EXPLORER INSTITUTIONAL TRUST, 485APOS, 1999-03-01

EXPLORER INSTITUTIONAL TRUST
485APOS, 1999-03-01

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1999

FILE NO. 33-84942
811-8808
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]

Post-Effective Amendment No. 3 [X]
and

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 6 [X]
</TABLE>

THE EXPLORER
INSTITUTIONAL TRUST

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

1 PARKVIEW PLAZA, PO BOX 5555, OAKBROOK TERRACE, ILLINOIS 60181-5555

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(630) 684-6000
(REGISTRANT'S TELEPHONE NUMBER)

DENNIS J. MCDONNELL

EXECUTIVE VICE PRESIDENT

VAN KAMPEN INVESTMENTS INC.

1 PARKVIEW PLAZA

PO BOX 5555

OAKBROOK TERRACE, ILLINOIS 60181-5555

(NAME AND ADDRESS OF AGENT FOR SERVICE)

Copies to:

WAYNE W. WHALEN, ESQ.

THOMAS A. HALE, ESQ.

SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable
following effectiveness of this Registration Statement.

It is proposed that this filing will become effective: (check appropriate
box)

[ ] immediately upon filing pursuant to paragraph (b)

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

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

[X] on April 30, 1999 pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate check the following:

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

TITLE OF SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR
VALUE $0.01 PER SHARE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

The information in this prospectus is not complete and may be changed. The
Funds may not sell these securities until the post-effective amendment to
the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities.

SUBJECT TO COMPLETION -- DATED MARCH 1, 1999

EXPLORER INSTITUTIONAL FUNDS(SM)

* Active Core Fund

* Limited Duration Fund

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

This prospectus is dated APRIL , 1999.

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
Risk/Return Summaries:
Active Core Fund................................. 3
Limited Duration Fund............................ 5
Summary of Fund Expenses........................... 7
The Funds' Investment Objectives................... 7
How the Funds Seek Their Investment Objectives..... 8
How to Buy Shares.................................. 12
Distributions and Taxes............................ 14
How the Funds Value Their Shares................... 14
How to Sell Shares................................. 14
How the Funds Are Managed.......................... 15
How the Funds Execute Portfolio Transactions....... 16
Shareholder Services............................... 17
Financial Highlights............................... 18
</TABLE>

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

<PAGE> 4

RISK/RETURN SUMMARIES

The Explorer Institutional Funds(SM) currently consist of two separate
professionally managed, no-load investment portfolios, the Active Core Fund and
the Limited Duration Fund. Each Fund has its own investment objective, policies
and restrictions.

The Funds are primarily designed to provide pension and profit sharing plans,
employee benefit trusts, endowments, foundations, other institutions,
corporations and high net worth individuals with the professional investment
management services offered by the Funds' investment adviser. In managing the
Funds, the investment adviser seeks to enhance total return as compared to an
unmanaged portfolio of income securities by identifying value and opportunity
through extensive market, quantitative and credit research, identifying and
taking advantage of market inefficiencies and, within a well defined portfolio
duration for each Fund, adjusting duration from time to time based on the
investment adviser's view of market conditions.

ACTIVE CORE FUND

INVESTMENT OBJECTIVE

The Active Core Fund is a mutual fund with an investment objective to provide an
enhanced level of total return as compared to investment in an unmanaged
portfolio consisting primarily of investment grade intermediate- and long-term
income securities of U.S. issuers. Total return includes income, together with
realized and unrealized capital appreciation and depreciation. There can be no
assurance that the Fund will achieve its investment objective.

INVESTMENT STRATEGIES

The Fund's management seeks to achieve the investment objective by investing
substantially all of its total assets in a professionally managed, diversified
portfolio of intermediate- and long-term income securities of U.S. issuers.
Under normal market conditions the Fund's investment adviser seeks to maintain a
dollar-weighted average portfolio duration between three to six years. The Fund
invests in income securities rated as investment grade at the time of
investment. Investment grade securities are securities rated BBB or higher by
Standard & Poor's ("S&P") or rated Baa or higher by Moody's Investor Services,
Inc. ("Moody's"). The Fund invests at least 75% of its assets in securities
rated AA or higher by S&P or rated Aa or higher by Moody's. The Fund may
purchase or sell securities on a when-issued or delayed delivery basis.

INVESTMENT RISKS

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

MARKET RISK. The prices of income securities tend to fall as interest rates
rise. This market risk is usually greater among income securities with longer
durations. Because the Fund's investment adviser seeks to maintain a
dollar-weighted average portfolio duration between three to six years, the Fund
will be subject to greater market risk than a fund investing solely in
shorter-term securities but less market risk than a fund investing solely in
longer-term securities. The yields and market prices of the Fund's income
securities may move differently and adversely compared to the yields and market
prices of the overall securities markets. When-issued and delayed delivery
transactions are subject to changes in market conditions from the time of the
commitment until settlement. This may adversely affect the prices or yields of
the securities being purchased, as well as any portfolio securities held for
payment of such commitments. The greater the Fund's outstanding commitment for
these securities, the greater the Fund's exposure to market price fluctuation.

CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Credit risk should be low for the Fund because it
invests in investment grade quality income securities.

INCOME RISK. The income you receive from the Fund is based primarily on interest
rates, which can vary widely over the short and long term. If interest rates
drop, your income from the Fund may drop as well.

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

3
<PAGE> 5

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

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

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Active Core Fund is to look at
how the Fund's performance varies from year to year. The following chart shows
the annual returns of the Active Core Fund over the past three calendar years
prior to the date of this prospectus. Remember that the past performance of the
Fund is not indicative of its future performance.

<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Gross (4) Net (5) Index (7)(8)
<S> <C> <C> <C>
One Year -0.59 -0.99 -1.31
Three Year 8.85 8.43 7.94
Five Year 9.06 8.64 8.46
Since Inception(12/31/87 9.52 9.10 9.16
</TABLE>

*The return for 1996 is for the period from April 23, 1996 (commencement
of investment operations) to December 31, 1996.

During the three-year period shown in the bar chart, the highest quarterly
return for the Active Core Fund was 4.37% (for the quarter ended September 30,
1998) and the lowest quarterly return was -0.62% (for the quarter ended March
31, 1997).

COMPARATIVE PERFORMANCE

This table shows how the Active Core Fund's performance compares with a
broad-based market index that the Fund's management believes is an applicable
benchmark for the Fund. Average annual total returns and are shown for the
periods ended December 31, 1998 (the most recently completed calendar year prior
to the date of this prospectus). Remember that the past performance of the Fund
is not indicative of its future performance.

<TABLE>
<CAPTION>
Average Annual
Total Returns Past 10
for the Years
Periods Ended Past Past or Since
December 31, 1998 1 Year 5 Years Inception
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Active Core Fund 8.45% -- 8.41%(1)
...................................................
Lehman Brothers
Aggregate Bond
Index
...................................................
...................................................
</TABLE>

(1) Inception date: 4/23/96.

4
<PAGE> 6

LIMITED DURATION FUND

INVESTMENT OBJECTIVE

The Limited Duration Fund is a mutual fund with an investment objective to
provide an enhanced level of total return as compared to investment in an
unmanaged portfolio consisting primarily of investment grade short- and
intermediate-term income securities of U.S. issuers, consistent with
preservation of capital. Total return includes income, together with realized
and unrealized capital appreciation and depreciation. There can be no assurance
that the Fund will achieve its investment objective.

INVESTMENT STRATEGIES

The Fund's management seeks to achieve the investment objective by investing
substantially all of its total assets in a professionally managed, diversified
portfolio of short- and intermediate-term income securities of U.S. issuers.
Under normal market conditions, the Fund's investment adviser seeks to maintain
a dollar-weighted average portfolio duration between one to three years. The
Fund invests in income securities rated at least investment grade at the time of
investment. Investment grade securities are securities are securities rated BBB
or better by Standard & Poor's ("S&P") or rated Baa or better by Moody's
Investor Services, Inc. ("Moody's") The Fund invests at least 75% of its total
assets in securities rated AA or higher by S&P or rated Aa or higher by Moody's.
The Fund does not invest in securities rated below A by S&P or Moody's.

INVESTMENT RISKS

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

MARKET RISK. The prices of income securities tend to fall as interest rates
rise. This market risk is usually greater among income securities with longer
durations. Because the Fund's investment adviser seeks to maintain a
dollar-weighted average portfolio duration between one to three years, the Fund
will be subject to less market risk than a fund investing solely in longer-term
securities. The yields and market prices of the Fund's income securities may
move differently and adversely compared to the yields and market prices of the
overall securities markets. When-issued and delayed delivery transactions are
subject to changes in market conditions from the time of the commitment until
settlement. This may adversely affect the prices or yields of the securities
being purchased, as well as any portfolio securities held for payment of such
commitments. The greater the Fund's outstanding commitment for these securities,
the greater the Fund's exposure to market price fluctuation.

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

5
<PAGE> 7

ANNUAL PERFORMANCE

One way to measure the risks of investing in the Limited Duration Fund is to
look at how the Fund's performance varies from year to year. The following chart
shows the annual returns of the Limited Duration Fund over the past three
calendar years prior to the date of this prospectus. Remember that the past
performance of the Fund is not indicative of its future performance.

<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Gross Net Index
<S> <C> <C> <C>
One Year 1.79 1.39 1.50
Three Year 7.75 7.32 6.06
Five Year 8.31 7.89 7.34
Since Inception(12/31/87 8.05 7.63 7.39
</TABLE>

*The return for 1996 is for the period from April 23, 1996 (commencement
of investment operations) to December 31, 1996.

During the three-year period shown in the bar chart, the highest quarterly
return for the Limited Duration Fund was 2.97% (for the quarter ended September
30, 1998) and the lowest quarterly return was 0.42% (for the quarter ended March
31, 1997).

COMPARATIVE PERFORMANCE

This table shows how the Limited Duration Fund's performance compares with a
broad-based market index that the Fund's management believes is an applicable
benchmark for the Fund. Average annual total returns are shown for the periods
ended December 31, 1998 (the most recently completed calendar year prior to the
date of this prospectus). Remember that the past performance of the Fund is not
indicative of its future performance.

<TABLE>
<CAPTION>
Average Annual
Total Returns Past 10
for the Years
Periods Ended Past Past or Since
December 31, 1998 1 Year 5 Years Inception
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Limited Duration
Fund 6.65% -- 6.36%(1)
...................................................
Lehman Brothers 1
to 3 Year
Government Bond
Index
...................................................
</TABLE>

(1) Inception date: 4/23/96.

6
<PAGE> 8

SUMMARY OF FUND EXPENSES

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

SHAREHOLDER FEES

(fees paid directly from your investment)

<TABLE>
<CAPTION>
Active Limited
Core Duration
Fund Fund
- --------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering None None
price)
..................................................
Maximum deferred sales
charge (load) (as a
percentage of the lesser
of original purchase None None
price or redemption
proceeds)
..................................................
Maximum sales charge
(load) imposed on
reinvested dividends (as
a percentage of offering None None
price)
..................................................
Redemption fees (as a
percentage of amount None None
redeemed)
..................................................
Exchange fee None None
..................................................
</TABLE>

ANNUAL FUND

OPERATING EXPENSES

(expenses that are deducted from each
Fund's assets)

<TABLE>
<CAPTION>
Active Limited
Core Duration
Fund Fund
- ------------------------------------------------------
<S> <C> <C> <C>
Management Fees(1) 0.40 % 0.40 %
......................................................
Other Expenses(1) % %
......................................................
Total Annual Fund % %
Operating Expenses(1)
......................................................
</TABLE>

(1) The investment adviser is currently waiving or reimbursing all or a portion
of each Fund's Management Fees and Other Expenses such that actual Total
Annual Fund Operating Expenses for the fiscal period ended December 31, 1998
were % for each Fund.

Example:

The following examples are intended to help you compare the costs of investing
in the Funds with the costs of investing in other mutual funds.

Each example assumes that you invest $10,000 in such Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% annual return each year and
that each Fund's operating expenses remain the same each year. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Active Core Fund
......................................................................
Limited Duration Fund
......................................................................
</TABLE>

To simplify comparison among funds, all funds are required by the SEC to assume
a 5% annual return. Each Fund's actual annual return and actual expenses for
future periods may be greater or less than those shown.

THE FUNDS' INVESTMENT OBJECTIVES

ACTIVE CORE FUND

The investment objective of the Active Core Fund is to provide an enhanced level
of total return as compared to investment in an unmanaged portfolio consisting
primarily of investment grade intermediate- and long-term income securities of
U.S. issuers.

LIMITED DURATION FUND

The investment objective of the Limited Duration Fund is to provide an enhanced
level of total return as compared to investment in an unmanaged portfolio
consisting primarily of investment grade short- and intermediate-term income
securities of U.S. issuers, consistent with preservation of capital.

Each Fund's investment objective is a fundamental policy and may not be changed
without shareholder approval of the holders of a majority of such Fund's
outstanding voting securities, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"). Total return includes income together with realized
and unrealized capital appreciation or depreciation. U.S. issuers include the
U.S. government, states and territories of the U.S., agencies,

7
<PAGE> 9

instrumentalities and other political subdivisions of any of the above and
corporations, partnerships, trusts and other organizations and entities. There
are risks inherent in all investments in securities; accordingly there can be no
assurance that the Funds will achieve their investment objectives.

HOW THE FUNDS SEEK THEIR INVESTMENT OBJECTIVES

Each Fund seeks to achieve its investment objective by investing substantially
all of its total assets in a professionally managed, diversified portfolio of
income securities. For a discussion of the various types of income securities in
which the Funds may invest, see "Income Securities" below. The Funds differ
primarily in the length of their portfolio duration. For a discussion of the
concept of duration, see "Duration" below. The Funds will not invest in income
securities rated at the time of investment below investment grade. Investment
grade rated securities are securities rated in one of the four highest rating
categories by at least one nationally recognized rating organization, such as
Standard and Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's"). For
a description of S&P and Moody's ratings, see the Funds' Statement of Additional
Information. Each Fund will invest at least 75% of its assets in securities
rated AA/Aa or higher.

ACTIVE CORE FUND

Under normal market conditions, the Active Core Fund invests substantially all
of its assets in a diversified portfolio of investment grade income securities
having various maturities and seeks to maintain a portfolio duration of three to
six years. The Fund invests at least 75% of its total assets in securities rated
AA/Aa or higher. The Active Core Fund does not invest in securities rated below
BBB/Baa. The Fund does not invest in securities of foreign issuers.

LIMITED DURATION FUND

Under normal markets conditions, the Limited Duration Fund invests substantially
all of its assets in a diversified portfolio of investment grade income
securities having various maturities and seeks to maintain a portfolio duration
of one to three years. The Fund invests at least 75% of its total assets in
securities rated AA/Aa or higher. The Limited Duration Fund does not invest in
securities rated below A. The Fund does not invest in securities of foreign
issuers. The total return of the Limited Duration Fund is expected to exhibit
less volatility than that of the Active Core Fund because its duration will be
shorter while its other investment policies are similar to those of the Active
Core Fund.

DURATION. Duration is a measure of the expected life of an income security that
was developed as a more precise alternative to the concept of "term to
maturity." Duration incorporates a security's yield, coupon interest payments,
final maturity and call features into one measure. Duration is an important
criteria used by the Fund's investment adviser in portfolio selection for the
Funds.

Most debt obligations provide interest ("coupon") payments in addition to a
final ("par") payment at maturity. Some obligations also have call provisions.
Depending on the relative magnitude of these payments, the market values of debt
obligations may respond differently to changes in interest rates.

Traditionally, an income security's "term to maturity" has been used as a
measure of the sensitivity of the security's price to changes in interest rates
(which is the "interest rate risk" or "volatility" of the security). However,
"term to maturity" measures only the time until an income security provides its
final payment, taking no account of the pattern of the security's payments prior
to maturity. Duration is a measure of the expected life of an income security on
a present value basis. Duration takes the length of the time intervals between
the present time and the time that the interest and principal payments are
scheduled or, in the case of a callable security, expected to be received, and
weights them by the present values of the cash to be received at each future
point in time. For an income security with interest payments occurring prior to
the payment of principal, duration is less than maturity. In general, all other
things being equal, the lower the stated or coupon rate of interest of a fixed
income security, the longer the duration of the security; conversely, the higher
the stated or coupon rate of interest of a fixed income security, the shorter
the duration of the security.

There are some situations where the standard duration calculation does not
properly reflect the interest rate exposure of a security. For example,

8
<PAGE> 10

floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where interest rate exposure is not properly
captured by duration is the case of mortgage pass-through securities. The stated
final maturity of such securities is frequently 30 years, but prepayment rates
are more critical in determining the securities' interest rate exposure. In
these and other similar situations, in determining portfolio duration the Funds'
investment adviser will use more sophisticated analytical techniques that
incorporate the anticipated economic life of a security into the determination
of its interest rate exposure.

The change in market value of investment grade income securities is largely a
function of changes in the prevailing level of interest rates. When interest
rates are falling, a portfolio with a shorter duration generally will not
generate as high a level of total return as a portfolio with a longer duration.
When interest rates are flat, shorter duration portfolios generally will not
generate as high a level of total return as longer duration portfolios (assuming
that long-term interest rates are higher than short-term rates, which is
commonly the case). When interest rates are rising, a portfolio with a shorter
duration will generally outperform longer duration portfolios. With respect to
the composition of an income portfolio, the longer the duration of the
portfolio, the greater the anticipated potential for total return, with,
however, greater attendant interest rate risk and price volatility than for a
portfolio with a shorter duration.

PORTFOLIO CREDIT QUALITY. Each Fund will invest at least 75% of its assets in
securities rated AA/Aa or higher. A Fund's investments may range in quality from
securities rated in the lowest category in which the Fund is permitted to invest
to securities rated in the highest category.

The Active Core Fund may invest in securities rated in the fourth highest rating
category by a nationally recognized rating organization (e.g., BBB by S&P or Baa
by Moody's). Securities rated BBB are regarded by S&P as having adequate
capacity to pay interest and repay principal. Whereas in S&P's view such
securities normally exhibit 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 securities in this category
than for securities in higher rated categories. Securities rated Baa are
regarded by Moody's as medium grade obligations (i.e. neither highly protected
nor poorly secured). In Moody's view, interest payments and principal security
for such securities appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. In Moody's view, such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

The Limited Duration Fund may invest in securities rated in the third highest
rating category by a nationally recognized rating organization (e.g. A by S&P or
Moody's). Securities rated A by S&P are regarded by S&P as having a strong
capacity to pay interest and repay principal although they are in S&P's view
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than higher rated securities. Securities rated A by Moody's
in Moody's view possess many favorable investment attributes and are considered
by Moody's as upper medium grade obligations. Factors giving security to
principal and interest are considered by Moody's to be adequate but elements may
be present which suggest a susceptibility to impairment sometime in the future.

The percentage of a Fund's assets invested in securities in a particular rating
category will vary from time to time.

INCOME SECURITIES. Each Fund will invest substantially all of its total assets
in U.S. dollar denominated income securities of U.S. issuers. Income securities
include securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities ("U.S. Government Securities"); mortgage and other asset-
backed securities; corporate debt securities; variable and floating rate debt
securities; commercial paper; certificates of deposit, time deposits and bankers
acceptances; and other instruments having investment characteristics
substantially similar to any of the foregoing and repurchase agreements. The
Funds will not invest in securities of foreign issuers. Prior to investing in
any category of instruments not identified in this Prospectus, the Funds intend
to revise this Prospectus to identify such categories. Certain of the Funds'
investments may be considered derivative instruments. A derivative is a
financial instrument whose performance is derived at least in part from the
performance of an underlying index, security or asset. The values of certain
derivatives can be affected dramatically by even small market movements,
sometimes in ways that are difficult to predict.

