VAN KAMPEN AMERICAN CAPITAL BOND FUND INC, PREM14A, 1996-08-21

VAN KAMPEN AMERICAN CAPITAL BOND FUND INC
PREM14A, 1996-08-21

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

VAN KAMPEN AMERICAN CAPITAL INCOME TRUST
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:

- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- - --------------------------------------------------------------------------------
(5) Total fee paid:

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

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

- - --------------------------------------------------------------------------------
(3) Filing Party:

- - --------------------------------------------------------------------------------
(4) Date Filed:

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

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

(1) Title of each class of securities to which transaction applies:

- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- - --------------------------------------------------------------------------------
(5) Total fee paid:

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

/ / Fee paid previously with preliminary materials.

(1) Amount Previously Paid:

- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

- - --------------------------------------------------------------------------------
(3) Filing Party:

- - --------------------------------------------------------------------------------
(4) Date Filed:

- - --------------------------------------------------------------------------------
<PAGE> 3

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

VAN KAMPEN AMERICAN CAPITAL BOND FUND, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

(1) Title of each class of securities to which transaction applies:

- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- - --------------------------------------------------------------------------------
(5) Total fee paid:

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

/ / Fee paid previously with preliminary materials.

(1) Amount Previously Paid:

- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

- - --------------------------------------------------------------------------------
(3) Filing Party:

- - --------------------------------------------------------------------------------
(4) Date Filed:

- - --------------------------------------------------------------------------------
<PAGE> 4

Dear Van Kampen American Capital Fund Shareholder:

Each proxy card enclosed in this envelope represents your voting privilege in
a separate Van Kampen American Capital Fund. We have grouped your proxy cards
together for your convenience and to reduce postage expenses.

The meeting date for your Fund is October 29, 1996. Please sign all proxy
cards and return them in the postage-paid envelope included with this material.

We appreciate the prompt return of your proxy cards.
<PAGE> 5

September 4, 1996

Dear Van Kampen American Capital Fund Shareholder:

The enclosed proxy statement relates to a joint meeting of the shareholders of
the Van Kampen American Capital Funds (the "Funds"). VK/AC Holding, Inc., the
corporate parent of the investment adviser of each Fund, has entered into a
merger agreement with Morgan Stanley Group Inc. ("Morgan Stanley") and certain
of Morgan Stanley's affiliates. Pursuant to the merger agreement, your Fund's
investment adviser will become an indirect subsidiary of Morgan Stanley. Each
Fund's current investment adviser will continue to provide the Fund with
investment advisory and management services following the merger. The primary
purpose of the meeting is to permit each Fund's shareholders to consider a new
investment advisory agreement to take effect following the merger, as required
by the federal securities laws. The new investment advisory agreement between
your Fund and its investment adviser will be substantially identical to the
Fund's current investment advisory agreement, except for the dates of execution,
effectiveness and termination.

The attached proxy statement seeks shareholder approval on this and certain
other items. Although we encourage you to read carefully the full proxy
statement, we have created a brief question-and-answer section for your
convenience.

Your vote is important and your participation
in the governance of your Fund(s) does make a difference.

The proposals have been unanimously approved by the Board of Directors or
Trustees of the Fund(s), who recommend you vote "FOR" each of these proposals.
YOUR IMMEDIATE RESPONSE WILL HELP SAVE ON THE COSTS OF ADDITIONAL SOLICITATIONS.
EACH FUND VOTES SEPARATELY, SO PLEASE SIGN AND RETURN ALL OF YOUR FUND PROXY
FORMS. We look forward to your participation, and we thank you for your
continued confidence in Van Kampen American Capital.

PLEASE SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.

Sincerely,

Don G. Powell
Chief Executive Officer
<PAGE> 6

INFORMATION ABOUT YOUR PROXY STATEMENT

Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. Federal securities laws require a vote by each Fund's shareholders on
certain matters whenever the Fund's investment adviser, or its parent
corporation, is subject to a change in control. Morgan Stanley's
acquisition of the corporate parent of your Fund's investment adviser may
be deemed to be a change of control. Among the proposed items your Fund is
seeking shareholder approval on are:

- approval of a new investment advisory agreement

- approval of the reorganization and conversion into a Delaware business
trust, if applicable

- election of Directors or Trustees

- ratification of the independent auditors

Please refer to the proxy statement for a detailed explanation of the
proposed items.

Q. HOW WILL THE ACQUISITION OF THE FUND'S INVESTMENT ADVISER AFFECT MY
ACCOUNT?
A. You can expect the same management expertise and high quality shareholder
service you've grown accustomed to. The new investment advisory agreement
between your Fund and its investment adviser will be substantially
identical to the Fund's current investment advisory agreement, except for
the dates of execution, effectiveness and termination. The acquisition
will not cause a change in the portfolio manager of your Fund.

Q. WHAT OTHER SHAREHOLDER PROPOSALS WILL BE VOTED ON?
A. You are being asked to elect the nominees for your Board of Directors in
the case of Van Kampen American Capital Bond Fund, Inc. (the "Bond Fund")
and Van Kampen American Capital Convertible Securities, Inc. (the
"Convertible Securities Fund") or Trustees in the case of Van Kampen
American Capital Income Trust (the "Income Trust") and ratify the
selection of Ernst & Young LLP as the independent auditors for your
Fund(s). In addition, shareholders of the Bond Fund and the Convertible
Securities Fund are being asked to approve the reorganization and
conversion of their Funds into Delaware business trusts from their current
organization as Maryland corporations.

Q. HOW WILL THE REORGANIZATION OF MY FUND AFFECT MY ACCOUNT?
A. By reorganizing your Fund into a Delaware business trust, your Fund will
not be required to pay Texas franchise taxes. The reorganization of your
Fund
<PAGE> 7

into a Delaware business trust will not affect the investment objective,
investment policies or tax status of your Fund.

Q. WHY DO I NEED TO VOTE?
A. Your vote is needed to ensure that the proposals can be acted upon. Your
immediate response on the enclosed proxy card(s) will help save on the
costs of any further solicitations for a shareholder vote. We encourage
all shareholders to participate in the governance of their Fund(s).

Q. HOW DO THE BOARD OF DIRECTORS IN THE CASE OF THE BOND FUND AND THE
CONVERTIBLE SECURITIES FUND AND TRUSTEES IN THE CASE OF INCOME TRUST
SUGGEST THAT I VOTE?
A. After careful consideration, the Directors or Trustees of your Fund
unanimously recommend that you vote "FOR" each of the items proposed on
the enclosed proxy card(s).

Q. WHO IS PAYING FOR EXPENSES RELATED TO THE SHAREHOLDER MEETING?
A. Van Kampen American Capital will pay for those expenses relating to
reapproval of the investment advisory agreement and the Funds will pay for
those expenses related to other proposals.

Q. WHERE DO I MAIL MY PROXY CARD(S)?
A. You may use the enclosed postage-paid envelope or mail
your proxy card(s) to:
Proxy Tabulator
P.O. Box 9111
Hingham, MA 02043

Q. WHO DO I CALL IF I HAVE QUESTIONS?
A. We will be happy to answer your questions about the proxy solicitation.
Please call us at 1-800-341-2929 between 7:00 a.m. and 7:00 p.m. Central
time, Monday through Friday.
<PAGE> 8

VAN KAMPEN AMERICAN CAPITAL BOND FUND, INC.
VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES, INC.
VAN KAMPEN AMERICAN CAPITAL INCOME TRUST

ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 341-2929

NOTICE OF JOINT ANNUAL MEETING OF
SHAREHOLDERS

TO BE HELD OCTOBER 29, 1996

A Joint Annual Meeting of Shareholders (the "Meeting") of Van Kampen American
Capital Bond Fund, Inc. (the "Bond Fund"), Van Kampen American Capital
Convertible Securities, Inc. (the "Convertible Securities Fund") and Van Kampen
American Capital Income Trust (the "Income Trust") (each a "Fund" and
collectively, the "Funds"), will be held at the offices of Van Kampen American
Capital, Inc., 2800 Post Oak Boulevard, Houston, Texas 77056, in the 46th floor
conference room, on Tuesday, October 29, 1996 at 2:30 p.m. for the following
purposes:

1. With respect to each Fund, to approve or disapprove a new investment
advisory agreement;

2. With respect to the Bond Fund and the Convertible Securities Fund, to
approve or disapprove the proposed reorganization and conversion of such Funds
to Delaware business trusts;

3. With respect to each Fund, to elect four Directors or Trustees;

4. With respect to each Fund, to ratify or reject the selection of Ernst &
Young LLP as independent auditors for its current fiscal year; and

5. To transact such other business as may properly come before the Meeting
or any adjournments thereof.

Shareholders of record at the close of business on September 3, 1996 are
entitled to notice of and to vote at this meeting or any adjournment thereof.

By Order of the Board of Directors or Trustees

Nori L. Gabert, Vice President and Secretary

September 4, 1996
<PAGE> 9

EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF
ANY) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD BE DIRECTED TO THE
VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING (800) 341-2929 OR BY WRITING TO THE
FUNDS AT ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181.

SHAREHOLDERS OF THE FUNDS ARE INVITED TO ATTEND THE MEETING IN PERSON. IF YOU
DO NOT EXPECT TO ATTEND THE MEETING, PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON
THE ENCLOSED PROXY CARD WITH RESPECT TO EACH FUND IN WHICH YOU WERE A
SHAREHOLDER AS OF THE RECORD DATE, DATE AND SIGN SUCH PROXY CARD(S), AND RETURN
IT (THEM) IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND
NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.

IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK THAT
YOU MAIL YOUR PROXY PROMPTLY.

THE BOARD OF DIRECTORS OR TRUSTEES RECOMMENDS THAT YOU CAST YOUR VOTE:

FOR ALL FUNDS

- FOR APPROVAL OF EACH NEW INVESTMENT ADVISORY AGREEMENT.

- IN FAVOR OF THE NOMINEES FOR THE BOARD OF DIRECTORS OR TRUSTEES LISTED IN
THE PROXY STATEMENT.

- FOR THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE CURRENT FISCAL YEAR OF EACH FUND.

FOR THE BOND FUND AND THE CONVERTIBLE SECURITIES FUND ONLY

- FOR APPROVAL OF THE REORGANIZATION AND CONVERSION OF EACH OF BOND FUND AND
CONVERTIBLE SECURITIES FUND INTO A DELAWARE BUSINESS TRUST.

YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD(S) PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
<PAGE> 10

PROXY STATEMENT

VAN KAMPEN AMERICAN CAPITAL BOND FUND, INC.
VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES, INC.
VAN KAMPEN AMERICAN CAPITAL INCOME TRUST

ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 341-2929

JOINT ANNUAL MEETING OF SHAREHOLDERS

OCTOBER 29, 1996

This proxy statement is furnished in connection with the solicitation by the
respective Board of Directors or Trustees, as the case may be (the "Board"), of
each of the entities (defined below) of proxies to be voted at a Joint Annual
Meeting of Shareholders, and all adjournments thereof (the "Meeting"), to be
held at the offices of Van Kampen American Capital, Inc., 2800 Post Oak
Boulevard, Houston, Texas 77056, in the 46th floor conference room, Tuesday,
October 29, 1996, at 2:30 p.m. The approximate mailing date of this proxy
statement and accompanying form of proxy is September 4, 1996.

The primary purpose of the Meeting is to permit each Fund's shareholders to
consider a New Advisory Agreement (defined below) to take effect following the
consummation of the transactions contemplated by an Agreement and Plan of
Merger, dated as of June 21, 1996 (the "Merger Agreement"), among Morgan Stanley
Group Inc. ("Morgan Stanley"), MSAM Holdings II, Inc., MSAM Acquisition Inc. and
VK/AC Holding, Inc. ("VKAC Holding"), the indirect parent corporation of each
Fund's investment adviser. Pursuant to the Merger Agreement, each Fund's
investment adviser will become an indirect subsidiary of Morgan Stanley. The
shareholder vote on the New Advisory Agreements is required under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a result of Morgan
Stanley's contemplated acquisition of the investment adviser. Each Fund's New
Advisory Agreement is substantially identical to such Fund's Current Advisory
Agreement (defined below), except for the dates of execution, effectiveness and
termination.

Participating in the Meeting are holders of common stock or shares of
beneficial interest, as the case may be (collectively, the "Shares"), of (1)
each of the following two funds organized as Maryland corporations (the
"Maryland Funds"): Van Kampen American Capital Bond Fund, Inc. (the "Bond Fund")
and Van Kampen American Capital Convertible Securities, Inc. (the "Convertible
Securities Fund"); and (2) Van Kampen American Capital Income Trust (the "Income
<PAGE> 11

Trust"). Each of the Maryland Funds and Income Trust sometimes are referred to
herein as a "Fund" and collectively, as the "Funds."

The Meeting is scheduled as a joint meeting of the respective shareholders of
the Funds, because the shareholders of each of the Funds are expected to
consider and vote on similar matters. The Board has determined that the use of a
joint proxy statement for the Meeting is in the best interest of the
shareholders (the "Shareholders") of each of the Funds. In the event that any
Shareholder of any Fund present at the Meeting objects to the holding of a joint
meeting and moves for an adjournment of the meeting of such Fund to a time
immediately after the Meeting so that such Fund's meeting may be held
separately, the persons named as proxies will vote in favor of the adjournment.
Shareholders of each Fund will vote separately on each of the proposals relating
to their Fund, and an unfavorable vote on a proposal by the Shareholders of one
Fund will not affect the implementation of such a proposal by another Fund, if
the proposal is approved by the Shareholders of the other Fund.

The Board has fixed the close of business on September 3, 1996, as the record
date (the "Record Date") for the determination of holders of Shares of each Fund
entitled to vote at the Meeting. Shareholders of a Fund on the Record Date will
be entitled to one vote per share with respect to each proposal submitted to the
Shareholders of the Fund for each Share of the Fund then held, with no Share
having cumulative voting rights.

As used in the Notice of Joint Annual Meeting of Shareholders and as used
herein, the term "Trustees" shall include Directors where the use of the term
"Directors" would otherwise be appropriate.

The following table summarizes each proposal to be presented at the Meeting
and the Funds solicited with respect to such proposal:

<TABLE>
<CAPTION>
PROPOSAL AFFECTED FUNDS
----------------------------------------------------- -------------------
<S> <C> <C>
1. Approval of New Advisory Agreement Each Fund
2. Reorganization and Conversion to Delaware Business
Trust Each Maryland Fund
3. Election of Directors or Trustees Each Fund
4. Ratification of Independent Auditors Each Fund
</TABLE>

EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL
REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF
ANY) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD BE DIRECTED TO THE
VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING (800) 341-2929 OR BY WRITING TO THE
RESPECTIVE FUND, ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181.

2
<PAGE> 12

At the close of business on August 12, 1996, there were issued and outstanding
Shares of each of the Funds as set forth below:

<TABLE>
<CAPTION>
TOTAL SHARES
FUND NAME OUTSTANDING
- - ------------------------------------------------------------------- ------------
<S> <C>
Van Kampen American Capital Bond Fund, Inc. ....................... 11,362,465
Van Kampen American Capital Convertible Securities, Inc. .......... 3,241,824
Van Kampen American Capital Income Trust........................... 15,290,019
</TABLE>

As of August 12, 1996, to the knowledge of each Fund, no person beneficially
owned more than 5% of such Fund's outstanding shares.

VOTING

The voting requirement for passage of a particular proposal depends on the
nature of the particular proposal. With respect to Proposal 1, a vote of a
"majority of the outstanding voting securities" is required, which is defined
under the 1940 Act as the lesser of (i) 67% or more of the voting securities of
each respective Fund entitled to vote thereon present in person or by proxy at
the Meeting, if the holders of more than 50% of the outstanding voting
securities entitled to vote thereon are present in person or represented by
proxy, or (ii) more than 50% of the outstanding voting securities of each
respective Fund entitled to vote thereon.

