VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND, 485BPOS, 1999-04-30

VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
485BPOS, 1999-04-30

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION APRIL 30, 1999

REGISTRATION NOS. 33-1705
811-4491
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 22 [X]
REGISTRATION STATEMENT UNDER THE

INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 24 [X]
</TABLE>

VAN KAMPEN
LIMITED MATURITY GOVERNMENT FUND

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

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

COPIES TO:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.

It is proposed that this filing will become effective:

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

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

[ ] on (date) pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

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

Title of Securities Being Registered: Shares of Beneficial Interest, par value
$0.01 per share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

[VAN KAMPEN FUNDS LOGO]

VAN KAMPEN
LIMITED MATURITY
GOVERNMENT FUND

Van Kampen Limited Maturity Government Fund is
a mutual fund with an investment objective to
seek to provide investors with a high current
return and relative safety of capital. The
Fund's management seeks to achieve the
investment objective by investing primarily in
securities issued or guaranteed by the U.S.
government, its agencies or its
instrumentalities, including mortgage-related
securities issued or guaranteed by agencies or
instrumentalities of the U.S. government.
Shares of the Fund have not been approved or
disapproved by the Securities and Exchange
Commission (SEC) or any state regulators, and
neither the SEC nor any state regulator has
passed upon the accuracy or adequacy of this
prospectus. It is a criminal offense to state
otherwise.

This prospectus is dated APRIL 30, 1999.

<PAGE> 3

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.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 6
Investment Objective and Policies.................. 7
Investment Advisory Services....................... 14
Purchase of Shares................................. 14
Redemption of Shares............................... 21
Distributions from the Fund........................ 22
Shareholder Services............................... 23
Federal Income Taxation............................ 25
Financial Highlights............................... 26
</TABLE>

<PAGE> 4

RISK/RETURN SUMMARY

INVESTMENT OBJECTIVE
The Fund is a mutual fund with an investment objective to seek to provide
investors with a high current return and relative safety of capital. There can
be no assurance that the Fund will achieve its investment objective.

INVESTMENT STRATEGIES

Under normal market conditions, the Fund's management seeks to achieve the
investment objective by investing at least 65% of the Fund's total assets in
securities issued or guaranteed by the U.S. government, its agencies or its
instrumentalities, including mortgage-related securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. In addition, the Fund may
invest up to 35% of its total assets in mortgage-related securities or
mortgage-backed securities that are not issued or guaranteed by the U.S.
government, its agencies or its instrumentalities, other government-related
securities, asset-backed securities, corporate debt obligations or other debt
obligations. The Fund may purchase or sell securities on a when-issued or
delayed delivery basis. The Fund may purchase or sell certain derivative
instruments (such as options, futures and options on futures, and interest rate
swaps or other interest rate-related transactions) for various risk management
and hedging purposes.

INVESTMENT RISKS

An investment in the Fund is subject to investment risks, and you could lose
money on your investment in the Fund.

MARKET RISK. Market risk is the possibility that market values of securities
owned by the Fund will decline. The value of debt securities tends to fall as
interest rates rise, and such declines tend to be greater among debt securities
with longer maturities or longer durations. Although the Fund has no policy
limiting the maturities of its investments, the Fund's management normally
maintains a portfolio duration with a range of six months to five years. This
means that the Fund will be subject to greater market risk than a fund investing
solely in shorter-term securities but lesser market risk than a fund investing
solely in longer-term securities (see sidebar 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. These securities, while backed by the U.S.
government, are not guaranteed against declines in their market prices.

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

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

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

3
<PAGE> 5

CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Credit risk should be low for the Fund because it
invests primarily in U.S. government securities and other high-quality debt
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 may drop as well. The more the Fund invests in
adjustable, variable or floating rate securities or in securities susceptible to
prepayment risk, the greater the Fund's income risk.

PREPAYMENT RISK. If interest rates fall, the principal on debt securities held
by the Fund may be paid earlier than expected. If this happens, the proceeds
from a prepaid security would 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 mortgage-related or mortgage-backed securities, which are
especially sensitive to prepayment risk because property owners often refinance
their mortgages when interest rates drop.

EXTENSION RISK. The value of debt securities tends to fall as interest rates
rise. For mortgage-related or mortgage-backed securities, if interest rates
rise, property owners may prepay mortgages more slowly than originally expected
which may further reduce the market value of such security and lengthen the
duration of the security.

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

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

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

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

- - Seek current income.

- - Wish to add to their personal investment portfolio a fund that invests
primarily in debt securities issued or guaranteed by the U.S. government, its
agencies or its instrumentalities and other high-quality debt securities.

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

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> <C>
1-3 years Short
-----------------------------------------------------------
4-10 years Intermediate
-----------------------------------------------------------
More than 10 years Long
-----------------------------------------------------------

</TABLE>

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. While 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.

4
<PAGE> 6

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

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

<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
'1989' 13.73
'1990' 9.47
'1991' 9.77
'1992' 3.16
'1993' 3.15
'1994' 0.16
'1995' 9.96
'1996' 3.34
'1997' 5.92
'1998' 5.40
</TABLE>

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

During the ten-year period shown in the bar chart, the highest quarterly return
was 7.74% (for the quarter ended June 30, 1989) and the lowest quarterly return
was -0.77% (for the quarter ended March 31, 1990).

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: Merrill Lynch 1 to 3 Year U.S. Treasury Index and Lehman Brothers Mutual
Fund 1 to 2 Year U.S. Government Index. The Fund's performance figures include
the maximum sales charges paid by investors. The indices' performance figures do
not include commissions or sales charges that would be paid by investors
purchasing the securities represented by those indices. Average annual total
returns are shown for the periods ended December 31, 1998 (the most recently
completed calendar year prior to the date of this

prospectus). Remember that the past performance of the Fund is not indicative of
its future performance.

<TABLE>
<CAPTION>
Average Annual
Total Returns Past 10
for the Years
Periods Ended Past Past or Since
December 31, 1998 1 Year 5 Years Inception
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen
Limited Maturity
Government Fund
-- Class A Shares 1.97% 4.21% 5.98%
Merrill Lynch 1
to 3 Year U.S.
Treasury Index 6.98% 5.98% 7.38%
Lehman Brothers
Mutual Fund 1 to
2 Year U.S.
Government Index 6.59% 5.86% N/A
.......................................................
Van Kampen
Limited Maturity
Government Fund
-- Class B Shares 1.65% 4.13% 3.72%(1)
Merrill Lynch 1
to 3 Year U.S.
Treasury Index 6.98% 5.98% 6.18%(1)
Lehman Brothers
Mutual Fund 1 to
2 Year U.S.
Government Index 6.59% 5.86% N/A
.......................................................
Van Kampen
Limited Maturity
Government Fund
-- Class C Shares 3.57% 4.13% 3.84%(2)
Merrill Lynch 1
to 3 Year U.S.
Treasury Index 6.98% 5.98% 5.71%(2)
Lehman Brothers
Mutual Fund 1 to
2 Year U.S.
Government Index 6.59% 5.86% 5.59%(3)
.......................................................
</TABLE>

Inception dates: (1) 11/5/91, (2) 5/10/93, (3) 4/30/93.

N/A -- Not applicable, this index started reporting returns in 1992.

5
<PAGE> 7

The current yield for the thirty-day period ended December 31, 1998 is 4.42% for
Class A Shares, 3.75% for Class B Shares and 3.75% for Class C Shares. Investors
can obtain the current yield of the Fund for each class of shares by calling
(800) 341-2911.

FEES AND EXPENSES
OF THE FUND

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

SHAREHOLDER FEES

(fees paid directly from your investment)

<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 3.25%(1) None None
..............................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption None(2) 3.00%(3) 1.00%(4)
proceeds)
..............................................................
Maximum sales charge
(load) imposed on
reinvested dividends
(as a percentage of
offering price) None None None
..............................................................
Redemption fees (as a
percentage of amount None None None
redeemed)
..............................................................
Exchange fee None None None
..............................................................
</TABLE>

(1) Reduced for purchases of $25,000 and over. See "Purchase of Shares--Class A
Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a deferred sales charge of 1.00% may be imposed on
certain redemptions made within one year of the purchase. See "Purchase of
Shares--Class A Shares."

(3) The maximum deferred sales charge is 3.00% in the first year after purchase
and declining thereafter as follows:

Year 1-3.00%

Year 2-2.50%

Year 3-2.00%

Year 4-1.00%

After-None

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

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

ANNUAL FUND

OPERATING EXPENSES

(expenses that are deducted from Fund assets)

<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.50% 0.50% 0.50%
..............................................................
Distribution and/or 0.24% 1.00%(2) 1.00%(2)
Service (12b-1)
Fees(1)
..............................................................
Other Expenses 0.68% 0.69% 0.69%
..............................................................
Total Annual Fund 1.42% 2.19% 2.19%
Operating Expenses
..............................................................
</TABLE>

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

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

Example:

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

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

<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $465 $760 $1,076 $1,972
......................................................................
Class B Shares $522 $885 $1,175 $2,329*
......................................................................
Class C Shares $322 $685 $1,175 $2,524
......................................................................
</TABLE>

6
<PAGE> 8

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

<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $465 $760 $1,076 $1,972
......................................................................
Class B Shares $222 $685 $1,175 $2,329*
......................................................................
Class C Shares $222 $685 $1,175 $2,524
......................................................................
</TABLE>

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

INVESTMENT OBJECTIVE
AND POLICIES

The Fund's investment objective is to seek to provide a high current return and
relative safety 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; accordingly there can be no assurance
that the Fund will achieve its investment objective.

Under normal market conditions, the Fund's investment adviser seeks to achieve
the investment objective by investing at least 65% of the Fund's total assets in
securities issued or guaranteed by the U.S. government, its agencies or its
instrumentalities, including mortgage-related securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Under normal market
conditions, the Fund may invest up to 35% of its total assets in
mortgage-related securities or mortgage-backed securities that are not issued or
guaranteed by the U.S. government, its agencies or its instrumentalities, other
government-related securities, asset-backed securities, corporate debt
obligations or other debt obligations provided that such obligations are rated
at the time of purchase within the two highest grades assigned by Standard and
Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's") or another
nationally recognized statistical rating organization ("NRSRO") or unrated debt
securities considered by the Fund's investment adviser to be of comparable
quality. While securities purchased for the Fund's portfolio may be issued or
guaranteed by the U.S. government, the shares issued by the Fund to investors
are not insured or guaranteed by the U.S. government, its agencies or
instrumentalities or any other person or entity.

The value of debt securities generally varies inversely with changes in
prevailing 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. 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 maintain a portfolio duration within a range of six
months to five years. This potential for market price volatility is reduced to
the extent the Fund invests in adjustable, variable or floating rate securities.
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
a 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 invest in mortgage-related or mortgage-backed securities. The value
of such securities tend to vary inversely with changes in prevailing interest
rates, but also are more susceptible to prepayment risk and extension risk than
other debt securities.

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 enter into
certain derivative transactions, such as the purchase or sale of options,
futures

7
<PAGE> 9

contracts and options on such contracts and interest rate swaps or other
interest rate-related transactions. By using such strategies, the Fund seeks to
limit its exposure to adverse interest rate changes, but the Fund also reduces
its potential for capital appreciation on debt securities if interest rates
decline. The purchase and sale of such securities may result in a higher
portfolio turnover rate than if the Fund had not purchased or sold such
securities.

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 of
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 instrumentality.

MORTGAGE-RELATED SECURITIES

Mortgage loans securing real property made by banks, savings and loan
institutions, and other lenders are often assembled into pools. Interests in
such pools may be issued by private entities or 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."

The yield and payment characteristics of mortgage-related securities differ from
traditional debt securities. 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 mortgage-related securities frequently receive prepayments of
principal, in addition to the principal which is part of the regular monthly
payment. Faster or slower prepayments than expected on underlying mortgage loans
can dramatically alter the valuation and yield-to-maturity of mortgage-related
securities. The value of most mortgage-related securities, like traditional debt
securities, tends to vary inversely with changes in prevailing interest rates.
Mortgage-related securities, however, may benefit less than traditional debt
securities from declining interest rates because a property owner is more likely
to refinance a mortgage which bears a relatively high rate of interest during a
period of declining interest rates. This means 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 new securities at
prevailing interest rates. 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. Alternatively, during periods of rising interest rates,
mortgage-related securities are often more susceptible to extension risk (i.e.
rising interest rates could cause property owners to prepay their mortgage loans
more slowly than expected when the security was purchased by the Fund which may
further reduce the market value of such security and lengthen the duration of
such security) than traditional debt securities.

Mortgage-related securities guaranteed by the U.S. government, its agencies or
its instrumentalities include 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

8
<PAGE> 10

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.

The Fund may invest in collateralized mortgage obligations ("CMOs") and real
estate mortgage investment conduits ("REMICs"). CMOs are debt obligations
collateralized by mortgage loans or mortgage-related securities which generally
are held under an indenture issued by financial institutions or other mortgage
lenders or issued or guaranteed by agencies or instrumentalities of the U.S.
government. REMICs are private entities formed for the purpose of holding a
fixed pool of mortgages secured by an interest in real property. CMOs and REMICs
generally are issued in a number of classes or series with different maturities.
The classes or series are retired in sequence as the underlying mortgages are
repaid. Such securities generally are subject to market risk, prepayment risk
and extension risk like other mortgage-related securities. 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). CMOs or REMICs issued or guaranteed by agencies or
instrumentalities of the U.S. government are treated by the Fund as U.S.
government securities.