9
<PAGE> 11

U.S. GOVERNMENT SECURITIES. U.S. Government Securities are considered among the
most creditworthy of fixed income investments; however, the yields on U.S.
Government Securities generally are lower than yields available from most other
types of income securities having comparable duration. U.S. Government
Securities include (1) U.S. Treasury obligations; (2) obligations issued or
guaranteed by U.S. government agencies and instrumentalities ("Agencies") which
are supported by: (a) the full faith and credit of the U.S. government; (b) the
right of the issuer or guarantor to borrow an amount from a line of credit with
the U.S. Treasury; (c) discretionary power of the U.S. government to purchase
obligations of the agencies or (d) the credit of the agencies; (3) certain real
estate mortgage investment conduits, certain collateralized mortgage obligations
and other mortgage-backed securities and (4) "when-issued" commitments relating
to the foregoing.

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans secured by real property. The yield characteristics
of mortgage-backed securities differ from traditional debt securities. Interest
and principal payments are made more frequently and principal may be prepaid at
any time because the underlying mortgage loans generally may be prepaid at any
time. Faster or slower prepayments than expected on underlying mortgage loans
can dramatically alter the yield to maturity and duration of a mortgage-backed
security. The value of most mortgage-backed securities, like traditional debt
securities, tends to vary inversely with changes in interest rates; however,
mortgage-backed securities may benefit less than traditional debt securities
from declining interest rates because prepayment of mortgages tend to accelerate
during periods of declining interest rates. When mortgage loans underlying
mortgage-backed securities held by a Fund are prepaid, the Fund reinvests the
prepaid amounts in other income-producing securities, the yields of which will
reflect interest rates prevailing at the time. Therefore, a Fund's ability to
maintain a portfolio of higher-yielding mortgage-backed securities will be
adversely affected to the extent that prepayments must be reinvested in
securities which have lower yields.

Mortgage-backed securities may be structured with various classes of holders
that can receive different proportions of the interest and principal
distributions from the same pool of underlying mortgage assets. The yield to
maturity, duration and market value of such classes may be substantially more
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a Fund may fail to fully
recoup its initial investment in certain of these securities even if held to
final maturity. A more complete description of mortgage-backed securities is
contained in the Statement of Additional Information.

COLLATERALIZED MORTGAGE OBLIGATIONS. CMOs are debt obligations collateralized by
mortgage loans or mortgage pass-through securities and multiclass pass-through
securities, which are equity interests in a trust composed of mortgage assets.
Payments of principal and interest on the mortgage assets, and any reinvestment
income thereon, provide the funds to pay debt service on the CMOs or make
scheduled distributions on the multiclass pass-through securities. In a CMO, a
series of bonds or certificates is issued in multiple classes. Each class of
CMOs, often referred to as a "tranche", is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the mortgage assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
The principal and interest on the mortgage assets may be allocated among the
several classes of a series of a CMO in innumerable ways, some of which bear
substantially more risk than others.

ASSET-BACKED SECURITIES. The securitization techniques used to develop
mortgage-backed securities are now also applied to a broad range of assets,
primarily automobile and credit card receivables. Other types of asset-backed
securities may be developed in the future. In general, the collateral supporting
asset-backed securities is of shorter maturity than mortgage loans and is less
likely to experience substantial prepayments. Asset-backed securities present
certain risks that are not presented by mortgage-backed securities. Primarily,
these securities do not have the benefit of the same security interest in the
related collateral as do mortgage-backed securities.

CORPORATE INCOME SECURITIES. Corporate income securities in which a Fund may
invest include adjustable and fixed rate bonds, debentures and notes and will
generally be unsecured. A Fund may also

10
<PAGE> 12

invest in income securities with floating or variable rates of interest.

ZERO-COUPON SECURITIES. Zero-coupon securities pay no cash interest but are sold
at substantial discounts from their value at maturity. When a zero-coupon bond
is held to maturity, its entire investment return comes from the difference
between its purchase price and its maturity value.

STRIPPED TREASURY SECURITIES. Stripped Treasury securities are obligations
representing an interest in all or a portion of the income or principal
components of an underlying Treasury or pool of Treasury securities. Stripped
Treasury securities include obligations entitled to receive all of the interest
component but none of the principal component (IOs) and obligations entitled to
receive all of the principal component but none of the interest component (POs).
The market values of stripped Treasury securities tend to be more volatile in
response to changes in interest rates than are those of conventional Treasury
securities.

PREMIUM SECURITIES. A Fund may at times invest in securities bearing coupon
rates higher than prevailing market rates. Such "premium" securities are
typically purchased at prices greater than the principal amounts payable on
maturity. If an issuer were to redeem securities held by a Fund during a time of
declining interest rates, the Fund may not be able to reinvest the proceeds in
securities providing the same investment return as the securities redeemed. If
securities purchased by a Fund at a premium are called or sold prior to
maturity, the Fund generally will recognize a capital loss to the extent the
call or sale price is less than the Fund's adjusted tax basis in such
securities. Similarly, the Fund generally will recognize a capital loss in the
event that such securities are held to maturity.

ADJUSTABLE AND FLOATING RATE SECURITIES. Adjustable and floating rate securities
are securities having interest rates which are adjusted or reset at periodic
intervals ranging, in general, from one day to several years, based on a spread
over a specific interest rate or interest rate index or on the results of
periodic auctions. Adjustable and floating rate securities allow a Fund to
participate in all or a portion of increases in interest rates through periodic
upward adjustments of the coupon rates of such securities, resulting in higher
yields. During periods of declining interest rates, however, coupon rates may
readjust downward resulting in lower yields. The Funds will not invest in
"inverse-floaters" (securities whose coupon rates vary inversely with changes in
market rates of interest).

OTHER INVESTMENT PRACTICES. In connection with the investment policies described
above, the Funds may also purchase and sell securities on a "when issued" and
"delayed delivery" basis, enter into repurchase agreements and, for cash
management purposes only, enter into reverse repurchase agreements and borrow
money from banks, in each case subject to the limitations set forth below.
Certain of these investment practices involve special risks.

The Funds may purchase and sell securities on a "when issued" and "delayed
delivery" basis. A Fund accrues no income on purchases of such securities until
the Fund actually takes delivery of such securities. These transactions are
subject to market fluctuation; the value of the securities at delivery may be
more or less than their purchase price. The yields generally available on
comparable securities when delivery occurs may be higher than yields on the
securities obtained pursuant to such transactions. Because a Fund relies on the
buyer or seller to consummate the transaction, failure by the other party to
complete the transaction may result in the Fund missing the opportunity of
obtaining a price or yield considered to be advantageous. A Fund will engage in
when issued and delayed delivery transactions for the purpose of acquiring
securities consistent with the Fund's investment objective and policies and not
for the purpose of investment leverage.

A Fund may enter into repurchase agreements whereby the Fund purchases
securities and agrees to resell the securities at an agreed upon time and at an
agreed upon price. The difference between the purchase amount and resale amount
is accrued as interest in the Fund's net income. Failure of the seller to
repurchase the securities may cause losses for a Fund. Thus, a Fund must
consider the credit-worthiness of such party. In the event of default by such
party, a Fund may not have a right to the underlying security and there may be
possible delays and expenses in liquidating the security purchased, resulting in
a decline in its value and loss of interest. A Fund generally will not invest
more than 15% of its total assets in repurchase agreements with a maturity of
seven days or more.

Each Fund may borrow money from banks for temporary emergency purposes only
(such as meeting

11
<PAGE> 13

share redemption requests), although no Fund expects to do so in an amount
exceeding 5% of its respective total assets (after giving effect to any such
borrowing). Interest expenses and other costs from these transactions may exceed
the interest income and other revenues earned from portfolio assets, and the net
income of the Fund may be less than if these transactions were not used.

As a matter of fundamental policy that may not be changed without shareholder
approval, the Funds may not sell any securities "short," write, purchase or sell
puts, calls or combinations thereof, or purchase or sell interest rate or other
financial futures or index contracts or related options for risk management,
hedging or any other purpose.

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

When market conditions dictate a more "defensive" investment strategy each Fund
may invest on a temporary basis a portion or all of its assets in high quality
short term securities. High quality short term securities include obligations of
the U.S. government, its agencies or instrumentalities, other debt securities
rated A or above by S&P or Moody's, prime commercial paper, certificates of
deposit, and bankers' acceptances, repurchase agreements or other debt
securities which the investment adviser believes to be consistent with such
strategy. Under normal market conditions, the potential for total return on
these securities will tend to be lower than the potential for total return on
other securities owned by the Funds. The effect of taking such a defensive
position may be that such Fund does not achieve its investment objective.

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

HOW TO BUY SHARES

Shares of each Fund are offered at a price equal to net asset value per share,
without a sales charge. The minimum initial investment is $500,000. The minimum
subsequent investment is $25,000.

The Funds offer their shares to the public on a continuous basis through Van
Kampen Funds Inc. (the "Distributor"), as principal underwriter, which is
located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.
The Distributor receives no compensation for this service. The Funds' investment
adviser may compensate the Distributor's registered representatives for sales of
shares of the Funds out of its own assets, not out of the assets of the Funds.

12
<PAGE> 14

Investments may be made either by wire transfer or by mail as follows:

(1) By Wire. Explorer Institutional FundsSM will accept investments by wire. An
investor must first telephone the Explorer Institutional FundsSM at (800)
822-3699 and, in the case of initial investments, provide the account
registration, address, tax identification number, the Fund in which the
investment is being made, and the amount being wired. Investors will then be
assigned an account number and should instruct their bank or broker to wire
federal funds to Van Kampen Investor Services Inc., Attn: Explorer
Institutional FundsSM for further credit to Account ________ Name
__________ , Account Number ________ . Investors will be responsible for
the charges, if any, that the bank, broker, dealer or financial intermediary
may make to handle the wire transfer. A completed Account Application must
then be forwarded to the Explorer Institutional FundsSM. Subsequent
investments by wire may be made by instructing a bank or broker to wire the
specified amount in accordance with the above instructions. Please call to
advise the Explorer Institutional FundsSM before wiring monies.

Investments made by federal funds wire (up to ten million dollars) received
prior to 12:00 p.m. Eastern time will be invested at the next determined net
asset value and begin receiving dividends on that day. Investments made by
federal funds wire received after 12:00 p.m. Eastern time will be invested at
the next determined net asset value and begin receiving dividends on the next
business day.

(2) By Mail. The Explorer Institutional FundsSM will also accept investments by
mail. Investments by mail may be made by sending a check payable to
"Explorer Institutional FundsSM" and identifying the Fund in which such
investment is being made. A completed Account Application, indicating the
Fund in which the investment is being made, must accompany the check in the
case of initial investments. Checks and applications should be mailed to the
transfer agent of the Explorer Institutional FundsSM, Van Kampen Investor
Services Inc. ("Investor Services"), Explorer Institutional FundsSM, PO Box
418256, Kansas City, Missouri, 64141-9256. Investor Services is a wholly
owned subsidiary of Van Kampen Investments Inc. ("Van Kampen Investments").
Subsequent investments by mail may be made directly to the Explorer
Institutional FundSM in which such initial investment was made accompanied
by either the detachable form which is part of the Account Statement or by a
letter indicating the dollar amount of the investment, the account number,
and registration. Investments made by check will begin receiving dividends
on the next business day after the Explorer Institutional FundsSM received
good funds. For checks drawn on foreign banks, monies must be collected
before shares will be purchased.

In addition, investors may, subject to the approval of the Explorer
Institutional Funds(SM), purchase shares of a Fund with liquid securities that
are eligible for purchase by the Fund (consistent with such Fund's investment
policies and restrictions) and that have a value that is readily ascertainable.
These transactions will be effected only if the Fund's investment adviser
intends to retain the securities in such Fund as an investment. Assets so
purchased by a Fund will be valued in the same manner as they would be valued
for purposes of pricing the Fund's shares if such assets were included in the
Fund's assets at the time of purchase. The Funds reserve the right to amend or
terminate this practice at any time without notice. Investors should consult
their own tax adviser as to the tax consequences of such transactions.

OTHER PURCHASE INFORMATION. Purchases of a Fund's shares will be made in full
and fractional shares. In the interest of economy and convenience, certificates
for shares generally will not be issued.

The Explorer Institutional Funds(SM) reserves the right, in its sole discretion,
to suspend the offering of shares of any Fund or to reject purchase orders when,
in the judgment of management, such suspension or rejection is in the best
interests of a Fund; to waive the minimum investment requirements for certain
investors; and to redeem shares if information provided in the Account
Application should prove to be incorrect in any material respect.

Shares of the Explorer Institutional Funds(SM) may not be offered or sold in any
state unless registered or qualified in that jurisdiction or unless an exemption
from registration or qualification is available. The Funds are not registered or
qualified for sale in all jurisdictions. Potential investors should contact Van
Kampen Management Inc. at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL
60181-5555 or

13
<PAGE> 15

call the Explorer Institutional FundsSM at (800) 822-3699 to determine whether a
Fund is registered or qualified for sale in their particular jurisdiction.

Shares of the Explorer Institutional Funds(SM) may be purchased by customers of
broker-dealers or other financial intermediaries ("service agents") which
interact with the Explorer Institutional Funds(SM) on behalf of their customers.
Service agents may impose additional or different conditions on the purchase or
redemption of Fund shares by their customers and may charge their customers
transaction or other account fees on the purchase and redemption of Fund shares.
Each service agent is responsible for transmitting to its customers a schedule
of any such fees and information regarding any additional or different
conditions regarding purchases and redemptions. Shareholders who are customers
of service agents should consult their service agent for information regarding
these fees and conditions.

DIVIDEND REINVESTMENT PROGRAM. Each Fund will automatically credit monthly and
annual distributions to a shareholder's account in additional shares of the
Fund, without a sales charge, unless a shareholder elects another treatment for
such distributions. An election to receive distributions in cash may be made by
calling (800) 822-3699 or by writing the Explorer Institutional FundsSM at 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL 60181-5555.

DISTRIBUTIONS AND
TAXES

Each Fund will declare distributions on a daily basis and will pay such
distributions from net investment income on a monthly basis. Each Fund will also
distribute annually any net realized short-term capital gains together with net
realized long-term capital gains, if any.

Each Fund has elected and qualified and intends to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, and to distribute substantially all of its net investment income and
net realized capital gains at least annually. Any distributions in excess of a
Fund's tax-basis, net investment income and capital gains will be a tax-free
return of capital, to the extent of the investor's tax basis in its shares.
Distributions of a Fund's net investment income are taxable to shareholders as
ordinary dividend income whether received in shares or in cash. Distributions of
a Fund's net capital gains ("capital gains dividends") are taxable to
shareholders as long-term capital gains regardless of the length of time the
shares of the Fund have been held by such shareholders. Shareholders not subject
to federal income tax on their income generally will not be required to pay
federal income tax on amounts distributed to them. Interest on certain U.S.
Government Securities is exempt from state income taxes when received by an
individual and may be exempt when received by a Fund. Each Fund will inform
shareholders annually of the amount and nature of its income and gains and the
percentage of the Fund invested over the year in U.S. Government Securities.

Redemption or resale of shares of a Fund will be a taxable transaction for
federal income tax purposes. For further information with respect to taxes, see
the Statement of Additional Information.

HOW THE FUNDS VALUE THEIR SHARES

The net asset value per share of a Fund is determined by calculating the total
value of the Fund's assets, deducting the total liabilities of the Fund, and
dividing the result by the number of shares of the Fund outstanding. Generally,
net asset value is computed once daily as of 4:00 p.m. Eastern time Monday
through Friday, each day the New York Stock Exchange is open for trading.

Portfolio securities are valued by using market quotations, prices provided by
market makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics in accordance with
procedures established from time to time by the Board of Trustees of the Funds.

HOW TO SELL SHARES

Shareholders may sell shares without charge at any time by mailing a written
redemption request in proper form

14
<PAGE> 16

to the Fund or by calling the Fund at (800) 822-3699 before 4:00 p.m. Central
time to request a redemption. Shareholders will receive the net asset value next
determined after such shareholder places the sell order. A Fund will not honor a
request for redemption until it has confirmed receipt of good funds with respect
to the purchase of such shares.

Due to the relatively high cost of maintaining small accounts, each Fund
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the investor) if at any time, due to redemption
by the investor, the shares in the account do not have a value of at least
$250,000. A shareholder will receive advance notice of a mandatory redemption
and will be given at least 30 days to bring the value of its account up to at
least $250,000.

Neither the Funds, the Distributor nor Investor Services will be liable for any
loss, cost or expense for acting on instructions (whether in writing or by
telephone) believed by the party receiving such instructions to be genuine and
in accordance with the procedures described in this Prospectus. The Funds, the
Distributor and Investor Services seek to employ procedures reasonably believed
to confirm that instructions communicated by telephone are genuine. Such
procedures include requiring a person attempting to redeem shares by telephone
to provide, on a recorded line, the name on the account, a social security
number or tax identification number and such additional information as may be
necessary. An investor agrees that no such person will be liable for any loss,
liability, cost or expense arising out of any request, including any fraudulent
or unauthorized request.

Each Fund agrees to redeem shares solely in cash up to the lesser of $2,000,000
or 1.00% of the respective Fund's net assets during any 90-day period for any
one shareholder. In consideration of the best interests of the remaining
shareholders of each Fund, the Fund reserves the right to pay any redemption
price exceeding this amount in whole or in part by a distribution in kind of
securities held by the respective Fund in lieu of cash. It is unlikely that
shares will be redeemed in kind. If shares are redeemed in kind, however, the
redeeming shareholder should expect to incur transaction costs upon the
disposition of the securities received in the distribution. For more information
regarding selling shares, please see the Statement of Additional Information.

HOW THE FUNDS
ARE MANAGED

THE ADVISER. Van Kampen Management Inc. (the "Adviser") is the investment
adviser for the Funds. The Adviser provides investment advice to a wide variety
of institutional, individual and investment company clients and, together with
its affiliates, had aggregate assets under management or supervision of more
than $75 billion.

The Adviser is a wholly owned subsidiary of Van Kampen Investments. Van Kampen
Investments is an indirect wholly owned subsidiary of Morgan Stanley Dean Witter
& Co. The Adviser's principal office is located at 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555.

The Funds' day-to-day portfolio management is the responsibility of a team of
officers of the Adviser.

ADVISORY AGREEMENT. The business and affairs of the Funds are managed by the
Adviser under the direction of the Board of Trustees of the Funds. Subject to
the Trustees' authority, the Adviser and the Funds' officers supervise and
implement the Funds' investment activities. The Funds pay the Adviser a fee
(accrued daily and paid monthly) equal to a percentage of their respective
average daily net assets as follows:

<TABLE>
<CAPTION>
Average
Daily % Per
Fund Net Assets Annum
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Up to one
Active Core Fund billion dollars 0.30%
...................................
Thereafter 0.25%
.............................................................
Up to one
Limited Duration Fund billion dollars 0.30%
...................................
Thereafter 0.25%
.............................................................
</TABLE>

Under each Fund's investment advisory agreement with the Adviser, subject to the
expense limitations discussed below, each Fund has agreed to assume and pay the
charges and expenses of its operations, including the compensation of the
trustees of the Fund (other than those who are interested persons of the Adviser
and other than those who are interested persons of the Distributor but not of
the Adviser, if the Distributor has agreed to pay such compensation), the
charges and expenses of independent

15
<PAGE> 17

accountants, legal counsel, any transfer or dividend disbursing agent and the
custodian (including fees for safekeeping of securities), costs of calculating
net asset value, costs of acquiring and disposing of portfolio securities,
interest (if any) on obligations incurred by the Fund, costs of share
certificates, membership dues in the Investment Company Institute or any similar
organization, costs of trustee and officer errors and omissions insurance,
reports and notices to shareholders, costs of registering shares of the Fund
under the federal securities laws, miscellaneous expenses and all taxes and fees
to federal, state or other governmental agencies.

EXPENSE LIMITATION. In the interest of limiting the overall expenses of the
Funds, the Adviser has agreed to waive fees or reimburse certain expenses such
that the expenses of each Fund, including the advisory fees (but excluding
interest, taxes, brokerage commissions and other portfolio transaction expenses,
other expenditures which are capitalized in accordance with generally accepted
accounting principles and any extraordinary costs and expenses) will not exceed
the following amounts (expressed as a percentage of average net assets on an
annual basis).

