<PAGE> 1
SUPPLEMENT, DATED MAY 1, 1995 TO
AMERICAN CAPITAL TAX-EXEMPT TRUST PROSPECTUS
1. Effective today, the Distributor has increased the ongoing payments to
broker-dealers and other Service Organizations with respect to Class C shares.
The Distributor will now pay broker-dealers and other Service Organizations
ongoing commissions and transaction fees of up to 0.75% of the average daily net
assets of the Fund's Class C shares for the second through tenth year after
purchase for Class C shares sold on or after May 1, 1995. Broker-dealers and
other Service Organizations will still be paid ongoing commissions and
transaction fees for the second through tenth year after purchase of up to 0.65%
for Class C shares sold before May 1, 1995.
2. The first two paragraphs of "Shareholder Services -- Shareholder
Services Applicable to all Classes -- Exchange Privilege" are amended to read in
their entirety as follows:
EXCHANGE PRIVILEGE. Shares of the High Yield Municipal Portfolio,
Insured Municipal Portfolio or of any Participating Fund (listed herein
under "Purchase of Shares -- Class A Shares -- Volume Discounts") other
than Government Target, may be exchanged for shares of the same class of
any other fund without sales charge, provided that shares of the High Yield
Municipal Portfolio and Insured Municipal Portfolio and shares of Corporate
Bond, Federal Mortgage, Global Managed, Government Trust, High Yield,
Municipal Bond, Real Estate, Tax-Exempt, Texas Municipal, Utilities, and
the American Capital Global Government Securities Fund of World Portfolio
are subject to a 30-day holding period requirement. Shares of Government
Target may be exchanged for Class A shares of the Fund without sales
charge. Class A shares of Reserve that were not acquired in exchange for
Class B or Class C shares of a Participating Fund may be exchanged for
Class A shares of the Fund 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. Shares of Reserve acquired through an exchange of
Class B or Class C shares may be exchanged only for the same class of
shares of a Participating Fund without incurring a contingent deferred
sales charge. Shares of any Participating Fund or Reserve may be exchanged
for shares of any other Participating Fund if shares of that Participating
Fund are available for sale; however, during periods of suspension of
sales, shares of a Participating Fund may be available for sale only to
existing shareholders of the Participating Fund. Additional Funds may be
added from time to time as a Participating Fund.
Class B and Class C shareholders of the Fund have the ability to
exchange their shares ("original shares") for the same class of shares of
any other American Capital fund that offers such class of shares ("new
shares") in an amount equal to the aggregate net asset value of the
original shares, without the payment of any contingent deferred sales
charge otherwise due upon redemption of the original shares. For purposes
of computing the contingent deferred sales charge payable upon a
disposition of the new shares, the holding period for the original shares
is added to the holding period of the new shares. Class B and Class C
shareholders would remain subject to the contingent deferred sales charge
imposed by the
<PAGE> 2
original fund upon their redemption from the American Capital complex of
funds. The contingent deferred sales charge is based on the holding period
requirements of the original fund.
3. Effective today, the dividend procedures for the Fund have been changed
so that all shares earn daily dividends through the day such shares are
processed for payment on redemption rather than through the day before such
shares are processed for payment.
4. The following should be added as the last paragraph under the section
entitled "The Fund and Its Management":
The Adviser may utilize at its own expense credit analysis, research
and trading support services provided by its affiliate, Van Kampen American
Capital Investment Advisory Corp. (formerly Van Kampen Merritt Investment
Advisory Corp.).
5. The following should be added under the section entitled "Purchase of
Shares -- General":
Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by registered
representatives and members of their families to locations within or
outside of the United States for meetings or seminars of a business nature.
