VAN KAMPEN AMERICAN CAPITAL U S GOVERNMENT TRUST, 485BPOS, 1997-04-30

VAN KAMPEN AMERICAN CAPITAL U S GOVERNMENT TRUST
485BPOS, 1997-04-30

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997

REGISTRATION NOS. 2-89190
811-3950
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]

Post-Effective Amendment No. 29 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 30 [X]
</TABLE>

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT TRUST

(Exact Name of Registrant as Specified in Declaration of Trust)

One Parkview Plaza, Oakbrook Terrace, Illinois 60181
(Address of Principal Executive Offices)

(630) 684-6000

(Registrant's Telephone Number)

Ronald A. Nyberg, Esq.
Executive Vice President,
General Counsel and Secretary,
Van Kampen American Capital, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Name and Address of Agent for Service)

Copies to:
Wayne W. Whalen, Esq.
Thomas A. Hale, Esq.

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

333 West Wacker Drive
Chicago, Illinois 60606
(312) 407-0700

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

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE: (CHECK APPROPRIATE
BOX)

[X] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)

[ ] ON (DATE) PURSUANT TO PARAGRAPH (B)

[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)

[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(1)

[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)

[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(2) OF RULE 485.

IF APPROPRIATE CHECK THE FOLLOWING:

[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR
A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.

DECLARATION PURSUANT TO RULE 24F-2

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940 AND INTENDS TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A RULE
24F-2 NOTICE FOR ITS FISCAL YEAR ENDING DECEMBER 31, 1997 ON OR ABOUT MARCH 30,
1998.

================================================================================
<PAGE> 2

VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT FUND

CROSS REFERENCE SHEET

(AS REQUIRED BY ITEM 501(B) OF REGULATION S-K)

<TABLE>
<CAPTION>
ITEM NUMBER OF LOCATION OR CAPTION
FORM N-1A IN PROSPECTUS
-------------- -------------------
<S> <C> <C>
PART A INFORMATION REQUIRED IN A PROSPECTUS

Item 1. Cover Page.................. Cover Page

Item 2. Synopsis.................... SHAREHOLDER TRANSACTION EXPENSES; ANNUAL FUND OPERATING
EXPENSES AND EXAMPLE

Item 3. Condensed Financial
Information............... FINANCIAL HIGHLIGHTS; FUND PERFORMANCE
Item 4. General Description of
Registrant................ THE FUND'S INVESTMENT OBJECTIVE; HOW THE FUND SEEKS ITS
INVESTMENT OBJECTIVE; FUND ORGANIZATION
Item 5. Management of the
Fund...................... SHAREHOLDER TRANSACTION EXPENSES; ANNUAL FUND OPERATING
EXPENSES AND EXAMPLE; HOW THE FUND IS MANAGED
Item 6. Capital Stock and Other
Securities................ FUND ORGANIZATION; HOW TO BUY SHARES; HOW TO SELL SHARES;
DISTRIBUTION AND SERVICE PLANS; DISTRIBUTIONS AND TAXES;
ADDITIONAL INFORMATION
Item 7. Purchase of Securities
Being Offered............. HOW TO BUY SHARES; DISTRIBUTION AND SERVICE PLANS
Item 8. Redemption or
Repurchase................ HOW TO BUY SHARES; HOW TO SELL SHARES
Item 9. Pending Legal
Proceedings............... Not Applicable
</TABLE>

i
<PAGE> 3

<TABLE>
<CAPTION>
LOCATION OR CAPTION
ITEM NUMBER OF IN STATEMENT OF
FORM N-1A ADDITIONAL INFORMATION
-------------- ----------------------
<S> <C> <C>
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page.................. Cover Page
Item 11. Table of Contents........... Table of Contents
Item 12. General Information
and History............... The Fund and the Trust
Item 13. Investment Objectives
and Policies.............. Investment Policies and Restrictions; U.S. Government
Securities; Additional Investment Considerations
Item 14. Management of the
Fund...................... Trustees and Officers
Item 15. Control Persons and
Principal Holders of
Securities................ Trustees and Officers
Item 16. Investment Advisory and
Other Services............ Contained in Prospectus under captions: HOW THE FUND IS
MANAGED; DISTRIBUTION AND SERVICE PLANS; Legal Counsel;
Investment Advisory and Other Services; Custodian and
Independent Auditors; Trustees and Officers; The
Distributor; Notes to Financial Statements
Item 17. Brokerage Allocation........ Contained in the Prospectus under caption: HOW THE FUND IS
MANAGED; Portfolio Transactions and Brokerage Allocation
Item 18. Capital Stock and
Other Securities.......... Contained in the Prospectus under caption: FUND
ORGANIZATION; The Fund and the Trust; Alternative Sales
Arrangements; Purchase of Shares
Item 19. Purchase, Redemption
and Pricing of
Securities Being
Offered................... Contained in Prospectus under captions: HOW TO BUY SHARES;
HOW TO SELL SHARES; Alternative Sales Arrangements;
Purchase of Shares; Shareholder Services; Redemptions;
Distributions from the Fund
Item 20. Tax Status.................. Contained in Prospectus under captions: DISTRIBUTIONS AND
TAXES; Tax Status of the Fund
Item 21. Underwriters................ Contained in the Prospectus under captions: HOW TO BUY
SHARES; DISTRIBUTION AND SERVICE PLANS; The Distributor;
Alternative Sales Arrangements; Purchase of Shares; Notes
to Financial Statements
Item 22. Calculations of
Performance Data.......... Contained in Prospectus under caption: FUND PERFORMANCE;
Performance Information
Item 23. Financial Statements........ Contained in the Prospectus under caption: FINANCIAL
HIGHLIGHTS; Independent Auditors' Report; Financial
Statements; Notes to Financial Statements; Trustees and
Officers
</TABLE>

PART C

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.

ii
<PAGE> 4

- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------

Van Kampen American Capital U.S. Government Fund (the "Fund") is a
diversified series of the Van Kampen American Capital U.S. Government Trust (the
"Trust"), an open-end management investment company. The Fund's investment
objective is to provide a high level of current income, with liquidity and
safety of principal. The Fund invests primarily in obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities. The
Fund may invest a substantial portion of its assets in mortgage-backed
securities issued by agencies of the U.S. Government, some of which are backed
by the full faith and credit of the U.S. Government and others of which are
backed only by the right of the issuer to borrow from the U.S. Treasury or the
credit of the issuer. The Fund may engage in strategic transactions including
borrowing for investment purposes and utilizing financial derivative
instruments, subject to the limitations set forth in this Prospectus. Such
transactions may entail certain risks, which are described under "How the Fund
Seeks Its Investment Objective." The net asset value and the return of the Fund
will fluctuate depending on market conditions and other factors. The Fund is
managed by Van Kampen American Capital Investment Advisory Corp. (the "Adviser")
and distributed by Van Kampen American Capital Distributors, Inc. (the
"Distributor").
Investors may elect to purchase Class A Shares, Class B Shares or Class C
Shares, each with different sales charges and expenses. The different classes of
shares permit an investor to choose the method of purchasing shares that is more
beneficial to the investor, taking into account the amount of the purchase, the
length of time the investor expects to hold the shares and other circumstances.
See "How to Buy Shares."

Additional information about the Fund is contained in a Statement of
Additional Information dated April 30, 1997, which has been filed with the
Securities and Exchange Commission ("SEC"), a copy of which may be obtained
without charge by calling: (800) 421-5666 (or (800) 421-2833 for the hearing
impaired) and is available along with other related materials at the SEC's
Internet web site (http://www.sec.gov). This Prospectus, which incorporates by
reference the entire Statement of Additional Information, concisely sets forth
certain information about the Fund that a prospective shareholder should know
before investing in the Fund. Shareholders should read this Prospectus carefully
and retain it for future reference.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

------------------
VAN KAMPEN AMERICAN CAPITAL SM

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

One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(800) 421-5666

APRIL 30, 1997

<PAGE> 5

- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder Transaction Expenses............................ 3
Annual Fund Operating Expenses and Example.................. 4
Financial Highlights........................................ 5
The Fund's Investment Objective............................. 7
How the Fund Seeks its Investment Objective................. 7
How the Fund is Managed..................................... 11
How to Buy Shares........................................... 13
How to Sell Shares.......................................... 18
Distribution and Service Plans.............................. 20
Distributions and Taxes..................................... 22
Fund Performance............................................ 23
Fund Organization........................................... 23
Additional Information...................................... 24
</TABLE>

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER, OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.

2
<PAGE> 6

- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Maximum sales load imposed
on purchases (as a
percentage of the offering
price)..................... 4.75% (1) None None
Maximum sales load imposed
on reinvested dividends (as
a percentage of the
offering price)............ None None(3) None(3)
Deferred sales load (as a
percentage of the lesser of
the original purchase price
or redemption proceeds).... None (2) Year Year
1--4.00% 1--1.00%
Year After--None
2--3.75%
Year
3--3.50%
Year
4--2.50%
Year
5--1.50%
Year
6--1.00%
After--None
Redemption fees (as a
percentage of amount
redeemed).................. None None None
Exchange fees............... None None None
</TABLE>

- ------------------------------------------------------------------------------
(1) Reduced on investments of $100,000 or more. See "How to Buy Shares--
Class A Shares."

(2) Investments of $1 million or more are not subject to an initial sales
charge, but a contingent deferred sales charge of 1.00% may be imposed on
redemptions made within one year of the purchase.

(3) Subject to a 12b-1 fee, a portion of which may indirectly pay for the
initial sales commission incurred on behalf of the investor. See
"Distribution and Service Plans."

3
<PAGE> 7

- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
- ------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management fees (as a percentage of average
daily net assets)............................ 0.51% 0.51% 0.51%
12b-1 fees (as a percentage of average daily
net assets)(1)............................... 0.18% 1.00% 1.00%
Other expenses (as a percentage of average
daily net assets):
Miscellaneous other expenses.......... 0.21% 0.22% 0.21%
Interest expenses..................... 0.02% 0.02% 0.02%
----- ----- -----
Total other expenses (as a
percentage of average daily net
assets)......................... 0.23% 0.24% 0.23%
----- ----- -----
Total expenses (as a percentage of average
daily
net assets)(2)............................... 0.92% 1.75% 1.74%
</TABLE>

- ------------------------------------------------------------------------------
(1) Such fees are being phased-in and it is anticipated that such fees will
increase over time to the maximum aggregate amount of 0.25% of the net
assets attributable to the Class A Shares. See "Distribution and Service
Plans."

(2) The Fund incurred financing expenses related to borrowings for investment
purposes. Borrowings provide the opportunity for increased net income, but
may increase the Fund's investment risk. "Total expenses" without regard to
the "Interest expenses" would have been 0.90%, 1.73% and 1.72% for each of
the Class A Shares, Class B Shares and Class C Shares, respectively. See
"Financial Highlights" and "How the Fund Seeks Its Investment Objective."

EXAMPLE:

A $1,000 investment would have the following transaction costs and operating
expenses assuming a 5% annual return. This example should not be considered
indicative of actual or expected Fund performance or expenses, both of which
will vary.

<TABLE>
<CAPTION>
WITH REDEMPTION AT
THE END OF PERIOD: ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
------------------ -------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class A Shares................. $56 $75 $ 96 $155
Class B Shares................. $58 $90 $110 $184*
Class C Shares................. $28 $55 $ 94 $205
</TABLE>

<TABLE>
<CAPTION>
WITHOUT
REDEMPTION AT THE
END OF PERIOD:
-----------------
<S> <C> <C> <C> <C>
Class A Shares................. $56 $75 $ 96 $155
Class B Shares................. $18 $55 $ 95 $184*
Class C Shares................. $18 $55 $ 94 $205
</TABLE>

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

* Class B Shares convert to Class A Shares at the end of eight years after
purchase; ten-year amounts reflect lower expenses applicable to such shares
after conversion.

4
<PAGE> 8

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for a share outstanding throughout the periods)
- --------------------------------------------------------------------------------

The following schedule presents financial highlights for one Class A Share, one
Class B Share and one Class C Share of the Fund outstanding throughout each of
the periods indicated. The financial highlights have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, for each of the periods
indicated and their report thereon appears in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and related notes thereto included in the Statement of Additional
Information.

<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 14.950 $ 13.698 $ 15.662 $ 15.720 $ 16.130 $ 15.253 $ 15.280
-------- -------- -------- -------- -------- -------- --------
Net Investment Income............ 1.069 1.111 1.177 1.286 1.365 1.390 1.407
Net Realized and Unrealized
Gain/Loss on Investments....... (.495) 1.233 (1.965) (0.060) (0.407) 0.897 (0.024)
-------- -------- -------- -------- -------- -------- --------
Total from Investment Operations... 0.574 2.344 (0.788) 1.226 0.958 2.287 1.383
-------- -------- -------- -------- -------- -------- --------
Less:
Distributions from and in Excess
of Net Investment Income....... 1.065 1.092 1.176 1.284 1.368 1.410 1.410
Distributions from Net Realized
Gain on Investments............ -- -- -- -- -- -- --
Return of Capital Distribution... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total Distributions................ 1.065 1.092 1.176 1.284 1.368 1.410 1.410
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period..... $ 14.459 $ 14.950 $ 13.698 $ 15.662 $ 15.720 $ 16.130 $ 15.253
======== ======== ======== ======== ======== ======== ========
Total Return(1).................... 4.10% 17.61% (5.10%) 7.95% 6.27% 15.80% 9.62%
Net Assets at End of Period (in
millions)........................ $2,560.1 $2,962.9 $2,924.4 $3,653.6 $3,571.7 $3,505.9 $3,329.0
Ratio of Operating Expenses to
Average Net Assets............... 0.90% 0.93%(2) 0.92% 0.87% 0.77% 0.68% 0.72%
Ratio of Interest Expense to
Average Net Assets(3)............ 0.02% 0.27% 0.08% N/A N/A N/A N/A
Ratio of Net Investment Income to
Average Net Assets............... 7.38% 7.68%(2) 8.13% 8.08% 8.64% 8.97% 9.38%
Portfolio Turnover (excluding
dollars rolls and forward
commitment transactions)......... 59% 63% 44% 67% 111% 27% 56%

<CAPTION>
CLASS A SHARES
------------------------------
YEAR ENDED DECEMBER 31
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 14.695 $ 15.046 $ 16.568
-------- -------- --------
Net Investment Income............ 1.404 1.319 1.384
Net Realized and Unrealized
Gain/Loss on Investments....... 0.558 (0.221) (1.264)
-------- -------- --------
Total from Investment Operations... 1.962 1.098 0.120
-------- -------- --------
Less:
Distributions from and in Excess
of Net Investment Income....... 1.377 1.319 1.400
Distributions from Net Realized
Gain on Investments............ -- -- .081
Return of Capital Distribution... -- .130 .161
-------- -------- --------
Total Distributions................ 1.377 1.449 1.642
-------- -------- --------
Net Asset Value, End of Period..... $ 15.280 $ 14.695 $ 15.046
======== ======== ========
Total Return(1).................... 13.88% 7.50% 1.45%
Net Assets at End of Period (in
millions)........................ $3,550.5 $3,825.6 $4,814.6
Ratio of Operating Expenses to
Average Net Assets............... 0.65% 0.71% 0.60%
Ratio of Interest Expense to
Average Net Assets(3)............ N/A N/A N/A
Ratio of Net Investment Income to
Average Net Assets............... 9.37% 8.85% 8.96%
Portfolio Turnover (excluding
dollars rolls and forward
commitment transactions)......... 101% 167% 124%
</TABLE>

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

(1)Total return does not consider the effect of sales charges.

(2)The Ratios of Expenses to Average Net Assets and Net Investment Income to
Average Net Assets were not affected by the assumption of certain expenses.

(3)See Note 1 to the Financial Statements.

N/A -- Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.

See Financial Statements and Notes Thereto

5
<PAGE> 9

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- continued (for a share outstanding throughout the
periods)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
-------------------------------------------------------- ---------------------------
YEAR ENDED AUGUST 24, 1992 YEAR ENDED
DEC. 31 (COMMENCEMENT DEC. 31
------------------------------------- OF DISTRIBUTION) ---------------------------
1996 1995 1994 1993 TO DEC. 31, 1992 1996 1995 1994
---- ---- ---- ---- ---------------- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $14.948 $13.694 $15.643 $15.709 $ 15.983 $14.948 $13.693 $15.626
------- ------- ------- ------- -------- ------- ------- -------
Net Investment Income.................. 0.947 0.991 1.055 1.149 0.425 0.943 0.996 1.063
Net Realized and Unrealized Gain/Loss
on Investments....................... (0.494) 1.241 (1.964) (0.063) (0.263) (0.489) 1.237 (1.956)
------- ------- ------- ------- -------- ------- ------- -------
Total from Investment Operations......... 0.453 2.232 (0.909) 1.086 0.162 0.454 2.233 (0.893)
Less Distributions from and in Excess of
Net Investment Income.................. 0.954 0.978 1.04 1.152 0.436 0.954 0.978 1.040
------- ------- ------- ------- -------- ------- ------- -------
Net Asset Value, End of Period........... $14.447 $14.948 $13.694 $15.643 $ 15.709 $14.448 $14.948 $13.693
======= ======= ======= ======= ======== ======= ======= =======
Total Return(1).......................... 3.24% 16.78% (5.93%) 7.01% 1.64%(2) 3.24% 16.78% (5.86%)
Net Assets at End of Period (in
millions).............................. $ 414.8 $ 466.7 $ 436.3 $ 474.7 $ 103.1 $ 14.3 $ 13.3 $ 11.4
Ratio of Operating Expenses to Average
Net Assets (annualized)................ 1.73% 1.75%(4) 1.74% 1.73% 1.61% 1.72% 1.75%(4) 1.74%
Ratio of Interest Expense to Average Net
Assets (annualized)(3)................. 0.02% 0.27% 0.09% N/A N/A 0.02% 0.27% 0.10%
Ratio of Net Investment Income to Average
Net Assets (annualized)................ 6.55% 6.85%(4) 7.29% 7.00% 6.16% 6.55% 6.86%(4) 7.29%
Portfolio Turnover (excluding dollar
rolls and forward transactions)........ 59% 63% 44% 67% 111% 59% 63% 44%

<CAPTION>
CLASS C SHARES
----------------
AUGUST 13, 1993
(COMMENCEMENT
OF DISTRIBUTION)
TO DEC. 31, 1993
----------------
<S> <C>
Net Asset Value, Beginning of Period..... $ 16.000
--------
Net Investment Income.................. 0.433
Net Realized and Unrealized Gain/Loss
on Investments....................... (0.364)
--------
Total from Investment Operations......... 0.069
Less Distributions from and in Excess of
Net Investment Income.................. 0.443
--------
Net Asset Value, End of Period........... $ 15.626
========
Total Return(1).......................... 0.46%(2)
Net Assets at End of Period (in
millions).............................. $ 9.6
Ratio of Operating Expenses to Average
Net Assets (annualized)................ 1.71%
Ratio of Interest Expense to Average Net
Assets (annualized)(3)................. N/A
Ratio of Net Investment Income to Average
Net Assets (annualized)................ 6.42%
Portfolio Turnover (excluding dollar
rolls and forward transactions)........ 67%
</TABLE>

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

(1)Total return does not consider the effect of sales charges.

(2)Non-Annualized

(3)See Note 1 to the Financial Statements

(4)The Ratios of Expenses to Average Net Assets and Net Investment Income to
Average Net Assets were not affected by the assumption of certain expenses.
N/A -- Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.

See Financial Statements and Notes Thereto

6
<PAGE> 10

- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------

The Fund's investment objective is to provide a high level of current income,
with liquidity and safety of principal. This objective is fundamental and cannot
be changed without shareholder approval. There are risks inherent in all
securities investments and there can be no assurance that the Fund will achieve
its objective. An investment in the Fund may not be appropriate for all
investors. The Fund is not intended to be a complete investment program, and
investors should consider their long-term investment goals and financial needs
when making an investment decision with respect to the Fund. An investment in
the Fund is intended to be a long-term investment and should not be used as a
trading vehicle.
- ------------------------------------------------------------------------------
HOW THE FUND SEEKS ITS INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------

The Fund seeks to achieve its investment objective by investing at least 65%
of its assets in obligations issued or guaranteed by the U.S. Government or in
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government (collectively, "U.S. Government Securities"). This policy is
fundamental and cannot be changed without shareholder approval. U.S. Government
Securities are considered among the most creditworthy of fixed income
investments; however, the yields on U.S. Government securities generally are
lower than yields available from corporate debt securities. The value of U.S.
Government Securities (as with most fixed income securities) generally varies
inversely with changes in prevailing interest rates. The magnitude of these
fluctuations generally is greater for securities with longer maturities. The
fluctuating value of U.S. Government Securities affects the Fund's net asset
value but will not affect investment income from those securities.

U.S. Government Securities include: (1) U.S. Treasury obligations and (2)
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities ("Agencies") which are supported by: (a) the full faith and
credit of the U.S. Government; (b) the right of the issuer or guarantor to
borrow an amount from a line of credit with the U.S. Treasury; (c) discretionary
power of the U.S. Government to purchase obligations of the Agencies or (d) the
credit of the Agencies. U.S. Government Securities also may include: (1) real
estate mortgage investment conduits ("REMICs"), collateralized mortgage
obligations ("CMOs") and other mortgage-backed securities ("Mortgage-Backed
Securities") issued or guaranteed by an Agency, (2) "when-issued" commitments
relating to the foregoing and (3) repurchase agreements ("Repos") collateralized
by U.S. Government Securities. The Fund invests in U.S. Government Securities of
varying maturities and interest rates, including investments in obligations
issued or guaranteed in zero coupon securities ("Zero Coupon Securities").

The Fund historically has invested substantially all of its assets in
Mortgage-Backed Securities that directly or indirectly represent a participation
in, or are

7
<PAGE> 11

secured by and payable from, mortgage loans secured by real property. Mortgage
Backed Securities are issued or guaranteed by U.S. Government agencies or
instrumentalities, such as certificates issued by the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-
Backed Securities also include mortgage pass-through certificates representing
participation interests in pools of mortgage loans originated by the U.S.
Government or private lenders and guaranteed by U.S. Government agencies such as
GNMA, FNMA or FHLMC. Guarantees by GNMA are backed by the full faith and credit
of the United States. Guarantees by other agencies or instrumentalities of the
U.S. Government, such as FNMA or FHLMC, are not backed by the full faith and
credit of the United States, although FNMA and FHLMC are authorized to borrow
from the U.S. Treasury to meet their obligations.

The yield and payment characteristics of Mortgage-Backed Securities differ
from traditional debt securities. Interest and principal payments are made
regularly and frequently, usually monthly, over the life of the mortgage loans
unlike traditional debt securities and principal may be prepaid at any time
because the underlying mortgage loans generally may be prepaid at any time.
Faster or slower prepayments than expected on underlying mortgage loans can
dramatically alter the yield to maturity of a Mortgage-Backed Security. The
value of most Mortgage-Backed Securities, like traditional debt securities,
tends to vary inversely with changes in interest rates (i.e., as interest rates
increase, the value of such securities decrease). Mortgage-Backed Securities,
however, may benefit less than traditional debt securities from declining
interest rates because prepayment of mortgages tends to accelerate during
periods of declining interest rates. When mortgage loans underlying
Mortgage-Backed Securities held by the Fund are prepaid, the Fund reinvests the
prepaid amounts in other income-producing securities, the yields of which will
reflect interest rates prevailing at the time. Therefore, the Fund's ability to
maintain a portfolio of higher-yielding Mortgage-Backed Securities will be
adversely affected to the extent that prepayments must be reinvested in
securities which have lower yields. A more complete description of
Mortgage-Backed Securities is contained in the Statement of Additional
Information.

The Fund may invest in CMOs, which are debt obligations collateralized by
mortgage loans or mortgage pass-through securities and multiclass pass-through
securities, which are equity interests in a trust composed of mortgage assets.
Payments of principal and interest on the mortgage assets, and any reinvestment
income thereon, provide the funds to pay debt service on the CMOs or make
scheduled distributions on the multiclass pass-through securities. A more
complete description of CMOs is contained in the Statement of Additional
Information.

The Fund may invest in Zero Coupon Securities. Zero Coupon Securities are U.S.
Treasury notes and bonds which are stripped of their unmatured interest coupons
and therefore pay no interest to its holder during the life thereof. Because
Zero Coupon Securities do not pay interest prior to maturity, such securities
usually

8
<PAGE> 12

trade at a deep discount from their face or par value and such securities are
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities which make current
distributions of interest. Even though the holder of a Zero Coupon Security does
not receive interest payments prior to maturity, a portion of the purchase price
discount must be accrued as income each year under current federal tax law. A
more complete description of Zero Coupon Securities is contained in the
Statement of Additional Information. In order to generate sufficient cash to
make distributions, the Fund may have to dispose of securities that it would
otherwise continue to hold, which, in some cases, may be disadvantageous to the
Fund. See "Distributions and Taxes."

The Fund may engage in strategic transactions, purchase and sell securities on
a "when issued" and "delayed delivery" basis, enter into Repos and reverse
repurchase agreements, and lend portfolio securities in certain circumstances,
in each case subject to the limitations set forth below.

The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
equity and fixed-income indices, and other financial instruments, purchase and
sell financial futures contracts and options thereon, and enter into various
interest rate transactions such as swaps, caps, floors or collars. Collectively,
all of the above are referred to as "Strategic Transactions". The Fund generally
seeks to use Strategic Transactions as a hedging technique to seek to protect
against possible adverse changes in the market value of the Fund's securities,
protect the Fund's unrealized gains, facilitate the sale of certain securities
for investment purposes, manage the effective maturity or duration of the Fund's
portfolio, or establish positions in the derivatives markets as a temporary
substitute for purchasing or selling particular securities. The Fund may use
some Strategic Transactions to seek to enhance income, although no more than 25%
of the Fund's assets will be committed to Strategic Transactions entered into
for non-hedging purposes.

Strategic Transactions have risks including the possible default or
illiquidity of the other party to the transaction. Furthermore, the ability to
successfully use Strategic Transactions depends on the Adviser's ability to
predict pertinent market movements, which cannot be assured. Thus, the use of
such Strategic Transactions may result in losses greater than if they had not
been used, require the Fund to sell or purchase portfolio securities at
inopportune times or for prices other than current market values, limit the
amount of appreciation the Fund can realize on an investment, or cause the Fund
to hold a security it might otherwise sell. Money paid by the Fund as premium
and money or other assets placed in margin accounts in connection with entering
into Strategic Transactions are not otherwise available to the Fund for
investment purposes. The Strategic Transactions that the Fund may use and some
of their risks are described more fully in the Fund's Statement of Additional
Information.

The Fund may purchase and sell "when issued" and "delayed delivery"
securities. The Fund accrues no income on such securities until the Fund
actually takes

9
<PAGE> 13

delivery of such securities. These transactions are subject to market
fluctuation; the value of the securities at delivery may be more or less than
their purchase price. The yields generally available on comparable securities
when delivery occurs may be higher than yields on the securities obtained
pursuant to such transactions. Because the Fund relies on the buyer or seller to
consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. The Fund will engage in when issued and
delayed delivery transactions for the purpose of acquiring securities consistent
with the Fund's investment objective and policies and not for the purpose of
investment leverage.

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

The Fund is authorized to borrow money from banks and to engage in reverse
repurchase agreements and dollar rolls in an aggregate amount up to 33 1/3% of
the Fund's total assets (after giving effect to any such borrowing); provided,
however, that with respect to such amount no more than 5% may be invested in
bank borrowings and reverse repurchase agreements. The use of such transactions
to purchase additional securities is known as "leverage". Leverage transactions
create an opportunity for increased net income but, at the same time, may
increase the volatility of the Fund's net asset value as a result of
fluctuations in market interest rates and increase the risk of the Fund's
portfolio. The principal amount of these transactions is fixed when the
transaction is opened, but the Fund's assets may change in value during the time
these transactions are outstanding. As a result, interest expenses and other
costs from these transactions may exceed the interest income and other revenues
earned from portfolio assets, and the net income of the Fund may be less than if
these transactions were not used. Reverse repurchase agreements are transactions
whereby the Fund sells certain securities concurrently with an agreement to
repurchase the same securities at a later date at a fixed price. During the
reverse repurchase agreement period, the Fund continues to receive principal and
interest payments on these securities. Dollar rolls are transactions whereby the
Fund sells securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar securities on a specified future
date. During the roll period, the Fund forgoes principal and interest paid on
such securities. Reverse repurchase agreements and dollar rolls involve the risk
that the market value of the securities retained by the Fund may decline below
the price of the securities the Fund has sold but is obligated to repurchase
under the agreement.

10
<PAGE> 14

The Fund may lend its portfolio securities to banks or broker-dealers, to a
maximum of 25% of the total assets of the Fund, provided such loans are callable
at any time and are continuously secured by collateral consisting of cash or
U.S. Government Securities equal to at least 100% of the value of the securities
loaned, including accrued interest. The Fund will receive income for having made
the loan. The Fund is the beneficial owner of the loaned securities so that any
gain or loss in the market price during the loan inures to the Fund and its
shareholders.

- ------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- ------------------------------------------------------------------------------

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

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

On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover & Co.
announced that they had entered into an Agreement and Plan of Merger to form
Morgan Stanley, Dean Witter, Discover & Co. Subject to certain conditions being
met, it is currently anticipated that the transaction will close in mid-1997.
Thereafter, Van Kampen American Capital Investment Advisory Corp. will be an
indirect subsidiary of Morgan Stanley, Dean Witter, Discover & Co.

Dean Witter, Discover & Co. is a financial services company with three major
businesses; full service brokerage, credit services and asset management.

11
<PAGE> 15

ADVISORY AGREEMENT. The business and affairs of the Fund will be managed under
the direction of the Board of Trustees of the Trust, of which the Fund is a
series. Subject to the Trustees' authority, the Adviser and the Fund's officers
supervise and implement the Fund's investment activities. The Fund pays the
Adviser a fee (accrued daily and paid monthly) equal to a percentage of the
average daily net assets of the Fund as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY
NET ASSETS
(MILLIONS) % PER ANNUM
------------- -----------
<S> <C>
First $500...................................... 0.550%
Next $500....................................... 0.525%
Next $2,000..................................... 0.500%
Next $2,000..................................... 0.475%
Next $2,000..................................... 0.450%
Next $2,000..................................... 0.425%
Thereafter...................................... 0.400%
</TABLE>

Under its investment advisory agreement, the Fund has agreed to assume and pay
the charges and expenses of the Fund's operations, including the compensation of
the Trustees of the Trust (other than those who are affiliated persons, as
defined in the Investment Company Act of 1940 (the "1940 Act"), of the Adviser,
the Distributor or Van Kampen American Capital), the charges and expenses of
independent accountants, legal counsel, transfer agent, or dividend disbursing
agent and the custodian (including fees for safekeeping of securities), costs of
calculating net asset value, costs of acquiring and disposing of portfolio
securities, interest (if any) on obligations incurred by the Fund, costs of
share certificates, membership dues in the Investment Company Institute or any
similar organization, reports and notices to shareholders, costs of registering
shares of the Fund under the federal securities laws, miscellaneous expenses and
all taxes and fees to federal, state or other governmental agencies.

PERSONAL INVESTING POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes permit directors, trustees, officers and
employees to buy and sell securities for their personal accounts subject to
certain restrictions. Persons with access to certain sensitive information are
subject to preclearance and other procedures designed to prevent conflicts of
interest.

PORTFOLIO MANAGER. John E. Doyle, Senior Vice President of the Adviser, has
been primarily responsible for the day to day management of the Fund's portfolio
since October, 1984. Mr. Doyle has been employed by the Adviser since October,
1984.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION. The Adviser is responsible
for decisions to buy and sell securities for the Fund, the selection of brokers
and dealers to effect the transactions and the negotiation of prices and any
brokerage commissions. The securities in which the Fund invests are traded
principally in the over-

12
<PAGE> 16

the-counter market. Over-the-counter securities generally are traded on a net
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a mark-up to the
dealer. Securities purchased in underwritten offerings generally include, in the
price, a fixed amount of compensation for the advisers, underwriters and
dealers. The Fund may also purchase certain money market instruments directly
from an issuer, in which case no commissions or discounts are paid. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services.

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

In effecting purchases and sales of the Fund's portfolio securities, the
Adviser and the Fund may place orders with and pay brokerage commissions to
brokers, including brokers which may be affiliated with the Fund, the Adviser
and the Distributor or dealers participating in the offering of the Fund's
shares.
- ------------------------------------------------------------------------------
HOW TO BUY SHARES
- ------------------------------------------------------------------------------

The Fund currently offers three classes of shares, designated Class A Shares,
Class B Shares and Class C Shares. Shares of each class are offered at a price
equal to their net asset value per share plus a sales charge which, at the
election of the purchaser, may be imposed (a) at the time of purchase ("Class A
Shares") or (b) on a contingent deferred basis (Class A Share accounts over $1
million, "Class B Shares" and "Class C Shares"). The three classes of shares
permit an investor to choose the method of purchasing shares that is most
beneficial to the investor, taking into account the amount of the purchase, the
length of time the investor expects to hold the shares, whether the investor
wishes to receive dividends in cash or to reinvest them in additional shares of
the Fund, and other circumstances. Class A Share accounts over $1 million or
otherwise subject to a contingent deferred sales charge ("CDSC"), Class B Shares
and Class C Shares sometimes are referred to herein collectively as "Contingent
Deferred Sales Charge Shares" or "CDSC Shares." The minimum initial investment
with respect to each class of shares is $500 and the minimum subsequent
investment with respect to each class of shares is $25. It is presently the
policy of the Distributor to accept any order in an amount of $500,000 or more
for Class B Shares or any order of Class C Shares in an amount in excess of

13
<PAGE> 17

$1 million or more because it ordinarily will be more advantageous for an
investor making such an investment to purchase Class A Shares.

Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except each class of shares
has: (i) distribution fees, service fees and administrative expenses unique to
its respective class of shares, (ii) exclusive voting rights on certain
provisions of the Fund's Rule 12b-1 distribution plan which relate only to such
class and (iii) different exchange privileges. Furthermore, the Class B Shares
and Class C Shares have a conversion feature (discussed below).

The Fund offers its three classes of shares to the public on a continuous
basis through Van Kampen American Capital Distributors, Inc. (the
"Distributor"), as principal underwriter, which is located at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered through members
of the National Association of Securities Dealers, Inc. ("NASD") acting as
securities dealers ("dealers") and through NASD members acting as brokers for
investors ("brokers") or eligible non-NASD members acting as agents for
investors ("financial intermediaries"). The Fund reserves the right to suspend
or terminate the continuous public offering at any time and without prior
notice. ACCESS Investor Services, Inc. ("ACCESS"), transfer agent for the Fund
and a wholly-owned subsidiary of Van Kampen American Capital, performs
bookkeeping, data processing and administration services related to the
maintenance of shareholder accounts.

CLASS A SHARES

The public offering price of Class A Shares is equal to the net asset value
per share plus an initial sales charge which varies depending upon the total
amount of the sale. The table below shows sales charges and the aggregate amount
of the sales charges which are paid as dealer concessions or broker agency
commissions on sales of Class A Shares. The sales charges collected from the
investor are allocated between the investor's broker, dealer or financial
intermediary and the Distributor.