<TABLE>
<S> <C> <C> <C>
Active Core Fund 0.40%
...................................................
Limited Duration Fund 0.40%
...................................................
</TABLE>

Fees foregone or payments made by the Adviser with respect to a Fund pursuant to
the expense limitation are contingent liabilities of such Fund which are subject
to potential reimbursement by that Fund to the Adviser, provided the Fund's
assets reach a sufficient size to permit such reimbursement to be made without
causing the annual expense ratio of the Fund to exceed the applicable limitation
set forth above, or such lower amount as may be imposed by any state expense
limitation to which the Fund is subject, and provided such reimbursement is made
within four years of the recognition of the contingent liability by the Fund. If
a reimbursement appears probable, it will be accounted for as an expense of the
Fund regardless of the time period over which the reimbursement may actually be
paid by the Fund.

HOW THE FUNDS
EXECUTE PORTFOLIO
TRANSACTIONS

The Adviser is responsible for decisions to buy and sell securities for the
Funds, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions. Many securities in which
the Funds invest are traded principally in the over-the-counter market.
Over-the-counter securities generally are traded on a net basis with dealers
acting as principal for their own accounts without a stated commission, although
the price of the security usually includes a mark-up to the dealer. Securities
purchased in underwritten offerings generally include, in the price, a fixed
amount of compensation for the financial advisers, underwriters and dealers. The
Funds also may purchase certain money market instruments directly from an
issuer, in which case no commissions or discounts are paid. Purchases and sales
of securities on a stock exchange are effected through brokers who charge a
commission for their services. Day to day management of the portfolios of each
Fund is the responsibility of a team of officers of the Adviser.

The Adviser's primary considerations in selecting the manner of executing
securities transactions for the Funds will be prompt execution of orders, the
size and breadth of the market for the security, the reliability, integrity and
financial condition and execution capability of the firm, the size of and
difficulty in executing the order, and the best net price. There are many
instances when, in the judgment of the Adviser, more than one firm can offer
comparable execution services. In selecting among such firms, consideration is
given to those firms which supply research and other services in addition to
execution services. See "Portfolio Transactions and Brokerage Allocation" in the
Statement of Additional Information for more information.

In effecting purchases and sales of the Funds' portfolio securities, the Adviser
and the Funds may place orders with and pay brokerage commissions to brokers
which may be affiliated with the Funds, the Adviser or the Distributor.

The Funds and the Adviser have adopted Codes of Ethics designed to recognize the
fiduciary relationship between each Fund and the Adviser and its

16
<PAGE> 18

employees. The Codes permit directors, trustees, officers and employees to buy
and sell securities for their personal accounts subject to certain restrictions.
Persons with access to certain sensitive information are subject to
pre-clearance and other procedures designed to prevent conflicts of interest.

SHAREHOLDER SERVICES

Shareholders of the Funds automatically are enrolled in or may elect to
participate in certain shareholder programs available to shareholders of the
Explorer Institutional FundsSM. These programs include Dividend Reinvestment
Programs and Exchange Programs. For more information regarding these shareholder
services and programs, please see the Statement of Additional Information.
Shareholder inquiries should be directed to the Funds c/o the Explorer
Institutional FundsSM, 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois
60181-5555 or by calling (800) 822-3699.

Van Kampen Investor Services Inc., PO Box 418256, Kansas City, MO 64141-9256, an
affiliated transfer agent for the Funds, performs bookkeeping, data processing
and administrative services related to the maintenance of shareholder accounts.

17
<PAGE> 19

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
Active Core Fund Limited Duration Fund
April 23, 1996 April 23, 1996
(Commencement of (Commencement of
Year Ended Investment Operations) Year Ended Investment
December 31, to December 31, 1996 December 31, Operations) to
1998 1997 1998 1998 1997 December 31, 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $10.085 $10.000 $10.019 $10.000
------ ------- ------- ------ ------- -------
Net Investment Income....... 0.626 .409 0.574
Net Realized and Unrealized
Gain..................... 0.249 .095 0.036
------ ------- ------- ------ ------- -------
Total from Investment
Operations.................. 0.875 .504 0.610 .405
------ ------- ------- ------ ------- -------
Less:
Distributions From Net
Investment Income........ 0.626 .409 0.574 .386
Distributions From Net
Realized Gain............ 0.163 .010 0.018 --
------ ------- ------- ------ ------- -------
Total Distributions........... 0.789 .419 0.592 .386
------ ------- ------- ------ ------- -------
Net Asset Value, End of the
Period...................... $10.171 $10.085 $10.037 $10.019
====== ======= ======= ====== ======= =======
Total Return*................. 8.93% 5.20%** 6.29% 4.14%**
Net Assets at End of Period
(In millions)............... $4.9 $5.6 $8.2 $9.8
Ratio of Expenses to Average
Net Assets*(a).............. 0.60% 0.40% 0.56% 0.40%
Ratio of Net Investment Income
to Average Net Assets*...... 6.19% 5.98% 5.74% 5.68%
Portfolio Turnover............ 109% 84%** 41% 16%**
</TABLE>

* If certain expenses had not been reimbursed by the Adviser, total return

<TABLE>
<S> <C> <C> <C> <C>
Ratio of Expenses to Average
Net Assets(a)............... 2.01% 1.81% 1.86% 1.40%
Ratio of Net Investment Income
to Average Net Assets....... 4.78% 4.57% 4.59% 4.68%
</TABLE>

(a) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by 0.20% and 0.16% for the year ended
December 31, 1997 for Active Core Fund and Limited Duration Fund,
respectively.

** Non-Annualized

See Financial Statements and Notes Thereto.

18
<PAGE> 20

FOR MORE INFORMATION

EXISTING SHAREHOLDERS
OR PROSPECTIVE INVESTORS

For information please call the

Trust's toll-free number 1-800-822-3699.

EXPLORER INSTITUTIONAL FUNDSSM

1 Parkview Plaza

PO Box 5555

Oakbrook Terrace, Illinois 60181-5555

Investment Adviser

VAN KAMPEN MANAGEMENT INC.

1 Parkview Plaza

PO Box 5555

Oakbrook Terrace, Illinois 60181-5555

Distributor

VAN KAMPEN FUNDS INC.

1 Parkview Plaza

PO Box 5555

Oakbrook Terrace, Illinois 60181-5555

Transfer Agent

VAN KAMPEN INVESTOR SERVICES INC.

PO Box 418256

Kansas City, MO 64141-9256

Attn: Explorer Institutional FundsSM

Custodian

STATE STREET BANK AND TRUST COMPANY

225 West Franklin Street, PO Box 1713

Boston, MA 02105-1713
Attn: Explorer Institutional FundsSM

Legal Counsel

SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)

333 WEST WACKER DRIVE

CHICAGO, IL 60606

Independent Accountants

KPMG LLP
303 East Wacker Drive
Chicago, IL 60601
<PAGE> 21

EXPLORER INSTITUTIONAL FUNDS(SM)

* Active Core Fund

* Limited Duration Fund

PROSPECTUS

APRIL , 1999

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

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

You can ask questions or obtain a free copy of
the Funds' reports or their Statement of
Additional Information by calling (800)
822-3699 from 7:00 a.m. to 7:00 p.m., Central
time, Monday through Friday.

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

Investment Company Act File No.
811-8808.
EXP PRO 4/99

<PAGE> 22

The information in this statement of additional information is not complete and
may be changed. The Funds may not sell these securities until the post-effective
amendment to the registration statement filed with the Securities and Exchange
Commission is effective. This statement of additional information is not a
prospectus. This statement of additional information is not an offer to sell
these securities and is not soliciting an offer to buy these securities.

SUBJECT TO COMPLETION -- DATED MARCH 1, 1999

STATEMENT OF ADDITIONAL INFORMATION

EXPLORER INSTITUTIONAL FUNDS(SM)

The Explorer Institutional Trust (the "Trust") is a professionally managed
no-load, open-end management investment company consisting of two separate
diversified investment portfolios, the Active Core Fund and the Limited Duration
Fund (each a "Fund" and together the "Funds"). Each Fund has its own investment
objective, policies and restrictions. The Funds are primarily designed to
provide pension and profit sharing plans, employee benefit trusts, endowments,
foundations, other institutions, corporations and high net worth individuals
with access to the professional investment management services offered by Van
Kampen Management Inc. (the "Adviser"), the investment adviser to the Funds. In
managing the Funds, the investment adviser seeks to enhance total return as
compared to an unmanaged portfolio of income securities by identifying value and
opportunity through extension market, quantitative and credit research,
identifying and taking advantage of market inefficiencies and, within a well
defined portfolio duration for each Fund, adjusting duration from time to time
based on the investment adviser's view of market condition. The net asset value
and the return of the Funds will fluctuate depending on market conditions and
other factors.

This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Funds'
prospectus (the "Prospectus") dated as of the same date as this Statement of
Additional Information. This Statement of Additional Information does not
include all the information that a prospective investor should consider before
purchasing shares of the Funds. Investors should obtain and read the Prospectus
prior to purchasing shares of the Funds. A Prospectus may be obtained without
charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 822-3699.

TABLE OF CONTENTS

<TABLE>
<S> <C>
The Funds and the Trust..................................... B-2
Investment Policies and Restrictions........................ B-3
Income Securities........................................... B-4
Investment Practices........................................ B-9
Description of Securities Ratings........................... B-10
Trustees and Officers....................................... B-16
Investment Advisory and Other Services...................... B-25
Portfolio Transactions and Brokerage Allocation............. B-27
Taxation.................................................... B-29
The Distributor............................................. B-32
Transfer Agent.............................................. B-32
Legal Counsel............................................... B-32
Performance Information..................................... B-33
How to Buy Shares........................................... B-34
How to Sell Shares.......................................... B-35
Shareholder Services........................................ B-37
Instructions Regarding Backup Withholding................... B-38
Report of Independent Accountants........................... F-
Financial Statements -- Explorer Institutional Active Core
Fund...................................................... F-
Financial Statements -- Explorer Institutional Limited
Duration Fund............................................. F-
Notes to Financial Statements............................... F-
Account Applications........................................ X-1
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL , 1999

<PAGE> 23

THE FUNDS AND THE TRUST

The Trust is an unincorporated business trust established under the laws of
the State of Massachusetts by an Agreement and Declaration of Trust dated
September 30, 1994 and amended on November 14, 1995. The Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional shares,
without par value, in separate series. To date, the Explorer Institutional
Active Core Fund (the "Active Core Fund"), formerly known as the Explorer
Institutional Enhanced Benchmark Fund, and Explorer Institutional Limited
Duration Fund (the "Limited Duration Fund"), formerly known as the Explorer
Institutional Enhanced Limited Duration Fund, (each a "Fund" and together the
"Funds"), which were each established pursuant to a Designation of Series on
September 30, 1994, are the only series of the Trust, although the Trustees are
empowered by the Declaration of Trust to designate additional series and issue
shares thereof.

Shares of each series represent an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.

Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon by shareholders of only the series involved. Shares do not have cumulative
voting rights, preemptive rights or any conversion or exchange rights other than
those described in the Prospectus or this Statement of Additional Information.
The Trust does not contemplate holding regular meetings of shareholders to elect
Trustees or otherwise. However, the holders of 10% or more of the outstanding
shares may by written request require a meeting to consider the removal of
Trustees by a vote of a majority of the shares present and voting at such
meeting.

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

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

Morgan Stanley Dean Witter & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Dean Witter Investment Management
Inc., an investment adviser, Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include

B-2
<PAGE> 24

securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; credit services; asset management;
trading of futures, options, foreign exchange, commodities and swaps (involving
foreign exchange, commodities, indices and interest rates); real estate advice,
financing and investing; and securities lending.

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

INVESTMENT POLICIES AND RESTRICTIONS

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

Fundamental investment restrictions limiting the investments of the Funds
provide that each Fund may not:

1. With respect to 75% of its total assets, purchase any securities
(other than obligations guaranteed by the United States government or by
its agencies or instrumentalities), if, as a result, more than 5% of the
Fund's total assets (determined at the time of investment) would then be
invested in securities of a single issuer or, if, as a result, the Fund
would hold more than 10% of the outstanding voting securities of an issuer.

2. Invest 25% or more of the value of its total assets in any single
industry. (Neither the U.S. government nor any of its agencies or
instrumentalities will be considered an industry for purposes of this
restriction.)

3. Borrow money, except from banks for temporary purposes and then in
amounts not in excess of 5% of the total asset value of the Fund, or
mortgage, pledge, or hypothecate any assets except in connection with a
borrowing and in amounts not in excess of 5% of the total asset value of
the Fund. Borrowings may not be made for investment leverage, but only to
enable the Fund to satisfy redemption requests where liquidation of
portfolio securities is considered disadvantageous or inconvenient. In this
connection, the Fund will not purchase portfolio securities during any
period that such borrowings exceed 5% of the total asset value of the Fund.
Notwithstanding this investment restriction, the Fund may enter into when
issued and delayed delivery transactions as described in the Prospectus.

4. Make loans of money or property to any person, except to the extent
the securities in which the Fund may invest are considered to be loans.

B-3
<PAGE> 25

5. Buy any securities "on margin." Neither the deposit of initial or
maintenance margin in connection with risk management and hedging
transactions nor short term credits as may be necessary for the clearance
of transactions is considered the purchase of a security on margin.

6. Sell any securities "short," write, purchase or sell puts, calls or
combinations thereof, or purchase or sell interest rate or other financial
futures or index contracts or related options.

7. Act as an underwriter of securities, except to the extent the Fund
may be deemed to be an underwriter in connection with the sale of
securities held in its portfolio.

8. Make investments for the purpose of exercising control or
participation in management, except to the extent that exercise by the Fund
of its rights under agreements related to portfolio securities would be
deemed to constitute such control or participation.

9. Invest in securities of other investment companies, except as part
of a merger, consolidation or other acquisition and except as permitted
under the 1940 Act.

10. Invest in oil, gas or mineral leases or in equity interests in
oil, gas, or other mineral exploration or development programs except
pursuant to the exercise by the Fund of its rights under agreements
relating to portfolio securities.

11. Purchase or sell real estate (including real estate limited
partnership interests), commodities or commodity contracts, except to the
extent that the securities that the Fund may invest in are considered to be
interests in real estate, commodities or commodity contracts or to the
extent the Fund exercises its rights under agreements relating to portfolio
securities (in which case the Fund may liquidate real estate acquired as a
result of a default on a mortgage), and except to the extent that risk
management and hedging transactions the Fund may engage in are considered
to be commodities or commodities contracts.

INCOME SECURITIES

Income securities include securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities ("U.S. Government Securities");
mortgage and other asset-backed securities; corporate debt securities; variable
and floating rate debt securities; commercial paper; certificates of deposit,
time deposits and bankers acceptances; other instruments having investment
characteristics substantially similar to any of the foregoing and repurchase
agreements and reverse repurchase agreements with respect to any of the
foregoing. Corporate income securities in which a Fund may invest include
adjustable and fixed rate bonds, debentures and notes and will generally be
unsecured. A Fund may also invest in debt securities with floating or variable
rates of interest.

U.S. Treasury Securities. U.S. Treasury securities include bills, notes and
bonds issued by the U.S. Treasury. These instruments are direct obligations of
the U.S. government and, as such, are backed by the full faith and credit of the
United States. They differ primarily in their interest rates, the lengths of
their maturities and the dates of their issuances.

Stripped Treasury Securities. Stripped Treasury securities are obligations
representing an interest in all or a portion of the income or principal
components of an underlying Treasury or pool of Treasury securities. Stripped
Treasury securities include obligations entitled to receive all of the interest
component but none of the principal component (IOs) and obligations entitled to
receive all of the principal component but none of the interest component (POs).
The market values of stripped

B-4
<PAGE> 26

Treasury securities tend to be more volatile in response to changes in interest
rates than are those of conventional Treasury securities.

Obligations Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. Obligations issued by agencies of the U.S. government or
instrumentalities established or sponsored by the U.S. government include those
that are guaranteed by federal agencies or instrumentalities and may or may not
be backed by the full faith and credit of the United States. Obligations of the
Government National Mortgage Association ("GNMA"), the Farmers Home
Administration and the Export-Import Bank are backed by the full faith and
credit of the United States. U.S. Government Securities that are not backed by
the full faith and credit of the United States include, among others,
obligations issued by the Tennessee Valley Authority, the Resolution Trust
Corporation, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the United States Postal Service,
each of which has the right to borrow from the United States Treasury to meet
its obligations, and obligations of the Federal Farm Credit Bank and the Federal
Home Loan Bank, the obligations of which may be satisfied only by the individual
credit of the issuing agency. Investments in FHLMC, FNMA and other obligations
may include collateralized mortgage obligations and real estate mortgage
investment conduits issued or guaranteed by such entities. In the case of
securities not backed by the full faith and credit of the United States, a Fund
must look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment and may not be able to assert a claim against the U.S. if the
agency or instrumentality does not meet its commitments.

Mortgage-Backed Securities Issued or Guaranteed by U.S. Government
Instrumentalities. Mortgage-backed securities may be issued or guaranteed by
U.S. government agencies such as GNMA, FNMA or FHLMC and represent undivided
ownership interests in pools of mortgages. The mortgages backing these
securities may include conventional 30-year fixed rate mortgages, 15-year fixed
rate mortgages adjustable rate mortgages. The U.S. government or the issuing
agency guarantees the payment of the interest on and principal of these
securities. However, the guarantees do not extend to the securities' yield or
value, which are likely to vary inversely with fluctuations in interest rates,
nor do the guarantees extend to the yield or value of a Fund's shares. These
securities are in most cases "pass-through" instruments, through which the
holders receive a share of all interest and principal payments from the
mortgages underlying the securities, net of certain fees. Because the principal
amounts of such underlying mortgages may generally be prepaid in whole or in
part by the mortgagees at any time without penalty and the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through securities.
Mortgage-backed securities are subject to more rapid repayment than their stated
maturity date would indicate as a result of the pass-through of prepayments of
principal on the underlying mortgage obligations. The remaining maturity of a
mortgage-backed security will be deemed to be equal to the average maturity of
the mortgages underlying such security determined by the Adviser on the basis of
assumed prepayment rates with respect to such mortgages. The remaining expected
average life of a pool of mortgages underlying a mortgage-backed security is a
prediction of when the mortgages will be repaid and is based upon a variety of
factors such as the demographic and geographic characteristics of the borrowers
and the mortgaged properties, the length of time that each of the mortgages has
been outstanding, the interest rates payable on the mortgages and the current
interest rate environment. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities can be expected to
accelerate. When the mortgage obligations are prepaid, a Fund reinvests the
prepaid amounts in other income producing securities, the yields of

B-5
<PAGE> 27

which reflect interest rates prevailing at the time. Therefore, a Fund's ability
to maintain a portfolio of high-yielding mortgage- backed securities will be
adversely affected to the extent that prepayments of mortgages must be
reinvested in securities which have lower yields than the prepaid mortgage-
backed securities. Moreover, prepayments of mortgages which underlie securities
purchased by a Fund at a premium would result in capital losses.

Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities. Collateralized mortgage obligations ("CMOs") are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
CMOs are collateralized by GNMA, FNMA and FHLMC certificates, but also may be
collateralized by whole loans or private pass-through securities (such
collateral collectively hereinafter referred to as "Mortgage Assets").
Multiclass pass-through securities are equity interests in a trust composed of
Mortgage Assets. Unless the context indicates otherwise, all references herein
to CMOs include multiclass pass-through securities. Payments of principal of and
interest on the Mortgage Assets, and any reinvestment income thereon, provide
the funds to pay debt service on the CMOs or make scheduled distributions on the
multiclass pass-through securities. CMOs deemed to be U.S. government securities
are those issued or guaranteed as to principal and interest by a person
controlled or supervised by and acting as an agency or instrumentality of the
U.S. government. The issuer of a series of CMOs may elect to be treated as a
Real Estate Mortgage Investment Conduit (a "REMIC").

In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest typically is paid or accrues on a monthly, quarterly or
semi-annual basis. The principal and interest on the Mortgage Assets may be
allocated among the several classes of a series of a CMO in innumerable ways. In
one structure, payments of principal, including any principal prepayments, on
the Mortgage Assets are applied to the classes of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment of
principal will be made on any class of CMOs until all other classes having an
earlier stated maturity or final distribution date have been paid in full.

Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken into
account in calculating the stated maturity date or final distribution date of
each class, which, as with other CMO structures, must be retired by its stated
maturity date or final distribution date but may be retired earlier. Planned
Amortization Class CMOs ("PAC Bonds") generally require payments of a specified
amount of principal on each payment date. PAC Bonds are always parallel pay CMOs
with the required principal payment on such securities having the highest
priority after interest has been paid to all classes.

Types of Credit Support. Mortgage-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make payments,
such securities may contain elements of credit support. Such credit support
falls into two categories: (i) liquidity protection and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection
B-6
<PAGE> 28

against losses resulting from ultimate default ensures ultimate payment of the
obligations on at least a portion of the assets in the pool. Such protection may
be provided through guarantees, insurance policies or letters of credit obtained
by the issuer or sponsor from third parties, through various means of
structuring the transaction or through a combination of such approaches.

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

Asset-Backed Securities. The securitization techniques used to develop
mortgage-backed securities are now also applied to a broad range of assets.
Through the use of trusts and special purpose corporations, various types of
assets, primarily automobile and credit card receivables, are being securitized
in pass-through structures similar to the mortgage pass-through structures
described above or in a pay-through structure similar to the CMO structure.
Other types of asset-backed securities may be developed in the future.

In general, the collateral supporting asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. As with mortgage-backed securities, asset-backed securities are
often backed by a pool of assets representing the obligations of a number of
different parties and use similar credit enhancement techniques. Asset-backed
securities present certain risks that are not presented by mortgage-backed
securities. Primarily, these securities do not have the benefit of the same
security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of asset-backed securities backed by automobile
receivables permit the servicers of such receivables to retain possession of the
underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related asset-backed securities. In
addition, because of the large number of vehicles involved in a typical issuance
and technical requirements under state laws, the trustee for the holders of
asset-backed securities backed by automobile receivables may not have a proper
security interest in all of the obligations backing such receivables. Therefore,
there is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on these securities.

Zero-coupon securities. Zero-coupon securities pay no cash interest but are
sold at substantial discounts from their value at maturity. When a zero-coupon
bond is held to maturity, its entire investment return comes from the difference
between its purchase price and its maturity value. The market values of such
securities are generally subject to greater fluctuations in response to market
rates of interest than bonds that pay interest currently. Because such
securities allow an issuer to

B-7
<PAGE> 29

avoid the need to generate cash to meet current interest payments, such bonds
may involve greater credit risk than bonds paying cash interest currently.

Premium securities. A Fund may at times invest in securities bearing coupon
rates higher than prevailing market rates. Such "premium" securities are
typically purchased at prices greater than the principal amounts payable on
maturity. If an issuer were to redeem securities held by a Fund during a time of
declining interest rates, the Fund may not be able to reinvest the proceeds in
securities providing the same investment return as the securities redeemed. If
securities purchased by a Fund at a premium are called or sold prior to
maturity, the Fund generally will recognize a capital loss to the extent the
call or sale price is less than the Fund's adjusted tax basis in such
securities. Additionally, a Fund generally will recognize a capital loss if it
holds such securities to maturity.

Adjustable and Floating Rate Securities. Adjustable rate securities are
securities having interest rates which are adjusted or reset at periodic
intervals ranging, in general, from one day to several years, based on a spread
over a specific interest rate or interest rate index or on the results of
periodic auctions. There are three main categories of indices: (i) those based
on U.S. Government Securities; (ii) those derived from a calculated measure such
as a cost of funds index; and (iii) those based on a moving average of interest
rates, including mortgage rates. Commonly utilized indices include, for example,
the One Year Constant Maturity Treasury Index, the London Interbank Offered Rate
(LIBOR), the Federal Home Loan Bank Cost of Funds, the prime rate and commercial
paper rates.

Adjustable rate securities allow a Fund to participate in all or a portion of
increases in interest rates through periodic upward adjustments of the coupon
rates of such securities, resulting in higher yields. During periods of
declining interest rates, however, coupon rates may readjust downward resulting
in lower yields to the Fund. During periods of rising interest rates, changes in
the coupon rate of adjustable rate securities will lag behind changes in the
market interest rate, which may result in such security having a lower value
until the coupon resets to reflect more closely market interest rates.
Adjustable rate securities frequently limit the maximum amount the rate may be
adjusted during any adjustment period, in any one year or during the term of the
security.

Defensive Strategies. In certain circumstances market conditions may, in the
Adviser's judgment, make pursuing a Fund's basic investment strategy
inconsistent with the best interests of its shareholders. At such times, the
Adviser may use alternative strategies primarily designed to reduce fluctuations
in the value of the Fund's assets. In implementing these "defensive" strategies,
a Fund may invest to a substantial degree in high-quality, short-term
obligations. Such obligations may include: obligations of the U.S. Government,
its agencies or instrumentalities; other debt securities rated within the three
highest grades by either Standard and Poor's ("S&P") or Moody's Investor
Services, Inc. ("Moody's") (or comparably rated by any other nationally
recognized statistical rating organization ("NRSRO")); commercial paper rated in
the highest grade by either rating service (or comparably rated by any other
nationally recognized statistical rating organization); certificates of deposit
and bankers' acceptances; repurchase agreements with respect to any of the
foregoing investments; or any other fixed-income securities that the Adviser
considers consistent with such strategy.

B-8
<PAGE> 30

INVESTMENT PRACTICES

BORROWINGS

Each Fund may borrow money from banks for temporary, emergency purposes only
(such as meeting share redemption requests), although no Fund expects to do so
in an amount exceeding 5% of its respective total assets (after giving effect to
any such borrowing). Borrowing creates special risk considerations such as
changes in the net asset value of the shares and in the yield on the Fund's
portfolio. Borrowing will create interest expenses for a Fund which can exceed
the income from the assets retained.

"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS

Each Fund may purchase and sell portfolio securities on a "when issued" and
"delayed delivery" basis. No income accrues to or is earned by a Fund on
purchases of portfolio securities in connection with such transactions prior to
the date the Fund actually takes delivery of such securities. These transactions
are subject to market fluctuation; the value of such securities at delivery may
be more or less than their purchase price, and yields generally available on
such securities when delivery occurs may be higher than yields on such
securities obtained pursuant to such transactions. Because a Fund relies on the
buyer or seller, as the case may be, to consummate the transaction, failure by
the other party to complete the transaction may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous. When a
Fund is the buyer in such a transaction, however, it will maintain, in a
segregated account with its custodian, cash or liquid securities having an
aggregate value equal to the amount of such purchase commitments until payment
is made. A Fund will make commitments to purchase securities on such basis only
with the intention of actually acquiring these securities, but a Fund may sell
such securities prior to the settlement date if such sale is considered to be
advisable. To the extent a Fund engages in "when issued" and "delayed delivery"
transactions, it will do so for the purpose of acquiring securities for the
Fund's portfolio consistent with the Fund's investment objectives and policies
and not for the purposes of investment leverage. No specific limitation exists
as to the percentage of a Fund's assets which may be used to acquire securities
on a "when issued" or "delayed delivery" basis.

PORTFOLIO TURNOVER

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

B-9
<PAGE> 31

DESCRIPTION OF SECURITIES RATINGS

STANDARD & POOR'S -- A brief description of the applicable Standard & Poor's
(S&P) rating symbols and their meanings (as published by S&P) follow:

A S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.

The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of payment--capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation:

2. Nature of and provisions of the obligation:

3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditor's rights.

1. LONG-TERM DEBT -- INVESTMENT GRADE

AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to meet
its financial commitment on the obligation is extremely strong.

AA: Debt rated "AA" differs from the highest rated issues only in small
degree. Capacity to meet its financial commitment on the obligation is very
strong.

A: Debt rated "A" is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories. Capacity to meet its financial commitment on the obligation is
still strong.

BBB: Debt rated "BBB" exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to meet its financial commitment on the obligation.

SPECULATIVE GRADE

BB, B, CCC, CC, C: Debts rated "BB", "B", "CCC", "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

B-10
<PAGE> 32

BB: Debt rated "BB" is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

B: Debt rated "B" is more vulnerable to nonpayment than obligations rated
"BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

CCC: Debt rated "CCC" is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC: Debt rated "CC" is currently highly vulnerable to nonpayment.

C: The "C" rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this obligation
are being continued.

D: Debt rated "D" is in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The 'D' rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.

BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA", "AA", "A", "BBB", commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain ratings or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.

B-11
<PAGE> 33

2. COMMERCIAL PAPER

A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

A-1: The highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".

A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

B: Issues rated "B" are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

C: This rating is assigned to short-term debt obligations currently vulnerable
to nonpayment and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the obligation.

D: Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

A commercial paper rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances.

3. PREFERRED STOCK

A S&P preferred stock rating is an assessment of the capacity and willingness
of an issuer to pay preferred stock dividends and any applicable sinking fund
obligations. A preferred stock rating differs from a bond rating inasmuch as it
is assigned to an equity issue, which issue is intrinsically different from, and
subordinated to, a debt issue. Therefore, to reflect this difference, the
preferred stock rating symbol will normally not be higher than the bond rating
symbol assigned to, or that would be assigned to, the senior debt of the same
issuer.

B-12
<PAGE> 34

The preferred stock ratings are based on the following considerations:

i. Likelihood of payment-capacity and willingness of the issuer to meet the
timely payment of preferred stock dividends and any applicable sinking fund
requirements in accordance with the terms of the obligation.

ii. Nature of, and provisions of, the issuer.

iii. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements under the laws of bankruptcy and other
laws affecting creditors' rights.

AAA: This is the highest rating that may be assigned by S&P to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations.

AA: A preferred stock issue rated "AA" also qualifies as a high-quality, fixed
income security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated "AAA".

A: An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.

BBB: An issue rated "BBB" is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.

BB, B and CCC: Preferred stock rated "B", "B", and "CCC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations.

"BB" indicates the lowest degree of speculation and "CCC" the highest. While
such issues will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

CC: The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments, but that is currently paying.

C: A preferred stock rated "C" is a nonpaying issue.

D: A preferred stock rated "D" is a nonpaying issue with the issuer in default
on debt instruments.

NR: This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy. PLUS (+) or MINUS (-): To
provide more detailed indications of preferred stock quality, ratings from "AA"
to "CCC" may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.

A preferred stock rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or

B-13
<PAGE> 35

withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances.

MOODY'S INVESTORS SERVICE -- a brief description of the applicable Moody's
Investors Service (Moody's) rating symbols and their meanings (as published by
Moody's Investor Service) follows:

1. LONG-TERM DEBT

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." 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 the Aaa securities.

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 some time 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 payment
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.

Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the issue ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

B-14
<PAGE> 36

ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated as
a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published
in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

2. SHORT-TERM DEBT

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year unless explicitly noted.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issues:

Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics:

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

-- Broad margins is earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes of the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

B-15
<PAGE> 37

3. PREFERRED STOCK

Preferred stock rating symbols and their definitions are as follows:

AAA: As issue which is rated "AAA" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.

AA: An issue which is rated "AA" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance the earnings and
asset protection will remain relatively well maintained in the foreseeable
future.

A: An issue which is rated "A" is considered to be an upper-medium-grade
preferred stock. While risks are judged to be somewhat greater than in the "AAA"
and "AA" classifications, earnings and asset protections are, nevertheless,
expected to be maintained at adequate levels.

BAA: An issue which is rated "BAA" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.

BA: An issue which is rated "BA" is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.

B: An issue which is rated "B" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.

CAA: An issue which is rated "CAA" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.

CA: An issue which is rated "CA" is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.

C: This is the lowest rated class of preferred or preference stock. Issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each rating classification.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category, the modifier 2 indicates a mid-range ranking, and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.

TRUSTEES AND OFFICERS

The Declaration of Trust of the Trust provides that the Board of Trustees
shall consist of not less than three nor more than eleven trustees. The Funds do
not contemplate holding regular meetings of shareholders to elect Trustees or
otherwise. In the event a vacancy occurs on the Board of Trustees by reason of
death, resignation or a reason other than removal by the shareholders, the
remaining Trustees shall appoint a person to fill the vacancy for the entire
unexpired term.

The table below sets forth the officers and trustees of the Fund, their
principal occupations for the last five years and their affiliations, if any,
with the Adviser, Van Kampen Investment Advisory Corp. ("Advisory Corp.") and
Van Kampen Asset Management Inc. ("Asset Management") (the Adviser, Advisory
Corp. and Asset Management are referred to herein collectively as the
"Advisers"), Van

B-16
<PAGE> 38

Kampen Funds Inc. (the "Distributor"), Van Kampen Investments Inc. ("Van Kampen
Investments"), Van Kampen Advisors Inc., Van Kampen Investor Services Inc.
("Investor Services"), Van Kampen Merritt Equity Advisors Corp., Van Kampen
Insurance Agency of Illinois Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company and Van Kampen Exchange Corp.. Unless otherwise noted the
address of each of the Trustees and Officers is 1 Parkview Plaza, PO Box 5555,
Oakbrook Terrace, IL 60181-5555.

The following sets forth the names, ages, principal occupations and other
information regarding the Trustees.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
David C. Arch........................ Trustee. Mr. Arch is Chairman and Chief Executive Officer
1800 Swift Drive of Blistex Inc., a consumer health care products
Oak Brook, IL 60521 manufacturer, a Director of Elmhurst College and the
Date of Birth 07/17/45 Illinois Manufacturers' Association, Mr. Arch is also a
Trustee, Director or Managing General Partner of other
investment companies advised by the Advisers.
Rod Dammeyer......................... Trustee. Mr. Dammeyer is Managing Partner of Equity Group
Two North Riverside Plaza Corporate Investments, a company that makes private
Chicago, IL 60606 equity investments in other companies, and Vice Chairman
Date of Birth 11/05/40 and Director of Anixter International Inc., a value-added
provider of integrated networking and cabling solutions
that support business information and network
infrastructure requirements (employed by Anixter since
1985). He is also a member of the Board of Directors of
TeleTech Holdings Inc., Metal Management, Inc.,
Stericycle, Inc., Transmedia Networks, Inc., Jacor
Communications, Inc., CNA Surety, Corp., IMC Global Inc.,
Antec Corporation, Groupo Azucarero Mexico (GAM) and Kent
State University Foundation. Prior to 1998, Mr. Dammeyer
was a Director of Lukens, Inc., Capsure Holdings Corp.,
Revco D.S., Inc. the Chase Manhattan Corporation National
Advisory Board and Sealy, Inc. Prior to 1997, Mr.
Dammeyer was President, Chief Executive Officer and a
Director of Great American Management & Investment, Inc.,
a diversified manufacturing company and a Director of
Santa Fe Energy Resources, Inc., Falcon Building
Products, Inc., Lomas Financial Corporation, Santa Fe
Pacific Corporation, Q-Tel, S.A. de C.V. and Servicios
Financieros Quadrum, S.A. Mr. Dammeyer is also a Trustee,
Director or Managing General Partner of other investment
companies advised by the Advisers.
Howard J Kerr........................ Trustee. Prior to 1998, Mr. Kerr was the President and
736 North Western Ave. Chief Executive Officer of Pocklington Corporation, Inc.,
P.O. Box 317 an investment holding company. Mr. Kerr is a Director of
Lake Forest, IL 60045 Canbra Foods, Ltd., a Canadian oilseed crushing,
Date of Birth 11/17/35 refining, processing and packaging operation. Mr. Kerr is
a Trustee, Director or Managing General Partner of other
investment companies advised by the Advisers.
</TABLE>

B-17
<PAGE> 39

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Dennis J. McDonnell*................. President, Chairman of the Board and Trustee. Mr.
1 Parkview Plaza McDonnell is Executive Vice President and a Director of
PO Box 5555 Van Kampen President, Chief Operating Officer and a
Oakbrook Terrace, Director of the Advisers, Van Kampen Advisors Inc.
IL 60181-5555 ("Advisors Inc.") and Van Kampen Management Inc.
Date of Birth 05/20/42 ("Management Inc."). He is also an Executive Vice
President of Van Kampen Investments. Prior to April of
1997, he was a Director of Van Kampen Merritt Equity
Holding Corp. Prior to September of 1996, Mr. McDonnell
was Chief Executive Officer and Director of MCM Group,
Inc., McCarthy, Crisanti & Maffei, Inc., MCM Asia Pacific
Company, Limited and MCM (Europe) Limited. Prior to
November 1996, Executive Vice President and a Director of
VK/AC Holdings. Prior to July of 1996, Mr. McDonnell was
President, Chief Operating Officer and Trustee of VSM
Inc. and VCJ Inc. Trustee, Chief Executive Officer and
Executive Vice President of certain open-end and
closed-end investment companies advised by the Advisers.
Dr. Steven Muller.................... Trustee. President Emeritus of The Johns Hopkins
The Johns Hopkins University University, Director of Beneficial Corporation (bank
1619 Massachusetts Avenue, N.W. holding company) and Millipore Corporation
Suite 711 (biotechnology). Prior to December of 1997, Dr. Muller
Washington, D.C. 20036 was a Trustee of the Common Sense Trust and Chairman of
Date of Birth 11/22/27 The 21(st) Century Foundation (public affairs). Prior to
May of 1997, he was a Director of BT Alex. Brown & Sons
(investment banking). Dr. Muller is also a Trustee,
Director or Managing General Partner of other investment
companies advised by the Advisers.
Theodore A. Myers.................... Trustee. Mr. Myers is the Senior Financial Advisor (and
550 Washington Avenue prior to 1996, an Executive Vice President and Chief
Glencoe, Illinois 60022 Financial Officer) of Qualitech Steel Corporation, a
Date of Birth 08/03/30 producer of high quality engineered steels for
automotive, transportation and capital goods industries.
Mr. Myers is a Director of COVA Series Trust of COVA
Financial Life Insurance (formerly known as Xerox Life).
Prior to 1997, Mr. Myers was a Director of McLouth Steel
and a member of the Arthur Andersen Chief Financial
Officer Advisory Committee. Mr. Myers is also a Trustee,
Director or Managing General Partner of other investment
companies advised by the Advisers.
</TABLE>

B-18
<PAGE> 40

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Don G. Powell........................ Trustee. Mr. Powell is currently a member of the board of
3 Wexford Court governors and executive committee for the Investment
Houston, TX 77024 Company Institute, and a member of the Board of Trustees
Date of Birth 10/19/39 of the Houston Museum of Natural Science. Mr. Powell is
the Immediate past chairman of the Investment Company
Institute. Prior to January 1999, he was Chairman and a
Director of Van Kampen Investments, the Advisers, the
Distributor, Investor Services, Van Kampen Advisors Inc.,
Van Kampen Recordkeeping Services Inc., American Capital
Contractual Services Inc., Van Kampen Merritt Equity
Advisors Corp., Van Kampen Insurance Agency of Illinois
Inc., Van Kampen System Inc., Van Kampen Trust Company,
Van Kampen Services Inc. and Van Kampen Exchange Corp.
Prior to July of 1998, Mr. Powell was Director and
Chairman of VK/AC Holding, Inc. Prior to 1997, he was
Chairman, President and Director of American Capital
Shareholders Corporation. Prior to April of 1997, Mr.
Powell was Chairman, President and Director of Van Kampen
Merritt Equity Holdings Corp. Prior to July of 1996, he
was Chairman and Director of VSM Inc. and VCJ Inc. Prior
to September 1996, Mr. Powell was Chairman and Director
of McCarthy, Crisanti & Maffei, Inc. and McCarthy,
Crisanti & Maffei Acquisition Corporation. Prior to
November 1996, President, Chief Executive Officer and a
Director of VK/AC Holding, Inc. Mr. Powell is also a
Trustee or Director of other investment companies advised
by the Advisers and their affiliates.
Hugo F. Sonnenschein................. Trustee. Mr. Sonnenschein is President of the University
5801 South Ellis Avenue of Chicago. Mr. Sonnenschein is a member of the Board of
Suite 502 Trustees of the University of Rochester and a member of
Chicago, IL 60637 its investment committee. Mr. Sonnenschein is a member of
Date of Birth 11/14/40 the National Academy of Sciences and a fellow of the
American Academy of Arts and Sciences. Mr. Sonnenschein
is also a Trustee, Director or Managing General Partner
of other investment companies advised by the Advisers.
Wayne W. Whalen*..................... Trustee. Mr. Whalen is a partner in the law firm of
333 West Wacker Drive Skadden, Arps, Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to certain open end and closed end investment
Date of Birth 08/22/39 companies advised by the Advisers. Mr. Whalen is also a
Trustee, Director or Managing General Partner of other
investment companies advised by the Advisers.
</TABLE>

- ---------------
* Such Trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Messrs. McDonnell and Powell are interested persons of the
Adviser and the Funds by reason of their positions with the Adviser. Mr.
Whalen is an interested person of the Funds by reason of his firm acting as
legal counsel for the Funds.