With respect to Proposal 2, the affirmative vote of a majority of the
outstanding Shares of Bond Fund and two-thirds of the outstanding Shares of
Convertible Securities Fund entitled to vote on such proposal is required to
approve the Reorganization.

With respect to Proposal 3, a plurality of all the votes cast at the Meeting,
with a quorum present, is sufficient to elect a director or trustee.

With respect to Proposal 4, an affirmative vote of a majority of the votes
cast by holders of Shares present in person or represented by proxy at the
Meeting, with a quorum present, is required to ratify the selection of the
independent auditors for such Fund.

The Board recommends that you cast your vote:

- FOR approval of each New Advisory Agreement.

- FOR approval of the reorganization and conversion of each Maryland Fund to a
Delaware business trust.

- IN FAVOR of the nominees for the Board of Directors or Trustees of each Fund
listed in the proxy statement.

- FOR the ratification of the selection of Ernst & Young LLP as independent
auditors for the current fiscal year of each Fund.

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<PAGE> 13

All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon. Proxies received
prior to the Meeting on which no vote is indicated will be voted "for" each
proposal as to which it is entitled to vote. With respect to Proposal 1, the
Shares represented by a proxy that represents a broker non-vote or an abstention
will have the same effect as Shares voted "against" the proposal. With respect
to Proposal 4, abstentions and broker non-votes will not be considered "votes
cast" on the proposal. Broker non-votes (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other person entitled to vote shares on a particular matter with
respect to which the broker or nominees do not have discretionary power) will
have the same effect as abstentions. With respect to Proposals 1 and 2,
abstentions and broker non-votes will have the effect of a vote cast "against"
approval of the New Advisory Agreement and the reorganization and conversion of
each Maryland Fund to a Delaware business trust. A majority of the outstanding
Shares must be present in person or by proxy to have a quorum to conduct
business at the Meeting. Abstentions, broker non-votes and withhold authority
votes will be counted for the purpose of determining a quorum. An unfavorable
vote on a proposal by the Shareholders of one Fund will not affect the
implementation of such a proposal by another Fund, if the proposal is approved
by the shareholders of the other Fund.

Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the respective Fund a written notice of revocation, by
delivering a duly executed proxy bearing a later date or by attending the
Meeting and voting in person.

The Funds know of no business other than that mentioned in Proposals 1 through
4 of the Notice that will be presented for consideration at the Meeting. If any
other matters are properly presented, it is the intention of the persons named
on the enclosed proxy to vote proxies in accordance with their best judgment. In
the event a quorum is present at the Meeting but sufficient votes to approve any
of the proposals with respect to one or more Funds are not received, the persons
named as proxies may propose one or more adjournments of the Meeting of the
concerned Fund to permit further solicitation of proxies provided they determine
that such an adjournment and additional solicitation is reasonable and in the
interest of Shareholders based on a consideration of all relevant factors,
including the nature of the relevant proposal, the percentage of affirmative
votes then cast, the percentage of negative votes then cast, the nature of the
proposed solicitation activities and the nature of the reasons for such further
solicitation.

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<PAGE> 14

- - ------------------------------------------------------------------------------
PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENTS
- - ------------------------------------------------------------------------------

THE ADVISER

Van Kampen American Capital Asset Management, Inc. (the "Adviser") acts as
investment adviser for each Fund. The Adviser has acted as investment adviser
for each Fund since each Fund commenced its investment operations.

The Adviser currently is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("VKAC"), which is a wholly-owned subsidiary of VKAC Holding,
which in turn is controlled, through the ownership of a substantial majority of
its common stock, by The Clayton & Dubilier Private Equity Fund IV Limited
Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is managed
by Clayton, Dubilier & Rice, Inc., a New York based private investment firm. The
General Partner of C&D L.P. is Clayton & Dubilier Associates IV Limited
Partnership ("C&D Associates L.P."). The general partners of C&D Associates L.P.
are Joseph L. Rice, III, B. Charles Ames, William A. Barbe, Alberto Cribiore,
Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson,
each of whom is a principal of Clayton, Dubilier & Rice, Inc. In addition,
certain officers, directors and employees of VKAC own, in the aggregate,
approximately 6% of the common stock of VKAC Holding and have the right to
acquire, upon the exercise of options (whether or not vested), approximately an
additional 12% of the common stock of VKAC Holding. Currently, and after giving
effect to the exercise of such options, no officer or trustee of the Funds owns
or would own 5% of more of the common stock of VKAC Holding. The addresses of
VKAC Holding, VKAC and the Adviser are One Parkview Plaza, Oakbrook Terrace,
Illinois 60181 and 2800 Post Oak Blvd., Houston, Texas 77056.

Prior to December, 1994, the Adviser provided investment advisory services
under the name "American Capital Asset Management, Inc."

INFORMATION CONCERNING MORGAN STANLEY

Morgan Stanley and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co."), a
registered broker-dealer and investment adviser, and Morgan Stanley
International, are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange, commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; and global custody, securities clearance
services and securities lending. Morgan Stanley Asset Management Inc. ("MSAM")
also is a wholly-owned subsidiary of Morgan Stanley. As of June 30, 1996, MSAM,
together with its affiliated investment

5
<PAGE> 15

advisory companies, had approximately $103.5 billion of assets under management
and fiduciary advice.

THE ACQUISITION

Pursuant to the Merger Agreement, MSAM Acquisition Inc. will be merged with
and into VKAC Holding and VKAC Holding will be the surviving corporation (the
"Acquisition"). Following the Acquisition, VKAC Holding and the Adviser will be
indirect subsidiaries of Morgan Stanley.

The Adviser anticipates that the consummation of the Acquisition will occur by
the end of November 1996 provided that a number of conditions set forth in the
Merger Agreement are met or waived. The conditions require, among other things,
that as of the closing the shareholders of certain investment companies
(including the Funds) and investors in certain accounts advised by the Adviser
or its affiliates, which investment companies and accounts have aggregate assets
in excess of a specified minimum amount, have approved new investment advisory
agreements or consented to the assignment of existing investment advisory
agreements. At the closing, MSAM Acquisition Inc. will pay approximately $740
million (based on VKAC's long-term debt outstanding as of July 31, 1996) in cash
to the stockholders of VKAC Holding (excluding certain management stockholders),
and to persons owning options to purchase stock of VKAC Holding, subject to
certain purchase price adjustments set forth in the Merger Agreement. As of July
31, 1996, VKAC had long-term debt outstanding of approximately $410 million. To
the extent that pre-tax income of VKAC prior to the closing of the Acquisition
permits the repayment of its long-term debt, the purchase price for the equity
interests in VKAC Holding will be increased by the amount of long-term debt
repaid. The purchase price also is subject to certain adjustments based, among
other things, on assets under management of VKAC and its subsidiaries at the
time of closing. The Adviser also contemplates that, as part of the Acquisition,
certain officers and directors of VKAC Holding and its affiliates will
contribute to MSAM Holdings II, Inc. their existing shares of common stock of
VKAC Holding in exchange for approximately $25 million of shares of preferred
stock of MSAM Holdings II, Inc. which, in turn, will be exchangeable into common
stock, par value $1.00 per share, of Morgan Stanley at specified times over a
four year period. Such shares of preferred stock will represent, in the
aggregate, 5% of the combined voting power in MSAM Holdings II, Inc., the
remainder of which will be indirectly owned by Morgan Stanley.

VKAC Holding will engage in certain preparatory transactions prior to the
Acquisition, including the distribution to stockholders of VKAC Holding of (i)
all of VKAC Holding's investment in McCarthy, Crisanti & Maffei, Inc., a wholly-
owned subsidiary engaged in the business of distributing research and financial
information, (ii) all of VKAC Holding's investment in Hansberger Global Inves-

6
<PAGE> 16

tors, Inc., a company in which VKAC Holding made a minority investment in May
1996, and (iii) certain related cash amounts.

There is no financing condition to the closing of the Acquisition. VKAC has
been advised by Morgan Stanley that as of August , 1996, no determination has
been made whether any additional indebtedness will be incurred by Morgan Stanley
and its affiliates or VKAC and its affiliates in connection with the
Acquisition. In addition, the disposition of VKAC's outstanding long-term
indebtedness (including its bank loans and senior notes) in connection with the
Acquisition has not yet been determined.

The operating revenue of VKAC and its subsidiaries for the fiscal year ended
December 31, 1995, less expenses for the same period, was more than adequate to
service VKAC's outstanding debt. VKAC prepaid $80 million of its long-term debt
in 1995, and has continued to make debt prepayments during 1996. VKAC Holding
and VKAC believe, based on the earnings experience of VKAC and its subsidiaries,
that after the Acquisition the operating revenue of VKAC and its subsidiaries
should be more than sufficient to service their debt and that VKAC and its
subsidiaries should be able to conduct their respective operations as now
conducted and as proposed to be conducted.

The Merger Agreement does not contemplate any changes, other than changes in
the ordinary course of business, in the management or operation of the Adviser
relating to the Funds, the personnel managing the Funds or other services or
business activities of the Funds. The Acquisition is not expected to result in
material changes in the business, corporate structure or composition of the
senior management or personnel of the Adviser, or in the manner in which the
Adviser renders services to the Funds. Morgan Stanley has agreed in the Merger
Agreement that, for a period of two years from the date of the Acquisition, it
will cause the Adviser to provide compensation and employee benefits which are
substantially comparable in the aggregate to those presently provided. The
Adviser does not anticipate that the Acquisition or any ancillary transactions
will cause a reduction in the quality of services now provided to the Funds, or
have any adverse effect on the Adviser's ability to fulfill its obligations
under the New Advisory Agreements (defined below) or operate its business in a
manner consistent with past business practices.

Certain officers of the Adviser, including Don G. Powell, who also is a member
of the Board, previously entered into employment agreements with VKAC Holding
which expire from between 1997 and 2000. Certain officers of the Adviser also
previously entered into retention agreements with VKAC Holding, which will
remain in place for two years following the consummation of the Acquisition. The
Merger Agreement contemplates that Morgan Stanley will, and will cause VKAC
Holding to, honor such employment and retention agreements. The employment
agreements and retention agreements are intended to assure that the services of
the

7
<PAGE> 17

officers are available to the Adviser (and thus to the Funds) for a remaining
term of two to four years. As described above, certain officers and employees of
VKAC and the Adviser, including Mr. Powell, are expected to contribute their
existing shares of common stock of VKAC Holding to MSAM Holdings II, Inc. in
exchange for approximately $25 million of preferred stock in MSAM Holdings II,
Inc. which, in turn, will be exchangeable into common stock, par value $1.00 per
share, of Morgan Stanley at specified times over a four year period. Such shares
of preferred stock will represent, in the aggregate, 5% of the combined voting
power in MSAM Holdings II, Inc.

THE ADVISORY AGREEMENTS

Consummation of the Acquisition may constitute an "assignment" (as defined in
the 1940 Act) of the investment advisory agreement currently in effect between
each Fund and the Adviser (the "Current Advisory Agreement"). As required by the
1940 Act, the Current Advisory Agreement provides for its automatic termination
in the event of an assignment. See "The Current Advisory Agreements" below.

In anticipation of the Acquisition and in order for the Adviser to continue to
serve as investment adviser to the Funds after consummation of the Acquisition,
a new investment advisory agreement (the "New Advisory Agreement") between each
Fund and the Adviser must be approved (i) by a majority of the Trustees of each
Fund who are not parties to the New Advisory Agreement or interested persons of
any such party ("Disinterested Trustees") and (ii) by the holders of a majority
of the outstanding voting securities (within the meaning of the 1940 Act) of
each Fund. See "The New Advisory Agreements" below.

The following summary of the Current Advisory Agreements and the New Advisory
Agreements set forth herein is qualified by reference to Annex A.

THE CURRENT ADVISORY AGREEMENTS. The Current Advisory Agreement for each Fund
was last approved by a majority of the Trustees, including a majority of the
Disinterested Trustees, voting in person at a meeting called for that purpose on
June 12, 1996, to continue the Current Advisory Agreement for a period of one
year. The Current Advisory Agreement was last approved by Shareholders of each
Fund at a meeting held on December 16, 1994 relating to the acquisition of the
Adviser's corporate parent by The Van Kampen Merritt Companies, Inc.

Each Current Advisory Agreement provides that the Adviser will supply
investment research and portfolio management, including the selection of
securities for each Fund to purchase, hold or sell and the selection of brokers
through whom that 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

8
<PAGE> 18

without compensation as Trustees and officers of such Fund if duly elected to
such positions.

Each Current Advisory Agreement provides that the Adviser shall not be liable
for any error of judgment or of law, or for any loss suffered by the particular
Fund in connection with the matters to which the Current Advisory Agreement
relates except a loss resulting from willful misfeasance, bad faith, negligence
or reckless disregard of its obligations or duties under the Current Advisory
Agreement.

Each Fund's advisory fee is based on that Fund's average net assets, which are
calculated on a weekly basis. The advisory fee is payable for each calendar
month as soon as practicable after the end of that month. The fees payable to
the Adviser are reduced by any commissions, tender solicitation and other fees,
brokerage or similar payments received by the Adviser or any other direct or
indirect majority owned subsidiary of VKAC Holding, or its successors, in
connection with the purchase and sale of assets of the Fund, less any direct
expenses incurred by such person in connection with obtaining such commissions,
fees, brokerage or similar payments. Under the Current Advisory Agreement, the
Adviser agrees to use its best efforts to recapture tender offer solicitation
fees and exchange offer fees in connection with the Fund's transactions and to
advise the Board of any other commissions, fees, brokerage or similar payments
which may be possible for the Adviser or any other direct or indirect majority
owned subsidiary of VKAC Holding, or its successor, to receive in connection
with the Fund's portfolio transactions or other arrangements which may benefit
the Fund.

Set forth below are the fee schedules in effect for each Fund:

A. Van Kampen American Capital Bond Fund, Inc.
Van Kampen American Capital Convertible Securities, Inc.

.50% of the first $150 million of average weekly net assets; .45% of
the next $100 million; .40% of the next $100 million; and .35% of
average weekly net assets in excess of $350 million.

B. Van Kampen American Capital Income Trust

.65% of the Fund's average weekly net assets.

The Adviser's activities are subject to the review and supervision of the
Board to which the Adviser renders periodic reports with respect to each Fund's
investment activities. The Current Advisory Agreement may be terminated by
either party, at any time, without penalty, on not more than 60 days nor less
than 30 days written notice, or upon such shorter notice as may be mutually
agreed upon, and will automatically terminate in the event of its assignment.

The net assets of each of the Funds as of August 12, 1996, as well as other
investment companies advised by the Adviser, and other investment companies for

9
<PAGE> 19

which the Adviser acts as subadviser, the rates of compensation to the Adviser,
the aggregate amount of advisory fees paid by each Fund to the Adviser and the
aggregate amount of any other material payments by each Fund to the Adviser are
set forth at Annex B hereto.

Each Fund pays all other expenses incurred in its operation including, but not
limited to, direct charges relating to the purchase and sale of its portfolio
securities, interest charges, fees and expenses of outside legal counsel and
independent auditors, taxes and governmental fees, costs of share certificates
and any other expenses (including clerical expenses) of issuance, sale or
repurchase of its Shares, expenses in connection with its dividend reinvestment
plan, membership fees in trade associations, expenses of registering and
qualifying its Shares for sale under federal and state securities laws, expenses
of printing and distribution, expenses of filing reports and other documents
filed with governmental agencies, expenses of annual and special meetings of the
Trustees and Shareholders, fees and disbursements of the transfer agents,
custodians and sub-custodians, expenses of disbursing dividends and
distributions, fees, expenses and out-of-pocket costs of the trustees who are
not affiliated with the Adviser, insurance premiums, indemnification and other
expenses not expressly provided for in each Current Advisory Agreement, and any
extraordinary expenses of a nonrecurring nature.