14
<PAGE> 18

SALES CHARGE TABLE

<TABLE>
<CAPTION>
DEALER
CONCESSIONS
OR AGENCY
TOTAL SALES CHARGE COMMISSION
------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
SIZE OF TRANSACTION OF OFFERING OF NET OF OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000........................ 4.75% 4.99% 4.25%
$100,000 but less than $250,000........... 3.75 3.90 3.25
$250,000 but less than $500,000........... 2.75 2.83 2.25
$500,000 but less than $1,000,000......... 2.00 2.04 1.75
$1,000,000 or more........................ * * *
- ------------------------------------------
</TABLE>

* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a CDSC
of 1.00% on redemptions made within one year of the purchase. See "How
to Buy Shares -- Deferred Sales Charge Alternatives" for additional
information.

QUANTITY DISCOUNTS AND OTHER PURCHASE PROGRAMS. The Fund's Statement of
Additional Information contains more detailed information about quantity
discounts and other purchase programs available to purchasers of Class A Shares.
Interested investors may obtain a free copy of the Fund's Statement of
Additional Information by calling (800) 421-5666 (or (800) 421-2833 for the
hearing impaired).

DEFERRED SALES CHARGE ALTERNATIVES

Investors choosing the deferred sales charge alternative may purchase Class A
Shares in an amount of $1 million or more, Class B Shares or Class C Shares. The
public offering price of these CDSC Shares is equal to the net asset value per
share. The investor incurs no initial sales charge at the time of purchase.
However, as discussed below, the investor may be subject to a contingent
deferred sales charge upon disposition of such shares depending on the length of
time the investor holds such shares. The Distributor compensates brokers,
dealers and financial intermediaries for participating in the continuous public
offering of the CDSC Shares but does so out of its own assets and not out of the
assets of the Fund. The amount paid to brokers, dealers and financial
intermediaries varies as a percentage of the dollar value of the CDSC Shares
purchased from the Fund by such brokers, dealers and financial intermediaries.
The percentage rate equals: (i) with respect to Class A Shares, 1.00% on sales
to $2 million, plus 0.80% on the next $1 million and 0.50% on the excess over $3
million; (ii) 4.00% with respect to the Class B Shares and (iii) 1.00% with
respect to the Class C Shares. When an investor sells its CDSC Shares, any
applicable CDSC is paid to the Distributor and used by the Distributor to defray
its expenses related to providing distribution-related services to the Fund in

15
<PAGE> 19

connection with the sale of such CDSC Shares, including the payment of
compensation to dealers and agents for selling such shares. The discussions of
Class A Shares, Class B Shares and Class C Shares below summarize an investor's
contingent deferred sales charge. The contingent deferred sales charge and the
distribution and service fees (see "Distribution and Service Plans" below)
enable the Fund to sell such CDSC Shares without an initial sales charge.

CLASS B SHARES. Class B Shares redeemed within eight years of purchase
generally will be subject to a CDSC at the rates set forth below, charged as a
percentage of the dollar amount redeemed:

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

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- -------------------------------------------------------------------------------
<S> <C>
First....................................... 4.00%
Second...................................... 3.75%
Third....................................... 3.50%
Fourth...................................... 2.50%
Fifth....................................... 1.50%
Sixth....................................... 1.00%
Seventh and after........................... 0.00%
</TABLE>

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

CLASS C SHARES. Class C Shares redeemed within the first twelve months of
purchase generally will be subject to a CDSC of 1.00% of the dollar amount
subject thereto. Class C Shares redeemed thereafter will not be subject to a
CDSC.

CONVERSION FEATURE. Class B Shares purchased on or after June 1, 1996, and any
dividend reinvestment plan shares received thereon automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A Shares six years after the end of the calendar month in which the shares
were purchased. Class C Shares purchased before January 1, 1997, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A Shares ten years after the end of the calendar month in which such
shares were purchased. The conversion feature is subject to the continuing
availability of an opinion of counsel to the Fund regarding certain tax matters
and the Fund may suspend such conversion feature in the absence of such opinion.

WAIVERS OF CONTINGENT DEFERRED SALES CHARGE. The Fund's Statement of
Additional Information contains more detailed information about waivers of
contingent deferred sales charges available to purchasers of CDSC Shares.
Interested investors

16
<PAGE> 20

may obtain a free copy of the Fund's Statement of Additional Information by
calling (800) 421-5666 (or (800) 421-2833 for the hearing impaired).

NET ASSET VALUE

The net asset value per share of the Fund will be determined separately for
each class of shares. The net asset value per share of a given class of shares
of the Fund is determined by calculating the total value of the Fund's assets
attributable to such class of shares, deducting the total liabilities
attributable to such class of shares, and dividing the result by the number of
shares of such class outstanding. Generally, the net asset value for the Fund is
computed once daily as of 5:00 p.m. Eastern time Monday through Friday.

Portfolio securities are valued by using market quotations, prices provided by
market makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Board of Trustees of the Trust, of
which the Fund is a series.

OTHER PURCHASE INFORMATION

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

The Distributor may from time to time implement special programs or contests
which are intended to result in sales of shares of the Fund. Such programs,
which will be conducted pursuant to objective criteria established by the
Distributor, generally will result in brokers, dealers and financial
intermediaries being paid additional amounts than those described above with
respect to sales of shares of the Fund. In some instances additional
compensation or promotional incentives may be offered to brokers, dealers or
financial intermediaries that have sold or may sell significant amounts of
shares during specified periods of time. The Distributor may provide additional
compensation to Edward D. Jones & Co. or an affiliate thereof based on a
combination of its sales of shares and increases in assets under management.
Such payments to brokers, dealers and financial intermediaries for such programs
are made by the Distributor out of its own assets and not out of the assets of
the Fund. These programs will not change the price an investor pays for shares
or the amount the Fund will receive from such sale.

DIVIDEND REINVESTMENT PROGRAM

The Fund automatically will credit monthly and annual distributions to a
shareholder's account in additional shares of the Fund, without a sales charge,
unless a shareholder instructs otherwise. This instruction may be made by
telephone by calling (800) 421-5666 (or (800) 421-2833 for the hearing impaired)
or in writing to Van Kampen American Capital Funds, c/o ACCESS, P.O. Box 418256,
Kansas City, MO 64141-9256.

17
<PAGE> 21

- ------------------------------------------------------------------------------
HOW TO SELL SHARES
- ------------------------------------------------------------------------------

Shareholders may redeem for cash some or all of their shares without charge by
the Fund (other than, with respect to CDSC Shares, the applicable contingent
deferred sales charge) at any time by sending a written request in proper form
directly to ACCESS, P. O. Box 418256, Kansas City, MO 64141-9256, by placing the
redemption request through an authorized dealer or by calling the Fund.

WRITTEN REDEMPTION REQUESTS. In the case of redemption requests sent directly
to ACCESS, the redemption request should indicate the number of shares to be
redeemed, the class designation of such shares, the account number and be signed
exactly as the shares are registered. Signatures must conform exactly to the
account registration. If the proceeds of the redemption would exceed $50,000, or
if the proceeds are not to be paid to the record owner at the record address, or
if the record address has changed within the previous 30 days, signature(s) must
be guaranteed by one of the following: a bank or trust company; a broker-dealer;
a credit union; a national securities exchange, registered securities
association or clearing agency; a savings and loan association; or a federal
savings bank. If certificates are held for the shares being redeemed, such
certificates must be endorsed for transfer or accompanied by an endorsed stock
power and sent with the redemption request. In the event the redemption is
requested by a corporation, partnership, trust, fiduciary, executor or
administrator, and the name and title of the individual(s) authorizing such
redemption is not shown in the account registration, a copy of the corporate
resolution or other legal documentation appointing the authorized signer and
certified within the prior 60 days must accompany the redemption request. The
redemption price is the net asset value per share next determined after the
request is received by ACCESS in proper form. Payment for shares redeemed (less
any sales charge, if applicable) will ordinarily be made by check mailed within
three business days after acceptance by ACCESS of the request and any other
necessary documents in proper order. Such payments may be postponed or the right
of redemption suspended as provided by the rules of the Securities and Exchange
Commission ("SEC"). If the shares to be redeemed have been recently purchased by
check, ACCESS may delay mailing a redemption check until it confirms that the
purchase check has cleared, usually a period of up to 15 days. Any gain or loss
realized on the redemption of shares is a taxable event.

18
<PAGE> 22

shareholder and dealer. Shareholders must submit a written redemption request in
proper form (as described above under "Written Redemption Requests") to the
dealer within three business days after calling the dealer with the sell order.
Payment for shares redeemed (less any sales charge, if applicable) ordinarily
will be made by check mailed within three business days to the dealer.

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. To establish
such privilege, a shareholder must complete the appropriate section of the
application form accompanying this Prospectus or call the Fund at (800) 421-5666
(or (800) 421-2833 for the hearing impaired) to request that a copy of the
Telephone Redemption Authorization form be sent to them for completion. To
redeem shares, contact the telephone transaction line at (800) 421-5684. VKAC
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, a shareholder agrees that neither VKAC nor the Fund
will be liable for following instructions which it reasonably believes to be
genuine. VKAC and the Fund may be liable for any losses due to unauthorized or
fraudulent instructions if reasonable procedures are not followed. Telephone
redemptions may not be available if the shareholder cannot reach ACCESS by
telephone, whether because all telephone lines are busy or for any other reason;
in such case, a shareholder would have to use the Fund's other redemption
procedures previously described. Requests received by ACCESS prior to 4:00 p.m.,
New York time, on a regular business day will be processed at the net asset
value per share determined that day. These privileges are available for all
accounts other than retirement accounts. The telephone redemption privilege is
not available for shares represented by certificates. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check or wiring redemption proceeds until it confirms that the
purchase check has cleared, usually a period of up to 15 days. If an account has
multiple owners, ACCESS may rely on the instructions of any one owner.

For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check sent to the shareholders'
address of record and amounts of at least $1,000 and up to $1 million may be
redeemed daily if the proceeds are to be paid by wire sent to the shareholder's
bank account of record. The proceeds must be payable to the shareholder(s) of
record. Proceeds from redemptions to be paid by check will ordinarily be mailed
within three business days to the shareholder's address of record. Proceeds from
redemptions to be paid by wire will ordinarily be wired on the next business day
to the shareholder's bank account of record. This privilege is not available if
the address of record has been changed within 30 days prior to a telephone
redemption request.

19
<PAGE> 23

The Fund reserves the right at any time to terminate, limit or otherwise modify
this telephone redemption privilege.

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

Further information regarding redemptions from the Fund is contained in the
Fund's Statement of Additional Information.

- ------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS
- ------------------------------------------------------------------------------

The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan provide
that the Fund may spend a portion of the Fund's average daily net assets
attributable to each class of shares in connection with distribution of the
respective class of shares and in connection with the provision of ongoing
services to shareholders of each class. The Fund may spend up to 0.25% per year
of the Fund's average daily net assets attributable to each class of shares
pursuant to the Service Plan in connection with the ongoing provision of
services to holders of such shares by the Distributor and brokers, dealers or
financial intermediaries in connection with the maintenance of such
shareholders' accounts. The Distribution Plan and the Service Plan are
implemented through an agreement with the Distributor and sub-agreements between
the Distributor and brokers, dealers or financial intermediaries (collectively,
"Selling Agreements") that may provide customers certain services or assistance.

CLASS A SHARES. The Fund may spend an aggregate amount up to 0.25% per year of
the average daily net assets attributable to the Class A Shares of the Fund
pursuant to the Distribution Plan and the Service Plan. The Fund pays the
Distributor the lesser of the balance of the 0.25% not paid to brokers, dealers
or financial intermediaries or the amount of the Distributor's actual
distribution-related expenses.

CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B Shares of the Fund pursuant to the
Distribution Plan. In addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B Shares pursuant to
the

20
<PAGE> 24

Service Plan in connection with the ongoing provision of services to holders of
such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.

CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C Shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C Shares up to 0.75% of the Fund's average daily
net assets attributable to Class C Shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of 0.75% not paid to such
brokers, dealers or financial intermediaries or the amount of the Distributor's
actual distribution-related expense attributable to the Class C Shares. In
addition, the Fund may spend up to 0.25% per year of the Fund's average daily
net assets attributable to the Class C Shares pursuant to the Service Plan in
connection with the ongoing provision of services to holders of such shares by
the Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts.

OTHER INFORMATION. Amounts payable to the Distributor with respect to the
Class A Shares under the Distribution Plan in a given year may not fully
reimburse the Distributor for its actual distribution-related expenses during
such year. In such event, there is no carryover of such reimbursement
obligations to succeeding years.

The Distributor's expenses with respect to a class of CDSC Shares (for
purposes of this paragraph excluding any Class A Shares that may be subject to a
CDSC) for any given year may exceed the amounts payable to the Distributor with
respect to such class of CDSC Shares under the Distribution Plan, the Service
Plan and payments received pursuant to the contingent deferred sales charge. Any
unreimbursed expenses will be carried forward and paid by the Fund (up to the
amount of the actual expenses incurred) in future years so long as such
Distribution Plan is in effect. Except as mandated by applicable law, the Fund
does not impose any limit with respect to the number of years into the future
that such unreimbursed expenses may be carried forward. Because such expenses
are accounted on a Fund level basis, in periods of extreme net asset value
fluctuation, amounts paid to the Distributor with respect to a particular CDSC
Share may be greater or less than the amount of the initial commission
(including carrying cost) paid by the Distributor with respect to such CDSC
Share. In such circumstances, the holder of such CDSC Share may be deemed to
incur expenses attributable to other shareholders of such class. As of December
31, 1996, there were $12,789,938 and $54,828 of unreimbursed distribution
expenses with respect to Class B Shares and Class C Shares, respectively,
representing 3.08% and 0.38% of the Fund's net assets attributable to Class B
Shares and Class C Shares, respectively. If the Distribution Plan was terminated
or not continued, the Fund would not be contractually

21
<PAGE> 25

obligated to pay the Distributor for any expenses not previously reimbursed by
the Fund or recovered through contingent deferred sales charges.

Because the Fund is a series of the Trust, amounts paid to the Distributor as
reimbursement for expenses of one series of the Trust may indirectly benefit the
other funds which are series of the Trust. The Distributor will endeavor to
allocate such expenses among such funds in an equitable manner. The Distributor
will not use the proceeds from the contingent deferred sales charge applicable
to a particular class of CDSC Shares to defray distribution-related expenses
attributable to any other class of CDSC Shares. Various federal and state laws
prohibit national banks and some state-chartered commercial banks from
underwriting or dealing in the Fund's shares. In addition, state securities laws
on this issue may differ from the interpretations of federal law, and banks and
financial institutions may be required to register as dealers pursuant to state
law. In the unlikely event that a court were to find that these laws prevent
such banks from providing the services described above, the Fund would seek
alternate providers and expects that shareholders would not experience any
disadvantage.

- ------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------

The Fund will declare distributions on a daily basis and will pay such
distributions from net investment income and net realized short-term capital
gains on a monthly basis. The Fund will distribute annually any remaining
short-term capital gains together with long-term capital gains, if any.
Distributions with respect to each class of shares will be calculated in the
same manner on the same day and will be in the same amount, except that the
different distribution and service fees and any incremental administrative
expenses relating to each class of shares will be borne exclusively by the
respective class and may cause the distributions relating to the different
classes of shares to differ.

In order to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended, the Fund intends to distribute substantially
all of its net investment income and capital gains at least annually. Any
distributions in excess of the Fund's net investment income and capital gains
will be a return of principal, which will reduce the investor's tax basis in the
shares. Distributions of the Fund's net investment income are taxable to
shareholders as ordinary income whether received in shares or in cash.
Distributions of the Fund's net capital gains ("capital gains dividends") are
taxable to shareholders as long-term capital gains regardless of the length of
time the shares of the Fund have been held by such shareholders.

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

22
<PAGE> 26

- ------------------------------------------------------------------------------
FUND PERFORMANCE
- ------------------------------------------------------------------------------

From time to time advertisements and other sales materials for the Fund may
include information concerning the historical performance of the Fund. Any such
information will include the average total return of the Fund calculated on a
compounded basis for specified periods of time. Such advertisements and sales
material may also include a yield quotation as of a current period. In each
case, such total return and yield information, if any, will be calculated
pursuant to rules established by the SEC and will be computed separately for
each class of the Fund's shares.

Further information about the Fund's performance is contained in the Fund's
Annual Report and the Fund's Statement of Additional Information, each of which
can be obtained without charge by calling (800) 421-5666 (or (800) 421-2833 for
the hearing impaired).

- ------------------------------------------------------------------------------
FUND ORGANIZATION
- ------------------------------------------------------------------------------

The Fund is a diversified, open-end management investment company. The Fund is
a series of the Van Kampen American Capital U.S. Government Trust, a Delaware
business trust organized as of May 10, 1995 (the "Trust"). To date, the Fund is
the only series of the Trust, although the Trustees of the Trust are empowered
to organize and designate other series in the future. Shares of the Trust
entitle their holders to one vote per share; however, separate votes are taken
by each series on matters affecting an individual series. The Trust does not
contemplate holding regular meetings of shareholders to elect Trustees or
otherwise. However, the holders of 10% or more of the outstanding Shares may by
written request require a meeting to consider the removal of Trustees by a vote
of two-thirds of the shares then outstanding cast in person or by proxy at such
meeting. More detailed information concerning the Trust is set forth in the
Statement of Additional Information.

The authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, par value $.01 per share, divided into classes.
The Fund currently offers three classes of shares, designated Class A Shares,
Class B Shares and Class C Shares. Each class of shares represents an interest
in the same assets of the Fund and are identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee.

The Fund issues multiple classes of shares pursuant to a plan adopted under
Rule 18f-3 of the 1940 Act. Each class of shares is equal as to earnings, assets
and voting privileges, except as noted herein, and each class bears the expenses
related to the distribution of its shares. There are no conversion, preemptive
or other subscription rights, except with respect to the conversion of Class B
Shares into

23
<PAGE> 27

Class A Shares as described above. In the event of liquidation, each of the
shares of the Fund is entitled to its portion of all of the Fund's net assets
after all debt and expenses of the Fund have been paid. Since Class B Shares and
Class C Shares pay higher distribution expenses, the liquidation proceeds to
holders of Class B Shares and Class C Shares are likely to be lower than to
other shareholders. The fiscal year end of the Fund is December 31.

- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------

This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration Statement
may be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.

Shareholder inquiries should be directed to: Van Kampen American Capital U.S.
Government Fund, One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attn:
Correspondence. The telephone number is (800) 421-5666 (or (800) 421-2833 for
the hearing impaired). For Automated Telephone Service which provides 24-hour
direct dial access to Fund facts and shareholder account information dial (800)
847-2424.

24
<PAGE> 28

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE
CALL THE FUND'S TOLL-FREE

NUMBER--(800) 341-2911.

PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666.

DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666.

FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)

DIAL (800) 421-2833.

FOR AUTOMATED TELEPHONE

SERVICES DIAL (800) 847-2424.

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181

Investment Adviser

VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, IL 60181

Distributor

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181

Transfer Agent

ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen American Capital
U.S. Government Fund

Custodian

STATE STREET BANK AND
TRUST COMPANY

225 West Franklin Street, P.O. Box 1713

Boston, MA 02105-1713
Attn: Van Kampen American Capital
U.S. Government Fund

Legal Counsel

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM (ILLINOIS)

333 West Wacker Drive
Chicago, IL 60606

Independent Accountants

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601
<PAGE> 29

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

U.S. GOVERNMENT
FUND

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

P R O S P E C T U S

APRIL 30, 1997

- ------ ------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 30

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT FUND

Van Kampen American Capital U.S. Government Fund, formerly known as Van Kampen
Merritt U.S. Government Fund (the "Fund"), is a mutual fund organized as a
diversified series of Van Kampen American Capital U.S. Government Trust, a
Delaware business trust (the "Trust"). The Trust is an open-end management
investment company. The Fund's investment objective is to provide a high level
of current income with liquidity and safety of principal. The Fund invests in
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities. The net asset value and the return of the Fund will fluctuate
depending on market conditions and other factors.

This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Prospectus for the Fund dated April 30, 1997 (the
"Prospectus"). This Statement of Additional Information does not include all of
the information that a prospective investor should consider before purchasing
shares of the Fund, and investors should obtain and read the Prospectus prior to
purchasing shares. A copy of the Prospectus may be obtained without charge by
writing or calling Van Kampen American Capital Distributors, Inc. at One
Parkview Plaza, Oakbrook Terrace, IL 60181 at (800) 421-5666 (or (800) 421-2833
for the hearing impaired).

The Prospectus and this Statement of Additional Information omit certain of
the information contained in the registration statement filed with the
Securities and Exchange Commission, Washington, D.C. (the "SEC"). These items
may be obtained from the SEC upon payment of the fee prescribed, or inspected at
the SEC's office at no charge.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Fund and the Trust...................................... B-2
Investment Policies and Restrictions........................ B-2
U.S. Government Securities.................................. B-4
Additional Investment Considerations........................ B-6
Trustees and Officers....................................... B-14
Investment Advisory and Other Services...................... B-21
Custodian and Independent Accountants....................... B-23
Portfolio Transactions and Brokerage Allocation............. B-23
Tax Status of the Fund...................................... B-24
The Distributor............................................. B-26
Distribution and Service Plans.............................. B-26
Legal Counsel............................................... B-27
Performance Information..................................... B-27
Alternative Sales Arrangements.............................. B-29
Purchase of Shares.......................................... B-31
Shareholder Services........................................ B-37
Redemptions................................................. B-40
Distributions from the Fund................................. B-42
Report of Independent Accountants........................... B-43
Financial Statements........................................ B-44
Notes to Financial Statements............................... B-52
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL 30, 1997

B-1
<PAGE> 31

THE FUND AND THE TRUST

Van Kampen American Capital U.S. Government Fund (the "Fund") is an open-end
diversified management investment company. Currently, the Fund is the only
series of the Trust. Other series may be organized and offered in the future.
The Fund was originally organized in 1984 under the name Van Kampen Merritt U.S.
Government Fund Inc. as a Maryland corporation and was reorganized in 1988 under
the name Van Kampen Merritt U.S. Government Fund as a sub-trust of Van Kampen
Merritt U.S. Government Trust, a Massachusetts business trust. The Fund was
again reorganized as of July 31, 1995 as a series of the Trust.

The Trust is an unincorporated business trust established under the laws of
the state of Delaware by an Agreement and Declaration of Trust dated as of May
10, 1995 (the "Declaration of Trust"). The Declaration of Trust permits the
Trustees to create one or more separate investment portfolios and issue a series
of shares for each portfolio. The Trustees can further sub-divide each series of
shares into one or more classes of shares for each portfolio. The Trust can
issue an unlimited number of shares, par value $.01 per share (prior to July 31,
1995, the shares had no par value). Each share represents an equal proportionate
interest in the assets of the series with each other share in such series and no
interest in any other series. No series is subject to the liabilities of any
other series. The Declaration of Trust provides that shareholders are not liable
for any liabilities of the Trust or any of its series, requires inclusion of a
clause to that effect in every agreement entered into by the Trust or any of its
series and indemnifies shareholders against any such liability.

Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon by shareholders of only the series involved. Shares do not have cumulative
voting rights, preemptive rights or any conversion (other than Class B Shares of
each series which convert into Class A shares of the respective series after
eight years) or exchange rights. The Trust does not contemplate holding regular
meetings of shareholders to elect Trustees or otherwise. However, the holders of
10% or more of the outstanding shares may by written request require a meeting
to consider the removal of Trustees by a vote of two-thirds of the shares then
outstanding cast in person or by proxy at such meeting.

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

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

INVESTMENT POLICIES AND RESTRICTIONS

The investment objective of the Fund is to provide a high level of current
income, with liquidity and safety of principal. The Fund will invest at least
65% and up to 100% of its assets in obligations issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities, including Government
National Mortgage Association Certificates of the modified pass-through type.
The Fund may also make other investments described in the Prospectus. The net
asset value and return of the Fund may vary.

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

1. Purchase any securities (other than obligations issued or guaranteed by
the United States Government or by its agencies or instrumentalities), if,
as a result, more than 5% of the Fund's total assets (taken at current
value) would then be invested in securities of a single issuer or, if, as
a result, the Fund would hold more than 10% of the outstanding voting
securities of an issuer, except that the Fund may purchase securities of
other investment companies to the extent permitted by (i) the 1940 Act, as

B-2
<PAGE> 32

amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, or (iii) an
exemption or other relief from the provisions of the 1940 Act. (There is
no limit on the amount of the Fund's assets which may be invested in the
securities of any one issuer of obligations issued or guaranteed by the
United States Government or by its agencies or instrumentalities.)

2. Issue senior securities, borrow money or enter into reverse repurchase
agreements or dollar rolls in the aggregate in excess of 33 1/3 of the
Fund's total assets (after giving effect to any such borrowing); provided,
however, that with respect to such amount no more than 5% may be invested
in bank borrowings and reverse repurchase agreements. The Fund will not
mortgage, pledge or hypothecate any assets other than in connection with
issuances, borrowings, hedging transactions and risk management
techniques.

3. Buy any securities "on margin" or sell any securities "short."

4. Make investments for the purpose of exercising control or management,
except that the Fund may purchase securities of other investment companies
to the extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940 Act,
as amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act.

5. Write, purchase or sell puts, calls or combinations thereof, or purchase
or sell interest rate futures contracts or related options, except that
the Fund may purchase or sell puts, calls or combinations thereof and may
purchase or sell commodities futures contracts on related put and call
options on such contracts for hedging purposes, in accordance with
applicable requirements of the SEC and the Commodity Futures Trading
Commission.

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

7. Invest in interests in oil, gas or other mineral exploration or
development programs.

8. Purchase or retain securities of any company if, to the knowledge of the
Fund, its officers and directors and officers and directors of the Fund's
investment adviser who individually own more than 1/2 of 1% of the
securities of such company together own beneficially more than 5% of such
securities.

9. Make loans, except that the Fund may purchase or hold debt obligations in
accordance with the investment restrictions set forth in paragraph 1
above, may enter into repurchase agreements, and may lend its portfolio
securities against collateral consisting of cash or of securities issued
or guaranteed by the U.S. Government or its agencies, which collateral is
equal at all times to at least 100% of the value of the securities loaned,
including accrued interest.

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

11. Purchase or sell real estate, commodities or commodity contracts, except
as set forth in 5 above.

12. Purchase or retain securities of issuers having a record of less than
three years continuous operation (such period of three years may include
the operation of predecessor companies or enterprises if the issuer came
into existence as a result of merger, consolidation or reorganization, or
the purchase of substantially all of the assets of the predecessor
companies or enterprises), except that the Fund may purchase securities of
other investment companies to the extent permitted by (i) the 1940 Act, as
amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, or (iii) an
exemption or other relief from the provisions of the 1940 Act.

13. Invest more than 25% of its assets in a single industry, except that the
Fund may purchase securities of other investment companies to the extent
permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from the
provisions of the 1940 Act. (Neither the U.S.

B-3
<PAGE> 33

Government nor any of its agencies or instrumentalities will be considered
an industry for purposes of this restriction.)

The Fund may not change any of these investment restrictions without the
approval of the lesser of (i) more than 50% of the Fund's outstanding shares or
(ii) 67% of the Fund's shares present at a meeting at which the holders of more
than 50% of the outstanding shares are present in person or by proxy. As long as
the percentage restrictions described above are satisfied at the time of the
investment or borrowing, the Fund will be considered to have abided by those
restrictions even if, at a later time, a change in values or net assets causes
an increase or decrease in percentage beyond that allowed.

The Fund may invest up to 15% of its total assets in illiquid securities,
securities the disposition of which is subject to substantial legal or
contractual restrictions on resale and securities that are not readily
marketable. The sale of restricted and illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Restricted securities salable among qualified
institutional buyers without restriction pursuant to Rule 144A under the
Securities Act of 1933, as amended, that are determined to be liquid by the
Adviser under guidelines adopted by the Board of Trustees of the Trust (under
which guidelines the Adviser will consider factors such as trading activities
and the availability of price quotations), will not be treated as restricted
securities by the Fund pursuant to such rules. The Fund's policy with respect to
investment in illiquid and restricted securities is not a fundamental policy and
may be changed by the Board of Trustees, in consultation with the adviser,
without obtaining shareholder approval.

The Fund will not generally engage in the trading of securities for the
purpose of realizing short-term profits, but it will adjust its portfolio as it
deems advisable in view of prevailing or anticipated market conditions to
accomplish the Fund's investment objective. For example, the Fund may sell
portfolio securities in anticipation of a movement in interest rates or to avoid
loss of premiums paid and unrealized capital gains earned on GNMA Certificates
selling at a substantial premium. Frequency of portfolio turnover will not be a
limiting factor if the Fund considers it advantageous to purchase or sell
securities. The Fund anticipates that the portfolio turnover rate of the Fund
will normally be less than 200%, and may be significantly less in a period of
stable or rising interest rates.

U.S. GOVERNMENT SECURITIES

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

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

B-4
<PAGE> 34

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

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

In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semi-annual basis. The principal of and interest on the Mortgage
Assets may be allocated among the several classes of a series of a CMO in
innumerable ways.

The Fund may invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more

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<PAGE> 35

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

Stripped Mortgage-Backed Securities. The Fund also may invest in stripped
mortgage-backed securities ("SMBS") An SMBS is a derivative multiclass mortgage
security. SMBS usually are structured with two classes that receive different
proportions of the interest and principal distribution on a pool of Mortgage
Assets. In the most extreme case, one class will receive all of the interest
(the interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). The yield to maturity on an IO
class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on such security's yield
to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities. Conversely, if the underlying mortgage
assets experience less than anticipated prepayments of principal, the yield of
POs could be materially adversely affected. The market values of IOs and POs are
subject to greater risk of fluctuation in response to changes in market rates of
interest than many other types of government securities and, to the extent the
Fund invests in IOs and POs, increases the risk of fluctuations in the net asset
value of the Fund. The Adviser will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and through the use of
Strategic Transactions (described below).

ADDITIONAL INVESTMENT CONSIDERATIONS

The Fund may also engage in strategic transactions, purchase and sell
securities on a "when issued" and "delayed delivery" basis, enter into
repurchase and reverse repurchase agreements, and lend its portfolio securities
in certain circumstances, in each case subject to the limitations set forth
below. These investments entail risks.

Strategic Transactions. The Fund may, but is not required to, utilize various
investment strategies as described below to hedge various market risks (such as
interest rates and broad or specific market movements), to manage the effective
maturity or duration of the Fund's fixed-income securities or to enhance
potential gain. Such strategies are generally accepted by modern portfolio
managers and are regularly utilized by many mutual funds and other institutional
investors. Techniques and instruments may change over time as new instruments
and strategies are developed or regulatory changes occur.

In the course of pursuing these investment strategies, the Fund may purchase
and sell derivative securities such as exchange-listed and over-the-counter put
and call options on securities, fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options thereon,
enter into various interest rate transactions such as swaps, caps, floors or
collars (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used to attempt to protect against possible
changes in the market value of securities held in or to be purchased for the
Fund's portfolio resulting from securities markets fluctuations, to protect the
Fund's unrealized gains in the value of its portfolio securities, to facilitate
the sale of such securities for investment purposes, to manage the effective
maturity or duration of the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities.

Some Strategic Transactions may also be used to enhance potential gain
although no more than 25% of the Fund's assets will be committed to Strategic
Transactions entered into for non-hedging purposes. When the Fund sells an
option, if the underlying securities do not increase (in the case of a call
option) or decrease (in the case of a put option) to a price level that would
make the exercise of the option profitable to the holder of the option, the
option generally will expire without being exercised and the Fund will realize
as profit the premium received for such option. When a call option of which the
Fund is the writer is exercised, the option holder purchases the underlying
security at the strike price and the Fund does not participate in any increase

B-6
<PAGE> 36

in the price of such securities above the strike price. In addition, the Fund
would need to replace the underlying securities at prices which may not be
advantageous to the Fund. When a put option of which the Fund is the writer is
exercised, the Fund will be required to purchase the underlying securities at
the strike price, which may be in excess of the market value of such securities.

Any or all of these investment techniques may be used at any time and there is
no particular strategy that dictates the use of one technique rather than
another, as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of the Fund to utilize these Strategic
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. The Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial futures
and options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not for
speculative purposes.

Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to the
Fund, force the sale or purchase of portfolio securities at inopportune times or
for prices other than current market values, limit the amount of appreciation
the Fund can realize on its investments or cause the Fund to hold a security it
might otherwise sell. The use of options and futures transactions entails
certain other risks. In particular, the variable degree of correlation between
price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time they
tend to limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of Strategic Transactions would reduce
net asset value, and possibly income, and such losses can be greater than if the
Strategic Transactions had not been utilized. Income earned or deemed to be
earned, if any, by the Fund from its Strategic Transactions will generally be
taxable. See "Tax Status of the Fund."

General Characteristics of Options. Put options and call options typically
have similar structural characteristics and operational mechanics regardless of
the underlying instrument on which they are purchased or sold. Thus, the
following general discussion relates to each of the particular types of options
discussed in greater detail below. In addition, many Strategic Transactions
involving options require segregation of Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."

A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the underlying security,
commodity, index, or other instrument at the exercise price. For instance, the
Fund's purchase of a put option on a security might be designed to protect its
holdings in the underlying instrument (or, in some cases, a similar instrument)
against a substantial decline in the market value by giving the Fund the right
to sell such instrument at the option exercise price. A call option, upon
payment of a premium, gives the purchaser of the option the right to buy, and
the seller the obligation to sell, the underlying instrument at the exercise
price. The Fund's purchase of a call option on a security, financial future,
index, or other instrument might be intended to protect the Fund against an
increase in the price of the underlying instrument that it intends to purchase
in the future by fixing the price at which it may purchase such instrument. An
American style put or call option may be exercised at any time during the option
period while a European style put or call option may be exercised only upon
expiration or during a fixed period prior thereto. The Fund is authorized to
purchase and sell exchange listed options and over-the-counter options ("OTC
options"). Exchange listed options are issued by a regulated intermediary such
as the Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such

B-7
<PAGE> 37

options. The discussion below uses the OCC as a paradigm, but is also applicable
to other financial intermediaries.

With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.

The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options that are subject to a buy-back provision
permitting the Fund to require the Counterparty to sell the option back to the
Fund at a formula price within seven days. The Fund expects generally to enter
into OTC options that have cash settlement provisions, although it is not
required to do so.

Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, or other instrument underlying an OTC option it
has entered into with the Fund or fails to make a cash settlement payment due in
accordance with the terms of that option, the Fund will lose any premium it paid
for the option as well as any anticipated benefit of the transaction.
Accordingly, the Adviser must assess the creditworthiness of each such
Counterparty or any guarantor or credit enhancement of the Counterparty's credit
to determine the likelihood that the terms of the OTC option will be satisfied.
The Fund will engage in OTC option transactions only with United States
government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers", or broker dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of "A-1" from Standard &
Poor's Ratings Group ("S&P") or "P-1" from Moody's Investor Services, Inc.
("Moody's") or an equivalent rating from any other nationally recognized
statistical rating organization ("NRSRO"). The staff of the SEC currently takes
the position that, in general, OTC options on securities other than U.S.
Government securities purchased by the Fund, and portfolio securities "covering"
the amount of the Fund's obligation pursuant to an OTC option sold by it (the
cost of the sell-back plus the in-the-money amount, if any) are illiquid, and
are subject to the Fund's limitation on investing no more than 15% of its assets
in illiquid securities.

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<PAGE> 38

If the Fund sells a call option, the premium that it receives may serve as a
partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.

