<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Performance in Perspective.................. 4
Portfolio of Investments.................... 5
Statement of Assets and Liabilities......... 7
Statement of Operations..................... 8
Statement of Changes in Net Assets.......... 9
Financial Highlights........................ 10
Notes to Financial Statements............... 11
Report of Independent Accountants........... 14
</TABLE>
EXCH ANR 2/97
<PAGE>
LETTER TO SHAREHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
February 10, 1997
Dear Shareholder,
The stock market surged in 1996, sending most of the major market indices to
all-time highs. The Dow Jones Industrial Average rose 26.01 percent to close
at 6448, far above the 6000 high-water mark that mesmerized the market earlier
in the year, and the NASDAQ Composite Index climbed 22.71 percent to end the
year at 1291.
Underpinning the rally were a growing economy, strong corporate earnings,
and a continuous
flow of money into the equity market. Economic growth (real gross domestic
product, adjusted for inflation) accelerated at a moderate 2.0 percent pace in
the first quarter and jumped to a 4.7 percent rate in the second quarter of
1996. In the first six months of 1996, the stocks of small capitalization com-
panies led the market.
The sharp increase in economic growth, however, fueled fears that the Fed-
eral Reserve Board would raise interest rates. This caused bond prices to fall
as their yields rose (bond yields move in the opposite direction of prices).
Stocks followed the decline in bonds but bounced back and rallied through year
end, led by large capitalization stocks. Bonds recovered as economic growth
slowed to a 2.0 percent pace in the third quarter, and their lower yields pro-
vided additional support to the stock market.
PERFORMANCE SUMMARY
The Van Kampen American Capital Exchange Fund consists of 33 stocks and is
closed to new investors. The Fund remains heavily invested in Alco Standard
(7.9 percent), an office and paper products distribution company; Intel Corp.
(18.2 percent), a manufacturer of semiconductors; and several energy and
health care stocks (stock percentages are of total investments as of December
31, 1996).
For the 12-month period ended December 31, 1996, the Fund generated a total
return at net asset value (NAV) of 36.21 percent/1/. This return reflects an
increase in NAV from $151.88 per share on December 31, 1995 to $205.35 per
share on December 31, 1996. By comparison, the Standard & Poor's 500-Stock In-
dex produced a total return of 22.9 percent for the same period. Keep in mind
that this is a broad-based, unmanaged index that reflects the general perfor-
mance of the stock market. It does not reflect any commissions or fees that
would be paid by an investor purchasing the securities it represents.
1
Continued on page two
<PAGE>
OUTLOOK
We believe that the stock market will continue to advance in 1997, although
probably at a slower pace than in 1996. The economy in the U.S. and in many
other countries continues to grow, money influx into the equities market is
strong, and inflation is under control. We
believe that the U.S. economy will grow at a modest pace this year, near 2.5
percent, although there could be periods of greater strength. We believe there
is a chance that the Fed will grow more concerned about the economy's strength
and nudge interest rates higher, though not before March. Finally, we expect
that many of the sectors in which the Fund is invested, including pharmaceuti-
cals, health care, and technology, will remain promising in 1997.
CORPORATE NEWS
As you may be aware, shareholders approved the acquisition of VK/AC Holding,
Inc. by Morgan Stanley Group Inc. We believe this acquisition will further help
investors achieve their long-term goals. Morgan Stanley's strong global pres-
ence and commitment to superior investment performance complement our broad
range of investment products, money management capability and high level of
service. Thank you for your continued confidence in your investment with Van
Kampen American Capital.
Sincerely,
[LOGO OF DON G. POWELL] [LOGO OF DENNIS J. MCDONNELL]
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1996
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
TOTAL RETURNS
<TABLE>
<S> <C>
One-year total return/1/............................................... 36.21%
Five-year average annual total return/1/............................... 16.40%
Ten-year average annual total return/1/................................ 16.25%
Life-of-Fund average annual total return/1/............................ 14.31%
Commencement Date...................................................... 12/16/76
</TABLE>
/1/Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Fund shares, when redeemed, may be worth
more or less than their original cost.
