VAN KAMPEN AMERICAN CAPITAL TRUST, 485BPOS, 1996-10-28

VAN KAMPEN AMERICAN CAPITAL TRUST
485BPOS, 1996-10-28

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1996

REGISTRATION NOS. 33-04410
811-4629
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 /X/

Post-Effective Amendment No. 41 /X/
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 42 /X/

VAN KAMPEN AMERICAN CAPITAL TRUST
(Exact Name of Registrant as Specified in Agreement and Declaration of Trust)

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

(630) 684-6000

(Registrant's Telephone Number)

<TABLE>
<S> <C>
Ronald A. Nyberg, Esq. Copies to:
Executive Vice President, Wayne W. Whalen, Esq.
General Counsel and Secretary Thomas A. Hale, Esq.
Van Kampen American Capital, Inc. Skadden, Arps, Slate, Meagher & Flom
One Parkview Plaza 333 West Wacker Drive
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60606
(Name and Address of Agent for Service) (312) 407-0700
</TABLE>

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

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) of Rule 485.
/ / 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 and intends to
file with the Securities and Exchange Commission a Form 24f-2 for its fiscal
year ending June 30, 1997 on or before August 29, 1997.

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<PAGE> 2

EXPLANATORY NOTE

This Post-Effective Amendment No. 41 to the Registrant's Registration
Statement contains three Prospectuses and three Statements of Additional
Information describing three series of the Registrant (the "Applicable Series").
The Registration Statement is organized as follows:

Facing Page

Cross Reference Sheet with respect to the Applicable Series

Prospectuses with respect to the Applicable Series in the following order:

Van Kampen American Capital High Yield Fund

Van Kampen American Capital Short-Term Global Income Fund

Van Kampen American Capital Strategic Income Fund

Statements of Additional Information with respect to the Applicable Series
in the following order:

Van Kampen American Capital High Yield Fund

Van Kampen American Capital Short-Term Global Income Fund

Van Kampen American Capital Strategic Income Fund

Part C Information

Exhibits
<PAGE> 3

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME 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............... PROSPECTUS SUMMARY; SHAREHOLDER TRANSACTION EXPENSES;
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
Item 3. Condensed Financial
Information.......... SHAREHOLDER TRANSACTION EXPENSES; ANNUAL FUND OPERATING
EXPENSES AND EXAMPLE; FINANCIAL HIGHLIGHTS; FUND
PERFORMANCE; SHAREHOLDER SERVICES; ADDITIONAL INFORMATION
Item 4. General Description of
Registrant........... THE FUND; INVESTMENT OBJECTIVES AND POLICIES; INVESTMENT
PRACTICES; DESCRIPTION OF SHARES OF THE FUND; ADDITIONAL
INFORMATION
Item 5. Management of the
Fund................. ANNUAL FUND OPERATING EXPENSES AND EXAMPLE; INVESTMENT
PRACTICES; INVESTMENT ADVISORY SERVICES; SHAREHOLDER
SERVICES; ALTERNATIVE SALES ARRANGEMENTS; PURCHASE OF
SHARES
Item 6. Capital Stock and Other
Securities........... DISTRIBUTIONS FROM THE FUND; REDEMPTION OF SHARES; THE
DISTRIBUTION AND SERVICE PLANS; TAX STATUS; ALTERNATIVE
SALES ARRANGEMENTS; PURCHASE OF SHARES; SHAREHOLDER
SERVICES; DESCRIPTION OF SHARES OF THE FUND; ADDITIONAL
INFORMATION
Item 7. Purchase of Securities
Being Offered........ SHAREHOLDER TRANSACTION EXPENSES; ALTERNATIVE SALES
ARRANGEMENTS; PURCHASE OF SHARES; THE DISTRIBUTION AND
SERVICE PLANS; FUND PERFORMANCE; SHAREHOLDER SERVICES;
ADDITIONAL INFORMATION
Item 8. Redemption or
Repurchase........... ALTERNATIVE SALES ARRANGEMENTS; PURCHASE OF SHARES;
REDEMPTION OF SHARES; SHAREHOLDER SERVICES
Item 9. Pending Legal
Proceedings.......... Not Applicable
</TABLE>

i.
<PAGE> 4

<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; 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....... Investment Advisory and Other Services; Trustees and
Officers; The Distributor; Legal Counsel; Notes to the
Financial Statements
Item 17. Brokerage Allocation... Portfolio Transactions and Brokerage Allocation
Item 18. Capital Stock and
Other Securities..... Contained in the Prospectus under the caption: DESCRIPTION
OF SHARES OF THE FUND; The Fund and the Trust
Item 19. Purchase, Redemption
and Pricing of
Securities Being
Offered.............. Contained in the Prospectus under captions: SHAREHOLDER
TRANSACTION EXPENSES; ALTERNATIVE SALES ALTERNATIVES;
PURCHASE OF SHARES; SHAREHOLDER SERVICES; REDEMPTION OF
SHARES
Item 20. Tax Status............. Contained In the Prospectus under the caption: TAX STATUS;
Tax Status of the Fund
Item 21. Underwriters........... The Distributor; Notes to Financial Statements
Item 22. Calculations of
Performance Data..... Contained in the Prospectus under the caption: FUND
PERFORMANCE; Performance Information
Item 23. Financial Statements... Contained in the Prospectus under the caption: FINANCIAL
HIGHLIGHTS; Independent Accountants Report; Financial
Statements; Notes to Financial Statements

</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> 5

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VAN KAMPEN AMERICAN CAPITAL
HIGH YIELD FUND
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Van Kampen American Capital High Yield Fund (the "Fund") is a diversified
open-end management investment company, commonly known as a mutual fund. The
Fund's primary investment objective is to provide a high level of current
income. As a secondary objective, the Fund seeks capital appreciation. The Fund
will attempt to achieve its investment objectives primarily through investment
in a diversified portfolio of medium and lower grade domestic corporate debt
securities. The Fund also may invest up to 35% of its assets in foreign
government and foreign corporate debt securities of similar quality. The Fund
may invest in debt securities rated between BB and D (inclusive) by Standard &
Poor's Ratings Group, Ba and C (inclusive) by Moody's Investors Service, Inc.,
comparably rated short-term debt obligations and unrated debt securities
determined by the Fund's investment adviser to be of comparable quality, which
securities are commonly referred to as "junk bonds."

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.

------------------
FOR ARIZONA AND WASHINGTON INVESTORS:
THESE ARE SPECULATIVE SECURITIES.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
FEDERALLY 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.

Additional information about the Fund is contained in a Statement of
Additional Information, dated October 28, 1996, containing additional
information about the Fund is hereby incorporated by reference in its entirety
into this Prospectus. A copy of the Fund's Statement of Additional Information
may be obtained without charge, by calling (800) 421-5666 or for
Telecommunication Device for the Deaf at (800) 772-8889. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is available along with other related materials at the
SEC's internet web site (http://www.sec.gov).

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

THIS PROSPECTUS IS DATED OCTOBER 28, 1996.

<PAGE> 6

(Continued from previous page.)

invest. See "Investment Objective and Policies." Investment in the Fund may not
be appropriate for all investors. Purchasers should carefully assess the risks
associated with an investment in this Fund.

The Fund's investment adviser is Van Kampen American Capital Investment
Advisory Corp (the "Adviser"). The Fund is a series of Van Kampen American
Capital Trust. This Prospectus sets forth the information about the Fund that a
prospective investor should know before investing. Please read and retain this
Prospectus for future reference. The address of the Fund is One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, and its telephone number is (800) 421-5666.

2
<PAGE> 7

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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................................. 4
Shareholder Transaction Expenses............................... 7
Annual Fund Operating Expenses and Example..................... 8
Financial Highlights........................................... 10
The Fund....................................................... 12
Investment Objectives and Policies............................. 12
Investment Practices........................................... 18
Investment Advisory Services................................... 23
Alternative Sales Arrangements................................. 24
Purchase of Shares............................................. 26
Shareholder Services........................................... 36
Redemption of Shares........................................... 40
The Distribution and Service Plans............................. 43
Distributions from the Fund.................................... 45
Tax Status..................................................... 46
Fund Performance............................................... 49
Description of Shares of the Fund.............................. 50
Additional Information......................................... 51
Appendix A: Ratings of Corporate Obligations................... A-1
</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.

3
<PAGE> 8

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PROSPECTUS SUMMARY
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THE FUND. Van Kampen American Capital High Yield Fund (the "Fund") is a
diversified series of Van Kampen American Capital Trust (the "Trust"). The Trust
is an open-end management investment company organized as a Delaware business
trust.

MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and
$25 minimum subsequent investment for each class of shares (or less as described
under "Purchase of Shares").

INVESTMENT OBJECTIVES. The Fund's primary investment objective is to provide a
high level of current income. As a secondary objective, the Fund seeks capital
appreciation. There can be no assurance the Fund will achieve its investment
objectives.

INVESTMENT POLICIES. The Fund will attempt to achieve its investment objectives
primarily through investment in a diversified portfolio of medium and lower
grade domestic corporate debt securities. The Fund also may invest up to 35% of
its assets in foreign government and foreign corporate debt securities of
similar quality as determined by the Fund's investment adviser, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser").

Medium grade debt securities are those rated BBB by Standard & Poor's Ratings
Group ("S&P") or Baa by Moody's Investor Services, Inc. ("Moody's"), comparably
rated short-term debt obligations and unrated debt securities determined by the
Adviser to be of comparable quality. Debt securities rated BBB by S&P generally
are regarded by S&P as having an adequate capacity to pay interest and repay
principal; adverse economic conditions or changing circumstances are, however,
more likely in S&P's view to lead to a weakened capacity to pay interest and
repay principal as compared with higher rated debt securities. Debt securities
rated Baa by Moody's generally are considered by Moody's as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured. In
Moody's view, interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. In Moody's view,
such securities lack outstanding investment characteristics and have speculative
characteristics as well.

Lower grade debt securities are those rated between BB and D (inclusive) by
S&P, Ba and C (inclusive) by Moody's, comparably rated short-term debt
obligations and unrated debt securities determined by the Adviser to be of
comparable quality, which securities sometimes are referred to as "junk bonds."
Debt securities rated BB, B, CCC, CC and C by S&P generally are regarded by S&P,
on balance, as significantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, in S&P's view

4
<PAGE> 9

these are outweighed by large uncertainties or major risk exposures to adverse
conditions. Debt securities rated C by S&P may be used to cover a situation
where a bankruptcy petition has been filed, but debt service payments are
continued. Debt securities rated D by S&P are in payment default, and payment of
interest or repayment of principal is in arrears. Debt securities rated Ba by
Moody's are judged to have speculative elements, their future cannot be as
well-assured. In Moody's view, often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Debt securities rated B by Moody's are viewed by
Moody's as generally lacking characteristics of the desirable investment. In
Moody's view, assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small. Debt
securities which are rated Caa by Moody's are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest. Bonds which are rated Ca by Moody's represent obligations
which are speculative in a high degree. Such issues are often in default or have
other market shortcomings. Bonds which are rated C by Moody's are the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing. A complete
description of the various S&P and Moody's rating categories is included as
Appendix A to this Prospectus.

Investment in medium and lower grade securities involves special risks as
compared with investment in higher grade securities, including potentially
greater sensitivity to a general economic downturn or a significant increase in
interest rates, greater market price volatility and less liquid secondary market
trading, among others. Investment in securities that are in default, or with
respect to which payment of interest or principal are in arrears, presents
additional special risk considerations. Investment in foreign securities
involves certain risks in addition to those associated with the domestic
securities in which the Fund may invest. There is no assurance that the Fund
will achieve its investment objective. The Fund may not be an appropriate
investment for all investors. The net asset value per share of the Fund can be
expected to increase or decrease depending on real or perceived changes in the
credit risks associated with its portfolio investments, changes in interest
rates and other factors affecting the credit markets generally. See "Investment
Objectives and Policies" and "Appendix A."

INVESTMENT PRACTICES. Subject to certain limitations, the Fund may enter into
strategic transactions, write covered call options, lend its portfolio
securities, enter into when issued or delayed delivery transactions, and enter
into repurchase and reverse repurchase agreements. These investment practices
entail certain risks. See "Investment Practices."

INVESTMENT RESULTS. The investment results of the Fund are shown in the table
of "Financial Highlights."

PURCHASE OF SHARES. Investors may elect to purchase Class A Shares, Class B
Shares or Class C Shares, each with different sales charges and expenses. The

5
<PAGE> 10

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 "Purchase of Shares."

REDEMPTION. Class A Shares may be redeemed at net asset value, without charge,
subject to conditions set forth herein. Shares sold subject to a contingent
deferred sales charge ("CDSC Shares") may be redeemed at net asset value less a
deferred sales charge which will vary among each class of CDSC Shares and with
the length of time a redeeming shareholder has owned such shares. CDSC Shares
redeemed after the expiration of the CDSC period applicable to the respective
class of CDSC Shares will not be subject to a deferred sales charge. The Fund
may require the redemption of shares if the value of an account is $500 or less.
See "Redemption of Shares".

INVESTMENT ADVISER. Van Kampen American Capital Investment Advisory Corp. is
the Fund's investment adviser.

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. distributes the
Fund's shares.

DISTRIBUTIONS FROM THE FUND. The Fund will declare distributions on a daily
basis and will pay such distributions from net investment income, net recognized
short-term capital gains and principal on a monthly basis. Long-term capital
gains, if any, are distributed annually. 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 different distribution and service fees and
administrative expenses relating to each class of shares will be borne
exclusively by the respective class of shares. See "Distributions from the
Fund."

The foregoing is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.

6
<PAGE> 11

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SHAREHOLDER TRANSACTION EXPENSES
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<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------------ ------------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as percentage of
the offering price).......... 4.75%(1) None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of the offering
price)....................... None None(3) None(3)
Deferred sales charge (as a
percentage of the lesser of
the original purchase price
or redemption proceeds)...... None(2) Year 1--4.00% Year 1--1.00%
Year 2--3.75% After--None
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>

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

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

(3) CDSC Shares received as reinvested dividends are 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 "The Distribution and Service
Plans."

7
<PAGE> 12

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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)........................ 0.75% 0.75% 0.75%
12b-1 fees(1) (as a percentage of average
daily
net assets).............................. 0.24%(2) 1.00% 1.00%
Other expenses (as a percentage of average
daily
net assets).............................. 0.32% 0.32% 0.31%(3)
Total expenses (as a percentage of average
daily
net assets).............................. 1.31% 2.07% 2.06%(3)
</TABLE>

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

(1) Includes a service fee of up to 0.25% (as a percentage of net asset value)
paid by the Fund as compensation for ongoing services rendered to investors.
With respect to each class of shares, amounts in excess of 0.25%, if any,
represent an asset based sales charge. The asset based sales charge with
respect to Class C Shares includes an amount of 0.75% (as a percentage of
net asset value) paid to investors' broker-dealers as sales compensation.
See "The Distribution and Service Plans."

(2) The Fund's distribution and service plans with respect to Class A Shares
provide that 12b-1 and service fees are charged only with respect to Class A
Shares of the Fund sold after the implementation date of such plans. Due to
the incremental "phase-in" of the Fund's 12b-1 and service plans with
respect to Class A Shares, it is anticipated that 12b-1 and service fees
attributable to Class A Shares will increase in accordance with such plans
to a maximum aggregate amount of 0.25% of the net assets attributable to the
Fund's Class A Shares. Accordingly, it is unlikely that future expenses will
remain consistent with those disclosed in the fee table. See "The
Distribution and Service Plans."

(3) In the absence of expense reimbursement, "Other expenses" would have been
0.32% for Class C Shares and "Total expenses" would have been 2.07% for
Class C Shares.

8
<PAGE> 13

EXAMPLE:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) an operating
expense ratio of 1.31% for Class A Shares,
2.07% for Class B Shares, and 2.06% for the
Class C Shares, (ii) a 5% annual return and
(iii) redemptions at the end of each time
period.
Class A Shares........................... $60 $ 87 $ 116 $ 198
Class B Shares........................... $61 $ 100 $ 126 $ 221*
Class C Shares........................... $31 $ 65 $ 111 $ 239
You would pay the following expenses on the
same $1,000 investment assuming no redemption
at the end of each period:
Class A Shares........................... $60 $ 87 $ 116 $ 198
Class B Shares........................... $21 $ 65 $ 111 $ 221*
Class C Shares........................... $21 $ 65 $ 111 $ 239
</TABLE>

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

* Based on conversion to Class A Shares after eight years.

The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above carried out to future years. The ten
year amount with respect to Class B Shares of the Fund reflects the lower
aggregate 12b-1 and service fees applicable to such shares after conversion to
Class A Shares. THE INFORMATION CONTAINED IN THE ABOVE TABLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESSER THAN THOSE SHOWN. For a more complete description of such
costs and expenses, see "Purchase of Shares," "Redemption of Shares,"
"Investment Advisory Services" and "The Distribution and Service Plans."

9
<PAGE> 14

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

FINANCIAL HIGHLIGHTS (for one share outstanding throughout the periods
indicated)

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

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 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 Fund's related 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 JUNE 30,
---------------------------------------------------------
1996 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................................ $ 9.398 $ 9.643 $10.380 $ 9.896 $ 9.202 $ 9.960
------- ------- ------- ------- ------- -------
Net Investment Income.................................................. .878 .844 .908 1.118 1.169 1.256
Net Realized and Unrealized Gain/Loss Securities....................... .147 (.099) (.595) .566 .813 (.604)
------- ------- ------- ------- ------- -------
Total from Investment Operations........................................ 1.025 .745 .313 1.684 1.982 .652
------- ------- ------- ------- ------- -------
Less:
Distributions from and in Excess of Net Investment Income.............. .880 .815 .950 1.129 1.189 1.297
Distributions from Net Realized Gain on Investments.................... .000 .000 .000 .000 .000 .000
Return of Capital Distributions........................................ .050 .175 .100 .071 .099 .113
------- ------- ------- ------- ------- -------
Total Distributions..................................................... .930 .990 1.050 1.200 1.288 1.410
------- ------- ------- ------- ------- -------
Net Asset Value, End of the Period...................................... $ 9.493 $ 9.398 $ 9.643 $10.380 $ 9.896 $ 9.202
======== ======== ======== ======== ======== ========
Total Return* (a)....................................................... 11.26% 8.50% 2.92% 18.08% 22.85% 8.22%
Net Assets at End of the Period (In millions)........................... $ 271.1 $ 253.3 $ 260.7 $ 251.5 $ 221.4 $ 199.5
Ratio of Expenses to Average Net Assets*................................ 1.31% 1.31% 1.32% 1.20% 1.42% 1.41%
Ratio of Net Investment Income to Average Net Assets*................... 9.16% 9.13% 8.85% 11.13% 12.12% 14.00%
Portfolio Turnover...................................................... 102% 152% 203% 198% 174% 158%
* If certain expenses had not been assumed by the Adviser, total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets.............................. 1.31% N/A N/A N/A N/A N/A
Ratio of Net Investment Income to Average Net Assets................. 9.15% N/A N/A N/A N/A N/A

1990 1989 1988 1987
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................................ $12.980 $13.650 $14.570 $14.336
------- ------- ------- -------
Net Investment Income.................................................. 1.608 1.650 1.586 1.426
Net Realized and Unrealized Gain/Loss Securities....................... (2.970) (.610) (.747) .326
------- ------- ------- -------
Total from Investment Operations........................................ (1.362) 1.040 .839 1.752
------- ------- ------- -------
Less:
Distributions from and in Excess of Net Investment Income.............. 1.608 1.650 1.619 1.412
Distributions from Net Realized Gain on Investments.................... .000 .000 .029 .106
Return of Capital Distributions........................................ .050 .060 .111 .000
------- ------- ------- -------
Total Distributions..................................................... 1.658 1.710 1.759 1.518
------- ------- ------- -------
Net Asset Value, End of the Period...................................... $ 9.960 $12.980 $13.650 $14.570
======== ======== ======== ========
Total Return* (a)....................................................... (10.88%) 7.96% 6.26% 12.83%
Net Assets at End of the Period (In millions)........................... $ 220.5 $ 353.8 $ 248.6 $ 121.3
Ratio of Expenses to Average Net Assets*................................ 1.28% 1.27% 1.23% 1.25%
Ratio of Net Investment Income to Average Net Assets*................... 13.68% 12.47% 11.36% 10.28%
Portfolio Turnover...................................................... 67% 120% 126% 135%
* If certain expenses had not been assumed by the Adviser, total return
follows:
Ratio of Expenses to Average Net Assets.............................. N/A N/A N/A N/A
Ratio of Net Investment Income to Average Net Assets................. N/A N/A N/A N/A
</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.

N/A = Not Applicable

See Financial Statements and Notes Thereto

10
<PAGE> 15

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

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

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

<TABLE>
<CAPTION>
CLASS B SHARES
--------------------------------------------------------
YEAR ENDED MAY 17, 1993
JUNE 30, (COMMENCEMENT
---------------------------------- OF DISTRIBUTION)
1996 1995 1994 TO JUNE 30, 1993
------- ------- -------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........................... $ 9.398 $ 9.638 $ 10.382 $ 10.190
------- ------- -------- ------
Net Investment Income............................................. .797 .788 .889 .117
Net Realized and Unrealized Gain/Loss on Securities............... .160 (.115) (.665) .217
------- ------- -------- ------
Total from Investment Operations................................... .957 .673 .224 .334
------- ------- -------- ------
Less:
Distributions from and in Excess of Net Investment Income......... .812 .751 .877 .128
Return of Capital Distributions................................... .046 .162 .091 .014
------- ------- -------- ------
Total Distributions................................................ .858 .913 .968 .142
------- ------- -------- ------
Net Asset Value, End of the Period................................. $ 9.497 $ 9.398 $ 9.638 $ 10.382
======== ======== ========= =================
Total Return*(a)................................................... 10.55% 7.61% 2.11% 3.27%**
Net Assets at End of the Period (In millions)...................... $ 97.1 $ 55.9 $ 33.2 $ 2.7
Ratio of Expenses to Average Net Assets*........................... 2.07% 2.04% 2.13% 2.06%
Ratio of Net Investment Income to Average Net Assets*.............. 8.39% 8.35% 7.94% 7.17%
Portfolio Turnover................................................. 102% 152% 203% 198%
* If certain expenses had not been assumed by the Adviser, total return would have been lower and the ratios would have been
as follows:
Ratio of Expenses to Average Net Assets......................... 2.07% N/A N/A N/A
Ratio of Net Investment Income to Average Net Assets............ 8.38% N/A N/A N/A

CLASS C SHARES
------------------------------------------
AUGUST 13, 1993
YEAR ENDED JUNE 30, (COMMENCEMENT
-------------------- OF DISTRIBUTION)
1996 1995 TO JUNE 30, 1994
------- ------- ----------------
<S> <<C> <C> <C>
Net Asset Value, Beginning of the Period........................... $ 9.396 $ 9.643 $ 10.340
------- ------- -------
Net Investment Income............................................. .828 .745 .761
Net Realized and Unrealized Gain/Loss on Securities............... .129 (.079) (.605)
------- ------- -------
Total from Investment Operations................................... .957 .666 .156
------- ------- -------
Less:
Distributions from and in Excess of Net Investment Income......... .812 .751 .763
Return of Capital Distributions................................... .046 .162 .090
------- ------- -------
Total Distributions................................................ .858 .913 .853
------- ------- -------
Net Asset Value, End of the Period................................. $ 9.495 $ 9.396 $ 9.643
======== ======== =================
Total Return*(a)................................................... 10.55% 7.61% 1.37%**
Net Assets at End of the Period (In millions)...................... $ 7.0 $ 2.0 $ 2.2
Ratio of Expenses to Average Net Assets*........................... 2.06% 2.12% 2.14%
Ratio of Net Investment Income to Average Net Assets*.............. 8.38% 8.13% 7.91%
Portfolio Turnover................................................. 102% 152% 203%
* If certain expenses had not been assumed by the Adviser, total r
as follows:
Ratio of Expenses to Average Net Assets......................... 2.07% N/A N/A
Ratio of Net Investment Income to Average Net Assets............ 8.38% N/A N/A
</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.

N/A = Not Applicable.

See Financial Statements and Notes Thereto

11
<PAGE> 16

- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------

Van Kampen American Capital High Yield Fund (the "Fund") is a mutual fund. A
mutual fund allows investors to pool their money with that of other investors in
order to obtain professional investment management. Mutual funds generally make
it possible for investors to obtain greater diversification of their investments
and to simplify their recordkeeping. The Fund is a separate diversified series
of Van Kampen American Capital Trust (the "Trust"). The Trust is an open-end
management investment company organized as a Delaware business trust.

Van Kampen American Capital Investment Advisory Corp. (the "Adviser") provides
investment advisory and administrative services to the Fund. The Adviser and its
affiliates also act as investment adviser to other mutual funds distributed by
Van Kampen American Capital Distributors, Inc. (the "Distributor"). To obtain
prospectuses and other information on any of these other funds, please call the
telephone number on the cover page of this Prospectus.

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

INVESTMENT OBJECTIVES AND POLICIES

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

The Fund's primary investment objective is to provide a high level of current
income. As a secondary objective, the Fund seeks capital appreciation. These
objectives are fundamental and cannot be changed without shareholder approval.
The Fund will attempt to achieve its investment objectives primarily through
investment in a diversified portfolio of medium and lower grade domestic
corporate debt securities. The Fund also may invest up to 35% of its assets in
foreign government and foreign corporate debt securities of similar quality as
determined by the Adviser. The Fund will invest in a broad range of issues
representing various companies and industries and traded on various markets.

Medium grade debt securities are those rated BBB by Standard & Poor's Ratings
Group ("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's"), comparably
rated short-term debt obligations and unrated debt securities determined by the
Adviser to be of comparable quality. Debt securities rated BBB by S&P generally
are regarded by S&P as having an adequate capacity to pay interest and repay
principal; adverse economic conditions or changing circumstances are, however,
more likely in S&P's view to lead to a weakened capacity to pay interest and
repay principal as compared with higher rated debt securities. Debt securities
rated Baa by Moody's generally are considered by Moody's as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured. In
Moody's view, interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. In Moody's view,
such securities lack outstanding investment characteristics and have speculative
characteristics as well.

Lower grade debt securities are those rated between BB and D (inclusive) by
S&P, Ba and C (inclusive) by Moody's, comparably rated short-term debt

12
<PAGE> 17

obligations and unrated debt securities determined by the Adviser to be of
comparable quality, which securities sometimes are referred to as "junk bonds".
Debt securities rated BB, B, CCC, CC and C by S&P generally are regarded by S&P,
on balance, as significantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation with respect to such securities. While such debt will likely have
some quality and protective characteristics, in S&P's view these are outweighed
by large uncertainties or major risk exposures to adverse conditions. Debt
securities rated C by S&P may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued. Debt
securities rated D by S&P are in default, and payment of interest or repayment
of principal is in arrears. The D rating is used when interest payments or
principal payments are not made on the date due even if the applicable grace
period has not expired, unless S&P believes that such payments will be made
during such grace period. Debt securities rated Ba by Moody's are judged to have
speculative elements, their future cannot be as well-assured. In Moody's view,
often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Debt securities rated B by Moody's are viewed by Moody's as generally lacking
characteristics of the desirable investment. In Moody's view, assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Debt securities which are rated Caa
by Moody's are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Bonds which
are rated Ca by Moody's represent obligations which are speculative in a high
degree. Such issues are often in default or have other market shortcomings.
Bonds which are rated C by Moody's are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing. A complete description of the various
S&P and Moody's rating categories is included as Appendix A to this Prospectus.

Investment in medium and lower grade securities involves special risks as
compared with investment in higher grade securities, including potentially
greater sensitivity to a general economic downturn or a significant increase in
interest rates, greater market price volatility and less liquid secondary market
trading, among others. Investment in securities that are in default, or with
respect to which payment of interest or repayment of principal is in arrears,
presents special risk considerations. The Fund may incur additional expenses to
the extent that it is required to seek recovery of interest or principal, and
the Fund may be unable to obtain full recovery thereof. See "Special Risk
Considerations Regarding Medium and Lower Grade Debt Securities." Investment in
foreign government and foreign corporate debt securities entails risks in
addition to those associated with the domestic securities in which the Fund may
invest. See "Foreign Securities." There can be no assurance that the Fund will
achieve its investment objective. An investment in the Fund may not be
appropriate for all investors. The Fund is not

13
<PAGE> 18

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. The net asset
value per share of the Fund can be expected to increase or decrease depending on
real or perceived changes in the credit risks associated with its portfolio
investments, changes in interest rates and other factors affecting the credit
markets generally.

The table below sets forth the percentages of the Fund's assets invested as of
June 30, 1996 in the various Moody's and S&P rating categories and in unrated
securities determined by the Adviser to be of comparable quality. The
percentages are based on the dollar-weighted average of credit ratings of all
debt securities held by the Fund during the 1996 fiscal year computed on a
monthly basis.

<TABLE>
<CAPTION>
UNRATED SECURITIES OF
RATED SECURITIES COMPARABLE QUALITY
RATING (AS A PERCENTAGE OF (AS A PERCENTAGE OF
CATEGORY PORTFOLIO VALUE) PORTFOLIO VALUE)
- ------------------------------------- -------------------- ---------------------
<S> <C> <C>
AAA/Aaa.............................. 7.2% 0.0%
AA/Aa................................ 1.7% 2.1%
A/A.................................. 0.9% 0.0%
BBB/Baa.............................. 2.7% 0.0%
BB/Ba................................ 24.4% 1.3%
B/B.................................. 54.9% 2.4%
CCC/Caa.............................. 2.2% 0.2%
CC/Ca................................ 0.0% 0.0%
C/C.................................. 0.0% 0.0%
D.................................... 0.0% 0.0%
------ -----
Percentage of Rated and Unrated
Debt Securities.................... 94.0% 6.0%
=============== ================
</TABLE>

There is no limitation with respect to the maturities of the securities in
which the Fund may invest.

SPECIAL RISK CONSIDERATIONS REGARDING MEDIUM AND LOWER GRADE DEBT SECURITIES.
The Fund invests in medium and lower grade debt securities. Debt securities
which are in the medium and lower grade categories generally offer a higher
current yield than is offered by higher grade debt securities, but they also
generally involve greater price volatility and greater credit and market risk.
Credit risk relates to the issuer's ability to make timely payment of interest
and principal when due. Market risk relates to the changes in market value that
occur as a result of variation in the level of prevailing interest rates and
yield relationships in the debt securities market and as a result of real or
perceived changes in credit risk. Debt securities rated BB or below by S&P and
Ba or below by Moody's commonly are referred to as "junk bonds." Although the
Fund primarily will invest in medium and lower grade debt securities, the Fund
may invest in higher grade debt securities for temporary

14
<PAGE> 19

defensive purposes. Such investments may result in a lower current income than
if the Fund were fully invested in medium and lower grade debt securities.

The value of the Fund's portfolio securities can be expected to fluctuate over
time. When interest rates decline, the value of a portfolio invested in fixed
income securities generally can be expected to rise. Conversely, when interest
rates rise, the value of a portfolio invested in fixed income securities
generally can be expected to decline. However, the secondary market prices of
medium and lower grade debt securities are less sensitive to changes in interest
rates and are more sensitive to adverse economic changes or individual
developments than are the secondary market prices of higher grade debt
securities. A significant increase in interest rates or a general economic
downturn could severely disrupt the market for lower grade debt securities and
adversely affect the market value of such securities. Such events also could
lead to a higher incidence of default by issuers of lower grade debt securities
as compared with historical default rates. In addition, changes in interest
rates and periods of economic uncertainty can be expected to result in increased
volatility in the market price of the debt securities in the Fund's portfolio
and thus in the net asset value of the Fund. Also, adverse publicity and
investor perceptions, whether or not based on rational analysis, may affect the
value and liquidity of medium and lower grade debt securities. The secondary
market value of debt securities structured as zero coupon securities and
payment-in-kind securities may be more volatile in response to changes in
interest rates than debt securities which pay interest periodically in cash.

Increases in interest rates and changes in the economy may adversely affect
the ability of issuers of medium and lower grade debt securities to pay interest
and to repay principal, to meet projected financial goals and to obtain
additional financing. In the event that an issuer of securities held by the Fund
experiences difficulties in the timely payment of principal or interest and such
issuer seeks to restructure the terms of its borrowings, the Fund may incur
additional expenses and may determine to invest additional assets with respect
to such issuer or the project or projects to which the Fund's portfolio
securities relate. Further, the Fund may incur additional expenses to the extent
that it is required to seek recovery upon a default in the payment of interest
or the repayment of principal on its portfolio holdings, and the Fund may be
unable to obtain full recovery thereof.

To the extent that there is no established retail market for some of the
medium or lower grade debt securities in which the Fund may invest, trading in
such securities may be relatively inactive. The Adviser is responsible for
determining the net asset value of the Fund, subject to the supervision of the
Board of Trustees of the Trust. During periods of reduced market liquidity and
in the absence of readily available market quotations for medium and lower grade
debt securities held in the Fund's portfolio, the ability of the Adviser to
value the Fund's securities becomes more difficult and the Adviser's use of
judgment may play a greater role in the valuation of the Fund's securities due
to the reduced availability of reliable objective data. The effects of adverse
publicity and investor perceptions may be more pronounced

15
<PAGE> 20

for securities for which no established retail market exists as compared with
the effects on securities for which such a market does exist. Further, the Fund
may have more difficulty selling such securities in a timely manner and at their
stated value than would be the case for securities for which an established
retail market does exist. To the extent that the Fund purchases illiquid debt
securities or securities which are restricted as to resale, the Fund may be
required to incur costs in connection with the registration of restricted
securities in order to dispose of such securities, although under Rule 144A
under the Securities Act of 1933, as amended such securities may become more
liquid.

Legislation has been and may be adopted which may have an adverse impact on
the market for medium and lower grade debt securities. The Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 required savings and
loan associations to dispose of their high yield bonds no later than July 1,
1994. Qualified affiliates of savings and loan associations may purchase and
retain such securities, however, and any savings and loan associations may
divest such securities by sale to their qualified affiliates. The Adviser is
unable at this time to predict what negative effect, if any, this legislation
may have on the market for high yield corporate debt securities. In addition,
participation by banks in highly leveraged transactions may subject such banks
to increased regulatory scrutiny. Other legislation may be proposed which, if
enacted, could have an adverse impact on the market for medium and lower grade
debt securities.

The Fund may invest in zero coupon and payment-in-kind debt securities. Zero
coupon securities are debt obligations that do not entitle the holder to any
periodic payment of interest prior to maturity or a specified date when the
securities begin paying current interest. They are issued and traded at a
discount from their face amounts or par value, which discount varies depending
on the time remaining until cash payments begin, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer. The
Internal Revenue Code of 1986, as amended (the "Code"), requires that regulated
investment companies distribute at least 90% of their net investment income each
year, including tax-exempt and non-cash income. Accordingly, although the Fund
will receive no coupon payments on zero coupon securities prior to their
maturity, the Fund is required, in order to maintain its desired tax treatment,
to include in its distribution to shareholders in each year any income
attributable to zero coupon securities that is in excess of 10% of the Fund's
net investment income in that year. The Fund may be required to borrow or to
liquidate portfolio securities at a time that it otherwise would not have done
so in order to make such distributions. As of June 30, 1996, approximately 1.24%
of the Fund's total assets were invested in zero coupon securities.

Payment-in-kind securities are securities that pay interest through the
issuance of additional securities. They are issued by companies that have
significant amounts of debt outstanding and are seeking to raise additional
funds without incurring additional periodic cash interest payment obligations.
Although payment-in-kind securities generally offer the opportunity for higher
returns than securities that pay

16
<PAGE> 21

interest periodically in cash, they also generally are more volatile in response
to changes in interest rates and are more speculative investments than such
securities. The Fund is required, in order to maintain its desired tax
treatment, to include in its distributions to shareholders in each year any
income attributable to securities received as interest on payment-in-kind
securities that is in excess of 10% of the Fund's net investment income in that
year. The Fund may be required to borrow or to liquidate portfolio securities at
a time that it otherwise would not have done so in order to make such
distributions. As of June 30, 1996, approximately 0.97% of the Fund's total
assets were invested in payment-in-kind securities.

The Adviser seeks to minimize the risks involved in investing in medium and
lower grade debt securities through portfolio diversification, careful
investment analysis, and attention to current developments and trends in the
economy and financial and credit markets. The Fund will rely on the Adviser's
judgment, analysis and experience in evaluating the creditworthiness of an
issue. In its analysis, the Adviser will take into consideration, among other
things, the issuer's financial resources, its sensitivity to economic conditions
and trends, its operating history, the quality of the issuer's management and
regulatory matters. As described under "Investment Advisory Services," the
Adviser may utilize at its own expense, credit analysis and research services
provided by McCarthy, Crisanti & Maffei, Inc. ("MCM"). The Adviser may consider
the credit ratings of Moody's and S&P in evaluating debt securities although it
does not rely primarily on these ratings. Such ratings evaluate only the safety
of principal and interest payments, not market value risk. Additionally, because
the creditworthiness of an issuer may change more rapidly than is able to be
timely reflected in changes in credit ratings, the Adviser continuously monitors
the issuers of debt securities held in the Fund's portfolio.

Many medium and lower grade debt securities are not listed for trading on any
national securities exchange, and many issuers of medium and lower grade debt
securities choose not to have a rating assigned to their obligations by any
nationally recognized statistical rating organization. As a result, the Fund's
portfolio may consist of a relatively high proportion of unlisted or unrated
securities as compared with an investment company that invests primarily in
higher grade securities. The amount of information available about the financial
condition of an issuer of unrated or unlisted securities generally is not as
extensive as that which is available with respect to issuers of listed or rated
securities. Because of the nature of medium and lower rated debt securities,
achievement by the Fund of its investment objective may be more dependent on the
credit analysis of the Adviser than is the case for an investment company which
invests primarily in higher grade securities.

FOREIGN SECURITIES. The Fund may invest up to 35% of its assets in foreign
government and foreign corporate debt securities of similar quality as the
securities described above as determined by the Adviser. These investments
generally will be limited to securities issued by foreign companies with at
least three years of operations in developed countries or by foreign
governments. Investments in foreign

17
<PAGE> 22

securities present certain risks not ordinarily found in investments in
securities of U.S. issuers. These risks include fluctuations in foreign exchange
rates, political and economic developments (including war or other instability,
expropriation of assets, nationalization and confiscatory taxation), the
imposition of foreign exchange limitations, withholding taxes on income or
capital transactions or other restrictions, higher transaction costs and
difficulty in taking judicial action. Generally, a significant factor affecting
the performance of the Fund's investments in foreign securities is the
fluctuation in the relative values of the currencies in which such securities
are denominated. In addition, there generally is less publicly available
information about many foreign issuers, and auditing, accounting and financial
reporting requirements are less stringent and less uniform in many foreign
countries and, accordingly, their securities markets may be less liquid than
those in the U.S. Because there is usually less supervision and governmental
regulation of exchanges, brokers and dealers than there is in the U.S., the Fund
may experience settlement difficulties or delays not usually encountered in the
U.S.

- ------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------

In connection with the investment objectives and policies described above, the
Fund may, but is not required to, utilize various other investment strategies as
described below to earn income, facilitate portfolio management and mitigate
risk. Such strategies are generally accepted by modern portfolio managers and
are regularly utilized by many mutual funds and other institutional investors.
Although the Adviser believes that these investment practices may further the
Fund's investment objectives, no assurance can be given that these investment
practices will achieve this result.

18
<PAGE> 23

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 of portfolio securities at inopportune times or for prices
other than at 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 currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. 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
contemplated use of these futures contracts and options thereon 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. 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.

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 Investment Company Act of 1940, as amended (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

19
<PAGE> 24

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
creditworthiness 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 may invest in repurchase agreements
of duration of seven days or less without limitation. 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 10% of the Fund's net
assets.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that funds advised or subadvised by the Adviser or its
affiliates would otherwise invest separately into a joint account. The cash in
the joint account is then invested in repurchase agreements and the funds that
contributed to the joint account share pro rata in the net revenue generated.
The Adviser believes that the joint account produces efficiencies and economies
of scale that may contribute to reduced transaction costs, higher returns,
higher quality investments and greater diversity of investments for the Fund
than would be available to the Fund investing separately. The manner in which
the joint account is managed is subject to conditions set forth in an SEC
exemptive order authorizing this practice, which conditions are designed to
ensure the fair administration of the joint account and to protect the amounts
in that account.

SECURITIES LENDING. The Fund may lend its portfolio securities to brokers or
dealers, banks or other recognized institutional borrowers of securities to a
maximum of 25% of the net assets of the Fund, provided that the borrower at all
times maintains cash or equivalent collateral or secures a letter of credit in
favor of the Fund in an amount equal to at least 100% of the market value of the
securities loaned. During the time portfolio securities are on loan, the
borrower will pay the Fund an amount equivalent to any dividend or interest paid
on such securities and the Fund may invest the cash collateral and earn
additional income, or it may receive an agreed-upon amount of interest income
from the borrower who has delivered equivalent collateral or secured a letter of
credit. Loans are subject to termination at the option of the Fund or the
borrower. The Fund may pay reasonable administration and custodial fees in
connection with a loan.

20
<PAGE> 25

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in securities the
disposition of which is subject to substantial legal or contractual restrictions
or the markets for which are illiquid. 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 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.

"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 liquid 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. No specific
limitation exists as to the percentage of the Fund's assets which may be used to
acquire securities on a "when issued" or "delayed delivery" basis. 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.

PORTFOLIO TURNOVER. Portfolio turnover is calculated by dividing the lesser of
purchases or sales of portfolio securities by the monthly average value of the
securities in the portfolio during the year. Securities, including options,
whose maturity or expiration date at the time of acquisition were one year or
less are excluded from such calculation. The Fund anticipates that the annual
portfolio turnover rate for the Fund's portfolio will generally be less than
200%, and may be significantly less in a period of stable or rising interest
rates. If the turnover rate for the Fund reaches or exceeds this percentage, the
Fund's brokerage costs may

21
<PAGE> 26

increase and the Adviser for the Fund will monitor the Fund's trading practices
to avoid potential adverse tax consequences. See "Portfolio Transactions and
Brokerage Allocation" in the Statement of Additional Information.

TEMPORARY DEFENSIVE POSITIONS. When the Adviser determines that market
conditions warrant and deems it to be in the best interest of the Fund, the Fund
may, for temporary defensive purposes, invest up to 100% of its total assets in
(i) cash, (ii) U.S. Government securities and (iii) money market instruments.
When maintaining such a temporary defensive position, the Fund's yield may be
lower and, therefore, it may be more difficult to achieve the Fund's investment
objective of high current income.

INVESTMENT RESTRICTIONS. The Fund is subject to certain investment
restrictions which constitute fundamental policies. Fundamental policies cannot
be changed without the approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the 1940 Act. See "Investment
Policies and Restrictions" in the Statement of Additional Information.

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-the-counter market. In the over-the-counter market,
securities are generally 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 managers, 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 bonds on a stock
exchange are effected through brokers who charge a commission for their
services.

The Adviser is responsible for effecting securities transactions of the Fund
and will do so in a manner deemed fair and reasonable to shareholders of the
Fund and not according to any formula. 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. However, it is not the policy of the Adviser,
absent special circumstances, to pay higher commissions to a firm because it has
supplied such services.

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,

22
<PAGE> 27

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. In
addition, in selecting among firms to handle a particular transaction, the
Adviser and the Fund may take into account whether the firm has sold or is
selling shares of the Fund. See "Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information for more information.

- ------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------------------

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 2,800 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 a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc., a New York based private investment
firm. The General Partner of C&D L.P is Clayton & Dubilier Associates IV Limited
Partnership ("C&D Associates L.P."). The general partners of C&D Associates L.P.
are Joseph L. Rice, III, B. Charles Ames, William A. Barbe, Alberto Cribiore,
Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson,
each of whom is a principal of Clayton, Dubilier & Rice, Inc. In addition,
certain officers, directors and employees of Van Kampen American Capital and its
subsidiaries (some of whom are officers or trustees of the Fund) own, in the
aggregate, not more than 6% of the common stock of VK/AC Holding, Inc. and have
the right to acquire, upon the exercise of options, approximately an additional
12% of the common stock of VK/AC Holding, Inc. Presently, and after giving
effect to the exercise of such options, no officer or trustee of the Fund owns
or would own 5% or more of the common stock of VK/AC Holding, Inc. The address
of the Adviser is One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

ADVISORY AGREEMENT. The business and affairs of the Fund are managed under the
direction of the Board of Trustees of the Trust of which the Fund is a separate
series. Subject to the Trustees' authority, the Adviser and the officers of the
Fund supervise and implement the Fund's investment activities and are
responsible for

23
<PAGE> 28

overall management of the Fund's business affairs. The Fund pays the Adviser a
fee equal to a percentage of the average daily net assets of the Fund as
indicated below. This fee is higher than that paid by most mutual funds.

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS PERCENTAGE PER ANNUM
- ------------------------------------------------ ---------------------
<S> <C>
First $500 million.............................. 0.75 of 1.00%
Over $500 million............................... 0.65 of 1.00%
</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 1940 Act, of the Adviser, the Distributor or Van Kampen American
Capital), the charges and expenses of independent accountants, legal counsel,
any transfer 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, costs of
reports and notices to shareholders, costs of registering shares of the Fund
under federal and state securities laws, miscellaneous expenses and all taxes
and fees to federal, state or other governmental agencies. The Adviser reserves
the right in its sole discretion from time-to-time to waive all or a portion of
its management fee or to reimburse the Fund for all or a portion of its other
expenses.

The Adviser may utilize at its own expense credit analysis, research and
trading support services provided by its affiliate, Van Kampen American Capital
Asset Management, Inc.

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 trustees, directors, officers and
employees to buy and sell securities for their personal accounts subject to
procedures designed to prevent conflicts of interest including, in some
instances, preclearance of trades.

PORTFOLIO MANAGEMENT. Anne K. Lorsung, a Vice President of the Adviser, has
been primarily responsible for the day-to-day management of the Fund's portfolio
since May 1995. Prior to January 1994, Ms. Lorsung was employed as a Group Vice
President in the high yield research area at Duff & Phelps, MCM.

- ------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- ------------------------------------------------------------------------------

24
<PAGE> 29

such factors together with the amount of sales charges and aggregate
distribution and service fees with respect to each class of shares that may be
incurred over the anticipated duration of their investment in the Fund.

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"). Class A Share accounts over $1
million or otherwise subject to a contingent deferred sales charge (a "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 for Class
B Shares in an amount of $500,000 or more and not to accept 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 period 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). Investors should 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.

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

25
<PAGE> 30

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. Generally, a class of shares subject to a higher
ongoing distribution and services fee or subject to the conversion feature will
have a higher expense ratio and pay lower dividends than a class of shares
subject to a lower ongoing distribution and services 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
this Prospectus under "Purchase of Shares -- Net Asset Value."

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.
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.

- ------------------------------------------------------------------------------
PURCHASE OF SHARES
- ------------------------------------------------------------------------------

The Fund offers three classes of shares to the public through Van Kampen
American Capital Distributors, Inc. (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 net asset value per share next computed after
an investor places an order to purchase with the investor's broker, dealer or
financial intermediary or directly with the Distributor plus any applicable
sales charge. Sales personnel of brokers, dealers and financial intermediaries
distributing the Fund's

26
<PAGE> 31

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, for 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 to, and sponsor business seminars
for, 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 and 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

27
<PAGE> 32

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 brokers, dealers or financial
intermediaries 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
1933, as amended.

SALES CHARGE TABLE

<TABLE>
<CAPTION>
DEALER
CONCESSION
OR AGENCY
COMMISSION
TOTAL SALES CHARGE ----------
-------------------------- PERCENTAGE
PERCENTAGE PERCENTAGE OF
SIZE OF TRANSACTION OF OFFERING OF NET 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. A commission
will be paid to brokers, dealers and financial intermediaries 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. See "Purchase of Shares -- Deferred Sales Charge
Alternatives" for additional information with respect to CDSC.

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 minor children (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 purchasing for a single fiduciary account; or a
"company" as defined is section 2(a)(8) of the 1940 Act.

28
<PAGE> 33

As used herein, "Participating Funds" refers to all open-end investment
companies distributed by the Distributor other than Van Kampen American Capital
Tax Free Money Fund ("Tax Free Money Fund"), Van Kampen American Capital Reserve
Fund ("Reserve Fund") and The Govett Funds, Inc.

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

CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the preceding
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 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 charges applicable to the purchases made and the 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 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.

29
<PAGE> 34

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 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, 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, Van
Kampen American Capital Asset Management, Inc. or John Govett & Co.
Limited and such persons' families and their beneficial accounts.

(2) Current or retired directors, officers and employees of VK/AC Holding,
Inc. and any of its subsidiaries, Clayton, Dubilier & Rice, Inc.,
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 minor children 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.

30
<PAGE> 35

(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 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 $10 million or more. The
Distributor may pay commissions of up to 1.00% for such purchases.

(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) Full service participant directed profit sharing and money purchase plans,
full service 401(k) plans, or similar full service recordkeeping programs
made available through Van Kampen American Capital Trust Company with at
least 50 eligible employees or investing at least $250,000 in the
Participating Funds, Tax Free Money Fund or Reserve Fund. For such
investments the Fund imposes a contingent deferred sales charge of 1.00%
in the event of redemptions within one year of the purchase other than
redemptions required to make payments to participants under the terms of
the plan. The contingent deferred sales charge incurred upon certain
redemptions is paid to the Distributor in reimbursement for distribution-
related expenses. A commission will be paid to dealers who initiate and
are responsible for such purchases 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.

(9) Participants in any 403(b)(7) program of a college or university system
which permits only net asset value mutual fund investments and for which
Van Kampen American Capital Trust Company serves as custodian. In
connection with such purchases, the Distributor may pay, out of its own
assets, a commission to brokers, dealers, or financial intermediaries as
follows: one percent on sales up to $5 million, plus 0.50% on the next $5
million, plus 0.25% on the excess over $10 million.

(10) Individuals who are members of a "qualified group" may purchase Class A
Shares of the Fund without the imposition of a front end sales charge. For

31
<PAGE> 36

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 funds in the Van Kampen American Capital
Family of 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 economics of
scale in distributing such shares. A qualified group does not include one
whose sole organization 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 million and 0.50% on the
excess over $3 million.

The term "families" includes a person's spouse, minor children 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, 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.

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 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 compensates 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 is equal to (i) with respect to Class A Shares, 1.00% on sales
to $2 million, plus 0.80% on the

32
<PAGE> 37

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
does not change the price an investor pays for CDSC Shares or the amount that
the Fund receives from such sale.

CDSC Shares redeemed within a specified period of time generally will be
subject to a CDSC at the rates set forth below charged as a percentage of the
dollar amount subject thereto. The amount of the CDSC 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
CDSC 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 CDSC and the distribution fee 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 fee 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 CDSC 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 or Class C Shares, if any, and
fourth of CDSC Shares held longest during the period of time that a CDSC 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 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. 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).

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<PAGE> 38

CLASS A SHARE PURCHASES OF $1 MILLION OR MORE. 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. 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
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>

The CDSC generally is waived on redemption 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 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 and Class C Shares automatically will
convert to Class A Shares eight years or ten years, respectively, after the end
of the month in which a shareholder's order to purchase the shares was accepted,
and thereafter will not be subject to the higher distribution fees applicable to
Class B Shares and Class C Shares. The purpose of the conversion feature is to
relieve the holders of Class B Shares and Class C Shares that have been
outstanding for a period of time sufficient for the Distributor to have been
compensated for distribution expenses related to such shares from most of the
burden of such distribution-related expenses. The Fund does not expect to issue
any share certificates upon conversion.

For purposes of conversion to Class A Shares, Class B Shares and Class C
Shares purchased through the reinvestment of dividends and distributions paid in
respect of such shares in a shareholder's account will be considered to be held
in a separate sub-account. Each time any Class B Shares or Class C 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 shares in the respective sub-account
also will convert to Class A Shares.

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<PAGE> 39

The CDSC schedule and conversion schedule applicable to a CDSC Share acquired
through the exchange privilege is determined by reference to the Van Kampen
American Capital fund from which such share originally was purchased. The
holding period of a CDSC Share acquired through the exchange privilege is
determined by reference to the date such share originally was purchased from a
Van Kampen American Capital fund.

The conversion of Class B Shares and Class C 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 and service fees 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 or Class C Shares to
Class A Shares may be suspended if such an opinion is no longer available. In
that event, no further conversions of such shares would occur and 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 CDSC is waived on redemptions
of Class B Shares and Class C 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 "Redemption of Shares." The CDSC
also is waived on redemptions of Class C Shares as 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 "Redemption of
Shares" for further discussion of the waiver provisions.

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 its total liabilities
attributable to such class of shares, and dividing the result by the number of
shares of such class of the Fund outstanding. The net asset value for the Fund
is computed once daily as of 5:00 p.m. Eastern time, Monday through Friday,
except on customary business holidays, or except on any day on which no purchase
or redemption orders are received, or when there is not sufficient trading in
the Fund's portfolio securities such that the Fund's net asset value per share
might be materially affected. The Fund reserves the right to calculate the net
asset value and to adjust the public offering price based thereon more
frequently than once a day if deemed desirable. The net asset value per share of
the different classes of shares are expected to be substantially the same; from

35
<PAGE> 40

time to time, however, the per share net asset value of the different classes of
shares may differ.

Fixed income 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 Trustees of the Trust, of which
the Fund is a series. Short-term securities with remaining maturities of less
than 60 days are valued at amortized cost when amortized cost is determined in
good faith by or under the direction of the Board of Trustees of the Trust to be
representative of the fair value at which it is expected such securities may be
resold. Other assets are valued at fair value as determined in good faith by or
under the direction of the Trustees.

- ------------------------------------------------------------------------------
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.

36
<PAGE> 41

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 ((800) 772-8889 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 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 ((800) 772-8889 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. Both
accounts must be of the same type, either non-retirement or retirement. Any two
non-retirement accounts can be used. If the accounts are retirement accounts,
they must both be for the same type of retirement plan (e.g. IRA, 403(b)(7),
401(k) or Keogh) and for the benefit of the same individual. 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.

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. Before effecting an exchange, shareholders in the Fund
should obtain and read a current prospectus of the fund into which the exchange
is

37
<PAGE> 42

to be made. SHAREHOLDERS MAY ONLY EXCHANGE INTO SUCH OTHER FUNDS AS ARE LEGALLY
AVAILABLE FOR SALE IN THEIR STATE.

To be eligible for exchange, 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. 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. The CDSC schedule and conversion schedule applicable to a Class B Share
or Class C Share acquired through the exchange privilege is determined by
reference to the Van Kampen American Capital fund from which such share
originally was purchased. The holding period of a Class B Share or Class C Share
acquired through the exchange privilege is determined by reference to the date
such 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.

38
<PAGE> 43

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 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 CDSC. 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

39
<PAGE> 44

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 "Redemption of
Shares."

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. 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.

- ------------------------------------------------------------------------------
REDEMPTION OF 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 CDSC) 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

40
<PAGE> 45

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.

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 accompanying this Prospectus or call the Fund at (800) 421-5666
((800) 772-8889 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

41
<PAGE> 46

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

REDEMPTION UPON DISABILITY. The Fund will waive the CDSC 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
CDSC on Class B Shares and Class C Shares.

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<PAGE> 47

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 CDSC 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.

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 CDSC 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.

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 CDSC paid upon such redemption. Such reinstatement is made at the net asset
value next determined after the order is received, which must be within 120 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 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.

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

43
<PAGE> 48

CLASS A SHARES. The Fund may spend an aggregate amount of 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. From such amount, the
Fund may spend up to 0.25% per year of the Fund's average daily net assets
attributable to the Class A 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. The Fund pays
the Distributor the lesser of the balance of the 0.25% not paid to such brokers,
dealers or financial intermediaries as a service fee or the amount of the
Distributor's actual distribution-related expense.

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 connection with the distribution of the Class B 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 B 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.

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 the 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, with respect to the Class A Shares, there is no
carryover of such reimbursement obligations to succeeding years.

44
<PAGE> 49

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 (on a Fund level basis). Because such expenses
are accounted on a Fund level basis, in periods of extreme net asset value
fluctuation such amounts 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, a
shareholder of such CDSC Share may be deemed to incur expenses attributable to
other shareholders of such class. As of June 30, 1996, there were $2,860,061 and
$17,670 of unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares, respectively, representing 2.96% and 0.25% 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 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 Distributors will endeavor to
allocate such expenses among such funds in an equitable manner. The Distributors
will not use the proceeds from the CDSC applicable to a particular class of
shares to defray distribution-related expenses attributable to any other class
of 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 such
services described above, the Fund would seek alternate providers and expects
that shareholders would not experience any disadvantage.

- ------------------------------------------------------------------------------
DISTRIBUTIONS FROM THE FUND
- ------------------------------------------------------------------------------

The Fund's present policy, which may be changed at any time by the Board of
Trustees, is to declare distributions on a daily basis and to pay such
distributions from net investment income, net recognized short-term capital
gains and principal attributable to the respective classes on a monthly basis.
The Fund also presently intends to make distributions of net long-term capital
gains, if any, annually. The monthly distribution is composed of all or a
portion of investment income earned by the Fund, all or a portion of net
short-term capital gains recognized by the Fund on transactions in securities
and in futures and options, in each case, less the expenses attributable to the
respective class, and principal. A distribution from principal made by the Fund
will result in a decrease in the Fund's net assets equal to the amount of such
principal distribution. Long-term capital gains distributions consist

45
<PAGE> 50

of the Fund's recognized long-term gain on transactions in securities and
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 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. Persons 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 automatically will
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 ((800) 772-8889 for the hearing impaired) or
in writing to ACCESS.
- ------------------------------------------------------------------------------
TAX STATUS
- ------------------------------------------------------------------------------

The Fund has qualified and intends to continue to qualify 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 sources of its income and the
diversification of its assets. If the Fund so qualifies and if it distributes to
its shareholders at least 90% of its net investment income (which includes
tax-exempt income and net short-term capital gains, 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

46
<PAGE> 51

federal income taxes on any income distributed to shareholders. The Fund intends
to distribute at least the minimum amount of net investment income required to
satisfy the 90% distribution requirement. The Fund will not be subject to
federal income tax on any net capital gains distributed to its shareholders.

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
received in shares or cash. Shareholders who receive distributions in the form
of additional shares will have a basis for federal income tax purposes in each
share equal to the value thereof on the distribution date. Distributions of the
Fund's net capital gains ("capital gain dividends"), if any, are taxable to
shareholders as long-term capital gains regardless of the length of time the
Fund shares have been held by such shareholders. Distributions in excess of the
Fund's earnings and profits, such as distributions of principal, first will
reduce the adjusted tax basis of the shares held by the shareholders and, after
such adjusted tax basis is reduced to zero, will constitute capital gains to
such shareholder (assuming such shares are held as a capital asset). The Fund
will inform shareholders of the source and tax status of such distributions
promptly after the close of each calendar year. Distributions by the Fund
generally will not be eligible for the dividends received deduction for
corporations.

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 generally be long-term if such
shareholders have held their shares for more than one year. Any loss realized
upon a taxable disposition of shares held for six months or less will be treated
as long-term capital loss to the extent of any capital gain dividends received
with respect to such shares. For purposes of determining whether shares have
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.

Some of the Fund's investment practices are subject to special provisions of
the Code that may, among other things, defer the use of losses of the Fund and
affect the holding period of the securities held by the Fund and the nature of
the income 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 closed out), which may cause the Fund to recognize income without
receiving the cash with which to make distributions in amounts necessary to
satisfy the distribution requirements for avoiding federal income and, as
described below, 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.

47
<PAGE> 52

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 taxes. In order to
generate sufficient cash to make distributions necessary to satisfy the
distribution requirements for avoiding federal income and, as described below,
excise taxes, the Fund may have to dispose of securities that it would otherwise
have continued to hold.

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 gross income be derived from the disposition of securities
held for less than three months.

Income from certain foreign securities may be subject to foreign withholding
taxes. Shareholders of the Fund will not be able to claim any deduction or
foreign tax credit with respect to such foreign taxes.

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 for such year and
at least 98% of its capital gain net income (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.

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 a month and paid in January of the following
year will be treated as having been distributed by the Fund (and received by the
shareholders) on December 31 of the year in which the dividend was declared. In
addition, certain other distributions made after the close of a taxable year of
the Fund may be "spilled back" and treated as having been 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 is 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) or who are otherwise subject to
backup withholding. Foreign shareholders, including shareholders who are
nonresident aliens, may be subject to U.S. withholding tax on certain
distributions (whether received in cash or in shares) at a rate of 30% or such
lower rate as prescribed by any applicable treaty.

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<PAGE> 53

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

- ------------------------------------------------------------------------------
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 may 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 shares. In lieu of or in addition to total return and yield
calculations, such information may include performance rankings and similar
information from independent organizations such as Lipper Analytical Services,
Inc., or nationally recognized financial publications. In addition, from time to
time the Fund may compare its performance to certain securities and unmanaged
indices which may have different risk/reward characteristics than the Fund. Such
characteristics may include, but are not limited to, tax features, guarantees,
insurance and the fluctuation of principal or return. In addition, from time to
time sales materials and advertisements for the Fund may include hypothetical
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 earned during such a 30-day period by the
Fund's maximum offering price per share on the last day of such period. The
Fund's net investment income per share is determined by taking the interest
earned by the Fund during the period, subtracting the expenses accrued for the
period (net of any reimbursements), and dividing the result by the product of
(a) the average daily number of Fund shares outstanding during the period that
were entitled to receive dividends and (b) the Fund's maximum offering price per
share on the last day of the period. 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.

The Fund calculates average compounded total return by determining the
redemption value at the end of specified periods (after adding back all
dividends and other distributions made during the period) of a $1,000 investment
in the Fund (less the maximum sales charge) 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.

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

49
<PAGE> 54

share 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.