THE NEW ADVISORY AGREEMENTS. The Board approved a proposed New Advisory
Agreement between each Fund and the Adviser on July 22, 1996, the form of which
is attached as Annex B. The form of the proposed New Advisory Agreement is
substantially identical to the Current Advisory Agreement, except for the dates
of execution, effectiveness and termination.

The investment advisory fee as a percentage of net assets payable by each Fund
will be the same under each New Advisory Agreement as under the Current Advisory
Agreement. If the investment advisory fee under each New Advisory Agreement had
been in effect for each Fund's most recently completed fiscal year, advisory
fees paid to the Adviser by each Fund would have been identical to those paid
under the Current Advisory Agreement.

The Board of each Fund held a joint meeting on July 22, 1996, at which meeting
the Trustees, including the Disinterested Trustees, unanimously approved the New
Advisory Agreement for each Fund and recommended each such agreement for
approval by the Shareholders of the respective Fund at the Meeting. The New
Advisory Agreement would take effect as to each Fund upon the later to occur of
(i) the obtaining of Shareholder approval or (ii) the closing of the
Acquisition. Each New Advisory Agreement will continue in effect for an initial
two year term and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.

In evaluating the New Advisory Agreements, the Board took into account that
each Fund's Current Advisory Agreement and its New Advisory Agreement,

10
<PAGE> 20

including the terms relating to the services to be provided thereunder by the
Adviser and the fees and expenses payable by such Fund, are substantially
identical, except for the dates of execution, effectiveness and termination. The
Trustees also considered other possible benefits to the Adviser and Morgan
Stanley that may result from the Acquisition, including the continued use, to
the extent permitted by law, of Morgan Stanley & Co. and its affiliates for
brokerage services and the possible retention of MSAM as a subadviser to certain
Van Kampen American Capital investment companies (not including the Funds).

The Board also considered the terms of the Merger Agreement and the possible
effects of the Acquisition upon VKAC's and the Adviser's organization and upon
the ability of the Adviser to provide advisory services to each respective Fund.
The Board considered the skills and capabilities of the Adviser and the
representations of Morgan Stanley that no material change was planned in the
current management or facilities of the Adviser. In this regard, representatives
of Morgan Stanley met with the Board at the joint board meeting at which time
such representatives described the resources available to VKAC and the Adviser,
after giving effect to the Acquisition, to secure for each Fund quality
investment research, investment advice and other client services. The Board
considered the financial resources of Morgan Stanley and Morgan Stanley's
representation to the Board that it will provide sufficient capital to support
the operations of the Adviser. The Board considered the reputation, expertise
and resources of Morgan Stanley and its affiliates in domestic and international
financial markets. The Board also considered the continued employment of members
of senior management of the Adviser and VKAC pursuant to employment and
retention agreements and the incentives provided to such members and other key
employees of the Adviser and VKAC, to be important to help to assure continuity
of the personnel primarily responsible for maintaining the quality of investment
advisory and other services for the Funds.

The Board also considered the effects on the Funds of the Adviser becoming an
affiliate of Morgan Stanley. Following the Acquisition, the 1940 Act will
prohibit or impose certain conditions on the ability of the Funds to engage in
certain transactions with Morgan Stanley and its affiliates. For example, absent
exemptive relief the Funds will be prohibited from purchasing securities from
Morgan Stanley & Co., a wholly-owned broker-dealer subsidiary of Morgan Stanley,
in transactions in which Morgan Stanley & Co. acts as a principal, and the Funds
will have to satisfy certain conditions in order to engage in securities
transactions in which Morgan Stanley & Co. acts as a broker or to purchase
securities in an underwritten offering in which Morgan Stanley & Co. is acting
as an underwriter. In this connection, management of the Adviser represented to
the Board that they do not believe these prohibitions or conditions will have a
material effect on the management or performance of the Funds.

The Board was advised that Section 15(f) of the 1940 Act is applicable to the
Acquisition. Section 15(f) of the 1940 Act permits, in the context of a change
in

11
<PAGE> 21

control of an investment adviser to a registered investment company, the receipt
by such investment adviser or any of its affiliated persons, of an amount of
benefit in connection with such sale, as long as two conditions are satisfied.
First, an "unfair burden" must not be imposed on the investment company for
which the investment adviser acts in such capacity as a result of the sale of
such interest, or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden," as defined in the 1940 Act,
includes any arrangement during the two-year period after the transaction
whereby the investment adviser (or predecessor or successor adviser), or any
interested person of any such adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
securities holders (other than fees for bona fide investment advisory and other
services), or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than ordinary fees for bona fide principal underwriting services).

Management of each of the Funds is aware of no circumstances arising from the
Acquisition, preparatory transactions to the Acquisition or any potential
financing that might result in the imposition of an "unfair burden" on the
Funds. Moreover, Morgan Stanley has agreed in the Merger Agreement that, upon
consummation of the Acquisition, it will take no action which would have the
effect, directly or indirectly, of violating any of the provisions of Section
15(f) of the 1940 Act in respect of the Acquisition. In this regard, the Merger
Agreement provides that Morgan Stanley will use its reasonable best efforts to
assure that (i) no "unfair burden" will be imposed on any Fund as a result of
the transactions contemplated by the Merger Agreement and (ii) except as
provided in the Merger Agreement, the investment advisory fees paid by the Funds
will not be increased for a period of two years from the closing of the
Acquisition and that, during such period, advisory fee waivers shall not be
permitted to expire except in accordance with their terms. The Adviser may
permit a voluntary fee waiver unilaterally adopted by it to expire at any time
and no assurance can be given that voluntary waivers will not be permitted to
expire during the two year period. During the two year period following the
Acquisition, the Adviser does not intend to change its policies with respect to
the circumstances under which voluntary fee waivers may be permitted to expire.
Following the Acquisition, to the extent permitted by applicable law, VKAC
anticipates that the Funds will continue to use Morgan Stanley & Co. and its
affiliates for brokerage services.

The second condition of Section 15(f) is that during the three-year period
immediately following a transaction to which Section 15(f) is applicable, at
least 75% of the subject investment company's board of directors must not be
"interested persons" (as defined in the 1940 Act) of the investment company's
investment adviser or predecessor adviser. The current composition of the Board
of each Fund would be in compliance with such condition subsequent to the
Acquisition.

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<PAGE> 22

After consideration of the above factors, and such other factors and
information that the Trustees deemed relevant, the Trustees, including the
Disinterested Trustees, unanimously approved the New Advisory Agreement with
respect to each Fund and voted to recommend its approval to the Shareholders of
each Fund.

In the event that Shareholders of a Fund do not approve the New Advisory
Agreement with respect to a Fund and the Acquisition is consummated, the Board
would seek to obtain for the Fund interim investment advisory services at the
lesser of cost or the current fee rate either from the Adviser or from another
advisory organization. Thereafter, the Board would either negotiate a new
investment advisory agreement with an advisory organization selected by the
Board or make appropriate arrangements, in either event subject to approval of
the shareholders of such Fund. In the event the Acquisition is not consummated,
the Adviser would continue to serve as investment adviser of the Funds pursuant
to the terms of the Current Advisory Agreement.

SHAREHOLDER APPROVAL

To become effective, each New Advisory Agreement must be approved by a
majority of the outstanding voting securities of the respective Fund. The vote
of "a majority of the outstanding voting securities" is defined under the 1940
Act as the lesser of the vote of (i) 67% or more of the Shares of the respective
Fund entitled to vote thereon present at the Meeting if the holders of more than
50% of such outstanding Shares are present in person or represented by proxy; or
(ii) more than 50% of such outstanding Shares of the Fund entitled to vote
thereon. Each New Advisory Agreement was unanimously approved by the Board after
consideration of all factors which they determined to be relevant to their
deliberations, including those discussed above. The Board also unanimously
determined to submit each New Advisory Agreement for consideration by the
Shareholders of the respective Fund. THE BOARD OF DIRECTORS OR TRUSTEES OF EACH
FUND RECOMMENDS A VOTE "FOR" APPROVAL OF THE NEW ADVISORY AGREEMENT.
- - ------------------------------------------------------------------------------
PROPOSAL 2: APPROVAL OF THE REORGANIZATION AND CONVERSION OF EACH MARYLAND FUND
TO A DELAWARE BUSINESS TRUST
- - ------------------------------------------------------------------------------

The Board has unanimously approved an Agreement and Plan of Reorganization and
Liquidation (a "Plan of Reorganization") substantially in the form attached
hereto as Annex C with respect to Bond Fund and Convertible Securities Fund,
each of which is organized as a Maryland Fund. Each Plan of Reorganization
provides for the reorganization (the "Reorganization") of each Maryland Fund
into a Delaware business trust (each a "Delaware Trust"). The Board of Trustees
of each respective Delaware Trust, which is comprised of the same Trustees
currently

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<PAGE> 23

serving in such position with each Maryland Fund, has unanimously approved the
Plan of Reorganization.

The proposed reorganization and conversion of each Maryland Fund is not
related to the Acquisition described in Proposal 1.

REASONS FOR THE REORGANIZATIONS

There are two principal reasons for reorganizing the Maryland Funds in
Delaware as business trusts. The first is to take advantage of certain
beneficial aspects of Delaware law with respect to business trusts. The second
reason is to eliminate the payment of an annual Texas franchise tax by each
Maryland Fund.

Delaware law provides that the trustees of a Delaware business trust may
authorize for issuance an unlimited number of shares. Maryland corporate law
provides that the articles of incorporation of a Maryland corporation must set
forth the number of shares authorized for issuance. In addition, Delaware law
with respect to business trusts has been specifically drafted to accommodate the
unique corporate governance needs of investment companies and provides that its
policy is to give maximum freedom of contract to the trust instrument of a
Delaware business trust. Maryland corporate law, although it contains many
provisions specifically applicable to investment companies, is less customized
for use by investment companies.

Each Maryland Fund is subject to Texas franchise tax. A Delaware business
trust is not subject to Texas franchise tax. Consequently, the reorganization
into a Delaware business trust will eliminate the need for each Maryland Fund to
pay a Texas franchise tax. Bond Fund paid $18,600 in franchise taxes for 1995,
and $32,474 for the period 1992 through 1994; Convertible Securities Fund paid
$7,800 for 1995, and $25,000 for the period 1992 through 1994.

The investment objectives of each Maryland Fund will remain unchanged. In
addition, the fundamental investment restrictions of both the Maryland Funds and
the Delaware Trusts will remain fundamental; and may be changed only by
Shareholder vote.

For a more detailed comparison of the Maryland Funds' articles of
incorporation and the Delaware trust instrument, see "Certain Comparative
Information About Maryland Funds and Delaware Trusts" below.

PROCEDURES FOR REORGANIZATION

In order to accomplish the Reorganizations, each Maryland Fund has organized a
corresponding Delaware Trust. Each Delaware Trust was formed as a Delaware
business trust pursuant to an Agreement and Declaration of Trust (the "Trust

14
<PAGE> 24

Instrument"). The investment objectives and policies of each Delaware Trust are
the same as those of its corresponding Maryland Fund.

Prior to the Reorganizations, each Maryland Fund as the sole shareholder of
the Delaware Trust will vote to elect a Board of Trustees of the Delaware Trust
(with the nominees for Trustees or Directors being those persons currently
serving in such positions with the Maryland Funds), ratify the selection of
Ernst & Young LLP as the Delaware Trust's independent auditors, and approve the
Delaware Trust's investment advisory agreement (a "Successor Advisory
Agreement") between each Delaware Trust and the Adviser. Accordingly, a vote in
favor of the Reorganization will constitute a vote in favor of the election of
the nominees for Trustee as set forth in Proposal 3, as well as for the election
of the Trustees currently serving in such position for each Maryland Fund,
ratification of the Board's selection of Ernst & Young LLP as independent
auditors as set forth in Proposal 4, and approval of the Successor Advisory
Agreement which is the same in all material respects as those currently in
effect with each Maryland Fund as set forth in Proposal 1 except that the
Successor Advisory Agreement reflects each Fund as a Delaware business trust
rather than a Maryland Fund.

Each Delaware Trust will survive the Reorganization. The Reorganization will
not interrupt the continuity of each Maryland Fund or change its character as a
closed-end investment company, and the tax status and interests of each Maryland
Fund and its Shareholders would continue to be the same following the
Reorganization. The only material difference would be that the surviving entity
would be a business trust governed by Delaware law pursuant to a Delaware Trust
Instrument instead of a corporation governed by Maryland law pursuant to
Articles of Incorporation. On the effective date of each Reorganization approved
by Shareholders, each Maryland Fund will transfer all of its assets and
liabilities to its corresponding Delaware Trust in exchange for shares of such
Delaware Trust having an equal net asset value. The Maryland Fund will then be
liquidated and each Shareholder of the Maryland Fund will receive for his or her
Shares an equal number of full and fractional shares of the corresponding
Delaware Trust. A Shareholder's investment in the Maryland Fund will remain the
same after the Reorganization and the corresponding Delaware Trust will operate
with the same investment objectives, policies and restrictions as the
corresponding Maryland Fund had in the past.

If Shareholders of a Maryland Fund do not approve its Reorganization, the
Maryland Fund will continue in business as a Maryland corporation.

It will not be necessary for holders of certificates of the Maryland Funds to
exchange their certificates for new certificates following consummation of the
Reorganizations. Certificates for Shares of the Maryland Funds issued prior to
the Reorganizations shall represent outstanding shares of the corresponding
Delaware Trusts after the Reorganizations.

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<PAGE> 25

Each Reorganization approved by Shareholders of a Maryland Fund will become
effective as soon as practicable following receipt of such approval. At such
time as a Reorganization becomes effective, the respective Successor Advisory
Agreement also will become effective and will continue thereafter if approved as
required by the 1940 Act.

CERTAIN COMPARATIVE INFORMATION ABOUT MARYLAND FUNDS AND DELAWARE TRUSTS

Summary of the Trust Instrument. Each Delaware Trust has been established
pursuant to a Trust Instrument under the laws of the State of Delaware. The
Trust Instrument of each Delaware Trust created in connection with the
Reorganization is identical, except for the name of the respective Delaware
Trust. The investment objectives, policies and restrictions of each Delaware
Trust after the Reorganization will be the same as those of its corresponding
Maryland Fund. Prior to the Reorganization, each Delaware Trust will not have
any assets or liabilities. During the Reorganization, the Maryland Fund will be
the sole shareholder of its corresponding Delaware Trust immediately prior to
the distribution of Delaware Trust shares to Maryland Fund Shareholders.

As a Delaware business trust, each Delaware Trust's operations will be
governed by its Trust Instrument, its By-Laws and applicable Delaware law rather
than by the Maryland Fund's Articles of Incorporation, By-Laws and applicable
Maryland law. The operations of each Delaware Trust will continue to be subject
to the provisions of the 1940 Act, the rules and regulations of the Securities
and Exchange Commission ("SEC") thereunder, and applicable state securities law.

Trustees of the Delaware Trust. Subject to the provisions of the Trust
Instrument, the business of each Delaware Trust is supervised by its Trustees.
The responsibilities, powers, and fiduciary duties of the Trustees of the
Delaware Trusts will be substantially the same as those of the Directors of the
Maryland Funds. The Trust Instrument includes the same provision as contained in
each Maryland Fund's Articles of Incorporation providing for a classified Board.
Under Maryland law, a Director of the Maryland Funds may be removed with or
without cause only by the affirmative vote of a majority of Shares entitled to
vote on the election of Directors. The provisions of the Trust Instrument would
permit removal of a Trustee by vote of a majority of the Shares then
outstanding. The Trustees of each Delaware Trust would be all of the incumbent
Directors of each current Maryland Fund as set forth in Proposal 3.

