in an amount up to 10% of the Fund's total assets, to
broker-dealers and other financial institutions provided that such loans are
callable at any time by the Fund, and are at all times secured by cash
collateral that is at least equal to the market value, determined daily, of the
loaned securities. The advantage of such loans is that the Fund continues to
receive the interest on the loaned securities, while at the same time earning
interest on the collateral which will be invested in short-term obligations. The
Fund pays lending fees and custodial fees in connection with loans of its
securities. There is no assurance as to the extent to which securities loans can
be effected.

A loan may be terminated by the borrower on one business day's notice, or
by the Fund at any time. If the borrower fails to maintain the requisite amount
of collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases even loss of rights in
the collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms deemed by the
Fund's management to be creditworthy and when the consideration which can be
earned from such loans is believed to justify the attendant risks. The Fund
would not lend any portfolio securities to brokers affiliated with the Adviser.
On termination of the loan, the borrower is required to return the securities to
the Fund; any gain or loss in the market price during the loan would inure to
the Fund.

When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, 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.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements with banks or broker-dealers
in order to earn a return on temporarily available cash. A repurchase agreement
is a short-term investment in which the purchaser (i.e., the Fund) acquires
ownership of a debt security and the seller agrees to repurchase the obligation
at a future time and set price, thereby determining the yield during the holding
period. Repurchase agreements involve certain risks in the event of default by
the other party. The Fund may enter into repurchase agreements with banks or
broker-dealers deemed to be creditworthy by the Adviser under guidelines
approved by the Trustees. The Fund will not invest in repurchase agreements
maturing in more than seven days if any such investment, together with any other
illiquid securities held by the Fund, would exceed the Fund's limitation on
illiquid securities described below. In the event of the bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying 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.

B-8
<PAGE> 40

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an exemptive order from the SEC authorizing this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.

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

FORWARD COMMITMENTS

The Fund may purchase or sell securities on a "when-issued" or
"delayed-delivery" basis ("Forward Commitments"). These transactions occur when
securities are purchased or sold by the Fund with payment and delivery taking
place in the future, frequently a month or more after such transaction. The
price is fixed on the date of the commitment, and the seller continues to accrue
interest on the securities covered by the Forward Commitment until delivery and
payment takes place. At the time of settlement, the market value of the
securities may be more or less than the purchase or sale price. The Fund may
either settle a Forward Commitment by taking delivery of the securities or may
either resell or repurchase a Forward Commitment on or before the settlement
date in which event the Fund may reinvest the proceeds in another Forward
Commitment.

Relative to a Forward Commitment purchase, the Fund maintains a segregated
account (which is marked-to-market daily) of cash or liquid securities (which
may have maturities which are longer than the term of the Forward Commitment)
with the Fund's custodian in an aggregate amount equal to the amount of its
commitment as long as the obligation to purchase continues. Since the market
value of both the securities subject to the Forward Commitment and the
securities held in the segregated account may fluctuate, the use of Forward
Commitments may magnify the impact of interest rate changes on the Fund's net
asset value.

A Forward Commitment sale is covered if the Fund owns or has the right to
acquire the underlying securities subject to the Forward Commitment. A Forward
Commitment sale is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline in value of a security which the
Fund owns or has the right to acquire. In either circumstance, the Fund
maintains in a segregated account (which is marked-to-market daily) either the
security covered by the Forward Commitment or cash or

B-9
<PAGE> 41

securities (which may have maturities which are longer than the term of the
Forward Commitment) with the Fund's custodian in an aggregate amount equal to
the amount of its commitment as long as the obligation to sell continues. By
entering into a Forward Commitment sale transaction, the Fund foregoes or
reduces the potential for both gain and loss in the security which is being
hedged by the Forward Commitment sale.

When engaging in Forward Commitments, the Fund relies on the other party to
complete the transaction. Should the other party fail to do so, the Fund might
lose a purchase or sale opportunity that could be more advantageous than
alternative opportunities at the time of the failure. Forward Commitments are
not traded on an exchange and thus may be less liquid than exchange traded
contracts.

INTEREST RATE TRANSACTIONS

The Fund may enter into interest rate swaps and may purchase or sell
interest rate 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. The Fund may also enter into these transactions to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. The Fund does not intend to use these transactions
as speculative investments and will not enter into interest rate swaps or sell
interest rate caps or floors where it does not own or have the right to acquire
the underlying 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.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a contractually-based principal amount from the party selling the
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a contractually-based
principal amount from the party selling the interest rate floor. An interest
rate collar combines the elements of purchasing a cap and selling a floor. The
collar protects against an interest rate rise above the maximum amount but
foregoes the benefit of an interest rate decline below the minimum amount.
Interest rate swaps, caps, floors and collars will be treated as illiquid
securities and will, therefore, be subject to the Fund's investment restriction
limiting investment in illiquid securities.

The Fund may enter into interest rate swaps, caps, floors and collars on
either an asset-based or liability-based basis, and will usually enter into
interest rate swaps on a net basis, i.e., the two payment streams are netted
out, with the Fund receiving or paying, as the case may be, only the net amount
of the two payments. The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each interest rate swap will
be accrued on a daily basis and an amount of cash or liquid securities having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Fund's custodian. If the Fund enters
into an interest rate swap on other than a net basis, the Fund would maintain a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the swap. Interest rate transactions do not
constitute senior securities under the 1940 Act when the Fund segregates assets
to cover the obligations under the transactions. The Fund will enter into
interest rate swap, cap or floor transactions only with counterparties approved
by the

B-10
<PAGE> 42

Trustees. The Adviser will monitor the creditworthiness of counterparties to its
interest rate swap, cap, floor and collar transactions on an ongoing basis. If
there is a default by the other party to such a transaction, the Fund will have
contractual remedies pursuant to the agreements related to the transaction. To
the extent the Fund sells (i.e., writes) caps, floors and collars, it will
maintain in a segregated account cash or liquid securities having an aggregate
net asset value at least equal to the full amount, accrued on a daily basis, of
the Fund's net obligations with respect to the caps, floors or collars. The use
of interest rate swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Adviser is incorrect in its forecasts
of the market values, interest rates and other applicable factors, the
investment performance of the Fund would diminish compared with what it would
have been if these investment techniques were not used. The use of interest rate
swaps, caps, collars and floors may also have the effect of shifting the
recognition of income between current and future periods.

These transactions do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest rate swaps is limited to the net amount of interest payments that the
Fund is contractually obligated to make. If the other party to an interest rate
swap defaults, the Fund's risk of loss consists of the net amount of interest
payments that the Fund contractually is entitled to receive.

PORTFOLIO TURNOVER

The Fund may experience a high rate of portfolio turnover. The Fund's
portfolio turnover rate is calculated by dividing the lesser of purchases or
sales of portfolio securities for a fiscal year by the average monthly value of
the Fund's portfolio securities during such fiscal year. The turnover rate may
vary greatly from year to year as well as within a year. The Fund's portfolio
turnover rate (the lesser of the value of the securities purchased or securities
sold divided by the average value of the securities held in the Fund's portfolio
excluding all securities whose maturities at acquisition were one year or less)
is shown in the table of "Financial Highlights" in the Prospectus. A high
portfolio turnover rate (100% or more) increases the Fund's transaction costs,
including brokerage commissions, and may result in the realization of more
short-term capital gains than if the Fund had a lower portfolio turnover. The
turnover rate will not be a limiting factor, however, if the Adviser deems
portfolio changes appropriate.

ILLIQUID SECURITIES

The Fund may invest up to 10% 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"). Restricted
securities are often purchased at a discount from the market price of
unrestricted securities of the same issuer reflecting the fact that such
securities may not be readily marketable without some time delay. Investments in
securities which have no ready market are valued at fair value as determined in
good faith by the Adviser in accordance with procedures approved by the Fund's
Trustees. Ordinarily, the Fund would invest in restricted securities only when
it receives the issuer's commitment to register the securities without expense
to the Fund. However, registration and underwriting expenses (which may

B-11
<PAGE> 43

range from 7% to 15% of the gross proceeds of the securities sold) may be paid
by the Fund. Restricted securities which can be offered and sold to qualified
institutional buyers under Rule 144A under the 1933 Act ("144A Securities") and
are determined to be liquid under guidelines adopted by and subject to the
supervision of the Fund's Board of Trustees are not subject to the limitation on
illiquid securities. Such 144A Securities are subject to monitoring and may
become illiquid to the extent qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Factors used to determine whether
144A Securities are liquid include, among other things, a security's trading
history, the availability of reliable pricing information, the number of dealers
making quotes or making a market in such security and the number of potential
purchasers in the market for such security. For purposes hereof, investments by
the Fund in securities of other investment companies will not be considered
investments in restricted securities to the extent permitted by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief from the provisions of the 1940 Act.

OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS

CALL AND PUT OPTIONS

Call and put options on various U.S. Treasury notes and U.S. Treasury bonds
are listed and traded on exchanges and are written in over-the-counter
transactions. Call and put options on mortgage-related securities are currently
written or purchased only in over-the-counter transactions.

SELLING CALL AND PUT OPTIONS

Selling Options. The purchaser of a call option pays a premium to the
seller (i.e., the writer) for the right to buy the underlying security from the
seller at a specified price during a certain period. The Fund sells call options
either on a covered basis or for cross-hedging purposes. A call option is
covered if, at all times during the option period, the Fund owns or has the
right to acquire the underlying securities subject to the call option. An option
is for cross-hedging purposes if it is not covered by the security subject to
the option, but is designed to provide a hedge against another security which
the Fund owns or has the right to acquire. In such circumstances, the Fund
collateralizes the option by maintaining in a segregated account with the Fund's
custodian, cash or liquid securities in an amount not less than the market value
of the underlying security, marked to market daily, while the option is
outstanding.

The purchaser of a put option pays a premium to the seller (i.e., the
writer) for the right to sell the underlying security to the writer at a
specified price during a certain period. The Fund would sell put options only on
a secured basis, which means that, at all times during the option period, the
Fund would maintain in a segregated account with its custodian cash or liquid
securities in an amount of not less than the exercise price of the option or
would hold a put on the same underlying security at an equal or greater exercise
price.