From time to time, the Fund may include in its supplemental sales literature
and shareholder reports a quotation of the current "distribution rate" for the
Fund. Distribution rate is a measure of the level of income and short-term
capital gain dividends, if any, distributed for a specified period. Distribution
rate is determined by annualizing the distributions per share for a stated
period and dividing the result by the ending maximum public offering price for
the same period. It differs from yield, which is a measure of the income
actually earned by the Fund's investments, and from total return, which is a
measure of the income actually earned by, plus the effect of any realized and
unrealized appreciation or depreciation of, such investments during a stated
period. Distribution rate is, therefore, not intended to be a complete measure
of the Fund's performance. Distribution rate may sometimes be greater than
yield, for instance, it may not include the effect of amortization of bond
premiums, and may include non-recurring short-term capital gains and premiums
from options and futures transactions engaged in by the Fund. In addition, the
Fund may, in supplemental sales literature, advertise non-standardized total
return figures representing the cumulative, non-annualized total return from a
given date to a subsequent given date. Cumulative non-standardized total return
is calculated by measuring the value of an initial investment in the Fund at a
given date, deducting the maximum front-end sales charge of 4.75% for Class A
Shares, determining the value of all subsequent reinvested dividends, 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.

- ------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------

The Fund is a series of the Van Kampen American Capital Trust, a Delaware
business trust organized as of May 10, 1995 (the "Trust"). 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 authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, par value $0.01 per share, divided into classes.
The Fund currently offers three classes, 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. See "The Distribution and Service Plans."

50
<PAGE> 55

The Fund is permitted to issue an unlimited number of classes of shares. Each
class of shares is equal as to earnings, assets and voting privileges, except as
noted above, 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 and Class C Shares into
Class A Shares as described above. In the event of liquidation, each share of
the Fund is entitled to its pro rata 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
holders of Class A Shares.

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 Trust will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
1940 Act. More detailed information concerning the Trust is set forth in the
Statement of Additional Information.
- ------------------------------------------------------------------------------
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.

The fiscal year end of the Fund is June 30. The Fund sends to its shareholders
at least semi-annually reports showing the Fund's portfolio and other
information. An annual report, containing financial statements audited by the
Fund's independent accountants, is sent to shareholders each year. After the end
of each year, shareholders will receive federal income tax information regarding
dividends and capital gains distributions.

Shareholder inquiries should be directed to Van Kampen American Capital High
Yield Fund, One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attn:
Correspondence.

For Automated Telephone Service which provides 24-hour direct dial access to
Fund facts and Shareholder account information, dial (800) 421-5666. For
inquiries through Telecommunications Device for the Deaf (TDD), dial (800)
772-8889.

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<PAGE> 56

APPENDIX A

RATINGS OF CORPORATE OBLIGATIONS

STANDARD & POOR'S RATINGS GROUP--A brief description of the applicable Standard
& Poor's Ratings Group (S&P) rating symbols and their meanings (as published by
S&P) follows:

1. DEBT

A S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.

The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as
a result of changes in, or unavailability of, such information, or based on
other circumstances.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of payment--capacity and willingness of the obligor to meet
its financing commitment on an obligation in accordance with the terms of
the obligation;

2. Nature of and provisions of the obligation;

3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.

INVESTMENT GRADE

A-1
<PAGE> 57

<TABLE>
<S> <C>
BBB Debt rated "BBB" is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated
categories.
</TABLE>

SPECULATIVE GRADE

<TABLE>
<S> <C>
BB Debt rated "BB", "B", "CCC", "CC", and "C" is regarded as
B having significantly speculative characteristics with
CCC respect to capacity to pay interest and repay principal.
CC "BB" indicates the least degree of speculation and "C" the
C highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.
BB Debt rated "BB" is less vulnerable to default than other
speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial,
or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments.
The "BB" rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied "BBB-"
rating.
B Debt rated "B" is more vulnerable to default but currently
has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category
is also used for debt subordinated to senior debt that is
assigned an actual or implied "BB" or "BB-" rating.
CCC Debt rated "CCC" is currently vulnerable to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial,
or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or
"B-" rating.
CC Debt rated "CC" is currently highly vulnerable to
nonpayment. The rating "CC" is also used for debt
subordinated to senior debt that is assigned an actual or
implied "CCC" debt rating.
C The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service
payments are continued. The rating "C" typically is applied
to debt subordinated to senior debt which is assigned an
actual or implied "CCC-" debt rating.
</TABLE>

A-2
<PAGE> 58

<TABLE>
<S> <C>
D Debt rated "D" is in payment default. The "D" rating
category is used when interest payments or principal
payments are not made on the date due even if the
applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace
period. The "D" rating also will be used upon the filing of
a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may
be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
NR Not rated.
R This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to
principal or volatility of expected returns which are not
addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or
commodities; obligations exposed to severe payment risk --
such as interest-only or principal-only mortgage
securities; and obligations with unusually risky or
interest terms, such as inverse floaters.
DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND
ITS TERRITORIES are rated on the same basis as domestic
corporate and municipal issues. The ratings measure the
creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.
BOND INVESTMENT QUALITY STANDARDS: Under present commercial
bank regulations issued by the Comptroller of the Currency,
bonds rated in the top four categories ("AAA", "AA", "A",
"BBB", commonly known as "investment grade" ratings) are
generally regarded as eligible for bank investment. In
addition, the laws of various states governing legal
investments impose certain rating or other standards for
obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
</TABLE>

2. COMMERCIAL PAPER

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

<TABLE>
<S> <C>
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics are
denoted with a plus sign (+) designation.
</TABLE>

A-3
<PAGE> 59

<TABLE>
<S> <C>
A-2 Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is
not as high as for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than
obligations carrying the higher designations.
B Issues rated "B" are regarded as having significant
speculative characteristics.
C This rating is assigned to short-term debt obligations with
a doubtful capacity for payment.
D Debt rated "D" is in payment default. The "D" rating
category is used when interest payments or principal
payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace
period.
A commercial paper rating is not a recommendation to
purchase, sell or hold a security inasmuch as it does not
comment as to market price or suitability for a particular
investor. The ratings are based on current information
furnished to S&P by the issuer or obtained by S&P from
other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The
ratings may be changed, suspended or withdrawn as a result
of changes in, or unavailability of, such information, or
based on other circumstances.
</TABLE>

3. VARIABLE RATE DEMAND BONDS

S&P assigns "dual" ratings to all debt issues that have a put or demand
feature as part of their structure.

The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for example
"AAA/A-1+"). With short-term demand debt, S&P's note rating symbols are used
with the commercial paper rating symbols (for example, "SP-1+/A-1+").

4. NOTES

An S&P note rating reflects the liquidity factors and market access risks
unique to notes. Notes maturing in three years or less will likely receive a
note rating.

A-4
<PAGE> 60

Notes maturing beyond three years will most likely receive a long-term debt
rating. The following criteria will be used in making that assignment:

-- Amortization schedule (the longer the final maturity relative to other
maturities the more likely the issue is to be treated as a note).

-- Source of payment (the more the issue depends on the market for its
refinancing, the more likely it is to be treated as a note).

Note rating symbols and definitions are as follows:

SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics will be given a plus (+)
designation.

SP-2 Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term
of the notes.

SP-3 Speculative capacity to pay principal and interest.

5. PREFERRED STOCK

A S&P preferred stock rating is an assessment of the capacity and willingness
of an issuer to pay preferred stock dividends and any applicable sinking fund
obligations. A preferred stock rating differs from a bond rating inasmuch as it
is assigned to an equity issue, which issue is intrinsically different from, and
subordinated to, a debt issue. Therefore, to reflect this difference, the
preferred stock rating symbol will normally not be higher than the bond rating
symbol assigned to, or that would be assigned to, the senior debt of the same
issuer.

The preferred stock ratings are based on the following considerations:

1. Likelihood of payment-capacity and willingness of the issuer to meet the
timely payment of preferred stock dividends and any applicable sinking fund
requirements in accordance with the terms of the obligation.

2. Nature of, and provisions of, the issue.

3. Relative position of the issue in the event of bankruptcy, reorganization,
or other arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.

A-5
<PAGE> 61

<TABLE>
<S> <C>
BBB An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for
preferred stock in this category than for issues in the "A"
category.
BB Preferred stock rated "BB", "B" and "CCC" are regarded, on
B balance, as predominantly speculative with respect to the
CCC issuer's capacity to pay preferred stock obligations. "BB"
indicates the lowest degree of speculation and "CCC" the
highest. While such issues will likely have some quality
and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
CC The rating "CC" is reserved for a preferred stock issue in
arrears on dividends or sinking fund payments, but that is
currently paying.
C A preferred stock rated "C" is a nonpaying issue.
D A preferred stock rated "D" is a nonpaying issue with the
issuer in default on debt instruments.
NR This indicates that no rating has been requested, that
there is insufficient information on which to base a rating
or that S&P does not rate a particular type of obligation
as a matter of policy.
PLUS (+) or MINUS (-): To provide more detailed indications
of preferred stock quality, ratings from "AA" to "CCC" may
be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
</TABLE>

A preferred stock rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer, and obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information.

MOODY'S INVESTORS SERVICE -- A brief description of the applicable Moody's
Investors Service (Moody's) rating symbols and their meanings (as published by
Moody's) follows:

1. LONG-TERM DEBT

AAA: Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

A-6
<PAGE> 62

AA: Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in AAA
securities.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

BAA: Bonds which are rated BAA are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA: Bonds which are rated BA are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA: Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA: Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from AA to B. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

A-7
<PAGE> 63

Should no rating be assigned, the reasons may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published
in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

2. SHORT-TERM DEBT

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year unless explicitly noted.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issues:

Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics:

--Leading market positions in well-established industries.

--High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment or senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics

A-8
<PAGE> 64

and market compositions may be more pronounced. Variability in earnings and
profitability may result in changes of the level of debt protection measurements
and may require relatively high financial leverage. Adequate alternate liquidity
is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

3. PREFERRED STOCK

Preferred stock rating symbols and their definitions are as follows:

AAA: An issue which is rated "AAA" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least
risk of dividend impairment within the universe of preferred stocks.

AA: An issue which is rated "AA" is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance the earnings
and asset protection will remain relatively well maintained in the foreseeable
future.

A: An issue which is rated "A" is considered to be an upper-medium-grade
preferred stock. While risks are judged to be somewhat greater than in the
"AAA" and "AA" classifications, earnings and asset protections are,
nevertheless, expected to be maintained at adequate levels.

BAA: An issue which is rated "BAA" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and
asset protection appear adequate at present but may be questionable over any
great length of time.

BA: An issue which is rated "BA" is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse
periods. Uncertainty of position characterizes preferred stocks in this class.

B: An issue which is rated "B" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.

CAA: An issue which is rated "CAA" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payments.

CA: An issue which is rated "CA" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payment.

C: This is the lowest rated class of preferred or preference stock. Issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "AA" through "B" in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.

A-9
<PAGE> 65

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666.

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) 772-8889.

FOR AUTOMATED TELEPHONE

SERVICES DIAL (800) 421-5684.

VAN KAMPEN AMERICAN CAPITAL
HIGH YIELD 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 High Yield Fund

Custodian

STATE STREET BANK AND
TRUST COMPANY
225 Franklin Street, P.O. Box 1713

Boston, MA 02105-1713

Attn: Van Kampen American Capital High Yield 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> 66

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

HIGH YIELD FUND
------------------------------------------------------------------------------

P R O S P E C T U S

OCTOBER 28, 1996

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 67

- ------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
SHORT-TERM GLOBAL INCOME FUND
- ------------------------------------------------------------------------------

Van Kampen American Capital Short-Term Global Income Fund (the "Fund") is a
non-diversified open-end management investment company, commonly known as a
mutual fund. The Fund's investment objective is to seek a high level of current
income, consistent with prudent investment risk.

The Fund seeks to achieve its investment objective by investing in a global
portfolio of investment grade debt securities denominated in various currencies
and multi-national currency units and maintaining a dollar-weighted average
portfolio maturity of not more than three years. The portfolio consists of
investment grade debt securities issued or guaranteed by foreign governments or
supranational organizations or their agencies, instrumentalities, or
subdivisions, investment grade debt securities issued by corporations,
investment grade certificates of deposit or bankers acceptances issued or
guaranteed by large U.S. or foreign banks, investment grade commercial paper and
debt securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. Investments in securities denominated in currencies other
than the U.S. dollar involve foreign currency exchange risks. The Fund intends
to engage in strategic transactions to seek to reduce or eliminate such risks.

The Fund is designed for the investor who seeks a higher yield than a money
market fund and less fluctuation in net asset value than a longer-term global
bond fund. There is no assurance that the Fund will achieve its investment
objective. The Fund is a separate series of the Van Kampen American Capital
Trust.

(Continued on next page.)
------------------

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT FEDERALLY
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.

A Statement of Additional Information, dated October 28, 1996, containing
additional information about the Fund is hereby incorporated by reference into
this Prospectus. A copy of the Fund's the Statement of Additional Information
may be obtained without charge by calling (800) 421-5666 or for
Telecommunications Device for the Deaf at (800) 772-8889. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is available along with other related materials at the
SEC's internet web site (http://www.sec.gov).

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

THIS PROSPECTUS IS DATED OCTOBER 28, 1996.

<PAGE> 68

(Continued from previous page.)

The Fund's investment adviser is Van Kampen American Capital Investment
Advisory Corp. (the "Adviser"). The net asset value and yield of the Fund will
fluctuate depending on market conditions and other factors. This Prospectus sets
forth information that a prospective investor should know before investing in
the Fund. Please read it carefully and retain it for future reference. The
address of the Fund is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, and
its telephone number is (800) 421-5666.

2
<PAGE> 69

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................................. 4
Shareholder Transaction Expenses................................ 7
Annual Fund Operating Expenses and Example...................... 8
Financial Highlights............................................ 10
The Fund........................................................ 12
Investment Objective and Policies............................... 12
Investment Practices............................................ 18
Investment Advisory Services.................................... 25
Alternative Sales Arrangements.................................. 27
Purchase of Shares.............................................. 29
Shareholder Services............................................ 39
Redemption of Shares............................................ 43
The Distribution and Service Plans.............................. 46
Distributions from the Fund..................................... 48
Tax Status...................................................... 49
Fund Performance................................................ 53
Description of Shares of the Fund............................... 55
Additional Information.......................................... 56
</TABLE>

3
<PAGE> 70

- ------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------

THE FUND. Van Kampen American Capital Short-Term Global Income Fund (the
"Fund") is a non-diversified series of the Van Kampen American Capital Trust
(the "Trust"). The Trust is an open-end management investment company organized
as a Delaware business trust.

MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and
$25 minimum subsequent investment for each class of shares (or less as described
under "Purchase of Shares").

INVESTMENT OBJECTIVE. The Fund's investment objective is to seek a high level
of current income, consistent with prudent investment risk. There can be no
assurance that the Fund will achieve its investment objective.

INVESTMENT POLICIES. The Fund seeks to achieve its investment objective by
investing in a global portfolio of investment grade debt securities denominated
in various currencies and multi-national currency units and maintaining a
dollar-weighted average portfolio maturity of not more than three years. In
normal circumstances, at least 65% of the Fund's total assets will be invested
in obligations of or issued by issuers located in at least three different
countries, one of which may be the United States. The Fund is designed for the
investor who seeks a higher yield than a money market fund and less fluctuation
in net asset value than a longer-term global bond fund. Investment grade debt
securities and securities with shorter maturities generally have lower yields
than debt securities of lower quality and with longer maturities. See
"Investment Objective and Policies" and "Investment Practices."

INVESTMENT RESULTS. The investment results of the Fund are shown in the table
of "Financial Highlights."

PURCHASE OF SHARES. 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 "Purchase of Shares."

REDEMPTION. Class A Shares may be redeemed at net asset value, without charge
subject to conditions set forth herein. Shares sold subject to a contingent
deferred sales charge ("CDSC Shares") may be redeemed at net asset value less a
deferred sales charge, which will vary among each class of CDSC Shares and with
the length of time a redeeming shareholder has owned such shares. CDSC Shares
redeemed after the expiration of the CDSC period applicable to the respective
class of CDSC Shares will not be subject to a deferred sales charge. The Fund
may require the redemption of shares if the value of an account is $500 or less.
See "Redemption of Shares."

INVESTMENT ADVISER. Van Kampen American Capital Investment Advisory Corp. is
the Fund's investment adviser.

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. distributes the
Fund's shares.

4
<PAGE> 71

DISTRIBUTIONS FROM THE FUND. Distributions from net investment income will be
declared daily and paid monthly; net realized capital gains, if any, will be
distributed annually. 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 administrative
expenses relating to each class of shares will be borne exclusively by the
respective class of shares. See "Distributions from the Fund."

RISK FACTORS AND SPECIAL CONSIDERATIONS. As a global fund, the Fund may invest
in United States and foreign securities. Investments in securities of foreign
entities and securities denominated in foreign currencies involve risks not
typically involved in domestic investment, including fluctuations in foreign
exchange rates, future foreign political and economic developments, and the
possible imposition of exchange controls or other foreign or United States
governmental laws or restrictions applicable to such investments. Since the Fund
may invest in securities denominated or quoted in currencies other than the
United States dollar, changes in foreign currency exchange rates may affect the
value of investments in the Fund's portfolio and the accrued income and
unrealized appreciation or depreciation of investments. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S. dollar
value of the Fund's assets denominated in that currency and the Fund's yield on
such assets. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets. These forces are, in turn, affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation, and other factors. Moreover,
individual foreign economies may differ favorably or unfavorably from the United
States economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investment in such countries.
There may be less publicly available information about a foreign financial
instrument than about an United States instrument, and foreign entities may not
be subject to accounting, auditing and financial reporting standards and
requirements comparable to those of United States entities. In addition, certain
foreign investments made by the Fund may be subject to foreign withholding
taxes, which would reduce the Fund's total return on such investments and the
amounts available for distribution by the Fund to its shareholders. For any
taxable year that more than 50% of the Fund's total assets at the close of such
year consist of stock or securities of foreign corporations and that the Fund
otherwise qualifies for and makes an election, the amount of foreign taxes paid
by the Fund that can be treated as foreign income taxes for United States
federal income tax purposes would be included in the income of its shareholders
and (subject to certain limitations) shareholders would be entitled to credit
their portions of these amounts against their United States federal income tax
due, if any, or to deduct their portions of these amounts from their United
States taxable income, if any. See "Tax Status." Most foreign financial markets,
while growing in volume, have, for the most part, substantially less volume than
United States markets, and securities of many foreign companies are less liquid
and their prices more volatile than securities of comparable domestic companies.
Foreign markets

5
<PAGE> 72

also have different clearance and settlement procedures and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of the Fund are not invested and no return is earned thereon. The inability of
the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in the value of the portfolio security
or, if the Fund has entered into a contract to sell the security, could result
in possible liability to the purchaser. Costs associated with transactions in
foreign securities, including custodial costs and foreign brokerage commissions,
are generally higher than with transactions in United States securities. In
addition, the Fund incurs costs in connection with conversions between various
currencies. There is generally less government supervision and regulation of
exchanges, financial institutions and issuers in foreign countries than there is
in the United States.

The net asset value of the Fund's shares will be affected by changes in the
general level of interest rates. When interest rates decline, the value of a
portfolio of fixed income securities can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio of fixed income securities can be
expected to decline.

The Fund intends to engage in strategic transactions with all or a portion of
its portfolio investments through transactions in forward currency contracts,
options on foreign currencies, foreign currency swap contracts, financial
futures contracts and options on such financial futures contracts and through
the use of "cross hedges." Successful investments in such transactions are
subject to the Adviser's ability to predict correctly movements in the relevant
markets. Certain of such transactions may be illiquid.

The Fund may invest in commercial paper and certificates of deposit which are
indexed to certain specific foreign currency exchange rates. The terms of such
commercial paper or certificates of deposit provide that their principal amount
is adjusted upwards or downwards (but not below zero) at maturity to reflect
changes in the exchange rate between two currencies while the obligation is
outstanding. Such commercial paper and certificates of deposit entail the risk
of loss of principal.

The Fund is a "non-diversified" investment company, which means the Fund may,
subject to the requirements for qualification as a regulated investment company
for United States federal income tax purposes, invest more than 5% of the value
of its total assets in the securities of a single issuer. Because the Fund, as a
non-diversified investment company, may invest in a smaller number of individual
issuers than a diversified investment company, an investment in the Fund may, in
certain circumstances, present greater risk to an investor than an investment in
a diversified company.

The foregoing is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.

6
<PAGE> 73

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-------- ------------- -------------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
the offering price).......... 3.25%(1) None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of the offering
price)....................... None None(3) None(3)
Deferred sales charge (as a
percentage of the lesser of
the original purchase price
or redemption proceeds)...... None(2) Year 1--3.00% Year 1--1.00%
Year 2--2.00% After--None
Year 3--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 $25,000 or more. See "Purchase of Shares--Class A
Shares."

(2) Investments of $1 million or more are not subject to a sales charge at the
time of purchase, but a CDSC of 1.00% may be imposed on certain redemptions
made within one year of the purchase. See "Purchase of Shares--Deferred
Sales Charge Alternatives--Class A Shares of $1 million or more."

7
<PAGE> 74

<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).................................... 0.55% 0.55% 0.55%
12b-1 fees(1) (as a percentage of average
daily net assets).............................. 0.25% 1.00% 1.00%
Other expenses (after expense reimbursement) (as
a percentage of average daily net assets)(2)... 0.51% 0.54% 0.52%
Total expenses (after expense reimbursement) (as
a percentage of average daily net assets)(2)... 1.31% 2.09% 2.07%
</TABLE>

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

(1) Includes a service fee of up to 0.25% (as a percentage of net asset value)
paid by the Fund as compensation for ongoing services rendered to investors.
With respect to each class of shares, amounts in excess of 0.25%, if any,
represent an asset based sales charge. The asset based sales charge with
respect to Class C Shares includes 0.75% (as a percentage of net asset
value) paid to investors' broker-dealers as sales compensation. See "The
Distribution and Service Plans."

(2) In the absence of expense reimbursement, "Other expenses" would have been
0.54%, 0.57% and 0.54% for Class A Shares, Class B Shares and Class C
Shares, respectively, and "Total expenses" would have been 1.34%, 2.12% and
2.09% for Class A Shares, Class B Shares and Class C Shares, respectively.

8
<PAGE> 75

EXAMPLE:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) an operating
expense ratio of 1.31% for Class A Shares,
2.09% for Class B Shares and 2.07% for Class
C Shares, (ii) a 5% annual return and (iii)
redemption at the end of each period:
Class A Shares............................ $45 $73 $ 102 $ 185
Class B Shares............................ 51 75 112 204*
Class C Shares............................ 31 65 111 240
You would pay the following expenses on the
same $1,000 investment assuming no
redemption at the end of each period:
Class A Shares............................ $45 $73 $ 102 $ 185
Class B Shares............................ 21 65 112 204*
Class C Shares............................ 21 65 111 240
</TABLE>

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

* Based on conversion to Class A Shares after six years.

The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above, carried out to future years. The ten
year amount with respect to Class B Shares of the Fund reflects the lower
aggregate 12b-1 and service fees applicable to such shares after conversion to
Class A Shares. Class B Shares acquired through the exchange privilege are
subject to the deferred sales charge schedule relating to the Class B Shares of
the Fund from which the purchase of Class B Shares was originally made.
Accordingly, future expenses as projected could be higher than those determined
in the above table if the investor's Class B Shares were exchanged from a fund
with a higher contingent deferred sales charge. THE INFORMATION CONTAINED IN THE
ABOVE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of such costs and expenses, see "Purchase of Shares," "Redemption of
Shares," "Investment Advisory Services" and "The Distribution and Service
Plans."

9
<PAGE> 76

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for one 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,
and their report thereon appears in the Fund's related 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
---------------------------------------------------------------------------
SEPTEMBER 28, 1990
YEAR ENDED JUNE 30 (COMMENCEMENT
------------------------------------------------- INVESTMENT OPERATIONS)
1996 1995 1994 1993 1992 TO JUNE 30, 1991
------ ------- ------- ------- ------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................ $ 7.56 $ 8.15 $ 9.11 $ 9.65 $ 9.49 $ 9.70
Net Investment Income............................. .49 .50 .59 .71 .69 .62
Net Realized and Unrealized Gain/Loss on
Investments and Foreign Currency................ .16 (.45) (.89) (.46) .34 (.15)
------ ------- ------- ------- ------ ------
Total from Investment Operations.................... .65 .05 (.30) .25 1.03 .47
------ ------- ------- ------- ------ ------
Less:
Distributions from and in Excess of Net Investment
Income.......................................... -0- .37 .35 .79 .87 .68
Return of Capital Distribution.................... .59 .27 .31 -0- -0- -0-
------ ------- ------- ------- ------ ------
Total Distributions................................. .59 .64 .66 .79 .87 .68
------ ------- ------- ------- ------ ------
Net Asset Value, End of Period...................... $ 7.62 $ 7.56 $ 8.15 $ 9.11 $ 9.65 $ 9.49
====== ======= ======= ======= ====== ======
Total Return(1)(2).................................. 8.81% .69% (3.61%) 2.86% 11.35% 4.97%(3)
Net Assets at End of Period (In millions)........... $ 50.1 $ 72.5 $ 147.7 $ 205.9 $205.1 $ 85.4
Ratio of Expenses to Average Net Assets(1).......... 1.31% 1.14% 1.13% 1.14% 1.32% 1.57%
Ratio of Net Investment Income to Average Net
Assets(1)......................................... 6.54% 7.20% 6.64% 7.87% 8.12% 7.20%
Portfolio Turnover.................................. 225% 204% 259% 141% 65% 78%
- ----------------
(1) If certain expenses had not been assumed by the Adviser, total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets........... 1.34% N/A N/A N/A N/A N/A
Ratio of Net Investment Income to Average Net
Assets.......................................... 6.51% N/A N/A N/A N/A N/A
</TABLE>

(2) Total Return does not reflect the effects of sales charges

(3) Non-Annualized

See Financial Statements and Notes Thereto

10
<PAGE> 77

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

<TABLE>
<CAPTION>
CLASS B SHARES
------------------------------------------------------
JULY 22, 1991 CLASS C SHARES
(COMMENCEMENT ----------------------------------------
OF AUGUST 13, 1993
YEAR ENDED JUNE 30 DISTRIBUTION) YEAR ENDED JUNE 30 (COMMENCEMENT
--------------------------------------- TO JUNE 30, ---------------------- OF DISTRIBUTION)
1996 1995 1994 1993 1992 1996 1995 TO JUNE 30, 1994
------------ ------- ------- ------- ------------- ------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $ 7.56 $ 8.15 $ 9.10 $ 9.65 $ 9.43 $ 7.56 $ 8.16 $ 9.24
Net Investment Income.......... .39 .41 .54 .67 .78 .45 .50 .49
Net Realized and Unrealized
Gain/Loss on Investments and
Foreign Currency............. .20 (.42) (.90) (.49) .19 .14 (.52) (1.05)
------------ ------- ------- ------- ------------- ------------ -------- --------
Total from Investment
Operations..................... .59 (.01) (.36) .18 .97 .59 (.02) (.56)
------------ ------- ------- ------- ------------- ------------ -------- --------
Less:
Distributions from and in
Excess of Net Investment
Income....................... -0- .34 .32 .73 .75 -0- .34 .27
Return of Capital
Distribution................. .53 .24 .27 -0- -0- .53 .24 .25
------------ ------- ------- ------- ------------- ------------ -------- --------
Total Distributions.............. .53 .58 .59 .73 .75 .53 .58 .52
------------ ------- ------- ------- ------------- ------------ -------- --------
Net Asset Value, End of Period... $ 7.62 $ 7.56 $ 8.15 $ 9.10 $ 9.65 $ 7.62 $ 7.56 $ 8.16
============ ======= ======= ======= ============= ============ ======== ========
Total Return(1)(2)............... 8.02% (.14%) (4.22%) 2.02% 10.47%(3) 8.03% (.27%) (6.32%)(3)
Net Assets at End of Period (In
millions)...................... $ 81.1 $ 127.9 $ 271.8 $ 393.1 $ 241.7 $ .2 $ .2 $ .2
Ratio of Expenses to Average Net
Assets(1)...................... 2.09% 1.96% 1.85% 1.85% 2.08% 2.07% 1.96% 1.84%
Ratio of Net Investment Income to
Average Net Assets(1).......... 5.79% 6.42% 5.91% 7.20% 8.62% 5.72% 6.30% 5.83%
Portfolio Turnover............... 225% 204% 259% 141% 65% 225% 204% 259%
- ----------------
(1) If certain expenses had not been assumed by the Adviser, total return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average
Net Assets..................... 2.12% N/A N/A N/A N/A 2.09% N/A N/A
Ratio of Net Investment Income
to Average Net Assets........ 5.76% N/A N/A N/A N/A 5.69% N/A N/A
</TABLE>

(2) Total Return does not reflect the effects of sales charges
(3) Non-Annualized

See Financial Statements and Notes Thereto

11
<PAGE> 78

- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------

Van Kampen American Capital Short-Term Global Income Fund (the "Fund") is a
mutual fund. A mutual fund allows investors to pool their money with that of
other investors in order to obtain professional investment management. Mutual
funds generally make it possible for investors to obtain greater diversification
of their investments and to simplify their recordkeeping. The Fund is a separate
non-diversified series of Van Kampen American Capital Trust (the "Trust"). The
Trust is an open-end management investment company organized as a Delaware
business trust.

- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------

The Fund's investment objective is to seek a high level of current income,
consistent with prudent investment risk. The Fund seeks to achieve its
investment objective by investing in a global portfolio of investment grade debt
securities denominated in various currencies and multi-national currency units
and maintaining a dollar-weighted average portfolio maturity of not more than
three years. The Fund's investment objective is fundamental and, as such, cannot
be changed without the approval of the holders of a majority (defined as the
lesser of (i) 67% of the voting securities present at a meeting of shareholders,
if the holders of more than 50% of the outstanding voting securities are present
or represented by proxy at such meeting, or (ii) more than 50% of the
outstanding voting securities) of the Fund's outstanding shares. The Fund is
designed for the investor who seeks a higher yield than a money market fund and
less fluctuation in net asset value than a longer-term global bond fund.
Investment grade debt securities and securities with shorter maturities
generally have lower yields than debt securities of lower quality and with
longer maturities. There can be no assurance that the Fund will achieve its
investment 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.

The Fund invests in debt securities denominated in multi-national currency
units and in the currencies of countries whose governments are considered stable
by the Adviser and whose currency is convertible into U.S. dollars. Such
currencies

12
<PAGE> 79

currently include, among others, the Australian Dollar, Austrian Schilling,
British Pound Sterling, Canadian Dollar, Dutch Guilder, European Currency Unit
("ECU"), French Franc, German Mark, Italian Lira, Japanese Yen, New Zealand
Dollar, Spanish Peseta, Swedish Krona and Swiss Franc. In 1995, non-dollar fixed
income securities (i.e., those denominated in a currency other than the U.S.
dollar) comprised more than 50% of the global fixed-income market. An issuer of
debt securities purchased by the Fund may be domiciled in a country other than
the country in whose currency the instrument is denominated.

The Fund seeks to minimize credit risk by limiting its portfolio investments
to investment grade debt securities. Accordingly, the Fund may only invest in:
(i) obligations issued or guaranteed by foreign governments or supranational
organizations or their agencies, instrumentalities or subdivisions and that are
rated, at the time of investment, at least BBB by Standard & Poor's Ratings
Group ("S&P") or at least Baa by Moody's Investors Service, Inc. ("Moody's") or
similarly rated by another nationally recognized statistical rating organization
("NRSRO") as determined by the Adviser subject to the review of the Board of
Trustees ("Investment Grade Ratings") or, if unrated, determined by the Adviser
to be of comparable quality; (ii) corporate debt securities having at least one
Investment Grade Rating, at the time of investment, or if unrated, determined by
the Adviser to be of comparable quality; (iii) certificates of deposit and
bankers' acceptances issued or guaranteed by, or time deposits maintained at,
banks (including foreign branches of U.S. banks or U.S. or foreign branches of
foreign banks) having total assets of more than $500 million and determined by
the Adviser to be of investment grade; (iv) commercial paper rated, at the time
of investment, A-3 by S&P, Prime-3 by Moody's or similarly rated by another
NRSRO as determined by the Adviser subject to the review of the Board of
Trustees or, if not rated, issued by U.S. or foreign companies having
outstanding debt securities rated at least BBB or Baa by S&P or Moody's,
respectively, or similarly rated by another NRSRO, or determined by the Adviser
to be of comparable quality; and (v) debt securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities.

Securities rated BBB by S&P are regarded by S&P as having an adequate capacity
to pay interest and repay principal. Whereas such securities normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely, in the opinion of S&P, to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories. According to published guidelines, securities rated Baa
by Moody's are considered by Moody's as medium grade obligations. Such
securities are, in the opinion of Moody's, neither highly protected nor poorly
secured. Interest payments and principal security appear to Moody's to be
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. In the opinion
of Moody's they lack outstanding investment characteristics and in fact have
speculative characteristics

13
<PAGE> 80

as well. For a description of S&P's and Moody's ratings see the Statement of
Additional Information.

The foregoing policies with respect to credit quality of portfolio investments
will apply only at the time of purchase of a security, and the Fund will not be
required to dispose of a security in the event that S&P or Moody's (or any other
NRSRO) downgrades its assessment of the credit characteristics of a particular
issuer. In determining whether the Fund will retain or sell such a security, the
Adviser may consider such factors as the Adviser's assessment of the credit
quality of the issuer of such security, the price at which such security could
be sold and the rating, if any, assigned to such security by other NRSRO.

In pursuing its investment objective, the Fund seeks to minimize fluctuations
in net asset value as a result of changes in market rates of interest by
investing only in shorter-term debt securities. The Fund seeks to maintain a
dollar-weighted average portfolio maturity of not more than three years. The net
asset value of the Fund's shares will change as the general level of interest
rates fluctuate. When interest rates decline, the value of a portfolio primarily
invested in debt securities can be expected to rise. Conversely, when interest
rates rise, the value of a portfolio primarily invested in debt securities can
be expected to decline. However, shorter-term securities generally are less
sensitive to changes in value as a result of fluctuations in market rates of
interest than are longer-term securities, and it is expected that the net asset
value of the Fund's shares will fluctuate as a result of changes in market rates
of interest less than that of a longer-term global bond fund. The Fund's net
asset value may fluctuate as a result of changes in foreign exchange rates,
independent of fluctuations in market rates of interest, although as described
herein the Fund intends to engage in foreign currency hedging transactions to
seek to minimize such fluctuations. The Adviser actively manages the Fund's
portfolio, allocating portfolio assets among various types of U.S. and foreign
debt securities and adjusting the Fund's exposure to each currency based on the
Adviser's perception of the most favorable markets and issuers. In this regard,
the percentage of assets invested in securities of a particular country or
denominated in a particular currency will vary in accordance with the Adviser's
assessment of the relative yield and appreciation potential of such securities
and the relationship of a country's currency to the U.S. dollar. Fundamental
economic strength, credit quality and interest rate trends are the principal
factors considered by the Adviser in determining to increase or decrease the
emphasis placed upon a particular industry sector within the Fund's investment
portfolio. The Fund will not invest more than 25% of its total assets in debt
securities denominated in a single currency other than the U.S. dollar.

From time to time the returns available on short-term debt instruments
denominated in the currencies of certain foreign countries may be more
attractive than the corresponding returns available on U.S. dollar denominated
short-term debt instruments. However, the attractive returns which may from time
to time be available from certain short-term foreign currency denominated debt
instruments can be

14
<PAGE> 81

adversely affected by changes in currency exchange rates. The Fund will receive
much of its income and gains, if any, in currencies other than U.S. dollars,
although the Fund will make distributions in U.S. dollars. A reduction in the
value of such foreign currencies relative to the value of the U.S. dollar would
adversely affect the dollar value of the net assets (including accrued income
and unrealized appreciation or depreciation of investments) of the Fund. The
Fund will seek to maintain a portfolio of investments that is, in the aggregate,
relatively neutral to fluctuations in the value of the U.S. dollar relative to
the currencies of major industrialized nations. In addition, the Fund intends to
engage in hedging and risk management transactions in instruments such as
forward currency contracts, options on foreign currencies, foreign currency swap
agreements, financial futures contracts and options thereon. There can be no
assurance that the Fund will not be adversely affected by fluctuations in
currency exchange rates and such hedging and risk management transactions entail
risks. See "Investment Practices."

The Fund may invest without limitation in commercial paper and certificates of
deposit which are indexed to certain specific foreign currency exchange rates.
The terms of such commercial paper or certificates of deposit provide that the
principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect fluctuations in the exchange rate between two currencies
while the obligation is outstanding, depending on the terms of the specific
security. The Fund will purchase such commercial paper or certificates of
deposit with the currency in which it is denominated and, at maturity, will
receive interest and principal payments thereon in that currency, but the amount
of principal payable by the issuer at maturity will vary in proportion to the
change (if any) in the exchange rate between the two specified currencies
between the date the instrument is issued and the date the instrument matures.
While such commercial paper and certificates of deposit entail the risk of loss
of principal, the potential for realizing gains as a result of changes in
foreign currency exchange rates enables the Fund to hedge (or cross-hedge)
against a decline in the U.S. dollar value of investments denominated in foreign
currencies while providing an attractive money market rate of return. The Fund
will purchase such commercial paper and certificates of deposit for hedging
purposes only, not for speculation. The staff of the Securities and Exchange
Commission (the "SEC") is currently considering whether the Fund's purchase of
this type of commercial paper and certificates of deposit would result in the
issuance of a "senior security" within the meaning of the Investment Company Act
of 1940, as amended (the "1940 Act"). The Fund believes that such investments do
not involve the creation of such a senior security, but nevertheless undertakes,
pending the resolution of this issue by the staff, to establish a segregated
account with respect to its investments in this type of commercial paper and
certificates of deposit and to maintain in such account cash not available for
investment or liquid securities having a value equal to the aggregate principal
amount of outstanding commercial paper and certificates of deposit of this type.

The Fund may invest in debt securities issued by supranational organizations
such as the World Bank, which was chartered to finance development projects in

15
<PAGE> 82

developing member countries, and the Asian Development Bank, which is an
international development bank established to lend funds, promote investment and
provide technical assistance to member nations in the Asian and Pacific regions.
Supranational entities do not have taxing authority and are therefore dependent
on their members' support in order to meet interest and principal payments.

The Fund may invest in debt securities denominated in the ECU, which is a
"basket" consisting of specified amounts of the currencies of certain of the
twelve member states of the European Economic Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. The Fund's Adviser does not believe that such adjustments will
adversely affect holders of ECU-denominated obligations or the marketability of
such securities. European supranationals, in particular, issue ECU-denominated
obligations.

As a global fund, the Fund may invest in United States and foreign securities.
It is a policy of the Fund that, in normal circumstances, the Fund's assets will
be invested in obligations of or issued by issuers located in at least three
different countries, one of which may be the United States. Investments in
securities of foreign entities and securities denominated in foreign currencies
involve risks not typically involved in domestic investment, including
fluctuations in foreign exchange rates, future foreign political and economic
developments, and the possible imposition of exchange controls or other foreign
or United States governmental laws or restrictions applicable to such
investments. Since the Fund may invest in securities denominated or quoted in
currencies other than the United States dollar, changes in foreign currency
exchange rates may affect the value of investments in the portfolio and the
accrued income and unrealized appreciation or depreciation of investments.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and the Fund's yield on such assets. Foreign currency exchange rates are
determined by forces of supply and demand on the foreign exchange markets. These
forces are, in turn, affected by the international balance of payments and other
economic and financial conditions, government intervention, speculation, and
other factors. Moreover, individual foreign economies may differ favorably or
unfavorably from the United States economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position.

16
<PAGE> 83

subject to foreign withholding taxes, which would reduce the Fund's total return
on such investments and the amounts available for distributions by the Fund to
its shareholders. For any taxable year that more than 50% of the Fund's total
assets at the close of such year consist of stock or securities in foreign
corporations and that the Fund otherwise qualifies for and makes an election,
the amount of foreign taxes paid by the Fund that can be treated as foreign
income taxes for United States federal income tax purposes would be included in
the income of its shareholders and (subject to certain limitations) shareholders
would be entitled to credit their portion of these amounts against their United
States federal income tax due, if any, or to deduct their portions of these
amounts from their United States taxable income, if any. See "Tax Status."
Foreign financial markets, while growing in volume, have, for the most part,
substantially less volume than United States markets, and securities of many
foreign companies are less liquid and their prices more volatile than securities
of comparable domestic companies. The foreign markets also have different
clearance and settlement procedures and in certain markets there have been times
when settlements have been unable to keep pace with the volume of securities
transactions making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are not
invested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Costs associated with transactions in foreign
securities, including custodial costs and foreign brokerage commissions, are
generally higher than with transactions in United States securities. In
addition, the Fund will incur costs in connection with conversions between
various currencies. There is generally less government supervision and
regulation of exchanges, financial institutions and issuers in foreign countries
than there is in the United States.

The Fund may invest in debt securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities. Such securities may include
either direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes or bonds) or securities issued or guaranteed by agencies or
instrumentalities of the U.S. government (such as Federal Home Loan Bank
securities and Federal National Mortgage Association securities). Of the
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
government, some are backed by the full faith and credit of the U.S. government
and others are backed only by the rights of the issuer to borrow from the U.S.
Treasury.

The Fund has a policy which states that it may not purchase any security which
is restricted as to disposition under federal securities laws or by contract or
which is not readily marketable or is illiquid, if immediately after such
purchase more than 10% of the Fund's assets (taken at market value) would be
invested in such securities. The following are presently subject to such policy:
(a) direct placements

17
<PAGE> 84

or other securities which are subject to legal or contractual restrictions on
resale or for which there is no readily available market (e.g., trading in the
security is suspended or, in the case of unlisted securities, market makers do
not exist or will not entertain bids or offers), (b) certain options purchased
by the Fund over-the-counter on securities other than U.S. government securities
and the cover for options written by the Fund over the counter, and (c)
repurchase agreements not terminable within seven days. See "Investment
Practices."

The Fund is a "non-diversified" investment company, which means the Fund is
not limited in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), which will relieve
the Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. See "Tax Status." To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year (i) at least 50% of the market value of the Fund's
total assets will be invested in cash, cash items, U.S. government securities
and other securities that are, for purposes of this requirement, limited in
respect of a single issuer to an amount not greater in market value than 5% of
the market value of its total assets and to not more than 10% of the outstanding
voting securities of a single issuer and (ii) not more than 25% of the market
value of the Fund's total assets will be invested in the securities (other than
U.S. government securities or the securities of other regulated investment
companies) of a single issuer or any two or more issuers that the Fund controls
and that are determined to be engaged in the same or similar trades or
businesses or related trades or businesses. Because the Fund, as a
non-diversified investment company, may invest in a smaller number of individual
issuers than a diversified investment company, an investment in the Fund may,
under certain circumstances, present greater risk to an investor than an
investment in a diversified company.

- ------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------

18
<PAGE> 85

as swaps, caps, floors or collars, and enter into various currency transactions
such as currency forward contracts, currency futures contracts, currency swaps
or options on currency or currency futures. Collectively, all the above are
referred to as "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 or currency exchange rate 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. The
Fund may sell options on securities the Fund owns or has the right to purchase
without additional payments, up to a maximum of 25% of the Fund's assets, for
non-hedging purposes. 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.

19
<PAGE> 86

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. 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 engage in currency transactions in order to hedge the value of
currencies against fluctuations in relative value. Currency transactions include
forward currency contracts, exchange listed currency futures, exchange listed
and OTC options on currencies, and currency swaps. A forward currency contract
involves a privately negotiated obligation to purchase or sell (with delivery
generally required) a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. A currency swap is an agreement to
exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap. The Fund may enter
into currency transactions with persons rated A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
options) are determined to be of equivalent credit quality by the Adviser. The
Fund's dealings in forward currency contracts and other currency transactions
such as futures, options, options on futures and swaps will be limited to
hedging involving either specific transactions or portfolio positions. The Fund
will not enter into a transaction to hedge currency exposure to an extent
greater, after netting all transactions intended to wholly or partially offset
other transactions, than the aggregate market value (at the time of entering
into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency
other than with respect to proxy hedging as described below.

The Fund may cross-hedge currencies by entering into transactions to purchase
or sell one or more currencies that are expected to decline in value relative to
other currencies to which the Fund has or in which Fund expects to have
portfolio exposure. To attempt to reduce the effect of currency fluctuations on
the value of existing or anticipated holdings of portfolio securities, the Fund
also may engage in proxy hedging. Proxy hedging is often used when the currency
to which the Fund's portfolio is exposed is difficult to hedge or to hedge
against the dollar. Proxy hedging entails entering into a forward contract to
sell a currency whose changes in value are generally considered to be linked to
a currency or currencies in which some or all of the Fund's portfolio securities
are or are expected to be denominated, and to buy U.S. dollars. The amount of
the contract would not exceed the value of the Fund's securities denominated in
linked currencies. For example, if the Adviser considers the Austrian schilling
to be linked to the German deutschemark (the "D-mark"), the Fund holds
securities denominated in Austrian schillings and the Adviser believes that the
value of schillings will decline against the U.S. dollar, the

20
<PAGE> 87

Adviser may enter into a contract to sell D-marks and buy dollars. Proxy hedging
involves some of the same risks and considerations as other transactions with
similar instruments. Currency transactions can result in losses to the Fund if
the currency being hedged fluctuates in value to a degree or in a direction that
is not anticipated. Further, there is the risk that the perceived linkage
between various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.

Currency transactions are subject to some risks different from other
transactions. Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases and sales of
currency and related instruments can be negatively affected by government
exchange controls, blockages, and manipulations or exchange restrictions imposed
by governments. These can result in losses to the Fund if it is unable to
deliver or receive currency or funds in settlement of obligations and could also
cause hedges it has entered into to be rendered useless, resulting in full
currency exposure as well as incurring transaction costs. Buyers and sellers of
currency futures are subject to the same risks that apply to the use of futures
generally. Further, settlement of a currency futures contract for the purchase
of most currencies must occur at a bank based in the issuing nation. Trading
options on currency futures is relatively new, and the ability to establish and
close out positions on such options is subject to the maintenance of a liquid
market which may not always be available. Currency exchange rates may fluctuate
based on factors extrinsic to that country's economy.

When conducted outside the United States, Strategic Transactions may not be
regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities, currencies
and other instruments. The value of such positions also could be adversely
affected by: (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lower
trading volume and liquidity.

21
<PAGE> 88

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.

"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Fund may also 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 investment grade 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. No specific limitation exists as to the percentage of the Fund's
assets which may be used to acquire securities on a "when issued" or "delayed
delivery" basis. 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 purposes of investment leverage.

LENDING OF PORTFOLIO HOLDINGS. The Fund has a fundamental policy which states
that the Fund may not make loans, except to the extent the obligations the Fund
may invest in are considered to be loans, through loans of portfolio securities
or the acquisition of securities subject to repurchase agreements. Consistent
therewith, the Fund may seek to increase its income by lending financial
instruments in its portfolio in accordance with present regulatory policies,
including those of the Board of Governors of the Federal Reserve System and the
SEC. Such loans may be made, without limit, to brokers, dealers, banks or other
recognized institutional borrowers of financial instruments and are required to
be secured continuously by collateral, including cash, cash equivalents or U.S.
Treasury bills maintained on a current basis at an amount at least equal to the
market value of the financial instruments loaned. The Fund would have the right
to call a loan and obtain the financial instruments loaned at any time on five
days' notice. For the duration of a loan, the Fund would continue to receive the
equivalent of the interest paid by the issuer on the financial instruments
loaned and also would receive compensation from the investment of the
collateral. The Fund would not have the right to vote any financial instruments
having voting rights during the existence of the loan, but

22
<PAGE> 89

the Fund could call the loan in anticipation of an important vote to be taken
among holders of the financial instruments or in anticipation of the giving or
withholding of their consent on a material matter affecting the financial
instruments. As with other extensions of credit, risks of delay in recovery or
even loss of rights in the collateral exist should the borrower of the financial
instruments fail financially. However, the loans would be made only to firms
deemed by the Adviser to be of good standing and when, in the judgment of the
Adviser, the consideration which can be earned currently from loans of this type
justifies the attendant risk. The creditworthiness of firms to which the Fund
lends its portfolio holdings will be monitored on an ongoing basis by the
Adviser pursuant to procedures adopted and reviewed, on an ongoing basis, by the
Board of Trustees of the Trust. No specific limitation exists as to the
percentage of the Fund's assets which the Fund may lend.

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 creditworthiness 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 may
invest in repurchase agreements of duration of seven days or less without
limitation. 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 10% of the Fund's net assets.

23
<PAGE> 90

diversity of investments for the Fund than would be available to the Fund
investing separately. The manner in which the joint account is managed is
subject to conditions set forth in an SEC exemptive order authorizing this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.

OTHER PRACTICES. The Fund has a fundamental policy which states that it may
not borrow money, except from banks for temporary purposes and then in amounts
not in excess of 5% of the total asset value of the Fund, or mortgage, pledge,
or hypothecate any assets except in connection with a borrowing and in amounts
not in excess of 10% of the total asset value of the Fund. Borrowings may not be
made for investment leverage, but only to enable the Fund to satisfy redemption
requests where liquidation of portfolio securities is considered disadvantageous
or inconvenient. In this connection, the Fund will not purchase portfolio
securities during any period that such borrowings, including the Fund's
commitments pursuant to reverse repurchase agreements, exceed 5% of the total
asset value of the Fund (after giving effect to the amount borrowed).
Notwithstanding this policy, the Fund may enter into when issued and delayed
delivery transactions as described in this Prospectus.

PORTFOLIO TURNOVER. The Fund may engage in active short-term trading to
benefit from yield disparities among different issuers of securities, to seek
short-term profits during periods of fluctuating interest rates, or for other
reasons. Such trading will increase the Fund's rate of turnover and the
incidence of short-term capital gain taxable as ordinary income. Management
anticipates that the annual portfolio turnover in the Fund may be in excess of
200%. Portfolio turnover is calculated by dividing the lesser of purchases or
sales of portfolio securities by the monthly average value of the securities in
the portfolio during the year. Securities, including options, whose maturity or
expiration date at the time of acquisition were one year or less are excluded
from such calculation. A high rate of portfolio turnover involves
correspondingly greater expenses than a lower rate, which expenses must be borne
by the Fund and its shareholders. High portfolio turnover also may result in the
realization of substantial net short-term capital gains. The Fund's ability to
engage in active short-term trading may be limited by the general requirements
for qualification as a regulated investment company for federal tax purposes
that less than 30% of the annual gross income of the Fund be derived from the
sale or disposition of securities and certain other assets held by the Fund for
less than three months. See "Tax Status."

24
<PAGE> 91

commissions. The U.S. securities in which the Fund invests are traded
principally in the over-the-counter market. In the over-the-counter market,
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 managers, 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 bonds on a stock
exchange are effected through brokers who charge a commission for their
services.

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. In addition, in selecting among firms to handle a particular
transaction, the Adviser and the Fund may take into account whether the firm has
sold or is selling shares of the Fund. See "Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information for more information.

- ------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------------------

25
<PAGE> 92

distributed by leading financial advisers nationwide. Van Kampen American
Capital Distributors, Inc., the distributor of the Fund and sponsor of the funds
mentioned above, is a wholly-owned subsidiary of Van Kampen American Capital.

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

ADVISORY AGREEMENT. The business and affairs of the Fund are managed under the
direction of the Board of Trustees of the Trust, of which the Fund is a separate
series. Subject to the Trustees' authority, the Adviser and the officers of the
Fund supervise and implement the Fund's investment activities and are
responsible for overall management of the Fund's business affairs. The Fund pays
the Adviser an annual fee equal to 0.55% of the average daily net assets of the
Fund.

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 1940 Act, of the Adviser, the Distributor or Van Kampen American
Capital), the charges and expenses of independent accountants, legal counsel,
any transfer 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 federal
and state securities laws, miscellaneous expenses and all taxes and fees to
federal, state or other governmental agencies. The Adviser reserves the right in
its sole discretion from time to time to waive all or a portion of its
management fee or to reimburse the Fund for all or a portion of its other
expenses.

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<PAGE> 93

The Adviser may utilize at its own expense credit analysis, research and
trading support services provided by its affiliate, Van Kampen American Capital
Asset Management, Inc.

PORTFOLIO MANAGEMENT. Thomas J. Slefinger, First Vice President of the
Adviser, has been primarily responsible for the day to day management of the
Fund's portfolio since the Fund's commencement of investment operations. Mr.
Slefinger has been employed by the Adviser since July 1989.

- ------------------------------------------------------------------------------
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 aggregate
distribution and service fees with respect to each class of shares that may be
incurred over the anticipated duration of their investment in the Fund.

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

27
<PAGE> 94

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 Shares
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 period 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 (discussed below). Investors should
weigh the benefits of deferring the sales charges and having all of their funds
invested against the higher aggregate distribution and service fee applicable to
Class B Shares and Class C 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 (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. Generally, a class of shares subject
to a higher ongoing distribution and services fee or subject to the conversion
feature will have a higher expense ratio and pay lower dividends than a class of
shares subject to a lower ongoing distribution and services 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 this Prospectus under "Purchase of Shares -- Net Asset Value."

28
<PAGE> 95

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. 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 Internal Revenue Code of 1986, as amended
(the "Code").

- ------------------------------------------------------------------------------
PURCHASE OF SHARES
- ------------------------------------------------------------------------------

The Fund offers three classes of shares for sale to the public through Van
Kampen American Capital Distributors, Inc. (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
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 of its
shares 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
Fund 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 Fund 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.

29
<PAGE> 96

distribution arrangements for shares of the Fund. Also, the Distributor in its
discretion may from time to time, pursuant to objective criteria established by
the Distributor, pay fees to, and sponsor business seminars for, qualifying
brokers, dealers or financial intermediaries 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 and financial intermediaries for
sales contests, other sales programs and seminars are made by the Distributor
out of its own assets and not out of assets of the Fund. These programs will not
change the price an investor will pay for shares or the amount that a 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
brokers, dealers or financial intermediaries 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 1933, as amended.

30
<PAGE> 97

SALES CHARGE TABLE

<TABLE>
<CAPTION>
DEALER
CONCESSION
OR AGENCY
COMMISSION
TOTAL SALES CHARGE ----------
------------------------- PERCENTAGE
PERCENTAGE PERCENTAGE OF
SIZE OF TRANSACTION OF OFFERING OF NET OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000....................... 3.25% 3.36% 3.00%
$25,000 but less than $250,000.......... 2.75 2.83 2.50
$250,000 but less than $500,000......... 1.75 1.78 1.50
$500,000 but less than $1,000,000....... 1.50 1.52 1.25
$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 brokers, dealers or
financial intermediaries 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. See "Purchase of
Shares -- Deferred Sales Charge Alternatives" for additional information
with respect to contingent deferred sales charges.

QUANTITY DISCOUNTS

31
<PAGE> 98

OTHER PURCHASE PROGRAMS

32
<PAGE> 99

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, financial intermediary or the Distributor.

33
<PAGE> 100

described herein under "Purchase of Shares -- Class A Shares -- Quantity
Discounts," during the 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.

(9) Participants in any 403(b)(7) program of a college or university system
which permits only net asset value mutual fund investments and for which
Van Kampen American Capital Trust Company serves as custodian. In
connection with such purchases, the Distributor may pay, out of its own
assets, a commission to brokers, dealers, or financial intermediaries as
follows: 1.00% on sales up to $5 million, plus 0.50% on the next $5
million, plus 0.25% on the excess over $10 million.

34
<PAGE> 101

of the Fund and other funds in the Van Kampen American Capital Family of
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 organization 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 million and 0.50% on the excess over
$3 million.

The term "families" includes a person's spouse, minor children and
grandchildren, parents, and a person's spouse's parents.

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 compensates
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 is 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) 3.00% 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.

35
<PAGE> 102

Proceeds from the CDSC and the distribution fee 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 fee 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 CDSC 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 of the Fund in the
shareholder's account, that have converted from Class B Shares or Class C
Shares, if any, and fourth of CDSC Shares held longest during the period of time
that a CDSC 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 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. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 2.00% (the
applicable rate in the second year after purchase).

36
<PAGE> 103

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 three 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
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- -------------------------------------------------------------------------------
<S> <C>
First...................................... 3.00%
Second..................................... 2.00%
Third...................................... 1.00%
Fourth and after........................... 0.00%
</TABLE>

The CDSC generally is waived on redemptions of Class B Shares made pursuant to
the Systematic Withdrawal Plan. See "Shareholder Services -- Systematic
Withdrawal Plan".

CONVERSION FEATURE. Class B Shares and Class C Shares automatically will
convert to Class A Shares six years or ten years, respectively, after the end of
the month in which a shareholder's order to purchase the shares was accepted and
thereafter will not be subject to the higher distribution fees applicable to
Class B Shares and Class C Shares. The purpose of the conversion feature is to
relieve the holders of Class B Shares and Class C Shares that have been
outstanding for a period of time sufficient for the Distributor to have been
compensated for distribution expenses related to such shares from most of the
burden of such distribution-related expenses. The Fund does not expect to issue
any share certificates upon conversion.

37
<PAGE> 104

The conversion of Class B Shares and Class C 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 and service fees 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 or Class C Shares to
Class A Shares may be suspended if such an opinion is no longer available. In
that event, no further conversions of such shares would occur and 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 CDSC is waived on redemptions
of Class B Shares and Class C 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 "Redemption of Shares." The CDSC
is also waived on redemptions of Class C Shares as 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 "Redemption of
Shares" for further discussion of the waiver provisions.

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 its total liabilities
attributable to such class of shares, and dividing the result by the number of
shares of such class outstanding. The net asset value for the Fund is computed
once daily as of 5:00 p.m. Eastern time Monday through Friday, except on
customary business holidays, or except on any day on which no purchase or
redemption orders are received, or there is not a sufficient degree of trading
in the Fund's portfolio securities such that the Fund's net asset value per
share might be materially affected. The Fund reserves the right to calculate the
net asset value and to adjust the public offering price based thereon more
frequently than once a day if deemed desirable. The net asset value per share of
the different classes of shares are expected to be substantially the same; from
time to time, however, the per share net asset value of the different classes of
shares may differ.

Securities and other portfolio investments traded in the OTC or interbank
market are valued at the last available bid price or yield equivalents obtained
from one or more dealers in the OTC or interbank market prior to the time of
valuation. When the Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option

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<PAGE> 105

written, based on the last asked price in the case of exchange-traded options
or, in the case of options traded in the OTC market, the average of the last
asked price as obtained from one or more dealers. Options purchased by the Fund
are valued at their last bid price in the case of exchange-traded options or in
the case of options traded in the OTC market, the average of the last bid price
as obtained from two or more dealers. Portfolio securities which are traded on
stock exchanges are valued at the last sale price on the principal market on
which such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. Short-term securities with maturities of less than 60 days are valued at
amortized cost when amortized cost is determined in good faith by or under the
direction of the Board of Trustees of the Trust to be representative of the fair
value at which it is expected such securities may be resold. Other investments,
including futures contracts and related options, are stated at market value or
otherwise at the fair value at which it is expected they may be resold, as
determined in good faith by or under the direction of the Board of Trustees of
the Trust, of which the Fund is a series. Any assets or liabilities expressed in
terms of foreign currencies are translated into United States dollars at the
prevailing market rates as obtained from one or more dealers.

Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Trustees of the Trust. Such valuations and procedures will be reviewed
periodically by the Trustees.

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SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------

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<PAGE> 106

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.

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<PAGE> 107

retirement plan (e.g., IRA, 403(b)(7), 401(k) or Keogh) and for the benefit of
the same individual. 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.

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<PAGE> 108

dividend and capital gains options (except dividend diversification options) and
broker, dealer or financial 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.

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."

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<PAGE> 109

payable by the holder of Class A Shares to the order of any person in any amount
of $100 or more.

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REDEMPTION OF 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, Missouri 64141-9256, by
placing the redemption request through an authorized dealer or by calling the
Fund.

43
<PAGE> 110

44
<PAGE> 111

telephone transaction line at (800) 421-5684. 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. 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

45
<PAGE> 112

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.

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.

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 120 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 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.

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

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<PAGE> 113

Distribution Plan and the Service Plan are being implemented through an
agreement with the Distributor and sub-agreements between the Distributor and
brokers, dealers and financial intermediaries (collectively, "Selling
Agreements") that may provide for their customers or clients certain services or
assistance.

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 connection with the distribution of Class B 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 B 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.

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 the 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.

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<PAGE> 114

The Distributor's actual distribution-related expenses with respect to a class
of CDSC Shares for any given year may exceed the amounts payable to the
Distributor with respect to such shares under the Distribution Plan, the Service
Plan and payments received pursuant to the CDSC. In such event, with respect to
any such class of CDSC Shares, any unreimbursed distribution-related 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 (on a Fund level basis). Because such expenses
are accounted on a Fund level basis, in periods of extreme net asset value
fluctuation such amounts 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, a
shareholder of such CDSC Share may be deemed to incur expenses attributable to
other shareholders of such class. As of June 30, 1996, there were $10,517,533
and $1,741 of unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares respectively, representing 12.98% and 6% 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 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 CDSC applicable to a particular class of
shares to defray distribution-related expenses attributable to any other class
of 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 such
services described above, the Fund would seek alternate providers and expects
that shareholders would not experience any disadvantage.

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DISTRIBUTIONS FROM THE FUND
- ------------------------------------------------------------------------------

The Fund's present policy,which may be changed at any time by the Board of
Trustees, is to declare daily and pay monthly distributions of all or a portion
of net investment income of the Fund attributable to each class of shares. Net
investment income consists of all interest income, dividends, other ordinary
income earned by the Fund on its portfolio assets and net short-term capital
gains, less all expenses of the Fund attributable to the class of shares in
question. Expenses of the Fund are

48
<PAGE> 115

accrued each day. Net realized long-term capital gains, if any, are expected to
be distributed, to the extent permitted by applicable law, to shareholders at
least annually. Distributions cannot be assured, and the amount of each monthly
distribution may vary.