3
<PAGE>
PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE
As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular inter-
vals. A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison
can:
. Illustrate the general market environment in which your investments are
being managed
. Reflect the impact of favorable market trends or difficult market con-
ditions
. Help you evaluate the extent to which your fund's management team has
responded to the opportunities and challenges presented to them over
the period measured
For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Standard & Poor's 500-Stock
Index over time. As a broad-based, unmanaged statistical composite, this index
does not reflect any commissions or fees which would be incurred by an in-
vestor purchasing the securities it represents. Similarly, its performance
does not reflect any sales charges or other costs which would be applicable to
an actively managed portfolio, such as that of the Fund.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital Exchange Fund vs. Standard & Poor's 500-Stock
Index (December 31, 1986 through December 31, 1996)
[CHART APPEARS HERE]
VKAC Exchange S&P
Fund 500 INDEX
------------- ---------
DEC 31,1986 $10,000.00 $10,000.00
DEC 31,1987 $10,478.00 $10,518.00
DEC 31,1988 $12,449.00 $12,253.00
DEC 31,1989 $15,940.00 $16,124.00
DEC 31,1990 $16,296.00 $15,622.00
DEC 31,1991 $21,097.00 $20,360.00
DEC 31,1992 $22,020.00 $21,909.00
DEC 31,1993 $23,759.00 $24,108.00
DEC 31,1994 $24,899.00 $24,435.00
DEC 31,1995 $33,103.00 $33,585.00
DEC 31,1996 $45,089.00 $41,276.00
The above chart reflects the performance of the Fund. The Fund's performance
assumes reinvestment of all distributions and is shown at net asset value.
While past performance is not indicative of future performance, the above in-
formation provides a broader vantage point from which to evaluate the discus-
sion of the Fund's performance found in the following pages.
4
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 98.7%
CONSUMER DISTRIBUTION 7.3%
86,993 Alco Standard Corp. .................................. $ 4,491,014
-----------
CONSUMER DURABLES 0.7%
13,677 Dana Corp. ........................................... 446,212
-----------
CONSUMER NON-DURABLES 5.5%
49,712 International Flavours & Fragrances, Inc. ............ 2,237,040
49,394 McCormick & Co., Inc. ................................ 1,163,846
-----------
3,400,886
-----------
CONSUMER SERVICES 0.4%
13,367 Luby's Cafeterias, Inc. .............................. 265,669
-----------
ENERGY 13.8%
21,200 Amerada Hess Corp. ................................... 1,226,950
12,800 Amoco Corp. .......................................... 1,030,400
11,406 Apache Corp. ......................................... 403,487
25,634 Baker Hughes, Inc. ................................... 884,373
30,320 Dresser Industries, Inc. ............................. 939,920
10,900 Kerr McGee Corp. ..................................... 784,800
20,131 Mobil Corp. .......................................... 2,461,015
8,040 Schlumberger, Ltd. ................................... 802,995
-----------
8,533,940
-----------
FINANCE 2.8%
9,882 American International Group, Inc. ................... 1,069,727
7,124 Household International, Inc. ........................ 657,189
-----------
1,726,916
-----------
HEALTH CARE 21.2%
1,000 Allegiance Corp. ..................................... 27,625
28,000 American Home Products Corp. ......................... 1,641,500
5,000 Baxter International, Inc. ........................... 205,000
54,432 Johnson & Johnson..................................... 2,707,992
25,188 Merck & Co., Inc. .................................... 1,996,149
51,304 Schering Plough Corp. ................................ 3,321,934
42,430 Warner Lambert Co. ................................... 3,182,250
-----------
13,082,450
-----------
PRODUCER MANUFACTURING 2.0%
6,264 Allied Signal, Inc. .................................. 419,688
12,831 Fluor Corp. .......................................... 805,145
-----------
1,224,833
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 15.9%
54,545 Air Products & Chemicals, Inc. ....................... 3,770,423
10,774 Alcan Aluminum, Ltd. ................................. 362,276
</TABLE>
See Notes to Financial Statements
5
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
RAW MATERIALS/PROCESSING INDUSTRIES (CONTINUED)
18,688 Georgia Pacific Corp. ................................ $ 1,345,536
43,400 Loctite Corp. ........................................ 2,641,975
25,970 Louisiana Pacific Corp. .............................. 548,616
37,620 Lubrizol Corp. ....................................... 1,166,220
-----------
9,835,046
-----------
TECHNOLOGY 29.1%
20,000 General Signal Corp. ................................. 855,000
126,464 Intel Corp. .......................................... 16,558,880
3,754 International Business Machines Corp. ................ 566,854
-----------
17,980,734
-----------
TOTAL LONG-TERM INVESTMENTS 98.7%
(Cost $7,652,393) (a)................................ 60,987,700
SHORT-TERM INVESTMENTS AT AMORTIZED COST 1.3%......... 774,699
OTHER ASSETS IN EXCESS OF LIABILITIES 0.0%............ 4,435
-----------
NET ASSETS 100.0%..................................... $61,766,834
-----------
</TABLE>
(a) At December 31, 1996, for federal income tax purposes cost is $3,077,184
the aggregate gross unrealized appreciation is $57,910,516 and the
aggregate gross unrealized depreciation is $-0-, resulting in net
unrealized appreciation of $57,910,516.
