VAN KAMPEN EQUITY INCOME FUND, 485BPOS, 2000-04-28

VAN KAMPEN EQUITY INCOME FUND
485BPOS, 2000-04-28

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<PAGE> 1

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

REGISTRATION NO. 2-15957
811-919
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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. 77 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 27 [X]
</TABLE>

VAN KAMPEN EQUITY INCOME 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
EQUITY INCOME FUND

Van Kampen Equity Income Fund is a mutual fund with the primary investment
objective to seek the highest possible income consistent with safety of
principal. Long-term growth of capital is an important secondary investment
objective. The Fund's investment adviser seeks to achieve the Fund's investment
objectives by investing primarily in income-producing equity instruments and
debt securities issued by a wide group of companies in many different
industries.

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

This prospectus is dated APRIL 28, 2000.

[VAN KAMPEN FUNDS LOGO]
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 6
Investment Objectives, Policies and Risks.......... 7
Investment Advisory Services....................... 11
Purchase of Shares................................. 12
Redemption of Shares............................... 18
Distributions from the Fund........................ 20
Shareholder Services............................... 20
Federal Income Taxation............................ 22
Financial Highlights............................... 24
</TABLE>

No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus, in connection with the offer contained in this prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, the Fund's investment adviser or the
Fund's distributor. This prospectus does not constitute an offer by the Fund or
by the Fund's distributor to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the Fund to make such an offer in such jurisdiction.
<PAGE> 4

RISK/RETURN SUMMARY

INVESTMENT OBJECTIVES

The Fund is a mutual fund with the primary investment objective to seek the
highest possible income consistent with safety of principal. Long-term growth of
capital is an important secondary investment objective.

INVESTMENT STRATEGIES

The Fund's investment adviser seeks to achieve the Fund's investment objectives
by investing primarily in income-producing equity instruments (including common
stocks, preferred stocks and convertible securities) and investment grade
quality debt securities. Investment grade securities are securities rated BBB or
higher by Standard & Poor's ("S&P") or Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or unrated securities determined by the Fund's
investment adviser to be of comparable quality. The composition of the Fund's
portfolio will vary over time based upon evaluations of economic conditions by
the Fund's investment adviser and its belief about which securities would best
accomplish the Fund's investment objectives. The Fund emphasizes a "value" style
of investing, seeking well-established, undervalued companies that the Fund's
investment adviser believes offer the potential for income with safety of
principal and long-term growth of capital. Portfolio securities are typically
sold when the Fund's investment adviser's assessments of the income or growth
potential of such securities materially change. Under normal market conditions,
the Fund invests at least 65% of its total assets in income-producing equity
securities. The Fund may invest up to 15% of its total assets in securities of
foreign issuers. The Fund may purchase and sell certain derivative instruments,
such as options, futures and options on futures, for various portfolio
management purposes.

INVESTMENT RISKS

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

MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. A "value" style of
investing emphasizes undervalued companies with characteristics for improved
valuations. This style of investing is subject to the risk that the valuations
never improve or that the returns on value equity securities are less than
returns on other styles of investing or the overall stock market. Investments in
equity securities generally are affected by changes in the stock markets, which
fluctuate substantially over time, sometimes suddenly and sharply. During an
overall stock market decline, stock prices of small- or medium-sized companies
often fluctuate more than the stock prices of larger companies.

Investments in debt securities generally are affected by changes in interest
rates and the creditworthiness of the issuer. The market prices of such
securities tend to fall as interest rates rise, and such declines tend to be
greater among securities with longer duration.

The prices of convertible securities are affected by changes similar to those of
debt and equity securities. The value of a convertible security tends to decline
as interest rates rise and, because of the conversion feature, tends to vary
with fluctuations in the market value of the underlying equity security.

INCOME RISK. The ability of the Fund's equity securities to generate income
generally depends on the earnings and the continuing declaration of dividends by
the issuers of such securities. The interest income on debt securities generally
is affected by prevailing interest rates, which can vary widely over the short
and long term. If dividends are reduced or discontinued or interest rates drop,
your income from the Fund may drop as well.

CALL RISK. If interest rates fall, it is possible that issuers of callable
convertible and nonconvertible debt securities held by the Fund will call or
prepay their securities before their maturity dates. In this event, the proceeds
from the called securities would most likely be reinvested by the Fund in
securities bearing the new, lower interest rates, resulting in a possible
decline in the Fund's income and distributions to shareholders and termination
of any conversion option on convertible securities.

CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Because the Fund generally invests only in investment

3
<PAGE> 5

grade-quality debt securities, it is subject to a lower level of credit risk
than a fund investing in lower-quality securities. Securities rated BBB by S&P
or Baa by Moody's are in the lowest of the four investment grades and are
considered by the rating agencies to be medium-grade obligations, which possess
speculative characteristics so that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of the issuer to
make principal and interest payments than in the case of higher-rated
securities.

FOREIGN RISKS. Because the Fund may own securities of foreign issuers, it may be
subject to risks not usually associated with owning securities of U.S. issuers.
These risks can include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading, and foreign
taxation issues.

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

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

INVESTOR PROFILE

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

- - Seek a high level of income

- - Seek to grow their capital over the long term

- - Can withstand volatility in the value of their shares of the Fund

- - Wish to add to their investment portfolio a fund that emphasizes a "value"
style of investing and invests primarily in income-producing equity
instruments

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

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

ANNUAL PERFORMANCE

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

<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C> <C>
1990 -4.68
1991 26.67
1992 10.72
1993 16.00
1994 -1.98
1995 32.57
1996 15.55
1997 24.13
1998 16.99
1999 9.95
</TABLE>

The Fund's return for the three-month period ended March 31, 2000 was 6.47%.

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

4
<PAGE> 6

portfolio of securities; however, the actual annual returns of the Class B
Shares and Class C Shares would be lower than the annual returns shown for the
Fund's Class A Shares because of differences in the expenses borne by each class
of shares.

During the ten-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 12.91% (for the quarter ended June 30, 1997) and the
lowest quarterly return was -12.21% (for the quarter ended September 30, 1990).

COMPARATIVE PERFORMANCE

As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with two broad-based market indices
that the Fund's investment adviser believes are appropriate benchmarks for the
Fund: Standard & Poor's 500-Stock Index* and the Russell 1000 Value Index**; and
also with the Lipper Equity Income Fund Index***, an index of funds with similar
investment objectives. The Fund's performance figures include the maximum sales
charges paid by investors. The indices' performance figures do not include any
commissions or sales charges that would be paid by investors purchasing the
securities represented by the indices. An investment can not be made directly in
the indices. Average annual total returns are shown for the periods ended
December 31, 1999 (the most recently completed calendar year prior to the date
of this prospectus). Remember that the past performance of the Fund is not
indicative of its future performance.

<TABLE>
<CAPTION>
Average Annual
Total Returns
for the
Periods Ended Past Past Since
December 31, 1999 1 Year 5 Years Inception
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen Equity
Income Fund--
Class A Shares 3.59% 18.21% 13.37%
Standard & Poor's
500-Stock Index 21.04% 28.56% 18.21%
Russell 1000
Value Index 7.35% 23.07% 15.60%
Lipper Equity
Income Fund Index 4.19% 17.80% 13.03%
.......................................................
Van Kampen Equity
Income Fund--
Class B Shares 4.31% 18.53% 14.93%(1)****
Standard & Poor's
500-Stock Index 21.04% 28.56% 20.67%(1)
Russell 1000
Value Index 7.35% 23.07% 17.87%(2)
Lipper Equity
Income Fund Index 4.19% 17.80% 14.24%(1)
.......................................................
Van Kampen Equity
Income Fund--
Class C Shares 8.21% 18.69% 15.03%(3)
Standard & Poor's
500-Stock Index 21.04% 28.56% 22.61%(4)
Russell 1000
Value Index 7.35% 23.07% 17.78%(5)
Lipper Equity
Income Fund Index 4.19% 17.80% 14.25%(3)
.......................................................
</TABLE>

Inception dates: (1) 5/1/92, (2) 4/30/92, (3) 7/6/93, (4) 7/8/93, (5) 6/30/93.

* The Standard and Poor's 500-Stock Index consists of 500 widely-held common
stocks of companies with market capitalization of $1 billion or more that
are a representative sample of approximately 100 industries, chosen mainly
for market size, liquidity and industry group representation (assumes
dividends are reinvested).

** The Russell 1000 Value Index measures the performance of those Russell 1000
Index companies with lower price-to-book ratios and lower forecasted growth
values. The Russell 1000 Index is an index of the 1,000 largest U.S.
companies based on market capitalization.

*** Since Lipper Analytical Services has reclassified how it categorizes many of
its indices, the Fund's investment adviser believes the new system is less
applicable for this Fund. Based on the Fund's asset composition, the Fund's
investment adviser believes adding the Russell 1000 Value Index provides a
more appropriate benchmark for the Fund, and the Lipper Equity Income Fund
Index will not be shown in future prospectuses of the Fund.

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

5
<PAGE> 7

FEES AND EXPENSES
OF THE FUND

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

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

SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering 5.75%(1) None None
price)
......................................................
Maximum deferred sales
charge (load) (as a
percentage of the
lesser of original
purchase price or
redemption proceeds) None(2) 5.00%(3) 1.00%(4)
......................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
......................................................
Redemption fees None None None
......................................................
Exchange fee None None None
......................................................

ANNUAL FUND OPERATING EXPENSES

(expenses that are deducted from Fund assets)
- ------------------------------------------------------
Management fees 0.37% 0.37% 0.37%
......................................................
Distribution and/or
service (12b-1)
fees(5) 0.25% 1.00%(6) 1.00%(6)
......................................................
Other expenses 0.20% 0.21% 0.21%
......................................................
Total annual fund
operating expenses
0.82% 1.58% 1.58%
......................................................
</TABLE>

(1) Reduced for purchases of $50,000 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 5.00% in the first year after purchase,
declining thereafter as follows:

Year 1 -- 5.00%
Year 2 -- 4.00%
Year 3 -- 3.00%
Year 4 -- 2.50%
Year 5 -- 1.50%

After-None

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

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

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

Example:

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

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

<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $654 $822 $1,004 $1,530
......................................................................
Class B Shares $661 $799 $1,010 $1,674*
......................................................................
Class C Shares $261 $499 $ 860 $1,878
......................................................................
</TABLE>

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

<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $654 $822 $1,004 $1,530
......................................................................
Class B Shares $161 $499 $ 860 $1,674*
......................................................................
Class C Shares $161 $499 $ 860 $1,878
......................................................................
</TABLE>

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

6
<PAGE> 8

INVESTMENT OBJECTIVES,

POLICIES AND RISKS

The Fund operates under the following four fundamental investment policies which
may not be changed without shareholder approval of a majority of the Fund's
outstanding voting securities (as defined in the Investment Company Act of 1940,
as amended ("1940 Act")). There are risks inherent in all investments in
securities; accordingly there can be no assurance that the Fund will achieve its
investment objectives.

(1) The Fund invests primarily in securities which provide the highest possible
income as is consistent with safety of principal. To the extent possible,
considering its primary investment objective, the Fund seeks long-term
growth of capital as an important secondary objective.

(2) The Fund under normal conditions invests at least 65% of its total assets in
income-producing equity investments, which may include without limitation
dividend paying common or preferred stocks, interest paying convertible
debentures or bonds, or zero coupon convertible securities (on which the
Fund accrues income for tax and accounting purposes, but receives no cash).

(3) The Fund may invest in income-producing equity instruments (subject to
number two above), debt securities and warrants or rights to acquire such
securities, in such proportions as economic conditions indicate would best
accomplish the Fund's objectives. Although the Fund has not adopted any
fundamental investment policies specifying the rating categories for
investment in debt securities, it is the current operating policy of the
Fund to invest in debt securities rated Baa or higher by Moody's or rated
BBB or higher by S&P or in unrated securities considered by the Fund's
investment adviser to be of comparable quality. It is also the operating
policy of the Fund to invest not more than 10% of its total assets in debt
securities rated Baa by Moody's or BBB by S&P or in unrated securities
considered by the Fund's investment adviser to be of comparable quality.
These operating policies do not apply to convertible securities which are
selected primarily on the basis of their equity characteristics. Ratings at
the time of purchase determine which securities may be acquired, and a
subsequent reduction in ratings does not require the Fund to dispose of a
security. Securities rated Baa by Moody's or BBB by S&P are considered by
the rating agencies to be medium grade obligations which possess speculative
characteristics so that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher rated securities.
Debt securities with longer maturities generally tend to produce higher
yields and are subject to greater market price fluctuations as a result of
changes in interest rates than debt securities with shorter maturities.

(4) The Fund intends to diversify its investments among various industries,
although the Fund may invest up to 25% of its total assets in a particular
industry at any one time.

In selecting securities, the Fund's investment adviser focuses on a security's
potential for income with safety of principal and long-term growth of capital.
The Fund emphasizes a "value" style of investing and seeks income-producing
securities which have attractive growth potential on an individual company
basis. The Fund's investment adviser generally seeks to identify companies that
are undervalued and have identifiable factors that might lead to improved
valuation. This catalyst could come from within the company in the form of new
management, operational enhancements, restructuring or reorganization. It could
also be an external factor, such as an improvement in industry conditions or a
regulatory change. The Fund's style presents the risk that the valuations never
improve or that the returns on "value" securities are less than returns on other
styles of investing or the overall market. The Fund may, however, invest in
securities which do not pay dividends or interest. The Fund may invest in
securities that have above average volatility of price movement including
warrants or rights to acquire securities. Because prices of equity securities
and debt securities fluctuate, the value of an investment in the Fund will vary
based upon the Fund's investment performance. In an effort to reduce the
portfolio's overall exposure to any individual security price decline, the Fund
spreads its investments over many different companies in a variety of
industries.

The Fund's investment adviser focuses on larger capitalization companies,
although the Fund may invest in companies of any capitalization range including
securities of small- and medium-sized

7
<PAGE> 9

companies. The securities of small- and medium-sized companies may be subject to
more abrupt or erratic market movements and may have lower trading volumes or
more erratic trading than securities of larger companies or the market averages
in general. To the extent the Fund invests in small-and medium-sized companies,
it will be subject to greater investment risk than that assumed through
investment in the securities of larger-sized companies.

The Fund may dispose of a security whenever, in the opinion of the Fund's
investment adviser, factors indicate it is desirable to do so. Such factors
include change in economic or market factors in general or with respect to a
particular industry, a change in the market trend or other factors affecting an
individual security, changes in the relative market performance or appreciation
possibilities offered by individual securities and other circumstances affecting
the desirability of a given investment.

Income-producing equity securities include common and preferred stocks and
convertible securities. Common stocks are shares of a corporation or other
entity that entitle the holder to a pro rata share of the profits of the
corporation, if any, without preference over any other class of securities,
including such entity's debt securities, preferred stock and other senior equity
securities. Common stock usually carries with it the right to vote and
frequently an exclusive right to do so. Preferred stock generally has a
preference as to dividends and liquidation over an issuer's common stock but
ranks junior to debt securities in an issuer's capital structure. Unlike
interest payments on debt securities, preferred stock dividends are payable only
if declared by the issuer's board of directors. Preferred stock also may be
subject to optional or mandatory redemption provisions. The ability of common
stocks and preferred stocks to generate income is dependent on the earnings and
continuing declaration of dividends by the issuers of such securities. A
convertible security is a bond, debenture, note, preferred stock, warrant or
other security that may be converted into or exchanged for a prescribed amount
of common stock or other equity security of the same or different issuer or into
cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt securities or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities generally have characteristics similar to
both debt and equity securities. The value of convertible securities tends to
decline as interest rates rise and, because of the conversion feature, tends to
vary with fluctuations in the market value of the underlying equity securities.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity securities although the
market prices of convertible securities may be affected by any such dividend
changes or other changes in the underlying equity securities. The Fund may
purchase convertible securities rated Ba or lower by Moody's or BB or lower by
S&P. Although the Fund selects these securities primarily on the basis of their
equity characteristics, investors should be aware that convertible securities
rated in these categories are considered high risk securities; the rating
agencies consider them speculative with respect to the issuer's continuing
ability to make timely payments of interest and principal. To the extent that
such convertible securities are acquired by the Fund there is a greater risk as
to the timely repayment of the principal of, and timely payment of interest or
dividends on, such securities than in the case of higher-rated convertible
securities.

While the Fund invests primarily in income-producing equity securities, the Fund
may invest in investment grade quality debt securities. The Fund may invest in
debt securities of various maturities. The Fund invests only in debt securities
that are investment grade at the time of investment, and a subsequent reduction
in rating does not require the Fund to dispose of a security. Securities rated
BBB by S&P or Baa by Moody's are in the lowest of the four investment grades and
are considered by the rating agencies to be medium-grade obligations which
possess speculative characteristics so that changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher-rated securities. The
market prices of debt securities generally fluctuate inversely with changes in
interest rates so that the value of investments in such securities can be
expected to decrease as interest rates rise and increase as interest rates fall
and such changes may be greater among debt securities with longer maturities.