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.

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 accompanying account application
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 automatically will
credit monthly distributions and any annual net long-term capital gain
distributions to a shareholder's account in additional shares of the same class
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 ((800) 772-8889 for the hearing
impaired) or in writing to ACCESS.

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TAX STATUS
- ------------------------------------------------------------------------------

TAXATION OF THE FUND

The Fund intends 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 the
diversification of its

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<PAGE> 116

assets. Included among such requirements is the requirement that the Fund must
derive at least 90% of its gross income from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
stocks, securities or foreign currencies or other income (including but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stocks, securities or currencies.
For purposes of this requirement, the Treasury Department is authorized to issue
(but has not yet issued) regulations excluding from qualifying income foreign
currency gains that are not directly related to a regulated investment company's
principal business of investing in stocks or securities (or options and futures
with respect to stocks or securities). The Fund expects that all of its foreign
currency gains will be directly related to its principal business of investing
in securities.

If the Fund qualifies as a regulated investment company and distributes to its
shareholders at least 90% of its net investment income (which includes
tax-exempt income and net short-term capital gains, but not net capital gains,
which are the excess of net long-term capital gains over net short-term capital
losses) in each year, 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 its 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 for such year and
at least 98% of its capital gains net income (the latter of which 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 gains 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 satisfy the 90% distribution requirement or otherwise
failed to qualify as a regulated investment company in any taxable year, the
Fund would be taxed as an ordinary corporation on all of 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
would be required to distribute to shareholders its earnings and profits
attributable to non-regulated investment company years (less any interest charge
described below) and may be required to pay an interest charge on 50% of such
amount. 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 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.

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<PAGE> 117

Some of the Fund's investment practices, including those involving certain
risk management transactions and foreign currency transactions, may be subject
to special provisions of the Code that, among other things, 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 closed out), which may cause the
Fund to recognize income without receiving cash with which to make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
federal income and excise taxes. Thus, these provisions could affect the amount,
timing and character of distributions to shareholders. 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 liquidate portfolio securities may be limited by the
requirement for qualification as a regulated investment company that the Fund
derive less than 30% of its annual gross income from the sale or disposition of
any of the following assets held for less than three months: (i) stocks or
securities; (ii) options, futures or forward contracts (other than options,
futures or forward contracts on foreign currencies); (iii) foreign currencies
(or options, futures or forward contracts on foreign currencies), but only if
such currencies (or such options, futures or forward contracts) are not directly
related to the Fund's principal business of investing in stock or securities (or
options and futures with respect to stocks or securities).

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 gain dividends"), if any, are taxable to a shareholder
as long-term capital gains regardless of the length of time the shares have been
held by such holder. Distributions in excess of the Fund's earnings and profits
will first reduce the adjusted tax basis of the shares held by the shareholders
and, after such adjusted tax basis is reduced to zero, will constitute capital
gains to such shareholders (assuming such shares are held as a capital asset).

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 a 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 having been paid by the Fund
(except for purposes of the 4% excise tax) during such taxable year. In such
case, shareholders will be treated as

51
<PAGE> 118

having received such dividends in the taxable year in which the distribution is
actually made.

The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Distributions from
the Fund will not be eligible for the dividends received deduction for
corporations. 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.

FOREIGN TAXES

It is expected that a portion of the interest earned by the Fund from non-U.S.
resident issuers and in certain circumstances gains realized by the Fund will be
subject to foreign withholding taxes. The tax rate to which such interest and
gains will be subject will vary depending on the country or countries having
taxing jurisdiction over a particular non-U.S. resident issuer and may be
affected by the existence of an income tax treaty with the United States. If
more than 50% of the value of the Fund's total assets at the close of any
taxable year consists of stocks or securities of "foreign corporations," the
Fund may elect and currently intends to elect, for United States federal income
tax purposes, to treat any foreign taxes paid by the Fund that can be treated as
foreign income taxes under United States federal income tax principles as paid
by its shareholders. The Fund expects that it will be able to treat some, but
not necessarily all, of the foreign taxes it will have to pay as foreign income
taxes for United States federal income tax purposes. In addition, the Fund
currently intends to treat investments in securities that are issued by, or that
are treated under relevant United States federal income tax principles as issued
by, foreign governments as not constituting securities of "foreign corporations"
for purposes of meeting the 50% test described above. Accordingly, the Fund may
not qualify for this election in all of its taxable years. For any year that the
Fund so qualifies and makes such an election, the amount of foreign taxes paid
by the Fund that can be treated as foreign income taxes for United States
federal income tax purposes would be included in the income of its shareholders
(in addition to other taxable dividends received) and (subject to certain
limitations) shareholders would be entitled to credit their portions of these
amounts against their United States federal income tax due, if any, or to deduct
their portions from their United States taxable income, if any. A shareholder
who does not itemize deductions may not claim a deduction for foreign taxes. The
Fund will notify each shareholder within 60 days after the close of the Fund's
taxable year as to whether the foreign income taxes paid by the Fund will
qualify for "pass-through" treatment for that year and, if so, such notification
will designate (i) each shareholder's pro rata portion of the foreign income
taxes paid and (ii) the portion of distributions that represents income derived
from foreign sources.

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<PAGE> 119

Generally, a foreign tax credit is subject to the limitation that it may not
exceed the shareholder's United States tax (before the credit) attributable to
the shareholder's total taxable income from foreign sources. For this purpose,
the shareholder's proportionate share of dividends paid by the Fund that
represent income derived from foreign sources will be treated as foreign source
income. The Fund's gains and losses from the sale of securities and certain
currency gains and losses generally will be treated as derived from United
States sources. The limitation on the foreign tax credit applies separately to
specific categories of foreign source income, including "passive income," a
category that includes the portion of dividends received from the Fund that
qualifies as foreign source income. The foregoing limitation may prevent a
shareholder from claiming a credit for the full amount of his proportionate
share of the foreign income taxes paid by the Fund.

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 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 share sales.

GENERAL

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

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FUND PERFORMANCE
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<PAGE> 120

Fund's shares. In lieu of or in addition to total return and yield calculations,
such information may include performance rankings and similar information from
independent organizations such as Lipper Analytical Services, Inc., or
nationally recognized financial publications.

The Fund's yield quotation is determined on a monthly basis with respect to
the immediately preceding 30 day period, and is computed by 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 initial 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 such class of shares
accrued for the period (net of any reimbursements), and dividing the result by
the average daily number of the shares of such class outstanding during the
period that were 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 the Fund's shares. 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 initial 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, deducting the
maximum initial sales charge, if any, 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

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<PAGE> 121

to the CDSC Shares imposed at the time of redemption were reflected, it would
reduce the performance quoted.

From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. It differs from yield, which is a measure of the income
actually earned by the Fund's investments, and from total return, which is a
measure of the income actually earned by, plus the effect of any realized and
unrealized appreciation or depreciation of, such investments during a stated
period. Distribution rate is, therefore, not intended to be a complete measure
of the Fund's performance. Distribution rate may sometimes be greater than yield
since, for instance, it may not include the effect of amortization of bond
premiums, and may include non-recurring short-term capital gains and premiums
from futures transactions engaged in by the Fund. Distribution rates will be
computed separately for each class of the Fund's shares.

From time to time the Fund may compare its performance to certain securities
and unmanaged indices which may have different risk/reward characteristics than
the Fund. Such characteristics may include, but are not limited to, tax
features, guarantees, insurance and the fluctuation of principal or return. In
addition, from time to time sales materials and advertisements for the Fund may
include hypothetical information.

- ------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------

The authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, par value $0.01 per share, divided into classes.
The Fund currently offers three classes, 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 generally are identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee. See "The Distribution and Service Plans."

55
<PAGE> 122

There are no conversion, preemptive or other subscription rights, except with
respect to the conversion of Class B Shares and Class C Shares into Class A
Shares as described above. In the event of liquidation, each of the shares of
the Fund is entitled to its pro rata portion of all of the Fund's net assets
after all debts 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
holders of Class A Shares.

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

Shareholder inquiries should be directed to Van Kampen American Capital
Short-Term Global Income Fund, One Parkview Plaza, Oakbrook Terrace, Illinois
60181.

For Automated Telephone Service which provides 24-hour direct dial access to
Fund facts and shareholder account information, dial (800) 421-5666. For
inquiries through Telecommunications Device for the Deaf (TDD) dial (800)
772-8889.

56
<PAGE> 123

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE
CALL THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666.

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) 772-8889.

FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 421-5684.
VAN KAMPEN AMERICAN CAPITAL
SHORT-TERM GLOBAL INCOME 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
Short-Term Global Income Fund

Custodian
STATE STREET BANK AND
TRUST COMPANY
225 Franklin Street, P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen American Capital
Short-Term Global Income 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> 124

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

SHORT-TERM GLOBAL
INCOME FUND

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

P R O S P E C T U S

OCTOBER 28, 1996

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 125

- ------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
STRATEGIC INCOME FUND
- ------------------------------------------------------------------------------

Van Kampen American Capital Strategic Income Fund (the "Fund") is a
non-diversified management investment company, commonly known as a mutual fund.
The Fund's primary investment objective is to seek to provide its shareholders
with high current income. The Fund has a secondary investment objective of
seeking capital appreciation. The Fund will seek to achieve its investment
objectives by investing primarily in a portfolio of income securities selected
by Van Kampen American Capital Investment Advisory Corp., the Fund's investment
adviser, from the following market sectors: U.S. government securities; domestic
investment grade income securities; domestic lower grade income securities;
foreign investment grade income securities; and foreign lower grade income
securities. The Adviser will allocate the Fund's investments among these market
sectors based on its evaluation of the relative investment opportunities and
investment risks presented by such sectors from time to time. Under normal
market conditions, at least 65% of the Fund's total assets will be invested in
U.S. dollar-denominated income securities and at least 40% of the Fund's total
assets will be invested in U.S. government securities and investment grade rated
income securities. The Fund is organized as a separate series of Van Kampen
American Capital Trust.

A substantial portion of the Fund's assets may be invested in lower grade
income securities, including securities of issuers in emerging market countries
and
(Continued on next page.)
------------------

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

FOR ARIZONA INVESTORS: THESE SECURITIES ARE SPECULATIVE

A Statement of Additional Information, dated October 28, 1996, containing
additional information about the Fund is hereby incorporated by reference in its
entirety into this Prospectus. A copy of the Fund's Statement of Additional
Information may be obtained without charge by calling (800) 421-5666 or for
Telecommunications Device For the Deaf at (800) 772-8889. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") and is available along with other related materials at
the SEC's internet web site (http: //www.sec.gov).

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

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

THIS PROSPECTUS IS DATED OCTOBER 28, 1996.

<PAGE> 126

(Continued from previous page.)

securities rated in the lowest rating category. Investment in lower grade income
securities involves significant risks. Lower grade securities commonly are
referred to as "junk bonds." The Fund borrows money for investment purposes
which will create the opportunity for increased return but also involves special
risks. The Fund is allowed to invest in derivative mortgage-backed securities,
as described in "Investment Objectives and Policies--Portfolio
Securities--Mortgage-Backed and Asset-Backed Securities," without limitation. In
addition, the Fund may invest up to 20% of total assets in defaulted bank loans.
The Fund is designed for investors willing to assume additional risk in return
for the potential for high current income and capital appreciation. There can be
no assurance that the Fund will achieve its investment objectives. See
"Investment Objectives and Policies--Special Risk Factors" and "Investment
Practices--Use of Leverage."

This Prospectus sets forth information that a prospective investor should know
before investing in the Fund. Please read it carefully and retain it for future
reference. The address of the Fund is One Parkview Plaza, Oakbrook Terrace,
Illinois 60181, and its telephone number is (800) 421-5666.

2
<PAGE> 127

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................................. 4
Shareholder Transaction Expenses............................... 5
Annual Fund Operating Expenses and Example..................... 6
Financial Highlights........................................... 8
The Fund....................................................... 10
Investment Objectives and Policies............................. 10
Investment Practices........................................... 21
Investment Advisory Services................................... 26
Alternative Sales Arrangements................................. 28
Purchase of Shares............................................. 30
Shareholder Services........................................... 39
Redemption of Shares........................................... 43
The Distribution and Service Plans............................. 46
Distributions from the Fund.................................... 48
Tax Status..................................................... 50
Fund Performance............................................... 51
Description of Shares of the Fund.............................. 52
Additional Information......................................... 53
</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.

3
<PAGE> 128

- ------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------

THE FUND. Van Kampen American Capital Strategic Income Fund (the "Fund") is a
non-diversified series of Van Kampen American Capital Trust (the "Trust"). The
Trust is an open-end management investment company organized as a Delaware
business trust.

MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and
$25 minimum subsequent investment for each class of shares (or less as described
under "Purchase of Shares").

INVESTMENT OBJECTIVES. The Fund's primary investment objective is to seek to
provide its shareholders with high current income. The Fund has a secondary
investment objective of seeking capital appreciation. There can be no assurance
the Fund will achieve its investment objectives.

INVESTMENT POLICIES. The Fund will seek to achieve its investment objectives by
investing primarily in a portfolio of income securities selected by the Fund's
investment adviser from the following market sectors: U.S. government
securities; domestic investment grade income securities; domestic lower grade
income securities; foreign investment grade income securities; and foreign lower
grade income securities. See "Investment Objectives and Policies" and
"Investment Practices."

INVESTMENT RESULTS. The investment results of the Fund are shown in the table
of "Financial Highlights."

INVESTMENT ADVISER. Van Kampen American Capital Investment Advisory Corp. is
the Fund's investment adviser.

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. distributes the
Fund's shares.

SPECIAL RISK FACTORS. A substantial portion of the Fund's assets may be
invested in lower grade income securities, including securities of issuers in
emerging market countries and securities rated in the lowest ratings category.
Lower grade income securities commonly are referred to as "junk bonds."
Investment in lower grade income securities involves significant risks. The Fund
intends to borrow money for investment purposes which will create the
opportunity for increased return but also involves special risks. The Fund is
also allowed to invest in derivative mortgage-backed securities and defaulted
bank loans. The Fund is designed for investors willing to assume additional risk
in return for the potential for high current income and capital appreciation.
There can be no assurance that the Fund will achieve its investment objectives.
See "Investment Objectives and Policies--Special Risk Factors."

THE FOREGOING IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED

INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.

4
<PAGE> 129

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------------ ------------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
the offering price).......... 4.75%(1) None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of the
offering price).............. None None(3) None(3)
Deferred sales charge (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 "Purchase of Shares -- Class
A Shares."

5
<PAGE> 130

<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)(1)................. 1.02% 1.02% 1.02%
12b-1 fees (as a percentage of
average daily net assets)(2)................. 0.25% 1.00% 1.00%
Other expenses:
Miscellaneous other expenses
(as a percentage of
average daily net assets)(1)............... 0.57% 0.57% 0.56%
Interest expenses (as a percentage of
average daily net assets)(1)(3)............ 2.27% 2.26% 2.22%
Total other expenses (as a percentage of
average daily net assets)(1)(3).............. 2.84% 2.83% 2.78%
Total expenses (as a percentage of
average daily net assets)(1)(3).............. 4.11% 4.85% 4.80%
</TABLE>

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

(1) Represents the effective management fee as a percent of average daily net
assets. Management fees are based on a percentage of average daily managed
assets. For purposes of determining the investment fee, "average daily
managed assets" means the average daily value of the Fund's aggregate
assets, minus the sum of accrued liabilities other than the aggregate amount
of any borrowings undertaken by the Fund. Absent the Adviser's assumption of
certain expenses of the Fund "Total other expenses" would have been 2.92%
for Class A Shares, 2.91% for Class B Shares and 2.86% for Class C Shares
and the "Total expenses" would have been 4.19% for Class A Shares, 4.93% for
Class B Shares and 4.88% for Class C Shares.

(2) Includes a service fee of up to 0.25% (as a percentage of net asset value)
paid by the Fund as compensation for ongoing services rendered to investors.
With respect to each class of shares, amounts in excess of 0.25%, if any,
represent an asset based sales charge. The asset based sales charge with
respect to Class C Shares includes 0.75% (as a percentage of net asset
value) paid to investors' broker-dealers as sales compensation. See "The
Distribution and Service Plans."

(3) 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 expense would have been 1.84%, 2.59% and 2.58% for each of the
Class A Shares, Class B Shares and Class C Shares, respectively. See
"Financial Highlights" and "Investment Objectives and Policies -- Special
Risk Factors."

6
<PAGE> 131

EXAMPLE:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) an
operating expense ratio of 4.11% for Class
A Shares, 4.85% for Class B Shares and
4.80% for Class C Shares, (ii) 5% annual
return and (iii) redemption at the end of
each time period:
Class A Shares............................ $87 $ 167 $ 248 $ 457
Class B Shares............................ $89 $ 181 $ 258 $ 474*
Class C Shares............................ $58 $ 144 $ 241 $ 485
You would pay the following expenses on the
same $1,000 investment assuming no
redemption at the end of each period:
Class A Shares............................ $87 $ 167 $ 248 $ 457
Class B Shares............................ $49 $ 146 $ 243 $ 474*
Class C Shares............................ $48 $ 144 $ 241 $ 485
</TABLE>

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

* Based on conversion to Class A Shares after eight years.

7
<PAGE> 132

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

FINANCIAL HIGHLIGHTS (for one share outstanding throughout the periods
indicated)

- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one Class A Share, one
Class B Share and one Class C Share of the Fund throughout the periods
indicated. The financial highlights have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, for each of the periods and their
report thereon appears in the Fund's related 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.

CLASS B
CLASS A SHARES SHARES
------------------------------------- -------
FROM
DECEMBER 31, 1993 ENDED
YEAR ENDED (COMMENCEMENT OF JUNE
JUNE 30, INVESTMENT 30,
----------------- OPERATIONS) TO -------
1996 1995 JUNE 30, 1994 1996
------- ------- ----------------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.......................................... 11.704 $11.975 $14.300 $11.706
------- ------- ------ -------
Net Investment Income............................................................ 1.013 .657 .566 .926
Net Realized and Unrealized Gain/Loss on Securities.............................. .446 .272 (2.391) .443
------- ------- ------ -------
Total from Investment Operations.................................................. 1.459 .929 (1.825) 1.369
------- ------- ------ -------
Less:
Distributions from and in Excess of Net Investment Income........................ 1.098 .793 .500 1.006
Return of Capital Distributions.................................................. -0- .407 -0- -0-
------- ------- ------ -------
Total Distributions............................................................... 1.098 1.200 .500 1.006
------- ------- ------ -------
Net Asset Value, End of the Period................................................ $12.065 $11.704 $11.975 $12.069
======= ======= ======= =======

CLASS C SHARES
-----------------
FROM
DECEMBER 31, 1993
(COMMENCEMENT OF YEAR ENDED
INVESTMENT JUNE 30,
OPERATIONS) TO -----------------
1995 JUNE 30, 1994 1996 1995
------- ----------------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.......................................... $11.968 $14.300 $11.699 $11.966
------- ------ ------- -------
Net Investment Income............................................................ .585 .515 .944 .598
Net Realized and Unrealized Gain/Loss on Securities.............................. .245 (2.392) .422 .227
------- ------ ------- -------
Total from Investment Operations.................................................. .830 (1.877) 1.366 .825
------- ------ ------- -------
Less:
Distributions from and in Excess of Net Investment Income........................ .722 .455 1.006 .722
Return of Capital Distributions.................................................. .370 -0- -0- .370
------- ------ ------- -------
Total Distributions............................................................... 1.092 .455 1.006 1.092
------- ------ ------- -------
Net Asset Value, End of the Period................................................ $11.706 $11.968 $12.059 $11.699
======= ======= ======= =======

FROM
DECEMBER 31, 1993
(COMMENCEMENT OF
INVESTMENT
OPERATIONS) TO
JUNE 30, 1994
-----------------
<S> <C>
Net Asset Value, Beginning of the Period.......................................... $14.300
------
Net Investment Income............................................................ .509
Net Realized and Unrealized Gain/Loss on Securities.............................. (2.388)
------
Total from Investment Operations.................................................. (1.879)
------
Less:
Distributions from and in Excess of Net Investment Income........................ .455
Return of Capital Distributions.................................................. -0-
------
Total Distributions............................................................... .455
------
Net Asset Value, End of the Period................................................ $11.966
=======
</TABLE>

(Continued on following page)

See Financial Statements and Notes Thereto

8
<PAGE> 133

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

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

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

<TABLE>
<CAPTION>
CLASS B
SHARES
CLASS A SHARES -------
-------------------------------------
FROM YEAR
DECEMBER 31, 1993 ENDED
YEAR ENDED (COMMENCEMENT OF JUNE
JUNE 30, INVESTMENT 30,
----------------- OPERATIONS) TO -------
1996 1995 JUNE 30, 1994 1996
------- ------- ----------------- -------
<S> <C> <C> <C> <C>
Total Return*(a).................................................................. 12.92% 8.46% (12.83%)** 12.06%
Net Assets at End of the Period (In millions)..................................... $33.8 $29.6 $24.5 $61.9
Ratio of Operating Expenses to Average Net Assets*................................ 1.84% 1.98% 1.88% 2.59%
Ratio of Interest Expense to Average Net Assets................................... 2.27% 2.38% .96% 2.26%
Ratio of Net Investment Income to Average Net Assets*............................. 8.34% 5.88% 9.27% 7.58%
Portfolio Turnover................................................................ 343% 253% 114%** 343%
* If certain expenses had not been assumed by VKAC, total return would have been lower and the ratios would have been as
follows:
Ratio of Operating Expenses to Average Net Assets.............................. 1.92% N/A N/A 2.67%
Ratio of Net Investment Income to Average Net Assets........................... 8.26% N/A N/A 7.50%

CLASS C SHARES
-----------------
FROM
DECEMBER 31, 1993

(COMMENCEMENT OF YEAR ENDED
INVESTMENT JUNE 30,
OPERATIONS) TO -----------------
1995 JUNE 30, 1994 1996 1995
------- ----------------- ------- -------
<S> <C> <C> <C> <C>
Total Return*(a).................................................................. 7.62% (13.21%)** 12.07% 7.53%
Net Assets at End of the Period (In millions)..................................... $52.6 $46.4 $3.1 $1.7
Ratio of Operating Expenses to Average Net Assets*................................ 2.68% 2.63% 2.58% 2.69%
Ratio of Interest Expense to Average Net Assets................................... 2.38% .96% 2.22% 2.38%
Ratio of Net Investment Income to Average Net Assets*............................. 5.30% 8.48% 7.49% 5.92%
Portfolio Turnover................................................................ 253% 114%** 343% 253%
* If certain expenses had not been assumed by VKAC, total return would have been
follows:
Ratio of Operating Expenses to Average Net Assets.............................. N/A N/A 2.66% N/A
Ratio of Net Investment Income to Average Net Assets........................... N/A N/A 7.41% N/A

FROM
DECEMBER 31, 1993
(COMMENCEMENT OF
INVESTMENT
OPERATIONS) TO
JUNE 30, 1994
-----------------
<S> <C>
Total Return*(a).................................................................. (13.21%)**
Net Assets at End of the Period (In millions)..................................... $2.1
Ratio of Operating Expenses to Average Net Assets*................................ 2.65%
Ratio of Interest Expense to Average Net Assets................................... .95%
Ratio of Net Investment Income to Average Net Assets*............................. 8.36%
Portfolio Turnover................................................................ 114%**
* If certain expenses had not been assumed by VKAC, total return would have been
follows:
Ratio of Operating Expenses to Average Net Assets.............................. N/A
Ratio of Net Investment Income to Average Net Assets........................... N/A
</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.

N/A = Not Applicable

<TABLE>
<CAPTION>
AMOUNT OF DEBT
Bank Borrowing: OUTSTANDING AT
PERIOD END OF YEAR
--------------
<S> <C>
Six Months Ended June 30, 1994........................................................................ $ 19,574,968
Year Ended June 30, 1995.............................................................................. $ 28,496,055
Year Ended June 30, 1996.............................................................................. $ 15,913,433

<CAPTION>
AVERAGE DAILY BALANCE
OF
Bank Borrowing: DEBT OUTSTANDING DURING
PERIOD PERIOD
-----------------------
<S> <C>
Six Months Ended June 30, 1994........................................................................ $ 4,421,010
Year Ended June 30, 1995.............................................................................. $29,790,000
Year Ended June 30, 1996.............................................................................. $32,784,900

<CAPTION>
AVERAGE MONTHLY
BALANCE OF SHARES
Bank Borrowing: OUTSTANDING DURING
PERIOD PERIOD
------------------
<S> <C>
Six Months Ended June 30, 1994........................................................................ 5,080,190
Year Ended June 30, 1995.............................................................................. 6,729,831
Year Ended June 30, 1996.............................................................................. 7,658,078

AVERAGE AMOUNT OF

Bank Borrowing: DEBT PER SHARE

PERIOD DURING PERIOD

-----------------
<S> <C>
Six Months Ended June 30, 1994........................................................................ $ 0.870

Year Ended June 30, 1995.............................................................................. $ 4.427

Year Ended June 30, 1996.............................................................................. $ 4.281

</TABLE>

See Financial Statements and Notes Thereto

9
<PAGE> 134

- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------

Van Kampen American Capital Strategic Income Fund (the "Fund") is a mutual
fund. A mutual fund allows investors to pool their money with that of other
investors in order to obtain professional investment management. Mutual funds
generally make it possible for investors to obtain greater diversification of
their investments and to simplify their recordkeeping. The Fund is a separate,
non-diversified series of Van Kampen American Capital Trust (the "Trust"). The
Trust is an open-end management investment company organized as a Delaware
business trust.

- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- ------------------------------------------------------------------------------

The Fund's primary investment objective is to provide its shareholders with
high current income. The Fund has a secondary investment objective of seeking
capital appreciation. The Fund will seek to achieve its investment objectives by
investing primarily in a portfolio of income securities selected by the Adviser
from the following market sectors: U.S. government securities; domestic
investment grade income securities; domestic lower grade income securities;
foreign investment grade income securities; and foreign lower grade income
securities. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in U.S. dollar-denominated income securities and at
least 40% of the Fund's total assets will be invested in U.S. government
securities and investment grade rated income securities. A substantial portion
of the Fund's assets (up to 60%) may be invested in lower grade income
securities, including securities of issuers located in emerging market
countries. The Fund may invest 100% of total assets in asset-backed securities.
Such investments involve significant risks. See "Investment Objectives and
Policies -- Special Risk Considerations." The Fund is designed for investors
willing to assume additional risk in return for the potential for high current
income and capital appreciation. The Fund's investment objectives are
fundamental and may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). There can be no
assurance that the Fund will achieve its investment objectives.

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

10
<PAGE> 135

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.

The Adviser will allocate the Fund's investments among market sectors based on
its evaluation of the relative investment opportunities and investment risks
presented by income securities in such sectors from time to time. See
"Investment Objectives and Policies -- Allocation of Investments." Under normal
market conditions, the Fund will invest at least 10% of its total assets in each
of at least three market sectors. The Fund is not required to invest a minimum
amount of its assets in any one market sector. The Fund does not intend to
invest more than 25% of its total assets in any one industry or in income
securities of issuers (including foreign governments) located in any single
country other than the United States.

Investment grade income securities are income securities rated at least BBB by
Standard & Poor's Ratings Group ("S&P"), at least Baa by Moody's Investors
Service, Inc. ("Moody's"), comparably rated by any other nationally recognized
statistical rating organization ("NRSRO") or, if not rated by any NRSRO,
determined by the Adviser to be of comparable quality to income securities so
rated. Securities rated BBB by S&P are regarded by S&P as having an adequate
capacity to pay interest and repay principal. Whereas such securities normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely, in the opinion of S&P, to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories. Securities rated Baa by Moody's are considered by
Moody's as medium grade obligations. Such securities are in the opinion of
Moody's, neither highly protected nor poorly secured. Interest payments and
principal security appear to Moody's to be adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time. In the opinion of Moody's, they lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Lower grade income securities are income securities rated BB or below by S&P, Ba
or below by Moody's, comparably rated by any other NRSRO or, if not rated by any
NRSRO, determined by the Adviser to be of comparable quality to income
securities so rated. Lower grade income securities are commonly referred to as
"junk bonds" and are regarded by S&P and Moody's as predominately speculative
with respect to the capacity to pay interest or repay principal in accordance
with their terms. Lower grade income securities involve a greater degree of
credit risk than investment grade income securities. There is no minimum rating
or comparable quality standard imposed on the Fund's investments and the Fund
may purchase income securities that are rated D and that are in default in the
payment of interest or repayment of principal. In S&P's view, the D rating
category is used when interest payments or principal payments are not made on
the date due even if an applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The 'D'
rating also is used upon the filing of a bankruptcy petition if debt service
payments are jeopardized. The Fund will not, however, invest in any security
that does not provide for, or that is not current in the payment of, periodic
interest or dividend

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distributions if as a result of such investment more than 20% of the Fund's
total assets would, at the time of investment, be invested in such securities.

ALLOCATION OF INVESTMENTS

The Adviser allocates the Fund's investments among various market sectors
based on the Adviser's assessment of the relative investment opportunities and
investment risks presented by income securities in such sectors from time to
time. The Adviser believes that, over time, market sectors become undervalued
relative to the risks of investing in such sectors due to actual or perceived
changes in interest rate cycles, business or economic conditions, rates of
inflation, currency relationships, political factors, investor demand, new issue
or secondary market supply and other factors. Accordingly, the relative
investment performance of the various market sectors change over time, with the
best performing sectors frequently changing from year to year. The Adviser seeks
to take advantage of these changes by allocating a greater proportion of the
Fund's assets to those market sectors that the Adviser believes are undervalued.
If successful, this strategy may enable the Fund to achieve a higher level of
investment return over time than if the Fund invested exclusively in one market
sector or if the Fund allocated a fixed proportion of its assets to each market
sector. In addition, the Fund has a policy of investing, under normal market
conditions, a portion of its assets in each of at least three market sectors.
This policy may, over time, enable the Fund to experience less volatility in
income and net asset value than if the Fund invested exclusively in one market
sector. The Fund is, however, more dependent on the Adviser's ability to
successfully evaluate the relative values of various market sectors as compared
to an investment company that does not seek to adjust market sector allocations
over time.

The Adviser dedicates at least one portfolio manager to the continuing
analysis of each market sector in which the Fund may invest. Peter W. Hegel, the
Adviser's Chief Investment Officer, makes market sector investment allocation
decisions for the Fund based on recommendations made by such portfolio managers
responsible for each market sector. Once assets are allocated to a particular
sector, the portfolio manager responsible for such sector selects the Fund's
investments within that sector and monitors such investments on an ongoing
basis, subject to the continuing supervision and authority of Mr. Hegel. Market
sector allocations may be adjusted at any time and are formally reviewed at
least monthly.

MARKET SECTORS

U.S. GOVERNMENT SECURITIES. U.S. government securities are obligations issued
or guaranteed by the U.S. government or its agencies, instrumentalities or
political subdivisions (collectively "agencies"). These obligations may be
either direct obligations of the U.S. Treasury or obligations issued or
guaranteed by U.S. government agencies. Of the obligations issued or guaranteed
by agencies, some are backed by the full faith and credit of the U.S. government
and others are

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backed only by the right of the issuer to borrow from the U.S. Treasury. U.S.
government securities generally are not rated, but are generally considered to
be of at least the same credit quality as privately issued securities rated in
the highest investment grade rating categories.

DOMESTIC INVESTMENT GRADE INCOME SECURITIES. Domestic investment grade income
securities are income securities of domestic issuers rated investment grade or,
if not rated, determined by the Adviser to be of comparable quality to
investment grade rated securities. Such securities are issued primarily by
domestic corporations.

DOMESTIC LOWER GRADE INCOME SECURITIES. Domestic lower grade income securities
are income securities of domestic issuers rated below investment grade or, if
not rated, determined by the Adviser to be of comparable quality to securities
rated below investment grade. Lower grade income securities commonly are
referred to as "junk bonds." Such securities are issued primarily by domestic
corporations. Investment in lower grade income securities involves certain
risks. See "Investment Objectives and Policies -- Special Risk Considerations."

FOREIGN INVESTMENT GRADE INCOME SECURITIES. Foreign investment grade income
securities are income securities issued by non-domestic issuers and rated
investment grade or, if not rated, determined by the Adviser to be of comparable
quality to income securities rated investment grade. Such securities may include
income securities issued or guaranteed by foreign governments or their agencies,
central banks of foreign countries, supranational entities, such as the
International Bank for Reconstruction and Development, and corporations or other
business entities. Foreign investment grade income securities may be denominated
in any currency and include U.S. dollar denominated income securities sold in
the United States (commonly known as "Yankee bonds") and income securities
denominated in U.S. dollars or other currencies and sold outside the United
States (commonly referred to as "Eurobonds"). As of the date of this prospectus,
most foreign investment grade income securities are issued by issuers located in
more developed countries, including Canada, Japan, Australia, New Zealand and
several Western European countries.

FOREIGN LOWER GRADE INCOME SECURITIES. Foreign lower grade income securities
are income securities issued by non-domestic issuers and rated below investment
grade or, if not rated, determined by the Adviser to be of comparable quality to
income securities rated below investment grade. Lower grade income securities
commonly are referred to as "junk bonds." Such securities may include income
securities issued or guaranteed by foreign governments or their agencies,
central banks of foreign countries and corporations or other business entities.
Investments in this sector may include interests or assignments in nonperforming
or restructured income securities. Issuers of foreign lower grade income
securities frequently will be located in emerging market countries, including
countries in Latin America, Eastern Europe, Africa and much of Asia. Investment
in emerging market

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countries involves significant risks. See "Investment Objectives and Policies --
Special Risk Considerations."

PORTFOLIO SECURITIES

As used in this prospectus, the term "income securities" includes: fixed or
variable rate bonds, notes, bills or debentures; mortgage backed securities;
asset backed securities; stripped income securities; convertible securities;
zero coupon or deferred payment securities; payment in kind securities;
preferred stock; dividend paying common stock; warrants and other equity
securities acquired as units together with other income securities; bank debt
obligations; short-term paper; loan participations and assignments; assignments
and interests issued by entities organized and operated for the purpose of
restructuring the investment characteristics of other income securities and
securities whose principal or interest payments are indexed to changes in the
values of currencies, interest rates, commodities or a basket of securities. The
Fund may invest in income securities of any maturity and denominated in any
currency. At least 65% of the Fund's total assets will be invested in U.S.
dollar denominated securities. Following is a brief description of some of the
portfolio securities in which the Fund may invest. See the Statement of
Additional Information for more information concerning these and other portfolio
securities in which the Fund may invest.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-backed securities are
securities that directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans secured by real property.
Mortgage-backed securities may be issued by the U.S. government or its agencies
or by private entities. The yield characteristics of mortgage-backed securities
differ from traditional debt securities. Interest and principal prepayments are
made more frequently, usually monthly, and principal may be prepaid at any time.
Mortgage-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities from
declining interest rates because of the risk of prepayment. Amounts available
for reinvestment by the Fund are likely to be greater during a period of
declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates. Asset-backed
securities have structural characteristics similar to mortgage-backed
securities, but have underlying assets such as automobile and credit card
receivables and home equity loans. In general, these types of loans are of
shorter average life than mortgage loans and are less likely to have substantial
prepayments.

STRIPPED INCOME SECURITIES. Stripped income securities are derivative
obligations representing an interest in all or a portion of the income or
principal components of an underlying or related security, a pool of securities
or other 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 market values of
stripped income securities tend to be more volatile in response to changes in
interest rates than are conventional income

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securities. In the case of mortgage backed IOs, if the underlying assets
experience greater than anticipated prepayments of principal, the Fund may not
fully recoup its initial investment.

FLOATING AND VARIABLE RATE INCOME SECURITIES. Income securities may provide
for floating or variable rate interest or dividend payments. The Fund may invest
in derivative floating and variable rate securities such as inverse floaters,
whose rates vary inversely with market rates of interest, or range floaters or
capped floaters, whose rates are subject to periodic or lifetime caps. Such
securities may also pay a rate of interest determined by applying a multiple to
the variable rate. The extent of increases and decreases in the value of
securities whose rates vary inversely with changes in market rates of interest
generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.

DISCOUNT, ZERO COUPON SECURITIES AND PAYMENT-IN-KIND SECURITIES. The Fund may
invest in securities sold at a substantial discount from their value at
maturity. Such securities include "zero coupon" and payment-in-kind securities
of governmental or private issuers. Zero coupon securities generally pay no cash
interest (or dividends in the case of preferred stock) to their holders prior to
maturity. Payment-in-kind securities allow the issuer, at its option, to make
current interest payments on such securities either in cash or in additional
securities. Accordingly, zero coupon and payment-in-kind securities usually are
issued and traded at a deep discount from their face or par value and generally
are subject to greater fluctuations of market value in response to changing
interest rates than securities of comparable maturities and credit quality that
pay cash interest (or dividends in the case of preferred stock) on a current
basis. Even though the holder of a zero coupon bond or a payment-in-kind
security does not receive cash interest payments prior to maturity, a portion of
the purchase price discount must be accrued as income each year under current
federal tax law. 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.

PREMIUM SECURITIES. The fund may invest in income securities bearing coupon
rates higher than prevailing market rates. Such "premium" securities are
typically purchased at prices greater than the principal amounts payable on
maturity. Although such securities bear coupon rates higher than prevailing
market rates, because they are purchased at a price in excess of par value, the
yield earned by the Fund on such investments may not exceed prevailing market
yields. If securities purchased by a Fund at a premium are called or sold prior
to maturity, the Fund may recognize a capital loss. Additionally, the Fund will
recognize a capital loss if it holds such securities to maturity.

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entitles the holder to receive interest generally paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged.

BRADY BONDS. The Fund may invest in Brady Bonds and other sovereign debt of
countries that have restructured or are in the process of restructuring
sovereign debt pursuant to the Brady Plan. "Brady Bonds" are debt securities
issued under the framework of the Brady Plan, an initiative announced by former
U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor
nations to restructure their outstanding external commercial bank indebtedness.
Brady Bonds may also be issued in respect of new money being advanced by
existing lenders in connection with the debt restructuring. Certain Brady Bonds
have been collateralized as to principal due at maturity by U.S. Treasury zero
coupon bonds with a maturity equal to the final maturity of such Brady Bonds.
Brady Bonds have been issued only recently, and accordingly do not have a long
payment history. In light of the risk of Brady Bonds including, among other
factors, the history of defaults with respect to commercial bank loans by public
and private entities of countries issuing Brady Bonds, investments in Brady
Bonds are to be viewed as speculative.

OTHER SOVEREIGN-RELATED DEBT. In addition to Brady Bonds, the Fund may invest
in sovereign or sovereign-related debt obligations, including obligations of
supranational entities. Such investments may include participations and
assignments of sovereign bank debt, restructured external debt that has not
undergone a Brady-style debt exchange, and internal government debt. The Fund
may invest in fixed and floating rate loans ("Loans") arranged through private
negotiations between a foreign government or agency and one or more financial
institutions ("Lenders"). The Fund's investments in Loans are expected in most
instances to be in the form of participations in Loans ("Participations") and
assignments of all or a portion of Loans ("Assignments") from third parties.
Participations typically will result in the Fund having a contractual
relationship only with the Lender, not with the borrower. The Fund will have the
right to receive payments of principal, interest and any fees to which it is
entitled only from the Lender selling the Participation and only upon receipt by
the Lender of the payments from the borrower. The Fund generally has no direct
right to enforce compliance by the borrower with the terms of the loan agreement
relating to the Loan ("Loan Agreement"), nor any rights of set-off against the
borrower, and the Fund may not directly benefit from any collateral supporting
the Loan in which it has purchased the Participation. As a result, the Fund will
assume the credit risk of both the borrower and the Lender that is selling the
Participation. When the Fund purchases Assignments from Lenders, the Fund

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will acquire direct rights against the borrower on the Loan. However, since
Assignments are arranged through private negotiations between potential
assignees and assignors, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.

STRUCTURED INVESTMENTS. The Fund may invest a portion of its assets in
interests in entities organized and operated for the purpose of restructuring
the investment characteristics of other income securities. This type of
restructuring involves the deposit with or purchase by an entity of income
securities (such as bank loans or Brady Bonds) and the issuance by that entity
of one or more classes of securities ("Structured Investments") backed by, or
representing interests in, the underlying instruments. The cash flow on the
underlying instruments may be apportioned among the newly issued Structured
Investments to create securities with different investment characteristics such
as varying maturities, payment priorities and interest rate provisions.

PRIVATE PLACEMENTS. The Fund may invest in income securities that are sold in
private placement transactions between their issuers and their purchasers and
that are neither listed on an exchange nor traded in the OTC secondary market.
In many cases, privately placed securities will be subject to contractual or
legal restrictions on transfer. As a result of the absence of a public trading
market, privately placed securities may in turn be less liquid and more
difficult to value than publicly traded securities. In addition, issuers whose
securities are not publicly traded may not be subject to the disclosure and
other investor protection requirements that may be applicable if their
securities were publicly traded. Certain of the Fund's direct investments,
particularly in emerging foreign markets, may include investments in smaller,
less seasoned companies, which may involve greater risks. These companies may
have limited product lines, markets or financial resources, or they may be
dependent on a limited management group.

INDEXED INCOME SECURITIES. The Fund may invest in income securities that are
indexed to certain specific foreign currency exchange rates, interest rates or
other reference rates. The terms of such securities provide that their principal
amount is adjusted upwards or downwards (but ordinarily not below zero) at
maturity to reflect changes in the exchange rate between two currencies (or
other rates) while the obligations are outstanding.

SPECIAL RISK FACTORS

INVESTMENTS IN INCOME SECURITIES. The value of the income securities held by
the Fund, and thus the net asset value of the shares, generally will fluctuate
with (i) changes in the perceived creditworthiness of the issuers of those
securities, (ii) movements in interest rates, and (iii) changes in the relative
values of the currencies in which the Fund's investments are denominated with
respect to the U.S. dollar. Many of the income securities in which the Fund will
invest have long maturities. A longer average maturity generally is associated
with a higher level of

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volatility in market value in response to changes in interest rates. In
addition, securities issued at a discount, such as certain types of Brady Bonds
and zero coupon obligations, may be subject to greater fluctuations in market
value in response to changes in interest rates.

The Fund may invest in derivative income securities such as stripped income
securities, inverse floaters, range floaters and capped floaters. Investment in
such securities involves special risks as compared to investment in conventional
floating or variable rate income securities. The extent of increases and
decreases in the value of such securities and the corresponding changes to the
per share net asset value of the Fund in response to changes in market rates of
interest generally will be larger than comparable changes in the value of an
equal principal amount of a fixed rate income security having similar credit
quality, redemption provisions and maturity. The markets for such securities may
be less developed than the markets for conventional floating or variable rate
income securities.

INVESTMENT IN LOWER GRADE INCOME SECURITIES. A substantial portion of the
Fund's assets may be invested in lower grade securities, commonly referred to as
"junk bonds." Debt securities rated BB or below by S&P or below Ba by Moody's
are deemed by S&P and Moody's to be predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal and may involve major
risk exposure to adverse conditions. The lower grade income securities in which
the Fund may invest may include securities having the lowest ratings assigned by
S&P or Moody's and, together with comparable unrated securities, may include
securities in default or that face the risk of default with respect to the
payment of principal or interest or that have filed for bankruptcy protection.
These securities are considered to have extremely poor prospects of ever
attaining any real investment standing. See the Statement of Additional
Information for a more complete description of S&P and Moody's ratings. Lower
grade income securities are especially subject to adverse changes in general
economic conditions, the industries in which the issuers are engaged, the
financial condition of the issuers and prevailing interest rates. Issuers of
lower grade securities are often highly leveraged and may not have available to
them more traditional methods of financing. During periods of economic downturn
or rising interest rates, highly leveraged issuers may experience financial
stress which could adversely affect their ability to make payments of principal
and interest and increase the possibility of default. Lower grade income
securities are generally unsecured and are often subordinated to other income
securities of the issuer. To the extent the Fund is required to seek recovery
upon a default in the payment of principal or interest on its portfolio
holdings, the Fund may incur additional expenses and, with respect to foreign
lower grade income securities, may have limited legal recourse in the event of a
default. Lower grade income securities frequently have call or buy-back features
which permit an issuer to call or repurchase the security prior to its maturity.
If an issuer exercises these provisions in a declining interest rate
environment, the Fund may have to reinvest in lower yielding securities,
resulting in a decrease in income earned by the Fund.

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DEFAULTED SECURITIES. The Fund may invest in defaulted securities. Defaulted
securities are securities with respect to which payment of interest or repayment
of principal is in arrears. Any investment in defaulted securities primarily
would be intended to benefit the Fund's investment objective with respect to
capital appreciation and not its investment objective with respect to providing
a high level of current income. Defaulted securities may be less liquid than
investments in more highly rated securities and the Fund may be unable to
dispose of such securities in a timely fashion. Investment in defaulted
securities should be considered speculative. Defaulted securities may not resume
payment of interest or repayment of principal in accordance with the terms of
the original obligation and the Fund may not recoup its investment in such
securities.

INVESTMENTS IN FOREIGN INCOME SECURITIES. Investment in foreign income
securities involves certain special risks not usually associated with investment
in domestic income securities. In addition, the magnitude of such risks is
generally greater with respect to investment in emerging market countries.
Investments in foreign income securities involve risks relating to political and
economic developments abroad. With respect to many foreign countries, there is
the possibility of nationalization, expropriation or confiscatory taxation,
political instability, increased governmental regulation, social instability or
diplomatic developments (including armed conflict) which could adversely affect
the economies of such countries or the value of the Fund's investments in those
countries. Foreign investment in certain countries is restricted or controlled
to varying degrees. These restrictions or controls may at times limit or
preclude foreign investment in certain emerging market income securities and
increase the costs and expenses of the Fund. Disclosure, accounting and
regulatory standards in many respects are less stringent in many countries than
in the U.S and there may be less publicly available information concerning
foreign issuers than there is with respect to domestic issuers. In addition,
there may be less timely and accurate information with respect to general
economic conditions and trends in countries in which issuers of foreign income
securities are located, particularly in emerging market countries. There also
may be a lower level of monitoring and regulation of securities markets and the
activities of investors in such markets, and enforcement of existing regulations
has in many instances been limited. Foreign markets also have different
clearance and settlement procedures, and in certain markets settlement may fail
to keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned thereon.
Because the Fund may invest in non-U.S. dollar-denominated securities, changes
in foreign currency exchange rates will affect the Fund's net asset value, the
value of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income to be distributed to shareholders. The
exchange rates between the U.S. dollar and other currencies can be volatile.
Investment income on certain foreign securities in which the Fund may invest may
be subject to foreign withholding or other government taxes.

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<PAGE> 144

SOVEREIGN DEBT. The issuer of sovereign debt or the governmental authorities
that control the repayment of sovereign debt may be unable or unwilling to repay
principal or interest when due in accordance with the terms of such debt.
Sovereign debt differs from debt obligations issued by private entities in that,
generally, remedies for defaults must be pursued in the courts of the defaulting
party. Legal recourse is therefore limited. At times certain emerging market
countries have declared moratoria on the payment of principal and interest on
external debt; such moratoria are currently in effect in certain Latin American
countries. Holders of sovereign debt, including the Fund, may be requested to
participate in the rescheduling of such debt and to extend further loans to
sovereign debtors.

LEVERAGE. The Fund may borrow for investment purposes in an amount equal to
33 1/3% of the Fund's total assets (after giving effect to the amount borrowed).
The use of leverage creates the opportunity for enhanced return, but also should
be considered a speculative technique and may increase the Fund's investment
risk, including the potential for greater volatility in the Fund's net asset
value and net income available for distribution to shareholders.

RESTRICTED AND ILLIQUID SECURITIES. Subject to limitations under state law,
the Fund may invest up to 15% of its net assets in illiquid securities including
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. The Fund may
find it difficult to sell such illiquid securities when the Adviser believes it
is advisable to do so or may be able to sell such securities only at prices
lower than if such securities were more liquid. The lack of a liquid secondary
market also may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio and calculating net
asset value. These risks may be intensified in the case of securities issued by
issuers located in, or traded in capital markets located in, emerging foreign
markets. Such securities may trade infrequently and such markets may be unable
to respond effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings impossible at times, particularly in times
of economic distress. 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 will not
be treated as restricted securities by the Fund pursuant to such rules.

NON-DIVERSIFIED STATUS. The Fund has registered as a non-diversified
investment company, which means that the Fund may invest to a greater degree in
a relatively limited number of issuers than may a diversified investment
company. To the extent that the Fund so invests, the Fund will be more
susceptible to any single adverse economic, political or regulatory occurrence.

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- ------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------

In connection with the investment policies described above, the Fund also may
engage in strategic transactions, enter into currency transactions, purchase and
sell securities on a "when issued" and "delayed delivery" basis, borrow money
from banks, enter into repurchase and reverse repurchase agreements, engage in
dollar rolls and lend its portfolio securities, in each case subject to the
limitations set forth below. These investment practices entail risks. See the
Statement of Additional Information for a more complete discussion of these
practices.

STRATEGIC TRANSACTIONS. The Fund may purchase and sell derivative instruments
such as exchange-listed and over-the-counter put and call options on securities,
financial futures, fixed-income indices and other financial instruments and
purchase and sell financial futures contracts and enter into various interest
rate and currency transactions such as forward contracts, futures contracts,
swaps, caps, floors or collars or options on currencies or futures.
Collectively, all of the above are referred to as "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, 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 interest rate exposure of the Fund's
portfolio, to protect against changes in currency exchange rates, or to
establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. Strategic Transactions may also be
used to enhance potential gain, although no more than 5% of the Fund's assets
will be committed to certain Strategic Transactions for non-hedging
transactions. The use of Strategic Transactions for non-hedging purposes should
be considered a speculative technique. 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 Fund may also
invest in income securities the terms of which include elements of or are
similar in effect to Strategic Transactions in which the Fund may engage. 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.

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cause the Fund to hold a security it might otherwise sell. The use of currency
transactions can result in the Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of settlements
or the inability to deliver or receive a specified currency. 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. 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.

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<PAGE> 147

"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Fund may also purchase
and sell portfolio securities on a "when issued" and "delayed delivery" purchase
basis. No income accrues to or is earned by the Fund on portfolio securities in
connection with such transactions prior to the date the Fund actually takes
delivery of such securities. These transactions are subject to market
fluctuation; the value of such securities at delivery may be more or less than
their purchase price, and yields generally available on such securities when
delivery occurs may be higher or lower than yields on the such securities
obtained pursuant to such transactions.

SHORT SALES. The Fund may make short sales of securities. A short sale is a
transaction in which the Fund sells a security it does not own in anticipation
that the market price of that security will decline. When the Fund makes a short
sale, it must borrow the security sold short and deliver it to the broker-dealer
through which it made the short sale in order to satisfy its obligation to
deliver the security upon conclusion of the sale. The Fund is obligated to
collateralize its obligation to replace the borrowed security with cash, U.S.
government securities or other highly liquid securities. The Fund may have to
pay a fee to borrow particular securities and is often obligated to pay over any
payments received on such borrowed securities. If the price of the security sold
short increases between the time of the short sale and the time the Fund
replaces the borrowed security, the Fund will incur a loss; conversely, if the
price declines, the Fund will realize a capital gain. Any gain will be
decreased, and any loss increased, by the transaction costs described above.
Although the Fund's gain is limited to the price at which it sold the security
short, its potential loss is theoretically unlimited. The short sale of a
security is considered a speculative investment technique.

The market value of the security sold short of any one issuer will not exceed
either 5% of the Fund's total assets or 5% of such issuer's voting securities.
The Fund will not make a short sale, if, after giving effect to such sale, the
market value of all securities sold short exceeds 25% of the value of its assets
or the Fund's aggregate short sales of a particular class of securities exceeds
25% of the outstanding securities of that class. The Fund may also make short
sales "against the box" without respect to such limitations. In this type of
short sale, at the time of the sale, the Fund owns or has the immediate and
unconditional right to acquire at no additional cost the identical security.

LOANS OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to selected commercial
banks or broker-dealers up to a maximum of 50% of the assets of the Fund. 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.

USE OF LEVERAGE. The Fund is authorized to borrow money from banks for
investment purposes in an amount up to 33 1/3% of its total assets (including
the amount of the borrowing). The Fund is also authorized to borrow an
additional 5% of its total assets from any person without regard to the
foregoing limitation for

23
<PAGE> 148

temporary purposes such as clearance of portfolio transactions, the payment of
dividends and share repurchases. The use of leverage will provide the
opportunity for increased net income, but also should be considered a
speculative technique and may increase the Fund's investment risk.

Borrowing will exaggerate changes in the net asset value of the shares and in
the yield on the Fund's portfolio, which may, in turn, result in increased
volatility of the market price of the shares. Borrowing will create interest
expenses for the Fund which can exceed the income from the assets obtained with
the proceeds. To the extent the income derived from securities purchased with
funds obtained through borrowing exceeds the interest and other expenses that
the Fund will have to pay in connection with such borrowing, the Fund's net
income will be greater than if the Fund did not borrow. Conversely, if the
income from the assets obtained through borrowing is not sufficient to cover the
cost of borrowing, the net income of the Fund will be less than if the Fund did
not borrow, and therefore the amount available for distribution to shareholders
will be reduced. See "Investment Objectives and Policies -- Special Risk Factors
- -- Leverage."

BANK BORROWING. The Fund may borrow money from banks on a secured or unsecured
basis, and may be required to pledge specific portfolio securities as
collateral. The Fund may incur various fees and expenses in connection with bank
borrowings, including initial facility fees, ongoing commitment fees and
interest expenses. Loan agreements may include various covenants, including
restrictions on certain investment practices in which the Fund might otherwise
be permitted to engage. Bank borrowings constitute senior securities under the
1940 Act, and the Fund is required to maintain an asset coverage of at least
300% of the amount of any bank borrowing.

DOLLAR ROLLS. Dollar rolls are transactions in which the Fund sells securities
for delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a specified
future date. During the roll period, the Fund foregoes principal and interest
paid on the securities. The Fund is compensated by the difference between the
current sales price and lower 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. The Fund also could be compensated through the
receipt of fee income equivalent to a lower forward price. At the time the Fund
enters into a dollar roll, the Fund's custodian will segregate cash or liquid
securities having a value not less than the forward purchase price. Dollar rolls
will be considered borrowings and, accordingly, will be subject to the Fund's
33 1/3% limitation on borrowings.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements with the same parties with whom it may enter into repurchase
agreements. Under a reverse repurchase agreement, the Fund sells securities and
agrees to repurchase them at a mutually agreed date and price. At the time the
Fund enters into a reverse repurchase agreement, an approved custodian will
segregate cash or liquid, high grade debt securities having a value not less
than the

24
<PAGE> 149

repurchase price (including accrued interest). Reverse repurchase agreements
will be considered borrowings and, accordingly, will be subject to the Fund's
33 1/3% limitation on borrowings.

DEFENSIVE STRATEGIES. At times, conditions in the markets may, in the
Adviser's judgment, make pursuing the Fund's basic investment strategy
inconsistent with the best interests of its shareholders. At such times, the
Adviser may use alternative strategies primarily designed to reduce fluctuations
in the value of the Fund's assets. In implementing these "defensive" strategies,
the Fund may invest to a substantial degree in high-quality, short-term
obligations.

PORTFOLIO TURNOVER. Other than for tax purposes, frequency of portfolio
turnover generally will not be a limiting factor if the Fund considers it
advantageous to purchase or sell securities. The Fund anticipates that the
annual portfolio turnover rate may be in excess of 200%. A high rate of
portfolio turnover involves correspondingly greater brokerage commission
expenses or dealer costs than a lower rate, which expenses and costs must be
borne by the Fund and its shareholders. A high portfolio turnover rate may
result in the realization of more capital gains taxes than if the Fund had a
lower portfolio turnover rate.

INVESTMENT RESTRICTIONS. The Fund is subject to certain investment
restrictions set forth in the Statement of Additional Information which are
fundamental policies. These investment restrictions together with the Fund's
investment objectives cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act. The Fund's other investment policies are not fundamental and may be changed
without shareholder approval. See "Investment Policies and Restrictions" in the
Statement of Additional Information.

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 income securities in which the Fund may invest are
traded principally in the over-the-counter market. In the over-the-counter
market, 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 managers, 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 bonds on a stock
exchange are effected through brokers who charge a commission for their
services.

25
<PAGE> 150

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. However, it is not the policy of the Adviser, absent special
circumstances, to pay higher commissions to a firm because it has supplied such
services.

- ------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------------------

Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc., a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital and its subsidiaries (some of whom are officers or trustees of
the Fund) own, in the aggregate, not more than 6% of the common stock of VK/AC
Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an

26
<PAGE> 151

additional 12% of the common stock of VK/AC Holding, Inc. Presently, and after
giving effect to the exercise of such options, no officer or trustee of the Fund
owns or would own 5% or more of the common stock of VK/AC Holding, Inc. The
address of the Adviser is One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

ADVISORY AGREEMENT. The business and affairs of the Fund are managed under the
direction of the Board of Trustees of the Trust, of which the Fund is a separate
series. Subject to the Trustees' authority, the Adviser and the officers of the
Fund supervise and implement the Fund's investment activities and are
responsible for overall management of the Fund's business affairs. The Fund will
pay the Adviser a fee equal to a percentage of the average daily managed assets
of the Fund as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY MANAGED ASSETS % PER ANNUM
- -------------------------------------------------------- -------------
<S> <C>
First $500 million...................................... 0.75 of 1.00%
Next $500 million....................................... 0.70 of 1.00%
Over $1 billion......................................... 0.65 of 1.00%
</TABLE>

For purposes of determining the investment advisory fee, "average daily managed
assets" shall mean the average daily value of the Fund's aggregate assets, minus
the sum of accrued liabilities other than the aggregate amount of any borrowings
(whether from banks, through reverse repurchase agreements or dollar rolls, or
otherwise) undertaken by the Fund.

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 1940 Act, of the Adviser, the Distributor or Van Kampen American
Capital), the charges and expenses of independent accountants, legal counsel,
any transfer 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 and state securities laws, miscellaneous expenses and all taxes and fees
to federal, state or other governmental agencies. The Adviser reserves the right
in its sole discretion from time to time to waive all or a portion of its
management fee or to reimburse the Fund for all or a portion of its other
expenses.

The Adviser may utilize at its own expense credit analysis, research and
trading support services provided by its affiliate, Van Kampen American Capital
Asset Management, Inc.

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 of Ethics permit trustees, directors,
officers and employees to buy and sell securities for their personal accounts
subject to

27
<PAGE> 152

procedures designed to prevent conflicts of interest including, in some
instances, preclearance of trades.

PORTFOLIO MANAGEMENT. Peter W. Hegel is an Executive Vice President, Chief
Investment Officer and Portfolio Manager of the Adviser. He has made market
sector investment allocation decisions for the Fund since its inception based on
recommendations made by portfolio managers responsible for each market sector.
Mr. Hegel has been employed by the Adviser for the last five years. The Adviser
dedicates at least one portfolio manager to the continuing analysis of each
market sector in which the Fund may invest. Once assets are allocated to a
particular sector, the portfolio manager responsible for such sector selects the
Fund's investments within that sector and monitors such investments on an
ongoing basis, subject to the continuing supervision and authority of Mr. Hegel.

- ------------------------------------------------------------------------------
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 the
aggregate distribution and services fees with respect to each class of shares
that may be incurred over the anticipated duration of their investment in the
Fund.

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, the distributor of each class of
shares, not to accept any order for Class B Shares in an amount of $500,000 or
more and not to accept 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.

28
<PAGE> 153

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 period may wish to defer the sales charge and have all his or
her funds initially invested in Class B 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 (discussed below). Investors should 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.

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. Generally, a class of shares subject
to a higher ongoing distribution fee and service fee or subject to the
conversion feature will have a higher expense ratio and pay lower dividends than
a class of shares subject to a lower ongoing distribution and 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 this Prospectus under "Purchase of Shares -- Net Asset Value."

29
<PAGE> 154

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 Internal Revenue Code of 1986, as amended (the "Code").
- ------------------------------------------------------------------------------
PURCHASE OF SHARES
- ------------------------------------------------------------------------------

The Fund's shares are offered at net asset value per share next computed after
an investor places an order to purchase with the investor's broker, dealer or
financial intermediary or with the Distributor, plus any applicable sales
charge. Pursuant to state law, such intermediaries may be required to register
as broker/dealers. 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
Fund 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 Fund 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.

30
<PAGE> 155

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. In addition, 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 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
brokers, dealers or financial intermediaries who receive 90% or more of the
sales charge may be deemed to be "underwriters" as that term is defined in the
Securities Act of 1933, as amended.

SALES CHARGE TABLE

<TABLE>
<CAPTION>
DEALER
CONCESSION
OR AGENCY
COMMISSION
TOTAL SALES CHARGE ----------
-------------------------- PERCENTAGE
PERCENTAGE PERCENTAGE OF
SIZE OF TRANSACTION OF OFFERING OF NET OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
$100 but 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 brokers, dealers and financial
intermediaries 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

31
<PAGE> 156

over $3 million. See "Purchase of Shares -- Deferred Sales Charge
Alternatives" for additional information with respect to contingent deferred
sales charges.

QUANTITY DISCOUNTS

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

32
<PAGE> 157

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 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
charges applicable to the purchases made and the 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

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 a net asset value 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, financial intermediary or the Distributor.

33
<PAGE> 158

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.

34
<PAGE> 159

(10) Individuals who are members of a "qualified group" may purchase Class A
Shares of the Fund without the imposition of a front end sales charge. 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 funds in the Van Kampen American Capital
Family of 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 organization 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 million and 0.50% on the excess over $3
million.