The Fund may purchase and sell call options on securities, including U.S.
Treasury and agency securities, municipal obligations, mortgage-backed
securities and Eurodollar instruments that are traded on U.S. and foreign
securities exchanges and in the over-the-counter markets. All calls sold by the
Fund must be "covered" (i.e., the Fund must own the securities or futures
contract subject to the call) or must meet the asset segregation requirements
described below as long as the call is outstanding. Even though the Fund will
receive the option premium to help protect it against loss, a call sold by the
Fund exposes the Fund during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security or instrument and may require the Fund to hold a security or instrument
which it might otherwise have sold.

The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, municipal
obligations and Eurodollar instruments (whether or not it holds the above
securities in its portfolio.) The Fund will not sell put options if, as a
result, more than 50% of the Fund's assets would be required to be segregated to
cover its potential obligations under such put options other than those with
respect to futures and options thereon. In selling put options, there is a risk
that the Fund may be required to buy the underlying security at a
disadvantageous price above the market price.

General Characteristics of Futures. The Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate or fixed-income market changes, for duration
management and for risk management purposes. Futures are generally bought and
sold on the commodities exchanges where they are listed with payment of initial
and variation margin as described below. The purchase of a futures contract
creates a firm obligation by the Fund, as purchaser, to take delivery from the
seller the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect index futures and
Eurodollar instruments, the net cash amount). The sale of a futures contract
creates a firm obligation by the Fund, as seller, to deliver to the buyer the
specific type of financial instrument called for in the contract at a specific
future time for a specified price (or, with respect to index futures and
Eurodollar instruments, the net cash amount). Options on futures contracts are
similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such option.

The Fund's use of financial futures and options thereon will in all cases be
consistent with applicable regulatory requirements and in particular the rules
and regulations of the Commodity Futures Trading Commission and will be entered
into only for bona fide hedging, risk management (including duration management)
or other portfolio management purposes. Typically, maintaining a futures
contract or selling an option thereon requires the Fund to deposit with a
financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of options on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price nor that delivery will occur.

The Fund will not enter into a futures contract or related option (except for
closing transactions) if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open futures contracts and options thereon would
exceed 5% of the Fund's total assets (taken at current value); however, in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.

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<PAGE> 39

Options on Securities Indices and Other Financial Indices. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.

Combined Transactions. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions and
multiple interest rate transactions and any combination of futures, options and
interest rate transactions ("component" transactions), instead of a single
Strategic Transaction, as part of a single or combined strategy when, in the
opinion of the Adviser, it is in the best interests of the Fund to do so. A
combined transaction will usually contain elements of risk that are present in
each of its component transactions. Although combined transactions are normally
entered into based on the Adviser's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase such
risks or hinder achievement of the portfolio management objective.

Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which
the Fund may enter are interest rate and index swaps and the purchase or sale of
related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. An index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.

The Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least "A" by S&P or Moody's or has an equivalent
equity rating from an NRSRO or is determined to be of equivalent credit quality
by the Adviser. If there is a default by the Counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. A
large number of banks and investment banking firms now act both as principals
and agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and

B-10
<PAGE> 40

collars are more recent innovations for which standardized documentation has not
yet been fully developed and, accordingly, they are less liquid than swaps.

Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate liquid
high-grade assets with its custodian to the extent Fund obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any obligation by
the Fund to pay or deliver securities or assets must be covered at all times by
the securities, instruments or currency required to be delivered, or, subject to
any regulatory restrictions, an amount of cash or liquid high-grade securities
at least equal to the current amount of the obligation must be segregated with
the custodian. The segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer necessary to
segregate them. For example, a call option written by the Fund will require the
Fund to hold the securities subject to the call (or securities convertible into
the needed securities without additional consideration) or to segregate liquid
high-grade securities sufficient to purchase and deliver the securities if the
call is exercised. A call option sold by the Fund on an index will require the
Fund to own portfolio securities which correlate with the index or to segregate
liquid high-grade assets equal to the excess of the index value over the
exercise price on a current basis. A put option written by the Fund requires the
Fund to segregate liquid, high-grade assets equal to the exercise price.

OTC options entered into by the Fund, including those on securities, financial
instruments or indices and OCC issued and exchange listed index options, will
generally provide for cash settlement. As a result, when the Fund sells these
instruments it will only segregate an amount of assets equal to its accrued net
obligations, as there is no requirement for payment or delivery of amounts in
excess of the net amount. These amounts will equal 100% of the exercise price in
the case of a non cash-settled put, the same as an OCC guaranteed listed option
sold by the Fund, or the in-the-money amount plus any sell-back formula amount
in the case of a cash-settled put or call. In addition, when the Fund sells a
call option on an index at a time when the in-the-money amount exceeds the
exercise price, the Fund will segregate, until the option expires or is closed
out, cash or cash equivalents equal in value to such excess. OCC issued and
exchange listed options sold by the Fund other than those above generally settle
with physical delivery, and the Fund will segregate an amount of assets equal to
the full value of the option. OTC options settling with physical delivery, or
with an election of either physical delivery or cash settlement, will be treated
the same as other options settling with physical delivery.

In the case of a futures contract or an option thereon, the Fund must deposit
initial margin and possible daily variation margin in addition to segregating
assets sufficient to meet its obligation to purchase or provide securities or
currencies, or to pay the amount owed at the expiration of an index-based
futures contract. Such assets may consist of cash, cash equivalents, liquid debt
or equity securities or other acceptable assets.

With respect to swaps, the Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high-grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.

Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund also may enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions also may be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.

The Fund's activities involving Strategic Transactions may be limited by the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company. See "Tax
Status of the Fund."

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<PAGE> 41

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

Repurchase Agreements. The Fund may enter into repurchase agreements with
banks and broker-dealers, under which the Fund purchases securities and agrees
to resell the securities at an agreed upon time and at an agreed upon price.
Under the 1940 Act, repurchase agreements may be considered collateralized loans
by the Fund, and the difference between the amount the Fund pays for the
securities and the amount it receives upon resale is accrued as interest and
reflected in the Fund's net income. When the Fund enters into repurchase
agreements, it relies on the seller to repurchase the securities. Failure to do
so may result in a loss for the Fund if the market value of the securities is
less than the repurchase price. At the time the Fund enters into a repurchase
agreement, the value of the underlying security including accrued interest will
be equal to or exceed the value of the repurchase agreement and, for repurchase
agreements that mature in more than one day, the seller will agree that the
value of the underlying security including accrued interest will continue to be
at least equal to the value of the repurchase agreement. In determining whether
to enter into a repurchase agreement with a bank or broker-dealer, the Fund will
take into account the credit-worthiness of such party. In the event of default
by such party, the Fund may not have a right to the underlying security and
there may be possible delays and expenses in liquidating the security purchased,
resulting in a decline in its value and loss of interest. The Fund will use
repurchase agreements as a means of making short-term investments, and will
invest in repurchase agreements of duration of seven days or less in an amount
not exceeding 25% of the net assets of the Fund. The Fund's ability to invest in
repurchase agreements that mature in more than seven days is subject to an
investment restriction that limits the Fund's investment in "illiquid"
securities, including such repurchase agreements, to 15% of the Fund's net
assets.

Reverse Repurchase Agreements and Dollar Rolls. In order to seek a high level
of current income, the Fund may enter into reverse repurchase agreements with
respect to securities which could otherwise be sold by the Fund. Reverse
repurchase agreements involve sales by the Fund of portfolio assets concurrently
with an agreement by the Fund to repurchase the same assets at a later date at a
fixed price. During the reverse repurchase agreement period, the Fund continues
to receive principal and interest payments on these securities.

In order to seek a high level of current income, the Fund may enter into
dollar rolls in which the Fund sells securities for delivery in the current
month and simultaneously contracts to repurchase, typically in 30 or 60 days,
substantially similar (same type, coupon and maturity) securities on a specified
future date. During the roll period, the Fund forgoes principal and interest
paid on such securities. The Fund is compensated by the difference between the
current sales price and the forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. A "covered roll" is a specific type of dollar roll
for which there is an offsetting cash position or cash equivalent security
position which matures on or before the forward settlement date of the dollar
roll transaction.

The Fund will establish a segregated account with its custodian in which it
will maintain cash, U.S. Government securities or other liquid high-grade debt
obligations equal in value to its obligations in respect of reverse repurchase
agreements and dollar rolls and, accordingly, the Fund will not treat such
obligations as

B-12
<PAGE> 42

senior securities for purposes of the 1940 Act. "Covered rolls" are not subject
to these segregation requirements. Reverse repurchase agreements and dollar
rolls involve the risk that the market value of the securities retained by the
Fund may decline below the price of the securities the Fund has sold but is
obligated to repurchase under the agreement. In the event the buyer of
securities under a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement
may be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.

The Fund is authorized to borrow money from banks or otherwise in an amount up
to 33 1/3% of the Fund's total assets (after giving effect to any such
borrowing). The Fund considers reverse repurchase agreements and dollar rolls to
be borrowings for purposes of such percentage limitation. No more than 5% of the
Fund's total assets may be invested in bank borrowings and reverse repurchase
agreements. The Fund will borrow only when the Adviser believes that such
borrowings will benefit the Fund.

Borrowing by the Fund creates an opportunity for increased net income but, at
the same time, increases the risk of the Fund's portfolio. Leveraging by the
Fund will generally increase the volatility of the Fund's net asset value in
response to fluctuations in market interest rates and accordingly may increase
the risk of the Fund's portfolio. Although the principal of such borrowings will
be fixed, the Fund's assets may change in value during the time the borrowing is
outstanding. Borrowing will create interest expenses for the Fund which can
exceed the income from the assets retained. To the extent the income derived
from securities purchased with borrowed funds exceeds the interest the Fund will
have to pay, the Fund's net income will be greater than if borrowing were not
used. Conversely, if the income from the assets retained with borrowed funds is
not sufficient to cover the cost of borrowing, the net income of the Fund will
be less than if borrowing were not used, and therefore the amount available for
distribution to stockholders as dividends will be reduced.

Loans of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to banks or
broker-dealers, to a maximum of 25% of the assets of the Fund, where such loans
are callable at any time and are continuously secured by collateral consisting
of cash or of securities issued or guaranteed by the U.S. Government or its
agencies, which collateral is equal at all times to at least 100% of the value
of the securities loaned, including accrued interest. The Fund will receive
amounts equal to earned income for having made the loan. Any cash collateral
pursuant to these loans will be invested in short-term instruments. The Fund is
the beneficial owner of the loaned securities in that any gain or loss in the
market price during the loan inures to the Fund and its shareholders. Thus, when
the loan is terminated, the value of the securities may be more or less than
their value at the beginning of the loan. In determining whether to lend its
portfolio securities to a bank or broker-dealer, the Fund will take into account
the credit-worthiness of such borrower and will monitor such credit-worthiness
on an ongoing basis inasmuch as default by the other party may cause delays or
other collection difficulties. The Fund may pay finders' fees in connection with
loans of its portfolio securities.

B-13
<PAGE> 43

TRUSTEES AND OFFICERS

The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and other executive officers of the Fund's investment
adviser and their principal occupations for the last five years and their
affiliations, if any, with VK/AC Holding, Inc. ("VKAC Holding"), Van Kampen
American Capital, Inc. ("Van Kampen American Capital" or "VKAC"), Van Kampen
American Capital Investment Advisory Corp. ("Advisory Corp."), Van Kampen
American Capital Asset Management, Inc. ("Asset Management"), Van Kampen
American Capital Distributors, Inc., the distributor of the Fund's shares (the
"Distributor") and ACCESS Investors Services Inc., the Fund's transfer agent
("ACCESS"). Advisory Corp. and Asset Management sometimes are referred to herein
collectively as the "Advisers". For purposes hereof, the term "Fund Complex"
includes each of the open-end investment companies advised by the Advisers
(excluding the American Capital Exchange Fund and the Common Sense Trust).

TRUSTEES

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Co-founder, and prior to August 1996,
1632 Morning Mountain Road Chairman, Chief Executive Officer and President, MDT
Raleigh, NC 27614 Corporation (now known as Getinge/Castle, Inc., a
Date of Birth: 07/14/32 subsidiary of Getinge Industrier AB), a company which
develops, manufactures, markets and services medical and
scientific equipment. Trustee of each of the funds in the
Fund Complex.
Linda Hutton Heagy........................ Partner, Ray & Berndtson, Inc. An executive recruiting
Sears Tower and management consulting firm. Formerly, Executive Vice
233 South Wacker Drive President of ABN AMRO, N.A., a Dutch bank holding
Suite 4020 company. Prior to 1992, Executive Vice President of La
Chicago, IL 60606 Salle National Bank. Trustee of each of the funds in the
Date of Birth: 06/03/48 Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation. Trustee of
each of the funds in the Fund Complex.
Dennis J. McDonnell*...................... President and a Director of VKAC. President, Chief
One Parkview Plaza Operating Officer and a Director of the Advisers.
Oakbrook Terrace, IL 60181 Director or officer of certain other subsidiaries of
Date of Birth: 05/20/42 VKAC. Prior to November 1996, Executive Vice President
and a Director of VKAC Holding. President and Trustee of
each of the funds in the Fund Complex. President,
Chairman of the Board and Trustee of other investment
companies advised by the Advisers or their affiliates.
Jack E. Nelson............................ President, Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President, Nelson Ivest Brokerage Services Inc.,
Date of Birth: 02/13/36 a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors
Protection Corp. ("SIPC"). Trustee of each of the funds
in the Fund Complex.
Jerome L. Robinson........................ President, Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director, Pacesetter Software, a software
Date of Birth: 10/10/22 programming company specializing in white collar
productivity. Director, Panasia Bank. Trustee of each of
the funds in the Fund Complex.
</TABLE>

B-14
<PAGE> 44

<TABLE>
<S> <C>
Phillip B. Rooney......................... Private investor. Director, Illinois Tool Works, Inc., a manufacturing
348 East Third Street company; Vice Chairman and Director, The Servicemaster Company, a
Hinsdale, IL 60521 business and consumer services company; Director, Urban Shopping
Date of Birth: 07/08/44 Centers Inc., a retail mall management company; Director, Stone
Container Corp., a paper manufacturing company. Trustee, University of
Notre Dame. Formerly, President and Chief Executive Officer, WMX
Technologies Inc., an environmental services company, and prior to that
President and Chief Operating Officer, WMX Technologies Inc. Trustee of
each of the funds in the Fund Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of the Graduate School,
155 Hickory Lane Stevens Institute of Technology. Director, Dynalysis of Princeton, a
Closter, NJ 07624 firm engaged in engineering research. Trustee of each of the funds in
Date of Birth: 08/02/24 the Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive (Illinois), legal counsel to the funds in the Fund Complex, open-end
Chicago, IL 60606 funds advised by Van Kampen American Capital Management, Inc. and
Date of Birth: 08/22/39 closed-end funds advised by Advisory Corp. Trustee of each of the funds
in the Fund Complex, open-end funds advised by Van Kampen American
Capital Management, Inc. and closed-end funds advised by Advisory Corp.
</TABLE>

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

* Such trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. McDonnell is an interested person of the Advisers and
the Fund by reason of his positions with VKAC and its affiliates. Mr. Whalen
is an interested person of the Fund by reason of his firm currently acting as
legal counsel to the Fund and is an interested person of Asset Management with
respect to certain funds advised by Asset Management by reason of his firm in
the past acting as legal counsel to Asset Management.

OFFICERS

Messrs. Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin, Wetherell and Hill are
located at One Parkview Plaza, Oakbrook Terrace, IL 60181. The Fund's other
officers are located at 2800 Post Oak Blvd., Houston, TX 77056.

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Peter W. Hegel.............. Vice President Executive Vice President of the Advisers.
Date of Birth: 06/25/56 Director of Asset Management. Officer of
certain other subsidiaries of VKAC. Vice
President of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.

Curtis W. Morell............ Vice President and Chief Senior Vice President of the Advisers, Vice
Date of Birth: 08/04/46 Accounting Officer President and Chief Accounting Officer of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
</TABLE>

B-15
<PAGE> 45

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Ronald A. Nyberg............ Vice President and Secretary Executive Vice President, General Counsel
Date of Birth: 07/29/53 and Secretary of VKAC. Executive Vice
President, General Counsel, Assistant
Secretary and a Director of the Advisers
and the Distributor. Executive Vice
President, General Counsel and Assistant
Secretary of ACCESS. Director or officer of
certain other subsidiaries of VKAC.
Director of ICI Mutual Insurance Co., a
provider of insurance to members of the
Investment Company Institute. Prior to
November 1996, Executive Vice President,
General Counsel and Secretary of VKAC
Holding. Vice President and Secretary of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.

Don G. Powell Chairman, President, Chief Executive
2800 Post Oak Blvd. Officer and a Director of VKAC. Chairman,
Houston, TX 77056 Chief Executive Officer and a Director of
Date of Birth: 10/19/39 the Advisers and the Distributor. Chairman
and a Director of ACCESS. Director or
officer of certain other subsidiaries of
VKAC. Chairman of the Board of Governors
and the Executive Committee of the
Investment Company Institute. Prior to
November, 1996, President, Chief Executive
Officer and a Director of VKAC Holding.
President, Chief Executive Officer and a
Trustee/Director of certain investment
companies advised by Asset Management and
prior to July 1996, President, Chief
Executive Officer and a Trustee of the
funds in the Fund Complex and closed-end
investment companies advised by Advisory
Corp.

Alan T. Sachtleben.......... Vice President Executive Vice President of the Advisers.
Date of Birth: 04/20/42 Director of Asset Management. Director or
officer of certain other subsidiaries of
VKAC. Vice President of each of the funds
in the Fund Complex and certain other
investment companies advised by the
Advisers or their affiliates.

Paul R. Wolkenberg.......... Vice President Executive Vice President of the VKAC, the
Date of Birth: 11/10/44 Advisers and the Distributor. President,
Chief Executive Officer and a Director of
ACCESS. Director or officer of certain
other subsidiaries of VKAC. Vice President
of each of the funds in the Fund Complex
and certain other investment companies
advised by the Advisers or their
affiliates.

Edward C. Wood III.......... Vice President and Chief Senior Vice President of the Advisers. Vice
Date of Birth: 01/11/56 Financial Officer President and Chief Financial Officer of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
</TABLE>

B-16
<PAGE> 46

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
John L. Sullivan............ Treasurer First Vice President of the Advisers.
Date of Birth: 08/20/55 Treasurer of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.

Tanya M. Loden.............. Controller Vice President of the Advisers. Controller
Date of Birth: 11/19/59 of each of the funds in the Fund Complex
and other investment companies advised by
the Advisers or the affiliates.

Nicholas Dalmaso............ Assistant Secretary Assistant Vice President and Senior
Date of Birth: 03/01/65 Attorney of VKAC. Assistant Vice President
and Assistant Secretary of the Advisers and
the Distributor. Officer of certain other
subsidiaries of VKAC. Assistant Secretary
of each of the funds in the Fund Complex
and other investment companies advised by
the Advisers or the affiliates.

Huey P. Falgout, Jr......... Assistant Secretary Assistant Vice President and Senior
Date of Birth: 11/15/63 Attorney of VKAC. Assistant Vice President
and Assistant Secretary of the Advisers,
the Distributor and ACCESS. Officer of
certain other subsidiaries of VKAC.
Assistant Secretary of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.

Scott E. Martin............. Assistant Secretary Senior Vice President, Deputy General
Date of Birth: 08/20/56 Counsel and Assistant Secretary of VKAC.
Senior Vice President, Deputy General
Counsel and Secretary of the Advisers, the
Distributor and ACCESS. Officer of certain
other subsidiaries of VKAC. Prior to
November 1996, Senior Vice President,
Deputy General Counsel and Assistant
Secretary of VKAC Holding. Assistant
Secretary of each of the funds in the Fund
Complex and other investment companies
advised by the Advisers or the affiliates.

Weston B. Wetherell......... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: 06/15/56 and Assistant Secretary of VKAC, the
Advisers and the Distributor. Officer of
certain other subsidiaries of VKAC.
Assistant Secretary of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.

Steven M. Hill.............. Assistant Treasurer Assistant Vice President of the Advisers.
Date of Birth: 10/16/64 Assistant Treasurer of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.

M. Robert Sullivan.......... Assistant Controller Assistant Vice President of the Advisers.
Date of Birth: 03/30/33 Assistant Controller of each of the funds
in the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
</TABLE>

B-17
<PAGE> 47

Each of the trustees holds the same position with each of the funds in the
Fund Complex. As of December 31, 1996, there were 51 funds in the Fund Complex.
Each trustee who is not an affiliated person of VKAC, the Advisers, the
Distributor, ACCESS or Morgan Stanley (each a "Non-Affiliated Trustee") is
compensated by an annual retainer and meeting fees for services to the funds in
the Fund Complex. Each fund in the Fund Complex provides a deferred compensation
plan to its Non-Affiliated Trustees that allows trustees to defer receipt of
their compensation and earn a return on such deferred amounts based upon the
return of the common shares of the funds in the Fund Complex as more fully
described below. Each fund in the Fund Complex also provides a retirement plan
to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.

The compensation of each Non-Affiliated Trustee from each fund in the Fund
Complex advised by Advisory Corp. (each a "VK Fund" and collectively the "VK
Funds") includes an annual retainer in an amount equal to $2,500 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. Each Non-Affiliated Trustee receives a per meeting fee from
each VK Fund in the amount of $125 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Each Non-Affiliated Trustee receives a per meeting fee
from each VK Fund in the amount of $125 per special meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee, provided that no compensation will be paid in connection
with certain telephonic special meetings.

The compensation of each Non-Affiliated Trustee from the funds in the Fund
Complex advised by Asset Management (each an "AC Fund" or collectively the "AC
Funds") includes an annual retainer in an amount equal to $35,000 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. The AC Funds pay each Non-Affiliated Trustee a per meeting fee
in the amount of $2,000 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Payment of the annual retainer and the regular meeting
fee is allocated among the AC Funds (i) 50% on the basis of the relative net
assets of each AC Fund to the aggregate net assets of all the AC Funds and (ii)
50% equally to each AC Fund, in each case as of the last business day of the
preceding calendar quarter. Each AC Fund which is the subject of a special
meeting of the trustees generally pays each Non-Affiliated Trustee a per meeting
fee in the amount of $125 per special meeting attended by the Non-Affiliated
Trustee, due on the date of such meeting, plus reasonable expenses incurred by
the Non-Affiliated Trustee in connection with his or her services as a trustee,
provided that no compensation will be paid in connection with certain telephonic
special meetings.

The trustees approved an aggregate compensation cap with respect to funds in
the Fund Complex of $84,000 per Non-Affiliated Trustee per year (excluding any
retirement benefits) for the period July 22, 1995 through December 31, 1996,
subject to the net assets and the number of funds in the Fund Complex as of July
21, 1995 and certain other exceptions. For the calendar year ended December 31,
1996, certain trustees received aggregate compensation from the funds in the
Fund Complex over $84,000 due to compensation received but not subject to the
cap, including compensation from new funds added to the Fund Complex after July
22, 1995 and certain special meetings in 1996. In addition, each of Advisory
Corp. or Asset Management, as the case may be, agreed to reimburse each fund in
the Fund Complex through December 31, 1996 for any increase in the aggregate
trustee's compensation over the aggregate compensation paid by such fund in its
1994 fiscal year, provided that if a fund did not exist for the entire 1994
fiscal year appropriate adjustments will be made.

Each Non-Affiliated Trustee generally can elect to defer receipt of all or a
portion of the compensation earned by such Non-Affiliated Trustee until
retirement. Amounts deferred are retained by the Fund and earn a rate of return
determined by reference to the return on the common shares of such Fund or other
funds in the Fund Complex as selected by the respective Non-Affiliated Trustee,
with the same economic effect as if such Non-Affiliated Trustee had invested in
one or more funds in the Fund Complex. To the extent permitted by the 1940 Act,
the Fund may invest in securities of those funds selected by the Non-Affiliated
Trustees in

B-18
<PAGE> 48

order to match the deferred compensation obligation. The deferred compensation
plan is not funded and obligations thereunder represent general unsecured claims
against the general assets of the Fund.

Each fund in the Fund Complex has adopted a retirement plan. Under the Fund's
retirement plan, a Non-Affiliated Trustee who is receiving trustee's
compensation from the Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such trustee's retirement from the Fund. Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from the Fund. Each
trustee has served as a member of the Board of Trustees since he or she was
first appointed or elected in the year set forth below. The retirement plan
contains a Fund Complex retirement benefit cap of $60,000 per year. Asset
Management has reimbursed each AC Fund for the expenses related to the
retirement plan through December 31, 1996.

Additional information regarding compensation and benefits for trustees is set
forth below. As indicated in the notes accompanying the table, the amounts
relate to either the Fund's most recently completed fiscal year or the Fund
Complex' most recently completed calendar year ended December 31, 1996.

1996 COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
YEAR FIRST PENSION OR ESTIMATED MAXIMUM BEFORE DEFERRAL
APPOINTED OR AGGREGATE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS FROM FUND
ELECTED TO THE BEFORE DEFERRAL FROM THE ACCRUED AS PART OF FROM THE FUND UPON COMPLEX PAID
NAME(1) BOARD FUND(2) EXPENSES(3) RETIREMENT(4) TO TRUSTEE(5)
------- -------------- ------------------------ ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan* 1995 $3,125 $ 499 $2,500 $104,875
Philip P. Gaughan 625 2,169 2,000 16,875
Linda Hutton Heagy* 1995 3,125 56 2,500 104,875
Dr. Roger Hilsman 3,125 0 2,500 103,750
R. Craig Kennedy* 1993 3,125 48 2,500 104,875
Donald C. Miller 3,125 3,589 2,500 104,875
Jack E. Nelson* 1988 3,125 404 2,500 97,875
David Rees 750 0 2,500 22,000
Jerome L. Robinson* 1992 3,125 2,520 2,500 101,625
Lawrence J. Sheehan 750 0 -0- 22,000
Dr. Fernando Sisto* 1995 3,125 861 2,500 104,875
Wayne W. Whalen* 1988 3,125 292 2,500 104,875
William S. Woodside 3,125 0 2,500 104,875
</TABLE>

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

* Currently a member of the Board of Trustees. Mr. Phillip B. Rooney also is a
current member of the Board of Trustees but is not included in the
compensation table because he did not serve on the Board of Trustees or
receive any compensation from the Fund prior to April 14, 1997. Messrs.
McDonnell and Powell, also trustees of the Fund during all or a portion of
the Fund's last fiscal year, are not included in the compensation table
because they are affiliated persons of the Advisers and are not eligible for
compensation or retirement benefits from the Fund.

(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the Fund's
most recently completed fiscal year. Messrs. Gaughan and Rees retired from
the Board of Trustees on January 26, 1996 and January 29, 1996,
respectively. Mr. Sheehan was removed from the Board of Trustees effective
January 29, 1996. Messrs. Hilsman, Miller and Woodside retired from the
Board of Trustees on December 31, 1996.

(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended December 31, 1996. The
following trustees deferred compensation from the

B-19
<PAGE> 49

Fund during the fiscal year ended December 31, 1996: Mr. Branagan, $875; Mr.
Gaughan, $625; Ms. Heagy, $2,500; Mr. Kennedy, $1,500; Mr. Miller, $625; Mr.
Nelson, $625; Mr. Rees, $750; Mr. Robinson, $625; and Mr. Whalen, $625. Amounts
deferred are retained by the Fund and earn a rate of return determined by
reference to either the return on the common shares of the Fund or other
funds in the Fund Complex as selected by the respective Non-Affiliated
Trustee, with the same economic effect as if such Non-Affiliated Trustee had
invested in one or more funds in the Fund Complex. To the extent permitted by
the 1940 Act, each Fund may invest in securities of those funds selected by
the Non-Affiliated Trustees in order to match the deferred compensation
obligation. The cumulative deferred compensation (including interest) accrued
with respect to each trustee from the Trust as of December 31, 1996 is as
follows: Mr. Branagan, $864; Mr. Gaughan, $3,486; Ms. Heagy, $3,412; Mr.
Kennedy, $7,792; Mr. Miller, $9,083; Mr. Nelson, $9,476; Mr. Rees, $2,477;
Mr. Robinson, $8,925; and Mr. Whalen, $7,967. The deferred compensation plan
is described above the Compensation Table.

(3) The amounts shown in this column represent the Retirement Benefits accrued
by the Fund during its fiscal year ended December 31, 1996. The retirement
plan is described above the Compensation Table.

(4) This is the estimated maximum annual benefits payable by the Fund in each
year of the 10-year period commencing in the year of such trustee's
retirement from the Fund assuming: the trustee has 10 or more years of
service on the Board of Trustees (including years of service prior to the
adoption of the retirement plan) and retires at or after attaining the age
of 60. Trustees retiring prior to the age of 60 or with fewer than 10 years
of service for the Fund may receive reduced retirement benefits from the
Fund. The actual annual benefit may be less if the trustee is subject to the
Fund Complex retirement benefit cap or if the trustee is not fully vested at
the time of retirement. Each incumbent nominee to the Board of Trustees has
served as a member of the Board of Trustees since he or she was first
appointed or elected in the year set forth in the Compensation Table.

(5) The amounts shown in this column represent the aggregate compensation paid
by all 51 of the investment companies in the Fund Complex as of December 31,
1996 before deferral by the trustees under the deferred compensation plan.
Certain trustees deferred all or a portion of their aggregate compensation
from the Fund Complex during the calendar year ended December 31, 1996. The
deferred compensation earns a rate of return determined by reference to the
return on the shares of the funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those investment companies selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
trustees' Fund Complex compensation cap covered the period July 22, 1995
through December 31, 1996. For the calendar year ended December 31, 1996,
certain trustees received compensation over $84,000 in the aggregate due to
compensation received but not subject to the cap, including compensation
from new funds added to the Fund Complex after July 22, 1995 and certain
special meetings in 1996. The Advisers and their affiliates also serve as
investment adviser for other investment companies; however, with the
exception of Messrs. McDonnell, Powell and Whalen, the trustees were not
trustees of such investment companies. Combining the Fund Complex with other
investment companies advised by the Advisers and their affiliates, Mr.
Whalen received Total Compensation of $243,375 during the calendar year
ended December 31, 1996.

As of April 4, 1997, the trustees and officers of the Fund as a group owned
less than 1% of the shares of the Fund.

B-20
<PAGE> 50

As of April 4, 1997, no person was known by the Fund to own beneficially or to
hold of record as much as 5% of the outstanding Class A shares, Class B shares
or Class C shares of the Fund, except as follows:

<TABLE>
<CAPTION>
AMOUNT OF
OWNERSHIP AT CLASS OF PERCENTAGE
NAME AND ADDRESS OF HOLDER APRIL 4, 1997 SHARES OWNERSHIP
-------------------------- ------------- -------- ----------
<S> <C> <C> <C>
Van Kampen American Capital Trust Company................ 19,502,097 A 11.45%
2800 Post Oak Blvd. 2,313,721 B 8.43%
Houston, TX 77056
Martha J. Ruoff Estate................................... 63,809 C 6.31%
Russell Ruoff Conservator
435 North Alfred
Los Angeles, CA 90048-2504
Merrill Lynch, Pierce, Fenner & Smith.................... 59,577 C 5.89%
For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
Anne Holuba.............................................. 58,713 C 5.80%
2 Hackensack Ave.
South Kearny, NJ 07032-4611
Robert J. Holuba......................................... 120,645 C 11.92%
Stanley J. Holuba Tr
Angela Holuba Term Tr
FBO Angela Holuba Dtd. 7/28/87
2 Hackensack Ave.
South Kearny, NJ 07032-4611
Firefighters Credit Union................................ 51,830 C 5.12%
124 W. 1400 South
Salt Lake City, UT 84115-5227
</TABLE>

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

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

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISORY AGREEMENT

Van Kampen American Capital Investment Advisory Corp. (the "Adviser") is the
Fund's investment adviser. The Adviser was incorporated as a Delaware
corporation in 1982 (and through December 31, 1987 transacted business under the
name of American Portfolio Advisory Service Inc.).

The Adviser is a wholly-owned subsidiary of Van Kampen American Capital, Inc.
("VKAC"), which is a wholly-owned subsidiary of VK/AC Holding, Inc. VK/AC
Holding, Inc. is a wholly-owned subsidiary of MSAM Holdings II, Inc. which, in
turn, is a wholly-owned subsidiary of Morgan Stanley Group Inc. The principal
office of the Fund, the Adviser, the Distributor and VKAC is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181.

Morgan Stanley Group Inc. and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange, commodities and swaps (involving foreign exchange,
commodities, indices and

B-21
<PAGE> 51

interest rates); real estate advice, financing and investing; and global
custody, securities clearance services and securities lending.

On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover & Co.
announced that they had entered into an Agreement and Plan of Merger to form
Morgan Stanley, Dean Witter, Discover & Co. Subject to certain conditions being
met, it is currently anticipated that the transaction will close in mid-1997.
Thereafter, Van Kampen American Capital Asset Management, Inc. will be an
indirect subsidiary of Morgan Stanley, Dean Witter, Discover & Co.

Dean Witter, Discover & Co. is a financial services company with three major
businesses; full service brokerage, credit services and asset management.

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

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

The Adviser's activities are subject to the review and supervision of the
Board of Trustees of the Trust, of which the Fund is a series, to whom the
Adviser renders periodic reports of the Fund's investment activities.

The investment advisory agreement will remain in effect from year to year if
specifically approved by the Trustees of the Trust or the Fund's shareholders
and by the disinterested Trustees of the Trust in compliance with the
requirements of the 1940 Act. The agreement may be terminated without penalty
upon 60 days written notice by either party and will automatically terminate in
the event of assignment.

The agreement specifies that the Adviser will reimburse the Fund for annual
expenses of the Fund which exceed the most stringent limits prescribed by any
state in which the Fund shares are offered for sale. The most stringent limit as
of the date of this Statement of Additional Information, as affecting the Fund,
requires the Adviser to reimburse the Fund to the extent that aggregate expenses
of the Fund (excluding interest, taxes and other expenses which may be
excludable under applicable state law) exceed in any fiscal year 2 1/2% of the
average annual net assets of the Fund up to $30 million, 2% of the average
annual net assets of the Fund of the next $70 million, and 1 1/2% of the
remaining average annual net assets of the Fund. In addition to making any
required reimbursements, the Adviser may in its discretion, but is not obligated
to, waive all or any portion of its fee or assume all or any portion of the
expenses of the Fund.

For the years ended December 31, 1994, 1995 and 1996, the Fund recognized
advisory expenses of $18,897,359, $17,475,740 and $16,225,091, respectively.

OTHER AGREEMENTS

FUND ACCOUNTING AGREEMENT. The Fund has also entered into an accounting
services agreement pursuant to which the Adviser provides accounting services
supplementary to those provided by the Custodian. Such services are expected to
enable the Fund to more closely monitor and maintain its accounts and records.
The Fund shares together with the other funds in the Fund Complex the cost of
providing such services, with 25% of such costs shared proportionately based on
the number of outstanding classes of securities per fund and with the remaining
75% of such cost being paid by the Fund and such other Van Kampen American
Capital funds based proportionally on their respective net assets.

For the years ended December 31, 1994, 1995 and 1996, the Fund recognized
expenses of approximately $80,100, $137,300 and $123,700, respectively,
representing the Adviser's cost of providing accounting services.