See Notes to Financial Statements
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $7,652,393) (Note 1). $60,987,700
Short-Term Investments (Note 1)................................... 774,699
Cash.............................................................. 4,445
Dividends Receivable.............................................. 84,265
Other............................................................. 679
-----------
Total Assets..................................................... 61,851,788
-----------
LIABILITIES:
Payables:
Investment Advisory Fee (Note 2)................................. 25,881
Affiliates (Note 2).............................................. 4,196
Fund Shares Repurchased.......................................... 4,100
Income Distributions............................................. 1,358
Accrued Expenses.................................................. 27,825
Retirement Plan (Note 2).......................................... 21,594
-----------
Total Liabilities................................................ 84,954
-----------
NET ASSETS........................................................ $61,766,834
-----------
NET ASSETS WERE COMPRISED OF:
296,771 units of limited partnership interest..................... $60,941,549
3,524 units of non-managing general partnership interest.......... 723,722
495 units of managing general partnership interest................ 101,563
-----------
NET ASSETS........................................................ $61,766,834
-----------
NET ASSET VALUE PER UNIT ($61,766,834 divided by 300,790 units of
partnership interest outstanding)................................ $ 205.35
-----------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................... $ 910,080
Interest............................................................ 38,820
-----------
Total Income....................................................... 948,900
-----------
EXPENSES:
Investment Advisory Fee (Note 2).................................... 264,323
Managing General Partners' Fees and Expenses (Note 2)............... 66,597
Accounting Services................................................. 50,358
Legal............................................................... 21,343
Shareholder Services (Note 2)....................................... 15,921
Custody............................................................. 11,937
Other .............................................................. 61,047
-----------
Total Expenses..................................................... 491,526
-----------
NET INVESTMENT INCOME............................................... $ 457,374
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net Realized Gain on Investments.................................... $ 1,864,174
-----------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period............................................ 38,908,254
End of the Period.................................................. 53,335,307
-----------
Net Unrealized Appreciation on Investments During the Period........ 14,427,053
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS..................... $16,291,227
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......................... $16,748,601
-----------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1996 and 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................... $ 457,374 $ 516,078
Net Realized Gain on Investments......... 1,864,174 993,874
Net Unrealized Appreciation on
Investments During the Period........... 14,427,053 10,576,351
----------- -----------
Change in Net Assets from Operations..... 16,748,601 12,086,303
Distributions from Net Investment Income. (393,524) (408,602)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.............................. 16,355,077 11,677,701
----------- -----------
FROM PARTNERSHIP UNIT TRANSACTIONS (NOTE
3):
Proceeds from Units Issued Through
Dividend Reinvestment.................... 52,164 51,670
Cost of Units Repurchased................ (2,395,079) (1,713,769)
----------- -----------
NET CHANGE IN NET ASSETS FROM PARTNERSHIP
UNIT TRANSACTIONS....................... (2,342,915) (1,662,099)
----------- -----------
TOTAL INCREASE IN NET ASSETS............. 14,012,162 10,015,602
NET ASSETS:
Beginning of the Period.................. 47,754,672 37,739,070
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of
$2,433,418 and $2,369,568,
respectively)........................... $61,766,834 $47,754,672
----------- -----------
CHANGE IN PARTNERSHIP UNITS OUTSTANDING:
Units Issued Through Dividend
Reinvestment............................ 313 377
Units Repurchased........................ (13,938) (13,104)
----------- -----------
Decrease in Partnership Units
Outstanding............................ (13,625) (12,727)
----------- -----------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one unit of
partnership interest outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31 (a)
----------------------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period................................ $151.88 $115.36 $111.32 $104.40 $101.56
-------- ------- ------- ------- -------
Net Investment Income................ 1.488 1.62 1.62 1.49 1.60
Net Realized and Unrealized Gain on
Securities.......................... 53.261 36.18 3.70 6.71 2.83
-------- ------- ------- ------- -------
Total from Investment Operations...... 54.749 37.80 5.32 8.20 4.43
Less Distributions from Net Investment
Income................................ 1.280 1.28 1.28 1.28 1.59
-------- ------- ------- ------- -------
Net Asset Value, End of the Period.... $205.349 $151.88 $115.36 $111.32 $104.40
-------- ------- ------- ------- -------
Total Return.......................... 36.21% 32.89% 4.82% 7.91% 4.42%
Net Assets at End of the Period (In
millions)............................. $61.8 $47.8 $37.7 $38.5 $38.7
Ratio of Expenses to Average Net
Assets................................ .93% .88% .89% .93% .87%
Ratio of Net Investment Income to
Average Net Assets................... .87% 1.16% 1.45% 1.38% 1.59%
Portfolio Turnover.................... 0% 0% 0% 0% 0%
</TABLE>
(a) Based on average units outstanding.