The term "families" includes a person's spouse, minor children and
grandchildren, parents, and a person's spouse's parents.

35
<PAGE> 160

DEFERRED SALES CHARGE ALTERNATIVES

36
<PAGE> 161

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 fee facilitates the ability of the
Fund to sell CDSC Shares without a sales charge being deducted at the time of
purchase.

To provide an example, assume an investor purchased 100 Class B Shares 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 the 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.
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 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
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>

37
<PAGE> 162

The CDSC generally 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 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 and Class C Shares automatically will
convert to Class A Shares eight years or ten years, respectively, after the end
of the month in which a shareholder's order to purchase the shares was accepted
and thereafter will not be subject to the higher distribution fees applicable to
Class B Shares and Class C Shares. The purpose of the conversion feature is to
relieve the holders of Class B Shares and Class C Shares that have been
outstanding for a period of time sufficient for the Distributor to have been
compensated for distribution expenses related to such shares from most of the
burden of such distribution-related expenses. The Fund does not expect to issue
any share certificates upon conversion.

38
<PAGE> 163

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 "Redemption of Shares." The CDSC also is
waived on redemptions of Class C Shares as 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 "Redemption of Shares" for
further discussion of the waiver provisions.

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 its total liabilities
attributable to such class of shares, and dividing the result by the number of
shares of such class outstanding. The net asset value for the Fund is computed
once daily as of 5:00 p.m. Eastern time Monday through Friday, except on
customary business holidays, or except on any day on which no purchase or
redemption orders are received, or there is not a sufficient degree of trading
in the Fund's portfolio securities such that the Fund's net asset value per
share might be materially affected. The Fund reserves the right to calculate the
net asset value and to adjust the public offering price based thereon more
frequently than once a day if deemed desirable. The net asset value per share of
the different classes of shares are expected to be substantially the same; from
time to time, however, the per share net asset value of the different classes of
shares may differ.

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. Securities with remaining maturities of 60 days or
less are valued at amortized cost when amortized cost is determined in good
faith by or under the direction of the Board of Trustees of the Trust to be
representative of the fair value at which it is expected such securities may be
resold. Any securities or other assets for which current market quotations are
not readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Trustees of the Trust.

- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------

39
<PAGE> 164

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.

40
<PAGE> 165

certain non-profit organizations. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
American Capital Trust Company 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.

EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged with shares of another
Participating Fund, Tax Free Money Fund or Reserve Fund, subject to certain
limitations. 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.

To be eligible for exchanges, 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. Under normal
circumstances, it is the policy of the Adviser not to approve such requests.

41
<PAGE> 166

acquired through the exchange privilege is determined by reference to the date
such share originally was purchased from a Van Kampen American Capital fund.

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 ((800) 772-8889 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
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.

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<PAGE> 167

investor purchasing shares for a retirement plan established on a form made
available by the Fund. See "Shareholder Services -- Retirement Plans."

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 ACH. In addition, the shareholder must fill out the appropriate
section of the account application. 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.

- ------------------------------------------------------------------------------
REDEMPTION OF SHARES
- ------------------------------------------------------------------------------

43
<PAGE> 168

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.

44
<PAGE> 169

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.

45
<PAGE> 170

he or she may require, the Distributor will require satisfactory proof of
disability before it determines to waive the CDSC on Class B Shares and Class C
Shares.

In cases of disability, the CDSC 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 CDSC 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.

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

46
<PAGE> 171

dealers and financial intermediaries (collectively, "Selling Agreements") that
may provide for their customers or clients certain services or assistance.

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 connection with the distribution of Class B 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 B 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.

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 brokers, dealers or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of the 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.

The Distributor's actual distribution-related expenses with respect to a class
of CDSC Shares for any given year may exceed the amounts payable to the

47
<PAGE> 172

Distributor with respect to such shares under the Distribution Plan, the Service
Plan and payments received pursuant to the CDSC. In such event, with respect to
any such class of CDSC Shares, any unreimbursed distribution-related 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 (on a Fund level basis). Because such expenses
are accounted on a Fund level basis, in periods of extreme net asset value
fluctuation such amounts 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, a
shareholder of such CDSC Share may be deemed to incur expenses attributable to
other shareholders of such class. As of June 30, 1996, there were $2,671,259 and
$10,067 of unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares representing 4.33% and 0.33% 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 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 CDSC applicable to a particular class of
shares to defray distribution related expenses attributable to any other class
of 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 such
services described above, the Fund would seek alternate providers and expects
that shareholders would not experience any disadvantage.

- ------------------------------------------------------------------------------
DISTRIBUTIONS FROM THE FUND
- ------------------------------------------------------------------------------

The Fund's present policy, which may be changed at any time by the Board of
Trustees, is to declare distributions on a daily basis and to pay such
distributions from net investment income and principal attributable to each
respective class of shares of the Fund on a monthly basis. The Fund may at times
pay out less than the entire amount of net investment income earned in any
particular period and may at times pay out such accumulated undistributed income
in addition to net investment income earned in other periods in order to permit
the Fund to maintain a more stable level of distributions to shareholders. As a
result, the distributions paid by the

48
<PAGE> 173

Fund for any particular period may be more or less than the amount of net
investment income earned by the Fund during such period. Net investment income
consists of all interest income, dividends, other ordinary income earned by the
Fund on its portfolio assets and net short-term capital gains, less all expenses
of the Fund (including any interest payments required with respect to any
borrowings by the Fund) attributable to the class of shares in question.
Expenses of the Fund are accrued each day. Net realized long-term capital gains,
if any, are expected to be distributed, to the extent permitted by applicable
law, to shareholders at least annually. Distributions cannot be assured, and the
amount of each monthly distribution may vary.

PURCHASE OF ADDITIONAL SHARES WITH DISTRIBUTIONS. The Fund automatically will
credit quarterly 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 ((800) 772-8889 for the hearing impaired) or
in writing to ACCESS.

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<PAGE> 174

- ------------------------------------------------------------------------------
TAX STATUS
- ------------------------------------------------------------------------------

The following federal income tax discussion is based on the advice of Skadden,
Arps, Slate, Meagher & Flom, and reflects applicable tax laws as of the date of
this Prospectus and is qualified by reference to the additional federal income
tax discussion included in the Statement of Additional Information.

FEDERAL INCOME TAXATION. The Fund intends to qualify each year and to elect to
be treated as a regulated investment company under Subchapter M of the Code. If
the Fund so qualifies and distributes each year to its shareholders at least 90%
of its net investment income (which includes tax-exempt 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) in each year, it
will not be required to pay federal income taxes on any income distributed to
shareholders. The Fund will not be subject to federal income tax on any net
capital gains 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 at the rates applicable to 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). The Fund will inform shareholders of the
source and tax status of all distributions promptly after the close of each
calendar year. A portion of the distributions from the Fund will be eligible for
the dividends received deduction for corporations if the Fund receives
qualifying dividends during the year and if certain other requirements of the
Code are satisfied.

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.

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

50
<PAGE> 175

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 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 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.
- ------------------------------------------------------------------------------
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. In lieu of or in addition to total return and
yield calculations, such information may include performance rankings and
similar information from independent organizations such as Lipper Analytical
Services, Inc. or nationally recognized financial publications. From time to
time, the Fund may compare its overall performance to certain securities and
unmanaged indices which may have different risk/reward characteristics than the
Fund and also may compare its performance in certain sectors to the Lehman
Non-Dollar Global Government Index, the Lehman U.S. Government Five Year Plus
Index and the Lehman High Yield Corporate Index. Such characteristics may
include, but are not limited to, tax features, guarantees, insurance and the
fluctuation of principal or return. In addition, from time to time, the Fund may
utilize sales literature that includes hypotheticals.

51
<PAGE> 176

yield, which is a measure of the income actually earned by the Fund's
investments, and from total return, which is a measure of the income actually
earned by, plus the effect of any realized and unrealized appreciation or
depreciation of, such investments during a stated period. Distribution rate is,
therefore, not intended to be a complete measure of the Fund's performance.
Distribution rate may sometimes be greater than yield since, for instance, it
may not include the effect of amortization of bond premiums, and may include
non-recurring short-term capital gains and premiums from futures transactions
engaged in by the Fund. Distribution rates 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 ((800) 772-8889 for the
hearing impaired).
- ------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------

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<PAGE> 177

shareholders of the Fund to the extent required by the 1940 Act. More detailed
information concerning the Trust is set forth in the Statement of Additional
Information.

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

The fiscal year end of the Fund is June 30. The Fund sends to its shareholders
at least semi-annually reports showing the Fund's portfolio and other
information. An annual report, containing financial statements audited by
independent accountants, is sent to shareholders each year. After the end of
each year, shareholders will receive federal income tax information regarding
dividends and capital gains distributions.

Shareholder inquiries should be directed to Van Kampen American Capital
Strategic Income Fund, One Parkview Plaza, Oakbrook Terrace, Illinois 60181
Attn: Correspondence.

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<PAGE> 178

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666.

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) 772-8889.

FOR AUTOMATED TELEPHONE

SERVICES DIAL (800) 421-5684.

VAN KAMPEN AMERICAN CAPITAL
STRATEGIC INCOME 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

Strategic Income Fund

Custodian
STATE STREET BANK AND
TRUST COMPANY
225 Franklin Street, P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen American Capital

Strategic Income 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> 179

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

STRATEGIC INCOME
FUND

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

P R O S P E C T U S

OCTOBER 28, 1996

- ------ ------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH

VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 180

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

Van Kampen American Capital High Yield Fund (the "Fund") seeks as its primary
investment objective to provide a high level of current income. As a secondary
objective, the Fund seeks capital appreciation. The Fund will attempt to achieve
its investment objectives through investment primarily in a diversified
portfolio of medium and lower grade domestic corporate debt securities. There is
no assurance that the Fund will achieve its investment objective.

This Statement of Additional Information is not a prospectus but should be
read in conjunction with the current Prospectus for the Fund dated the date
hereof (the "Prospectus"). This Statement of Additional Information does not
include all 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 calling (800) 421-5666 ((800) 772-8889 for the hearing
impaired). This Statement of Additional Information incorporates by reference
the entire Prospectus.

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
Additional Investment Considerations.................................................. B-4
Trustees and Officers................................................................. B-13
Legal Counsel......................................................................... B-20
Investment Advisory and Other Services................................................ B-20
Custodian and Independent Accountants................................................. B-22
Portfolio Transactions and Brokerage Allocation....................................... B-22
Tax Status of the Fund................................................................ B-23
The Distributor....................................................................... B-23
Performance Information............................................................... B-24
Independent Accountants' Report....................................................... B-27
Financial Statement................................................................... B-28
Notes to the Financial Statements..................................................... B-38
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED OCTOBER 28, 1996.

<PAGE> 181

THE FUND AND THE TRUST

The Fund is a diversified series of Van Kampen American Capital Trust (the
"Trust"), an open-end management investment company. The Fund was established
pursuant to a designation of series dated May 10, 1995. At present, the Fund,
Van Kampen American Capital Short-Term Global Income Fund and Van Kampen
American Capital Strategic Income Fund are the only series of the Trust,
although other series may be organized and offered in the future. Each series of
the Trust will be treated as a separate corporation for Federal income tax
purposes.

The Trust is an unincorporated business trust established under the laws of
the State of Delaware by an Agreement and Declaration of Trust (the "Declaration
of Trust") dated as of May 10, 1995. The Declaration of Trust permits the
Trustees to create one or more separate investment portfolios and issue a series
of shares, par value $0.01 per share for each portfolio. The trustees can
further sub-divide each series of shares into one or more classes of shares for
each portfolio. 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. Except as described in the
Prospectus, shares do not have cumulative voting rights, preemptive rights or
any conversion 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 Trust
will assist such holders in communicating with other shareholders of the Fund to
the extent required by the Investment Company Act of 1940, as amended (the "1940
Act").

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 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.

The Trust originally was organized as the Van Kampen Merritt Trust, a
Massachusetts business trust, by a Declaration of Trust dated March 14, 1986
(the "Massachusetts Trust"). The Massachusetts Trust was reorganized into the
Trust on July 31, 1995 pursuant to an Agreement and Plan of Reorganization and
Liquidation. The Trust was formed pursuant to an Agreement and Declaration of
Trust dated May 10, 1995 for the purpose of facilitating the Massachusetts
Trust's reorganization into a Delaware business trust. The Trust filed a
Certificate of Trust with the Delaware Secretary of State on July 28, 1995.

The Fund originally was organized, under the name Van Kampen Merritt High
Yield Fund, as a sub-trust of the Massachusetts Trust. In connection with the
Massachusetts Trust's reorganization into a Delaware business trust, the Fund
was reorganized into a series of the Trust and renamed Van Kampen American
Capital High Yield Fund.

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 as part, each such statement
being qualified in all respects by such reference.

INVESTMENT POLICIES AND RESTRICTIONS

The primary investment objective of the Fund is to provide high level of
current income. As a secondary objective the Fund seeks capital appreciation.
The Fund will attempt to achieve its investment objectives through investment
primarily in a diversified portfolio of medium and lower grade domestic
corporate debt

B-2
<PAGE> 182

securities. There is no assurance that such objectives will be achieved. The
Fund may invest in debt securities rated between BB and D (inclusive) by
Standard & Poor's Ratings Group ("S&P"), Ba and C (inclusive) by Moody's
Investor Services, Inc. ("Moody's"), comparably rated short-term debt securities
and unrated debt securities determined by the Fund's investment adviser to be of
comparable quality. The Fund may also invest up to 35% of its assets in foreign
government and foreign corporate debt securities of similar quality. The
securities in which the Fund invests generally will have a higher degree of
individual credit and market risk and as a result their prices may be more
volatile as compared to higher rated securities, which may cause the Fund's net
asset value to be more volatile than the net asset value of a portfolio of
higher rated securities. The net asset value of the Fund may also increase or
decrease depending on changes in interest rates and other factors affecting
credit markets.

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 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 up to 25% of the Fund's total assets may be invested
without regard to such limitations.

2. Invest more than 25% of its assets in a single industry. (Neither the U.S.
Government nor any of its agencies or instrumentalities will be considered
an industry for purposes of this restriction.)

3. Borrow money, except for temporary purposes from banks or in reverse
repurchase transactions as described in the Statement of Additional
Information and then in amounts not in excess of 5% of the total asset
value of the Fund, or mortgage, pledge, or hypothecate any assets except
in connection with a borrowing and in amounts not in excess of 10% of the
total asset value of the Fund. Borrowings may not be made for investment
leverage, but only to enable the Fund to satisfy redemption requests where
liquidation of portfolio securities is considered disadvantageous or
inconvenient. In this connection, the Fund will not purchase portfolio
securities during any period that such borrowings exceed 5% of the total
asset value of the Fund. Notwithstanding this investment restriction, the
Fund may enter into "when issued" and "delayed delivery" transactions as
described in the Prospectus.

4. 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.

5. Sell any securities "short", unless at all times when a short position is
open the Fund owns an equal amount of the securities or of securities
convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities sold short.

6. 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 write covered call options with respect to its portfolio
securities and enter into closing purchase transactions with respect to
such options, to a maximum of 25% of its net assets and except that the
Fund may invest in hedging instruments as described in the Prospectus and
the Statement of Additional Information from time to time.

7. 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.

8. Make investments for the purpose of exercising control or management.

9. Invest in securities of other investment companies, except as part of a
merger, consolidation or other acquisition and except that the Fund may
invest up to 10% of its assets in money market funds so long as the Fund
does not own more than 3% of the outstanding voting stock of any money
market fund or securities of any money market fund aggregating in value
more than 5% of the total assets of the Fund.

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

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11. Purchase or sell real estate, commodities, or commodity contracts, except
for investments in hedging instruments as described in the Prospectus and
this Statement of Additional Information from time to time.

The Fund may not change any of these investment restrictions nor any other
fundamental policy 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.

From time to time the Fund may commit to more stringent restrictions in order
to be able to offer its shares to residents in particular states. In this
connection the Fund has committed that it will not invest assets of the Fund in
securities of companies which have a record of less than three years continuous
operation. However, such period of three years may include the operation of any
predecessor company or companies, partnership or individual enterprise if the
company whose securities are proposed as an investment for funds of the Fund has
come into existence as the result of a merger, consolidation, reorganization or
the purchase of substantially all of the assets of such predecessor company or
companies, partnership or individual enterprise. The Fund may revoke any such
commitments at any time so long as it thereafter ceases to offer its shares in
the state or states involved.

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 may, from time to time,
adopt a more restrictive limitation with respect to investment in illiquid and
restricted securities in order to comply with the most restrictive state
securities law, currently 10%. This policy does not include restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended, which the Board of Trustees or the Fund's investment adviser
has determined under Board-approved guidelines to be liquid. 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.

ADDITIONAL INVESTMENT CONSIDERATIONS

MEDIUM AND LOWER GRADE DEBT SECURITIES

Discussion concerning the special risk factors of the Fund's investments in
medium and lower grade debt securities appears in the Prospectus under the
heading "Investment Objective and Policies--Special Risk Considerations
Regarding Medium and Lower Grade Debt Securities." Other corporate debt
securities which may also be acquired by the Fund include preferred stocks and
all types of debt obligations having varying terms with respect to security or
credit support, subordination, purchase price, interest payments and maturity.
Such obligations may include, for example, bonds, debentures, notes, mortgage-
or other asset-backed instruments, equipment lease or trust participation
certificates, conditional sales contracts, commercial paper and obligations
issued or guaranteed by the United States government or any of its political
subdivisions, agencies or instrumentalities (including obligations, such as
repurchase agreements, secured by such instruments). Mortgage-backed securities
are securities that directly or indirectly represent a participation in, or are
secured and payable from, mortgage loans secured by real property. The Fund will
not invest in mortgage-backed residual interests. Asset-backed securities have
structural characteristics similar to mortgage-backed securities, but have
underlying assets, such as accounts receivable, that are not mortgage loans or

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interests in mortgage loans. Participation certificates are issued by obligors
to finance the acquisition of equipment and facilities and may represent
participations in a lease, an installment purchase contract or a conditional
sales contract. Most debt securities in which the Fund will invest will bear
interest at fixed rates. However, the Fund reserves the right to invest without
limitation in corporate debt securities that have variable rates of interest or
involve equity features, such as contingent interest or participation based on
revenues, sales or profits (i.e., interest or other payments, often in addition
to a fixed rate of return, that are based on the borrower's attainment of
specified levels of revenues, sales or profits and thus enable the holder of the
security to share in the potential success of the venture). Corporate debt
securities consisting of preferred stocks may have cumulative or non-cumulative
dividend rights. To the extent the Fund invests in non-cumulative preferred
stocks, the Fund's ability to achieve its investment objective of high current
income may be affected adversely. In connection with its investments in
corporate debt securities, the Fund also may invest in equity securities,
including warrants and common stocks. No more than 5% of the Fund's assets will
be invested in such equity securities. The Fund also may invest in convertible
securities, zero coupon securities and payment-in-kind securities.

OTHER INVESTMENT STRATEGIES

The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates and currency exchange rates), to manage the effective maturity or duration
of securities or portfolios 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.

STRATEGIC TRANSACTIONS. In the course of pursuing these investment strategies,
the Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures,
interest rate indices and other financial instruments, purchase and sell
financial futures contracts, enter into various interest rate transactions such
as swaps, caps, floors or collars, and enter into various currency transactions
such as currency forward contracts, currency futures contracts, currency swaps
or options on currency or currency futures (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 or
currency exchange rate 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 as a temporary substitute for
purchasing or selling particular securities. The Fund may sell options on
securities the Fund owns or has the right to purchase without additional
payments, up to a maximum of 25% of the Fund's net assets, for non-hedging
purposes. 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.

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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
contemplated use of these futures contracts and options thereon 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.

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, currency 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, currency 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 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, to the extent 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.

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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, guaranties and security, are set by negotiation of the parties. The
Fund will only enter into OTC options that have a buy-back provision permitting
the Fund to require the Counterparty to buy back the option 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, currency 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 the 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 in
New York as "primary dealers", broker dealers, domestic or foreign banks or
other financial institutions which have received a short-term credit rating of
A-1 from S&P or P-1 from Moody's or any equivalent rating from any other
nationally recognized statistical rating organization ("NRSRO"). The staff of
the SEC currently takes the position that the amount of the Fund's obligation
pursuant to an OTC option is illiquid, and is subject to the Fund's limitation
on investing no more than 10% of its assets in illiquid instruments.

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 for hedging purposes call options on U.S.
Treasury and agency securities, foreign sovereign debt, mortgage-backed
securities, corporate debt securities and foreign debt securities that are
traded on U.S. and foreign securities exchanges and in the over-the-counter
markets and related futures on such securities other than futures on individual
corporate debt securities. 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 and may require the Fund to hold a
security which it might otherwise have sold. In selling calls on securities not
owned by the Fund, the Fund may be required to acquire the underlying security
at a disadvantageous price in order to satisfy its obligation with respect to
the call option. The Fund may sell options on securities the Fund owns or has
the right to purchase without additional payments, up to a maximum of 25% of the
Fund's net assets, for non-hedging purposes.

The Fund may purchase and sell for hedging purposes put options that relate to
U.S. Government Securities, Mortgage-Backed Securities, corporate debt
securities, foreign sovereign debt and foreign debt securities (whether or not
it holds the above securities in its portfolio) or futures on such securities
other than futures on individual corporate debt and individual equity
securities. 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.

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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.

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 5% 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 will be offset prior
to settlement and that delivery will not 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 and options thereon are
described below.

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.

CURRENCY TRANSACTIONS. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
exchange listed currency futures, exchange listed and OTC options on currencies,
and currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional difference among two or more currencies and operates similarly to an
interest rate swap, which is described below. The Fund may enter into currency
transactions with Counterparties rated A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
options) are determined to be of equivalent credit quality by the Adviser.

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positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.

The Fund will not enter into a transaction to hedge currency exposure to an
extent greater, after netting all transactions intended to wholly or partially
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency
other than with respect to proxy hedging as described below.

The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which Fund expects to
have portfolio exposure.

To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and to buy U.S. dollars. The amount of the contract
would not exceed the value of the Fund's securities denominated in linked
currencies. For example, if the Adviser considers the Austrian schilling is
linked to the German deutschemark (the "D-mark"), the Fund holds securities
denominated in Austrian schillings and the Adviser believes that the value of
schillings will decline against the U.S. dollar, the Adviser may enter into a
contract to sell D-marks and buy dollars, hedging involves some of the same
risks and considerations as other transactions with similar instruments.
Currency transactions can result in losses to the Fund if the currency being
hedged fluctuates in value to a degree or in a direction that is not
anticipated. Further, there is the risk that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.

RISKS OF CURRENCY TRANSACTIONS. Currency transactions are subject to risks
different from other transactions. Because currency control is of great
importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related instruments can be
negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.

COMBINED TRANSACTIONS. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, multiple
currency transactions (including forward currency contracts) and any combination
of futures, options and currency 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.

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portion of its portfolio, to protect against currency fluctuations, 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. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and 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 may enter into swaps, caps, floors or collars on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or its liabilities, and 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
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 will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

RISKS OF STRATEGIC TRANSACTIONS OUTSIDE THE UNITED STATES. When conducted
outside the United States, Strategic Transactions may not be regulated as
rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities, currencies
and other instruments. The value of such positions also could be adversely
affected by: (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lower
trading volume and liquidity.

USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
securities 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 an amount of
cash or liquid 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 cash or liquid 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 cash or liquid securities equal to the
excess

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of the index value over the exercise price on a current basis. A put option
written by the Fund requires the Fund to segregate cash or liquid securities
equal to the exercise price.

Except when the Fund enters into a forward contract for the purchase or sale
of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
cash or liquid securities denominated in that currency equal to the Fund's
obligations or to segregate cash or liquid securities equal to the amount of the
Fund's obligation.

OTC options entered into by the Fund, including those on securities, currency,
financial instruments or indices, OCC issued and exchange listed index options,
swaps, caps, floors and collars will generally provide for cash settlement. As a
result, with respect to these instruments the Fund 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 put, or the in-the-money
amount in the case of a 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. Other 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, if any, 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 may also 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 may also 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 the Code for qualification as a regulated investment company.
See "Tax Status" in the Prospectus.

REPURCHASE AGREEMENTS

The Fund will enter into repurchase transactions only with parties meeting
creditworthiness standards approved the Fund's Board of Trustees. The Adviser
will monitor the creditworthiness of such parties, under the general supervision
of the Board of Trustees. In the event of a default or a bankruptcy by a seller,
the Fund will promptly seek to liquidate the collateral. To the extent that the
proceeds from any sale of such collateral upon a default in the obligation to
repurchase are less than the repurchase price, the Fund will suffer the loss.

REVERSE REPURCHASE AGREEMENTS

B-11
<PAGE> 191

bank or a broker or dealer) to sell the security back to the Fund at an agreed
upon price on an agreed upon date. The value of underlying securities will be at
least equal at all times to the total amount of the resale obligation, including
the interest factor. The Fund receives payment for such securities only upon
physical delivery or evidence of book entry transfer by its custodian.
Regulations of the SEC require either that securities sold by the Fund under a
reverse repurchase agreement be segregated pending repurchase or that the
proceeds be segregated on the Fund's books and records pending repurchase.
Reverse repurchase agreements could involve certain risks in the event of
default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities. An
additional risk is that the market value of securities sold by the Fund under a
reverse repurchase agreement could decline below the price at which the Fund is
obligated to repurchase them.

During the time a reverse repurchase agreement is outstanding, the Fund will
maintain a segregated custodial account containing cash or liquid securities
having a value equal to the repurchase price under such reverse repurchase
agreement. Any investment gains made by the Fund with monies borrowed through
reverse repurchase agreements will cause the net asset value of the Fund's
shares to rise faster than would be the case if the Fund had not engaged in such
borrowings. On the other hand, if the investment performance resulting from the
investment of borrowings obtained through reverse repurchase agreements fails to
cover the cost of such borrowings to the Fund, the net asset value of the Fund
will decrease faster than would otherwise be the case.

Reverse repurchase agreements will be considered borrowings by the Fund and as
such would be subject to the restrictions on borrowings described under
"Investment Policies and Restrictions" in this Statement of Additional
Information. The Fund will enter into reverse repurchase agreements only with
commercial banks whose deposits are insured by the Federal Deposit Insurance
Corporation and whose assets exceed $500 million or broker-dealers who are
registered with the SEC. In determining whether to enter into a reverse
repurchase agreement with a bank or broker-dealer, the Fund will take into
account the credit-worthiness of such party and will monitor such
credit-worthiness on an ongoing basis.

BORROWING

The Fund may borrow up to 5% of the value of its assets from a bank, or
through reverse repurchase agreements with broker-dealers or banks meeting the
same qualifications as set forth above under "Repurchase Agreements." The Fund
will use such borrowings only for temporary emergency purposes such as paying
for unexpectedly heavy redemptions.

SECURITIES LENDING

Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund, and are at all
times secured by cash or liquid securities, which are maintained in a segregated
account pursuant to applicable regulations that are equal to at least the market
value, determined daily, of the loaned securities. The advantage of such loans
is that the Fund continues to receive the income on the loaned securities while
at the same time earning interest on the cash amounts deposited as collateral,
which will be invested in short-term obligations.

A loan may be terminated by the borrower on one business day's notice, or by
the Fund on two business days' notice. If the borrower fails to deliver the
loaned securities within two days after receipt of notice, the Fund could use
the collateral to replace the securities while holding the borrower liable for
any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail financially.
However, these loans of portfolio securities will only be made to firms deemed
by the Adviser to be creditworthy and when the income which can be earned from
such loans justifies the attendant risks. Upon termination of the loan, the
borrower is required to return the securities to the Fund. Any gain or loss in
the market price during the loan period would inure to the Fund. The
creditworthiness of firms to which the Fund lends its portfolio securities will
be monitored on an ongoing basis by the investment adviser pursuant to
procedures adopted and reviewed, on an ongoing basis, by the Board of Trustees
of the Trust.

B-12
<PAGE> 192

When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund may pay reasonable finders', administrative and
custodial fees in connection with a loan of its securities.

"WHEN-ISSUED" AND "DELAYED DELIVERY" SECURITIES

From time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis--i.e., delivery and
payment can take place a month or more after the date of the transactions. The
securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during this period. While the Fund will only purchase
securities on a when-issued, delayed delivery or forward commitment basis with
the intention of acquiring the securities, the Fund may sell the securities
before the settlement date, if it is deemed advisable. At the time the Fund
makes the commitment to purchase securities on a when-issued or delayed delivery
basis, the Fund will record the transaction and thereafter reflect the value,
each day, of such security in determining the net asset value of the Fund. At
the time of delivery of the securities, the value may be more or less than the
purchase price. The Fund will also establish a segregated account with the
Fund's custodian bank in which it will continuously maintain cash or other
liquid securities equal in value to commitments for such when-issued or delayed
delivery securities; subject to this requirement, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value. The investment adviser does not believe that the Fund's net asset value
or income will be adversely affected by the Fund's purchase of securities on
such basis.

TRUSTEES AND OFFICERS

The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and their principal occupations for the last five
years and their affiliations, if any, with Van Kampen American Capital
Investment Advisory Corp. (the "VK Adviser"), Van Kampen American Capital Asset
Management, Inc. (the "AC Adviser"), Van Kampen American Capital Distributors,
Inc. (the "Distributor"), Van Kampen American Capital, Inc. ("Van Kampen
American Capital"), VK/AC Holding, Inc. or ACCESS Investor Services, Inc.
("ACCESS"). For purposes hereof, the terms "Van Kampen American Capital Funds"
or "Fund Complex" includes each of the open-end investment companies advised by
the VK Adviser (excluding The Explorer Institutional Trust) and each of the
open-end investment companies advised by the AC Adviser (excluding the Van
Kampen 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.................. Co-founder, Chairman, Chief Executive Officer and
1632 Morning Mountain Road President of MDT Corporation, a company which develops
Raleigh, NC 27614 manufactures, markets and services medical and scientific
Date of Birth: 07/14/32 equipment. Trustee of each of the Van Kampen American
Capital Funds.
Linda Hutton Heagy................. Managing Partner, Paul Ray Berndtson, an executive
10 South Riverside Plaza recruiting and management consulting firm. Formerly,
Suite 720 Executive Vice President of ABN AMRO, N.A., a Dutch bank
Chicago, IL 60606 holding company. Prior to 1992, Executive Vice President
Date of Birth: 06/03/49 of La Salle National Bank. Trustee of each of the Van
Kampen American Capital Funds.
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. Trustee of each of the Van
Lyme, CT 06371 Kampen American Capital Funds.
Date of Birth: 11/23/19
</TABLE>

B-13
<PAGE> 193

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
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 Van Kampen American Capital Funds.
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently known as The Traveler's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a producer
Date of Birth: 01/31/22 of paper products. Trustee, and former President of
Whitney Museum of American Art. Formerly, Chairman of
Institute for Educational Leadership, Inc., Board of
Visitors, Graduate School of The City University of New
York, Academy of Political Science. Trustee of Committee
for Economic Development. Director of Public Education
Fund Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's Council,
Harvard School of Public Health. Member of Mental Health
Task Force, Carter Center. Trustee of each of the Van
Kampen American Capital Funds.
</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 VK Adviser, the
AC Adviser and the Fund by reason of his positions with the VK Adviser and the
AC Adviser. Mr. Whalen is an interested person of the Fund by reason of his
firm acting as legal counsel to the Fund.

OFFICERS

The address for William N. Brown, Curtis W. Morell, Robert C. Peck, Jr., Alan
T. Sachtleben, Paul R. Wolkenberg, Tanya M. Loden, Huey P. Falgout, Jr. and
Robert Sullivan is 2800 Post Oak Blvd., Houston, TX 77056. The address for Peter
W. Hegel, Ronald A. Nyberg, Edward C. Wood III, John L. Sullivan, Nicholas
Dalmaso, Scott E. Martin, Weston B. Wetherell and Steven M. Hill is One Parkview
Plaza, Oakbrook Terrace, IL 60181.

B-14
<PAGE> 194

<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 VK Adviser,
Date of Birth: AC Adviser, Van Kampen American Capital
06/25/56 Management, Inc. and Van Kampen American
Capital Advisors, Inc. Prior to September
1996, Director of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Director
of VSM Inc. Vice President of each of the
Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Curtis W. Morell........ Vice President and Senior Vice President of the VK Adviser and
Date of Birth: Chief Accounting the AC Adviser. Vice President and Chief
08/04/46 Officer Accounting Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Ronald A. Nyberg........ Vice President and Executive Vice President, General Counsel
Date of Birth: Secretary and Secretary of Van Kampen American
07/29/53 Capital and VK/AC Holding, Inc. Executive
Vice President, General Counsel and a
Director of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen Merritt Equity Advisors Corp., and
Van Kampen Merritt Equity Holdings Corp.
Executive Vice President, General Counsel
and Assistant Secretary of Van Kampen
American Capital Advisors, Inc., American
Capital Contractual Services, Inc., Van
Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc. and ACCESS. Executive Vice
President, General Counsel, Assistant
Secretary and Director of Van Kampen
American Capital Trust Company. Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to September 1996,
General Counsel of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Executive
Vice President and General Counsel of VSM
Inc. and VCJ Inc. Vice President and
Secretary of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
Robert C. Peck, Jr...... Vice President Executive Vice President of the VK Adviser
Date of Birth: and Van Kampen American Capital Management,
10/01/46 Inc. Executive Vice President and Director
of the AC Adviser and Van Kampen American
Capital Advisors, Inc. Vice President of
each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Alan T. Sachtleben...... Vice President Executive Vice President of the VK Adviser
Date of Birth: and Van Kampen American Capital Management,
04/20/42 Inc. Executive Vice President and a
Director of the AC Adviser and Van Kampen
American Capital Advisors, Inc. Vice
President of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
</TABLE>

B-15
<PAGE> 195

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Paul R. Wolkenberg...... Vice President Executive Vice President of VK/AC Holding,
Date of Birth: Inc., Van Kampen American Capital, the
11/10/44 Distributor and the AC Adviser. President,
Chief Executive Officer and a Director of
Van Kampen American Capital Trust Company
and ACCESS. Director of American Capital
Contractual Services, Inc. Vice President
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Edward C. Wood III...... Vice President and Senior Vice President of the VK Adviser,
Date of Birth: Chief Financial Officer the AC Adviser and Van Kampen American
01/11/56 Capital Management, Inc. Vice President and
Chief Financial Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
John L. Sullivan........ Treasurer First Vice President of the VK Adviser and
Date of Birth: the AC Adviser. Treasurer of each of the
08/20/55 Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Tanya M. Loden.......... Controller Vice President of the VK Adviser and the AC
Date of Birth: Adviser. Controller of each of the Van
11/19/59 Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Nicholas Dalmaso........ Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of Van Kampen American Capital.
03/01/65 Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser and Van Kampen
American Capital Management, Inc. Assistant
Vice President of Van Kampen American
Capital Advisors, Inc. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.
Huey P. Falgout, Jr..... Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of Van Kampen American Capital.
11/15/63 Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation and ACCESS. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
</TABLE>

B-16
<PAGE> 196

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Scott E. Martin......... Assistant Secretary Senior Vice President, Deputy General
Date of Birth: Counsel and Assistant Secretary of Van
08/20/56 Kampen American Capital and VK/AC Holding,
Inc. Senior Vice President, Deputy General
Counsel and Secretary of the VK Adviser,
the AC Adviser, the Distributor, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc., ACCESS, Van Kampen Merritt
Equity Advisors Corp. and Van Kampen
Merritt Equity Holdings Corp. Prior to
September 1996, Deputy General Counsel and
Secretary of McCarthy, Crisanti & Maffei,
Inc. Prior to July 1996, Senior Vice
President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Weston B. Wetherell..... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: and Assistant Secretary of Van Kampen
06/15/56 American Capital, the VK Adviser, the AC
Adviser, the Distributor, Van Kampen
American Capital Management, Inc. and Van
Kampen American Capital Advisors, Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Steven M. Hill.......... Assistant Treasurer Assistant Vice President of the VK Adviser
Date of Birth: and AC Adviser. Assistant Treasurer of each
10/16/64 of the Van Kampen American Capital Funds
and other investment companies advised by
the VK Adviser and the AC Adviser.
Robert Sullivan......... Assistant Controller Assistant Vice President of the VK Adviser
Date of Birth: and the AC Adviser. Assistant Controller of
03/30/33 each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser.
</TABLE>

Each of the foregoing trustees and officers holds the same position with each
of the funds in the Fund Complex. As of December 31, 1995, there were 50 funds
in the Fund Complex. Each trustee who is not an affiliated person of the VK
Adviser, the AC Adviser, the Distributor or Van Kampen American Capital (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 his or her 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.

B-17
<PAGE> 197

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 have 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. In addition, each of the VK Adviser or
the AC Adviser, as the case may be, has 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 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 the Fund or other funds in the
Fund Complex as selected by the respective Non-Affiliated Trustee. To the extent
permitted by the 1940 Act, the Fund may invest in securities of those funds
selected by the Non-Affiliated Trustees in 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.

The Fund adopted a retirement plan on July 21, 1994. Under the Fund's
retirement plan, a Non-Affiliated Trustee who is receiving trustee's fees from
the Fund prior to such Non-Affiliated Trustee's retirement, has at least ten
years of service 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. 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 a series. The retirement plan contains a Fund Complex
retirement benefit cap of $60,000 per year.

Additional information regarding compensation and benefits for trustees is set
forth below. The "Registrant" is the Trust, which currently consists of three
operating series. As indicated in the notes accompanying the table, the amounts
relate to either the Registrant's last fiscal year ended June 30, 1996 or the
Fund Complex' last calendar year ended December 31, 1995.

COMPENSATION TABLE

<TABLE>
<CAPTION>
ESTIMATED TOTAL
PENSION OR ANNUAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS BEFORE DEFERRAL
COMPENSATION BENEFITS ACCRUED FROM FROM REGISTRANT
BEFORE DEFERRAL AS PART OF REGISTRANT AND FUND
FROM REGISTRANT UPON COMPLEX PAID TO
NAME(1) REGISTRANT(2) EXPENSES(3) RETIREMENT(4) TRUSTEE(5)
- --------------------------------------- ---------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
J. Miles Branagan...................... $ 10,250 $ 6,750 $84,250
Dr. Richard E. Caruso.................. 6,875 -0- -0- 57,250
Philip P. Gaughan...................... 6,875 3,250 76,500
Linda Hutton Heagy..................... 10,250 7,500 38,417
Dr. Roger Hilsman...................... 10,250 -0- -0- 91,250
R. Craig Kennedy....................... 11,500 7,500 92,625
Donald C. Miller....................... 11,500 4,000 94,625
Jack E. Nelson......................... 11,500 7,500 93,625
David Rees............................. 7,875 -0- -0- 83,250
Jerome L. Robinson..................... 11,500 2,500 89,375
Lawrence J. Sheehan.................... 10,250 -0- -0- 91,250
Dr. Fernando Sisto..................... 10,250 3,750 98,750
Wayne W. Whalen........................ 11,500 7,500 93,375
William S. Woodside.................... 10,250 -0- -0- 79,125
</TABLE>

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

B-18
<PAGE> 198

July 21, 1995. Ms. Heagy was appointed to the Board of Trustees on September
7, 1995. Mr. Don G. Powell resigned from the Board of Trustees on August 15,
1996, and did not receive any compensation or benefits from the Fund while a
trustee because he was an affiliated person of the VK Adviser and AC
Adviser. Messrs. Gaughan and Rees retired from the Board of Trustees on
January 26, 1996 and January 29, 1996, respectively. Messrs. Caruso and
Sheehan were removed from the Board of Trustees effective September 7, 1995
and January 29, 1996, respectively.

(2) The amounts shown in this column are aggregated from the compensation paid
by each series in operation during the Registrant's fiscal year ended June
30, 1996 before deferral by the trustees under the deferred compensation
plan. The following trustees deferred all or a portion of their compensation
from the Registrant during the fiscal year ended June 30, 1996: Dr. Caruso,
$0; Mr. Gaughan, $6,875; Ms. Heagy, $3,750; Mr. Kennedy, $11,500; Mr.
Miller, $11,500; Mr. Nelson, $11,500; Mr. Rees, $4,750; Mr. Robinson,
$11,500; Dr. Sisto, $0; and Mr. Whalen, $11,500. The cumulative deferred
compensation (including interest) accrued with respect to each trustee from
the Registrant as of June 30, 1996 is as follows: Dr. Caruso, $0; Mr.
Gaughan, $15,367; Ms. Heagy, $3,838; Mr. Kennedy, $27,805; Mr. Miller,
$26,353; Mr. Nelson, $27,805; Mr. Rees, $7,796; Mr. Robinson, $26,724; Dr.
Sisto, $0; and Mr. Whalen, $21,331. The deferred compensation plan is
described above the Compensation Table. 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. To the extent permitted
by the 1940 Act, the Fund may invest in securities of those funds selected
by the Non-Affiliated Trustees in order to match the deferred compensation
obligation.

(3) The amounts shown in this column are aggregated from the Retirement Benefits
accrued by each series in operation during the Registrant's fiscal year
ended June 30, 1996. The Retirement Plan is described above the Compensation
Table.

(4) The amounts shown in this column are the estimated annual benefits payable
by the Registrant in each year of the 10-year period commencing in the year
of such trustee's retirement from the Registrant (based on $2,500 per series
for each series of the Registrant in operation) assuming: the trustee has 10
or more years of service on the Board of the respective series and retires
at or after attaining the age of 60. 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.

(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1995, before
deferral by the trustees under the deferred compensation plan. The following
trustees deferred compensation paid by the Registrant and the Fund Complex
during the calendar year ended December 31, 1995; Dr. Caruso, $41,750; Mr.
Gaughan, $57,750; Ms. Heagy, $8,750; Mr. Kennedy, $65,875; Mr. Miller,
$65,875; Mr. Nelson, $65,875; Mr. Rees, $8,375; Mr. Robinson, $62,375; Dr.
Sisto, $30,260; and Mr. Whalen, $65,625. The deferred compensation earns a
rate of return determined by reference to the return on the common shares of
the Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee. To the extent permitted by the 1940 Act, the Fund
may invest in securities of those funds selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
trustees' Fund Complex compensation cap commenced on July 22, 1995 and
covered the period between July 22, 1995 and December 31, 1995. Compensation
received prior to July 22, 1995 was not subject to the cap. For the calendar
year ended December 31, 1995, while certain trustees received compensation
over $84,000 in the aggregate, no trustee received compensation in excess of
the pro rata amount of the Fund Complex cap for the period July 22, 1995
through December 31, 1995. In addition to the amounts set forth above,
certain trustees received lump sum retirement benefit distributions not
subject to the cap in 1995 related to three mutual funds that ceased
investment operations during 1995 as follows: Mr. Gaughan, $22,136; Mr.
Miller, $33,205; Mr. Nelson, $30,851; Mr. Robinson, $11,068; and Mr. Whalen,
$27,332. The VK Adviser, AC Adviser and their affiliates also serve as
investment adviser for other investment companies; however, with the
exception of Messrs. McDonnell and Whalen, the trustees were not trustees of
such investment companies. Combining the Fund Complex with other investment
companies advised by the VK Adviser, AC Adviser and their affiliates, Mr.
Whalen received Total Compensation of $268,857 during the calendar year
ended December 31, 1995.

As of October 17, 1996, the trustees and officers of the Fund as a group owned
less than 1% of the shares of the Fund. As of October 17, 1996, no trustee or
officer of the Fund owns or would be able to acquire 5% or more of the common
stock of VK/AC Holding, Inc. Mr. McDonnell owns, or has the opportunity to
purchase, an equity interest in VK/AC Holding, Inc., the parent company of Van
Kampen American Capital, and has entered into an employment contract (for a term
until February 17, 1998) with Van Kampen American Capital.

B-19
<PAGE> 199

As of October 17, 1996, 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 OCTOBER 17, 1996 SHARES OWNERSHIP
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Trust Company............................. 2,109,861 A 7.24%
2800 Post Oak Blvd. ................................................ 555,807 B 4.79%
Houston, TX 77056 11,264 C 1.45%
PaineWebber for the Benefit of
Richard Larry Owens Sr. ............................................ 52,390 C 6.73%
Revocable Trust DTD 09/12/98
Richard Larry Owens Sr. TTEE
80 Trotters Walk
Covington, GA 30209
</TABLE>

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

LEGAL COUNSEL

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

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's principal
office is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. The
Adviser is a wholly-owned subsidiary of Van Kampen American Capital, Inc. ("Van
Kampen American Capital") which in turn is a wholly-owned subsidiary of VK/AC
Holding, Inc.

VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc., a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital own, in the aggregate, not more than 6% of the common stock of
VK/AC Holding, Inc. and have the right to acquire, upon exercise of options,
approximately an additional 12% of the common stock of VK/AC Holding, Inc.
Presently, and after giving effect to the exercise of stock options, no officer
or trustee of the Fund owns or would own 5% or more of the common stock of VK/AC
Holding, Inc.

The investment advisory agreement 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 Trustees and officers of
the Fund 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.

B-20
<PAGE> 200

The Adviser's activities are subject to the review and supervision of the
Fund's Trustees 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 Fund's Trustees or the Fund's shareholders and by
the Fund's independent Trustees 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 Adviser has undertaken to reimburse the Fund for annual expenses of the
Fund which exceed the most stringent limit prescribed by any State in which the
Fund's shares are offered for sale. Currently, the most stringent limit in any
State would require such reimbursement to the extent that aggregate operating
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 June 30, 1996, 1995 and 1994, the Fund recognized advisory
expenses of $2,614,970, $2,202,317 and $2,069,670, respectively.

OTHER AGREEMENTS.

SUPPORT SERVICES AGREEMENT. Under a support services agreement with the
Distributor which terminated as of July 10, 1995 concurrent with the Fund's
change in Transfer Agent, the Fund received support services for shareholders,
including the handling of all written and telephonic communications, except
initial order entry and other distribution related communications. Payment by
the Fund for such services was made on cost basis for the employment of the
personnel and the equipment necessary to render the support services. The Fund,
and the other Van Kampen American Capital mutual funds distributed by the
Distributor, shared such costs proportionately among themselves based upon their
respective net asset values.

For the years ended June 30, 1996, 1995 and 1994, the Fund recognized expenses
of approximately $10,600, $129,700 and $114,700, respectively, representing the
Distributor's cost of providing certain support services.

ACCOUNTING SERVICES 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 Van Kampen American Capital mutual funds
advised by the Adviser and distributed by the Distributor in the cost of
providing such services, with 25% of such costs shared proportionately based on
the respective number of classes of securities issued per fund and the remaining
75% of such cost based proportionally on their respective net assets per fund.

For the years ended June 30, 1996, 1995 and 1994, the Fund recognized expenses
of approximately $11,300, $10,500 and $9,000, respectively, representing the
Adviser's cost of providing certain accounting services.

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 funds' minute books and records, preparation and oversight of
the funds' 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 insurance and
other regular wages for the employment of personnel as well as the overhead and
expenses related to office space and the equipment necessary to render such
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 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.

B-21
<PAGE> 201

For the years ended June 30, 1996, 1995 and 1994, the Fund recognized expenses
of approximately $14,300, $10,100 and $12,600, 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, Chicago,
Illinois. 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 or the 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 Adviser. Since statistical and other
research information is only supplementary to the research efforts of the
Adviser to the Fund 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 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 or 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 Fund's 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 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 of
the Fund.

The Board of Trustees has 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 Board of Trustees and to maintain records in
connection with such reviews. After

B-22
<PAGE> 202

consideration of all factors deemed relevant, the Board of 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.

TAX STATUS OF THE FUND

The Trust and each of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund will be subject
to tax if, among other things, it fails to distribute net capital gains, or if
its annual distributions, as a percentage of its income, are less than the
distributions required by tax laws.

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
currently the nation's 5th largest broker-sold mutual fund group according to
Strategic Insight. Van Kampen American Capital's roots in money management
extend back to 1926. Today, Van Kampen American Capital manages or supervises
more than $57 billion in mutual funds, closed-end funds and unit investment
trusts -- assets which have been entrusted to Van Kampen American Capital in
more than 2 million investor accounts. Van Kampen American Capital has one of
the largest research teams (outside of the rating agencies) in the country, with
more than 80 analysts devoted to various specializations.

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 are
sometimes referred to herein 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 and
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 (collectively, "Selling 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 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

B-23
<PAGE> 203

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 year ended June 30, 1994, the Fund has recognized expenses under the
Plans of $646,904, $179,333 and $9,643 for the Class A Shares, Class B Shares
and Class C Shares, respectively, of which $587,241 and $44,181 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares and Class B Shares, respectively. For the year ended June 30, 1994, the
Fund has reimbursed the Distributor $34,437 and $324 for advertising expenses,
and $46,015 and $9,228 for compensation of the Distributor's sales personnel for
the Class A Shares and Class B Shares, respectively.

For the year ended June 30, 1995, the Fund has recognized expenses under the
Plans of $645,210, $433,721 and $18,586 for the Class A Shares, Class B Shares
and Class C Shares, respectively, of which $578,187, $106,435 and $4,170
represent payments to financial intermediaries under the Selling Agreements for
Class A Shares, Class B Shares and Class C Shares, respectively. For the year
ended June 30, 1995, the Fund has reimbursed the Distributor $79,336, $3,915 and
$0 for advertising expenses, and $22,813, $19,846 and $0 for compensation of the
Distributor's sales personnel for the Class A Shares, Class B Shares and Class C
Shares, respectively.

For the year ended June 30, 1996, the Fund recognized expenses under the Plans
of $647,486, $779,712 and $51,552 for the Class A Shares, Class B Shares and
Class C Shares, respectively, of which $520,742, $154,566 and $7,520 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares, Class B Shares and Class C Shares, respectively.

PERFORMANCE INFORMATION

The Fund's yield quotation is determined on a daily 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 front-end 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 period (net of any reimbursements), and dividing
the result by the average daily number of shares of each class outstanding
during the period that were 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 CDSC on 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.

B-24
<PAGE> 204

asset class diversification, top five sector holdings and ten largest holdings.
Materials may also mention how Van Kampen American Capital believes the Fund
compares relative to other Van Kampen American Capital funds. Materials may also
discuss the Dalbar Financial Services study from 1984 to 1994 which examined
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 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.

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, deducting the
maximum sales charge, if any, 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 CDSC, and if any such contingent deferred
sales charge with respect to the CDSC Shares imposed at the time of redemption
were reflected, it would reduce the performance quoted.

CLASS A SHARES

The Fund's yield for the 30-day period ending June 30, 1996 (calculated in the
manner described in the Prospectus under the heading "Fund Performance") for
Class A Shares was 8.19%. In determining the Fund's net investment income for a
stated 30 day period, the Fund calculates yield to maturity on each portfolio
security on a daily basis. The Fund's distribution rate for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") for Class A Shares was 9.04%.

The Fund's average total returns, including payment of the maximum sales
charge, for Class A Shares for (i) the one year period ended June 30, 1996 was
5.96%, (ii) the five year period ended June 30, 1996 was 11.41%, (iii) the ten
year period ended June 30, 1996 was 7.92% and (iv) the approximately ten year
period since June 27, 1986, the commencement of investment operations, through
June 30, 1996 was 7.97%.

The Fund's cumulative non-standardized total return, including payment of the
maximum sales charge, for Class A Shares from inception through June 30, 1996
(as calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 115.43%.

The Fund's cumulative non-standardized total return, excluding the payment of
the maximum front-end sales charge, with respect to the Class A Shares from the
commencement of operations through June 30, 1996 (as calculated in the manner
described in the Prospectus under the heading "Fund Performance") was 8.49%.

CLASS B SHARES

The Fund's yield for the 30-day period ending June 30, 1996 (calculated in the
manner described in the Prospectus under the heading "Fund Performance") for
Class B Shares was 7.82%. In determining the Fund's net investment income for a
stated 30-day period, the Fund calculates yield to maturity on each portfolio
security on a daily basis. The Fund's distribution rate for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") for Class B Shares was 8.72%.

The Fund's average total return, including payment of the CDSC, for Class B
Shares for (i) the one year period ended June 30, 1996 was 6.55% and (ii) the
approximately three year period since May 17, 1993, the commencement of
distribution for Class B Shares of the Fund, through June 30, 1996 was 6.89%.

B-25
<PAGE> 205

The Fund's cumulative non-standardized total return, including payment of the
CDSC, for Class B Shares from inception through June 30, 1996 (as calculated in
the manner described in the Prospectus under the heading "Fund Performance") was
23.11%.

The Fund's cumulative non-standardized total return, excluding the payment of
the maximum front-end sales charge, with respect to the Class B Shares from June
30, 1993 (the commencement of the sale of Class B Shares) through June 30, 1996
(as calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 25.44%.

CLASS C SHARES

The Fund's yield for the 30-day period ending June 30, 1996 (calculated in the
manner described in the Prospectus under the heading "Fund Performance") for
Class C Shares was 7.82%. In determining the Fund's net investment income for a
stated 30 day period, the Fund calculates yield to maturity on each portfolio
security on a daily basis. The Fund's distribution rate for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") for Class C Shares was 8.72%.

The Fund's average total returns, including payment of the CDSC, for Class C
Shares for (i) the one year period ended June 30, 1996 was 9.55%, and (ii) the
approximately three year period since August 13, 1993, the commencement of
distribution, through June 30, 1996 was 6.72%.

The Fund's cumulative non-standardized total return, including payment of the
CDSC, for Class C Shares from inception through June 30, 1996 (as calculated in
the manner described in the Prospectus under the heading "Fund Performance") was
20.59%.

The Fund's cumulative non-standardized total return, excluding the payment of
the maximum front-end sales charge, with respect to the Class C Shares from June
30, 1994 (the commencement of the sale of Class C Shares) through June 30, 1996
(as calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 20.59%.