Closing Purchase Transactions and Offsetting Transactions. In order to
terminate its position as a seller of a call or put option, the Fund could enter
into a "closing purchase transaction," which is the purchase of a call (put) on
the same underlying security and

B-12
<PAGE> 44

having the same exercise price and expiration date as the call (put) previously
sold by the Fund. The Fund would realize a gain (loss) if the premium plus
commission paid in the closing purchase transaction is less (greater) than the
premium it received on the sale of the option. The Fund would also realize a
gain if an option it has written lapses unexercised.

The Fund could sell options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. The
Fund could close out its position as a seller of an option only if a liquid
secondary market exists for options of that series, but there is no assurance
that such a market will exist, particularly in the case of over-the-counter
options, since they can be closed out only with the other party to the
transaction. Alternatively, the Fund could purchase an offsetting option, which
would not close out its position as a seller, but would provide an asset of
equal value to its obligation under the option sold. If the Fund is not able to
enter into a closing purchase transaction or to purchase an offsetting option
with respect to an option it has sold, it will be required to maintain the
securities subject to the call or the collateral securing the option until a
closing purchase transaction can be entered into (or the option is exercised or
expires), even though it might not be advantageous to do so.

The exercise price of call options may be below ("in-the-money"), equal to
("at-the-money"), or above ("out-of-the-money") the current market value of the
underlying securities or futures contracts at the time the options are written.
The converse applies to put options.

Risks of Writing Options. By selling a call option, the Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by selling a put option the Fund might become obligated
to purchase the underlying security at an exercise price that exceeds the then
current market price.

PURCHASING CALL AND PUT OPTIONS

The Fund could purchase call options to protect (i.e., hedge) against
anticipated increases in the prices of securities it wishes to acquire. Since
the premium paid for a call option is typically a small fraction of the price of
the underlying security, a given amount of funds will purchase call options
covering a much larger quantity of such security than could be purchased
directly. By purchasing call options, the Fund could benefit from any
significant increase in the price of the underlying security to a greater extent
than had it invested the same amount in the security directly. However, because
of the very high volatility of option premiums, the Fund would bear a
significant risk of losing the entire premium if the price of the underlying
security did not rise sufficiently, or if it did not do so before the option
expired.

Put options may be purchased to protect (i.e., hedge) against anticipated
declines in the market value of either specific portfolio securities or of the
Fund's assets generally. The Fund will not purchase call or put options on
securities if as a result, more than 10% of its net assets would be invested in
premiums on such options.

The Fund may purchase either listed or over-the-counter options.

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<PAGE> 45

OVER THE COUNTER OPTIONS

The Fund is authorized to purchase and sell over-the-counter options ("OTC
Options"). OTC Options are purchased from or sold to securities dealers,
financial institutions of other parties ("Counterparties") through direct
bilateral agreement with the Counterparty. The Fund will sell only OTC Options
(other than OTC currency options) that are subject to a buy-back provision
permitting the Fund to require to the Counterparty to sell the option back to
the Fund at a formula price within seven days. 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
OTC Options sold by the Fund, are illiquid securities subject to the Fund's
limitation on illiquid securities.

RISK FACTORS APPLICABLE TO OPTIONS ON U.S. GOVERNMENT SECURITIES

Treasury Bonds and Notes. Because trading interest in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the exchanges will not continue indefinitely to introduce options with new
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each issue of bonds or notes will thus be phased out as new options are
listed on more recent issues, and options representing a full range of
expirations will not ordinarily be available for every issue on which options
are traded.

Treasury Bills. Because the deliverable Treasury bill changes from week to
week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its custodian so that it will be
treated as being covered.

Mortgage-Related Securities. The following special considerations will be
applicable to options on mortgage-related securities. Currently such options are
only traded over-the-counter. Since the remaining principal balance of a
mortgage-related security declines each month as a result of mortgage payments,
the Fund as a writer of a mortgage-related call holding mortgage-related
securities as "cover" to satisfy its delivery obligation in the event of
exercise may find that the mortgage-related securities it holds no longer have a
sufficient remaining principal balance for this purpose. Should this occur, the
Fund will purchase additional mortgage-related securities from the same pool (if
obtainable) or replacement mortgage-related securities in the cash market in
order to maintain its cover. A mortgage-related security held by the Fund to
cover an option position in any but the nearest expiration month may cease to
represent cover for the option in the event of a decline in the coupon rate at
which new pools are originated under the FHA/VA loan ceiling in effect at any
given time. If this should occur, the Fund will no longer be covered, and the
Fund will either enter into a closing purchase transaction or replace such
mortgage-related security with a mortgage-related security which represents
cover. When

B-14
<PAGE> 46

the Fund closes its position or replaces such mortgage-related security, it may
realize an unanticipated loss and incur transaction costs.

INTEREST RATE FUTURES CONTRACTS

The Fund may engage in transactions involving futures contracts and related
options in accordance with the rules and interpretations of the Commodity
Futures Trading Commission ("CFTC") under which the Fund would be exempt from
registration as a "commodity pool."

An interest rate futures contract is an agreement pursuant to which a party
agrees to take or make delivery of a specified debt security (such as U.S.
Treasury bonds, U.S. Treasury notes, U.S. Treasury bills and GNMA Certificates)
at a specified future time and at a specified price. Interest rate futures
contracts also include cash settlement contracts based upon a specified interest
rate such as the London interbank offering rate for dollar deposits or LIBOR.

Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, the Fund is required to deposit with its custodian in an
account in the broker's name an amount of cash or liquid securities equal to not
more than 5% of the contract amount. This amount is known as initial margin. The
nature of initial margin in futures transactions is different from that of
margin in securities transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transaction.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract, which is returned to the Fund upon termination of the
futures contract and satisfaction of its contractual obligations. Subsequent
payments to and from the broker, called variation margin, are made on a daily
basis as the price of the underlying securities fluctuates, making the long and
short positions in the futures contract more or less valuable, a process known
as marking to market.

For example, when the Fund purchases a futures contract and the price of
the underlying security rises, that position increases in value, and the Fund
will receive from the broker a variation margin payment equal to that increase
in value. Conversely, where the Fund purchases a futures contract and the value
of the underlying security declines, the position is less valuable, and the Fund
would make a variation margin payment to the broker.

At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.

Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is otherwise
fully invested ("anticipatory hedge"). Such purchase of a futures contract would
serve as a temporary substitute for the purchase of individual securities, which
may be purchased in an orderly fashion once the market has stabilized. As
individual securities are purchased, an equivalent amount of futures contracts
could be terminated by offsetting sales. The Fund may sell futures contracts in
anticipation

B-15
<PAGE> 47

of or in a general market or market sector decline that may adversely affect the
market value of the Fund's securities ("defensive hedge"). To the extent that
the Fund's portfolio of securities changes in value in correlation with the
underlying security, the sale of futures contracts would substantially reduce
the risk to the Fund of a market decline and, by so doing, provide an
alternative to the liquidation of securities positions in the Fund. Ordinarily
commissions on futures transactions are lower than transaction costs incurred in
the purchase and sale of mortgage-related and U.S. Government securities.

Special Risks Associated with Futures Transactions. There are several
risks connected with the use of futures contracts as a hedging device. These
include the risk of imperfect correlation between movements in the price of the
futures contracts and of the underlying securities, the risk of market
distortion, the illiquidity risk and the risk of error in anticipating price
movement.

There may be an imperfect correlation (or no correlation) between movements
in the price of the futures contracts and of the securities being hedged. The
risk of imperfect correlation increases as the composition of the securities
being hedged diverges from the securities upon which the futures contract is
based. If the price of the futures contract moves less than the price of the
securities being hedged, the hedge will not be fully effective. To compensate
for the imperfect correlation, the Fund could buy or sell futures contracts in a
greater dollar amount than the dollar amount of securities being hedged if the
historical volatility of the securities being hedged is greater than the
historical volatility of the securities underlying the futures contract.
Conversely, the Fund could buy or sell futures contracts in a lesser dollar
amount than the dollar amount of securities being hedged if the historical
volatility of the securities being hedged is less than the historical volatility
of the securities underlying the futures contracts. It is also possible that the
value of futures contracts held by the Fund could decline at the same time as
portfolio securities being hedged; if this occurred, the Fund would lose money
on the futures contract in addition to suffering a decline in value in the
portfolio securities being hedged.

There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities underlying the futures
contract due to certain market distortions. First, all participants in the
futures market are subject to margin depository and maintenance requirements.
Rather than meet additional margin depository requirements, investors may close
futures contracts through offsetting transactions, which could distort the
normal relationship between the futures market and the securities underlying the
futures contract. Second, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities markets. Therefore, increased participation by speculators in the
futures markets may cause temporary price distortions. Due to the possibility of
price distortion in the futures markets and because of the imperfect correlation
between movements in futures contracts and movements in the securities
underlying them, a correct forecast of general market trends by the Adviser may
still not result in a successful hedging transaction judged over a very short
time frame.

There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although the Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract

B-16
<PAGE> 48

or at any particular time. In the event of such illiquidity, it might not be
possible to close a futures position and, in the event of adverse price
movement, the Fund would continue to be required to make daily payments of
variation margin. Since the securities being hedged would not be sold until the
related futures contract is sold, an increase, if any, in the price of the
securities may to some extent offset losses on the related futures contract. In
such event, the Fund would lose the benefit of the appreciation in value of the
securities.

Successful use of futures is also subject to the Adviser's ability to
correctly predict the direction of movements in the market. For example, if the
Fund hedges against a decline in the market, and market prices instead advance,
the Fund will lose part or all of the benefit of the increase in value of its
securities holdings because it will have offsetting losses in futures contracts.
In such cases, if the Fund has insufficient cash, it may have to sell portfolio
securities at a time when it is disadvantageous to do so in order to meet the
daily variation margin.

Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, the Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. However, there is no guarantee that the
price of the securities being hedged will, in fact, correlate with the price
movements in a futures contract and thus provide an offset to losses on the
futures contract.

