MORGAN STANLEY FUND INC, 497, 1997-09-12

MORGAN STANLEY FUND INC
497, 1997-09-12

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P R O S P E C T U S
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MORGAN STANLEY GLOBAL EQUITY FUND

A PORTFOLIO OF THE
MORGAN STANLEY FUND, INC.

P.O. BOX 418256, KANSAS CITY, MISSOURI 64141
FOR INFORMATION CALL 1-800-282-4404

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Morgan Stanley Fund, Inc. (the "Company") is an open-end management investment
company, or mutual fund, which consists of twenty-two investment portfolios.
This prospectus (the "Prospectus") describes the Class A, Class B and Class C
shares of the Morgan Stanley Global Equity Fund (the "Fund"). The Fund is
designed to make available to retail investors the expertise of Van Kampen
American Capital Investment Advisory Corp., the adviser (the "Adviser") and
administrator (the "Administrator"), and its affiliate, Morgan Stanley Asset
Management Inc., the sub-adviser (the "Sub-Adviser"), to the Fund. Shares are
available through Van Kampen American Capital Distributors, Inc. (the
"Distributor"), and through investment dealers, banks and financial services
firms that provide distribution, administrative or shareholder services
("Participating Dealers").

This Prospectus is designed to set forth concisely the information about the
Fund that a prospective investor should know before investing and it should be
retained for future reference. Additional information about the Company is
contained in a "Statement of Additional Information," dated January 2, 1997,
which is incorporated herein by reference. The Company offers other portfolios
which are described in other prospectuses. The Statement of Additional
Information and the prospectuses pertaining to the other portfolios of the
Company are available upon request and without charge by writing or calling the
Company at the address and telephone number set forth above. The Statement of
Additional Information and other materials regarding the Company have been filed
with the Securities and Exchange Commission and are available at the
Commission's internet web site (http://www.sec.gov).

THE COMPANY'S SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY, ANY BANK OR DEPOSITORY INSTITUTION, OR ANY AFFILIATES
OR CORRESPONDENTS THEREOF. THE COMPANY'S SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. SHARES OF THE COMPANY INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS JANUARY 2, 1997
AS SUPPLEMENTED THROUGH SEPTEMBER 5, 1997

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FUND EXPENSES

The following table illustrates all expenses and fees that a shareholder of
the Fund may incur:

<TABLE>
<CAPTION>
GLOBAL
EQUITY
SHAREHOLDER TRANSACTION EXPENSES FUND
- ------------------------------------------------------------------------------------------------------- ----------
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)
Class A............................................................................................ 5.75%(1)
Class B............................................................................................ None
Class C............................................................................................ None
Maximum Deferred Sales Load (as a Percentage of the lesser of initial purchase price or current market
value)
Class A
For Purchases up to $999,999..................................................................... None
For Purchases of $1,000,000 or more.............................................................. 1.00%(2)
Class B............................................................................................ 5.00%(3)
Class C............................................................................................ 1.00%(4)
Maximum Sales Load Imposed on Reinvested Dividends
Class A............................................................................................ None
Class B............................................................................................ None
Class C............................................................................................ None
Redemption Fees
Class A............................................................................................ None
Class B............................................................................................ None
Class C............................................................................................ None
Exchange Fees
Class A............................................................................................ None
Class B............................................................................................ None
Class C............................................................................................ None
</TABLE>

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(1) Percentage shown is the maximum sales load. Certain large purchases may be
subject to a reduced sales load.

(2) Purchases of Class A shares of the Fund which, when combined with the net
asset value of the purchaser's existing investments in Class A shares of the
Participating Funds (as defined under "Purchase of Shares -- Quantity
Discounts"), aggregate to $1 million or more are not subject to an initial
sales load (an "initial sales charge"). A contingent deferred sales charge
("CDSC") of 1.00% will be imposed, however, on shares from any such purchase
that are redeemed within one year following such purchase. Certain other
purchases are not subject to an initial sales charge. See "Purchase of
Shares."

(3) Percentage shown is the maximum CDSC. Purchases of Class B shares of the
Fund are subject to a maximum CDSC of 5.00% which decreases in steps to 0%
after five years. See "Purchase of Shares."

(4) Purchases of Class C shares of the Fund are subject to a CDSC of 1.00% for
redemptions made within one year of purchase. See "Purchase of Shares."

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<TABLE>
<CAPTION>
GLOBAL
EQUITY
ANNUAL FUND OPERATING EXPENSES FUND
- --------------------------------------------------------------------------------------------------------- ----------
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<S> <C>
Investment Advisory Fee
Class A.............................................................................................. 1.00%
Class B.............................................................................................. 1.00%
Class C.............................................................................................. 1.00%
12b-1/Service Fees
Class A (5).......................................................................................... 0.25%
Class B (5).......................................................................................... 1.00%
Class C (5).......................................................................................... 1.00%
Other Expenses
Class A.............................................................................................. 0.55%
Class B.............................................................................................. 0.55%
Class C.............................................................................................. 0.55%
Total Operating Expenses
Class A.............................................................................................. 1.80%
Class B.............................................................................................. 2.55%
Class C.............................................................................................. 2.55%
</TABLE>

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(5) Of the 12b-1/Service fees for the Class A shares, 0.25% represents a
shareholder services fee, and for the Class B shares and the Class C shares,
0.75% represents a distribution fee and 0.25% represents a shareholder
services fee. See "Management of the Company -- Distributor."

The purpose of the above table is to assist the investor in understanding
the various expenses that an investor in the Fund will bear directly or
indirectly. The expenses and fees for the Fund are based on estimates because
the Fund has not commenced investment operations. Individual long-term
shareholders may pay more than the equivalent of the maximum front-end sales
charges permitted as a fund-level expense by the Conduct Rules of the National
Association of Securities Dealers, Inc. ("NASD").

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The following example illustrates the expenses that you would pay on a
$1,000 investment, assuming a 5% annual rate of return and redemption at the end
of each time period as indicated, in (i) Class A shares of the Fund, including
the maximum 5.75% initial sales charge, (ii) Class B shares of the Fund, which
have a CDSC, but no initial sales charge and (iii) Class C shares of the Fund,
which have a CDSC, but no initial sales charge.

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(1) The example reflects Class A shares sold subject to the maximum 5.75%
initial sales charge. Certain large purchases may be subject to a reduced
initial sales charge. Purchases of Class A shares of the Fund which, when
combined with the net asset value of the purchaser's existing investments in
Class A shares of the Participating Funds, aggregate to $1 million or more
are not subject to an initial sales charge. A CDSC of 1.00% will be imposed,
however, on shares from any such purchase that are redeemed within one year
following such purchase.

THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.

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PROSPECTUS SUMMARY

THE COMPANY

The Company currently consists of twenty-two portfolios which are designed
to offer investors a range of investment choices with Van Kampen American
Capital Investment Advisory Corp. (the "Adviser") providing services as adviser
and administrator and its affiliate and Morgan Stanley Asset Management Inc.
("MSAM" or the "Sub-Adviser") providing services as the sub-adviser. Van Kampen
American Capital Distributors, Inc. (the "Distributor") provides services as
distributor to the Fund. The investment objective of the Fund is as follows:

- The Fund seeks long-term capital appreciation by investing primarily in
equity securities of issuers throughout the world, including U.S. issuers.

RISK FACTORS

The investment policies of the Fund entail certain risks and considerations
of which an investor should be aware. The Fund will invest in securities of
foreign issuers. Securities of foreign issuers are subject to certain risks not
typically associated with domestic securities. See "Additional Investment
Information -- Foreign Investment" for more information. The Fund may invest in
forward foreign currency exchange contracts, and in foreign currency exchange
futures and options. In addition, the Fund may invest in repurchase agreements,
borrow money, lend its portfolio securities, and purchase securities on a
when-issued or delayed delivery basis. The Fund may invest in derivative
instruments including options and futures. The Fund may invest in securities
that are neither listed on a stock exchange nor traded over-the-counter,
including private placement securities. Such securities may be less liquid than
publicly traded securities. Each of these investment strategies involves
specific risks which are described under "Investment Objective and Policies" and
"Additional Investment Information" herein and under "Investment Objectives and
Policies" in the Statement of Additional Information.

HOW TO INVEST

The Fund offers three classes of shares to the public, designated Class A
shares, Class B shares and Class C shares. The Class A shares, Class B shares
and Class C shares of the Fund are designed to provide investors a choice of
three ways to pay distribution-related charges. Class A shares are subject to a
maximum initial sales charge of 5.75%, which initial sales charge may be reduced
on certain larger purchases or when combining purchases with the investor's
aggregate investment in the Participating Funds (as defined herein). Class B
shares are not subject to an initial sales charge but are subject to a
contingent deferred sales charge ("CDSC") of 5% for redemptions within the first
year after purchase and declining thereafter to 0% after five years. Class C
shares are not subject to an initial sales charge but are subject to a maximum
CDSC of 1% for redemptions within the first year after purchase. The minimum
initial investment is $500 for each class of shares of the Fund, except that the
minimum initial investment amount may be reduced for certain categories of
investors. See "Purchase of Shares".

Initial Public Offering -- On September 24, 1997, the Fund is commencing an
initial public offering of its shares (the "Initial Public Offering"). The
Initial Public Offering period expires at 5:00 p.m. Eastern time on Friday,
October 24, 1997, unless extended to a later date by agreement between the Fund
and the Distributor (the "Expiration Date"). Investors seeking to purchase
shares of the Fund should contact the Distributor or their broker or dealer
prior to the Expiration Date for instructions on how to place an order. Shares
of the Fund are being offered initially at $10.00 per share plus any applicable
initial sales charge. Payment for shares is due, and

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the Fund anticipates commencing investment operations, on the third business day
after the Expiration Date (the "Closing Date"). The Fund does not seek payment
from investors prior to the Closing Date and any payments received prior thereto
will be returned to investors. Shortly after termination of the Initial Public
Offering, the Fund expects to commence a continuous public offering of its
shares.

Continuous Public Offering -- Shortly after termination of the Initial
Public Offering, the Fund expects to commence a continuous public offering of
its three classes of shares through the Distributor and selected brokers and
dealers. Shares of the Fund are offered during the continuous public offering at
the net asset value per share next determined after receipt of the investor's
order to purchase plus any applicable initial sales charge.

HOW TO REDEEM

Shares of the Fund may be redeemed at any time at the net asset value per
share (less any applicable CDSC) of the Fund next determined after receipt of
the redemption request. The redemption price may be more or less than the
purchase price. See "Redemption of Shares."

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INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is described below, together with the
policies the Fund employs in its efforts to achieve its objective. The Fund's
investment objective is a fundamental policy which may not be changed by the
Fund without the approval of a majority of the Fund's outstanding voting
securities. There is no assurance that the Fund will attain its objective. The
investment policies described below are not fundamental policies and may be
changed without shareholder approval. For more information about certain
investment practices of the Fund, see "Additional Investment Information" below
and "Investment Objectives and Policies" in the Statement of Additional
Information.