Adjustable rate mortgage securities ("ARMS") are mortgage-related securities
collateralized by mortgages with adjustable, rather than fixed, interest rates.
The ARMS in which the Fund invests are issued primarily by GNMA, FNMA and FHLMC,
and are actively traded in the secondary market. The underlying mortgages which
collateralize ARMS issued by GNMA are fully guaranteed by the Federal Housing
Administration or the Veterans Administration. The underlying mortgages which
collateralize ARMS issued by FHLMC or FNMA are typically conventional
residential mortgages conforming to standard underwriting size and maturity
constraints.

For certain types of ARMS in which the Fund may invest, the rate of amortization
of principal and interest payments changes in accordance with movements in a
predetermined interest rate index. The interest rates paid on such ARMS
generally are readjusted at intervals of one year or less to an increment over
this predetermined interest rate index. The amount of interest due is calculated
by adding a specified additional amount (margin) to the index, subject to
limitations (caps and floors) on the maximum and minimum interest charged to the
mortgagor during the life of the mortgage or to the maximum and minimum changes
to that interest rate during a given period.

ARMS allow the Fund to participate in increases in interest rates through
periodic adjustments in the coupons of the underlying mortgages, resulting in
higher current yields and lower price fluctuations than if such periodic
adjustments were not available. The Fund, however, will not benefit from
increases in interest rates if they rise to the point where they cause the
current coupon to exceed the maximum allowable cap rates for a particular
mortgage. Alternatively the Fund participates in decreases in interest rates
through periodic adjustments which means income to the Fund and distributions to
shareholders also decline. The resetting of the interest rates should cause the
net asset value of the Fund to fluctuate less dramatically than it would with
investments in long-term fixed-rate debt securities. However, during periods of
rising interest rates, changes in the coupon rate lag behind changes in the
market rate resulting in possibly a slightly lower net asset value until the
coupon resets to market rates. In addition, when interest rates decline, there
may be less potential for capital appreciation than other investments of similar
maturities due to the likelihood of increased prepayments.

The Fund currently seeks to maintain a more consistent and less volatile net
asset value than funds investing primarily in longer duration, fixed rate
mortgage securities by investing a significant portion of its assets in ARMS and
in shorter duration fixed rate mortgage-related securities.

OTHER MORTGAGE-RELATED AND MORTGAGE-BACKED SECURITIES

The Fund may invest up to 35% of its total assets in, among other things, high
quality mortgage-related or mortgage-backed securities issued by certain
private, nongovernment corporations such as financial institutions, if the
securities are fully collateralized at the time of issuance by securities or
certificates issued or guaranteed by the U.S. government, its agencies or its
instrumentalities.

9
<PAGE> 11

The Fund may invest in other 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 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
and they are rated at the time of purchase in the two highest grades by a NRSRO.

The Fund may invest in mortgage-backed securities. A mortgage-backed security is
a general obligation of the issuer, which is additionally secured by a mortgage
collateral. Such securities have a known maturity date and a pre-determined cash
flow. This category may include debt securities issued by a public utility
secured by mortgages on properties owned by the public utility. The Fund intends
to invest in such debt securities only if at the time of purchase they are rated
in one of the two highest grades by a NRSRO.

Additional information regarding mortgage-related securities, CMOs, REMICs and
other mortgage-related securities or mortgage-backed securities is contained in
the Fund's Statement of Additional Information.

ZERO COUPON AND STRIPPED SECURITIES

The Fund may also invest in "zero coupon" securities and "stripped" securities.

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

Currently the principal U.S. Treasury security issued without coupons is the
Treasury bill. The Treasury also has wire transferable "zero coupon" Treasury
securities available. In the last few years, agencies or instrumentalities of
the U.S. government and a number of banks and brokerage firms have separated
("stripped") the principal portions from the coupon portions of U.S. Treasury
bonds and notes and sold them separately in the form of receipts or certificates
representing undivided interests in these instruments (which instruments are
often held by a bank in a custodial or trust account). Such custodial receipts
or certificates of private issuers are not considered by the Fund to be U.S.
government securities.

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

Stripped mortgage-related securities (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

10
<PAGE> 12

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. 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.

Although the market for stripped securities is increasingly liquid, certain of
such securities may not be readily marketable and will be considered illiquid
for purposes of the Fund's limitation on investments in illiquid securities. The
Fund will follow established guidelines and standards for determining whether a
particular stripped security 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 considered by the staff
of the SEC to be illiquid securities and thus subject to the Fund's limitation
on investment in illiquid securities.

ASSET-BACKED SECURITIES
Asset-backed securities are similar to mortgage-backed securities, however, the
underlying assets include assets such as automobile and credit card receivables.
The assets are securitized either in a pass-through structure (similar to a
mortgage pass-through structure) or in a pay-through structure (similar to the
CMO structure). The Fund may invest in these and other types of asset-backed
securities that are rated at the time of purchase in one of the two highest
grades by a NRSRO. Although the collateral supporting asset-backed securities
generally is of a shorter maturity than mortgage loans and historically has been
less likely to experience substantial prepayments, no assurance can be given as
to the actual maturity of an asset-backed security because prepayments of
principal may be made at any time.

Asset-backed securities entail certain risks not presented by mortgage-backed
securities. Asset-backed securities do not have the benefit of the same type of
security interest in the related collateral. Credit card receivables are
generally unsecured and a number of state and federal consumer credit laws give
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the outstanding balance. In the case of automobile receivables, there
is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due to the large
number of vehicles involved in a typical issuance, and technical requirements
under state laws. Therefore, recoveries on repossessed collateral may not always
be available to support payments on the securities.

TREASURY INFLATION-INDEXED NOTES
The Fund may invest in inflation-indexed notes offered by the U.S. Treasury. The
coupon interest rate as a percentage of principal for these securities is
established in an open auction process and then remains constant over the life
of the security. The principal value of the security is adjusted commensurate
with changes in the U.S. Consumer Price Index for All Urban Consumers ("CPI-U").
Thus, semi-annual interest payments are a fixed percentage of an adjusting
principal value. Because the coupon-interest payments increase as the principal
increases with the CPI-U measured inflation, the inflation-indexed notes are
protected against inflation. Holders of inflation-indexed notes are taxed on the
interest income received, as well as on the increase in principal that is due to
the inflation adjustment. As a result, the after-tax annual yield on
inflation-indexed notes is lower than the after-tax annual yield on a
fixed-principal Treasury security of the same maturi-

11
<PAGE> 13

ty. Inflation-indexed notes are expected to show less market risk/price
volatility, as interest rates rise and fall, than a fixed-principal Treasury
security of the same maturity, because inflation risk, as measured by CPI-U, is
virtually eliminated on inflation-indexed notes. Even though inflation-indexed
notes should experience less market volatility than regular fixed-principal
instruments, they should not be viewed as a surrogate for a money market
instrument or other cash equivalents.

CORPORATE DEBT OBLIGATIONS

The Fund may invest in corporate and other debt obligations which are rated at
the time of investment at least AA by S&P or Aa by Moody's (or comparably rated
by another NRSRO) or, if unrated, deemed to be of comparable credit quality by
the Fund's investment adviser. Securities rated AA are regarded by S&P as having
a very strong capacity to pay interest and repay principal and differs from the
highest-rated issues only in small degrees.

USING OPTIONS, FUTURES CONTRACTS

AND RELATED OPTIONS
The Fund expects to utilize options, futures contracts and options on futures
contracts in several different ways, depending upon the status of the 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 worse 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 options, futures contracts and related options,
and other risks is contained in the Fund's Statement of Additional Information
which can be obtained by investors free of charge as described on the back cover
of this prospectus.

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. Interest rate swaps, caps, floors and collars will be treated
as illiquid securities for the purposes of the Fund's investment restriction
limiting investment in illiquid securities. Besides liquidity, such transactions
include market risk, risk of default by the other party to the transaction, risk
of imperfect correlation and manager risk. Such transactions may involve
commissions or other costs.

A more complete discussion of interest rate transactions and their risks is
contained in the Fund's Statement of Additional Information.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
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

12
<PAGE> 14

opportunity that could be more advantageous than alternative opportunities at
the time of the failure. The Fund maintains a segregated account (which is
marked to market daily) of 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.

OTHER INVESTMENTS AND RISK FACTORS

For cash management and investment 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.

In order to generate additional income, the Fund may lend its portfolio
securities in an amount up to 10% of total assets to broker-dealers, major banks
or other recognized domestic institutional borrowers of securities. The borrower
at all times during the loan must maintain collateral or provide to the Fund an
irrevocable letter of credit equal in value to at least 100% of the value of the
securities loaned. During the time portfolio securities are on loan, the Fund
receives any dividends or interest paid on such securities and may invest the
collateral itself or receive an agreed-upon amount of interest income from the
borrower who has delivered the collateral or a letter of credit. There are risks
of delay in recovery and in some cases even loss of rights in the collateral
should the borrower of the securities fail financially.

The Fund may invest up to 10% of its net assets in illiquid securities and
repurchase agreements that have a maturity of longer than seven days. Such
securities may be difficult or impossible to sell at the time and the price that
the Fund would like. Thus, the Fund may have to sell such securities at a lower
price, sell other securities instead to obtain cash or forego other investment
opportunities.

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

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.

When market conditions dictate a more "defensive" investment strategy, the Fund
may invest on a temporary basis a portion or all of its assets in securities
issued or guaranteed by the U.S. government, its agencies and its
instrumentalities and repurchase agreements secured by such obligations.

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

13
<PAGE> 15

INVESTMENT ADVISORY SERVICES

THE ADVISER. Van Kampen Asset Management Inc. is the Fund's investment adviser
(the "Adviser" or "Asset Management"). The Adviser is a wholly owned subsidiary
of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
Investments is a diversified asset management company with more than two million
retail investor accounts, extensive capabilities for managing institutional
portfolios, and more than $75 billion under management or supervision. Van
Kampen Investments' more than 50 open-end and 39 closed-end funds and more than
2,500 unit investment trusts are professionally distributed by leading financial
advisers nationwide. Van Kampen Funds Inc., the distributor of the Fund (the
"Distributor") and the sponsor of the funds mentioned above, is also a wholly
owned subsidiary of Van Kampen Investments. Van Kampen Investments is an
indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at 1 Parkview Plaza, PO Box 5555, Oakbrook
Terrace, Illinois 60181-5555.

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

<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
- ------------------------------------------------------
<S> <C> <C> <C>
First $1 billion 0.500 of 1.00%
......................................................
Next $1 billion 0.475 of 1.00%
......................................................
Next $1 billion 0.450 of 1.00%
......................................................
Next $1 billion 0.400 of 1.00%
......................................................
Over $4 billion 0.350 of 1.00%
......................................................
</TABLE>

Applying this fee schedule, the Fund paid the Adviser an advisory fee at the
effective rate of 0.50% of the Fund's average daily net assets for the Fund's
fiscal year ended December 31, 1998.

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

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

The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen 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. Ted Mundy has been primarily responsible for the
day-to-day management of the Fund's investment portfolio since June 1994. Mr.
Mundy has been Vice President of the Adviser and Advisory Corp. since June 1995.
Prior to June 1994, Mr. Mundy was a portfolio manager with AMR Investment
Services, Inc.

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.

14
<PAGE> 16

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

Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares bear the sales charge expenses at the time of redemption and any
expenses (including higher distribution fees and transfer agency costs)
resulting from such deferred sales charge arrangement, (ii) generally, each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan (described below) 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 offering price of the Fund's shares is based upon the Fund's net asset value
per share (plus sales charges, where applicable). The net asset values per share
of the Class A Shares, Class B Shares and Class C Shares are generally expected
to be substantially the same. In certain circumstances, however, the per share
net asset values of the classes of shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fees and
transfer agency costs applicable to the Class B Shares and Class C Shares and
the differential in the dividends that may be paid on each class of shares.

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading. 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 agency obligations are
valued at the mean between the 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. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Adviser in
accordance with procedures established by the Board of Trustees. Short-term
investments are valued in the manner described in the notes to financial
statements in the Fund's Statement of Additional Information.

The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by National
Association of Securities Dealers, Inc. rules. The net income attributable to a
class of shares and the dividends payable on such class of shares will be
reduced by the amount of the distribution fees and other expenses associated
with such class of shares. To assist investors in comparing classes of shares,
the tables under the heading "Fees and Expenses of the Fund" provide a summary
of sales charges and expenses and an example of the sales charges and expenses
applicable to each class of shares.