Series of Delaware Trusts and Maryland Funds. The Trust Instrument of each
Delaware Trust permits the Trustees thereof to issue an unlimited number of full
or fractional shares of beneficial interests. The Directors of each Maryland
Fund have substantially similar power under Maryland law, except that they are
required to specify a fixed number of shares authorized for issuance. Each share
of a Delaware Trust like each share of a Maryland corporation, represents an
equal proportionate

16
<PAGE> 26

interest with each other share in that series, none having priority or
preference over another. Although both Delaware and Maryland permit the creation
of one or more series or classes of shares, neither the proposed Delaware Trusts
nor the current Maryland Funds currently intend to divide their shares into
series or classes.

Delaware Trust and Maryland Fund Shareholder Liability and Maryland
Corporation Liability. One area of difference between the two forms of
organizations is the potential liability of shareholders. Generally,
shareholders of a Delaware business trust are not personally liable for
obligations of the Delaware Trust under Delaware law. The Delaware Business
Trust Act (the "Delaware Act") provides that a shareholder of a Delaware
business trust be entitled to the same limitation of liability extended to
shareholders of private, for-profit corporations. However, no similar statutory
or other authority limiting business trust shareholder liability applies in many
other states. As a result, to the extent that the Delaware Trust or a
shareholder is subject to the jurisdiction of courts in those states, the courts
may not apply Delaware law, and may thereby subject the Delaware Trust
shareholders to liability. To guard against this risk, the Trust Instrument (i)
contains an express disclaimer of shareholder liability for acts or obligations
of the Delaware Trust and requires that notice of such disclaimer be given in
each agreement, obligation and instrument entered into by the Delaware Trust or
its Trustees and (ii) provides for indemnification by the fund of any
shareholder held personally liable for the obligations of the Delaware Trust.
Thus, the risk of a Delaware Trust shareholder incurring financial loss beyond
his or her investment because of shareholder liability is limited to
circumstances in which (1) a court refused to apply Delaware law, (2) no
contractual limitation of liability was in effect, and (3) the series or fund
itself would be unable to meet its obligations. In light of Delaware law, the
nature of the Delaware Trust's business, and the nature of its assets, the
Adviser believes that the risk of personal liability to a Delaware Trust
shareholder is extremely remote.

Shareholders of a Maryland corporation currently have no personal liability
for the corporation's acts or obligations, except that a shareholder may be
liable to the extent that he or she knowingly receives a distribution (including
a transfer of money or other property and the incurrence or forgiveness of
indebtedness by corporation) in excess of the amount which properly could have
been paid under Maryland law.

Liability of Trustees or Directors. Maryland law provides that, in addition to
any other liability imposed by law, the Directors may be liable to a Maryland
corporation: (1) for voting or assenting to the declaration of any dividend or
other distribution of assets to shareholders which is contrary to Maryland law,
(2) for voting or assenting to certain distributions of assets to shareholders
during liquidation of the corporation and (3) for voting or assenting to a
repurchase of the shares of a Maryland corporation in violation of Maryland law.
In the event of any litigation against the Directors or officers of a Maryland
Fund, the Maryland Fund

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<PAGE> 27

may indemnify the Director, unless it is established that the Director acted in
bad faith or with active and deliberate dishonesty, or the Director actually
received an improper personal benefit, or, in the case of any criminal
proceeding, the Director had reasonable cause to believe that the conduct was
unlawful. However, indemnification may not be made in any proceeding by or in
the right of a Maryland Fund in which a Director is adjudged to be liable to the
Maryland Fund. Under Maryland law, a Maryland Fund may advance money to a
Director for expenses of litigation only if he or she demonstrates that he or
she acted in good faith and reasonably believed that his or her conduct met the
standard of conduct necessary for indemnification by the Fund. The Trust
Instrument provides that the Trustees shall not be liable to any person in
connection with the assets or affairs of the Delaware Trust and that a Trustee
shall not be liable for any errors of judgement or mistakes of fact or law.
Nothing in the Trust Instrument of the Delaware Trusts or the Articles of
Incorporation of the Maryland Funds protects a Trustee or Director against any
liability to the Delaware Trust or Maryland Fund, or its shareholders, to which
he or she 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.

Voting Rights of Maryland Fund and Delaware Trust Shareholders. Neither
Maryland corporations nor Delaware business trusts are required to hold annual
meetings. The New York Stock Exchange, Inc. requires that any listed company
hold an annual meeting each fiscal year. The shares of the Maryland Funds are
listed on the New York Stock Exchange, Inc. and, even if the Maryland Funds
convert to Delaware Trusts, the Delaware Trusts will continue to conduct an
Annual Meeting of Shareholders each year. The Articles of Incorporation or By-
Laws of the Maryland Funds and Trust Instruments of the Delaware Trusts each, in
substance, provide that a special meeting of shareholders may be called by the
holders of 10% or more of the shares.

Each Delaware Trust, like its corresponding Maryland Fund, will operate as a
closed-end investment company registered with the SEC under the 1940 Act.
Shareholders of each Delaware Trust will, therefore, have the power to vote with
respect to, among other things, changes in fundamental investment policies and
restrictions of their respective Delaware Trust; ratification of the selection
by the Trustees of the independent auditors for the Delaware Trust; and such
additional matters relating to the Delaware Trust as may be required by law, or
which the Trustees consider desirable. If, at any time, less than two-thirds of
the Trustees holding office have been elected by shareholders, the Trustees then
in office will promptly call a meeting of shareholders of the affected Delaware
Trust for the purpose of electing a Board of Trustees.

The Trust Instrument provides that shareholders shall have the power to vote
only with respect to (i) the election or removal of Trustees as provided
therein,

18
<PAGE> 28

(ii) the approval or termination of investment advisory agreements or the
distribution contracts, (iii) the termination or reorganization of the Trust,
(iv) with respect to amendments of the Trust Instrument to the extent they would
adversely affect the rights of shareholders, (v) to the same extent as the
stockholders of a Delaware business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Delaware Trust or any series
or the shareholders thereof, and (vi) with respect to such additional matters as
may be required by law, the Trust Instrument, By-Laws or as the Trustees may
consider necessary or desirable.

Each Maryland Fund's Articles of Incorporation and Maryland law generally give
shareholders substantially similar voting rights. Both the Trust Instrument and
the Maryland Fund's Articles of Incorporation require a majority of shares to
establish quorum for a meeting and require at least the vote of a majority of
the shares present in person or by proxy at the meeting to constitute
shareholder action except as described in greater detail herein. Each Trust
Instrument may require a greater vote than a majority of the shares present in
person or by proxy to authorize the following actions: (a) a merger or
consolidation of the Delaware Trust (in which the Delaware Trust is not the
surviving company); (b) the dissolution of the Delaware Trust; (c) the sale of
all or substantially all of the assets of the Delaware Trust to any person (as
such term is defined in the 1940 Act ); (d) any amendment to the Trust
Instrument that makes any of the Trust's shares a "redeemable security" (as such
term is defined in the 1940 Act); (e) any amendment to, repeal of or adoption of
any provision inconsistent with the election and term of the trustees; or (f)
any amendment to the Trust Instrument that reduces the vote required to
authorize the actions enumerated in clauses (a) through (f). Under the Trust
Instrument, the vote requirement to authorize the actions specified in clauses
(a) through (f) above is the affirmative vote of three-fourths of the
outstanding shares entitled to be cast unless such action has been approved by
two-thirds of the Trustees in which case an affirmative vote of a majority of
the outstanding shares entitled to be cast is required to authorize the action.
The Articles of Incorporation of Bond Fund contain the identical voting
requirements as in the Trust Instrument with respect to the actions enumerated
in clauses (a) through (f) above. The Articles of Incorporation of Convertible
Securities Fund require a vote of two-thirds of the outstanding shares entitled
to be cast to authorize any action listed in clauses (a) through (f) above and
specifically require with respect to clause (a) that a merger with a closed-end
investment company requires that such closed-end investment company's charter
provides for a two-thirds or greater vote of each class of such company's stock
to approve the transactions described by clauses (a) through (f).

Right of Inspection. Maryland law provides that persons who have been
shareholders of record for six months or more and who own at least five percent
of the shares of a Maryland Fund may inspect the books of account and stock
ledger of the

19
<PAGE> 29

Maryland Fund. Delaware Trust shareholders have the same rights to inspect the
records, accounts and books of the Delaware Trust as are permitted shareholders
of a Delaware business corporation. Currently, each shareholder of a Delaware
business corporation is permitted to inspect records, accounts and books of a
business corporation for any legitimate business purpose.

The foregoing is only a summary of certain of the differences between the
Maryland Funds, the Articles of Incorporation and By-Laws and Maryland law and
the Trust Instrument of the Delaware Trusts, their By-Laws and Delaware law. It
is not a complete list of differences. Shareholders should refer to the
provisions of such Articles of Incorporation, By-Laws and Maryland law and the
Trust Instrument, By-Laws and Delaware law directly for a more thorough
comparison. Shareholders on the Record Date may obtain copies of the
organizational documents of the Maryland Funds by calling the telephone number
set forth on the first page of this Proxy Statement.

TEMPORARY AMENDMENT TO INVESTMENT RESTRICTIONS

During the period prior to its Reorganization, each Maryland Fund will own the
only outstanding share of its corresponding Delaware Trust. By acquiring a
nominal share of its corresponding Delaware Trust, the Maryland Fund can then
vote to elect as Trustees of such Delaware Trust the nominees named in Proposal
3 below, (provided that Shareholders of the Maryland Fund elect such nominees at
the Meeting), approve the Successor Investment Advisory Agreement and ratify the
selection of Ernst & Young LLP independent auditors, in order to comply with the
provisions of the 1940 Act requiring such Shareholder approvals.

The Maryland Funds have investment restrictions which require Shareholder
approval before they can be changed and which might otherwise preclude such
Maryland Fund from completing the Reorganization, including (for example)
restrictions which prohibit such Maryland Fund from purchasing any securities
(excluding securities of the United States Government or any instrumentality
thereof), if, as a result, more than five percent of the Maryland Fund's total
assets (taken at market value) would then be invested in securities of a single
issuer or, if, as a result, such Fund would hold more than ten percent of the
outstanding voting securities of an issuer; a prohibition against making
investments for the purpose of exercising control or participating in
management; and a prohibition from investing in another investment company. By
approving the Reorganizations, the Shareholders will be authorizing a suspension
of any and all of these restrictions only to the extent necessary to permit the
Reorganizations to take place.

FEDERAL INCOME TAX CONSEQUENCES

It is anticipated that the transactions contemplated by the Plans of
Reorganization will be tax-free. Consummation of each Reorganization is subject
to receipt of

20
<PAGE> 30

an opinion of Sullivan & Worcester LLP, counsel to each Maryland Fund, that,
under the Code, the Reorganization of the respective Maryland Fund into a
Delaware Fund pursuant to a Plan of Reorganization will not give rise to the
recognition of income, gain or loss for federal income tax purposes to the
Maryland Fund or the Shareholders of the Maryland Fund. A Shareholder's adjusted
basis for tax purposes in shares of a Delaware Trust after the Reorganizations
will be the same as his or her adjusted basis for tax purposes in the shares of
the corresponding Maryland Fund immediately before the Reorganizations. Each
Shareholder should consult his or her own tax adviser with respect to the state
and local tax consequences of the proposed transaction.

EXPENSES

Expenses related to the Reorganization of each Maryland Fund into a Delaware
Trust are currently expected to be approximately $14,500, which expenses will be
borne by each respective Maryland Fund.

SHAREHOLDER APPROVAL

Approval of the Reorganization will require the affirmative vote of a majority
of the outstanding shares of Bond Fund entitled to vote on the proposal and
two-thirds of the outstanding shares of Convertible Securities Fund entitled to
vote on the proposal.

RECOMMENDATION OF TRUSTEES

The Board of each Maryland Fund has unanimously approved the proposed
Reorganization of each Maryland Fund and has determined that participation in
such Reorganization is in the best interests of each Maryland Fund and that the
interests of existing shareholders of each Maryland Fund will not be diluted as
a result of the Reorganization. THE BOARD RECOMMENDS THAT SHAREHOLDERS OF EACH
MARYLAND FUND VOTE "FOR" APPROVAL OF PROPOSAL 2.

- - ------------------------------------------------------------------------------
PROPOSAL 3: ELECTION OF TRUSTEES
- - ------------------------------------------------------------------------------

Each Fund's Board is divided into three classes of directors for Bond Fund and
Convertible Securities Fund and trustees for Income Trust, each class serving
for three years. The term of one class expires each year and no term shall
continue for more than three years after the applicable election. This type of
classification may prevent replacement of a majority of the Trustees for up to a
two-year period. The foregoing is subject to the provisions of the 1940 Act,
Maryland or Massachusetts law, respectively, and the By-Laws of each of the
Funds.

21
<PAGE> 31

It is the intention of the persons named in the accompanying form of proxy to
nominate and to vote such proxy for the election of the persons named below, or
if any such persons shall be unable to serve, to vote for the election of such
other person or persons as shall be determined by the persons named in the proxy
in accordance with their judgment. The Funds, however, have no reason to believe
that it will be necessary to designate a substitute nominee.

The term "Trustees" includes Directors where the use of the term "Directors"
would otherwise be appropriate.

The following schedule sets forth certain information regarding each Trustee
and nominee, including incumbent Trustees whose current terms do not expire in
1996. All nominees have consented to being named in this proxy statement and
have agreed to serve if elected for each Maryland Fund, each Delaware Trust and
Income Trust.

Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. The "Interested" nominee
and Trustees (as defined by Section 2(a)(19) of the 1940 Act) are indicated by
asterisks.

THE TRUSTEES

The following schedule sets forth the initial election of each incumbent
Trustee of each Fund listed below:

<TABLE>
<CAPTION>
FUND CARLTON COCANOUGHER GROSS MERTEN MULLER PAULSEN PETTIT POWELL SHEPARD
- - ----------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond......... 1992 1993 1993 1993 1990 1983 1993 1987 1972
Convertible.. 1992 1993 1993 1993 1990 1983 1993 1987 1972
Income....... 1992 1993 1993 1993 1990 1988 1993 1987 1987
</TABLE>

22
<PAGE> 32

INFORMATION REGARDING NOMINEES FOR ELECTION

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST FIVE YEARS
NAME, ADDRESS AND AGE OF TRUSTEE AND PUBLIC DIRECTORSHIPS
- - ---------------------------------- --------------------------------------------
<S> <C>
STEPHEN R. GROSS Managing Partner and Vice President of
Gross, Collins & Cress, P.C. Gross, Collins & Cress, P.C. (accounting
2625 Cumberland Parkway firm); Director, Charter Bank & Trust,
Suite 400 Marietta, Georgia. A director or trustee of
Atlanta, GA 30339 each Fund and a trustee and managing general
Age: 48 partner of other open-end investment
companies for which the Adviser serves as
investment adviser.
ALAN G. MERTEN, Ph.D. President, George Mason University;
Office of the President Director, Comshare, Inc. (information
George Mason University technology), The INDUS Group (information
Mason Hall technology) and BIG, Inc. (information
4400 University Drive technology); formerly Director; Tompkins
Fairfax, VA 22030 County Trust Company, Ithaca, New York;
Age: 54 formerly Dean, College of Business
Administration, University of Florida;
formerly the Anne and Elmer Lindseth Dean of
Johnson Graduate School of Management,
Cornell University. A director or trustee of
each Fund and trustee of Common Sense Trust,
an open-end investment company for which the
Adviser serves as investment adviser.
F. ROBERT PAULSEN, Ph.D. Dean Emeritus and Professor Emeritus of
2801 N. Indian Ruins Higher Education, The University of Arizona;
Tucson, AZ 85715 Director, American General Series Portfolio
Age: 74 Co. (mutual fund). A director or trustee of
each Fund, a trustee and managing general
partner of other open-end investment
companies for which the Adviser serves as
investment adviser.
</TABLE>