THE GLOBAL EQUITY FUND

The Global Equity Fund seeks long-term capital appreciation by investing
primarily in equity securities of issuers throughout the world, including U.S.
issuers. Equity securities include common and preferred stocks, convertible
securities, and rights and warrants to purchase common stocks. The Fund may
invest in American, global or other types of depositary receipts. The Fund also
may invest in equity-linked securities. The Sub-Adviser expects that, under
normal circumstances, at least 20% of the Fund's total assets will be invested
in the common stocks of U.S. issuers. The remainder of the Fund will be invested
in issuers located throughout the world, including those located in emerging
markets. As used in this Prospectus, the term "emerging markets" applies to any
country which, in the opinion of the Sub-Adviser, is generally considered to be
an emerging or developing country by the international financial community,
including the International Bank for Reconstruction and Development (more
commonly known as The World Bank) and the International Finance Corporation.
There are currently over 130 countries which, in the opinion of the Sub-Adviser,
are generally considered to be emerging or developing countries by the
international financial community, approximately 40 of which currently have
stock markets. These countries generally include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand and most nations
located in Western Europe. Currently, investing in many emerging markets is not
feasible or may involve unacceptable political risks. The Fund will focus its
investments on those emerging markets countries in which it believes the
economics are developing strongly and in which the markets are becoming more
sophisticated. An emerging markets security is one issued by a company that, in
the opinion of the Sub-Adviser, has one or more of the following
characteristics: (i) its principal securities trading market is in an emerging
markets country; (ii) alone or on a consolidated basis it derives 50% or more of
its annual revenue from either goods produced, sales made or services performed
in emerging markets; or (iii) it is organized under the laws of, and has a
principal office in, an emerging markets country. The Sub-Adviser will base
determinations as to eligibility on publicly available information and inquiries
made to the companies. At least 65% of the total assets of the Fund will be
invested in equity securities under normal circumstances. Securities in emerging
markets may not be as liquid as those in developed markets and pose greater
risks. Although the Fund intends to invest primarily in securities listed on
stock exchanges, it will also invest in securities traded in over-the-counter
markets. The Fund may invest in derivatives, when-issued and delayed delivery
securities and non-publicly traded securities, including private placements and
restricted securities. For temporary defensive purposes, the Fund invests in
money market instruments and short-term and medium-term debt securities as
described below under "Additional Investment Information -- Temporary
Investments."

The Sub-Adviser's approach in selecting investments for the Fund is oriented
to individual stock selection, and is value driven. The Sub-Adviser initially
identifies those stocks which it believes to be undervalued in

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relation to the issuer's cash flow, assets, earnings and dividends. The
Sub-Adviser utilizes the research from a number of sources, including Morgan
Stanley Capital International, an affiliate of the Adviser and Sub-Adviser
located in Geneva, Switzerland, in identifying attractive securities, and
applies a number of proprietary screening criteria to identify those securities
it believes to be undervalued. Fund holdings are regularly reviewed and
subjected to fundamental analysis to determine whether they continue to conform
to the Sub-Adviser's value criteria. Securities which no longer conform to such
value criteria are sold.

For further information about the foregoing and certain additional
investment practices of the Fund, see "Additional Investment Information" below.

ADDITIONAL INVESTMENT INFORMATION

BORROWING AND OTHER FORMS OF LEVERAGE

The Fund may borrow money (i) as a temporary measure for extraordinary or
emergency purposes, and (ii) in connection with reverse repurchase agreements,
provided that (i) and (ii) in combination do not exceed 33 1/3% of the Fund's
total assets (including the amount borrowed) less liabilities (exclusive of
borrowings) and, further, that the Fund may not purchase additional securities
when borrowings exceed 5% of its total assets. The Fund expects that any
borrowing, for other than temporary purposes, will be made on a secured basis.
The Fund's custodian will either segregate the assets securing the borrowing for
the benefit of the lenders or arrangements will be made with a suitable
sub-custodian. If assets used to secure the borrowing decrease in value, the
Fund may be required to pledge additional collateral to the lender in the form
of cash or securities to avoid liquidation of those assets.

CONVERTIBLE SECURITIES, WARRANTS AND EQUITY-LINKED SECURITIES

The Fund may invest in convertible securities, preferred stock, warrants or
other securities exchangeable under certain circumstances for shares of common
stock. Warrants are instruments giving holders the right, but not the
obligation, to buy shares of a company at a given price during a specified
period.

The Fund may invest in equity-linked securities which are securities that
are convertible into, or the value of which is based upon the value of, equity
securities upon certain terms and conditions. The amount received by an investor
at maturity of such securities is not fixed but is based on the price of the
underlying common stock. Trading prices of the underlying common stock will be
influenced by the issuer's operational results, by complex, interrelated
political, economic, financial or other factors affecting the capital markets,
the stock exchanges on which the underlying common stock is traded and the
market segment of which the issuer is a part. In addition, it is not possible to
predict how equity-linked securities will trade in the secondary market which is
fairly developed and liquid. The market for such securities may be shallow,
however, and high volume trades may be possible only with discounting. In
addition to the foregoing risks, the return on such securities depends on the
creditworthiness of the issuer of the securities, which may be the issuer of the
underlying securities or a third party investment banker or other Lender. The
creditworthiness of such third party issuer of equity-linked securities may, and
often does, exceed the creditworthiness of the issuer of the underlying
securities. The advantage of using equity-linked securities over traditional
equity and debt securities is that the former are income producing vehicles that
may provide a higher income than the dividend income on the underlying

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equity securities while allowing some participation in the capital appreciation
of the underlying equity securities. Another advantage of using equity-linked
securities is that they may be used for hedging to reduce the risk of investing
in the generally more volatile underlying equity securities.

DEPOSITARY RECEIPTS

The Fund may invest in depositary receipts, including American Depositary
Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), European Depositary
Receipts ("EDRs") and other depositary receipts, to the extent that such
depositary receipts become available. ADRs are securities, typically issued by a
U.S. financial institution (a "depositary"), that evidence ownership interests
in a security or a pool of securities issued by a foreign issuer (the
"underlying issuer") and deposited with the depositary. ADRs include American
Depositary Shares and New York Shares and may be "sponsored" or "unsponsored."
Sponsored ADRs are established jointly by a depositary and the underlying
issuer, whereas unsponsored ADRs may be established by a depositary without
participation by the underlying issuer. GDRs, EDRs and other types of depositary
receipts are typically issued by foreign depositaries, although they may also be
issued by U.S. depositaries, and evidence ownership interests in a security or
pool of securities issued by either a foreign or a U.S. corporation.

Holders of unsponsored depositary receipts generally bear all the costs
associated with establishing the unsponsored depositary receipt. The depositary
of an unsponsored depositary receipt is under no obligation to distribute
shareholder communications received from the underlying issuer or to pass
through to the holders of the unsponsored depositary receipt voting rights with
respect to the deposited securities or pool of securities. Depositary receipts
are not necessarily denominated in the same currency as the underlying
securities to which they may be connected. Generally, depositary receipts in
registered form are designed for use in the U.S. securities market and
depositary receipts in bearer form are designed for use in securities markets
outside the United States. The Fund may invest in sponsored and unsponsored
depositary receipts. For purposes of the Fund's investment policies, the Fund's
investments in depositary receipts will be deemed to be investments in the
underlying securities.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Fund may enter into forward foreign currency exchange contracts
("forward contracts"). Forward contracts provide for the purchase or sale of an
amount of a specified foreign currency at a future date. Purposes for which such
contracts may be used include protecting against a decline in a foreign currency
against the U.S. Dollar between the trade date and settlement date when the Fund
purchases or sells securities, locking in the U.S. Dollar value of dividends
declared on securities held by the Fund and generally protecting the U.S. Dollar
value of securities held by the Fund against exchange rate fluctuations. While
such forward contracts may limit losses to the Fund as a result of exchange rate
fluctuations, they will also limit any exchange rate gains that might otherwise
have been realized.

FOREIGN INVESTMENT

The Fund may invest in securities of foreign issuers. Investment in
securities of foreign issuers, especially in securities of issuers in emerging
countries, involves somewhat different investment risks from those affecting
securities of U.S. issuers. There may be limited publicly available information
with respect to foreign issuers, and foreign issuers are not generally subject
to uniform accounting, auditing, and financial and other reporting standards and
requirements comparable to those applicable to domestic companies. Therefore,
disclosure of certain material information may not be made and less information
may be available to investors investing in

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foreign countries than in the United States. There may also be less government
supervision and regulation of foreign securities exchanges, brokers and listed
companies than in the United States. Many foreign securities markets have
substantially less volume than U.S. national securities exchanges, and
securities of some foreign issuers are less liquid and subject to greater price
volatility than securities of comparable domestic issuers. Brokerage commissions
and other transaction costs on foreign securities exchanges are generally higher
than in the United States. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes, which may decrease the net
return on foreign investments as compared to dividends and interest paid to the
Fund by domestic companies. Additional risks include future adverse political
and economic developments, the possibility that a foreign jurisdiction might
impose or change withholding taxes on income payable with respect to foreign
securities, possible seizure, nationalization or expropriation of the foreign
issuer or foreign deposits, and the possible adoption of foreign governmental
restrictions such as exchange controls. Also, it may be more difficult to obtain
a judgment in a court outside the United States. Emerging countries may have
less stable political environments than more developed countries.

Investments in securities of foreign issuers are frequently denominated in
foreign currencies, and the Fund may temporarily hold uninvested reserves in
bank deposits in foreign currencies. Therefore, the value of a Fund's assets
measured in U.S. Dollars may be affected favorably or unfavorably by changes in
currency exchange rates and exchange control regulations. The Fund will also
incur certain costs in connection with conversions between various currencies.

INVESTMENT COMPANY SECURITIES

The Fund may invest in securities of another open-end or closed-end
investment company, by purchase in the open market involving only customary
brokers' commissions or in connection with mergers, acquisitions of assets or
consolidations and as may otherwise be permitted by the Investment Company Act
of 1940, as amended (the "1940 Act").

Some emerging market countries have laws and regulations that currently
preclude direct foreign investment in the securities of their companies.
However, indirect foreign investment in the securities of companies listed and
traded on the stock exchanges in these countries is permitted by certain
emerging market countries through investment funds which have been specifically
authorized. The Fund may invest in these investment funds, including those
advised by MSAM, as well as other investment companies, subject to applicable
provisions of the 1940 Act and other applicable laws. If the Fund invests in
such investment companies, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and the fees of the Adviser), but also will indirectly bear similar expenses of
the underlying investment funds. If the Fund elects to purchase the securities
of an investment fund, it will purchase those securities in the secondary
market.

LOANS OF PORTFOLIO SECURITIES

The Fund may lend its portfolio securities to brokers, dealers, domestic and
foreign banks or other financial institutions for the purpose of increasing its
net investment income. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued interest. The Fund will not enter
into securities loan transactions exceeding in the aggregate 33 1/3% of the
market value of the Fund's total assets. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in collateral should
the borrower of the portfolio securities fail financially.

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MONEY MARKET INSTRUMENTS

The Fund is permitted to invest in money market instruments pending other
investment or settlement, for liquidity and temporary defensive purposes,
although the Fund intends to stay invested in securities satisfying its primary
investment objective to the extent practical. The money market investments
permitted for the Fund include obligations of the U.S. Government, its agencies
and instrumentalities, obligations of foreign sovereignties and other debt
securities, including high-grade commercial paper, repurchase agreements and
bank obligations, such as bankers' acceptances and certificates of deposit
(including Eurodollar certificates of deposit).

NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED SECURITIES

The Fund may invest in securities that are neither listed on a stock
exchange nor traded over the counter. Such unlisted securities may involve a
higher degree of business and financial risk that can result in substantial
losses. As a result of the absence of a public trading market for these
securities, they may be less liquid than publicly traded securities. Although
these securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by the Fund
or less than what may be considered the fair value of such securities.
Furthermore, companies whose securities are not publicly traded may not be
subject to the disclosure and other investor protection requirements which might
be applicable if their securities were publicly traded. If such securities are
required to be registered under the securities laws of one or more jurisdictions
before being resold, the Fund may be required to bear the expenses of
registration. The Fund may not invest more than 15% of its net assets in
illiquid securities. Securities that are restricted from sale to the public
without registration ("Restricted Securities") under the Securities Act of 1933,
as amended (the "1933 Act"), which can be offered and sold to qualified
institutional buyers under Rule 144A under the 1933 Act ("Rule 144A Securities")
may be determined to be liquid under guidelines adopted by, and subject to the
supervision of, the Board of Directors. Rule 144A securities may become illiquid
if qualified institutional buyers are not interested in acquiring the
securities.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements with investment dealers or
financial institutions that meet the credit guidelines of the Company's Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. The term
of these agreements is usually from overnight to one week and never exceeds one
year. A repurchase agreement may be viewed as a fully collateralized loan of
money by the Fund to the seller. The Fund always receives securities as
collateral with a market value at least equal to the purchase price, including
accrued interest, and this value is maintained during the term of the agreement.
If the seller defaults and the collateral value declines, the Fund might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Fund's realization upon the collateral may be delayed or limited. Repurchase
agreements with durations (or maturities) over seven days in length are
considered to be illiquid securities.