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

Shares may be purchased on any business day by completing the application
accompanying this prospec-

15
<PAGE> 17

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

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

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

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

CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 3.25% of the offering price (or 3.36% of the net amount
invested), reduced on investments of $25,000 or more as follows:

CLASS A SHARES

SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
As % of As % of
Size of Offering Net Amount
Investment Price Invested
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $25,000 3.25% 3.36%
..........................................................
$25,000 but less than
$250,000 2.75% 2.83%
..........................................................
$250,000 but less than
$500,000 1.75% 1.78%
..........................................................
$500,000 but less than
$1,000,000 1.50% 1.52%
..........................................................
$1,000,000 or more * *
..........................................................
</TABLE>

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

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

16
<PAGE> 18

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

CLASS B SHARES

SALES CHARGE SCHEDULE

<TABLE>
<CAPTION>
Contingent Deferred Sales
Charge as a Percentage
of Dollar Amount
Year Since Purchase Subject to Charge
- ------------------------------------------------------
<S> <C> <C> <C>
First 3.00%
......................................................
Second 2.50%
......................................................
Third 2.00%
......................................................
Fourth 1.00%
......................................................
Fifth 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.

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.

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

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

17
<PAGE> 19

any dividend reinvestment plan Class B Shares received on such shares,
automatically convert to Class A Shares six years after the end of the calendar
month in which the shares were purchased. Class C Shares purchased before
January 1, 1997, and any dividend reinvestment plan Class C Shares received on
such shares, automatically convert to Class A Shares ten years after the end of
the calendar month in which such shares were purchased. Such conversion will be
on the basis of the relative net asset values per share, without the imposition
of any sales load, fee or other charge. The conversion schedule applicable to a
share of the Fund acquired through the exchange privilege from another Van
Kampen fund is determined by reference to the Van Kampen fund from which such
share was originally purchased.

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

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

QUANTITY DISCOUNTS
Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced sales charges. Investors, or their authorized
dealers, must notify the Fund at the time of the purchase order whenever a
quantity discount is applicable to purchases. Upon such notification, an
investor will receive the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.

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

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

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

CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the Class A Shares
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds which have been previously purchased and are
still owned.

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating the investments over a 13-month
period to determine the sales charge as outlined in the Class A Shares sales
charge table. The size of investment shown in the Class A Shares sales charge
table also

18
<PAGE> 20

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

OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced initial sales charges in
connection with the unit investment trust reinvestment program and purchases by
registered representatives of selling firms or purchases by persons affiliated
with the Fund or the Distributor. The Fund reserves the right to modify or
terminate these arrangements at any time.

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

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

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

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

(1) Current or retired trustees or directors of funds advised by Asset
Management or Advisory Corp. and such persons' families and their
beneficial accounts.

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

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

19
<PAGE> 21

provided that such purchases are otherwise permitted by such institutions.

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

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

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

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

(8) Trusts created under pension, profit sharing or other employee benefit plans
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), or custodial accounts held by a bank created pursuant
to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code and assets held by an employer
or trustee in connection with an eligible deferred compensation plan under
Section 457 of the Code. Such plans will qualify for purchases at net asset
value provided, for plans initially establishing accounts with the
Distributor in the Participating Funds after February 1, 1997, that (1) the
initial amount invested in the Participating Funds is at least $500,000 or
(2) such shares are purchased by an employer sponsored plan with more than
100 eligible employees. Such plans that have been established with a
Participating Fund or have received proposals from the Distributor prior to
February 1, 1997 based on net asset value purchase privileges previously in
effect will be qualified to purchase shares of the Participating Funds at
net asset value for accounts established on or before May 1, 1997. Section
403(b) and similar accounts for which Van Kampen Trust Company serves as
custodian will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible employees,
except under certain uniform criteria established by the Distributor from
time to time. Prior to February 1, 1997, a commission will be paid to
authorized dealers who initiate and are responsible for such purchases
within a rolling twelve-month period as follows: 1.00% on sales to $5
million, plus 0.50% on the next $5 million, plus 0.25% on the excess over
$10 million. For purchases on February 1, 1997 and thereafter, a commission
will be paid as follows: 1.00% on sales to $2 million, plus 0.80% on the
next $1 million, plus 0.50% on the next $47 million, plus 0.25% on the
excess over $50 million.

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

20
<PAGE> 22

$1 million and 0.50% on the excess over $3 million.

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

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

REDEMPTION OF
SHARES

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

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

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

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

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

AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. Orders sent through authorized dealers
must be at least $500 (unless transmitted by your authorized dealer via the
FUNDSERV network).

21
<PAGE> 23

The redemption price for such shares is the net asset value per share next
calculated after an order in proper form is received by an authorized dealer
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. It is the responsibility of authorized dealers to
transmit redemption requests received by them to the Distributor so they will be
received prior to such time. Redemptions completed through an authorized dealer
may involve additional fees charged by the dealer.

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. To establish
such privilege, a shareholder must complete the appropriate section of the
application form accompanying this prospectus or call the Fund at (800) 341-2911
to request that a copy of the Telephone Redemption Authorization form be sent to
them for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Van Kampen Investments, Investor Services and the Fund employ
procedures considered by them to be reasonable to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring certain
personal identification information prior to acting upon telephone instructions,
tape recording telephone communications and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
neither Van Kampen Investments, Investor Services nor the Fund will be liable
for following telephone instructions which it reasonably believes to be genuine.
Telephone redemptions may not be available if the shareholder cannot reach
Investor Services by telephone, whether because all telephone lines are busy or
for any other reason; in such case, a shareholder would have to use the Fund's
other redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, will be processed at the next
determined net asset value per share. These privileges are available for all
accounts other than retirement accounts or accounts with shares represented by
certificates. If an account has multiple owners, Investor Services may rely on
the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.

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

DISTRIBUTIONS FROM
THE FUND

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

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

22
<PAGE> 24

determined net asset value unless the shareholder instructs otherwise.

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

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

SHAREHOLDER SERVICES

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

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

AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to charge a bank account on a
regular basis to invest 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 per share. Check writing redemptions represent the sale of Class A
Shares. Any gain or loss realized on the redemption of shares is a taxable
event.

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

EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however,

23
<PAGE> 25

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 for at least 30 days. Shares of the Fund registered in a
shareholder's name for less than 30 days may only be exchanged upon receipt of
prior approval of the Adviser. It is the policy of the Adviser, under normal
circumstances, 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 contingent deferred sales
charge is based upon the date of the initial purchase of such shares from a
Participating Fund. If such Class B Shares or Class C Shares are redeemed and
not exchanged for shares of another Participating Fund, Class B Shares and Class
C Shares are subject to the contingent deferred sales charge schedule imposed by
the Participating Fund from which such shares were originally purchased.

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

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

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

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

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

INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our

24
<PAGE> 26

web site at www.vankampen.com for further instruction. Van Kampen Investments,
Investor Services and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated through the internet are
genuine. Such procedures include requiring use of a personal identification
number prior to acting upon internet instructions and providing written
confirmation of instructions communicated through the internet. If reasonable
procedures are employed, neither Van Kampen Investments, Investor Services nor
the Fund will be liable for following instructions through the internet which it
reasonably believes to be genuine. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.

FEDERAL INCOME TAXATION

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

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

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

Foreign shareholders, including shareholders who are nonresident aliens, may be
subject to United States withholding tax on certain distributions (whether
received in cash or in shares) at a rate of 30% or such lower rate as prescribed
by an applicable treaty. Accordingly, investment in the Fund is likely to be
appropriate for such shareholders only if they can utilize a foreign tax credit
or corresponding tax benefit in respect of such federal withholding taxes.
Prospective foreign investors should consult their United States tax advisers
concerning the tax consequences to them of an investment in shares.

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

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

25
<PAGE> 27

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 Class B Shares
Year Ended December 31, Year Ended December 31,
1998(a) 1997 1996 1995 1994 1998(a) 1997(a) 1996(a)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $12.191 $12.151 $ 12.41 $ 11.90 $ 12.42 $12.220 $12.174 $ 12.43
------- ------- ------- ------- ------- ------- ------- -------
Net Investment Income................ .685 .685 .627 .67 .50 .590 .598 .550
Net Realized and Unrealized
Gain/Loss.......................... (.043) .015 (.226) .4888 (.4817) (.036) .012 (.242)
------- ------- ------- ------- ------- ------- ------- -------

Total from Investment Operations..... .642 .700 .401 1.1588 .0183 .554 .610 .308

Less Distributions from and in Excess
of Net Investment Income........... .673 .660 .660 .6488 .5383 .577 .564 .564
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of the Period... $12.160 $12.191 $12.151 $ 12.41 $ 11.90 $12.197 $12.220 $12.174
======= ======= ======= ======= ======= ======= ======= =======

Total Return*(b)..................... 5.40% 5.92% 3.34% 9.96% .16% 4.65% 5.08% 2.69%
Net Assets at End of the Period (In
millions).......................... $ 35.2 $ 39.4 $ 40.2 $ 45.4 $ 41.2 $ 12.4 $ 16.2 $ 22.5
Ratio of Expenses to Average Net
Assets*............................ 1.42% 1.32% 1.45% 1.45% 1.15% 2.19% 2.11% 2.19%
Ratio of Net Investment Income to
Average Net Assets*................ 5.61% 5.68% 5.23% 5.47% 4.75% 4.82% 4.92% 4.50%
Portfolio Turnover................... 249% 175% 260% 187% 161% 249% 175% 260%
* If certain expenses had not been reimbursed by the Adviser, Total Return would have been lower and the ratios would have been
as follows:

Ratio of Expenses to Average Net
Assets............................. N/A N/A 1.47% 1.50% 1.31% N/A N/A 2.22%

Ratio of Net Investment Income to
Average Net Assets................. N/A N/A 5.21% 5.42% 4.58% N/A N/A 4.47%

<CAPTION>
Class B Shares Class C Shares
Year Ended December 31, Year Ended December 31,
1995(a) 1994 1998(a) 1997 1996 1995(a) 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $ 11.91 $ 12.43 $12.206 $12.162 $ 12.42 $ 11.90 $ 12.41
------- ------- ------- ------- ------- ------- ------- ---
Net Investment Income................ .57 .42 .582 .597 .554 .57 .45
Net Realized and Unrealized
Gain/Loss.......................... .5028 (.4977) (.029) .011 (.248) .5028 (.5177)
------- ------- ------- ------- ------- ------- ------- ---
Total from Investment Operations..... 1.0728 (.0777) .553 .608 .306 1.0728 (.0677)
Less Distributions from and in Excess
of Net Investment Income........... .5528 .4423 .577 .564 .564 .5528 .4423
------- ------- ------- ------- ------- ------- ------- ---
Net Asset Value, End of the Period... $ 12.43 $ 11.91 $12.182 $12.206 $12.162 $ 12.42 $ 11.90
======= ======= ======= ======= ======= ======= ======= ===
Total Return*(b)..................... 9.09% (.62%) 4.57% 5.17% 2.62% 9.10% (.55%)
Net Assets at End of the Period (In
millions).......................... $ 30.3 $ 18.4 $ 3.3 $ 4.2 $ 4.7 $ 6.2 $ 5.8
Ratio of Expenses to Average Net
Assets*............................ 2.24% 1.91% 2.19% 2.10% 2.20% 2.23% 1.90%
Ratio of Net Investment Income to
Average Net Assets*................ 4.63% 3.99% 4.76% 4.92% 4.48% 4.71% 3.98%
Portfolio Turnover................... 187% 161% 249% 175% 260% 187% 161%
* If certain expenses had not been re
as follows:
Ratio of Expenses to Average Net
Assets............................. 2.29% 2.08% N/A N/A 2.22% 2.27% 2.07%
Ratio of Net Investment Income to
Average Net Assets................. 4.59% 3.82% N/A N/A 4.45% 4.67% 3.81%
</TABLE>

(a) Based on average shares outstanding.

(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A--Not Applicable.

26
<PAGE> 28

FOR MORE INFORMATION

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

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

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

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

WEB SITE
www.vankampen.com

VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555

Investment Adviser

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

Distributor

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

Transfer Agent

VAN KAMPEN INVESTOR SERVICES INC.
PO Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen Limited Maturity Government Fund

Custodian

STATE STREET BANK AND TRUST COMPANY
225 West Franklin Street, PO Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Limited Maturity Government 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> 29

[VAN KAMPEN FUNDS LOGO]

Investment Company Act File No.
811-4491.
LTDMAT PRO 4/99

VAN KAMPEN
LIMITED MATURITY GOVERNMENT FUND

PROSPECTUS

APRIL 30, 1999

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

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

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

Information about the Fund, including its
reports and Statement of Additional
Information, has been filed with the
Securities and Exchange Commission (SEC). It
can be reviewed and copied at the SEC Public
Reference Room in Washington, DC or online at
the SEC's web site (http://www.sec.gov). For
more information, please call the SEC at (800)
SEC-0330. You can also request these materials
by writing the Public Reference Section of the
SEC, Washington DC, 20549-6009, and paying a
duplication fee.
<PAGE> 30

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN
LIMITED MATURITY GOVERNMENT FUND

Van Kampen Limited Maturity Government Fund (the "Fund") is a mutual fund
with an investment objective to seek to provide a high current return and
relative safety of capital. The Fund's management seeks to achieve the
investment objective by investing primarily in securities issued or guaranteed
by the U.S. government, its agencies or its instrumentalities, including
mortgage-related securities issued or guaranteed by an agency or instrumentality
of the U.S. government.