8
<PAGE> 10

RISKS OF INVESTING IN

SECURITIES OF FOREIGN ISSUERS

The Fund may invest up to 15% of its total assets in securities of foreign
issuers. Securities of foreign issuers may be denominated in U.S. dollars or in
currencies other than U.S. dollars. Investments in foreign securities present
certain risks not ordinarily associated with investments in securities of U.S.
issuers. These risks include fluctuations in foreign currency exchange rates,
political, economic or legal developments (including war or other instability,
expropriation of assets, nationalization and confiscatory taxation), the
imposition of foreign exchange limitations (including currency blockage),
withholding taxes on dividend or interest payments, or capital transactions or
other restrictions, higher transaction costs (including higher brokerage,
custodial and settlement costs and currency conversion costs) and possible
difficulty in enforcing contractual obligations or taking judicial action. Also,
foreign securities may not be as liquid and may be more volatile than comparable
domestic securities.

In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive, auditing, accounting and financial reporting
disclosure requirements than domestic issuers. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the U.S., and, with respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of foreign exchanges,
brokers and dealers than there is in the U.S., the Fund may experience
settlement difficulties or delays not usually encountered in the U.S.

Delays in making trades in foreign securities relating to volume constraints,
limitations or restrictions, clearance or settlement procedures, or otherwise
could impact returns and result in temporary periods when assets of the Fund are
not fully invested or attractive investment opportunities are foregone.

The Fund may invest in securities of issuers in developing or emerging market
countries. Investments in securities of issuers in developing or emerging market
countries are subject to greater risks than investments in securities of
developed countries since emerging market countries tend to have economic
structures that are less diverse and mature and political systems that are less
stable than developed countries.

In addition to the increased risks of investing in foreign securities, there are
often increased transactions costs associated with investing in foreign
securities including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.

USING OPTIONS, FUTURES CONTRACTS

AND RELATED OPTIONS

The Fund may, but is not required to, use various investment strategic
transactions, including options, futures contracts and options on futures
contracts, in several different ways depending upon the status of the Fund's
portfolio and the Fund's investment adviser's expectations concerning the
securities markets. Although the Fund's investment adviser seeks to use the
practices to further the Fund's investment objective, no assurance can be given
that the use of these practices will achieve this result.

In times of stable or rising prices, the Fund generally seeks to be fully
invested in income-producing equity and debt securities. Even when the Fund is
fully invested, however, prudent management requires that at least a small
portion of assets be available as cash to honor redemption requests and for
other short-term needs. The Fund may also have cash on hand that has not yet
been invested. The portion of the Fund's assets that is invested in cash or cash
equivalents does not fluctuate with market prices, so that, in times of rising
market prices, the Fund may underperform the market in proportion to the amount
of cash or cash equivalents in its portfolio. By purchasing index futures
contracts, however, the Fund can compensate for the cash portion of its assets
and may obtain performance equivalent to investing 100% of its assets in
securities.

If the Fund's investment adviser forecasts a market decline, the Fund may seek
to reduce its exposure to the securities markets by increasing its cash
position. By selling index futures contracts instead of portfolio securities, a
similar result can be achieved to the extent that the performance of the futures
contracts correlates to the performance of the Fund's portfolio securities.
Sales of futures contracts frequently may be accomplished more rapidly and at
less cost than the actual sale of securities. Once the desired hedged position
has been effected, the Fund could then

9
<PAGE> 11

liquidate securities in a more deliberate manner, reducing its futures position
simultaneously to maintain the desired balance, or it could maintain the hedged
position.

The Fund can engage in options transactions on securities, indices or on futures
to attempt to manage the portfolio's risk in advancing or declining markets. For
example, the value of a put option generally increases as the underlying
security declines below a specified level. Value is protected against a market
decline to the degree the performance of the put correlates with the performance
of the Fund's investment portfolio. If the market remains stable or advances,
the Fund can refrain from exercising the put and its portfolio will participate
in the advance, having incurred only the premium cost for the put.

Generally, the Fund expects that options will be purchased or sold on securities
exchanges. However, 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 transactions.

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, such transactions involve
risks different from the direct investment in underlying securities. For
example, there may be imperfect correlation between the value of the instruments
and the underlying assets. In addition, the use of such instruments includes the
risks of default by the other party to certain transactions. The Fund may incur
losses in using these instruments that partially or completely offset gains in
portfolio positions. These transactions may not be liquid and involve manager
risk. In addition, such transactions may involve commissions and other costs,
which may increase the Fund's expenses and reduce its return.

A more complete discussion of options, futures contracts and related options and
their risks is contained in the Fund's Statement of Additional Information which
may be obtained by investors free of charge as described on the back cover of
this prospectus.

OTHER INVESTMENTS AND RISK FACTORS

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

The Fund may invest up to 10% of the Fund's net assets in illiquid securities
and certain restricted securities. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to sell such securities at a lower price, sell other securities
instead to obtain cash or forego other investment opportunities.

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

The Fund may sell securities without regard to the length of time they have been
held in order to take advantage of new investment opportunities, or when the
Fund's investment adviser believes the potential for income or capital growth
has lessened, or for other reasons. The Fund's portfolio turnover is shown under
the Prospectus heading "Financial Highlights." The portfolio turnover rate may
vary from year to year. A high portfolio turnover rate (100% or more) increases
a fund's transactions costs (including brokerage commissions or dealer costs)
and a higher portfolio turnover rate may result in the realization of more
short-term capital gains than if a fund had a lower portfolio turnover rate.
Increases in a fund's transaction costs would adversely impact the fund's
performance. The turnover rate will not be a limiting factor, however, if the
Fund's investment adviser considers portfolio changes appropriate.

TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may on a temporary basis hold cash or invest a
portion or all of its assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, prime commercial paper,
certificates of deposit, bankers' acceptances and repurchase agreements. Under
normal market conditions, the potential for income and capital appreciation on
these securities will tend to be lower than the potential for income and capital
appreciation on other securities that may be owned by the Fund. In taking such a
defensive position, the Fund would not be pursuing

10
<PAGE> 12

and may not achieve its investment objectives of income and long-term capital
growth.

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

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

<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
- ------------------------------------------------------
<S> <C> <C> <C>
First $150 million 0.50 of 1.00%
......................................................
Next $100 million 0.45 of 1.00%
......................................................
Next $100 million 0.40 of 1.00%
......................................................
Over $350 million 0.35 of 1.00%
......................................................
</TABLE>

Applying this fee schedule, the effective advisory fee rate was 0.37% of the
Fund's average daily net assets for the Fund's fiscal year ended December 31,
1999. The Fund's average daily net assets are determined by taking the average
of all of the determinations of the net assets during a given calendar month.
Such fee is payable for each calendar month as soon as practicable after the end
of that month.

Under the Advisory Agreement, the Adviser furnishes offices, necessary
facilities and equipment and provides administrative services to the Fund. The
Fund pays all charges and expenses of its day-to-day operations, including
service fees, distribution fees, custodian fees, legal and independent
accountant fees, the costs of reports and proxies to shareholders, compensation
of trustees of the Trust (other than those who are affiliated persons of the
Adviser, Distributor or Van Kampen Investments) and all other ordinary business
expenses not specifically assumed by the Adviser.

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

PORTFOLIO MANAGEMENT. The Fund is managed by a team led by James A. Gilligan,
Senior Portfolio Manager, Scott Carroll, Portfolio Manager and James O. Roeder,
Portfolio Manager.

Mr. Gilligan has been primarily responsible for managing the Fund's investment
portfolio since January 1990. Mr. Gilligan has been Senior Vice President and
Portfolio Manager of the Adviser since September 1995 and of Advisory Corp.
since June 1995. Prior to that time, Mr. Gilligan was Vice President and
Portfolio Manager of the Adviser.

11
<PAGE> 13

Mr. Carroll has been a Portfolio Manager of the Fund since July 1997 and has
been employed by the Adviser and Advisory Corp. since December 1996, and a Vice
President of the Adviser and Advisory Corp. since February 1999. Prior to
December 1996, Mr. Carroll was an Equity Analyst with Lincoln Capital Management
Company. Prior to September 1992, Mr. Carroll was a Senior Internal Auditor for
2 years with Pittway Corporation.

Mr. Roeder has been a Portfolio Manager of the Fund since May 1999 and a Vice
President of the Adviser and Advisory Corp. since May 1999. Prior to that time,
Mr. Roeder was an analyst for 3 years with Midwest Research and prior to that,
an analyst for 1 year with Duff & Phelps Equity Research.

PURCHASE OF SHARES

GENERAL

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

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

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

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

The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Trustees reserves the right to calculate the net
asset value per share and adjust the offering price based thereon more
frequently than once daily if deemed desirable. Net asset value per share for
each class is determined by dividing the value of the Fund's portfolio
securities, cash and other assets (including accrued interest) attributable to
such class, less all liabilities (including accrued expenses) attributable to
such class, by the total number of shares of the class outstanding. Such
computation is made by using prices as of the close of trading on the Exchange
and (i) valuing securities listed or traded on a national securities exchange at
the last reported sale price, or if there has been no sale that day, at the mean
between the last reported bid and asked prices, (ii) valuing over-the-counter
securities at the mean between the last reported bid and asked prices available
from the National Association of Securities Dealers Automated Quotations
("NASDAQ") and (iii) valuing securities for which market quotations are not
readily available and any other assets at fair value as determined in good faith
by the Adviser in accordance with procedures established by the Fund's Board of
Trustees. Short-term securities are valued in the manner described in the notes
to the financial statements included in the Fund's Statement of Additional
Information.

12
<PAGE> 14

shares. Under the Distribution Plan and the Service Plan, the Fund pays
distribution fees in connection with the sale and distribution of its shares and
service fees in connection with the provision of ongoing services to
shareholders and the maintenance of the shareholders' accounts.

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

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

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

The offering price for shares is based upon the next calculation of net asset
value per share (plus sales charges, where applicable) after an order is
received by Investor Services. Orders received by authorized dealers prior to
the close of the Exchange are priced based on the date of receipt provided such
order is transmitted to Investor Services prior to Investor Services' close of
business on such date. Orders received by authorized dealers after the close of
the Exchange or transmitted to Investor Services after its close of business are
priced based on the date of the next 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.

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

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

13
<PAGE> 15

CLASS A SHARES

Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 5.75% of the offering price (or 6.10% of the net amount
invested), reduced on investments of $50,000 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 $50,000 5.75% 6.10%
........................................................
$50,000 but less than
$100,000 4.75% 4.99%
........................................................
$100,000 but less than
$250,000 3.75% 3.90%
........................................................
$250,000 but less than
$500,000 2.75% 2.83%
........................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
........................................................
$1,000,000 or more * *
........................................................
</TABLE>

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

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

Under the Distribution Plan and the Service Plan, the Fund may spend up to a
total of 0.25% per year of the Fund's average daily net assets with respect to
the Class A Shares of the Fund. From such amount, under the Service Plan, the
Fund may spend up to 0.25% per year of the Fund's average daily net assets with
respect to the Class A Shares of the Fund. The rates in this paragraph are 0.15%
per year of the Fund's average daily net assets attributable to Class A Shares
with respect to accounts existing before July 3, 1990.

CLASS B SHARES

Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within 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 5.00%
................................................
Second 4.00%
................................................
Third 3.00%
................................................
Fourth 2.50%
................................................
Fifth 1.50%
................................................
Sixth and After None
................................................
</TABLE>

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

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

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

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

14
<PAGE> 16

CLASS C SHARES

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

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

Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to the Class C Shares of the Fund.
In addition, under the Service Plan, the Fund may spend up to 0.25% per year of
the Fund's average daily net assets with respect to the Class C Shares of the
Fund. The aggregate distribution and service fees are currently 1.00% per year
of the average daily net assets attributable to Class C Shares of the Fund. The
aggregate distribution and service fees are 0.90% per year of the average daily
net assets attributable to Class C Shares of the Fund with respect to accounts
existing before April 1, 1995.

CONVERSION FEATURE

Class B Shares purchased on or after June 1, 1996, including Class B Shares
received from reinvestment of distributions through the dividend reinvestment
plan, automatically convert to Class A Shares eight years after the end of the
calendar month in which the shares were purchased. Class B Shares purchased
before June 1, 1996, including Class B Shares received from reinvestment of
distributions through the dividend reinvestment plan, automatically convert to
Class A Shares six years after the end of the calendar month in which the shares
were purchased. Class C Shares purchased before January 1, 1997, including Class
C Shares received from reinvestment of distributions through the dividend
reinvestment plan, automatically convert to Class A Shares ten years after the
end of the calendar month in which such shares were purchased. Such conversion
will be on the basis of the relative net asset values per share, without the
imposition of any sales load, fee or other charge. The conversion schedule
applicable to a share of the Fund acquired through the exchange privilege from
another Van Kampen fund participating in the exchange program is determined by
reference to the Van Kampen fund from which such share was originally purchased.

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

WAIVER OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by the
Fund's involuntary liquidation of a shareholder's account as described under the
Prospectus heading "Redemption of Shares." Subject to certain limitations, a
shareholder who has redeemed Class C Shares of the Fund may reinvest in Class C
Shares at net asset value with credit for any contingent deferred sales charge
if the reinvestment is made within 180 days after the redemption. For a more
complete description of contingent deferred sales charge waivers, please refer
to the Fund's Statement of Additional Information or contact your authorized
dealer.

15
<PAGE> 17

QUANTITY DISCOUNTS

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

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

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

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

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

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

OTHER PURCHASE PROGRAMS

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

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

16
<PAGE> 18

program, should contact their authorized dealer or the Distributor.

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

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

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

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

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

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

(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers through
which 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 January 1, 2000, that (1) the
total plan assets are at least $1 million or (2) such shares are purchased
by an employer sponsored plan with more than 100 eligible employees. Such
plans that have been established with a Participating

17
<PAGE> 19

Fund or have received proposals from the Distributor prior to January 1, 2000
based on net asset value purchase privileges previously in effect will be
qualified to purchase shares of the Participating Funds at net asset value.
Section 403(b) and similar accounts for which Van Kampen Trust Company
serves as custodian will not be eligible for net asset value purchases based
on the aggregate investment made by the plan or the number of eligible
employees, except under certain uniform criteria established by the
Distributor from time to time. For purchases on February 1, 1997 and
thereafter, a commission will be paid on purchases as follows: 1.00% on
sales to $2 million, plus 0.80% on the next $1 million, plus 0.50% on the
next $47 million, plus 0.25% on the excess over $50 million.

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

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

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

REDEMPTION OF
SHARES

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

Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the request and any other necessary documents in
proper form as described below. Such payment may be postponed or the right of
redemption suspended as provided by the rules of the SEC. Such payment may,
under certain circumstances, be paid wholly or in part by a distribution-in-kind
of portfolio securities. A distribution-in-kind will result in recognition by
the shareholder of a gain or loss for federal income tax purposes when such
securities are distributed, and the shareholder may have brokerage costs and a
gain or loss for federal income tax purposes upon a shareholder's subsequent
disposition of such

18
<PAGE> 20

securities. If the shares to be redeemed have been recently purchased by check,
Investor Services may delay the payment of redemption proceeds until it confirms
the purchase check has cleared, which may take up to 15 days. A taxable gain or
loss may be recognized by the shareholder upon redemption of shares.

WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares or dollar amount to be redeemed, the Fund
name and class designation of such shares and the shareholder's account number.
The redemption request must be signed by all persons in whose names the shares
are registered. Signatures must conform exactly to the account registration. If
the proceeds of the redemption exceed $50,000, or if the proceeds are not to be
paid to the record owner at the record address, or if the record address has
changed within the previous 30 days, signature(s) must be guaranteed by one of
the following: a bank or trust company; a broker-dealer; a credit union; a
national securities exchange, registered securities association or clearing
agency; a savings and loan association; or a federal savings bank.

Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some cases, however, additional documents may be necessary. In the case of
shareholders holding certificates, the certificates for the shares being
redeemed must be properly endorsed for transfer and must accompany the
redemption request. In the event a redemption is requested by and registered to
a corporation, partnership, trust, fiduciary, estate or other legal entity
owning shares of the Fund, generally a copy of the corporate resolution or other
legal documentation appointing the authorized signer and certified within the
prior 120 days must accompany the redemption request. Retirement plan
distribution requests should be sent to the custodian/trustee to be forwarded to
Investor Services. Contact the custodian/trustee for further information.

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

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

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Shares may also be redeemed by phone through FundInfo(R)
(automated phone system), which is accessible 24 hours a day, seven days a week
at (800) 847-2424. Van Kampen Investments and its subsidiaries, including
Investor Services, and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions,
tape-recording telephone communications and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
none of Van Kampen Investments, Investor Services or the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine.
Telephone redemptions may not be available if the shareholder cannot reach
Investor Services by telephone, whether because all telephone lines are busy or
for any other reason; in such case, a shareholder would have to use the Fund's
other redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, will be processed at the next
determined net asset value per share. These privileges are available for most
accounts other than retirement

19
<PAGE> 21

accounts or accounts with shares represented by certificates. If an account has
multiple owners, Investor Services may rely on the instructions of any one
owner.

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

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

DISTRIBUTIONS FROM THE FUND

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

DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Trustees, is to
distribute net investment income quarterly as dividends to shareholders.
Dividends are automatically applied to purchase additional shares of the Fund at
the next determined net asset value unless the shareholder instructs otherwise.

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

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

SHAREHOLDER SERVICES

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

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

20
<PAGE> 22

AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to debit a shareholder's bank
account on a regular basis to invest predetermined amounts in the Fund.
Additional information is available from the Distributor or your authorized
dealer.

EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of a
Participating Fund. Shareholders seeking an exchange into a Participating Fund
should obtain and read the current prospectus for such fund prior to
implementing an exchange. A prospectus of any of the Participating Funds may be
obtained from any authorized dealer or the Distributor.