REVERSE REPURCHASE AGREEMENTS

The Fund may enter into reverse repurchase agreements with brokers, dealers,
domestic and foreign banks or other financial institutions that have been
determined by the Sub-Adviser to be creditworthy. In a reverse repurchase
agreement, the Fund sells a security and agrees to repurchase it at a mutually
agreed upon date and price, reflecting the interest rate effective for the term
of the agreement. It may also be viewed as the borrowing of money by the Fund.
The Fund's investment of the proceeds of a reverse repurchase agreement is the

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speculative factor known as leverage. The Fund will enter into a reverse
repurchase agreement only if the interest income from investment of the proceeds
is expected to be greater than the interest expense of the transaction and the
proceeds are invested for a period no longer than the term of the agreement. The
Fund will maintain with the appropriate custodian a separate account with a
segregated portfolio of cash or liquid assets in an amount at least equal to its
purchase obligations under these agreements (including accrued interest). If
interest rates rise during a reverse repurchase agreement, it may adversely
affect the Fund's net asset value. In the event that the buyer of securities
under a reverse repurchase agreement files for bankruptcy or becomes insolvent,
the buyer or its trustee or receiver may receive an extension of time to
determine whether to enforce the Fund's repurchase obligation, and the Fund's
use of proceeds of the agreement may effectively be restricted pending such
decision.

TEMPORARY INVESTMENTS

For temporary defensive purposes, when the Sub-Adviser determines that
market conditions warrant, the Fund may invest up to 100% of its assets in money
market instruments and short- and medium-term debt securities that the
Sub-Adviser believes to be of high quality or hold cash.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase securities on a when-issued or delayed delivery basis.
In such transactions, instruments are bought with payment and delivery taking
place in the future in order to secure what is considered to be an advantageous
yield or price at the time of the transaction. The payment obligation and the
interest rates that will be received are each fixed at the time the Fund enters
into the commitment, and no interest accrues to the Fund until settlement. Thus,
it is possible that the market value at the time of settlement could be higher
or lower than the purchase price if the general level of interest rates has
changed.

ZERO COUPONS; PAY-IN-KIND; DEFERRED PAYMENT SECURITIES

The Fund may invest in zero coupon securities, which are securities that are
sold at a discount to par value and on which interest payments are not made
during the life of the security. Upon maturity, the holder is entitled to
receive the par value of the security. While interest payments are not made on
such securities, holders of such securities are deemed to have received annually
"phantom income." Because the Fund will distribute its "phantom income" to
shareholders, to the extent that shareholders elect to receive dividends in cash
rather than reinvesting such dividends in additional shares, the Fund will have
fewer assets with which to purchase income producing securities. The Fund
accrues income with respect to these securities prior to the receipt of cash
payments. Pay-in-kind securities are securities that have interest payable by
delivery of additional securities. Upon maturity, the holder is entitled to
receive the aggregate par value of the securities. Deferred payment securities
are securities that remain zero coupon securities until a predetermined date, at
which time the stated coupon rate becomes effective and interest becomes payable
at regular intervals. Zero coupon, pay-in-kind and deferred payment securities
may be subject to greater fluctuation in value and lesser liquidity in the event
of adverse market conditions than comparably rated securities paying cash
interest at regular interest payment periods.

DERIVATIVE INSTRUMENTS

The Fund is permitted to invest in various derivative instruments for both
hedging and non-hedging purposes. Derivative instruments include options,
futures and options on futures, structured notes, caps, floors, collars and
swaps. Additionally, the Fund may invest in other derivative instruments that
are developed over

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<PAGE>

time if their use would be consistent with the objective of the Fund. The Fund
will limit its use of the foregoing derivative instruments to 50% of its total
assets measured by the aggregate notional amount of outstanding derivative
instruments, provided that no more than 33 1/3% of its total assets are
invested, for non-hedging purposes, in derivatives other than futures and
options on futures. The Fund's investments in forward foreign currency contracts
and derivatives used for hedging purposes are not subject to the limits
described above.

The Fund may use derivative instruments under a number of different
circumstances to further its investment objective. The Fund may use derivatives
when doing so provides more liquidity than the direct purchase of the securities
underlying such derivatives. For example, the Fund may purchase derivatives to
quickly gain exposure to a market in response to changes in the Fund's asset
allocation policy or upon the inflow of investable cash when the derivative
provides greater liquidity than the underlying securities market. The Fund may
also use derivatives when it is restricted from directly owning the underlying
securities due to foreign investment restrictions or other reasons or when doing
so provides a price advantage over purchasing the underlying securities
directly, either because of a pricing differential between the derivatives and
securities markets or because of lower transaction costs associated with the
derivatives transaction. Derivatives may also be used by the Fund for hedging
purposes and under other circumstances in which the Fund's portfolio manager
believes it advantageous to do so consistent with the Fund's investment
objective. The Fund will not, however, use derivatives in a manner that creates
leverage, except to the extent that the use of leverage is expressly permitted
by a the Fund's investment policies, and then only in a manner consistent with
such policies.

Some of the derivative instruments in which the Fund may invest and the
risks related thereto are described in more detail below.

CAPS, FLOORS AND COLLARS

The Fund may invest in caps, floors and collars, which are instruments
analogous to options. In particular, a cap is the right to receive the excess of
a reference rate over a given rate and is analogous to a put option. A floor is
the right to receive the excess of a given rate over a reference rate and is
analogous to a call option. Finally, a collar is an instrument that combines a
cap and a floor. That is, the buyer of a collar buys a cap and writes a floor,
and the writer of a collar writes a cap and buys a floor. The risks associated
with caps, floors and collars are similar to those associated with options. In
addition, caps, floors and collars are subject to risk of default by the
counterparty because they are privately negotiated instruments.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

The Fund may purchase and sell futures contracts and options on futures
contracts, including but not limited to securities index futures, foreign
currency exchange futures, interest rate futures contracts and other financial
futures. Futures contracts provide for the sale by one party and purchase by
another party of a specified amount of a specific security, instrument or basket
thereof, at a specific future date and at a specified price. An option on a
futures contract is a legal contract that gives the holder the right to buy or
sell a specified amount of futures contracts at a fixed or determinable price
upon the exercise of the option.

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<PAGE>

The Fund may sell securities index futures contracts and/or options thereon
in anticipation of or during a market decline to attempt to offset the decrease
in market value of investments in its portfolio, or purchase securities index
futures in order to gain market exposure. Subject to applicable laws, the Fund
may engage in transactions in securities index futures contracts (and options
thereon) which are traded on a recognized securities or futures exchange, or may
purchase or sell such instruments in the over-the-counter market. There
currently are limited securities index futures and options on such futures in
many countries, particularly emerging countries. The nature of the strategies
adopted by the Sub-Adviser, and the extent to which those strategies are used,
may depend on the development of such markets.

The Fund may engage in transactions involving foreign currency exchange
futures contracts. Such contracts involve an obligation to purchase or sell a
specific currency at a specified future date and at a specified price. The Fund
may engage in such transactions to hedge their respective holdings and
commitments against changes in the level of future currency rates or to adjust
their exposure to a particular currency.

The Fund may engage in transactions in interest rate futures transactions.
Interest rate futures contracts involve an obligation to purchase or sell a
specific debt security, instrument or basket thereof at a specified future date
at a specified price. The value of the contract rises and falls inversely with
changes in interest rates. The Fund may engage in such transactions to hedge
their holdings of debt instruments against future changes in interest rates.

Financial futures are futures contracts relating to financial instruments,
such as U.S. Government securities, foreign currencies and certificates of
deposit. Such contracts involve an obligation to purchase or sell a specific
security, instrument or basket thereof at a specified future date at a specified
price. Like interest rate futures contracts, the value of financial futures
contracts rises and falls inversely with changes in interest rates. The Fund may
engage in financial futures contracts for hedging and non-hedging purposes.

Under rules adopted by the Commodity Futures Trading Commission, the Fund
may enter into futures contracts and options thereon for both hedging and
non-hedging purposes, provided that not more than 5% of the Fund's total assets
at the time of entering the transaction are required as margin and option
premiums to secure obligations under such contracts relating to non-hedging
activities.

Gains and losses on futures contracts and options thereon depend on the
Sub-Adviser's ability to predict correctly the direction of securities prices,
interest rates and other economic factors. Other risks associated with the use
of futures and options are (i) imperfect correlation between the change in
market value of investments held by the Fund and the prices of futures and
options relating to investments purchased or sold by the Fund, and (ii) possible
lack of a liquid secondary market for a futures contract and the resulting
inability to close a futures position. The risk that the Fund will be unable to
close out a futures position or options contract will be minimized by only
entering into futures contracts or options transactions for which there appears
to be a liquid exchange or secondary market. The risk of loss in trading on
futures contracts in some strategies can be substantial, due both to the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing.

OPTIONS TRANSACTIONS

The Fund may seek to increase their returns or may hedge their portfolio
investments through options transactions with respect to (i) securities,
instruments, indices or baskets thereof in which the Fund may invest and (ii)
foreign currencies. Purchasing a put option gives the Fund the right to sell a
specified security, currency

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<PAGE>

or basket of securities or currencies at the exercise price until the expiration
of the option. Purchasing a call option gives the Fund the right to purchase a
specified security, currency or basket of securities or currencies at the
exercise price until the expiration of the option.

The Fund also may write (i.e., sell) put and call options on investments
held in its portfolio, as well as with respect to a foreign currency. The Fund
that has written an option receives a premium, which increases the Fund's return
on the underlying security or instrument in the event the option expires
unexercised or is closed out at a profit. However, by writing a call option, the
Fund will limit its opportunity to profit from an increase in the market value
of the underlying security or instrument above the exercise price of the option
for as long as the Fund's obligation as writer of the option continues. The Fund
may only write options that are "covered." A covered call option means that so
long as the Fund is obligated as the writer of the option, it will earmark or
segregate sufficient liquid assets to cover its obligations under the option or
own (i) the underlying security or instrument subject to the option, (ii)
securities or instruments convertible or exchangeable without the payment of any
consideration into the security or instrument subject to the option, or (iii) a
call option on the same underlying security with a strike price no higher than
the price at which the underlying instrument was sold pursuant to a short option
position.

By writing (or selling) a put option, the Fund incurs an obligation to buy
the security or instrument underlying the option from the purchaser of the put
at the option's exercise price at any time during the option period, at the
purchaser's election. The Fund may also write options that may be exercisable by
the purchaser only on a specific date. The Fund that has written a put option
will earmark or segregate sufficient liquid assets to cover its obligations
under the option or will own a put option on the same underlying security with
an equal or higher strike price.

The Fund may engage in transactions in options which are traded on
recognized exchanges or over-the-counter. There currently are limited options
markets in many countries, particularly emerging countries such as Latin
American countries, and the nature of the strategies adopted by the Sub-Adviser
and the extent to which those strategies are used will depend on the development
of such option markets. The primary risks associated with the use of options are
(i) imperfect correlation between the change in market value of investments
held, purchased or sold by the Fund and the prices of options relating to such
investments; and (ii) possible lack of a liquid secondary market for an option.

STRUCTURED NOTES

Structured Notes are derivatives on which the amount of principal repayment
and/or interest payments is based upon the movement of one or more factors.
These factors include, but are not limited to, currency exchange rates, interest
rates (such as the prime lending rate and LIBOR) and stock indices such as the
S&P 500 Index. In some cases, the impact of the movements of these factors may
increase or decrease through the use of multipliers or deflators. The Fund may
use structured notes to tailor their investments to the specific risks and
returns the Sub-Adviser wishes to accept while avoiding or reducing certain
other risks.

SWAPS -- SWAP CONTRACTS

Swaps and Swap Contracts are derivatives in the form of a contract or other
similar instrument in which two parties agree to exchange the returns generated
by a security, instrument, basket thereof or index for the returns generated by
another security, instrument, basket thereof or index. The payment streams are
calculated by reference to a specific security, index or instrument and an
agreed upon notional amount. The relevant indices

15
<PAGE>

include but are not limited to, currencies, fixed interest rates, prices and
total return on interest rate indices, fixed income indices, stock indices and
commodity indices (as well as amounts derived from arithmetic operations on
these indices). For example, the Fund may agree to swap the return generated by
a fixed income index for the return generated by a second fixed income index.
The currency swaps in which the Fund may enter will generally involve an
agreement to pay interest streams in one currency based on a specified index in
exchange for receiving interest streams denominated in another currency. Such
swaps may involve initial and final exchanges that correspond to the agreed upon
notional amount.