The Fund is organized as a diversified series of Van Kampen Limited
Maturity Government 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, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 341-2911 (or (800) 421-2833
for the hearing impaired).

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

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

<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective and Policies........................... B-4
Options, Futures Contracts and Related Options.............. B-13
Investment Restrictions..................................... B-20
Trustees and Officers....................................... B-22
Investment Advisory Agreement............................... B-31
Distribution and Service.................................... B-33
Transfer Agent.............................................. B-36
Portfolio Transactions and Brokerage Allocation............. B-37
Shareholder Services........................................ B-39
Redemption of Shares........................................ B-41
Contingent Deferred Sales Charge-Class A.................... B-41
Waiver of Class B and Class C Contingent Deferred Sales
Charge.................................................... B-42
Taxation.................................................... B-44
Fund Performance............................................ B-47
Other Information........................................... B-51
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-10
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL 30, 1999.

<PAGE> 31

GENERAL INFORMATION

The Fund was originally organized under the name American Capital Federal
Mortgage Trust as a Massachusetts business trust on September 9, 1985. As of
July 31, 1995, the Fund was renamed Van Kampen American Capital Limited Maturity
Government Fund and was reorganized as a series of the Trust. The Trust is a
business trust organized under the laws of the State of Delaware. On July 14,
1998, the Fund and the Trust adopted their present names.

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

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

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

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

Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series and separate votes are taken by each class of a series on matters
affecting an individual class of such series. For example, a change in
investment policy for a series would be voted upon by shareholders of only the
series involved and a change in the distribution fee for a class of a series
would be voted upon by shareholders of only the class of such series involved.
Except as otherwise described in the Prospectus or herein, shares do not have
cumulative voting rights, preemptive rights or any conversion, subscription or
exchange rights.

B-2
<PAGE> 32

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 majority of the shares then outstanding cast in
person or by proxy at such meeting. The Fund will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or rules or
regulations promulgated by the Securities and Exchange Commission ("SEC").

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

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

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

B-3
<PAGE> 33

As of April 7, 1999, no person was known by the Fund to own beneficially or
to hold of record 5% or more of the outstanding Class A Shares, Class B Shares
or Class C Shares of the Fund, except as follows:

<TABLE>
<CAPTION>
Amount of
Ownership at Class Percentage
Name and Address of Holder April 7, 1999 of Shares Ownership
-------------------------- ------------- --------- ----------
<S> <C> <C> <C>
Chicago Board of Education...................... 179,553 B 18.44%
City Treasurer's Office
Room 206
121 N. LaSalle Street
Chicago, IL 60602-1204
Donaldson Lufkin Jenrette....................... 29,787 C 11.03%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Merrill Lynch Pierce Fenner & Smith Inc. ....... 272,566 A 9.08%
For the Sole benefit of its Customers 122,189 B 12.55%
Attn: Fund Administration 19,476 C 7.21%
4800 Dear Lake Drive East
2nd Floor
Jacksonville, FL 32246-6484
NFSC............................................ 20,213 C 7.49%
Marc A Buettell Trust
6803 Tuban
Fort Myers, FL 33908-1669
Everen Securities, Inc. ........................ 162,470 A 5.41%
Partnership Healthplan of CAL.
111 East Kilbourn Avenue
Milwaukee, WI 53202-6611
NFSC............................................ 13,683 C 5.07%
Jones Hydraulic Service Inc.
5955 Armour Drive
Houston, TX 77020-8103
Van Kampen Trust Company........................ 479,649 A 15.98%
2800 Post Oak Blvd. 52,159 B 5.36%
Houston, TX 77056
</TABLE>

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

INVESTMENT OBJECTIVE AND POLICIES

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

B-4
<PAGE> 34

DURATION

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 six months to five 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.

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

B-5
<PAGE> 35

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 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% more than
high grade corporate bonds and 1/2 of 1% 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

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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 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 FHMLC 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

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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.

ASSET-BACKED SECURITIES

The Fund may invest a portion of its assets in asset-backed securities
rated at the time of purchase in the two highest grades by a nationally
recognized statistical rating agency ("NRSRO"). The rate of principal payment
generally depends on the rate of principal payments received on the underlying
assets. Such rate of payments may be affected by economic and various other
factors. Therefore, the yield may be difficult to predict and actual yield to
maturity may be more or less than the anticipated yield to maturity. The credit
quality of most asset-backed securities depends primarily on the credit quality
of the assets underlying such securities, how well the entity issuing the
security is insulated from the credit risk of the originator or affiliated
entities, and the amount of credit support provided to the securities.

Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors on underlying assets to make payments, such securities may
contain elements of credit support. Such credit support falls into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payment of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Fund will not pay any

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additional fees for such credit support, although the existence of credit
support may increase the price of a security.

Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceeds that required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit risk associated with the underlying assets. Delinquencies or
losses in excess of those anticipated could adversely affect the return on an
investment in such issue.

LENDING OF SECURITIES

Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities 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 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. 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 engage in repurchase agreements with banks or broker-dealers
in order to earn a return on temporarily available cash or for investment
purposes. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a debt security

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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.

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.

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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 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 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

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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 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'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

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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"). The sale of such
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of liquid
securities trading on national securities exchanges or in the over-the-counter
markets. Restricted securities are often purchased at a discount from the market
price of unrestricted securities of the same issuer reflecting the fact that
such securities may not be readily marketable without some time delay.
Investments in securities which have no ready market are valued at fair value as
determined in good faith by the Adviser in accordance with procedures approved
by the Fund's Trustees. Ordinarily, the Fund would invest in restricted
securities only when it receives the issuer's commitment to register the
securities without expense to the Fund. However, registration and underwriting
expenses (which may range from 7% to 15% of the gross proceeds of the securities
sold) may be paid by the Fund. Restricted securities which can be offered and
sold to qualified institutional buyers under Rule 144A under the 1933 Act ("144A
Securities") and are determined to be liquid under guidelines adopted by and
subject to the supervision of the Fund's Board of Trustees are not subject to
the limitation on illiquid securities. Such 144A Securities are subject to
monitoring and may become illiquid to the extent qualified institutional buyers
become, for a time, uninterested in purchasing such securities. Factors used to
determine whether 144A Securities are liquid include, among other things, a
security's trading history, the availability of reliable pricing information,
the number of dealers making quotes or making a market in such security and the
number of potential purchasers in the market for such security. For purposes
hereof, investments by the Fund in securities of other investment companies will
not be considered investments in restricted securities to the extent permitted
by (i) the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from time to
time, or (iii) an exemption or other relief from the provisions of the 1940 Act.

OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS

CALL AND PUT OPTIONS

The Fund may sell or purchase call and put options only for bona fide
hedging purposes. 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

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<PAGE> 43

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 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. The Fund will only enter
into over-the-counter options (other than currency options) that are subject to
a buy back-provision permitting the Fund to require the counterparty to close
out the option at a formula price within seven days. 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. Such options may be
considered illiquid and subject to the Fund's limitation on illiquid securities.

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.

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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 total assets would be invested
in premiums on such options.

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

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

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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 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.

B-16
<PAGE> 46

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 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

B-17
<PAGE> 47

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.

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 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
total 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 addition, the Fund may not purchase futures contracts or related
options in excess of 30% of the Fund's total assets. 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

B-18
<PAGE> 48

(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
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 purposes 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 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 and/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.

B-19
<PAGE> 49

INVESTMENT RESTRICTIONS

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

1. 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 will invest in mortgage-related and
mortgage-backed securities and engage in transactions in futures
contracts and related options, as described in the Prospectus and
elsewhere in this Statement of Additional Information.

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 its
instrumentalities.

4. Make loans of money or securities, except (a) by investment in
repurchase agreements in accordance with applicable requirements set
forth in the Fund's Prospectus 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.

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. Transactions in forward commitments, options,
interest rate futures contracts and options on such contracts, including
deposits or payments of initial or maintenance margin in connection with
any such transaction, are not considered to be purchases of securities
on margin within the meaning of this limitation.

7. Invest in securities of any company if, to the knowledge of the Fund,
any of its officers or trustees, or any officer or director of the
Adviser, owns more than 1/2 of 1% of the outstanding securities of such
company, and such officers, trustees, and

B-20
<PAGE> 50

directors who individually own more than such amount together own more
than 5% of the outstanding securities of such issuer.

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

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

10. With respect to 75% of its assets, invest more than 5% of its assets in
the securities of any one issuer (except obligations of the U.S.
government, its agencies or 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
the 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. Deposits in escrow in connection
with the writing of covered or fully collateralized 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 an illiquid security if, as a result of such purchase, more
than 10% of the Fund's net assets would be invested in such securities.
Illiquid securities are securities subject to legal or contractual
restrictions on resale, which include repurchase agreements maturing in
more than seven days and any over-the-counter options or other
restricted securities purchased by the Fund. 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 the 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.

B-21
<PAGE> 51

TRUSTEES AND OFFICERS

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

TRUSTEES

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. 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.
</TABLE>

B-22
<PAGE> 52

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Richard M. DeMartini*..................... Chairman and Chief Executive Officer of
Two World Trade Center International Private Client Group, a
66th Floor division of Morgan Stanley Dean Witter & Co.
New York, NY 10048 Director of Dean Witter Reynolds Inc.
Date of Birth: 10/12/52 Chairman and Director of Dean Witter Capital
Corporation. Chairman, Chief Executive
Officer, President and Director of Dean
Witter Alliance Capital Corporation. Director
of the National Healthcare Resources, Inc.,
Dean Witter Realty Inc., Dean Witter Reynolds
Venture Equities Inc., DW Window Covering
Holding, Inc. and is a member of the Morgan
Stanley Dean Witter Management Committee.
Prior to March of 1999, Director of Morgan
Stanley Dean Witter Distributors, Inc. Prior
to January 1999, Chairman of Dean Witter
Futures & Currency Management Inc. and
Demeter Management Corporation. Prior to
December 1998, Mr. DeMartini was President
and Chief Operating Officer of Morgan Stanley
Dean Witter Individual Asset Management and
Director of Morgan Stanley Dean Witter Trust
FSB. Formerly Vice Chairman of the Board of
the National Association of Securities
Dealers, Inc. and Chairman of the Board of
the Nasdaq Stock Market, Inc. Trustee of the
TCW/DW Funds, Director of the Morgan Stanley
Dean Witter Funds and Trustee/ Director of
each of the funds in the Fund Complex.
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, Vice
Chair of the Board of The YMCA of
Metropolitan Chicago and a member of the
Women's Board of the University of Chicago.
Prior to 1996, Trustee of The International
House Board. Trustee/Director of each of the
funds in the Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund
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.
</TABLE>

B-23
<PAGE> 53

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
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. and Securities
Investors Protection Corp. ("SIPC").
Trustee/Director of each of the funds in the
Fund Complex.
Don G. Powell*............................ Currently a member of the board of governors
2800 Post Oak Blvd. and executive committee for the Investment
Houston, TX 77056 Company Institute, and a member of the Board
Date of Birth: 10/19/39 of Trustees of the Houston Museum of Natural
Science. Prior to January 1999, Chairman of
the Investment Company Institute and Chairman
and Director of Van Kampen Investments, the
Advisers, the Distributor, Investor Services,
Van Kampen Advisors Inc., Van Kampen
Recordkeeping Services, Inc., American
Capital Contractual Services, Inc., Van
Kampen Merritt Equity Advisors Corp., Van
Kampen Insurance Agency of Illinois Inc., Van
Kampen System Inc., Van Kampen Trust Company,
Van Kampen Services Inc. and Van Kampen
Exchange Corp. Prior to July 1998, Director
and Chairman of VK/AC Holding, Inc. Prior to
1997, Chairman, President and Director of
American Capital Shareholders Corporation.
Prior to April 1997, Chairman, President and
Director of Van Kampen Merritt Equity
Holdings Corp. Prior to November 1996,
President, Chief Executive Officer and
Director of VK/AC Holding, Inc. Prior to
September 1996, Chairman and Director of
McCarthy, Crisanti & Maffei, Inc. and
McCarthy, Crisanti & Maffei Acquisition
Corporation. Prior to July 1996, Chairman and
Director of VSM Inc. and VCJ 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.
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, and the Urban Shopping Centers Inc.,
a retail mall management company. Trustee,
University of Notre Dame. Prior to 1998,
Director of Stone Smurfit Container Corp., a
paper manufacturing company. Formerly,
President, Chief Executive Officer and Chief
Operating Officer of Waste Management, Inc.,
an environmental services company.
Trustee/Director of each of the funds in the
Fund Complex.
</TABLE>

B-24
<PAGE> 54

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
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 Customer
Suite 9700 Services, Inc. and COMARCO, Inc.
Chicago, IL 60606 Trustee/Director of each of the Funds in the
Date of Birth: 10/29/53 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
current or former positions with Morgan Stanley Dean Witter & Co. or its
affiliates.