23
<PAGE> 33

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST FIVE YEARS
NAME, ADDRESS AND AGE OF TRUSTEE AND PUBLIC DIRECTORSHIPS
- - ---------------------------------- --------------------------------------------
<S> <C>
*DON G. POWELL President, Chief Executive Officer and a
2800 Post Oak Blvd. Director of VKAC Holding and VKAC and
Houston, TX 77056 Chairman, Chief Executive Officer and a
Age: 56 Director of Van Kampen American Capital
Distributors, Inc. ("Distributors"), the
Adviser, Van Kampen American Capital
Investment Advisory Corp. (the "VK
Adviser"), Van Kampen American Capital
Management, Inc. and Van Kampen American
Capital Advisors, Inc. Chairman, President
and a Director of Van Kampen American
Capital Exchange Corporation, American
Capital Contractual Services, Inc., Van
Kampen Merritt Equity Holdings Corp., and
American Capital Shareholders Corporation,
Chairman and a Director of ACCESS Investor
Services, Inc. ("ACCESS"), Van Kampen
Merritt Equity Advisors Corp., McCarthy,
Crisanti & Maffei, Inc., and Van Kampen
American Capital Trust Company. Chairman,
President and a Director of Van Kampen
American Capital Services, Inc. Chairman of
the Board, President and a Director or
Trustee of each Fund. Trustee or Managing
General Partner of other open-end investment
companies and closed-end investment
companies advised by the Adviser. Prior to
July 1996, Chairman and Director of VSM Inc.
and VCI Inc. Prior to July 1996, President,
Chief Executive Officer and a
Trustee/Director of certain open-end
investment companies and closed-end
investment companies advised by the Adviser
and the VK Adviser.
</TABLE>

OTHER TRUSTEES

The other Trustees of the Funds whose terms will not expire in 1996 are:

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST FIVE YEARS
NAME, ADDRESS AND AGE OF TRUSTEE AND PUBLIC DIRECTORSHIPS
- - ---------------------------------- --------------------------------------------
<S> <C>
DONALD M. CARLTON, Ph.D. President and Chief Executive Officer,
Radian International L.L.C. Radian International L.L.C. (chemical
8501 N. Mopac Blvd. engineering); Director, National Instruments
Building No. 6 Corp. (computer hardware and software
Austin, TX 78759 development); Central and Southwest
Age: 59 Corporation (utility holding company);
formerly Director, The Hartford Steam Boiler
Inspection & Insurance Company (insurance/
engineering services). A director or trustee
of each Fund, a trustee and managing general
partner of other open-end investment
companies for which the Adviser serves as
investment adviser.
</TABLE>

24
<PAGE> 34

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST FIVE YEARS
NAME, ADDRESS AND AGE OF TRUSTEE AND PUBLIC DIRECTORSHIPS
- - ---------------------------------- --------------------------------------------
<S> <C>
A. BENTON COCANOUGHER, Ph.D. Dean of College of Business Administration
Texas A&M University and Graduate School of Business, Texas A&M
College of Business University; Director, Randall's Food
Administration Markets, Inc. (grocery stores); Director,
Wehner Building, Room 413 First American Savings Bank; Director, First
College Station, TX 77843 American Bank; formerly Senior Vice
Age: 58 President and Dean, University of Houston. A
director or trustee of each Fund and trustee
of Common Sense Trust, an open-end
investment company for which the Adviser
serves as investment adviser.
**STEVEN MULLER, Ph.D. Chairman of The 21st Century Foundation
President Emeritus (public affairs); President Emeritus, The
The Johns Hopkins University Johns Hopkins University; Director, Alex.
Suite 711 Brown & Sons, Inc. (investment banking),
1619 Massachusetts Avenue, Beneficial Corporation (bank holding
N.W. company), and Millipore Corporation
Washington, D.C. 20036 (bio-technology). A director or trustee of
Age: 68 each Fund and trustee of Common Sense Trust,
an open-end investment company for which the
Adviser serves as investment adviser.
R. RICHARD PETTIT, Ph.D. Duncan Professor of Finance, University of
University of Houston Houston; formerly Hanson Distinguished
Central Campus Professor of Business, University of
Dept. of Finance Washington. A director or trustee of each
College of Business Fund and trustee of Common Sense Trust, an
4800 Calhoun open-end investment company for which the
Houston, TX 77204 Adviser serves as investment adviser.
Age: 54
ALAN B. SHEPARD, JR. President, Seven Fourteen Enterprises, Inc.
1512 Bonifacio Road (investment); Partner, Houston Partners
Pebble Beach, Calif. 93953 (venture capital); Director and Vice
Age: 72 Chairman, Kwik-Kopy Corporation (printing);
Director, Allied Waste Industries (waste
treatment). A director or trustee of each
Fund, a trustee and managing general partner
of other open-end investment companies for
which the Adviser serves as investment
adviser.
</TABLE>

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

* Mr. Powell is an interested person, as defined in the 1940 Act, of the Funds
and the Adviser by reason of his affiliation with the Adviser.

** Dr. Muller is an interested person of the Funds by reason of his position as
director of a company which is a registered broker-dealer.

As of August 12, 1996, certain nominees owned, directly or beneficially, the
number of Shares of each Fund as set forth in the table below. Nominees who do
not own any Shares of the Funds have been omitted from the table. All Trustees

25
<PAGE> 35

and officers as a group owned, directly or beneficially, less than 1% of the
outstanding Shares of each Fund as of August 12, 1996.

<TABLE>
<CAPTION>
FUND NAME PAULSEN
- - ------------------------------------------------------------------- -----
<S> <C>
Bond............................................................... 1,000
Convertible........................................................ 300
Income............................................................. 4,000
</TABLE>

REMUNERATION PAID TO TRUSTEES

No remuneration is paid by a Fund to a Trustee who is an affiliated person of
the Adviser. Trustees who are not affiliated with the Adviser are compensated by
each Fund and reimbursed for out-of-pocket expenses. A Trustee on the Board of
Bond Fund is compensated at the annual rate of $1,921 plus $128 for each Board
and committee meeting attended. A Trustee on the Board of Income Trust is
compensated at the annual rate of $1,551 plus $103 for each Board and committee
meeting attended. A Trustee on the Board of Convertible Securities Fund is
compensated at the annual rate of $1,416 plus $94 for each Board and committee
meeting attended. The Trustees also receive compensation for serving in similar
capacities for a number of other funds advised by the Adviser.

Additional information regarding compensation paid by each Fund and the
related mutual funds for which the Trustees serve as directors, trustees or
managing general partners noted above is set forth in Annex D.

STANDING COMMITTEES

Each Fund has a Nominating Committee, the functions of which are (a) selecting
and recommending to the Board nominees for election as trustees and (b)
proposing and recommending to the Board the terms of compensation for trustees.
The committee consists of Messrs. Cocanougher, Muller, Paulsen, Pettit and
Shepard. With respect to Bond Fund, the committee held six meetings during the
last fiscal year. With respect to Convertible Securities Fund and Income Trust,
the committee held four meetings during the last fiscal year. The committee is
prepared to review nominations from Shareholders to fill trusteeships in written
communications addressed to the committee at the applicable Fund's headquarters,
although the committee expects to be able to identify from its own resources an
ample number of qualified candidates.

Each Fund has an Audit Committee which makes recommendations to the Board
concerning the selection of each Fund's independent auditors, reviews with such
auditors the scope and results of the annual audits and considers any comments
which the auditors may have regarding such Fund's financial statements or books
of account. The committee consists of Messrs. Gross, Paulsen and Shepard. With
respect to the Bond Fund, the Committee held three meetings

26
<PAGE> 36

during the last fiscal year. With respect to the Convertible Securities Fund and
Income Trust, the committee held two meetings during the last fiscal year.

With respect to Bond Fund, the Board met five times during the last fiscal
year. With respect to Convertible Securities Fund and Income Trust, the board
met four times during the last fiscal year. During such fiscal year all trustees
attended at least 75% of the aggregate of (a) the total number of meetings of
the Board and (b) the total number of meetings held by all committees of the
Board on which they served.

SHAREHOLDER APPROVAL

The Shareholders of each Fund are entitled to vote on this issue. An
affirmative vote of a plurality of the outstanding Shares of each Fund present
in person or by proxy is required to elect the nominees for each Fund. THE BOARD
OF TRUSTEES OF EACH FUND RECOMMENDS A VOTE "IN FAVOR" OF ALL OF THE NOMINEES.

- - ------------------------------------------------------------------------------
PROPOSAL 4: RATIFICATION OF INDEPENDENT AUDITORS
- - ------------------------------------------------------------------------------

The Board of each Fund, including a majority of the Disinterested Trustees,
has selected the firm of Ernst & Young LLP, independent auditors, to examine the
financial statements for the current fiscal year of each Fund. Each Fund knows
of no direct or indirect financial interest of the auditors in the Funds. Such
appointment is subject to ratification or rejection by the Shareholders of each
Fund. Unless a contrary specification is made, the accompanying proxy will be
voted in favor of ratifying the selection of such accountants.

Representatives of Ernst & Young LLP are expected to be present at the Meeting
and will be available to respond to appropriate questions from Shareholders and
will have the opportunity to make a statement if they so desire.

SHAREHOLDER APPROVAL

The Shareholders of each Fund are entitled to vote on this issue. An
affirmative vote of a majority of the Shares of each Fund present in person or
by proxy is required to ratify the selection of the accountants for such Fund.
THE BOARD OF TRUSTEES OF EACH FUND RECOMMENDS A VOTE "FOR" RATIFICATION OF ERNST
& YOUNG LLP AS INDEPENDENT AUDITORS FOR THE CURRENT FISCAL YEAR OF EACH FUND.

27
<PAGE> 37

- - ------------------------------------------------------------------------------
OTHER INFORMATION
- - ------------------------------------------------------------------------------

DIRECTORS AND OFFICERS OF THE ADVISER

The following table sets forth certain information concerning the principal
executive officers and directors of the Adviser who are not Trustees of the
Funds. The address of each of the following persons is noted below.

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- - ---------------------------- ----------------------------------------------
<S> <C>
Dennis J. McDonnell......... President, Chief Operating Officer and a
One Parkview Plaza Director of the Adviser, the VK Adviser, Van
Oakbrook Terrace, IL 60181 Kampen American Capital Advisors, Inc. and Van
Kampen American Capital Management, Inc.
Executive Vice President and a Director of
VKAC Holding and VKAC. President and Director
of Van Kampen Merritt Equity Advisors Corp.
Director of Van Kampen Merritt Equity Holding
Corp. and McCarthy, Crisanti & Maffei, S.A.
Chief Executive Officer and Director of
McCarthy, Crisanti & Maffei, Inc. Chairman and
a Director of MCM Asia Pacific Company,
Limited. President and a Trustee/Director of
open-end investment companies and closed-end
investment companies advised by the Adviser
and the VK Adviser. Executive Vice President
of certain open-end investment companies and
closed-end investment companies advised by the
Adviser. Prior to July 1996, President, Chief
Operating Officer and Director of VSM Inc. and
VCJ Inc.
</TABLE>

28
<PAGE> 38

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- - ---------------------------- ----------------------------------------------
<S> <C>
Ronald A. Nyberg............ Executive Vice President, General Counsel and
One Parkview Plaza Secretary of VKAC Holding and VKAC. Executive
Oakbrook Terrace, IL 60181 Vice President, General Counsel and a Director
of the Distributors, the Adviser, the VK
Adviser, Van Kampen American Capital
Management, Inc., Van Kampen Merritt Equity
Advisors Corp., and Van Kampen Merritt Equity
Holdings Corp. Executive Vice President,
General Counsel and Assistant Secretary of Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services, Inc.,
Van Kampen American Capital Exchange
Corporation, ACCESS, Van Kampen American
Capital Services, Inc. and American Capital
Shareholders Corporation. Executive Vice
President, General Counsel, Assistant
Secretary and Director of Van Kampen American
Capital Trust Company. General Counsel of
McCarthy, Crisanti & Maffei, Inc. Vice
President and Secretary of open-end investment
companies and closed-end investment companies
advised by the VK Adviser. Vice President of
open-end investment companies and closed-end
investment companies advised by the Adviser.
Director of ICI Mutual Insurance Co., a
provider of insurance to members of the
Investment Company Institute. Prior to July
1996, Executive Vice President and General
Counsel of VSM Inc., and Executive Vice
President, General Counsel and Director of
VCI.
William R. Rybak............ Executive Vice President and Chief Financial
One Parkview Plaza Officer of VKAC Holding and VKAC since
Oakbrook Terrace, IL 60181 February 1993, and Treasurer of VKAC Holding
through December 1993. Executive Vice
President, Chief Financial Officer and a
Director of the Distributors, the Adviser, the
VK Adviser and Van Kampen American Capital
Management, Inc. Executive Vice President,
Chief Financial Officer, Treasurer and
Director of Van Kampen Merritt Equity Advisors
Corp. Executive Vice President and Chief
Financial Officer of the Van Kampen American
Capital Advisors, Inc., Van Kampen American
Capital Exchange Corporation, Van Kampen
American Capital Trust Company, ACCESS and
American Capital Contractual Services, Inc.
Executive Vice President, Chief Financial
Officer and Treasurer of American Capital
Shareholders Corporation, Van Kampen American
Capital Services, Inc. and Van Kampen Merritt
Equity Holdings Corp. Chief Financial Officer
and Treasurer of McCarthy, Crisanti & Maffei,
Inc. Chairman of the Board of Hinsdale
Financial Corp., a savings and loan holding
company. Prior to July 1996, Executive Vice
President, Chief Financial Officer and a
Director of VCJ Inc., and Executive Vice
President and Chief Financial Officer of VSM
Inc.
</TABLE>

29
<PAGE> 39

<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- - ---------------------------- ----------------------------------------------
<S> <C>
Peter W. Hegel.............. Executive Vice President of the Adviser, the
One Parkview Plaza VK Adviser, Van Kampen American Capital
Oakbrook Terrace, IL 60181 Advisors, Inc. Director of McCarthy, Crisanti
& Maffei, Inc. and Van Kampen American Capital
Management, Inc. Vice President of certain
open-end investment companies and certain
closed-end investment companies advised by the
Adviser and the VK Adviser. Prior to July
1996, Director of VSM Inc.
Robert C. Peck, Jr.......... Executive Vice President of the VK Adviser.
2800 Post Oak Blvd. Executive Vice President and Director of the
Houston, TX 77056 Adviser. Vice President of certain open-end
investment companies and certain closed-end
investment companies advised it by the Adviser
and the VK Adviser.
Alan T. Sachtleben.......... Executive Vice President of the VK Adviser.
2800 Post Oak Boulevard Executive Vice President and Director of the
Houston, Texas 77056 Adviser. Vice President of certain open-end
investment companies and certain closed-end
investment companies advised it by the Adviser
and VK Adviser.
</TABLE>

The following table sets forth the trustees and officers of the Funds who are
also officers of the Adviser.

<TABLE>
<CAPTION>
NAME POSITION WITH THE FUNDS
- - ------------------------------- -------------------------------------------
<S> <C>
Don G. Powell.................. President
Dennis J. McDonnell............ Executive Vice President
William N. Brown............... Vice President
Nori L. Gabert................. Vice President and Secretary
Curtis W. Morell............... Vice President and Chief Accounting Officer
Ronald A. Nyberg............... Vice President
Robert C. Peck, Jr. ........... Vice President
Alan T. Sachtleben............. Vice President
Paul R. Wolkenberg............. Vice President
Edward C. Wood III............. Vice President and Chief Financial Officer
John L. Sullivan............... Treasurer
Tanya M. Loden................. Controller
Huey P. Falgout, Jr. .......... Assistant Secretary
Steven M. Hill................. Assistant Treasurer
Robert Sullivan................ Assistant Controller
</TABLE>

The officers of each Fund serve for one year or until their respective
successors are chosen and qualified. Each Fund's officers receive no
compensation from the Funds but may also be officers of the Adviser or officers
of affiliates of the Adviser and receive compensation in such capacities.

