<PAGE> 1
Rule 14a-6(b)
MERGER
COMBINING SIMILAR FUNDS ENHANCES
EFFICIENCY
One of the many benefits to the successful merger of Van Kampen Merritt and
American Capital investment management companies is the ability to combine
similar funds. By consolidating certain overhead costs, we should be able to
operate these funds more efficiently.
We're proposing to combine six pairs of funds, each of which is subject to
shareholder approval (see box for listing). While the idea of combining two
mutual funds into one may seem complicated, in reality, you will see minimal
impact from these combinations.
We will automatically convert your shares to the new fund once the
combinations are approved. At that time, shareholders of the acquired fund
will receive shares of the acquiring fund approximately equal in value to their
shares of the acquired fund immediately prior to the combination. You do not
have to pay any sales loads, commissions or transaction fees in connection with
these fund reorganizations, and you will receive written confirmation once this
conversion takes place.
Combining these funds enhances our primary goal: creating and preserving
wealth for investors. We plan to achieve economics of scale and eliminate many
of the costs of operating each of the funds separately. For example, we expect
to be able to spread certain costs, such as accounting, legal and printing
expenses, over a larger asset base. This should reduce per-share expense
levels.
Additionally, higher net asset levels should benefit portfolio management
by permitting larger investments, which may result in reduced transaction costs
or more favorable pricing. Furthermore, higher net asset levels also should
allow for greater portfolio diversity. Investors who have any questions may
call the Van Kampen American Capital Investor Services line at 1-800-421-5666
from 7 a.m. to 7 p.m., Central time, Monday through Friday.
<PAGE> 2
SIX FUNDS TARGETED FOR MERGING
------------------------------
We're proposing to combine the following funds, and they will continue to be
managed by a team of experienced investment professionals.
<TABLE>
<CAPTION>
combines with to become NEW FUND NAME
==========================================================================================================
<S> <C> <C>
American Capital Van Kampen Merritt Van Kampen American Capital
Utilities Income Fund Utility Fund Utility Fund
----------------------------------------------------------------------------------------------------------
Van Kampen Merritt American Capital Van Kampen American Capital
Money Market Fund Reserve Fund Reserve Fund
----------------------------------------------------------------------------------------------------------
Van Kampen Merritt American Capital Van Kampen American Capital
Growth and Income Fund Growth and Income Fund Growth and Income Fund
----------------------------------------------------------------------------------------------------------
Van Kampen Merritt American Capital Van Kampen American Capital
Adjustable Rate Federal Mortgage Trust Limited Maturity
U.S. Government Fund Government Fund
----------------------------------------------------------------------------------------------------------
American Capital Van Kampen Merritt Van Kampen American Capital
Municipal Bond Fund Municipal Income Fund Municipal Income Fund
----------------------------------------------------------------------------------------------------------
American Capital Van Kampen Merritt Van Kampen American Capital
Tax-Exempt Trust-Insured Insured Tax Free Income Fund Insured Tax Free Income Fund
Municipal Portfolio
----------------------------------------------------------------------------------------------------------
</TABLE>
Effective August 1:
FOUR FUNDS RECEIVE NEW NAMES
------------------------
What's in a name? A lot if you're trying to track the performance of your
investments.
So take note of a simple change we're implementing to maintain a cohesive
label for our family of funds. Each fund in the group is now named after our
consolidated company, Van Kampen American Capital. The changes took
effect throughout the month of August, but newspaper mutual fund listings won't
reflect the new names until October 6. In the meantime, continue looking under
the old company names to view your fund's performance data. At no point will
the funds be listed under both American Capital and Van Kampen Merritt.
Individually, the beginning of each fund's name will change from Van Kampen
Merritt or American Capital to VAN KAMPEN AMERICAN CAPITAL. The actual fund
title (e.g. Global Equity Fund, Balanced Fund) will remain the same in most
cases. For example, the Van Kampen Merritt Balanced-Fund's new name will be Van
Kampen American Capital Balanced Fund.
Nevertheless, there are a few exceptions. Four of our funds will have
entirely new names:
OLD FUND NAME NEW FUND NAME
=============================================================================
American Capital Texas Municipal Van Kampen American Capital
Securities Fund Texas Tax Free Income Fund
-----------------------------------------------------------------------------
American Capital Federal Van Kampen American Capital
Mortgage Trust Limited Maturity Government Fund
-----------------------------------------------------------------------------
American Capital High Yield Van Kampen American Capital
Investments High Income Corporate Bond Fund
-----------------------------------------------------------------------------
American Capital Tax-Exempt Trust- Van Kampen American Capital
High Yield Municipal Portfolio High Yield Municipal Fund
<PAGE> 3
Rule 14a-6(c)
VKM FUND REORGANIZATION INTO AC FUND
PROXY STATEMENT Q & A
VKM GROWTH & INCOME FUND INTO VKAC GROWTH & INCOME FUND
VKAC MONEY MARKET FUND INTO VKAC RESERVE FUND
VKAC AJUSTABLE RATE US GOVERNMENT FUND INTO VKAC LIMITED MATURITY
GOVERNMENT FUND
Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. You are being asked to vote on a proposed Reorganization which calls for VK
Fund shareholders to become shareholders of an AC Fund which pursues a
substantially similar investment objective.