B-25
<PAGE> 55

OFFICERS

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

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>

Dennis J. McDonnell.................. Executive Vice President and 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 1998, Director and Executive
Vice President of VK/AC Holding, Inc. Prior to
April 1998, President and Director of Van Kampen
Merritt Equity Advisors Corp. Prior to April
1997, Mr. McDonnell was Director of Van Kampen
Merritt Equity Holdings Corp. Prior to September
1996, Mr. McDonnell was Chief Executive Officer
and Director of MCM Group, Inc. and McCarthy,
Crisanti & Maffei, Inc. and Chairman and Director
of MCM Asia Pacific Company, Limited and MCM
(Europe) Limited. Prior to July 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 Van Kampen Management
Inc.

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 September 1996, a Director of
McCarthy, Crisanti & Maffei, Inc. Prior to July
1996, Mr. Hegel was Director of VSM Inc. Vice
President of each of the funds in the Fund
Complex and certain other investment companies
advised by the Advisers or their affiliates.

John L. Sullivan..................... Senior 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.

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-26
<PAGE> 56

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Paul R. Wolkenberg................... Executive Vice President and Director of Van
Date of Birth: 11/10/44 Kampen Investments. Executive Vice President of
Vice President the Advisers and the Distributor. President and
Director of Investor Services. President, Chief
Operating Officer and Director of Van Kampen
Recordkeeping Services Inc. President, Chief
Executive Officer and Director of Van Kampen
Trust Company. Prior to July 1998, Director and
Executive Vice President of VK/AC Holding, Inc.
Vice President of each of the funds in the Fund
Complex and certain other investment companies
advised by the Advisers or their affiliates.

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

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

Nicholas Dalmaso..................... Vice President, Associate General Counsel and
Date of Birth: 03/01/65 Assistant Secretary of Van Kampen Investments,
Assistant Secretary 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.
</TABLE>

B-27
<PAGE> 57

<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 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 1998, Senior Vice President,
Deputy General Counsel and Assistant Secretary of
VK/AC Holding, Inc. Prior to April 1998, Senior
Vice President, Deputy General Counsel and
Secretary of Van Kampen Merritt Equity Advisors
Corp. Prior to April 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
1996, Deputy General Counsel and Secretary of
McCarthy, Crisanti & Maffei, Inc. Prior to July
1996, 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.
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, Van
Date of Birth: 10/16/64 Kampen Management Inc. and the Advisers.
Assistant Treasurer Assistant Treasurer of each of the funds in the
Fund Complex and other investment companies
advised by the Advisers or their affiliates.

Michael Robert Sullivan.............. Assistant Vice President of Van Kampen
Date of Birth: 03/30/33 Investments, the Advisers and Van Kampen
Assistant Controller Management Inc. Assistant Controller of each of
the funds in the 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 63 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated

B-28
<PAGE> 58

person of Van Kampen Investments, the Advisers or the Distributor (each a "Non-
Affiliated Trustee") is compensated by an annual retainer and meeting fees for
services to the funds in the Fund Complex. Each fund in the Fund Complex (except
the money market series of the Van Kampen Series Fund, Inc.) provides a deferred
compensation plan to its Non-Affiliated Trustees that allows trustees/directors
to defer receipt of their compensation and earn a return on such deferred
amounts. Deferring compensation has the economic effect as if the Non-Affiliated
Trustee reinvested his or her compensation into the funds. Each fund in the Fund
Complex (except the money market series of the Van Kampen Series Fund, Inc.)
provides a retirement plan to its Non-Affiliated Trustees that provides
Non-Affiliated Trustees with compensation after retirement, provided that
certain eligibility requirements are met as more fully described below.

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

Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
the Fund and earn a rate of 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-29
<PAGE> 59

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

COMPENSATION TABLE

<TABLE>
<CAPTION>
Fund Complex
-------------------------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Aggregate Retirement Annual Compensation
Year First Compensation Benefits Benefits from before
Appointed or before Accrued as the Fund Deferral from
Elected to Deferral from Part of Upon Fund
Name the Board the Fund(2) Expenses(3) Retirement(4) Complex(5)
---- ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan 1991 $1,280 $35,691 $60,000 $125,200
Linda Hutton Heagy 1995 1,080 3,861 60,000 112,800
R. Craig Kennedy 1995 1,280 2,652 60,000 125,200
Jack E. Nelson 1995 1,280 18,385 60,000 125,200
Phillip B. Rooney 1997 1,280 6,002 60,000 125,200
Dr. Fernando Sisto 1985 1,280 68,615 60,000 125,200
Wayne W. Whalen 1995 1,280 12,658 60,000 125,200
Paul G. Yovovich (1) 1998 220 0 60,000 25,300
</TABLE>

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

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

(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended December 31, 1998. The
following trustees deferred compensation from the Fund during the fiscal
year ended December 31, 1998: Mr. Branagan, $1,280; Ms. Heagy, $1,080; Mr.
Kennedy, $640; Mr. Nelson, $1,280; Mr. Rooney, $1,280; Dr. Sisto, $640; and
Mr. Whalen, $1,280. Amounts deferred are retained by the Fund and earn a
rate of return determined by reference to either the return on the common
shares of the Fund or other funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, each Fund may invest in
securities of those funds selected by the Non-Affiliated Trustees in order
to match the deferred compensation obligation. The cumulative deferred
compensation (including interest) accrued with respect to each trustee,
including former trustees, from the Fund as of December 31, 1998 is as
follows: Mr. Branagan, $3,080; Dr. Caruso, $2,570; Mr. Gaughan, $1,632; Ms.
Heagy, $3,649; Mr. Kennedy, $10,185; Mr. Miller, $7,423; Mr. Nelson,
$12,596; Mr. Rees, $6,987; Mr. Robinson, $9,408; Mr. Rooney, $2,033; Dr.
Sisto, $8,481; Mr. Vernon, $370; and Mr. Whalen, $9,913. The deferred
compensation plan is described above the Compensation Table.

(3) The amounts shown in this column represent the sum of the retirement
benefits expected to be accrued by the operating investment companies in the
Fund Complex for their respective fiscal years ended in 1998. The retirement
plan is described above the Compensation Table.

B-30
<PAGE> 60

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

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

As of April 7, 1999, 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 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 independent
accountant 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 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

B-31
<PAGE> 61

omissions if it acted without willful misfeasance, bad faith, negligence or
reckless disregard of its obligations.

Under the Advisory Agreement, the Fund pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a
monthly fee payable computed based upon the annual rate applied to the average
daily net assets of the Fund as follow: 0.500% on the first $1 billion of
average daily net assets; 0.475% on the next $1 billion of average daily net
assets; 0.450% on the next $1 billion of average daily net assets; 0.400% on the
next $1 billion of average daily net assets; and 0.350% on the average daily net
assets over $4 billion.

The Fund's average daily net assets are determined by taking the average of
all of the determinations of the net assets during a given calendar month. Such
fee is payable for each calendar month as soon as practicable after the end of
that month. The fee payable to the Adviser is reduced by any commissions, tender
solicitation and other fees, brokerage or similar payments received by the
Adviser or any other direct or indirect majority owned subsidiary of Van Kampen
Investments 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 1.5% of the first $30
million of the Fund's average daily net assets, plus 1% of any excess over $30
million, 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 a vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the Trustees who are not parties to the agreement or
interested persons of any such party by votes cast in person at a meeting called
for such purpose. The Advisory Agreement provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party on 60 days' written notice.

During the fiscal years ended December 31, 1998, 1997 and 1996, the Adviser
received approximately $245,300, $303,800 and $352,300, respectively, in
advisory fees from the Fund. For such periods the Fund paid approximately
$64,900, $30,100 and $67,100, respectively, for accounting services.

B-32
<PAGE> 62

DISTRIBUTION AND SERVICE

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

<TABLE>
<CAPTION>
Total Amounts
Underwriting Retained by
Commissions Distributor
------------ -----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998..................... $117,014 $7,142
Fiscal Year Ended December 31, 1997..................... $126,365 $4,855
Fiscal Year Ended December 31, 1996..................... $ 47,329 $3,000
</TABLE>

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

CLASS A SHARES SALES CHARGE TABLE

<TABLE>
<CAPTION>
Total Sales Charge
------------------------- Reallowed
As % of As % of Net To Dealers
Size of Offering Amount As a % of
Investment Price Invested Offering Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000........................... 3.25% 3.36% 3.00%
$25,000 but less than $250,000.............. 2.75% 2.83% 2.50%
$250,000 but less than $500,000............. 1.75% 1.78% 1.50%
$500,000 but less than $1,000,000........... 1.50% 1.52% 1.25%
$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.

B-33
<PAGE> 63

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 3.00% on Class B Shares and 1.00% on Class C Shares.

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

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

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.

B-34
<PAGE> 64

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

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

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

B-35
<PAGE> 65

such circumstances, a shareholder of a share may be deemed to incur expenses
attributable to other shareholders of such class. As of December 31, 1998, there
were $2,500,684 and $316,398 of unreimbursed distribution-related expenses with
respect to Class B Shares and Class C Shares, respectively, representing 20.17%
and 9.59% of the Fund's average daily net assets attributable to Class B Shares
and Class C Shares, respectively. If the Plans were terminated or not continued,
the Fund would not be contractually obligated to pay the Distributor for any
expenses not previously reimbursed by the Fund or recovered through contingent
deferred sales charges.

For the fiscal year ended December 31, 1998, the Fund's aggregate expenses
paid under the Plans for Class A Shares were $82,122 or 0.24% 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 Class A Share Plans. For the fiscal
period ended December 31, 1998, the Fund's aggregate expenses paid under the
Plans for Class B Shares were $134,822 or 1.00% of the Class B Shares' average
daily net assets. Such expenses were paid to reimburse the Distributor for the
following payments: $99,691 for commissions and transaction fees paid to
financial intermediaries in respect of sales of Class B Shares of the Fund and
$35,131 for fees paid to financial intermediaries for servicing Class B
shareholders and administering the Class B Share Plans. For the fiscal period
ended December 31, 1998, the Fund's aggregate expenses paid under the Plans for
Class C Shares were $34,032 or 1.00% of the Class C Shares' average daily net
assets. Such expenses were paid to reimburse the Distributor for the following
payments; $20,823 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class C Shares of the Fund and $13,209 for
fees paid to financial intermediaries for servicing Class C shareholders and
administering the Class C Share Plans.

The Distributor has entered into agreements with the following firms: (i)
Merrill Lynch, (ii) Fidelity Brokerage Services, Inc. & National Financial
Services Corporation and (iii) Norwest Bank Minnesota, N.A. Shares of Fund shall
be offered pursuant to such firm's retirement plan alliance program(s). Trustees
and other fiduciaries of retirement plans seeking to invest in multiple fund
families through broker-dealer retirement plan alliance programs should contact
the firms mentioned above for further information concerning the program(s)
including, but not limited to, minimum size and operational requirements.

TRANSFER AGENT

The Fund's transfer agent, shareholder service agent and dividend
disbursing agent is Van Kampen Investor Services Inc., PO Box 418256, Kansas
City, MO 64141-9256. During the fiscal years ending December 31, 1998, 1997 and
1996, Investor Services, shareholder service agent and dividend disbursing agent
for the Fund, received fees aggregating approximately $73,600, $84,500 and
$140,000, respectively for these services. Prior to 1998, these services were
provided at cost plus a profit. Beginning in 1998, the transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive benchmarks.

B-36
<PAGE> 66

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

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

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

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

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<PAGE> 67

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

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

<TABLE>
<CAPTION>
Affiliated Brokers
----------------------
Morgan Dean
Brokers Stanley Witter
------- ------- ------
<S> <C> <C> <C>
Commissions Paid:
Fiscal year ended December 31, 1998.................. $21,226 $-0- $-0-
Fiscal year ended December 31, 1997.................. $24,901 $-0- $-0-
Fiscal year ended December 31, 1996.................. $35,368 $-0- $-0-
Fiscal year 1998 Percentages:
Commissions with affiliate to total commissions.... -0- -0-
Value of brokerage transactions with affiliate to
total transactions.............................. -0- -0-
</TABLE>

B-38
<PAGE> 68

SHAREHOLDER SERVICES

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

INVESTMENT ACCOUNT

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

SHARE CERTIFICATES

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

RETIREMENT PLANS

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

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<PAGE> 69

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS

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

DIVIDEND DIVERSIFICATION

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

SYSTEMATIC WITHDRAWAL PLAN

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

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

Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held

B-40
<PAGE> 70

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

REINSTATEMENT PRIVILEGE

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

REDEMPTION OF SHARES

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

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

CONTINGENT DEFERRED SALES CHARGE-CLASS A

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

B-41
<PAGE> 71

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 contingent deferred sales
charge. The CDSC-Class B and C is waived on redemptions of Class B Shares and
Class C Shares in the circumstances described below:

REDEMPTION UPON DEATH OR DISABILITY

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

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

REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS

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

B-42
<PAGE> 72

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

REDEMPTION PURSUANT TO A FUND'S SYSTEMATIC WITHDRAWAL PLAN

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

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

NO INITIAL COMMISSION OR TRANSACTION FEE

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

INVOLUNTARY REDEMPTIONS OF SHARES

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

REINVESTMENT OF REDEMPTION PROCEEDS

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

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.