With respect to the Funds, as of August 12, 1996, the Trustees and officers as
a group owned less than 1% of the outstanding shares of each Fund. At such date
the "interested persons" of each Fund as a group owned an aggregate of less than
5% of the outstanding shares of the Fund.

30
<PAGE> 40
No Trustee, other than Mr. Powell, has owned any securities of or has had any
other material interest in, or a material interest in a material transaction
with, the Adviser or its respective affiliates since the beginning of such
Fund's most recent fiscal year.

Following the Acquisition, the Adviser will be an affiliate of Morgan Stanley
& Co., a registered broker-dealer. The amount of commissions paid by the
Convertible Securities Fund to Morgan Stanley & Co. during its most recently
completed fiscal year was $7,435. The Bond Fund and Income Trust paid no
commissions to Morgan Stanley & Co. during their most recently completed fiscal
year.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
each of the Fund's Trustees, officers, investment adviser, affiliated persons of
the investment adviser and persons who own more than 10% of a registered class
of the Fund's equity securities to file forms with the SEC and the New York
Stock Exchange, Inc., reporting their affiliation with the Fund and reports of
ownership and changes in ownership of Fund Shares. These persons and entities
are required by SEC regulations to furnish the Fund with copies of all such
forms they file. Based on a review of these forms furnished to each Fund, such
Fund believes that during the last fiscal year for each Fund, the Fund's
Trustees, officers, investment adviser and affiliated persons of the investment
adviser complied with the applicable filing requirements except for the
following: a Form 3 reflecting the election of Messrs. John L. Sullivan and
Edward C. Wood as officers of each Fund was inadvertently reported late. To the
knowledge of management of each Fund, no Shareholder of any of the Funds owns
more than 10% of a registered class of any Fund's equity securities.

- - ------------------------------------------------------------------------------
EXPENSES
- - ------------------------------------------------------------------------------

VKAC Holding and the Funds will share the expense of preparing, printing and
mailing the enclosed form of proxy, the accompanying Notice, this Proxy
Statement. VKAC Holding will bear such expenses to the extent that they relate
to the Acquisition (i.e. Proposal 1). The Funds will bear such expenses to the
extent that they relate to governance of the Funds (i.e., Proposals 2, 3 and 4).

In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made by mail, telephone, telegraph or personal interview by
representatives of each of the Funds, the Adviser or VKAC, or by Boston
Financial Data Services, Inc. or by First Data Investors Services Group, a
solicitation firm located in Boston,

31
<PAGE> 41

Massachusetts that has been engaged to assist in proxy solicitation at an
estimated cost of approximately $ .

- - ------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- - ------------------------------------------------------------------------------

Shareholder proposals intended to be presented at the 1997 Annual Meeting of
the Shareholders of each of the Funds must be received by May 6, 1997 to be
included in the Proxy Statement and the form of proxy relating to that meeting.

- - ------------------------------------------------------------------------------
GENERAL
- - ------------------------------------------------------------------------------

Management of each Fund does not intend to present and does not have reason to
believe that others will present any other items of business at the Meeting.
However, if other matters are properly presented to the Meeting for a vote, the
proxies will be voted upon such matters in accordance with the judgment of the
persons acting under the proxies.

A list of Shareholders of each Fund entitled to be present and vote at the
Meeting will be available at the offices of the respective Fund, 2800 Post Oak
Boulevard, Houston, Texas 77056, for inspection by any Shareholder during
regular business hours for ten days prior to the date of the Meeting.

Failure of a quorum to be present at the Meeting for any Fund may necessitate
adjournment and may subject such Fund to additional expense.

IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.

NORI L. GABERT,
Vice President and Secretary
September 4, 1996

32
<PAGE> 42

ANNEX A
- - ------------------------------------------------------------------------------
FORM OF INVESTMENT ADVISORY AGREEMENT
- - ------------------------------------------------------------------------------

AGREEMENT, made this day of , 1996, by and between VAN KAMPEN
AMERICAN CAPITAL BOND FUND, INC., a Maryland corporation, hereinafter referred
to as the "FUND," and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC., a
Delaware corporation, hereinafter referred to as the "ADVISOR".

The FUND and the ADVISER agree as follows:

(1.) SERVICES RENDERED AND EXPENSES PAID BY ADVISER

The ADVISER, subject to the control, direction and supervision of the FUND's
Board of Directors and in conformity with applicable laws, the FUND's Articles
of Incorporation, Bylaws, registration statements, prospectus and stated
investment objectives, policies and restrictions, shall:

a. manage the investment and reinvestment of the FUND's assets
including, by way of illustration, the evaluation of pertinent economic,
statistical, financial and other data, determination of the industries and
companies to be represented in the FUND's portfolio, and formulating and
implementation of investment programs;

b. maintain a trading desk and place all orders for the purchase and
sale of portfolio investments for the FUND's account with brokers or dealers
selected by the ADVISER;

c. conduct and manage the day-to-day operations of the FUND including,
by way of illustration, the preparation of registration statements,
prospectuses, reports, proxy solicitation materials and amendments thereto,
the furnishing of routine legal services except for services provided by
outside counsel to the FUND selected by the Board of Directors, and the
supervision of the FUND's Treasurer and the personnel working under his
direction; and

d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c.
above and pay the compensation of each FUND director and FUND officer who is
an affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.

A-1
<PAGE> 43

appropriate policies and procedures, the ADVISER may, to the extent authorized
by law, cause the FUND to pay a broker or dealer that provides brokerage and
research services to the ADVISER an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction. In the event
of such authorization and to the extent authorized by law the ADVISER shall not
be deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of such action.

Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its directors and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office space,
facilities, and equipment used by the Treasurer and such personnel in the
performance of their normal duties for the FUND which consist of maintenance of
the accounts, books and other documents which constitute the record forming the
basis for the FUND's financial statements, preparation of such financial
statements and other FUND documents and reports of a financial nature required
by federal and state laws, and participation in the production of the FUND's
registration statement, prospectuses, proxy solicitation materials and reports
to stockholders; (v) fees of outside counsel to and of independent accountants
of the FUND selected by the Board of Directors; (vi) custodian, registrar and
transfer agent fees and expense; (vii) expenses related to the repurchase or
redemption of its shares including expenses related to a program of periodic
repurchases or redemptions; (viii) expenses related to the issuance of its
shares against payment therefor by or on behalf of the subscribers thereto; (ix)
fees and related expenses of registering and qualifying the FUND and its shares
for distribution under state and federal securities laws; (x) expenses of
printing and mailing of registration statements, prospectuses, reports, notices
and proxy solicitation materials of the FUND; (xi) all other expenses incidental
to holding meetings of the FUND's stockholders including proxy solicitations
therefor; (xii) expenses for servicing stockholder accounts; (xiii) insurance
premiums for fidelity coverage and errors and omissions insurance; (xiv) dues
for the FUND's membership in trade associations approved by the Board of
Directors; and (xv) such nonrecurring expenses as may arise, including those
associated with actions, suits, or proceedings to which the FUND may have to
indemnify its officers and directors with respect thereto. To the extent that
any of the foregoing expenses are allocated between the FUND and any other
party, such allocations shall be pursuant to methods approved by the Board of
Directors.

A-2
<PAGE> 44

(2.) ROLE OF ADVISER

The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.

Except as otherwise required by the Investment Company Act of 1940 any of the
stockholders, directors, officers and employees of the FUND may be a
stockholder, director, officer or employee of, or be otherwise interested in,
the ADVISER, and in any person controlled by or under common control with the
ADVISER, and the ADVISER, and any person controlled by or under common control
with the ADVISER, may have an interest in the FUND.

Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties hereunder on the part
of the ADVISER, the ADVISER shall not be subject to liability to the FUND, or to
any stockholder of the FUND, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.

(3.) COMPENSATION PAYABLE TO ADVISER

The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed at
the following annual rates:

a. on the first $150 million of the FUND's average weekly net assets,
.50%;

b. on the next $100 million of the FUND's average weekly net assets,
.45%;

c. on the next $100 million of the FUND's average weekly net assets,
.40%; and

d. on the excess over $350 million of the FUND's average weekly net
assets, .35%.

Such average weekly net assets shall be determined by taking the average of
the net assets made in the manner provided in the FUND's Articles of
Incorporation for each week during a given calendar month. Such fee shall be
payable for each calendar month as soon as practicable after the end of that
month.

A-3
<PAGE> 45

with the purchase and sale of portfolio investments of the FUND, less any direct
expenses incurred by such person, in connection with obtaining such commissions,
fees, brokerage or similar payments. The ADVISER shall use its best efforts to
recapture all available tender offer solicitation fees and exchange offer fees
in connection with the FUND's portfolio transactions and shall advise the Board
of Directors of any other commissions, fees, brokerage or similar payments which
may be possible for the ADVISER or any other direct or indirect majority owned
subsidiary of VK/AC Holding, Inc., or its successor, to receive in connection
with the FUND's portfolio transactions or other arrangements which may benefit
the FUND.

In the event that the ordinary business expenses of the FUND for any fiscal
year should exceed 1 1/2% of the first $30 million of the FUND's average weekly
net assets determined in the manner described in this Section 3, plus 1% of any
excess over $30 million of such average weekly net assets so taken, the
compensation due the ADVISER for such fiscal year shall be reduced by the amount
of such excess. The ADVISER's compensation shall be so reduced by a reduction or
a refund thereof, at the time such compensation is payable after the end of each
calendar month during such fiscal year of the FUND, and if such amount should
exceed such monthly compensation, the ADVISER shall pay the FUND an amount
sufficient to make up the deficiency, subject to readjustment during the FUND's
fiscal year. For purposes of this paragraph, all ordinary business expenses of
the FUND shall exclude expenses incurred by the FUND (i) for interest and taxes;
(ii) brokerage commissions; (iii) as a result of litigation in connection with a
suit involving a claim for recovery by the FUND; (iv) as a result of litigation
involving a defense against a liability asserted against the FUND, provided
that, if the ADVISER made the decision or took the actions which resulted in
such claim, it acted in good faith without negligence or misconduct; and (v) any
indemnification paid by the FUND to its officers and directors and the ADVISER
in accordance with applicable state and federal laws as a result of such
litigation.

If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.

(4.) DURATION OF AGREEMENT

This Agreement shall have an initial term of two years from the date hereof
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved at least annually by the vote of a majority of the
FUND's directors who are not parties to this Agreement or interested persons of
any such parties, cast in person at a meeting called for the purpose of voting
on such approval, and by a vote of a majority of the FUND's Board of Directors
or a majority of the FUND's outstanding voting securities.

A-4
<PAGE> 46

This Agreement shall terminate automatically in the event of its assignment.
The Agreement may be terminated at any time by the FUND's Board of Directors, by
vote of a majority of the FUND's outstanding voting securities, or by the
ADVISER, on not more than 60 days', nor less than 30 days' written notice, or
upon such shorter notice as may be mutually agreed upon. Such termination shall
be without payment of any penalty.

(5.) MISCELLANEOUS PROVISIONS

For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of 1940 and the Rules and Regulations thereunder, subject, however,
to such exemptions as may be granted to either the ADVISER or the FUND by the
Securities and Exchange Commission, or such interpretive positions as may be
taken by the Commission or its staff, under said Act, and the term "brokerage
and research services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.

The parties hereto each have caused this Agreement to be signed in duplicate
on its behalf by its duly authorized officer on the above date.

VAN KAMPEN AMERICAN CAPITAL BOND FUND, INC.

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

Name:
- - ------------------------------

Its:
- - ------------------------------

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

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

Name:
- - ------------------------------

Its:
- - ------------------------------

A-5
<PAGE> 47

- - ------------------------------------------------------------------------------
FORM OF INVESTMENT ADVISORY AGREEMENT
- - ------------------------------------------------------------------------------

AGREEMENT made this day of , 1996, by and between VAN KAMPEN
AMERICAN CAPITAL CONVERTIBLE SECURITIES, INC., a Maryland corporation,
hereinafter referred to as the "FUND," and VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC., a Delaware corporation, hereinafter referred to as the
"ADVISER".

The FUND and the ADVISER agree as follows:

(1.) SERVICES RENDERED AND EXPENSES PAID BY ADVISER

b. maintain a trading desk and place all orders for the purchase and
sale of portfolio investments for the FUND's account with brokers or dealers
selected by the ADVISER;

A-6
<PAGE> 48

research services to the ADVISER an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction. In the event
of such authorization and to the extent authorized by law the ADVISER shall not
be deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of such action.

Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its directors and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office space,
facilities, and equipment used by the Treasurer and such personnel in the
performance of their normal duties for the FUND which consist of maintenance of
the accounts, books and other documents which constitute the record forming the
basis for the FUND's financial statements, preparation of such financial
statements and other FUND documents and reports of a financial nature required
by federal and state laws, and participation in the production of the FUND's
registration statement, prospectuses, proxy solicitation materials and reports
to stockholders; (v) fees of outside counsel to and of independent accountants
of the FUND selected by the Board of Directors; (vi) custodian, registrar and
transfer agent fees and expenses; (vii) expenses related to the repurchase or
redemption of its shares including expenses relating to a program of periodic
repurchase or redemptions; (viii) expenses related to the issuance of its shares
against payment therefor by or on behalf of the subscribers thereto; (ix) fees
and related expenses of registering and qualifying the FUND and its shares for
distribution under state and federal securities laws; (x) expenses of printing
and mailing of registration statements, prospectuses, reports, notices and proxy
solicitation materials of the FUND; (xi) all other expenses incidental to
holding meetings of the FUND's stockholders including proxy solicitations
therefor; (xii) expenses for servicing stockholder accounts; (xiii) insurance
premiums for fidelity coverage and errors and omissions insurance; (xiv) dues
for the FUND's membership in trade associations approved by the Board of
Directors; and (xv) such nonrecurring expenses as may arise, including those
associated with actions, suits, or proceedings to which the FUND is a party and
the legal obligation which the FUND may have to indemnify its officers and
directors with respect thereto. To the extent that any of the foregoing expenses
are allocated between the FUND and any other party, such allocations shall be
pursuant to methods approved by the Board of Directors.

A-7
<PAGE> 49

(2.) ROLE OF ADVISER

(3.) COMPENSATION PAYABLE TO ADVISER

The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed at
the following annual rates:

a. on the first $150 million of the FUND's average weekly net assets,
.50%;

b. on the next $100 million of the FUND's average weekly net assets,
.45%;

c. on the next $100 million of the FUND's average weekly net assets,
.40%; and

d. on the excess over $350 million of the FUND's average weekly net
assets, .35%.

Such average weekly net assets shall be determined by taking the average of
the net assets made in the manner provided in the FUND's Articles of
Incorporation for each week during a calendar month. Such fee shall be payable
for each calendar month as soon as practicable after the end of that month.

A-8
<PAGE> 50

If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.

(4.) DURATION OF AGREEMENT

A-9
<PAGE> 51

(5.) MISCELLANEOUS PROVISIONS

The parties hereto each have caused this Agreement to be signed in duplicate
on its behalf by its duly authorized officer on the above date.

VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES, INC.

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

Name:
- - --------------------------------

Its:
- - --------------------------------

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

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

Name:
- - --------------------------------

Its:
- - --------------------------------

A-10
<PAGE> 52

AGREEMENT made this day of , 1996 by and between VAN KAMPEN
AMERICAN CAPITAL INCOME TRUST, a Massachusetts business trust, hereinafter
referred to as the "FUND," and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC., a Delaware corporation, hereinafter referred to as the "ADVISER."

The FUND and the ADVISER agree as follows:

(1.) SERVICES RENDERED AND EXPENSES PAID BY ADVISER

The ADVISER, subject to the control, direction and supervision of the FUND's
Trustees and in conformity with applicable laws, the FUND's Agreement and
Declaration of Trust, Bylaws, registration statements and amendments thereto,
prospectus and stated investment objectives, policies and restrictions, shall:

b. maintain a trading desk and place all orders for the purchase and
sale of portfolio investments for the FUND's account with brokers or dealers
selected by the ADVISER;

c. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a. and b. above and
pay the compensation of each FUND Trustee and FUND officer who is an
affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.