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

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

A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, by contacting the telephone transaction line at (800)
421-5684, through FundInfo(R) (automated phone system) at (800) 847-2424 or
through the internet at www.vankampen.com. A shareholder automatically has these
exchange privileges unless the shareholder indicates otherwise by checking the
applicable box on the account application form. Van Kampen Investments and its
subsidiaries, including Investor Services, and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring certain personal
identification information prior to acting upon telephone instructions,
tape-recording telephone communications, and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
none of Van Kampen Investments, Investor Services or the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine. If
the exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital gain dividend options (except dividend diversification) and
authorized dealer of record as the account from which shares are exchanged,
unless otherwise specified by the shareholder. In order to establish a
systematic withdrawal plan for the new account or reinvest dividends from the
new account into another fund, however, an exchanging shareholder must submit a
specific request. The Fund reserves the right to reject any order to acquire its
shares through exchange. In addition, the Fund and other Participating Funds may
restrict exchanges by shareholders engaged in excessive trading by limiting or
disallowing the exchange privileges to such shareholders. For further
information on these restrictions, see the Fund's Statement of Additional
Information. The Fund may modify, restrict or terminate the exchange privilege
at any time on 60 days' notice to its shareholders of any termination or
material amendment.

For purposes of determining the sales charge rate previously paid on Class A
Shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or 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 of the fund which the
shareholder is redeeming will be redeemed

21
<PAGE> 23

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

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

FEDERAL INCOME TAXATION

Distributions of the Fund's investment company taxable income (consisting
generally of taxable income and net short-term capital gain) are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain (which is the excess of net long-term capital
gain over net short-term capital loss) as capital gain dividends, if any, are
taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of how long the shares of the
Fund have been held by such shareholders. The Fund expects that its
distributions will consist primarily of ordinary income and capital gain
dividends. Distributions in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of a 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 may be a taxable transaction for federal income
tax purposes. Shareholders who sell their shares will generally recognize a gain
or loss in an amount equal to the difference between their adjusted tax basis in
the shares sold and the amount received. If the shares are held as a capital
asset, the gain or loss will be a capital gain or loss. Any recognized capital
gains may be taxed at different rates depending on how long the shareholder held
such shares.

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

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

22
<PAGE> 24

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

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

23
<PAGE> 25

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
Class A Shares
Year Ended December 31,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.............................. $7.820 $7.242 $6.740 $6.310 $5.160
-------- ------ ------ ------ ------
Net Investment Income............... .185 .174 .152 .158 .200
Net Realized and Unrealized Gain.... .568 1.030 1.435 .796 1.458
-------- ------ ------ ------ ------

Total from Investment Operations...... .753 1.204 1.587 .954 1.658
-------- ------ ------ ------ ------
Less:
Distributions from and in Excess of
Net Investment Income............. .183 .175 .168 .156 .188
Distributions from Net Realized
Gain.............................. .744 .451 .917 .368 .320
-------- ------ ------ ------ ------
Total Distributions................... .927 .626 1.085 .524 .508
-------- ------ ------ ------ ------
Net Asset Value, End of the Period.... $7.646 $7.820 $7.242 $6.740 $6.310
======== ====== ====== ====== ======

Total Return(a)....................... 9.95% 16.99% 24.13% 15.55% 32.57%
Net Assets at End of the Period (In
millions)........................... $1,068.5 $808.5 $638.1 $471.8 $349.9
Ratio of Expenses to Average Net
Assets(b)........................... .82% .85% .86% .97% .95%
Ratio of Net Investment Income to
Average Net Assets(b)............... 2.43% 2.31% 2.09% 2.50% 3.43%
Portfolio Turnover.................... 81% 61% 86% 99% 92%

<CAPTION>
Class B Shares
Year Ended December 31,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.............................. $7.766 $7.203 $6.713 $6.300 $5.160
-------- -------- ------ ------ ------
Net Investment Income............... .128 .118 .100 .113 .150
Net Realized and Unrealized Gain.... .559 1.019 1.423 .784 1.458
-------- -------- ------ ------ ------
Total from Investment Operations...... .687 1.137 1.523 .897 1.608
-------- -------- ------ ------ ------
Less:
Distributions from and in Excess of
Net Investment Income............. .131 .123 .116 .116 .148
Distributions from Net Realized
Gain.............................. .744 .451 .917 .368 .320
-------- -------- ------ ------ ------
Total Distributions................... .875 .574 1.033 .484 .468
-------- -------- ------ ------ ------
Net Asset Value, End of the Period.... $7.578 $7.766 $7.203 $6.713 $6.300
======== ======== ====== ====== ======
Total Return(a)....................... 9.19% 16.17% 23.23% 14.56% 31.51%
Net Assets at End of the Period (In
millions)........................... $1,148.9 $1,140.0 $908.7 $633.3 $408.9
Ratio of Expenses to Average Net
Assets(b)........................... 1.58% 1.62% 1.64% 1.74% 1.75%
Ratio of Net Investment Income to
Average Net Assets(b)............... 1.67% 1.55% 1.32% 1.74% 2.62%
Portfolio Turnover.................... 81% 61% 86% 99% 92%

<CAPTION>
Class C Shares
Year Ended December 31,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.............................. $7.767 $7.204 $6.713 $6.30 $5.160
------- ------- -------- ------- ------
Net Investment Income............... .133 .117 .100 .113 .150
Net Realized and Unrealized Gain.... .554 1.020 1.424 .784 1.458
------- ------- -------- ------- ------
Total from Investment Operations...... .687 1.137 1.524 .897 1.608
------- ------- -------- ------- ------
Less:
Distributions from and in Excess of
Net Investment Income............. .131 .123 .116 .116 .148
Distributions from Net Realized
Gain.............................. .744 .451 .917 .368 .320
------- ------- -------- ------- ------
Total Distributions................... .875 .574 -1.033 .484 .468
------- ------- -------- ------- ------
Net Asset Value, End of the Period.... $7.579 $7.767 -$7.204 $6.713 $6.300
======= ======= ======== ======= ======
Total Return(a)....................... 9.19% 16.17% 23.23% 14.56% 31.51%
Net Assets at End of the Period (In
millions)........................... $120.2 $96.1 $75.8 $55.2 $38.3
Ratio of Expenses to Average Net
Assets(b)........................... 1.58% 1.62% 1.64% 1.74% 1.76%
Ratio of Net Investment Income to
Average Net Assets(b)............... 1.67% 1.55% 1.32% 1.73% 2.63%
Portfolio Turnover.................... 81% 61% 86% 99% 92%
</TABLE>

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

(b) For the years ended December 31, 1995 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to the
Adviser's reimbursement of certain expenses was less than 0.01%.

24
<PAGE> 26

BOARD OF TRUSTEES

AND OFFICERS

BOARD OF TRUSTEES

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

OFFICERS

Richard F. Powers, III*

President

Stephen L. Boyd*

Executive Vice President & Chief Investment Officer

A. Thomas Smith III*

Vice President and Secretary

John H. Zimmermann, III*

Vice President

Michael H. Santo*

Vice President

Peter W. Hegel*

Vice President

John L. Sullivan*

Vice President, Chief Financial Officer and Treasurer

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

FOR MORE INFORMATION

EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS

Call your broker or (800) 341-2911

7:00 a.m. to 7:00 p.m. Central time Monday through Friday

DEALERS

For dealer information, selling agreements, wire orders, or

redemptions, call the Distributor at (800) 421-5666

TELECOMMUNICATIONS DEVICE FOR THE DEAF

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

FUNDINFO(R)

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

WEB SITE

www.vankampen.com

VAN KAMPEN EQUITY INCOME 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 218256

Kansas City, MO 64121-8256

Attn: Van Kampen Equity Income Fund

Custodian

STATE STREET BANK AND TRUST COMPANY

225 West Franklin Street, PO Box 1713

Boston, MA 02105-1713

Attn: Van Kampen Equity Income 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> 27

VAN KAMPEN
EQUITY INCOME FUND

PROSPECTUS

APRIL 28, 2000

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

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

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

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

[VAN KAMPEN FUNDS LOGO]

The Fund's Investment Company Act File is No. 811-919.
EQI PRO 4/00

<PAGE> 28

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN
EQUITY INCOME FUND

Van Kampen Equity Income Fund (the "Fund") is a mutual fund with the
primary investment objective to seek the highest possible income consistent with
safety of principal. Long-term growth of capital is an important secondary
investment objective. The Fund's investment adviser seeks to achieve the Fund's
investment objectives by investing primarily in income-producing equity
instruments and debt securities issued by a wide group of companies in many
different industries.

The Fund is organized as a diversified series of Van Kampen Equity Income
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 Objectives, Policies and Risks................... B-4
Options, Futures Contracts and Related Options.............. B-7
Investment Restrictions..................................... B-13
Trustees and Officers....................................... B-15
Investment Advisory Agreement............................... B-25
Other Agreements............................................ B-26
Distribution and Service.................................... B-26
Transfer Agent.............................................. B-30
Portfolio Transactions and Brokerage Allocation............. B-30
Shareholder Services........................................ B-32
Redemption of Shares........................................ B-35
Contingent Deferred Sales Charge-Class A.................... B-35
Waiver of Class B and Class C Contingent Deferred Sales
Charges................................................... B-36
Taxation.................................................... B-38
Fund Performance............................................ B-43
Other Information........................................... B-46
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-17
</TABLE>

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

<PAGE> 29

GENERAL INFORMATION

The Fund was originally incorporated in Delaware on August 14, 1957 under
the name the Provident Fund for Income, Inc. On July 2, 1990, the Fund changed
its name from the Provident Fund for Income, Inc. to American Capital Equity
Income Fund, Inc. The Fund was reincorporated by merger as a Maryland
corporation on October 22, 1991, under the same name. As of August 18, 1995, the
Fund was reorganized under the name Van Kampen American Capital Equity Income
Fund as a series of the Trust. The Trust is organized as a business trust 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. ("Morgan Stanley Dean Witter"). The principal
office of the Fund, the Trust, the Adviser, the Distributor and Van Kampen
Investments is located at 1 Parkview Plaza, Oakbrook Terrace, Illinois
60181-5555. The principal office of Investor Services is located at 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153.

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

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

The Fund currently offers three classes of shares, designated Class A
Shares, Class B Shares and Class C Shares. Other classes may be established from
time to time in accordance with provisions of the Declaration of Trust. Each
class of shares of the Fund generally is identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee. Shares of the Trust entitle their holders
to one vote per share; however, separate votes are taken by each series on
matters affecting an individual series and separate votes are taken by each
class of a series on matters affecting an individual class of such series. For
example, a change in investment policy for a series would be voted upon by
shareholders of only the series involved and a change in the distribution fee
for a class of a series would be voted upon by shareholders of only the class of
such series involved. Except as otherwise described in the Prospectus or herein,
shares do not have cumulative voting rights, preemptive rights or any
conversion, subscription or exchange rights.

The Fund 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 a majority of the shares then outstanding cast
in person or by proxy at such meeting. The

B-2
<PAGE> 30

Fund will assist such holders in communicating with other shareholders of the
Fund to the extent required by the Investment Company Act of 1940, as amended
(the "1940 Act"), or rules or regulations promulgated by the Securities and
Exchange Commission ("SEC").

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

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

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

As of April 3, 2000, no person was known by the Fund to own beneficially or
to hold of record 5% or more of the outstanding Class A Shares, Class B Shares
or Class C Shares of the Fund, except as follows:

<TABLE>
<CAPTION>
Amount of
Ownership at Class Percentage
Name and Address of Record Holder April 3, 2000 of Shares Ownership
--------------------------------- ------------- --------- ----------
<S> <C> <C> <C>
Van Kampen Trust Company........................ 35,098,529 A 23.69%
2800 Post Oak Blvd. 41,610,313 B 28.65%
Houston, TX 77056 2,279,860 C 14.05%
Edward Jones & Co. ............................. 19,317,081 A 13.04%
Attn Mutual Fund 1,082,622 C 6.67%
Shareholder Accounting
201 Progress Parkway
Maryland Heights, MO 63043-3009
Merrill Lynch Pierce Fenner & Smith Inc. ....... 9,181,532 A 6.20%
For the Sole Benefit of its Customers 1,613,126 C 9.94%
Attn: Fund Administration
4800 Deer Lake Drive East
2nd Floor
Jacksonville, FL 32246-6484
</TABLE>

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

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

B-3
<PAGE> 31

INVESTMENT OBJECTIVES, POLICIES AND RISKS

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

REPURCHASE AGREEMENTS

The Fund may engage in repurchase agreements with broker-dealers, banks and
other recognized financial institutions in order to earn a return on temporarily
available cash. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the holding period. Repurchase agreements involve
certain risks in the event of default by the other party. The Fund may enter
into repurchase agreements with broker-dealers, banks and other recognized
financial institutions deemed to be creditworthy by the Adviser under guidelines
approved by the Fund's Board of Trustees. The Fund will not invest in repurchase
agreements maturing in more than seven days if any such investment, together
with any other illiquid securities held by the Fund, would exceed the Fund's
limitation on illiquid securities described herein. The Fund does not bear the
risk of a decline in the value of the underlying security unless the seller
defaults under its repurchase obligation. In the event of the bankruptcy or
other default of a seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying securities and losses including: (a)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (b) possible lack of access to
income on the underlying security during this period; and (c) expenses of
enforcing its rights.

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

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

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

B-4
<PAGE> 32

portfolio securities during such fiscal year. The turnover rate may vary greatly
from year to year as well as within a year.

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 for which market quotations are not readily available
are valued at fair value as determined in good faith by the Adviser in
accordance with procedures approved by the Fund's Board of Trustees. Ordinarily,
the Fund would invest in restricted securities only when it receives the
issuer's commitment to register the securities without expense to the Fund.
However, registration and underwriting expenses (which typically range from 7%
to 15% of the gross proceeds of the securities sold) may be paid by the Fund.
Restricted securities which can be offered and sold to qualified institutional
buyers under Rule 144A under the 1933 Act ("144A Securities") and are determined
to be liquid under guidelines adopted by and subject to the supervision of the
Fund's Board of Trustees are not subject to the limitation on illiquid
securities. Such 144A Securities are subject to monitoring and may become
illiquid to the extent qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Factors used to determine whether
144A Securities are liquid include, among other things, a security's trading
history, the availability of reliable pricing information, the number of dealers
making quotes or making a market in such security and the number of potential
purchasers in the market for such security. For purposes hereof, investments by
the Fund in securities of other investment companies will not be considered
investments in restricted securities to the extent permitted by (i) the 1940
Act, (ii) the rules and regulations promulgated by the SEC under the 1940 Act,
as amended from time to time, or (iii) an exemption or other relief (such as "no
action" letters issued by the staff of the SEC interpreting or providing
guidance on the 1940 Act or regulations thereunder) from the provisions of the
1940 Act, as amended from time to time.

CONVERTIBLE SECURITIES

Convertible securities include corporate bonds, notes and preferred stock
that can be converted into or exchanged for a prescribed amount of common stock
of the same or a different issue or into cash within a particular period of time
at a specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or dividends paid on preferred stock
until the convertible stock matures or is redeemed, converted or exchanged.
Convertible securities combine the fixed-income characteristics of bonds and
capital appreciation potential of preferred stock. While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than the issuer's common stock, although the extent to which
such risk is reduced depends in large measure upon the degree to which the
convertible security sells

B-5
<PAGE> 33

above its value as a fixed income security. The market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. While convertible securities generally offer
lower interest or dividends yields than nonconvertible debt securities of
similar quality, they do enable the investor to benefit from increases in the
market price of the underlying common stock.

WARRANTS AND RIGHTS

Warrants and rights are instruments that permit the holder to acquire, by
subscription, the capital stock of a corporation at a set price, regardless of
the market price for such stock. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant or right expects that the
market price of the security will exceed the purchase price of the warrant plus
the exercise price of the warrant or right, thus giving him a profit. Of course,
since the market price may never exceed the exercise price before the expiration
date of the warrant, the purchaser of the warrant risks the loss of the entire
purchase price of the warrant. Warrants generally trade in the open market and
may be sold rather than exercised. Warrants are sometimes sold in unit form with
other securities of an issuer. Units of warrants and common stock may be
employed in financing young, unseasoned companies. The purchase price of a
warrant or right varies with the exercise price of such security, the current
market value of the underlying security, the life of the warrant or right and
various other investment factors.

ZERO COUPON SECURITIES

The Fund may invest in zero coupon debt securities which generally are sold
at a substantial discount from their value at maturity. Zero coupon securities
generally pay no cash interest (or dividends in the case of preferred stock) to
their holders prior to maturity. Accordingly, such securities usually are issued
and traded at a deep discount from their face or par value and generally are
subject to greater fluctuations of market value in response to changing interest
rates than securities of comparable maturities and credit quality that pay cash
interest (or dividends in the case of preferred stock) on a current basis.
Special tax considerations are associated with investing in zero coupon
securities. The accrued interest income earned on such instruments is included
in investment company taxable income, thereby increasing the required minimum
distributions to shareholders without providing the corresponding cash flow with
which to pay such distributions. The Fund's Adviser will weigh these concerns
against the expected total returns from such instruments.