The compensation of the officers and trustees who are affiliated persons (as
defined in the 1940 Act) of the Adviser, the Distributor or Van Kampen
Investments is paid by the respective entity.

B-19
<PAGE> 41

The Funds pays the compensation of all other officers and trustees of the Funds.
Funds in the Fund Complex, including the Funds, pay the Trustees who are not
affiliated persons of the Adviser, the Distributor or Van Kampen Investments, an
annual retainer of $97,500, which retainer is allocated among the funds based on
the relative net assets of such funds, and $250 per fund per meeting of the
Board of Trustees, as well as reimbursement of expenses incurred in connection
with such meetings. Under the Funds' retirement plans, trustees who are not
affiliated with the Adviser, the Distributor or Van Kampen Investments, have at
least ten years of service (including years of service prior to adoption of the
retirement plan) and retire at or after attaining the age of 60, are eligible to
receive a retirement benefit from each Fund equal to $2,500 for each of the ten
years following such trustee's retirement. Under certain conditions, reduced
benefits are available for early retirement. Under the Funds' deferred
compensation plans, a trustee who is not affiliated with the Adviser, the
Distributor or Van Kampen Investments can elect to defer receipt of all or a
portion of the trustee's fees earned by such trustee until such trustee's
retirement. The deferred compensation earns a rate of return determined by
reference to the Funds or other funds in the Fund Complex selected by the
trustee. To the extent permitted by the 1940 Act, the Funds may invest in
securities of other funds in the Fund Complex in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Funds.

COMPENSATION TABLE

<TABLE>
<CAPTION>
FUND COMPLEX
------------------------------------------------------
AGGREGATE
ESTIMATED
PENSION TOTAL
YEAR FIRST AGGREGATE OR RETIREMENT ESTIMATED COMPENSATION
APPOINTED OR COMPENSATION BENEFITS ACCRUED AGGREGATE ANNUAL BEFORE DEFERRAL
ELECTED TO BEFORE DEFERRAL AS PART OF BENEFITS UPON FROM FUND
NAME(1) THE BOARD FROM THE TRUST(2) EXPENSES(3) RETIREMENT(4) COMPLEX(5)
------- ------------ --------------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
David C. Arch........ 1994 $3,028 $10,861 $97,500 $160,875
Rod Dammeyer......... 1994 3,028 19,532 97,500 161,125
Howard J Kerr........ 1994 3,028 37,215 96,250 161,125
Steven Muller........ 1998 0 22,683 7,500 161,125
Theodore A. Myers.... 1994 3,028 66,530 81,750 161,125
Hugo F.
Sonnenschein....... 1994 3,028 18,878 97,500 161,125
Wayne W. Whalen...... 1994 3,208 22,126 97,500 160,625
</TABLE>

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

(1) Messrs. McDonnell and Powell are affiliated person of the Adviser, the
Distributor or Van Kampen Investments and do not receive compensation or
retirement benefits from the Funds.

(2) The amounts shown in this column represent the Aggregate Compensation
before Deferral with respect to the Trusts' fiscal year ended December 31,
1998. The following trustees deferred compensation from the Trusts' during
the fiscal year ended December 31, 1998 as follows: Mr. Dammeyer, $3,028;
Mr. Kerr, $3,028; Mr. Sonnenschein, $3,028 and Mr. Whalen, $3,028. Amounts
deferred are retained by the respective Fund and earn a rate of return
determined by reference to either the return on the common shares of the
Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Funds may invest in
securities of these funds selected by

B-20
<PAGE> 42

the trustees in order to match the deferred compensation obligation. The
cumulative deferred compensation (including interest) accrued with respect
to each trustee from the Registrant as of December 31, 1998 is as follows:
Mr. Dammeyer, $3,172; Mr. Kerr, $3,172; Mr. Sonnenschein, $3,272 and Mr.
Whalen $3,272.

(3) The amounts shown in this column represent the sum of the estimated Pension
or Retirement Benefit Accruals expected to be accrued by the operating
funds in the Fund Complex for their respective fiscal years end in 1998.
The retirement plan is described above the table.

(4) The amounts shown in this column represent the sum of the estimated annual
benefits payable per year by the operating funds in the Fund Complex for
each year of the 10-year period commencing in the year of such trustee's
anticipated retirement. The retirement plan is described above the
compensation table.

(5) The "Fund Complex" currently consists of 41 investment companies (including
the Funds) advised by the Adviser or its affiliates that have the same
members on each investment company's Board of Trustees. The amounts shown
in this column are accumulated from the Aggregate Compensation of the 41
operating investment companies in the Fund Complex for the year ended
December 31, 1998 before deferral by the trustees under the deferred
compensation plan. Amounts deferred are retained by the respective Fund and
earn a rate of return determined by reference to either the return on the
Common Shares of such Fund or common shares of other funds in the Fund
Complex (as defined below) as selected by the respective trustee. To the
extent permitted by the 1940 Act, the respective fund may invest in
securities of the funds selected by the trustees in order to match the
deferred compensation obligation. The Adviser and its affiliates also serve
as investment adviser for other investment companies; however, with the
exception of Mr. Whalen, the Trustees are not trustees of other affiliated
investment companies. Combining the Fund Complex with other investment
companies advised by the Adviser or its affiliates, Mr. Whalen received
Total Compensation of $285,825 for the year ended December 31, 1998.

The following table sets forth certain information (other than information
concerning Messrs. McDonnell and Powell, which is set forth above) concerning
the executive officers of the Funds, each of whom holds the same office with
each of the other open-end and closed-end investment companies advised by the
Adviser, Advisory Corp or Asset Management. The officers serve for one year or
until their respective successors are chosen and qualified. Each Fund's officers
receive no compensation from the Fund but are officers of the Adviser or Van
Kampen Investments or its affiliates and receive compensation in such
capacities.

OFFICERS

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>

Peter W. Hegel.............. Vice President Executive Vice President of the
Date of Birth: 06/25/56 Advisers, Van Kampen Management Inc.
and Van Kampen Advisors Inc. Prior to
September 1996, Director of McCarthy,
Crisanti & Maffei, Inc. Prior to July
1996, Director of VSM Inc. Vice
President of each of the Van Kampen
Funds and other investment companies
advised by the Advisers or their
affiliates.
</TABLE>

B-21
<PAGE> 43

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Curtis W. Morell............ Vice President and Chief Senior Vice President of the Advisers
2500 Post Oak Blvd. Accounting Officer and Van Kampen Investments. Vice
Houston, TX 77056 President and Chief Accounting Officer
Date of Birth: 08/04/46 of each of the Van Kampen Funds and
other investment companies advised by
the Advisers or their affiliates.

John L. Sullivan............ Vice President, Treasurer Senior Vice President of the Advisers,
Date of Birth: 08/20/55 and Chief Financial Officer Van Kampen Management Inc., and Van
Kampen Investments. Treasurer and
Chief Financial Officer of each of the
Van Kampen Investments Funds and other
investment companies advised by the
Advisers and their affiliates.

Edward C. Wood III.......... Vice President Senior Vice President of the Advisers,
Date of Birth: 01/11/56 Van Kampen Investments, the
Distributor Van Kampen Insurance
Agency of Illinois Inc. and Van Kampen
Management Inc. Vice President of each
of the Van Kampen Funds and other
investment companies advised by the
Advisers and their affiliates.

Tanya M. Loden.............. Controller Vice President of the Advisers and Van
2500 Post Oak Blvd. Kampen Investments. Controller of each
Houston, TX 77056 of the Van Kampen Funds and other
Date of Birth: 11/19/59 investment companies advised by the
Advisers and their affiliates.

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

B-22
<PAGE> 44

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Scott E. Martin............. Assistant Secretary Senior Vice President, Deputy General
Date of Birth: 08/20/56 Counsel and Assistant Secretary of Van
Kampen Investments. Senior Vice
President, Deputy General Counsel and
Secretary of the Advisers, the
Distributor, Van Kampen Management
Inc., Van Kampen Advisors Inc.,
American Capital Contractual Services,
Inc., Van Kampen Exchange Corporation,
Van Kampen Investor Services Inc., Van
Kampen Insurance Agency of Illinois
Inc., Van Kampen System Inc. and Van
Kampen Recordkeeping Services Inc.
Prior to July of 1998, Mr. Martin was
Senior Vice President, Deputy General
Counsel and Assistant Secretary of
VK/AC Holding, Inc. Prior to April of
1998, Senior Vice President, Deputy
General Counsel and Secretary of Van
Kampen Equity Advisors Corp. Prior to
April of 1997, Senior Vice President,
Deputy General Counsel and Secretary
of Van Kampen Services Inc. and Van
Kampen Merritt Equity Holdings Corp.
Prior to September 1996, Deputy
General Counsel and Secretary of
McCarthy, Crisanti & Maffei, Inc.
Prior to July 1996, Senior Vice
President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc.
Assistant Secretary of each of the Van
Kampen Funds and other investment
companies advised by the Advisers and
their affiliates.

Weston B. Wetherell......... Assistant Secretary Vice President, Associate General
Date of Birth: 06/15/56 Counsel and Assistant Secretary of Van
Kampen Investments, the Advisers, the
Distributor, Van Kampen Management
Inc. and Van Kampen Advisors Inc.
Assistant Secretary of each of the Van
Kampen Funds and other investment
companies advised by the Advisers and
their affiliates.

Steven M. Hill.............. Assistant Treasurer Vice President of Advisers Van Kampen
Date of Birth: 10/16/64 Management Inc. and Van Kampen
Investments. Assistant Treasurer of
each of the Van Kampen Funds and other
investment companies advised by the
Advisers and their affiliates.
</TABLE>

B-23
<PAGE> 45

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
M. Robert Sullivan.......... Assistant Controller Assistant Vice President of the
2800 Post Oak Blvd. Advisers, Van Kampen Management Inc.
Houston, TX 77056 and Van Kampen Investments. Assistant
Date of Birth: 03/30/33 Controller of each of the Van Kampen
Funds and other investment companies
advised by the Advisers and their
affiliates.
Edward A. Treichel.......... Vice President Senior Vice President of the Adviser
Date of Birth: 08/21/43 and an Agent of Van Kampen Funds Inc.
John M. McCareins........... Vice President First Vice President of the Adviser
Date of Birth: 01/31/49 and an Agent of Van Kampen Funds Inc.
Michael P. Kamradt.......... Vice President First Vice President of the Adviser
Date of Birth: 05/14/56 and Van Kampen Management and an agent
of Van Kampen Funds Inc.
</TABLE>

With respect to each Fund, as of April , 1999, the trustees and officers as
a group owned less than 1% of the outstanding shares of the Fund. At such date,
the "interested persons" of the Fund as a group owned an aggregate of less than
5% of the outstanding shares of the Fund and no person owned 5% or more of the
outstanding shares of the Fund except as noted below.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF PERCENT OF
FUND BENEFICIAL OWNER BENEFICIAL OWNERSHIP FUND
---- ------------------- -------------------- ----------
<S> <C> <C> <C>
ACTIVE CORE FUND Wendel & Co. %
FBO General Income Trust
C/O Bank of NY Mutual FD Reorg Dept
PO Box 1066 Wall Street Station
New York, NY 10286
Wendel & Co. %
FBO Klukwan Inc. Permanent Fund
C/O Bank of NY Mutual FD Reorg Dept
PO Box 1066 Wall Street Station
New York, NY 10286
LIMITED DURATION FUND Jerry McCall TR %
Plumbers Local Union Number 68
Group Protection PL DTD 1981
PO Box 8746
Houston, TX 77249-8746
Jerry McCall TR %
UA Plumbers Local Union 68
Apprenticeship Fund
DTD 03/29/56
PO Box 8746
Houston, TX 77249-8746
</TABLE>

Those entities which own more than 25% of the outstanding shares of any Fund
would be deemed to control the Fund within the meaning of the 1940 Act.

B-24
<PAGE> 46

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISORY AGREEMENT

Van Kampen Management Inc. (the "Adviser") is the investment adviser for each
of the Funds. The Adviser provides investment advice to a wide variety of
institutional, individual and investment company clients and, together with its
affiliates, had aggregate assets under management or supervision of more than
$75 billion. The Adviser was incorporated as a Delaware corporation in 1990.

The investment advisory agreement between the Adviser and each Fund provides
that the Adviser will supply investment research and portfolio management,
including the selection of securities for the Fund to purchase, hold or sell and
the selection of brokers and dealers through whom the Fund's portfolio
transactions are executed. The Adviser also administers the business affairs of
each Fund, furnishes offices, necessary facilities and equipment, provides
administrative services, and permits its officers and employees to serve without
compensation as officers of the Fund and trustees of the Trust if duly elected
to such positions. Day to day management of the portfolios of each Fund is the
responsibility of a team of officers of the Adviser.

The agreement provides that the Adviser shall not be liable for any error of
judgment or of law, or for any loss suffered by a Fund in connection with the
matters to which the agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.

The Adviser's activities are subject to the review and supervision of the
Board of Trustees of the Trust, of which each Fund is a series, to whom the
Adviser renders periodic reports of each Fund's investment activities. Each Fund
pays the Adviser a fee (accrued daily and paid monthly) equal to a percentage of
its respective average daily net assets as follows:

<TABLE>
<CAPTION>
AVERAGE
DAILY % PER
FUND NET ASSETS ANNUM
---- ---------- -----
<S> <C> <C>
Active Core Fund...................... Up to one billion dollars 0.30%
Thereafter 0.25%
Limited Duration Fund................. Up to one billion dollars 0.30%
Thereafter 0.25%
</TABLE>

Each Fund's investment advisory agreement with the Adviser dated May 31, 1997
was approved by the shareholders of each respective Fund on May 28, 1997. Each
agreement will continue until May 31, 1999, and will remain in effect from year
to year if specifically approved by the Trustees of the Trust or the Fund's
shareholders and by the disinterested Trustees of the Trust in compliance with
the requirements of the 1940 Act. Each agreement may be terminated without
penalty upon 60 days written notice by either party and will automatically
terminate in the event of assignment.

Subject to the expense limitations discussed below, each Fund has agreed to
assume and pay the charges and expenses of its operations, including the
compensation of the Trustees of the Trust (other than those who are affiliated
persons, as defined in the 1940 Act, of the Trust, the Adviser or the
Distributor), the charges and expenses of independent accountants, legal
counsel, any transfer or dividend disbursing agent and the custodian (including
fees for safekeeping of securities), costs of calculating net asset value, costs
of acquiring and disposing of portfolio securities, interest (if any) on

B-25
<PAGE> 47

obligations incurred by the Fund, costs of share certificates, membership dues
in the Investment Company Institute or any similar organization, costs of
trustee and officer errors and omissions insurance, reports and notices to
shareholders, costs of registering shares of the Funds under the federal
securities laws, miscellaneous expenses and all taxes and fees to federal,
state, foreign or other governmental agencies.

EXPENSE LIMITATION. In the interest of limiting the overall expenses of the
Funds, the Adviser has agreed to waive fees or reimburse each Fund for certain
expenses, such that certain expenses of each Fund, including the advisory fees
(but excluding interest, taxes, brokerage commissions and other portfolio
transaction expenses, other expenditures which are capitalized in accordance
with generally accepted accounting principles, and any extraordinary costs and
expenses) will not exceed the following amounts (expressed as a percentage of
average net assets on an annual basis).

<TABLE>
<S> <C>
Active Core Fund............................................ 0.40%
Limited Duration Fund....................................... 0.40%
</TABLE>

Fees foregone or payments made by the Adviser with respect to a Fund pursuant
to the expense limitation are contingent liabilities of a Fund which are subject
to potential reimbursement by that Fund to the Adviser, provided that such
reimbursement may be made without causing the annual expense ratio of the Fund
to exceed the applicable limitation set forth above, or such lower amount as may
be imposed by any state expense limitation to which the Trust is subject, and
provided such reimbursement is made within four years of the recognition of the
contingent liability by the Fund. If a reimbursement appears probable, it will
be accounted for as an expense of the Fund regardless of the time period over
which the reimbursement may actually be paid by the Fund.

Each Advisory Agreement specifies that the Adviser will reimburse the Fund for
annual expenses of the Fund which exceed the most stringent limits prescribed by
any State in which the Fund shares are offered for sale.

In addition to making any required reimbursements, the Adviser may in its
discretion, but is not obligated to, waive all or any portion of its fee or
assume all or any portion of the expenses of a Fund.

The Adviser has agreed to waive fees or reimburse certain expenses such that
the net expenses of each Fund will not exceed 0.40% of average net assets.
Should the assets of a particular fund increase sufficiently to allow for
reimbursement of prior year's excess expenses to the Adviser without causing
that Fund's expense ratio to exceed 0.40%, that Fund may be required to
reimburse the Adviser for fees waived or expenses assumed within the previous
four years. Therefore, these expenses totaling [$137,325 and $151,534] for
Active Core Fund and Limited Duration Fund, respectively, could become
liabilities of each respective Fund at a future date.

OTHER AGREEMENTS

FUND ACCOUNTING AGREEMENT. The Fund has also entered into a Fund accounting
agreement pursuant to which the Advisory Corp. provides accounting services.
Such services are expected to enable the Funds to more closely monitor and
maintain its accounts and records. The Funds shares together with the other Van
Kampen funds advised by the Adviser, Van Kampen Investment Advisory Corp., Van
Kampen Asset Management Inc. and distributed by the Distributor in the cost of
providing such services, with 25% of such costs shared proportionately based on
the respective

B-26
<PAGE> 48

number of classes of securities issued per fund and the remaining 75% of such
cost based proportionally on their respective net assets per fund.

For the period ended December 31, 1998, after expense reimbursement the Funds
paid $ for the cost of providing accounting services for each Fund.

LEGAL SERVICES AGREEMENT. The Funds and each of the Van Kampen Investments
funds advised by Van Kampen Investment Advisory Corp., and distributed by the
Distributor have entered into Legal Services Agreements pursuant to which Van
Kampen Investments provides legal services, including without limitation:
accurate maintenance of the funds' minute books and records, preparation and
oversight of the funds' regulatory reports, and other information provided to
shareholders, as well as responding to day-to-day legal issues on behalf of the
funds. It is expected that Van Kampen Investments can render such legal services
on a more cost effective basis than other providers of such services. Payment by
the Funds for such services is made on a cost basis for the employment of
personnel as well as the overhead and the equipment necessary to render such
services. Other funds distributed by the Distributor also receive legal services
from Van Kampen Investments. Of the total costs for legal services provided to
funds distributed by the Distributor, one half of such costs are allocated
equally to each fund and the remaining one half of such costs are allocated to
specific funds based on monthly time records.

For the period ended December 31, 1998, Van Kampen Investments waived its cost
of providing legal services for each Fund.

CUSTODIAN AND INDEPENDENT ACCOUNTANTS

State Street Bank and Trust Company, 225 West Franklin Street, PO Box 1713,
Boston, MA 02105-1713, is the custodian of each Fund and has custody of all
securities and cash of each Fund. The custodian, among other things, attends to
the collection of principal and income, and payment for and collection of
proceeds of securities bought and sold by each respective Fund.