The Fund will not enter into futures contracts or option transactions
(except for closing transactions) other than for bona fide hedging purposes if
immediately thereafter, the sum of its initial margin and premiums on open
futures contracts and options exceeds 5% of the fair market value of the Fund's
assets; however, in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. In order to prevent leverage in connection with the purchase of
futures contracts by the Fund, an amount of cash or liquid securities equal to
the market value of the obligation under the futures contracts (less any related
margin deposits) will be maintained in a segregated account with the custodian.

OPTIONS ON FUTURES CONTRACTS

The Fund could also purchase and write options on futures contracts. 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 (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option period. As a writer of an option on
a futures contract, the Fund would be subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net

B-17
<PAGE> 49

option premiums received by the Fund are required to be included as initial
margin deposits. When an option on a futures contract is exercised, delivery of
the futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purpose as the sale of, a futures contract. The purchase of call
options on futures contracts would be intended to serve the same purpose as the
actual purchase of the futures contract.

In addition to the risks described above which apply to all options
transactions, there are several special risks relating to options on futures.
The Adviser will not purchase options on futures on any exchange unless in the
Adviser's opinion, a liquid secondary exchange market for such options exists.
Compared to the use of futures, the purchase of options on futures involves less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). However, there may be
circumstances, such as when there is no movement in the price of the underlying
security, when the use of an option on a future would result in a loss to the
Fund when the use of a future would not.

ADDITIONAL RISKS RELATING OF OPTIONS, FUTURES AND OPTIONS ON FUTURES
TRANSACTIONS

Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges, or are held or written
on one or more accounts, or through one or more brokers). Option positions of
all investment companies advised by the Adviser are combined for purposes of
these limits. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in listed options, futures or related options, the Fund could
experience delays or losses in liquidating open positions purchased or incur a
loss of all or part of its margin deposits with the broker. Transactions are
entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental restrictions which may not
be changed without approval by the vote of a majority of its outstanding voting
securities, which is defined by the 1940 Act as the lesser of (i) 67% or more of
the voting securities present at the meeting, if the holders of more than 50% of
the outstanding voting securities are present or represented by proxy; or (ii)
more than 50% of the outstanding voting securities. The percentage limitations
contained in the restrictions and policies set forth

B-18
<PAGE> 50

herein apply at the time of purchase of Securities. These restrictions provide
that the Fund shall not:

1. Invest in securities issued by other investment companies except as
part of a merger, reorganization or other acquisition and 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.

2. Make any investment in real estate, commodities or commodities
contracts, except that the Fund may purchase or sell securities which
are secured by real estate, and engage in transactions in interest rate
futures contracts and related options as described under Investment
Restriction Number 13 below.

3. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities
of issuers, all of which conduct their principal business activities in
the same industry. This restriction does not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

4. Make loans of money or securities, except that the Fund may invest (a)
by investment in repurchase agreements in accordance with applicable
requirements set forth in the Fund's Prospectus or herein or (b) by
lending its portfolio securities in amounts not to exceed 10% of the
Fund's total assets, provided that such loans are secured by cash
collateral that is at least equal to the market value. The Fund will
not invest in repurchase agreements maturing in more than seven days
(unless subject to a demand feature) if any such investment, together
with any illiquid securities (including securities which are subject to
legal or contractual restrictions on resale and which are not readily
marketable) held by the Fund, exceeds 10% of the market or other fair
value of its total net assets.

5. Make short sales of securities, unless at the time of the sale the Fund
owns an equal amount of such securities. Notwithstanding the foregoing,
the Fund may make short sales by entering into forward commitments for
hedging or cross-hedging purposes and engage in transactions in
options, futures contracts and related options.

6. Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities. The deposit or payment by the Fund of initial
or maintenance margin in connection with options, interest rate futures
contracts or related options transactions is not considered the
purchase of a security on margin.

7. Invest in warrants or rights except where acquired in units or attached
to other securities. This restriction does not apply to options,
futures contracts or related options.

8. Invest in securities of any company if any officer or director of the
Fund or of the Adviser owns more than 1/2 of 1% of the outstanding
securities of such company,

B-19
<PAGE> 51

and such officers and directors own in the aggregate more than 5% of
the outstanding securities of such issuer.

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

10. Invest more than 5% of its assets in the securities of any one issuer
(except the U.S. Government, its agencies and instrumentalities) or
purchase more than 10% of the outstanding voting securities of any one
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 provisions of the 1940 Act.

11. Borrow in excess of 5% of the market or other fair value of its total
assets; or pledge its assets to an extent greater than 5% of the market
or other fair value of its total assets. Any such borrowings shall be
from banks and shall be undertaken only as a temporary measure for
extraordinary or emergency purposes. Margin deposits or payments in
connection with the writing of covered call or secured put options, or
in connection with the purchase or sale of futures contracts and
related options, are not deemed to be a pledge or other encumbrance.

12. Purchase a restricted security or a security for which market
quotations are not readily available if as a result of such purchase
more than 5% of the Fund's assets would be invested in such securities.
Restricted securities are securities which must be registered under the
Securities Act of 1933 before they may be offered or sold to the
public. Excluded from this limitation are securities purchased by the
Fund 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. Write, purchase or sell puts, calls or combinations thereof, except
that the Fund may (a) write covered or fully collateralized call
options, write secured put options, and enter into closing or
offsetting purchase transactions with respect to such options, (b)
purchase and sell options to the extent that the premiums paid for all
such options owned at any time do not exceed 10% of its total assets
and (c) engage in transactions in interest rate futures contracts and
related options provided that such transactions are entered into for
bona fide hedging purposes (or that the underlying commodity value of
the Fund's long positions do not exceed the sum of certain identified
liquid investments as specified in CFTC regulations), provided further
that the aggregate initial margin and premiums do not exceed 5% of the
fair market value of the Fund's total assets, and provided further that
the Fund may not purchase futures contracts or related options if more
than 30% of the Fund's total assets would be so invested.

14. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making
and collateralizing any permitted borrowings, (ii) making any permitted
loans of its portfolio securities, or (iii) entering into repurchase
agreements, utilizing options, futures contracts, options on futures
contracts, forward commitments and other investment strategies

B-20
<PAGE> 52

and instruments that would be considered "senior securities" but for
the maintenance by the Fund of a segregated account with its custodian
or some other form of "cover."

15. Underwrite securities of other companies, except insofar as the Fund
might be deemed to be an underwriter for purposes of the Securities Act
of 1933 in the resale of any securities owned by the Fund.

B-21
<PAGE> 53

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 Corp., 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 American Capital Exchange Fund).

TRUSTEES

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Co-founder, and prior to
1632 Morning Mountain Road August 1996, Chairman, Chief Executive
Raleigh, NC 27614 Officer and President, MDT Corporation (now
Date of Birth: 07/14/32 known as Getinge/Castle, Inc., a subsidiary
of Getinge Industrier AB), a company which
develops, manufactures, markets and services
medical and scientific equipment.
Trustee/Director of each of the funds in the
Fund Complex.
Richard M. DeMartini*..................... President and Chief Operating Officer,
Two World Trade Center Individual Asset Management Group, a division
66th Floor of Morgan Stanley Dean Witter & Co. Mr.
New York, NY 10048 DeMartini is a Director of the Morgan Stanley
Date of Birth: 10/12/52 Dean Witter Funds, Morgan Stanley Dean Witter
Distributors, Inc. and Dean Witter Trust
Company. Trustee of the TCW/DW Funds.
Director of the National Healthcare
Resources, Inc. Formerly Vice Chairman of the
Board of the National Association of
Securities Dealers, Inc. and Chairman of the
Board of the Nasdaq Stock Market, Inc.
Trustee/Director of each of the funds in the
Fund Complex.
</TABLE>

B-22
<PAGE> 54

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Prior to 1997,
233 South Wacker Drive Partner, Ray & Berndtson, Inc., an executive
Suite 7000 recruiting and management consulting firm.
Chicago, IL 60606 Formerly, Executive Vice President of ABN
Date of Birth: 06/03/48 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, The
International House Board and the Women's
Board of the University of Chicago.
Trustee/Director of each of the funds in the
Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund
11 DuPont Circle, N.W. of the United States. Formerly, advisor to
Washington, D.C. 20036 the Dennis Trading Group Inc. Prior to 1992,
Date of Birth: 02/29/52 President and Chief Executive Officer,
Director and Member of the Investment
Committee of the Joyce Foundation, a private
foundation. Trustee/Director of each of the
funds in the Fund Complex.
Jack E. Nelson............................ President, Nelson Investment Planning
423 Country Club Drive Services, Inc., a financial planning company
Winter Park, FL 32789 and registered investment adviser. President,
Date of Birth: 02/13/36 Nelson Ivest Brokerage Services Inc., a
member of the National Association of
Securities Dealers, Inc. ("NASD") and
Securities Investors Protection Corp.
("SIPC"). Trustee/Director of each of the
funds in the Fund Complex.
Don G. Powell*............................ Chairman and a Director of Van Kampen
2800 Post Oak Blvd. Investments, the Advisers, the Distributor
Houston, TX 77056 and Investor Services. Director or officer of
Date of Birth: 10/19/39 certain other subsidiaries of Van Kampen
Investments. Chairman of River View
International Inc. Chairman of the Board of
Governors and the Executive Committee of the
Investment Company Institute. Prior to July
of 1998, Director and Chairman of VK/AC
Holding, Inc. Prior to November 1996,
President, Chief Executive Officer and a
Director of VK/AC Holding, Inc.
Trustee/Director of each of the funds in the
Fund Complex and Trustee of other funds
advised by the Advisers or Van Kampen
Management Inc.
</TABLE>

B-23
<PAGE> 55

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Phillip B. Rooney......................... Vice Chairman and Director of The
One ServiceMaster Way ServiceMaster Company, a business and
Downers Grove, IL 60515 consumer services company. Director of
Date of Birth: 07/08/44 Illinois Tool Works, Inc., a manufacturing
company; the Urban Shopping Centers Inc., a
retail mall management company; and Stone
Container Corp., a paper manufacturing
company. Trustee, University of Notre Dame.
Formerly, President and Chief Executive
Officer, Waste Management, Inc., an
environmental services company, and prior to
that President and Chief Operating Officer,
Waste Management, Inc. Trustee/Director of
each of the funds in the Fund Complex.