SECURITIES OF FOREIGN ISSUERS

The Fund may purchase foreign securities in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other securities
representing underlying shares of foreign companies. These securities are not
necessarily denominated in the same currency as the underlying securities but
generally are denominated in the currency of the market in which they are
traded. ADRs are receipts typically issued by an American bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. ADRs are publicly traded on exchanges or over-the-counter in the
United States and are issued through "sponsored" or

B-6
<PAGE> 34

"unsponsored" arrangements. In a sponsored ADR arrangement, the foreign issuer
assumes the obligation to pay some or all of the depositary's transaction fees,
whereas under an unsponsored arrangement, the foreign issuer assumes no
obligations and the depositary's transaction fees are paid by the ADR holders.
In addition, less information is available in the United States about an
unsponsored ADR than about a sponsored ADR and financial information about a
company may not be as reliable for an unsponsored ADR as it is for a sponsored
ADR. The Fund may invest in ADRs through both sponsored and unsponsored
arrangements. EDRs are receipts issued in Europe by banks or depositaries which
evidence a similar ownership arrangement.

OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS

The Fund may, but is not required to, use various investment strategies as
described below to earn income, facilitate portfolio management and mitigate
risks. Techniques and investments may change over time as new instruments and
strategies are developed or as regulatory changes occur. Although the Fund's
Adviser seeks to use such transactions to further the Fund's investment
objective, no assurance can be given that the use of these transactions will
achieve this result.

SELLING CALL AND PUT OPTIONS

Purpose. The principal reason for selling options is to obtain, through
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. Such current return could be expected to fluctuate
because premiums earned from an option selling program and dividend or interest
income yields on portfolio securities vary as economic and market conditions
change. Selling options on portfolio securities is likely to result in a higher
portfolio turnover rate.

Selling Options. The purchaser of a call option pays a premium to the
seller (i.e., the writer) for the right to buy the underlying security from the
seller at a specified price during a certain period. The Fund would write call
options only on a covered basis or for cross-hedging purposes. A call option is
covered if, at all times during the option period, the Fund would own or have
the right to acquire securities of the type that it would be obligated to
deliver if any outstanding option were exercised. 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 writer of a call or put option, the Fund could enter
into a "closing purchase

B-7
<PAGE> 35

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 lesser
(greater) than the premium it received on the sale of the option. The Fund would
also realize a gain if an option it has written lapses unexercised.

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

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

PURCHASING CALL AND PUT OPTIONS

The Fund could purchase call options to protect against anticipated
increases in the prices of securities it wishes to acquire. Alternatively, call
options could be purchased for capital appreciation. 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 against anticipated declines in the
market value of either specific portfolio securities or of the Fund's assets
generally. Alternatively, put options may be purchased for capital appreciation
in anticipation of a price decline in the underlying security and a
corresponding increase in the value of the put option. The purchase of put
options for capital appreciation involves the same significant risk of loss as
described above for call options.

B-8
<PAGE> 36

In any case, the purchase of options for capital appreciation would
increase the Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.

OPTIONS ON STOCK INDICES

Options on stock indices are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash which amount will depend upon the closing
level of the stock index upon which the option is based being greater than (in
the case of a call) or less than (in the case of a put) the exercise price of
the option. The amount of cash received will be the difference between the
closing price of the index and the exercise price of the option, multiplied by a
specified dollar multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount.

Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indices are also based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. A stock index fluctuates with changes in the
market values of the stocks included in the index. Options are currently traded
on several exchanges.

Gain or loss to the Fund on transactions in stock index options will depend
on price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities. As
with stock options, the Fund may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange, or it
may let the option expire unexercised.

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."

A stock index futures contract is an agreement pursuant to which a party
agrees to take or make delivery of an amount of cash equal to a specified dollar
amount multiplied by the difference between the stock index value at a specified
time and the price at which the futures contract originally was struck. No
physical delivery of the underlying stocks in the index is made.

Currently, stock index futures contracts can be purchased with respect to
several indices on various exchanges. Differences in the stocks included in the
indices may result in differences in correlation of the futures contracts with
movements in the value of the securities being hedged.

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 or notes) at a specified future time and at a specified price.

The Fund also may invest in foreign stock index futures traded outside the
United States which involve additional risks including fluctuations in foreign
exchange rates,

B-9
<PAGE> 37

foreign currency exchange controls, political and economic instability,
differences in financial reporting and securities regulation and trading, and
foreign taxation issues.

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 a
percentage (which will normally range between 2% and 10%) 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 or index 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 or index rises, that position increases in value, and
the Fund receives 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 or index declines, the position is less
valuable, and the Fund is required to make a variation margin payment to the
broker.

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

Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is otherwise
fully invested ("anticipatory hedge"). Such purchase of a futures contract would
serve as a temporary substitute for the purchase of individual securities, which
may be purchased in an orderly fashion once the market has stabilized. As
individual securities are purchased, an equivalent amount of futures contracts
could be terminated by offsetting sales. The Fund may sell futures contracts in
anticipation 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 or index, the sale of futures contracts
would substantially reduce the risk to the Fund of a market decline and, by so
doing, provides an alternative to the liquidation of securities positions in the
Fund. Ordinarily transaction costs associated with futures transactions are
lower than transaction costs that would be incurred in the purchase and sale of
the underlying securities.

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

B-10
<PAGE> 38

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 or index 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 or index underlying the futures contract. Second, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions. Due to the possibility of price distortion in the futures markets
and because of the imperfect correlation between movements in futures contracts
and movements in the securities underlying them, a correct forecast of general
market trends by the Adviser may still not result in a successful hedging
transaction.

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.

B-11
<PAGE> 39

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, as described above, 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 options 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 exceed 5% of the fair market value of the Fund's
assets; however, in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. In order to prevent leverage in connection with the purchase of
futures contracts by the Fund, an amount of cash or liquid securities equal to
the market value of the obligation under the futures contracts (less any related
margin deposits) will be maintained in a segregated account with the custodian.

OPTIONS ON FUTURES CONTRACTS

The Fund could also purchase and write options on futures contracts. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option period. As a writer of an option on
a futures contract, the Fund would be subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net
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; at the same time, it
could write put options at a lower strike price (a "put bear spread") to offset
part of the cost of the strategy to the Fund. The purchase of call options on
futures contracts is intended to serve the same purpose as the actual purchase
of the futures contracts.

Risks of Transactions in Options on Futures Contracts. 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

B-12
<PAGE> 40

costs). However, there may be circumstances, such as when there is no movement
in the price of the underlying security or index, 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 CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

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

USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS

Many derivative transactions, in addition to other requirements, require
that the Fund segregate cash and liquid securities with its custodian to the
extent the Fund's obligations are not otherwise "covered" as described above. In
general, either the full amount of any obligation by the Fund to pay or deliver
securities or assets must be covered at all times by the securities, instruments
or currency required to be delivered (or securities convertible into the needed
securities without additional consideration), or, subject to applicable
regulatory restrictions, an amount of cash or liquid securities at least equal
to the current amount of the obligation must be segregated with the custodian.
The segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. In
the case of a futures contract or an option thereon, the Fund must deposit
initial margin and possible daily variation margin in addition to segregating
cash and liquid securities sufficient to meet its obligation to purchase or
provide securities or currencies, or to pay the amount owed at the expiration of
an index-based futures contract. Derivative transactions may be covered by other
means when consistent with applicable regulatory policies. The Fund may also
enter into offsetting transactions so that its combined position, coupled with
any segregated cash and liquid securities, equals its net outstanding
obligation.

INVESTMENT RESTRICTIONS

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

B-13
<PAGE> 41

With respect to the limitations on illiquid securities and borrowings, the
percentage limitations apply at the time of purchase and on an ongoing basis.
The Fund shall not:

1. Invest more than 5% of its assets in the securities of any one issuer
(except the U.S. government) 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.

2. Borrow money, except for a temporary purpose and then not in excess of
10% of its net assets taken at cost or market, whichever is lower, and
may not pledge more than 15% of gross assets taken at cost to secure
such borrowings; such borrowings in excess of 5% may be made from banks
only. The Fund will not purchase additional securities while any such
borrowings exceed 5% of the Fund's total assets. Notwithstanding the
foregoing, the Fund may engage in transactions in options, futures
contracts and related options, segregate or deposit assets to cover or
secure options written, and make margin deposits or payments for
futures contracts and related options.

3. Purchase securities on margin, sell securities short, or act as an
underwriter of securities except to the extent that in selling
restricted securities the Fund may be deemed to be an underwriter for
purposes of the 1933 Act, but the Fund may engage in transactions in
options, futures contracts and related options and make margin deposits
and payments in connection therewith.

As used herein, "restricted securities" means securities acquired under
circumstances in which the Fund might not be free to sell such
securities without being deemed an underwriter for purposes of the 1933
Act and without registration of such securities under that Act. Where
registration is required, the Fund may have to bear the expense of
registration and a considerable period may elapse between the time when
a decision is made to sell such securities and the effectiveness of the
registration statement. The Fund's position in restricted securities may
adversely affect the liquidity and marketability of such securities and
the Fund may not be able to dispose of its holding in these securities
at reasonable price levels.

4. Purchase or sell commodities or commodities futures, except that the
Fund may enter into transactions in futures contracts or related
options.

5. Make loans to any individual.

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

7. Purchase or retain securities of a company if any officer or director
of the Fund or the investment adviser owns beneficially more than 1/2
of 1% of the securities of such company and together own more than 5%
of the securities of such company.

8. Purchase a restricted security or a security for which market
quotations are not readily available if as a result of such purchase
more than 5% of the Fund's assets would be invested in such securities,
except that the Fund may purchase securities

B-14
<PAGE> 42

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.

9. Invest more than 10% of its net assets in real estate, but the Fund may
purchase securities issued by real estate investment trusts and
corporations engaged primarily in real estate.

10. Invest more than 5% of its assets in companies having a record,
together with predecessors, of less than three years continuous
operation, 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. Invest in companies for the purpose of exercising control of
management, except that the Fund may purchase securities of other
investment companies to the extent permitted by (i) the 1940 Act, as
amended from time to time, (ii) the rules and regulations promulgated
by the SEC under the 1940 Act, as amended from time to time, or (iii)
an exemption or other relief from the provisions of the 1940 Act.

12. Concentrate its investments in any single group or type of securities
except that it may, on occasion, invest up to 25% of its assets in any
one industry 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.

13. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making
and collateralizing any permitted borrowings, (ii) making any permitted
loans of its portfolio securities, or (iii) entering into repurchase
agreements, utilizing options, futures contracts, options on futures
contracts, forward commitments and other investment strategies and
instruments that would be considered "senior securities" but for the
maintenance by the Fund of a segregated account with its custodian or
some other form of "cover."

The Fund has an operating policy, which may be amended by its Trustees,
that the Fund shall not invest more than 10% of its net assets (determined at
the time of investment) in illiquid securities and repurchase agreements that
have a maturity of longer than seven days.

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"),

B-15
<PAGE> 43

Van Kampen Investment Advisory Corp. ("Advisory Corp."), Van Kampen Asset
Management Inc. ("Asset Management"), Van Kampen Funds Inc. (the "Distributor"),
Van Kampen Management Inc., Van Kampen Advisors Inc., Van Kampen Insurance
Agency of Illinois Inc., Van Kampen Insurance Agency of Texas Inc., Van Kampen
System Inc., Van Kampen Recordkeeping Services Inc., American Capital
Contractual Services, Inc., Van Kampen Trust Company, Van Kampen Exchange Corp.
and Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and
Asset Management sometimes are referred to herein collectively as the
"Advisers". For purposes hereof, the term "Fund Complex" includes each of the
open-end investment companies advised by the Advisers (excluding Van Kampen
Exchange Fund).

TRUSTEES

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder, and
Raleigh, NC 27614 prior to August 1996, Chairman, Chief Executive
Date of Birth: 07/14/32 Officer and President, MDT Corporation (now
Age: 67 known as Getinge/Castle, Inc., a subsidiary of
Getinge Industrier AB), a company which
develops, manufactures, markets and services
medical and scientific equipment.
Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
53 Monarch Bay Drive company. Trustee/Director of each of the funds
Dana Point, CA 92629 in the Fund Complex. Prior to January 1999,
Date of Birth: 09/16/38 Chairman and Chief Executive Officer of The
Age: 61 Allstate Corporation ("Allstate") and Allstate
Insurance Company. Prior to January 1995,
President and Chief Executive Officer of
Allstate. Prior to August 1994, various
management positions at Allstate.
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Trustee/Director of each
233 South Wacker Drive of the funds in the Fund Complex. Prior to
Suite 7000 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management consulting
Date of Birth: 06/03/48 firm. Formerly, Executive Vice President of ABN
Age: 51 AMRO, N.A., a Dutch bank holding company. Prior
to 1992, Executive Vice President of La Salle
National Bank. Trustee on the University of
Chicago Hospitals Board, Vice Chair of the
Board of The YMCA of Metropolitan Chicago and a
member of the Women's Board of the University
of Chicago. Prior to 1996, Trustee of The
International House Board, a fellowship and
housing organization for international graduate
students.
</TABLE>

B-16
<PAGE> 44

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
R. Craig Kennedy.......................... President and Director, German Marshall Fund of
11 DuPont Circle, N.W. the United States, an independent U.S.
Washington, D.C. 20016 foundation created to deepen understanding,
Date of Birth: 02/29/52 promote collaboration and stimulate exchanges
Age: 48 of practical experience between Americans and
Europeans. Trustee/Director of each of the
funds in the Fund Complex. Formerly, advisor to
the Dennis Trading Group Inc., a managed
futures and option company that invests money
for individuals and institutions. Prior to
1992, President and Chief Executive Officer,
Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation.
Mitchell M. Merin*........................ President and Chief Operating Officer of Asset
Two World Trade Center Management of Morgan Stanley Dean Witter since
66th Floor December 1998. President and Director since
New York, NY 10048 April 1997 and Chief Executive Officer since
Date of Birth: 08/13/53 June 1998 of Morgan Stanley Dean Witter
Age: 46 Advisors Inc. and Morgan Stanley Dean Witter
Services Company Inc. Chairman, Chief Executive
Officer and Director of Morgan Stanley Dean
Witter Distributors Inc. since June 1998.
Chairman and Chief Executive Officer since June
1998, and Director since January 1998, of
Morgan Stanley Dean Witter Trust FSB. Director
of various Morgan Stanley Dean Witter
subsidiaries. President of the Morgan Stanley
Dean Witter Funds and Discover Brokerage Index
Series since May 1999. Trustee/Director of each
of the funds in the Fund Complex. Previously
Chief Strategic Officer of Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean
Witter Services Company Inc. and Executive Vice
President of Morgan Stanley Dean Witter
Distributors Inc. April 1997-June 1998, Vice
President of the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series May
1997-April 1999, and Executive Vice President
of Dean Witter, Discover & Co.
Jack E. Nelson............................ President and owner, Nelson Investment Planning
423 Country Club Drive Services, Inc., a financial planning company
Winter Park, FL 32789 and registered investment adviser in the State
Date of Birth: 02/13/36 of Florida. President and owner, Nelson Ivest
Age: 64 Brokerage Services Inc., a member of the
National Association of Securities Dealers,
Inc. and Securities Investors Protection Corp.
Trustee/Director of each of the funds in the
Fund Complex.
</TABLE>

B-17
<PAGE> 45

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

Fernando Sisto............................ Professor Emeritus. Prior to August 1996, a
155 Hickory Lane George M. Bond Chaired Professor with Stevens
Closter, NJ 07624 Institute of Technology, and prior to 1995,
Date of Birth: 08/02/24 Dean of the Graduate School, Stevens Institute
Age: 75 of Technology. Director, Dynalysis of
Princeton, 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 counsel
Chicago, IL 60606 to the funds in the Fund Complex, and other
Date of Birth: 08/22/39 investment companies advised by the Advisers or
Age: 60 Van Kampen Management Inc. Trustee/Director of
each of the funds in the Fund Complex, and
Trustee/Managing General Partner of other
investment companies advised by the Advisers or
Van Kampen Management Inc.
</TABLE>

B-18
<PAGE> 46

<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Suzanne H. Woolsey........................ Chief Operating Officer of the National Academy
2101 Constitution Ave., N.W. of Sciences/National Research Council, an
Room 206 independent, federally chartered policy
Washington, D.C. 20418 institution, since 1993. Director of Neurogen
Date of Birth: 12/27/41 Corporation, a pharmaceutical company, since
Age: 58 January 1998. Director of the German Marshall
Fund of the United States, Trustee of Colorado
College, and Vice Chair of the Board of the
Council for Excellence in Government. Trustee/
Director of each of the funds in the Fund
Complex. Prior to 1993, Executive Director of
the Commission on Behavioral and Social
Sciences and Education at the National Academy
of Sciences/National Research Council. From
1980 through 1989, Partner of Coopers &
Lybrand.
</TABLE>

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

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

B-19
<PAGE> 47

OFFICERS

Messrs. Smith, Santo, Hegel, Sullivan and Zimmermann are located at 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL 60181-5555. Mr. Boyd is
located at 2800 Post Oak Blvd., Houston, TX 77056.

<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
A. Thomas Smith III.................. Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Secretary and Director of Van Kampen Investments,
Age: 43 the Advisers, Van Kampen Advisors Inc., Van Kampen
Vice President and Secretary Management Inc., the Distributor, American Capital
Contractual Services, Inc., Van Kampen Exchange
Corp., Van Kampen Recordkeeping Services Inc.,
Investor Services, Van Kampen Insurance Agency of
Illinois Inc. and Van Kampen System Inc. Vice
President and Secretary/Vice President, Principal
Legal Officer and Secretary of other investment
companies advised by the Advisers or their
affiliates. Vice President and Secretary of each of
the funds in the Fund Complex. Prior to January
1999, Vice President and Associate General Counsel
to New York Life Insurance Company ("New York
Life"), and prior to March 1997, Associate General
Counsel of New York Life. Prior to December 1993,
Assistant General Counsel of The Dreyfus
Corporation. Prior to August 1991, Senior
Associate, Willkie Farr & Gallagher. Prior to
January 1989, Staff Attorney at the Securities and
Exchange Commission, Division of Investment
Management, Office of Chief Counsel.