B-26
<PAGE> 206

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital High Yield Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital High Yield Fund (the "Fund"), including the portfolio of
investments, as of June 30, 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 June
30, 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 High Yield Fund as of June 30, 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
August 2, 1996

B-27
<PAGE> 207

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DOMESTIC CORPORATE BONDS 70.6%
AEROSPACE & DEFENSE 1.0%
1,650 Sequa Corp................................ 9.625% 10/15/99 $ 1,662,375
2,150 Sequa Corp................................ 9.375 12/15/03 2,074,750
-------------
3,737,125
-------------
AUTOMOBILE 0.7%
2,600 Exide Corp................................ 10.750 12/15/02 2,658,500
-------------
BEVERAGE, FOOD & TOBACCO 0.5%
2,100 Pilgrims Pride Corp....................... 10.875 08/01/03 2,037,000
-------------
BUILDINGS & REAL ESTATE 3.1%
2,900 American Standard Inc..................... 10.875 05/15/99 3,074,000
1,000 American Standard Inc..................... 11.375 05/15/04 1,082,500
3,300 Schuller International Group Inc.......... 10.875 12/15/04 3,564,000
3,500 Southdown Inc............................. 14.000 10/15/01 3,745,000
-------------
11,465,500
-------------
CHEMICALS, PLASTICS & RUBBER 1.1%
4,258 G I Holdings Inc.......................... 10.000 02/15/06 4,151,550
-------------
CONTAINERS, PACKAGING & GLASS 5.1%
460 Anchor Glass Container Corp............... 10.250 06/30/02 322,000
950 Owens Illinois Inc........................ 10.250 04/01/99 966,625
2,950 Owens Illinois Inc........................ 11.000 12/01/03 3,171,250
2,100 S.D. Warren Co............................ 12.000 12/15/04 2,226,000
6,598 Silgan Holdings Inc....................... 13.250 12/15/02 6,630,990
2,000 Stone Consolidated Corp................... 10.250 12/15/00 2,060,000
3,500 U.S. Can Co............................... 13.500 01/15/02 3,727,500
-------------
19,104,365
-------------
DIVERSIFIED/CONGLOMERATE
MANUFACTURING 2.8%
3,400 Communications & Power Industries Inc..... 12.000 08/01/05 3,595,500
3,500 Jordan Industries Inc..................... 10.375 08/01/03 3,333,750
773 Talley Industries Inc. (b)................ 0/12.250 10/15/05 616,467
2,900 Talley Manufacturing & Technology Inc..... 10.750 10/15/03 3,016,000
-------------
10,561,717
-------------
ECOLOGICAL 0.7%
1,800 Envirosource Inc.......................... 9.750 06/15/03 1,629,000
1,100 Norcal Waste Systems Inc. (b)............. 12.50/13.50 11/15/05 1,163,250
-------------
2,792,250
-------------
</TABLE>

See Notes to Financial Statements

B-28
<PAGE> 208

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ELECTRONICS 2.5%
4,250 Bell & Howell Co. (b)..................... 0/11.500% 03/01/05 $ 2,911,250
3,400 Computervision............................ 11.375 08/15/99 3,519,000
2,950 Exide Electronics Group Inc.
(Including 2,950 common stock warrants)... 11.500 03/15/06 3,009,000
-------------
9,439,250
-------------
FARMING & AGRICULTURE 0.9%
1,100 Agco Corp................................. 8.500 03/15/06 1,078,000
2,350 Trans Resources Inc....................... 11.875 07/01/02 2,256,000
-------------
3,334,000
-------------
FINANCE 1.9%
3,650 American Annuity Group Inc................ 11.125 02/01/03 3,923,750
3,300 Americo Life Inc. (d)..................... 9.250 06/01/05 3,118,500
-------------
7,042,250
-------------
GROCERY 3.4%
3,650 Pantry Inc................................ 12.000 11/15/00 3,212,000
3,700 Pathmark Stores Inc....................... 9.625 05/01/03 3,478,000
3,550 Purity Supreme Inc........................ 11.750 08/01/99 3,851,750
2,200 Vons Cos. Inc............................. 9.625 04/01/02 2,310,000
-------------
12,851,750
-------------
HEALTHCARE 3.8%
3,100 Merit Behavioral Care Corp................ 11.500 11/15/05 3,255,000
500 Ornda Healthcorp.......................... 12.250 05/15/02 541,250
3,250 Ornda Healthcorp.......................... 11.375 08/15/04 3,583,125
1,850 Paracelsus Healthcare Corp................ 9.875 10/15/03 1,822,250
4,600 Tenet Healthcare Corp. (d)................ 10.125 03/01/05 4,876,000
-------------
14,077,625
-------------
</TABLE>

See Notes to Financial Statements

B-29
<PAGE> 209

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HOTEL, MOTEL, INNS & GAMING 6.1%
1,100 Argosy Gaming Co.......................... 13.250% 06/01/04 $ 1,116,500
1,000 Bally's Grand Inc......................... 10.375 12/15/03 1,097,500
1,800 Bally's Park Place Funding Inc............ 9.250 03/15/04 1,917,000
3,200 California Hotel Finance Corp............. 11.000 12/01/02 3,376,000
3,350 Coast Hotels & Casino..................... 13.000 12/15/02 3,643,125
3,300 Grand Casino Inc.......................... 10.125 12/01/03 3,390,750
2,700 Harvey's Casino Resorts................... 10.625 06/01/06 2,733,750
2,300 Hollywood Casino Inc...................... 12.750 11/01/03 2,288,500
3,325 Trump Atlantic City Associates............ 11.250 05/01/06 3,341,625
-------------
22,904,750
-------------
LEISURE/ENTERTAINMENT 1.3%
1,750 Cobblestone Holdings Inc.................. * 06/01/04 647,500
3,850 Viacom International Inc.................. 10.250 09/15/01 4,206,125
-------------
4,853,625
-------------
MINING, STEEL, IRON & NON-PRECIOUS
METAL 3.1%
3,200 Armco Inc................................. 11.375 10/15/99 3,304,000
3,000 Carbide/Graphite Group Inc................ 11.500 09/01/03 3,247,500
3,000 Easco Corp................................ 10.000 03/15/01 3,045,000
500 Magma Copper Co........................... 12.000 12/15/01 542,500
1,700 Republic Engineered Steels Inc............ 9.875 12/15/01 1,589,500
-------------
11,728,500
-------------
OIL & GAS 7.6%
1,800 Clark R & M Holdings Inc.................. * 02/15/00 1,233,000
3,600 Coda Energy Inc........................... 10.500 04/01/06 3,582,000
3,200 Giant Industries Inc...................... 9.750 11/15/03 3,136,000
4,500 Global Marine Inc. (d).................... 12.750 12/15/99 4,882,500
3,000 KCS Energy Inc............................ 11.000 01/15/03 3,172,500
4,500 Mesa Capital Corp......................... 12.750 06/30/98 4,511,250
3,650 Petroleum Heat & Power Inc................ 12.250 02/01/05 4,015,000
800 Triton Energy Corp........................ * 11/01/97 722,000
3,250 Triton Energy Corp. (b)................... 0/9.750 12/15/00 3,152,500
-------------
28,406,750
-------------
PERSONAL/FOOD 0.6%
2,600 Flagstar Corp............................. 10.750 09/15/01 2,288,000
-------------
</TABLE>

See Notes to Financial Statements

B-30
<PAGE> 210

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PERSONAL & NON-DURABLE 1.6%
2,000 Playtex Family Products Corp.............. 9.000% 12/15/03 $ 1,880,000
3,350 Revlon Consumer Products Corp............. 9.375 04/01/01 3,291,375
900 Revlon Consumer Products Corp............. 10.875 07/15/10 922,500
------------
6,093,875
------------
PRINTING, PUBLISHING & BROADCASTING 8.3%
1,200 Cablevision Systems Corp.................. 10.750 04/01/04 1,236,000
1,350 Cablevision Systems Corp.................. 10.500 05/15/16 1,312,875
750 Century Communications Corp............... 9.750 02/15/02 746,250
900 Century Communications Corp............... * 03/15/03 443,250
1,800 Century Communications Corp............... 11.875 10/15/03 1,921,500
3,100 Comcast Corp.............................. 9.375 05/15/05 3,007,000
3,000 Continental Cablevision Inc............... 8.300 05/15/06 3,105,000
3,675 Insight Communications Co. L.P............ 11.250 03/01/00 3,693,375
2,700 International Cabletel Inc. (b)........... 0/12.750 04/15/05 1,734,750
900 International Cabletel Inc. (b)........... 0/11.500 02/01/06 504,000
1,900 K-III Communications Corp................. 10.625 05/01/02 1,976,000
1,600 K-III Communications Corp................. 10.250 06/01/04 1,640,000
4,200 SCI Television Inc........................ 11.000 06/30/05 4,378,500
1,600 Storer Communications Inc................. 10.000 05/15/03 1,604,000
1,350 Young Broadcasting Inc.................... 10.125 02/15/05 1,302,750
2,700 Young Broadcasting Inc.................... 9.000 01/15/06 2,409,750
------------
31,015,000
------------
RETAIL 3.8%
2,950 Hosiery Corp. America Inc. (Including
2,950 common stock warrants).............. 13.750 08/01/02 3,230,250
2,800 Loehmann's Inc............................ 11.875 05/15/03 2,912,000
4,115 Thrifty Payless........................... 12.250 04/15/04 4,547,075
3,400 Waban Inc................................. 11.000 05/15/04 3,536,000
------------
14,225,325
------------
TELECOMMUNICATIONS 6.3%
3,500 Centennial Cellular Corp.................. 10.125 05/15/05 3,377,500
1,800 Echostar Communications Corp.............. * 06/01/04 1,318,500
550 Intercel Inc.............................. * 05/01/06 299,750
1,350 Intermedia Communications of Florida, Inc.
(Including 3,150 common stock warrants)... 13.500 06/01/05 1,638,000
2,700 Intermedia Communications of Florida, Inc.
(b)....................................... 0/12.500 05/15/06 1,512,000
4,000 IXC Communications Inc.................... 12.500 10/01/05 4,200,000
</TABLE>

See Notes to Financial Statements

B-31
<PAGE> 211

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
600 Metrocall Inc............................. 10.375% 10/01/07 $ 558,000
4,500 Mobilemedia Communications Inc. (b)....... 0/10.500 12/01/03 3,195,000
900 Panamsat L.P.............................. 9.750 08/01/00 931,500
1,800 Panamsat L.P. (b)......................... 0/11.375 08/01/03 1,566,000
3,200 Pricellular Wireless Corp. (b)............ 0/14.000 11/15/01 2,912,000
800 Pricellular Wireless Corp. (b)............ 0/12.250 10/01/03 632,000
3,000 Teleport Communications Group (b)(c)...... 0/11.125 07/01/07 1,747,500
------------
23,887,750
------------
TEXTILES 0.9%
3,300 Dan River Inc............................. 10.125 12/15/03 3,176,250
------------
TRANSPORTATION 0.7%
2,500 U.S. Air Inc.............................. 8.625 09/01/98 2,450,000
------------
UTILITIES 2.8%
2,000 AES Corp. (c)............................. 10.250 07/15/06 2,000,000
3,150 California Energy Inc..................... 9.875 06/30/03 3,205,125
2,100 El Paso Electric Co....................... 8.900 02/01/06 2,073,750
3,200 Midland Funding Corp. II.................. 11.750 07/23/05 3,360,000
------------
10,638,875
------------
TOTAL DOMESTIC CORPORATE BONDS 264,921,582
------------
FOREIGN BONDS AND DEBT SECURITIES 15.6%
ARGENTINA 2.4%
3,550 Federal Republic of Argentina
(Var. Rate Cpn.) (US$).................... 5.250 03/31/23 1,952,500
2,000 Sodigas Pampeana (US$).................... 10.500 07/06/99 2,030,000
2,000 Telefonica De Argentina (US$)............. 8.375 10/01/00 1,927,500
3,000 Transportadora De Gas Del Sur SA (US$).... 10.250 04/25/01 2,985,000
------------
8,895,000
------------
AUSTRALIA 0.6%
1,300 Commonwealth of Australia (AU$)........... 9.000 09/15/04 1,032,338
1,900 New South Wales Trust (AU$)............... 6.500 05/01/06 1,240,786
------------
2,273,124
------------
BRAZIL 0.8%
2,600 Federal Republic of Brazil (Var. Rate
Cpn.) (US$)............................... 5.000 04/15/24 1,443,000
1,862 Federal Republic of Brazil (Var. Rate
Cpn.) (US$)............................... 6.375 01/01/01 1,743,297
------------
3,186,297
------------
CANADA 3.3%
2,100 Doman Industries Ltd. (US$)............... 8.750 03/15/04 1,900,500
</TABLE>

See Notes to Financial Statements

B-32
<PAGE> 212

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CANADA (CONTINUED)
3,400 Fonorola Inc. (US$)....................... 12.500% 08/15/02 $ 3,672,000
3,000 Fundy Cable Ltd. (US$).................... 11.000 11/15/05 3,030,000
3,600 Rogers Communications Inc. (US$).......... 10.875 04/15/04 3,654,000
------------
12,256,500
------------
COLOMBIA 0.9%
3,500 Republic of Colombia (US$)................ 7.250 02/23/04 3,222,310
------------
ECUADOR 0.3%
2,000 Republic of Ecuador Par Bonds (Var. Rate
Cpn.) (US$)............................... 3.250 02/28/25 725,000
1,000 Republic of Ecuador (Var. Rate Cpn.)
(US$)..................................... 6.063 02/28/25 571,250
------------
1,296,250
------------
INDONESIA 1.2%
1,930 Indah Kiat International Finance Co. B.V.
(US$)..................................... 11.875 06/15/02 2,045,800
2,200 Tjiwi Kimia International Finance (US$)... 13.250 08/01/01 2,464,000
------------
4,509,800
------------
ITALY 0.6%
1,700,000 Federal Republic of Italy (Lira).......... 9.000 10/01/98 1,127,412
1,650,000 Federal Republic of Italy (Lira).......... 10.500 04/01/00 1,141,450
------------
2,268,862
------------
LUXEMBOURG 0.5%
3,200 Millicom International Cellular SA (US$)
(b)....................................... 0/13.500 06/01/06 1,696,000
------------
MEXICO 0.4%
2,000 Petroleos Mexicanos (US$)................. 8.625 12/01/23 1,490,000
------------
MOROCCO 0.6%
3,000 Morocco Trust A Loan (US$) (e)............ 6.4375 01/01/09 2,167,500
------------
NETHERLANDS 0.9%
3,700 Fresh Del Monte Produce N V (US$)......... 10.000 05/01/03 3,422,500
------------
POLAND 1.4%
5,700 Government of Poland (Var. Rate Cpn.)
(US$)..................................... 7.125 10/27/24 5,343,750
------------
SPAIN 0.8%
129,500 Government of Spain (Peseta).............. 10.250 11/30/98 1,069,750
114,000 Government of Spain (Peseta).............. 12.250 03/25/00 1,011,978
125,000 Government of Spain (Peseta).............. 10.150 01/31/06 1,056,599
------------
3,138,327
------------
SWEDEN 0.4%
7,300 Kingdom of Sweden (Krona)................. 13.000 06/15/01 1,351,362
------------
</TABLE>

See Notes to Financial Statements

B-33

<PAGE> 213

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
in Local
Currency U.S.($)
(000) Description Coupon Maturity Market Value
------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED KINGDOM 0.5%
1,250 Telewest PLC (US$) (b).................... 0/11.000% 10/01/07 $ 740,625
650 United Kingdom Treasury (Pound)........... 8.500 12/07/05 1,053,012
------------
1,793,637
------------
TOTAL FOREIGN BONDS AND DEBT SECURITIES......................................... 58,311,219
------------
U.S GOVERNMENT OBLIGATIONS 0.8%
3,000 U.S. T-Notes.............................. 9.000 05/15/98 3,152,040
------------
EQUITIES 1.4%
American Telecasting Inc. (8,370 common stock warrants) (g)................... 37,665
Cablevision Systems Corp. (14,608 preferred shares) (f)....................... 1,416,976
Capital Gaming International Inc. (5,000 common stock warrants) (g)........... 0
Casino America Inc. (5,873 common stock warrants) (g)......................... 5,874
El Paso Electric Co. (9,000 preferred shares)................................. 949,500
Panamsat L.P. (1,923 preferred shares) (f).................................... 2,230,680
Supermarkets General Holdings Corp. (28,600 preferred shares)................. 736,450
------------
TOTAL EQUITIES.................................................................. 5,377,145
------------
TOTAL LONG-TERM INVESTMENTS 88.4%
(Cost $326,056,234) (a)......................................................... 331,761,986
------------
SHORT-TERM INVESTMENTS 11.1%
Repurchase Agreement (J.P. Morgan, U.S. T-Note, $29,599,000 par, 9.875%
coupon, due 11/15/15, dated 06/28/96, to be sold on 07/01/96 at
$37,740,976).................................................................. 37,724,000
J.P. Morgan Polish Zloty Linked CD, ($2,954,990 par, yielding 20.913%,
maturing 10/23/96)............................................................ 2,678,950
New Zealand T-Bills, (2,000,000 New Zealand Dollar par, yielding 9.755%,
maturing 01/08/97)............................................................ 1,308,215
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $41,812,853) (a)............................. 41,711,165
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%..................................... 1,706,744
------------
NET ASSETS 100%................................................................ $375,179,895
------------
</TABLE>

*Zero coupon bond

(a) At June 30, 1996, cost for federal income tax purposes including short-term
investments is $367,869,087; the aggregate gross unrealized appreciation is
$10,127,208 and the aggregate gross unrealized depreciation is $4,572,871,
resulting in net unrealized appreciation including foreign currency
translation of other assets and liabilities and forward currency contracts
of $5,554,337.

(b) Security is a "Step-up" bond where the coupon increases or steps up at a
predetermined date.

(d) Assets segregated as collateral for when issued or delayed delivery purchase
commitments and open forward transactions.

(e) Security is a bank loan participation.

(f) Payment-in-kind security.

(g) Non-income producing security.

See Notes to Financial Statements

B-34
<PAGE> 214

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $326,056,234) (Note 1).............. $ 331,761,986
Short-Term Investments (Cost $41,812,853) (Note 1)..................... 41,711,165
Cash................................................................... 313
Receivables:
Interest............................................................. 7,449,171
Securities Sold...................................................... 2,946,411
Fund Shares Sold..................................................... 681,864
Other.................................................................. 45,015
-------------
Total Assets..................................................... 384,595,925
-------------
LIABILITIES:
Payables:
Securities Purchased................................................. 6,444,746
Income Distributions................................................. 1,784,659
Distributor and Affiliates (Notes 2 and 6)........................... 358,828
Fund Shares Repurchased.............................................. 334,121
Investment Advisory Fee (Note 2)..................................... 229,419
Forward Currency Contracts (Note 5).................................. 45,158
Accrued Expenses....................................................... 155,719
Deferred Compensation and Retirement Plans (Note 2).................... 63,380
-------------
Total Liabilities................................................ 9,416,030
-------------
NET ASSETS............................................................. $ 375,179,895
----------
NET ASSETS CONSIST OF:
Capital (Note 3)....................................................... $ 477,157,576
Net Unrealized Appreciation on Securities.............................. 5,542,049
Accumulated Distributions in Excess of Net Investment Income (Note
1)................................................................... (1,835,750)
Accumulated Net Realized Loss on Securities............................ (105,683,980)
-------------
NET ASSETS............................................................. $ 375,179,895
----------
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $271,105,413 and 28,557,300 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 9.49
Maximum sales charge (4.75%* of offering price).................... .47
-------------
Maximum offering price to public................................... $ 9.96
----------
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $97,098,815 and 10,224,423 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 9.50
----------
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $6,975,667 and 734,629 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 9.50
----------
*On sales of $100,000 or more, the sales charge will be reduced.
</TABLE>

See Notes to Financial Statements

B-35

<PAGE> 215

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $32,955).................. $35,516,846
Dividends............................................................... 458,386
Other................................................................... 510,503
-----------
Total Income........................................................ 36,485,735
-----------
EXPENSES:
Investment Advisory Fee (Note 2)........................................ 2,614,970
Distribution (12b-1) and Service Fees (Allocated to Classes A, B, and C
of $647,486, $779,712, and $51,552, respectively) (Note 6)............ 1,478,750
Shareholder Services (Note 2)........................................... 566,209
Trustees Fees and Expenses (Note 2)..................................... 37,859
Legal (Note 2).......................................................... 24,650
Other................................................................... 485,150
-----------
Total Expenses...................................................... 5,207,588
Less Expenses Reimbursed............................................ 18,112
-----------
Net Expenses........................................................ 5,189,476
-----------
NET INVESTMENT INCOME................................................... $31,296,259
---------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments......................................................... $ 5,747,673
Forwards............................................................ 675,027
Foreign Currency Transactions....................................... (428,329)
-----------
Net Realized Gain on Securities......................................... 5,994,371
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................... 6,439,004
-----------
End of the Period:
Investments......................................................... 5,604,064
Forward Currency Contracts.......................................... (60,696)
Foreign Currency Translation........................................ (1,319)
-----------
5,542,049
-----------
Net Unrealized Depreciation on Securities During the Period............. (896,955)
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.......................... $ 5,097,416
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $36,393,675
---------
</TABLE>

See Notes to Financial Statements

B-36
<PAGE> 216

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 31,296,259 $ 26,497,560
Net Realized Gain/Loss on Securities..................... 5,994,371 (18,692,466)
Net Unrealized Appreciation/Depreciation on Securities
During the Period...................................... (896,955) 16,038,701
---------- ----------
Change in Net Assets from Operations..................... 36,393,675 23,843,795
---------- ----------
Distributions from Net Investment Income................. (31,296,259) (25,471,594)
Distributions in Excess of Net Investment Income (Note
1)..................................................... (186,982) -0-
---------- ----------
Distributions from and in Excess of Net Investment
Income*.............................................. (31,483,241) (25,471,594)
Return of Capital Distribution* (Note 1)................. (1,853,192) (5,584,355)
---------- ----------
Total Distributions.................................... (33,336,433) (31,055,949)
---------- ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 3,057,242 (7,212,154)
---------- ----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................................ 130,645,161 73,674,367
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 12,295,000 11,308,840
Cost of Shares Repurchased............................... (81,944,626) (62,721,749)
---------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... 60,995,535 22,261,458
---------- ----------
TOTAL INCREASE IN NET ASSETS............................. 64,052,777 15,049,304
NET ASSETS:
Beginning of the Period.................................. 311,127,118 296,077,814
---------- ----------
End of the Period (Including undistributed net investment
income of $(1,835,750) and $(1,895,466),
respectively).......................................... $375,179,895 $311,127,118
---------- ----------
</TABLE>

<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1996 June 30, 1995
<S> <C> <C>
------------------------------------------------------------------
Distributions from and in Excess of
Net Investment Income:
Class A Shares....................... $(24,518,181) $(21,911,417)
Class B Shares....................... (6,539,545) (3,405,059)
Class C Shares....................... (425,515) (155,035)
Class D Shares....................... -- (83)
---------- ----------
$(31,483,241) $(25,471,594)
---------- ----------
Return of Capital Distribution:
Class A Shares....................... $ (1,394,959) $ (4,709,317)
Class B Shares....................... (427,086) (846,910)
Class C Shares....................... (31,147) (28,115)
Class D Shares....................... -- (13)
---------- ----------
$ (1,853,192) $ (5,584,355)
---------- ----------
</TABLE>

See Notes to Financial Statements

B-37
<PAGE> 217

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital High Yield Fund (the "Fund") is organized as a
series of Van Kampen American Capital Trust, a Delaware business trust (the
"Trust"), and is registered as a diversified open-end management investment
company under the Investment Company Act of 1940, as amended. The Fund's primary
investment objective is to provide a high level of current income through
investment in medium and lower grade domestic corporate debt securities. The
Fund also may invest up to 35% of its assets in foreign government and corporate
debt securities of comparable quality. The Fund commenced investment operations
on June 27, 1986. The Fund commenced distribution of its Class B and C shares on
May 17, 1993 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 Fund 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 less than 60 days are valued at
amortized cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.

A repurchase agreement is a short-term investment 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. Repurchase agreements are collateralized by
the underlying debt

B-38
<PAGE> 218

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

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.

C. INVESTMENT INCOME--Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Bond 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 the loss and offset such losses against any future realized capital
gains. At June 30, 1996, the Fund had an accumulated capital loss carryforward
for tax purposes of $105,683,980. Of this amount, $4,105,907, $55,112,310,
$30,038,345, $45,384, $12,726,456 and $3,655,578 will expire on June 30, 1998,
1999, 2000, 2002, 2003 and 2004, respectively. Net realized gains or losses may
differ for financial and tax reporting purposes primarily as a result of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.

E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on foreign currency
transactions. These gains and losses are included as net realized gains and
losses for financial reporting purposes. Permanent book and tax basis
differences resulting from these items totaling $246,698 were reclassified from
accumulated undistributed net investment income to accumulated net realized
gain/loss on securities. Additional permanent book and tax basis differences
related to the recognition of realized gains and losses totaling $45,380 was
reclassified from accumulated realized gain/loss on securities to Class A share
capital.

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.

B-39
<PAGE> 219

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

F. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars at the mean of the quoted bid and ask prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates prevailing when accrued.

G. BANK LOAN PARTICIPATIONS--The Fund invests in participation interests of
loans to foreign entities. When the Fund purchases a participation of a foreign
loan interest, the Fund typically enters into a contractual agreement with the
lender or other third party selling the participation, but not with the borrower
directly. As such, the Fund assumes credit risk for the borrower, selling
participant or other persons positioned between the Fund and the borrower.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen American
Capital Investment Advisory Corp. (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.................................. .75 of 1%
Over $500 million................................... .65 of 1%
</TABLE>

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 year ended June 30, 1996, the Fund recognized expenses of approximately
$38,900 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.

In July, 1995, the Fund began using ACCESS Investor Services, Inc.
("ACCESS"), an affiliate of the Adviser, as the shareholder servicing agent of
the Fund. For the year ended June 30, 1996, the Fund recognized expenses of
approximately $406,100, representing ACCESS' cost of providing transfer agency
and shareholder services plus a profit.

Additionally, for the year ended June 30, 1996, the Fund reimbursed VKAC
approximately $26,400 related to the direct cost of consolidating the VKAC
open-end fund complex. The reimbursement represents the reduction in expense
realized by the Fund during the period as a result of the consolidation.

B-40
<PAGE> 220

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

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.

At June 30, 1996, VKAC owned 100 shares each of Classes B and C,
respectively.

3. CAPITAL TRANSACTIONS
The Fund has outstanding three classes of common shares, 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 June 30, 1996, capital aggregated $372,301,052,
$97,806,116 and $7,050,408 for Class A, B and C shares, respectively. For the
year ended June 30, 1996, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------
Sales:
Class A................................... 7,294,414 $ 69,532,238
Class B................................... 5,691,156 54,286,076
Class C................................... 717,313 6,826,847
---------- ------------
Total Sales................................. 13,702,883 $130,645,161
---------- ------------
Dividend Reinvestment:
Class A................................... 1,003,726 $ 9,564,922
Class B................................... 265,511 2,531,980
Class C................................... 20,771 198,098
---------- ------------
Total Dividend Reinvestment................. 1,290,008 $ 12,295,000
---------- ------------
Repurchases:
Class A................................... (6,692,159) $(63,898,755)
Class B................................... (1,675,635) (15,998,857)
Class C................................... (215,382) (2,047,014)
---------- ------------
Total Repurchases........................... (8,583,176) $(81,944,626)
---------- ------------
</TABLE>

B-41
<PAGE> 221

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1995, capital aggregated $358,452,226, $57,414,003 and
$2,103,624 for Class A, B and C shares, respectively. For the year ended June
30, 1995, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
Sales:
Class A.................................... 4,486,285 $ 41,415,162
Class B.................................... 3,320,361 30,775,474
Class C.................................... 160,125 1,483,731
Class D.................................... -0- -0-
---------- ------------
Total Sales.................................. 7,966,771 $ 73,674,367
---------- ------------
Dividend Reinvestment:
Class A.................................... 1,055,695 $ 9,744,229
Class B.................................... 159,582 1,472,222
Class C.................................... 10,007 92,378
Class D.................................... 1 11
---------- ------------
Total Dividend Reinvestment.................. 1,225,285 $ 11,308,840
---------- ------------
Repurchases:
Class A.................................... (5,626,205) $(51,959,218)
Class B.................................... (978,937) (9,050,461)
Class C.................................... (186,357) (1,710,842)
Class D.................................... (121) (1,228)
---------- ------------
Total Repurchases............................ (6,791,620) $(62,721,749)
---------- ------------
</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.

B-42
<PAGE> 222

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<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............................................ 1.50% None
Sixth............................................ 1.00% None
Seventh and Thereafter........................... None None
</TABLE>

For the year ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$118,900 and CDSC on redeemed shares of approximately $237,600. Sales charges do
not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $373,040,141 and $312,876,157,
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, foreign currency
exposure, 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 investments. Upon
disposition, a realized gain or loss is recognized accordingly.

During the year ended June 30, 1996, the Fund entered into forward currency
contracts, a type of derivative. These instruments are commitments to purchase
or sell a foreign currency at a future date at a negotiated forward rate. The
gain or loss arising from the difference between the original value of the
contract and the closing value of such contract is included as a component of
realized gain/loss on investments and foreign currency.

B-43
<PAGE> 223

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1996, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
ORIGINAL CURRENT UNREALIZED
FORWARD CURRENCY CONTRACTS VALUE VALUE DEPRECIATION
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
Sells to Open
German Deutsche Mark, expiring
07/29/96 to 08/05/96.............. $4,011,349 $4,023,637 $12,288
Italian Lira, expiring 08/02/96..... 1,000,000 1,000,000 -0-
Spanish Peseta, expiring 07/11/96 to
09/11/96.......................... 1,998,383 2,025,045 26,662
Swedish Krona, expiring 06/11/97.... 1,000,000 1,021,746 21,746
--------
$60,696
--------
</TABLE>

At June 30, 1996, the Fund had realized gains on closed but unsettled
forward currency contracts of $15,538 scheduled to settle August 2, 1996.

6. 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% for Class A shares and 1.00% each
for Class B and Class C shares are accrued daily. Included in these fees for the
year ended June 30, 1996, are payments to VKAC of approximately $583,000.

B-44
<PAGE> 224

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN AMERICAN CAPITAL SHORT-TERM GLOBAL INCOME FUND

Van Kampen American Capital Short-Term Global Income Fund (the "Fund") is a
non-diversified separate series of an open-end management investment company.
The Fund's investment objective is to seek a high level of current income,
consistent with prudent investment risk.

The Fund seeks to achieve its investment objective by investing in a global
portfolio of investment grade debt securities denominated in various currencies
and multi-national currency units and maintaining a dollar-weighted average
portfolio maturity of not more than three years. The portfolio will consist of
debt securities issued by foreign governments or supranational organizations or
their agencies, instrumentalities or subdivisions, investment grade debt
securities issued by corporations, certificates of deposit or bankers
acceptances issued or guaranteed by large U.S. or foreign banks, investment
grade commercial paper and debt securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities. Investments in securities
denominated in currencies other than the U.S. dollar involve foreign currency
exchange risks. The Fund may engage in hedging and risk management transactions
to seek to reduce or eliminate such risks.

This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Prospectus for the Fund dated the date hereof (the
"Prospectus"). This Statement of Additional Information does not include all
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
calling (800) 421-5666 ((800) 772-8889 for the hearing impaired). This Statement
of Additional Information incorporates by reference the entire Prospectus.

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
Additional Investment Considerations................................................... B-4
Description of Securities Ratings...................................................... B-11
Trustees and Officers.................................................................. B-16
Legal Counsel.......................................................................... B-24
Investment Advisory and Other Services................................................. B-24
Custodian and Independent Accountants.................................................. B-26
Portfolio Transactions and Brokerage Allocation........................................ B-26
Tax Status of the Fund................................................................. B-27
The Distributor........................................................................ B-27
Performance Information................................................................ B-28
Independent Accountants' Report........................................................ B-31
Financial Statements................................................................... B-32
Notes to Financial Statements.......................................................... B-36
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED OCTOBER 28, 1996.

<PAGE> 225

THE FUND AND THE TRUST

The Fund is a separate non-diversified series of the Van Kampen American
Capital Trust (the "Trust"), an open-end management investment company. The Fund
was established pursuant to a Designation of Series dated May 10, 1995. At
present, the Fund, Van Kampen American Capital High Yield Fund and Van Kampen
American Capital Strategic Income Fund, each a separate series of the Trust, are
the only series of the Trust, although other series may be organized and offered
in the future. Each series of the Trust will be treated as a separate
corporation for federal income tax purposes.

The Trust is an unincorporated business trust established under the laws of
the State of Delaware by an Agreement and Declaration of Trust dated 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 full and fractional shares, par value $0.01 (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.

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.

The Trust originally was organized as the Van Kampen Merritt Trust, a
Massachusetts business trust created by a Declaration of Trust dated March 14,
1986 (the "Massachusetts Trust"). The Massachusetts Trust was reorganized into
the Trust on July 31, 1995 pursuant to an Agreement and Plan of Reorganization
and Liquidation. The Trust was formed pursuant to an Agreement and Declaration
of Trust dated May 10, 1995 for the purpose of facilitating the Massachusetts
Trust's reorganization into a Delaware business trust. The Trust filed a
Certificate of Trust with the Delaware Secretary of State on June 28, 1995.

The Fund originally was organized, under the name Van Kampen Merritt
Short-Term Global Income Fund, as a sub-trust of the Massachusetts Trust. In
connection with the Massachusetts Trust's reorganization into a Delaware
business trust, the Fund was reorganized into a series of the Trust and renamed
Van Kampen American Capital Short-Term Global Income Fund.

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 set forth in the Prospectus under the
caption "Investment Objectives and Policies." There can be no assurance that the
Fund will achieve its investment objective.

B-2
<PAGE> 226

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 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 any single issuer;
provided that, with respect to 50% of the Fund's assets, the Fund may
invest up to 25% of its assets in the securities of any one issuer.

2. Borrow money, except from banks for temporary purposes and then in amounts
not in excess of 5% of the total asset value of the Fund, or mortgage,
pledge, or hypothecate any assets except in connection with a borrowing
and in amounts not in excess of 10% of the total asset value of the Fund.
Borrowings may not be made for investment leverage, but only to enable the
Fund to satisfy redemption requests where liquidation of portfolio
securities is considered disadvantageous or inconvenient. In this
connection, the Fund will not purchase portfolio securities during any
period that such borrowings, including the Fund's commitments pursuant to
reverse repurchase agreements, exceed 5% of the total asset value of the
Fund (after giving effect to the amount borrowed). Notwithstanding this
investment restriction, the Fund may enter into when issued and delayed
delivery transactions as described in the Prospectus.

3. Make loans, except to the extent the obligations the Fund may invest in
are considered to be loans, through loans of portfolio securities or the
acquisition of securities subject to repurchase agreements.

4. Buy any securities "on margin." Neither the deposit of initial or
maintenance margin in connection with transactions described under the
caption "Investment Practices" in the Prospectus nor short term credits in
connection with the clearance of transactions are considered the purchase
of a security on margin.

5. Sell any securities "short," write, purchase or sell puts, calls or
combinations thereof, or purchase or sell financial futures contracts or
related options, except to the extent that the hedging transactions
described under the heading "Investment Practices" in the Prospectus would
be deemed to be any of the foregoing transactions.

6. 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.

7. Make investments for the purpose of exercising control or participation in
management.

8. Invest in securities of other investment companies, except as part of a
merger, consolidation or other acquisition and except that the Fund may
invest up to 10% of its assets in investment companies that invest in
securities comparable to those in which the Fund may invest so long as the
Fund does not own more than 3% of the outstanding voting stock of any
investment company or securities of any investment company aggregating in
value more than 5% of the total assets of the Fund.

9. Invest in oil, gas or mineral leases or in equity interests in oil, gas or
other mineral exploration or development programs.

10. Purchase or sell real estate, commodities or commodities contracts except
to the extent that hedging instruments the Fund may invest in are
considered to be commodities or commodities contracts.

The Fund may not change any of these investment restrictions or any other
fundamental policy as they apply to the Fund without the approval of the lesser
of (a) 67% or more of the voting securities present at such meeting, if the
holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy; or (b) more than 50% of the outstanding voting
securities of the Fund. 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.

B-3
<PAGE> 227

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 may, from time to time,
adopt a more restrictive limitation with respect to investment in illiquid and
restricted securities in order to comply with the most restrictive state
securities law, currently 10%. This policy does not include restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended, which the Board of Trustees or the Fund's investment adviser
has determined under Board-approved guidelines to be liquid. 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.

In connection with certain state securities law requirements, the Fund has a
policy of limiting its investment in warrants, valued at the lower of cost or
market, to not more than 5.0% of the value of the Fund's net assets and, within
such amount, to not more than 2.0% of the value of its net assets in warrants
not listed on the New York Stock Exchange or on the American Stock Exchange;
provided however, that warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.

ADDITIONAL INVESTMENT CONSIDERATIONS

REVERSE REPURCHASE AGREEMENTS

The Fund may enter into reverse repurchase agreements with respect to debt
obligations which could otherwise be sold by the Fund. A reverse repurchase
agreement is an instrument under which the Fund may sell an underlying debt
instrument and simultaneously obtain the commitment of the purchaser (a
commercial bank or a broker or dealer) to sell the security back to the Fund at
an agreed upon price on an agreed upon date. The value of underlying securities
will be at least equal at all times to the total amount of the resale
obligation, including the interest factor. The Fund receives payment for such
securities only upon physical delivery or evidence of book entry transfer by its
custodian. Regulations of the SEC require either that securities sold by the
Fund under a reverse repurchase agreement be segregated pending repurchase or
that the proceeds be segregated on the Fund's books and records pending
repurchase. Reverse repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities. An
additional risk is that the market value of securities sold by the Fund under a
reverse repurchase agreement could decline below the price at which the Fund is
obligated to repurchase them. Reverse repurchase agreements will be considered
borrowings by the Fund and as such would be subject to the restrictions on
borrowing described under "Investment Policies and Restrictions" in the
Statement of Additional Information. The Fund will not hold more than 5% of the
value of its total assets in reverse repurchase agreements.

OTHER INVESTMENT STRATEGIES

B-4
<PAGE> 228

or options on currency or currency futures (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 or
currency exchange rate 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 as a temporary substitute for
purchasing or selling particular securities. The Fund may sell options on
securities the Fund owns or has the right to purchase without additional
payments, up to a maximum of 25% of the Fund's net assets, for non-hedging
purposes.

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 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 currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. 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
contemplated use of these futures contracts and options thereon 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.

B-5
<PAGE> 229

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

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, currency 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 the 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 in
New York as "primary dealers", broker dealers, domestic or foreign banks or
other financial institutions 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 any equivalent rating from any other nationally
recognized statistical rating organization ("NRSRO"). The staff of the SEC
currently takes the position that the amount of the Fund's obligation pursuant
to an OTC option is illiquid, and is subject to the Fund's limitation on
investing no more than 10% of its assets in illiquid instruments.

B-6
<PAGE> 230

The Fund may purchase and sell for hedging purposes call options on U.S.
Treasury and agency securities, foreign sovereign debt, mortgage-backed
securities, corporate debt securities and foreign debt securities that are
traded on U.S. and foreign securities exchanges and in the over-the-counter
markets and related futures on such securities other than futures on individual
corporate debt securities. All calls sold by the Fund must be "covered" or must
meet the asset segregation requirements described below as long as the call is
outstanding (i.e., the Fund must own the securities or futures contract subject
to the call). 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 and may require the Fund to hold a
security which it might otherwise have sold. The Fund may sell options on
securities the Fund owns or has the right to purchase without additional
payments, up to a maximum of 25% of the Fund's net assets, for non-hedging
purposes.

GENERAL CHARACTERISTICS OF FUTURES. The Fund may purchase and sell financial
futures contracts or purchase put and call options on such futures as a hedge
against anticipated interest rate, currency market changes, for duration
management and for risk management purposes. Futures generally are bought and
sold on the commodities exchanges where they are listed with payment of initial
and variation margin as described below. The sale of a futures contract creates
a firm obligation by the Fund, as seller, to deliver 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.

B-7
<PAGE> 231

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.

The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.

B-8
<PAGE> 232

SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions into which
the Fund may enter are interest rate, currency 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, to protect against currency
fluctuations, 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. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and 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.

B-9
<PAGE> 233

As a result, the swap market has become relatively liquid. Caps, floors and
collars are more recent innovations for which standardized documentation has not
yet been fully developed and, accordingly, they are less liquid than swaps.

RISKS OF STRATEGIC TRANSACTIONS OUTSIDE THE UNITED STATES. When conducted
outside the United States, Strategic Transactions may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (v) lower trading volume
and liquidity.

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 an amount of
cash or liquid investment 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 investment grade assets 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 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, investment grade assets equal
to the exercise price.

Except when the Fund enters into a forward contract for the purchase or sale
of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate liquid assets equal to the amount of the Fund's obligation.

OTC options entered into by the Fund, including those on securities, currency,
financial instruments or indices, OCC issued and exchange listed index options,
swaps, caps, floors and collars will generally provide for cash settlement. As a
result, with respect to these instruments the Fund 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 put, or the in-the-money
amount in the case of a 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 liquid
securities equal in value to such excess. Other 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, if any, will
be treated the same as other options settling with physical delivery.

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 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.

B-10
<PAGE> 234

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,
for qualification as a regulated investment company. See "Tax Status" in the
Prospectus.

DESCRIPTION OF SECURITIES RATINGS

STANDARD & POOR'S RATINGS GROUP--A brief description of the applicable
Standard & Poor's Ratings Group (S&P) rating symbols and their meanings (as
published by S&P) follows:

1. DEBT

The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of payment--capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation;

2. Nature of and provisions of the obligation;

3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditor's rights.

INVESTMENT GRADE

<TABLE>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay interest
and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
</TABLE>

B-11
<PAGE> 235

SPECULATIVE GRADE

<TABLE>
<S> <C>
BB, B, CCC, CC, C: Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as
having significantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions.
BB Debt rated "BB" is less vulnerable to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The "BB" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BBB-" rating.
B Debt rated "B" is more vulnerable to default but currently has the capacity to
meet interest payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay interest
and repay principal. The "B" rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied "BB" or "BB-" rating.
CCC Debt rated "CCC" is currently vulnerable to default, and is dependent upon
favorable business, financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the capacity to pay
interest and repay principal. The "CCC" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "B" or "B-"
rating.
CC Debt rated "CC" is currently highly vulnerable to nonpayment. The rating "CC" is
also used for debt subordinated to senior debt that is assigned an actual or
implied "CCC" rating.
C The "C" rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued. The rating "C" typically is
applied to debt subordinated to senior debt which is assigned an actual or
implied "CCC-" debt rating.
D Debt rated "D"; is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR Not rated
R This symbol is attached to the ratings of instruments with significant noncredit
risks. It highlights risks to principal or volatility of expected returns which
are not addressed in the credit rating. Examples include: obligations linked or
indexed to equities, currencies, or commodities; obligations exposed to severe
payment risk -- such as interest-only or principal-only mortgage securities; and
obligations with unusually risky interest terms, such as inverse floaters.
DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA," "AA," "A," and "BBB", commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies, and fiduciaries generally.
</TABLE>

B-12
<PAGE> 236

2. COMMERCIAL PAPER

A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

<TABLE>
<S> <C>
A-1 This highest category indicates that the degree of safety regarding timely payment
is strong. Those issues determined to possess extremely safe characteristics are
denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1".
A-3 Issues carrying this designation have adequate capacity for timely payment. They
are, however, more vulnerable to the adverse effects of changes in circumstances
than obligations carrying the higher designations.
B Issues rated "B" are regarded as having significant speculative characteristics.
C This rating is assigned to short-term debt obligations with a doubtful capacity
for payment.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.
</TABLE>

A commercial paper rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or based on other circumstances.

3. VARIABLE RATE DEMAND BONDS

S&P assigns "dual" ratings to all debt issues that have a put or demand
feature as part of their structure.

The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-1+"). With short-term demand debt, S&P's note rating symbols are
used with the commercial paper rating symbols (for example, "SP-1+/A-1+").

4. NOTES

A S&P note rating reflects the liquidity factors and market access risks
unique to notes. Notes maturing in three years or less will likely receive a
note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assignment:

-- Amortization schedule (the longer the final maturity relative to other
maturities, the more likely the issue is to be treated as a note).

-- Source of payment (the more the issue depends on the market for its
refinancing, the more likely it is to be treated as a note).

B-13
<PAGE> 237

Note rating symbols and definitions are as follows:

SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics will be given a plus (+)
designation.

SP-2 Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the
term of the notes.

SP-3 Speculative capacity to pay principal and interest.

MOODY'S INVESTORS SERVICE, INC.--A brief description of the applicable Moody's
Investors Service, Inc. (Moody's) rating symbols and their meanings (as
published by Moody's) follows:

1. LONG-TERM BONDS

AA: Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than AAA securities.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

BAA: Bonds which are rated BAA are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA: Bonds which are rated BA are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

CAA: Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA: Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from AA to B. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

B-14
<PAGE> 238

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

2. SHORT-TERM DEBT

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issues:

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings,
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternative liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

3. COMMERCIAL PAPER

Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers:

Issuers rated PRIME-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics:

- Leading market positions in well-established industries.

- High rates of return on funds employed.

- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

B-15
<PAGE> 239

- Board margins in earnings coverage of fixed financial charges and high
internal cash generation.

- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated PRIME-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated PRIME-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.

TRUSTEES AND OFFICERS

TRUSTEES

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
1632 Morning Mountain Road President of MDT Corporation, a company which develops
Raleigh, NC 27614 manufactures, markets and services medical and scientific
Date of Birth: 07/14/32 equipment. Trustee of each of the Van Kampen American
Capital Funds.
Linda Hutton Heagy................. Managing Partner, Paul Ray Berndtson, an executive
10 South Riverside Plaza recruiting and management consulting firm. Formerly,
Suite 720 Executive Vice President of ABN AMRO, N.A., a Dutch bank
Chicago, IL 60606 holding company. Prior to 1992, Executive Vice President
Date of Birth: 06/03/49 of La Salle National Bank. Trustee of each of the Van
Kampen American Capital Funds.
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. Trustee of each of the Van
Lyme, CT 06371 Kampen American Capital Funds.
Date of Birth: 11/23/19
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 Van Kampen American Capital Funds.
</TABLE>

B-16
<PAGE> 240

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Dennis J. McDonnell*............... President, Chief Operating Officer and a Director of the
One Parkview Plaza VK Adviser, the AC Adviser, Van Kampen American Capital
Oakbrook Terrace, IL 60181 Advisors, Inc. and Van Kampen American Capital
Date of Birth: 05/20/42 Management, Inc. Executive Vice President and a Director
of VK/AC Holding, Inc. and Van Kampen American Capital.
President and Director of Van Kampen Merritt Equity
Advisors Corp. Director of Van Kampen Merritt Equity
Holdings Corp. Director of McCarthy, Crisanti & Maffei,
Inc. Prior to September 1996, Chief Executive Officer
McCarthy, Crisanti & Maffei, Inc. and Chairman and
Director of MCM Asia Pacific Company, Limited. Prior to
July 1996, President, Chief Operating Officer and Trustee
of VSM Inc. and VCJ Inc. President, Chief Executive
Officer and Trustee of each of the Van Kampen American
Capital Funds. President, Chairman of the Board and
Trustee of other investment companies advised by the VK
Adviser. Executive Vice President of other investment
companies advised by the AC Adviser.
Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a company
415 North Adams in insurance related businesses. Formerly Vice Chairman
Hinsdale, IL 60521 and Director of Continental Illinois National Bank and
Date of Birth: 03/31/20 Trust Company of Chicago and Continental Illinois
Corporation. Trustee and Co-Chairman of each of the Van
Kampen American Capital Funds.
Jack E. Nelson..................... President of Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President of Nelson Investment Brokerage
Date of Birth: 02/13/36 Services Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and Securities
Investors Protection Corp. ("SIPC"). Trustee of each of
the Van Kampen American Capital Funds.
Jerome L. Robinson................. President of Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director of Pacesetter Software, a
Date of Birth: 10/10/22 software programming company specializing in white collar
productivity. Director of Panasia Bank. Trustee of each
of the Van Kampen American Capital Funds.
Fernando Sisto..................... George M. Bond Chaired Professor and, prior to 1995, Dean
155 Hickory Lane of Graduate School and Chairman, Department of Mechanical
Closter, NJ 07624-2322 Engineering, Stevens Institute of Technology. Director of
Date of Birth: 08/02/24 Dynalysis of Princeton, a firm engaged in engineering
research. Trustee and Co-Chairman of each of the Van
Kampen American Capital Funds.
Wayne W. Whalen*................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom, legal counsel to the Van Kampen American Capital
Chicago, IL 60606 Funds, The Explorer Institutional Trust and the
Date of Birth: 08/22/39 closed-end investment companies advised by the VK
Adviser. Trustee of each of the Van Kampen American
Capital Funds, The Explorer Institutional Trust and the
closed-end investment companies advised by the VK
Adviser.
</TABLE>

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<PAGE> 241

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently known as The Traveler's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a producer
Date of Birth: 01/31/22 of paper products. Trustee, and former President of
Whitney Museum of American Art. Formerly, Chairman of
Institute for Educational Leadership, Inc., Board of
Visitors, Graduate School of The City University of New
York, Academy of Political Science. Trustee of Committee
for Economic Development. Director of Public Education
Fund Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's Council,
Harvard School of Public Health. Member of Mental Health
Task Force, Carter Center. Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>

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

OFFICERS

B-18
<PAGE> 242

<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 Executive Vice President, General Counsel
Date of Birth: 07/29/53 Secretary and Secretary of Van Kampen American
Capital and VK/AC Holding, Inc. Executive
Vice President, General Counsel and a
Director of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen Merritt Equity Advisors Corp., and
Van Kampen Merritt Equity Holdings Corp.
Executive Vice President, General Counsel
and Assistant Secretary of Van Kampen
American Capital Advisors, Inc., American
Capital Contractual Services, Inc., Van
Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc. and ACCESS. Executive Vice
President, General Counsel, Assistant
Secretary and Director of Van Kampen
American Capital Trust Company. Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to September 1996,
General Counsel of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Executive
Vice President and General Counsel of VSM
Inc. and VCJ Inc. Vice President and
Secretary of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
Robert C. Peck, Jr....... Vice President Executive Vice President of the VK Adviser
Date of Birth: 10/01/46 and Van Kampen American Capital Management,
Inc. Executive Vice President and Director
of the AC Adviser and Van Kampen American
Capital Advisors, Inc. Vice President of
each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Alan T. Sachtleben....... Vice President Executive Vice President of the VK Adviser
Date of Birth: 04/20/42 and Van Kampen American Capital Management,
Inc. Executive Vice President and a
Director of the AC Adviser and Van Kampen
American Capital Advisors, Inc. Vice
President of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
Paul R. Wolkenberg....... Vice President Executive Vice President of VK/AC Holding,
Date of Birth: 11/10/44 Inc., Van Kampen American Capital, the
Distributor and the AC Adviser. President,
Chief Executive Officer and a Director of
Van Kampen American Capital Trust Company
and ACCESS. Director of American Capital
Contractual Services, Inc. Vice President
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Edward C. Wood III....... Vice President and Senior Vice President of the VK Adviser,
Date of Birth: 01/11/56 Chief Financial Officer the AC Adviser and Van Kampen American
Capital Management, Inc. Vice President and
Chief Financial Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
</TABLE>

B-19
<PAGE> 243

<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 VK Adviser and
Date of Birth: 08/20/55 the AC Adviser. Treasurer of each of the
Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Tanya M. Loden.......... Controller Vice President of the VK Adviser and the AC
Date of Birth: 11/19/59 Adviser. Controller of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Nicholas Dalmaso........ Assistant Secretary Assistant Vice President and Senior
Date of Birth: 03/01/65 Attorney of Van Kampen American Capital.
Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser and Van Kampen
American Capital Management, Inc. Assistant
Vice President of Van Kampen American
Capital Advisors, Inc. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.
Huey P. Falgout, Jr..... Assistant Secretary Assistant Vice President and Senior
Date of Birth: 11/15/63 Attorney of Van Kampen American Capital.
Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation and ACCESS. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Scott E. Martin......... Assistant Secretary Senior Vice President, Deputy General
Date of Birth: 08/20/56 Counsel and Assistant Secretary of Van
Kampen American Capital and VK/AC Holding,
Inc. Senior Vice President, Deputy General
Counsel and Secretary of the VK Adviser,
the AC Adviser, the Distributor, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc., ACCESS, Van Kampen Merritt
Equity Advisors Corp. and Van Kampen
Merritt Equity Holdings Corp. Prior to
September 1996, Deputy General Counsel and
Secretary of McCarthy, Crisanti & Maffei,
Inc. Prior to July 1996, Senior Vice
President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
</TABLE>

B-20
<PAGE> 244

The compensation of each Non-Affiliated Trustee includes a retainer from the
Fund 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 the 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 the 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.

B-21
<PAGE> 245

COMPENSATION TABLE

- ---------------
(1) Mr. McDonnell, a trustee of the Trust, is an affiliated person of the VK
Adviser and AC Adviser and is not eligible for compensation or retirement
benefits from the Registrant. Messrs. Branagan, Caruso, Hilsman, Powell,
Rees, Sheehan, Sisto and Woodside were elected by shareholders to the Board
of Trustees on July 21, 1995. Ms. Heagy was appointed to the Board of
Trustees on September 7, 1995. Mr. Don G. Powell resigned from the Board of
Trustees on August 15, 1996, and did not receive any compensation or
benefits from the Fund while a trustee because he was an affiliated person
of the VK Adviser and AC Adviser. Messrs. Gaughan and Rees retired from the
Board of Trustees on January 26, 1996 and January 29, 1996, respectively.
Messrs. Caruso and Sheehan were removed from the Board of Trustees effective
September 7, 1995 and January 29, 1996, respectively.

B-22
<PAGE> 246

B-23
<PAGE> 247

<TABLE>
<CAPTION>
AMOUNT OF
OWNERSHIP AT CLASS OF PERCENTAGE
NAME AND ADDRESS OF HOLDER OCTOBER 17, 1996 SHARES OWNERSHIP
- ------------------------------------------------------- ---------------- -------- ---------
<S> <C> <C> <C>
Van Kampen American Capital Trust Company.............. 664,187 B 7.13%
2800 Post Oak Blvd. 2,228 C 5.82%
Houston, TX 77056
Xerox Financial Services............................... 1,293,108 A 21.18%
Life Insurance Company
1 Tower Ln. #3000
Villa Park, IL 60181-4644
Raymond James & Assoc. Inc. CSDN....................... 2,408 C 6.29%
Hugh D. McPherson IRA
1217 Denton Rd.
Winter Park, FL 32792-2774
Principal Financial.................................... 4,015 C 10.50%
IRA Cust. FBO
Mary Alice Murphy
P.O. Box 215132
Dallas, TX 75221-5132
Principal Financial Cust. FBO.......................... 11,489 C 30.01%
Mary A. Murphy
P.O. Box 508
Dallas, TX 75221-0508
</TABLE>

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

LEGAL COUNSEL

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

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISORY AGREEMENT.

The Adviser is a wholly-owned subsidiary of Van Kampen American Capital, which
in turn is a wholly-owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc.
is controlled, through the ownership of a substantial majority of its common
stock by The Clayton & Dubilier Private Equity Fund IV Limited Partnership ("C&D
L.P."), a Connecticut limited partnership. C&D L.P. is managed by Clayton,
Dubilier & Rice, Inc., a New York based private investment firm. The General
Partner of C&D L.P. is Clayton & Dubilier Associates IV Limited Partnership
("C&D Associates L.P."). The general partners of C&D Associates L.P. are Joseph
L. Rice, III, B. Charles Ames, William A. Barbe, Alberto Cribiore, Donald J.
Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson, each of
whom is a principal of Clayton, Dubilier & Rice, Inc. In addition, certain
officers, directors and employees of Van Kampen American Capital own, in the
aggregate, not more than 6% of the common stock of VK/AC Holding, Inc. and have
the right to acquire, upon exercise of options, approximately an additional 12%
of the common stock of VK/AC

B-24
<PAGE> 248

Holding, Inc. Presently, and after giving effect to the exercise of stock
options, no officer or trustee of the Fund owns or would own 5% or more of the
common stock of VK/AC Holding, Inc.

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 trustees of the Trust and officers of the Fund if duly elected to such
positions.

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, of which the Fund is a
separate series (or by the Fund's shareholders), and by the disinterested
trustees in compliance with the requirements of the 1940 Act. The agreement may
be terminated without penalty upon 60 days' written notice by either party
thereto and will automatically terminate in the event of assignment.

The Adviser has undertaken to reimburse the Fund for annual expenses of the
Fund which exceed the most stringent limit prescribed by any state in which the
Fund's shares are offered for sale. Currently, the most stringent limit in any
state would require such reimbursement to the extent that aggregate operating
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 June 30, 1996, 1995 and 1994, the Fund recognized advisory
expenses of $882,054, $1,616,498 and $3,008,248, respectively.

OTHER AGREEMENTS.

SUPPORT SERVICES AGREEMENT. Under a support services agreement with the
Distributor which terminated as of July 10, 1995 concurrent with the Fund's
change in transfer agent, the Fund received support services for shareholders,
including the handling of all written and telephonic communications, except
initial order entry and other distribution related communications. Payment by
the Fund for such services was made on cost basis for the employment of the
personnel and the equipment necessary to render the support services. At such
time, the Fund, and the other Van Kampen American Capital mutual funds
distributed by the Distributor, shared such costs proportionately among
themselves based upon their respective net asset values.

For the years ended June 30, 1996, 1995 and 1994, the Fund recognized expenses
of approximately $0, $126,400 and $278,000, respectively, representing the
Distributor's cost of providing certain support services.

ACCOUNTING SERVICES 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 equally, together with the other Van Kampen American Capital
mutual funds advised by the Adviser and distributed by the Distributor, in 25%
of the cost of providing such services, with the remaining 75% of such cost
being paid by the Fund and such other funds based proportionally on their
respective net assets.

For the years ended June 30, 1996, 1995 and 1994, the Fund recognized expenses
of approximately $9,900, $9,900 and $21,000, respectively, representing the
Adviser's cost of providing accounting services.

B-25
<PAGE> 249

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 funds' minute books and records, preparation and oversight of
the funds' regulatory reports, and other information provided to shareholders,
as well as responding to day-to-day legal issues on behalf of the funds. It is
expected that Van Kampen American Capital can render such legal services on a
more cost effective basis than other providers of such services. Payment by the
Fund for such services is made on a cost basis for the employment of personnel
as well as the overhead and the equipment necessary to render such 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 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 June 30, 1996, 1995 and 1994, the Fund recognized expenses
of approximately $14,300, $15,800 and $17,000, respectively, representing Van
Kampen American Capital's cost of providing legal services.

CUSTODIAN AND INDEPENDENT ACCOUNTANTS

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

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 set
forth above to the Fund and 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 Fund and other
investment companies and clients 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

B-26
<PAGE> 250

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

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 for the Fund 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

The Trust and each of its series, including the Fund, will be treated as
separate corporations for federal income tax purposes. The Fund will be subject
to tax, among other things, if it fails to distribute net capital gains, or if
its annual distributions, as a percentage of its income, are less than the
distributions required by tax laws.

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 currently the nation's 5th largest broker-sold mutual fund group
according to Strategic Insight. Van Kampen American Capital's roots in money
management extend back to 1926. Today, Van Kampen American Capital manages or
supervises more than $57 billion in mutual funds, closed-end funds and unit
investment trusts--assets which have been entrusted to Van Kampen American
Capital in more than 2 million investor accounts. Van Kampen American Capital
has one of the largest research terms (outside of the rating agencies) in the
country, with more than 80 analysts devoted to various specializations.

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 sometimes
are referred to herein 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 and 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 (collectively,
"Selling 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."

B-27
<PAGE> 251

(an "Implementation Date") are not eligible to receive compensation pursuant to
such Distribution and Service Agreement 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.

For the year ended June 30, 1994, the Fund has recognized expenses under the
Plans of $540,613, $3,563,969 and $1,364 for the Class A Shares, Class B Shares
and Class C Shares, respectively, of which $471,049 and $872,003 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares and Class B Shares, respectively. For the year ended June 30, 1994, the
Fund has reimbursed the Distributor $48,070 and $90,367 for advertising
expenses, and $21,958 and $26,247 for compensation of the Distributor's sales
personnel for the Class A Shares and Class B Shares, respectively.

For the year ended June 30, 1995, the Fund recognized expenses under the Plans
of $263,818, $1,899,931 and $1,918 for the Class A Shares, Class B Shares and
Class C Shares, respectively, of which $256,375, $469,537 and $672 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares, Class B Shares and Class C Shares, respectively. For the year ended June
30, 1995, the Fund has reimbursed the Distributor $39,387, $63,700 and $0 for
advertising expenses, and $3,453, $5,441 and $0 for compensation of the
Distributor's sales personnel for the Class A Shares, Class B Shares and Class C
Shares, respectively.

For the year ended June 30, 1996, the Fund recognized expenses under the Plans
of $131,097, $1,019,724 and $1,665 for the Class A Shares, Class B Shares and
Class C Shares, respectively, of which $123,267, $216,622 and $1,221 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares, Class B Shares and Class C Shares, respectively.

PERFORMANCE INFORMATION

From time to time marketing materials may provide a portfolio manager update,
an adviser update and discuss general economic conditions and outlooks. The
Fund's marketing materials may also 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 may also 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 whether 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.

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<PAGE> 252

CLASS A SHARES

The Fund's yield with respect to the Class A Shares for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 4.47%. In determining the Fund's net
investment income for a stated 30 day period, the Fund calculates yield to
maturity on each portfolio security on a daily basis. The Fund's current
distribution rate with respect to the Class A Shares for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 7.16%.

The Fund's average total return, including the payment of the maximum
front-end sales charge, with respect to the Class A Shares for the (i) the one
year period ended June 30, 1996 was 5.33%, (ii) the five year period ended June
30, 1996 was 3.19% and (iii) the approximately 69 month period from September
28, 1990 (the commencement of the sale of Class A Shares) through June 30, 1996
was 3.63%.

The Fund's cumulative non-standardized total return, including the payment of
the maximum front-end sales charge, with respect to the Class A Shares from
September 21, 1990 (the commencement of the sale of Class A Shares) through June
30, 1996 (as calculated in the manner described in the Prospectus under the
heading "Fund Performance") was 22.78%.

The Fund's cumulative non-standardized total return, excluding the payment of
the maximum front-end sales charge, with respect to the Class A Shares from
September 21, 1990 (the commencement of the sale of Class A Shares) through June
30, 1996 (as calculated in the manner described in the Prospectus under the
heading "Fund Performance") was 26.96%.

CLASS B SHARES

The Fund's yield with respect to the Class B Shares for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 3.87%. In determining the Fund's net
investment income for a stated 30 day period, the Fund calculates yield to
maturity on each portfolio security on a daily basis. The Fund's current
distribution rate with respect to the Class B Shares for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 6.63%.

The Fund's average total return, including the payment of the maximum CDSC,
with respect to the Class B Shares for (i) the one year period ended June 30,
1996 was 5.02%, and (ii) the approximately 60 month period from July 22, 1991
(the commencement of the sale of Class B Shares) through June 30, 1996 was
3.13%.

The Fund's cumulative non-standardized total return, including the payment of
the maximum CDSC, with respect to the Class B Shares from July 22, 1991 (the
commencement of the sale of Class B Shares) through June 30, 1996 (as calculated
in the manner described in the Prospectus under the heading "Fund Performance")
was 16.44%.

The Fund's cumulative non-standardized total return, excluding the payment of
the CDSC, with respect to the Class B Shares from July 22, 1991 (the
commencement of the sale of Class B Shares) through June 30, 1996 (as calculated
in the manner described in the Prospectus under the heading "Fund Performance")
was 16.44%.

CLASS C SHARES

The Fund's yield with respect to the Class C Shares for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 3.87%. In determining the Fund's net
investment income for a stated 30 day period, the Fund calculates yield to
maturity on each portfolio security on a daily basis. The Fund's current
distribution rate with respect to the Class C Shares for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 6.63%.

The Fund's average total return, including the payment of the maximum CDSC,
with respect to the Class C Shares for (i) the one year period ended June 30,
1996 was 7.03%, and (ii) the approximately 35 month

B-29
<PAGE> 253

period from August 13, 1993 (the commencement of the sale of Class C Shares)
through June 30, 1996 was 0.32%.

The Fund's cumulative non-standardized total return, including the payment of
the maximum CDSC, with respect to the Class C Shares from August 13, 1993 (the
commencement of the sale of Class C Shares) through June 30, 1996 (as calculated
in the manner described in the Prospectus under the heading "Fund Performance")
was 0.91%.

The Fund's cumulative non-standardized total return, excluding the payment of
the CDSC, with respect to the Class C Shares from August 13, 1993 (the
commencement of the sale of Class B Shares) through June 30, 1996 (as calculated
in the manner described in the Prospectus under the heading "Fund Performance
was 0.91%.

B-30
<PAGE> 254

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Short-Term Global Income Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Short-Term Global Income Fund (the "Fund"), including
the portfolio of investments, as of June 30, 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.

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 Short-Term Global Income Fund as of June 30, 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
August 2, 1996

B-31
<PAGE> 255

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED INCOME SECURITIES 91.3%
ITALY 7.5% LIRA
Government/Agency
15,000,000 Vermilion International Trust -- BTPS....... 9.160% 12/01/97 $ 9,924,735
------------
NEW ZEALAND 8.9% NZ$
Government/Agency
17,250 New Zealand Government...................... * 09/11/96 11,637,201
------------
SPAIN 3.6% PESETA
Government/Agency
600,000 Kingdom of Spain............................ 7.300 07/30/97 4,689,192
------------
UNITED STATES 71.3% US$
Government/Agency
30,000 U.S. Treasury Note.......................... 5.000 01/31/98 29,534,700
17,500 U.S. Treasury Note.......................... 5.000 02/15/98 16,979,200
32,000 U.S. Treasury Note.......................... 6.375 05/15/99 32,080,000
15,000 U.S. Treasury Note.......................... 6.500 05/31/01 15,014,100
------------
93,608,000
------------
TOTAL FIXED INCOME SECURITIES..................................... 119,859,128
------------
SWAP TRANSACTIONS 0.0%
Goldman Sachs, 18.75 million US$ notional amount, maturing
01/30/97, payment based upon the spread between the German Mark
swap interest rate versus the 3 month German LIBOR................ (39,292)
------------
TOTAL INVESTMENTS 91.3%
(Cost $119,166,291) (a)......................................... 119,819,836
OTHER ASSETS IN EXCESS OF LIABILITIES 8.7%........................ 11,520,371
------------
NET ASSETS 100.0%................................................. $131,340,207
------------
</TABLE>

* Zero coupon bond

(a) At June 30, 1996, the cost for federal income tax purposes is $119,166,291;
the aggregate gross unrealized appreciation is $1,358,465 and the aggregate
gross unrealized depreciation is $1,392,670, resulting in net unrealized
depreciation on investments, including foreign currency translation of other
assets and liabilities, forward currency contracts and forward swap
transactions of $34,205.

The following table summarizes the portfolio composition at June 30, 1996,
based upon quality ratings issued by Standard & Poor's. For securities not rated
by Standard & Poor's, the Moody's rating is used.