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

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

Paul G. Yovovich.......................... Private investor. Prior to April 1996,
Sears Tower President of Advance Ross Corporation.
233 South Wacker Drive Director of 3Com Corporation, APAC
Suite 9700 Teleservices, Inc., COMARCO, Inc., Applied
Chicago, IL 60606 Language Technologies, Focal Communications,
Date of Birth: 10/29/53 and Lante Corporation. Limited Partner of
Evercore Partners, LLP. Trustee/Director of
each of the Funds in the Fund Complex.
</TABLE>

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

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

B-24
<PAGE> 56

OFFICERS

Messrs. McDonnell, Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin,
Wetherell and Hill are located at 1 Parkview Plaza, Oakbrook Terrace, IL
60181-5555. The Fund's other officers are located at 2800 Post Oak Blvd.,
Houston, TX 77056.

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Dennis J. McDonnell.................. Executive Vice President and a Director of Van
Date of Birth: 05/20/42 Kampen Investments. President, Chief Operating
President Officer and a Director of the Advisers, Van
Kampen Advisors Inc., and Van Kampen Management
Inc. Prior to July of 1998, Director and
Executive Vice President of VK/AC Holding, Inc.
Prior to April of 1998, President and a Director
of Van Kampen Merritt Equity Advisors Corp. Prior
to April of 1997, Mr. McDonnell was a Director of
Van Kampen Merritt Equity Holdings Corp. Prior to
September of 1996, Mr. McDonnell was Chief
Executive Officer and Director of MCM Group,
Inc., McCarthy, Crisanti & Maffei, Inc. and
Chairman and Director of MCM Asia Pacific
Company, Limited and MCM (Europe) Limited. Prior
to July of 1996, Mr. McDonnell was President,
Chief Operating Officer and Trustee of VSM Inc.
and VCJ Inc. President of each of the funds in
the Fund Complex. President, Chairman of the
Board and Trustee/Managing General Partner of
other investment companies advised by the
Advisers or their affiliates.

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

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

B-25
<PAGE> 57

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Ronald A. Nyberg..................... Executive Vice President, General Counsel,
Date of Birth: 07/29/53 Secretary and Director of Van Kampen Investments.
Vice President and Secretary Mr. Nyberg is Executive Vice President, General
Counsel, Assistant Secretary and a Director of
the Advisers and the Distributor, Van Kampen
Advisors Inc., Van Kampen Management Inc., Van
Kampen Exchange Corp., American Capital
Contractual Services, Inc. and Van Kampen Trust
Company. Executive Vice President, General
Counsel and Assistant Secretary of Investor
Services and River View International Inc.
Director or officer of certain other subsidiaries
of Van Kampen. Director of ICI Mutual Insurance
Co., a provider of insurance to members of the
Investment Company Institute. Prior to July of
1998, Director and Executive Vice President,
General Counsel and Secretary of VK/AC Holding,
Inc. Prior to April of 1998, Executive Vice
President, General Counsel and Director of Van
Kampen Merritt Equity Advisors Corp. Prior to
April of 1997, he was Executive Vice President,
General Counsel and a Director of Van Kampen
Merritt Equity Holdings Corp. Prior to September
of 1996, he was General Counsel of McCarthy,
Crisanti & Maffei, Inc. Prior to July of 1996,
Mr. Nyberg was Executive Vice President and
General Counsel of VSM Inc. and Executive Vice
President and General Counsel of VCJ Inc. Vice
President and Secretary of each of the funds in
the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.

Paul R. Wolkenberg................... Executive Vice President and Director of Van
Date of Birth: 11/10/44 Kampen Investments. Executive Vice President of
Vice President Asset Management and the Distributor. President
and a Director of Investor Services. President
and Chief Operating Officer of Van Kampen
Recordkeeping Services Inc. Prior to July of
1998, Director and Executive Vice President of
VK/AC Holding, Inc. Vice President of each of the
funds in the Fund Complex and certain other
investment companies advised by the Advisers or
their affiliates.

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

B-26
<PAGE> 58

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
John L. Sullivan..................... First Vice President of Van Kampen Investments
Date of Birth: 08/20/55 and the Advisers. Treasurer, Vice President and
Treasurer, Vice President and Chief Chief Financial Officer of each of the funds in
Financial Officer the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.

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

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

Huey P. Falgout, Jr.................. Vice President, Assistant Secretary and Senior
Date of Birth: 11/15/63 Attorney of Van Kampen Investments. Vice
Assistant Secretary President, Assistant Secretary and Senior
Attorney of the Advisers, the Distributor,
Investor Services, Van Kampen Management Inc.,
American Capital Contractual Services, Inc., Van
Kampen Exchange Corp. and Van Kampen Advisors
Inc. Assistant Secretary of each of the funds in
the Fund Complex and other investment companies
advised by the Advisers or their affiliates.
</TABLE>

B-27
<PAGE> 59

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Scott E. Martin...................... Senior Vice President, Deputy General Counsel and
Date of Birth: 08/20/56 Assistant Secretary of Van Kampen Investments.
Assistant Secretary Senior Vice President, Deputy General Counsel and
Secretary of the Advisers, the Distributor,
Investor Services, American Capital Contractual
Services, Inc., Van Kampen Management Inc., Van
Kampen Exchange Corp., Van Kampen Advisors Inc.,
Van Kampen Insurance Agency of Illinois Inc., Van
Kampen System Inc. and Van Kampen Recordkeeping
Services Inc. Prior to July of 1998, Senior Vice
President, Deputy General Counsel and Assistant
Secretary of VK/AC Holding, Inc. Prior to April
of 1998, Van Kampen Merritt Equity Advisors Corp.
Prior to April of 1997, Senior Vice President,
Deputy General Counsel and Secretary of Van
Kampen American Capital Services, Inc. and Van
Kampen Merritt Holdings Corp. Prior to September
of 1996, Mr. Martin was Deputy General Counsel
and Secretary of McCarthy, Crisanti & Maffei,
Inc., and prior to July of 1996, he was Senior
Vice President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc. Assistant
Secretary of each of the funds in the Fund
Complex and other investment companies advised by
the Advisers or their affiliates.

Weston B. Wetherell.................. Vice President, Associate General Counsel and
Date of Birth: 06/15/56 Assistant Secretary of Van Kampen Investments,
Assistant Secretary the Advisers, the Distributor, Van Kampen
Management Inc. and Van Kampen Advisors Inc.
Prior to September of 1996, Mr. Wetherell was
Assistant Secretary of McCarthy, Crisanti &
Maffei, Inc. Assistant Secretary of each of the
funds in the Fund Complex and other investment
companies advised by the Advisers or their
affiliates.

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

Michael Robert Sullivan.............. Assistant Vice President of the Advisers.
Date of Birth: 03/30/33 Assistant Controller of each of the funds in the
Assistant Controller Fund Complex and other investment companies
advised by the Advisers or their affiliates.
</TABLE>

Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 64 operating funds in the Fund Complex. For purposes of the following
compensation and benefits discussion, the Fund Complex is divided into the
following three groups: the funds

B-28
<PAGE> 60

advised by Asset Management (the "AC Funds"), the funds advised by Advisory
Corp. excluding funds organized as series of the Van Kampen Series Fund, Inc.
(the "VK Funds") and the funds advised by Advisory Corp. organized as series of
the Van Kampen Series Fund, Inc. (the "MS Funds"). Each trustee/director who is
not an affiliated person of VK, the Advisers or the Distributor (each a
"Non-Affiliated Trustee") is compensated by an annual retainer and meeting fees
for services to the funds in the Fund Complex. Each fund in the Fund Complex
(except the money market series of the MS Funds) provides a deferred
compensation plan to its Non-Affiliated Trustees that allows trustees/directors
to defer receipt of their compensation and earn a return on such deferred
amounts. Deferring compensation has the economic effect as if the Non-Affiliated
Trustee reinvested his or her compensation into the funds. Each fund in the Fund
Complex (except the money market series of the MS Funds) 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 trustees recently reviewed and adopted a standardized compensation and
benefits program for each fund in the Fund Complex. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes an annual retainer in
an amount equal to $50,000 per calendar year, due in four quarterly installments
on the first business day of each quarter. Payment of the annual retainer is
allocated among the funds in the Fund Complex (except the money market series of
the MS Funds) on the basis of the relative net assets of each fund as of the
last business day of the preceding calendar quarter. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes a per meeting fee from
each fund in the Fund Complex (except the money market series of the MS Funds)
in the amount of $200 per quarterly or special meeting attended by the Non-
Affiliated Trustee, due on the date of the meeting, plus reasonable expenses
incurred by the Non-Affiliated Trustee in connection with his or her services as
a trustee, provided that no compensation will be paid in connection with certain
telephonic special meetings.

For each AC Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from the AC
Funds includes an annual retainer in an amount equal to $35,000 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. The AC Funds pay each Non-Affiliated Trustee a per meeting fee
in the amount of $2,000 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Payment of the annual retainer and the regular meeting
fee is allocated among the AC Funds (i) 50% on the basis of the relative net
assets of each AC Fund to the aggregate net assets of all the AC Funds and (ii)
50% equally to each AC Fund, in each case as of the last business day of the
preceding calendar quarter. Each AC Fund which is the subject of a special
meeting of the trustees generally pays each Non-Affiliated Trustee a per meeting
fee in the amount of $125 per special meeting attended by the Non-Affiliated
Trustee, due on the date of such 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.

B-29
<PAGE> 61

For each VK Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from each VK
Fund includes an annual retainer in an amount equal to $2,500 per calendar year,
due in four quarterly installments on the first business day of each calendar
quarter. Each Non-Affiliated Trustee receives a per meeting fee from each VK
Fund in the amount of $125 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Each Non-Affiliated Trustee receives a per meeting fee
from each VK Fund in the amount of $125 per special meeting attended by the Non-
Affiliated Trustee, due on the date of such 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.