The Fund will usually enter into swaps on a net basis, i.e., the two return
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two returns. The Fund's obligations under a swap
agreement will be accrued daily (offset against any amounts owing to the Fund)
and any accrued, but unpaid, net amounts owed to a swap counterparty will be
covered by the maintenance of a segregated account consisting of cash or liquid
securities. The Fund will not enter into any swap agreement unless the
counterparty meets the rating requirements set forth in guidelines established
by the Company's Board of Directors.

Interest rate and total rate of return swaps do not involve the delivery of
securities, other underlying assets, or principal. Accordingly, the risk of loss
with respect to interest rate and total rate of return swaps is limited to the
net amount of payments that the Fund is contractually obligated to make. If the
other party to an interest rate or total rate of return swap defaults, the
Fund's risk of loss consists of the net amount of payments that the Fund is
contractually entitled to receive. In contrast, currency swaps may involve the
delivery of the entire principal value of one designated currency in exchange
for the other designated currency. Therefore, the entire principal value of a
currency swap may be subject to the risk that the other party to the swap will
default on its contractual delivery obligations. If there is a default by the
counterparty, the Fund may have contractual remedies pursuant to the agreements
related to the transaction. The swaps market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the swaps market has become relatively liquid. Swaps that include caps, floors
and collars are more recent innovations for which standardized documentation has
not yet been fully developed and, accordingly, they are less liquid than
"traditional" swaps.

The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Sub-Adviser is incorrect in its forecasts of
market values, interest rates and currency exchange rates, the investment
performance of the Fund would be less favorable than it would have been if this
investment technique were not used.

INVESTMENT LIMITATIONS

The Fund is a diversified investment company under the 1940 Act, and is
subject to the following limitations as to 75% of its total assets: (a) the Fund
may not invest more than 5% of its total assets in the securities of any one
issuer, except obligations of the U.S. Government, and its agencies and
instrumentalities, and (b) the Fund may not own more than 10% of the outstanding
voting securities of any one issuer.

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<PAGE>
MANAGEMENT OF THE COMPANY

INVESTMENT ADVISER. Van Kampen American Capital Investment Advisory Corp.
(the "Adviser") is the investment adviser and administrator of the Fund. The
Adviser provides investment advice and portfolio management services pursuant to
an advisory agreement (the "Advisory Agreement") and subject to the supervision
of the Company's Board of Directors, makes the Fund's investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Fund's investments. The Advisory Agreement also provides that the Adviser may
appoint sub-advisers to perform these portfolio management responsibilities. See
"Investment Sub-Adviser" below. The Adviser is entitled to receive an investment
advisory fee computed daily and paid monthly at the annual rate of 1.00% based
on the Fund's average daily net assets.

The Adviser is a wholly-owned subsidiary of Van Kampen American Capital,
Inc. ("Van Kampen American Capital"). Van Kampen American Capital is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $57 billion under management or supervision. Van Kampen American Capital's
more than 40 open-end and 38 closed-end funds and more than 2,500 unit
investment trusts are professionally distributed by leading financial advisers
nationwide. The Distributor of the Company and the sponsor of the funds
mentioned above, is also a wholly-owned subsidiary of Van Kampen American
Capital. The Adviser's principal office is located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181.

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

INVESTMENT SUB-ADVISER. Morgan Stanley Asset Management Inc. ("MSAM," or
the "Sub-Adviser") is the investment sub-adviser of the Fund. The Sub-Adviser
provides investment advice and portfolio management services pursuant to an
investment sub-advisory agreement and, subject to the supervision of the Adviser
and the Company's Board of Directors, makes the Fund's investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Fund's investments.

The Sub-Adviser is entitled to receive sub-advisory fees computed daily and
paid quarterly. If the average daily net assets of the Fund during the monthly
period are less than or equal to $500 million, the Adviser shall pay MSAM
one-half of the total investment advisory fee payable to the Adviser by the Fund
(after application of any fee waivers in effect) for such monthly period. If the
Fund's average daily net assets for the monthly period are greater than $500
million, the Adviser shall pay MSAM a fee for such monthly period equal to the
greater of (a) one-half of what the total investment advisory fee payable to the
Adviser by the Fund (after application of any fee waivers in effect) for such
monthly period would have been had the Fund's average daily net assets during
such period been equal to $500 million, or (b) forty-five percent of the total
investment advisory fee payable to the Adviser by the Fund (after application of
any fee waivers in effect) for such monthly period.

17
<PAGE>

MSAM, with principal offices at 1221 Avenue of the Americas, New York, NY
10020, conducts a worldwide portfolio management business. It provides a broad
range of portfolio management services to customers in the United States and
abroad. At June 30, 1997, MSAM had approximately $83.1 billion in assets under
management as an investment adviser or as a Named Fiduciary or Fiduciary
Adviser.

PORTFOLIO MANAGER. Frances Campion joined the Sub-Adviser in January 1990
as a Global Equity Fund Manager and is now a Principal of Morgan Stanley. Her
responsibilities include day-to-day management of the Global Equity product. Ms.
Campion has ten years global investment experience. She is a graduate of
University College, Dublin.

ADMINISTRATOR. The Administrator provides the Company with administrative
services pursuant to an administration agreement (the "Administration
Agreement"). The services provided under the Administration Agreement are
subject to the supervision of the officers and Board of Directors of the Company
and include day-to-day administration of matters related to the corporate
existence of the Company, maintenance of its records, preparation of reports,
supervision of the Company's arrangements with its custodian and assistance in
the preparation of the Company's registration statements under federal and state
laws. The Administration Agreement also provides that the Administrator through
its agents will provide the Company dividend disbursing and transfer agent
services. For its services under the Administration Agreement, the Company pays
the Administrator a monthly fee which on an annual basis equals 0.25% of the
average daily net assets of the Fund.

Under a sub-administration agreement between the Administrator and The Chase
Manhattan Bank ("Chase"), Chase Global Funds Services Company ("CGFSC"), a
corporate affiliate of Chase, provides certain administrative services to the
Company. The Administrator supervises and monitors such administrative services
provided by CGFSC. The services provided under the sub-administration agreement
are subject to the supervision of the Board of Directors of the Company. The
Board of Directors of the Company has approved the provision of services
described above pursuant to the sub-administration agreement as being in the
best interests of the Company. CGFSC's business address is 73 Tremont Street,
Boston, Massachusetts 02108-3913. For additional information on the
Administration Agreement, see "Management of the Company" in the Statement of
Additional Information.

DIRECTORS AND OFFICERS. Pursuant to the Company's Articles of
Incorporation, the Board of Directors decides upon matters of general policy and
reviews the actions of the Company's Adviser, Sub-Adviser, Administrator and
Distributor. The Officers of the Company conduct and supervise its daily
business operations.

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the
"Distributor") serves as the distributor of the shares of the Company. Under its
distribution agreement (the "Distribution Agreement") with the Company, the
Distributor sells shares of the Company upon the terms and at the current
offering price described in this Prospectus. The Distributor is not obligated to
sell any specific number of shares of the Company.

The Company currently has Class A shares, Class B shares and Class C shares
of the Fund. The Company may in the future create one or more classes of shares
for the Fund that may have sales charges or other distribution charges or a
combination thereof different from those of the classes currently offered.

The Board of Directors of the Company has approved and adopted the
Distribution Agreement for the Company and a Plan for each class of the Fund
pursuant to Rule 12b-1 under the 1940 Act (each a "Plan" and together, the
"Plans"). Under each Plan, the Distributor is entitled to receive from the Fund
a distribution fee,

18
<PAGE>

which is accrued daily and paid quarterly, at a maximum rate of 0.75% of the
Class B shares and Class C shares of the Fund, on an annualized basis of the
average daily net assets of such classes. The actual amount of such compensation
is agreed upon by the Company's Board of Directors and by the Distributor. With
respect to Class B shares, the Distributor expects to utilize substantially all
of its fee to reimburse itself for commissions paid to investment dealers, banks
or financial services firms that provide distribution services (each, a
"Participating Dealer"). With respect to the Class C shares, the Distributor
expects to reallocate substantially all of its fee to such Participating
Dealers. The Distributor may, in its discretion, voluntarily waive from time to
time all or any portion of its distribution fee and the Distributor is free to
make additional payments out of its own assets to promote the sale of Fund
shares. Class A shares, Class B shares and Class C shares authorize the payment
of a service fee at an annual rate of 0.25% on an annualized basis of the
average daily net assets of such class of shares of the Fund as compensation to
the Distributor for shareholder services. In addition to such payments, the
Adviser may use its advisory fees or other resources to pay expenses associated
with activities which might be construed to be financing the sale of the Fund's
shares, including payments to third parties that provide assistance in the
distribution effort (in addition to selling shares and providing shareholder
services).

The Plans obligate the Fund to accrue and pay to the Distributor the fee
agreed to under its Distribution Agreement. The Plans do not obligate the Fund
to reimburse the Distributor for the actual expenses the Distributor may incur
in fulfilling its obligations under the Plan. Thus, under each Plan, even if the
Distributor's actual expenses exceed the fee payable to it thereunder at any
given time, the Fund will not be obligated to pay more than that fee. If actual
expenses are less than the fee it receives, the Distributor will retain the full
amount of the fee.

Each Plan for a class of Company shares, under the terms of Rule 12b-1, will
remain in effect only if approved at least annually by the Company's Board of
Directors, including those directors who are not "interested persons" of the
Company as that term is defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of a Plan or in any agreements
related thereto ("12b-1 Directors"). Each Plan may be terminated at any time by
a vote of a majority of the 12b-1 Directors or by a vote of a majority of the
outstanding voting securities of the applicable class of the Fund. The fee set
forth above will be paid by the appropriate class to the Distributor unless and
until a Plan is terminated or not renewed. The Company intends to operate each
Plan in accordance with its terms and the NASD Conduct Rules concerning sales
charges.

PAYMENTS TO FINANCIAL INSTITUTIONS. The Adviser or its affiliates may
compensate certain financial institutions for the continued investment of their
customers' assets in the Fund pursuant to the advice of such financial
institutions. These payments will be made directly by the Adviser or its
affiliates from their assets, and will not be made from the assets of the
Company or by the assessment of a sales charge on shares. Such financial
institutions may also perform certain shareholder or recordkeeping services that
would otherwise be performed by CGFSC. The Adviser may elect to enter into a
contract to pay the financial institutions for such services.

EXPENSES. The Fund is responsible for payment of certain other fees and
expenses (including professional fees, custodial fees and printing and mailing
costs) specified in the Administration and Distribution Agreements.

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<PAGE>
PURCHASE OF SHARES

The Fund offers three classes of shares, designated Class A shares, Class B
shares and Class C shares, to the public through the Distributor as principal
underwriter which is located at One Parkview Plaza, Oakbrook Terrace, Illinois
60181. Shares are also 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"). The term "dealers"
and "brokers" are sometimes referred to herein as "Participating Dealers".

The Class A shares, Class B shares and Class C shares of the Fund are
designed to provide investors a choice of three ways to pay distribution-related
charges. Initial investments must be at least $500 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. The $500
minimum may be waived by the Distributor for plans involving periodic
investments. Shares of the Company may be sold in foreign countries where
permissible. The Company and the Distributor reserve the right to refuse any
order for the purchase of shares. The Company also reserves the right to suspend
the sale of the Company's shares in response to conditions in the securities
markets or for other reasons.