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

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

B-20
<PAGE> 48

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

John L. Sullivan..................... Senior Vice President of Van Kampen Investments and
Date of Birth: 08/20/55 the Advisers. Vice President, Chief Financial
Age: 44 Officer and Treasurer of each of the funds in the
Vice President, Chief Financial Fund Complex and certain other investment companies
Officer and Treasurer advised by the Advisers or their affiliates.

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

Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 63 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated person of Van Kampen Investments, the Advisers or the Distributor
(each a "Non-Affiliated Trustee") is compensated by an annual retainer and
meeting fees for services to the funds in the Fund Complex. Each fund in the
Fund Complex provides a deferred compensation plan to its Non-Affiliated
Trustees that allows trustees/directors to defer receipt of their compensation
and earn a return on such deferred amounts. Deferring compensation has the
economic effect as if the Non-Affiliated Trustee reinvested his or her
compensation into the funds. Each fund in the Fund Complex provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.

The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex on the basis of the
relative net assets of each fund as of the last business day of the preceding
calendar quarter. The compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex in the amount of $200 per
quarterly or special meeting attended by the Non-Affiliated Trustee, due on the

B-21
<PAGE> 49

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-22
<PAGE> 50

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

COMPENSATION TABLE

<TABLE>
<CAPTION>
Fund Complex
-------------------------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Retirement Annual Compensation
Year First Aggregate Benefits Benefits from before
Appointed or Compensation Accrued as the Fund Deferral from
Elected to from the Part of Upon Fund
Name(1) the Board Fund(2) Expenses(3) Retirement(4) Complex(5)
------- ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan 1991 $ 4,086 $40,303 $60,000 $126,000
Jerry D. Choate(1) 1999 2,966 0 60,000 88,700
Linda Hutton Heagy 1995 4,086 5,045 60,000 126,000
R. Craig Kennedy 1995 4,086 3,571 60,000 125,600
Jack E. Nelson 1995 4,086 21,664 60,000 126,000
Phillip B. Rooney 1997 3,866 7,787 60,000 113,400
Fernando Sisto 1978 4,086 72,060 60,000 126,000
Wayne W. Whalen 1995 4,086 15,189 60,000 126,000
Suzanne H. Woolsey(1) 1999 2,966 0 60,000 88,700
</TABLE>

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

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

(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended December 31, 1999. The
following trustees deferred compensation from the Fund during the fiscal
year ended December 31, 1999: Mr. Branagan, $4,086; Mr. Choate, $2,059; Ms.
Heagy, $4,086; Mr. Kennedy, $2,043; Mr. Nelson, $4,086; Mr. Rooney, $3,886;
Mr. Sisto, $2,043; and Mr. Whalen, $4,086. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to either the
return on the common shares of the Fund or other funds in the Fund Complex
as selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds
in the Fund Complex. To the extent permitted by the 1940 Act, each fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match the deferred compensation obligation. The cumulative
deferred compensation (including interest) accrued with respect to each
trustee, including former trustees, from the Fund as of December 31, 1999 is
as follows: Mr. Branagan, $16,395; Mr. Caruso, $3,242; Mr. Choate, $2,805;
Mr. Gaughan, $492; Ms. Heagy, $15,587; Mr. Kennedy, $16,844; Mr. Miller,
$7,585; Mr. Nelson, $33,707; Mr. Rees, $18,938; Mr. Robinson, $14,932; Mr.
Rooney, $16,168; Mr. Sisto, $33,071; Mr. Whalen, $23,622; and Mr. Yovovich,
$4,851. The deferred compensation plan is described above the Compensation
Table.

(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the

B-23
<PAGE> 51

trustees for the funds' respective fiscal years ended in 1999. The
retirement plan is described above the Compensation Table.

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

(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1999 before
deferral by the trustees under the deferred compensation plan. Because the
funds in the Fund Complex have different fiscal year ends, the amounts shown
in this column are presented on a calendar year basis. Certain trustees
deferred all or a portion of their aggregate compensation from the Fund
Complex during the calendar year ended December 31, 1999. The deferred
compensation earns a rate of return determined by reference to the return on
the shares of the funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such Non-
Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of
those investment companies selected by the Non-Affiliated Trustees in order
to match the deferred compensation obligation. The Advisers and their
affiliates also serve as investment adviser for other investment companies;
however, with the exception of Mr. Whalen, the Non-Affiliated Trustees were
not trustees of such investment companies. Combining the Fund Complex with
other investment companies advised by the Advisers and their affiliates, Mr.
Whalen received Total Compensation of $279,250 during the calendar year
ended December 31, 1999.

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

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

B-24
<PAGE> 52

INVESTMENT ADVISORY AGREEMENT

The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate
strategy and implement the Fund's investment objectives. The Adviser also
furnishes offices, necessary facilities and equipment, provides administrative
services to the Fund, renders periodic reports to the Board of Trustees and
permits its officers and employees to serve without compensation as trustees of
the Trust or officers of the Fund if elected to such positions. The Fund,
however, bears the cost of its day-to-day operations, including service fees,
distribution fees, custodian fees, legal and independent accountant fees, the
costs of reports and proxies to shareholders, compensation of trustees of the
Trust (other than those who are affiliated persons of the Adviser, Distributor
or Van Kampen Investments) and all other ordinary business expenses not
specifically assumed by the Adviser. The Advisory Agreement also provides that
the Adviser shall not be liable to the Fund for any actions or omissions in the
absence of willful misfeasance, bad faith, negligence or reckless disregard of
its obligations and duties under the Advisory Agreement.

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

B-25
<PAGE> 53

During the fiscal years ended December 31, 1999, 1998 and 1997, the Adviser
received approximately $8,101,800, $6,877,600 and $5,339,000, respectively, in
advisory fees from the Fund.

OTHER AGREEMENTS

Accounting Services Agreement. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
supplementary to those provided by the custodian. Such services are expected to
enable the Fund to more closely monitor and maintain its accounts and records.
The Fund pays all costs and expenses related to such services, including all
salary and related benefits of accounting personnel, as well as the overhead and
expenses of office space and the equipment necessary to render such services.
The Fund shares together with the other Van Kampen funds in the cost of
providing such services with 25% of such costs shared proportionately based on
the respective number of classes of securities issued per fund and the remaining
75% of such costs based proportionately on the respective net assets per fund.

During the fiscal years ended December 31, 1999, 1998 and 1997, Advisory
Corp. received approximately $412,200, $423,600 and $180,500, respectively, in
accounting services fees from the Fund.

DISTRIBUTION AND SERVICE

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

<TABLE>
<CAPTION>
Total Amounts
Underwriting Retained by
Commissions Distributor
------------ -----------
<S> <C> <C>
Fiscal year ended December 31, 1999..................... $4,771,745 $729,970
Fiscal year ended December 31, 1998..................... $4,675,252 $639,141
Fiscal year ended December 31, 1997..................... $3,833,492 $567,161
</TABLE>

B-26
<PAGE> 54

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 $50,000........................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............. 3.75% 3.90% 3.00%
$250,000 but less than $500,000............. 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000........... 2.00% 2.04% 1.75%
$1,000,000 or more.......................... * * *
- ------------------------------------------------------------------------------------------------
</TABLE>

* No sales charge is payable at the time of purchase on investments of $1
million or more, although the Fund may impose a contingent deferred sales
charge of 1.00% on certain redemptions made within one year of the purchase. A
commission or transaction fee will be paid by the Distributor at the time of
purchase directly out of the Distributor's assets (and not out of the Fund's
assets) to authorized dealers who initiate and are responsible for purchases
of $1 million or more computed on a percentage of the dollar value of such
shares sold as follows: 1.00% on sales to $2 million, plus 0.80% on the next
$1 million and 0.50% on the excess over $3 million. For single purchases of
$20 million or more by an individual retail investor the Distributor will pay,
at the time of purchase and directly out of the Distributor's assets (and not
out of the Fund's assets), a commission or transaction fee of 1.00% to
authorized dealers who initiate and are responsible for such purchases. The
commission or transaction fee of 1.00% will be computed on a percentage of the
dollar value of such shares sold.

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

Proceeds from any contingent deferred sales charge and any distribution
fees on Class B Shares and Class C Shares of the Fund are paid to the
Distributor and are used by the Distributor to defray its distribution related
expenses in connection with the sale of the Fund's shares, such as the payment
to authorized dealers for selling such shares. With respect to Class C Shares,
the authorized dealers generally are paid the ongoing 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

B-27
<PAGE> 55

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

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

Certain financial intermediaries may be prohibited under law from providing
certain underwriting or distribution services. If a financial intermediary were
prohibited from acting in any capacity or providing any of the described
services, the Distributor would consider what action, if any, would be
appropriate. The Distributor does not believe that termination of a relationship
with a financial intermediary would result in any material adverse consequences
to the Fund.

The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to

B-28
<PAGE> 56

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

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

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

Because of fluctuation in net asset value, the plan fees with respect to a
particular Class B Share or Class C Share may be greater or less than the amount
of the initial commission (including carrying cost) paid by the Distributor with
respect to such share. In such circumstances, a shareholder of a share may be
deemed to incur expenses attributable to other shareholders of such class. As of
December 31, 1999, there were $33,938,095 and $1,210,790 of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing 2.95% and 1.01% of the Fund's average daily net
assets attributable to Class B Shares and Class C Shares, respectively. If the
Plans are terminated or not continued, the Fund would not be contractually
obligated to pay the Distributor for any expenses not previously reimbursed by
the Fund or recovered through contingent deferred sales charges.

For the fiscal year ended December 31, 1999, the Fund's aggregate expenses
paid under the Plans for Class A Shares were $2,206,787 or 0.25% of the Class A
Shares' average daily net assets. Such expenses were paid to reimburse the
Distributor for

B-29
<PAGE> 57

payments made to financial intermediaries for servicing Class A shareholders and
for administering the Class A Share Plans. For the fiscal year ended December
31, 1999, the Fund's aggregate expenses paid under the Plans for Class B Shares
were $11,532,757 or 1.00% of the Class B Shares' average daily net assets. Such
expenses were paid to reimburse the Distributor for the following payments:
$8,643,074 for commissions and transaction fees paid to financial intermediaries
in respect of sales of Class B Shares of the Fund and $2,889,683 for fees paid
to financial intermediaries for servicing Class B shareholders and administering
the Class B Share Plans. For the fiscal year ended December 31, 1999, the Fund's
aggregate expenses paid under the Plans for Class C Shares were $1,064,463 or
1.00% of the Class C Shares' average daily net assets. Such expenses were paid
to reimburse the Distributor for the following payments: $612,234 for
commissions and transaction fees paid to financial intermediaries in respect of
sales of Class C Shares of the Fund and $452,229 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)
The Prudential Insurance Company of America, (ii) Smith Barney, Inc., (iii)
Merrill Lynch, Pierce, Fenner & Smith Incorporated, (iv) Fidelity Brokerage
Services, Inc. & National Financial Services Corporation, (v) Hewitt Associates,
LLC, (vi) Norwest Bank Minnesota, N.A./Wells Fargo Bank, N.A. (vii) GreatWest
Life & Annuity Insurance Company/Benefits Corp Equities, Inc., (viii) Huntington
Bank, (ix) Invesco Retirement and Benefit Services, Inc., (x) Lincoln National
Life Insurance Company, (xi) Dean Witter Reynolds, Inc., (xii) National Deferred
Compensation, Inc., (xiii) Delaware Charter Guarantee & Trust under the
tradename of Trustar(SM) Retirement Services, (iv) Union Bank of California,
N.A. Shares of the Fund will be offered pursuant to such firm's retirement plan
alliance program(s). Trustees and other fiduciaries of retirement plans seeking
to invest in multiple fund families through broker-dealer retirement plan
alliance programs should contact the firms mentioned above for further
information concerning the program(s) including, but not limited to, minimum
investment and operational requirements.

TRANSFER AGENT

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

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

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

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

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<PAGE> 58

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

The Adviser also may place portfolio transactions, to the extent permitted
by law, with brokerage firms affiliated with the Fund, the Adviser or the
Distributor and with brokerage 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
Fund's Board of Trustees has adopted certain policies incorporating the
standards of Rule 17e-1 issued by the SEC under the 1940 Act which require that
the commissions paid to affiliates of the Fund must

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<PAGE> 59

be reasonable and fair compared to the commissions, fees or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time.
The rule and procedures also contain review requirements and require the Adviser
to furnish reports to the Trustees and to maintain records in connection with
such reviews. After consideration of all factors deemed relevant, the Trustees
will consider from time to time whether the advisory fee for the Fund will be
reduced by all or a portion of the brokerage commission given to affiliated
brokers.

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

Commissions Paid:

<TABLE>
<CAPTION>
Affiliated Brokers
All -----------------------------
Brokers Morgan Stanley Dean Witter
------- -------------- -----------
<S> <C> <C> <C>
Fiscal year ended December 31, 1999....... $2,920,499 $ 93,874 -0-
Fiscal year ended December 31, 1998....... 2,120,029 -0- -0-
Fiscal year ended December 31, 1997....... 2,269,523 1,875 -0-
Fiscal year 1999 Percentages:
Commissions with affiliate to total
commissions............................ 3.21% -0-
Value of brokerage transactions with
affiliate to total transactions........ 0.43% -0-
</TABLE>

During the fiscal year ended December 31, 1999, the Fund paid $2,278,060 in
brokerage commissions on transactions totaling $1,796,299,202 to brokers
selected primarily on the basis of research services provided to the Adviser.

SHAREHOLDER SERVICES

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

INVESTMENT ACCOUNT

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

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<PAGE> 60

SHARE CERTIFICATES

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

RETIREMENT PLANS

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

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS

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

DIVIDEND DIVERSIFICATION

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

B-33
<PAGE> 61

which distributions would be invested. Distributions are invested into the
selected fund at its net asset value per share as of the payable date of the
distribution.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder may establish a monthly, quarterly, semiannual or annual
withdrawal plan if the shareholder owns shares in a single account valued at
$10,000 or more at the next determined net asset value per share at the time the
plan is established. If a shareholder owns shares in a single account valued at
$5,000 or more at the next determined net asset value per share at the time the
plan is established, the shareholder may establish a quarterly, semiannual or
annual withdrawal plan. This plan provides for the orderly use of the entire
account, not only the income but also the capital, if necessary. Each payment
represents the proceeds of a redemption of shares on which any capital gain or
loss will be recognized. The planholder may arrange for regular checks in any
amount, not less than $25. Such a systematic withdrawal plan may also be
maintained by an investor purchasing shares for a retirement plan established on
a form made available by the Fund. See "Shareholder Services -- Retirement
Plans."

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

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

EXCHANGE PRIVILEGE

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

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

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

REINSTATEMENT PRIVILEGE

A Class A Shareholder or Class B Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class A Shares

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<PAGE> 62

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

REDEMPTION OF SHARES

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

In addition, if the Board of Trustees determines that payment wholly or
partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. A
distribution-in-kind will result in recognition by the shareholder of a gain or
loss for federal income tax purposes when such securities are distributed, and
the shareholder may have brokerage charges and a gain or loss for federal income
tax purposes upon a shareholder's subsequent disposition of such securities.

CONTINGENT DEFERRED SALES CHARGE-CLASS A

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

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<PAGE> 63

WAIVER OF CLASS B AND CLASS C

CONTINGENT DEFERRED SALES CHARGES

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

REDEMPTION UPON DEATH OR DISABILITY

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

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

REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS

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

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

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<PAGE> 64

REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN

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

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

NO INITIAL COMMISSION OR TRANSACTION FEE

The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares. See "Purchase of Shares--Waiver of Contingent Deferred Sales
Charge" in the Prospectus.

INVOLUNTARY REDEMPTIONS OF SHARES

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

REINVESTMENT OF REDEMPTION PROCEEDS

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

REDEMPTION BY ADVISER

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

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<PAGE> 65

TAXATION

FEDERAL INCOME TAXATION OF THE FUND

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

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

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

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

Some of the Fund's investment practices are subject to special provisions
of the Code that may, among other things, defer the use of certain losses of the
Fund, affect the holding period of the securities held by the Fund and alter the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to recognize income or gain without receiving cash with which
to make distributions in amounts necessary to satisfy the 90% distribution
requirement and the distribution requirements for avoiding income and excise
taxes. The Fund will monitor its transactions and may make

B-38
<PAGE> 66

certain tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.

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

PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (i) at least
75% of its gross income is passive income or (ii) an average of at least 50% of
its assets produce, or are held for the production of, passive income. Under
certain circumstances, a regulated investment company that holds stock of a PFIC
will be subject to federal income tax on (i) a portion of any "excess
distribution" received on such stock or (ii) any gain from a sale or disposition
of such stock (collectively, "PFIC income"), plus interest on such amounts, even
if the regulated investment company distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be included in
the regulated investment company's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If the Fund invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain, which most likely would have to be distributed to satisfy the 90%
distribution requirement and the distribution requirement for avoiding income
and excise taxes. In most instances it will be very difficult to make this
election due to certain requirements imposed with respect to the election.