The independent accountants for each Fund are KPMG LLP, 303 East Wacker Drive,
Chicago, IL 60601. The selection of independent accountants will be subject to
ratification by the shareholders of each Fund at any annual meeting of
shareholders.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

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

The Adviser is responsible for placing portfolio transactions and does so in a
manner deemed fair and reasonable to the Funds and not according to any formula.
The primary consideration in all portfolio transactions is prompt execution of
orders in an effective manner at the most favorable price. In selecting
broker/dealers and in negotiating prices and any brokerage commissions on such
transactions, the Adviser considers the firm's reliability, integrity and
financial condition and the firm's execution capability, the size and breadth of
the market for the security, the size of and difficulty in executing the order,
and the best net price. There are many instances when, in the

B-27
<PAGE> 49

judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser to the Funds and still must be analyzed
and reviewed by its staff, the receipt of research information is not expected
to reduce its expenses materially. The investment advisory fee is not reduced as
a result of the Adviser's receipt of such research services. Services provided
may include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). Research
services furnished by firms through which the Funds effects its securities
transactions may be used by the Adviser in servicing all of its advisory
accounts; not all of such services may be used by the Adviser in connection with
the Funds. The Adviser also may place portfolio transactions, to the extent
permitted by law, with brokerage firms affiliated with the Funds, the Adviser or
the Distributor and with brokerage firms participating in the distribution of
the Funds' shares if it reasonably believes that the quality of execution and
the commission are comparable to that available from other qualified firms.
Similarly, to the extent permitted by law and subject to the same considerations
on quality of execution and comparable commission rates, the Adviser may direct
an executing broker to pay a portion or all of any commissions, concessions or
discounts to a firm supplying research or other services or to a firm
participating in the distribution of the Funds' shares.

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

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

B-28
<PAGE> 50

Trustees will consider from time to time whether the advisory fee for the Funds
will be reduced by all or a portion of the brokerage commission given to
affiliated brokers.

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

ACTIVE CORE FUND

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

LIMITED DURATION FUND

State securities laws may differ from the interpretations of federal law
expressed herein.

TAXATION

TAXATION OF THE FUNDS

The following federal income tax discussion is based on the advice of Skadden,
Arps, Slate, Meagher & Flom (Illinois) and reflects applicable tax laws as of
the date of this Statement of Additional Information.

Each Fund has elected and qualified and intends to continue to qualify each
year to be treated as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"). To qualify as a regulated investment
company, each Fund must comply with certain requirements of the Code relating
to, among other things, the source of its income and the diversification of its
assets. If a Fund so qualifies and distributes to its shareholders at least 90%
of its net investment income (which includes net short-term capital gains, but
not net capital gains,

B-29
<PAGE> 51

which are the excess of net long-term capital gains over net short-term capital
losses) in each year, it will not be required to pay federal income taxes on any
income distributed to its shareholders. Each Fund intends to distribute at least
the minimum amount of net investment income necessary to satisfy the 90%
distribution requirement. Each Fund will not be subject to federal income tax on
any net capital gains distributed to its shareholders.

In order to avoid a 4% excise tax, a Fund will be required to distribute, by
December 31 of each year, at least 98% of its ordinary income (not including
tax-exempt income) for such year and at least 98% of its capital gain net income
determined in general on an October 31 year end, plus any amounts that were not
distributed in previous taxable years. For purposes of the excise tax, any
ordinary income or capital gain net income retained by, and subject to federal
income tax in the hands of, a Fund will be treated as having been distributed.

If a Fund failed to qualify as a regulated investment company, the Fund would
be subject to tax on its income at corporate tax rates, without deduction for
any distribution to its shareholders, thereby materially reducing the amount of
any cash available for distribution to its shareholders. In addition, among
other things, capital gains of the Fund would not pass through to the
shareholders, and distributions to shareholders would be treated as dividends,
return of capital (to the extent of a shareholder's tax basis in its shares) or
gain derived from the sale or exchange of property. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge of 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order to qualify as
a regulated investment company in a subsequent year.

Some of the Funds' investment practices are subject to special provisions of
the Code that, among other things, may defer the use of certain losses of a Fund
and affect the holding period of the securities held by a Fund and the character
of the gains or losses realized by a Fund. These provisions may also require a
Fund to recognize income or gain without receiving the cash necessary to satisfy
the 90% distribution requirement and the distribution requirements for avoiding
federal income and excise taxes. Each Fund will monitor its transactions and may
make certain tax elections in order to mitigate the effect of these rules and
prevent disqualification of the Fund as a regulated investment company.

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

B-30
<PAGE> 52

TAXATION OF SHAREHOLDER DISTRIBUTIONS

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

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

Distributions attributable to any dividend income earned by a Fund will be
eligible for the dividends received deduction for corporations if certain
requirements of the Code are satisfied. A Fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the close of each
quarter of the Fund's taxable year, at least 50% of the total value of the
Fund's assets consist of securities the interest on which is exempt from federal
income tax. However, neither Fund expects to invest a sufficient amount of its
assets in such securities so as to be qualified to pay exempt-interest
dividends.

Each Fund will inform its shareholders of the source and tax status of all
distributions promptly after the close of each calendar year.

Each Fund is required, in certain circumstances, to withhold 31% of ordinary
income and certain other payments, including redemptions, paid to shareholders
who do not furnish to the Fund their correct taxpayer identification numbers (in
the case of any individual, his or her social security number) together with
certain required certifications or who are otherwise subject to backup
withholding.

SALE OF SHARES

The sale of shares (including transfers in connection with a redemption or
repurchase of shares) will be a taxable transaction for federal income tax
purposes. Selling shareholders will generally recognize gain or loss in an
amount equal to the difference between their adjusted tax basis in the shares
and the amount received. If such shares are held as a capital asset, the gain or
loss will be a capital gain or loss and will be long-term if such shares have
been held for more than one year. Any loss recognized upon a taxable disposition
of shares held for six months or less will be treated as a long-term capital
loss to the extent of any capital gain dividends received with respect to such
shares.
B-31
<PAGE> 53

For purposes of determining whether shares have been held for six months or
less, the holding period is suspended for any periods during which the
shareholder's risk of loss is diminished as a result of holding one or more
other positions in substantially similar or related property or through certain
options or short sales.

CAPITAL GAINS RATES. The maximum tax rate applicable to net capital gains
recognized by individuals and other non-corporate taxpayers is (i) the same as
the maximum ordinary income tax rate for capital assets held for one year or
less, or (ii) 20% for capital assets held for more than one year. A special 28%
tax rate may apply to a portion of the capital gain dividends paid by each Fund
with respect to its fiscal year ended December 31, 1998. Shareholders should
consult their own tax advisers as to the application of the new capital gains
rates to their particular circumstances.

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

THE DISTRIBUTOR

Shares of each Fund are offered on a continuous basis through Van Kampen Funds
Inc., 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL 60181-5555. The
Distributor is a wholly owned subsidiary of Van Kampen Investments Inc., which
is an indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co.

Pursuant to a distribution agreement, the Distributor will purchase shares of
the Funds for resale to the public, and is obligated to purchase only those
shares for which it has received purchase orders. A discussion of how to
purchase and redeem the Funds' shares and how the Funds' shares are priced is
contained in the Prospectus and below under the captions "How to Buy Shares,"
"How to Sell Shares" and "Shareholder Services."

TRANSFER AGENT

The Funds' transfer agent is Van Kampen Investor Services Inc., PO Box 418256,
Kansas City, MO 64141-9256. During the fiscal years ended December 31, 1998,
1997 and 1996 for the Active Core Fund Investor Services received fees
aggregating $ , $ and $ , respectively, for these services.
During the fiscal years ended December 31, 1998, 1997 and 1996 for the Limited
Duration Fund, Investor Services received fees aggregating $ , $ and
$ , respectively for these services. Prior to 1998, these services were
provided at cost plus a profit. Beginning in 1998, the transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive benchmarks.

LEGAL COUNSEL

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

B-32
<PAGE> 54

PERFORMANCE INFORMATION

From time to time advertisements and other sales materials for the Funds may
include information concerning the historical performance of the Funds. Any such
information will include the average total return calculated on a compounded
basis for specified periods of time.

Such advertisements and sales literature may also include a yield quotation,
which is determined on a daily basis with respect to the immediately preceding
30 day period; yield is computed by first dividing the Fund's net investment
income per share earned during such period by a Fund's maximum offering price
per share on the last day of such period. A Fund's net investment income per
share is determined by taking the interest attributable to shares earned by a
Fund during the period, subtracting the expenses attributable to shares accrued
for the period (net of any reimbursements), and dividing the result by the
average daily number of shares outstanding during the period that were entitled
to receive dividends. The yield calculation formula assumes net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six month period. In each case, such total return and yield information, if
any, will be calculated pursuant to rules established by the SEC.

In addition, the Funds may include in advertisements or other sales literature
information regarding the past performance of certain types of investments or
market indices. In lieu of or in addition to total return and yield
calculations, such information may include performance rankings and similar
information from independent organizations such as Lipper Analytical Services,
Inc., Business Week, Forbes or other industry publications. From time to time, a
Fund may compare its performance to certain securities and unmanaged indices
which may have different risk/reward characteristics than the Fund. Such
characteristics may include, but are not limited to, tax features, guarantees,
insurance and the fluctuation of principal or return. In addition, from time to
time, the Funds may utilize sales literature that includes hypotheticals.

Each Fund calculates average compounded total return by determining the
redemption value at the end of specified periods (after adding back all
dividends and other distributions made during the period) of an investment in a
given Fund at the beginning of the period, annualizing the increase or decrease
over the specified period with respect to such initial investment and expressing
the result as a percentage.

Total return figures utilized by the Funds are based on historical performance
and are not intended to indicate future performance. Total return and net asset
value per share can be expected to fluctuate over time, and accordingly upon
redemption a shareholder's shares may be worth more or less than their original
cost.

The Funds may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
the Funds from a given date to a subsequent given date. Cumulative total return
is calculated by measuring the value of an initial investment in a given Fund at
a given time, determining the value of all subsequent reinvested distributions,
and dividing the net change in the value of the investment as of the end of the
period by the amount of the initial investment and expressing the result as a
percentage.

From time to time, the Funds may include in sales literature and shareholder
reports a quotation of the current "distribution rate." Distribution rate is a
measure of the level of income and short-term capital gain dividends, if any,
distributed for a specified period. Distribution rate is determined

B-33
<PAGE> 55

by annualizing the distributions per share for a stated period and dividing the
result by the public offering price for the same period. It differs from yield,
which is a measure of the income actually earned by a Fund's investments, and
from total return, which is a measure of the income actually earned by, plus the
effect of any realized and unrealized appreciation or depreciation of, such
investments during a stated period. Distribution rate is, therefore, not
intended to be a complete measure of a Fund's performance. Distribution rate may
sometimes be greater than yield since, for instance, it may not include the
effect of amortization of bond premiums, and may include non-recurring
short-term capital gains and premiums from futures transactions engaged in by
the Fund.

The average annual total return for the Active Core Fund for (i) the one year
period ended December 31, 1998 was % and (ii) the approximately one-year
and eight-month period from April 23, 1996 (the commencement of investment
operations of the Fund) through December 31, 1998 was %. The cumulative
non-standardized total return from the Fund's inception to December 31, 1998 was
%.

The average annual total return for the Limited Duration Fund for (i) the
one-year period ended December 31, 1998 was % and (ii) the approximately
one year and eight-month period from April 23, 1996, (the commencement of
investment operations of the Fund) through December 31, 1998 was %. The
cumulative non-standardized total return from the Fund's inception to December
31, 1998 was %.

HOW TO BUY SHARES

Shares of each Fund are offered at a price equal to net asset value per share,
without a sales charge. The minimum initial investment is $500,000. The minimum
subsequent investment is $25,000. The Funds offer their shares to the public on
a continuous basis through Van Kampen Funds Inc. (the "Distributor"), as
principal underwriter, which is located at 1 Parkview Plaza, PO Box 5555,
Oakbrook Terrace, Illinois 60181-5555. The Distributor receives no compensation
for this service.

In addition, investors may, subject to the approval of the Trust, purchase
shares of a Fund with liquid securities that are eligible for purchase by the
Fund (consistent with such Fund's investment policies and restrictions) and that
have a value that is readily ascertainable. These transactions will be effected
only if the Adviser intends to retain the securities in the Fund as an
investment. Assets so purchased by a Fund will be valued in the same manner as
they would be valued for purposes of pricing the Fund's shares, if such assets
were included in the Fund's assets at the time of purchase. The Trust reserves
the right to amend or terminate this practice with respect to any Fund at any
time without notice.

OTHER PURCHASE INFORMATION. Purchases of a Fund's shares will be made in full
and fractional shares. In the interest of economy and convenience, certificates
for shares will generally not be issued.

The Trust reserves the right, in its sole discretion and without prior notice,
to suspend the offering of shares of any Fund or to reject purchase orders when,
in the judgment of management, such suspension or rejection is in the best
interests of the Fund; to waive the minimum investment requirement for certain
investors; and to redeem shares if information provided in the Account
Application should prove to be incorrect in any material manner.

B-34
<PAGE> 56

Shares of the Trust may not be offered or sold in any state unless registered
or qualified in that jurisdiction or unless an exemption from registration or
qualification is available. The Funds are not registered or qualified for sale
in all jurisdictions. Potential investors should contact the Distributor at 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL 60181-5555 or call the
Explorer Institutional FundsSM at (800) 822-3699 to determine whether a Fund is
registered or qualified for sale in their particular jurisdiction.

HOW TO SELL SHARES

WRITTEN REDEMPTION REQUEST. Shareholders may sell shares without charge at any
time by mailing a written redemption request in proper form to the "Transfer
Agent" Van Kampen Investor Services Inc., PO Box 418256, Kansas City, MO
64141-9256 Attn: Explorer Institutional FundsSM. The request should indicate the
number of shares to be redeemed of a particular Fund and identify the account
number and be signed exactly as the shares are registered. If the amount being
redeemed is in excess of $50,000 or if the redemption proceeds will be sent to
an address other than the address of record, the signature(s) must be guaranteed
by a member firm of a principal stock exchange, a commercial bank or trust
company which is a member of the Federal Deposit Insurance Corporation (the
"FDIC"), a credit union or a savings association. The guarantee must state the
words "Signature Guaranteed" along with the name of the granting institution.
Shareholders should verify with the institution that it is an eligible guarantor
prior to signing. A guarantee from a notary public is not acceptable. If
certificates are held for the shares being redeemed, such certificates must be
sent and endorsed for transfer or accompanied by an endorsed stock power. Share
certificates should be sent by registered mail to Van Kampen Investor Services
Inc., PO Box 418256, Kansas City, MO 64141-9256. Shareholders will receive the
net asset value per share next computed after the Transfer Agent receives the
redemption request and certificates (if any) in proper form.

TELEPHONE REDEMPTIONS. Shareholders may sell shares without charge by calling
their Fund at (800) 822-3699 before 4:00 p.m. Central time to request a
redemption. There is a $50,000 minimum per request if the redemption proceeds
are to be mailed to the shareholder or wired to a bank. Prior to redeeming
shares by telephone the "Expedited Telephone Redemption" section of either the
Account Application or Expedited Telephone Redemption and Exchange Request Form
(the "Authorization") must be completed by the shareholder and be on file with
the Transfer Agent. The signature(s) on the Authorization must be guaranteed by
a member firm of a principal stock exchange, a commercial bank or trust company
which is a member of the FDIC, a credit union or a savings association unless
the Authorization is completed at the time an account is originally established.
The guarantee must state the words "Signature Guaranteed" along with the name of
the granting institution. Shareholders should verify with the institution that
it is an eligible guarantor prior to signing. A guarantee from a notary public
is not acceptable. A redemption requested by telephone will be processed at the
net asset value next determined after the request is received. The proceeds
would then be made payable to the registered shareowner(s) and mailed to the
address registered on the account or wired to a bank, as requested on the
Authorization. Shareholders cannot redeem shares by telephone if certificates
are held for those shares. This service is not available with respect to shares
held in an Individual Retirement Account for which State Street Bank and Trust
Company acts as custodian. In addition, this service is not available with
respect to shares purchased by check until 15 days after purchase.

B-35
<PAGE> 57

By establishing the telephone redemption service, a shareholder authorizes,
the Trust, the Funds, the Distributor or Van Kampen Investor Services Inc.
("Investor Services") to act upon the instructions of any person by telephone to
redeem shares for any account for which such service has been authorized to the
address of record of such account or such other address as is listed in the
Authorization. The Funds, the Trust, the Distributor and Investor Services
employ procedures reasonably believed to confirm that instructions communicated
by telephone are genuine. Such procedures include requiring a person attempting
to redeem shares by telephone to provide, on a recorded line, the name on the
account, a social security number or tax identification number and such
additional information as may be included in the Authorization. An investor
agrees that no such person will be liable for any loss, liability, cost or
expense arising out of any request, including any fraudulent or unauthorized
request. This service may be amended or terminated at any time by the Trust, the
Funds, the Distributor or Investor Services. If an investor is unable to reach a
Fund by telephone, he or she may redeem shares pursuant to the procedures set
forth above under the caption "Written Redemption Request." During periods of
extreme economic or market changes, it may be difficult for investors to reach
the Fund by telephone and to effect telephone redemptions.

A Fund will not honor a request for redemption, whether in writing or by
telephone, until it has confirmed receipt of good funds with respect to the
purchase of such shares.

GENERAL. When shares are redeemed by a Fund, a check for the proceeds (net of
any required tax withholding) ordinarily will be mailed to shareholders within
one business day after a redemption request or repurchase order and share
certificates (if any) are received in proper form as set forth above. Wire
transfers from a Fund of redemption proceeds, in the manner described above,
ordinarily will be transmitted to the shareholder within one business day. In
each case, the Trust reserves the right to take up to seven days to mail or wire
redemption proceeds. If any shares are redeemed or repurchased shortly after
purchase, a Fund will not mail the proceeds until checks received for the
purchase of shares have cleared, which may take 10 days or more. The proceeds,
of course, may be more or less than the cost of the shares.

The right of redemption or resale to a Fund may be suspended or the date of
payment postponed during any period when the New York Stock Exchange is closed
(other than customary weekend and holiday closings), when an emergency exists as
defined by rules and regulations of the Securities and Exchange Commission, or
during any period when the Securities and Exchange Commission has by order
permitted such suspension or postponement.

Due to the relatively high cost of maintaining small accounts, the Funds
reserve the right to redeem shares in any account for their then-current value
(which will be promptly paid to the investor) if at any time, due to redemption
by the investor, the shares in the account do not have a value of at least
$250,000. A shareholder will receive advance notice of a mandatory redemption
and will be given at least 30 days to bring the value of its account up to at
least $250,000.

Neither the Trust, the Funds, the Distributor nor Investor Services will be
liable for any loss, cost or expense for acting on instructions (whether in
writing or by telephone) believed by the party receiving such instructions to be
genuine and in accordance with the procedures described in the Prospectus or
this Statement of Additional Information.

The Trust agrees to redeem shares of each Fund solely in cash up to the lesser
of $2,000,000 or 1.00% of the respective Fund's net assets during any 90-day
period for any one shareholder. In

B-36
<PAGE> 58

consideration of the best interests of the remaining shareholders of each Fund,
the Trust reserves the right to pay any redemption price exceeding this amount
in whole or in part by a distribution in kind of securities held by the
respective Fund in lieu of cash. It is unlikely that shares will be redeemed in
kind. If shares are redeemed in kind, however, the redeeming shareholder should
expect to incur transaction costs upon the disposition of the securities
received in the distribution.

SHAREHOLDER SERVICES

EXCHANGE PRIVILEGE. Any shares of a Fund which have been registered in a
shareholder's name for at least 15 days may be exchanged for shares of any other
Fund of the Explorer Institutional FundsSM which are then available for sale.
Under the exchange privilege, the Funds offer to exchange their respective
shares on the basis of relative net asset value per share.