For the period from July 2, 1997 up to and including December 31, 1997, the
compensation of each Non-Affiliated Trustee from the MS Funds was based
generally on the compensation amounts and methodology used by such funds prior
to their joining the current Fund Complex on July 2, 1997. Each trustee/director
was elected as a director of the MS Funds on July 2, 1997. Prior to July 2,
1997, the MS Funds were part of another fund complex (the "Prior Complex") and
the former directors of the MS Funds were paid an aggregate fee allocated among
the funds in the Prior Complex that resulted in individual directors receiving
total compensation between approximately $8,000 to $10,000 from the MS Funds
during such funds' last fiscal year.

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-30
<PAGE> 62

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

COMPENSATION TABLE

<TABLE>
<CAPTION>
Fund Complex
-------------------------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Aggregate Retirement Annual Compensation
Year First Compensation Benefits Benefits from before
Appointed or before Accrued as the Fund Deferral from
Elected to Deferral from Part of Upon Fund
Name(1) the Board the Fund(2) Expenses(3) Retirement(4) Complex(5)
------- ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan* 1991 $ $30,328 $60,000 $111,197
Linda Hutton Heagy* 1995 3,141 60,000 111,197
R. Craig Kennedy* 1995 2,229 60,000 111,197
Jack E. Nelson* 1995 15,820 60,000 104,322
Jerome L. Robinson 1995 32,020 15,750 107,947
Phillip B. Rooney* 1997 0 60,000 74,697
Dr. Fernando Sisto* 1978 60,208 60,000 111,197
Wayne W. Whalen* 1995 10,788 60,000 111,197
</TABLE>

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

* Currently a member of the Board of Trustees.

(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the Fund's
most recently completed fiscal year. Mr. Robinson retired from the Board of
Trustees on December 31, 1997. Mr. Yovovich became a member of the Board of
Trustees effective October 22, 1998 and thus does not have any historical
information to report. Trustees not eligible for compensation are not
included in the compensation table.

(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal period ended September 30, 1998.
The following trustees deferred compensation from the Fund during the fiscal
period ended September 30, 1998: Mr. Branagan, ; Ms. Heagy, ;
Mr. Kennedy, ; Mr. Nelson, ; Mr. Robinson, ; Mr.
Rooney, ; Dr. Sisto, ; and Mr. Whalen, . 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 September 30, 1998 is as follows: Mr. Branagan, ; Dr.
Caruso, ; Mr. Gaughan, ; Ms. Heagy, ; Mr. Kennedy,
; Mr. Miller, ; Mr. Nelson, ; Mr. Rees, ; Mr.
Robinson, ; Mr. Rooney, ; Dr. Sisto, ; Mr. Vernon,

B-31
<PAGE> 63

; and Mr. Whalen, . The deferred compensation plan is described
above the Compensation Table.

(3) The amounts shown in this column represent the sum of the retirement
benefits expected to be accrued by the operating investment companies in the
Fund Complex for each of the current trustees for the Funds' respective
fiscal years ended in 1997. The retirement plan is described above the
Compensation Table.

(4) For Mr. Robinson, this is the sum of the actual annual benefits payable by
the operating investment companies in the Fund Complex as of the date of his
retirement for each year of the 10-year period since his retirement. For the
remaining trustees, this is the sum of the estimated maximum annual benefits
payable by the operating investment companies in the Fund Complex for each
year of the 10-year period commencing in the year of such trustee's
anticipated retirement. The Retirement Plan is described above the
Compensation Table.

(5) The amounts shown in this column represent the aggregate compensation paid
by all operating investment companies in the Fund Complex as of December 31,
1997 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, 1997. 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
$268,447 during the calendar year ended December 31, 1997.

As of December , 1998, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.

INVESTMENT ADVISORY AGREEMENT

The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate and
implement the Fund's investment objectives. The Adviser also furnishes the
services of the Fund's President and such other executive and clerical personnel
as are necessary to prepare the various reports and statements and conduct the
Fund's day-to-day operations. The Fund, however, bears the cost of its
accounting services, which include maintaining its financial books and records
and calculating its daily net asset value. The costs of such accounting services
include the

B-32
<PAGE> 64

salaries and overhead expenses of the Fund's Treasurer and the personnel
operating under his direction. Charges are allocated among the investment
companies advised or subadvised by the Adviser or its affiliates. A portion of
these amounts is paid to the Adviser or its affiliates in reimbursement of
personnel, office space, facilities and equipment costs attributable to the
provision of accounting services to the Fund. The Fund also pays distribution
fees, service fees, custodian fees, legal and auditing fees, the costs of
reports to shareholders, and all other ordinary business expenses not
specifically assumed by the Adviser. The Advisory Agreement also provides that
the Adviser shall not be liable to the Fund for any actions or omissions if it
acted without willful misfeasance, bad faith, negligence or reckless disregard
of its obligations.

Under the Advisory Agreement, the Fund pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a
monthly fee payable computed based upon the annual rate applied to average daily
net assets of the Fund as follows: 0.540% on the first $1 billion of average
daily net assets; 0.515% on the next $1 billion of average daily net assets;
0.490% on the next $1 billion of average daily net assets; 0.440% on the next $1
billion of average daily net assets; 0.390% on the next $1 billion of average
daily net assets; 0.340% on the next $1 billion of average daily net assets;
0.290% on the next $1 billion of average daily net assets; and 0.240% on the
average daily net assets over $7 billion.

The Fund's average net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month. The fee payable to the Adviser is reduced by any commissions, tender
solicitation and other fees, brokerage or similar payments received by the
Adviser or any other direct or indirect majority owned subsidiary of Van Kampen
Investments Inc. in connection with the purchase and sale of portfolio
investments less any direct expenses incurred by such subsidiary of Van Kampen
Investments Inc., in connection with obtaining such commissions, fees, brokerage
or similar payments. The Adviser agrees to use its best efforts to recapture
tender solicitation fees and exchange offer fees for the Fund's benefit and to
advise the Trustees of the Fund of any other commissions, fees, brokerage or
similar payments which may be possible for the Adviser or any other direct or
indirect majority owned subsidiary of Van Kampen Investments Inc. to receive in
connection with the Fund's portfolio transactions or other arrangements which
may benefit the Fund.

The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed the most restrictive
expense limitation applicable in the states where the Fund's shares are
qualified for sale, the compensation due the Adviser will be reduced by the
amount of such excess and that, if a reduction in and refund of the advisory fee
is insufficient, the Adviser will pay the Fund monthly an amount sufficient to
make up the deficiency, subject to readjustment during the year. Ordinary
business expenses include the investment advisory fee and other operating costs
paid by the Fund except (1) interest and taxes, (2) brokerage commissions, (3)
certain litigation and indemnification expenses as described in the Advisory
Agreement and (4) payments made by the Fund pursuant to the distribution plans.

The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Trustees or (ii) by vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the Trustees

B-33
<PAGE> 65

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 period ended September 30, 1998 and the fiscal years
ended December 31, 1997 and 1996, the Adviser received $[ ], $11,754,020
and $13,463,409, respectively, in advisory fees from the Fund. For such periods
the Fund paid $[ ], $292,509 and $404,459, respectively, for accounting
services.

DISTRIBUTION AND SERVICE

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

<TABLE>
<CAPTION>
Dealer
Reallowances
Received by
Total Amounts Advantage
Underwriting Retained by Capital
Commissions Distributor Corporation
------------ ----------- ------------
<S> <C> <C> <C>
Fiscal Period Ended September 30, 1998.... $ $ $
Fiscal Year Ended December 31, 1997....... $ 747,490 $ 72,969 $ 0
Fiscal Year Ended December 31, 1996....... $1,028,110 $105,404 $ 0
</TABLE>

B-34
<PAGE> 66

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

CLASS A SHARES SALES CHARGE TABLE

<TABLE>
<CAPTION>
Total Sales Charge
------------------------- Reallowed
As % of As % of Net To Dealers
Size of Offering Amount As a % of
Investment Price Invested Offering Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000.......................... 4.75% 4.99% 4.25%
$100,000 but less than $250,000............. 3.75% 3.90% 3.25%
$250,000 but less than $500,000............. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........... 2.00% 2.04% 1.75%
$1,000,000 or more*......................... * * *
- ------------------------------------------------------------------------------------------------
</TABLE>

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

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

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

In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any authorized dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the authorized dealer at the public offering price during such programs.
Other programs provide, among other things and subject to certain conditions,
for certain favorable distribution arrangements for shares of the Fund. Also,
the Distributor in its discretion may from time to time, pursuant to objective
criteria established by the

B-35
<PAGE> 67

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

Banks are currently prohibited under the Glass-Steagall Act from providing
certain underwriting or distribution services. If banking firms were prohibited
from acting in any capacity or providing any of the described services, the
Distributor would consider what action, if any, would be appropriate. The
Distributor does not believe that termination of a relationship with a bank
would result in any material adverse consequences to the Fund. State securities
laws regarding registration of banks and other financial institutions may differ
from the interpretations of federal law expressed herein, and banks and other
financial institutions may be required to register as dealers pursuant to
certain state laws.

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

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

B-36
<PAGE> 68

Trustees. The Plans provide that they will continue in full force and effect
from year to year so long as such continuance is specifically approved by a vote
of the Trustees, and also by a vote of the disinterested Trustees, cast in
person at a meeting called for the purpose of voting on the Plans. Each of the
Plans may not be amended to increase materially the amount to be spent for the
services described therein with respect to any class of shares without approval
by a vote of a majority of the outstanding voting shares of such class, and all
material amendments to either of the Plans must be approved by the Trustees and
also by the disinterested Trustees. Each of the Plans may be terminated with
respect to any class of shares at any time by a vote of a majority of the
disinterested Trustees or by a vote of a majority of the outstanding voting
shares of such class.