Q. HOW WILL THE REORGANIZATION AFFECT ME?
A. The assets and liabilities of your Fund will be combined with those of the
AC Fund and you will become a shareholder of the AC Fund. You will
receive shares of the AC Fund approximately equal in value to the shares of
the VK Fund that you hold immediately prior to the Reorganization.
Q. WHY IS THE REORGANIZATION BEING RECOMMENDED?
A. The primary purposes of the Reorganization are to seek to achieve future
economies of scale and eliminate certain costs associated with
operating the VK Fund and the AC Fund separately. The Reorganization will
result in combining the assets and liabilities of the VK Fund with those of
the VK Fund and consolidating their operations.
Q. HOW WILL THIS BENEFIT ME?
A. The Reorganization is intended to provide various benefits to shareholders.
For example, higher net asset levels should enable the AC Fund to
spread such costs as accounting, legal and printing expenses over a larger
asset base, thereby potentially reducing per share expense levels. Higher
net asset levels also may benefit portfolio management by permitting larger
individual portfolio investments that may result in reduced transaction
costs or more favorable pricing and by providing the opportunity for
greater portfolio diversity. These benefits, in turn, should have a
favorable effect on the relative performance of the AC Fund.
FOR INTERNAL USE ONLY
<PAGE> 4
Q. WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR TRANSACTION FEES IN
CONNECTION WITH THE REORGANIZATION?
A. No. The full value of your VK Fund shares will be exchanged for shares of
the corresponding class of the AC Fund without any sales load,
commission or other transactional fee being imposed.
Q. WHAT WILL I HAVE TO DO TO OPEN AN ACCOUNT IN THE AC FUND? WHAT HAPPENS
TO MY ACCOUNT IF THE REORGANIZATION IS APPROVED?
A. Your interest in Class A, B or C shares of the VK Fund will automatically
be converted into the same class of shares of the AC Fund and we will
send you written confirmation that the change has taken place.
Q. DO CERTIFICATES NEED TO BE REISSUED?
A. No.
Q. WILL NEW CERTIFICATES BE ISSUED?
A. No certificates for AC Fund shares will be issued in connection with the
Reorganization, although certificates will be available upon request.
Q. WHO WILL ADVISE THE AC FUND AND PROVIDE OTHER SERVICES?
A. VKAC Asset Management, Inc. provides advisory services to the AC Fund
under an arrangement that is substantially similar to that currently in
effect between the VK Fund and VK Adviser. Both the VK and AC Funds are
already served by the same Distributor, custodian bank and transfer agent.
Q. WHERE DO I MAIL MY PROXY CARD(S)?
A. You may use the postage-paid envelope enclosed with your proxy statement,
or mail your proxy card(s) to:
Proxy Tabulator
P.O. Box 9111
Hingham, MA 02043
FOR INTERNAL USE ONLY
<PAGE> 5
Q. WHEN AND WHERE IS THE SHAREHOLDER MEETING BEING HELD?
A. The meeting will be held at the Hyatt Regency Oak Brook, 1909 Spring Road,
Oak Brook, Illinois 60521, on Friday, September 15, 1995, at 2:00 p.m.
Q. WILL I HAVE TO PAY ANY FEDERAL TAXES AS A RESULT OF THE REORGAZIATION?
A. The Reorganization is intended to qualify as a "reorganization" under
Internal Revenue Code. In such an event a shareholder of the VK Fund
will recognize no gain or loss upon receipt of solely the shares of the AC
Fund in connection with the Reorganization.
Q. WHAT IF I REDEEM MY VK SHARES BEFORE THE REORGANIZATION TAKES PLACE?
A. The redemption will be treated as a normal sale of shares and will be a
taxable transaction (unless your account is an individual retirement
account or other tax-qualified retirement plan and is not subject to
taxation).
PLEASE REMEMBER TO "STIK" ALL PROXY CALLS AND INDICATE THE NATURE OF THE CALL
IN THE "FREE FORM" LINE.
FOR INTERNAL USE ONLY