INITIAL PUBLIC OFFERING

On September, 24, 1997, the Fund is commencing an initial public offering of
its shares (the "Initial Public Offering"). The Initial Public Offering period
expires at 5:00 p.m. Eastern time on Friday, October 24, 1997, unless extended
to a later date by agreement between the Fund and the Distributor (the
"Expiration Date"). Investors seeking to purchase shares of the Fund should
contact the Distributor or their broker or dealer prior to the Expiration Date
for instructions on how to place an order. Shares of the Fund are being offered
initially at $10.00 per share plus any applicable initial sales charge. Payment
for shares is due, and the Fund anticipates commencing investment operations, on
the third business day after the Expiration Date (the "Closing Date"). The Fund
does not seek payment from investors prior to the Closing Date and any payments
received prior thereto will be returned to investors. Shortly after termination
of the Initial Public Offering, the Fund expects to commence a continuous public
offering of its shares.

CONTINUOUS PUBLIC OFFERING

Shortly after termination of the Initial Public Offering, the Fund expects
to commence a continuous public offering of its three classes of shares through
the Distributor and selected brokers and dealers. Shares of the Fund are offered
during the continuous public offering at the net asset value per share next
determined after receipt of the investor's order to purchase plus any applicable
initial sales charge. Shares of the Company may be purchased on any business day
through Participating Dealers. Shares may also be purchased by completing the
application accompanying this Prospectus and forwarding the application, through
the Participating Dealer, to the shareholder service agent, ACCESS Investor
Services, Inc. ("ACCESS"), a wholly-owned subsidiary of Van Kampen American
Capital, Inc. When purchasing shares of the Company, investors must specify
whether the purchase is for Class A shares, Class B shares or Class C shares.
Shares are offered at the next determined net asset value per share, plus any
initial or contingent deferred sales charge depending on the class of shares
chosen by the investor, as shown in the tables herein. See "Valuation of Shares"
for a further description of net asset value computations. Generally, the net
asset values per share of the Class A shares, Class B shares and Class C shares
are expected to be substantially the same. Under certain circumstances, however,
the per share net asset

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<PAGE>
values of the classes of shares may differ from one another, reflecting the
daily expense accruals of the distribution and the higher transfer agency fees
applicable with respect to the Class B shares and Class C shares and the
differential in the dividends paid on the classes of shares. The price paid for
shares purchased is based on the next calculation of net asset value (plus sales
charges, where applicable) after an order is received by a Participating Dealer
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. Orders received by Participating Dealers after
the close of the New York Stock Exchange (the "NYSE") are priced based on the
net asset value calculated after the next day's close provided they are received
by the Distributor prior to the Distributor's close of business on such day. It
is the responsibility of Participating Dealers to transmit orders received by
them to the Distributor so they will be received prior to such time.

GENERAL

Each class of shares represents an interest in the same portfolio of
investments, has the same rights and is identical in all respects, except that
(i) Class B shares and Class C shares bear the expenses of the deferred sales
arrangement and any expenses (including the distribution fee and incremental
transfer agency costs) resulting from such sales arrangement, (ii) generally,
each class has exclusive voting rights with respect to approvals of the Rule
12b-1 distribution plan to which its distribution fee or service fee is paid,
(iii) Class B shares are subject to a conversion feature, (iv) each class has
different exchange privileges and (v) each class has different shareholder
service options available. The net income attributable to Class B shares and
Class C shares and the dividends payable on Class B shares and Class C shares
will be reduced by the amount of the distribution fee and incremental transfer
agency expenses associated with such class of shares. Sales personnel of
Participating Dealers distributing the Company's shares and other persons
entitled to receive compensation for selling such shares may receive differing
compensation for selling Class A shares, Class B shares or Class C shares.

In deciding which class of shares to purchase, investors should take into
consideration their investment goals, present and anticipated purchase amounts,
time horizons and temperments. Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated distribution
fees and contingent deferred sales charges on Class B shares prior to conversion
or Class C shares would be less than the initial sales charge on Class A shares
purchased at the same time, and to what extent such differential would be offset
by the higher dividends per share on Class A shares. To assist investors in
making this determination, the table under the caption "Fund Expenses" sets
forth examples of the charges applicable to each class of shares. In this
regard, Class A shares may be more beneficial to the investor who qualifies for
reduced initial sales charges or purchases shares at net asset value, as
described herein under "Purchase of Shares -- Class A Shares." For these
reasons, it is presently the policy of the Distributor not to accept any order
of $500,000 or more for Class B shares or any order of $1 million or more for
Class C shares as it ordinarily would be more beneficial for such investor to
purchase Class A shares.

Class A shares may be appropriate for investors who prefer to pay the sales
charge up front, want to take advantage of the reduced sales charges available
on larger investments, wish to maximize their current income from the start,
prefer not to pay redemption charges and/or have a longer-term investment
horizon. Class B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately, and/or have a longer-term investment horizon. Class C shares may be
appropriate for investors who wish to avoid a front-end sales charge, put 100%
of their investment dollars to work

21
<PAGE>
immediately, have a shorter-term investment horizon and/or desire a short
contingent deferred sales charge schedule.

The distribution expenses incurred by the Distributor in connection with the
sale of the shares will be reimbursed, in the case of Class A shares, from the
proceeds of the initial sales charge and, in the case of Class B shares and
Class C shares, from the proceeds of the ongoing distribution fee and any CDSC
incurred upon redemption within five years or one year, respectively, of
purchase. Investors should understand that the purpose and function of the CDSC
and ongoing distribution fee with respect to Class B shares and Class C shares
are the same as those of the initial sales charge with respect to Class A
shares. See "Distribution Plans."

The Distributor may from time to time implement programs under which a
Participating Dealer's sales force may be eligible to win nominal awards for
certain sales efforts or under which the Distributor will reallow to any
Participating 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 Participating Dealer at
the public offering price during such programs. Other programs provide, among
other things and subject to certain conditions, for certain favorable
distribution arrangements for shares of the Company. 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 Company. Fees may include payment
for travel expenses, including lodging, incurred in connection with trips taken
by invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. 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. All of the foregoing payments are made by the
Distributor out of its own assets. These programs will not change the price an
investor will pay for shares or the amount that the Fund will receive from such
sale.

CLASS A SHARES

The public offering price of Class A shares in the Initial Public Offering
is $10.00 per share plus a sales charge and during the continuous public
offering is the next determined net asset value plus a sales charge, as set
forth herein.

22
<PAGE>
SALES CHARGE TABLE

<TABLE>
<CAPTION>
REALLOWED TO DEALERS
AS % OF AS % OF NET AMOUNT (AS % OF OFFERING
SIZE OF INVESTMENT OFFERING PRICE INVESTED 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 for such investments the Fund imposes a contingent
deferred sales charge of 1.00% in the event of certain redemptions within one
year of the purchase. A commission will be paid to brokers, dealers or
financial intermediaries who initiate and are responsible for purchases of $1
million or more as follows: 1.00 % on sales to $2 million, plus 0.80% on the
next million, plus 0.50% on the excess over $3 million. See "Purchase of
Shares -- Purchase of Class B Shares" and "-- Purchase of Class C Shares" for
additional information with respect to contingent deferred sales charges.

In addition to the reallowances from the applicable public offering price
described herein, the Distributor may, from time to time, pay or allow
additional reallowances or promotional incentives, in the form of cash or other
compensation, to Participating Dealers that sell shares of the Company.
Participating Dealers which are reallowed all or substantially all of the sales
charges may be deemed to be underwriters for purposes of the Securities Act of
1933, as amended. The Distributor may also pay financial institutions (which may
include banks) and other industry professionals that provide services to
facilitate transactions in shares of the Company for their clients a transaction
fee up to the level of the reallowance allowable to Participating Dealers
described herein. Such financial institutions, other industry professionals and
Participating Dealers are hereinafter referred to as "Service Organizations."
Banks are currently prohibited under the Glass-Steagall Act from providing
certain underwriting or distribution services. If banking firms were prohibited
from acting in any capacity or providing any of the described services, the
Distributor would consider what action, if any, would be appropriate.

The Distributor does not believe that termination of a relationship with a
bank would result in any material adverse consequences to the Company. State
securities laws regarding registration of banks and other financial institutions
may differ from the interpretations of federal law expressed herein and banks
and other financial institutions may be required to register as dealers pursuant
to certain state laws.

QUANTITY DISCOUNTS

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

Investors or their Participating Dealers must notify the Company whenever a
quantity discount is applicable to purchases. Upon such notification, an
investor will receive the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their Participating Dealer or the
Distributor.

A person eligible for a reduced sales charge includes an individual, their
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
estate or single fiduciary account, or a "company" as defined in Section 2(a)(8)
of the 1940 Act.

23
<PAGE>
The phrase "Participating Funds," as used herein, refers to certain open-end
investment companies advised by the Adviser or Van Kampen American Capital Asset
Management Inc. and distributed by the Distributor as determined from time to
time by the Company's Board of Directors.

VOLUME DISCOUNTS. The size of investment shown in the preceding sales
charge tables 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 preceding
sales charge tables may also be determined by combining the amount being
invested in shares of the Participating Funds plus the current offering price of
all shares of the Participating Funds which have been previously purchased and
are still owned.

LETTER OF INTENT. A Letter of Intent provides an opportunity for an
investor to obtain a reduced sales charge by aggregating investments over a
13-month period to determine the sales charge as outlined in the preceding
table. The size of investment shown in the preceding tables also includes
purchases of shares of the Participating Funds over a 13-month period based on
the total amount of intended purchases plus the value of all shares of the
Participating Funds previously purchased and still owned. An investor may elect
to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
If the goal is not achieved within the period, the investor must pay the
difference between the sales charges applicable to the purchases made and the
sales charges previously paid. The initial purchase must be for an amount equal
to at least 5% of the minimum total purchased amount of the level selected. If
trades not initially made under a Letter of Intent subsequently qualify for a
lower sales charge through the 90-day back-dating provisions, an adjustment will
be made at the expiration of the Letter of Intent to give effect to the lower
charge. Such adjustments in sales charge will be used to purchase additional
shares for the shareholder at the applicable discount category. Additional
information is contained in the application form accompanying this Prospectus.

OTHER PURCHASE PROGRAMS

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

UNIT INVESTMENT TRUST REINVESTMENT PROGRAMS. The Company permits
unitholders of unit investment trusts to reinvest distributions from such trusts
in Class A shares of the Company at net asset value 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 Company and the Distributor. The total sales charge for all other
investments made from unit trust distributions will be 1.00% of the offering
price (1.01% of net asset value). Of this amount, the Distributor will pay to
the Participating Dealer, if any, through which such participation in the
qualifying program was initiated 0.50% of the offering price as a dealer
concession or agency commission. Persons desiring more information with respect
to this program, including the applicable terms and conditions thereof, should
contact their Participating 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

24
<PAGE>
investments in a Fund during each distribution period by all investors who
choose to invest in the Fund through the program and (2) provide ACCESS with
appropriate backup data for each participating investor in a computerized format
fully compatible with ACCESS' processing system.

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

NAV PURCHASE OPTIONS. Class A shares of the Fund may be purchased without
an initial sales charge, 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/directors of funds advised by the
Adviser or Van Kampen American Capital Asset Management, Inc. and such
persons' families and their beneficial accounts.

(2) Current or retired directors, officers and employees of Morgan
Stanley, Dean Witter, Discover & 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 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.

(4) Registered investment advisers, trust companies and bank trust
departments investing on their own behalf or on behalf of their clients
provided that the aggregate amount invested in the Fund alone, or in any
combination of shares of the Fund and shares of other Participating Funds as
described herein under "Purchase of Shares -- Class A Shares -- Volume
Discounts," during the 13-month period commencing with the first investment
pursuant hereto equals at least $1 million. The Distributor may pay
Participating Dealers through which purchases are made an amount up to 0.50%
of the amount invested, over a 12-month period following such transaction.

(5) Trustees and other fiduciaries purchasing shares for retirement
plans of organizations with retirement plan assets of $3 million or more and
which invest in multiple fund families through national wirehouse alliance
programs. The Distributor may pay commissions of up to 1.00% for such
purchases.