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<PAGE> 73

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 gains, 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 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 gains 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 gains 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.

B-44
<PAGE> 74

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

DISTRIBUTIONS

Distributions of the Fund's net investment income are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gains ("capital gains 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 gains dividends), see "Capital Gains Rates" below. Tax-exempt
shareholders not subject to federal income tax on their income generally will
not be taxed on distributions from the Fund.

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

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

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

SALE OF SHARES

The sale of shares (including transfers in connection with a redemption or
repurchase of shares) 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

B-45
<PAGE> 75

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. 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 gains 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 gains 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 gains dividends and gross proceeds paid to them upon the
sale of their shares. See "Backup Withholding" below.

If income from the Fund or gains realized from the sale of shares is
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will be subject to United States federal income tax
on a net basis at the tax rates applicable to United States citizens or domestic
corporations. Non-U.S. Shareholders that are corporations may also be subject to
an additional "branch profits tax" with respect to income from the Fund that is
effectively connected with a United States trade or business.

The United States Treasury Department has issued Treasury regulations
generally effective for payments made after December 31, 1999 concerning the
withholding of tax and reporting for certain amounts paid to nonresident alien
individuals and foreign

B-46
<PAGE> 76

corporations (the "Final Withholding Regulations"). Among other things, the
Final Withholding Regulations may require Non-U.S. Shareholders to furnish new
certification of their foreign status after December 31, 1999. Prospective
investors should consult their tax advisors concerning the applicability and
effect of the Final Withholding Regulations on an investment in shares of the
Fund.

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

BACKUP WITHHOLDING

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

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

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

GENERAL

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

FUND PERFORMANCE

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

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<PAGE> 77

The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the end of the period. Total return is calculated by
subtracting the value of the initial investment from the ending value and
showing the difference as a percentage of the initial investment; the
calculation assumes the initial investment is made at the current maximum public
offering price (which includes the maximum sales charge for Class A Shares);
that all income dividends or capital gains distributions during the period are
reinvested in Fund shares at net asset value; and that any applicable CDSC has
been paid. The Fund's total return will vary depending on market conditions, the
securities comprising the Fund's portfolio, the Fund's operating expenses and
unrealized net capital gains or losses during the period. Total return is based
on historical earnings and asset value fluctuations and is not intended to
indicate future performance. Since Class A Shares of the Fund were offered at a
maximum sales charge of 4.00% prior to May 10, 1993, and 2.25% from such date to
April 28, 1995, actual Fund total return would have been somewhat different than
that computed on the basis of the current maximum sales charge. No adjustments
are made to reflect any income taxes payable by shareholders on dividends and
distributions paid by the Fund.

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

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

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

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

B-48
<PAGE> 78

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

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

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

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

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

In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds, with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite

B-49
<PAGE> 79

Index, other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking services and by nationally
recognized financial publications. Such comparative performance information will
be stated in the same terms in which the comparative data or indices are stated.
Such advertisements and sales material may also include a yield quotation as of
a current period. In each case, such total return and yield information, if any,
will be calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. For these purposes, the
performance of the Fund, as well as the performance of other mutual funds or
indices, do not reflect sales charges, the inclusion of which would reduce the
Fund's performance. The Fund will include performance data for each class of
shares of the Fund in any advertisement or information including performance
data of the Fund.

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

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

CLASS A SHARES

The Fund's average annual total return assuming payment of the maximum
sales charge, for Class A Shares of the Fund for (i) the one-year period ended
December 31, 1998 was 1.97%, (ii) the five-year period ended December 31, 1998
was 4.21% and (iii) the ten-year period ended December 31, 1998 was 5.98%. The
Fund's cumulative non-standardized total return, including payment of the
maximum sales charge, with respect to the Class A Shares from its inception to
December 31, 1998 was 96.22%. The Fund's cumulative non-standardized total
return, excluding payment of the maximum sales charge, with respect to the Class
A Shares from its inception to December 31, 1998 was 102.75%.

CLASS B SHARES

The Fund's average annual total return assuming payment of the contingent
deferred sales charge, for Class B Shares of the Fund for (i) the one-year
period ended December 31, 1998 was 1.65%, (ii) the five-year period ended
December 31, 1998 was 4.13% and (iii) the approximately seven-year, one-month
period since November 5, 1991, the date the Fund's investment strategy was
implemented, through December 31, 1998 was 3.72%. The Fund's cumulative
non-standardized total return, including payment of the maximum deferred sales
charge, with respect to the Class B Shares from its inception to December 31,
1998 was

B-50
<PAGE> 80

29.85%. The Fund's cumulative non-standardized total return, excluding payment
of the maximum deferred sales charge, with respect to the Class B Shares from
its inception to December 31, 1998 was 29.85%.

CLASS C SHARES

The Fund's average annual total return assuming payment of the contingent
deferred sales charge, for Class C Shares of the Fund for (i) the one-year
period ended December 31, 1998 was 3.57%, (ii) the five-year period ended
December 31, 1998 was 4.13% and (iii) the approximately five-year, seven-month
period since May 10, 1993, the commencement of distribution for Class C shares
of the Fund, through December 31, 1998 was 3.84%. The Fund's cumulative
non-standardized total return, including payment of the maximum deferred sales
charge, with respect to the Class C Shares from its inception to December 31,
1998 was 23.70%. The Fund's cumulative non-standardized total return, excluding
payment of the maximum deferred sales charge, with respect to the Class C Shares
from its inception to December 31, 1998 was 23.70%.

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.

B-51
<PAGE> 81

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).

B-52
<PAGE> 82

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Trustees of

Van Kampen Limited Maturity Government Fund

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen Limited Maturity
Government Fund (the "Fund") at December 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois

February 8, 1999

F-1
<PAGE> 83

PORTFOLIO OF INVESTMENTS

December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ADJUSTABLE RATE MORTGAGE-BACKED
SECURITIES 5.1%
$ 44 Federal Home Loan Mortgage Corp.
Pools.................................. 9.925% 02/01/18 $ 44,470
910 Federal National Mortgage Association
Pools.................................. 7.532 03/01/19 924,622
1,608 Federal National Mortgage Association
Pools.................................. 7.561 09/01/19 1,635,879
-----------
TOTAL ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES....................... 2,604,971
-----------
ASSET BACKED SECURITIES 19.9%
4,000 Deutsche Floorplan Master Trust........ 5.856 02/15/01 4,002,280
3,000 First USA Credit Card Master Trust..... 5.733 04/15/03 3,001,170
3,188 PacificAmerica Home Equity Loan........ 5.916 12/25/27 3,150,175
-----------
TOTAL ASSET BACKED SECURITIES.......................................... 10,153,625
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS 8.7%
623 Federal Home Loan Mortgage Corp.
(Variable Rate Coupon)................. 6.088 04/15/99 623,458
1,523 Federal Home Loan Mortgage Corp.
(Variable Rate Coupon)................. 6.188 04/15/20 1,527,334
172 Federal National Mortgage Association
(Variable Rate Coupon)................. 6.388 02/25/21 172,259
2,100 Saxon Mortgage Securities Corp......... 5.680 11/25/23 2,094,473
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS.............................. 4,417,524
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS 35.0%
5,000 Federal Home Loan Mortgage Corp.
(PAC).................................. 6.250 07/15/18 5,069,900
676 Federal Home Loan Mortgage Corp. 15
Year Pools............................. 9.500 12/01/01 706,760
1,211 Federal Home Loan Mortgage Corp. 30
Year Pools............................. 9.250 12/01/15 1,292,092
1,465 Federal National Mortgage Association
30 Year Pools (15 Year Dwarf).......... 6.500 11/01/09 to 01/01/13 1,485,413
2,077 Federal National Mortgage Association
(PAC).................................. 7.000 01/25/03 2,142,208
1,094 Federal National Mortgage Association
30 Year Pools.......................... 8.500 05/01/21 to 04/01/25 1,147,854
294 Federal National Mortgage Association
30 Year Pools.......................... 9.500 07/01/11 to 08/01/21 314,554
573 Federal National Mortgage Association
30 Year Pools.......................... 10.000 05/01/21 624,247
3,849 Government National Mortgage
Association
30 Year Pools.......................... 7.500 06/15/28 to 09/15/28 3,970,344
94 Government National Mortgage
Association
30 Year Pools.......................... 8.500 06/15/16 to 01/15/17 100,387
159 Government National Mortgage
Association
30 Year Pools.......................... 9.500 03/15/16 to 01/15/19 171,771
376 Government National Mortgage
Association
30 Year Pools.......................... 10.000 03/15/16 to 04/15/19 412,555
</TABLE>

See Notes to Financial Statements

F-2
<PAGE> 84
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
$ 199 Government National Mortgage
Association
30 Year Pools.......................... 10.500% 05/15/13 to 02/15/18 $ 221,145
156 Government National Mortgage
Association
30 Year Pools.......................... 11.000 11/15/18 176,268
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 35.0%........................ 17,835,498
----- -----------
U.S. GOVERNMENT OBLIGATIONS 27.2%
14,000 United States Treasury Notes (a)....... 4.000 10/31/00 13,863,920
-----------
TOTAL LONG-TERM INVESTMENTS 95.9%
(Cost $48,485,872)............................................................. 48,875,538
REPURCHASE AGREEMENT 4.1%
SBC Warburg ($2,075,000 par, collateralized by U.S. Government obligations in a
pooled cash account, dated 12/31/98, to be sold on 01/04/99 at $2,076,095)
(Cost $2,075,000).............................................................. 2,075,000
-----------
TOTAL INVESTMENTS 100.0%
(Cost $50,560,872)............................................................. 50,950,538
OTHER ASSETS IN EXCESS OF LIABILITIES 0.0%...................................... 15,938
-----------
NET ASSETS 100.0%............................................................... $50,966,476
===========
</TABLE>

PAC--Planned Amortization Class

(a) Assets segregated as collateral for open futures transactions.

See Notes to Financial Statements

F-3
<PAGE> 85

STATEMENT OF ASSETS AND LIABILITIES

December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $50,560,872)........................ $50,950,538
Cash........................................................ 4,660
Receivables:
Fund Shares Sold.......................................... 346,185
Interest.................................................. 272,441
Investments Sold.......................................... 30,955
Other....................................................... 47,149
-----------
Total Assets.......................................... 51,651,928
-----------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 301,155
Income Distributions...................................... 120,105
Distributor and Affiliates................................ 57,782
Investment Advisory Fee................................... 21,809
Variation Margin on Futures............................... 688
Trustees' Deferred Compensation and Retirement Plans........ 135,511
Accrued Expenses............................................ 48,402
-----------
Total Liabilities..................................... 685,452
-----------
NET ASSETS.................................................. $50,966,476
===========
NET ASSETS CONSIST OF:
Capital..................................................... $59,874,146
Net Unrealized Appreciation................................. 411,092
Accumulated Distributions in Excess of Net Investment
Income.................................................... (46,250)
Accumulated Net Realized Loss............................... (9,272,512)
-----------
NET ASSETS.................................................. $50,966,476
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $35,219,022 and 2,896,387 shares of
beneficial interest issued and outstanding)............. $ 12.16
Maximum sales charge (3.25%* of offering price)......... .41
-----------
Maximum offering price to public........................ $ 12.57
===========
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $12,439,045 and 1,019,808 shares of
beneficial interest issued and outstanding)............. $ 12.20
===========
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $3,308,409 and 271,571 shares of
beneficial interest issued and outstanding)............. $ 12.18
===========
</TABLE>

*On sales of $25,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

F-4
<PAGE> 86

STATEMENT OF OPERATIONS

For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $3,199,339
Fee Income.................................................. 243,844
----------
Total Income............................................ 3,443,183
----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $78,771, $132,921 and $33,967,
respectively)............................................. 245,659
Investment Advisory Fee..................................... 245,261
Shareholder Services........................................ 100,792
Accounting.................................................. 64,929
Registration and Filing Fees................................ 53,965
Trustees' Fees and Expenses................................. 18,166
Custody..................................................... 12,896
Legal....................................................... 2,264
Other....................................................... 81,044
----------
Total Expenses.......................................... 824,976
----------
NET INVESTMENT INCOME....................................... $2,618,207
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (242,488)
Futures................................................... 44,705
Forward Commitments....................................... 85,762
----------
Net Realized Loss........................................... (112,021)
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 453,759
----------
End of the Period:
Investments............................................. 389,666
Futures................................................. 21,426
----------
411,092
----------
Net Unrealized Depreciation During the Period............... (42,667)
----------
NET REALIZED AND UNREALIZED LOSS............................ $ (154,688)
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $2,463,519
==========
</TABLE>

See Notes to Financial Statements

F-5
<PAGE> 87

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 2,618,207 $ 3,271,677
Net Realized Loss..................................... (112,021) (147,652)
Net Unrealized Appreciation/Depreciation
During the Period................................... (42,667) 184,520
----------- -----------
Change in Net Assets from Operations.................. 2,463,519 3,308,545
Distributions from Net Investment Income*............. (2,577,038) (3,115,620)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (113,519) 192,925
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................. 33,962,320 40,769,266
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................ 1,577,636 1,972,876
Cost of Shares Repurchased............................ (44,219,999) (50,576,668)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.... (8,680,043) (7,834,526)
----------- -----------
TOTAL DECREASE IN NET ASSETS.......................... (8,793,562) (7,641,601)
NET ASSETS:
Beginning of the Period............................... 59,760,038 67,401,639
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of $(46,250) and $20,201,
respectively)....................................... $50,966,476 $59,760,038
=========== ===========
</TABLE>