In order to qualify for the exchange privilege, it is required that the shares
being exchanged have a net asset value of at least $250,000 (unless prior
approval has been obtained from the Trust). Shareholders will be able to effect
an exchange by telephone by calling a Fund at (800) 822-3699 prior to 4:00 p.m.
Central Standard time and requesting the exchange. The exchange will be
processed at the net asset values of the respective Fund next determined after
receipt of such request. By utilizing the telephone exchange service, a
shareholder authorizes the Trust or Investor Services to act upon the
instructions of any person by telephone to exchange shares from any account of a
Fund for which such service has been authorized to any identically registered
account(s) with any other Fund. The Funds, the Trust, the Distributor and
Investor Services employ procedures reasonably believed to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring a person attempting to exchange shares by telephone to provide, on a
recorded line, the name on the account, a social security or tax identification
number and such additional information as may be necessary or appropriate. An
investor agrees that no such person will be liable for any loss, liability, cost
or expense arising out of any request, including any fraudulent or unauthorized
request. This service may be amended or terminated at any time by Investor
Services or the Trust. If a shareholder has certificates for any shares being
exchanged, such certificates must be surrendered prior to the exchange in the
same manner as in redemption of such shares. See "How to Sell Shares--Telephone
Redemptions." Any shares exchanged between a Fund and any of the other Funds
will begin earning dividends on the next business day after the exchange is
effected. Before effecting an exchange, shareholders in a Fund should obtain and
read a current prospectus of the Fund into which the exchange is to be made.
SHAREHOLDERS MAY ONLY EXCHANGE INTO SUCH OTHER FUNDS AS ARE LEGALLY AVAILABLE
FOR SALE IN THEIR STATE.

An exchange between Funds pursuant to the exchange privilege is treated as a
sale for federal income tax purposes and, depending upon the circumstances, a
short- or long-term capital gain or loss may be realized.

The exchange privilege may be modified or terminated at any time, subject to
the requirement that the Funds give prominent notice thereof at least 60 days
prior to the effective date of the modification or termination in certain
circumstances. The Funds reserve the right to limit the number of times a
shareholder may exercise the exchange privilege.

B-37
<PAGE> 59

INSTRUCTIONS REGARDING BACKUP WITHHOLDING

You may be, or may have been, notified that you are subject to backup
withholding under section 3406(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"), because you have under-reported interest or dividends or
you were required to but failed to file a return which would have included a
reportable interest or dividend payment. IF YOU HAVE BEEN SO NOTIFIED AND YOU
HAVE NOT RECEIVED A SUBSEQUENT NOTICE FROM THE INTERNAL REVENUE SERVICE ADVISING
YOU THAT BACKUP WITHHOLDING HAS BEEN TERMINATED, YOU MUST STRIKE OUT THE
LANGUAGE ON THIS APPLICATION FORM CERTIFYING THAT YOU ARE NOT SUBJECT TO BACKUP
WITHHOLDING.

Caution: There are other situations where you may be subject to backup
withholding. Please read these instructions carefully.

BACKUP WITHHOLDING

The Fund must generally withhold 31% of taxable interest, dividend, and
certain other payments if you are subject to backup withholding. You are subject
to backup withholding if:

(1) You fail to furnish your taxpayer identification number to the
Fund, OR

(2) The Internal Revenue Service notifies the Fund that you furnished
an incorrect taxpayer identification number, OR

(3) You are notified that you are subject to backup withholding (under
section 3406(a)(1)(C) of the Code), OR

(4) You fail to certify to the Fund that you are not subject to backup
withholding under (3) above, or fail to certify your taxpayer
identification number.

To prevent backup withholding on these payments be sure to notify the Fund of
your correct taxpayer identification number and properly certify that you are
not subject to backup withholding under section 3406(a)(1)(C) of the Code. You
should use this application form for this purpose.

If you are subject to backup withholding and you strike out the language on
this application form certifying that you are not subject to backup withholding,
you should nonetheless provide your correct taxpayer identification number to
the Fund and certify that it is correct.

TAXPAYER IDENTIFICATION NUMBER

The taxpayer identification number is the social security number or employer
identification number of the record owner of the account. If the account belongs
to you as an individual, give your social security number. If you have any
questions about what number to provide, contact the Transfer Agent at the
address or telephone number set forth at the top of this application form.

Certain entities and certain payments are exempted from backup withholding. If
you think you may be exempt, contact the Transfer Agent at the address or
telephone number set forth at the top of this application form.

If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for
B-38
<PAGE> 60

Employer Identification Number, at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number. Write
"applied for" in place of your number. When you get a number, submit a new
application form to the Fund. If you do not provide your taxpayer identification
number to the Fund within 60 days, backup withholding will begin and continue
until you furnish your taxpayer identification number to the Fund.

You may be subject to penalties if you fail to furnish your taxpayer
identification number, provide false information or falsify information with
respect to backup withholding.

B-39
<PAGE> 61

INDIVIDUAL APPLICATION
- --------------------------------------------------------------------------------

1 ACCOUNT REGISTRATION

<TABLE>
<S> <C>
Mail Application to:
INITIAL INVESTMENT($500,000 Minimum) Edward Treichel, Sr., VP
Wire instructions will be supplied upon receipt of EXPLORER INSTITUTIONAL FUNDS(SM)
application Explorer Institutional Institutional Asset Management
Active Core Fund Amount: $ 4th Floor
------------ 1 Parkview Plaza
Explorer Institutional Limited Duration Fund PO Box 5555
Amount: $ Oakbrook Terrace, IL 60181-5555
------------ Phone # 1-800-822-3699
-------------------------------------------------------------------------------------------------
A. INDIVIDUAL OR JOINT TENANTS SOCIAL SECURITY NUMBER

-------------------------------------------------- ------------------------------------------
FIRST MIDDLE LAST
Registration will be "Joint Tenants with
Right of Survivorship" unless otherwise
specified here:

-------------------------------------------------- ------------------------------------------
FIRST MIDDLE LAST

B. ADDRESS

-------------------------------------------------- ------------------------------------------
STREET OR P.O. BOX TELEPHONE (DURING THE DAY)

-------------------------------------------------- ------------------------------------------
CITY STATE ZIP CODE CITIZEN OF
===================================================================================================
2 DISTRIBUTIONS All distributions are reinvested in shares of the Fund unless you elect otherwise.
[ ] Payment Order. Dividends and redemptions should be wired to the following bank rather than the
registered owner.

-------------------------------------------------- ------------------------------------
BANK NAME ACCOUNT NUMBER
--------------------------------------------------

--------------------------------------------------
ADDRESS
--------------------------------------------------
CITY STATE ZIP CODE
</TABLE>

================================================================================
3 AUTOMATED ACCOUNT SERVICES (This section must be completed or redemption
requests can only be accepted in writing)

A. EXPEDITED TELEPHONE REDEMPTIONS

[ ] I authorize the Fund, upon receipt of instructions received by telephone
from any person, to redeem shares from my account to wire the proceeds
of redemptions to my commercial bank account as follows. I understand,
as set forth in the prospectus, that shareholders bear the risk of loss
with respect to fraudulent telephone redemptions (subject to the terms
and conditions set forth in the prospectus).

Wires: Minimum $
---------------.

B. AUTOMATED DIVIDEND PROGRAMS

I authorize the Fund to:

[ ] Deposit distributions from my Fund Account into the bank account
indicated (subject to the terms and conditions outlined in the
Prospectus). NOTE: IF NAME OF BANK ACCOUNT IS OTHER THAN THE
REGISTRATION OWNER OF THE FUND ACCOUNT, THE SIGNATURE GUARANTEE IN #4
MUST BE COMPLETED.
================================================================================
X-1
<PAGE> 62

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

4 SIGNATURE AND BACKUP WITHHOLDING CERTIFICATE

I certify that I am of legal age and have received and read the Fund's
current prospectus. Under penalty of perjury, I certify that (1) the number
shown on this application form is the correct taxpayer identification number
and (2) I am not subject to backup withholding because I have not been
notified by the Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or
the IRS has notified me that I am no longer subject to backup withholding.

<TABLE>
<S> <C>
Signature Guarantee (if required)
--------------------------------------- --------------------- ------------------------------------------------

SIGNATURE DATE
--------------------------------------- --------------------- ------------------------------------------------
JOINT OWNER DATE

</TABLE>

You must cross out item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting interest or
dividends on your tax return and you have not been notified by the IRS that
you are no longer subject to backup withholding.
- --------------------------------------------------------------------------------

5 COMPLETED BY ACCOUNT EXECUTIVE

----------------------------------------------------- ---------------------------------
NAME OF VAN KAMPEN ACCOUNT EXECUTIVE TELEPHONE

-----------------------------------------------------
OFFICE LOCATION
</TABLE>

VK Account Number/Date
------------------------------------------------

------------------------------------------------
</TABLE>

X-2
<PAGE> 63

INSTITUTIONAL APPLICATION
- --------------------------------------------------------------------------------

1 ACCOUNT REGISTRATION

<TABLE>
<S> <C>
Mail Application to:
INITIAL INVESTMENT($500,000 Minimum) Edward Treichel, Sr., VP
Wire instructions will be supplied upon receipt of EXPLORER INSTITUTIONAL FUNDS(SM)
application Institutional Asset Management
Explorer Institutional Active 4th Floor
Core Fund (7481) Amount: $_____________ 1 Parkview Plaza
PO Box 5555
Explorer Institutional Limited Oakbrook Terrace, IL 60181-5555
Duration Fund (7482) Amount:$______________ Phone # 1-800-822-3699
------------------------------------------------------------
</TABLE>

A. CORPORATION, ORGANIZATION, PARTNERSHIP, FIDUCIARY, TRUST, ETC.

- -------------------------------------------------- -------------------------
NAME TAX IDENTIFICATION NUMBER

- -------------------------------------------------- -----------------------
NAME(S) OF TRUSTEES/BENEFICIARY(IES) TO BE DATE OF TRUST AGREEMENT
INCLUDED IN REGISTRATION

- --------------------------------------------------------------------------------
2 DISTRIBUTIONS All distributions are reinvested in shares of the Fund unless
you elect otherwise.
[ ] Payment Order. Dividends and redemptions should be wired to the
following bank rather than the registered owner.

------------------------------------------------------------ ------------------------------------
BANK NAME ACCOUNT NUMBER

------------------------------------------------------------
ADDRESS

------------------------------------------------------------
CITY STATE ZIP CODE
</TABLE>

- --------------------------------------------------------------------------------
3 AUTOMATED ACCOUNT SERVICES (This section must be completed or redemption
requests can only be accepted in writing)

A. EXPEDITED TELEPHONE REDEMPTIONS

Wires: minimum $ ______________.

B. AUTOMATED DIVIDEND PROGRAMS

I authorize the Fund to:

[ ] Deposit distributions from my Fund Account into the bank account
indicated (subject to the terms and conditions outlined in the
Prospectus). NOTE: IF NAME OF BANK ACCOUNT IS OTHER THAN THE REGISTERED
OWNER OF THE FUND ACCOUNT, THE SIGNATURE GUARANTEE IN #4 MUST BE
COMPLETED.
- --------------------------------------------------------------------------------

X-3
<PAGE> 64

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

4 SIGNATURE AND BACKUP WITHHOLDING CERTIFICATE

<TABLE>
<S> <C> <C>
Signature Guarantee (if required)
--------------------------------------- --------------------- ------------------------------------------------
SIGNATURE DATE

--------------------------------------- --------------------- ------------------------------------------------
JOINT OWNER DATE

</TABLE>

You must cross out item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting interest or
dividends on your tax return and you have not been notified by the IRS that
you are no longer subject to backup withholding.
----------------------------------------------------------------------------

5 COMPLETED BY ACCOUNT EXECUTIVE

----------------------------------------------------- ---------------------------------
NAME OF VAN KAMPEN ACCOUNT EXECUTIVE TELEPHONE

-----------------------------------------------------
OFFICE LOCATION
</TABLE>

VK Account Number/Date
------------------------------------------------

------------------------------------------------
</TABLE>

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

X-4
<PAGE> 65

PART C: OTHER INFORMATION

ITEM 23. EXHIBITS.

<TABLE>
<S> <C>
(a)(1) Agreement and Declaration of Trust(1)
(2) Form of Amendment to the Agreement and Declaration of Trust(2)
(3) Amended Certificate of Designation -- Active Core Fund(3)
(4) Amended Certificate of Designation -- Limited Duration Fund(3)
(b) By-Laws of the Registrant(1)
(c) Form of Specimen of Share Certificate
(1) Active Core Fund(1)
(2) Limited Duration Fund(1)
(d) Investment Advisory Agreement
(1) Active Core Fund(6)
(2) Limited Duration Fund(6)
(e) Distribution Agreement
(1) Active Core Fund(6)
(2) Limited Duration Fund(6)
(f) (1) Trustee Deferred Compensation Plan++
(2) Trustee Retirement Plan++
(g)(1) Custodian Contract(4)
(2) Transfer Agency and Service Agreement(6)
(h)(1) Fund Accounting Agreement(5)
(2) Amended and Restated Legal Services Agreement(6)
(i) Opinion and Consent of Skadden, Arps, Meagher & Flom (Illinois)(2)
(1) Active Core Fund(1)
(2) Limited Duration Fund(1)
(j) Consent of KPMG LLP++
(k) Not Applicable
(l) Form of Letter Agreement(1)
(m) Not Applicable
(n) Financial Data Schedules++
(o) Not Applicable
(p) Power of Attorney+
(z)(1) List of Certain Investment Companies in Response to Item 27(a)+
(2) List of Officers and Directors of Van Kampen Funds Inc. in Response
to Item 27(b)+
</TABLE>

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

(1) Incorporated by reference to the Trust's Registration Statement on Form
N-1A, File No. 33-84942, filed on October 11, 1994.

(2) Incorporated by reference to the Trust's Registration Statement on Form
N-1A, File No. 33-84942, filed on November 13, 1995.

(3) Incorporated by reference to the Trust's Registration Statement
Post-Effective Amendment No. 1 of Form N-1A, File No. 33-84942, filed on
April 28, 1997.

(4) Incorporated by reference to Van Kampen American Capital Growth and Income
Fund Registration Statement Post-Effective Amendment No. 25 of Form N-1A,
File No. 2-21657, filed on March 27, 1998.

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

(6) Incorporated by reference to the Trust's Registration Statement
Post-Effective Amendment No. 2 of Form N-1A, File 33-84942, filed on April
30, 1998.

+ Filed herewith.

++ To be filed by further amendment.

C-1
<PAGE> 66

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

Not applicable.

ITEM 25. INDEMNIFICATION:

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

Article 8 Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal
in which the officer or trustee may be or may have been involved by reason of
being or having been an officer or trustee, except that such indemnity shall not
protect any such person against a liability to the Registrant or any shareholder
thereof to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, the decision by the
Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.

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

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

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

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:

See "How the Funds Are Managed" in the Prospectus and "Trustees and
Officers" in the Statement of Additional Information for information regarding
the business of the Adviser. For information as to the business, profession,
vocation or employment of a substantial nature of each of the officers and
Directors of Van Kampen Management Inc., reference is made to the Adviser's
current Form ADV filed under the Investment Advisers Act of 1940, incorporated
herein by reference.

C-2
<PAGE> 67

ITEM 27. PRINCIPAL UNDERWRITERS

(a) The sole principal underwriter is Van Kampen Funds Inc. which acts as a
principal underwriter for the investment companies and the unit investment
trusts as set forth in Exhibit (z)(1) hereto.

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

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:

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

ITEM 29. MANAGEMENT SERVICES:

Not applicable.

ITEM 30. UNDERTAKINGS:

Not applicable.

C-3
<PAGE> 68

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE EXPLORER INSTITUTIONAL
TRUST, duly caused this Amendment to this Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized in the City of Oakbrook
Terrace, and the State of Illinois, on March 1, 1999.

THE EXPLORER INSTITUTIONAL TRUST

/S/ DENNIS J. MCDONNELL

By:
--------------------------------------

Dennis J. McDonnell

Chairman, Trustee and President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed on March 1, 1999 by the following
persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
Principal Executive Officer
/s/ DENNIS J. MCDONNELL Chairman, Trustee and President
- ------------------------------------------------------
Dennis J. McDonnell

Chief Financial and Accounting Officer

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

Trustees

/s/ DAVID C. ARCH* Trustee
- ------------------------------------------------------
David C. Arch

/s/ ROD DAMMEYER* Trustee
- ------------------------------------------------------
Rod Dammeyer

/s/ HOWARD J KERR* Trustee
- ------------------------------------------------------
Howard J Kerr

/s/ STEVEN MULLER* Trustee
- ------------------------------------------------------
Steven Muller

/s/ THEODORE A. MYERS* Trustee
- ------------------------------------------------------
Theodore A. Myers

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

/s/ HUGO SONNENSCHEIN* Trustee
- ------------------------------------------------------
Hugo Sonnenschein

/s/ WAYNE W. WHALEN* Trustee
- ------------------------------------------------------
Wayne W. Whalen
</TABLE>

* Signed by Dennis J. McDonnell pursuant to power of attorney, as previously
filed.

<TABLE>
<C> <S>
/s/ DENNIS J. MCDONNELL March 1, 1999
- ------------------------------------------------------
Dennis J. McDonnell
Attorney-in-fact
</TABLE>

C-4
<PAGE> 69

THE EXPLORER INSTITUTIONAL TRUST

SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 3 TO

FORM N-1A SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION ON

MARCH 1, 1999

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<S> <C>
(p) Power of Attorney
(z)(1) List of Certain Investment Companies in Response to Item
27(a)
(z)(2) List of Officers and Directors of Van Kampen Funds Inc.
</TABLE>

C-5

<PAGE> 1
EXHIBIT (p)

POWER OF ATTORNEY
-----------------

The undersigned, being officers and trustees of each of the Van Kampen
Closed End Trusts (individually, a "Trust") as indicated on Exhibit A attached
hereto and incorporated by reference, each a Massachusetts business trust
except for the Van Kampen Bond Fund and Van Kampen Convertible Securities Fund
each being a Delaware business trust (individually, a "Trust"), and being
officers and Managing General Partners of the Van Kampen Exchange Fund
(the "Fund") California Limited Partnership, do hereby, in the capacities
shown below, appoint Dennis J. McDonnell, of Oakbrook Terrace, Illinois, as
agent and attorney-in-fact with full power of substitution and resubstitution,
for each of the undersigned, to execute and deliver, for and on behalf of the
undersigned, a Certificate of Trustees and any corresponding documents with
regard to the name changes of each respective Trust and all amendments thereto,
upon the advice of counsel, filed by each Trust or the Fund with the Securities
and Exchange Commission pursuant to the provisions of the Securities Act of 1933
and the Investment Company Act of 1940.