The Plans generally provide for the Fund to reimburse the lesser of (i) the
distribution and service fees at the rates specified in the prospectus or (ii)
the amount of the Distributor's actual expenses incurred less any deferred sales
charges it received. For Class A Shares, to the extent the Distributor is not
fully reimbursed in a given year, there is no carryover of such unreimbursed
amounts to succeeding years. For each of the Class B Shares and Class C Shares,
to the extent the Distributor is not fully reimbursed in a given year, any
unreimbursed expenses for such class will be carried forward and paid by the
Fund in future years so long as such Plans are in effect. Except as mandated by
applicable law, the Fund does not impose any limit with respect to the number of
years into the future that such unreimbursed expenses may be carried forward (on
a Fund level basis). Because such expenses are accounted on a Fund level basis,
in periods of extreme net asset value fluctuation such amounts with respect to a
particular Class B Share of Class C Share may be greater or less than the amount
of the initial commission (including carrying cost) paid by the Distributor with
respect to such share. In such circumstances, a shareholder of a share may be
deemed to incur expenses attributable to other shareholders of such class. As of
September 30, 1998, there were $ and $ of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing % and % of the Fund's net assets
attributable to Class B Shares and Class C Shares, respectively. If the Plan
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 deferred sales charge.

For the fiscal period ended September 30, 1998, the Fund's aggregate
expenses under the Plans for Class A Shares were $[ ] or [ ]%
of the Class A Shares' average daily net assets. Such expenses were paid to
reimburse the Distributor for payments made to financial intermediaries for
servicing Fund shareholders and for administering the Plans. For the fiscal
period ended September 30, 1998, the Fund's aggregate expenses under the Class B
Plan were $[ ] or [ ]% of the Class B Shares' average net
assets. Such expenses were paid to reimburse the Distributor for the following
payments: $[ ] for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class B Shares of the Fund and
$[ ] for fees paid to financial intermediaries for servicing Class B
shareholders and administering the Plans. For the fiscal period ended September
30, 1998, the Fund's aggregate expenses under the Plans for Class C Shares were
$[ ] or [ ]% of the Class C Shares' average net assets. Such
expenses were paid to reimburse the Distributor for the following payments;
$[ ] for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class C Shares of the Fund and

B-37
<PAGE> 69

$[ ] for fees paid to financial intermediaries for servicing Class C
shareholders and administering the Class C Plan.

TRANSFER AGENT

The Fund's transfer agent is Van Kampen Investor Services Inc., P.O. Box
418256, Kansas City, MO 64141-9256. During the fiscal period ended September 30,
1998 and the fiscal years ended December 31, 1997 and 1996, Investor Services,
shareholder service agent and dividend disbursing agent for the Fund, received
fees aggregating $[ ], $3,027,304 and $4,246,528, respectively for
these services. Prior to 1998, these services were provided at cost plus a
profit. Beginning in 1998, the transfer agency prices are determined through
negotiations with the Fund's Board of Trustees and are based on competitive
benchmarks.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

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

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

The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker/dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and

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other research information is only supplementary to the research efforts of the
Adviser to the Fund and still must be analyzed and reviewed by its staff, the
receipt of research information is not expected to reduce its expenses
materially. The investment advisory fee is not reduced as a result of the
Adviser's receipt of such research services. Services provided may include (a)
furnishing advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; (b) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and (c) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement and custody). Research services furnished by firms through
which the Fund effects its securities transactions may be used by the Adviser in
servicing all of its advisory accounts; not all of such services may be used by
the Adviser in connection with the Fund.

The Adviser also may place portfolio transactions, to the extent permitted
by law, with brokerage firms affiliated with the Fund, the Adviser or the
Distributor and with brokerage firms participating in the distribution of the
Fund's shares if it reasonably believes that the quality of execution and the
commission are comparable to that available from other qualified firms.
Similarly, to the extent permitted by law and subject to the same considerations
on quality of execution and comparable commission rates, the Adviser may direct
an executing broker to pay a portion or all of any commissions, concessions or
discounts to a firm supplying research or other services or to a firm
participating in the distribution of the Fund's shares.

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

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

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

Commissions Paid:

<TABLE>
<CAPTION>
Affiliated Brokers
------------------
Morgan Dean
Brokers Stanley Witter
------- ------- ------
<S> <C> <C> <C>
Commissions paid:
Fiscal period ended September 30, 1998.................
Fiscal year ended December 31, 1997.................... $1,180,447 $0 $0
Fiscal year ended December 31, 1996.................... $1,490,426 $0 $0
Fiscal period 1998 Percentages:
Commissions with affiliate to total commissions......
Value of brokerage transactions with affiliate to
total transactions................................
</TABLE>

SHARE PURCHASE PROGRAMS

The following information supplements the section in the Fund's Prospectus
captioned "Purchase of Shares."

QUANTITY DISCOUNTS

Investors purchasing Class A Shares may, under certain circumstances, be
entitled to pay reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are described herein.

Investors, or their authorized dealers, must notify the Fund at the time of
the purchase order whenever a quantity discount is applicable to purchases. Upon
such notification, an investor will receive the lowest applicable sales charge.
Quantity discounts may be modified or terminated at any time. For more
information about quantity discounts, investors should contact their authorized
dealer or the Distributor.

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

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

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

Cumulative Purchase Discount. The size of investment shown in the Class A
Shares sales charge table may also be determined by combining the amount being
invested in

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shares of the Participating Funds plus the current offering price of all shares
of the Participating Funds which have been previously purchased and are still
owned.

Letter of Intent. A Letter of Intent provides an opportunity for an
investor to obtain a reduced sales charge by aggregating the investments over a
13-month period to determine the sales charge as outlined in the Class A Shares
sales charge table. The size of investment shown in the Class A Shares sales
charge table also includes purchases of shares of the Participating Funds over a
13-month period based on the total amount of intended purchases plus the value
of all shares of the Participating Funds previously purchased and still owned.
An investor may elect to compute the 13-month period starting up to 90 days
before the date of execution of a Letter of Intent. Each investment made during
the period receives the reduced sales charge applicable to the total amount of
the investment goal. The initial purchase must be for an amount equal to at
least 5% of the minimum total purchase amount of the level selected. If trades
not initially made under a Letter of Intent subsequently qualify for a lower
sales charge through the 90-day back-dating provisions, an adjustment will be
made at the expiration of the Letter of Intent to give effect to the lower
charge. Such adjustment in sales charge will be used to purchase additional
shares for the shareholder at the applicable discount category. The Fund
initially will escrow shares totaling 5% of the dollar amount of the Letter of
Intent to be held by Investor Services in the name of the shareholder. In the
event the Letter of Intent goal is not achieved within the period, the investor
must pay the difference between the sales charge applicable to the purchases
made and the 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 initial sales
charges in connection with unit investment trust reinvestment programs 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 Programs. 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 and with no minimum initial or subsequent
investment requirement, if the administrator of an investor's unit investment
trust program meets certain uniform criteria relating to cost savings by the
Fund and the Distributor. The total sales charge for all other investments made
from unit trust distributions will be 1.00% of the offering price (1.01% of net
asset value). Of this amount, the Distributor will pay to the authorized dealer,
if any, through which such participation in the qualifying program was initiated
0.50% of the offering price as a dealer concession or agency commission. Persons
desiring more information with respect to this program, including the applicable
terms and conditions thereof, 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 participating

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<PAGE> 73

investor in a computerized format fully compatible with Investor Services'
processing system.

As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.

NAV 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 Asset
Management or Advisory Corp. and such persons' families and their
beneficial accounts.

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

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

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

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

(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

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Section 403(b) of the Code and sponsored by non-profit organizations
defined under Section 501(c)(3) of the Code and assets held by an
employer or trustee in connection with an eligible deferred
compensation plan under Section 457 of the Code. Such plans will
qualify for purchases at net asset value provided, for plans initially
establishing accounts with the Distributor in the Participating Funds
after February 1, 1997, that (1) the initial amount invested in the
Participating Funds is at least $500,000 or (2) such shares are
purchased by an employer sponsored plan with more than 100 eligible
employees. Such plans that have been established with a Participating
Fund or have received proposals from the Distributor prior to February
1, 1997 based on net asset value purchase privileges previously in
effect will be qualified to purchase shares of the Participating Funds
at net asset value for accounts established on or before May 1, 1997.
Section 403(b) and similar accounts for which Van Kampen Trust Company
serves as custodian will not be eligible for net asset value purchases
based on the aggregate investment made by the plan or the number of
eligible employees, except under certain uniform criteria established
by the Distributor from time to time. Prior to February 1, 1997, a
commission will be paid to authorized dealers who initiate and are
responsible for such purchases within a rolling twelve-month period as
follows: 1.00% on sales to $5 million, plus 0.50% on the next $5
million, plus 0.25% on the excess over $10 million. For purchases on
February 1, 1997 and thereafter, a commission will be paid as follows:
1.00% on sales to $2 million, plus 0.80% on the next $1 million, plus
0.50% on the next $47 million, plus 0.25% on the excess over $50
million.

(9) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than
six months, (ii) has a purpose other than to acquire shares of the Fund
or similar investments, (iii) has given and continues to give its
endorsement or authorization, on behalf of the group, for purchase of
shares of the Fund and Participating Funds, (iv) has a membership that
the authorized dealer can certify as to the group's members and (v)
satisfies other uniform criteria established by the Distributor for the
purpose of realizing economies of scale in distributing such shares. A
qualified group does not include one whose sole organizational nexus,
for example, is that its participants are credit card holders of the
same institution, policy holders of an insurance company, customers of
a bank or broker-dealer, clients of an investment adviser or other
similar groups. Shares purchased in each group's participants account
in connection with this privilege will be subject to a contingent
deferred sales charge ("CDSC") of 1.00% in the event of redemption
within one year of purchase, and a commission will be paid to
authorized dealers who initiate and are responsible for such sales to
each individual as follows: 1.00% on sales to $2 million, plus 0.80% on
the next $1 million and 0.50% on the excess over $3 million.

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

Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal

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<PAGE> 75

funds for the purchase by the close of business on the next business day
following acceptance of the order. An authorized dealer may charge a transaction
fee for placing an order to purchase shares pursuant to this provision or for
placing a redemption order with respect to such shares. Authorized dealers will
be paid a service fee as described on purchases made as described in (3) through
(9) above. The Fund may terminate, or amend the terms of, offering shares of the
Fund at net asset value to such groups at any time.