B-22
<PAGE> 52

LEGAL SERVICES AGREEMENT. The Fund and each of the other Van Kampen American
Capital funds advised by the Adviser and distributed by the Distributor have
entered into Legal Services Agreements pursuant to which Van Kampen American
Capital provides legal services, including without limitation: accurate
maintenance of the fund's minute books and records, preparation and oversight of
the fund's regulatory reports, and other information provided to shareholders,
as well as responding to day-to-day legal issues on behalf of the funds. Payment
by the Fund for such services is made on a cost basis for the salary and salary
related benefits, including but not limited to bonuses, group insurances and
other regular wages for the employment of personnel, as well as overhead and the
expenses related to the office space and the equipment necessary to render the
legal services. Other funds distributed by the Distributor also receive legal
services from Van Kampen American Capital. Of the total costs for legal services
provided to the funds distributed by the Distributor, one half of such costs are
allocated equally to each fund and the remaining one half of such costs are
allocated to specific funds based on monthly time records.

For the years ended December 31, 1994, 1995 and 1996, the Fund recognized
expenses of approximately $62,900, $98,200 and $57,000, respectively,
representing Van Kampen American Capital's cost of providing legal services.

CUSTODIAN AND INDEPENDENT ACCOUNTANTS

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

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

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

The Adviser will place orders for portfolio transactions for the Fund with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services. These services include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to the Fund and the investment adviser, including
quotations necessary to determine the value of the Fund's net assets. Any
research benefits derived are available for all clients of the investment
adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser and still must be analyzed and reviewed
by its staff, the receipt of research information is not expected to materially
reduce its expenses.

If it is believed to be in the best interests of the Fund, the Adviser may
place portfolio transactions with brokers who provide the types of research
service described above, even if it means the Fund will have to pay a higher
commission, (or, if the broker's profit is part of the cost of the security,
will have to pay a higher price for the security) than would be the case if no
weight were given to the broker's furnishing of those research services. This
will be done, however, only if, in the opinion of the Adviser, the amount of
additional commission or increased cost is reasonable in relation to the value
of such services.

In selecting among the firms believed to meet the criteria for handling a
particular transaction, the Adviser may take into consideration that certain
firms (i) provide market, statistical or other research information such as that
set forth above to the Fund and the Adviser, (ii) have sold or are selling
shares of the Fund and (iii) may select firms that are affiliated with the Fund,
its investment adviser or its distributor and other principal underwriters. If
purchases or sales of securities of the Fund and of one or more other investment
companies or clients supervised by the Adviser are considered at or about the
same time, transactions in such securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by the
Adviser, taking into account the respective sizes of the funds and the amount of
securities to be purchased or sold. Although it is possible that in some cases
this procedure could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned, it is also possible that the ability
to

B-23
<PAGE> 53

participate in volume transactions and to negotiate lower brokerage commissions
will be beneficial to the Fund.

While the Adviser will be primarily responsible for the placement of the
Fund's business, the policies and practices in this regard must be consistent
with the foregoing and will at all times be subject to review by the Trustees.

The Trustees have adopted certain policies incorporating the standards of Rule
17e-1 issued by the SEC under the 1940 Act which requires that the commissions
paid to the Distributor and other affiliates of the Fund must be reasonable and
fair compared to the commissions, fees or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time. The rule and procedures
also contain review requirements and require the Adviser to furnish reports to
the Trustees and to maintain records in connection with such reviews. After
consideration of all factors deemed relevant, the Trustees will consider from
time to time whether the advisory fee will be reduced by all or a portion of the
brokerage commission given to affiliated brokers.

State securities laws may differ from the interpretations of federal law
expressed herein, and banks and financial institutions may be required to
register as dealers pursuant to state law.

TAX STATUS OF THE FUND

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

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

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

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

Some of the Fund's investment practices are subject to special provisions of
the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to mark-to-market some of the positions in its portfolio (i.e.,
treat them as if they were sold for fair

B-24
<PAGE> 54

market value at the end of the tax-year), which may cause the Fund to recognize
income without receiving cash with which to make distributions in amounts
necessary to satisfy the 90% distribution requirement and the distribution
requirements for avoiding income and excise taxes. The Fund will monitor its
transactions and may make certain tax elections in order to mitigate the effect
of these rules and prevent disqualification of the Fund as a regulated
investment company.

The Fund's ability to dispose of portfolio securities may be limited by the
requirement for qualification as a regulated investment company that less than
30% of the Fund's annual gross income be derived from the disposition of
securities held for less than three months.

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

DISTRIBUTIONS. Distributions of the Fund's net investment income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gains ("capital gains dividends"), if any, are taxable
to shareholders as long-term capital gains regardless of the length of time
shares of the Fund have been held by such shareholders. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). Tax-exempt shareholders not subject to federal income tax on
their income generally will not be taxed on distributions from the Fund.

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

The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Fund distributions
will not qualify for the dividends received deduction for corporations, except
to the extent the Fund receives dividends from domestic corporations.

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

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

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

B-25
<PAGE> 55

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

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

THE DISTRIBUTOR

The Distributor offers one of the industry's broadest lines of investments --
encompassing mutual funds, closed-end funds and unit investment trusts -- and is
the nation's 5th largest broker-sold mutual fund group according to Strategic
Insight, July 1995. VKAC manages or supervises more than $57 billion in mutual
funds, closed-end funds and unit investment trusts -- assets which have been
entrusted to VKAC in more than 2 million investor accounts. VKAC has one of the
largest research teams (outside of the rating agencies) in the country, with
more than 80 analysts devoted to various specializations.

Shares of the Fund are offered on a continuous basis through Van Kampen
American Capital Distributors, Inc. (the "Distributor"), One Parkview Plaza,
Oakbrook Terrace, IL 60181. The Distributor is an indirect wholly-owned
subsidiary of Morgan Stanley Group Inc. The principal office of the Fund, the
Adviser, the Distributor and VKAC is located at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181.

Morgan Stanley Group Inc. and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
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.

On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover & Co.
announced that they had entered into an Agreement and Plan of Merger to form
Morgan Stanley, Dean Witter, Discover & Co. Subject to certain conditions being
met, it is currently anticipated that the transaction will close in mid-1997.
Thereafter, Van Kampen American Capital Asset Management, Inc. will be an
indirect subsidiary of Morgan Stanley, Dean Witter, Discover & Co.

Dean Witter, Discover & Co. is a financial services company with three major
businesses; full service brokerage, credit services and asset management.

Pursuant to a distribution agreement, the Distributor will purchase shares of
the Fund for resale to the public, either directly or through securities
dealers, and is obligated to purchase only those shares for which it has
received purchase orders. A discussion of how to purchase and redeem the Fund's
shares and how the Fund's shares are priced is contained in the Prospectus.

DISTRIBUTION AND SERVICE PLANS

The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and Service Plan sometimes are
referred to herein collectively as the "Plans". The Plans provide that the Fund
may spend a portion of the Fund's average daily net assets attributable to each
class of shares in connection with distribution of the respective class of
shares and in connection with the provision of ongoing services to shareholders
of such class, respectively. The Plans are being implemented through an
agreement (the "Distribution and Service Agreement") with the Distributor,
sub-agreements between the Distributor and members of the NASD acting as
securities dealers and NASD members or eligible non-members acting as brokers or
agents for investors (collectively, "Selling

B-26
<PAGE> 56

Agreements") that may provide for their customers or clients certain services or
assistance, which may include, but not be limited to, processing purchase and
redemption transactions, establishing and maintaining shareholder accounts
regarding the Fund, and such other services as may be agreed to from time to
time and as may be permitted by applicable statute, rule or regulation. Brokers,
dealers and financial intermediaries that have entered into sub-agreements with
the Distributor and sell shares of the Fund are referred to herein as "financial
intermediaries."

Under the Distribution and Service Agreement and the Selling Agreements,
financial intermediaries that sold shares prior to July 1, 1987, or prior to the
beginning of the calendar quarter in which the Selling Agreement between the
Fund and such financial intermediary was approved by the Fund's Board of
Trustees (an "Implementation Date") are not eligible to receive compensation
pursuant to such Distribution and Service Agreement and/or Selling Agreement. To
the extent that there remain outstanding shares of the Fund that were purchased
prior to all Implementation Dates, the percentage of the total average daily net
asset value of a class of shares that may be utilized pursuant to the
Distribution and Service Agreement will be less than the maximum percentage
amount permissible with respect to such class of shares under the Distribution
and Service Agreement.

The Distributor must submit quarterly reports to the Board of Trustees of the
Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Plans and the purposes for which such
expenditures were made, together with such other information as from time to
time is reasonably requested by the Trustees. The Plans provide that they will
continue in full force and effect from year to year so long as such continuance
is specifically approved by a vote of the Trustees, and also by a vote of the
disinterested Trustees, cast in person at a meeting called for the purpose of
voting on the Plans. Each of the Plans may not be amended to increase materially
the amount to be spent for the services described therein with respect to either
class of shares without approval by a vote of a majority of the outstanding
voting shares of such class, and all material amendments to either of the Plans
must be approved by the Trustees and also by the disinterested Trustees. Each of
the Plans may be terminated with respect to either class of shares at any time
by a vote of a majority of the disinterested Trustees or by a vote of a majority
of the outstanding voting shares of such class.

For the fiscal year ended December 31, 1996, the Fund's aggregate expense
under the Plans for Class A Shares was $4,773,135. Such expenses were paid to
reimburse the Distributor for payments made to financial intermediaries for
servicing Fund shareholders and for administering the Plans. For the fiscal year
ended December 31, 1996, the Fund's aggregate expense under the Plans for Class
B Shares was $4,378,912. Such expenses were paid to reimburse the Distributor
for the following payments: $3,284,184 for commissions and transaction fees paid
to financial intermediaries in respect of sales of Class B shares of the Fund
and $1,094,728 for fees paid to financial intermediaries for servicing Class B
shareholders and administering the Plans. For the fiscal year ended December 31,
1996, the Fund's aggregate expense under the Plans for Class C Shares was
$145,308. Such expenses were paid to reimburse the Distributor for the following
payments: $41,615 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class C shares of the Fund and $103,693
for fees paid to financial intermediaries for servicing Class C shareholders and
administering the Plans.

LEGAL COUNSEL

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

PERFORMANCE INFORMATION

The Fund's yield quotation is determined on a monthly basis with respect to
the immediately preceding 30 day period; yield is computed by first dividing the
Fund's net investment income per share of a given class earned during such
period by the Fund's maximum offering price (including, with respect to the
Class A Shares, the maximum sales charge) per share of such class on the last
day of such period. The Fund's net investment income per share is determined by
taking the interest attributable to a given class of shares earned by the Fund
during the period, subtracting the expenses attributable to a given class of
shares accrued for the

B-27
<PAGE> 57

period (net of any reimbursements), and dividing the result by the average daily
number of shares of each class outstanding during the period that was entitled
to receive dividends. The yield calculation formula assumes net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six month period. Yield will be computed separately for each class of shares.
Class B Shares redeemed during the first six years after their issuance and
Class C Shares redeemed during the first year after their issuance may be
subject to a contingent deferred sales charge in a maximum amount equal to 4.00%
and 1.00%, respectively, of the lesser of the then current net asset value of
the shares redeemed or their initial purchase price from the Fund. Yield
quotations do not reflect the imposition of a contingent deferred sales charge,
and if any such contingent deferred sales charge imposed at the time of
redemption were reflected, it would reduce the performance quoted.

The Fund calculates average compounded total return by determining the
redemption value (less any applicable contingent deferred sales charge) at the
end of specified periods (after adding back all dividends and other
distributions made during the period) of a $1,000 investment in a given class of
shares of the Fund (less the maximum sales charge, if any) at the beginning of
the period, annualizing the increase or decrease over the specified period with
respect to such initial investment and expressing the result as a percentage.
Average compounded total return will be computed separately for each class of
shares.

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

The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of shares of the Fund from a given date to a subsequent given date.
Cumulative total return is calculated by measuring the value of an initial
investment in a given class of shares of the Fund at a given time, and if
applicable may include or exclude the sales charge or CDSC as indicated,
determining the value of all subsequent reinvested distributions, and dividing
the net change in the value of the investment as of the end of the period by the
amount of the initial investment and expressing the result as a percentage.
Non-standardized total return will be calculated separately for each class of
shares. Non-standardized total return calculations do not reflect the imposition
of a contingent deferred sales charge, and if any such contingent deferred sales
charge with respect to the CDSC imposed at the time of redemption were
reflected, it would reduce the performance quoted.

From time to time marketing materials may provide a portfolio manager update,
an adviser update or discuss general economic conditions and outlooks. The
Fund's marketing materials may show the Fund's asset class diversification, top
five sectors, ten largest holdings and other Fund asset structures, such as
duration, maturity, coupon, NAV, rating breakdown, AMT exposure and number of
issues in the portfolio. Materials may also mention how Van Kampen American
Capital believes the Fund compares relative to other Van Kampen American Capital
funds. Materials also may discuss the Dalbar Financial Services study from 1984
to 1994 which studied investor cash flow into and out of all types of mutual
funds. The ten year study found that investors who bought mutual fund shares and
held such shares outperformed investors who bought and sold. The Dalbar study
conclusions were consistent regardless of if shareholders purchased their funds
in direct or sales force distribution channels. The study showed that investors
working with a professional representative have tended over time to earn higher
returns than those who invested directly. The Fund will also be marketed on the
Internet.

CLASS A SHARES

The average total return, including the payment of the maximum sales charge,
with respect to the Class A Shares for (i) the one year period ended December
31, 1996 was (.87%); (ii) the 5 year period ended December 31, 1996 was 4.90%;
(iii) the 10 year period ended December 31, 1996 was 7.18% and (iv) the
approximately 12 year, 7 month period from May 27, 1984 (the commencement of
investment operations of the Fund) through December 31, 1996 was 9.54%.

The Fund's yield with respect to the Class A Shares for the 30 day period
ending December 31, 1996 (calculated in the manner described in the Prospectus
under the heading "Fund Performance") was 9.35%.

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<PAGE> 58

The Fund's current distribution rate with respect to the Class A Shares for the
month ending December 31, 1996 (calculated in the manner described in the
Prospectus under the heading "Fund Performance") was 6.92%.

The Fund's cumulative non-standardized total return, including payment of the
maximum sales charge, with respect to the Class A Shares from its inception to
the end of the current period, was 214.81%.

The Fund's cumulative non-standardized total return, excluding payment of the
maximum sales charge, with respect to Class A Shares from its inception to the
end of the current period was 230.48%.

CLASS B SHARES

The average total return, including payment of the CDSC, with respect to the
Class B Shares for (i) the one year period ended December 31, 1996 was (.63%)
and (ii) the approximately 4 year, 4 month period of August 24, 1992
(commencement of distribution) through December 31, 1996 was 4.67%.

The Fund's yield with respect to the Class B Shares for the 30 day period
ending December 31, 1996 (calculated in the manner described in the Prospectus
under the heading "Fund Performance") was 8.96%. The Fund's current distribution
rate with respect to the Class B Shares for the month ending December 31, 1996
(calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 6.48%.

The Fund's cumulative non-standardized total return, including payment of the
CDSC, with respect to the Class B Shares from its inception to the end of the
current period was 22.00%.

The Fund's cumulative non-standardized total return, excluding payment of the
CDSC, with respect to the Class B Shares from its inception to the end of the
current period was 23.37%.

CLASS C SHARES

The average total return, including payment of the CDSC, with respect to the
Class C Shares for (i) the one year period ended December 31, 1996 was 2.27% and
(ii) the approximately 3 year, 4 and 1/2 month period from August 13, 1993
(commencement of distribution) through December 31, 1996 was 3.39%.

The Fund's yield with respect to the Class C Shares for the 30 day period
ending December 31, 1996 (calculated in the manner described in the Prospectus
under the heading "Fund Performance") was 8.96%. The Fund's current distribution
rate with respect to the Class C Shares for the month ending December 31, 1996
(calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 6.48%.

The Fund's cumulative non-standardized total return, including payment of the
CDSC, with respect to the Class C Shares from its inception to the end of the
current period was 14.02%.

The Fund's cumulative non-standardized total return, excluding payment of the
CDSC, with respect to the Class C Shares from its inception to the end of the
current period was 14.02%.

ALTERNATIVE SALES ARRANGEMENTS

The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to the investor, taking into account
the amount of the purchase, the length of time the investor expects to hold the
shares, whether the investor wishes to receive dividends in cash or to reinvest
them in additional shares of the Fund, and other circumstances. Investors should
consider such factors together with the amount of sales charges and accumulated
distribution fees with respect to each class of shares that may be incurred over
the anticipated duration of their investment in the Fund.

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<PAGE> 59

Shares"). Class A Share accounts over $1 million or otherwise subject to a
contingent deferred sales charge ("CDSC"), Class B Shares and Class C Shares
sometimes are referred to herein collectively as "Contingent Deferred Sales
Charge Shares" or "CDSC Shares."

The minimum initial investment with respect to each class of shares is $500.
The minimum subsequent investment with respect to each class of shares is $25.
It is presently the policy of the Distributor not to accept any order in an
amount of $500,000 or more for Class B Shares or any order for Class C Shares in
an amount of $1 million or more because it ordinarily will be more advantageous
for an investor making such an investment to purchase Class A Shares.

An investor should carefully consider the sales charges applicable to each
class of shares and the estimated period of their investment to determine which
class of shares is more beneficial for the investor to purchase. For example,
investors who would qualify for a significant purchase price discount from the
maximum sales charge on Class A Shares may determine that payment of such a
reduced front-end sales charge is superior to electing to purchase Class B
Shares or Class C Shares, each with no front-end sales charge but subject to a
CDSC and a higher aggregate distribution and service fee. However, because
initial sales charges are deducted at the time of purchase of Class A Share
accounts under $1 million, a purchaser of such Class A Shares would not have all
of his or her funds invested initially and, therefore, would initially own fewer
shares than if Class B Shares or Class C Shares had been purchased. On the other
hand, an investor whose purchase would not qualify for price discounts
applicable to Class A Shares and intends to remain invested until after the
expiration of the applicable CDSC may wish to defer the sales charge and have
all his or her funds initially invested in Class B Shares or Class C Shares. If
such an investor anticipates that he or she will redeem such shares prior to the
expiration of the CDSC period applicable to Class B Shares, the investor may
wish to acquire Class C Shares. Investors must weigh the benefits of deferring
the sales charge and having all of their funds invested against the higher
aggregate distribution and service fee applicable to Class B Shares and Class C
Shares (discussed below).

Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except each class of shares (i)
bears those distribution fees, service fees and administrative expenses
applicable to the respective class of shares as a result of its sales
arrangements, (ii) has exclusive voting rights with respect to those provisions
of the Fund's Rule 12b-1 distribution plan which relate only to such class and
(iii) has a different exchange privilege. Only the Class B Shares are subject to
a conversion feature (discussed below). Generally, a class of shares subject to
a higher ongoing distribution fee, service fee or, where applicable, the
conversion feature will have a higher expense ratio and pay lower dividends than
a class of shares subject to a lower ongoing distribution fee, service fee or
not subject to the conversion feature. The per share net asset values of the
different classes of shares are expected to be substantially the same; from time
to time, however, the per share net asset values of the classes may differ. The
net asset value per share of each class of shares of the Fund will be determined
as described in the Prospectus under "How to Buy Shares."

The administrative expenses that may be allocated to a specific class of
shares may consist of (i) transfer agency expenses attributable to a specific
class of shares, which expenses typically will be higher with respect to classes
of shares subject to the conversion feature; (ii) printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxy statements to current shareholders of a specific class;
(iii) SEC registration fees incurred by a class of shares; (iv) the expense of
administrative personnel and services as required to support the shareholders of
a specific class; (v) Trustees' fees or expense incurred as a result of issues
relating to one class of shares; (vi) accounting expenses relating solely to one
class of shares; and (vii) any other incremental expenses subsequently
identified that should be properly allocated to one or more classes of shares
that shall be approved by the SEC pursuant to an amended exemptive order. All
such expenses incurred by a class will be borne on a pro rata basis by the
outstanding shares of such class. All allocations of administrative expenses to
a particular class of shares will be limited to the extent necessary to preserve
the Fund's qualification as a regulated investment company under the Code.

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PURCHASE OF SHARES

The Fund currently offers three classes of shares to the public on a
continuous basis through the Distributor, as principal underwriter, which is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares are also
offered through members of the National Association of Securities Dealers, Inc.
("NASD") acting as securities dealers ("dealers") and through NASD members
acting as brokers for investors ("brokers") or eligible non-NASD members acting
as agents for investors ("financial intermediaries"). The Fund reserves the
right to suspend or terminate the continuous public offering at any time and
without prior notice.

The Fund's shares are offered at the net asset value per share next computed
after an investor places an order to purchase directly with the investor's
broker, dealer or financial intermediary or with the Distributor, plus any
applicable sales charge. Sales personnel of brokers, dealers and financial
intermediaries distributing the Fund's shares may receive differing compensation
for selling different classes of shares. It is the responsibility of the
investor's broker, dealer or financial intermediary to transmit the order to the
Distributor. Because the Fund generally will determine net asset value once each
business day as of the close of business, purchase orders placed through an
investor's broker, dealer or financial intermediary must be transmitted to the
Distributor by such broker, dealer or financial intermediary prior to such time
in order for the investor's order to be fulfilled on the basis of the net asset
value to be determined that day. Any change in the purchase price due to the
failure of the Distributor to receive a purchase order prior to such time must
be settled between the investor and the broker, dealer or financial intermediary
submitting the order.

The Distributor may from time to time implement programs under which a broker,
dealer or financial intermediary's sales force may be eligible to win nominal
awards for certain sales efforts or under which the Distributor will reallow to
any broker, dealer or financial intermediary that sponsors sales contests or
recognition programs conforming to criteria established by the Distributor, or
participates in sales programs sponsored by the Distributor, an amount not
exceeding the total applicable sales charges on the sales generated by the
broker, dealer or financial intermediary at the public offering price during
such programs. Other programs provide, among other things and subject to certain
conditions, certain favorable distribution arrangements for shares of the Fund.
Also, the Distributor in its discretion may from time to time, pursuant to
objective criteria established by it, pay fees and sponsor business seminars to
qualifying brokers, dealers or financial intermediary for certain services or
activities which are primarily intended to result in sales of shares of the
Fund. Fees may include payment for travel expenses, including lodging, incurred
in connection with trips taken by invited registered representatives and members
of their families to locations within or outside of the United States for
meetings or seminars of a business nature. Such fees paid for such services and
activities with respect to the Fund will not exceed in the aggregate 1.25% of
the average total daily net assets of the Fund on an annual basis. The
Distributor may provide additional compensation to Edward D. Jones & Co. or an
affiliate thereof based on a combination of its sales of shares and increases in
assets under management. Such payments to brokers, dealers or financial
intermediaries for sales contests, other sales programs and seminars are made by
the Distributor out of its own assets and not out of the assets of the Fund.
These programs will not change the price an investor will pay for shares or the
amount that the Fund will receive from such sale.

CLASS A SHARES

The public offering price of Class A Shares is equal to the net asset value
per share plus an initial sales charge which is a variable percentage of the
offering price depending upon the amount of the sale. The table below shows
total sales charges and dealer concessions reallowed to dealers and agency
commissions paid to brokers with respect to sales of Class A Shares. The sales
charge is allocated between the investor's broker, dealer or financial
intermediary and the Distributor. As indicated previously, at the discretion of
the Distributor, the entire sales charge may be reallowed to such broker, dealer
or financial intermediary. The staff of the SEC has taken the position that
dealers who receive more than 90% or more of the sales charge may be deemed to
be "underwriters" as that term is defined in the Securities Act of the 1933.

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<PAGE> 61

SALES CHARGE TABLE

<TABLE>
<CAPTION>
DEALER
CONCESSION
OR AGENCY
TOTAL SALES CHARGE COMMISSION
------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
SIZE OF TRANSACTION OF OFFERING OF NET OF OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Less than $100,000.......................................... 4.75% 4.99% 4.25%
$100,000 but less than $250,000............................. 3.75 3.90 3.25
$250,000 but less than $500,000............................. 2.75 2.83 2.25
$500,000 but less than $1,000,000........................... 2.00 2.04 1.75
$1,000,000 or more.......................................... * * *
</TABLE>

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

* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a contingent
deferred sales charge of 1.00% on redemptions made within one year of the
purchase. A commission will be paid to dealers who initiate and are
responsible for purchases of $1 million or more as follows: 1.00% on sales to
$2 million, plus 0.80% on the next $1 million and 0.50% on the excess over $3
million. See "Purchase of Shares--Deferred Sales Charge Alternatives" for
additional information with respect to contingent deferred sales charges.

QUANTITY DISCOUNTS

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

Investors, or their brokers, dealers or financial intermediaries, must notify
the Fund whenever a quantity discount is applicable to purchases. Upon such
notification, an investor will receive the lowest applicable sales charge.
Quantity discounts may be modified or terminated at any time. For more
information about quantity discounts, investors should contact their broker,
dealer or financial intermediary or the Distributor.

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

As used herein, "Participating Funds" refers to all open-end investment
companies in the Fund Complex.

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

CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the preceding
sales charge table may also be determined by combining the amount being invested
in Class A Shares of the Fund with other shares of the Fund and shares of
Participating Funds plus the current offering price of all shares of the Fund
and other Participating Funds which have been previously purchased and are still
owned.

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the amount being invested over a
13-month period to determine the sales charge as outlined in the preceding
table. The size of investment shown in the preceding table includes the amount
of intended purchases of Class A Shares of the Fund with other shares of the
Fund and shares of the Participating Funds plus the value of all shares of the
Fund and other Participating Funds previously purchased during such 13-month
period and still owned. An investor may elect to compute the 13-month period
starting up to 90 days before the date of execution of a Letter of Intent. Each
investment made during the period receives the reduced sales charge applicable
to the total amount of the investment goal. If trades not initially made under a
Letter of Intent subsequently qualify for a lower sales charge through the
90-day back-dating provision, an

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<PAGE> 62

adjustment will be made at the expiration of the Letter of Intent to give effect
to the lower charge. If the goal is not achieved within the 13-month period, the
investor must pay the difference between the sales charges applicable to the
purchases made and the sales charges previously paid. When an investor signs a
Letter of Intent, shares equal to at least 5% of the total purchase amount of
the level selected will be restricted from sale or redemption by the investor
until the Letter of Intent is satisfied or any additional sales charges have
been paid; if the Letter of Intent is not satisfied by the investor and any
additional sales charges are not paid, sufficient restricted shares will be
redeemed by the Fund to pay such charges. Additional information is contained in
the application accompanying this Prospectus.

OTHER PURCHASE PROGRAMS

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

UNIT INVESTMENT TRUST REINVESTMENT PROGRAMS. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
Shares of the Fund at net asset value and with no minimum initial or subsequent
investment requirement if the administrator of an investor's unit investment
trust program meets certain uniform criteria relating to cost savings by the
Fund and the Distributor. The total sales charge for all other investments made
from unit trust distributions will be 1.00% of the offering price (1.01% of net
asset value). Of this amount, the Distributor will pay to the broker, dealer or
financial intermediary, if any, through which such participation in the
qualifying program was initiated 0.50% of the offering price as a dealer
concession or agency commission. Persons desiring more information with respect
to this program, including the applicable terms and conditions thereof, should
contact their broker, dealer or financial intermediary or the Distributor.

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

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

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

(1) Current or retired Trustees/Directors of funds advised by the Adviser or
Van Kampen American Capital Asset Management, Inc. and such persons'
families and their beneficial accounts.

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

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

(4) Registered investment advisers, trust companies and bank trust departments
investing on their own behalf or on behalf of their clients provided that
the aggregate amount invested in Class A Shares of the Fund alone, or in
any combination of shares of the Fund and shares of other Participating
Funds as described herein under "Purchase of Shares -- Class A Shares --
Quantity Discounts," during the

B-33
<PAGE> 63

13-month period commencing with the first investment pursuant hereto
equals at least $1 million. The Distributor may pay brokers, dealers or
financial intermediaries through which purchases are made an amount up to
0.50% of the amount invested, over a 12-month period following such
transaction.

(5) Trustees and other fiduciaries purchasing shares for retirement plans of
organizations with retirement plan assets of $3 million or more and which
invest in multiple fund families through national wirehouses alliance
programs.

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

(7) Investors purchasing shares of the Fund with redemption proceeds from
other mutual fund complexes on which the investor has paid a front-end
sales charge or was subject to a deferred sales charge, whether or not
paid, if such redemption has occurred no more than 30 days prior to such
purchase.

(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Code, or custodial accounts
held by a bank created pursuant to Section 403(b) of the Code and
sponsored by non-profit organizations defined under Section 501(c)(3) of
the Code and assets held by an employer or trustee in connection with an
eligible deferred compensation plan under Section 457 of the Code. Such
plans will qualify for purchases at net asset value provided, for plans
initially establishing accounts with the Distributor in the Participating
Funds after February 1, 1997, that (1) the initial amount invested in the
Participating Funds is at least $500,000 or (2) such shares are purchased
by an employer sponsored plan with more than 100 eligible employees. Such
plans that have been established with a Participating Fund or have
received proposals from the Distributor prior to February 1, 1997 based on
net asset value purchase privileges previously in effect will be qualified
to purchase shares of the Participating Funds at net asset value for
accounts established on or before May 1, 1997. Section 403(b) and similar
accounts for which Van Kampen American Capital Trust Company served as
custodian will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible employees,
except under certain uniform criteria established by the Distributor from
time to time. Prior to February 1, 1997, a commission will be paid to
authorized dealers who initiate and are responsible for such purchases
within a rolling twelve-month period as follows: 1.00% on sales to $5
million, plus 0.50% on the next $5 million, plus 0.25% on the excess over
$10 million. For purchases on February 1, 1997 and thereafter, a
commission will be paid as follows: 1.00% on sales to $2 million, plus
0.80% on the next $1 million, plus 0.50% on the next $47 million and 0.25%
on the excess over $50 million.

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

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

Purchase orders made pursuant to clause (4) may be placed either through
authorized brokers, dealers or financial intermediaries as described above or
directly with the Fund's transfer agent, the investment adviser,

B-34
<PAGE> 64

trust company or bank trust department, provided that the Fund's transfer agent
receives federal funds for the purchase by the close of business on the next
business day following acceptance of the order. An authorized broker, dealer or
financial intermediary may charge a transaction fee for placing an order to
purchase shares pursuant to this provision or for placing a redemption order
with respect to such shares. The Fund may terminate, or amend the terms of,
offering shares of the Fund at net asset value to such groups at any time.
Authorized dealers will be paid a service fee as described herein under
"Distribution and Service Plans" on purchases made as described in (3) through
(9) above. The Fund may terminate, or amend the terms of, offering shares of the
Fund at net asset value to such groups at any time.

DEFERRED SALES CHARGE ALTERNATIVES

Investors choosing the deferred sales charge alternative may purchase Class A
Shares in an amount of $1 million or more, Class B Shares and Class C Shares.
The public offering price of a CDSC Share is equal to the net asset value per
share without the imposition of a sales charge at the time of purchase. CDSC
Shares are sold without an initial sales charge so that the Fund may invest the
full amount of the investor's purchase payment. The Distributor will compensate
brokers, dealers and financial intermediaries participating in the continuous
public offering of the CDSC Shares out of its own assets, and not out of the
assets of the Fund, at a percentage rate of the dollar value of the CDSC Shares
purchased from the Fund by such brokers, dealers and financial intermediaries,
which percentage rate will be equal to (i) with respect to Class A Shares, 1.00%
on sales to $2 million, plus 0.80% on the next million and 0.50% on the excess
over $3 million; (ii) 4.00% with respect to Class B Shares, and (iii) 1.00% with
respect to Class C Shares. Such compensation will not change the price an
investor will pay for CDSC Shares or the amount that the Fund will receive from
such sale.

CDSC Shares redeemed within a specified period of time generally will be
subject to a contingent deferred sales charge at the rates set forth below. The
amount of the contingent deferred sales charge will vary depending on (i) the
class of CDSC Shares to which such shares belong and (ii) the number of years
from the time of payment for the purchase of the CDSC Shares until the time of
their redemption. The charge will be assessed on an amount equal to the lesser
of the then current market value or the original purchase price of the CDSC
Shares being redeemed. Accordingly, no sales charge will be imposed on increases
in net asset value above the initial purchase price. In addition, no contingent
deferred sales charge will be assessed on CDSC Shares derived from reinvestment
of dividends or capital gains distributions. Solely for purposes of determining
the number of years from the time of any payment for the purchase of CDSC
Shares, all payments during a month will be aggregated and deemed to have been
made on the last day of the month.

Proceeds from the contingent deferred sales charge applicable to a class of
CDSC Shares are paid to the Distributor and are used by the Distributor to
defray its expenses related to providing distribution related services to the
Fund in connection with the sale of shares of such class of CDSC Shares, such as
the payment of compensation to selected dealers and agents for selling such
shares. The combination of the CDSC and the distribution and services fees
facilitates the ability of the Fund to sell such CDSC Shares without a sales
charge being deducted at the time of purchase.

In determining whether a contingent deferred sales charge is applicable to a
redemption of CDSC Shares, it will be assumed that the redemption is made first
of any CDSC Shares acquired pursuant to reinvestment of dividends or
distributions, second of CDSC Shares that have been held for a sufficient period
of time such that the CDSC no longer is applicable to such shares, third of
Class A Shares in the shareholder's Fund account that have converted from Class
B Shares, if any, and fourth of CDSC Shares held longest during the period of
time that a contingent deferred sales charge is applicable to such CDSC Shares.
The charge will not be applied to dollar amounts representing an increase in the
net asset value per share since the time of purchase.

To provide an example, assume an investor purchased 100 Class B Shares (as set
forth below) at $10 per share (at a cost of $1,000) and in the second year after
purchase, the net asset value per share is $12 and, during such time, the
investor has acquired 10 additional Class B Shares upon dividend reinvestment.
If at such time the investor makes his first redemption of 50 shares (proceeds
of $600), 10 shares will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 shares, the charge is applied
only to the original cost of $10 per share and not to the increase in net asset
value of $2 per share.

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<PAGE> 65

Therefore, $400 of the $600 redemption proceeds will be charged at a rate of
3.75% (the applicable rate in the second year after purchase).

CLASS A SHARE PURCHASES OF $1 MILLION OR MORE. No sales charge is payable at
the time of purchase on investments in Class A Shares of $1 million or more,
although for such investments the Fund imposes a CDSC of 1.00% on redemptions
made within one year of the purchase. A commission will be paid to dealers who
initiate and are responsible for purchases of $1 million or more as follows:
1.00% on sales to $2 million, plus 0.80% on the next million and 0.50% on the
excess over $3 million.

CLASS B SHARES. Class B Shares redeemed within six years of purchase generally
will be subject to a CDSC at the rates set forth below, charged as a percentage
of the dollar amount subject thereto:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
------------------- --------------------------------
<S> <C>
First..................................... 4.00%
Second.................................... 3.75%
Third..................................... 3.50%
Fourth.................................... 2.50%
Fifth..................................... 1.50%
Sixth..................................... 1.00%
Seventh and after......................... 0.00%
</TABLE>

The contingent deferred sales charge is waived on redemptions of Class B
Shares made pursuant to the Systematic Withdrawal Plan. See "Shareholder
Services--Systematic Withdrawal Plan."

CLASS C SHARES. Class C Shares redeemed within the first twelve months of
purchase generally will be subject to a contingent deferred sales charge of
1.00% of the dollar amount subject thereto. Class C Shares redeemed thereafter
will not be subject to a CDSC.