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

Dated: February 12, 1999

<TABLE>
<CAPTION>
Signature Title
--------- -----

<S> <C>
/s/ Dennis J. McDonnell
- ------------------------- Chairman, Trustee/Managing General Partner
Dennis J. McDonnell and President

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

/s/ David C. Arch
- ------------------------ Trustee/Managing General Partner
David C. Arch

/s/ Rod Dammeyer
- ------------------------ Trustee/Managing General Partner
Rod Dammeyer

/s/ Howard J Kerr
- ------------------------ Trustee/Managing General Partner
Howard J Kerr

/s/ Steven Muller
- ------------------------ Trustee/Managing General Partner
Steven Muller

/s/ Theodore A. Myers
- ------------------------ Trustee/Managing General Partner
Theodore A. Myers

/s/ Don G. Powell
- ------------------------ Trustee/Managing General Partner
Don G. Powell

/s/ Hugo F. Sonnenschein
- ------------------------ Trustee/Managing General Partner
Hugo F. Sonnenschein

/s/ Wayne W. Whalen
- ---------------------- Trustee/Managing General Partner
Wayne W. Whalen
</TABLE>

<PAGE> 2
SCHEDULE A
----------
VAN KAMPEN MUNICIPAL INCOME TRUST
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
VAN KAMPEN HIGH INCOME TRUST
VAN KAMPEN HIGH INCOME TRUST II
VAN KAMPEN PRIME RATE INCOME TRUST
VAN KAMPEN SENIOR FLOATING RATE FUND
VAN KAMPEN SENIOR INCOME TRUST
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
VAN KAMPEN MUNICIPAL TRUST
VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST
VAN KAMPEN FLORIDA QUALITY MUNICIPAL TRUST
VAN KAMPEN NEW YORK QUALITY MUNICIPAL TRUST
VAN KAMPEN OHIO QUALITY MUNICIPAL TRUST
VAN KAMPEN PENNSYLVANIA QUALITY MUNICIPAL TRUST
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
VAN KAMPEN STRATEGIC SECTOR MUNICIPAL TRUST
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN CALIFORNIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN NEW JERSEY VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN NEW YORK VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN OHIO VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
VAN KAMPEN FLORIDA MUNICIPAL OPPORTUNITY TRUST
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST II
VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST
VAN KAMPEN BOND FUND
VAN KAMPEN CONVERTIBLE SECURITIES FUND
VAN KAMPEN INCOME TRUST
VAN KAMPEN EXCHANGE FUND
THE EXPLORER INSTITUTIONAL TRUST

<PAGE> 1
EXHIBIT(z)(1)

Item 27(a)
- ----------
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST II
VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
VAN KAMPEN BOND FUND
VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST
VAN KAMPEN CALIFORNIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN COMSTOCK FUND
VAN KAMPEN CONVERTIBLE SECURITIES FUND
VAN KAMPEN CORPORATE BOND FUND
VAN KAMPEN EMERGING GROWTH FUND
VAN KAMPEN ENTERPRISE FUND
VAN KAMPEN EQUITY TRUST
VAN KAMPEN AGGRESSIVE GROWTH FUND
VAN KAMPEN GREAT AMERICAN COMPANIES FUND
VAN KAMPEN GROWTH FUND
VAN KAMPEN MID CAP VALUE FUND
VAN KAMPEN PROSPECTOR FUND
VAN KAMPEN UTILITY FUND
VAN KAMPEN EQUITY INCOME FUND
THE EXPLORER INSTITUTIONAL TRUST
EXPLORER INSTITUTIONAL ACTIVE CORE FUND
EXPLORER INSTITUTIONAL LIMITED DURATION FUND
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
VAN KAMPEN FLORIDA MUNICIPAL OPPORTUNITY TRUST
VAN KAMPEN FLORIDA QUALITY MUNICIPAL TRUST
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
VAN KAMPEN GOVERNMENT SECURITIES FUND
VAN KAMPEN GROWTH AND INCOME FUND
VAN KAMPEN HARBOR FUND
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN HIGH INCOME TRUST
VAN KAMPEN HIGH INCOME TRUST II
VAN KAMPEN INCOME TRUST
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
VAN KAMPEN LIFE INVESTMENT TRUST
on behalf of its Series
ASSET ALLOCATION PORTFOLIO
COMSTOCK PORTFOLIO
DOMESTIC INCOME PORTFOLIO
EMERGING GROWTH PORTFOLIO
ENTERPRISE PORTFOLIO
GLOBAL EQUITY PORTFOLIO
GOVERNMENT PORTFOLIO
GROWTH AND INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
STRATEGIC STOCK PORTFOLIO
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN MUNICIPAL INCOME TRUST
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST

<PAGE> 2

VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
VAN KAMPEN MUNICIPAL TRUST
VAN KAMPEN NEW JERSEY VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN NEW YORK QUALITY MUNICIPAL TRUST
VAN KAMPEN NEW YORK VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN OHIO QUALITY MUNICIPAL TRUST
VAN KAMPEN OHIO VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN PACE FUND
VAN KAMPEN PENNSYLVANIA QUALITY MUNICIPAL TRUST
VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN PRIME RATE INCOME TRUST
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST
VAN KAMPEN SENIOR FLOATING RATE FUND
VAN KAMPEN SENIOR INCOME TRUST
VAN KAMPEN SERIES FUND, INC.
VAN KAMPEN AGGRESSIVE EQUITY FUND
VAN KAMPEN AMERICAN VALUE FUND
VAN KAMPEN ASIAN GROWTH FUND
VAN KAMPEN EMERGING MARKETS DEBT FUND*
VAN KAMPEN EMERGING MARKETS FUND
VAN KAMPEN EQUITY GROWTH FUND*
VAN KAMPEN EUROPEAN EQUITY FUND*
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
VAN KAMPEN GLOBAL EQUITY FUND
VAN KAMPEN GLOBAL FIXED INCOME FUND
VAN KAMPEN GLOBAL FRANCHISE FUND*
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
VAN KAMPEN GROWTH AND INCOME FUND II*
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
VAN KAMPEN INTERNATIONAL MAGNUM FUND
VAN KAMPEN JAPANESE EQUITY FUND*
VAN KAMPEN LATIN AMERICAN FUND
VAN KAMPEN MID CAP GROWTH FUND*
MORGAN STANLEY MONEY MARKET FUND
MORGAN STANLEY TAX-FREE MONEY MARKET FUND*
VAN KAMPEN VALUE FUND
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
VAN KAMPEN STRATEGIC SECTOR MUNICIPAL TRUST
VAN KAMPEN TAX-EXEMPT TRUST
on behalf of its Series
HIGH YIELD MUNICIPAL FUND
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN CALIFORNIA INSURED TAX FREE FUND
VAN KAMPEN CALIFORNIA TAX FREE INCOME FUND*
VAN KAMPEN FLORIDA INSURED TAX FREE INCOME FUND
VAN KAMPEN INSURED TAX FREE INCOME FUND
VAN KAMPEN INTERMEDIATE TERM MUNICIPAL INCOME FUND

<PAGE> 3

VAN KAMPEN MICHIGAN TAX FREE INCOME FUND*
VAN KAMPEN MISSOURI TAX FREE INCOME FUND*
VAN KAMPEN MUNICIPAL INCOME FUND
VAN KAMPEN NEW YORK TAX FREE INCOME FUND
VAN KAMPEN OHIO TAX FREE INCOME FUND*
VAN KAMPEN TAX FREE HIGH INCOME FUND
VAN KAMPEN TAX FREE MONEY FUND
VAN KAMPEN TRUST
VAN KAMPEN HIGH YIELD FUND
VAN KAMPEN SHORT-TERM GLOBAL INCOME FUND
VAN KAMPEN STRATEGIC INCOME FUND
VAN KAMPEN TRUST FOR INSURED MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS
VAN KAMPEN TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS
VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN U.S. GOVERNMENT FUND
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
on behalf of its Series
VAN KAMPEN GLOBAL GOVERNMENT SECURITIES FUND

* Funds have not commenced investment operations.
<PAGE> 4

<TABLE>
<S> <C>
Insured Municipals Income Trust Series 404
California Insured Municipals Income Trust Series 178
Colorado Insured Municipals Income Trust Series 88
Connecticut Insured Municipals Income Trust Series 38
Florida Insured Municipals Income Trust Series 124
Georgia Insured Municipals Income Trust Series 88
Maryland Investors' Quality Tax-Exempt Trust Series 87
Michigan Insured Municipals Income Trust Series 153
Minnesota Insured Municipals Income Trust Series 62
Missouri Insured Municipals Income Trust Series 109
New Jersey Insured Municipals Income Trust Series 125
New York Insured Municipals Income Trust Series 147
North Carolina Investors' Quality Tax-Exempt Trust Series 96
Ohio Insured Municipals Income Trust Series 111
Pennsylvania Insured Municipals Income Trust Series 240
South Carolina Investors' Quality Tax-Exempt Trust Series 86
Tennessee Insured Municipals Income Trust Series 41
Tennessee Investors' Quality Tax Exempt Trust Series 1
Virginia Investors' Quality Tax-Exempt Trust Series 83
Van Kampen American Capital Insured Income Trust Series 73
Internet Trust Series 13
The Dow SM Strategic 10 Trust January 1999
Series
The Dow SM Strategic 10 Trust January 1999
Traditional
Series
The Dow SM Strategic 5 Trust January 1999
Series
The Dow SM Strategic 5 Trust January 1999
Traditional
Series
EAFE Strategic 20 Trust January 1999
Series
EURO Strategic 20 Trust January 1999
Series
Strategic Picks Opportunity Trust January 1999
PACT Strategic 10 Trust January 1999
Series
Great International Firms Trust Series 7
Dow 30 Index Trust Series 6
Dow 30 Index and Treasury Trust Series 8
Baby Boomer Opportunity Trust Series 6
Global Energy Trust Series 8
Brand Name Equity Trust Series 8
Edward Jones Select Growth Trust January 1999
Series
Banking Trust Series 5
Morgan Stanley High-Technology 35 Index Trust Series 5
Health Care Trust Series 4
Telecommunications Trust Series 4
Utility Trust Series 4
Financial Services Trust Series 3
Morgan Stanley Euro Tec Trust Series 2
Gruntal Global Transport Trust Series 1
Josepthal Financial Institutions Growth & Consolidation Trust Series 2001
Josepthal - Select Equity Portfolio 1
Northern Illinois Equity Value Trust Series
Euro/Pacific Strategy Series 1
</TABLE>

<PAGE> 1
EXHIBIT (z)(2)

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

<TABLE>
<S> <C> <C>
Powers, Richard F. III Chairman & Chief Executive Officer Oakbrook Terrace, IL
Zimmermann, III, John H. President Oakbrook Terrace, IL
Gehman, Douglas B. Executive Vice President Houston, TX
Rybak, William R. Executive Vice President & Chief Financial Officer Oakbrook Terrace, IL
Santo, Michael H. Executive Vice President & Chief Administrative
Officer Oakbrook Terrace, IL
Wolkenberg, Paul R. Executive Vice President Oakbrook Terrace, IL
Althoff, Laurence Joseph Senior Vice President & Controller Oakbrook Terrace, IL
DeMoss, Gary R. Senior Vice President Oakbrook Terrace, IL
Doyle, John E. Senior Vice President Oakbrook Terrace, IL
Golod, Richard G. Senior Vice President Annapolis, MD
Martin, Scott Evan Sen. V.P., Deputy Gen. Coun. and Sec. Oakbrook Terrace, IL
Millington, Charles G. Senior Vice President and Treasurer Oakbrook Terrace, IL
Rein, Walter E. Senior Vice President Oakbrook Terrace, IL
Saucedo, Colette M. Senior Vice President Houston, TX
Shepherd, Frederick Senior Vice President Houston, TX
Sorenson, Steven P. Senior Vice President Oakbrook Terrace, IL
Stallard, Michael L. Senior Vice President Oakbrook Terrace, IL
West, Robert Scott Senior Vice President Oakbrook Terrace, IL
Wood, Edward C, III Senior Vice President & Chief Operating Officer Oakbrook Terrace, IL
Cackovic, Glenn M. First Vice President Laguna Nigel, CA
Hargens, Eric J. First Vice President Orlando, FL
Hogaboom, David S. First Vice President Oakbrook Terrace, IL
Martellaro, Dominic C. First Vice President Danville, CA
Mayfield, Carl First Vice President Lakewood, CO
McClure, Mark R. First Vice President Oakbrook Terrace, IL
Ryan, James J. First Vice President Oakbrook Terrace, IL
Vogel, George J. First Vice President Oakbrook Terrace, IL
Woelfel, Patrick J. First Vice President Oakbrook Terrace, IL
Abreu, Robert J. Vice President New York, NY
Ambrosio, James K. Vice President Massapequa, NY
Arcara, Brian P. Vice President Buffalo, NY
Bemstiel, Scott C. Vice President Plainsboro, NJ
Bettlach, Patricia A. Vice President Chesterfield, Mo
Biegel, Carol S. Vice President Oakbrook Terrace, IL
Bisaillon, Chistopher M. Vice President Oakbrook Terrace, IL
Boos, Michal P. Vice President Oakbrook Terrace, IL
Boyne, James Joseph V.P., Associate Gen. Coun. & Asst. Sec. Oakbrook Terrace, IL
Brooks, Robert C. Vice President Oakbrook Terrace, IL
Burke, Jr., William F. Vice President Mendham, NJ
Burket, Loren Vice President Plymouth, MN
Byrum, Christine Cleary Vice President Tampa, FL
Chambers, Daniel R. Vice President Austin, TX
</TABLE>

<PAGE> 2
[CAPTION]
<TABLE>

<S> <C> <C>
Charlino, Richard J. Vice President Houston, TX
Chiaro, Deanne Margaret Vice President Oakbrook Terrace, IL
Chriske, Scott A. Vice President Plano, TX
Clavijo, German Vice President Atlanta, GA
Cloud, Eleanor M. Vice President Oakbrook Terrace, IL
Cogliandro, Dominick Vice President and Assistant Treasurer New York, NY
Colston, Michael Vice President Louisville, KY
Cummings, Suzanne Vice President Oakbrook Terrace, IL
Dalmaso, Nicholas V.P., Associate Gen. Coun. & Asst. Sec. Oakbrook Terrace, IL
Eccleston, Michael E. Vice President Oakbrook Terrace, IL
Egan, Christopher J. Vice President Oakbrook Terrace, IL
Fow, William J. Vice President Redding, CT
Foxhoven, Nicholas J. Vice President Englewood, CO
Friday, Charles Vice President Gibsonia, PA
Griffith, Timothy D. Vice President Kirkland, WA
Haas, Kyle D. Vice President Oakbrook Terrace, IL
Hamilton, Daniel Vice President Austin, TX
Hansen, John G. Vice President Oakbrook Terrace, IL
Hays, Joseph Vice President Cherry Hill, NJ
Heffington, Gregory Vice President Ft. Collins, CO
Hill, Susan Jean Vice President and Senior Attorney Oakbrook Terrace, IL
Hindelang, Thomas R. Vice President Gilbert, AZ
Hoggard, Bryn M. Vice President Houston, TX
Hughes, Michael B. Vice President Oakbrook Terrace, IL
Hunt, Robert S. Vice President Phoenix, MD
Jackson, Lowell Vice President Norcross, GA
Jajuga, Kevin G. Vice President Baltimore, MD
Johnson, Steven T. Vice President Oakbrook Terrace, IL
Klein, Dana R. Vice President Oakbrook Terrace, IL
Kohly, Frederick Vice President Miami, FL
Kowalski, David Richard Vice President & Director of Compliance Oakbrook Terrace, IL
Kozlowski, Richard D. Vice President Atlanta, GA
Lathrop, Patricia D. Vice President Tampa, FL
Laux, Brian Vice President Staten Island, NY
Leal, Tony E. Vice President Daphne, AL
Lehew III, S. William Vice President Charlotte, NC
Levinson, Eric Vice President San Francisco, CA
Linstra, Jonathan Vice President Oakbrook Terrace, IL
Lundgren, Richard M. Vice President Oakbrook Terrace, IL
Lynn, Walter Vice President Flower Mound, TX
MacAyeal, Linda S. Vice President and Senior Attorney Oakbrook Terrace, IL
Marsh, Kevin S. Vice President Bellevue, WA

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McCartney, Brooks D. Vice President Puyallup, WA
McGrath, Anne Therese Vice President Los Gatos, CA
McGrath, Maura A. Vice President New York, NY
Mills, John Vice President Kenner, LA
Morrow, Ted Vice President Dallas, TX
Muller, Jr. Robert F. Vice President Cypress, TX
Nicolas, Peter Vice President Beverly, MA
Page, Todd W. Vice President Oakbrook Terrace, IL
Parker, Gregory S. Vice President Houston, TX
Petrungaro, Christopher Vice President Oakbrook Terrace, IL
Poli, Richard J. Vice President Philadelphia, PA
Pratt, Ronald E. Vice President Marletta, GA
Prichard, Craig S. Vice President Fairlawn, OH
Reams, Daniel D. Vice President Royal Oak, MI
Rohr, Michael W. Vice President Oakbrook Terrace, IL
Rose, Jeffrey L. Vice President Houston, TX
Rothberg, Suzette N. Vice President Plymouth, MN
Rourke, Jeffrey Vice President Oakbrook Terrace, IL
Rowley, Thomas Vice President St. Louis, MO
Sabo, Heather R. Vice President Richmond, VA
Scarlata, Stephanie Vice President Bedford Corners, NY
Scherer, Andrew J. Vice President Oakbrook Terrace, IL
Schuster, Ronald J. Vice President Tampa, FL
Shaneyfelt, Gwen L. Vice President Oakbrook Terrace, IL
Shirk, Jefferey C. Vice President Swampscott, MA
Sorensen, Traci T. Vice President Oakbrook Terrace, IL
Spangler, Kimberly M. Vice President Fairfax, VA
Stabler, Darren D. Vice President Phoenix, AZ
Staniforth, Christopher Vice President Leawood, KS
Stefanec, Richard Vice President Los Angeles, CA
Stevens, James D. Vice President North Andover, MA
Strafford, William C. Vice President Granger, IN
Syswerda, Mark A. Vice President Oakbrook Terrace, IL
Tierney, John F. Vice President Oakbrook Terrace, IL
Ulvestad, Curtis L. Vice President Red Wing, MN
Volkman, Todd A. Vice President Austin, TX
Waldron, Daniel B. Vice President Oakbrook Terrace, IL
Warland, Jeff Vice President Oakbrook Terrace, IL
Wetherell, Weston B. V.P., Associate Gen. Coun. & Asst. Sec Oakbrook Terrace, IL
Wheeler, Frank L. Vice President Oakbrook Terrace, IL
Whitworth III, Harold Vice President Oakbrook Terrace, IL
Wilson, Thomas M. Vice President Oakbrook Terrace, IL
Withers, Barbara A. Vice President Oakbrook Terrace, IL
Wynn, David M. Vice President Phoenix, AZ
Yount, James R. Vice President Mercer Island, WA

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Zacchea, Patrick M. Vice President Oakbrook Terrace, IL
Becker, Scott F. Assistant Vice President Oakbrook Terrace, IL
Binder, Brian E. Assistant Vice President Oakbrook Terrace, IL
Blackwood, Joan E. Assistant Vice President Oakbrook Terrace, IL
Bronaugh, Billie J. Assistant Vice President Houston, TX
Brunk, Gregory T. Assistant Vice President Oakbrook Terrace, IL
Costello, Gina Assistant Vice President & Assistant Secretary Oakbrook Terrace, IL
Gieser, Sarah K. Assistant Vice President Oakbrook Terrace, IL
Gray, Walter C. Assistant Vice President Houston, TX
Jones, Laurie L. Assistant Vice President Houston, TX
Jordan, Robin R. Assistant Vice President Oakbrook Terrace, IL
Lowe, Ivan R. Assistant Vice President Houston, TX
Moehlman, Stuart R. Assistant Vice President Houston, TX
Norvid, Steven R. Assistant Vice President Oakbrook Terrace, IL
Putong, Christine K. Assistant Vice President & Assistant Secretary Oakbrook Terrace, IL
Robbins, David P. Assistant Vice President Oakbrook Terrace, IL
Rosen, Regina Assistant Vice President Oakbrook Terrace, IL
Salley, Pamela S. Assistant Vice President Houston, TX
Sanchez, Vanessa M. Assistant Vice President Oakbrook Terrace, IL
Sauerborn, Thomas J. Assistant Vice President New York, NY
Saxon, Bruce Assistant Vice President Oakbrook Terrace, IL
Saylor, David T. Assistant Vice President Oakbrook Terrace, IL
Schmieder, Christina L. Assistant Vice President Oakbrook Terrace, IL
Sinai, Lauren B. Assistant Vice President Oakbrook Terrace, IL
Transier, Kristen L. Assistant Vice President Houston, TX
Villarreal, David H. Assistant Vice President Oakbrook Terrace, IL
Wells, Sharon M.C. Assistant Vice President Oakbrook Terrace, IL
Napoli, Cathy Assistant Secretary Oakbrook Terrace, IL
Brown, Elizabeth M. Officer Houston, TX
Browning, John Officer Oakbrook Terrace, IL
George, Leticia Officer Houston, TX
McLaughlin, William D. Officer Houston, TX
Newman, Rebecca Officer Houston, TX
Renn, Theresa M. Officer Oakbrook Terrace, IL
Vickrey, Larry Officer Houston, TX
Yovanovic, John Officer Houston, TX
Powers, Richard F. III Director
Rybak, William R. Director
Zimmermann, III, John H. Director

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