SHAREHOLDER SERVICES

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

INVESTMENT ACCOUNT

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

SHARE CERTIFICATES

Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon redemption
thereof. In addition, if such certificates are lost the shareholder must write
to Van Kampen Funds, c/o Investor Services, P.O. Box 418256, Kansas City, MO
64141-9256, requesting an "affidavit of loss" and obtain a Surety Bond in a form
acceptable to Investor Services. On the date the letter is received, Investor
Services will calculate a fee for replacing the lost certificate equal to no
more than 2.00% of the net asset value of the issued shares, and bill the party
to whom the replacement certificate was mailed.

RETIREMENT PLANS

Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations; or other pension or profit
sharing plans. Documents

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<PAGE> 76

and forms containing detailed information regarding these plans are available
from the Distributor. Van Kampen Trust Company serves as custodian under the
IRA, 403(b)(7) and Keogh plans. Details regarding fees, as well as full plan
administration for profit sharing, pension and 401(k) plans, are available from
the Distributor.

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS

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

DIVIDEND DIVERSIFICATION

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

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.

To be eligible for exchange, shares of the Fund must have been registered
in the shareholder's name at least 30 days prior to an exchange. Shares of the
Fund registered in a shareholder's name for less than 30 days may only be
exchanged upon receipt of prior

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<PAGE> 77

approval of the Adviser. Under normal circumstances, it is the policy of the
Adviser not to approve such requests.

When Class B Shares and Class C Shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the
date of the initial purchase of such shares from a Participating Fund. If such
Class B Shares or Class C Shares are redeemed and not exchanged for shares of
another Participating Fund, Class B Shares and Class C Shares are subject to the
CDSC schedule imposed by the Participating Fund from which such shares were
originally purchased.

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

A shareholder wishing to make an exchange may do so by sending a written
request to Investor Services or by contacting the telephone transaction line at
(800) 421-5684. A shareholder automatically has telephone exchange privileges
unless otherwise designated in the application form accompanying the Prospectus.
Van Kampen Investments and its subsidiaries, including Investor Services, and
the Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither Van Kampen Investments, Investor Services nor
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. If the exchanging shareholder does not have an account
in the fund whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gains options (except dividend
diversification) and authorized dealer of record as the account from which
shares are exchanged, unless otherwise specified by the shareholder. In order to
establish a systematic withdrawal plan for the new account or reinvest dividends
from the new account into another fund, however, an exchanging shareholder must
file a specific written request. The Fund reserves the right to reject any order
to acquire its shares through exchange. In addition, the Fund may modify,
restrict or terminate the exchange privilege at any time on 60 days' notice to
its shareholders of any termination or material amendment.

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

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

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<PAGE> 78

next determined on the date of receipt. Exchange requests received on a business
day after the time shares of the funds involved in the request are priced will
be processed on the next business day in the manner described herein.

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

SYSTEMATIC WITHDRAWAL PLAN

Any investor whose shares in a single account total $10,000 or more at the
offering price next computed after receipt of instructions may establish a
monthly, quarterly, semi-annual or annual withdrawal plan. Any investor whose
shares in a single account total $5,000 or more at the offering price next
computed after receipt of instructions may establish a quarterly, semiannual or
annual withdrawal plan. This plan provides for the orderly use of the entire
account, not only the income but also the capital, if necessary. Each withdrawal
constitutes a redemption of shares on which any capital gain or loss will be
recognized. The planholder may arrange for monthly, quarterly, semi-annual or
annual checks in any amount, not less than $25. Such a systematic withdrawal
plan may also be maintained by an investor purchasing shares for a retirement
plan established on a form made available by the Fund. See "Shareholder
Services--Retirement Plans."

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

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

INTERNET TRANSACTIONS

In addition to performing transactions on your account through written
instruction or by telephone, you may also perform certain transactions through
the internet. Please refer to our web site at www.vankampen.com for further
instruction. Van Kampen Investments, Investor Services and the Fund employ
procedures considered by them to be reasonable to confirm that instructions
communicated through the internet are genuine. Such procedures include requiring
use of a personal identification number prior to acting upon internet
instructions and providing written confirmation of instructions communicated
through the internet. If reasonable procedures are employed, neither Van Kampen
Investments, Investor Services nor the Fund will be liable for following
instruction through the internet

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<PAGE> 79

which it reasonably believes to be genuine. If an account has multiple owners,
Investor Services may rely on the instructions of any one owner.

REINSTATEMENT PRIVILEGE

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

REDEMPTION OF SHARES

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

CONTINGENT DEFERRED SALES CHARGE-CLASS A

For purposes of the CDSC-Class A, when shares of one fund are exchanged for
shares of another fund, the purchase date for the shares of the fund exchanged
into will be assumed to be the date on which shares were purchased in the fund
from which the exchange was made. If the exchanged shares themselves are
acquired through an exchange, the purchase date is assumed to carry over from
the date of the original election to purchase shares subject to a CDSC-Class A
rather than a front-end load sales charge. In determining whether a CDSC-Class A
is payable, it is assumed that shares held the longest are the first to be
redeemed.

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

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

REDEMPTION UPON DEATH OR DISABILITY

The Fund will waive the CDSC-Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be

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

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

REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS

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

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

REDEMPTION PURSUANT TO A FUND'S SYSTEMATIC WITHDRAWAL PLAN

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

The amount of the shareholder's investment in a Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to be
systematically redeemed from the Fund without the imposition of a CDSC-Class B
and C may not exceed a maximum of 12%

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<PAGE> 81

annually of the shareholder's initial account balance. The Fund reserves the
right to change the terms and conditions of the Plan and the ability to offer
the Plan.

NO INITIAL COMMISSION OR TRANSACTION FEE

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

INVOLUNTARY REDEMPTIONS OF SHARES

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

REINVESTMENT OF REDEMPTION PROCEEDS

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

REDEMPTION BY ADVISER

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

TAXATION

FEDERAL INCOME TAXATION

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

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

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<PAGE> 82

will not be subject to federal income tax on any net capital gains distributed
to shareholders.

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

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

Some of the Fund's investment practices are subject to special provisions
of the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses 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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<PAGE> 83

DISTRIBUTIONS

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

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

The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Fund distributions
generally will not qualify for the dividends received deduction for
corporations.

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

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

Under Code Section 988, foreign currency gains or losses from certain
forward contracts not traded in the interbank market as well as certain other
gains or losses attributable to currency exchange rate fluctuations are
typically treated as ordinary income or loss. Such income or loss may increase
or decrease (or possibly eliminate) the Fund's income available for
distribution. If, under the rules governing the tax treatment of foreign
currency gains and losses, the Fund's income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital or, in
some circumstances, as capital gain. Generally, a shareholder's tax basis in
Fund shares will be reduced to the extent that an amount distributed to such
shareholder is treated as a return of capital.

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<PAGE> 84

SALE OF SHARES

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

CAPITAL GAINS RATES

The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers is (i) the same as the maximum
ordinary income tax rate for capital assets held for one year or less or (ii)
20% for capital assets held for more than one year. A special 28% tax rate may
apply to a portion of the capital gain dividends paid by the Fund with respect
to its taxable year ended August 31, 1998. The maximum long-term capital gains
rate for corporations is 35%.

NON-U.S. SHAREHOLDERS.

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

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

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

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<PAGE> 85

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

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

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

BACKUP WITHHOLDING

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

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

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

GENERAL

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

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FUND PERFORMANCE

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

The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the end of the period. Total return is calculated by
subtracting the value of the initial investment from the ending value and
showing the difference as a percentage of the initial investment; the
calculation assumes the initial investment is made at the current maximum public
offering price (which includes a maximum sales charge of 4.75% for Class A
Shares); that all income dividends or capital gains distributions during the
period are reinvested in Fund shares at net asset value; and that any applicable
CDSC has been paid. The Fund's total return will vary depending on market
conditions, the securities comprising the Fund's portfolio, the Fund's operating
expenses and unrealized net capital gains or losses during the period. Since
Class A Shares of the Fund were offered at a maximum sales charge of 6.75% prior
to June 12, 1989, actual Fund total return would have been somewhat less than
that computed on the basis of the current maximum sales charge. Total return is
based on historical earnings and asset value fluctuations and is not intended to
indicate future performance. No adjustments are made to reflect any income taxes
payable by shareholders on dividends and distributions paid by the Fund or to
reflect the fact no 12b-1 fees were incurred prior to October 1, 1989.

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

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

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

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

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<PAGE> 87

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

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

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

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

From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from total return
which is a measure of the income actually earned by the Fund's investments plus
the effect of any realized and unrealized appreciation or depreciation of such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of the Fund's performance. Distribution rate
may sometimes be greater than yield since, for instance, it may not include the
effect of amortization of bond premiums, and may include non-recurring
short-term capital gains and premiums from futures transactions engaged in by
the Fund. Distribution rates will be computed separately for each class of the
Fund's shares.

From time to time marketing materials may provide a portfolio manager
update, an adviser update or discuss general economic conditions an outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sectors, ten largest holdings and other Fund asset
structures, such as duration, maturity, coupon, NAV, rating breakdown, AMT
exposure and number of issues in the portfolio. Materials may also mention how
the Distributor believes the Fund compares relative to other Van Kampen funds.
Materials may also discuss the Dalbar Financial Services study from 1984 to 1994
which studied investor cash flow into and out of all types of mutual funds. The
ten year study found that investors who bought mutual fund shares and held such
shares outperformed investors who bought and sold. The Dalbar study conclusions
were consistent regardless of if shareholders purchased their funds in direct or
sales force distribution channels. The study showed that investors working with
a professional representative have

B-56
<PAGE> 88

tended over time to earn higher returns than hose who invested directly. The
Fund will also be marketed on the internet.

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

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;
and (3) in reports or other communications to shareholders or in advertising
material, illustrate the benefits of compounding at various assumed rates of
return. Such illustrations may be in the form of charts or graphs and will not
be based on historical returns experienced by the Fund.