For purposes of conversion to Class A Shares, Class B Shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
Shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's account (other
than those in the sub-account) convert to Class A Shares, an equal pro rata
portion of the Class B Shares in the sub-account also will convert to Class A
Shares. The holding period applicable to a Class B Share acquired through the
use of the exchange privilege (discussed below) shall be the holding period
applicable to a Class B Share of such Fund acquired other than through use of
the exchange privilege. For purposes of calculating the holding period
applicable to a Class B Share of the Fund prior to conversion, a Class B Share
of the Fund issued in connection with an exercise of the exchange privilege, or
a series of exchanges, shall be deemed to have been issued on the date on which
the investor's order to purchase the exchanged Class B Share was accepted or, in
the case of a series of exchanges, when the investor's order to purchase the
original Class B Share was accepted.

The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee and transfer agency costs
with respect to such shares does not result in the Fund's dividends or
distributions constituting "preferential dividends" under the Code, and (ii)
that the conversion of such shares does not constitute a taxable event under
federal income tax law. The conversion of Class B Shares to Class A Shares may
be suspended if such an opinion is no longer available. In that event, no
further conversions of Class B Shares would occur, and

B-36
<PAGE> 66

such shares might continue to be subject to the higher aggregate distribution
and service fees for an indefinite period.

WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The contingent deferred sales
charge is waived on redemptions of Class B Shares (i) following the death or
disability (as defined in the Code) of a shareholder, (ii) in connection with
certain distributions from an IRA or other retirement plan, (iii) pursuant to
the Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, and (iv) effected pursuant to the right of the Fund to
liquidate a shareholder's account as described herein under "Redemptions." The
contingent deferred sales charge is also waived on redemptions of Class C Shares
if it relates to the reinvestment of redemption proceeds in shares of the same
class of the Fund within 120 days after redemption. See "Shareholder Services"
and "Redemptions" for further discussion of the waiver provisions.

SHAREHOLDER SERVICES

The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. Unless otherwise described below, each of these
services may be modified or terminated by the Fund at any time.

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

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

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge) on
the record date of such dividend or distribution. Unless the shareholder
instructs otherwise, the reinvestment plan is automatic. This instruction may be
made by telephone by calling (800) 421-5666 (or (800) 421-2833 for the hearing
impaired) or in writing to ACCESS. The investor may, on the initial application
or prior to any declaration, instruct that dividends be paid in cash and capital
gains distributions be reinvested at net asset value, or that both dividends and
capital gains distributions be paid in cash. For further information, see
"Distributions from the Fund."

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

RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP; and pension and profit sharing plans; 401(k) plans; or
Section 403(b)(7) plans in the case of employees of public school systems and
certain non-profit organizations. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
American Capital Trust Company

B-37
<PAGE> 67

serves as custodian under the IRA, 403(b)(7) and Keogh plans. Details regarding
fees, as well as full plan administration for profit sharing, pension and 401(k)
plans, are available from the Distributor.

DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanied by this
Prospectus or by calling (800) 421-5666 (or (800) 421-2883 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same class of any other
Participating Fund, Tax Free Money Fund or Reserve Fund so long as a
pre-existing account for such class of shares exists for such shareholder.

If the qualified pre-existing account does not exist, the shareholder must
establish a new account subject to minimum investment and other requirements of
the fund into which distributions would be invested. Distributions are invested
into the selected fund at its net asset value as of the payable date of the
distribution only if shares of such selected fund have been registered for sale
in the investor's state.

EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged with shares of another
Participating Fund, the Tax Free Money Fund or the Reserve Fund, subject to
certain limitations herein or in such other fund's prospectus. Before effecting
an exchange, shareholders in the Fund should obtain and read a current
prospectus of the fund into which the exchange is to be made. SHAREHOLDERS MAY
ONLY EXCHANGE INTO SUCH OTHER FUNDS AS ARE LEGALLY AVAILABLE FOR SALE IN THEIR
STATE.

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

Class A Shares of Van Kampen American Capital funds that generally impose an
initial sales charge are not subject to any sales charge upon exchange into the
Fund. Class A Shares of Van Kampen American Capital funds that generally do not
impose an initial sales charge are subject to the appropriate sales charge
applicable to Class A Shares of the Fund.

No sales charge is imposed upon the exchange of Class B Shares and Class C
Shares between Van Kampen American Capital funds. Upon redemption from the Van
Kampen American Capital family of funds, however, such shares are subject to the
contingent deferred sales charge schedule of the initial Van Kampen American
Capital fund from which such shares were purchased. The holding period of a
Class B Share or Class C Share for purposes of determining the contingent
deferred sales charge and the conversion privilege with respect thereto is
determined by reference to the date the respective share originally was
purchased from a Van Kampen American Capital fund.

Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is not included in the tax basis of
the exchanged shares, but is carried over and included in the tax basis of the
shares acquired.

A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684 (or (800) 421-2833 for the hearing impaired). A shareholder
automatically has telephone exchange privileges unless otherwise designated in
the application form accompanied by this Prospectus. The exchange will take
place at the relative net asset values of the shares next determined after
receipt of such request with adjustment for any additional sales charge. Any
shares exchanged begin earning dividends on the next business day after the
exchange is affected. Van Kampen American Capital and its subsidiaries,
including ACCESS (collectively, "VKAC"), and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring certain personal
identification information prior to acting upon telephone instructions, tape
recording telephone communications, and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed, a
shareholder agrees that neither VKAC nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. VKAC and the
Fund may be liable for any losses due to unauthorized or fraudulent instructions
if reasonable procedures are not followed. If the exchanging shareholder does
not have an account in the fund whose shares are being acquired, a new account
will be established with the same registration, dividend and capital gains
options (except dividend diversification options) and broker, dealer or
financial

B-38
<PAGE> 68

intermediary of record as the account from which shares are exchanged, unless
otherwise specified by the shareholder. In order to establish a systematic
withdrawal plan for the new account or dividend diversification options for the
new account, an exchanging shareholder must file a specific written request. The
Fund reserves the right to reject any order to acquire its shares through
exchange. In addition, the Fund may restrict or terminate the exchange privilege
at any time on 60 days' notice to its shareholders of any termination or
material amendment.

SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. This plan provides for the orderly use of the entire account,
not only the income but also the capital, if necessary. Each withdrawal
constitutes a redemption of shares on which taxable gain or loss will be
recognized. The plan holder may arrange for monthly, quarterly, semi-annual, or
annual checks in any amount not less than $25. Such a systematic withdrawal plan
may also be maintained by an investor purchasing shares for a retirement plan
established on a form made available by the Fund. See "Shareholder Services --
Retirement Plans."

Holders of Class B Shares and Class C Shares who establish a withdrawal plan
may redeem up to 12% annually of the shareholder's initial account balance
without incurring a contingent deferred sales charge. Initial account balance
means the amount of the shareholder's investment in the Fund at the time the
election to participate in the plan is made. See "Purchase of Shares -- Deferred
Sales Charge Alternatives -- Waiver of Contingent Deferred Sales Charge."

Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with purchases of additional shares ordinarily
will be disadvantageous to the shareholder because of the duplication of sales
charges. The Fund reserves the right to amend or terminate the systematic
withdrawal program on thirty days' notice to its shareholders.

CHECK WRITING PRIVILEGE. Holders of Class A Shares of the Fund for which
certificates have not been issued and which are in a non-escrow status may
appoint ACCESS as agent by completing the Authorization for Redemption by Check
Form and the appropriate section of the application and returning the form and
the application to ACCESS. Once the form is properly completed, signed and
returned to the agent, a supply of checks drawn on State Street Bank and Trust
Company ("State Street Bank") will be sent to such shareholder. These checks may
be made payable by the holder of Class A Shares to the order of any person in
any amount of $100 or more.

When a check is presented to State Street Bank for payment, full and
fractional Class A Shares required to cover the amount of the check are redeemed
from the shareholder's account by ACCESS at the next determined net asset value.
Check writing redemptions represent the sale of Class A Shares. Any gain or loss
realized on the sale of Class A Shares is a taxable event. See "Redemptions."

Checks will not be honored for redemption of Class A Shares held less than 15
calendar days, unless such Class A Shares have been paid for by bank wire. Any
Class A Shares for which there are outstanding certificates may not be redeemed
by check. If the amount of the check is greater than the proceeds of all
uncertificated shares held in the shareholder's Class A Share account, the check
will be returned and the shareholder may be subject to additional charges.
Holders of Class A Shares may not liquidate the entire account by means of a
check. The check writing privilege may be terminated or suspended at any time by
the Fund or State Street Bank. Retirement plans and accounts that are subject to
backup withholding are not eligible for the privilege. A "stop payment" system
is not available on these checks.

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A Shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of Automated Clearing House. In addition, the shareholder must fill out
the appropriate section of the account application.

B-39
<PAGE> 69

The shareholder must also include a voided check or deposit slip from the bank
account into which redemptions are to be deposited together with the completed
application. Once ACCESS has received the application and the voided check or
deposit slip, such shareholder's designated bank account, following any
redemption, will be credited with the proceeds of such redemption. Once enrolled
in the ACH plan, a shareholder may terminate participation at any time by
writing ACCESS.

REDEMPTIONS

Shareholders may redeem for cash some or all of their shares without charge by
the Fund (other than, with respect to CDSC Shares, the applicable contingent
deferred sales charge) at any time by sending a written request in proper form
directly to ACCESS, P. O. Box 418256, Kansas City, Missouri 64141-9256, by
placing the redemption request through an authorized dealer or by calling the
Fund.

WRITTEN REDEMPTION REQUESTS. In the case of redemption requests sent directly
to ACCESS, the redemption request should indicate the number of shares to be
redeemed, the class designation of such shares, the account number and be signed
exactly as the shares are registered. Signatures must conform exactly to the
account registration. If the proceeds of the redemption would exceed $50,000, or
if the proceeds are not to be paid to the record owner at the record address, or
if the record address has changed within the previous 30 days, signature(s) must
be guaranteed by one of the following: a bank or trust company; a broker-dealer;
a credit union; a national securities exchange, registered securities
association or clearing agency; a savings and loan association; or a federal
savings bank. If certificates are held for the shares being redeemed, such
certificates must be endorsed for transfer or accompanied by an endorsed stock
power and sent with the redemption request. In the event the redemption is
requested by a corporation, partnership, trust, fiduciary, executor or
administrator, and the name and title of the individual(s) authorizing such
redemption is not shown in the account registration, a copy of the corporate
resolution or other legal documentation appointing the authorized signer and
certified within the prior 60 days must accompany the redemption request. The
redemption price is the net asset value per share next determined after the
request is received by ACCESS in proper form. Payment for shares redeemed (less
any sales charge, if applicable) will ordinarily be made by check mailed within
three business days after acceptance by ACCESS of the request and any other
necessary documents in proper order. Such payments may be postponed or the right
of redemption suspended as provided by the rules of the SEC. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check until it confirms that the purchase check has cleared, usually
a period of up to 15 days. Any gain or loss realized on the redemption of shares
is a taxable event.

DEALER REDEMPTION REQUESTS. Shareholders may sell shares through their
securities dealer, who will telephone the request to the Distributor. Orders
received from dealers must be at least $500 unless transmitted via the FUNDSERV
network. The redemption price for such shares is the net asset value next
calculated after an order is received by a dealer provided such order is
transmitted to the Distributor prior to the Distributor's close of business on
such day. It is the responsibility of dealers to transmit redemption requests
received by them to the Distributor so they will be received prior to such time.
Any change in the redemption price due to failure of the Distributor to receive
a sell order prior to such time must be settled between the shareholder and
dealer. Shareholders must submit a written redemption request in proper form (as
described above under "Written Redemption Requests") to the dealer within three
business days after calling the dealer with the sell order. Payment for shares
redeemed (less any sales charge, if applicable) will ordinarily be made by check
mailed within three business days to the dealer.

B-40
<PAGE> 70

instructions communicated by telephone. If reasonable procedures are employed, a
shareholder agrees that neither VKAC nor the Fund will be liable for following
instructions which it reasonably believes to be genuine. VKAC and the Fund may
be liable for any losses due to unauthorized or fraudulent instructions if
reasonable procedures are not followed. Telephone redemptions may not be
available if the shareholder cannot reach ACCESS by telephone, whether because
all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the Fund's other redemption procedures previously
described. Requests received by ACCESS prior to 4:00 p.m., New York time, on a
regular business day will be processed at the net asset value per share
determined that day. These privileges are available for all accounts other than
retirement accounts. The telephone redemption privilege is not available for
shares represented by certificates. If the shares to be redeemed have been
recently purchased by check, ACCESS may delay mailing a redemption check or
wiring redemption proceeds until it confirms that the purchase check has
cleared, usually a period of up to 15 days. If an account has multiple owners,
ACCESS may rely on the instructions of any one owner.

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

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

REINSTATEMENT PRIVILEGE. Holders of Class A Shares or Class B Shares who have
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class A Shares of the Fund. Holders of Class C Shares who
have redeemed shares of the Fund may reinstate any portion or all of the net
proceeds of such redemption in Class C Shares of the Fund with credit given for
any contingent deferred sales charge paid upon such redemption. Such
reinstatement is made at the net asset value next determined after the order is
received, which must be within 180 days after the date of the redemption. See
"Purchase of Shares -- Waiver of Contingent Deferred Sales Charge."
Reinstatement at net asset value is also offered to participants

B-41
<PAGE> 71

in those eligible retirement plans held or administered by Van Kampen American
Capital Trust Company for repayment of principal (and interest) on their
borrowings on such plans.

DISTRIBUTIONS FROM THE FUND

The Fund will declare distributions on a daily basis and will pay such
distributions from net investment income and net realized short-term capital
gains on a monthly basis. The monthly distribution is composed of all or a
portion of investment income earned by the Fund plus all or a portion of net
short-term capital gains, if any, realized by the Fund on transactions in
securities and in futures and options, in each case less the Fund's expenses.
The Fund will also distribute annually any remaining short-term capital gains
together with long-term capital gains, if any. Long-term capital gains
distributions consist of the Fund's realized long-term gains on transactions in
securities and in futures and options, net of any realized capital losses, less
any carryover capital losses from previous years.

Distributions with respect to each class of shares will be calculated in the
same manner on the same day and will be in the same amount, except that the
different distribution and service fees and any incremental administrative
expenses relating to each class of shares will be borne exclusively by the
respective class and may cause the distributions relating to the different
classes of shares to differ. Generally, distributions with respect to a class of
shares subject to a higher distribution fee, service fee, or, where applicable,
the conversion feature will be lower than distributions with respect to a class
of shares subject to a lower distribution fee, service fee, or not subject to
the conversion feature.

Investors will be entitled to begin receiving dividends on their shares on the
business day after the Fund's transfer agent receives payments for such shares.
However, shares become entitled to dividends on the day the Fund's transfer
agent receives payment for the shares either through a fed wire or NSCC
settlement. Shares remain entitled to dividends through the day such shares are
processed for payment on redemption.

Distribution checks may be sent to parties other than the shareholder in whose
name the account is registered. Shareholders wishing to utilize this service
should complete the appropriate section of the account application accompanying
this Prospectus or available from Van Kampen American Capital Funds, c/o ACCESS,
P.O. Box 418256, Kansas City, MO 64141-9256. After ACCESS receives this
completed form, distribution checks will be sent to the bank or other person so
designated by such shareholder.

PURCHASE OF ADDITIONAL SHARES WITH DISTRIBUTIONS. The Fund will automatically
credit monthly distributions and any annual net long-term capital gain
distributions to a shareholder's account in additional shares of the Fund valued
at net asset value, without a sales charge. Unless a shareholder instructs
otherwise, the reinvestment plan is automatic. This instruction may be made by
telephone by calling (800) 421-5666 (or (800) 421-2833 for the hearing impaired)
or in writing to ACCESS.

B-42
<PAGE> 72

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders of
Van Kampen American Capital U.S. Government Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital U.S. Government Fund (the "Fund"), including the
portfolio of investments, 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 two years in the period then ended, and the financial highlights for
each of the periods presented. 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
standards. 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
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. 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 U.S. Government 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 two years in the period then ended, and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 30, 1997

B-43
<PAGE> 73

PORTFOLIO OF INVESTMENTS

December 31, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Market
Amount Value
(000) Description Coupon Maturity (000)
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES 87.8%
$ 4,668 FHLMC (Seasoned)............................................ 8.500% 01/01/16 $ 4,862
41,367 FHLMC....................................................... 8.500 02/01/17 42,647
9,784 FHLMC....................................................... 10.000 12/01/08 10,591
1,002 FHLMC (Seasoned)............................................ 10.250 11/01/09 1,074
28,251 FHLMC....................................................... 11.000 07/01/15 31,579
193 FHLMC (Seasoned)............................................ 11.250 09/01/15 217
31,095 FHLMC Gold.................................................. 6.500 12/01/25 29,790
18,865 FHLMC Gold.................................................. 10.000 06/01/19 20,533
32,708 FHLMC REMIC #79C PAC (b).................................... 8.600 10/15/05 33,733
11,089 FHLMC REMIC #89D (b)........................................ 9.000 02/15/21 11,755
11,677 FHLMC REMIC #97G PAC (b).................................... 9.250 11/15/05 12,027
15,061 FHLMC REMIC #106G PAC (b)................................... 8.250 12/15/20 15,835
18,272 FHLMC REMIC #170F PAC (b)................................... 8.000 01/15/21 18,707
112,703 FNMA........................................................ 6.500 12/01/23 to 05/01/26 108,007
27,073 FNMA (Seasoned)............................................. 6.500 04/01/24 to 05/01/24 26,024
393,196 FNMA (b).................................................... 7.000 09/01/22 to 10/01/25 385,835
38,199 FNMA........................................................ 7.500 12/01/22 38,199
53,859 FNMA........................................................ 8.000 06/01/25 54,886
9,766 FNMA........................................................ 8.500 06/01/25 10,133
6,078 FNMA (Seasoned)............................................. 8.500 07/01/19 6,377
9,443 FNMA (Seasoned)............................................. 9.000 05/01/09 10,051
5,764 FNMA........................................................ 9.000 02/01/20 6,081
2,658 FNMA (Seasoned)............................................. 9.500 05/01/20 2,874
8,667 FNMA........................................................ 10.500 08/01/16 9,601
8,783 FNMA........................................................ 11.000 05/01/17 9,903
1,706 FNMA........................................................ 11.500 11/01/09 1,938
48 FNMA (Seasoned)............................................. 12.500 03/01/15 55
2,176 FNMA (Seasoned)............................................. 13.000 06/01/15 2,514
3,521 FNMA REMIC #89-85D PAC (b).................................. 7.600 05/25/18 3,538
11,900 FNMA REMIC #89-94G PAC (b).................................. 7.500 12/25/19 12,010
18,085 FNMA REMIC #90-12G PAC (b).................................. 4.500 02/25/20 15,704
15,000 FNMA REMIC #93-4HB PAC (b).................................. 11.000 01/25/19 16,563
45,310 GNMA........................................................ 7.000 11/15/22 to 05/15/23 44,536
416,343 GNMA........................................................ 7.500 12/15/22 to 11/15/25 418,313
244,535 GNMA........................................................ 8.000 11/15/21 251,030
30,977 GNMA........................................................ 8.000 07/15/22 31,615
55,778 GNMA........................................................ 8.500 12/15/17 to 06/15/23 57,819
197,727 GNMA (Seasoned) (b)......................................... 9.000 05/15/16 211,877
491,504 GNMA (b).................................................... 9.000 08/15/16 to 06/15/18 522,967
57,651 GNMA........................................................ 9.500 08/15/13 62,281
13,685 GNMA........................................................ 10.000 08/15/16 15,011
19,588 GNMA........................................................ 10.500 02/15/17 21,730
2,188 GNMA........................................................ 11.000 11/15/15 2,461
3,493 GNMA........................................................ 11.500 06/15/15 3,972
2,318 GNMA........................................................ 12.000 12/15/15 2,669
2,278 GNMA........................................................ 12.500 12/15/14 2,646
1,496 GNMA........................................................ 13.000 05/15/15 1,747
</TABLE>

See Notes to Financial Statements

B-44

<PAGE> 74

PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

MORTGAGE BACKED SECURITIES (CONTINUED)
$ 855 GNMA GPM.................................................... 12.250% 05/15/15 $ 989
209 GNMA II..................................................... 8.500 05/20/02 216
7,303 GNMA II..................................................... 10.500 02/20/19 8,001
4,420 GNMA II..................................................... 11.000 10/20/13 4,911
1,949 GNMA II..................................................... 11.500 09/20/13 2,189
1,929 GNMA II..................................................... 12.000 12/20/13 2,194
1,135 GNMA II..................................................... 12.500 09/20/13 1,302
----------
2,624,119
----------
U.S. TREASURY SECURITIES 11.6%
15,000 U.S. T-Bonds................................................ 13.125 05/15/01 18,958
5,000 U.S. T-Bonds................................................ 13.750 08/15/04 7,192
55,000 U.S. T-Bonds................................................ 14.000 11/15/11 84,578
43,500 U.S. T-Bonds................................................ 10.375 11/15/12 56,025
40,000 U.S. T-Bonds................................................ 12.000 08/15/13 57,214
27,500 U.S. T-Bonds................................................ 8.000 11/15/21 31,534
61,000 U.S. T-Notes................................................ 6.625 07/31/01 62,008
28,500 U.S. T-Notes................................................ 7.875 11/15/04 31,081
----------
348,590
----------
TOTAL LONG-TERM INVESTMENTS 99.4%
(Cost $2,940,422,951) (a)........................................................................... 2,972,709
REPURCHASE AGREEMENT 0.3%
UBS Securities (U.S. T-Note, $6,673,000 par, 7.875% coupon, due 02/15/21, dated 12/31/96, to be sold
on 01/02/97 at $7,680,559)............................................................................ 7,678
OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%........................................................... 8,793
----------
NET ASSETS 100.0%.................................................................................... $2,989,181
==========
</TABLE>

(a) At December 31, 1996, for federal income tax purposes cost is
$2,940,422,951; the aggregate gross unrealized appreciation is $57,107,017
and the aggregate gross unrealized depreciation is $28,121,190, resulting in
net unrealized appreciation including forward commitments of $28,985,827.

(b) All or a portion of these assets segregated as collateral for forward
commitment transactions.

See Notes to Financial Statements

B-45
<PAGE> 75

STATEMENT OF ASSETS AND LIABILITIES

December 31, 1996
All amounts, except for Maximum Offering Price information,
reported in thousands
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $2,940,423)
(Note 1).................................................. $2,972,709
Short-Term Investments (Note 1)............................. 7,678
Cash........................................................ 1
Receivables:
Securities Sold........................................... 4,574
Interest.................................................. 25,633
Fund Shares Sold.......................................... 393
Other....................................................... 246
----------
Total Assets............................................ 3,011,234
----------
LIABILITIES:
Payables:
Forward Commitments (Note 6).............................. 5,551
Income Distributions...................................... 9,035
Fund Shares Repurchased................................... 3,479
Distributor and Affiliates (Notes 2 and 8)................ 1,675
Investment Advisory Fee (Note 2).......................... 1,309
Accrued Expenses............................................ 912
Deferred Compensation and Retirement Plans (Note 2)......... 92
----------
Total Liabilities....................................... 22,053
----------
NET ASSETS.................................................. $2,989,181
==========
NET ASSETS CONSIST OF:
Capital (Note 3)............................................ $3,256,402
Net Unrealized Appreciation on Securities................... 28,986
Accumulated Undistributed Net Investment Income............. 6,188
Accumulated Net Realized Loss on Securities................. (302,395)
----------
NET ASSETS.................................................. $2,989,181
==========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $2,560,058,763 and 177,061,820 shares of
beneficial interest issued and outstanding)............. $ 14.46
Maximum sales charge (4.75%* of offering price)......... .72
----------
Maximum offering price to public........................ $ 15.18
==========
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $414,772,573 and 28,710,235 shares of
beneficial interest issued and outstanding)............. $ 14.45
==========
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $14,349,774 and 993,209 shares of
beneficial interest issued and outstanding)............. $ 14.45
==========
</TABLE>

* On sales of $100,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

B-46
<PAGE> 76

STATEMENT OF OPERATIONS

For the Year Ended December 31, 1996
All amounts reported in thousands
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 253,377
Fee Income (Note 1)......................................... 10,476
---------
Total Income............................................ 263,853
---------
EXPENSES:
Investment Advisory Fee (Note 2)............................ 16,225
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $4,773, $4,379 and $145, respectively) (Note
8)........................................................ 9,297
Shareholder Services (Note 2)............................... 4,508
Custody..................................................... 850
Legal (Note 2).............................................. 250
Trustees Fees and Expenses (Note 2)......................... 48
Other....................................................... 1,147
---------
Total Operating Expenses................................ 32,325
Interest Expense (Note 1)............................... 692
---------
Total Expenses.......................................... 33,017
Less Expenses Reimbursed (Note 2)....................... 10
---------
Net Expenses............................................ 33,007
---------
NET INVESTMENT INCOME....................................... $ 230,846
=========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments............................................... $ 15,564
Forward Commitments (Note 6).............................. (13,064)
Options................................................... (8,220)
Futures................................................... (52)
---------
Net Realized Loss on Securities............................. (5,772)
---------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................... 137,484
---------
End of the Period:
Investments............................................. 32,286
Forward Commitments (Note 6)............................ (3,300)
---------
28,986
---------
Net Unrealized Depreciation on Securities During the
Period.................................................... (108,498)
---------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.............. $(114,270)
=========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 116,576
=========
</TABLE>

See Notes to Financial Statements

B-47
<PAGE> 77

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended December 31, 1996 and 1995
All amounts reported in thousands
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 230,846 $ 260,233
Net Realized Loss on Securities............................. (5,772) (3,772)
Net Unrealized Appreciation/Depreciation on Securities
During the Period......................................... (108,498) 299,945
--------- ---------
Change in Net Assets from Operations........................ 116,576 556,406
Distributions from Net Investment Income:
Class A Shares............................................ (200,824) (224,640)
Class B Shares............................................ (28,928) (30,640)
Class C Shares............................................ (960) (786)
--------- ---------
Total Distributions..................................... (230,712) (256,066)
--------- ---------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (114,136) 300,340
--------- ---------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................................... 93,780 114,233
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 113,310 125,466
Cost of Shares Repurchased.................................. (546,580) (469,431)
--------- ---------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... (339,490) (229,732)
--------- ---------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... (453,626) 70,608
NET ASSETS:
Beginning of the Period..................................... 3,442,807 3,372,199
--------- ---------
End of the Period (Including accumulated undistributed net
investment income of $6,188 and $4,934, respectively)..... $2,989,181 $3,442,807
========= =========
</TABLE>

See Notes to Financial Statements

B-48
<PAGE> 78

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
Class A Shares 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $ 14.950 $ 13.698 $ 15.662 $ 15.720 $ 16.130
-------- -------- -------- -------- --------
Net Investment Income..................................... 1.069 1.111 1.177 1.286 1.365
Net Realized and Unrealized Gain/Loss on Securities....... (.495) 1.233 (1.965) (.060) (.407)
-------- -------- -------- -------- --------
Total from Investment Operations............................ .574 2.344 (.788) 1.226 .958
Less Distributions from and in Excess of Net Investment
Income.................................................... 1.065 1.092 1.176 1.284 1.368
-------- -------- -------- -------- --------
Net Asset Value, End of the Period.......................... $ 14.459 $ 14.950 $ 13.698 $ 15.662 $ 15.720
======== ======== ======== ======== ========
Total Return (a)............................................ 4.10% 17.61% (5.10%) 7.95% 6.27%
Net Assets at End of the Period (In millions)............... $2,560.1 $2,962.9 $2,924.4 $3,653.6 $3,571.7
Ratio of Operating Expenses to Average Net Assets (b)....... .90% .93% .92% .87% .77%
Ratio of Interest Expense to Average Net Assets (Note 1).... .02% .27% .08% N/A N/A
Ratio of Net Investment Income to Average Net Assets (b).... 7.38% 7.68% 8.13% 8.08% 8.64%
Portfolio Turnover (Excluding Dollar Rolls and Forward
Commitment Transactions).................................. 59% 63% 44% 67% 111%
</TABLE>

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

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than
0.01%.

N/A = Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.

See Notes to Financial Statements

B-49
<PAGE> 79

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
August 24, 1992
Year Ended December 31, (Commencement of
------------------------------------- Distribution) to
Class B Shares 1996 1995 1994 1993 December 31, 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

Net Asset Value, Beginning of the Period.................. $14.948 $13.694 $15.643 $15.709 $15.983
------ ------ ------ ------ ------
Net Investment Income................................... .947 .991 1.055 1.149 .425
Net Realized and Unrealized Gain/Loss on Securities..... (.494) 1.241 (1.964) (.063) (.263)
------ ------ ------ ------ ------
Total from Investment Operations.......................... .453 2.232 (.909) 1.086 .162
Less Distributions from and in Excess of Net Investment
Income.................................................. .954 .978 1.040 1.152 .436
------ ------ ------ ------ ------
Net Asset Value, End of the Period........................ $14.447 $14.948 $13.694 $15.643 $15.709
------ ------ ------ ------ ------
Total Return (a).......................................... 3.24% 16.78% (5.93%) 7.01% 1.64%*
Net Assets at End of the Period (In millions)............. $414.8 $466.7 $436.3 $474.7 $ 103.1
Ratio of Operating Expenses to Average Net Assets (b)..... 1.73% 1.75% 1.74% 1.73% 1.61%
Ratio of Interest Expense to Average Net Assets (Note
1)...................................................... .02% .27% .09% N/A N/A
Ratio of Net Investment Income to Average Net
Assets (b).............................................. 6.55% 6.85% 7.29% 7.00% 6.16%
Portfolio Turnover (Excluding Dollar Rolls and Forward
Commitment Transactions)................................ 59% 63% 44% 67% 111%
</TABLE>

* Non-Annualized

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

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than
0.01%.

N/A = Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.

See Notes to Financial Statements

B-50
<PAGE> 80

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
August 13, 1993
Year Ended December 31, (Commencement of
--------------------------- Distribution) to
Class C Shares 1996 1995 1994 December 31, 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $14.948 $13.693 $15.626 $16.000
------- ------- ------- -------
Net Investment Income..................................... .943 .996 1.063 .433
Net Realized and Unrealized Gain/Loss on Securities....... (.489) 1.237 (1.956) (.364)
------- ------- ------- -------
Total from Investment Operations............................ .454 2.233 (.893) .069
Less Distributions from and in Excess of Net Investment
Income.................................................... .954 .978 1.040 .443
------- ------- ------- ------
Net Asset Value, End of the Period.......................... $14.448 $14.948 $13.693 $15.626
======= ======= ======= ======
Total Return (a)............................................ 3.24% 16.78% (5.86%) .46%*
Net Assets at End of the Period (In millions)............... $ 14.3 $ 13.3 $ 11.4 $ 9.6
Ratio of Operating Expenses to Average Net Assets (b)....... 1.72% 1.75% 1.74% 1.71%
Ratio of Interest Expense to Average Net Assets (Note 1).... .02% .27% .10% N/A
Ratio of Net Investment Income to Average Net Assets (b).... 6.55% 6.86% 7.29% 6.42%
Portfolio Turnover (Excluding Dollar Rolls and Forward
Commitment Transactions).................................. 59% 63% 44% 67%
</TABLE>

* Non-Annualized

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

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than
0.01%.

N/A = Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.

See Notes to Financial Statements

B-51
<PAGE> 81

NOTES TO FINANCIAL STATEMENTS

December 31, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital U.S. Government Fund (the "Fund") is organized as a
series of Van Kampen American Capital U.S. Government Trust (the "Trust"), a
Delaware business trust and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to provide a high level of current income, with
liquidity and safety of principal. The Fund commenced investment operations on
May 31, 1984. The distribution of the Fund's Class B and Class C shares
commenced on August 24, 1992 and August 13, 1993, respectively. On May 2, 1995,
all Class D shareholders redeemed their shares and the class was eliminated. The
Fund will no longer offer Class D shares.

The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

A. SECURITY VALUATION--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics 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 invests in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Investment Advisory, 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 physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.

The Fund trades certain securities under the terms of forward
commitments, whereby the settlement for payment and delivery occurs at a
specified future date. Forward commitments are privately negotiated transactions
between the Fund and dealers. Upon executing a forward commitment and during the
period of obligation, the Fund maintains collateral of cash or securities in a
segregated account with its custodian in an amount sufficient to relieve the
obligation. If the intent of the Fund is to accept delivery of a security traded
under a forward purchase commitment, the commitment is recorded as a long-term
purchase. For forward purchase commitments for which security settlement is not
intended by the Fund, changes in the value of the commitment are recognized by
marking the commitment to market on a daily basis. During the term of the
commitment, the Fund may resell the forward commitment and enter into a new
forward commitment, the effect of which is to extend the settlement date. In
connection with this extension, the Fund receives a fee, which is included in
fee income on the date of the extension. In addition, the Fund may occasionally
close such forward commitments prior to delivery.

The Fund may also invest in reverse repurchase agreements. In a reverse
repurchase agreement, the Fund sells securities and agrees to repurchase them at
a mutually agreed upon date and price. During the reverse

B-52
<PAGE> 82

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

repurchase agreement period, the Fund continues to receive principal and
interest payments on these securities but pays interest to the counter-party
based upon a short-term interest rate. The average daily balance of reverse
repurchase agreements during the period was approximately $14.0 million with an
average interest rate of 4.94%. At December 31, 1996, there were no reverse
repurchase agreements outstanding.

C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Original
issue discount is amortized over the expected life of each applicable security.

D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of loss and offset such losses against any future realized capital gains.
At December 31, 1996, the Fund had an accumulated capital loss carryforward for
tax purposes of $302,395,602 which will expire between December 31, 1997 and
December 31, 2004. Of this amount, $50,594,574 will expire on December 31, 1997.

E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included as ordinary income for
tax purposes.

Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 1996 fiscal year have been identified and appropriately reclassified.
Permanent book and tax differences relating to the recognition of certain
expenses which are not deductible for tax purposes totaling $1,119,607 have been
reclassified from accumulated undistributed net investment income to capital.
Additionally during the year, $157,069,719 of the Fund's capital loss
carryforward expired, resulting in a permanent book and tax basis difference
which was reclassified from accumulated net realized loss on securities to Class
A share capital.

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

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ------------------------------------------------------------------------
<S> <C>
First $500 million.......................................... .550 of 1%
Next $500 million........................................... .525 of 1%
Next $2 billion............................................. .500 of 1%
Next $2 billion............................................. .475 of 1%
Next $2 billion............................................. .450 of 1%
Next $2 billion............................................. .425 of 1%
Thereafter.................................................. .400 of 1%
</TABLE>

During the year ended December 31, 1996, the Adviser reimbursed the Fund for
certain trustees' compensation in connection with the July, 1995 increase in the
number of trustees of the Fund.

B-53
<PAGE> 83

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

For the year ended December 31, 1996, the Fund recognized expenses of
approximately $180,700 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting,
cash management and legal services to the Fund.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended
December 31, 1996, the Fund recognized expenses of approximately $3,400,800,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.

Additionally, for the year ended December 31, 1996, the Fund reimbursed VKAC
approximately $716,100 related to the direct cost of consolidating the VKAC
open-end fund complex. Payment was contingent upon the realization by the Fund
of cost efficiencies in certain expense categories resulting from the
consolidation.

Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.

The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized. At December 31, 1996, capital
aggregated $2,778,287,184, $462,643,924 and $15,470,402 for Class A, B and C,
respectively. For the year ended December 31, 1996, transactions were as
follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................................... 3,306,701 $ 47,964,099
Class B................................................... 2,702,553 39,213,360
Class C................................................... 454,440 6,602,052
---------- ------------
Total Sales................................................. 6,463,694 $ 93,779,511
========== ============
Dividend Reinvestment:
Class A................................................... 6,852,774 $ 98,957,199
Class B................................................... 956,499 13,802,832
Class C................................................... 38,150 550,108
---------- ------------
Total Dividend Reinvestment................................. 7,847,423 $ 113,310,139
========== ============
Repurchases:
Class A................................................... (31,284,344) $(451,949,019)
Class B................................................... (6,167,203) (89,031,089)
Class C................................................... (387,463) (5,599,852)
---------- ------------
Total Repurchases........................................... (37,839,010) $(546,579,960)
========== ============
</TABLE>

B-54
<PAGE> 84

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

At December 31, 1995, capital aggregated $3,241,403,229, $498,757,767 and
$13,921,150 for Classes A, B and C, respectively. For the year ended December
31, 1995, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................................... 4,450,487 $ 64,561,951
Class B................................................... 3,196,962 46,404,360
Class C................................................... 223,253 3,266,997
Class D................................................... -0- -0-
---------- ------------
Total Sales................................................. 7,870,702 $ 114,233,308
========== ============
Dividend Reinvestment:
Class A................................................... 7,595,317 $ 110,358,313
Class B................................................... 1,006,560 14,629,660
Class C................................................... 32,914 478,345
Class D................................................... -0- 4
---------- ------------
Total Dividend Reinvestment................................. 8,634,791 $ 125,466,322
========== ============
Repurchases:
Class A................................................... (27,345,845) $(396,421,409)
Class B................................................... (4,846,397) (70,074,798)
Class C................................................... (202,889) (2,933,194)
Class D................................................... (114) (1,717)
---------- ------------
Total Repurchases........................................... (32,395,245) $(469,431,118)
========== ============
</TABLE>

Class B and C shares are offered without a front end sales charge, but
are subject to a contingent deferred sales charge (CDSC). The CDSC will be
imposed on most redemptions made within six years of the purchase for Class B
and one year of the purchase for Class C as detailed in the following schedule.
The Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -------------------------------------------------------------------------------------
<S> <C> <C>
First....................................................... 4.00% 1.00%
Second...................................................... 3.75% None
Third....................................................... 3.50% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.00% None
Sixth....................................................... 1.00% None
Seventh and Thereafter...................................... None None
</TABLE>

B-55
<PAGE> 85

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

For the year ended December 31, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$158,100 and CDSC on redeemed shares of approximately $1,520,000. Sales charges
do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales on investments,
including principal paydowns, excluding forward commitment transactions and
short-term investments, for the year ended December 31, 1996, were
$2,177,562,489 and $2,653,639,913, respectively.

5. DERIVATIVE FINANCIAL INSTRUMENTS

A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.

The Fund has a variety of reasons to use derivative instruments, such as
to attempt to protect the Fund against possible changes in the market value of
its portfolio and to manage the portfolio's effective yield, maturity and
duration. All of the Fund's portfolio holdings, including derivative
instruments, are marked to market each day with the change in value reflected in
the unrealized appreciation/depreciation on securities. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising an
option contract or taking delivery of a security underlying a futures contract
or forward commitment. In these instances the recognition of gain or loss is
postponed until the disposal of the security underlying the option or futures
contract.

Summarized below are the specific types of derivative financial
instruments used by the Fund.

A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period.

Transactions in options for the year ended December 31, 1996, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1995............................ 2,000 $(1,926,233)
Options Written and Purchased (Net)......................... 51,880 (34,556,383)
Options Terminated in Closing Transactions (Net)............ (43,880) 33,802,159
Options Expired (Net)....................................... (10,000) 2,680,457
-------- ----------
Outstanding at December 31, 1996............................ 0 $ 0
======== ==========
</TABLE>

B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures on U.S. Treasury Bonds and
typically closes the contract prior to the delivery date.

Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin).

B-56
<PAGE> 86

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

Transactions in futures contracts for the year ended December 31, 1996,
were as follows:

<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1995............................ -0-
Futures Opened.............................................. 2,667
Futures Closed.............................................. (2,667)
-----
Outstanding at December 31, 1996............................ -0-
=====
</TABLE>

6. FORWARD COMMITMENTS

The Fund trades certain securities under the terms of forward commitments, as
described in Note 1. The following forward purchase commitments were outstanding
as of December 31, 1996. The change in value of these items is reflected as a
component of unrealized appreciation/depreciation on forwards commitments. The
Fund has segregated assets for these open commitments totaling $893.3 million.

<TABLE>
<CAPTION>
UNREALIZED
PAR AMOUNT APPRECIATION
(000) DESCRIPTION EXPIRATION PURCHASE PRICE CURRENT VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
$100,000 FHLMC Gold, 8.00% 05/13/97 $101,062,500 $102,001,000 $ 938,500
coupon
250,000 FNMA, 7.50% coupon 02/18/97 255,039,063 253,595,000 (1,444,063)
100,000 FNMA, 8.00% coupon 02/13/97 102,718,750 101,906,000 (812,750)
200,000 FNMA, 8.50% coupon 02/13/97 207,406,250 207,500,000 93,750
100,000 GNMA, 8.00% coupon 02/19/97 103,031,250 102,062,000 (969,250)
100,000 GNMA, 7.50% coupon 02/19/97 101,343,750 100,237,000 (1,106,750)
----------- ----------- ----------
$870,601,563 $867,301,000 $(3,300,563)
=========== =========== ==========
</TABLE>

At December 31, 1996, the Fund had realized losses on closed but
unsettled forward commitments of $2,250,000.

7. MORTGAGE BACKED SECURITIES

A Mortgage Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participations in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies--Government National Mortgage Association (GNMA), Federal
National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC).

A Collateralized Mortgage Obligation (CMO) is a bond which is
collateralized by a pool of MBS's. The Fund also invests in REMIC's (Real Estate
Mortgage Investment Conduit) which are simply another form of CMO. These MBS
pools are divided into classes or tranches with each class having its own
characteristics. For instance, a PAC (Planned Amortization Class) is a specific
class of mortgages which over its life will generally have the most stable cash
flows and the lowest prepayment risk. A GPM (Graduated Payment Mortgage) is a
negative amortization mortgage where the payment amount gradually increases over
the life of the mortgage. The early

B-57
<PAGE> 87

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

payment amounts are not sufficient to cover the interest due and, therefore, the
unpaid interest is added to the principal, thus increasing the borrower's
mortgage balance.

These MBS pools are divided into classes or tranches with each class having its
own characteristics. For instance, a PAC (Planned Amortization Class) is a
specific class of mortgages which over its life will generally have the most
stable cash flows and the lowest prepayment risk. A GPM (Graduated Payment
Mortgage) is a negative amortization mortgage where the payment amount gradually
increases over the life of the mortgage. The early payment amounts are not
sufficient to cover the interest due and, therefore, the unpaid interest is
added to the principal, thus increasing the borrower's mortgage balance.

8. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.

Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended December 31, 1996, are payments to VKAC of approximately
$3,370,900.

B-58
<PAGE> 88

PART C: OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(A) FINANCIAL STATEMENTS:

<TABLE>
<S> <C>
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
</TABLE>

(B) EXHIBITS:

<TABLE>
<S> <C> <C>
(1)(a) Agreement and Declaration of Trust(28)
(b) Amended and Restated Certificate of Designation(+)
(2) By-Laws(28)
(4) Specimen of Share Certificate
(i) Class A Shares(28)
(ii) Class B Shares(28)
(iii) Class C Shares(28)
(5) Investment Advisory Agreement(+)
(6)(a) Distribution and Service Agreement(+)
(b) Form of Dealer Agreement(27)
(c) Form of Broker Agreement(27)
(d) Form of Bank Agreement(27)
(8)(a) Custodian Agreement(8)
(b) Transfer Agency and Service Agreement(28)
(9)(a) Fund Accounting Agreement(+)
(b) Legal Services Agreement(+)
(10) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(+)
(11) Consent of KPMG Peat Marwick LLP(+)
(13) Letter of understand relating to initial capital*
(14)(a) Copy of Proposed Model Simplified Employee Pension Plan(1)
(b) Copy of Proposed Model Individual Retirement Account Plan(2)
(i) Copy of Proposed Profit-Sharing Adoption Agreement for
Prototype Paired Defined Contribution Plan(3)
(ii) Copy of Proposed Money Purchase Pension Adoption Agreement
for Prototype Paired Defined Contribution Plan(3)
(15)(a) Plan of Distribution Pursuant to Rule 12b-1(28)
(b) Form of Shareholder Assistance Agreement(27)
(c) Form of Administrative Services Agreement(27)
(d) Service Plan(28)
(16) Computation of Performance Quotations(+)
(17)(a) Investment Companies for which Van Kampen American Capital
Distributors, Inc. acts as principal underwriter or depositor(+)
(b) List of Officers and Directors of Van Kampen American Capital
Distributors, Inc.(+)
(18) Amended Multi-Class Plan (+)
(24) Power of Attorney(+)
(27) Financial Data Schedules(+)
</TABLE>

- ---------------
* Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement, File No. 2-89190, filed on April 6,
1984.

(1) Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement, File No. 2-89190, filed on June 19,
1984.

C-1
<PAGE> 89

(2) Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement, File No. 2-89190, filed on August 20,
1984.

(3) Incorporated herein by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File No. 2-89190, filed on January 25,
1985.

(8) Incorporated herein by reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement, File No. 2-89190, filed February 5,
1988.

(27) Incorporated herein by reference to Post-Effective Amendment No. 27 to
Registrant's Registration Statement, File No. 2-89190, filed August 2,
1995.

(28) Incorporated herein by reference to Post-Effective Amendment No. 28 to
Registrant's Registration Statement, File No. 2-89190, filed April 24,
1996.

+ Filed herewith.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:

To the best knowledge of Registrant, no person is controlled by or under
common control with the Registrant.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES:

AS OF APRIL 4, 1997

<TABLE>
<CAPTION>
(1) (2)
NUMBER OF RECORD HOLDERS
-----------------------------
TITLE OF CLASS CLASS A CLASS B CLASS C
-------------- ------- ------- -------
<S> <C> <C> <C>
Shares of Beneficial Interest,
$0.01 par value..................... 105,196 16,528 613
</TABLE>

ITEM 27. INDEMNIFICATION:

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

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

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

C-2
<PAGE> 90

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

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

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:

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

ITEM 29. PRINCIPAL UNDERWRITERS

(a) The sole principal underwriter is Van Kampen American Capital
Distributors, Inc., which acts as a principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit (17)(a) hereto.

(b) Van Kampen American Capital Distributors, Inc., which is an affiliated
person of an affiliated person of the Fund. The name, principal business address
and positions and offices with Van Kampen American Capital Distributors, Inc. of
each of the officers thereof are set forth in Exhibit 17(b). Except as disclosed
under the heading "Trustees and Officers" in Part B of this Registration
Statement, none of such persons has any position or office with Registrant.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS:

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

C-3
<PAGE> 91

ITEM 31. MANAGEMENT SERVICES:

Not applicable.

ITEM 32. UNDERTAKINGS:

(a) Not applicable.

(b) Not applicable.

(c) The Registrant provides the information required by Item 5A in the
respective annual reports to shareholders of Registrant's series and hereby
undertakes to furnish without charge to each person to whom a prospectus is
delivered for a particular series with a copy of the latest annual report to
shareholders of such series.

C-4
<PAGE> 92

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN AMERICAN CAPITAL U.S.
GOVERNMENT FUND, certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Oakbrook Terrace and the State of Illinois, on the
30th day of April, 1997.

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND

By: /s/ RONALD A. NYBERG

-----------------------------------------------
Ronald A. Nyberg, Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed on April 30, 1997 by the
following persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S> <C>

Principal Executive Officer:

/s/ DENNIS J. MCDONNELL* President and Trustee
- -----------------------------------------------------------
Dennis J. McDonnell

Principal Financial Officer:

/s/ EDWARD C. WOOD III Vice President and Chief Financial
- ----------------------------------------------------------- Officer
Edward C. Wood III

Trustees:

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

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

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

/s/ JACK E. NELSON* Trustee
- -----------------------------------------------------------
Jack E. Nelson
Trustee
- -----------------------------------------------------------
Jerome L. Robinson

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

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

/s/ WAYNE W. WHALEN* Trustee
- -----------------------------------------------------------
Wayne W. Whalen
- ------------
* Signed by Ronald A. Nyberg pursuant to a power of attorney.

RONALD A. NYBERG April 30, 1997
- -----------------------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>

C-5
<PAGE> 93

VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST

SCHEDULE OF EXHIBITS TO POST-EFFECTIVE

AMENDMENT 29 TO FORM N-1A SUBMITTED TO THE

SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
(1)(b) Amended and Restated Certificate of Designation
(5) Investment Advisory Agreement
(6)(a) Distribution and Service Agreement
(9)(a) Fund Accounting Agreement
(b) Legal Services Agreement
(10) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)
(11) Consent of KPMG Peat Marwick LLP
(16) Computation of Performance Quotations
(17)(a) Investment Companies for which Van Kampen American Capital
Distributors, Inc. acts as principal underwriter or
depositor
(b) List of Officers and Directors of Van Kampen American
Capital Distributors, Inc.
(18) Amended Multi-Class Plan
(24) Power of Attorney
(27) Financial Data Schedules
</TABLE>

<PAGE> 1
EXHIBIT (1)(b)

VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST

Amended and Restated
Certificate of Designation
of

Van Kampen American Capital U.S. Government Fund

The undersigned, being the Secretary of Van Kampen American Capital U.S.
Government Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's Agreement and Declaration of Trust ("Declaration"), and by the
affirmative vote of a Majority of the Trustees does hereby establish and
designate as a Series of the Trust the Van Kampen American Capital U.S.
Government Fund (the "Fund") with following the rights, preferences and
characteristics:

1. Shares. The beneficial interest in the Fund shall be divided into Shares
having a nominal or par value of $0.01 per Share, of which an unlimited number
may be issued, which Shares shall represent interests only in the Fund. The
Trustees shall have the authority from time to time to authorize separate
Series of Shares for the Trust as they deem necessary or desirable.

2. Classes of Shares. The Shares of the Fund shall be initially divided into
three classes--Class A, Class B and Class C. The Trustees shall have the
authority from time to time to authorize additional Classes of Shares of the
Fund

3. Sales Charges. Each Class A, Class B and Class C Share shall be subject to
such sales charges, if any, as may be established from time to time by the
Trustees in accordance with the Investment Company Act of 1940 (the "1940 Act")
and applicable rules and regulations of the National Association of Securities
Dealers, Inc., all as set forth in the Fund's prospectus.

4. Conversion. Each Class B Share and certain Class C Shares of the Fund
shall be converted automatically, and without any action or choice on the part
of the Shareholder into Class A Shares of the Fund at such times and
pursuant to such terms, conditions and restrictions as may be established by
the Trustees and as set forth in the Fund's Prospectus.

5. Allocation of Expenses Among Classes. Expenses related solely to a
particular Class (including, without limitation, distribution expenses under an
administrative or service agreement, plan or other arrangement, however
designated) shall be borne by that Class and shall be appropriately reflected
(in a manner determined by the Trustees) in the net asset value, dividends,
distribution and liquidation rights of the Shares of that Class.

6. Special Meetings. A special meeting of Shareholders of a Class of the Fund
may be called with respect to the Rule 12b-1 distribution plan applicable to
such Class or with respect to any other proper purpose affecting only holders
of shares of such Class at any time by a Majority of the Trustees.

7. Other Rights Governed by Declaration. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust or with respect to any Class of Shares set forth in the
Declaration shall apply to Shares of the Fund unless otherwise specified in
this Certificate of Designation, in which case this Certificate of Designation
shall govern.

8. Amendments, etc. Subject to the provisions and limitations of Section 9.5
of the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
any officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Fund outstanding and entitled to
vote or, if such amendment affects the Shares of one or more but not all of the
Classes of the Fund, the holders of a majority of all the Shares of the
affected Classes outstanding and entitled to vote.

9. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

December 12, 1996

/s/ Ronald A. Nyberg
--------------------------
Ronald A. Nyberg, Secretary

<PAGE> 1
EXHIBIT (5)

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT dated as of October 31, 1996, by and
between VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT FUND (the "Fund"), a series
of Van Kampen American Capital U.S. GOVERNMENT TRUST, Delaware business trust
(the "Trust"), and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. (the
"Adviser"), a Delaware corporation.

1. (a) Retention of Adviser by Fund. The Fund hereby employs the Adviser
to act as the investment adviser for and to manage the investment and
reinvestment of the assets of the Fund in accordance with the Fund's investment
objective and policies and limitations, and to administer its affairs to the
extent requested by, and subject to the review and supervision of, the Board of
Trustees of the Fund for the period and upon the terms herein set forth. The
investment of funds shall be subject to all applicable restrictions of
applicable law and of the Declaration of Trust and By-Laws of the Trust, and
resolutions of the Board of Trustees of the Fund as may from time to time be in
force and delivered or made available to the Adviser.

(b) Adviser's Acceptance of Employment. The Adviser accepts such
employment and agrees during such period to render such services, to supply
investment research and portfolio management (including without limitation the
selection of securities for the Fund to purchase, hold or sell and the
selection of brokers through whom the Fund's portfolio transactions are
executed, in accordance with the policies adopted by the Fund and its Board of
Trustees), to administer the business affairs of the Fund, to furnish offices
and necessary facilities and equipment to the Fund, to provide administrative
services for the Fund, to render periodic reports to the Board of Trustees of
the Fund, and to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions.

(c) Independent Contractor. The Adviser shall be deemed to be an
independent contractor under this Agreement and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the
Fund in any way or otherwise be deemed as agent of the Fund.

(d) Non-Exclusive Agreement. The services of the Adviser to the Fund
under this Agreement are not to be deemed exclusive, and the Adviser shall be
free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.

2. (a) Fee. For the services and facilities described in Section 1, the
Fund will accrue daily and pay to the Adviser at the end of each calendar month
an investment management fee equal to a percentage of the average daily net
assets of the Fund as follows:

AVERAGE DAILY
NET ASSETS
(millions) % PER ANNUM
------------- -----------
<S> <C>
First $500 0.550%
Next $500 0.525%
Next $2000 0.500%
Next $2000 0.475%
Next $2000 0.450%
Next $2000 0.425%
Over $2000 0.400%
Thereafter
</TABLE>

(b) Expense Limitation. The Adviser's compensation for any fiscal year
of the Fund shall be reduced by the amount, if any, by which the Fund's expense
for such fiscal year exceeds the most restrictive applicable expense
jurisdiction in which the Fund's shares are qualified for offer and sale, as
such limitations set forth in the most recent notice thereof furnished by the
Adviser to the Fund. For purposes of this paragraph there shall be excluded
from computation of the Fund's expenses any amount borne directly or indirectly
by the Fund which is permitted to be excluded from the computation of such
limitation by such statute or regulatory authority. If for any month expenses
of the Fund properly included in such calculation exceed 1/12 of the amount
permitted annually by the most restrictive applicable expense limitation, the
payment to the Adviser for that month shall be reduced, and, if necessary, the
Adviser shall make a refund payment to the Fund, so that the total net expense
for the month will not exceed 1/12 of such amount. As of the end of the Fund's
fiscal year, however, the computations and payments shall be readjusted so that
the aggregate compensation payable to the Adviser for the year is equal to the
fee set forth in subsection (a) of this Section 2, diminished to the extent
necessary so that the expenses for the year do not exceed those permitted by
the applicable expense limitation.

(c) Determination of Net Asset Value. The net asset value of the Fund
shall be calculated as of the close of the New York Stock Exchange on each day
the Exchange is open for trading or such other time or times as the trustees
may determine in accordance with the
<PAGE> 2
provisions of applicable law and of the Declaration of Trust and By-Laws
of the Trust, and resolutions of the Board of Trustees of the Fund as from time
to time in force. For the purpose of the foregoing computations, on each such
day when net asset value is not calculated, the net asset value of a share of
beneficial interest of the Fund shall be deemed to be the net asset value of
such share as of the close of business of the last day on which such
calculation was made.

(d) Proration. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Adviser's fee on the basis of the number of days that the Agreement is in
effect during such month and year, respectively.

3. Expenses. In addition to the fee of the Adviser, the Fund shall assume
and pay any expenses for services rendered by a custodian for the safekeeping
of the Fund's securities or other property, for keeping its books of account,
for any other charges of the custodian and for calculating the net asset value
of the Fund as provided above. The Adviser shall not be required to pay, and
the Fund shall assume and pay, the charges and expenses of its operations,
including compensation of the trustees (other than those who are interested
persons of the Adviser and other than those who are interested persons of the
distributor of the Fund but not of the Adviser, if the distributor has agreed
to pay such compensation), charges and expenses of independent accountants, of
legal counsel and of any transfer or dividend disbursing agent, costs of
acquiring and disposing of portfolio securities, cost of listing shares of the
New York Stock Exchange or other exchange interest (if any) on obligations
incurred by the Fund, costs of share certificates, membership dues in the
Investment Company Institute or any similar organization, costs of reports and
notices to shareholders, costs of registering shares of the Fund under the
federal securities laws, miscellaneous expenses and all taxes and fees to
federal, state or other governmental agencies on account of the registration of
securities issued by the Fund, filing of corporate documents or otherwise. The
Fund shall not pay or incur any obligation for any management or administrative
expenses for which the Fund intends to seek reimbursement from the Adviser
without first obtaining the written approval of the Adviser. The Adviser shall
arrange, if desired by the Fund, for officers or employees of the Adviser to
serve, without compensation from the Fund, as trustees, officers or agents of
the Fund if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law.

4. Interested Persons. Subject to applicable statutes and regulations, it
is understood that trustees, officers, shareholders and agents of the Fund are
or may be interested in the Adviser as directors, officers, shareholders,
agents or otherwise and that the directors, officers, shareholders and agents
of the Adviser may be interest in the Fund as trustees, officers, shareholders,
agents or otherwise.

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

6. (a) Term. This Agreement shall become effective on the date hereof
and shall remain in full force until the second anniversary of the date hereof
unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter, but only as long as such
continuance is specifically approved at least annually in the manner required
by the Investment Company Act of 1940, as amended.

(b) Termination. This Agreement shall automatically terminate in the
event of its assignment. This Agreement may be terminated at any time without
the payment of any penalty by the Fund or by the Adviser on sixty (60) days
written notice to the other party. The Fund may effect termination by action
of the Board of Trustees or by vote of a majority of the outstanding shares of
stock of the Fund, accompanied by appropriate notice. This Agreement may be
terminated at any time without the payment of any penalty and without advance
notice by the Board of Trustees or by vote of a majority of the outstanding
shares of the Fund in the event that it shall have been established by a court
of competent jurisdiction that the Adviser or any officer or director of the
Adviser has taken any action which results in a breach of the covenants of the
Adviser set forth herein.

(c) Payment upon Termination. Termination of this Agreement shall not
affect the right of the Adviser to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.

7. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall
not thereby affected.

8. Notices. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.

9. Disclaimer. The Adviser acknowledges and agrees that, as provided by
Section 8.1 of the Declaration of Trust of the Trust, (i) this Agreement has
been executed by officers of the

<PAGE> 3
Trust in their capacity as officers, and not individually, and (ii) the
shareholders, trustees, officers, employees and other agents of the Trust and
the Fund shall not personally be bound by or liable hereunder, nor shall resort
be had to their private property for the satisfaction of any obligation or
claim hereunder and that any such resort may only be had upon the assets and
property of the Fund.

10. Governing Law. All questions concerning the validity, meaning and
effect of this Agreement shall be determined in accordance with the laws
(without giving effect to the conflict-of-law principles thereof) of the State
of Delaware applicable to contracts made and to be performed in that state.

<PAGE> 4
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year first above written.

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.

By: /S/ Dennis J. McDonnell
-------------------------------
Dennis J. McDonnell, President

VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT FUND

By: /S/ Dennis J. McDonnell
-------------------------------
Dennis J. McDonnell, President

<PAGE> 1
EXHIBIT (6)(a)

DISTRIBUTION AND SERVICE AGREEMENT

THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of October 31, 1996 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST,
a Delaware business trust (the "Trust"), on behalf of its series, VAN KAMPEN
AMERICAN CAPITAL U.S. GOVERNMENT FUND (the "Fund"), and VAN KAMPEN AMERICAN
CAPITAL DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").

1. Appointment of Distributor. The Fund appoints the Distributor as a
principal underwriter and exclusive distributor of each class of its shares of
beneficial interest (the "Shares") offered for sale from time to time pursuant
to the then current prospectus of the Fund, subject to different combinations
of front-end sales charges, distribution fees, service fees and contingent
deferred sales charges. Classes of shares, if any, subject to a front-end
sales charge and a distribution and/or service fee are referred to herein as
"FESC Classes" and the Shares of such classes are referred to herein as "FESC
Shares." Classes of shares, if any, subject to a contingent-deferred sales
charge and a distribution and/or a service fee are referred to herein as "CDSC
Classes" and Shares of such classes are referred to herein as "CDSC Shares."
Classes of shares, if any, subject to a front-end sales charge, a
contingent-deferred sales charge and a distribution and/or service fee are
referred to herein as "Combination Classes" and Shares of such class are
referred to herein as "Combination Shares." The Fund reserves the right to
refuse at any time or times to sell Shares hereunder for any reason deemed
adequate by the Board of Trustees of the Fund.

The Distributor will use its best efforts to sell, through its
organization and through other dealers and agents, the Shares which the
Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares.

The Distributor agrees that it will not take any long or short positions
in the Shares, except for long positions in those Shares purchased by the
Distributor in accordance with any systematic sales plan described in the then
current Prospectus of the Fund and except as permitted by Section 2 hereof, and
that so far as it can control the situation, it will prevent any of its
trustees, officers or shareholders from taking any long or short positions in
the Shares, except for legitimate investment purposes.

2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth. Such
exclusive right hereby granted shall not apply to Shares issued or transferred
or sold at net asset value: (a) in connection with the merger or consolidation
of the Fund with any other investment company or the acquisition by the Fund of
all or substantially all of the assets of or the outstanding Shares of any
investment company; (b) in connection with a pro rata distribution directly to
the holders of Fund Shares in the nature of a stock dividend or stock split or
in connection with any other recapitalization approved by the Board of
Trustees; (c) upon the exercise of purchase or subscription rights granted to
the holders of Shares on a pro rata basis; (d) in connection with the automatic
reinvestment of dividends and distributions from the Fund; or (e) in connection
with the issue and sale of Shares to trustees, officers and employees of the
Fund; to directors, officers and employees of the investment adviser of the
Fund or any principal underwriter (including the Distributor) of the Fund; to
retirees of the Distributor that purchased shares of any mutual fund
distributed by the Distributor prior to retirement; to directors, officers and
employees of Van Kampen American Capital, Inc. (formerly The Van Kampen Merritt
Companies, Inc.) (the parent of the Distributor), VK/AC Holding, Inc. (formerly
VKM Holdings, Inc.)(the parent of The Van Kampen Merritt Companies, Inc.) and
to the subsidiaries of VK/AC Holding, Inc.; and to any trust, pension,
profit-sharing or other benefit plan for any of the aforesaid persons as
permitted by Rule 22d-1 under the Investment Company Act of 1940 (the "1940
Act").

The Distributor shall have the right to buy from the Fund the Shares
needed, but not more than the Shares needed (except for reasonable allowances
for clerical errors, delays and errors of

1
<PAGE> 2

transmission and cancellation of orders) to fill unconditional orders
for Shares received by the Distributor from dealers, agents and investors
during each period when particular net asset values and public offering prices
are in effect as provided in Section 3 hereof; and the price which the
Distributor shall pay for the Shares so purchased shall be the respective net
asset value used in determining the public offering price on which such orders
were based. The Distributor shall notify the Fund at the end of each such
period, or as soon thereafter on that business day as the orders received in
such period have been compiled, of the number of Shares of each class that the
Distributor elects to purchase hereunder.

3. Public Offering Price. The public offering price per Share shall be
determined in accordance with the then current Prospectus of the Fund. In no
event shall the public offering price exceed the net asset value per Share,
plus, with respect to the FESC Shares, a front-end sales charge not in excess
of the applicable maximum sales charge permitted under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., as in effect
from time to time. The net asset value per share for each class of Shares,
respectively, shall be determined in the manner provided in the Declaration of
Trust and By-Laws of the Trust as then amended, the Certificate of Designation
with respect to the Fund, as amended, and in accordance with the then current
Prospectus of the Fund consistent with the terms and conditions of the
exemptive order with respect to the Fund (Release No. IC-19600) issued by the
Securities and Exchange Commission on July 28, 1993, as it may be amended from
time to time or succeeded by other exemptive orders or rules promulgated by the
Securities and Exchange Commission under the 1940 Act. The Fund will cause
immediate notice to be given to the Distributor of each change in net asset
value as soon as it is determined. Discounts to dealers purchasing FESC Shares
from the Distributor for resale and to brokers and other eligible agents making
sales of FESC Shares to investors and compensation payable from the Distributor
to dealers, brokers and other eligible agents making sales of CDSC Shares and
Combination Shares shall be set forth in the selling agreements between the
Distributor and such dealers or agents, respectively, as from time to time
amended, and, if such discounts and compensation are described in the then
current Prospectus for the Fund, shall be as so set forth.

4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund Shares,
the Distributor will in all respects duly comply with all state and federal
laws relating to the sale of such securities and with all applicable rules and
regulations of all regulatory bodies, including without limitation the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., and all
applicable rules and regulations of the Securities and Exchange Commission
under the 1940 Act, and will indemnify and save the Fund harmless from any
damage or expense on account of any unlawful act by the Distributor or its
agents or employees. The Distributor is not, however, to be responsible for
the acts of other dealers or agents, except to the extent that they shall be
acting for the Distributor or under its direction or authority. None of the
Distributor, any dealer, any agent or any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus heretofore or hereafter
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act") (as any such Registration Statement and
Prospectus may have been or may be amended from time to time), covering the
Shares, and in any supplemental information to any such Prospectus approved by
the Fund in connection with the offer or sale of Shares. None of the
Distributor, any dealer, any broker or any other person is authorized to act as
agent for the Fund in connection with the offering or sale of Shares to the
public or otherwise. All such sales shall be made by the Distributor as
principal for its own account.

In selling Shares to investors, the Distributor will adopt and comply with
certain standards, as set forth in Exhibit III attached hereto as to when each
respective class of Shares may appropriately be sold to particular investors.
The Distributor will require every broker, dealer and other eligible agent
participating in the offering of the Shares to agree to adopt and comply with
such standards as a condition precedent to their participation in the offering.

2
<PAGE> 3

5. Expenses.

(a) The Fund will pay or cause to be paid:

(i) all expenses in connection with the registration
of Shares under the federal securities laws, and the Fund will
exercise its best efforts to obtain said registration and
qualification;

(ii) all expenses in connection with the printing of
any notices of shareholders' meetings, proxy and proxy
statements and enclosures therewith, as well as any other
notice or communication sent to shareholders in connection
with any meeting of the shareholders or otherwise, any annual,
semiannual or other reports or communications sent to the
shareholders, and the expenses of sending prospectuses
relating to the Shares to existing shareholders;

(iii) all expenses of any federal or state
original-issue tax or transfer tax payable upon the issuance,
transfer or delivery of Shares from the Fund to the
Distributor; and

(iv) the cost of preparing and issuing any Share
certificates which may be issued to represent Shares.

(b) The Distributor will pay the costs and expenses of qualifying and
maintaining qualification of the Shares for sale under the securities laws of
the various states. The Distributor will also permit its officers and
employees to serve without compensation as trustees and officers of the Fund if
duly elected to such positions.

(c) The Fund shall reimburse the Distributor for out-of-pocket costs and
expenses actually incurred by it in connection with distribution of each class
of Shares respectively in accordance with the terms of a plan (the "12b-1
Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as such
12b-1 Plan may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Distributor hereunder with respect to a
class of Shares unless and until this Agreement shall have been approved for
each such class by a majority of the Board of Trustees of the Fund and by a
majority of the "Disinterested Trustees" (as such term is defined in such 12b-1
Plan) by vote cast in person at a meeting called for the purpose of voting on
this Agreement. A copy of such 12b-1 Plan as in effect on the date of this
Agreement is attached as Exhibit I hereto. The Fund reserves the right to
terminate such 12b-1 Plan with respect to a class of Shares at any time, as
specified in the Plan. The persons authorized to direct the payment of funds
pursuant to this Agreement and the 12b-1 Plan shall provide to the Fund's Board
of Trustees, and the Trustees shall review, at least quarterly, a written
report with respect to each of the classes of Shares of the amounts so paid and
the purposes for which such expenditures were made for each such class of
Shares.

(d) The Fund shall compensate the Distributor for providing services to,
and the maintenance of, shareholder accounts in the Fund (including prepaying
service fees to eligible brokers, dealers and financial intermediaries and
expenses incurred in connection therewith) and the Distributor may pay as agent
for and on behalf of the Fund a service fee with respect to each class of
Shares to brokers, dealers and financial intermediaries for the provision of
shareholder services and the maintenance of shareholder accounts in the Fund in
the amount with respect to each class of Shares set forth from time to time in
the Fund's prospectus. The Fund shall compensate the Distributor for such
expenses in accordance with the terms of a service plan (the "Service Plan"),
as such Service Plan may be in effect from time to time; provided, however,
that no service fee payments shall be due or paid to the Distributor hereunder
with respect to a class of Shares unless and until this Agreement shall have
been approved for each such class by a majority of the Board of Trustees of the
Fund and by a majority of the Disinterested Trustees by vote cast in person at
a meeting called for the purpose of voting on this Agreement. A copy of such
Service Plan as in effect on the date of this Agreement is attached as Exhibit
II hereto. The Fund reserves the right to terminate such Service Plan with
respect to a class of Shares at
any time, as specified in the Plan. The persons authorized to direct the
payment of funds

3
<PAGE> 4

pursuant to this Agreement and the Service Plan shall provide to the Fund's
Board of Trustees, and the Trustees shall review, at least quarterly, a
written report with respect to each of the classes of Shares of the amounts
paid as service fees for each such class of Shares.

6. Redemption of Shares. In connection with the Fund's redemption of its
Shares, the Fund hereby authorizes the Distributor to repurchase, upon the
terms and conditions hereinafter set forth, as the Fund's agent and for the
Fund's account, such Shares as may be offered for sale to the Fund from time to
time by holders of such Shares or their agents.

(a) Subject to and in conformity with all applicable federal and state
legislation, any applicable rules of the National Association of Securities
Dealers, Inc., and any applicable rules and regulations of the Securities and
Exchange Commission under the 1940 Act, the Distributor may accept offers of
holders of Shares to resell such Shares to the Fund on such terms and
conditions and at such prices as described and provided for in the then current
Prospectus of the Fund.

(b) The Distributor agrees to notify the Fund at such times as the Fund
may specify of the number of each class of Shares, respectively, repurchased
for the Fund's account and the time or times of such repurchases, and the Fund
shall notify the Distributor of the prices and, in the case of a class of CDSC
Shares or Combination Shares, of the deferred sales charge as described below,
if any, applicable to repurchases of Shares of such class.