During the year ended December 31, 1996, the Fund incurred no brokerage
commissions on equity share trades. This disclosure was not required in fiscal
years prior to 1996.
See Notes to Financial Statements
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Exchange Fund (the "Fund"), a California limited
partnership is a partnership registered under the Investment Company Act of
1940, as amended, as a diversified open-end investment management company. The
Fund seeks capital appreciation in a portfolio of common stock. The Fund com-
menced investment operations on December 16, 1976.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The prep-
aration of financial statements in conformity with generally accepted account-
ing principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of con-
tingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
A. SECURITY VALUATION-Investments in securities listed on a securities ex-
change are valued at their sale price as of the close of such securities ex-
change. Fixed income investments are stated at value using market quotations.
Unlisted securities and listed securities for which the last sales price is
not available are valued at the mean between the last reported bid and ask
price. For those securities where quotations or prices are not available, val-
uations are determined in accordance with procedures established in good faith
by the Board of Trustees. Short-term securities with remaining maturities of
60 days or less are valued at amortized cost.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term invest-
ments whereby the Fund acquires ownership of a debt security and the seller
agrees to repurchase the security at a future time and specified price. The
Fund may invest independently in repurchase agreements, or transfer uninvested
cash balances into a pooled cash account along with other investment companies
advised by Van Kampen American Capital Asset Management, Inc. (the "Adviser")
or its affiliates, the daily aggregate of which is invested in repurchase
agreements. Repurchase agreements are fully collateralized by the underlying
debt security. The Fund will make payment for such securities only upon physi-
cal delivery or evidence of book entry transfer to the account of the custo-
dian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- -------------------------------------------------------------------------------
C. INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discount is
amortized over the life of each applicable security. Premiums on debt securi-
ties are not amortized. Market discounts are recognized at the time of sale as
realized gains for book purposes and ordinary income for tax purposes.
D. FEDERAL INCOME TAXES-The Fund has met the qualifications to be classified
as a partnership for federal income tax purposes and intends to maintain this
qualification in the future. A partnership is not subject to federal income
tax.
E. DISTRIBUTION OF INCOME AND GAINS-Quarterly distributions to partners are
recorded on the record date. Net investment income is allocated daily to each
partner, relative to the total number of units held. Capital gains or losses
will be allocated equally among units outstanding on the day recognized.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen Ameri-
can Capital Asset Management, Inc., the Adviser, will provide facilities and
investment advice to the Fund for an annual fee payable monthly of .50% based
on the average daily net assets of the Fund.
For the year ended December 31, 1996, the Fund recognized expenses of ap-
proximately $50,400 representing Van Kampen American Capital, Inc.'s or its
affiliates' (collectively "VKAC") cost of providing accounting services to the
Fund. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended De-
cember 31, 1996, the Fund recognized expenses of approximately $15,000, repre-
senting ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Managing general partners (the "Partners") of the Fund who are not affili-
ated with the Adviser are compensated by the Fund at the annual rate of $5,000
plus a fee of $750 per Board meeting attended.