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

(7) Trusts created under pension, profit sharing or other employee
benefit plans qualified under Section 401(a) of the Code, or custodial
accounts held by a bank created pursuant to Section 403(b) of the Code and
sponsored by non-profit organizations defined under Section 501(c)(3) of the
Code and assets held by an employer or trustee in connection with an
eligible deferred compensation plan under Section 457 of the Code. Such
plans will qualify for purchases at net asset value provided that (1) the
initial

25
<PAGE>
amount invested in the Participating Funds is at least $500,000 or (2) such
shares are purchased by an employer sponsored plan with more than 100
eligible employees. Section 403(b) and similar accounts for which Van Kampen
American Capital 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 employee, except under certain uniform criteria
established by the Distributor from time to time. A commission will be paid
to dealers who initiate and are responsible for such purchases within a
rolling twelve month period as follows: 1.00% on sales up 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.

(8) 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 other 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 participant's account in connection with this privilege will
be subject to a contingent deferred sales charge of one percent 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
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 ACCESS by the investment
adviser, trust company or bank trust department, provided that ACCESS 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 herein under "Distribution Plans" on
purchases made as described in (3) through (8) above.

The Company may terminate, or amend the terms of, offering shares of the
Fund at net asset value to the foregoing groups at any time.

RETIREMENT PLANS

Van Kampen American Capital Trust Company ("VK Trust") provides retirement
plan services and documents and can establish investor accounts in individual
retirement accounts ("IRAs"). This includes Simplified Employee Pension ("SEP")
Plan and IRA accounts. Brochures describing such plans and materials for
establishing them are available from VK Trust upon request. The brochures for
custodial accounts with VK Trust describe the current fees payable to VK Trust
for its services as custodian. Investors should consult with their own tax
advisers before establishing a retirement plan.

26
<PAGE>
PURCHASE OF CLASS B SHARES

Class B shares of the Fund may be purchased during the Initial Public
Offering at $10.00 per share without an initial sales charge and during the
continous public offering at net asset value without an initial sales charge.
However, a CDSC will be imposed on certain Class B shares redeemed within five
years of purchase. The charge is assessed on an amount equal to the lesser of
the then-current market value of the Class B shares redeemed or the total cost
of such shares. Accordingly, the CDSC will not be applied to dollar amounts
representing an increase in the net asset values above the initial purchase
price of the shares being redeemed. In addition, no charge is assessed on
redemptions of Class B shares derived from reinvestment of dividends or capital
gains distributions.

In determining whether the CDSC is applicable to a redemption, the
calculation is made in the manner that results in the lowest possible rate.
Therefore, it is assumed that the redemption is first of any Class B shares in
the shareholder's account that represent reinvested dividends and/or
distributions, and/or of Class B shares held longer than five years after
purchase, and next of Class B shares held the longest during the initial
five-year period after purchase. The amount of the CDSC, if any, will vary
depending on the number of years from the time of purchase of Class B shares
until the redemption of such shares (the "holding period"). The following table
sets forth the rates of the CDSC.

CONTINGENT DEFERRED SALES CHARGE

<TABLE>
<CAPTION>
SALES CHARGE AS
PERCENTAGE OF THE
YEAR SINCE PURCHASE DOLLAR AMOUNT
PAYMENT WAS MADE SUBJECT TO CHARGE
- ---------------------------------------------------------------------------- -----------------
<S> <C>
First....................................................................... 5.00%
Second...................................................................... 4.00%
Third....................................................................... 3.00%
Fourth...................................................................... 2.50%
Fifth....................................................................... 1.50%
Thereafter.................................................................. None*
</TABLE>

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

* As described more fully below, Class B shares automatically convert to Class A
shares after the eighth year following purchase.

Proceeds from any CDSC are paid to the Distributor and are used by the
Distributor to defray its expenses related to providing distribution-related
services to the Company in connection with the sale of the Class B shares. The
Distributor will make payments to the Participating Dealers that handle the
purchases of such shares at a rate not in excess of 4.00% of the purchase price
of such shares at the time of purchase and expects to pay to Participating
Dealers a portion of its distribution fee under the Rule 12b-1 Plan, as
described under "Management of the Company -- Distributor" above. Additionally,
the Distributor may pay additional promotional incentives, in the form of cash
or other compensation, to authorized dealers that sell Class B shares of the
Fund. The combination of the CDSC and the distribution/service fee facilitates
the ability of the Company to sell the Class B shares without a sales charge
being deducted at the time of purchase.

AUTOMATIC CONVERSION TO CLASS A SHARES. After the eighth year following
purchase, Class B shares will automatically convert to Class A shares and will
no longer be subject to the higher distribution and service fees. Such

27
<PAGE>
conversion will be on the basis of the relative net asset values of the two
classes, without the imposition of any sales load, fee or other charge. Under
current tax law, the conversion is not a taxable event to the shareholder.

PURCHASE OF CLASS C SHARES

Class C shares of the Fund may be purchased during the Initial Public
Offering at $10.00 per share without an initial sales charge and during the
continuous public offering at the net asset value per share without an initial
sales charge. Such shares are subject to a CDSC at the rate of 1.00% of the
lesser of the current market value of the shares redeemed or the total cost of
such shares for shares that are redeemed within one year of purchase. The
Distributor will make payments to the Participating Dealers that handle the
purchases of such shares at the rate of 1.00% of the purchase price of such
shares at the time of purchase and expects to pay to Participating Dealers most
of its distribution fee, with respect to such shares, under the Rule 12b-1 Plan
for such class of shares, as described under "Management of the Company --
Distributor" above. In determining whether a CDSC is payable, and, if so, the
amount of the fee or charge, it is assumed that shares not subject to such fee
or charge are the first redeemed.

WAIVER OF CDSC

The CDSC will be waived on the redemption of Class B or Class C shares (i)
following the death or initial determination of disability (as defined in the
Code) of a shareholder; (ii) certain distributions from an IRA or other
retirement plan; (iii) to the extent that shares redeemed have been withdrawn
from a Systematic Withdrawal Plan, up to a maximum of 12% per year from a
shareholder account based on the value of the account at the time the Withdrawal
Plan is established; or (iv) effected pursuant to the right of the Company to
liquidate a shareholder's account as described herein under "Redemption of
Shares." A shareholder, or his or her representative, must notify the Transfer
Agent prior to the time of redemption if such circumstances exist and the
shareholder is eligible for this waiver. The shareholder is responsible for
providing sufficient documentation to the Transfer Agent to verify the existence
of such circumstances. For information on the imposition and waiver of the CDSC,
contact Investor Services at 1-800-282-4404.

AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS

No initial sales charge or CDSC will be payable on the shares of the Fund or
classes thereof purchased through the automatic reinvestment of dividends and
distributions on shares of the Fund.

REINSTATEMENT PRIVILEGE OF EACH CLASS

A shareholder who has redeemed Class A shares of a Participating Fund may
reinvest up to the full amount received at net asset value at the time of the
reinvestment in Class A shares of the Fund without payment of a sales charge. A
shareholder who has redeemed Class B shares of a Participating Fund and paid a
CDSC upon such redemption may reinvest up to the full amount received upon
redemption in Class A shares of the Fund at net asset value with no initial
sales charge. A Class C shareholder who has redeemed shares of a Participating
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class C shares of the Fund with credit given for any CDSC paid upon such
redemption. The reinstatement privilege as to any specific Class A, Class B or
Class C shares must be exercised within 180 days of the redemption. The Transfer
Agent must receive from the shareholder or the shareholder's Participating
Dealer both a written request for reinstatement and a check or wire which does
not exceed the redemption proceeds. The written request must state that the
reinstatement is made pursuant to this reinstatement privilege. If a loss is
realized on the redemption of Class A shares, the reinstatement may be subject
to the "wash sale" rules if made within 30 days of the redemption, resulting in
a postponement of the recognition of such

28
<PAGE>
loss for federal income tax purposes. The reinstatement privilege may be
terminated or modified at any time. Reinstatement at net asset value is also
offered to participants in those eligible retirement plans held or administered
by VK Trust for repayment of principal (and interest) on their borrowings. See
the Statement of Additional Information for further discussion of waiver
provisions.

SHAREHOLDER SERVICES

The Company 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. Unless otherwise described below, each of these
services may be modified or terminated by the Company at any time.

INVESTMENT ACCOUNT. Each shareholder has an investment account under which
shares are held by ACCESS. ACCESS acts as transfer agent for the Company and
performs bookkeeping, data processing and administration services related to the
maintenance of shareholder accounts. Except as described herein, after each
share transaction in an account, the shareholder receives a statement showing
the activity in the account. Each shareholder will receive statements at least
quarterly from ACCESS showing any reinvestments of dividends and capital gains
distributions and any other activity in the account since the preceding
statement. Such shareholders also will receive separate confirmations for each
purchase or sale transaction other than reinvestment of dividends and capital
gains distributions and systematic purchases or redemptions. Additions to an
investment account may be made at any time by purchasing shares through
authorized brokers, dealers or financial intermediaries or by mailing a check
directly to ACCESS.

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

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge) on
the record date of such dividend or distribution. Unless the shareholder
instructs otherwise, the reinvestment plan is automatic. This instruction may be
made by telephone by calling (800) 282-4404 or (800) 772-8889 for the hearing
impaired, or in writing to ACCESS. The investor may, on the initial application
or prior to any declaration, instruct that dividends be paid in cash and capital
gains distributions be reinvested at net asset value, or that both dividends and
capital gains distributions be paid in cash. For further information, see
"Dividends and Distributions."

29
<PAGE>

AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize ACCESS to charge a bank account on a regular
basis to invest pre-determined amounts in the Fund. Additional information is
available from the Distributor or authorized brokers, dealers or financial
intermediaries.

DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanied by this
Prospectus or by calling (800) 282-4404 or (800) 772-8889 for the hearing
impaired, elect to have all dividends and other distributions paid on a class of
shares of the Company invested into shares of the same class of any
Participating Fund so long as a pre-existing account for such class of shares
exists for such shareholder. Both accounts must also be of the same type, either
non-retirement or retirement. Any two non-retirement accounts can be used. 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 the qualified pre-existing account does not exist, the shareholder must
establish a new account subject to minimum investment and other requirements of
the portfolio into which distributions would be invested. Distributions are
invested into the selected portfolio at its net asset value as of the payable
date of the distribution only if shares of such selected portfolio have been
registered for sale in the investor's state.

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

EXCHANGE PRIVILEGE. Shares of the Fund or any Participating Fund may be
exchanged with shares of the same class of another Participating Fund, subject
to certain limitations. Before effecting an exchange, shareholders in the
Company should obtain and read a current prospectus of the Participating Funds
into which the exchange is to be made. SHAREHOLDERS MAY ONLY EXCHANGE INTO SUCH
OTHER PARTICIPATING FUNDS AS ARE LEGALLY AVAILABLE FOR SALE IN THEIR STATE.

To be eligible for exchange, shares of the Fund generally must have been
registered in the shareholder's name for at least 30 days prior to an exchange.
Shares of the Fund registered in a shareholder's name for less than 30 days may
only be exchanged upon receipt of prior approval of the Adviser. Under normal
circumstances, it is the policy of the Adviser not to approve such requests.

Class A shares of a Participating Fund that generally impose an initial
sales charge are not subject to any sales charge upon exchange into another
Participating Fund. Class A shares of Participating Funds that do not impose an
initial sales charge will be subject to the applicable sales charge of the
Participating Fund being obtained in the exchange.

No sales charge is imposed upon the exchange of a Class B share or a Class C
share. The CDSC schedule and conversion schedule applicable to a Class B share
or a Class C share acquired through the exchange privilege is determined by
reference to the Participating Fund from which such share originally was
purchased. The holding period of a Class B share or a Class C share acquired
through the exchange privilege is determined by reference to the date such
exchanged share originally was purchased.

30
<PAGE>
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is not included in the tax basis of
the exchanged shares, but 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 ACCESS or by contacting the telephone transaction line at (800)
421-5684. A shareholder automatically has telephone exchange privileges unless
otherwise designated in the application form accompanied by this Prospectus. See
"Telephone Transaction Procedures" for more information. The exchange will take
place at the relative net asset values of the shares next determined after
receipt of such request with adjustment for any additional sales charge. Any
shares exchanged begin earning dividends on the next business day after the
exchange is affected. If the exchanging shareholder does not have an account in
the portfolio whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gains options (except dividend
diversification options) and broker, dealer or financial intermediary 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 dividend diversification options for the new account, an exchanging
shareholder must file a specific written request. The Company reserves the right
to reject any order to acquire its shares through exchange. In addition, the
Company may restrict or terminate the exchange privilege at any time on 60 days'
notice to its shareholders of any termination or material amendment. If an
account has multiple owners, ACCESS may rely on the instructions of any one
owner.

SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $5,000 or more at the offering price next computed after receipt of
instructions may establish a quarterly, semi-annual or annual withdrawal plan.
Investors whose shares in a single account total $10,000 or more at the offering
price next computed after receipt of instructions may establish a monthly,
quarterly, semi-annual or annual withdrawal plan. This plan provides for the
orderly use of the entire account, not only the income but also the principal,
if necessary. Each withdrawal constitutes a redemption of shares on which
taxable gain or loss will be recognized. The plan holder may arrange for
monthly, quarterly, semi-annual, or annual checks in any amount not less than
$25.

The CDSC on Class B and Class C shares is waived for withdrawals under the
Systematic Withdrawal Plan of a maximum 1% per month, 3% per quarter, 6%
semiannually or 12% annually, of the initial value of a shareholder's account.
Under this CDSC waiver policy, amounts withdrawn each period will be paid by
redeeming first shares not subject to a CDSC because the shares were purchased
by the reinvestment of dividends or capital gains distributions, the CDSC period
has elapsed or some other waiver of the CDSC applies. If no shares not subject
to the CDSC are available, or not enough such shares are available, shares
having a CDSC will be redeemed next, beginning with such shares held for the
longest period of time (having the lowest CDSC payable upon redemption) and
continuing with shares held the next longest period of time until shares held
the shortest period of time are redeemed. Under this policy, the least amount of
CDSC will be waived by withdrawals under the Systematic Withdrawal Plan.

Under the plan, sufficient shares of the Company are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with purchases of additional shares ordinarily
will be

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<PAGE>
disadvantageous to the shareholder because of the duplication of sales charges.
The Company reserves the right to amend or terminate the systematic withdrawal
program on 30 days' notice to its shareholders.

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A shares can
use ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of ACH. In addition, the shareholder must fill out the appropriate
section of the account application. The shareholder must also include a voided
check or deposit slip from the bank account into which redemptions are to be
deposited together with the completed application. Once ACCESS 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 to ACCESS or by calling 1-800-282-4404. A
shareholder's bank may charge a fee for ACH transfers.

REDEMPTION OF SHARES

Shareholders may redeem for cash some or all of their shares without charge
by the Company (other than, any applicable CDSC) at any time by sending a
written request in proper form directly to the Company c/o ACCESS, P.O. Box
418256, Kansas City, Missouri 64141-9256, by placing the redemption request
through a Participating Dealer or by calling the Company. See "Purchase of
Shares" for a discussion of applicable CDSC levels.

WRITTEN REDEMPTION REQUESTS. In the case of redemption requests sent
directly to ACCESS, the redemption request should indicate the number of shares
or dollars to be redeemed, the class designation of such shares, the account
number and be signed exactly as the shares are registered. Signatures must
conform exactly to the account registration. If the proceeds of the redemption
would 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. If certificates are held for the shares
being redeemed, such certificates must be endorsed for transfer or accompanied
by an endorsed stock power and sent with the redemption request. In the event
the redemption is requested by a corporation, partnership, trust, fiduciary,
executor or administrator, additional documents may be necessary. The redemption
price is the net asset value per share next determined after the request is
received by ACCESS in proper form. Payment for shares redeemed will ordinarily
be made by check mailed within seven business days after acceptance by ACCESS of
the request and any other necessary documents in proper order. Such payments may
be postponed or the right of redemption suspended as provided by the rules of
the SEC. Any gain or loss realized on the redemption of shares is a taxable
event.

DEALER REDEMPTION REQUESTS. Shareholders may redeem shares through their
securities dealer, who will submit the request to the Distributor. Orders
received from dealers must be at least $500 unless transmitted via the FUNDSERV
network. The redemption price for such shares is the net asset value next
calculated after an order is received, less any applicable CDSC, by a 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 dealers to transmit
redemption requests received by them to the Distributor so they will be received
prior to such time. Any change in the

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<PAGE>
redemption price due to failure of the Distributor to receive a redemption
request prior to such time must be settled between the shareholder and dealer.
Shareholders must submit a written redemption request in proper form (as
described above under "Written Redemption Requests") to the dealer within three
business days after calling the dealer with the redemption request. Payment for
shares redeemed will ordinarily be made by check mailed within three business
days to the dealer.

TELEPHONE REDEMPTION REQUESTS. The Company permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. To establish
such privilege, a shareholder must complete the appropriate section of the
application accompanying this Prospectus or call the Company at (800) 287-4404
or (800) 772-8889 for the hearing impaired, to request that a copy of the
Telephone Redemption Authorization form be sent to them for completion. To
redeem shares, contact the telephone transaction line at (800) 421-5684. See
"Telephone Transaction Procedures" for more information. Telephone redemptions
may not be available if the shareholder cannot reach ACCESS by telephone,
whether because all telephone lines are busy or for any other reason; in such
case, a shareholder would have to use the Company's other redemption procedures
previously described. Requests received by ACCESS prior to 4:00 p.m., Eastern
Time, on a regular business day will be processed at the net asset value per
share determined that day. These privileges are available for all accounts other
than retirement accounts. The telephone redemption privilege is not available
for shares represented by certificates. If an account has multiple owners,
ACCESS 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 sent to the shareholders'
address of record and amounts of at least $1,000 and up to $1 million may be
redeemed daily if the proceeds are to be paid by wire sent to the shareholder's
bank account of record. The proceeds must be payable to the shareholder(s) of
record. Proceeds from redemptions to be paid by check will ordinarily be mailed
within three business days to the shareholder's address of record. Proceeds from
redemptions to be paid by wire will ordinarily be wired on the next business day
to the shareholder's bank account of record. This privilege is not available if
the address or bank account of record has been changed within 30 days prior to a
telephone redemption request. The Company reserves the right at any time to
terminate, limit or otherwise modify this telephone redemption privilege.

REDEMPTION UPON DISABILITY. The Company will waive the CDSC on redemptions
following the disability of holders of Class B shares and Class C shares. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Code, which in pertinent part
defines a person as disabled if such person "is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration." While the Company 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 disability before it determines to waive the
contingent deferred sales charge on Class B shares and Class C shares.

In cases of disability, the CDSCs on Class B shares and Class C shares will
be waived where the 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 initial determination of disability. This waiver of the
CDSC on Class B shares and Class C shares applies to a

33
<PAGE>
total or partial redemption, but only to redemptions of shares held at the time
of the initial determination of disability.

GENERAL REDEMPTION INFORMATION. If the shares to be redeemed have been
recently purchased by check, ACCESS may delay mailing a redemption check or
wiring redemption proceeds until it confirms that the purchase check has
cleared, usually a period of up to 15 days.

The Company may redeem any shareholder account with a net asset value on the
date of the notice of redemption less than the minimum investment as specified
by the Directors. At least 60 days' advance written notice of any such
involuntary redemption is required and the shareholder is given an opportunity
to purchase the required value of additional shares at the next determined net
asset value without sales charge. Any applicable contingent deferred sales
charge will be deducted from the proceeds of this redemption. Any involuntary
redemption may only occur if the shareholder account is less than the minimum
investment due to shareholder redemptions.

A custodian of a retirement plan account may charge fees based on the
custodian's fee schedule. IRA redemption requests should be sent to the IRA
custodian to be forwarded to ACCESS. Where VK Trust serves as IRA custodian,
special IRA, 403(b)(7), or Keogh redemption forms must be obtained from and be
forwarded to Van Kampen American Capital Trust Company, P.O. Box 944, Houston,
Texas 77001-0944. Contact the custodian for information. Reinstatement
privileges (as otherwise described under "Reinstatement Privilege of Each Class"
above) also extend to participants in eligible retirement plans held or
administered by VK Trust who repay the principal and interest on their
borrowings from such plans.

FOR SHARES HELD IN BROKER STREET NAME, YOU CANNOT REQUEST REDEMPTION BY
TELEPHONE OR BY MAIL; SUCH SHARES MAY BE REDEEMED ONLY BY CONTACTING YOUR
PARTICIPATING DEALER.

TELEPHONE TRANSACTION PROCEDURES

Van Kampen American Capital, Inc. and its subsidiaries, including ACCESS
(collectively, "VKAC"), and the Company 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, a shareholder
agrees that neither VKAC nor the Company will be liable for following
instructions which it reasonably believes to be genuine. VKAC and the Company
may be liable for any losses due to unauthorized or fraudulent instructions if
reasonable procedures are not followed.

TRANSFER OF REGISTRATION

You may transfer the registration of any of your Company shares to another
person by writing to the Company c/o ACCESS, P.O. Box 418256, Kansas City,
Missouri 64141-9256. As in the case of redemptions, the written request must be
received in "good order" before any transfer can be made. Shares held in broker
street name may be transferred only by contacting your Participating Dealer.

34
<PAGE>
VALUATION OF SHARES

Net asset value is calculated separately for each class of the Fund. The net
asset value per share of each class of shares of the Fund is determined by
dividing the total fair market value of the investments and other assets
attributable to such class of shares, less all liabilities attributable to such
class of shares, by the total number of outstanding shares of such class of
shares. Net asset value per share of the Fund is determined as of the regular
close of the NYSE (currently 4:00 p.m. Eastern Time) on each day that the NYSE
is open for business. Securities listed on a securities exchange for which
market quotations are available are valued at their closing price. If no closing
price is available, such securities will be valued at the last quoted sale price
on the day the valuation is made. Price information on listed securities is
taken from the exchange where the security is primarily traded. Unlisted
securities and listed securities not traded on the valuation date for which
market quotations are readily available are valued at the average of the mean
between the current bid and asked prices obtained from reputable brokers.

Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities, which is
accrued daily. In addition, bonds and other fixed income securities may be
valued on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices but take into account institutional size trading in similar groups of
securities and any developments related to the specific securities. Securities
not priced in this manner are valued at the most recent quoted bid price, or,
when stock exchange valuations are used, at the closing price, or if that is
unavailable, the latest quoted sale price on the day of valuation. If there is
no such reported sale, the latest quoted bid price will be used. Debt securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost, if it approximates market value. In the event that amortized cost does not
approximate market value, market prices as determined above will be used. The
"amortized cost" method of valuation does not take into account unrealized gains
or losses. This method involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the instrument.

The value of other assets and securities for which no quotations are readily
available (including illiquid and unlisted foreign securities) and those
securities for which it is inappropriate to determine prices in accordance with
the above procedures are determined in good faith at fair value using methods
determined by the Board of Directors. For purposes of calculating net asset
value per share, all assets and liabilities initially expressed in foreign
currencies will be converted into U.S. Dollars at the mean of the bid price and
asked price of such currencies against the U.S. Dollar as quoted by a major
bank.

PORTFOLIO TRANSACTIONS

The Adviser and the Sub-Adviser select the brokers or dealers that will
execute the purchases and sales of investment securities for the Fund. The
Adviser and the Sub-Adviser may, consistent with NASD rules, place portfolio
orders with qualified broker-dealers who recommend the Fund to their clients or
who act as agents in the purchase of shares of the Fund for their clients.

35
<PAGE>

Subject to the overriding objective of obtaining the best execution of
orders, the Adviser and the Sub-Adviser may allocate a portion of the Company's
portfolio brokerage transactions to Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), an affiliate of the Adviser and the Sub-Adviser, or broker affiliates
of Morgan Stanley under procedures adopted by the Board of Directors. For such
portfolio transactions, the commissions, fees or other remuneration received by
Morgan Stanley or such affiliates must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers for comparable
transactions involving similar securities being purchased or sold during a
comparable period of time.