(c) The Fund shall have the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by
telegraph or by written instrument from any of the Fund's officers. In the
event that the Distributor's authorization is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this Section 6 shall not be revived except by vote of
the Board of Trustees of the Fund.

(d) The Distributor agrees that all repurchases of Shares made by the
Distributor shall be made only as agent for the Fund's account and pursuant to
the terms and conditions herein set forth.

(e) The Fund agrees to authorize and direct its Custodian to pay, for the
Fund's account, the repurchase price (together with any applicable contingent
deferred sales charge) of any Shares so repurchased for the Fund against the
authorized transfer of book shares from an open account and against delivery of
any other documentation required by the Board of Trustees of the Fund or, in
the case of certificated Shares, against delivery of the certificates
representing such Shares in proper form for transfer to the Fund.

(f) The Distributor shall receive no commissions or other compensation in
respect of any repurchases of FESC Shares for the Fund under the foregoing
authorization and appointment as agent. With respect to any repurchase of CDSC
Shares or Combination Shares, the Distributor shall receive the deferred sales
charge, if any, applicable to the respective class of Shares that have been
held for less than a specified period of time with respect to such class as set
forth from time to time in the Fund's Prospectus. The Distributor shall
receive no other commission or other compensation in respect of any repurchases
of CDSC Shares or Combination Shares for the Fund under the foregoing
authorization and appointment as agent.

(g) If any FESC Shares sold to the Distributor under the terms of this
Agreement are redeemed or repurchased by the Fund or by the Distributor as
agent or are tendered for redemption within seven business days after the date
of the Distributor's confirmation of the original purchase by the Distributor,
the Distributor shall forfeit the amount above the net asset value received by
it in respect of such Shares, provided that the portion, if any, of such amount
re-allowed by the Distributor to dealers or agents shall be repayable to the
Fund only to the extent recovered by the Distributor from the dealer or agent
concerned. The Distributor shall include in agreements with such dealers and
agents a corresponding provision for the forfeiture by them of their concession
with respect to FESC Shares purchased by them or their principals and redeemed
or repurchased by the Fund or by the Distributor as agent within seven business
days after the date of the Distributor's confirmation of such initial
purchases.

4
<PAGE> 5

7. Indemnification. The Fund agrees to indemnify and hold harmless the
Distributor and each of its trustees and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage,
or expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, based upon the ground
that the registration statement, Prospectus, shareholder reports or other
information filed or made public by the Fund (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading under the 1933 Act or any other statute or the common law. However,
the Fund does not agree to indemnify the Distributor or hold it harmless to the
extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund by or on behalf of the
Distributor. In no case (i) is the indemnity of the Fund in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor
or any person against any liability to the Fund or its securityholders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable under its indemnity agreement
contained in this Section with respect to any claim made against the
Distributor or any person indemnified unless the Distributor or any such person
shall have notified the Fund in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or any such
person (or after the Distributor or the person shall have received notice of
service on any designated agent). However, failure to notify the Fund of any
claim shall not relieve the Fund from any liability which it may have to the
Distributor or any person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. The Fund shall
be entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense, of any suit brought to enforce any claims, but
if the Fund elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any suit and retain counsel, the Distributor, officers or
trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them.
If the Fund does not elect to assume the defense of any suit, it will reimburse
the Distributor, officers or trustees or controlling person or persons,
defendant or defendants in the suit for the reasonable fees and expenses of any
counsel retained by them. The Fund agrees to notify the Distributor promptly
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of the
Shares.

The Distributor also covenants and agrees that it will indemnify and hold
harmless the Fund and each of its trustees and officers and each person, if
any, who controls the Fund within the meaning of Section 15 of the 1933 Act
against any loss, liability, damage, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable counsel fees incurred in connection therewith)
arising by reason of any person acquiring any Shares, based upon the 1933 Act
or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration
statement, Prospectus, shareholder reports or other information filed or made
public by the Fund (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, insofar as the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or on behalf of the Distributor. In no
case (i) is the indemnity of the Distributor in favor of the Fund or any person
indemnified to be deemed to protect the Fund or any such person against any
liability to which the Fund or such person would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligation and duties
under this Amended Agreement, or (ii) is the Distributor to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Fund or any person indemnified unless the Fund or person, as the
case may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first

5
<PAGE> 6

written notification giving information of the nature of the claim shall have
been served upon the Fund or person (or after the Fund or such person shall
have received notice of service on any designated agent). However, failure to
notify the Distributor of any claim shall not relieve the Distributor from any
liability which it may have to the Fund or any person against whom the action
is brought otherwise than on account of its indemnity agreement contained in
this paragraph. In the case of any notice to the Distributor, it shall be
entitled to participate, at its own expense, in the defense, or, if it so
elects, to assume the defense, of any suit brought to enforce the claim, but if
the Distributor elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Fund, to its officers and trustees
and to any controlling person or persons, defendant or defendants in the suit.
In the event that the Distributor elects to assume the defense of any suit and
retain counsel, the Fund or controlling persons, defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it will reimburse
the Fund, officers and trustees or controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Distributor agrees to notify the Fund promptly of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any of the Shares.

8. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect year to year with respect to each class of
Shares so long as such continuance is approved at least annually (i) by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the
Fund, on written notice to the Distributor; (b) this Agreement shall
immediately terminate in the event of its assignment; and (c) this Agreement
may be terminated by the Distributor on ninety (90) days' written notice to the
Fund. Upon termination of this Agreement with respect to either class of
Shares of the Fund, the obligations of the parties hereunder shall cease and
terminate with respect to such class of Shares as of the date of such
termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination.

This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.

For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall
have the meanings defined in the 1940 Act, as amended.

9. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.

10. Notice. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office
of such party or at such other address as such party shall have designated in
writing.

11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY,

6
<PAGE> 7
THE LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.

VAN KAMPEN AMERICAN CAPITAL U.S.
GOVERNMENT TRUST, on behalf of its
series, VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND

By: /s/ Dennis J. McDonnell
------------------------------------------
Name: Dennis J. McDonnell
Title: President

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.

By: /s/ Ronald A. Nyberg
------------------------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President

<PAGE> 1
EXHIBIT 9(a)

FUND ACCOUNTING AGREEMENT

THIS AGREEMENT, dated October 31, 1996, by and between the parties set
forth in Schedule A hereto (designated collectively hereafter as the "Funds")
and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware
corporation ("Advisory Corp.").

W I T N E S S E T H:

WHEREAS, each of the Funds is registered as a management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and

WHEREAS, Advisory Corp. has the capability of providing certain
accounting services to the Funds; and

WHEREAS, each desires to utilized Advisory Corp. in the provision of
such accounting services; and

WHEREAS, Advisory Corp. intends to maintain its staff in order to
accommodate the provision of all such services.

NOW THEREFORE, in consideration of the premises and the mutual
covenants spelled out herein, it is agreed between the parties hereto as
follows:

1. Appointment of Advisory Corp.. As agent, Advisory Corp. shall provide
each of the Funds the accounting services ("Accounting Services") as set forth
in Paragraph 2 of this Agreement. Advisory Corp. accepts such appointment and
agrees to furnish the Accounting Services in return for the compensation
provided in Paragraph 3 of this Agreement.

2. Accounting Services to be Provided. Advisory Corp. will provide to each
respective Fund accounting related services in connection with the maintenance
of the financial records of such Fund, including without limitation: (i)
maintenance of the general ledger and other financial books and records; (ii)
processing of portfolio transactions; (iii) coordination of the valuation of
portfolio securities; (iv) calculation of the Fund's net asset value; (v)
coordination of financial and regulatory reporting; (vi) preparation of
financial reports for each Fund's Board of Trustees; (vii) coordination of tax
and financial compliance issues; (viii) the establishment and maintenance of
accounting policies; (ix) recommendations with respect to dividend policies;
(x) preparation of each Fund's financial reports and other accounting and tax
related notice information to shareholders; and (xi) the assimilation and
interpretation of accounting data for meaningful management review. Advisory
Corp. shall provide accurate maintenance of each Fund's financial books and
records as required by the applicable securities statutes and regulations, and
shall hire persons (collectively the "Accounting Service Group") as needed to
provide such Accounting Services.

<PAGE> 2

3. Expenses and Reimbursements. Advisory Corp. shall be reimbursed by the
Funds for all costs and services incurred in connection with the provision of
the aforementioned Accounting Services ("Accounting Service Expenses"),
including but not limited to all salary and related benefits paid to the
personnel of the Accounting Service Group, overhead and expenses related to
office space and related equipment and out-of-pocket expenses.

The Accounting Services Expenses will be paid by Advisory Corp. and
reimbursed by the Funds. Advisory Corp. will tender to each Fund a monthly
invoice as of the last business day of each month which shall certify the total
support service expenses expended. Except as provided herein, Advisory Corp.
will receive no other compensation in connection with Accounting Services
rendered in accordance with this Agreement.

4. Payment for Accounting Service Expenses Among the Funds. As to one
quarter (25%) of the Accounting Service Expenses incurred under the Agreement,
the expense shall be allocated between all Funds based on the number of classes
of shares of beneficial interest that each respective Fund has issued. As to
the remaining three quarters (75%) of the Accounting Service Expenses incurred
under the Agreement, the expense shall be allocated between all Funds based on
their relative net assets. For purposes of determining the percentage of
expenses to be allocated to any Fund, the liquidation preference of any
preferred shares issued by any such Fund shall not be considered a liability of
such Fund for the purposes of calculating relative net assets of such Fund.

5. Maintenance of Records. All records maintained by Advisory Corp. in
connection with the performance of its duties under this Agreement will remain
the property of each respective Fund and will be preserved by Advisory Corp.
for the periods prescribed in Section 31 of the 1940 Act and the rules
thereunder or such other applicable rules that may be adopted from time to time
under the act. In the event of termination of the Agreement, such records will
be promptly delivered to the respective Funds. Such records may be inspected
by the respective Funds at reasonable times.

6. Liability of Advisory Corp. Advisory Corp. shall not be liable to any
Fund for any action taken or thing done by it or its agents or contractors on
behalf of the fund in carrying out the terms and provisions of the Agreement if
done in good faith and without gross negligence or misconduct on the part of
Advisory Corp., its agents or contractors.

7. Indemnification By Funds. Each Fund will indemnify and hold Advisory
Corp. harmless from all lost, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by Advisory Corp. resulting from: (a) any
claim, demand, action or suit in connection with Advisory Corp.'s acceptance of
this Agreement; (b) any action or omission by Advisory Corp. in the performance
of its duties hereunder; (c) Advisory Corp.'s acting upon instructions believed
by it to have been executed by a duly authorized officer of the Fund; or (d)
Advisory Corp.'s acting upon information provided by the Fund in form and under
policies agreed to by Advisory Corp. and the Fund. Advisory Corp. shall not be
entitled to such indemnification in respect of actions or omissions
constituting gross negligence or willful misconduct of Advisory Corp. or its
agents or contractors. Prior to confessing any claim against it which may be
subject to this indemnification, Advisory Corp. shall give the Fund reasonable
opportunity to defend against said claim in its own name or in the name of
Advisory Corp.

8. Indemnification By Advisory Corp. Advisory Corp. will indemnify and
hold harmless each Fund from all loss, cost, damage and expense, including
reasonable expenses for legal counsel, incurred by the Fund resulting from any
claim, demand, action or suit arising out of Advisory Corp.'s failure to comply
with the terms of this Agreement or which arises out of the gross negligence or
willful misconduct of Advisory Corp. or its agents or contractors; provided
that such negligence or misconduct is not attributable to the Funds, their
agents or contractors. Prior to confessing any claim against it which may be
subject to this indemnification, the Fund shall give Advisory Corp. reasonable
opportunity to defend against said claim in its own name or in the name of such
Fund.

2
<PAGE> 3

9. Further Assurances. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.

10. Dual Interests. It is understood that some person or persons may be
directors, trustees, officers or shareholders of both the Funds and Advisory
Corp. (including Advisory Corp.'s affiliates), and that the existence of any
such dual interest shall not affect the validity hereof or of any transactions
hereunder except as otherwise provided by a specific provision of applicable
law.

11. Execution, Amendment and Termination. The term of this Agreement shall
begin as of the date first above written, and unless sooner terminated as
herein provided, this Agreement shall remain in effect through May, 1998, and
thereafter from year to year, if such continuation is specifically approved at
least annually by the Board of Trustees of each Fund, including a majority of
the independent Trustees of each Fund. This Agreement may be modified or
amended from time to time by mutual agreement between the parties hereto and
may be terminated after May, 1998, by at least sixty (60) days' written notice
given by one party to the others. Upon termination hereof, each Fund shall pay
to Advisory Corp. such compensation as may be due as of the date of such
termination and shall likewise reimburse Advisory Corp. for its costs, expenses
and disbursements payable under this Agreement to such date. This Agreement
may be amended in the future to include as additional parties to the Agreement
other investment companies for with Advisory Corp., any subsidiary or affiliate
serves as investment advisor or distributor if such amendment is approved by
the President of each Fund.

12. Assignment. Any interest of Advisory Corp. under this Agreement shall
not be assigned or transferred, either voluntarily or involuntarily, by
operation of law or otherwise, without the prior written consent of the Funds.
This Agreement shall automatically and immediately terminate in the event of
its assignment without the prior written consent of the Funds.

13. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or sent by registered or certified mail, postage prepaid, to the
other party at such address as such other party may designate for the receipt
of such notices. Until further notice to the other parties, it is agreed that
for this purpose the address of each Fund is One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, Attention: President and that of Advisory Corp. for
this purpose is One Parkview Plaza, Oakbrook Terrace, Illinois 60181,
Attention: President.

14. Personal Liability. As provided for in the Agreement and Declaration of
Trust of the various Funds, under which the Funds are organized as
unincorporated trusts, the shareholders, trustees, officers, employees and
other agents of the Fund shall not personally be found by or liable for the
matters set forth hereto, nor shall resort be had to their private property for
the satisfaction of any obligation or claim hereunder.

15. Interpretative Provisions. In connection with the operation of this
Agreement, Advisory Corp. and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor of this
Agreement.

16. State Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Illinois.

17. Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.

3
<PAGE> 4

IN WITNESS WHEREOF, the parties have caused this amended and restated
Agreement to be executed as of the day and year first above written.

ALL OF THE PARTIES SET FORTH IN SCHEDULE A

By: /s/ Ronald A. Nyberg
----------------------------------
Ronald A. Nyberg, Vice President

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.

By: /s/ Dennis J. McDonnell
----------------------------------
Dennis J. McDonnell, President

4
<PAGE> 5

SCHEDULE A

I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):

CLOSED END FUNDS

Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital Intermediate Term High Income Trust
Van Kampen American Capital Limited Term High Income Trust
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust

INSTITUTIONAL FUNDS

II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
("MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):

The Explorer Institutional Trust
on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund

5
<PAGE> 6

OPEN END FUNDS

III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL FUNDS"):

Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Limited Maturity Government Fund ("Limited Maturity
Government Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed Assets
Funds")
Van Kampen American Capital Government Securities Fund ("Government Securities
Fund")
Van Kampen American Capital Government Target Fund ("Government Target Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund")
Van Kampen American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")

Van Kampen American Capital Life Investment Trust ("Life Investment Trust
" or "LIT") on behalf of its Series

Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Real Estate Securities Portfolio ("LIT Real Estate Securities Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")

Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small Capitalization
Fund")

Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust")
on behalf of its Series

Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")

Van Kampen American Capital U.S. Government Trust for Income ("U.S. Government
Trust for Income")

6
<PAGE> 7

IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):

Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")

Van Kampen American Capital Tax Free Trust ("Tax Free Trust")
on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High Income
Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate Term Municipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")

Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey
Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax Free
Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California Tax
Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax Free
Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax Free
Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free Income
Fund")

Van Kampen American Capital Trust ("VKAC Trust")
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term Global
Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")

Van Kampen American Capital Equity Trust ("Equity Trust")
on behalf of its series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Balanced Fund ("Balanced Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth Fund")

Van Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund")

Van Kampen American Capital Pennsylvania Tax Free Income Fund ("Pennsylvania
Tax Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund"); and

<PAGE> 1
EXHIBIT 9(b)

LEGAL SERVICES AGREEMENT

THIS AGREEMENT, dated as of October 31, 1996, by and between the
parties as set forth in Schedule 1, attached hereto and incorporated by
reference (designated collectively hereafter as the "Funds"), and VAN KAMPEN
AMERICAN CAPITAL, INC. (formerly Van Kampen Merritt Holdings Corp.), a Delaware
corporation ("Van Kampen").

W I T N E S S E T H:

WHEREAS, each of the Funds is registered as a management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and

WHEREAS, Van Kampen has the capability of providing certain legal
services to the Funds; and

WHEREAS, each Fund desires to utilize Van Kampen in the provision of
such legal services; and

WHEREAS, Van Kampen intends to increase its staff in order to
accommodate the provision of all such services.

NOW, THEREFORE, in consideration of the premises and the mutual
covenants spelled out herein, it is agreed between the parties hereto as
follows:

1. Appointment of Van Kampen. As agent, Van Kampen shall provide each of
the Funds the legal services (the "Legal Services") as set forth in Paragraph 2
of this Agreement. Van Kampen accepts such appointments and agrees to furnish
the Legal Services in return for the compensation provided in Paragraph 3 of
this Agreement.

2. Legal Services to be Provided. Van Kampen will provide to the Funds the
following legal services, including without limitation: accurate maintenance of
the Funds' Corporate Minute books and records, preparation and oversight of
each Fund's regulatory reports and other information provided to shareholders
as well as responding to day-to-day legal issues on behalf of the Funds. Van
Kampen shall hire persons (collectively the "Legal Services Group") as needed
to provide such Legal Services and in such numbers as may be agreed from time
to time.

3. Expenses and Reimbursement. The Legal Services expenses (the "Legal
Services Expenses") for which Van Kampen may be reimbursed are salary and
salary related benefits, including but not limited to bonuses, group insurance
and other regular wages paid to the personnel of the Legal Services Group, as
well as overhead and expenses related to office space and necessary equipment.
The Legal Services Expenses will be paid by Van Kampen and reimbursed by the
Funds. Van Kampen will

1
<PAGE> 2

tender to each Fund a monthly invoice as of the last business day of each month
which shall certify the total Legal Service Expenses expended. Except as
provided herein, Van Kampen will receive no other compensation in connection
with Legal Services rendered in accordance with this Agreement, and Van Kampen
will be responsible for all other expenses relating to the providing of Legal
Services.

4. Payment for Legal Services Expense Among the Funds. One half (50%) of
the Legal Services Expenses incurred under the Agreement shall be attributable
equally to each respective Fund and all other funds to whom Van Kampen provides
Legal Services, including all other Funds for which Van Kampen serves as
investment adviser and distributor and the Govett Funds (the Non-Participating
Funds"). Van Kampen shall assume the costs of Legal Services for the
Non-Participating Funds for which reimbursement is not received. The remaining
one half (50%) of the Legal Services Expenses shall be in allocated (a) in the
event services are attributable to specific funds (including the
Non-Participating Funds) based on such specific time allocations; and (b) in
the event services are attributable only to types of funds (i.e. closed-end and
open-end funds), the relative amount of time spent on each type of fund and
then further allocated between funds of that type on the basis of relative net
assets at the end of the period.

5. Maintenance of Records. All records maintained by Van Kampen in
connection with the performance of its duties under this Agreement will remain
the property of each respective Fund and will be preserved by Van Kampen for
the periods prescribed in Section 31 of the 1940 Act and the rules thereunder
or such other applicable rules that may be adopted from time to time under the
Act. In the event of termination of the Agreement, such records will be
promptly delivered to the respective Funds. Such records may be inspected by
the respective Funds at reasonable times.

6. Liability of Van Kampen. Van Kampen shall not be liable to any Fund for
any action taken or thing done by it or its agents or contractors on behalf of
the Fund in carrying out the terms and provisions of the Agreement if done in
good faith and without negligence or misconduct on the part of Van Kampen, its
agents or contractors.

7. Indemnification By Funds. Each Fund will indemnify and hold Van Kampen
harmless from all loss, cost, damage and expense, including reasonable expenses
for legal counsel, incurred by Van Kampen resulting from (a) any claim, demand,
action or suit in connection with Van Kampen's acceptance of this Agreement;
(b) an action or omission by Van Kampen in the performance of its duties
hereunder; (c) Van Kampen's acting upon instructions believed by it to have
been executed by a duly authorized office of the Fund; or (d) Van Kampen's
acting upon information provided by the Fund in form and under policies agreed
to by Van Kampen and the Fund. Van Kampen shall not be entitled to such
indemnification in respect of action or omissions constituting negligence or
willful misconduct of Van Kampen or its agents or contractors. Prior to
confessing any claim against it which may be subject to this indemnification,
Van

2
<PAGE> 3
Kampen shall give the Fund reasonable opportunity to defend against said
claim on its own name or in the name of Van Kampen.

8. Indemnification By Van Kampen. Van Kampen will indemnify and hold
harmless each Fund from all loss, cost, damage and expense, including
reasonable expenses for legal counsel, incurred by the Fund resulting from any
claim, demand, action or suit arising out of Van Kampen's failure to comply
with the terms of this Agreement or which arises out of the negligence or
willful misconduct of Van Kampen or its agents or contractors; provided, that
such negligence or misconduct is not attributable to the Funds, their agents or
contractors. Prior to confessing any claim against it which may be subject to
this indemnification, the Fund shall give Van Kampen reasonable opportunity to
defend against said claim in its own name or in the name of such Fund.

9. Further Assurances. Each party agrees to perform such further acts and
execute such further documents as necessary to effectuate the purposes hereof.

10. Dual Interests. It is understood that some person or persons may be
directors, trustees, officers, or shareholders of both the Funds and Van Kampen
(including Van Kampen's affiliates), and that the existence of any such dual
interest shall not affect the validity hereof or of any transactions hereunder
except as otherwise provided by a specific provision of applicable law.

11. Execution, Amendment and Termination. The term of this Agreement shall
begin as of the date first above written, and unless sooner terminated as
herein provided, this Agreement shall remain in effect through May 31, 1996,
and thereafter from year to year if such continuation is specifically approved
at least annually by the Board of Trustees of each Fund, including a majority
of the independent Trustees of each Fund. The Agreement may be modified or
amended from time to time by mutual agreement between the and shall likewise
reimburse Van Kampen for its costs, expenses and disbursements payable under
this Agreement to such date. This Agreement may be amended in the future to
include as additional parties to the Agreement other investment companies for
which Van Kampen, any subsidiary or affiliate serves as investment advisor or
distributor.

12. Assignment. Any interest of Van Kampen under this Agreement shall not
be assigned or transferred, either voluntarily or involuntarily, by operation
of law or otherwise, without the prior written consent of the Fund. This
Agreement shall automatically and immediately terminate in the event of its
assignment without the prior written consent of the Fund.

13. Notice. Any notice under this agreement shall be in writing, addressed
and delivered or sent by registered or certified mail, postage prepaid, to the
other party at such address as such other party may designate for the receipt
of such notices. Until further notice to the other parties, it is agreed that
for this purpose the address of each Fund is One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, Attention: President

3
<PAGE> 4

and the address of Van Kampen. for this purpose is One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, Attention: General Counsel.

14. Personal Liability. As provided for in the Declaration of Trust of the
various Funds, under which the Funds are organized as unincorporated trust
under the laws of the State of Delaware and Pennsylvania, as the case may be,
the shareholders, trustees, officers, employees and other agents of the Fund
shall not personally be found by or liable for the matters set forth hereunder,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim hereunder.

15. Interpretative Provisions. In connection with the operation of this
agreement, Van Kampen and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their opinion be consistent with the general tenor of this Agreement.

16. State Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Illinois.

17. Captions. The captions in the Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction effect.

4
<PAGE> 5

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.

ALL OF THE PARTIES SET FORTH IN SCHEDULE 1 ATTACHED HERETO

By: /s/ Ronald A. Nyberg
-------------------------
Ronald A. Nyberg
Executive Vice President

VAN KAMPEN AMERICAN CAPITAL, INC.

By: /s/ Dennis J. McDonnell
-------------------------
Dennis J. McDonnell
Executive Vice President

5
<PAGE> 6

SCHEDULE 1

1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST, on behalf of its
series, Van Kampen American Capital U.S. Government Fund

2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST, on behalf of its series, Van
Kampen American Capital Insured Tax Free Income Fund, Van Kampen American
Capital Tax Free High Income Fund, Van Kampen American Capital California
Insured Tax Free Fund, Van Kampen American Capital Municipal Income Fund,
Van Kampen American Capital Limited Term Municipal Income Fund, Van Kampen
American Capital New York Tax Free Income Fund, Van Kampen American Capital
New Jersey Tax Free Income Fund, Van Kampen American Capital Florida Insured
Tax Free Income Fund, Van Kampen American Capital California Tax Free Income
Fund, Van Kampen American Capital Michigan Tax Free Income Fund, Van Kampen
American Capital Missouri Tax Free Income Fund and Van Kampen American
Capital Ohio Tax Free Income Fund

3. VAN KAMPEN AMERICAN CAPITAL TRUST, on behalf of its series, Van Kampen
American Capital High Yield Fund, Van Kampen American Capital Short-Term
Global Income Fund and Van Kampen American Capital Strategic Income Fund

4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST, on behalf of its series, Van
Kampen American Capital Utility Fund, Van Kampen American Capital Balanced
Fund, Van Kampen American Capital Value Fund, Van Kampen American Capital
Growth Fund, Van Kampen American Capital Great American Companies Fund, Van
Kampen American Capital Prospector Fund and Van Kampen American Capital
Aggressive Growth Fund

5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND

7. VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND

8. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST

9. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST

10. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST

11. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II

12. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST

13. VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST

14. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST

15. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST

16. VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST

17. VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST

18. VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST

19. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST

6
<PAGE> 7
20. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS

21. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS

22. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA
MUNICIPALS

23. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS

24. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY
MUNICIPALS

25. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW
YORK MUNICIPALS

26. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE
PENNSYLVANIA MUNICIPALS

27. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST

28. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST

29. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL
INCOME TRUST

30. VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST

31. VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST

32. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL
INCOME TRUST

33. VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL
INCOME TRUST

34. VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL
INCOME TRUST

35. VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME
TRUST

36. VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME
TRUST

37. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL
INCOME TRUST

38. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II

39. VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST

40. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II

41. VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST

42. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its sub-trusts, Explorer
Institutional Active Core Fund and Explorer Institutional Limited Duration
Fund

<PAGE> 1
EXHIBIT (10)

[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)]

April 28, 1997

Van Kampen American Capital
U.S. Government Trust
One Parkview Plaza
Oakbrook Terrace, IL 60181

Re: Van Kampen American Capital U.S. Government Trust
Registration Statement on Form N-1A
(File Nos. 2-89190 and 811-3950)

Ladies and Gentlemen:
We have acted as counsel to Van Kampen American Capital U.S. Government
Trust (the "Trust"), a Delaware business trust, in connection with the
preparation of Post-Effective Amendment No. 29 to the Trust's Registration
Statement on Form N-1A (the "Registration Statement") to be filed under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940, as amended (the "1940 Act"), with the Securities and Exchange
Commission (the "Commission") on or about April 28, 1997. The Registration
Statement relates to the registration under the 1933 Act and 1940 Act of an
indefinite number of each of Class A Shares of beneficial interest, par value
$.01 per share, Class B Shares of beneficial interest, par value $.01 per share,
and Class C Shares of beneficial interest, par value $.01 per share, of the
Trust (collectively, the "Shares").

This opinion is delivered in accordance with the requirements of Item
24(b)(10) of Form N-1A under the 1933 Act and the 1940 Act.

In connection with this opinion, we have examined the originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Certificate of Trust filed with the Secretary of State of Delaware, (ii)
<PAGE> 2

Van Kampen American Capital
U.S. Government Trust
April 25, 1997
Page 2

the Agreement and Declaration of Trust and By-Laws of the Trust, each as amended
to date (the "Declaration of Trust" and "By-Laws", respectively), (iii) the
Certificate of Designation establishing the series of the Trust, (iv) the
resolutions adopted by the Board of Trustees of the Trust relating to the
authorization, issuance and sale of the Shares, the filing of the Registration
Statement and any amendments or supplements thereto and related matters and (v)
such other documents as we have deemed necessary or appropriate as a basis for
the opinions set forth herein.

In such examination we have assumed the legal capacity of natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed, photostatic, or other copies
and the authenticity of the originals of such latter documents. As to any
facts material to such opinion which were not independently established, we
have relied on statements or representations of officers and other
representatives of the Trust or others.

Members of our firm are admitted to the practice of law in the State
of Illinois, and we do not express any opinion as to the laws of any other
jurisdiction other than matters relating to the Delaware business
organization statutes (including statutes relating to Delaware business
trusts) and the federal laws of the United States of America to the extent
specifically referred to herein.

Based upon and subject to the foregoing, we are of the opinion that the
issuance and sale of Shares by the Trust have been validly authorized and,
assuming certificates therefor have been duly executed, countersigned,
registered and delivered or the shareholders' accounts have been duly credited
and the Shares represented thereby have been fully paid for, such Shares will
be validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion with the Commission as
Exhibit 10 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Counsel" in the Registration Statement. In
giving this consent, we do not hereby
<PAGE> 3

Van Kampen American Capital
U.S. Government Trust
April 28, 1997
Page 3

admit that we are in the category of persons whose consent is required under
Section 7 of the 1933 Act or the rules and regulations of the Commission.

Very truly yours,

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

<PAGE> 1
EXHIBIT 11

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders
Van Kampen American Capital U.S. Government Fund:

We consent to the use of our report included in the Statement of Additional
Information which is incorporated by reference into the Prospectus and to the
reference to our Firm under the headings "Financial Highlights" in the
Prospectus and "Custodian and Independent Accountants" in the Statement of
Additional Information.

/s/ KPMG Peat Marwick LLP

Chicago, Illinois
April 30, 1997

<PAGE> 1

EXHIBIT 16

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND - CLASS A SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1996

Formula P(1+T)n = ERV

Including Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P
Ending Redeemable Value $991.29 = ERV
One year period ended 12/31/96 1 = n

TOTAL RETURN FOR THE PERIOD (.87%) = T

Excluding Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,041.00 = ERV
One year period ended 12/31/96 1 = n

TOTAL RETURN FOR THE PERIOD 4.10% = T

TOTAL RETURN CALCULATION FIVE YEARS ENDED DECEMBER 31, 1996

Formula P(1+T)n = ERV
Including Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,270.02 = ERV
Five years ended 12/31/96 5 = n

TOTAL RETURN FOR THE PERIOD 4.90% = T

<PAGE> 2

Excluding Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P

Ending Redeemable Value $1,332.95 = ERV
Five years ended 12/31/96 5 = n

TOTAL RETURN FOR THE PERIOD 5.92% = T

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND - CLASS A SHARES

TOTAL RETURN CALCULATION TEN YEARS ENDED DECEMBER 31, 1996

Formula P(1+T)n = ERV
Including Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,000.83 = ERV
Ten years ended 12/31/96 10 = n

TOTAL RETURN FOR THE PERIOD 7.18% = T

Excluding Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,101.07 = ERV
Ten years ended 12/31/96 10 = n

TOTAL RETURN FOR THE PERIOD 7.71% = T

TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1996

Formula P(1+T)n = ERV

Including Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P
Ending Redeemable Value $3,148.14 = ERV
Inception through 12/31/96 12.59 = n

TOTAL RETURN FOR THE PERIOD 9.54% = T

<PAGE> 3

Excluding Payment of the Sales Charge
Net Asset Value $14.46

Initial Investment $1,000.00 = P
Ending Redeemable Value $3,304.75 = ERV
Inception through 12/31/96 12.59 = n

TOTAL RETURN FOR THE PERIOD 9.96% = T

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND - CLASS A SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH DECEMBER 31, 1996

Formula ERV - P
-------
P = T

Including Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P
Ending Redeemable Value $3,148.14 = ERV

TOTAL RETURN FOR THE PERIOD 214.81% = T

Excluding Payment of the Sales Charge
Net Asset Value $14.46
Initial Investment $1,000.00 = P
Ending Redeemable Value $3,304.75 = ERV

TOTAL RETURN FOR THE PERIOD 230.48% = T

<PAGE> 4

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND - CLASS B SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1996

Formula P(1+T)n = ERV

Including Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $993.75 = ERV
One year period ended 12/31/96 1 = n

TOTAL RETURN FOR THE PERIOD (.63%) = T

Excluding Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,032.41 = ERV
One year period ended 12/31/96 1 = n

TOTAL RETURN FOR THE PERIOD 3.24% = T

TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1996

Formula P(1+T)n = ERV

Including Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,220.03 = ERV
Inception through 12/31/96 4.36 = n

TOTAL RETURN FOR THE PERIOD 4.67% = T

<PAGE> 5

Excluding Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,233.67 = ERV
Inception through 12/31/96 4.36 = n

TOTAL RETURN FOR THE PERIOD 4.93% = T

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND - CLASS B SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH DECEMBER 31, 1996

Formula ERV - P
-------
P = T

Including Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,220.03 = ERV

TOTAL RETURN FOR THE PERIOD 22.00% = T

Excluding Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,233.67 = ERV

TOTAL RETURN FOR THE PERIOD 23.37% = T

<PAGE> 6

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND - CLASS C SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1996

Formula P(1+T)n = ERV

Including Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,022.74 = ERV
One year period ended 12/31/96 1 = n

TOTAL RETURN FOR THE PERIOD 2.27% = T

Excluding Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,032.41 = ERV
One year period ended 12/31/96 1 = n

TOTAL RETURN FOR THE PERIOD 3.24% = T

TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1996

Formula P(1+T)n = ERV

Including Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,140.22 = ERV
Inception through 12/31/96 3.39 = n

<PAGE> 7

TOTAL RETURN FOR THE PERIOD 3.95% = T

Excluding Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,140.22 = ERV
Inception through 12/31/96 3.39 = n

TOTAL RETURN FOR THE PERIOD 3.95% = T

VAN KAMPEN AMERICAN CAPITAL
U.S. GOVERNMENT FUND - CLASS C SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH DECEMBER 31, 1996

Formula ERV - P
-------
P = T

Including Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,140.22 = ERV

TOTAL RETURN FOR THE PERIOD 14.02% = T

Excluding Payment of the CDSC
Net Asset Value $14.45
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,140.22 = ERV

TOTAL RETURN FOR THE PERIOD 14.02% = T

<PAGE> 8
CALCULATION OF YIELD

The Fund calculates its yield quotations based on a 30-day period ended
on the date of the most recent balance sheet included in the registration
statement, by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a-b 6
YIELD (y) = 2 [ (------- + 1) - 1
cd

Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period

Class A

a = 22,325,717.70
b = 1,582,439.50
c = 177,774,562.330
d = 15.27
e = 9.35%

Class B Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential

Class A Share Yield 9.35%
+ Sales Charge Effect (Maximum Sales Charge x Class A
Share SEC Yield) 4.75% x 9.35% .44%
- Expense Differential between Class A Shares and Class B Shares .83%
-----
Class B Share SEC Yield 8.96%
=====

- Waived Expense Adjustment .00%
-----
Class B Share SEC Yield (Without Expense Waiver) 8.96%
=====

Class C Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential

Class A Share Yield 9.35%
+ Sales Charge Effect (Maximum Sales Charge x Class A
Share SEC Yield) 4.75% + 9.35% .44%
- Expense Differential between Class A Shares and Class C Shares .83%
-----
Class C Share SEC Yield 8.96%
=====

- Waived Expense Adjustment .00%
-----
Class C Share Yield (Without Expense Waiver 8.96%
=====
<PAGE> 9
U.S. GOVERNMENT FUND
CALCULATION OF DISTRIBUTION RATE
PERIOD ENDED DECEMBER 31, 1996

Current Annual Income Per Share
-------------------------------
Current Offering Price

Class A Shares

$1.050
------
$15.18 = 6.92%

Class B Shares

$ .936
------
$14.45 = 6.48%

Class C Shares

$ .936
------
$14.45 = 6.48%

<PAGE> 1
EXHIBIT (17)(a)

INVESTMENT COMPANIES FOR WHICH

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS INC.

ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR

APRIL 4, 1997

Van Kampen American Capital U.S. Government Trust
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Tax Free Trust
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Trust
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Equity Trust
Van Kampen American Capital Utility Fund

Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Tax Free Money Fund
Van Kampen American Capital Prime Rate Income Trust
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund

<PAGE> 2

Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Real Estate Securities Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Tax -Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
Internet Trust
Michigan Real Estate Income and Growth Trust
Van Kampen American Capital Insured Income Trust
Van Kampen American Capital Insured Income Trust (Intermediate)
Strategic Ten Trust, United States
Strategic Ten Trust, United Kingdom
Strategic Ten Trust, Hong Kong
Strategic Five Trust, United States
Global Fifteen Trust
Global Thirty Trust
Van Kampen American Capital Equity Opportunity Trust
Great International Firms Trust
Gruntal & Co. Incorporated Undervalued Growth Opportunities Trust
Principal Trust Princor Emerging Growth and Treasury
International Assets Advisory Corporation Global Blue Chip Trust
Renaissance Trust
Mississippi Insured Municipal Trust
Blue Chip Opportunity and Treasury Trust
Wheat First Butcher Singer Wheat First Strategic Opportunity Unit Trust
Baby Boomer Opportunity Trust
Van Kampen American Capital Utility Income Trust
Global Energy Trust
Michigan Select Trust
International Assets Advisory Corp. Latin American Trust
Brand Name Equity Trust
Aggressive Growth Series Global Health Care Trust
Global Precious Metals Trust

<PAGE> 3

<TABLE>
<S> <C>
Emerging Markets Municipal Income Trust Series 1
Insured Municipals Income Trust Series 1 through 387
Insured Municipals Income Trust (Discount) Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term) Series 1 through 106 1009
Insured Municipals Income Trust (Intermediate Term) Series 5 through 89
Insured Municipals Income Trust (Limited Term) Series 9 through 86
Insured Municipals Income Trust (Premium Bond Series) Series 1 through 3
Insured Municipals Income Trust (Intermediate Laddered Maturity) Series 1 and 2
Insured Tax Free Bond Trust Series 1 through 6
Insured Tax Free Bond Trust (Limited Term) Series 1
Investors' Quality Tax-Exempt Trust Series 1 through 93
Investors' Quality Tax-Exempt Trust-Intermediate Series 1
Investors' Corporate Income Trust Series 1 through 12
Investors' Governmental Securities Income Trust Series 1 through 7
Van Kampen Merritt International Bond Income Trust Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust Series 1
Alabama Insured Municipals Income Trust Series 1 through 9
Arizona Investors' Quality Tax-Exempt Trust Series 1 through 16
Arizona Insured Municipals Income Trust Series 1 through 18
Arkansas Insured Municipals Income Trust Series 1 through 2
Arkansas Investors' Quality Tax-Exempt Trust Series 1
California Insured Municipals Income Trust Series 1 through 164
California Insured Municipals Income Trust (Premium Bond Series) Series 1
California Insured Municipals Income Trust (1st Intermediate Series) Series 1 through 3
California Investors' Quality Tax-Exempt Trust Series 1 through 21
California Insured Municipals Income Trust (Intermediate Laddered) Series 1 through 22
Colorado Insured Municipals Income Trust Series 1 through 83
Colorado Investors' Quality Tax-Exempt Trust Series 1 through 18
Connecticut Insured Municipals Income Trust Series 1 through 34
Connecticut Investors' Quality Tax-Exempt Trust Series 1
Delaware Investor's Quality Tax-Exempt Trust Series 1 and 2
Florida Insured Municipal Income Trust - Intermediate Series 1 and 2
Florida Insured Municipals Income Trust Series 1 through 113
Florida Investors' Quality Tax-Exempt Trust Series 1 and 2
Florida Insured Municipals Income Trust (Intermediate Laddered) Series 1 through 13
Georgia Insured Municipals Income Trust Series 1 through 83
Georgia Investors' Quality Tax-Exempt Trust Series 1 through 16
Hawaii Investors' Quality Tax-Exempt Trust Series 1
Indiana Insured Municipals Income Trust Series 1
Investors' Quality Municipals Trust (AMT) Series 1 through 9
Kansas Investors' Quality Tax-Exempt Trust Series 1 through 11
Kentucky Investors' Quality Tax-Exempt Trust Series 1 through 59
Louisiana Insured Municipals Income Trust Series 1 through 17
Maine Investor's Quality Tax-Exempt Trust Series 1
Maryland Investors' Quality Tax-Exempt Trust Series 1 through 81
Massachusetts Insured Municipals Income Trust Series 1 through 34
Massachusetts Insured Municipals Income Trust (Premium Bond Series) Series 1
Michigan Financial Institutions Trust Series 1
Michigan Insured Municipals Income Trust Series 1 through 143
Michigan Insured Municipals Income Trust (Premium Bond Series) Series 1
Michigan Insured Municipals Income Trust (1st Intermediate Series) Series 1 through 3
Michigan Investors' Quality Tax-Exempt Trust Series 1 through 30
Michigan Select Trust Series 1
Minnesota Insured Municipals Income Trust Series 1 through 60
Minnesota Investors' Quality Tax-Exempt Trust Series 1 through 21
Mississippi Insured Municipals Income Trust Series 1
Missouri Insured Municipals Income Trust Series 1 through 100
Missouri Insured Municipals Income Trust (Premium Bond Series) Series 1
Missouri Investors' Quality Tax-Exempt Trust Series 1 through 15
Missouri Insured Municipals Income Trust (Intermediate Laddered Maturity) Series 1
</TABLE>

<PAGE> 4

<TABLE>
<S> <C>
Nebraska Investors' Quality Tax-Exempt Trust Series 1 through 9
New Mexico Insured Municipals Income Trust Series 1 through 18
New Jersey Insured Municipals Income Trust Series 1 through 118
New Jersey Investors' Quality Tax-Exempt Trust Series 1 through 22
New Jersey Insured Municipals Income Trust (Intermediate Laddered Maturity) Series 1 and 4
New York Insured Municipals Income Trust-Intermediate Series 1 through 6
New York Insured Municipals Income Trust (Limited Term) Series 1
New York Insured Municipals Income Trust Series 1 through 140
New York Insured Tax-Free Bond Trust Series 1
New York Insured Municipals Income Trust (Intermediate Laddered Maturity) Series 1 through 17
New York Investors' Quality Tax-Exempt Trust Series 1
North Carolina Investors' Quality Tax-Exempt Trust Series 1 through 91
Ohio Insured Municipals Income Trust Series 1 through 106
Ohio Insured Municipals Income Trust (Premium Bond Series) Series 1 and 2
Ohio Insured Municipals Income Trust (Intermediate Term) Series 1
Ohio Insured Municipals Income Trust (Intermediate Laddered Maturity) Series 3 through 6
Ohio Investors' Quality Tax-Exempt Trust Series 1 through 16
Oklahoma Insured Municipal Income Trust Series 1 through 17
Oregon Investors' Quality Tax-Exempt Trust Series 1 through 53
Pennsylvania Insured Municipals Income Trust - Intermediate Series 1 through 6
Pennsylvania Insured Municipals Income Trust Series 1 through 228
Pennsylvania Insured Municipals Income Trust (Premium Bond Series) Series 1
Pennsylvania Investors' Quality Tax-Exempt Trust Series 1 through 14
South Carolina Investors' Quality Tax-Exempt Trust Series 1 through 85
Stepstone Growth Equity and Treasury Securities Trust Series 1
Tennessee Insured Municipals Income Trust Series 1-3 and 5-39
Texas Insured Municipals Income Trust Series 1 through 40
Texas Insured Municipal Income Trust (Intermediate Ladder) Series 1
Virginia Investors' Quality Tax-Exempt Trust Series 1 through 76
Van Kampen American Capital Equity Opportunity Trust Series 1 through 54
Van Kampen American Capital Utility Income Trust Series 1 through 8
Van Kampen American Capital Insured Income Trust Series 1 through 64
Van Kampen American Capital Insured Income Trust (Intermediate Term) Series 1 through 62
Van Kampen Merritt Select Equity Trust Series 1
Van Kampen Merritt Select Equity and Treasury Trust Series 1
Washington Insured Municipals Income Trust Series 1
West Virginia Insured Municipals Income Trust Series 1 through 7
Principal Financial Institutions Trust Series 1
Internet Trust Series 1 through 5
Michigan Real Estate Income and Growth Trust Series 1
Strategic Ten Trust, United States Series 1 through 14
Strategic Ten Trust, United Kingdom Series 1 through 12
Strategic Ten Trust, Hong Kong Series 1 through 12
Strategic Five Trust, United States Series 1 through 8
Global Fifteen Trust Series 1 through 2
Global Thirty Trust Series 1 through 3
Great International Firms Trust Series 1 through 3
Undervalued Growth Opportunities Trust Series 1
Emerging Growth and Treasury Series 1
Global Blue Chip Trust Series 1
Renaissance Trust Series 1
Blue Chip Opportunity and Treasury Trust Series 1 through 4
Wheat First Strategic Opportunity Unit Trust Series 1
Baby Boomer Opportunity Trust Series 1 through 2
</TABLE>

<PAGE> 1
EXHIBIT 17 (b)
Officers
Van Kampen American Capital Distributors, Inc.

NAME OFFICE LOCATION
- ---- ------ --------
<S> <C> <C>
Don G. Powell Chairman & Chief Executive Officer Houston, TX

William R. Molinari President & Chief Operating Oakbrook Terrace, IL
Officer

Ronald A. Nyberg Executive Vice President, General Oakbrook Terrace, IL
Counsel & Assistant Secretary

William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX

Robert A. Broman Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL
Douglas B. Gehrman Sr. Vice President Houston, TX
Richard D. Humphrey Sr. Vice President Houston, TX
D. Bruce Johnston Sr. Vice President Oakbrook Terrace, IL
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Mark T. McGannon Sr. Vice President Oakbrook Terrace, IL
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace,
Robert S. West Sr. Vice President Oakbrook Terrace, IL
John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL

Dominic C. Martellaro 1st Vice President Danville, CA
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
Michael L. Stallard 1st Vice President Oakbrook Terrace, IL
Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL

Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Sheldon Barker Vice President Moon, PA
Patricia A. Bettlach Vice President Chesterfield, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Michael P. Boos Vice President Oakbrook Terrace, IL
Robert C. Brooks Vice President Oakbrook Terrace, IL
Brooksley Burke Vice President Marina Del Ray, CA
William F Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Christine Cleary Byrum Vice President Tampa, FL
Glenn M. Cackovic Vice President Laguna Niguel, CA
Joseph N. Caggiano Vice President New York, NY
</TABLE>
<PAGE> 2

<TABLE>
<S> <C> <C>
Richard J. Charlino Vice President Houston, TX
Deanna Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Suzanne Cummings Vice President Oakbrook Terrace, IL
Ken DeFrancesca Vice President Oakbrook Terrace, IL
Daniel R. DeJong Vice President Oakbrook Terrace, IL
Tracey M. DeLusant Vice President New York, NY
Mark B. Doremus Vice President Houston, TX
Michael E. Eccleston Vice President Oakbrook Terrace, IL
Jonathan Eckard Vice President Tampa, FL
Charles Edward Fisher Vice President Naperville, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhoven Vice President Englewood, CO
Charles Friday Vice President Gibsonia, PA
Erich P. Gerth Vice President Piedmont, CA
Richard G. Golod Vice President Annapolis, MD
Timothy D. Griffith Vice President Kirkland, WA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John A. Hanhauser Vice President Philadelphia, PA
John G. Hansen Vice President Oakbrook Terrace, IL
Eric J. Hargens Vice President Orlando, FL
Calvin B. Hays Vice President Richmond, VA
Joseph Hays Vice President Cherry Hill, NJ
Gregory Heffington Vice President Ft. Collins, CO
Scott F. Heyer Vice President Tampa, FL
Susan J. Hill Vice President Oakbrook Terrace, IL
David S. Hogaboom Vice President Oakbrook Terrace, IL
Bryn M. Hoggard Vice President Houston, TX
Robert S. Hunt Vice President Phoenix, MD
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Jeffrey S. Kinney Vice President Overland Park, KS
Dana R. Klein Vice President Oakbrook Terrace, IL
Ann Marie Klingenhagen Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
Richard D. Kozlowski Vice President Atlanta, GA
Thomas W. Knowles Vice President Cary, NC
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Statten Island, NY
S. William Lehew III Vice President Charlotte, NC
Tony E. Leal Vice President Daphne, AL
Eric Levinson Vice President San Francisco, CA
Jonathan Linstra Vice President Oakbrook Terrace, IL
Walter Lynn Vice President Flower Mound, TX
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Carl Mayfield Vice President Lakewood, CO
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
John Mills Vice President Kenner, LA
</TABLE>
<PAGE> 3

<TABLE>
<S> <C> <C>
Ted Morrow Vice President Dallas, TX
Robert Muller, Jr. Vice President Cypress, TX
Michael D. Ossmen Vice President Oakbrook Terrace, IL
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Anthony Piazza Vice President Old Bridge, NJ
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Fairlawn, OH
Daniel D. Reams Vice President Royal Oak, MI
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
Thomas Rowley Vice President St. Louis, MO
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Bedford Corners, NY
Ronald J. Schuster Vice President Tampa, FL
Jeffrey C. Shirk Vice President Swampscott, MA
Kimberly M. Spangler Vice President Fairfax, VA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Gary R. Steele Vice President Philadelphia, PA
Richard Stefanec Vice President Los Angeles, CA
James D. Stevens Vice President North Andover, MA
William C. Strafford Vice President Granger, IN
Eric Studer Vice President Flemington, NJ
David A. Tabone Vice President Scottsdale, AZ
James C. Taylor Vice President Naperville, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Todd Volkman Vice President Austin, TX
Christopher Walsh Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Sandra A. Waterworth Vice President and Assistant Oakbrook Terrace, IL
Secretary
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Kirk Wiggins Vice President Arlington, TX
James R. Yount Vice President Mercer Island, WA
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Nicholas Dalmaso Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX
Walter C. Gray Asst. Vice President Houston, TX
Michael B. Kollins Asst. Vice President Oakbrook Terrace, IL
Laurie L. Jones Asst. Vice President Houston, TX
Ivan R. Lowe Asst. Vice President Houston, TX
Linda S. MacAyeil Asst. Vice President Oakbrook Terrace, IL
Stuart R. Moehlman Asst. Vice President Houston, TX
Gregory S. Parker Asst. Vice President Houston, TX
David B. Partain Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Michael Quinn Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
</TABLE>

<PAGE> 4

<TABLE>
<S> <C> <C>
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
Andrew J. Scherer Asst. Vice President Oakbrook Terrace, IL
Traci T. Tighe Asst. Vice President Oakbrook Terrace, IL
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Robert A. Watson Asst. Vice President Oakbrook Terrace, IL
Natalie Wilson Asst. Vice President New York, NY
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL

Gina M. Costello Asst. Secretary Oakbrook Terrace, IL
Cathy Napoli Asst. Secretary Oakbrook Terrace, IL

Elizabeth M. Brown Officer Houston, TX
John Browning Offcer Oakbrook Terrace. IL
Leticia George Officer Houston, TX
Sarah Kessler Officer Oakbrook Terrace, IL
William D. McLaughlin Officer Houston, TX
Becky Newman Officer Houston, TX
Rosemary Pretty Officer Houston, TX
Colette Saucedo Officer Houston, TX
Frederick Shepherd Officer Houston, TX
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>

<PAGE> 1
EXHIBIT 18

AMENDED
MULTI-CLASS PLAN

FOR

VAN KAMPEN AMERICAN CAPITAL FAMILY OF FUNDS

This Plan is adopted pursuant to Rule 18f-3 under the Act to provide
for the issuance and distribution of multiple classes of shares by each of the
Funds in accordance with the terms, procedures and conditions set forth below.
A majority of the Trustees of the Funds, including a majority of the Trustees
who are not interested persons of the Funds within the meaning of the Act,
found this Multi-Class Plan, including the expense allocations, to be in the
best interest of each Fund and each Class of Shares of each Fund. The Fund
adopted this Plan on January 26, 1996 and amended the Plan as of January 1,
1997.

A. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.

1. The Act - Investment Company Act of 1940, as amended.

2. CDSC - contingent deferred sales charge.

3. CDSC Period - the period of years following acquisition during
which Shares are assessed a CDSC upon redemption.

4. Class - a class of Shares of a Fund.

5. Class A Shares - shall have the meaning ascribed in Section B. 1.

6. Class B Shares - shall have the meaning ascribed in Section B. 1.

7. Class C Shares - shall have the meaning ascribed in Section B. 1.

8. Distribution Expenses - expenses incurred in activities which are
primarily intended to result in the distribution and sale of
Shares as defined in a Plan of Distribution and/or board
resolutions.

9. Distribution Fee - a fee paid by a Fund to the Distributor in
reimbursement of Distribution Expenses.

10. Distributor - Van Kampen American Capital Distributors, Inc.

11. Fund - an investment company listed on Exhibit A hereto and each
series thereof.

12. Money Market Fund - Van Kampen American Capital Reserve Fund or
Van Kampen American Capital Tax Free Money Market Fund.
<PAGE> 2

13. Plan of Distribution - Any plan adopted under Rule 12b-1 under the
Act with respect to payment of a Distribution Fee.

14. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders and/or
the maintenance of shareholder accounts.

15. Share - a share of beneficial interest in a Fund.

16. Trustees - the trustees of a Fund.

B. Classes. Each Fund may offer three Classes as follows:

1. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Trustees and set forth in the Funds' prospectus,
which may be reduced or eliminated for Money Market Funds,
larger purchases, under a combined purchase privilege, under a
right of accumulation, under a letter of intent or for certain
categories of purchasers as permitted by Rule 22(d) of the Act
and as set forth in the Fund's prospectus. Class A Shares that
are not subject to a front-end sales charge as a result of the
foregoing, may be subject to a CDSC for the CDSC Period set forth
in Section D.1. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with Rule
22c-1 and Section 22(d) of the Act and the rules and regulations
thereunder. Class A Shares shall be subject to ongoing Service
Fees approved from time to time by the Trustees and set forth in
the Funds' prospectus. Although shares of Van Kampen American
Capital Tax Free Money Market Fund are not designated as "Class A"
they are substantially similar to Class A Shares as defined herein
and shall be treated as Class A shares for the purposes of this
Plan.

2. Class B Shares. Class B Shares shall be (1) offered at net asset
value, (2) subject to a CDSC for the CDSC Period set forth in
Section D. 1, (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) converted to Class A
Shares three to ten years after the calendar month in which the
shareholder's order to purchase was accepted, which number of
years shall be as approved from time to time by the Trustees and
set forth in the respective Fund's prospectus.

3. Class C Shares. Class C Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC Period set forth
in Section D. 1. , (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) prior to January 1,
1997, converted to Class A Shares eight to fifteen years after
the calendar month in which the shareholder's order to purchase
was accepted, which number of years shall be as approved from
time to time by the Trustees and set forth in the respective
Fund's prospectus.

<PAGE> 3

C. Rights and Privileges of Classes. Each Class of each Fund will
represent an interest in the same portfolio of investments of that
Fund and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions except as
described otherwise herein.

D. CDSC. A CDSC may be imposed upon redemption of Class A Shares, Class
B Shares and Class C Shares that do not incur a front end sales charge
subject to the following conditions:

1. CDSC Period. The CDSC Period for Class A Shares and Class C Shares
shall be one year. The CDSC Period for Class B Shares shall be at
least three but not more than ten years as recommended by the
Distributor and approved by the Trustees.

2. CDSC Rate. The CDSC rate shall be recommended by the Distributor
and approved by the Trustees. If a CDSC is imposed for a period
greater than one year the CDSC rate must decline during the CDSC
Period such that (a) the CDSC rate is less in the last year of the
CDSC Period than in the first and (b) in each succeeding year the
CDSC rate shall be less than or equal to the CDSC rate in the
preceding year.

3. Disclosure and Changes. The CDSC rates and CDSC Period shall be
disclosed in a Fund's prospectus and may be decreased at the
discretion of the Distributor but may not be increased unless
approved as set forth in Section L.

4. Method of Calculation. The CDSC shall be assessed on an amount
equal to the lesser of the then current market value or the cost of
the Shares being redeemed. No sales charge shall be imposed on
increases in the net asset value of the Shares being redeemed above
the initial purchase price. No CDSC shall be assessed on Shares
derived from reinvestment of dividends or capital gains
distributions. The order in which Class B Shares and Class C
Shares are to be redeemed when not all of such Shares would be
subject toa CDSC shall be as determined by the Distributor in
accordance with the provisions of Rule 6c-10 under the Act.

5. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares under circumstances
previously approved by the Trustees and disclosed in the Fund's
prospectus or statement of additional information and as allowed
under Rule 6c-10 under the Act.

6. Calculation of offering price. The offering price of Shares subject
to a CDSC shall be computed in accordance with Rule 22c-1 and
Section 22(d) of the Act and the rules and regulations thereunder.

7. Retention by Distributor. The CDSC paid with respect to Shares of
a Fund may be retained by the Distributor to reimburse the
Distributor for commissions paid by it in

<PAGE> 4

connection with the sale of Shares subject to a CDSC and
Distribution Expenses to the extent of such commissions and
Distribution Expenses eligible for reimbursement and approved by
the Trustees.

E. Service and Distribution Fees. Class A Shares shall be subject to a
Service Fee and Class B and Class C Shares shall be subject to a
Service Fee and a Distribution Fee. The Service Fee applicable to any
class shall not exceed 0.25% per annum of the average daily net assets
of the Class and the Distribution Fee shall not exceed 0.75% per annum
of the average daily net assets of the Class. All other terms and
conditions with respect to Service Fees and Distribution Fees shall be
governed by the plans adopted by the Fund with respect to such fees
and Rule 12b-1 of the Act.

F. Conversion. Shares purchased through the reinvestment of dividends
and distributions paid on Shares subject to conversion shall be
treated as if held in a separate sub-account . Each time any Shares
in a Shareholder's account (other than Shares held in the sub-
account) convert to Class A Shares, a proportionate number of Shares
held in the sub-account shall also convert to Class A Shares. All
conversions shall be effected on the basis of the relative net asset
values of the two Classes without the imposition of any sales load or
other charge. So long as any Class of Shares converts into Class A
Shares, the Distributor shall waive or reimburse each Fund, or take
such other actions with the approval of the Trustees as may be
reasonably necessary, to ensure the expenses, including payments
authorized under a Plan of Distribution, applicable to the Class A
Shares are not higher than the expenses, including payments authorized
under the Plan of Distribution, applicable to the class of shares
converting into Class A Shares.

G. Allocation of Expenses, Income and Gains Among Classes.

1. Expenses applicable to a particular class. Each Class of each
Fund shall pay any Service Fee, Distribution Fee and CDSC
applicable to that Class. Other expenses applicable to a
particular Class such as incremental transfer agency fees, but not
including advisory or custodial fees or other expenses related to
the management of the Fund's assets, shall be allocated between
Classes in different amounts if they are actually incurred in
different amounts by the Classes or the Classes receive services
of a different kind or to a different degree than other Classes.

2. Distribution Expenses. Distribution Expenses actually
attributable to the sale of all Classes shall be allocated to each
Class based upon the ratio which sales of each Class bears to the
sales of all Shares of the Fund. For this purpose, Shares issued
upon reinvestment of dividends or distributions, upon conversion
from Class B Shares or Class C Shares to Class A Shares or upon
stock splits will not be considered sales.

3. Income, capital gains and losses, and other expenses applicable to
all Classes. Income, realized and unrealized capital gains and
losses, and expenses such as advisory fees applicable to all
Classes shall be allocated to each Class on the basis of the net
asset value of that Class in relation to the net asset value of
the Fund.

<PAGE> 5

4. Determination of nature of expenses. The Trustees shall determine
in their sole discretion whether any expense other than those
listed herein is properly treated as attributed to a particular
Class or all Classes.

H. Exchange Privilege. Exchanges of Shares shall be permitted between
Funds as follows.

1. General. Shares of one Fund may be exchanged for Shares of the
same Class of another Fund at net asset value and without sales
charge, provided that

a. The Distributor may specify that certain Funds may not be
exchanged within a designated period, which shall not exceed
90 days, after acquisition without prior Distributor approval.

b. Class A Shares of a Money Market Fund that were not acquired
in exchange for Class B or Class C Shares of a Fund may be
exchanged for Class A Shares of another Fund only upon payment
of the excess, if any, of the sales charge rate applicable to
the Shares being acquired over the sales charge rate
previously paid.

c. Shares of a Money Market Fund acquired through an exchange of
Class B Shares or Class C Shares may be exchanged only for the
same Class of another Fund as the Class they were acquired in
exchange for or any Class into which those shares were
converted.

2. Target Fund. Shares of Van Kampen American Capital Government
Target Fund may be exchanged for Class A Shares of a Fund.

3. CDSC Computation. The acquired Shares will remain subject to the
CDSC rate schedule and CDSC Period for the original Fund upon the
redemption of the Shares from the Van Kampen American Capital
complex of funds. For purposes of computing the CDSC payable on a
disposition of the new Shares, the holding period for the
original Shares shall be added to the holding period of the new
Shares.

I. Voting Rights of Classes.

1. Shareholders of each Class shall have exclusive voting rights on
any matter submitted to them that relates solely to the Plan of
Distribution related to that Class, provided that

a. If any amendment is proposed to the plan under which Service
Fees are paid with respect to Class A Shares of a Fund that
would increase materially the amount to be borne by Class A
Shares under that plan, then no Class B Shares or Class C
Shares shall convert into Class A Shares of that Fund until
the holders of Class B Shares and Class C Shares of that Fund
have also approved the proposed amendment.

<PAGE> 6

b. If the holders of either the Class B Shares and/or Class C
Shares referred to in subparagraph a. do not approve the
proposed amendment, the Trustees of the Fund and the
Distributor shall take such action as is necessary to ensure
that the Class voting against the amendment shall convert into
another Class identical in all material respects to Class A
Shares of the Fund as constituted prior to the amendment.

2. Shareholders shall have separate voting rights on any matter
submitted to shareholders in which the interest of one Class
differs from the interests of any other Class.

J. Dividends. Dividends paid by a Fund with respect to each Class, to
the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in substantially
the same amount, except any Distribution Fees,Service Fees or
incremental expenses relating to a particular Class will be borne
exclusively by that Class.

K. Reports to Trustees. The Distributor shall provide to the Trustees of
each Fund quarterly and annual statements concerning distribution and
Shareholder servicing expenditures complying with paragraph (b)(3)(ii)
of Rule 12b-1 of the Act, as it may be amended from time to time. The
Distributors also shall provide the Trustees such information as the
Trustees may from time to time deem to be reasonably necessary to
evaluate this Plan.

L. Amendment. Any material amendment to this Plan shall be approved by
the affirmative vote of a majority of the Trustees of a Fund,
including the affirmative vote of the trustees of the Fund
who are not interested persons of the Fund, except that any amendment
that increases the CDSC rate schedule or CDSC Period must also be
approved by the affirmative vote of a majority of the Shares of the
affected Class. The Distributor shall provide the Trustees such
information as may be reasonably necessary to evaluate any amendment
to this Plan.

<PAGE> 7
EXHIBIT A

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

<PAGE> 1

EXHIBIT (24)

POWER OF ATTORNEY

The undersigned, being officers and trustees of each of the Van Kampen
American Capital Open-End Trusts, as indicated on Schedule 1 attached hereto and
incorporated by reference, each a Delaware business trust, except for the Van
Kampen American Capital Pennsylvania Tax Free Income Fund, being a Pennsylvania
business trust (individually, a "Trust"), do hereby, in the capacities shown
below, individually appoint Dennis J. McDonnell and Ronald A. Nyberg, each of
Oakbrook Terrace, Illinois, and each of them, as the agents and
attorneys-in-fact with full power of substitution and resubstitution, for each
of the undersigned, to execute and deliver, for and on behalf of the
undersigned, any and all amendments to the Registration Statement filed by each
Trust with the Securities and Exchange Commission pursuant to the provisions of
the Securities Act of 1933 and the Investment Company Act of 1940.

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

Dated: April 15, 1997

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ FERNANDO SISTO, SC.D. Trustee
- -----------------------------------------------------
Fernando Sisto, Sc.D.

/s/ DENNIS J. MCDONNELL President and Trustee
- -----------------------------------------------------
Dennis J. McDonnell

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

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

/s/ PHILLIP ROONEY Trustee
- -----------------------------------------------------
Phillip Rooney

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

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

/s/ WAYNE W. WHALEN Trustee and Chairman
- -----------------------------------------------------
Wayne W. Whalen

Trustee
- -----------------------------------------------------
Jerome L. Robinson

/s/ EDWARD C. WOOD III Vice President and Chief Financial Officer
- -----------------------------------------------------
Edward C. Wood III
</TABLE>

2
<PAGE> 2

SCHEDULE 1

<TABLE>
<S> <C>
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
3. VAN KAMPEN AMERICAN CAPITAL TRUST
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME
5. FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
8. VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
9. VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
10. VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
11. VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
12. VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
13. VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
14. VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
15. VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND
16. VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
17. VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
18. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
19. VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
20. VAN KAMPEN AMERICAN CAPITAL PACE FUND
21. VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
22. VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
23. VAN KAMPEN AMERICAN CAPITAL SMALL CAPITALIZATION FUND
24. VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
25. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
26. VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
27. VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> VKAC U.S. GOVERNMENT FUND - A SHARES
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2948101<F1>
<INVESTMENTS-AT-VALUE> 2980387<F1>
<RECEIVABLES> 30600<F1>
<ASSETS-OTHER> 246<F1>
<OTHER-ITEMS-ASSETS> 1<F1>
<TOTAL-ASSETS> 3011234<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 22053<F1>
<TOTAL-LIABILITIES> 22053<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 2778287
<SHARES-COMMON-STOCK> 177062
<SHARES-COMMON-PRIOR> 198187
<ACCUMULATED-NII-CURRENT> 6188<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (302395)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 28986<F1>
<NET-ASSETS> 2560059
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 253377<F1>
<OTHER-INCOME> 10476<F1>
<EXPENSES-NET> 33007<F1>
<NET-INVESTMENT-INCOME> 230846<F1>
<REALIZED-GAINS-CURRENT> (5772)<F1>
<APPREC-INCREASE-CURRENT> (108498)<F1>
<NET-CHANGE-FROM-OPS> 116576<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (200824)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3307
<NUMBER-OF-SHARES-REDEEMED> (31284)
<SHARES-REINVESTED> 6853
<NET-CHANGE-IN-ASSETS> (402814)
<ACCUMULATED-NII-PRIOR> 4934<F1>
<ACCUMULATED-GAINS-PRIOR> (453693)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 16225<F1>
<INTEREST-EXPENSE> 692<F1>
<GROSS-EXPENSE> 33017<F1>
<AVERAGE-NET-ASSETS> 2724881
<PER-SHARE-NAV-BEGIN> 14.950
<PER-SHARE-NII> 1.069
<PER-SHARE-GAIN-APPREC> (.495)
<PER-SHARE-DIVIDEND> (1.065)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.459
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> VKAC U.S. GOVERNMENT FUND - B SHARES
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2948101<F1>
<INVESTMENTS-AT-VALUE> 2980387<F1>
<RECEIVABLES> 30600<F1>
<ASSETS-OTHER> 246<F1>
<OTHER-ITEMS-ASSETS> 1<F1>
<TOTAL-ASSETS> 3011234<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 22053<F1>
<TOTAL-LIABILITIES> 22053<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 462644
<SHARES-COMMON-STOCK> 28710
<SHARES-COMMON-PRIOR> 31218
<ACCUMULATED-NII-CURRENT> 6188<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (302395)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 28986<F1>
<NET-ASSETS> 414773
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 253377<F1>
<OTHER-INCOME> 10476<F1>
<EXPENSES-NET> 33007<F1>
<NET-INVESTMENT-INCOME> 230846<F1>
<REALIZED-GAINS-CURRENT> (5772)<F1>
<APPREC-INCREASE-CURRENT> (108498)<F1>
<NET-CHANGE-FROM-OPS> 116576<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (28928)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2703
<NUMBER-OF-SHARES-REDEEMED> (6167)
<SHARES-REINVESTED> 956
<NET-CHANGE-IN-ASSETS> (51887)
<ACCUMULATED-NII-PRIOR> 4934<F1>
<ACCUMULATED-GAINS-PRIOR> (453693)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 16225<F1>
<INTEREST-EXPENSE> 692<F1>
<GROSS-EXPENSE> 33017<F1>
<AVERAGE-NET-ASSETS> 437967
<PER-SHARE-NAV-BEGIN> 14.948
<PER-SHARE-NII> .947
<PER-SHARE-GAIN-APPREC> (.494)
<PER-SHARE-DIVIDEND> (.954)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.447
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> VKAC U.S. GOVERNMENT FUND - C SHARES
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2948101<F1>
<INVESTMENTS-AT-VALUE> 2980387<F1>
<RECEIVABLES> 30600<F1>
<ASSETS-OTHER> 246<F1>
<OTHER-ITEMS-ASSETS> 1<F1>
<TOTAL-ASSETS> 3011234<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 22053<F1>
<TOTAL-LIABILITIES> 22053<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 15470
<SHARES-COMMON-STOCK> 993
<SHARES-COMMON-PRIOR> 888
<ACCUMULATED-NII-CURRENT> 6188<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (302395)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 28986<F1>
<NET-ASSETS> 14350
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 253377<F1>
<OTHER-INCOME> 10476<F1>
<EXPENSES-NET> 33007<F1>
<NET-INVESTMENT-INCOME> 230846<F1>
<REALIZED-GAINS-CURRENT> (5772)<F1>
<APPREC-INCREASE-CURRENT> (108498)<F1>
<NET-CHANGE-FROM-OPS> 116576<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (960)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 454
<NUMBER-OF-SHARES-REDEEMED> (387)
<SHARES-REINVESTED> 38
<NET-CHANGE-IN-ASSETS> 1074
<ACCUMULATED-NII-PRIOR> 4934<F1>
<ACCUMULATED-GAINS-PRIOR> (453693)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 16225<F1>
<INTEREST-EXPENSE> 692<F1>
<GROSS-EXPENSE> 33017<F1>
<AVERAGE-NET-ASSETS> 14531
<PER-SHARE-NAV-BEGIN> 14.948
<PER-SHARE-NII> .943
<PER-SHARE-GAIN-APPREC> (.489)
<PER-SHARE-DIVIDEND> (.954)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.448
<EXPENSE-RATIO> 1.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>

</TABLE>