The Partners of the Fund instituted a Retirement Plan effective April 1,
1996. The Plan is not funded, and obligations under the Plan will be paid
solely out of the Fund's general accounts. The Fund will not reserve or set
aside funds for the payment of its obligations under the Plan by any form of
trust or escrow. For the current Partners 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.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996
- -------------------------------------------------------------------------------
Partners with more than five but less than ten years service at retirement
will receive a prorated reduced benefit. Under the Plan, for the Partners re-
tiring with the effectiveness of the Plan, the annual retirement benefit pay-
able per year for a ten year period is equal to 75% of the total compensation
received from the Fund during the 1995 calendar year.
At December 31, 1996, the Adviser and Van Kampen American Capital Exchange
Corp., as non-managing general partners of the Fund, owned 354 and 3,175 units
of partnership interest, respectively.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $-0- and $2,304,182, respective-
ly.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS OF VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
We have audited the accompanying statement of assets and liabilities including
the portfolio of investments of Van Kampen American Capital Exchange Fund (a
California Limited Partnership), as of December 31, 1996, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the years in the two-year period then ended, and finan-
cial highlights for each of the years in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of De-
cember 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presenta-
tion. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Van Kampen American Capital Exchange Fund as of December 31, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and the financial high-
lights for each of the years in the five-year period then ended, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
January 17, 1997
14
<PAGE>
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds, or
1-800-282-4404 for Morgan Stanley retail funds.
15
<PAGE>
RESULTS OF SHAREHOLDER VOTES
A Meeting of Partners of the Fund was held on April 26, 1996, where partners
voted on the election of managing general partners, the ratification of KPMG
Peat Marwick LLP as independent auditors and the approval of an amendment to
the Restated Certificate and Agreement of Limited Partnership changing the
name and address of the Fund. With regard to the election of Donald M. Carl-
ton, Ph.D. as elected managing general partner of the partners 210,334 shares
voted in his favor, 2,407 shares withheld. With regard to the election of Ste-
phen R. Gross as elected managing general partner of the partners 210,334
shares voted in his favor, 2,407 shares withheld. With regard to the election
of F. Robert Paulsen as elected managing general partner of the partners
210,334 shares voted in his favor, 2,407 shares withheld. With regard to the
election of Don G. Powell as elected managing general partner of the partners
210,334 shares voted in his favor, 2,407 shares withheld. With regard to the
election of Alan B. Shepard, Jr. as elected managing general partner of the
partners 210,334 shares voted in his favor, 2,407 shares withheld. With regard
to the ratification of KPMG Peat Marwick LLP as independent auditors for the
Fund 211,481 shares voted in favor of the proposal, 0 shares voted against and
1,261 shares abstained. With regard to the approval of an amendment to the Re-
stated Certificate and Agreement of Limited Partnership changing the name and
address of the Fund 210,334 shares voted in favor of the proposal, 0 shares
voted against and 2,407 shares abstained.
A Special Meeting of Partners of the Fund was held on October 29, 1996,
where partners voted on the approval of a new investment advisory agreement
between Van Kampen American Capital Asset Management, Inc. and the Fund,
215,145 shares voted for the proposal, 14,728 shares voted against and 9,612
shares abstained.
16
<PAGE>
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
(A California Limited Partnership)
MANAGING GENERAL PARTNERS
DONALD M. CARLTON
STEPHEN RANDOLPH GROSS
F. ROBERT PAULSEN
DON G. POWELL*
ALAN B. SHEPARD, JR.
OFFICERS
DON G. POWELL*
Chairman and Chief Executive Officer
DENNIS J. MCDONNELL*
Executive Vice President
ALAN T. SACHTLEBEN*
Chief Investment Officer
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
PETER W. HEGEL*
RONALD A. NYBERG*
Vice Presidents
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Financial Officer
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
SHAREHOLDER SERVICE AGENT
ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street
Boston, Massachusetts 02105
NON-MANAGING GENERAL PARTNERS
VAN KAMPEN AMERICAN CAPITAL
EXCHANGE CORP.
One Parkview Plaza
Oakbrook Terrace, IL 60181
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
NationsBank Center
700 Louisiana
Houston, Texas 77210
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1997 All rights reserved.
SM denotes a service mark of Van Kampen American Capital Distributors, Inc.
Nationally distributed by Van Kampen American Capital Distributors, Inc.
17