<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Distributions from Net Investment
Income:
Class A Shares.................... $(1,789,709) $(2,049,150)
Class B Shares.................... (626,148) (875,834)
Class C Shares.................... (161,181) (190,636)
----------- -----------
$(2,577,038) $(3,115,620)
=========== ===========
</TABLE>

See Notes to Financial Statements

F-6
<PAGE> 88

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class A Shares 1998(a) 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period... $12.191 $12.151 $ 12.41 $ 11.90 $ 12.42
------- ------- ------- ------- -------
Net Investment Income...................... .685 .685 .627 .67 .50
Net Realized and Unrealized Gain/Loss...... (.043) .015 (.226) .4888 (.4817)
------- ------- ------- ------- -------
Total from Investment Operations........... .642 .700 .401 1.1588 .0183
Less Distributions from and in Excess of
Net Investment Income.................... .673 .660 .660 .6488 .5383
------- ------- ------- ------- -------
Net Asset Value, End of the Period......... $12.160 $12.191 $12.151 $ 12.41 $ 11.90
======= ======= ======= ======= =======
Total Return* (b).......................... 5.40% 5.92% 3.34% 9.96% .16%
Net Assets at End of the Period (In
millions)................................ $ 35.2 $ 39.4 $ 40.2 $ 45.4 $ 41.2
Ratio of Expenses to Average Net Assets*... 1.42% 1.32% 1.45% 1.45% 1.15%
Ratio of Net Investment Income to Average
Net Assets*.............................. 5.61% 5.68% 5.23% 5.47% 4.75%
Portfolio Turnover......................... 249% 175% 260% 187% 161%

* If certain expenses had not been
reimbursed by Van Kampen, Total
Return would have been lower
and the ratios would have been
as follows:

Ratio of Expenses to Average Net Assets.... N/A N/A 1.47% 1.50% 1.31%
Ratio of Net Investment Income to Average
Net Assets............................... N/A N/A 5.21% 5.42% 4.58%
</TABLE>

(a) Based on average shares outstanding.

(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A--Not Applicable.

See Notes to Financial Statements

F-7
<PAGE> 89

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class B Shares 1998(a) 1997(a) 1996(a) 1995(a) 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.... $12.220 $12.174 $ 12.43 $ 11.91 $ 12.43
------- ------- ------- ------- -------
Net Investment Income....................... .590 .598 .550 .57 .42
Net Realized and Unrealized Gain/Loss....... (.036) .012 (.242) .5028 (.4977)
------- ------- ------- ------- -------
Total from Investment Operations............ .554 .610 .308 1.0728 (.0777)
Less Distributions from and in Excess of
Net Investment Income..................... .577 .564 .564 .5528 .4423
------- ------- ------- ------- -------
Net Asset Value, End of the Period.......... $12.197 $12.220 $12.174 $ 12.43 $ 11.91
======= ======= ======= ======= =======
Total Return* (b)........................... 4.65% 5.08% 2.69% 9.09% (.62%)
Net Assets at End of the Period (In
millions)................................. $ 12.4 $ 16.2 $ 22.5 $ 30.3 $ 18.4
Ratio of Expenses to Average Net Assets*.... 2.19% 2.11% 2.19% 2.24% 1.91%
Ratio of Net Investment Income to Average
Net Assets*............................... 4.82% 4.92% 4.50% 4.63% 3.99%
Portfolio Turnover.......................... 249% 175% 260% 187% 161%

* If certain expenses had not been
reimbursed by Van Kampen, Total
Return would have been lower and
the ratios would have been
as follows:

Ratio of Expenses to Average Net Assets..... N/A N/A 2.22% 2.29% 2.08%
Ratio of Net Investment Income to Average
Net Assets................................ N/A N/A 4.47% 4.59% 3.82%
</TABLE>

(a) Based on average shares outstanding.

(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A--Not Applicable

See Notes to Financial Statements

F-8
<PAGE> 90

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class C Shares 1998(a) 1997 1996 1995(a) 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period... $12.206 $12.162 $ 12.42 $ 11.90 $ 12.41
------- ------- ------- ------- -------
Net Investment Income...................... .582 .597 .554 .57 .45
Net Realized and Unrealized Gain/Loss...... (.029) .011 (.248) .5028 (.5177)
------- ------- ------- ------- -------
Total from Investment Operations........... .553 .608 .306 1.0728 (.0677)
Less Distributions from and in Excess of
Net Investment Income.................... .577 .564 .564 .5528 .4423
------- ------- ------- ------- -------
Net Asset Value, End of the Period......... $12.182 $12.206 $12.162 $ 12.42 $ 11.90
======= ======= ======= ======= =======
Total Return* (b).......................... 4.57% 5.17% 2.62% 9.10% (.55%)
Net Assets at End of the Period (In
millions)................................ $ 3.3 $ 4.2 $ 4.7 $ 6.2 $ 5.8
Ratio of Expenses to Average Net Assets*... 2.19% 2.10% 2.20% 2.23% 1.90%
Ratio of Net Investment Income to Average
Net Assets*.............................. 4.76% 4.92% 4.48% 4.71% 3.98%
Portfolio Turnover......................... 249% 175% 260% 187% 161%

* If certain expenses had not been
reimbursed by Van Kampen, Total
Return would have been lower and
the ratios would have been
as follows:

Ratio of Expenses to Average Net Assets.... N/A N/A 2.22% 2.27% 2.07%
Ratio of Net Investment Income to Average
Net Assets............................... N/A N/A 4.45% 4.67% 3.81%
</TABLE>

(a) Based on average shares outstanding.

(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

N/A--Not Applicable

See Notes to Financial Statements

F-9

<PAGE> 91

NOTES TO FINANCIAL STATEMENTS

December 31, 1998
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen Limited Maturity Government Fund (the "Fund") is organized as a
Delaware business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek to provide a high current return and
relative safety of capital by primarily investing in mortgage-related securities
issued or guaranteed by an agency or instrumentality of the U.S. Government. The
Fund commenced investment operations on June 16, 1986. The distribution of the
Fund's Class B and Class C shares commenced on November 5, 1991 and May 10,
1993, respectively.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

A. SECURITY VALUATION--Investments are stated at value using market quotations
or indications of value obtained from an independent pricing service. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the Board
of Trustees. The Fund's security valuation methodology was changed in 1998 from
bid side pricing to the mean of the bid and asked prices. The impact of the
change, which was not material, is included as a component of the change in
unrealized appreciation/depreciation for the year ended December 31, 1998.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

The Fund trades certain securities under the terms of forward commitments,
whereby the settlement for payment and delivery occurs at a specified future
date. Forward commitments are privately negotiated transactions between the Fund
and dealers. Upon executing a forward commitment and during the period of
obligation, the Fund maintains collateral of cash or securities in a segregated
account with its custodian in an amount sufficient to relieve the obligation. If
the intent of the Fund is to accept delivery of a

F-10
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

security traded under a forward purchase commitment, the commitment is recorded
as a long-term purchase. For forward purchase commitments for which security
settlement is not intended by the Fund, changes in the value of the commitment
are recognized by marking the commitment to market on a daily basis. Certain
forward commitments are entered into with the intent of recognizing fee income
which results from the difference between the price of a forward settlement
security versus the current cash settlement price of the same security. Upon the
closing of these forward commitments, this income is recognized and is shown as
fee income on the Statement of Operations.

The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.

C. INCOME AND EXPENSES--Interest income is recorded on an accrual basis.
Discounts are amortized over the expected life of each applicable security.
Premiums on debt securities are not amortized. Expenses of the Fund are
allocated on a pro rata basis to each class of shares, except for distribution
and service fees and transfer agency costs which are unique to each class of
shares.

D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At December 31, 1998, the Fund had an accumulated capital loss
carryforward for tax purposes of $8,815,097 which will expire between December
31, 1999 and December 31, 2004. Of this amount, $12,348 will expire on December
31, 1999. Net realized loss may differ for financial and

F-11

<PAGE> 93
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

tax reporting purposes primarily as a result of post October 31 losses which are
not recognized for tax purposes until the first day of the following fiscal
year, the deferral of losses for tax purposes resulting from wash sales and
gains recognized for tax purposes on open futures positions at December 31,
1998.

At December 31, 1998, for federal income tax purposes the cost of long- and
short-term investments is $50,561,704, the aggregate gross unrealized
appreciation is $496,447 and the aggregate gross unrealized depreciation is
$107,613, resulting in unrealized appreciation on long- and short-term
investments of $388,834.

E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Due to the inherent differences in the recognition of
income, expenses and realized gains/losses under generally accepted accounting
principles and for federal income tax purposes, permanent differences relating
to the recognition of certain expenses which are not deductible for tax purposes
totaling $1,249 were reclassified from accumulated distributions in excess of
net investment income to capital. Permanent book and tax differences related to
paydown losses on mortgage-backed securities totaling $108,869 have been
reclassified from accumulated net realized loss to accumulated distributions in
excess of net investment income.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee, payable
monthly as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $1 billion........................................ .500 of 1%
Next $1 billion........................................ .475 of 1%
Next $1 billion........................................ .450 of 1%
Next $1 billion........................................ .400 of 1%
Over $4 billion........................................ .350 of 1%
</TABLE>

For the year ended December 31, 1998, the Fund recognized expenses of
approximately $2,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

For the year ended December 31, 1998, the Fund recognized expenses of
approximately $64,900 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.

F-12

<PAGE> 94
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended
December 31, 1998, the Fund recognized expenses of approximately $73,600.
Beginning in 1998, the transfer agency fees are determined through negotiations
with the Fund's Board of Trustees and are based on competitive market
benchmarks.

Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.

The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.

F-13
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

At December 31, 1998, capital aggregated $45,665,493, $11,294,002 and
$2,914,651 for Classes A, B and C, respectively. For the year ended December 31,
1998, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A...................................... 1,449,715 $ 17,709,670
Class B...................................... 521,188 6,401,373
Class C...................................... 805,325 9,851,277
---------- ------------
Total Sales.................................... 2,776,228 $ 33,962,320
========== ============
Dividend Reinvestment:
Class A...................................... 92,435 $ 1,128,107
Class B...................................... 27,879 341,146
Class C...................................... 8,863 108,383
---------- ------------
Total Dividend Reinvestment.................... 129,177 $ 1,577,636
========== ============
Repurchases:
Class A...................................... (1,875,249) $(22,928,861)
Class B...................................... (852,542) (10,436,057)
Class C...................................... (888,221) (10,855,081)
---------- ------------
Total Repurchases.............................. (3,616,012) $(44,219,999)
========== ============
</TABLE>

F-14
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

At December 31, 1997, capital aggregated $49,757,530, $14,987,776 and
$3,810,132 for Classes A, B and C, respectively. For the year ended December 31,
1997, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A..................................... 2,697,413 $ 32,731,390
Class B..................................... 186,057 2,257,587
Class C..................................... 475,531 5,780,289
---------- ------------
Total Sales................................... 3,359,001 $ 40,769,266
========== ============
Dividend Reinvestment:
Class A..................................... 108,340 $ 1,315,537
Class B..................................... 41,662 506,808
Class C..................................... 12,383 150,531
---------- ------------
Total Dividend Reinvestment................... 162,385 $ 1,972,876
========== ============
Repurchases:
Class A..................................... (2,886,550) $(35,029,758)
Class B..................................... (752,883) (9,146,731)
Class C..................................... (526,585) (6,400,179)
---------- ------------
Total Repurchases............................. (4,166,018) $(50,576,668)
========== ============
</TABLE>

Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares will
automatically convert to Class A shares after the eighth year following
purchase. The CDSC will be imposed on most redemptions made within four years of
the purchase for Class B and one year of the purchase for Class C as detailed in
the following schedule.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
-------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------------------------------------
<S> <C> <C>
First.......................................... 3.00% 1.00%
Second......................................... 2.50% None
Third.......................................... 2.00% None
Fourth......................................... 1.00% None
Fifth and Thereafter........................... None None
</TABLE>

F-15
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

For the year ended December 31, 1998, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $11,400 and CDSC on redeemed shares of approximately $22,400.
Sales charges do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $112,690,824 and $131,510,542,
respectively.

5. DERIVATIVE FINANCIAL INSTRUMENTS

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

The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except in instances where the
Fund accepts delivery of a security underlying a futures contract. In these
situations, the recognition of gain or loss is postponed until the disposal of
the security underlying the futures contract.

During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in exchange traded futures contracts on U.S. Treasury Bonds
and typically closes the contract prior to the delivery date. These contracts
are generally used to manage the portfolio's effective maturity and duration.

Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin). The risk of loss associated with a
futures contract is in excess of the variation margin reflected on the Statement
of Assets and Liabilities.