As an alternative to making the above-described election to treat the PFIC
as a qualified electing fund, the Fund may make an election to annually
mark-to-market PFIC stock that it owns (a "PFIC Mark-to-Market Election").
"Marking-to-market," in this context, means recognizing as ordinary income or
loss each year an amount equal to the difference between the Fund's adjusted tax
basis in such PFIC stock and its fair market value. Losses will be allowed only
to the extent of net mark-to-market gain previously included by the Fund
pursuant to the election for prior taxable years. The Fund may be required to
include in its taxable income for the first taxable year in which it makes a
PFIC Mark-to-Market Election an amount equal to the interest charge that would
otherwise accrue with respect to distributions on, or dispositions of, the PFIC
stock. This amount would not be deductible from the Fund's taxable income. The
PFIC Mark-to-Market Election applies to the taxable year for which made and to
all subsequent taxable years, unless the Internal Revenue Service (the "IRS")
consents to revocation of the election. By making the PFIC Mark-to-Market
Election, the Fund could ameliorate the adverse tax consequences arising from
its ownership of PFIC stock, but in any particular year may be required to
recognize income in excess of the distributions it receives from the PFIC and
proceeds from the dispositions of PFIC stock.

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<PAGE> 67

DISTRIBUTIONS TO SHAREHOLDERS

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

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

The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund may be eligible for the dividends received
deduction for corporations if the Fund receives qualifying dividends during the
year and if certain requirements of the Code are satisfied.

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

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

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

B-40
<PAGE> 68

SALE OF SHARES

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

CAPITAL GAINS RATES

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

NON-U.S. SHAREHOLDERS

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

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

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

B-41
<PAGE> 69

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

The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their 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 IRS notifies the Fund that the shareholder has failed to
properly report certain interest and dividend income to the IRS and to respond
to notices to that effect or (iii) when required to do so, the shareholder fails
to certify that he or she is not subject to backup withholding. Redemption
proceeds may be subject to withholding under the circumstances described in (i)
above.

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

INFORMATION REPORTING

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

GENERAL

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

B-42
<PAGE> 70

FUND PERFORMANCE

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

The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the end of the period. Total return is calculated by
subtracting the value of the initial investment from the ending value and
showing the difference as a percentage of the initial investment; the
calculation assumes the initial investment is made at the current maximum public
offering price (which includes the maximum sales charge for Class A Shares);
that all income dividends or capital gain dividends during the period are
reinvested in Fund shares at net asset value; and that any applicable contingent
deferred sales charge has been paid. The Fund's total return will vary depending
on market conditions, the securities comprising the Fund's portfolio, the Fund's
operating expenses and unrealized net capital gains or losses during the period.
Total return is based on historical earnings and asset value fluctuations and is
not intended to indicate future performance. No adjustments are made to reflect
any income taxes payable by shareholders on dividends and capital gain dividends
paid by the Fund or to reflect the fact 12b-1 fees previously may have been less
than the current 12b-1 fees for certain classes of shares as specified in the
Prospectus.

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

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

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 contingent deferred sales charge
imposed at the time of redemption were reflected, it would reduce the
performance quoted.

From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gains dividends, if any, distributed for a
specified period. Distribution rate differs from yield, which is a measure of
the income actually earned by the Fund's investments, and from

B-43
<PAGE> 71

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

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

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

B-44
<PAGE> 72

for investors at different stages of their lives; and (4) in reports or other
communications to shareholders or in advertising material, illustrate the
benefits of compounding at various assumed rates of return.

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

CLASS A SHARES

The Fund's average annual total return, assuming payment of the maximum
sales charge, for Class A Shares of the Fund for (i) the one-year period ended
December 31, 1999 was 3.59%, (ii) the five-year period ended December 31, 1999
was 18.21% and (iii) the ten-year period ended December 31, 1999 was 13.37%.

The Fund's cumulative non-standardized total return, including payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to December 31, 1999 was 6,994.71%.

The Fund's cumulative non-standardized total return, excluding payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to December 31, 1999 was 7,435.07%.

CLASS B SHARES

The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class B Shares of the Fund for (i) the one-year
period ended December 31, 1999 was 4.31%, (ii) the five-year period ended
December 31, 1999 was 18.53% and (iii) the approximately seven-year, eight-month
period since May 1, 1992, the commencement of distribution for Class B Shares of
the Fund, through December 31, 1999 was 14.93%.

The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class B Shares from
May 1, 1992 (commencement of distribution of Class B Shares) to December 31,
1999 was 190.90%.

The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class B Shares from
May 1, 1992 (commencement of distribution of Class B Shares) to December 31,
1998 was 190.90%.

CLASS C SHARES

The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class C Shares of the Fund for (i) the one-year
period ended December 31, 1999 was 8.21%, (ii) the five-year period ended
December 31, 1999 was 18.69% and (iii) the approximately six-year, six month
period since July 6, 1993, the commencement of distribution for Class C Shares
of the Fund, through December 31, 1999 was 15.03%.

The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class C Shares from
July 6, 1993 (commencement of distribution of Class C Shares) to December 31,
1999 was 148.10%.

B-45
<PAGE> 73

The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class C Shares from
July 6, 1993 (commencement of distribution of Class C Shares) to December 31,
1999 was 148.10%.

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. The custodian also provides
accounting services to the Fund.

SHAREHOLDER REPORTS

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

INDEPENDENT ACCOUNTANTS

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-46
<PAGE> 74

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Trustees of
Van Kampen Equity Income 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 Equity Income Fund (the
"Fund") at December 31, 1999, 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 accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States,
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, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 11, 2000

F-1
<PAGE> 75

PORTFOLIO OF INVESTMENTS

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

<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 65.3%
CONSUMER DISTRIBUTION 0.8%
Federated Department Stores, Inc. (a)............. 374,700 $ 18,945,769
--------------
CONSUMER NON-DURABLES 6.8%
Anheuser-Busch Cos., Inc.......................... 233,400 16,542,225
Benckiser NV, Class B -- ADR (Netherlands) (a).... 173,500 6,766,500
Colgate-Palmolive Co. ............................ 314,360 20,433,400
Nabisco Holdings Corp., Class A................... 117,800 3,725,425
Pepsi Bottling Group, Inc......................... 1,062,600 17,599,312
PepsiCo, Inc. .................................... 517,600 18,245,400
Philip Morris Cos., Inc. ......................... 63,400 1,470,088
Procter & Gamble Co. ............................. 140,700 15,415,444
Ralston Purina Group.............................. 668,400 18,631,650
Seagram Co., Ltd. -- ADR (Canada)................. 239,000 10,740,062
Seagram Co., Ltd. -- Convertible Preferred -- ADR 325,000 14,625,000
(Canada)........................................
Unilever NV -- ADR (Netherlands).................. 91,000 4,953,813
Whitman Corp. .................................... 691,100 9,286,656
--------------
158,434,975
--------------
CONSUMER SERVICES 1.1%
Aon Corp.......................................... 268,000 10,720,000
News Corp. -- Exchange Trust, 144A -- Convertible 83,000 11,879,375
Preferred (b).....................................
Sinclair Broadcast Group -- Convertible 82,000 2,875,125
Preferred.......................................
--------------
25,474,500
--------------
ENERGY 4.7%
Burlington Resources, Inc. ....................... 314,000 10,381,625
Coastal Corp. .................................... 517,200 18,328,275
Consolidated Edison, Inc. ........................ 453,380 15,641,610
El Paso Energy Corp. ............................. 704,500 27,343,407
Royal Dutch Petroleum Co. -- ADR (Netherlands).... 310,700 18,777,931
Texaco, Inc. ..................................... 378,800 20,573,575
--------------
111,046,423
--------------
</TABLE>

See Notes to Financial Statements

F-2
<PAGE> 76
PORTFOLIO OF INVESTMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
FINANCE 9.4%
American General Corp. ........................... 263,000 $ 19,955,125
AXA Financial, Inc. .............................. 782,000 26,490,250
Bank of Tokyo-Mitsubishi, Ltd. -- ADR (Japan)..... 1,225,800 17,084,587
BankAmerica Corp. ................................ 212,200 10,649,787
Citigroup, Inc. .................................. 347,665 19,317,137
Fannie Mae........................................ 313,000 19,542,937
FleetBoston Financial Corp........................ 639,900 22,276,519
Franklin Resources, Inc........................... 100,000 3,206,250
Jefferson-Pilot Corp. ............................ 210,800 14,387,100
Lincoln National Corp. ........................... 227,000 9,080,000
Marsh & McLennan Cos., Inc. ...................... 224,200 21,453,137
MBIA, Inc. ....................................... 186,000 9,823,125
U.S. Bancorp...................................... 63,000 1,500,188
Wachovia Corp. ................................... 42,400 2,883,200
Washington Mutual, Inc. .......................... 607,260 15,788,760
WBK Trust, STRYPES -- Convertible Preferred....... 201,000 6,444,563
--------------
219,882,665
--------------
HEALTHCARE 7.4%
American Home Products Corp. ..................... 551,000 21,730,062
Aventis, SA, Warrants -- ADR (France) (a)......... 248,000 1,271,000
Beckman Coulter, Inc. ............................ 326,800 16,625,950
Bristol-Myers Squibb Co. ......................... 181,400 11,643,612
Caremark Rx Capital Trust, 144A -- Convertible 150,000 6,318,750
Preferred (a) (b)...............................
Columbia/HCA Healthcare Corp. .................... 848,300 24,865,794
IMS Health, Inc. ................................. 223,600 6,079,125
Laboratory Corp., Ser A -- Convertible 313,000 21,597,000
Preferred.......................................
Lincare Holdings, Inc. (a)........................ 259,000 8,984,063
MedPartners, Inc., TAPS -- Convertible 867,000 6,881,813
Preferred.......................................
Oxford Health Plans, Inc. (a)..................... 134,000 1,700,125
Pharmacia & Upjohn, Inc. ......................... 265,720 11,957,400
United HealthCare Corp. .......................... 143,290 7,612,281
Warner-Lambert Co. ............................... 326,400 26,744,400
--------------
174,011,375
--------------
</TABLE>

See Notes to Financial Statements

F-3
<PAGE> 77
PORTFOLIO OF INVESTMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 5.2%
Fluor Corp. ...................................... 91,000 $ 4,174,625
Honeywell International, Inc. .................... 192,500 11,104,844
Ingersol Rand Co. ................................ 313,060 17,237,866
Koninklijke Philips Electronics NV -- ADR 200,384 27,051,840
(Netherlands)...................................
Lexmark International Group, Inc., Class A (a).... 194,000 17,557,000
Minnesota Mining & Manufacturing Co. ............. 445,100 43,564,162
--------------
120,690,337
--------------
RAW MATERIALS / PROCESSING INDUSTRIES 7.7%
Boise Cascade Corp. .............................. 261,140 10,576,170
Exxon Mobil Corp. ................................ 622,773 50,172,150
Fresenius National Med Care, Inc., Class D -- 12,000 120
Preferred (a)...................................
Imperial Chemical Industries PLC -- ADR (United 293,000 12,470,812
Kingdom)........................................
International Paper Co. .......................... 299,100 16,880,456
Monsanto Co. ..................................... 301,900 10,755,188
Monsanto Co., ACES -- Convertible Preferred....... 501,000 16,595,625
Newmont Mining Corp. ............................. 295,000 7,227,500
Pall Corp. ....................................... 584,200 12,596,812
Schlumberger Ltd. ................................ 141,000 7,931,250
Sherwin-Williams Co. ............................. 564,000 11,844,000
Tosco Corp. ...................................... 259,000 7,041,563
Transocean Sedco Forex, Inc. ..................... 27,298 919,588
USX -- U.S. Steel Group........................... 437,400 14,434,200
--------------
179,445,434
--------------
TECHNOLOGY 12.8%
Adobe Systems, Inc................................ 176,400 11,862,900
Alcatel SA -- ADR (France)........................ 426,900 19,210,500
Altera Corp. (a).................................. 156,600 7,761,487
Boeing Co. ....................................... 430,800 17,905,125
Cadence Design Systems, Inc. (a).................. 557,700 13,384,800
Cisco Systems, Inc. (a)........................... 79,400 8,505,725
Dell Computer Corp. (a)........................... 135,000 6,885,000
Electronic Data Systems Corp. .................... 216,100 14,465,194
EMC Corp. (a)..................................... 90,000 9,832,500
</TABLE>

See Notes to Financial Statements

F-4
<PAGE> 78
PORTFOLIO OF INVESTMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Hewlett-Packard Co. .............................. 111,000 $ 12,647,062
Intel Corp. ...................................... 142,800 11,754,225
J.D. Edwards & Co. (a)............................ 161,500 4,824,813
Microsoft Corp. (a)............................... 60,000 7,005,000
Motorola, Inc. ................................... 177,300 26,107,425
Nippon Telegraph & Telephone Corp. -- ADR 305,400 26,302,575
(Japan).........................................
Nortel Networks Corp. ............................ 223,300 22,553,300
Oracle Corp. (a).................................. 219,100 24,552,894
SAP AG -- ADR (Germany) (a)....................... 85,000 4,425,313
Sun Microsystems, Inc. (a)........................ 86,600 6,706,088
SunGard Data Systems, Inc. (a).................... 555,100 13,183,625
Texas Instruments, Inc. .......................... 202,740 19,640,437
Xilinx, Inc. (a).................................. 200,400 9,111,937
--------------
298,627,925
--------------
UTILITIES 9.4%
Avista Corp., Ser L -- Convertible Preferred...... 502,000 7,655,500
BellSouth Corp. .................................. 225,200 10,542,175
DQE, Inc. ........................................ 394,000 13,642,250
Edison International.............................. 386,000 10,108,375
GPU, Inc. ........................................ 363,700 10,888,269
GTE Corp. ........................................ 419,600 29,608,025
Illinova Corp. ................................... 764,600 26,569,850
Niagara Mohawk Holdings, Inc. (a)................. 1,652,100 23,026,144
Northeast Utilities............................... 1,588,859 32,670,913
NSTAR............................................. 730,300 29,577,150
PECO Energy Co.................................... 176,400 6,129,900
SBC Communications, Inc. ......................... 165,300 8,058,375
Sprint Corp. ..................................... 121,450 8,175,103
U.S. WEST Communications Group.................... 58,830 4,235,760
--------------
220,887,789
--------------
TOTAL COMMON AND PREFERRED STOCKS 65.3%......................... 1,527,447,192
--------------
</TABLE>

See Notes to Financial Statements

F-5
<PAGE> 79
PORTFOLIO OF INVESTMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS 9.1%
CONSUMER DURABLES 0.5%
$10,000 Ford Motor Credit Co. .............. 6.700% 07/16/04 $ 9,793,450
3,000 General Motors Corp. ............... 7.000 06/15/03 2,979,915
--------------
12,773,365
--------------
CONSUMER NON-DURABLES 0.2%
5,000 Coca-Cola Enterprises, Inc. ........ 7.125 09/30/09 4,902,650
--------------
CONSUMER SERVICES 0.8%
10,000 Clear Channel Communications........ 6.625 06/15/08 9,295,350
10,000 Cox Communications, Inc............. 7.250 11/15/15 9,436,620
--------------
18,731,970
--------------
ENERGY 0.6%
5,000 Enron Corp. ........................ 9.125 04/01/03 5,233,650
5,500 Texas Eastern Transmission Corp. ... 8.250 10/15/04 5,696,663
2,000 Western Atlas, Inc. ................ 7.875 06/15/04 2,038,590
--------------
12,968,903
--------------
FINANCE 1.5%
5,000 American Re Corp., Ser B............ 7.450 12/15/26 4,759,740
5,000 Avalonbay Communities, Inc. ........ 7.500 08/01/09 4,776,565
5,000 Countrywide Funding Corp. .......... 8.250 07/15/02 5,075,565
5,000 Finova Capital Corp. ............... 7.625 09/21/09 4,925,465
5,000 Fleet Boston Financial Corp. ....... 6.875 01/15/28 4,412,165
2,000 General Electric Capital Corp. ..... 8.900 09/15/04 2,146,644
5,000 Lehman Brothers, Inc. .............. 7.125 07/15/02 4,973,700
5,000 Washington Mutual Capital I......... 8.375 06/01/27 4,789,570
--------------
35,859,414
--------------
PRODUCER MANUFACTURING 0.3%
1,500 Reliance Electric Co. .............. 6.800 04/15/03 1,492,601
6,000 USA Waste Services, Inc. ........... 7.000 07/15/28 4,482,882
--------------
5,975,483
--------------
</TABLE>