PORTFOLIO COMPOSITION BY CREDIT QUALITY

See Notes to Financial Statements

B-32
<PAGE> 256

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $119,166,291) (Note 1)............... $119,819,836
Receivables:
Securities Sold....................................................... 12,840,473
Interest.............................................................. 1,687,063
Forward Currency Contracts (Note 5)................................... 196,556
Fund Shares Sold...................................................... 56,763
Options at Market Value (Net premiums paid of $25,497) (Note 5)......... 6,950
Other................................................................... 5,397
------------
Total Assets...................................................... 134,613,038
------------
LIABILITIES:
Payables:
Reverse Repurchase Agreements (Note 6)................................ 1,862,000
Fund Shares Repurchased............................................... 369,840
Income Distributions.................................................. 337,320
Distributor and Affiliates (Notes 2 and 7)............................ 252,266
Investment Advisory Fee (Note 2)...................................... 59,651
Custodian Bank........................................................ 1,458
Accrued Expenses........................................................ 330,319
Deferred Compensation and Retirement Plans (Note 2)..................... 59,977
------------
Total Liabilities................................................. 3,272,831
------------
NET ASSETS.............................................................. $131,340,207
============
NET ASSETS CONSIST OF:
Capital (Note 3)........................................................ $196,507,762
Net Unrealized Depreciation on Securities............................... (284,565)
Accumulated Distributions in Excess of Net Investment Income (Note 1)... (358,000)
Accumulated Net Realized Loss on Securities............................. (64,524,990)
------------
NET ASSETS.............................................................. $131,340,207
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $50,118,757 and 6,575,159 shares of capital stock issued and
outstanding) (Note 3)............................................... $ 7.62
Maximum sales charge (3.25%* of offering price)..................... .26
------------
Maximum offering price to public.................................... $ 7.88
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$81,057,362 and 10,639,329 shares of capital stock issued and
outstanding) (Note 3)............................................... $ 7.62
============
Class C Shares:
Net asset value and offering price per share (Based on net assets of
$164,088 and 21,536 shares of capital stock issued and outstanding)
(Note 3)............................................................ $ 7.62
============
</TABLE>

*On sales of $25,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

B-33
<PAGE> 257

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $62,358)................. $ 12,560,652
EXPENSES:
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C
of $131,097, $1,019,724 and $1,665, respectively) (Note 7)........... 1,152,486
Investment Advisory Fee (Note 2)....................................... 882,054
Shareholder Services (Note 2).......................................... 373,683
Custody................................................................ 184,449
Trustees Fees and Expenses (Note 2).................................... 49,859
Interest (Note 6)...................................................... 42,719
Legal (Note 2)......................................................... 16,410
Amortization of Organizational Expenses (Note 1)....................... 2,523
Other.................................................................. 235,126
------------
Total Expenses..................................................... 2,939,309
Less Expenses Reimbursed........................................... 44,473
------------
Net Expenses....................................................... 2,894,836
------------
NET INVESTMENT INCOME.................................................. $ 9,665,816
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments........................................................ $ 872,668
Options............................................................ 976,960
Foreign Currency Transactions...................................... (18,050,439)
------------
Net Realized Loss on Securities........................................ (16,200,811)
------------
Net Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.............................................. (20,294,494)
------------
End of the Period:
Investments........................................................ 653,545
Options............................................................ (18,547)
Forwards........................................................... (906,748)
Foreign Currency Translation....................................... (12,815)
------------
(284,565)
------------
Net Unrealized Appreciation on Securities During the Period............ 20,009,929
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES......................... $ 3,809,118
============
NET INCREASE IN NET ASSETS FROM OPERATIONS............................. $ 13,474,934
============
</TABLE>

See Notes to Financial Statements

B-34
<PAGE> 258

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 9,665,816 $ 19,761,456
Net Realized Loss on Securities......................... (16,200,811) (12,602,409)
Net Unrealized Appreciation/Depreciation on Securities
During the Period..................................... 20,009,929 (7,738,870)
------------ ------------
Change in Net Assets from Operations.................... 13,474,934 (579,823)
------------ ------------
Distributions from and in Excess of Net Investment
Income................................................ -0- (14,866,346)
Return of Capital Distribution (Note 1)................. (11,609,288) (7,736,408)
------------ ------------
Total Distributions*.................................... (11,609,288) (22,602,754)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 1,865,646 (23,182,577)
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold............................... 2,427,135 6,199,457
Net Asset Value of Shares Issued Through Dividend
Reinvestment.......................................... 6,370,708 12,635,688
Cost of Shares Repurchased.............................. (79,947,106) (214,719,738)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS...... (71,149,263) (195,884,593)
------------ ------------
TOTAL DECREASE IN NET ASSETS............................ (69,283,617) (219,067,170)
NET ASSETS:
Beginning of the Period................................. 200,623,824 419,690,994
------------ ------------
End of the Period (Including undistributed net
investment income of $(358,000) and $(588,190),
respectively)......................................... $131,340,207 $200,623,824
============ ============
</TABLE>

<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1996 June 30, 1995
---------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of
Net Investment Income (Note 1):
Class A Shares...................... $ -0- $ (5,617,141)
Class B Shares...................... -0- (9,240,772)
Class C Shares...................... -0- (8,387)
Class D Shares...................... -- (46)
------------ ------------
$ -0- $(14,866,346)
============ ============
Return of Capital Distribution (Note
1):
Class A Shares...................... $ (4,481,275) $ (2,908,177)
Class B Shares...................... (7,116,453) (4,822,441)
Class C Shares...................... (11,560) (5,768)
Class D Shares...................... -- (22)
------------ ------------
$(11,609,288) $ (7,736,408)
============ ============
</TABLE>

See Notes to Financial Statements

B-35
<PAGE> 259

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Short-Term Global Income Fund (the "Fund") is
organized as a series of Van Kampen American Capital Trust (the "Trust"), a
Delaware business trust, and is registered as a non-diversified open-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek a high level of current
income, consistent with prudent investment risk through investment in a global
portfolio of investment grade debt securities denominated in various currencies
and multi-national currency units and having an average maturity of three years
or less. The Fund commenced investment operations on September 28, 1990. The
distribution of the Fund's Class B and Class C shares commenced on July 22,
1991, 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.

A. SECURITY VALUATION--Investments are stated at value using the last available
bid price or yield equivalents obtained from dealers in the over-the-counter
(OTC) or interbank market. Short-term securities with remaining maturities of
less than 60 days are valued at amortized cost.

B-36
<PAGE> 260

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

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

D. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars at the mean of the quoted bid and ask prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates prevailing when accrued.

F. 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 the loss and offset such losses against any future realized capital
gains. At June 30, 1996, the Fund had an accumulated capital loss carryforward
for tax purposes of $64,736,057. Of this amount, $10,010,730, $53,019,433 and
$1,705,894 will expire on June 30, 2001, 2003 and 2004 respectively. Net
realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of post October 31 losses which are not recognized for tax
purposes until the first day of the following fiscal year.

G. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on transactions in foreign
currencies and options on foreign currencies. These realized gains and losses
are included as net realized gains or losses for financial reporting purposes.
Permanent book and tax basis differences relating to currency losses totaling
$17,134,347 were reclassified from accumulated net realized gain/loss on
securities to accumulated undistributed net investment income. In

B-37

<PAGE> 261

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

addition, a permanent book and tax basis difference due to a net operating loss
for tax purposes totaling $7,698,721 has been reclassified from accumulated
undistributed net investment income to capital.

Net realized gains on securities, if any, are distributed annually.

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 June 30, 1996, the Fund recognized expenses of
approximately $33,500 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund. Of this amount, approximately $9,300
has been assumed by VKAC.

In July, 1995, the Fund began using ACCESS Investor Services, Inc.
("ACCESS"), an affiliate of the Adviser, as the shareholder servicing agent for
the Fund. For the year ended June 30, 1996, the Fund recognized expenses of
approximately $269,400, representing ACCESS' cost of providing transfer agency
and shareholder services plus a profit.

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.

At June 30, 1996, VKAC owned 1,428 and 100 shares of Classes B and C,
respectively.

B-38
<PAGE> 262

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1996, capital aggregated $71,847,960, $124,493,824 and $165,978,
for Classes A, B and C, respectively. For the year ended June 30, 1996,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
Sales:
Class A.................................. 162,018 $ 1,242,482
Class B.................................. 153,961 1,176,596
Class C.................................. 1,057 8,057
----------- ------------
Total Sales................................ 317,036 $ 2,427,135
=========== ============
Dividend Reinvestment:
Class A.................................. 356,105 $ 2,727,316
Class B.................................. 474,434 3,632,026
Class C.................................. 1,485 11,366
----------- ------------
Total Dividend Reinvestment................ 832,024 $ 6,370,708
=========== ============
Repurchases:
Class A.................................. (3,533,398) $(27,079,054)
Class B.................................. (6,899,452) (52,839,746)
Class C.................................. (3,684) (28,306)
----------- ------------
Total Repurchases.......................... (10,436,534) $(79,947,106)
=========== ============
</TABLE>

B-39
<PAGE> 263

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1995, capital aggregated $102,375,382, $184,393,612 and
$196,040, for Classes A, B and C, respectively. For the year ended June 30,
1995, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------
Sales:
Class A.................................. 147,880 $ 1,164,395
Class B.................................. 633,871 5,017,062
Class C.................................. 2,233 18,000
Class D.................................. -0- -0-
----------- -------------
Total Sales................................ 783,984 $ 6,199,457
=========== =============
Dividend Reinvestment:
Class A.................................. 640,247 $ 5,003,613
Class B.................................. 973,210 7,618,093
Class C.................................. 1,792 13,973
Class D.................................. 1 9
----------- -------------
Total Dividend Reinvestment................ 1,615,250 $ 12,635,688
=========== =============
Repurchases:
Class A.................................. (9,324,231) $ (73,225,277)
Class B.................................. (18,052,147) (141,454,897)
Class C.................................. (4,985) (38,532)
Class D.................................. (124) (1,032)
----------- -------------
Total Repurchases.......................... (27,381,487) $(214,719,738)
=========== =============
</TABLE>

B-40

<PAGE> 264

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

the expense of their respective deferred sales arrangements, including higher
distribution and service fees and incremental transfer agency costs.

For the year ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of $1,540 and CDSC on
redeemed shares of approximately $59,300. Sales charges do not represent
expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding U.S. Government securities and short-term investments, were
$175,408,439 and $285,327,825, 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, foreign currency
exposure, 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 for
exercised option contracts where the recognition of gain or loss is postponed
until the disposal of the security underlying the option 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. These contracts are generally used by the Fund
to manage the portfolio's foreign currency exposure and effective maturity and
duration.

B-41
<PAGE> 265

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

Transactions in options for the year ended June 30, 1996, were as follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
<S> <C> <C>
- ---------------------------------------------------------------------------
Outstanding at June 30, 1995.................. 11 $(1,537,634)
Options Written and
Purchased (Net)............................. 44 (115,937)
Options Terminated in Closing
Transactions (Net).......................... (49) 1,044,426
Options Expired (Net)......................... (5) 583,648
--- -----------
Outstanding at June 30, 1996.................. 1 $ (25,497)
=== ===========

</TABLE>

The description and market value of the option contract outstanding as of
June 30, 1996, are as follows:

<TABLE>
<CAPTION>
OPENING EXPIRATION MARKET
DESCRIPTION TRANSACTION DATE VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
DEM Call Basket Currency Put.......... Buy 11/29/96 $6,950
======
</TABLE>

B. FORWARD CURRENCY CONTRACTS--These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on investments and foreign currency.

At June 30, 1996, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
UNREALIZED
FORWARD ORIGINAL CURRENT APPRECIATION/
CURRENCY CONTRACTS VALUE VALUE DEPRECIATION
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
BUYS TO OPEN
German Mark,
expiring 07/19/96-07/22/96... $24,490,548 $24,414,938 $ (75,610)
SELLS TO OPEN
Australian Dollar,
expiring 07/08/96-07/25/96... 4,497,779 4,484,806 12,973
German Mark,
expiring 09/25/96-09/30/96... 19,000,000 19,148,431 (148,431)
Italian Lira,
expiring 07/18/96............ 9,481,798 9,828,787 (346,989)
New Zealand Dollar,
expiring 07/11/96-08/01/96... 11,174,510 11,443,192 (268,682)
</TABLE>

B-42
<PAGE> 266

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
UNREALIZED
FORWARD ORIGINAL CURRENT APPRECIATION/
CURRENCY CONTRACTS VALUE VALUE DEPRECIATION
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
Spanish Peseta,
expiring 08/12/96............ 4,461,750 4,520,013 (58,263)
Swedish Krona,
expiring 07/11/97............ 1,000,000 1,021,746 (21,746)
---------
$(906,748)
=========
</TABLE>

At June 30, 1996, the Fund had realized gains on closed but unsettled
forward currency contracts of $1,103,304 scheduled to settle between July 3,
1996 and November 4, 1996.

C. SWAP TRANSACTIONS--These securities, which are identified in the portfolio of
investments, represent an agreement between two parties to exchange a series of
cash flows based upon various indices at specified intervals.

6. BORROWINGS

In accordance with its investment policies, the Fund may borrow money from banks
or enter into reverse repurchase agreements to enable the Fund to satisfy
redemption requests and other temporary purposes.

The Fund was entered into reverse repurchase agreements under which the Fund
sells securities and agrees to repurchase them at a mutually agreed upon date
and price. During the reverse 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
$1,243,000 with an average interest rate of 3.360%. At June 30, 1996, the
interest rate in effect for reverse repurchase agreements was 5.450%.

7. DISTRIBUTION AND SERVICE PLANS

Annual fees under the Plans of up to .25% for Class A and 1.00% each for
Class B and Class C shares are accrued daily. Included in these fees for the
year ended June 30, 1996, are payments to VKAC of approximately $736,700.

B-43
<PAGE> 267

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

Van Kampen American Capital Strategic Income Fund (the "Fund") is a
non-diversified mutual fund. The Fund's primary investment objective is to seek
to provide its shareholders with high current income. The Fund has a secondary
investment objective of seeking capital appreciation. The Fund will seek to
achieve its investment objectives by investing primarily in a portfolio of
income securities selected by Van Kampen American Capital Investment Advisory
Corp., the Fund's investment adviser, from the following market sectors: U.S.
government securities; U.S. investment grade income securities; U.S. lower grade
income securities; foreign investment grade income securities; and foreign lower
grade income securities. The Adviser will allocate the Fund's investments among
these market sectors based on its evaluation of the relative investment
opportunities and investment risks presented by such sectors from time to time.
Under normal market conditions, at least 65% of the Fund's total assets will be
invested in U.S. dollar-denominated income securities and at least 40% of the
Fund's total assets will be invested in U.S. government securities and
investment grade rated income securities. A substantial portion of the Fund's
assets may be invested in lower grade income securities, including securities of
issuers in emerging market countries and securities rated in the lowest rating
category. The Fund intends to borrow for investment purposes which will create
the opportunity for increased return but also involves special risks. The Fund
is also allowed to invest in derivative mortgage back securities without
limitation. In addition, the Fund may invest up to 20% in defaulted bank loans.
There can be no assurance that the Fund will achieve its investment objectives.

This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the current Prospectus for the Fund (the "Prospectus")
dated as of the date hereof. This Statement of Additional Information does not
include all 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 calling (800) 421-5666. This Statement of Additional
Information incorporates by reference the entire Prospectus.

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>
<S> <C>
The Fund and the Trust............................................................... B-2
Investment Policies and Restrictions................................................. B-3
Additional Investment Considerations................................................. B-4
Description of Securities Ratings.................................................... B-26
Trustees and Officers................................................................ B-33
Investment Advisory and Other Services............................................... B-39
Custodian and Independent Accountants................................................ B-42
Portfolio Transactions and Brokerage Allocation...................................... B-42
Tax Status of the Fund............................................................... B-43
The Distributor...................................................................... B-46
Legal Counsel........................................................................ B-47
Performance Information.............................................................. B-47
Independent Accountants' Report...................................................... B-50
Financial Statements................................................................. B-51
Notes to Financial Statements........................................................ B-59
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED OCTOBER 28, 1996.

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THE FUND AND THE TRUST

The Fund is a separate non-diversified series of Van Kampen American Capital
Trust (the "Trust"), an open-end management investment company. The Fund was
established pursuant to a designation of series dated May 10, 1995. At present,
the Fund, Van Kampen American Capital High Yield Fund, Van Kampen American
Capital Short-Term Global Income Fund, are the only series of the Trust,
although other series may be organized and offered in the future. Each series of
the Trust will be treated as a separate corporation for Federal income tax
purposes.

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. The Trustees can further sub-divide each series of shares into one or
more classes of shares. The Trust can issue an unlimited number of full and
fractional shares, par value $0.01 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.

The Trust originally was organized as Van Kampen Merritt Trust, a
Massachusetts business trust created by a Declaration of Trust dated March 14,
1986 (the "Massachusetts Trust"). The Massachusetts Trust was reorganized into
the Trust on July 31, 1995 pursuant to an Agreement and Plan of Reorganization
and Liquidation. The Trust was formed pursuant to an Agreement and Declaration
of Trust dated May 10, 1995 for the purpose of facilitating the Massachusetts
Trust's reorganization into a Delaware business Trust. The Trust filed a
Certificate of Trust with the Delaware Secretary of State on July 28, 1995.

The Fund originally was organized under the name Van Kampen Merritt Strategic
Income Fund, as a sub-trust of the Massachusetts Trust. In connection with the
Massachusetts Trust's reorganization into a Delaware business trust, the Fund
was reorganized into a series of the Trust and renamed Van Kampen American
Capital Strategic Income Fund.

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.

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INVESTMENT POLICIES AND RESTRICTIONS

The investment objectives of the Fund are set forth in the Prospectus under
the caption "Investment Objectives and Policies." There can be no assurance that
the Fund will achieve its investment objectives.

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

1. Invest 25% or more of the value of its total assets in any single industry.
(Neither the U.S. government nor any of its agencies or instrumentalities
will be considered an industry for purposes of this restriction.)

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
that the Fund may, with respect to up to an additional 5% of its total
assets, borrow from and enter into reverse repurchase agreements and dollar
rolls with, any entity for temporary purposes. The Fund will not mortgage,
pledge or hypothecate any assets other than in connection with borrowings,
reverse repurchase agreements, dollar rolls, and Strategic Transactions.

3. Make loans of money or property to any person, except (i) to the extent the
securities in which the Fund may invest are considered to be loans, (ii)
through the loan of portfolio securities or the acquisition of securities
subject to repurchase agreements, and (iii) to the extent that the Fund may
lend money or property in connection with maintenance of the value of, or
the Fund's interest with respect to, the securities owned by the Fund.

4. Buy securities "on margin." Neither the deposit of initial or maintenance
margin in connection with Strategic Transactions, short term credits as may
be necessary for the clearance of transactions nor borrowing, entering into
reverse repurchase agreements or dollar rolls consistent with investment
restriction 2. above is considered the purchase of a security on margin.

5. 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.

6. Make investments for the purpose of exercising control or participation in
management of any company other than a CMO issuer, except to the extent
that exercise by the Fund of its rights under agreements related to
portfolio securities would be deemed to constitute such control or
participation.

7. Invest in securities of other investment companies, except as part of a
merger, consolidation or other acquisition and except as permitted under
the 1940 Act.

8. Invest in oil, gas or mineral leases or in equity interests in oil, gas, or
other mineral exploration or development programs except pursuant to the
exercise by the Fund of its rights under agreements relating to portfolio
securities.

9. Purchase or sell real estate, commodities or commodity contracts, except to
the extent that the securities that the Fund may invest in are considered
to be interests in real estate, commodities or commodity contracts or to
the extent the Fund exercises its rights under agreements relating to
portfolio securities (in which case the Fund may liquidate real estate
acquired as a result of a default on a mortgage), and except to the extent
that Strategic Transactions the Fund may engage in are considered to be
commodities or commodities contracts.

The Fund may not change any of these investment restrictions as they apply to
the Fund or the Fund's fundamental investment objectives without the approval of
the lesser of (i) more than 50% of the Fund's outstanding shares or (ii) 67% of
the Fund's outstanding 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.

In addition, to comply with federal tax requirements for qualifications as a
"regulated investment company," the Fund's investments will be limited in a
manner such that at the close of each quarter of each fiscal year, (a) no more
than 25% of the Fund's total assets are invested in the securities of a single
issuer, and

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(b) with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer. These
tax-related limitations may be changed by the Trustees to the extent necessary
to comply with changes to applicable tax requirements.

The Fund generally will not engage in the trading of securities for the
purpose of realizing short-term profits, but it will adjust its portfolio as
deemed advisable in view of prevailing or anticipated market conditions to
accomplish the Fund's investment objectives. For example, the Fund may sell
portfolio securities in anticipation of a movement in interest rates. Other than
for tax purposes, 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 its annual portfolio turnover rate will normally be less than
200%. Portfolio turnover will be calculated by dividing the lesser of purchases
or sales of portfolio securities by the monthly average value of the securities
in the portfolio during the year. Securities, including options, whose maturity
or expiration date at the time of acquisition were one year or less will be
excluded from such calculation. A high rate of portfolio turnover involves
correspondingly higher brokerage commissions and transaction expenses than a
lower rate, which expenses must be borne by the Fund and its Shareholders.

ADDITIONAL INVESTMENT CONSIDERATIONS

The following information supplements the information provided in the
Prospectus under the headings "Investment Objectives and Policies" and "Other
Investment Practices."

PORTFOLIO SECURITIES

U.S. GOVERNMENT SECURITIES. U.S. government securities include securities
issued by the U.S. government, such as U.S. Treasury securities, and securities
issued or guaranteed by agencies of the U.S. government. U.S. Treasury
securities are generally fixed rate securities. The Fund may invest in both
adjustable rate and fixed rate securities issued or guaranteed by agencies of
the U.S. government, including, but not limited to, Government National Mortgage
Association (GNMA), Federal National Mortgage Association (FNMA) and Federal
Home Loan Mortgage Corporation (FHLMC) securities. 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.

U.S. government securities are considered among the most creditworthy of fixed
income investments. The yields available from U.S. government securities are
generally lower than the yields available from corporate debt securities. The
values of U.S. government securities will change as interest rates fluctuate. To
the extent U.S. government securities are not adjustable rate securities, these
changes in value in response to changes in interest rates generally will be more
pronounced. During periods of falling interest rates, the values of outstanding
long-term fixed rate U.S. government securities generally rise. Conversely,
during periods of rising interest rates, the values of such securities generally
decline. The magnitude of these fluctuations will generally be greater for
securities with longer maturities. Although changes in the value of U.S.
government securities will not affect investment income from those securities,
they may affect the net asset value of the Fund.

MORTGAGE-BACKED SECURITIES. "Mortgage-Backed Securities" are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans secured by real property. There are currently three
basic types of Mortgage-Backed Securities: (i) those issued or guaranteed by the
U.S. government or one of its agencies or instrumentalities, such as GNMA, FNMA
and FHLMC; (ii) those issued by private issuers that represent an interest in or
are collateralized by Mortgage-Backed Securities issued or guaranteed by the
U.S. government or one of its agencies or instrumentalities; and (iii) those
issued by private issuers that represent an interest in or are collateralized by
whole mortgage loans or Mortgage-Backed Securities without a government
guarantee but usually having some form of private credit enhancement.

Mortgage-Backed Securities may represent an 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

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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.

The yield characteristics of Mortgage-Backed Securities differ from
traditional debt securities. Among the major differences are that interest and
principal prepayments are made more frequently, usually monthly, and that
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. As a result, if the Fund
purchases such a security at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if the Fund purchases these securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity. Stripped Mortgage-Backed Securities (defined herein)
which are highly sensitive to changes in prepayment and interest rates.

Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. Generally, however, prepayments on
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Fund are likely to be greater during a period
of declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates. Mortgage-Backed
Securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment.

The Fund's yield may also be affected by the yields on instruments in which
the Fund is able to reinvest the proceeds of payments and prepayments.
Accelerated prepayments on securities purchased by the Fund at a premium also
impose a risk of loss of principal because the premium may not have been fully
amortized at the time the principal is repaid in full.

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.

Guaranteed Mortgage Pass-Through Securities. The Fund may invest in mortgage
pass-through securities representing participation interest in pools of
residential mortgage loans originated by U.S. governmental or private lenders or
guaranteed, to the extent provided in such securities, by the U.S. government or
one of its

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agencies or instrumentalities. Mortgage pass-through securities provide for
monthly payments that are a "pass-through" of the monthly interest and principal
payments (including any prepayment) made by the individual borrowers on the
pooled mortgage loans, net of any fees paid to the guarantor of such securities
and the servicer of the underlying mortgage loans.

The guaranteed mortgage pass-through securities that the Fund may invest in
include those issued or guaranteed by GNMA, FNMA and FHLMC. Each of GNMA, FNMA
and FHLMC guarantee timely distributions of interest to security holders. GNMA
and FNMA also guarantee timely distribution of scheduled principal. FHLMC
guarantees only ultimate collection of principal on the underlying loans, which
collection may take up to one year. The Fund may also invest in other agency
securities, including but not limited to securities issued by the Small Business
Administration, Export-Import Bank of the United States, Federal Housing
Administration, Farm Credit Administration, Federal Home Loan Banks, General
Services Administration, U.S. Department of Transportation, U.S. Department of
Housing and Urban Development, and Student Loan Marketing Association. These
securities generally are not backed by the full faith and credit of the United
States.

Private Mortgage Pass-Through Securities. Private mortgage pass-through
securities ("Private Pass-Throughs") are structured similarly to the GNMA, FNMA
and FHLMC mortgage pass-through securities described above and are issued by
originators of and investors in mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. Private Pass-Throughs constituting ARMS
are backed by a pool of conventional adjustable rate mortgage loans. Since
Private Pass-Throughs typically are not guaranteed by an entity having the
credit status of GNMA, FNMA or FHLMC, such securities generally are structured
with one or more types of credit enhancement.

GNMA Certificates. GNMA is a wholly-owned corporate instrumentality of the
United States within the Department of Housing and Urban Development. The
National Housing Act of 1934, as amended (the "Housing Act"), authorizes GNMA to
guarantee the timely payment of the principal of and interest on certificates
that are based on and backed by a pool of mortgage loans insured by the Federal
Housing Administration under the Housing Act, or Title V of the Housing Act of
1949 ("FHA Loans"), or guaranteed by the Veteran's Administration under the
Servicemen's Readjustment Act of 1944, as amended ("VA Loans"), or by pools of
other eligible mortgage loans. The Housing Act provides that the full faith and
credit of the U.S. government is pledged to the payment of all amounts that may
be required to be paid under any guarantee. In order to meet its obligations
under such guarantee, GNMA is authorized to borrow from the U.S. Treasury with
no limitations as to amount.

GNMA Certificates will represent a pro rata interest in one or more pools of
the following types of mortgage loans: (i) fixed rate level payment mortgage
loans, (ii) fixed rate graduated payment mortgage loans; (iii) fixed rate
growing equity mortgage loans; (iv) fixed rate mortgage loans secured by
manufactured (mobile) homes; (v) mortgage loans on multifamily residential
properties under construction; (vi) mortgage loans on completed multifamily
projects; (vii) fixed rate mortgage loans as to which escrowed funds are used to
reduce the borrower's monthly payments during the early years of the mortgage
loans ("buydown" mortgage loans); (viii) mortgage loans that provide for
adjustments in payments based on periodic changes in interest rates or in other
payment terms of the mortgage loans; and (ix) mortgage-backed serial notes. All
of these mortgage loans will be FHA Loans or VA Loans and, except as otherwise
specified above, will be fully-amortizing loans secured by first liens on
one- to four-family housing units.

FNMA Certificates. FNMA is a federally chartered and privately owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act. FNMA was originally established in 1938 as a U.S.
government agency to provide supplemental liquidity to the mortgage market and
was transformed into a stockholder owned and privately managed corporation by
legislation enacted in 1968. FNMA provides funds to the mortgage market
primarily by purchasing home mortgage loans from local lenders, thereby
replenishing their funds for additional lending. FNMA acquires funds to purchase
home mortgage loans from many capital market investors that may not ordinarily
invest in mortgage loans directly, thereby expanding the total amount of funds
available for housing.

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Each FNMA Certificate will entitle the registered holder thereof to receive
amounts representing such holder's pro rata interest in scheduled principal
payments and interest payments (at such FNMA Certificate's pass-through rate,
which is net of any servicing and guarantee fees on the underlying mortgage
loans), and any principal prepayments on the mortgage loans in the pool
represented by such FNMA Certificate and such holder's proportionate interest in
the full principal amount of any foreclosed or otherwise finally liquidated
mortgage loan. The full and timely payment of principal of and interest on each
FNMA Certificate will be guaranteed by FNMA, which guarantee is not backed by
the full faith and credit of the U.S. government.

Each FNMA Certificate will represent a pro rata interest in one or more pools
of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage loans that
are not insured or guaranteed by any governmental agency) of the following
types: (i) fixed rate level payment mortgage loans; (ii) fixed rate growing
equity mortgage loans; (iii) fixed rate graduated payment mortgage loans; (iv)
variable rate California mortgage loans; (v) other adjustable rate mortgage
loans; and (vi) fixed rate loans secured by multifamily projects.

FHLMC Certificates. FHLMC is a corporate instrumentality of the United States
created pursuant to the Emergency Home Finance Act of 1970, as amended (the
"FHLMC Act"). FHLMC was established primarily for the purpose of increasing the
availability of mortgage credit for the financing of needed housing. The
principal activity of FHLMC currently consists of the purchase of first lien,
conventional, residential mortgage loans and participation interests in such
mortgage loans and the resale of the mortgage loans so purchased in the form of
mortgage securities, primarily Freddie Mac Certificates.

FHLMC guarantees to each registered holder of a FHLMC Certificate the timely
payment of interest at the rate provided for by such FHLMC Certificate, whether
or not received. Freddie Mac also guarantees to each registered holder of a
FHLMC Certificate ultimate collection of all principal of the related mortgage
loans, without any offset or deduction, but does not, generally, guarantee the
timely payment of scheduled principal. FHLMC may remit the amount due on account
of its guarantee of collection of principal at any time after default on an
underlying mortgage loan, but not later than 30 days following (i) foreclosure
sale, (ii) payment of a claim by any mortgage insurer, or (iii) the expiration
of any right of redemption, whichever occurs later, but in any event no later
than one year after demand has been made upon the mortgagor for accelerated
payment of principal. The obligation of FHLMC under its guarantee are
obligations solely of FHLMC and are not backed by the full faith and credit of
the U.S. government.

FHLMC Certificates represent a pro rata interest in a group of mortgage loans
(a "FHLMC Certificate group") purchased by FHLMC. The mortgage loans underlying
the FHLMC Certificates will consist of fixed rate or adjustable rate mortgage
loans with original terms to maturity of between ten and thirty years,
substantially all of which are secured by first liens on one- to four-family
residential properties or multifamily projects. Each mortgage loan must meet the
applicable standards set forth in the FHLMC Act. A FHLMC Certificate group may
include whole loans, participation interests in whole loans and undivided
interests in whole loans and participations comprising another FHLMC Certificate
group.

Collateralized Mortgage Obligations and Multiclass Pass-Through Securities.
Collateralized mortgage obligations ("CMOs") are debt obligations which are
secured by mortgage loans or other Mortgage-Backed Securities (such collateral
is 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 may be issued by agencies or instrumentalities of
the U.S. government, or by private originators of, or investors in, mortgage
loans, including savings and loan associations, mortgage banks, commercial
banks, investment banks and special purpose subsidiaries of the foregoing. The
issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage
Investment Conduit (a "REMIC"). All future references to CMOs shall also be
deemed to include REMICs.The Fund will not invest in REMIC residuals or other
CMO residuals.

In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," may be issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the underlying 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

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all classes of a CMO 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 many ways. By investing in particular tranches
of a CMO with specified cash flows, the Fund may gain more predictability of
cash flows than if it had invested in the underlying Mortgage Assets. Generally,
the more predictable the cash flow of a CMO tranche, the lower the anticipated
yield will be on that tranche at the time of issuance relative to prevailing
market yields on Mortgage-Backed Securities. As part of the process of creating
more predictable cash flows on most of the tranches in a series of CMOs, one or
more tranches generally must be created that absorb most of the volatility in
the cash flows on the underlying Mortgage Assets. The yields on these tranches
are generally higher than prevailing market yields on Mortgage-Backed Securities
with similar average lives. Because of the uncertainty of the cash flows on
these tranches, and the sensitivity thereof to changes in prepayment rates on
the underlying Mortgage Assets, the market prices of and yield on these tranches
tend to be more volatile.

One or more tranches of a CMO may have coupon rates which reset periodically
at a specified increment over an index such as LIBOR. These adjustable rate
tranches are known as "floating rate CMOs," "inverse floating CMOs" and
"interest only CMOs". Floating rate CMOs may be backed by fixed rate or
adjustable rate mortgages; to date, fixed rate mortgages have been more commonly
utilized for this purpose. Floating rate CMOs are typically issued with lifetime
caps on the coupon rate thereon. These caps, similar to the caps on adjustable
rate mortgages, represent a ceiling beyond which the coupon rate on a floating
rate CMO may not be increased regardless of increases in the interest rate index
to which the floating rate CMO is geared. Floating rate CMOs pay interest at
rates that vary inversely with changes in market rates of interest and may pay a
rate of interest determined by applying a multiple to the floating rate.
Accordingly, when market rates of interest decrease, the change in value of
inverse floating CMOs owned by the Fund will have a positive effect on the net
asset value of the Fund and when market rates of interest increase, the change
in value of inverse floating rate CMOs owned by the Fund will have a negative
effect on the net asset value of the Fund. In addition, the extent of increases
and decreases in the net asset value of the Fund in response to changes in
market rates of interest generally will be larger than comparable changes in the
net asset value of the Fund if the Fund held an equal principal amount of a
fixed rate CMO security having similar credit quality, redemption provisions and
maturity.

The Fund also may invest in, among other things, 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 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. The Fund will not, however,
invest in CMO residuals.

In reliance on an SEC interpretation, the Fund's investment in certain
qualifying collateralized mortgage obligations (CMOs), including CMOs that have
elected to be treated as Real Estate Mortgage Investment Conduits (REMICs), are
not subject to the 1940 Act's limitation on acquiring interests in other
investment companies. In order to be able to rely on the SEC's interpretation,
the CMOs and REMICs must be unmanaged, fixed-asset issuers that (a) invest
primarily in mortgage-backed securities, (b) do not issue redeemable securities,
(c) operate under general exemptive orders exempting them from all provisions of
the 1940 Act, and (d) are not registered or regulated under the 1940 Act as
investment companies. To the extent that the Fund selects CMOs or REMICs that do
not meet the above requirements, the Fund may not invest more than 10% of its
assets in all such entities and may not acquire more than 3% of the voting
securities of any single such entity.

Stripped Mortgage-Backed Securities. Stripped Mortgage-Backed Securities are
derivative multi-class mortgage securities. Stripped Mortgage-Backed Securities
may be issued by agencies or instrumentalities of the U.S. government, or by
private originators of, or investors in, mortgage loans, including savings and
loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. Stripped Mortgage-Backed
Securities issued by parties other than agencies or instrumentalities of the
U.S. Government are considered, under current guidelines of the staff of the
Securities and Exchange Commission (the "SEC"), to be illiquid securities.

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Stripped Mortgage-Backed Securities are structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of Mortgage Assets. A common type of Stripped Mortgage-Backed Securities
will have one class receiving a small portion of the interest and a larger
portion of the principal from the Mortgage Assets, while the other classes will
receive primarily interest and only a small portion of the principal. 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 yields to maturity on IOs and POs are
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and principal payments may have a material
effect on yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, the Fund may not fully recoup
its initial investment in IOs. Conversely, if the underlying mortgage assets
experience less than anticipated prepayments of principal, the yield on POs
could be materially adversely affected. The market value of such Stripped
Mortgage-Backed Securities, including adjustable rate U.S. government IOs, are
subject to greater risk of fluctuation in response to changes in market interest
rates than other adjustable rate securities, and such greater risk of
fluctuation may adversely affect the ability of the Fund to achieve its
investment objective of maintaining a relatively stable net asset value.

Types of Credit Support. To lessen the effect of failures by obligors on
underlying mortgages to make payments, ARMS and other Mortgage-Backed Securities
may contain elements of credit support. Such credit support falls into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches. The Fund will not pay any additional fees for such credit support,
although the existence of credit support may increase the price of a security.

The ratings of securities for which third-party credit enhancement provides
liquidity protection or protection against losses from default are generally
dependent upon the continued creditworthiness of the enhancement provider. The
ratings of such securities could be subject to reduction in the event of
deterioration in the creditworthiness of the credit enhancement provider even in
cases where the delinquency and loss experience on the underlying pool of assets
is better than expected.

Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed those required to make payment on the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information with
respect to the level of credit risk associated with the underlying assets. Other
information which may be considered include demographic factors, loan
underwriting practices and general market and economic conditions. Delinquency
or loss in excess of that which is anticipated could adversely affect the return
on an investment in such a security.

Adjustable Rate Mortgage-Backed Securities. Adjustable rate Mortgage-Backed
Securities are debt securities having interest rates which are adjusted or reset
at periodic intervals ranging, in general, from one month to three years, based
on a spread over a specific interest rate or interest rate index. There are
three main categories of indices: (i) those based on U.S. Government Securities,
(ii) those derived from a calculated measure such as a cost of funds index and
(iii) those based on a moving average of interest rates, including mortgage
rates. Commonly utilized indices include, for example, the One Year Constant
Maturity Treasury Index, the London Interbank Offered Rate (LIBOR), the Federal
Home Loan Bank Cost of Funds, the prime rate and commercial paper rates.

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Adjustable rate securities allow the Fund to participate in increases in
interest rates through periodic upward adjustments of the coupon rates of such
securities, resulting in higher yields. During periods of declining interest
rates, however, coupon rates may readjust downward resulting in lower yields to
the Fund. During periods of rising interest rates, changes in the coupon rate of
adjustable rate securities will lag behind changes in the market interest rate,
which may result in such security having a lower value until the coupon resets
to reflect more closely market interest rates. Investors who redeem shares of
the Fund prior to the time the coupon rates of the Fund's portfolio securities
are adjusted could suffer some loss on their investment in the Fund's shares.
Adjustable rate securities typically limit the maximum amount the coupon rate
may be adjusted during any adjustment period, in any one year and during the
term of the security. During periods of significant fluctuations in market rates
of interest the net asset value of the Fund may fluctuate more significantly
since these limits may prevent the Fund's portfolio securities from fully
adjusting to reflect market rates.

The Fund may invest in adjustable rate securities with interest rates that
adjust or vary inversely to changes in market interest rates. Such securities,
which are referred to as "inverse floating obligations," provide opportunities
for high current income, but the market value of such securities may be more
volatile in response to changes in market interest rates. Certain of such
inverse floating obligations have coupon rates that adjust to changes in market
interest rates to a greater degree than the change in the market rate and
accordingly have investment characteristics similar to investment leverage. As a
result, the market value of such inverse floating obligations are subject to
greater risk of fluctuation than other adjustable rate securities which do not
vary inversely to changes in market interest rates, and such greater risk of
fluctuation may adversely affect the ability of the Fund to achieve its
investment objective of maintaining a relatively stable net asset value.

ASSET-BACKED SECURITIES. "Asset-Backed Securities" have structural
characteristics similar to Mortgage-Backed Securities but have underlying assets
that are not mortgage loans or interests in mortgage loans. Through the use of
trusts and special purpose corporations, various types of assets, primarily
automobile and credit card receivables and home equity loans, have been
securitized in pass-through structures similar to the mortgage pass-through
structures or in a pay-through structure similar to the CMO structure. In
general, these types of loans are of shorter average life than mortgage loans
and are less likely to have substantial prepayments.

Asset-Backed Securities present certain risks that are not presented by
Mortgage-Backed Securities, including the risk that these securities do not have
the benefit of a security interest in the related collateral. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, some of which
give such debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the balance due. Most issues of Asset-Backed Securities backed
by automobile receivables permit the servicers of such receivable to retain
possession of the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser would acquire
an interest superior to that of the holders of the related Asset-Backed
Securities. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirement under state laws, the trustee for the
holders of Asset-Backed Securities backed by automobile receivables may not have
a proper security interest in the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.

FLOATING AND VARIABLE RATE INCOME SECURITIES. Income securities may provide
for floating or variable rate interest or dividend payments. The floating or
variable rate may be determined by reference to a known lending rate, such as a
bank's prime rate, a certificate of deposit rate or the London Inter Bank
Offered Rate (LIBOR). Alternatively, the rate may be determined through an
auction or remarketing process. The rate may also be indexed to changes in the
values of interest rate or securities indexes, currency exchange rates or other
commodities. The amount by which the rate paid on an income security may
increase or decrease may be subject to periodic or lifetime caps. Floating and
variable rate income securities include derivative securities whose rates vary
inversely with changes in market rates of interest. Such securities may also pay
a rate of interest determined by applying a multiple to the variable rate. The
extent of increases and decreases in the value of securities whose rates vary
inversely with changes in market rates of interest generally will be larger

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than comparable changes in the value of an equal principal amount of a fixed
rate security having similar credit quality, redemption provisions and maturity.

Federal tax law requires that a holder of a zero coupon security accrue a
portion of the original issue discount on the security and to include the
"interest" on payment-in-kind securities as income each year, even though the
holder receives no interest payment on the security during the year. Federal tax
law also requires that entities such as the Fund which seek to qualify for
pass-through federal income tax treatment as regulated investment companies
distribute substantially all of their net investment income each year, including
non-cash income. Accordingly, although the Fund will receive no payments on its
zero coupon or payment-in-kind securities prior to their maturity or
disposition, it will have income attributable to such securities, and it will be
required, in order to maintain the desired tax treatment, to include in its
dividends an amount equal to the income attributable to its zero coupon and
payment-in-kind securities. Such dividends will be paid from the cash assets of
the Fund, from borrowings or by liquidation of portfolio securities, if
necessary, at a time that the Fund otherwise might not have done so. To the
extent the proceeds from any such dispositions are used by the Fund to pay
distributions, the Fund will not be able to purchase additional income-producing
securities with such proceeds, and as a result the Fund's current income
ultimately may be reduced. See "Taxation."

PREMIUM SECURITIES. The fund may invest in income securities bearing coupon
rates higher than prevailing market rates. Such "premium" securities are
typically purchased at prices greater than the principal amounts payable on
maturity. The Fund will not amortize the premium paid for such securities in
calculating its net investment income. As a result, in such cases the purchase
of such securities provides the Fund a higher level of investment income
distributable to shareholders on a current basis than if the Fund purchased
securities bearing current market rates of interest. Although such securities
bear coupon rates higher than prevailing market rates, because they are
purchased at a price in excess of par value, the yield earned by the Fund on
such investments may not exceed prevailing market yields. If an issuer were to
redeem securities held by a Fund during a time of declining interest rates, the
Fund may not be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed. If securities purchased by a Fund
at a premium are called or sold prior to maturity, the Fund will recognize a
capital loss to the extent the call or sale price is less than the purchase
price. Additionally, the Fund will recognize a capital loss if it holds such
securities to maturity.

CONVERTIBLE SECURITIES. Convertible securities are bonds, debentures, notes,
preferred stocks or other securities that may be converted into or exchanged for
a specified amount of common stock of the same or a different issuer within a
particular period of time and at a specified price or formula. A convertible
security entitles the holder to receive interest generally paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Convertible securities have
unique investment characteristics in that they generally (i) have higher yields
than common stocks, but lower yields than comparable non-convertible income
securities, (ii) are less subject to fluctuation in value than the underlying
stock since they have fixed income characteristics, and (iii) provide the
potential for capital appreciation if the market price of the underlying common
stock increases. Most convertible securities currently are issued by domestic
companies, although a substantial Eurodollar convertible securities market has
developed, and the markets for convertible securities denominated in local
currencies are increasing.

The value of a convertible security is a function of its "investment value"
(determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest

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rates, with investment value declining as interest rates increase and increasing
as interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price of
the underlying common stock. If the conversion value is low relative to the
investment value, the price of the convertible security is governed principally
by its investment value. Generally the conversion value decreases as the
convertible security approaches maturity. To the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price of
the convertible security will be increasingly influenced by its conversion
value. A convertible security generally will sell at a premium over its
conversion value by the extent to which investors place value on the right to
acquire the underlying common stock while holding a fixed income security.

EQUITY FEATURES. Income securities may involve equity features, such as
contingent interest or participations based on revenues, sales or profits (i.e.,
interest of other payments, often in addition to a fixed rate of return, that
are based on the borrower's attainment of specified levels of revenues, sales or
profits). At times, the Fund may also acquire warrants and other equity
securities in connection with the purchase of income securities. Warrants are
securities permitting, but not obligating, their holder to subscribe for other
securities or commodities. Warrants do not carry with them the right to
dividends or voting rights with respect to the securities that they entitle
their holder to purchase, and they do not represent any rights in the assets of
the issuer. As a result, warrants may be considered more speculative than
certain other types of investments.

PREFERRED STOCK. Preferred stock generally has a preference as to dividends
and upon liquidation over an issuer's common stock but ranks junior to debt
securities in an issuer's capital structure. Preferred stock generally pays
dividends in cash (or additional shares of preferred stock) at a defined rate
but, unlike interest payments on debt securities, preferred stock dividends are
payable only if declared by the issuer's board of directors. Dividends on
preferred stock may be cumulative, meaning that, in the event the issuer fails
to make one or more dividend payments on the preferred stock, no dividends may
be paid on the issuer's common stock until all unpaid preferred stock dividends
have been paid. Preferred stock also may provide that, in the event the issuer
fails to make a specified number of dividend payments, the holders of the
preferred stock will have the right to elect a specified number of directors to
the issuer's board. Preferred stock also may be subject to optional or mandatory
redemption provisions.

COMMON STOCK. Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without preference over any other shareholder or class of shareholders,
after making required payments to holders of such entity's preferred stock and
other senior equity. Common stock usually carries with it the right to vote and
frequently an exclusive right to do so. In selecting common stocks for
investment, the Fund will focus both on the security's dividend paying capacity
and on its potential for appreciation.

BRADY BONDS. The Fund may invest in Brady Bonds and other sovereign debt of
countries that have restructured or are in the process of restructuring
sovereign debt pursuant to the Brady Plan. "Brady Bonds" are debt securities
issuer under the framework of the Brady Plan, an initiative announced by former
U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor
nations to restructure their outstanding external commercial bank indebtedness.
The Brady Plan framework contemplates the exchange of commercial bank debt for
newly issued Brady Bonds. Brady Bonds may also be issued in respect of new money
being advanced by existing lenders in connection with the debt restructuring.
Certain Brady Bonds have been collateralized as to principal due at maturity by
U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of
such Brady Bonds.

Brady Plan debt restructurings totalling more than $80 billion have been
implemented to date in Mexico, Costa Rica, Venezuela, Uruguay, Nigeria,
Argentina and the Philippines and, in addition, Brazil has announced intentions
to issue Brady Bonds. Brady Bonds have been issued only recently, and
accordingly do not have a long payment history. Agreements implemented under the
Brady Plan to date are designed to achieve debt and debt-service reduction
through specific options negotiated by a debtor nation with its creditors. As a
result, the financial packages offered by each country differ. Brady Bonds
issued to date include bonds issued at 100% of face value of such debt, which
carry a below-market stated rate of interest (generally known as par bonds),
bonds issued at a discount from the face value of such debt (generally known as

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discount bonds), bonds bearing an interest rate which increases over time and
bonds issued in exchange for the advancement of new money by existing lenders.

In light of the risk of Brady Bonds including, among other factors, the
history of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are to be
viewed as speculative. The Fund may purchase Brady Bonds with no or limited
collateralization, and will be relying for payment of interest and (except in
the case of principal collateralized Brady Bonds) principal primarily on the
willingness and ability of the foreign government to make payment in accordance
with terms of the Brady Bonds. Many of the Brady Bonds and other income
securities in which the Fund invests are likely to be acquired at a discount.
See "Taxation."

The Salomon Brothers Brady Bond Index provides a benchmark that can be used to
compare returns of Brady Bonds with returns in other bond markets.

OTHER SOVEREIGN-RELATED DEBT. In addition to Brady Bonds, the Fund may invest
in sovereign or sovereign-related income securities. Such obligations may
include, but are limited to, participations and assignments in sovereign bank
loans, restructured external debt that has not undergone a Brady-style debt
exchange, and internal government debt such as Mexican Treasury Bills known as
Certificados de la Tesoreira ("CETES"), Argentine Bonos del Tesoro ("BOTE"),
Bonos de Inversion y Crecimiento-Quinta Serie ("BIC V") and Venezuelan zero
coupon notes.

The sovereign related income securities in which the Fund may invest generally
consist of obligations issued or backed by national, state or provincial
governments or similar political subdivisions or central banks in foreign
countries. Sovereign related income securities also include debt obligations of
supranational entities, which include international organizations designated or
backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
World Bank), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.

Sovereign related income securities also include income securities of
"quasi-governmental agencies" and income securities denominated in multinational
currency units of an issuer (including supranational issuers). An example of a
multinational currency unit is the European Currency Unit ("ECU"). An ECU
represents specified amounts of the currencies of certain member states of the
European Economic Community. The specific amounts of currencies comprising the
ECU may be adjusted by the Council of Ministers of the European Community to
reflect changes in relative values of the underlying currencies. European
supranational entities, in particular, issue ECU-denominated obligations. Income
securities of quasi-governmental agencies are issued by entities owned by either
a national, state or equivalent government or are obligations of a political
unit that is not backed by the national government's full faith and credit and
general taxing powers.

DEPOSITORY RECEIPTS. Some of the securities in the Fund may be in the form of
depository receipts. Depository receipts usually represent common stock or other
equity securities of non-domestic issuers deposited with a custodian in a
depository. The underlying securities are usually withdrawable at any time by
surrendering the depository receipt. Depository receipts are usually denominated
in U.S. dollars and dividends and other payments from the issuer are converted
by the custodian into U.S. dollars before payment to receipt holders. In other
respects depository receipts for foreign securities have the same
characteristics as the underlying securities. Depository receipts that are not
sponsored by the issuer may be less liquid and there may be less readily
available public information about the issuer.

STRUCTURED INVESTMENTS. The Fund may invest a portion of its assets in
interests in entities organized and operated solely for the purpose of
restructuring the investment characteristics of other income securities,
including income securities issued by foreign governments. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans or
Brady Bonds) and the issuance by that entity of one or more classes of
securities ("Structured Investments") backed by, or representing interests in,
the underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Investments is dependent on

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the extent of the cash flow on the underlying instruments. The Fund may invest
in a class of Structured Investments that is subordinated to the right of
payment of another class. Subordinated Structured Investments typically have
higher yields and present greater risks than unsubordinated Structured
Investments.

INDEXED INCOME SECURITIES. The Fund may invest in income securities issued by
banks and other business entities that are indexed to certain specific foreign
currency exchange rates, interest rates or other reference rates. The terms of
such securities provide that their principal amount is adjusted upwards or
downwards (but ordinarily not below zero) at maturity to reflect changes in the
exchange rate between two currencies (or other rates) while the obligations are
outstanding. While such securities offer the potential for an attractive rate of
return, they also entail the risk of loss of principal.

INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund may invest in other
investment companies whose investment objectives and policies are consistent
with those of the Fund. In accordance with the 1940 Act, the Fund may invest up
to 10% of its total assets in securities of other investment companies. In
addition, under the 1940 Act the Fund may not own more than 3% of the total
outstanding voting stock of any investment company and not more than 5% of the
value of the Fund's total assets may be invested in the securities of any
investment company. If the Fund acquires shares in investment companies,
stockholders would bear both their proportionate share of expenses in the Fund
(including investment advisory and administrative fees) and, indirectly, the
expenses of such investment companies (including investment advisory and
administrative fees).

SPECIAL RISK FACTORS

INVESTMENT IN LOWER GRADE INCOME SECURITIES. A substantial portion of the
Fund's assets may be invested in lower grade securities. Debt securities rated
BB or lower by S&P or Ba or lower by Moody's are deemed by S&P and Moody's to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal and may involve major risk exposure to adverse conditions.
The lower grade income securities in which the Fund may invest may include
securities having the lowest ratings assigned by S&P or Moody's and, together
with comparable unrated securities, may include securities in default or that
face the risk of default with respect to the payment of principal or interest.
The Fund may invest in income securities rated in the lowest rating categories.
These securities are considered to have extremely poor prospects of ever
attaining any real investment standing. See the Statement of Additional
Information for a more complete description of S&P and Moody's ratings.

Lower grade income securities generally offer a higher yield than that
available from higher grade income securities. However, lower grade income
securities involve higher risks, in that they are especially subject to adverse
changes in general economic conditions, the industries in which the issuers are
engaged, the financial condition of the issuers and prevailing interest rates.
Issuers of lower grade securities are often highly leveraged and may not have
available to them more traditional methods of financing. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could adversely affect their ability to make
payments of principal and interest and increase the possibility of default. The
issuer's ability to service its debt obligations may also be adversely affected
by specific

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developments affecting the issuer, such as the issuer's inability to meet
specific projected business or revenue forecasts. Similarly, certain emerging
market governments that issue lower grade income securities are among the
largest debtors to commercial banks, foreign governments and supranational
organizations and may not be able or willing to obtain additional financing.

Lower grade income securities frequently have call or buy-back features which
permit an issuer to call or repurchase the security prior to maturity. If an
issuer exercises these provisions in a declining interest rate environment, the
Fund may have to reinvest in lower yielding securities, resulting in a decrease
in income earned by the Fund. The risk of loss due to default by the issuer is
also significantly greater for the holders of lower grade securities because
such securities are generally unsecured and are often subordinated to other
income securities of the issuer. To the extent the Fund is required to seek
recovery upon a default in the payment of principal or interest on its portfolio
holdings, the Fund may incur additional expenses and, with respect to foreign
lower grade income securities, may have limited legal recourse in the event of a
default.

With respect to many foreign countries, there is the possibility of
nationalization, expropriation or confiscatory taxation, political instability,
increased governmental regulation, social instability or diplomatic developments
(including armed conflict) which could adversely affect the economies of such
countries or the value of the Fund's investments in those countries.

Foreign investment in certain countries is restricted or controlled to varying
degrees. These restrictions or controls may at times limit or preclude foreign
investment in certain emerging income securities and increase the costs and
expenses of the Fund. Certain countries require governmental approval prior to
investments by foreign persons, limit the amount of investment by foreign
persons in a particular issuer, limit the investment by foreign persons only to
a specific class of securities of an issuer that may have less advantageous
rights than the classes available for purchase by domiciliaries of the countries
and/or impose additional taxes on foreign investors. Certain countries may also
restrict investment opportunities in industries deemed important to national
interests. In addition, certain countries may require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. If a deterioration occurs in an emerging market
country's balance of payments, the country might impose temporary restrictions
on foreign capital remittances. Investing in local markets in certain countries
may require the Fund to adopt special procedures, seek local government
approvals or take other actions, each of which may involve additional costs to
the Fund.

Disclosure and regulatory standards in many respects are less stringent in
many countries than in the U.S. There also may be a lower level of monitoring
and regulation of securities markets and the activities of investors in such
markets, and enforcement of existing regulations has in many instances been
limited. Many of the foreign income securities held by the Fund will not be
registered with the SEC, nor will the issuers thereof be subject to SEC
reporting requirements. Accordingly, there may be less publicly available
information concerning foreign issuers than is available concerning domestic
companies. Foreign companies, and in particular, companies in emerging market
countries are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those applicable to domestic companies.

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Because the Fund may invest in non-U.S. dollars-denominated securities,
changes in foreign currency exchange rates will affect the Fund's net asset
value, the value of dividends and interest earned, gains and losses realized on
the sale of securities and net investment income to be distributed to
shareholders. If the value of a foreign currency rises against the U.S. dollar,
the value of Fund assets denominated in such currency will increase;
correspondingly, if the value of a foreign currency declines against the U.S.
dollar, the value of Fund assets denominated in such currency will decrease. The
exchange rates between the U.S. dollar and other currencies can be volatile. In
addition, there may be less timely and accurate information with respect to
general economic conditions and trends in countries in which issuers of foreign
income securities are located, particularly in emerging market countries.

The costs associated with investing in foreign income securities frequently
are higher than those attributable to domestic investing. Investment income on
certain foreign securities in which the Fund may invest may be subject to
foreign withholding or other government taxes.

Foreign markets also have different clearance and settlement procedures, and
in certain markets settlement may fail to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems could result in losses to the Fund due to
subsequent declines in the value of such portfolio security.

SOVEREIGN DEBT. Certain countries have historically experienced, and may
continue to experience, high rates of inflation, high interest rates, exchange
rate fluctuations, large amounts of external debt, balance of payment and trade
difficulties and extreme poverty and unemployment. The issuer of sovereign debt
or the governmental authorities that control the repayment of sovereign debt may
be unable or unwilling to repay principal or interest when due in accordance
with the terms of such debt. Sovereign debt differs from debt obligations issued
by private entities in that, generally, remedies for defaults must be pursued in
the courts of the defaulting party. Legal recourse is therefore limited.

Certain emerging market countries are among the largest debtors to commercial
banks and foreign governments. At times certain emerging market countries have
declared moratoria on the payment of principal and interest on external debt;
such moratoria are currently in effect in certain Latin American countries.
Since 1982, certain emerging market countries have experienced difficulty in
servicing their sovereign debt on a timely basis which led to defaults on
certain obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds, and
obtaining new credit to finance interest payments. Holders of sovereign debt,
including the Fund, may be requested to participate in the rescheduling of such
debt and to extend further loans to sovereign debtors. The interests of holders
of sovereign debt could be adversely affected in the course of restructuring
arrangements. Furthermore, some of the participants in the secondary market for
sovereign debt may also be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to other
market participants.

INVESTMENT PRACTICES

STRATEGIC TRANSACTIONS. The Fund may, but is not required to, utilize various
other investment strategies as described below to hedge various market risks
(such as interest rates, currency exchange rates and broad or specific market
movements) or to manage the effective maturity or duration of the Fund's 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 instruments such as exchange-listed and over-the-counter put
and call options on securities, equity and 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 and enter into various

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currency transactions such as currency forward contracts, currency futures
contracts, currency swaps or options on currencies or currency futures
(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 or exchange rate 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.

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 currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. 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 income of the Fund. See "Tax Status" in the Prospectus.

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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 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.

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 (other than OTC currency 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, currency 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 S&P
or "P-1" from 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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The Fund may purchase and sell call options on securities, including U.S.
Treasury and agency securities, municipal obligations, mortgage-backed
securities corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments that are traded on domestic and foreign
securities exchanges and in the over-the-counter markets and on securities
indices, currencies and futures contracts. 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. In selling calls on securities not owned by the Fund, the Fund may be
required to acquire the underlying security at a disadvantageous price in order
to satisfy its obligations with respect to the call.

The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, municipal
obligations corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments (whether or not it holds the above
securities in its portfolio) and on securities indices, currencies and futures
contracts other than futures or individual corporate debt and individual equity
securities. 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, currency, equity or 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 to
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. 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) for other than for bona fide hedging purposes if,
immediately thereafter, the sum of the amount of its initial margin and

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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. Certain state securities laws to
which the Fund may be subject may further restrict the Fund's ability to engage
in transactions in futures contracts and related options. The segregation
requirements with respect to futures contracts and options thereon are described
below.

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.

CURRENCY TRANSACTIONS. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holding denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. The Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations of such
Counterparties have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
currency options) are determined to be of equivalent credit quality by the
Adviser.

The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.

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denominated, and to buy U.S. dollars. For example, if the Adviser considers the
Austrian schilling is linked to the German deutschemark (the "D-mark"), the Fund
holds securities denominated in schillings and the Adviser believes that that
the value of schillings will decline against the U.S. dollar, the Adviser may
enter into a contract to sell D-marks and buy dollars. Currency hedging involves
some of the same risks and considerations as other transactions with similar
instruments. Currency transactions can result in losses to the Fund if the
currency being hedged fluctuates in value to a degree or in a direction that is
not anticipated. Further, there is the risk that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.

RISKS OF CURRENCY TRANSACTIONS. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.

COMBINED TRANSACTIONS. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, multiple
currency transactions (including forward currency contracts), multiple interest
rate transactions and any combination of futures, options, currency 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 interest 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, currency 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, to protect against currency
fluctuations, 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. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them. 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

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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. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and agents utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid. Caps,
floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed and, accordingly, they are less
liquid than swaps.

EURODOLLAR INSTRUMENTS. The Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. The Fund might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and income
instruments are linked.

RISKS OF STRATEGIC TRANSACTIONS OUTSIDE THE UNITED STATES. When conducted
outside the United States, Strategic Transactions may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantee, and are subject to the risk of governmental actions affecting
trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (v) lower trading volume
and liquidity.

USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
securities 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 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 cash or liquid
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 cash or
liquid securities 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 cash or liquid securities equal to the exercise price.

Except when the Fund enters into a forward contract for the purchase or sale
of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate cash or liquid securities equal to the amount of the Fund's
obligation.

OTC options entered into by the Fund, including those on securities,
currencies, 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

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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 or with an election of either
physical delivery or cash settlement, 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.

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 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.

The Fund's activities involving Strategic Transactions may be limited by the
requirements of the Code for qualification as a regulated investment company.
See "Tax Status of the Fund."

REPURCHASE AGREEMENTS. The Fund may use up to 20% of its assets to enter into
repurchase agreements with selected commercial banks and broker-dealers, under
which the Fund acquires securities and agrees to resell the securities at an
agreed upon time and at an agreed upon price. The Fund accrues as interest the
difference between the amount it pays for the securities and the amount it
receives upon resale. 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. The Adviser will monitor the
value of the underlying security in this regard. The Fund will enter into
repurchase agreements only with commercial banks whose deposits are insured by
the Federal Deposit Insurance Corporation and whose assets exceed $500 million
or broker-dealers who are registered with the SEC. 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 and will monitor its
credit-worthiness on an ongoing basis. In the event of default by such party,
the delays and expenses potentially involved in establishing the Fund's rights
to, and in liquidating, the security may result in loss to the Fund. The Fund's
ability to invest in repurchase agreements that mature in more than seven days
is subject to an investment policy that limits the Fund's investments in
"illiquid" securities, including such repurchase agreements, to 15% of the
Fund's net assets.

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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 liquid 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 objectives and policies and not for the
purposes of investment leverage. No specific limitation exists as to the
percentage of the Fund's assets which may be used to acquire securities on a
"when issued" or "delayed delivery" basis.

SHORT SALES. The Fund may make short sales of securities. A short sale is a
transaction in which the Fund sells a security it does not own in anticipation
that the market price of that security will decline. The Fund expects to make
short sales both to obtain capital gains from anticipated declines in securities
and as a form of hedging to offset potential declines in long positions in the
same or similar securities. The short sale of a security is considered a
speculative investment technique.

When the Fund makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale in order to
satisfy its obligation to deliver the security upon conclusion of the sale. The
Fund may have to pay a fee to borrow particular securities and is often
obligated to pay over any payments received on such borrowed securities.

The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other highly liquid securities. The Fund will also be required to
deposit similar collateral with its Custodian to the extent, if any, necessary
so that the value of both collateral deposits in the aggregate is at all times
equal to the greater of the price at which the security is sold short or 100% of
the current market value of the security sold short. Depending on arrangements
made with the broker-dealer from which it borrowed the security regarding
payment over of any payments received by the Fund on such security, the Fund may
not receive any payments (including interest) on its collateral deposited with
such broker-dealer. If the price of the security sold short increases between
the time of the short sale and the time the Fund replaces the borrowed security,
the Fund will incur a loss; conversely, if the price declines, the Fund will
realize a capital gain. Any gain will be decreased, and any loss increased, by
the transaction costs described above. Although the Fund's gain is limited to
the price at which it sold the security short, its potential loss is
theoretically unlimited.