F-16
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

Transactions in futures contracts for the year ended December 31, 1998, were
as follows:

<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1997............................ 10
Futures Opened.............................................. 1,176
Futures Closed.............................................. (1,142)
------
Outstanding at December 31, 1998............................ 44
======
</TABLE>

The futures contracts outstanding as of December 31, 1998, and the
description and unrealized appreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C>
Long Contracts--5 Year U.S. Treasury Note
Futures March 1999 (Current notional value
$113,344 per contract)....................... 44 $21,426
== =======
</TABLE>

6. MORTGAGE BACKED SECURITIES

A Mortgage Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participations in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies--Government National Mortgage Association (GNMA), Federal
National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC).

A Collateralized Mortgage Obligation (CMO) is a bond which is collateralized
by a pool of MBS's. These MBS pools are divided into classes or tranches with
each class having its own characteristics. For instance, a PAC (Planned
Amortization Class) is a specific class of mortgages which over its life will
generally have the most stable cash flows and the lowest prepayment risk.

7. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.

Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended December 31, 1998, are payments retained by Van Kampen of
approximately $126,900.

F-17
<PAGE> 99

PART C. OTHER INFORMATION

ITEM 23. EXHIBITS.

<TABLE>
<S> <C>
(a) (1) First Amended and Restated Agreement and Declaration of
Trust(1)
(2) Certificate of Amendment(1)
(3) Second Certificate of Amendment(6)
(4) Amended and Restated Certificate of Designation(5)
(5) Second Amended and Restated Certificate of Designation(6)
(b) Amended and Restated Bylaws(1)
(c) (1) Specimen Class A Share Certificate(2)
(2) Specimen Class B Share Certificate(2)
(3) Specimen Class C Share Certificate(2)
(d) Investment Advisory Agreement(5)
(e) (1) Distribution and Service Agreement(5)
(2) Form of Dealer Agreement(2)
(3) Form of Broker Agreement(2)
(4) Form of Bank Agreement(2)
(f) (1) Form of Trustee Deferred Compensation Plan(7)
(2) Form of Trustee Retirement Plan(7)
(g) (1) Custodian Contract(3)
(2) Transfer Agency and Service Agreement(4)
(h) (1) Data Access Services Agreement(2)
(2) Fund Accounting Agreement(4)
(i) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(2)
(j) Consent of PricewaterhouseCoopers LLP+
(k) Not Applicable
(l) Investment Letter+
(m) (1) Plan of Distribution Pursuant to 12b-1(2)
(2) Form of Shareholder Assistance Agreement(2)
(3) Form of Administrative Service Agreement(2)
(4) Service Plan(2)
(n) Financial Data Schedules+
(o) Amended Multi-Class Plan(2)
(p) Power of Attorney(6)
(z) (1) List of Certain Investment Companies in Response to Item
27(a)(7)
(2) List of Officers and Directors of Van Kampen Funds Inc. in
Response to Item 27(b)(7)
</TABLE>

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

(1) Incorporated herein by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A, File Number 33-1705, filed
April 19, 1996.

(2) Incorporated herein by reference to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A, File Number 33-1705, filed
April 29, 1997.

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

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

(5) Incorporated herein by reference to Post-Effective Amendment No. 20 to the
Registrant's Registration Statement on Form N-1A, File Number 33-1705, filed
April 29, 1998.

(6) Incorporated herein by reference to Post-Effective Amendment No. 21 to the
Registrant's Registration Statement on Form N-1A, File Number 33-1705, filed
March 1, 1999.

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

+ Filed herewith.

C-1
<PAGE> 100

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

Not applicable.

ITEM 25. INDEMNIFICATION.

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

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

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

Conditional advancing of indemnification monies may be made if the trustee or
officer undertakes to repay the advance unless it is ultimately determined that
he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides 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 Van Kampen Asset Management Inc. (the "Adviser"). For
information as to the business, profession, vocation and employment of a
substantial nature of directors and officers of the Adviser, reference is made
to the Adviser's current Form ADV (File No. 801-1669) filed under the Investment
Advisers Act of 1940, as amended, incorporated herein by reference.

ITEM 27. PRINCIPAL UNDERWRITERS.

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

(b) Van Kampen Funds Inc. which is an affiliated person of an affiliated
person of Registrant, is the sole principal underwriter for Registrant. The
name, principal business address and positions and offices with Van Kampen Funds
Inc. of each of the directors and officers are disclosed in Exhibit(z)(2).
Except as disclosed

C-2
<PAGE> 101

under the heading, "Trustees and Officers" in Part B of this Registration
Statement, none of such persons has any position or office with Registrant.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

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

ITEM 29. MANAGEMENT SERVICES.

Not applicable.

ITEM 30. UNDERTAKINGS.

Not applicable.

C-3
<PAGE> 102

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, VAN KAMPEN LIMITED MATURITY GOVERNMENT
FUND, certifies that it meets all of the requirements for effectiveness of this
Amendment to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Oakbrook Terrace and the State of Illinois, on the
30th day of April, 1999.

VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND

By: /s/ DENNIS J. McDONNELL
Dennis J. McDonnell, President

Pursuant to the requirements of the Securities Act of 1933, this Amendment to
this Registration Statement has been signed on April 30, 1999 by the following
persons in the capacities indicated:

<TABLE>
<C> <S> <C>
SIGNATURES TITLE
- ----------------------------------------------------- -------------------------------------
Principal Executive Officer:
/s/ DENNIS J. McDONNELL President
- -----------------------------------------------------
Dennis J. McDonnell
Principal Financial Officer:
/s/ JOHN L. SULLIVAN* Vice President, Chief Financial
- ----------------------------------------------------- Officer and Treasurer
John L. Sullivan
Trustees:

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

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

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

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

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

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

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

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

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

/s/ PAUL G. YOVOVICH* Trustee
- -----------------------------------------------------
Paul G. Yovovich
* Signed by Dennis J. McDonnell pursuant to a power of attorney filed herewith.
/s/ DENNIS J. McDONNELL April 30, 1999
- -----------------------------------------------------
DENNIS J. McDONNELL
Attorney-in-Fact
</TABLE>

<PAGE> 103

SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 22 TO FORM N-1A

AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION

ON APRIL 30, 1999

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
(j) Consent of PricewaterhouseCoopers LLP
(l) Investment Letter
(n) Financial Data Schedules
</TABLE>

<PAGE> 1

EXHIBIT (j)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 22 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 8, 1999, relating to the financial statements and financial highlights
of Van Kampen Limited Maturity Government Fund, which appears in such Statement
of Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the references to us under the headings "Financial Highlights"
and "Independent Accountants" in such Prospectus and to the reference to us
under the heading "Independent Accountants" in such Statement of Additional
Information.

/s/ PRICEWATERHOUSECOOPERS LLP

PRICEWATERHOUSECOOPERS LLP

Chicago, Illinois
April 26, 1999

<PAGE> 1
EXHIBIT(l)

[LETTERHEAD]

May 23, 1986

American Capital Federal
Mortgage Trust
2800 Post Oak Blvd.
Houston, TX 77056

Re: Investment Letter

Gentlemen:

We are purchasing 714,796.283 shares of your beneficial interest $0.01 par
value (the "Shares") at a price of $13.99 per share upon the terms and
conditions set forth below.

We understand that the Shares have not been registered under any state or
federal securities laws and that the Fund is relying on certain exemptions from
such registration requirements including exemptions dependent upon our intent in
acquiring the Shares. We also understand that any resale of the Shares or any
portion thereof may be subject to restrictions under state and federal
securities laws. Thus we may be required to bear the economic risk of an
investment in the Shares for an indefinite period of time.

We hereby represent and warrant that we are acquiring the Shares solely for
our own account and solely for investment purposes and not with a view to the
resale, redemption or disposition of all or any part thereof and that we have no
present plan or intention to sell, redeem or otherwise dispose of the Shares or
any part thereof. We also represent that the Shares will not be resold except
through redemption or repurchase.

Very truly yours,

AMERICAN CAPITAL ASSET MANAGEMENT,
INC.

By /s/ Nori L. Gabert
---------------------------------
Nori L. Gabert
Secretary

<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> LTD MAT GOVT A

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 50,560,872<F1>
<INVESTMENTS-AT-VALUE> 50,950,538<F1>
<RECEIVABLES> 649,581<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 51,809<F1>
<TOTAL-ASSETS> 51,651,928<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 685,452<F1>
<TOTAL-LIABILITIES> 685,452<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,665,493
<SHARES-COMMON-STOCK> 2,896,387
<SHARES-COMMON-PRIOR> 3,229,486
<ACCUMULATED-NII-CURRENT> (46,250)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,272,512)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 411,092<F1>
<NET-ASSETS> 35,219,022
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 3,199,339<F1>
<OTHER-INCOME> 243,844<F1>
<EXPENSES-NET> (824,976)<F1>
<NET-INVESTMENT-INCOME> 2,618,207<F1>
<REALIZED-GAINS-CURRENT> (112,021)<F1>
<APPREC-INCREASE-CURRENT> (42,667)<F1>
<NET-CHANGE-FROM-OPS> 2,463,519<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,789,709)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,449,715
<NUMBER-OF-SHARES-REDEEMED> (1,875,249)
<SHARES-REINVESTED> 92,435
<NET-CHANGE-IN-ASSETS> (4,152,198)
<ACCUMULATED-NII-PRIOR> 20,201<F1>
<ACCUMULATED-GAINS-PRIOR> (9,269,360)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 245,261<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 824,976<F1>
<AVERAGE-NET-ASSETS> 32,359,803
<PER-SHARE-NAV-BEGIN> 12.191
<PER-SHARE-NII> 0.685
<PER-SHARE-GAIN-APPREC> (0.043)
<PER-SHARE-DIVIDEND> (0.673)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.160
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite
basis and not on a class basis
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> LTD MAT GOVT B
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 50,560,872<F1>
<INVESTMENTS-AT-VALUE> 50,950,538<F1>
<RECEIVABLES> 649,581<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 51,809<F1>
<TOTAL-ASSETS> 51,651,928<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 685,452<F1>
<TOTAL-LIABILITIES> 685,452<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,294,002
<SHARES-COMMON-STOCK> 1,019,808
<SHARES-COMMON-PRIOR> 1,323,283
<ACCUMULATED-NII-CURRENT> (46,250)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,272,512)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 411,092<F1>
<NET-ASSETS> 12,439,045
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 3,199,339<F1>
<OTHER-INCOME> 243,844<F1>
<EXPENSES-NET> (824,976)<F1>
<NET-INVESTMENT-INCOME> 2,618,207<F1>
<REALIZED-GAINS-CURRENT> (112,021)<F1>
<APPREC-INCREASE-CURRENT> (42,667)<F1>
<NET-CHANGE-FROM-OPS> 2,463,519<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (626,148)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 521,188
<NUMBER-OF-SHARES-REDEEMED> (852,542)
<SHARES-REINVESTED> 27,879
<NET-CHANGE-IN-ASSETS> (3,731,268)
<ACCUMULATED-NII-PRIOR> 20,201<F1>
<ACCUMULATED-GAINS-PRIOR> (9,269,360)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 245,261<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 824,976<F1>
<AVERAGE-NET-ASSETS> 13,284,610
<PER-SHARE-NAV-BEGIN> 12.220
<PER-SHARE-NII> 0.590
<PER-SHARE-GAIN-APPREC> (0.036)
<PER-SHARE-DIVIDEND> (0.577)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.197
<EXPENSE-RATIO> 2.19
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite
basis and not on a class basis
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> LTD MAT GOVT C

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 50,560,872<F1>
<INVESTMENTS-AT-VALUE> 50,950,538<F1>
<RECEIVABLES> 649,581<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 51,809<F1>
<TOTAL-ASSETS> 51,651,928<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 685,452<F1>
<TOTAL-LIABILITIES> 685,452<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,914,651
<SHARES-COMMON-STOCK> 271,571
<SHARES-COMMON-PRIOR> 345,604
<ACCUMULATED-NII-CURRENT> (46,250)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,272,512)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 411,092<F1>
<NET-ASSETS> 3,308,409
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 3,199,339<F1>
<OTHER-INCOME> 243,844<F1>
<EXPENSES-NET> (824,976)<F1>
<NET-INVESTMENT-INCOME> 2,618,207<F1>
<REALIZED-GAINS-CURRENT> (112,021)<F1>
<APPREC-INCREASE-CURRENT> (42,667)<F1>
<NET-CHANGE-FROM-OPS> 2,463,519<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (161,181)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 805,325
<NUMBER-OF-SHARES-REDEEMED> (888,221)
<SHARES-REINVESTED> 8,863
<NET-CHANGE-IN-ASSETS> (910,096)
<ACCUMULATED-NII-PRIOR> 20,201<F1>
<ACCUMULATED-GAINS-PRIOR> (9,269,360)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 245,261<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 824,976<F1>
<AVERAGE-NET-ASSETS> 3,398,698
<PER-SHARE-NAV-BEGIN> 12,206
<PER-SHARE-NII> 0.582
<PER-SHARE-GAIN-APPREC> (0.029)
<PER-SHARE-DIVIDEND> (0.577)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.182
<EXPENSE-RATIO> 2.19
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>

</TABLE>