See Notes to Financial Statements

F-6
<PAGE> 80
PORTFOLIO OF INVESTMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
RAW MATERIALS/PROCESSING
INDUSTRIES 1.1%
$ 5,000 Crown Cork & Seal Finance PLC....... 7.000% 12/15/06 $ 4,684,205
5,000 Crown Cork & Seal, Inc. ............ 8.375 01/15/05 5,079,390
5,000 Georgia Pacific Corp. .............. 9.500 05/15/22 5,293,385
10,000 ICI North America, Inc. ............ 8.875 11/15/06 10,494,530
--------------
25,551,510
--------------
RETAIL 0.4%
4,500 Kroger Co. ......................... 7.250 06/01/09 4,319,420
4,000 May Department Stores Co. .......... 8.375 08/01/24 3,973,784
--------------
8,293,204
--------------
TECHNOLOGY 0.5%
10,000 Raytheon Co. ....................... 6.750 08/15/07 9,320,690
2,000 Sun Microsystems, Inc. ............. 7.000 08/15/02 1,991,180
--------------
11,311,870
--------------
TRANSPORTATION 0.4%
5,000 CSX Corp. .......................... 8.625 05/15/22 5,220,575
5,000 Delta Air Lines, Inc. .............. 6.650 03/15/04 4,779,555
--------------
10,000,130
--------------
UTILITIES 2.8%
5,000 360 Communications Co. ............. 7.125 03/01/03 4,995,880
10,000 Century Telephone Enterprises, Inc.,
Ser F............................... 6.300 01/15/08 9,077,800
5,000 Commonwealth Edison Co. ............ 8.000 05/15/08 5,088,030
4,500 Edison International, Inc. ......... 6.875 09/15/04 4,411,255
5,000 El Paso Electric Co., Ser C......... 8.250 02/01/03 5,087,500
4,000 Houston Lighting & Power Co. ....... 7.750 03/15/23 3,781,792
5,000 Illinois Power Co. ................. 7.500 06/15/09 4,891,750
5,000 Niagara Mohawk Power Corp., Ser G... 7.750 10/01/08 5,005,350
5,000 Public Service Co. of Colorado, Ser
A................................... 6.875 07/15/09 4,778,750
20,000 Sprint Capital Corp. ............... 6.900 05/01/19 18,284,920
--------------
65,403,027
--------------
TOTAL CORPORATE OBLIGATIONS 9.1%......................... 211,771,526
--------------
</TABLE>

See Notes to Financial Statements

F-7
<PAGE> 81
PORTFOLIO OF INVESTMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE CORPORATE
OBLIGATIONS 8.8%
FINANCE 1.6%
$ 3,000 Aegon NV, 144A (Netherlands)
(Convertible into 216,000 common
shares) (b)......................... 4.750% 11/01/04 $ 20,625,000
4,599 APP Finance VII Euro, 144A
(Mauritius) (Convertible into
267,724 common shares) (b).......... 3.500 04/30/03 3,416,827
18,401 APP Finance VII Mauritius, 144A
(Mauritius) (Convertible into
216,000 common shares) (b).......... 3.500 04/30/03 13,639,741
--------------
37,681,568
--------------
HEALTHCARE 2.5%
30,000 Alza Corp., LYON (Convertible into
389,610 common shares).............. * 07/14/14 15,187,500
20,000 Dura Pharmaceuticals, Inc.
(Convertible into 394,984 common
shares)............................. 3.500 07/15/02 16,200,000
43,500 Roche Holdings, Inc., LYON, 144A
(Switzerland) (Convertible into
206,347 common shares).............. * 04/20/10 26,290,530
--------------
57,678,030
--------------
PHARMACEUTICALS 0.1%
2,090 Sandoz, Ltd., 144A (Switzerland)
(Convertible into 1,958 common
shares) (b)......................... 2.000 10/06/02 2,936,450
--------------
PRODUCER MANUFACTURING 0.2%
5,000 WMX Technologies, Inc. (Convertible
into 94,533 Waste Management, Inc.
common shares)...................... 2.000 01/24/05 4,162,500
--------------
TECHNOLOGY 2.6%
11,500 Bea Systems, Inc. 144A (Convertible
into 165,945 common shares) (b)..... 4.000 12/15/06 13,443,270
22,000 DSC Communications Corp.
(Convertible into 360,582 Alcatel SA
common shares)...................... 7.000 08/01/04 23,100,000
12,000 Hewlett Packard Co., LYON
(Convertible into 65,160 common
shares)............................. * 10/14/17 8,265,000
24,000 Hewlett Packard Co., LYON, 144A
(Convertible into 130,320 common
shares) (b)......................... * 10/14/17 16,530,000
--------------
61,338,270
--------------
</TABLE>

See Notes to Financial Statements

F-8
<PAGE> 82
PORTFOLIO OF INVESTMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UTILITIES 1.8%
$31,800 Telefonos de Mexico, SA (Mexico)
(Convertible into 335,013 common
shares)............................. 4.250% 06/15/04 $ 41,459,250
--------------
TOTAL CONVERTIBLE CORPORATE OBLIGATIONS 8.8%............. 205,256,068
--------------
UNITED STATES OBLIGATIONS 5.7%
27,500 United States Treasury Bonds (c).... 8.750 08/15/20 33,326,562
4,250 United States Treasury Notes........ 5.875 11/30/01 4,224,766
23,000 United States Treasury Notes (c).... 5.875 02/15/04 22,626,250
4,000 United States Treasury Notes........ 6.000 08/15/04 3,938,752
48,000 United States Treasury Notes (c).... 6.250 10/31/01 48,015,024
22,000 United States Treasury Notes........ 6.250 02/15/07 21,656,250
--------------
TOTAL UNITED STATES OBLIGATIONS........................... 133,787,604
--------------
TOTAL LONG-TERM INVESTMENTS 88.9%
(Cost $1,783,086,173)............................................. 2,078,262,390
--------------
SHORT-TERM INVESTMENTS 9.7%
REPURCHASE AGREEMENT 2.2%
DLJ Mortgage Acceptance Corp. ($52,751,000 par, collateralized by
U.S. Government obligations in a pooled cash cash account, dated
12/31/99, to be sold on 01/03/00 at $52,759,792).................... 52,751,000
--------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 7.5%
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
5.376%, 01/25/00 maturity) (c)...................................... 24,906,667
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
5.393%, 01/27/00 maturity).......................................... 24,898,889
Federal National Mortgage Association Discount Notes ($25,000,000
par, yielding 5.405%, 02/17/00 maturity) (c)........................ 24,819,833
Federal National Mortgage Association Discount Notes ($25,000,000
par, yielding 5.279%, 01/18/00 maturity)............................ 24,934,007
</TABLE>

See Notes to Financial Statements

F-9
<PAGE> 83
PORTFOLIO OF INVESTMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
Description Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Federal National Mortgage Association Discount Notes ($50,000,000
par, yielding 4.700%, 01/06/00 maturity)............................ $ 49,960,834
Federal National Mortgage Association Discount Notes ($25,000,000
par, yielding 5.549%, 03/02/00 maturity) (c)........................ 24,761,083
--------------
174,281,313
--------------
TOTAL SHORT-TERM INVESTMENTS 9.7%
(Cost $227,032,313)................................................. 227,032,313
--------------
TOTAL INVESTMENTS 98.6%
(Cost $2,010,118,486)............................................... 2,305,294,703
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4%......................... 32,334,795
--------------
NET ASSETS 100.0%.................................................. $2,337,629,498
==============
</TABLE>

(a) Non-income producing security as this security currently does not declare
dividends or pay interest.

(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may be resold only in
transactions exempt from registration which are normally those transactions
with qualified institutional buyers.

ACES--Automatically Convertible Equity Securities
ADR--American Depositary Receipt
LYON--Liquid Yield Option Note
STRYPES--Structured Yield Product Exchangeable for Stock, traded in shares
TAPS--Threshold Appreciation Price Securities

See Notes to Financial Statements

F-10
<PAGE> 84

STATEMENT OF ASSETS AND LIABILITIES

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

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $2,010,118,486)..................... $2,305,294,703
Cash........................................................ 25,461,236
Receivables:
Interest.................................................. 8,036,893
Fund Shares Sold.......................................... 3,550,131
Investments Sold.......................................... 2,921,667
Dividends................................................. 1,081,491
Variation Margin on Futures............................... 131,750
Other....................................................... 124,305
--------------
Total Assets.......................................... 2,346,602,176
--------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 3,944,297
Distributor and Affiliates................................ 1,989,059
Capital Gain Distributions................................ 1,033,761
Investments Purchased..................................... 843,813
Investment Advisory Fee................................... 719,937
Trustees' Deferred Compensation and Retirement Plans........ 235,833
Accrued Expenses............................................ 205,978
--------------
Total Liabilities..................................... 8,972,678
--------------
NET ASSETS.................................................. $2,337,629,498
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,986,492,300
Net Unrealized Appreciation................................. 300,292,488
Accumulated Net Realized Gain............................... 48,694,994
Accumulated Undistributed Net Investment Income............. 2,149,716
--------------
NET ASSETS.................................................. $2,337,629,498
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,068,481,700 and 139,737,046 shares of
beneficial interest issued and outstanding)........... $ 7.65
Maximum sales charge (5.75%* of offering price)......... .47
--------------
Maximum offering price to public........................ $ 8.12
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,148,898,362 and 151,613,845 shares of
beneficial interest issued and outstanding)........... $ 7.58
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $120,249,436 and 15,866,802 shares of
beneficial interest issued and outstanding)........... $ 7.58
==============
</TABLE>

*On sales of $50,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

F-11
<PAGE> 85

STATEMENT OF OPERATIONS

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

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 42,044,593
Dividends................................................... 29,654,053
------------
Total Income............................................ 71,698,646
------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $2,299,731, $11,542,855 and $1,079,925,
respectively)............................................. 14,922,511
Investment Advisory Fee..................................... 8,101,825
Shareholder Services........................................ 3,637,813
Custody..................................................... 162,166
Trustees' Fees and Related Expenses......................... 77,660
Legal....................................................... 56,976
Other....................................................... 753,862
------------
Total Expenses.......................................... 27,712,813
Less Credits Earned on Overnight Cash Balances.......... 34,770
------------
Net Expenses............................................ 27,678,043
------------
NET INVESTMENT INCOME....................................... $ 44,020,603
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $233,945,000
Futures................................................... 7,717,054
------------
Net Realized Gain........................................... 241,662,054
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 378,269,769
------------
End of the Period:
Investments............................................... 295,176,217
Futures................................................... 5,116,271
------------
300,292,488
------------
Net Unrealized Depreciation During the Period............... (77,977,281)
------------
NET REALIZED AND UNREALIZED GAIN............................ $163,684,773
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $207,705,376
============
</TABLE>

See Notes to Financial Statements

F-12
<PAGE> 86

STATEMENT OF CHANGES IN NET ASSETS

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

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.......................... $ 44,020,603 $ 34,406,616
Net Realized Gain.............................. 241,662,054 112,427,033
Net Unrealized Appreciation/Depreciation During
the Period................................... (77,977,281) 132,837,124
-------------- --------------
Change in Net Assets from Operations........... 207,705,376 279,670,773
-------------- --------------
Distributions from Net Investment Income*...... (43,396,205) (34,947,222)
Distributions from Net Realized Gain*.......... (211,031,389) (110,554,644)
-------------- --------------
Total Distributions............................ (254,427,594) (145,501,866)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................... (46,722,218) 134,168,907
-------------- --------------
FROM CAPITAL TRANSACTIONS
Proceeds from Shares Sold...................... 1,758,232,318 1,143,314,008
Net Asset Value of Shares Issued Through
Dividend Reinvestment........................ 224,331,373 132,142,154
Cost of Shares Repurchased..................... (1,642,853,668) (987,638,702)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................. 339,710,023 287,817,460
-------------- --------------
TOTAL INCREASE IN NET ASSETS................... 292,987,805 421,986,367
NET ASSETS:
Beginning of the Period........................ 2,044,641,693 1,622,655,326
-------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
$2,149,716 and $1,525,318 respectively)...... $2,337,629,498 $2,044,641,693
============== ==============
</TABLE>

<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class December 31, 1999 December 31, 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Distributions from Net Investment Income:
Class A Shares............................... $ (21,806,216) $ (16,719,601)
Class B Shares............................... (19,796,994) (16,833,408)
Class C Shares............................... (1,792,995) (1,394,213)
-------------- --------------
$ (43,396,205) $ (34,947,222)
-------------- --------------
Distributions from Net Realized Gain:
Class A Shares............................... $ (95,603,166) $ (43,282,677)
Class B Shares............................... (104,683,398) (62,071,749)
Class C Shares............................... (10,744,825) (5,200,218)
-------------- --------------
$ (211,031,389) $ (110,554,644)
============== ==============
</TABLE>

See Notes to Financial Statements

F-13
<PAGE> 87

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
Class A Shares 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $ 7.820 $7.242 $6.740 $ 6.31 $ 5.16
-------- ------ ------ ------ ------
Net Investment Income.............. .185 .174 .152 .158 .20
Net Realized and Unrealized Gain... .568 1.030 1.435 .796 1.458
-------- ------ ------ ------ ------
Total from Investment Operations... .753 1.204 1.587 .954 1.658
-------- ------ ------ ------ ------
Less:
Distributions from and in Excess
of Net Investment Income....... .183 .175 .168 .156 .188
Distributions from Net Realized
Gain........................... .744 .451 .917 .368 .32
-------- ------ ------ ------ ------
Total Distributions................ .927 .626 1.085 .524 .508
-------- ------ ------ ------ ------
Net Asset Value, End of the
Period........................... $ 7.646 $7.820 $7.242 $6.740 $ 6.31
======== ====== ====== ====== ======
Total Return (a)................... 9.95% 16.99% 24.13% 15.55% 32.57%
Net Assets at End of the Period
(In millions).................... $1,068.5 $808.5 $638.1 $471.8 $349.9
Ratio of Expenses to Average
Net Assets (b)................... .82% .85% .86% .97% .95%
Ratio of Net Investment Income to
Average Net Assets (b)........... 2.43% 2.31% 2.09% 2.50% 3.43%
Portfolio Turnover................. 81% 61% 86% 99% 92%
</TABLE>

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

(b) For the years ended December 31, 1995 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.

See Notes to Financial Statements

F-14
<PAGE> 88
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
Class B Shares 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.......................... $ 7.766 $ 7.203 $6.713 $ 6.30 $ 5.16
-------- -------- ------ ------ ------
Net Investment Income............. .128 .118 .100 .113 .15
Net Realized and Unrealized
Gain............................ .559 1.019 1.423 .784 1.458
-------- -------- ------ ------ ------
Total from Investment
Operations...................... .687 1.137 1.523 .897 1.608
-------- -------- ------ ------ ------
Less:
Distributions from and in Excess
of Net Investment Income...... .131 .123 .116 .116 .148
Distributions from Net Realized
Gain.......................... .744 .451 .917 .368 .32
-------- -------- ------ ------ ------
Total Distributions............... .875 .574 1.033 .484 .468
-------- -------- ------ ------ ------
Net Asset Value, End of the
Period.......................... $ 7.578 $ 7.766 $7.203 $6.713 $ 6.30
======== ======== ====== ====== ======
Total Return (a).................. 9.19% 16.17% 23.23% 14.56% 31.51%
Net Assets at End of the Period
(In millions)................... $1,148.9 $1,140.0 $908.7 $633.3 $408.9
Ratio of Expenses to Average
Net Assets (b).................. 1.58% 1.62% 1.64% 1.74% 1.75%
Ratio of Net Investment Income to
Average Net Assets (b).......... 1.67% 1.55% 1.32% 1.74% 2.62%
Portfolio Turnover................ 81% 61% 86% 99% 92%
</TABLE>

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

See Notes to Financial Statements

F-15
<PAGE> 89
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
Class C Shares 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.......................... $7.767 $7.204 $6.713 $ 6.30 $ 5.16
------ ------ ------ ------ ------
Net Investment Income............. .133 .117 .100 .113 .15
Net Realized and Unrealized
Gain............................ .554 1.020 1.424 .784 1.458
------ ------ ------ ------ ------
Total from Investment
Operations...................... .687 1.137 1.524 .897 1.608
------ ------ ------ ------ ------
Less:
Distributions from and in Excess
of Net Investment Income...... .131 .123 .116 .116 .148
Distributions from Net Realized
Gain.......................... .744 .451 .917 .368 .32
------ ------ ------ ------ ------
Total Distributions............... .875 .574 1.033 .484 .468
------ ------ ------ ------ ------
Net Asset Value, End of the
Period.......................... $7.579 $7.767 $7.204 $6.713 $ 6.30
====== ====== ====== ====== ======
Total Return (a).................. 9.19% 16.17% 23.23% 14.56% 31.51%
Net Assets at End of the Period
(In millions)................... $120.2 $ 96.1 $ 75.8 $ 55.2 $ 38.3
Ratio of Expenses to Average Net
Assets (b)...................... 1.58% 1.62% 1.64% 1.74% 1.76%
Ratio of Net Investment Income to
Average Net Assets (b).......... 1.67% 1.55% 1.32% 1.73% 2.63%
Portfolio Turnover................ 81% 61% 86% 99% 92%
</TABLE>

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

See Notes to Financial Statements

F-16
<PAGE> 90

NOTES TO FINANCIAL STATEMENTS

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

1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Equity Income 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 the highest possible income consistent with safety of
principal by investing primarily in income-producing equity instruments and
other debt securities issued by a wide group of companies in many different
industries. The Fund commenced investment operations on August 3, 1960. The
distribution of the Fund's Class B and Class C shares commenced on May 1, 1992
and July 6, 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 in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sale price is not
available are valued at the mean of the bid and asked prices. Fixed income
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. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At December 31, 1999, there were no
when issued or delayed delivery purchase commitments.

F-17
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

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 security 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--Dividend income is recorded on the ex-dividend date and
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. Income and expenses of the Fund are allocated on a pro rata basis
to each class of shares, except for distribution and service fees and transfer
agency costs which are unique to each class of shares.

D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At December 31, 1999, for federal income tax purposes, cost of long- and
short-term investments is $2,015,796,898, the aggregate gross unrealized
appreciation is $368,772,631 and the aggregate gross unrealized depreciation is
$79,274,826, resulting in net unrealized appreciation on long- and short-term
investments of $289,497,805.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions and gains recognized for tax purposes on open future positions at
December 31, 1999.