In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the FUND the most favorable price and
execution available and shall maintain records adequate to demonstrate
compliance with this requirement. Subject to prior authorization by the FUND's
Trustees of appropriate policies and procedures, the ADVISER may, to the extent
authorized by law, cause the FUND to pay a broker or dealer that provides
brokerage and research services to the ADVISER an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. To the extent authorized by law the ADVISER shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of such action.

A-11
<PAGE> 53

Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder or by the Manager pursuant to the
Administrative Agreement, which expenses payable by the FUND shall include (i)
interest and taxes; (ii) brokerage commissions and other costs in connection
with the purchase and sale of portfolio investments; (iii) compensation of its
Trustees and officers other than those who are affiliated persons of the ADVISER
or the Manager; (iv) compensation of its Treasurer, compensation of personnel
working under the Treasurer's direction, and expenses of office space,
facilities, and equipment used by the Treasurer and such personnel in the
performance of their normal duties for the Fund which consist of maintenance of
the accounts, books, and other documents which constitute the record forming the
basis for the FUND's financial statements, preparation of such financial
statements, and other FUND documents and reports of a financial nature required
by federal and state laws, and participation in the production of the FUND's
registration statement and amendments thereto, prospectuses, proxy solicitation
materials and reports (including accounting and tax information) to
shareholders; (v) fees of outside counsel to and of independent accountants of
the FUND selected by the Trustees; (vi) custodian, registrar, transfer agent,
depository, dividend disbursing agent, and dividend reinvestment agent fees and
expenses; (vii) expenses related to the repurchase or redemption of its shares
including expenses related to a program of periodic repurchases and redemptions;
(viii) expenses related to the issuance of its shares against payment therefor
by or on behalf of the subscribers thereto; (ix) fees and related expenses of
registering and qualifying the FUND and its shares for distribution under state
and federal securities laws; (x) expense of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the FUND; (xi) all other expenses incidental to holding meetings of the FUND's
shareholders including proxy solicitations therefor; (xii) expenses for
servicing accounts (including the provision of accounting and tax information to
shareholders); (xiii) insurance premiums for fidelity coverage and errors and
omissions insurance; (xiv) dues for the FUND's membership in trade associations
approved by the Trustees; and (xv) such non-recurring expenses as may arise,
including those associated with actions, suits, or proceedings to which the FUND
is a party and arising from any legal obligation which the FUND may have to
indemnify its officers and Trustees with respect thereto. To the extent that any
of the foregoing expenses are allocated between the FUND and any other party,
such allocations shall be pursuant to methods approved by the Trustees.

(2.) ROLE OF ADVISER

The ADVISER, any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.

A-12
<PAGE> 54

Except as otherwise required by the Investment Company Act of 1940 any of the
shareholders, Trustees, officers and employees of the FUND may be a shareholder,
director, officer or employee of, or be otherwise interested in, the ADVISER,
and in any person controlled by or under common control with the ADVISER, and
the ADVISER, and any person controlled by or under common control with the
ADVISER, may have an interest in the FUND.

Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties hereunder on the part
of the ADVISER, the ADVISER shall not be subject to liability to the FUND, or to
any shareholder of the FUND, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.

(3.) COMPENSATION PAYABLE TO ADVISER

The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed at
the annual rate of 0.65% of the FUND's average weekly net assets. Such average
weekly net assets shall be determined by taking the average of the net assets
for each week ending during a calendar month. Such fee shall be payable for each
calendar month as soon as practicable after the end of that month.

The fees payable to the ADVISER by the FUND pursuant to this Section 3 shall
be reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., or its successor, in
connection with the purchase and sale of portfolio investments of the FUND, less
any direct expenses incurred by the ADVISER, or any such person of the ADVISER,
in connection with obtaining such commissions, fees, brokerage or similar
payments. The ADVISER shall use its best efforts to recapture all available
tender offer solicitation fees and exchange offer fees in connection with the
FUND's portfolio transactions and shall advise the Trustees of any other
commissions, fees, brokerage or similar payments which may be possible for the
ADVISER or any other direct or indirect majority owned subsidiary of VK/AC
Holding, Inc., or its successor, to receive in connection with the FUND's
portfolio transactions or other arrangements which may benefit the FUND.

In the event that the ordinary business expenses of the Fund for any fiscal
year should exceed 2% of the Fund's average weekly net assets determined in the
manner described in this Section 3, the compensation due the ADVISER for such
fiscal year shall be reduced by the amount of such excess. The ADVISER's
compensation shall be so reduced by a reduction or a refund thereof, at the time
such compensation is payable after the end of each calendar month during such
fiscal year of the FUND, and if such amount should exceed such monthly

A-13
<PAGE> 55

compensation, the ADVISER shall pay the FUND an amount sufficient to make up the
deficiency, subject to readjustment during the FUND's fiscal year. For purposes
of this paragraph, all ordinary business expenses of the FUND shall exclude
expenses incurred by the FUND (i) for interest and taxes; (ii) for brokerage
commissions; (iii) as a result of litigation in connection with a suit involving
a claim for recovery by the FUND; (iv) as a result of litigation involving a
defense against a liability asserted against the FUND, provided that, if the
ADVISER made the decision or took the actions which resulted in such claim, it
acted in good faith without negligence or misconduct; and (v) for any
indemnification paid by the FUND to its officers and Trustees and the ADVISER in
accordance with applicable state and federal laws as a result of such
litigation.

If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.

(4.) DURATION OF AGREEMENT

This Agreement shall have an initial term of two years from the date hereof
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved at least annually by the vote of a majority of the
FUND's Trustees who are not parties to this Agreement or interested persons of
any such parties, cast in person at a meeting called for the purpose of voting
on such approval, and by a majority of the FUND's Trustees or the holders of a
majority of the FUND's outstanding voting securities.

This Agreement shall terminate automatically in the event of its assignment.
The Agreement may be terminated at any time by the FUND's Trustees, by vote of
the holders of a majority of FUND's outstanding voting securities, or by the
ADVISER, on not more than 60 days', nor less than 30 days' written notice, or
upon such shorter notice as may be mutually agreed upon. Such termination shall
be without payment of any penalty.

(5.) MISCELLANEOUS PROVISIONS

A-14
<PAGE> 56

(6.) LIMITATION OF LIABILITY OF TRUSTEES AND SHAREHOLDERS

A copy of the Agreement and Declaration of Trust of the FUND is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this written instrument is executed on behalf of the Trustees of the FUND
as Trustees and not individually and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the FUND.

The parties hereto each have caused this Agreement to be signed in duplicate
on its behalf by its duly authorized officer on the above date.

VAN KAMPEN AMERICAN CAPITAL INCOME TRUST

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

Name:
- - -----------------------------------

Its:
- - -----------------------------------

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

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

Name:
- - -----------------------------------

Its:
- - -----------------------------------

Executed:
- - -----------------------------------

A-15
<PAGE> 57

ANNEX B

The following table indicates the size of each investment company advised or
subadvised by the Adviser, the advisory fee rate, the amount of advisory fees or
subadvisory fees paid to the Adviser for the last fiscal year, and the amount of
other material fees paid to such persons for such fiscal year. Average net
assets are calculated on a daily basis for open-end funds and on a weekly basis
for closed-end funds.

<TABLE>
<CAPTION>
AMOUNT
OF OTHER
MATERIAL
ANNUAL AGGREGATE PAYMENTS
MANAGEMENT AMOUNT OF TO
FEE AS ADVISER/ ADVISER/
NET PERCENT SUBADVISER'S SUBADVISER
ASSETS OF FEE FOR FOR THE
ON AVERAGE LAST LAST
AUGUST 12, NET FISCAL FISCAL
NAME 1996 ASSETS YEAR YEAR
- - ------------------------------ -------- -------- --------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ADVISER
OPEN-END:
Van Kampen American Capital
Comstock Fund............... $1,200.7 (12) $5,080,809 $146,156
Van Kampen American Capital
Corporate Bond Fund......... 195.6 (1) 907,960 71,183
Van Kampen American Capital
Emerging Growth Fund........ 2,261.0 (20) 5,810,837 158,937
Van Kampen American Capital
Enterprise Fund............. 1,372.9 (12) 5,293,215 131,706
Van Kampen American Capital
Equity Income Fund.......... 989.4 (1) 2,603,866 108,597
Van Kampen American Capital
Exchange Fund............... 51.8 (2) 221,917 52,584
Van Kampen American Capital
Global Managed Assets Fund.. 29.6 (15) 27,072 29,687
Van Kampen American Capital
Government Securities
Fund........................ 2,551.3 (4) 14,930,811 361,240
Van Kampen American Capital
Government Target Fund...... 16.0 (2) 78,242+ 49,880
Van Kampen American Capital
Growth and Income Fund...... 678.6 (1) 1,412,556 76,989
Van Kampen American Capital
Harbor Fund................. 447.7 (17) 2,494,437 91,039
Van Kampen American Capital
High Incorporate Bond
Fund........................ 551.0 (5) 2,650,114 107,087
Van Kampen American Capital
Life Investment Trust
Asset Allocation Fund....... 62.4 (6) 216,539+ 57,576
Domestic Income Fund........ 22.0 (6) 43,177+ 49,819
Emerging Growth Fund........ 5.3 (26) (15,060)+ 3,222
</TABLE>

B-1
<PAGE> 58

<TABLE>
<CAPTION>
AMOUNT
OF OTHER
MATERIAL
ANNUAL AGGREGATE PAYMENTS
MANAGEMENT AMOUNT OF TO
FEE AS ADVISER/ ADVISER/
NET PERCENT SUBADVISER'S SUBADVISER
ASSETS OF FEE FOR FOR THE
ON AVERAGE LAST LAST
AUGUST 12, NET FISCAL FISCAL
NAME 1996 ASSETS YEAR YEAR
- - ------------------------------ -------- -------- --------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Enterprise Fund............. $ 79.3 (6) $ 299,035+ $ 55,772
Global Equity Fund.......... 3.4 (15) (32,048)+ 7,200
Growth and Income Fund...... * (27) * *
Government Fund............. 59.8 (6) 256,026+ 57,526
Money Market Fund........... 20.6 (6) 40,915+ 48,109
Real Estate Securities
Fund...................... 35.8 (15) 10,963+ 3,153
Van Kampen American Capital
Limited Maturity Government
Fund........................ 72.3 (3) 312,558+ 65,703
Van Kampen American Capital
Real Estate Securities
Fund........................ 29.6 (15) 98,904+ 48,971
Van Kampen American Capital
Reserve Fund................ 536.0 (1) 1,836,244+ 127,090
Van Kampen American Capital
Pace Fund................... 2,530.8 (12) 11,589,844 351,270
Van Kampen American Capital
Small Capitalization Fund... 219.1 (23) -- 23,710
Van Kampen American Capital
Tax-Exempt Trust High Yield
Municipal Fund.............. 850.8 (17) 3,897,884+ 158,098
Van Kampen American Capital
Texas Tax Free Income Fund.. 17.1 (16) 61,589+ 67,413
Van Kampen American Capital
U.S. Government Trust For
Income...................... 224.5 (18) 1,874,427+ 91,294
Van Kampen American Capital
World Portfolio Series Trust
Van Kampen American Capital
Global Equity Fund........ 209.0 (15) 1,600,616+ 31,987
Van Kampen American Capital
Global Government
Securities Fund........... 140.4 (14) 1,249,294+ 31,987
Common Sense Trust
Common Sense Emerging Growth
Fund...................... 72.5 (9) 2,169+ 6,365
Common Sense Government
Fund...................... 318.8 (13) 1,979,623 92,277
Common Sense Growth Fund.... 2,943.9 (9) 14,436,748 277,991
</TABLE>

B-2
<PAGE> 59

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

(1) 0.50% on the first $150 million; 0.45% on the next $100 million; 0.40% on
the next $100 million; and 0.35% on the excess over $350 million.

(2) 0.50% on the Fund's average net assets.

(3) 0.50% on the first $1 billion; 0.475% on the next $1 billion; 0.45% of the
next $1 billion; 0.40% on the next $1 billion; and 0.35% on the excess over
$4 billion.

(4) 0.540% on the first $1 billion; 0.515% on the next $1 billion; 0.490% on
the next $1 billion; 0.440% on the next $1 billion; 0.390% on the next $1
billion; 0.340% on the next $1 billion; 0.290% on the next $1 billion; and
0.240% on the excess of over $7 billion.

B-3
<PAGE> 60

(5) 0.625% on the first $150 million; 0.55% on the next $150 million; and 0.50%
on the next $300 million.

(6) 0.50% on the first $500 million of the combined net assets of all Funds;
0.45% on the next $500 million; and 0.40% on the excess over $1 billion.

(7) 0.60% on the first $300 million: 0.55% on the next $300 million; and 0.50%
on the excess over $600 million.

(8) 0.65% of the Fund's average weekly net assets.

(9) 0.65% on the first $1 billion; 0.60% on the next $1 billion; 0.55% on the
next $1 billion; 0.50% on the next $1 billion; and 0.45% on the excess over
$4 billion.

(10) 0.50% on the first $2 billion; 0.475% on the next $2 billion; and 0.45% on
the excess over $4 billion.

(11) 0.60% on the first $1 billion; 0.55% on the next $1 billion; 0.50% on the
next $1 billion; and 0.45% on the excess over $3 billion.

(12) 0.50% on the first $1 billion; 0.45% on the next $1 billion; 0.40% on the
next $1 billion; and 0.35% on the excess over $3 billion.

(13) 0.60% on the first $1 billion; 0.55% on the next $1 billion; 0.50% on the
next $1 billion; 0.45% on the next $1 billion; 0.40% in the next $1
billion; and 0.35% on the excess over $5 billion.

(14) 0.75% of the Fund's average daily net assets.

(15) 1.00% of the Fund's average daily net assets.

(16) 0.60% on the first $300 million; 0.55% on the next $300 million; and 0.50%
on the excess over $600 million.

(17) 0.55% on the first $350 million; 0.50% on the next $350 million; 0.45% on
the next $350 million; and 0.40% on the excess over $1.05 billion.

(18) 0.60% of the Fund's average daily net assets.

(19) 50% of the fees received by the investment adviser to the Portfolio less
50% of the amount of any excess expenses paid by the investment adviser on
behalf of the Portfolio.

(20) 0.575% on the first $350 million; 0.525% on the next $350 million; 0.475%
on the next $350 million; and 0.425% on the excess over $1.05 billion.

(21) 0.75 of 1.00% of the Portfolio's average daily net assets.

(22) 0.45% on the Fund's average weekly net assets.

(23) The Adviser serves as investment adviser without fee for Van Kampen
American Capital Small Capitalization Fund ("Small Cap"), the shares of
which are held by other Van Kampen American Capital Funds listed above. The
assets in Small Cap are also reflected in the assets of the Funds that own
shares of Small Cap.

B-4
<PAGE> 61

(24) 0.325% of the Portfolio's average daily net assets.

(25) 0.65% of the Fund's average daily net assets.

(26) 0.70% of the Fund's average daily net assets.

(27) 0.60% on the first $500 million; 0.55% on the excess over $500 million.

* This fund has not commenced operations.

** This fund has not yet completed a full year of operations.

N/A Not applicable

+ This amount is net of either a voluntary advisory fee waiver or expense
reduction.

B-5
<PAGE> 62

ANNEX C
- - ------------------------------------------------------------------------------
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
- - ------------------------------------------------------------------------------

AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated as of ,
1996, (the "Agreement") between VAN KAMPEN AMERICAN CAPITAL , Inc., a
Maryland corporation (the "Fund"), and VAN KAMPEN AMERICAN CAPITAL , a
Delaware business trust (the "New Trust").