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

The Fund's average annual total return (computed in the manner described in
the Prospectus) for Class A Shares of the Fund for (i) the one year period ended
September 30, 1998 was [ ]%, (ii) the five year period ended September 30, 1998
was [ ]% and (iii) the ten year period ended September 30, 1998 was [ ]%. The
Fund's average annual total return (computed in the manner described in the
Prospectus) for Class B Shares of the Fund for (i) the one year period ended
September 30, 1998 was [ ]%, (ii) the five year period ended September 30, 1998
was [ ]% and (iii) the seven year, nine month period since December 20, 1991,
the commencement of distribution for Class B Shares of the Fund, through
September 30, 1998 was [ ]%. The average annual total return (computed in the
manner described in the Prospectus) for Class C Shares of the Fund for (i) the
one year period ended September 30, 1998 was [ ]% (ii) the five year period
ended September 30, 1998 was [ ]% and (iii) the five year, six month period
since March 10, 1993, the commencement of distribution for Class C Shares of the

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<PAGE> 89

Fund, through September 30, 1998 was [ ]%. These results are based on
historical earnings and asset value fluctuations and are not intended to
indicate future performance. Such information should be considered in light of
the Fund's investment objectives and policies as well as the risks incurred in
the Fund's investment practices.

OTHER INFORMATION

CUSTODY OF ASSETS

All securities owned by the Fund and all cash, including proceeds from the
sale of shares of the Fund and of securities in the Fund's investment portfolio,
are held by State Street Bank and Trust Company, 225 West Franklin Street,
Boston, Massachusetts 02110, as Custodian.

SHAREHOLDER REPORTS

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

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 200 East Randolph Drive, Chicago, Illinois
60601, the independent accountants for the Fund, performs an annual audit of the
Fund's financial statements.

LEGAL COUNSEL

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

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<PAGE> 90

PART C. OTHER INFORMATION

ITEM 23. EXHIBITS

<TABLE>
<C> <S> <C>
(a) (1) First Amended and Restated Agreement and Declaration of
Trust(7)

(2) Certificate of Amendment(7)

(3) Second Certificate of Amendment+

(4) Amended and Restated Certificate of Designation(11)

(5) Second Amended and Restated Certificate of Designation+

(b) Amended and Restated Bylaws(7)
(c) (1) Specimen Class A Shares Certificate(8)
(2) Specimen Class B Shares Certificate(8)
(3) Specimen Class C Shares Certificate(8)
(d) Investment Advisory Agreement(11)
(e) (1) Distribution and Service Agreement(11)
(2) Form of Dealer Agreement(8)
(3) Form of Broker Agreement(8)
(4) Form of Bank Agreement(8)
(f) (1) Individual Retirement Account Brochure with Application(5)
(2) 403(b)(7) Custodial Account(3)
(3) ORP 403(b)(7) Custodial Account(3)
(4) Retirement Plans for the Small Business -- Forms Package and
Plan Documents(6)
(5) Prototype Profit Sharing/Money Purchase Plan and Trust(2)
(6) Prototype 401(k) Plan and Trust(2)
(7) Salary Reduction Simplified Employee Pension Plan(4)
(g) (1) Custodian Contact(9)
(2) Transfer Agency and Service Agreement(11)
(h) (1) Data Access Services Agreement(8)
(2) Fund Accounting Agreement(10)
(i) Opinion of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(8)
(j) Consent of PricewaterhouseCoopers LLP++
(k) Computation of Performance Quotations++
(l) Investment Letter(1)
(m) (1) Plan of Distribution Pursuant to 12b-1(8)
(2) Form of Shareholder Assistance Agreement(8)
(3) Form of Administrative Service Agreement(8)
(4) Service Plan(8)
(n) Financial Data Schedules++
(o) Amended Multiple Class Plan(8)
(p) Power of Attorney+
</TABLE>

C-1
<PAGE> 91

- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, File Number 2-90482,
filed June 21, 1984.

(2) Incorporated herein by reference to Post-Effective Amendment No. 61 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Growth and Income Fund, File Number 2-21657, filed March 26, 1991.

(3) Incorporated herein by reference to Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Reserve Fund, File Number 2-50870, filed September 24, 1992.

(4) Incorporated herein by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital World Portfolio Series Trust, File Number 33-37879, filed September
24, 1993.

(5) Incorporated herein by reference to Post-Effective Amendment No. 31 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Reserve Fund, File Number 2-50870, filed September 24, 1993.

(6) Incorporated herein by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A, File Number 2-90482,
filed February 25, 1994.

(7) Incorporated herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A, File Number 2-90482,
filed April 19, 1996.

(8) Incorporated herein by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A, File Number 2-90482,
Filed April 28, 1997.

(9) Incorporated herein by reference to Post-Effective Amendment No. 75 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Growth and Income Fund, File Number 2-21657, Filed on March 27,
1998.

(10) Incorporated herein by reference to Post-Effective Amendment No. 50 to
Registrant's Registration Statement on Form N-1A of Van Kampen American
Capital Comstock Fund, File No. 2-27778 filed on April 27, 1998.

(11) Incorporated herein by reference to Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A File No. 2-90482 filed
April 29, 1998.

+ Filed herewith.

++ To be filed by further amendment.

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

See the Statement of Additional Information.

ITEM 25. INDEMNIFICATION.

Reference is made to Article 8, Section 8.4 of the Registrant's First
Amended and Restated Agreement and Declaration of Trust.

Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all

C-2
<PAGE> 92

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
interest of the Trust, (ii) willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office,
or (iii) for a criminal proceeding not having a reasonable cause to believe that
such conduct was unlawful (collectively "Disabling Conduct"). Absent a court
determination that an officer or trustee seeking indemnification was not liable
on the merits or guilty of Disabling Conduct in the conduct of his or her
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent counsel or non-party
independent trustees, after review of the facts, that such officer or trustee is
not guilty of Disabling Conduct in the conduct of his or her office.

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

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

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

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" in the Statement of Additional Information for information regarding
the business of the

C-3
<PAGE> 93

Adviser. For information as to the business, profession, vocation and employment
of a substantial nature of directors and officers of the Adviser, reference is
made to the Adviser's current Form ADV (File No. 801-1669) filed under the
Investment Advisers Act of 1940, as amended, incorporated herein by reference.

ITEM 27. PRINCIPAL UNDERWRITERS.

(a) The sole principal underwriter is Van Kampen Funds Inc. ("the
Distributor") which acts as principal underwriter for certain investment
companies and unit investment trusts to be filed by further amendment.

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

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

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

Registrant hereby undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.

Registrant hereby undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.

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<PAGE> 94

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN GOVERNMENT SECURITIES
FUND, has duly caused this Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of
Oakbrook Terrace and the State of Illinois, on the 23rd day of November, 1998.

VAN KAMPEN GOVERNMENT

SECURITIES FUND

By: /s/ RONALD A. NYBERG
-----------------------------------
Ronald A. Nyberg, Vice President
and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed on November 23, 1998 by the
following persons in the capacities indicated:

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

/s/ DENNIS J. McDONNELL* President and Trustee
- -----------------------------------------------------
Dennis J. McDonnell

Principal Financial Officer:

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

Trustees:

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

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

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

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

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

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

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

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

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

Trustee
- -----------------------------------------------------
Paul G. Yovovich
- ---------------
* Signed by Ronald A. Nyberg pursuant to a power of attorney filed herewith.

/s/ RONALD A. NYBERG
- -----------------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>

November 23, 1998

<PAGE> 95

VAN KAMPEN GOVERNMENT SECURITIES FUND

INDEX TO EXHIBITS TO AMENDMENT NO. 24 TO FORM N-1A

AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION

ON NOVEMBER 23, 1998

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C> <C>
(a)(3) Second Certificate of Amendment
(a)(5) Second Amended and Restated Certificate of Designation
(p) Power of Attorney
</TABLE>

<PAGE> 1
EXHIBIT (a)(3)

SECOND CERTIFICATE OF AMENDMENT DATED JULY 14, 1998
TO
FIRST AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST DATED JUNE 21, 1995

WHEREAS, the Trustees of Van Kampen American Capital Government
Securities Fund, a Delaware business trust (the "Trust") have approved the
amendment of the Trust's First Amended and Restated Agreement and Declaration of
Trust dated June 21, 1995 ("Declaration of Trust") in accordance with Section
9.5 thereof;

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

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

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

1.1 Name. The name of the Trust shall be

"VAN KAMPEN GOVERNMENT SECURITIES FUND"

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

EXECUTED, to be effective as of July 14, 1998

/s/ Ronald A. Nyberg

----------------------------------
Ronald A. Nyberg,
Secretary

<PAGE> 1

EXHIBIT (a)(5)

VAN KAMPEN GOVERNMENT SECURITIES FUND
Second Amended and Restated Certificate of Designation
of
Van Kampen Government Securities Fund

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

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

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

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

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

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

<PAGE> 2

6. Special Meetings. A special meeting of Shareholders of a Class of the Trust
may be called with respect to the Rule 12b-1 distribution plan applicable to
such Class or with respect to any other proper purpose affecting only holders of
shares of such Class at any time by a Majority of the Trustees.

7. Other Rights Governed by Declaration. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust or with respect to any Class of Shares set forth in the
Declaration shall apply to Shares of the Trust unless otherwise specified in
this Certificate of Designation, in which case this Certificate of Designation
shall govern.

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

9. Incorporation of Defined Terms. All capitalized terms which are not defined
herein shall have the same meaning as ascribed to those terms in the
Declaration.

July 14, 1998

/s/ Ronald A. Nyberg

-------------------------
Ronald A. Nyberg, Secretary

<PAGE> 1
EXHIBIT (p)
POWER OF ATTORNEY

The undersigned, being officers and trustees of each of the Van Kampen
American Capital 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 American Capital Pennsylvania Tax Free
Income Fund being a Pennsylvania business trust, and being officers and
directors of the Morgan Stanley Fund, Inc. (the "Corporation"), a Maryland
corporation, do hereby, in the capacities shown below, individually appoint
Dennis J. McDonnell and Ronald A. Nyberg, each of Oakbrook Terrace, Illinois,
and each of them, as the 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: April 24, 1998

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

/s/ EDWARD C. WOOD III Vice President and Chief Financial Officer
----------------------------------
Edward C. Wood III

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

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

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

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

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

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

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

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

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

<PAGE> 2

SCHEDULE 1

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