E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and gains on option and futures
transactions. All short-term capital gains and a portion of option and futures
gains are included in ordinary income for tax purposes.

F-18
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

F. EXPENSE REDUCTIONS--During the year ended December 31, 1999, the Fund's
custody fee was reduced by $34,770 as a result of credits earned on overnight
cash balances.

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

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
- --------------------------------------------------------------------
<S> <C>
First $150 million..................................... .50 of 1%
Next $100 million...................................... .45 of 1%
Next $100 million...................................... .40 of 1%
Over $350 million...................................... .35 of 1%
</TABLE>

For the year ended December 31, 1999, the Fund recognized expenses of
approximately $57,000 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, 1999, the Fund recognized expenses of
approximately $412,200 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended December 31,
1999, the Fund recognized expenses of approximately $2,760,200. 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.

F-19
<PAGE> 93
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

3. CAPITAL TRANSACTIONS
At December 31, 1999, capital aggregated $904,904,813, $975,836,016 and
$105,751,471 for Classes A, B, and C, respectively. For the year ended December
31, 1999, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................. 184,426,601 $ 1,454,879,523
Class B................................. 33,847,881 264,613,375
Class C................................. 4,962,745 38,739,420
------------ ---------------
Total Sales............................... 223,237,227 $ 1,758,232,318
============ ===============
Dividend Reinvestment:
Class A................................. 13,293,568 $ 100,260,988
Class B................................. 15,199,440 113,479,642
Class C................................. 1,419,166 10,590,743
------------ ---------------
Total Dividend Reinvestment............... 29,912,174 $ 224,331,373
============ ===============
Repurchases:
Class A................................. (161,372,353) $(1,274,308,351)
Class B................................. (44,226,967) (345,951,749)
Class C................................. (2,892,930) (22,593,568)
------------ ---------------
Total Repurchases......................... (208,492,250) $(1,642,853,668)
============ ===============
</TABLE>

F-20
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

At December 31, 1998, capital aggregated $624,072,653, $943,694,748 and
$79,014,876 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.................................. 108,360,203 $ 836,859,216
Class B.................................. 36,029,610 276,860,624
Class C.................................. 3,865,558 29,594,168
------------ --------------
Total Sales................................ 148,255,371 $1,143,314,008
============ ==============
Dividend Reinvestment:
Class A.................................. 7,130,348 $ 54,671,876
Class B.................................. 9,437,571 71,897,500
Class C.................................. 731,441 5,572,778
------------ --------------
Total Dividend Reinvestment................ 17,299,360 $ 132,142,154
============ ==============
Repurchases:
Class A.................................. (100,205,548) $ (776,904,382)
Class B.................................. (24,828,078) (189,850,088)
Class C.................................. (2,747,855) (20,884,232)
------------ --------------
Total Repurchases.......................... (127,781,481) $ (987,638,702)
============ ==============
</TABLE>

Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996, and any dividend reinvestment plan Class B shares
received on such shares, automatically convert to Class A shares eight years
after the end of the calendar month in which the shares were purchased. Class B
shares purchased before June 1, 1996, and any dividend reinvestment plan Class B
shares received on such shares, automatically convert to Class A shares six
years after the end of the calendar month in which the shares were purchased.
For the year ended December 31, 1999, 16,169,173 Class B shares automatically
converted to Class A shares and are shown in the above table as sales of Class A
shares and repurchases of Class B shares. Class C shares purchased before
January 1, 1997, and any dividend reinvestment plan 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. Class C shares purchased
on or after January 1, 1997 do not possess a conversion feature. For the year
ended December 31, 1999, no Class C shares converted to Class A shares. The CDSC
will be

F-21
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

imposed on most redemptions made within five 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............................................ 5.00% 1.00%
Second........................................... 4.00% None
Third............................................ 3.00% None
Fourth........................................... 2.50% None
Fifth............................................ 1.50% None
Sixth and Thereafter............................. None None
</TABLE>

For the year ended December 31, 1999, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $721,900 and CDSC on redeemed shares of approximately $2,080,500.
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 $1,627,989,344 and $1,686,201,689,
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 the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
exercising a call option contract or taking delivery of a security underlying a
futures contract. In these instances, the recognition of gain or loss is
postponed until the disposal of the security underlying the option or futures
contract.
Summarized below are the specific types of derivative financial instruments
used by the Fund.

F-22
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Fund
to provide the return of an index without purchasing all of the securities
underlying the index or as a substitute for purchasing or selling specific
securities. During the year ended December 31, 1999, the Fund did not invest in
option contracts.

B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in stock index futures. These contracts are generally
used to provide the return of an index without purchasing all of the securities
underlying the index or to manage the Fund's overall exposure to the equity
markets. Upon entering into futures contracts, the Fund maintains, in a
segregated account with its custodian, cash or liquid securities with a value
equal to its obligation under the futures contracts. During the period the
futures contract is open, payments are received from or made to the broker based
upon changes in the value of the contract (the variation margin). The risk of
loss associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts for the year ended December 31, 1999, were
as follows:

<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1998.......................... 161
Futures Opened............................................ 660
Futures Closed............................................ (666)
-----
Outstanding at December 31, 1999.......................... 155
=====
</TABLE>

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

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/DEPRECIATION
- ----------------------------------------------------------------------------
<S> <C> <C>
Long Contracts--Mar 2000 S&P 500
Index Futures (Current Notional
Value of $371,050 per
contract)........................ 155 $5,116,271
=== ==========
</TABLE>

F-23
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended December 31, 1999, are payments retained by Van Kampen of
approximately $9,327,500.

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

F-24
<PAGE> 98

PART C. OTHER INFORMATION

ITEM 23. EXHIBITS.

<TABLE>
<S> <C> <C>
(a) (1) First Amended and Restated Agreement and Declaration of
Trust(1)
(2) Certificate of Amendment(1)
(3) Second Certificate of Amendment(5)
(4) Amended and Restated Certificate of Designation(4)
(5) Second Amended and Restated Certificate of Designation(5)
(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(4)
(e) (1) Distribution and Service Agreement(4)
(2) Form of Dealer Agreement(2)
(3) Form of Broker Fully Disclosed Selling Agreement(2)
(4) Form of Bank Fully Disclosed Selling Agreement(2)
(f) (1) Form of Trustee Deferred Compensation Plan(6)
(2) Form of Trustee Retirement Plan(6)
(g) (1) Custodian Agreement(3)
(2) Transfer Agency and Service Agreement(4)
(h) (1) Data Services Agreement(2)
(2) Fund Accounting Agreement(4)
(i) (1) Opinion of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(2)
(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)+
(j) Consent of PricewaterhouseCoopers LLP+
(k) Not applicable
(1) Not applicable
(m) (1) Plan of Distribution Pursuant to Rule 12b-1(2)
(2) Form of Shareholder Assistance Agreement(2)
(3) Form of Administrative Services Agreement(2)
(4) Service Plan(2)
(n) Not Applicable
(o) Amended Multiple Class Plan(2)
(p) Form of Code of Ethics+
(q) Power of Attorney+
(z) (1) List of Certain Investment Companies in Response to Item
27(a)+
(2) List of Officers and Directors of Van Kampen Funds Inc. in
Response to Item 27(b)+
</TABLE>

- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 72 to
Registrant's Registration Statement on Form N-1A, File Number 2-15957,
filed April 19, 1996.

(2) Incorporated herein by reference to Post-Effective Amendment No. 73 to
Registrant's Registration Statement on Form N-1A, File Number 2-15957,
filed April 28, 1997.

(3) Incorporated herein by reference to Post-Effective Amendment 79 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File Number 2-21657 filed March 30, 1998.

(4) Incorporated herein by reference to Post-Effective Amendment No. 74 to
Registrant's Registration Statement on Form N-1A, File Number 2-15957,
filed April 28, 1998.

(5) Incorporated herein by reference to Post-Effective Amendment No. 75 to
Registrant's Registration Statement on Form N-1A, File Number 2-15957,
filed February 25, 1999.

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

+ Filed herewith.

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

None.

C-1
<PAGE> 99

ITEM 25. INDEMNIFICATION.

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

Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust, as amended. Article 8; Section 8.4 of the Agreement
and Declaration of Trust provides that each officer and trustee of the
Registrant shall be indemnified by the Registrant against all liabilities
incurred in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which the officer or trustee may
be or may have been involved by reason of being or having been an officer or
trustee, except that such indemnity shall not protect any such person against a
liability to the Registrant or any shareholder thereof to which such person
would otherwise be subject by reason of (i) not acting in good faith in the
reasonable belief that such person's actions were not in the best interest of
the Trust, (ii) willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office or (iii)
for a criminal proceeding, not having a reasonable cause to believe that such
conduct was unlawful (collectively, "Disabling Conduct"). Absent a court
determination that an officer or trustee seeking indemnification was not liable
on the merits or guilty of Disabling Conduct in the conduct of such person's
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent legal counsel in a written
opinion or a majority of a quorum of non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of Disabling
Conduct in the conduct of his or her office.

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

Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that there is reason to believe such person is entitled to the indemnification
and only if the following conditions are met: (1) the trustee or officer
provides 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 "1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by the trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees) arising by reason of any person
acquiring any shares, based upon the ground that the Registration Statement,
prospectus, shareholder reports or other information filed or made public by the
Registrant (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements, in light of the circumstances, not
misleading under the 1933 Act, or any other

C-2
<PAGE> 100

statute or the common law. The Registrant does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or omission was
made in reliance upon, and in conformity with, information furnished to the
Registrant by or on behalf of the Distributor. In no case is the indemnity of
the Registrant in favor of the distributor or any person indemnified to be
deemed to protect the Distributor or any person against any liability to the
Fund or its security holders to which the Distributor or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the agreement.

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

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

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

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

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

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

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" and "Investment Advisory Agreement" in the Statement of Additional
Information for information regarding the business of 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. is an affiliated person of an affiliated person
of the Registrant and is the only principal underwriter for the Registrant. The
name, principal business address and positions and offices with Van Kampen Funds
Inc. of each of its directors and officers are disclosed in Exhibit (z)(2).
Except as disclosed under the heading, "Trustees and Officers" in Part B of this
Registration Statement, none of such persons has any position or office with
Registrant.

C-3
<PAGE> 101

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

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

ITEM 29. MANAGEMENT SERVICES.

Not applicable.

ITEM 30 UNDERTAKINGS.

Not applicable.

C-4
<PAGE> 102

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant,
VAN KAMPEN EQUITY INCOME 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 1933 Act and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oakbrook Terrace and State of Illinois, on the
28th day of April, 2000.

VAN KAMPEN EQUITY INCOME FUND

By: /s/ A. THOMAS SMITH III
------------------------------------
A. Thomas Smith III
Secretary

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

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

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

Principal Financial Officer:

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

Trustees:

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

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

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

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

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

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

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

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

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

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

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

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

April 28, 2000

C-5
<PAGE> 103

VAN KAMPEN EQUITY INCOME FUND

INDEX TO EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 77 TO FORM N-1A

AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
(i) (2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
(j) Consent of PricewaterhouseCoopers LLP
(p) Form of Code of Ethics
(q) Power of Attorney
(z) (1) List of Certain Investment Companies in Response to Item
27(a)
(z) (2) List of Officers and Directors of VanKampen Funds Inc. in
Response to Item 27(b)
</TABLE>

C-6

<PAGE> 1
Exhibit(i)(2)

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

April 28, 2000

Van Kampen Equity Income Fund
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555

Re: Post-Effective Amendment No. 77 to the
Registration Statement on Form N-1A for the
Van Kampen Equity Income Fund
(the "Registration Statement")
(File Nos. 2-15957 and 811-919)
--------------------------------

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

Very truly yours,

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

<PAGE> 1

EXHIBIT (j)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 77 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 11, 2000, relating to the financial statements and financial highlights
of Van Kampen Equity Income 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, 2000

<PAGE> 1

EXHIBIT(p)

FORM OF

CODE OF ETHICS

I. INTRODUCTION

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

II. GENERAL PRINCIPLES

A. Shareholder and Client Interests Come First

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

B. Avoid Actual and Potential Conflicts of Interest

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

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

C. Avoiding Personal Benefit

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

III. OBJECTIVE

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

IV. DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

V. STANDARDS OF CONDUCT FOR PERSONAL SECURITIES TRANSACTIONS

A. Van Kampen Employee Brokerage Accounts

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

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

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

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

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

B. Pre-Clearance

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

2. Exceptions from the Pre-Clearance Requirement.

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

1) Covered Securities acquired through automatic
reinvestment plans.

2) Covered Securities acquired through employee
purchase plans.

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

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

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

5) Units in unit investment trusts.

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

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

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

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

4. Pre-Clearance Procedure

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

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

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

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

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

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

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

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

C. Other Restrictions

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

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

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

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

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

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

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

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

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

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

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

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D. Additional Responsibilities of Access Persons

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

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

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

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

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

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

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

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

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

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

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E. Additional Responsibilities of Investment Personnel

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

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

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

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

F. Additional Responsibilities of Portfolio Managers

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

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

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

G. Insiders

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

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

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

H. Exceptions

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

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

VI. ADMINISTRATION OF THE CODE

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

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

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

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

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

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

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

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

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

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

VII. RECORDS

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

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

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

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

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

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

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

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

VIII. SANCTIONS

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

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IX. APPROVAL OF CODE OF ETHICS

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

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

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

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

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

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

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

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X. EFFECTIVE DATE

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

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

Approved this _____ day of _______________.

<PAGE> 1
EXHIBIT (q)

POWER OF ATTORNEY

The undersigned, being Officers and Trustees of each of the Van Kampen
Open End Trusts (individually, a "Trust") as indicated on Schedule 1 attached
hereto and incorporated by reference, each a Delaware business trust, except for
the Van Kampen Pennsylvania Tax Free Income Fund being a Pennsylvania trust, and
being Officers and Directors of Van Kampen Series Fund, Inc. (the
"Corporation"), a Maryland corporation, do hereby, in the capacities shown
below, appoint Richard F. Powers, III, Stephen L. Boyd and A. Thomas Smith III,
each of Oakbrook Terrace, Illinois, as agents and attorneys-in-fact with full
power of substitution and resubstitution, for each of the undersigned, to
execute and deliver, for and on behalf of the undersigned, any and all
amendments to the Registration Statement filed by each Trust or the Corporation
with the Securities and Exchange Commission pursuant to the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940.

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

Dated: January 28, 2000

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

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

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

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

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

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

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

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

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

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

/s/ Fernando Sisto, Sc. D. Trustee/Director
- ---------------------------------------
Fernando Sisto, Sc. D.

/s/ Wayne W. Whalen Trustee/Director
- ---------------------------------------
Wayne W. Whalen

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

<PAGE> 2

SCHEDULE 1

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

<PAGE> 1
EXHIBIT (z)(1)

Item 27(a)
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Van Kampen U.S. Government Trust
Van Kampen U.S. Government Fund
Van Kampen Tax Free Trust
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Trust
Van Kampen High Yield Fund
Van Kampen Managed Short Term Income Fund*
Van Kampen Strategic Income Fund
Van Kampen Equity Trust
Van Kampen Aggressive Growth Fund
Van Kampen Growth Fund
Van Kampen Select Growth Fund
Van Kampen Small Company Growth Fund*
Van Kampen Small Cap Growth Fund*
Van Kampen Small Cap Value Fund
Van Kampen Utility Fund
Van Kampen Equity Trust II
Van Kampen Tax Managed Equity Growth Fund
Van Kampen Technology Fund
Van Kampen Pennsylvania Tax Free Income Fund
Van Kampen Tax Free Money Fund
Van Kampen Prime Rate Income Trust
Van Kampen Senior Floating Rate Fund
Van Kampen Comstock Fund
Van Kampen Corporate Bond Fund
Van Kampen Emerging Growth Fund
Van Kampen Enterprise Fund
Van Kampen Equity Income Fund
Van Kampen Exchange Fund
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Van Kampen Limited Maturity Government Fund
Van Kampen Global Managed Assets Fund
Van Kampen Government Securities Fund
Van Kampen Growth and Income Fund
Van Kampen Harbor Fund
Van Kampen High Income Corporate Bond Fund
Van Kampen Life Investment Trust on behalf of its series
Asset Allocation Portfolio
Comstock Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Strategic Stock Portfolio
Morgan Stanley Real Estate Securities Portfolio
Van Kampen Pace Fund
Van Kampen Real Estate Securities Fund
Van Kampen Reserve Fund
Van Kampen Tax Exempt Trust
Van Kampen High Yield Municipal Fund
Van Kampen U.S. Government Trust for Income
Van Kampen World Portfolio Series Trust
Van Kampen Global Government Securities Fund
Van Kampen Series Fund, Inc.
Van Kampen American Value Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Debt Fund*
Van Kampen Emerging Markets Fund
Van Kampen Equity Growth Fund
Van Kampen European Equity Fund
Van Kampen Focus Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity Fund
Van Kampen Global Fixed Income Fund
Van Kampen Growth and Income Fund II*
Van Kampen High Yield & Total Return Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund*
Van Kampen Latin American Fund
Van Kampen Mid Cap Growth Fund
Van Kampen Tax Managed Global Franchise Fund
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund

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

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

<PAGE> 1
EXHIBIT (z)(2)

Item 27(b)
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<TABLE>

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

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

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

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

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