The market value of the securities sold short of any one issuer will not
exceed either 5% of the Fund's total assets or 5% of such issuer's voting
securities. The Fund will not make a short sale, if, after giving effect to such
sale, the market value of all securities sold short exceeds 25% of the value of
its assets or the Fund's aggregate short sales of a particular class of
securities exceeds 25% of the outstanding securities of that class. The Fund may
also make short sales "against the box" without respect to such limitations. In
this type of short sale, at the time of the sale, the Fund owns or has the
immediate and unconditional right to acquire at no additional cost the identical
security.

LOANS OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to selected commercial
banks or broker-dealers up to a maximum of 50% of the assets of the Fund. Such
loans must be callable at any time and be continuously secured by collateral
deposited by the borrower in a segregated account with the Fund's custodian
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

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borrower and will monitor such credit-worthiness on an ongoing basis in as much
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.

BORROWINGS AND OTHER TECHNIQUES. 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 which is greater than the sales price. During the
reverse repurchase agreement period, the Fund continues to receive principal and
interest payments on these securities. Reverse repurchase agreements 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 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. Reverse repurchase
agreements will be treated as borrowings for the purposes of the Fund's
investment restriction on borrowings.

In order to seek high 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 and coupon) securities on a specified future
date from the same party at an agreed upon price which is less than the sales
price. During the roll period, the Fund forgoes principal and interest paid on
the 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. The cash proceeds from the sale will be maintained by the Fund in
a segregated account with its custodian in which cash, U.S. government
securities or other liquid debt obligations will be equal in value to its
obligations. Because such assets are maintained in a segregated account, the
Fund will not treat such obligations as senior securities for purposes of the
1940 Act. 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.
"Covered rolls" are not subject to these segregation requirements. Dollar rolls
will be treated as borrowings for purposes of the Fund's investment restriction
on borrowings.

Borrowing by the Fund creates an opportunity for increased net income but, at
the same time, creates special risk considerations such as changes in the net
asset value of the Shares and in the yield on 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
shareholders as dividends will be reduced.

DEFENSIVE STRATEGIES. At times conditions in the markets may, in the Adviser's
judgment, make pursuing the Fund's basic investment strategy inconsistent with
the best interests of its shareholders. At such times, the Adviser may use
alternative strategies primarily designed to reduce fluctuations in the value of
the Fund's assets. In implementing these "defensive" strategies, the Fund may
invest to a substantial degree in high-quality, short-term obligations. Such
obligations may include: obligations of the U.S. Government, its agencies or
instrumentalities; other debt securities rated within the four highest grades by
either S&P or Moody's (or comparably rated by any other NRSROs); commercial
paper rated in the highest grade by either rating service (or comparably rated
by any other nationally recognized statistical rating organization);
certificates of deposit and bankers' acceptances; repurchase agreements with
respect to any of the foregoing investments; or any other income securities that
the Adviser considers consistent with such strategy. The yield on these
securities generally is lower than the yield on the types of income securities
in which the Fund will invest in normal market conditions.

CREDIT QUALITY. The Fund's policies with respect to credit quality of
portfolio investments will apply only at the time of purchase of a security, and
the Fund will not be required to dispose of a security in the event that

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S&P or Moody's (or any other nationally recognized statistical rating
organization) or, in the case of unrated income securities, the Adviser,
downgrades its assessment of the credit characteristics of a particular issuer.
In determining whether the Fund will retain or sell such a security, the Adviser
may consider such factors as the Adviser's assessment of the credit quality of
the issuer of such security, the price at which such security could be sold and
the rating, if any, assigned to such security by other NRSROs.

LIQUIDITY. 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. The Fund may, from time to time, adopt a more
restrictive limitation with respect to investment in illiquid and restricted
securities in order to comply with the most restrictive state securities law,
currently 10%. The Fund may invest in income securities not registered under the
Securities Act of 1933 (the "Securities Act"), but eligible for resale pursuant
to Rule 144A under the Securities Act. Rule 144A establishes a "safe harbor"
from the registration requirements of the Securities Act for resales of certain
securities to qualified institutional buyers. Institutional markets for
restricted securities have developed as a result of Rule 144A, providing both
readily ascertainable values for restricted securities and the ability to
liquidate an investment. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. ("NASD"). An insufficient number of qualified buyers
interested in purchasing Rule 144A-eligible restricted securities held by the
Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices. The Fund's limitations with respect to investment in
illiquid and restricted securities does not include restricted securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, which the Board of Trustees or the Fund's investment adviser has
determined under Board-approved guidelines to be liquid. 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.

DESCRIPTION OF SECURITIES RATINGS

STANDARD & POOR'S RATINGS GROUP--A brief description of the applicable
Standard & Poor's Ratings Group (S&P) rating symbols and their meanings (as
published by S&P follows):

1. DEBT

The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely
on unaudited financial information. The ratings may be changed, suspended,
or withdrawn as a result of changes in, or unavailability of, such
information, or based on other circumstances.

The ratings are based, in varying degrees, on the following
considerations:

1. Likelihood of payment--capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance with the terms
of the obligation:

2. Nature of and provisions of the obligation:

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<PAGE> 293

3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the
laws of bankruptcy and other laws affecting creditor's rights.

LONG-TERM DEBT--INVESTMENT GRADE

AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A: Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in the higher rated categories.

BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

SPECULATIVE GRADE

BB, B, CCC, CC, C: Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as
having significantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposures
to adverse conditions.

BB: Debt rated "BB" is less vulnerable to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The "BB" rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied "BBB-" rating.

B: Debt rated "B" is more vulnerable to default but currently has the capacity
to meet interest payments and principal repayments. Adverse business, financial,
or economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.

CCC: Debt rated "CCC" is currently vulnerable to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

CC: Debt rated "CC" is currently highly vulnerable to nonpayment. The rating
"CC" is also used for debt subordinated to senior debt that is assigned an
actual or implied "CCC" rating.

C: The "C" rating may be used to cover a situation where a bankruptcy petition
has been filed, but debt service payments are continued. The rating "C"
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied "CCC-" debt rating.

D: Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

NR: Not rated.

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<PAGE> 294

R: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe payment risk -- such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.

DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.

BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA", "AA", "A," "BBB", commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.

2. COMMERCIAL PAPER

A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:

A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with a
plus sign (+) designation.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issues designated "A-1".

A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher
designations.

B Issues rated "B" are regarded as having significant speculative
characteristics.

C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

D Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period.

A commercial paper rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances.

3. VARIABLE RATE DEMAND BONDS

S&P assigns "dual" ratings to all debt issues that have a put or demand
feature as part of their structure.

The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-"). With short-term demand debt, S&P's note rating symbols are
used with the commercial paper rating symbols (for example, "SP-1+/A-1+").

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<PAGE> 295

4. NOTES

An S&P note rating reflects the liquidity factors and market access risks
unique to notes. Notes maturing in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assignment:

-- Amortization schedule (the longer the final maturity relative to other
maturities, the more likely the issue is to be treated as a note).

-- Source of payment (the more the issue depends on the market for its
refinancing, the more likely it is to be treated as a note).

Note rating symbols and definitions are as follows:

SP-1 Strong capacity to pay principal and interest. Issues determined
to possess very strong safety characteristics will be given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the
term of the notes.

SP-3 Speculative capacity to pay principal and interest.

5. PREFERRED STOCK

The preferred stock ratings are based on the following considerations:

2. Nature of, and provisions of, the issuer.

3. Relative position of the issue in the event of bankruptcy, reorganization,
or other arrangements under the laws of bankruptcy and other laws affecting
creditors' rights.

<TABLE>
<S> <C>
AAA This is the highest rating that may be assigned by S&P to a preferred stock issue
and indicates an extremely strong capacity to pay the preferred stock obligations.
AA A preferred stock issue rated "AA" also qualifies as a high-quality, fixed income
security. The capacity to pay preferred stock obligations is very strong, although
not as overwhelming as for issues rated "AAA".
A An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB An issue rated "BBB" is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a preferred stock in this
category than for issues in the "A" category.
BB Preferred stock rated "BB", "B", and "CCC" are regarded, on balance, as
B predominantly speculative with respect to the issuer's capacity to pay preferred
CCC stock obligations. "BB" indicates the lowest degree of speculation and "CCC" the
highest. While such issues will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
</TABLE>

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<PAGE> 296

<TABLE>
<S> <C>
CC The rating "CC" is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments, but that is currently paying.
C A preferred stock rated "C" is a nonpaying issue.
D A preferred stock rated "D" is a nonpaying issue with the issuer in default on debt
instruments.
NR: This indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular type
of obligation as a matter of policy.
PLUS (+) or MINUS (-): To provide more detailed indications of preferred stock
quality, ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
</TABLE>

A preferred stock rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or based on other circumstances.

MOODY'S INVESTORS SERVICE -- A brief description of the applicable Moody's
Investors Service (Moody's) rating symbols and their meanings (as published by
Moody's Investor Service) follows:

1. LONG-TERM DEBT

AA: Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than AAA securities.

CAA: Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA: Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

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<PAGE> 297

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Note: Moody's applies the numerical modifiers 1, 2, and 3 in each generic
rating classification from AA to B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or
issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

2. SHORT-TERM DEBT

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issues:

--Leading market positions in well-established industries.

--High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes of the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

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<PAGE> 298

3. PREFERRED STOCK

Preferred stock rating symbols and their definitions are as follows:

AA: An issue which is rated "AA" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance the
earnings and asset protection will remain relatively well maintained in the
foreseeable future.

A: An issue which is rated "A" is considered to be an
upper-medium-grade preferred stock. While risks are judged to be somewhat
greater than in the "AAA" and "AA" classifications, earnings and asset
protections are, nevertheless, expected to be maintained at adequate
levels.

BA: An issue which is rated "BA" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks in
this class.

B: An issue which is rated "B" generally lacks the characteristics of
a desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.

CAA: An issue which is rated "CAA" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate the
future status of payments.

CA: An issue which is rated "CA" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of eventual
payment.

C: This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from "AA" through "B" in its preferred stock rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.

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<PAGE> 299

TRUSTEES AND OFFICERS

TRUSTEES

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

B-33
<PAGE> 300

OFFICERS

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
William N. Brown........ Vice President Executive Vice President of the AC Adviser,
Date of Birth: VK/AC Holding, Inc., Van Kampen American
05/26/53 Capital, and American Capital Contractual
Services, Inc. Executive Vice President and
Director of Van Kampen American Capital
Trust Company, Van Kampen American Capital
Advisors, Inc., Van Kampen American Capital
Exchange Corporation, ACCESS and Van Kampen
American Capital Services, Inc. Prior to
September 1996, Director of American
Capital Shareholders Corporation. Vice
President of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and the
AC Adviser.
Peter W. Hegel.......... Vice President Executive Vice President of the VK Adviser,
Date of Birth: AC Adviser, Van Kampen American Capital
06/25/56 Management, Inc. and Van Kampen American
Capital Advisors, Inc. Prior to September
1996, Director of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Director
of VSM Inc. Vice President of each of the
Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Curtis W. Morell........ Vice President and Senior Vice President of the VK Adviser and
Date of Birth: Chief Accounting the AC Adviser. Vice President and Chief
08/04/46 Officer Accounting Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Ronald A. Nyberg........ Vice President and Executive Vice President, General Counsel
Date of Birth: Secretary and Secretary of Van Kampen American
07/29/53 Capital and VK/AC Holding, Inc. Executive
Vice President, General Counsel and a
Director of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen Merritt Equity Advisors Corp., and
Van Kampen Merritt Equity Holdings Corp.
Executive Vice President, General Counsel
and Assistant Secretary of Van Kampen
American Capital Advisors, Inc., American
Capital Contractual Services, Inc., Van
Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc. and ACCESS. Executive Vice
President, General Counsel, Assistant
Secretary and Director of Van Kampen
American Capital Trust Company. Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to September 1996,
General Counsel of McCarthy, Crisanti &
Maffei, Inc. Prior to July 1996, Executive
Vice President and General Counsel of VSM
Inc. and VCJ Inc. Vice President and
Secretary of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
</TABLE>

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<PAGE> 301

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Robert C. Peck, Jr...... Vice President Executive Vice President of the VK Adviser
Date of Birth: and Van Kampen American Capital Management,
10/01/46 Inc. Executive Vice President and Director
of the AC Adviser and Van Kampen American
Capital Advisors, Inc. Vice President of
each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Alan T. Sachtleben...... Vice President Executive Vice President of the VK Adviser
Date of Birth: and Van Kampen American Capital Management,
04/20/42 Inc. Executive Vice President and a
Director of the AC Adviser and Van Kampen
American Capital Advisors, Inc. Vice
President of each of the Van Kampen
American Capital Funds and other investment
companies advised by the VK Adviser and AC
Adviser.
Paul R. Wolkenberg...... Vice President Executive Vice President of VK/AC Holding,
Date of Birth: Inc., Van Kampen American Capital, the
11/10/44 Distributor and the AC Adviser. President,
Chief Executive Officer and a Director of
Van Kampen American Capital Trust Company
and ACCESS. Director of American Capital
Contractual Services, Inc. Vice President
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Edward C. Wood III...... Vice President and Senior Vice President of the VK Adviser,
Date of Birth: Chief Financial Officer the AC Adviser and Van Kampen American
01/11/56 Capital Management, Inc. Vice President and
Chief Financial Officer of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
John L. Sullivan........ Treasurer First Vice President of the VK Adviser and
Date of Birth: the AC Adviser. Treasurer of each of the
08/20/55 Van Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Tanya M. Loden.......... Controller Vice President of the VK Adviser and the AC
Date of Birth: Adviser. Controller of each of the Van
11/19/59 Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and AC Adviser.
Nicholas Dalmaso........ Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of Van Kampen American Capital.
03/01/65 Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser and Van Kampen
American Capital Management, Inc. Assistant
Vice President of Van Kampen American
Capital Advisors, Inc. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.
</TABLE>

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<PAGE> 302

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Huey P. Falgout, Jr..... Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of Van Kampen American Capital.
11/15/63 Assistant Vice President and Assistant
Secretary of the Distributor, the VK
Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation and ACCESS. Assistant Secretary
of each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and AC Adviser.
Scott E. Martin......... Assistant Secretary Senior Vice President, Deputy General
Date of Birth: Counsel and Assistant Secretary of Van
08/20/56 Kampen American Capital and VK/AC Holding,
Inc. Senior Vice President, Deputy General
Counsel and Secretary of the VK Adviser,
the AC Adviser, the Distributor, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, Van Kampen American Capital
Services, Inc., ACCESS, Van Kampen Merritt
Equity Advisors Corp. and Van Kampen
Merritt Equity Holdings Corp. Prior to
September 1996, Deputy General Counsel and
Secretary of McCarthy, Crisanti & Maffei,
Inc. Prior to July 1996, Senior Vice
President, Deputy General Counsel and
Secretary of VSM Inc. and VCJ Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Weston B. Wetherell..... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: and Assistant Secretary of Van Kampen
06/15/56 American Capital, the VK Adviser, the AC
Adviser, the Distributor, Van Kampen
American Capital Management, Inc. and Van
Kampen American Capital Advisors, Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and other
investment companies advised by the VK
Adviser and the AC Adviser.
Steven M. Hill.......... Assistant Treasurer Assistant Vice President of the VK Adviser
Date of Birth: and AC Adviser. Assistant Treasurer of each
10/16/64 of the Van Kampen American Capital Funds
and other investment companies advised by
the VK Adviser and the AC Adviser.
Robert Sullivan......... Assistant Controller Assistant Vice President of the VK Adviser
Date of Birth: and the AC Adviser. Assistant Controller of
03/30/33 each of the Van Kampen American Capital
Funds and other investment companies
advised by the VK Adviser and the AC
Adviser.
</TABLE>

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<PAGE> 303

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.

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<PAGE> 304

COMPENSATION TABLE

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

(1) Mr. McDonnell, a trustee of the Trust, is an affiliated person of the VK
Adviser and AC Adviser and is not eligible for compensation or retirement
benefits from the Registrant. Messrs. Branagan, Caruso, Hilsman, Powell,
Rees, Sheehan, Sisto and Woodside were elected by shareholders to the Board
of Trustees on July 21, 1995. Ms. Heagy was appointed to the Board of
Trustees on September 7, 1995. Mr. Don G. Powell resigned from the Board of
Trustees on August 15, 1996, and did not receive any compensation or
benefits from the Fund while a trustee because he was an affiliated person
of the VK Adviser and AC Adviser. Messrs. Gaughan and Rees retired from the
Board of Trustees on January 26, 1996 and January 29, 1996, respectively.
Messrs. Caruso and Sheehan were removed from the Board of Trustees effective
September 7, 1995 and January 29, 1996, respectively.

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<PAGE> 305

<TABLE>
<CAPTION>
AMOUNT OF
OWNERSHIP AT CLASS OF PERCENTAGE
NAME AND ADDRESS OF HOLDER OCTOBER 17, 1996 SHARES OWNERSHIP
- ------------------------------------------------------------- ---------------- -------- ----------
<S> <C> <C> <C>
Edward D. Hones and Co. F/A/O................................ 17,112 C 5.91%
Edward D. Jones & Co. Custodian
FBO Herman L. Dumming IRA
EDJ #271-90019-1-5
P.O. Box 2800
Maryland Hts, MO 63043-8500
Painewebber for the Benefit of............................... 15,203 C 5.25%
Abraham Elisha Ayson
4600 14th Avenue
Apt. #4C
Brooklyn, NY 11219-2606
Merrill Lynch Pierce Fenner & Smith.......................... 5,496,895 B 8.73%
Mutual Funds Operations.................................... 20,531 C 7.09%
Attn: Book Entry
4800 Deer Lake Drive E
3rd Floor
Jacksonville, FL 32246-6484
</TABLE>

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

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transacted business under the name of American Portfolio Advisory Service Inc.).
The Adviser's principal office is located at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181.

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

The investment advisory agreement provides that the Adviser will supply
investment research and portfolio management, including the selection of
securities for the Fund to purchase. 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 Adviser will utilize at its own expense, credit analysis and research
services provided by McCarthy, Crisanti and Maffei, Inc. ("MCM"). MCM and
Fintrend S.A. ("Fintrend"), a wholly-owned subsidiary of MCM, are providers of
specialized on-line Financial Information and analysis relating to domestic and
international debt and currency markets. MCM's services include
CorporateWatch(C), which is the leading provider of up-to-the-minute information
regarding the new issue corporate securities market; MoneyWatch(C), which
provides on-going analysis of developments in the U.S. Treasury, agency and
money markets; CurrencyWatch(C), which provides analysis of intraday
developments in currency markets; and YieldWatch(R) , which analyzes intraday
developments in the global bond markets. MCM and its subsidiaries produce and
distribute electronic information services worldwide with offices in New York,
London, Paris, Singapore and Tokyo.

The investment advisory agreement for the Fund will continue in effect from
year to year if specifically approved by the trustees of the Trust, of which the
Fund is a separate series (or by the Fund's shareholders), and by the
disinterested trustees in compliance with the requirements of the 1940 Act. The
agreement may be terminated without penalty upon 60 days' written notice by
either party thereto and will automatically terminate in the event of
assignment.

The investment advisory agreement specifies that the Adviser will reimburse
the Fund for annual expenses of the Fund which exceed the most stringent limit
prescribed by any state in which the Fund's shares are

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<PAGE> 307

offered for sale. Currently, the most stringent limit in any state would require
such reimbursement to the extent that aggregate operating 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 fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994, the
Fund recognized advisory expenses of $927,893, $798,331 and $306,119,
respectively.

OTHER AGREEMENTS

SUPPORT SERVICES AGREEMENT. Under a support services agreement with Van
Kampen American Capital Distributors, Inc. (the "Distributor") which terminated
as of July 10, 1995 concurrent with the Fund's change in Transfer Agent, the
Fund received support services for shareholders, including the handling of all
written and telephonic communications, except initial order entry and other
distribution related communications. Payment by the Fund for such services was
made on cost basis for the employment of the personnel and the equipment
necessary to render the support services. At such time, the Fund, and the other
Van Kampen American Capital mutual funds distributed by the Distributor, shared
such costs proportionately among themselves based upon their respective net
asset values.

For the fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994, the
Fund recognized expenses of approximately $0, $44,900 and $2,800, respectively,
representing the Distributor's cost of providing certain support services.

ACCOUNTING SERVICES 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 equally, together with the other Van Kampen American Capital
mutual funds advised by the Adviser and distributed by the Distributor, in 25%
of the cost of providing such services, with the remaining 75% of such cost
being paid by the Fund and such other funds based proportionally on their
respective net assets.

For the fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994, the
Fund recognized expenses of approximately $5,000, $4,500 and $2,800,
respectively, representing the Adviser's cost of providing accounting services.

LEGAL SERVICES AGREEMENT. The Fund and each of the other Van Kampen American
Capital Funds advised by the VK 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: 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 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 fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994, the
Fund recognized expenses of approximately $8,700, $12,000 and $6,000,
respectively, representing Van Kampen American Capital, Inc.'s cost of providing
legal services.

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CUSTODIAN AND INDEPENDENT ACCOUNTANTS

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, or the 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 Adviser. Since statistical and other
research information is only supplementary to the research efforts of the
Adviser to the Fund 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 Fund's 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 Fund and other
investment companies and clients 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 participate in volume
transactions and to negotiate lower brokerage commissions will be beneficial to
the Fund.

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.

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TAX STATUS OF THE FUND

The following federal income tax discussion is based on the advice of Skadden,
Arps, Slate, Meagher & Flom, and reflects applicable tax laws as of the date of
this Statement of Additional Information.

FEDERAL INCOME TAXATION. The Fund intends to qualify each year and to elect to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (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. Included among such requirements is the requirement that the Fund
must derive at least 90% of its gross income from dividends, interest, payments
with respect to securities loans and gains from the sale or other disposition of
stocks, securities or foreign currencies or other income (including but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stocks, securities or currencies.
For purposes of this requirement, the Treasury Department is authorized to issue
(but has not yet issued) regulations excluding from qualifying income foreign
currency gains that are not directly related to a regulated investment company's
principal business of investing in stocks or securities (or options and futures
with respect to stocks or securities). The Fund expects that all of its foreign
currency gains will be directly related to its principal business of investing
in securities.

If the Fund so qualifies and distributes each year to its Shareholders at
least 90% of its net investment income (which includes tax-exempt 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) in each year, 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 (including those involving certain
risk management transactions and foreign currency transactions) may be subject
to special provisions of the Code that, among other things, 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 closed out), 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.

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<PAGE> 310

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 this 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.

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.

PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produced, or are held for the production of, passive income. Under
certain circumstances, a regulated investment company that holds stock of a PFIC
will be subject to federal income tax, on a portion of any "excess distribution"
received on the stock or of any gain or disposition of the stock (collectively
"PFIC income"), plus interest thereon, even if the regulated investment company
distributes the PFIC income as a taxable dividend to its stockholders. The
balance of the PFIC income will be included in the regulated investment
company's investment company taxable income and, accordingly, will not be
taxable to it to the extent that income is distributed to its shareholders. If
the Fund invests in a PFIC and elects to treat the PFIC as a "qualified electing
fund," then in lieu of the foregoing tax and interest obligation, the Fund would
be required to include in income each year its pro rata share of the qualified
electing fund's annual ordinary earnings and net capital gain, which most likely
would have to be distributed to satisfy the 90% distribution requirement and the
distribution requirement for avoiding income and excise taxes. In most instances
it will be very difficult to make this election due to certain requirements
imposed with respect to the election.

Pursuant to proposed regulations, the Fund would be entitled to elect to
"mark-to-market" its stock in certain PFICs. "Marking-to-market," in this
context, means recognizing as gain for each taxable year the excess as of the
end of that year, of the fair market value of the PFIC's stock over the owner's
adjusted basis in that stock (including mark-to-market gain for each prior year
for which an election was in effect). These regulations, if adopted, would be
effective for taxable years ending after their promulgation as final
regulations.

DISTRIBUTIONS. Distribution 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 at the rates applicable to 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). The Fund will inform Shareholders of the
source and tax status of all distributions promptly after the close of each
calendar year. A portion of the distributions from the Fund will be eligible for
the dividends received deduction for corporations if the Fund receives
qualifying dividends during the year and if certain other requirements of the
Code are satisfied.

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.

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 a 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

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<PAGE> 311

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, is certain circumstances, to withhold 31% of taxable
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.

FOREIGN TAXES. It is expected that a portion of the interest earned by the
Fund from non-U.S. resident issuers and in certain circumstances gains realized
by the Fund will be subject to foreign withholding taxes. The tax rate to which
such interest and gains will be subject will vary depending on the country or
countries having taxing jurisdiction over a particular non-U.S. resident issuer
and may be affected by the existence of an income tax treaty with the United
States. If more than 50% of the value of the Fund's total assets at the close of
any taxable year consists of stocks or securities of "foreign corporations," the
Fund may elect and currently intends to elect, for United States federal income
tax purposes, to treat any foreign taxes paid by the Fund that can be treated as
foreign income taxes under United States federal income tax principles as paid
by its Shareholders. The Fund expects that it will be able to treat some, but
not necessarily all, of the foreign taxes it will have to pay as foreign income
taxes for United States federal income tax purposes. In addition, the Fund
currently intends to treat investments in securities that are issued by, or that
are treated under relevant United States federal income tax principles as issued
by, foreign governments as not constituting securities of "foreign corporations"
for purposes of meeting the 50% test described above. Accordingly, the Fund may
not qualify for this election in all of its taxable years. For any year that the
Fund so qualifies and makes such an election, the amount of foreign taxes paid
by the Fund that can be treated as foreign income taxes for United States
federal income tax purposes would be included in the income of its Shareholders
(in addition to other taxable dividends received) and (subject to certain
limitations) Shareholders would be entitled to credit their portions of these
amounts against their United States federal income tax due, if any, or to deduct
their portions from their United States taxable income, if any. A Shareholder
who does not itemize deductions may not claim a deduction for foreign taxes. The
Fund will notify each Shareholder within 60 days after the close of the Fund's
taxable year as to whether the foreign income taxes paid by the Fund will
qualify for "pass-through" treatment for that year and, if so, such notification
will designate (i) each Shareholder's pro rata portion of the foreign income
taxes paid and (ii) the portion of distributions that represents income derived
from foreign sources.

Generally, a foreign tax credit is subject to the limitation that it may not
exceed the Shareholder's United States tax (before the credit) attributable to
the Shareholder's total taxable income from foreign sources. For this purpose,
the Shareholder's proportionate share of dividends paid by the Fund that
represent income derived from foreign sources will be treated as foreign source
income. The Fund's gains and losses from the sale of securities and certain
currency gains and losses generally will be treated as derived from United
States sources. The limitation on the foreign tax credit applies separately to
specific categories of foreign source income, including "passive income," a
category that includes the portion of dividends received from the Fund that
qualifies as foreign source income. The foregoing limitation may prevent a
Shareholder from claiming a credit for the full amount of his proportionate
share of the foreign income taxes paid by the Fund.

SALES 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 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.

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THE DISTRIBUTOR

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 sometimes
are referred to herein 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 who are acting as brokers or agents and
similar agreements between the Fund and financial intermediaries acting as
brokers (collectively, "Selling 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."

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 it 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. 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 of the Plans must be
approved by the Trustees and also by the disinterested Trustees. 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 period ended June 30, 1994, the Fund has recognized expenses under the
Plans of $34,468, $208,286 and $9,351 for the Class A Shares, Class B Shares and
Class C Shares, respectively, of which $28,816 and $51,047 represent payments to
financial intermediaries under the Selling Agreements for Class A Shares and
Class B Shares, respectively. For the period ended June 30, 1994, the Fund has
reimbursed the Distributor $822 and $1,211 for advertising expenses, and $4,930
and $9,941 for compensation of the Distributor's sales personnel for the Class A
Shares and Class B Shares, respectively.

For the year ended June 30, 1995, the Fund has recognized expenses under the
Plans of $74,777, $487,064 and $20,370 for the Class A Shares, Class B Shares
and Class C Shares, respectively, of which $64,495, $119,407 and $2,755
represent payments to financial intermediaries under the Selling Agreements for
Class A Shares, Class B Shares and Class C Shares, respectively. For the year
ended June 30, 1995, the Fund has reimbursed the Distributor $5,464, $15,985 and
$0 for advertising expenses, and $7,717, $10,727 and $0 for compensation of the
Distributor's sales personnel for the Class A Shares, Class B Shares and Class C
Shares, respectively.

For the year ended June 30, 1996, the Fund has recognized expenses under the
Plans of $79,707, $569,681 and $25,454 for the Class A Shares, Class B Shares
and Class C Shares, respectively, of which $65,647,

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$115,828 and $9,418 represent payments to financial intermediaries under the
Selling Agreements for Class A Shares, Class B Shares and Class C Shares,
respectively.

LEGAL COUNSEL

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

PERFORMANCE INFORMATION

The Fund's yield quotation is determined on a daily basis with respect to the
immediately preceding 30 day period, and yield is computed by 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 initial 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 period (net of any reimbursements), and dividing
the result by the average daily number of the shares of each class outstanding
during the period that were 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 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.

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 non-standardized 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,
deducting the maximum initial sales charge, if any, 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 Shares imposed at the time of redemption were reflected, it would
reduce the performance quoted.

From time to time the Fund may compare its performance to certain indices or
utilize such indices to illustrate market trends in U.S. interest rates,
including indices with respect to interest rates on 90 day U.S. Treasury bills
and 30 year Treasury bonds.

B-47
<PAGE> 314

funds. Materials may also discuss the Dalbar Financial Services study from 1984
to 1994 which examined 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 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 Fund's yield for the 30-day period ending June 30, 1996 (calculated in the
manner described in the Prospectus under the heading "Fund Performance") for
Class A Shares was 6.72%. In determining the Fund's net investment income for a
stated 30-day period, the Fund calculates yield to maturity on each portfolio
security on a daily basis. The Fund's distribution rate for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") for Class A Shares was 8.29%.

The Fund's average total return, including payment of the maximum sales
charge, for (i) the one year ended June 30, 1996 was 7.58% and (ii) the two
year, six month period from December 31, 1993, the commencement of investment
operations for Class A Shares of the Fund, through June 30, 1996 was 0.68%.

The Fund's cumulative non-standardized total return, excluding the payment of
the maximum sales charge, for Class A Shares from inception through June 30,
1996 (as calculated in the manner described in the Prospectus under the heading
"Fund Performance") was 6.76%.

The Fund's cumulative non-standardized total return, including the payment of
the maximum sales charge, for Class A Shares from inception through June 30,
1996 (as calculated in the manner described in the Prospectus under the heading
"Fund Performance") was 1.71%.

CLASS B SHARES

The Fund's yield for the 30-day period ending June 30, 1996 (calculated in the
manner described in the Prospectus under the heading "Fund Performance") for
Class B Shares was 6.29%. In determining the Fund's net investment income for a
stated 30-day period, the Fund calculates yield to maturity on each portfolio
security on a daily basis. The Fund's distribution rate for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") for Class B Shares was 7.95%.

The Fund's average total return, including the payment of the CDSC, for (i)
the one year ended June 30, 1996 was 8.06% and (ii) the two year, six month
period from December 31, 1993, the commencement of investment operations for
Class B Shares of the Fund, through June 30, 1996 was 0.68%.

The Fund's cumulative non-standardized total return, excluding the payment of
the CDSC, for Class B Shares from inception through June 30, 1996 (as calculated
in the manner described in the Prospectus under the heading "Fund Performance")
was 4.67%.

The Fund's cumulative non-standardized total return, including the payment of
the CDSC, for Class B Shares from inception through June 30, 1996 (as calculated
in the manner described in the Prospectus under the heading "Fund Performance")
was 1.72%.

CLASS C SHARES

The Fund's yield for the 30-day period ending June 30, 1996 (calculated in the
manner described in the Prospectus under the heading "Fund Performance") for
Class C Shares was 6.29%. In determining the Fund's net investment income for a
stated 30-day period, the Fund calculates yield to maturity on each portfolio
security on a daily basis. The Fund's distribution rate for the 30-day period
ending June 30, 1996 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") for Class C Shares was 7.96%.

B-48
<PAGE> 315

The Fund's average total return, including the payment of the CDSC, for (i)
the one year ended June 30, 1996 was 11.07% and (ii) the two year, six month
period from December 31, 1993, the commencement of investment operations for
Class C Shares of the Fund, through June 30, 1996 was 1.81%.

The Fund's cumulative non-standardized total return, excluding the payment of
the CDSC, for Class C Shares from inception through June 30, 1996 (as calculated
in the manner described in the Prospectus under the heading "Fund Performance")
was 4.59%.

The Fund's cumulative non-standardized total return, including the payment of
the CDSC, for Class C Shares from inception through June 30, 1996 (as calculated
in the manner described in the Prospectus under the heading "Fund Performance")
was 4.59%.

B-49
<PAGE> 316

INDEPENDENT ACCOUNTANTS' REPORT

The Board of Trustees and Shareholders of
Van Kampen American Capital Strategic Income Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Strategic Income Fund (the "Fund"), including the
portfolio of investments, as of June 30, 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.

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 Strategic Income Fund as of June 30, 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
August 15, 1996

B-50
<PAGE> 317

PORTFOLIO OF INVESTMENTS

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS 58.0%
BANKING 7.4%
3,000 Banco del Estado - US$ (c).............. 8.390% 08/01/01 $ 3,141,540
4,100 Western Financial Savings - US$ (c)..... 8.500 07/01/03 4,143,960
------------
7,285,500
------------
CONTAINERS, PACKAGING & GLASS 0.7%
40 Anchor Glass Container Corp. - US$...... 10.250 06/30/02 28,000
700 Silligan Holdings Corp. - US$........... 13.250 12/15/02 703,500
------------
731,500
------------
DIVERSIFIED/CONGLOMERATE SERVICE 1.0%
1,000 Service Corp. International - US$....... 6.750 06/01/01 993,110
------------
ELECTRONICS 1.7%
1,000 Bell & Howell Co. - US$ (d)............. 0/11.500 03/01/05 685,000
1,000 Comdisco, Inc. - US$.................... 5.750 05/22/98 1,001,555
------------
1,686,555
------------
FINANCE 10.0%
3,000 Auxiliaire du Credit Foncier de France -
US$..................................... 5.332 09/25/02 2,730,000
3,000 Auxiliaire du Credit Foncier de France -
US$..................................... 5.000 02/18/03 2,692,500
4,000 Ford Motor Credit - US$................. 5.730 01/13/05 3,550,000
1,000 Guangdong Enterprise - US$ (c).......... 8.750 12/15/03 883,000
------------
9,855,500
------------
GROCERY 0.5%
500 Purity Supreme - US$.................... 11.750 08/01/99 542,500
------------
HEALTHCARE 1.1%
1,000 Tenet Healthcare Corp. - US$ (c)........ 10.125 03/01/05 1,060,000
------------
HOTEL, MOTEL, INNS & GAMING 0.6%
500 Showboat Marina - US$................... 13.500 03/15/03 545,000
------------
LEISURE AND AMUSEMENT 2.5%
2,500 Viacom, Inc. - US$...................... 7.750 06/01/05 2,433,765
------------
MINING 0.4%
400 Carbide/Graphite, Inc. - US$ (c)........ 11.500 09/01/03 433,000
------------
OIL & GAS 9.1%
500 Coda Energy - US$....................... 10.500 04/01/06 497,500
300 Global Marine - US$ (c)................. 12.750 12/15/99 325,500
1,500 Oleoducto Central S.A. - US$............ 9.350 09/01/05 1,472,085
4,950 Transportadora de Gas del Sur S.A. -
US$..................................... 7.750 12/23/98 4,826,250
2,000 Transportadora de Gas del Sur S.A. -
US$..................................... 10.250 04/25/01 1,990,000
------------
9,111,335
------------
PAPER 2.6%
500 Doman Industries Ltd - US$ (c).......... 8.750 03/15/04 452,500
</TABLE>

See Notes to Financial Statements

B-51
<PAGE> 318

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PAPER (CONTINUED)
500 Indah Kiat International Finance (Pulp
and Paper Corp) Global Bond - US$....... 11.375% 06/15/99 $ 525,000
500 Tjiwi Kimia International BV - US$...... 13.250 08/01/01 560,000
1,000 Willamette Industries - US$ (b)......... 7.850 07/01/26 1,023,620
------------
2,561,120
------------
PRINTING, PUBLISHING & BROADCASTING 4.2%
1,000 Century Communications - US$ (c)........ 9.750 02/15/02 995,000
500 K-III Communications - US$.............. 10.625 05/01/02 520,000
2,500 Time Warmer - US$....................... 9.150 02/01/23 2,582,475
------------
4,097,475
------------
RETAIL 3.0%
3,000 Wal-Mart Stores - US$ (c)............... 6.750 05/24/02 2,977,500
------------
TELECOMMUNICATIONS 6.6%
3,500 Cable & Wireless PLC - US$ (c).......... 6.500 12/16/03 3,333,750
1,000 Panamsat LP - US$....................... 9.750 08/01/00 1,035,000
600 Pricellular Wireless Corp - US$ (d)..... 0/12.250 10/01/03 474,000
1,000 Rogers Cablesystems - CA$............... 9.650 01/15/14 641,983
1,000 Telefonica de Argentina - US$........... 11.875 11/01/04 1,087,000
------------
6,571,733
------------
UTILITIES 6.6%
1,000 Bridas Corp - US$ (c)................... 12.500 11/15/99 1,042,500
1,000 Central Termica Guemes S.A. - US$....... 12.000 11/29/96 1,012,500
1,000 El Paso Electric Co - US$ (c)........... 7.750 05/01/01 975,000
1,500 Midland Funding Corp II - US$ (c)....... 11.750 07/23/05 1,575,000
1,000 Sodigas - US$........................... 10.500 07/06/99 1,015,000
862 Subic Power Corp - US$.................. 9.50 12/28/08 862,069
------------
6,482,069
------------
Total Corporate Bonds............................................... 57,367,662
------------
FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS 33.0%
ARGENTINA 2.3%
2,000 Goldman Sachs Argentine Bocones Trust -
US$..................................... 13.375 08/15/01 2,255,000
------------
AUSTRALIA 1.5%
1,900 Australian Government - AU$............. 7.000 04/15/00 1,426,695
------------

</TABLE>

See Notes to Financial Statements

B-52
<PAGE> 319

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BRAZIL 2.4%
1,624 Brazil C Bond - US$ (e)................. 8.000% 04/15/14 $ 1,010,719
2,500 Brazil Pars - US$ (d) (e)............... 5.000/5.250 04/15/24 1,387,500
------------
2,398,219
------------
CANADA 3.4%
1,250 Canadian Government - CA$ (b)........... 7.500 03/01/01 931,663
2,500 Province of Quebec - US$................ 5.670 02/27/26 2,405,050
------------
3,336,713
------------
COLOMBIA 1.9%
2,000 Republic of Colombia - US$.............. 7.250 02/15/03 1,877,500
------------
COSTA RICA 0.7%
1,000 Banco Central Costa Rica - US$ (e)...... 6.250 05/21/10 715,000
------------
ECUADOR 0.6%
1,000 Ecuador Discount Bond - US$ (e)......... 6.0625 02/28/25 571,250
------------
ITALY 1.0%
1,500,000 Republic of Italy BTPS - ITL (b)........ 9.500 05/01/01 1,010,449
------------
MEXICO 1.3%
2,000 Mexico Par Bond Ser A - US$ (e)......... 6.250 12/31/19 1,292,500
------------
NEW ZEALAND 1.3%
2,000 New Zealand Government - NZ$............ 8.000 02/15/01 1,322,174
------------
PANAMA 2.8%
5,000 Panama Interest Reduction Bond - US$ (b)
(d)..................................... 3.500/3.750 07/17/14 2,768,750
------------
PHILIPPINES 0.9%
1,000 Philippines Government (FLIRB) - US$ (d)
(e)..................................... 5.000/6.000 06/01/08 897,500
------------
POLAND 3.5%
3,500 Poland PDI Bond - US$ (c) (d) (e)....... 3.750/4.000 10/27/14 2,686,250
1,000 Poland Registered PDI Bond - US$ (d)
(e)..................................... 3.750/4.000 10/27/14 767,500
------------
3,453,750
------------
RUSSIA 1.8%
5,000 Vneshekonombank Loans - DEM............. (f) (f) 1,763,400
------------
SPAIN 1.6%
200,000 Spanish Government - ESP (b)............ 8.400 04/30/01 1,576,970
------------
SWITZERLAND 0.1%
148 Swiss Franc............................. 118,481
------------
THAILAND 1.0%
25,000 ABN/AMRO Bank - THB..................... 9.100 08/05/97 982,059
------------
</TABLE>

See Notes to Financial Statements

B-53
<PAGE> 320

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S.$
(000) Description Coupon Date Market Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED KINGDOM 2.1%
1,000 UK Treasury Bonds - GBP (b)............. 7.000% 11/06/01 $ 1,520,516
350 UK Treasury Bonds - GBP................. 6.750 11/26/04 508,911
------------
2,029,427
------------
URAGUAY 0.7%
1,000 Banco Central del Uruguay Ser B - US$
(e)..................................... 6.750 02/19/21 710,000
------------
VENEZUELA 2.1%
3,000 Venezuelan Debt Conversion Bond - US$
(e)..................................... 6.563 12/18/07 2,118,750
------------
Total Foreign Government and Agency
Obligations...................................................... 32,624,587
------------
US GOVERNMENT AND AGENCY OBLIGATIONS 3.0%
3,000 FNMA Note............................... 8.000 04/13/05 3,012,240
-----------
MORTGAGE BACKED OBLIGATIONS (US) 21.0%
5,807 FHLMC 1624-KZ (c)....................... 6.000 12/15/08 4,935,950
2,000 FNMA REMIC #92-33 S (Inverse Fitg)
(c)..................................... 14.400 03/25/22 1,692,500
75 FNMA REMIC #93-55 M PAC (Interest
Only)................................... 727.220 09/25/06 1,856,250
3,776 FNMA REMIC #93-180 SB (Inverse Fitg).... 4.993 09/25/00 3,280,550
5,000 FNMA REMIC #95-11A (Principal Only)
(c)..................................... * 01/25/24 3,659,375
5,410 GNMA Pool #336788 (c)................... 7.500 12/15/22 5,342,348
------------
Total Mortgage Backed Obligations (US)............................... 20,766,973
------------
SWAP TRANSACTIONS 0.0%
Goldman Sachs, 40.0 million US$ notional amount, maturing
01/23/00, payment based upon the spread between the 6 year French
Franc fixed swap interest rate versus the 6 year German Mark
fixed swap interest rate
........................................................................
(37,826)
------------
TOTAL LONG-TERM INVESTMENTS 115.0%
(Cost $113,946,239) (a).............................................. 113,733,636
LIABILITIES IN EXCESS OF OTHER ASSETS (15.0%)) ........................ (14,864,868)
------------
NET ASSETS 100.0%...................................................... $ 98,868,768
============
</TABLE>

* Zero coupon bond

(a) At June 30, 1996, cost for federal income tax purposes is $113,946,239; the
aggregate gross unrealized appreciation is $2,061,121 and the aggregate
gross unrealized gross unrealized depreciation is $2,586,548, resulting in
net unrealized depreciation on investments, foreign currency translation of
other assets and liabilities, forward currency contracts and option and
futures transactions of $525,427.

(b) Securities purchased on a when issued or delayed delivery basis.

(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments, open option, futures or swap transactions or borrowings of the
Fund.

(d) Security is a "Step-up" bond where the coupon increases, or steps up, at a
predetermined date.

See Notes to Financial Statements

B-54
<PAGE> 321

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

(e) Items represents a "Brady Bond" which is a product of the "Brady Plan" under
which various Latin American, African and Southeast Asian nations have
converted their outstanding external defaulted commercial bank loans into
bonds. Certain Brady Bonds have been collateralized, as to principal due at
maturity, by U.S. Treasury zero coupon bonds with a maturity date equal to
the final maturity date of such Brady Bonds.

(f) Item represents an assignment of a bank loan which currently is in default
with the potential to be restructured at a future date. As of June 30, 1996,
item is a non-income producing security.

The following table summarizes the portfolio composition at June 30, 1996,
based upon quality ratings issued by Standard & Poors. For securities not rated
by Standard & Poors, the Moody's rating is used.

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION BY CREDIT QUALITY
<S> <C>
U.S. Govt. and Agency Obligations............... 20.9%
AAA............................................. 7.9
AA.............................................. 3.5
A............................................... 11.8
BBB............................................. 9.2
BB.............................................. 28.6
B............................................... 7.3
CCC............................................. 0.4
Non-Rated....................................... 10.4
-----
100.0%
=====
</TABLE>

See Notes to Financial Statements

B-55
<PAGE> 322

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $113,946,239) (Note 1).............. $113,733,636
Receivables:
Securities Sold...................................................... 13,690,475
Interest............................................................. 2,358,242
Fund Shares Sold..................................................... 314,843
Options at Market Value (Net premiums paid of $458,000) (Note 5)....... 247,000
Unamortized Organizational Expenses (Note 1)........................... 85,000
Other.................................................................. 2,438
------------
Total Assets....................................................... 130,431,634
------------
LIABILITIES:
Payables:
Securities Purchased................................................. 14,330,183
Bank Borrowings (Note 8)............................................. 12,878,262
Reverse Repurchase Agreements (Note 8)............................... 3,035,171
Income Distributions................................................. 406,193
Variation Margin on Futures (Note 5)................................. 215,872
Distributor and Affiliates (Notes 2 and 7)........................... 146,717
Investment Advisory Fee (Note 2)..................................... 74,356
Fund Shares Repurchased.............................................. 63,588
Forward Currency Contracts (Note 5).................................. 6,311
Accrued Expenses....................................................... 357,716
Deferred Compensation and Retirement Plans (Note 2).................... 48,497
------------
Total Liabilities.................................................. 31,562,866
------------
NET ASSETS............................................................. $ 98,868,768
============
NET ASSETS CONSIST OF:
Capital (Note 3)....................................................... $107,528,301
Accumulated Undistributed Net Investment Income........................ 22,912
Net Unrealized Depreciation on Securities.............................. (794,446)
Accumulated Net Realized Loss on Securities............................ (7,887,999)
------------
NET ASSETS............................................................. $ 98,868,768
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $33,826,436 and 2,803,579 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 12.07
Maximum sales charge (4.75%* of offering price).................... .60
------------
Maximum offering price to public................................... $ 12.67
============
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $61,941,303 and 5,132,287 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 12.07
============
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $3,101,029 and 257,163 shares of capital stock issued and
outstanding) (Note 3).............................................. $ 12.06
============
</TABLE>

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

See Notes to Financial Statements

B-56
<PAGE> 323

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $11,751)................. $ 11,358,305
------------
EXPENSES:
Investment Advisory Fee (Note 2)....................................... 927,893
Distribution (12b-1) and Service Fees (Allocated to Classes A, B and C
of $79,707, $569,681 and $25,454, respectively) (Note 7)............. 674,842
Shareholder Services (Note 2).......................................... 163,002
Custody................................................................ 132,458
Trustees Fees and Expenses (Note 2).................................... 50,159
Amortization of Organizational Expenses (Note 1)....................... 34,074
Legal (Note 2)......................................................... 13,930
Other.................................................................. 204,927
------------
Total Operating Expenses......................................... 2,201,285
Less Expenses Reimbursed......................................... 75,046
------------
Net Operating Expenses........................................... 2,126,239
Interest Expense (Note 8)........................................ 2,065,824
------------
NET INVESTMENT INCOME.................................................. $ 7,166,242
============
NET REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments.......................................................... $ 1,456,472
Options.............................................................. (238,148)
Futures.............................................................. (97,630)
Forwards............................................................. 388,736
Foreign Currency Transactions........................................ 578,667
------------
Net Realized Gain on Securities........................................ 2,088,097
------------
Net Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................................ (1,979,896)
------------
End of the Period:
Investments.......................................................... (212,603)
Options.............................................................. (211,000)
Futures.............................................................. (277,662)
Forwards............................................................. (91,819)
Foreign Currency Translation......................................... (1,362)
------------
(794,446)
------------
Net Unrealized Appreciation on Securities During the Period............ 1,185,450
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES......................... $ 3,273,547
============
NET INCREASE IN NET ASSETS FROM OPERATIONS............................. $ 10,439,789
============
</TABLE>

See Notes to Financial Statements

B-57
<PAGE> 324

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income........................................ $ 7,166,242 $ 4,245,759
Net Realized Gain/Loss on Securities......................... 2,088,097 (5,113,942)
Net Unrealized Appreciation on Securities During the
Period...................................................... 1,185,450 6,772,099
----------- -----------
Change in Net Assets from Operations......................... 10,439,789 5,903,916
----------- -----------
Distributions from Net Investment Income..................... (7,166,242) (4,415,661)
Distributions in Excess of Net Investment Income (Note 1).... (721,843) (533,006)
----------- -----------
Distributions from and in Excess of Net Investment Income*... (7,888,085) (4,948,667)
Return of Capital Distribution*.............................. -0- (2,635,924)
----------- -----------
Total Distributions.......................................... (7,888,085) (7,584,591)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.......... 2,551,704 (1,680,675)
----------- -----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold.................................... 29,338,222 25,816,917
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................................ 3,220,366 3,244,998
Cost of Shares Repurchased................................... (20,206,493) (16,415,322)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS........... 12,352,095 12,646,593
----------- -----------
TOTAL INCREASE IN NET ASSETS................................. 14,903,799 10,965,918
NET ASSETS:
Beginning of the Period...................................... 83,964,969 72,999,051
----------- -----------
End of the Period (Including undistributed net investment
income of $22,912 and $(407,598), respectively)............. $ 98,868,768 $ 83,964,969
============ ============
</TABLE>

<TABLE>
<CAPTION>
Year Ended Year Ended
*Distributions by Class June 30, 1996 June 30, 1995
------------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of
Net Investment Income (Note 1):
Class A Shares........................... $ (2,908,823) $ (1,773,941)
Class B Shares........................... (4,768,060) (3,039,599)
Class C Shares........................... (211,202) (135,127)
------------ ------------
$ (7,888,085) $ (4,948,667)
============ ============
Return of Capital Distribution:
Class A Shares........................... $ -0- $ (957,995)
Class B Shares........................... -0- (1,618,412)
Class C Shares........................... -0- (59,517)
------------ ------------
$ -0- $ (2,635,924)
============ ============
</TABLE>

See Notes to Financial Statements

B-58
<PAGE> 325

NOTES TO FINANCIAL STATEMENTS

June 30, 1996
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Strategic Income Fund (the "Fund") is organized as a
series of Van Kampen American Capital Trust (the "Trust"), a Delaware business
trust, and is registered as a non-diversified open-end management investment
company under the Investment Company Act of 1940, as amended. The Fund's primary
investment objective is to seek to provide shareholders with high current
income, while its' secondary investment objective is to seek capital
appreciation. The Fund will allocate its investments among the following market
sectors: U.S. government securities, domestic investment grade income
securities, domestic lower grade income securities, foreign investment grade
income securities and foreign lower grade income securities. The Fund borrows
money for investment purposes which will create the opportunity for enhanced
return, but also should be considered a speculative technique and may increase
the Fund's volatility. The Fund commenced investment operations on December 31,
1993, with three classes of common shares, Class A, Class B and Class C shares.

A. SECURITY VALUATION--Investments are stated at value using market quotations,
prices provided by market makers 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. Foreign investments are stated at value using the last
available bid price or yield equivalents obtained from dealers in the
over-the-counter (OTC) or interbank market. Short-term securities with remaining
maturities of less than 60 days are valued at amortized cost.

B-59
<PAGE> 326

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

with its custodian, assets having an aggregate value at least equal to the
amount of the when issued or delayed delivery purchase commitments until payment
is made.

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

E. ORGANIZATIONAL EXPENSES--The Fund has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Fund's organization in the amount of $170,000. These costs
are being amortized on a straight line basis over the 60 month period ending
December 31, 1998. Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") has agreed that in the event any of the initial shares of the Fund
originally purchased by VKAC are redeemed during the amortization period, the
Fund will be reimbursed for any unamortized organizational expenses in the same
proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.

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 the loss and offset such losses against any future realized capital
gains. At June 30, 1996, the Fund had an accumulated capital loss carryforward
for tax purposes of $7,885,927. Of this amount, $4,216,449 and $3,669,478 will
expire on June 30, 2003 and 2004, respectively. Net realized gains or losses may
differ for financial and tax reporting purposes primarily as a result of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year and timing differences related to open futures and
forward transactions at year end.

B-60
<PAGE> 327

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

G. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on transactions in foreign
currencies and options on foreign currencies. These realized gains and losses
are included as net realized gains or losses for financial reporting purposes.
Permanent book and tax basis differences relating to net currency gains totaling
$1,152,353 were reclassified from accumulated net realized gain/loss on
investments to accumulated undistributed net investment income.

Net realized gains on securities, if any, are distributed annually.

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 MANAGED ASSETS % PER ANNUM
- -----------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>

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 June 30, 1996, the Fund recognized expenses of
approximately $20,000 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund.

In July, 1995, the Fund began using ACCESS Investor Services, Inc.
("ACCESS"), an affiliate of the Adviser, as the shareholder servicing agent for
the Fund. For the year ended June 30, 1996, the Fund recognized expenses of
approximately $128,300, representing ACCESS' cost of providing transfer agency
and shareholder services plus a profit.

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.

At June 30, 1996, VKAC owned 100 shares each of Classes A, B and C.

B-61
<PAGE> 328

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of common shares, 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 June 30, 1996, capital aggregated $36,670,209, $67,432,261 and $3,425,831
for Classes A, B and C, respectively. For the year ended June 30, 1996,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 751,977 $ 9,046,110
Class B.................................... 1,498,860 18,147,281
Class C.................................... 178,450 2,144,831
---------- ------------
Total Sales.................................. 2,429,287 $ 29,338,222
========== ============
Dividend Reinvestment:
Class A.................................... 94,962 $ 1,139,581
Class B.................................... 163,856 1,965,307
Class C.................................... 9,612 115,478
---------- ------------
Total Dividend Reinvestment.................. 268,430 $ 3,220,366
========== ============
Repurchases:
Class A.................................... (575,267) $ (6,903,393)
Class B.................................... (1,024,433) (12,352,105)
Class C.................................... (78,275) (950,995)
---------- ------------
Total Repurchases............................ (1,677,975) $(20,206,493)
========== ============
</TABLE>

B-62
<PAGE> 329

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1995, capital aggregated $33,387,911, $59,671,778 and $2,116,517
for Classes A, B and C, respectively. For the year ended June 30, 1995,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 970,765 $ 11,135,557
Class B.................................... 1,206,027 13,927,571
Class C.................................... 65,188 753,789
---------- ------------
Total Sales.................................. 2,241,980 $ 25,816,917
========== ============
Dividend Reinvestment:
Class A.................................... 90,046 $ 1,025,064
Class B.................................... 185,189 2,109,222
Class C.................................... 9,720 110,712
---------- ------------
Total Dividend Reinvestment.................. 284,955 $ 3,244,998
========== ============
Repurchases:
Class A.................................... (576,467) $ (6,551,783)
Class B.................................... (772,126) (8,730,596)
Class C.................................... (103,217) (1,132,943)
---------- ------------
Total Repurchases............................ (1,451,810) $(16,415,322)
========== ============
</TABLE>

<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...................................... 1.50% None
Sixth...................................... 1.00% None
Seventh and Thereafter..................... None None
</TABLE>

B-63
<PAGE> 330

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

For the year ended June 30, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$28,500 and CDSC on redeemed shares of approximately $261,900. Sales charges do
not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding U.S. Government Securities and short-term investments, were
$286,944,406 and $313,642,485, 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, manage the portfolio's effective yield, foreign currency exposure,
maturity and duration or generate potential gain. 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 for exercised option contracts where the recognition of gain or loss is
postponed until the disposal of the security underlying the option contract.

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

B-64
<PAGE> 331

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

Transactions in options for the year ended June 30, 1996, were as follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- ----------------------------------------------------------------------------
<S> <C> <C>
Outstanding at June 30, 1995................... 5 $ (268,450)
Options Written and Purchased (Net)............ 2,930 (1,921,659)
Options Terminated in Closing
Transactions (Net)........................... (1,627) 1,011,934
Options Exercised.............................. (202) 56,600
Options Expired (Net).......................... (1,103) 663,575
----- -----------
Outstanding at June 30, 1996................... 3 $ (458,000)
===== ===========
</TABLE>

The descriptions and market values of the option contracts outstanding as of
June 30, 1996, are as follows:

<TABLE>
<CAPTION>
STRIKE
OPENING EXPIRATION PRICE/ MARKET
DESCRIPTION TRANSACTION DATE YIELD VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina Brady Bond Put...... Buy 09/03/96 53.250% $ 72,000
German Mark Put............... Buy 01/22/97 1.57 100,000
Mexican Brady Bond Put........ Buy 09/03/96 63.813% 75,000
--------
$247,000
========
</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 futures on U.S. Treasury Bonds and typically closes
the contract prior to the delivery date. These contracts are generally used to
manage the portfolio's effective maturity and duration.

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). The cost of securities acquired through
delivery under a contract is adjusted by the unrealized gain or loss on the
contract.

Transactions in futures contracts for the year ended June 30, 1996, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS
- ------------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1995.............................. 299
Futures Opened............................................ 6,699
Futures Closed............................................ (6,767)
-----
Outstanding at June 30, 1996.............................. 231
=====
</TABLE>

B-65

<PAGE> 332

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

The futures contracts outstanding as of June 30, 1996, and the descriptions
and unrealized depreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
- ----------------------------------------------------------------------------
<S> <C> <C>
10-Year Japanese Bond Future Sept 1996--
Sells to Open................................ 2 $(14,432)
10-Year U.S. Treasury Note Future Sept 1996--
Sells to Open................................ 1 (844)
U.S. Treasury Long Bond Future Sept 1996--
Sells to Open................................ 228 (262,386)
--- ---------
231 $(277,662)
=== =========
</TABLE>

C. FORWARD CURRENCY CONTRACTS--These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on investments and foreign currency.

At June 30, 1996, the Fund has outstanding forward currency contracts as
follows:

<TABLE>
<CAPTION>
UNREALIZED
FORWARD ORIGINAL CURRENT APPRECIATION/
CURRENCY VALUE VALUE DEPRECIATION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
BUYS TO OPEN
Italian Lira,
expiring 07/02/96............... $ 356,142 $ 356,142 $ -0-

SELLS TO OPEN
Australian Dollar,
expiring 07/03/96............... 1,034,721 1,022,935 11,786
British Pound Sterling,
expiring 07/02/96............... 647,641 650,573 (2,932)
Canadian Dollar,
expiring 07/03/96 -- 09/10/96... 2,333,266 2,333,860 (594)
Deutsche Mark,
expiring 07/02/96 -- 09/09/96... 3,416,385 3,430,434 (14,049)
New Zealand Dollar,
expiring 07/03/96 -- 07/05/96... 1,321,301 1,335,329 (14,028)
Spanish Peseta,
expiring 07/02/96 -- 09/11/96... 2,550,457 2,574,704 (24,247)
Swedish Krona,
expiring 07/13/96............... 2,000,000 2,047,755 (47,755)
------------
$(91,819)
============
</TABLE>

B-66
<PAGE> 333

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

At June 30, 1996, the Fund had realized gains on closed but unsettled
forward currency contracts of $85,508 scheduled to settle between July 5, 1996
and July 8, 1996.

D. SWAP TRANSACTIONS--These securities, which are identified in the portfolio of
investments, represent an agreement between two parties to exchange a series of
cash flows based upon various indices at specified intervals.

E. INVERSE FLOATING SECURITY--These instruments, which are identified in the
portfolio of investments, have a coupon which is inversely indexed to a
short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. The price of these securities may be more
volatile than the price of a comparable fixed rate security. These instruments
are typically used by the Fund to enhance the yield of the portfolio.

6. 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 such as Federal Home Loan Mortgage Corp (FHLMC), Federal
National Mortgage Association (FNMA) or Government National Mortgage Association
(GNMA).

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 with the most stable cash flows and the lowest prepayment risk.

A MBS may also be stripped to create an Interest Only (IO) or a Principal
Only (PO) security. An IO represents ownership in the cash flows of the interest
payments made from a specific pool of MBS. The cash flow on this instrument
decreases as the mortgage principal balance is repaid by the borrower.
Conversely, a PO represents an ownership interest in the cash flows of the
principal payments made from a specified pool of MBS. The cash flows on this
instrument would increase in a declining interest rate environment as
prepayments on the underlying mortgages increase. IO's and PO's are typically
used to manage interest rate exposure in the Fund's portfolio.

B-67
<PAGE> 334

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1996
- --------------------------------------------------------------------------------

7. DISTRIBUTION AND SERVICE PLANS

8. BORROWINGS

In accordance with its investment policies, the Fund may borrow money from banks
or enter into reverse repurchase agreements or dollar rolls for investment
purposes in an amount up to 33.3% of its total assets.

The Fund has entered into a $45,000,000 revolving credit agreement which
expires on February 28, 1997. Interest is charged under the agreement at a rate
of 1.10% above the federal funds rate. The interest rate in effect at June 30,
1996, was 6.25%. An annual commitment fee of .15% is charged on the unused
portion of the credit line.

The Fund has entered into reverse repurchase agreements under which the Fund
sells securities and agrees to repurchase them at a mutually agreed upon date
and price. At June 30, 1996, the average interest rate in effect for reverse
repurchase agreements was 5.59%.

The average daily balance of bank borrowings and reverse repurchase
agreements for the year ended June 30, 1996, was approximately $32,784,900 with
an average interest rate of 6.32%.

At June 30, 1996, these agreements represented 12.2% of the Fund's total
assets.

B-68
<PAGE> 335

PART C: OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

List all financial statements and exhibits as part of the Registration
Statement.