Although the objective of the Fund is not to invest for short-term trading,
the Fund will seek to take advantage of trading opportunities as they arise to
the extent they are consistent with the Fund's objectives. Accordingly,
investment securities may be sold from time to time without regard to the length
of time they have been held. The Fund anticipates that its annual portfolio
turnover rate will not exceed 100% under normal circumstances but market
conditions could result in portfolio activity at a greater or lesser rate than
anticipated. High portfolio turnover involves correspondingly greater
transaction costs which will be borne directly by the Fund. In addition, high
portfolio turnover may result in more capital gains which would be taxable to
the shareholders of the particular Fund.

PERFORMANCE INFORMATION

The Company may from time to time advertise total return of the Fund. THESE
FIGURES WILL BE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE. The "total return" shows what an investment in the Fund
would have earned over a specified period of time (such as one, three, five or
ten years) assuming that all distributions and dividends by the Fund were
reinvested on the reinvestment dates during the period. Total return does not
take into account any federal or state income taxes consequences to shareholders
subject to tax. The Company may also include comparative performance information
in advertising or marketing the Fund's shares. Such performance information may
include data from Lipper Analytical Services, Inc. and Morgan Stanley Capital
International.

PERFORMANCE OF INVESTMENT SUB-ADVISER

The Sub-Adviser manages a portfolio of Morgan Stanley Institutional Fund,
Inc. ("MSIF") which served as the model for the Global Equity Fund. The
portfolio of MSIF (the "MSIF Portfolio") has substantially the same investment
objective and policies as the Global Equity Fund. In addition, the Adviser and
Sub-Adviser intends the Global Equity Fund and the corresponding MSIF Portfolio
to be managed by the same personnel and to continue to have closely similar
investment strategies, techniques and characteristics. Past investment
performance of the MSIF Portfolio, as shown in the table below, may be relevant
to your consideration of investment in the Global Equity Fund. The investment
performance of the MSIF Portfolio is not necessarily indicative of future
performance of the Global Equity Fund. Also, the operating expenses of the
Global Equity Fund will be different from, and may be higher than, the operating
expenses of the MSIF Portfolio. The investment performance of the MSIF Portfolio
is provided merely to indicate the experience of the Sub-Adviser in managing
similar investment portfolios.

The data set forth below under the heading "Return With Sales Charge" is
adjusted to reflect the Fund's projected operating expenses and (i) with respect
to the Class A shares, to take into account a maximum 5.75% initial sales charge
applicable to purchases of Class A shares of the Global Equity Fund; (ii) with
respect to Class B shares, to take into account the applicable CDSC that is
imposed if Class B shares of the Global Equity

36
<PAGE>

Fund are redeemed within the year of their purchase indicated; and (iii) with
respect to the Class C shares, to take into account a 1.00% CDSC that is imposed
if Class C shares of the Global Equity Fund are redeemed within one year of
their purchase. The data set forth below under the heading "Return Without Sales
Charge" is adjusted to reflect the Fund's projected operating expenses and is
not adjusted to take into account such sales charges.

TOTAL RETURN FOR THE MSIF GLOBAL EQUITY PORTFOLIO'S CLASS A SHARES
(A SEPARATE MUTUAL FUND FROM THE GLOBAL EQUITY FUND)
FOR THE PERIOD ENDED JULY 31, 1997
(ADJUSTED TO REFLECT STATED SALES LOAD AND PROJECTED OPERATING EXPENSES OF THE
GLOBAL EQUITY FUND)

<TABLE>
<CAPTION>
RETURN WITH SALES CHARGE 1 YEAR 3 YEAR 5 YEAR SINCE INCEPTION(1)
- ---------------------------------------------------------------- ---------- ---------- ---------- -------------------
<S> <C> <C> <C> <C>
Class A......................................................... 30.23% 17.48% 20.57% 19.73%
Class B......................................................... 32.43% 18.58% 21.52% 20.77%
Class C......................................................... 36.43% 19.29% 21.65% 20.77%

RETURN WITHOUT SALES CHARGE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A......................................................... 38.18% 19.83% 22.01% 21.14%
Class B......................................................... 37.43% 19.29% 21.65% 20.77%
Class C......................................................... 37.43% 19.29% 21.65% 20.77%
</TABLE>

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

(1) Commenced Operations on July 15, 1992.

The past performance of the MSIF Portfolio is not a guarantee of the future
performance of the Global Equity Fund.

DIVIDENDS AND DISTRIBUTIONS

Shareholders will automatically be credited with all dividends and
distributions in additional shares at net asset value, without payment of the
sales charge of the Fund, except that, upon written notice to the Company or by
checking off the appropriate box in the account application form, a shareholder
may elect to receive dividends and/or distributions in cash.

The Fund expects to distribute substantially all of its net investment
income in the form of annual dividends. Net realized gains, if any, will be
distributed annually. Confirmations of the purchase of shares of the Fund
through the automatic reinvestment of income dividends and capital gains
distributions will be provided, pursuant to Rule 10b-10(b) under the Securities
Exchange Act of 1934, as amended, on the next quarterly client statement
following such purchase of shares. Consequently, confirmations of such purchases
will not be provided at the time of completion of such purchases, as might
otherwise be required by Rule 10b-10.

Any undistributed net investment income and undistributed realized gains
increase the Fund's net assets for the purpose of calculating net asset value
per share. Therefore, on the "ex-dividend" or "ex-distribution" date, the net
asset value per share excludes the dividend or distribution (i.e., is reduced by
the per share amount of the dividend or distribution). Dividends and
distributions paid shortly after the purchase of shares by an investor, although
in effect a return of capital, are taxable to shareholders subject to tax.

37
<PAGE>
Expenses of the Company allocated to a particular class of shares of the
Fund will be borne on a pro rata basis by each outstanding share of that class.

TAXES

TAX STATUS OF THE FUND

The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. See also the tax sections in the Statement of
Additional Information.

No attempt has been made to present a detailed explanation of the federal,
state or local income tax treatment of the Funds or their shareholders.
Accordingly, shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state and local income taxes.

The Fund is generally treated as a separate entity for federal income tax
purposes, and thus the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), generally will be applied to the Fund separately, rather
than to the Company as a whole. Net long-term and short-term capital gains, net
income and operating expenses therefore will be determined separately for the
Fund.

The Fund intends to qualify for the special tax treatment afforded
"regulated investment companies" ("RICs") under Subchapter M of the Code so that
it will be relieved of federal income tax on that part of its net investment
income and net capital gain (the excess of net long-term capital gain over net
short-term capital loss less any available capital loss carryforward) which is
distributed to its shareholders.

TAX STATUS OF DISTRIBUTIONS

The Fund distributes substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to its shareholders.
Dividends paid by the Fund from its net investment income will be taxable to the
shareholders of the Fund as ordinary income, whether received in cash or in
additional shares, if the shareholder is subject to tax. Dividends paid by the
Fund attributable to dividends received from shares of domestic corporations may
qualify for the dividends-received deduction for corporations.

Distributions of net capital gains are taxable to shareholders subject to
tax as long-term capital gains, regardless of how long the shareholder has held
the Fund's shares. Capital gains distributions are not eligible for the
corporate dividends-received deduction. The Fund will make annual reports to
shareholders of the federal income tax status of all distributions.

The Fund intends to make sufficient distributions or deemed distributions of
its ordinary income and net capital gains prior to the end of each calendar year
to qualify as an RIC under the Code and to avoid liability for federal excise
tax.

Dividends and other distributions declared in October, November and December
by the Fund payable as of a record date in such month and paid at any time
during January of the following year are treated as having been paid by the Fund
and received by the shareholders on December 31 of the year declared.

The sale, exchange or redemption of shares may result in taxable gain or
loss to the selling, exchanging or redeeming shareholder, depending upon whether
the fair market value of the redemption proceeds exceeds or is

38
<PAGE>

less than the Shareholder's adjusted basis in the redeemed, exchanged or sold
shares. If capital gain distributions have been made with respect to shares that
are sold at a loss after being held for six months or less, then the loss is
treated as a long-term capital loss to the extent of the capital gain
distributions. Shareholders may also be subject to state and local taxes on
distributions from the Fund.

THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS AND SHAREHOLDERS SHOULD CONSULT THEIR
OWN TAX ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT
IN THE FUND.

GENERAL INFORMATION

DESCRIPTION OF COMMON STOCK

The Company was organized as a Maryland corporation on August 14, 1992. The
Amended Articles of Incorporation currently permit the Company to issue 27.375
billion shares of common stock, par value $.001 per share. Pursuant to the
Company's By-Laws, the Board of Directors may increase the number of shares the
Company is authorized to issue without the approval of the shareholders of the
Company. The Board of Directors has the power to designate one or more classes
of shares of common stock and to classify and reclassify any unissued shares
with respect to such classes.

The shares of the Fund, when issued, will be fully paid, nonassessable,
fully transferable and redeemable at the option of the holder. Except as
described herein, the shares have no preference as to conversion, exchange,
dividends, retirement or other features and have no preemptive rights. The
shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect 100% of the Directors if they choose to do so. Under Maryland law, the
Company is not required to hold an annual meeting of its shareholders unless
required to do so under the 1940 Act. Any person or organization owning 25% or
more of the outstanding shares of a Fund may be presumed to "control" (as that
term is defined in the 1940 Act) the Fund.

REPORTS TO SHAREHOLDERS

The Company will send to its shareholders annual and semi-annual reports;
the financial statements appearing in annual reports are audited by independent
accountants.

In addition, the Company or ACCESS, will send to each shareholder having an
account directly with the Company a quarterly statement showing transactions in
the account, the total number of shares owned, and any dividends or
distributions paid. In addition, when a transaction occurs in a shareholder's
account, the Company or ACCESS will send the shareholder a confirmation
statement showing the same information.

CUSTODIAN

Domestic securities and cash are held by Chase, which is not an affiliate of
the Adviser or the Distributor. Morgan Stanley Trust Company, Brooklyn, New York
("Morgan Stanley Trust"), acts as the Company's custodian for foreign assets
held outside the United States and employs subcustodians who were approved by
the Directors of the Company in accordance with regulations of the SEC for the
purpose of providing custodial services for such assets. Morgan Stanley Trust
may also hold certain domestic assets for the Company. Morgan

39
<PAGE>
Stanley Trust is an affiliate of the Adviser and the Distributor. For more
information on the custodians, see "General Information -- Custody Arrangements"
in the Statement of Additional Information.

DIVIDEND DISBURSING AND TRANSFER AGENT

ACCESS, P.O. Box 418256, Kansas City, Missouri 64141-9256, acts as dividend
disbursing and transfer agent for the Company.

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, NY 10036,
serves as independent accountants for the Company and audits its annual
financial statements.

40
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS

MOODY'S INVESTORS SERVICE, INC. -- CORPORATE BOND RATINGS:

Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier 3
indicates that the issue ranks at the lower end of the rating category.

A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

A-1
<PAGE>
STANDARD & POOR'S RATINGS GROUP -- CORPORATE BOND RATINGS:

AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay principal
and interest.

AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.

A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

C -- The rating C is reserved for income bonds on which no interest is being
paid.

D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

A-2
<PAGE>
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NO DEALER, SALES REPRESENTATIVE 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 MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER BY THE COMPANY OR THE 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 TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Fund Expenses......................................................... 2

Prospectus Summary.................................................... 5

Investment Objective and Policies..................................... 7

Additional Investment Information..................................... 8

Investment Limitations................................................ 16

Management of the Company............................................. 17

Purchase of Shares.................................................... 20

Shareholder Services.................................................. 29

Redemption of Shares.................................................. 32

Valuation of Shares................................................... 35

Portfolio Transactions................................................ 35

Performance Information............................................... 36

Dividends and Distributions........................................... 37

Taxes................................................................. 38

General Information................................................... 39
</TABLE>

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MORGAN STANLEY
GLOBAL EQUITY FUND

A PORTFOLIO OF

MORGAN STANLEY
FUND, INC.

---------------
PROSPECTUS
---------------

INVESTMENT ADVISER

VAN KAMPEN
AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.

INVESTMENT SUB-ADVISER

MORGAN STANLEY
ASSET MANAGEMENT INC.

DISTRIBUTOR

VAN KAMPEN AMERICAN
CAPITAL DISTRIBUTORS, INC.

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