WHEREAS the Fund is a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and

WHEREAS the Fund has authorized capital stock consisting of shares of
common stock, $1.00 par value;

WHEREAS the New Trust was organized pursuant to an Agreement and Declaration
of Trust dated July 18, 1996, and is presently authorized to issue an unlimited
number of shares of beneficial interest, with $0.01 par value;

WHEREAS, for good and sufficient business reasons the parties desire to change
the place of organization of the Fund; and

WHEREAS, the parties intend that this transaction (the "Reorganization")
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").

NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto agree as follows:

1. Plan of Reorganization. Prior to the Effective Time of the Reorganization,
as defined below, the Fund and New Trust shall file Articles of Transfer with
respect to the transactions contemplated hereby with the Department of
Assessments and Taxation of the State of Maryland (the "Department"). The Fund
shall, prior to the Effective Time of the Reorganization, transfer all of its
business and assets and assign all of its liabilities to the New Trust, and the
New Trust shall acquire all such business and assets and shall assume all such
liabilities of the Fund in exchange for delivery to the Fund of a number of
shares of the New Trust (both full and fractional) equivalent to the number of
shares of the Fund outstanding immediately prior to the Effective Time of the
Reorganization. All debts, liabilities, obligations and duties of the Fund, to
the extent that they exist at or after the Effective Time of the Reorganization,
shall after the Effective Time of the Reorganization attach to the New Trust and
may be enforced against the New Trust to the same extent as if the same had been
incurred by the New Trust.

C-1
<PAGE> 63

2. Liquidation and Dissolution of the Fund. At the Effective Time of the
Reorganization, the Fund will liquidate and the shares of the New Trust (both
full and fractional) received by the Fund will be distributed to the
shareholders of the Fund in exchange for their shares of the Fund, each
shareholder to receive a number of shares of the New Trust equal to the number
of shares of the Fund held by such person. Certificates for shares of the Fund
issued prior to the Reorganization shall represent outstanding shares of the New
Trust after the Effective Time of the Reorganization. As soon as practicable
after the Effective Time of the Reorganization, the Fund shall file Articles of
Dissolution for record with the Department, and shall take, in accordance with
Maryland General Corporation Law and any other applicable state law, all other
steps as shall be necessary and proper to effect a complete dissolution of the
Fund.

3. Issued Shares. Prior to the Effective Time of the Reorganization and after
the Fund has taken the actions authorized by shareholders of the Fund pursuant
to Section 4(f) hereof, the shares of the New Trust heretofore held by the Fund
shall be redeemed and canceled by the New Trust.

4. Conditions Precedent. The obligations of the Fund and the New Trust to
effectuate the Plan of Reorganization and Liquidation hereunder shall be subject
to the satisfaction of each of the following conditions:

(a) Such authority, including "no-action" letters and orders from the
Securities and Exchange Commission (the "Commission") and state securities
commissions as may be necessary to permit the parties to carry out the
transactions contemplated by this Agreement, shall have been received.

(b) One or more post-effective amendments to the Registration Statement
of the Fund on Form N-2 under the Securities Act of 1933 and the 1940 Act,
containing such amendments to such Registration Statement as are determined
by the Board of Directors of the Fund to be necessary and appropriate as a
result of the Agreement, and such post-effective amendment shall have become
effective, and no stop-order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceeding for that
purpose shall have been initiated or threatened by the Commission (and not
withdrawn or terminated).

(c) Each party shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom that the New Trust is duly formed and existing under the laws
of the State of Delaware and that the shares of the New Trust to be issued
pursuant to the terms of this Agreement have been duly authorized, and, when
issued and delivered as provided in this Agreement, will have been validly
issued, fully paid and nonassessable.

(d) Each party shall have received an opinion of Sullivan & Worcester
LLP to the effect that the reorganization contemplated by this Agreement

C-2
<PAGE> 64

qualifies as a "reorganization" under Section 368(a)(1) of the Code, and
each party shall have received an opinion of Sullivan & Worcester LLP to the
effect that each series, if any, established pursuant to the Agreement and
Declaration of Trust of the New Trust will be treated as a separate
association taxable as a corporation for federal income tax purposes which
potentially qualifies as a regulated investment company under the Code to
the extent that the New Trust complies with the requirements of Section 851
of the Code.

(e) The shares of the New Trust, as may be deemed necessary and
appropriate, shall have been duly qualified for offering to the public in
all states of the United States, the Commonwealth of Puerto Rico and the
District of Columbia (except where such qualifications are not required) so
as to permit the transfers contemplated by this Agreement to be consummated.

(f) A vote approving this Agreement and the reorganization contemplated
hereby shall have been adopted by at least a [two-thirds/majority] of the
outstanding shares of common stock of the Fund entitled to vote at an annual
or special meeting and the shareholders of the Fund shall have voted at such
meeting to direct the Fund to vote, and the Fund shall have voted, as the
sole shareholder of the New Trust to:

(1) elect the Nominees set forth in the Proxy Statement delivered
to the shareholders of the Fund as Trustees of the New Trust;

(2) approve an Investment Advisory Agreement (the "Advisory
Agreement") between the New Trust and Van Kampen American Capital Asset
Management, Inc.; and

(3) ratify the selection of Ernst & Young LLP as the New Trust's
independent auditors for the fiscal year ending June 30, 1996.

(g) The Trustees of the New Trust shall have taken the following actions
at a meeting duly called for such purposes:

(1) approval of the Advisory Agreement;

(2) selection of Ernst & Young LLP as the New Trust's independent
auditors for the fiscal year ending , 1996;

(3) authorization of the issuance by the New Trust, prior to the
Effective Time of the Reorganization, of one share of each class of the
New Trust to the Fund in consideration for the payment of $1.00 each
for the purpose of enabling the Fund to vote on the matters referred to
in paragraph (f) in this Section 4;

(4) submission of the matters referred to in paragraph (f) of this
Section 4 to the Fund as the sole shareholder of the New Trust; and

C-3
<PAGE> 65

(5) authorization of the issuance of shares of the New Trust at the
Effective Time of the Reorganization in exchange for the assets of the
Fund pursuant to the terms and provisions of this Agreement.

At any time prior to the Effective Time of the Reorganization, any of the
foregoing conditions may be waived by the Board of Directors of the Fund if, in
the judgment of such Board, such waiver will not have a material adverse effect
on the benefits intended under this Agreement to the shareholders of the fund.

5. Effective Time of the Reorganization. The exchange of the Fund's business
and assets for shares of the New Trust shall be effective as of 5:00 P.M.,
Delaware Time on , 1996 or at such other time and date as fixed by
the mutual consent of the parties (the "Effective Time of the Reorganization").

6. Termination. The Directors of the Fund and the Trustees of the New Trust
may terminate this Agreement and abandon the reorganization contemplated hereby,
notwithstanding approval thereof by the shareholders of the Fund at any time
prior to the Effective Time of the Reorganization, if circumstances should
develop that, in their judgment, make proceeding with this Agreement
inadvisable.

7. Limitation of Liability of the Trustees and Shareholders. The Fund
acknowledges and agrees that, pursuant to Article 8, Section 8.1 of the
Agreement and Declaration of Trust of the New Trust dated July 18, 1996,
shareholders, trustees, officers, employees or agents of the Trust shall not
personally be bound by or liable under this Agreement, nor shall resort be had
to their private property for the satisfaction of any obligation or claim
hereunder.

IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be
executed and delivered by their duly authorized officers as of the day and year
first written above.

Van Kampen American Capital , Inc.

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

Its: Vice President and Secretary

Van Kampen American Capital

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

Its: Vice President and Secretary

C-4
<PAGE> 66

ANNEX D

1996 COMPENSATION TABLE*

<TABLE>
<CAPTION>
TOTAL(1)
AGGREGATE COMPENSATION PENSION OR RETIREMENT ESTIMATED ANNUAL BENEFITS PER COMPENSATION
FROM EACH FUND(3) BENEFITS ACCRUAL PER FUND UPON RETIREMENT FROM THE FUND
----------------------------- FUND AS PART OF ----------------------------- COMPLEX PAID
DIRECTOR/TRUSTEE BOND CONVERTIBLE INCOME FUND EXPENSES(3) BOND CONVERTIBLE INCOME TO TRUSTEES
- - --------------------------- ------ ----------- ------ --------------------- ------ ----------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Donald M. Carlton...... $2,460 $ 1,800 $1,960 -- $2,460 $ 1,800 $1,960 $36,000
Dr. A. Benton
Cocanougher.............. 2,690 1,960 2,140 -- 2,690 1,960 2,140 39,500
Stephen R. Gross........... 2,885 2,080 2,270 -- 2,885 2,080 2,270 42,000
Dr. Norman Hackerman(2).... 2,723 1,985 2,165 -- 2,042 1,489 1,624 49,000
Robert D. H. Harvey(2)..... 2,885 2,080 2,270 -- 2,164 1,560 1,703 42,000
Dr. Alan G. Merten......... 2,600 1,890 2,060 -- 2,600 1,890 2,060 38,000
Dr. Steven Muller.......... 2,723 1,985 2,165 -- 2,723 1,985 2,165 40,000
Dr. F. Robert Paulsen...... 3,073 2,225 2,425 -- 3,073 2,225 2,183 54,000
Dr. R. Richardson Pettit... 2,600 1,890 2,060 -- 2,600 1,890 2,060 38,000
Alan B. Shepard, Jr. ...... 2,855 2,055 2,248 -- 2,855 2,055 2,248 48,750
Miller Upton(2)............ 2,690 1,960 2,140 -- 2,018 1,470 1,605 48,500
Benjamin N. Woodson(2)..... 2,310 1,690 1,840 -- 1,733 1,268 1,380 34,000
</TABLE>

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

* The compensation shown for the Funds and the total compensation shown for
the Funds and other related mutual funds is for the calendar year ended
December 31, 1995. Mr. Powell is not compensated for his service as Trustee
because of his affiliation with the Adviser.

(1) Reflects fourteen investment companies in the Fund complex.

(2) Messrs. Hackerman, Harvey, Upton and Woodson retired as Trustees of Income
Trust and Directors of Bond Fund and Convertible Securities Fund on April 1,
1996.

(3) The Trustees of each Fund instituted a Retirement Plan effective April 1,
1996. For the current Trustees not affiliated with the Adviser, the annual
retirement benefit payable per year for a ten-year period is based upon the
highest total annual compensation received in any of the three calendar
years preceding retirement. Trustees with more than five but less than ten
years of service at retirement will receive a prorated reduced benefit.
Under the Plan, for the Trustees retiring on April 1, 1996, the annual
retirement benefit payable per year for a ten-year period is equal to 75% of
the total compensation received from the Trust during the 1995 calendar
year.

D-1
<PAGE> 67
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.

Please return the proxy card in the enclosed envelope.

-Please fold and detach card at perforation before mailing -

VAN KAMPEN AMERICAN CAPITAL BOND FUND, INC.
PROXY SOLICITED BY THE DIRECTORS

The undersigned, revoking previous proxies, hereby appoint(s) Don G. Powell,
Ronald A. Nyberg and Nori L. Gabert or any one or more of them, proxies, with
full power of substitution, to vote all shares of the Fund as indicated
above which the undersigned is entitled to vote at the Joint Annual Meeting of
Shareholders of the Fund to be held in the 46th floor conference room of Van
Kampen American Capital, Inc., 2800 Post Oak Blvd., Houston, Texas 77056, on
October 29, 1996 at 2:30 P.M. and at any adjournments thereof. All powers may
be exercised by a majority of said proxy holders or substitutes voting or
acting or, if only one votes and acts, then by that one. This Proxy shall be
voted on the proposals described in the Proxy Statement as specified on the
reverse side. Receipt of the Notice of the Meeting and the accompanying Proxy
Statement is hereby acknowledged.

PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE

Date , 1996
----------------------
NOTE: Please sign exactly as your
name appears on this Proxy. When
signing in a fiduciary capacity,
such as executor, administrator,
trustee, attorney, guardian, etc.,
please so indicate. Corporate and
partnership proxies should be
signed by an authorized person
indicating the persons's title.
------------------------------------
| |
| |
------------------------------------
Signature(s) (Title), if applicable)

WHEN SHARES ARE REGISTERED WITH JOINT
OWNERS, ALL JOINT OWNERS SHOULD SIGN.

<PAGE> 68
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.

Please return the proxy card in the enclosed envelope.

-Please fold and detach card at perforation before mailing -

Please refer to the Proxy Statement discussion of the following matters:
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said proxies shall vote in accordance with their best
judgment.
THE DIRECTORS RECOMMEND A VOTE FOR EACH OF THE FOLLOWING PROPOSALS:
Please vote by filling in the appropriate boxes below, as shown, using blue or
black ink or dark pencil. Do not use red ink. [ ]
FOR AGAINST ABSTAIN
1. To approve a new investment advisory agreement. [ ] [ ] [ ]

2. To approve the reorganization and conversion
of the Fund to a Delaware business trust. [ ] [ ] [ ]

3. To vote to elect four directors to serve until FOR FOR ALL
their respective successors are duly elected and ALL WITHHOLD EXCEPT
qualified.
Stephen R. Gross, Alan G. Merten,
F. Robert Paulsen, Don G. Powell [ ] [ ] [ ]

INSTRUCTION: to withhold authority to vote for one or
more nominees, check FOR ALL EXCEPT and write the
nominee's name(s) on the line below.

______________________________________ FOR AGAINST ABSTAIN
4. To ratify the selection of Ernst & Young LLP
as independent auditors. [ ] [ ] [ ]

<PAGE> 69
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.

Please return the proxy card in the enclosed envelope.

-Please fold and detach card at perforation before mailing -

VAN KAMPEN AMERICAN CAPITAL INCOME TRUST
PROXY SOLICITED BY THE TRUSTEES

PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE

WHEN SHARES ARE REGISTERED WITH JOINT
OWNERS, ALL JOINT OWNERS SHOULD SIGN.

<PAGE> 70
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.

Please return the proxy card in the enclosed envelope.

-Please fold and detach card at perforation before mailing -

Please refer to the Proxy Statement discussion of the following matters:
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said proxies shall vote in accordance with their best
judgment.
THE TRUSTEES RECOMMEND A VOTE FOR EACH OF THE FOLLOWING PROPOSALS:
Please vote by filling in the appropriate boxes below, as shown, using blue or
black ink or dark pencil. Do not use red ink. [ ]
FOR AGAINST ABSTAIN
1. To approve a new investment advisory agreement. [ ] [ ] [ ]

2. Not applicable to Fund.

3. To vote to elect four trustees to serve until FOR FOR ALL
their respective successors are duly elected and ALL WITHHOLD EXCEPT
qualified.
Stephen R. Gross, Alan G. Merten,
F. Robert Paulsen, Don G. Powell [ ] [ ] [ ]

INSTRUCTION: to withhold authority to vote for one or
more nominees, check FOR ALL EXCEPT and write the
nominee's name(s) on the line below.

______________________________________ FOR AGAINST ABSTAIN
4. To ratify the selection of Ernst & Young LLP
as independent auditors. [ ] [ ] [ ]

<PAGE> 71
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.

Please return the proxy card in the enclosed envelope.

-Please fold and detach card at perforation before mailing -

VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES, INC.
PROXY SOLICITED BY THE DIRECTORS

PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE

WHEN SHARES ARE REGISTERED WITH JOINT
OWNERS, ALL JOINT OWNERS SHOULD SIGN.

<PAGE> 72
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS.

Please return the proxy card in the enclosed envelope.

-Please fold and detach card at perforation before mailing -

2. To approve the reorganization and conversion
of the Fund to a Delaware business trust. [ ] [ ] [ ]

INSTRUCTION: to withhold authority to vote for one or
more nominees, check FOR ALL EXCEPT and write the
nominee's name(s) on the line below.

______________________________________ FOR AGAINST ABSTAIN
4. To ratify the selection of Ernst & Young LLP
as independent auditors. [ ] [ ] [ ]