(A) FINANCIAL STATEMENTS:

For each of the following funds:

Van Kampen American Capital High Yield Fund

Van Kampen American Capital Short-Term Global Income Fund

Van Kampen American Capital Strategic Income Fund

Included in the Prospectus:

Financial Highlights

Included in the Statement of Additional Information:

Independent Accountants' Report

Financial Statements

Notes to Financial Statements

(B) EXHIBITS:

(1)(a) Agreement and Declaration of Trust(39)

(b) Certificate of Designation for:

(i) Van Kampen American Capital High Yield Fund+

(ii) Van Kampen American Capital Short-Term Global Income
Fund(39)

(iii) Van Kampen American Capital Strategic Income Fund+

(2) By-Laws(39)

(4) Specimen Share Certificates for:

(a) Van Kampen American Capital High Yield Fund

(i) Class A Shares+

(ii) Class B Shares+

(iii) Class C Shares+

(b) Van Kampen American Capital Short-Term Global Income Fund

(i) Class A Shares(39)

(ii) Class B Shares(39)

(iii) Class C Shares(39)

(i) Class A Shares+

(ii) Class B Shares+

(iii) Class C Shares+

(5)(a) Investment Advisory Agreement for:

(i) Van Kampen American Capital High Yield Fund+

(ii) Van Kampen American Capital Short-Term Global Income
Fund(39)

(iii) Van Kampen American Capital Strategic Income Fund+

(6)(a) Distribution and Service Agreement for:

(i) Van Kampen American Capital High Yield Fund+

(ii) Van Kampen American Capital Short-Term Global Income
Fund(39)

(iii) Van Kampen American Capital Strategic Income Fund+

(b) Form of Dealer Agreement(32)

(8)(a) Form of Custodian Agreement for:

(i) Van Kampen American Capital High Yield Fund*
(ii) Van Kampen American Capital Short-Term Global Income
Fund(6)
(iii) Van Kampen American Capital Strategic Income Fund(20)

(b) Transfer Agency and Service Agreement(39)

C-1
<PAGE> 336

(9)(a) Amended and Restated Fund Accounting Agreement and Amendment
No. 1 thereto+

(b) Legal Services Agreement(39)

(10) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom:

(a) Van Kampen American Capital High Yield Fund(36)
(b) Van Kampen American Capital Short-Term Global Income Fund(35)
(c) Van Kampen American Capital Strategic Income Fund(36)

(11) Consent of KPMG Peat Marwick LLP:

(a) Van Kampen American Capital High Yield Fund+

(b) Van Kampen American Capital Short-Term Global Income Fund+

(13) Letter of Understanding relating to initial capital+

(15)(a) Distribution Plan Pursuant to Rule 12b-1 for:

(i) Van Kampen American Capital High Yield Fund+

(ii) Van Kampen American Capital Short-Term Global Income
Fund(39)

(iii) Van Kampen American Capital Strategic Income Fund+

(b) Form of Shareholder Assistance Agreement+

(d) Service Plan for:

(i) Van Kampen American Capital High Yield Fund+

(ii) Van Kampen American Capital Short-Term Global Income
Fund(39)

(iii) Van Kampen American Capital Strategic Income Fund+

(16)(a) Computation of Performance Quotations:

(i) Van Kampen American Capital High Yield Fund+

(ii) Van Kampen American Capital Short-Term Global Income
Fund+

(iii) Van Kampen American Capital Strategic Income Fund+

(17)(a) List of certain investment companies in response to Item
29(a)+

(b) List of officers and directors of Van Kampen American Capital
Distributors, Inc. in response to Item 29(b)+

(18) Multiple Class Plan

(24) Power of attorney+
(27) Financial Data Schedules+
- ---------------
* Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A, File Number 33-4410.

(6) Incorporated herein by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.

(20) Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.

(32) Incorporated herein by reference to Post-Effective Amendment No. 32 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.

(35) Incorporated herein by reference to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.

(36) Incorporated herein by reference to Post-Effective Amendment No. 36 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.

(39) Incorporated herein by reference to Post-Effective Amendment No. 39 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410.

+ Filed herewith.

C-2
<PAGE> 337

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 October 17, 1996:

<TABLE>
<CAPTION>
(1) (2)
NUMBER
OF
RECORD
TITLE OF CLASS HOLDERS
---------------------------------------------------------- -------
<S> <C>
Shares of Beneficial Interest, $0.01 par value
(i) Van Kampen American Capital High Yield Fund:
Class A Shares.................................... 14,968
Class B Shares.................................... 4,599
Class C Shares.................................... 370
(ii) Van Kampen American Capital Short-Term Global
Income Fund:
Class A Shares.................................... 2,878
Class B Shares.................................... 5,414
Class C Shares.................................... 44
(iii) Van Kampen American Capital Strategic Income Fund:
Class A Shares.................................... 2,087
Class B Shares.................................... 3,296
Class C Shares.................................... 145
</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 or (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.

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 a 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.

C-3
<PAGE> 338

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, therefor 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 "Investment Advisory Services" in the Prospectus and "Investment
Advisory and Other Services" and "Trustees and Officers" in the Statement of
Additional Information for information regarding the business of the Adviser.
For information as to the business, profession, vocation and employment of a
substantial nature of directors and officers of the Adviser, reference is made
to the Adviser's current Form ADV (File No. 801-18161) filed under the
Investment Advisers Act of 1940, as amended, incorporated herein by reference.

ITEM 29. PRINCIPAL UNDERWRITERS.

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

(b) Van Kampen American Capital Distributors, Inc. is an affiliated person
of an affiliated person of Registrant and is the only principal underwriter for
Registrant. The name, principal business address and positions and offices with
Van Kampen American Capital Distributors, Inc. of each of the directors and
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 to be maintained by the
Registrant by Section 31 (a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained at the offices of the Registrant located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, ACCESS Investors Services,
Inc., 7501 Tiffany Springs Parkway, Kansas City, Missouri, 64153, or at the
State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts. All such accounts, books and other documents required to be
maintained by the principal underwriter will be maintained at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181.

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

ITEM 32. UNDERTAKINGS.

(a) Not Applicable.

(b) Not Applicable.

C-4
<PAGE> 339

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN AMERICAN CAPITAL
TRUST, certifies that it meets all of the requirements for effectiveness of this
Amendment to the 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
23rd day of October, 1996.

VAN KAMPEN AMERICAN CAPITAL TRUST

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 October 23, 1996 by the
following persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
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/ ROGER HILSMAN* Trustee
- ---------------------------------------------
Roger Hilsman

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

/s/ DONALD C. MILLER* Trustee
- ---------------------------------------------
Donald C. Miller

/s/ JACK E. NELSON* Trustee
- ---------------------------------------------
Jack E. Nelson

/s/ JEROME L. ROBINSON* Trustee
- ---------------------------------------------
Jerome L. Robinson

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

/s/ WAYNE W. WHALEN* Trustee
- ---------------------------------------------
Wayne W. Whalen
/s/ WILLIAM S. WOODSIDE* Trustee
- ---------------------------------------------
William S. Woodside
- ------------
* Signed by Ronald A. Nyberg pursuant to a power of attorney.
/s/ RONALD A. NYBERG October 23, 1996
- ---------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>

<PAGE> 340

SCHEDULE OF EXHIBITS TO

POST-EFFECTIVE AMENDMENT 41 TO FORM N-1A

AS SUBMITTED TO THE SECURITIES AND EXCHANGE

COMMISSION ON OCTOBER 28, 1996

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- ------------------------------------------------------------------------------------
<S> <C>
(1)(b) Certificate of Designation for:
(i) Van Kampen American Capital High Yield Fund
(iii) Van Kampen American Capital Strategic Income Fund
(4) Specimen Share Certificates for:
(a) Van Kampen American Capital High Yield Fund
(i) Class A Shares
(ii) Class B Shares
(iii) Class C Shares
(c) Van Kampen American Capital Strategic Income Fund
(i) Class A Shares
(ii) Class B Shares
(iii) Class C Shares
(5)(a) Investment Advisory Agreement for:
(i) Van Kampen American Capital High Yield Fund
(iii) Van Kampen American Capital Strategic Income Fund
(6)(a) Distribution and Service Agreement for:
(i) Van Kampen American Capital High Yield Fund
(iii) Van Kampen American Capital Strategic Income Fund
(9)(a) Amended and Restated Fund Accounting Agreement and Amendment No. 1 thereto
(11) Consent of KPMG Peat Marwick LLP:
(a) Van Kampen American Capital High Yield Fund
(b) Van Kampen American Capital Short-Term Global Income Fund
(c) Van Kampen American Capital Strategic Income Fund
(13) Letter of Understanding relating to initial capital
(15)(a) Distribution Plan Pursuant to Rule 12b-1 for:
(i) Van Kampen American Capital High Yield Fund
(iii) Van Kampen American Capital Strategic Income Fund
(b) Form of Shareholder Assistance Agreement
(c) Form of Administrative Services Agreement
(d) Service Plan for:
(i) Van Kampen American Capital High Yield Fund
(iii) Van Kampen American Capital Strategic Income Fund
(16)(a) Computation of Performance Quotations:
(i) Van Kampen American Capital High Yield Fund
(ii) Van Kampen American Capital Short-Term Global Income Fund
(iii) Van Kampen American Capital Strategic Income Fund
(17)(a) List of certain investment companies in response to Item 29(a)
(b) List of officers and directors of Van Kampen American Capital Distributors, Inc. in
response to Item 29(b)
(18) Multiple Class Plan
(24) Power of attorney
(27) Financial Data Schedules
</TABLE>

<PAGE> 1
EXHIBIT (1)(b)(i)

VAN KAMPEN AMERICAN CAPITAL TRUST

Certificate of Designation
of
Van Kampen American Capital High Yield Fund

The undersigned, being the Secretary of Van Kampen American Capital 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 High Yield 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 of the Fund shall be converted
automatically, and without any action or choice on the part of the Shareholder
thereof, 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.

<PAGE> 2

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
and 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.

May 10, 1995

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

<PAGE> 1
EXHIBIT (1)(b)(iii)

VAN KAMPEN AMERICAN CAPITAL TRUST

Certificate of Designation
of
Van Kampen American Capital Strategic Income Fund

The undersigned, being the Secretary of Van Kampen American Capital 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 Strategic Income Fund (the "Fund") with
following the rights, preferences and characteristics:

<PAGE> 2

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.

May 10, 1995

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

<PAGE> 1
EXHIBIT 4(a)(i)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND, a series of
VAN KAMPEN AMERICAN CAPITAL TRUST

CLASS A

ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 921126108
_________________

fully paid and nonassessable shares of beneficial interest of the par
value of $0.01 per share of Van Kampen American Capital High Yield
Fund, transferable on the books of the Fund by the holder thereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent.

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERICAN CAPITAL
HIGH YIELD FUND
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

NUMBER CLASS A SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

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

REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

THE 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.

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT 4(a)(ii)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL HIGH YIED FUND, a series
of VAN KAMPEN AMERICAN CAPITAL TRUST

CLASS B

ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 921126207
_________________

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERICAN CAPITAL
HIGH YIELD FUND
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

NUMBER CLASS B SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT 4(a)(iii)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND, a series of
VAN KAMPEN AMERICAN CAPITAL TRUST

CLASS C

ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 921126306
_________________

fully paid and nonassessable shares of beneficial interest of the par
value of $0.01 per share of Van Kampen American Capital High Yield Fund,
transferable on the books of the Fund by the holder thereof in person or by
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned by the Transfer Agent.

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERICAN CAPITAL
HIGH YIELD FUND
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

NUMBER CLASS C SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT 4(c)(i)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND, a series of
VAN KAMPEN AMERICAN CAPITAL TRUST

CLASS A

ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 92112G403
_________________

fully paid and nonassessable shares of beneficial interest of the par
value of $0.01 per share of Van Kampen American Capital Strategic Income
Fund, transferable on the books of the Fund by the holder thereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent.

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERCAN CAPITAL
STRATEGIC INCOME FUND
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

NUMBER CLASS A SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT 4(c)(ii)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND, a series
of VAN KAMPEN AMERICAN CAPITAL TRUST

CLASS B

ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 92112G502
_________________

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERICAN CAPITAL
STRATEGIC INCOME FUND
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

NUMBER CLASS B SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT 4(c)(iii)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND, a series of
VAN KAMPEN AMERICAN CAPITAL TRUST

CLASS C

ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 92112G601
_________________

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERICAN CAPITAL
STRATEGIC INCOME FUND
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

NUMBER CLASS C SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT (5)(a)(i)

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT dated as of April 7, 1995, by and
between VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND (the "Fund"),
a series of Van Kampen American Capital 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:

<TABLE>
<CAPTION>
FEE PERCENT OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
------------------ ---------------
<S> <C>
First $500 million 0.75% of 1%
Over $500 million 0.65% of 1%
</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 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

<PAGE> 2
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 as 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 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

<PAGE> 3
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 HIGH YIELD FUND

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

<PAGE> 1
EXHIBIT (5)(a)(iii)

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT dated as of April 7, 1995, by and
between VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND (the "Fund"),
a series of Van Kampen American Capital Trust, Delaware business
trust (the "Trust"), and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
(the "Adviser"), a Delaware corporation.

<TABLE>
<CAPTION>
FEE PERCENT OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
------------------ ---------------
<S> <C>
First $500 million 0.75% of 1%
Next $500 million 0.70% of 1%
Over $1.0 billion 0.65% of 1%
</TABLE>

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.

<PAGE> 3
any obligation or claim hereunder and that any such resort may only be had upon
the assets and property of the Fund.

<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 STRATEGIC INCOME FUND

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

<PAGE> 1
EXHIBIT (6)(a)(i)

DISTRIBUTION AND SERVICE AGREEMENT

THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of April 7, 1995 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL TRUST, a Delaware
business trust (the "Trust"), on behalf of its series, VAN KAMPEN AMERICAN
CAPITAL HIGH YIELD 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,

<PAGE> 2

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 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.

<PAGE> 3

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.

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

<PAGE> 4

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 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,

<PAGE> 5
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.

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

<PAGE> 6

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

<PAGE> 7

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 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

<PAGE> 8

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, 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 TRUST,
on behalf of its series, VAN KAMPEN
AMERICAN CAPITAL HIGH YIELD FUND

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

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.

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

<PAGE> 1
EXHIBIT (6)(a)(iii)

DISTRIBUTION AND SERVICE AGREEMENT

THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of April 7, 1995 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL TRUST, a Delaware
business trust (the "Trust"), on behalf of its series, VAN KAMPEN AMERICAN
CAPITAL STRATEGIC INCOME FUND (the "Fund"), and VAN KAMPEN AMERICAN
CAPITAL DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").

<PAGE> 2

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").

<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;

(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.

<PAGE> 4

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.

<PAGE> 5
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.

<PAGE> 6

<PAGE> 7

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

<PAGE> 8

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 TRUST,
on behalf of its series, VAN KAMPEN
AMERICAN CAPITAL STRATEGIC INCOME
FUND

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

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.

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

<PAGE> 1

EXHIBIT (9)(a)

AMENDED AND RESTATED

FUND ACCOUNTING AGREEMENT

THIS AGREEMENT, dated February 26, 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:

<PAGE> 2

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.

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

<PAGE> 3

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.

<PAGE> 4

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.

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, 1997, 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, 1997, 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

<PAGE> 5

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.

<PAGE> 6

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/ Dennis J. McDonnell
---------------------------------------
Dennis J. McDonnell, President

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.

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

SCHEDULE A

I. Funds Advised by Van Kampen American Capital Investment Advisory Corp.
("Investment Advisory Corp.") (Collectively, the

<PAGE> 7

"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

<PAGE> 8

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

<PAGE> 9

AMENDMENT NUMBER ONE

TO THE

AMENDED AND RESTATED FUND ACCOUNTING AGREEMENT

THIS AMENDMENT NUMBER ONE to the Amended and Restated Fund Accounting
Agreement dated February 26, 1996 (the "Agreement") by and between the parties
set forth in Schedule A, attached hereto and incorporated by reference and VAN
KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware corporation
("Advisory Corp.").

W I T N E S S E T H

WHEREAS, the following parties, each being an open-end management
investment company as that term is defined in the Investment Company Act of
1940, as amended, wish to become parties to the Agreement:

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")

<PAGE> 10

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 Fund ("LIT Enterprise Fund")

Domestic Income Fund ("LIT Domestic Income Fund")

Emerging Growth Fund ("LIT Emerging Growth Fund")

Government Fund ("LIT Government Fund")

Asset Allocation Fund ("LIT Asset Allocation Fund")

Money Market Fund ("LIT Money Market Fund")

Real Estate Securities Fund ("LIT Real Estate Securities Fund")

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

<PAGE> 11

Municipal Fund")

Van Kampen American Capital Texas Tax Free Income Fund ("Texas
Tax Free Income Fund")

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

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 IncomeFund
(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")

<PAGE> 12

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 Emerging Markets Income Fund
("Emerging Markets 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 Pennsylvania Tax Free Income Fund
("Pennsylvania Tax Free Income Fund")

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

WHEREAS, the original parties desire to add the aforementioned
additional entities as parties to the Agreement;

NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule A of
the Agreement, with the addition of Schedule B, be amended to add those parties
mentioned above as

<PAGE> 13

parties to the Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed this 29th day of April, 1996.

ALL OF THE PARTIES SET FORTH IN SCHEDULE A

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

ALL OF THE PARTIES SET FORTH IN SCHEDULE B

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

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.

<PAGE> 14

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

SCHEDULE A

CLOSED END FUNDS

I. Funds Advised by Van Kampen American Capital Investment
Advisory Corp. ("Investment Advisory Corp.") (Collectively, the
"Former Van Kampen 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
<PAGE> 15

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

<PAGE> 16

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

SCHEDULE B

OPEN END FUNDS

I. 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")

<PAGE> 17

Van Kampen American Capital Limited Term Municipal Income Fund ("Limited 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 Emerging Markets Income Fund ("Emerging Markets
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 Pennsylvania Tax Free Income Fund ("Pennsylvania
Tax Free Income Fund")

<PAGE> 18

Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")

II. 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 Fund ("LIT Enterprise Fund")

Domestic Income Fund ("LIT Domestic Income Fund")

Emerging Growth Fund ("LIT Emerging Growth Fund")

Government Fund ("LIT Government Fund")

<PAGE> 19

Asset Allocation Fund ("LIT Asset Allocation Fund")

Money Market Fund ("LIT Money Market Fund")

Real Estate Securities Fund ("LIT Real Estate Securities Fund")

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 Texas Tax Free Income Fund ("Texas Tax Free Income
Fund")

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

<PAGE> 1
EXHIBIT 11(a)

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders
Van Kampen American Capital High Yield 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
October 23, 1996

<PAGE> 1
EXHIBIT 11(b)

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders
Van Kampen American Capital Short-Term Global Income Fund:

/s/ KPMG Peat Marwick LLP

Chicago, Illinois
October 23, 1996

<PAGE> 1
EXHIBIT 11(c)

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders
Van Kampen American Capital Strategic Income Fund:

/s/ KPMG Peat Marwick LLP

Chicago, Illinois
October 23, 1996

<PAGE> 1
Exhibit 13

[LETTERHEAD OF VAN KAMPEN MERRITT]

May 1, 1986

Van Kampen Merritt Trust*
1901 North Naper Boulevard
Naperville, Illinois 60566

Dear Sirs:

The initial $100,069 investment by Van Kampen Merritt Inc. in Van Kampen
Merritt Trust will not be redeemed while any organizational expenses remain
unamortized unless the proceeds of any redemption of that initial investment
are reduced by their pro rata portion of any unamortized organizational
expenses. These shares are purchased for investment purposes, and Van Kampen
Merritt Inc. has no present intention of selling or publicly distributing these
shares.

Very truly yours,

VAN KAMPEN MERRITT INC.

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

- -------------
* As of the date of this letter, the Registrant was known as the "Van Kampen
Merritt Trust." The Registrant has since changed its name to the "Van Kampen
American Capital Trust."

<PAGE> 1
EXHIBIT (15)(a)(i)

PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the VAN KAMPEN AMERICAN CAPITAL
HIGH YIELD FUND (the "Fund"), a series of the Van Kampen American
Capital Trust (the "Trust"). This Distribution Plan describes the material
terms and conditions under which assets of the Fund may be used in connection
with financing distribution related activities with respect to each of its
classes of shares of beneficial interest (the "Shares"), each of which is
offered and sold subject to a different combination of front-end sales charges,
distribution fees, service fees and contingent deferred sales charges.(1)
Classes of shares, if any, subject to a front-end sales charge and a
distribution and/or service fee are referred to herein as "Front-End Classes"
and the Shares of such classes are referred to herein as "Front-End 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 has adopted a service plan (the "Service Plan") pursuant to which
the Fund is authorized to expend on an annual basis a portion of its average
net assets attributable to any or each class of Shares in connection with the
provision by the principal underwriter (within the meaning of the 1940 Act) of
the Shares and by brokers, dealers and other financial intermediaries
(collectively, "Financial Intermediaries") of personal services to holders of
Shares and/or the maintenance of shareholder accounts. The Fund also has
entered into a distribution and services agreement (the "Distribution and
Services Agreement") with Van Kampen American Capital Inc. (the "Distributor"),
pursuant to which the Distributor acts as the principal underwriter with
respect to each class of Shares and provides services to the Fund and acts as
agent on behalf of the Fund in connection with the implementation of the
Service Plan. The Distributor may enter into selling agreements (the "Selling
Agreements") with Financial Intermediaries in order to implement the
Distribution and Services Agreement, the Service Plan and this Distribution
Plan.

- -------------------
(1) The Fund is authorized to offer multiple classes of shares pursuant to an
order of the Securities and Exchange Commission exempting the Fund from
certain provisions of the 1940 Act.

1
<PAGE> 2

The Fund hereby is authorized to pay the Distributor a distribution fee
with respect to each class of its Shares to compensate the Distributor for
activities which are primarily intended to result in the sale of such Shares
("distribution related activities") performed by the Distributor with respect
to the respective class of Shares of the Fund. Such distribution related
activities include without limitation: (a) printing and distributing copies of
any prospectuses and annual and interim reports of the Fund (after the Fund has
prepared and set in type such materials) that are used by such Distributor in
connection with the offering of Shares; (b) preparing, printing or otherwise
manufacturing and distributing any other literature or materials of any nature
used by such Distributor in connection with promoting, distributing or offering
the Shares; (c) advertising, promoting and selling Shares to broker-dealers,
banks and the public; (d) distribution related overhead and the provision of
information programs and shareholder services intended to enhance the
attractiveness of investing in the Fund; (e) incurring initial outlay expenses
in connection with compensating Financial Intermediaries for (i) selling CDSC
Shares and Combination Shares and (ii) providing personal services to
shareholders and the maintenance of shareholder accounts of all classes of
Shares, including paying interest on and incurring other carrying costs on
funds borrowed to pay such initial outlays; and (f) acting as agent for the
Fund in connection with implementing this Distribution Plan pursuant to the
Selling Agreements.

The amount of the distribution fee hereby authorized with respect to each
class of Shares of the Fund shall be as follows:

With respect to Class A Shares, the distribution fee authorized hereby and
the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.25% of the Fund's average daily net
assets attributable to Class A Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to Class A Shares. The
Fund may pay a distribution fee as determined from time to time by its Board of
Trustees in an annual amount not to exceed the lesser of (i) (A) 0.25% of the
Fund's average daily net asset value during such year attributable to Class A
Shares sold on or after the date on which this Distribution Plan was first
implemented with respect to Class A Shares minus (B) the amount of the service
fee with respect to the Class A Shares actually expended during such year by
the Fund pursuant to the Service Plan and (ii) the actual amount of
distribution related expenses incurred by the Distributor with respect to Class
A Shares.

With respect to Class B Shares, the distribution fee authorized hereby and
the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 1.00% of the Fund's average daily net
assets attributable to Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class B Shares. The
Fund may pay a distribution fee with respect to the Class B Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class B Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class B
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class B Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class B Shares.

With respect to Class C Shares, the distribution fee authorized hereby and
the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 1.00% of the Fund's average daily net
assets attributable to Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class C Shares. The
Fund may pay a distribution fee with respect to the Class C Shares as
determined from time to time by its Board of Trustees in an

<PAGE> 3

annual amount not to exceed the lesser of (A) 0.75% of the Fund's average daily
net asset value during such year attributable to Class C Shares sold on or
after the date on which this Distribution Plan is first implemented with
respect to the Class C Shares and (B) the actual amount of distribution related
expenses incurred by the Distributor during such year plus prior unreimbursed
distribution related expenses less the amount of any contingent deferred sales
charge paid to the Distributor, in each case with respect to the Class C Shares
sold on or after the date on which this Distribution Plan is first implemented
with respect to the Class C Shares.

Payments pursuant to this Distribution Plan shall not be made more often
than monthly upon receipt by the Fund of a separate written expense report with
respect to each class of Shares setting forth the expenses qualifying for such
reimbursement allocated to each class of Shares and the purposes thereof.

In the event that amounts payable hereunder with respect to shares of a
Front-End Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of such class, there
is no carryforward of reimbursement obligations to succeeding years. In the
event the amounts payable hereunder with respect to a shares of a CDSC Class or
a Combination Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of the respective
class, such unreimbursed distribution expenses will be carried forward and paid
by the Fund hereunder in future years so long as this Distribution Plan remains
in effect, subject to applicable laws and regulations. Reimbursements for
distribution related expenses payable hereunder with respect to a particular
class of Shares may not be used to subsidize the sale of Shares of any other
class of Shares.

The Fund shall not compensate the Distributor, and neither the Fund nor
the Distributor shall compensate any Financial Intermediary, for any
distribution related expenses incurred with respect to a class of Shares prior
to the later of (a) the implementation of this Distribution Plan with respect
to such class of Shares or (b) the date that such Financial Intermediary enters
into a Selling Agreement with the Distributor.

The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Trust and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. The Distributor may reallocate all or a
portion of its distribution fee to such Financial Intermediaries as
compensation for the above-mentioned activities and services. Such
reallocation shall be in an amount as set forth from time to time in the Fund's
prospectus. Such Selling Agreements shall provide that the Financial
Intermediaries shall provide the Distributor with such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Paragraphs 3 and 8 hereof.

Subject to the provisions of this Distribution Agreement, the Fund is
hereby authorized to pay a distribution fee to any person that is not an
"affiliated person" or "interested person" of the Fund or its "investment
adviser" or "principal underwriter" (as such terms are defined in the 1940 Act)
who provides any of the foregoing services for the Fund. Such fee shall be
paid only pursuant to written agreements between the Fund and such other person
the terms of which permit payments to such person only in accordance with the
provisions of this Distribution Agreement and which have the approval of a
majority of the Disinterested Trustees by vote cast separately with respect to
each class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.

<PAGE> 4

The Fund and the Distributor shall prepare separate written reports for
each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Distribution Plan, the Service
Plan and the agreements contemplated hereby, the purposes for which such
payments were made and such other information as the Board of Trustees or the
Disinterested Trustees may reasonably request from time to time, and the Board
of Trustees shall review such reports and other information.

This Distribution Plan shall become effective upon its approval by (a) a
majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at
a meeting called for the purpose of voting on this Distribution Plan, and (b)
with respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.

This Distribution Plan and any agreement contemplated hereby shall
continue in effect beyond the first anniversary of its adoption by the Board of
Trustees of the Fund only so long as (a) its continuation is approved at least
annually in the manner set forth in clause (a) of paragraph 9 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.

This Distribution Plan may be terminated with respect to a class of Shares
without penalty at any time by a majority of the Disinterested Trustees or by a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund.

This Distribution Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund and may not be amended in any other material respect except
with the approval of a majority of the Disinterested Trustees. Amendments
required to conform this Distribution Plan to changes in the Rule or to other
changes in the 1940 Act or the rules and regulations thereunder shall not be
deemed to be material amendments.

To the extent any service fees paid by the Fund pursuant to the Service
Plan are deemed to be payments for the financing of any activity primarily
intended to result in the sale of Shares issued by the Fund within the meaning
of the Rule, the terms and provisions of such plan and any payments made
pursuant to such plan hereby are authorized pursuant to this Distribution Plan
in the amounts and for the purposes authorized in the Service Plan without any
further action by the Board of Trustees or the shareholders of the Fund. To
the extent the terms and provisions of the Service Plan conflict with the terms
and provisions of this Distribution Plan, the terms and provisions of the
Service Plan shall prevail with respect to amounts payable pursuant thereto.
This paragraph 13 is adopted solely due to the uncertainty that may exist with
respect to whether payments to be made by the Fund pursuant to the Service Plan
constitute payments primarily intended to result in the sale of Shares issued
by the Fund within the meaning of the Rule.

The Trustees of the Trust have adopted this Distribution Plan as trustees
under the Declaration of Trust of the Trust and the policies of the Trust
adopted hereby are not binding upon any of the Trustees or shareholders of the
Trust individually, but bind only the trust estate.

<PAGE> 1
EXHIBIT (15)(a)(iii)

PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the VAN KAMPEN AMERICAN CAPITAL
STRATEGIC INCOME FUND (the "Fund"), a series of the Van Kampen American
Capital Trust (the "Trust"). This Distribution Plan describes the material
terms and conditions under which assets of the Fund may be used in connection
with financing distribution related activities with respect to each of its
classes of shares of beneficial interest (the "Shares"), each of which is
offered and sold subject to a different combination of front-end sales charges,
distribution fees, service fees and contingent deferred sales charges.(1)
Classes of shares, if any, subject to a front-end sales charge and a
distribution and/or service fee are referred to herein as "Front-End Classes"
and the Shares of such classes are referred to herein as "Front-End 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."

1
<PAGE> 2

The amount of the distribution fee hereby authorized with respect to each
class of Shares of the Fund shall be as follows:

<PAGE> 3

<PAGE> 4

<PAGE> 1
EXHIBIT 15(b)

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

SHAREHOLDER ASSISTANCE AGREEMENT

This Agreement is entered into as of the 7th day of April, 1995, by and
between Van Kampen American Capital Distributors, Inc. (formerly Van Kampen
Merritt, Inc.) (the "Company") and the undersigned (the "Broker-Dealer").

WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and

WHEREAS, the Broker-Dealer is registered as a broker-dealer with the
National Association of Securities Dealers, Inc.; and

WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") and a service plan (the "Service Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), relating to such Fund, the Distribution Plans being described in
the Fund's Prospectus and Statement of Additional Information; and

WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution assistance agreements such as this Agreement with
broker-dealers selected by the Company, and the Broker-Dealer has been so
selected; and

WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such broker-dealer on or after the effective date
of this Agreement, as determined pursuant to Section 4 hereof, and held at the
close of each day in accounts of clients or customers of a particular
broker-dealer, such amount being referred to herein as the "Holding Level"; for
purposes of calculating the Holding Level, shares of such Fund which are
redeemed or otherwise disposed of from any account existing prior to such
effective date shall be deemed to have been shares sold prior to such effective
date to the extent of the number of shares held in such account immediately
after the close of business on the day prior to such effective date; and

WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;

NOW, THEREFORE, the Company and the Broker-Dealer agree as follows:

1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Broker-Dealer shall be entitled distribution fee and
service fee to payments, if any, to be paid by the Company at the annual
percentage rate of the Holding Level set forth from time to time in the then
current Prospectus of the Fund on a quarterly basis (prorated for any portion
of such period during which this Agreement is in effect for less than the full
amount of such period); it is understood and agreed that the Company may make
final and binding determinations as to whether such continuing compliance and
as to whether or not any Fund shares are to be considered in determining the
Holding Level of any particular broker-dealer and what Fund shares, if any, are
to be attributed to such purpose to a particular broker-dealer, to a different
broker-dealer or to no broker-dealer. Payments shall be made to the
Broker-Dealer named above and portions of the payments may be, in the
discretion of the Broker-Dealer, paid over to individual registered
representatives of said Broker-Dealer to whom there have been

1
<PAGE> 2

assigned accounts of clients or customers of the Broker-Dealer with respect to
which the respective Holding Level was determined.

2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.

3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Broker-Dealer shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Broker-dealer may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the Fund.

4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.

5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be), and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act), of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Broker-dealer, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.

IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.

----------------------------
Broker-dealer Firm Name

By:
- ------------------------ -------------------------
Firm Address Senior Vice President

By:
---------------------
Title:
------------------

2
<PAGE> 3
SCHEDULE 1

1. For Class A Shares, Class B Shares and Class C Shares:

Van Kampen American Capital U.S. Government Fund

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 California Tax Free Income Fund

Van Kampen American Capital Michigan Tax Free Income Fund

Van Kampen American Capital Missouri Tax Free Income Fund

Van Kampen American Capital Ohio Tax Free Income Fund

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 Utility Fund

Van Kampen American Capital Pennsylvania Tax Free Income Fund

Van Kampen American Capital Balanced Fund

Van Kampen American Capital Growth Fund

Van Kampen American Capital Value Fund

Van Kampen American Capital Great American Companies 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 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 Global Managed Assets Fund

Van Kampen American Capital Government Securities Fund

<PAGE> 4
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

Van Kampen American Capital Life Investment Trust

Van Kampen American Capital Asset Allocation Portfolio

Van Kampen American Capital Domestic Income Portfolio

Van Kampen American Capital Emerging Growth Portfolio

Van Kampen American Capital Enterprise Portfolio

Van Kampen American Capital Global Equity Portfolio

Van Kampen American Capital Government Portfolio

Van Kampen American Capital Growth and Income Portfolio

Van Kampen American Capital Money Market Portfolio

Van Kampen American Capital Real Estate Securities Portfolio

Van Kampen American Capital Limited Maturity Government 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 Small Capitalization Fund

Van Kampen American Capital High Yield Municipal Fund

Van Kampen American Capital Texas Tax Free Income Fund

Van Kampen American Capital U.S. Government Trust for Income

Van Kampen American Capital Global Equity Fund

Van Kampen American Capital Global Government Securities Fund

2. For Class A Shares Only:

Van Kampen American Capital Tax Free Money Fund

<PAGE> 1
EXHIBIT 15(c)

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

ADMINISTRATIVE SERVICES AGREEMENT

This Agreement is entered into as of the 7th day of April, 1995, by and
between Van Kampen American Capital Distributors, Inc. (formerly Van Kampen
American Capital, Inc.) (the "Company") and the undersigned (the
"Intermediary").

WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and

WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), and a Service Plan (the
"Service Plan") relating to such Fund, the Distribution Plans being described
in the Fund's Prospectus and Statement of Additional Information; and

WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution services agreements such as this Agreement with
certain financial intermediaries selected by the Company, and the Intermediary
has been so selected; and

WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such financial intermediary on or after the
effective date of this Agreement, as determined pursuant to Section 4 hereof,
and held at the close of each day in accounts of clients or customers of
particular intermediary, such amount being referred to herein as the "Holding
Level"; for purposes of calculating the Holding Level, shares of such Fund
which are redeemed or otherwise disposed of from any account existing prior to
such effective date shall be deemed to have been shares sold prior to such
effective date to the extent of the number of shares held in such account
immediately after the close of business on the day prior to such effective
date; and

WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;

NOW, THEREFORE, the Company and the Intermediary agree as follows:

1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Intermediary shall be entitled to distribution fee and
service fee payments, if any, to be paid by the Company with respect to each
class of the Fund's shares at the annual percentage rate of the Holding Level
set forth from time to time in the then current Prospect of the Fund on a
quarterly basis (prorated for any portion of such period during which this
Agreement is in effect for less than the full amount of such period); it is
understood and agreed that the Company may make final and binding
determinations as to whether such continuing compliance and as to whether or
not any Fund shares are to be considered in determining the Holding Level of
any particular financial intermediary and what Fund shares, if any, are to be
attributed to such purpose to a particular financial intermediary, to a
different financial intermediary or to no financial intermediary.

1
<PAGE> 2

3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Intermediary shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Intermediary may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the Fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the
Fund.

5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be) and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act) of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Intermediary, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.

IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.

By:
- ------------------ ----------------------
Intermediary Senior Vice President

- ------------------
Address

By:
---------------
Title

<PAGE> 3
SCHEDULE 1

1. For Class A Shares, Class B Shares and Class C Shares:

Van Kampen American Capital U.S. Government Fund

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 California Tax Free Income Fund

Van Kampen American Capital Michigan Tax Free Income Fund

Van Kampen American Capital Missouri Tax Free Income Fund

Van Kampen American Capital Ohio Tax Free Income Fund

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 Utility Fund

Van Kampen American Capital Pennsylvania Tax Free Income Fund

Van Kampen American Capital Balanced Fund

Van Kampen American Capital Growth Fund

Van Kampen American Capital Value Fund

Van Kampen American Capital Great American Companies 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 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 Global Managed Assets Fund

Van Kampen American Capital Government Securities Fund

<PAGE> 4
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

Van Kampen American Capital Life Investment Trust

Van Kampen American Capital Asset Allocation Portfolio

Van Kampen American Capital Domestic Income Portfolio

Van Kampen American Capital Emerging Growth Portfolio

Van Kampen American Capital Enterprise Portfolio

Van Kampen American Capital Global Equity Portfolio

Van Kampen American Capital Government Portfolio

Van Kampen American Capital Growth and Income Portfolio

Van Kampen American Capital Money Market Portfolio

Van Kampen American Capital Real Estate Securities Portfolio

Van Kampen American Capital Limited Maturity Government 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 Small Capitalization Fund

Van Kampen American Capital High Yield Municipal Fund

Van Kampen American Capital Texas Tax Free Income Fund

Van Kampen American Capital U.S. Government Trust for Income

Van Kampen American Capital Global Equity Fund

Van Kampen American Capital Global Government Securities Fund

2. For Class A Shares Only:

Van Kampen American Capital Tax Free Money Fund

<PAGE> 1
EXHIBIT 15(d)(i)

VAN KAMPEN AMERICAN CAPITAL HIGH YIELD FUND

SERVICE PLAN

The plan set forth below (the "Service Plan") for the VAN KAMPEN
AMERICAN CAPITAL HIGH YIELD FUND (the "Fund"), a series of the Van Kampen
American Capital Trust (the "Trust") describes the material terms and
conditions under which assets of the Fund may be used to compensate the Fund's
principal underwriter, within the meaning of the Investment Company Act of 1940,
as amended (the "1940 Act"), brokers, dealers and other financial intermediaries
(collectively "Financial Intermediaries") for providing personal services to
shareholders and/or the maintenance of shareholder accounts with respect to each
of its Class A Shares of beneficial interest (the "Class A Shares"), its Class B
Shares of beneficial interest (the "Class B Shares"), and its Class C Shares of
beneficial interest (the "Class C Shares"). The Class A Shares, Class B Shares
and Class C Shares sometimes are referred to herein collectively as the
"Shares." Each class of Shares is offered and sold subject to a different
combination of front-end sales charges, distribution fees, service fees and
contingent deferred sales charges.(1) Classes of shares, if any, subject to a
front-end sales charge and a distribution and/or service fee are referred to
herein as "Front-End Classes" and the Shares of such classes are referred to
herein as "Front-End 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 has adopted a distribution plan (the "Distribution Plan")
pursuant to which the Fund is authorized to expend on an annual basis a portion
of its average net assets attributable to each class of Shares in connection
with financing distribution related activities. The Fund also has entered into
a distribution and services agreement (the "Distribution and Services
Agreement") with Van Kampen American Capital Distributors, Inc. (formerly Van
Kampen Merritt, Inc.) (the "Distributor"), pursuant to which the Distributor
acts as agent on behalf of the Fund in connection with the implementation of
the Service Plan and acts as the principal underwriter with respect to each
class of Shares. The Distributor may enter into selling agreements (the
"Selling Agreements") with brokers, dealers and other financial intermediaries
("Financial Intermediaries") in order to implement the Distribution Agreement,
the Distribution Plan and this Service Plan.

The Fund hereby is authorized to pay a service fee with respect to its
Class A Shares, Class B Shares and Class C Shares to any person who sells such
Shares and provides personal services to shareholders and/or maintains
shareholder accounts in an annual amount not to exceed 0.25% of the average
annual net asset value of the Shares maintained in the Fund by such person that
were sold on or after the date on which this Service Plan was first
implemented. The aggregate annual amount of all such payments with respect to
each such class of Shares may not exceed 0.25% of the Fund's average annual net
assets attributable to the respective class of Shares sold on or after the date
on which this Service Plan was first implemented and maintained in the Fund
more than one year.

- --------------------
(1) The Fund is authorized to offer multiple classes of shares pursuant to
an order of the Securities and Exchange Commission exempting the Fund
from certain provisions of the 1940 Act.

1
<PAGE> 2
Payments pursuant to this Service Plan may be paid or prepaid on
behalf of the Fund by the Distributor acting as the Fund's agent.

Payments by the Fund to the Distributor pursuant to this Service Plan
shall not be made more often than monthly upon receipt by the Fund of a
separate written expense report with respect to each class of Shares setting
forth the expenses qualifying for such reimbursement allocated to each class
of Shares and the purposes thereof.

In the event that amounts payable hereunder with respect to a class of
Shares do not fully reimburse the Distributor for pre-paid service fees, such
unreimbursed service fee expenses will be carried forward and paid by the Fund
hereunder in future years so long as this Service Plan remains in effect,
subject to applicable laws and regulations. Reimbursements for service fee
related expenses payable hereunder with respect to a particular class of Shares
may not be used to subsidize services provided with respect to any other class
of Shares.

The Fund shall not compensate the Distributor, and neither the Fund nor
the Distributor shall compensate any Financial Intermediary, for any service
related expenses incurred with respect to a class of Shares prior to the later
of (a) the implementation of this Service Plan with respect to such class of
Shares or (b) the date that such Financial Intermediary enters into a Selling
Agreement with the Distributor.

The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to such
Financial Intermediaries for activities and services of the type referred to in
Paragraph 1 hereof. Prior to the implementation of a Selling Agreement, such
agreement shall be approved by a majority of the Board of Trustees of the Trust
and a majority of the Disinterested Trustees (within the meaning of the 1940
Act) by a vote cast in person at a meeting called for the purpose of voting on
such Selling Agreements. Such Selling Agreements shall provide that the
Financial Intermediaries shall provide the Distributor with such information
as is reasonably necessary to permit the Distributor to comply with the
reporting requirements set forth in Paragraphs 3 and 8 hereof.

Subject to the provisions of this Service Agreement, the Fund is hereby
authorized to pay a service fee to any person that is not an "affiliated
person" or "interested person" of the Fund or its "investment adviser" or
"principal underwriter" (as such terms are defined in the 1940 Act) who
provides any of the foregoing services for the Fund. Such fee shall be paid
only pursuant to written agreements between the Fund and such other person the
terms of which permit payments to such person only in accordance with the
provisions of this Service Agreement and which have the approval of a majority
of the Disinterested Trustees by vote cast separately with respect to each
class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.

The Fund and the Distributor shall prepare separate written reports for
each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Service Plan and the
agreements contemplated hereby, the purposes for which such payments were made
and such other information as the Board of Trustees or the Disinterested
Trustees may reasonably request from time to time, and the Board of Trustees
shall review such reports and other information.

This Service Plan may be terminated with respect to a class of Shares
without penalty at any time by a majority of the Disinterested Trustees or by a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund.

This Service Plan shall become effective upon its approval by (a) a
majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at a
meeting called for the purpose of voting on this Distribution Plan, and (b)
with respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.

2
<PAGE> 3
This Service Plan and any agreement contemplated hereby shall continue in
effect beyond the first anniversary of its adoption by the Board of Trustees
of the Fund only so long as (a) its continuation is approved at least annually
in the manner set forth in clause (a) of paragraph 10 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.

This Service Plan may not be amended to increase materially the maximum
amounts permitted to be expended hereunder except with the approval of a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund. This Service Plan may not be amended in any material
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Service Plan to changes in Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "1940 Act"), the 1940 Act,
the rules and regulations thereunder or the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall not be deemed to be
material amendments.

The Trustees of the Trust have adopted this Service Plan as trustees under
the Declaration of Trust of the Trust and the policies of the Trust adopted
hereby are not binding upon any of the Trustees or shareholders of the Trust
individually, but bind only the trust estate.

<PAGE> 1
EXHIBIT 15(d)(iii)

VAN KAMPEN AMERICAN CAPITAL STRATEGIC INCOME FUND

SERVICE PLAN

The plan set forth below (the "Service Plan") for the VAN KAMPEN
AMERICAN CAPITAL STRATEGIC INCOME FUND (the "Fund"), a series of the Van Kampen
American Capital Trust (the "Trust") describes the material terms and
conditions under which assets of the Fund may be used to compensate the Fund's
principal underwriter, within the meaning of the Investment Company Act of 1940,
as amended (the "1940 Act"), brokers, dealers and other financial intermediaries
(collectively "Financial Intermediaries") for providing personal services to
shareholders and/or the maintenance of shareholder accounts with respect to each
of its Class A Shares of beneficial interest (the "Class A Shares"), its Class B
Shares of beneficial interest (the "Class B Shares"), and its Class C Shares of
beneficial interest (the "Class C Shares"). The Class A Shares, Class B Shares
and Class C Shares sometimes are referred to herein collectively as the
"Shares." Each class of Shares is offered and sold subject to a different
combination of front-end sales charges, distribution fees, service fees and
contingent deferred sales charges.(1) Classes of shares, if any, subject to a
front-end sales charge and a distribution and/or service fee are referred to
herein as "Front-End Classes" and the Shares of such classes are referred to
herein as "Front-End 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."

1
<PAGE> 2
Payments pursuant to this Service Plan may be paid or prepaid on
behalf of the Fund by the Distributor acting as the Fund's agent.

The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to such
Financial Intermediaries for activities and services of the type referred to in
Paragraph 1 hereof. Prior to the implementation of a Selling Agreement, such
agreement shall be approved by a majority of the Board of Trustees of the Trust
and a majority of the Disinterested Trustees (within the meaning of the 1940
Act) by a vote cast in person at a meeting called for the purpose of voting on
such Selling Agreements. Such Selling Agreements shall provide that the
Financial Intermediaries shall provide the Distributor with such information
as is reasonably necessary to permit the Distributor to comply with the
reporting requirements set forth in Paragraphs 3 and 8 hereof.

The Fund and the Distributor shall prepare separate written reports for
each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Service Plan and the
agreements contemplated hereby, the purposes for which such payments were made
and such other information as the Board of Trustees or the Disinterested
Trustees may reasonably request from time to time, and the Board of Trustees
shall review such reports and other information.

<PAGE> 1
EXHIBIT (16)(a)(i)

HIGH YIELD FUND
CALCULATION OF DISTRIBUTION RATE
PERIOD ENDED JUNE 30, 1996

Current Annual Income Per Share
---------------------------------
Current Offering Price

Class A Shares

$.900
-----
$9.96 = 9.04%

Class B Shares

$.828
-----
$9.50 = 8.72%

Class C Shares

$.828
-----
$9.50 = 8.72%

<PAGE> 2

HIGH YIELD FUND - CLASS A SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
n
Formula P(1+T) = ERV

Including Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,059.64 = ERV
One year period ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 5.96% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,112.64 = ERV
One year period ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 11.26% = T

TOTAL RETURN CALCULATION FIVE YEARS ENDED JUNE 30, 1996

n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,716.62 = ERV
Five years ended 06/30/96 5 = n

TOTAL RETURN FOR THE PERIOD 11.41% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,802.39 = ERV
Five years ended 06/30/96 5 = n

TOTAL RETURN FOR THE PERIOD 12.50% = T
</TABLE>

<PAGE> 3

HIGH YIELD FUND - CLASS A SHARES

TOTAL RETURN CALCULATION TEN YEARS ENDED JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
n
Formula P(1+T) = ERV
Including Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,142.63 = ERV
Ten years ended 06/30/96 10 = n

TOTAL RETURN FOR THE PERIOD 7.92% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,250.41 = ERV
Ten years ended 06/30/96 10 = n

TOTAL RETURN FOR THE PERIOD 8.45% = T

TOTAL RETURN CALCULATION INCEPTION THROUGH JUNE 30, 1996

n
Formula P(1+T) = ERV

Including Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,154.26 = ERV
Inception through 06/30/96 10.01 = n

TOTAL RETURN FOR THE PERIOD 7.97% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,261.32 = ERV
Inception through 06/30/96 10.01 = n

TOTAL RETURN FOR THE PERIOD 8.49% = T
</TABLE>

<PAGE> 4

HIGH YIELD FUND - CLASS A SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
Formula ERV - P
-------
P = T

Including Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,154.26 = ERV

TOTAL RETURN FOR THE PERIOD 115.43% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 9.49
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,261.32 = ERV

TOTAL RETURN FOR THE PERIOD 126.13% = T
</TABLE>

<PAGE> 5

HIGH YIELD FUND - CLASS B SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,065.49 = ERV
One year period ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 6.55% = T

Excluding Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,105.49 = ERV
One year period ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 10.55% = T

TOTAL RETURN CALCULATION INCEPTION THROUGH JUNE 30, 1996

n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,231.12 = ERV
Inception through 06/30/96 3.12 = n

TOTAL RETURN FOR THE PERIOD 6.89% = T

Excluding Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,254.43 = ERV
Inception through 06/30/96 3.12 = n

TOTAL RETURN FOR THE PERIOD 7.54% = T

</TABLE>

<PAGE> 6

HIGH YIELD FUND - CLASS B SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1996

<TABLE>
<S> <C> <C> <C> <C>
Formula ERV - P
-------
P = T

Including Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,231.12 = ERV

TOTAL RETURN FOR THE PERIOD 23.11% = T

Excluding Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,254.43 = ERV

TOTAL RETURN FOR THE PERIOD 25.44% = T
</TABLE>

<PAGE> 7

HIGH YIELD FUND - CLASS C SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,095.53 = ERV
One year period ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 9.55% = T

Excluding Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,105.53 = ERV
One year period ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 10.55% = T

TOTAL RETURN CALCULATION INCEPTION THROUGH JUNE 30, 1996
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,205.88 = ERV
Inception through 06/30/96 2.88 = n

TOTAL RETURN FOR THE PERIOD 6.72% = T
Excluding Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,205.88 = ERV
Inception through 06/30/96 2.88 = n

TOTAL RETURN FOR THE PERIOD 6.72% = T

</TABLE>
<PAGE> 8

HIGH YIELD FUND - CLASS C SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1996

<TABLE>
<S> <C> <C> <C> <C>
Formula ERV - P
-------
P = T

Including Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,205.88 = ERV

TOTAL RETURN FOR THE PERIOD 20.59% = T

Excluding Payment of the CDSC
Net Asset Value $ 9.50
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,205.88 = ERV

TOTAL RETURN FOR THE PERIOD 20.59% = T
</TABLE>

<PAGE> 9
HIGH YIELD FUND
30 DAY SEC YIELD WORKSHEET
FOR PERIOD ENDING JUNE 30, 1996

Class A Shares

High Yield Fund

<TABLE>
<S> <C>
Formula [(((( Total Income - Total Expenses ) ) 6) ) ]
Class A Shares [((((-----------------------------------------------) + 1) ) - 1) * 2] = SEC Yield
[((((Average Dividend Shares x Public Offering Price) ) ) ) ]

[(((( $2,198,383.52 - $291,718.56 ) ) 6) ) ]
Class A Shares [((((-----------------------------------------------) + 1) ) - 1) * 2] = 8.19%
[(((( 28,508,293.390 x $9.96 ) ) ) ) ]

Class A Shares [(((( $2,198,383.52 - $293,306.12 ) ) 6) ) ]
Without [((((-----------------------------------------------) + 1) ) - 1) * 2] = 8.19%
Expense Waiver [(((( 28,508,293.390 x $9.96 ) ) ) ) ]

Waived Expense Adjustment (8.19%-8.19%) 0.00%
</TABLE>

Class B Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential
<S> <C>
Class A Share Yield 8.19%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
4.75% x 8.19% .39%
- Expense Differential between Class A Shares and Class B Shares .76%
----
Class B Share SEC Yield 7.82%
====

- Waived Expense Adjustment .00%
----
Class B Share SEC Yield (Without Expense Waiver) 7.82%
====
<CAPTION>

Class C Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential

Class A Share Yield 8.19%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
4.75% x 8.19% .39%
- Expense Differential between Class A Shares and Class C Shares .76%
----
Class C Share SEC Yield 7.82%
====

- Waived Expense Adjustment .00%
----
Class C Share SEC Yield (Without Expense Waiver) 7.82%
====
</TABLE>

<PAGE> 1
EXHIBIT (16)(a)(ii)

SHORT-TERM GLOBAL INCOME FUND
CALCULATION OF DISTRIBUTION RATE
PERIOD ENDED JUNE 30, 1996

Current Annual Income Per Share
------------------------------------
Current Offering Price

Class A Shares

$.564
-----
$7.88 = 7.16%

Class B Shares

$.505
-----
$7.62 = 6.63%

Class C Shares

$.505
-----
$7.62 = 6.63%

<PAGE> 2

SHORT-TERM GLOBAL INCOME FUND
CLASS A SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
n
Formula P(1+T) = ERV

Including Payment of the Sales Charge
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,053.27 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 5.33% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,088.08 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 8.81% = T

TOTAL RETURN CALCULATION FIVE YEAR PERIOD ENDED JUNE 30, 1996
n
Formula P(1+T) = ERV

Including Payment of the Sales Charge
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,169.94 = ERV
Five Year Period Ended 06/30/96 5 = n

TOTAL RETURN FOR THE PERIOD 3.19% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,209.39 = ERV
Five Year Period Ended 06/30/96 5 = n

TOTAL RETURN FOR THE PERIOD 3.88% = T
</TABLE>

<PAGE> 3

SHORT-TERM GLOBAL INCOME FUND
CLASS A SHARES

TOTAL RETURN CALCULATION FROM INCEPTION THROUGH JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
n
Formula P(1+T)n = ERV

Including Payment of the Sales Charge
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,227.80 = ERV
Period From Inception to 06/30/96 5.76 = n

TOTAL RETURN FOR THE PERIOD 3.63% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,269.61 = ERV
Period From Inception to 06/30/96 5.76 = n

TOTAL RETURN FOR THE PERIOD 4.23% = T

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1996

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

Including Payment of the Sales Charge
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,227.80 = ERV

TOTAL RETURN FOR THE PERIOD 22.78% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,269.61 = ERV

TOTAL RETURN FOR THE PERIOD 26.96% = T
</TABLE>

<PAGE> 4

SHORT-TERM GLOBAL INCOME FUND
CLASS B SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,050.24 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 5.02% = T

Excluding Payment of the CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,080.24 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 8.02% = T

TOTAL RETURN CALCULATION FROM INCEPTION THROUGH JUNE 30, 1996

n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,164.44 = ERV
Period From Inception to 06/30/96 4.94 = n

TOTAL RETURN FOR THE PERIOD 3.13% = T

Excluding Payment of the CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,164.44 = ERV
Period From Inception to 06/30/96 4.94 = n

TOTAL RETURN FOR THE PERIOD 3.13% = T
</TABLE>

<PAGE> 5

SHORT-TERM GLOBAL INCOME FUND
CLASS B SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
Formula ERV - P
----------
P = T

Including Payment of CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,164.44 = ERV

TOTAL RETURN FOR THE PERIOD 16.44% = T

Excluding Payment of CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,164.44 = ERV

TOTAL RETURN FOR THE PERIOD 16.44% = T
</TABLE>

<PAGE> 6

SHORT-TERM GLOBAL INCOME FUND
CLASS C SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,070.26 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 7.03% = T

Excluding Payment of the CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,080.26 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 8.03% = T

TOTAL RETURN CALCULATION FROM INCEPTION THROUGH JUNE 30, 1996
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,009.13 = ERV
Period From Inception to 06/30/96 2.88 = n

TOTAL RETURN FOR THE PERIOD 0.32% = T

Excluding Payment of the CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,009.13 = ERV
Period From Inception to 06/30/96 2.88 = n

TOTAL RETURN FOR THE PERIOD 0.32% = T
</TABLE>

<PAGE> 7

SHORT-TERM GLOBAL INCOME FUND
CLASS C SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH JUNE 30, 1996

<TABLE>
<S> <C> <C> <C>
Formula ERV - P
----------
P = T

Including Payment of CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,009.13 = ERV

TOTAL RETURN FOR THE PERIOD 0.91% = T

Excluding Payment of CDSC
Net Asset Value $ 7.62
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,009.13 = ERV

TOTAL RETURN FOR THE PERIOD 0.91% = T
</TABLE>

<PAGE> 8

SHORT-TERM GLOBAL INCOME FUND
30 DAY SEC YIELD WORKSHEET
FOR PERIOD ENDING JUNE 30, 1996

Class A Shares

Formula

Short-Term Global Income Fund

[(((( $248,731.67 - $56,214.22 ) ) 6) ) ]
Class A Shares [((((-----------------------------------------------) + 1) ) - 1) * 2] = 4.47%
[(((( 6,619,844.950 x $7.88 ) ) ) ) ]

Class A Shares [(((( $248,731.67 - $58,593.13 ) ) 6) ) ]
Without [((((-----------------------------------------------) + 1) ) - 1) * 2] = 4.41%
Expense Waiver [(((( 6,619,844.950 x $7.88 ) ) ) ) ]

Waived Expense Adjustment (4.47%-4.41%) 0.06%

</TABLE>

<TABLE>
<CAPTION>
Class B Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential
<S> <C>
Class A Share Yield 4.47%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
3.25% x 4.47% .15%
- Expense Differential between Class A Shares and Class B Shares .75%
-----
Class B Share SEC Yield 3.87%
=====

Class C Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential

Class A Share Yield 4.47%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
3.25% x 4.47% .15%
- Expense Differential between Class A Shares and Class C Shares .75%
-----
Class C Share SEC Yield 3.87%
=====

</TABLE>

<PAGE> 1

EXHIBIT (16)(a)(iii)

STRATEGIC INCOME FUND

Calculation of Distribution Rate

Period Ended June 30, 1996

Current Annual Income Per Share
-----------------------------------
Current Offering Price

Class A Shares

$ 1.050
--------
$12.67 = 8.29%

Class B Shares

$ 0.96
--------
$12.07 = 7.95%

Class C Shares

$ 0.96
--------
$12.06 = 7.96%

STRATEGIC INCOME FUND

CLASS A SHARES

<PAGE> 2

Total Return Calculation One Year Period Ended June 30, 1996

Formula P(1+T)n = ERV

Including Payment of the Sales Charge
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,075.84 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 7.58% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,129.17 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 12.92% = T

STRATEGIC INCOME FUND

CLASS A SHARES

Total Return Calculation From Inception Through June 30, 1996

Formula P(1+T)n = ERV

Including Payment of the Sales Charge
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,017.10 = ERV
Period From Inception to 06/30/96 2.50 = n

TOTAL RETURN FOR THE PERIOD 0.68% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,067.58 = ERV
Period From Inception to 06/30/96 2.50 = n

TOTAL RETURN FOR THE PERIOD 2.65% = T

<PAGE> 3

Non-Standardized Cumulative Total Return Calculation
Inception Through June 30, 1996

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

Including Payment of the Sales Charge
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,017.10 = ERV

TOTAL RETURN FOR THE PERIOD 1.71% = T

Excluding Payment of the Sales Charge
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,067.58 = ERV

TOTAL RETURN FOR THE PERIOD 6.76% = T

STRATEGIC INCOME FUND

CLASS B SHARES

Total Return Calculation One Year Period Ended June 30, 1996

Formula P(1+T)n = ERV

Including Payment of the CDSC
Net Asset Value $ 12.07
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,080.57 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 8.06% = T

Excluding Payment of the CDSC
Net Asset Value $ 12.07
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,120.57 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 12.06% = T

<PAGE> 4

Total Return Calculation From Inception Through June 30, 1996

Formula P(1+T)n = ERV

Including Payment of the CDSC
Net Asset Value $ 12.07
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,017.16 = ERV
Period From Inception to 06/30/96 2.50 = n

TOTAL RETURN FOR THE PERIOD 0.68% = T

Excluding Payment of the CDSC
Net Asset Value $ 12.07
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,046.70 = ERV
Period From Inception to 06/30/96 2.50 = n

TOTAL RETURN FOR THE PERIOD 1.84% = T

STRATEGIC INCOME FUND

CLASS B SHARES

Non-Standardized Cumulative Total Return Calculation
Inception Through June 30, 1996

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

Including Payment of CDSC
Net Asset Value $ 12.07
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,017.16 = ERV

TOTAL RETURN FOR THE PERIOD 1.72% = T

Excluding Payment of CDSC
Net Asset Value $ 12.07
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,046.70 = ERV

TOTAL RETURN FOR THE PERIOD 4.67% = T
<PAGE> 5

STRATEGIC INCOME FUND

CLASS C SHARES

Total Return Calculation One Year Period Ended June 30, 1996

Formula P(1+T)n = ERV

Including Payment of the CDSC
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,110.69 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 11.07% = T

Excluding Payment of the CDSC
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,120.69 = ERV
One Year Period Ended 06/30/96 1 = n

TOTAL RETURN FOR THE PERIOD 12.07% = T

Total Return Calculation From Inception Through June 30, 1996

Formula P(1+T)n = ERV

Including Payment of the CDSC
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,045.87 = ERV
Period From Inception to 06/30/96 2.50 = n

TOTAL RETURN FOR THE PERIOD 1.81% = T

Excluding Payment of the CDSC
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,045.87 = ERV
Period From Inception to 06/30/96 2.50 = n

TOTAL RETURN FOR THE PERIOD 1.81% = T

<PAGE> 6

STRATEGIC INCOME FUND

CLASS C SHARES

Non-Standardized Cumulative Total Return Calculation
Inception Through June 30, 1996

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

Including Payment of CDSC
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,045.87 = ERV

TOTAL RETURN FOR THE PERIOD 4.59% = T

Excluding Payment of CDSC
Net Asset Value $ 12.06
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,045.87 = ERV

TOTAL RETURN FOR THE PERIOD 4.59% = T

<PAGE> 7
STRATEGIC INCOME FUND
30 DAY SEC YIELD WORKSHEET
FOR PERIOD ENDING JUNE 30, 1996

Class A Shares

Formula

<TABLE>
<S> <C>
Formula [(((( Total Income - Total Expenses) ) 6) ) ]
Class A Shares [((((-----------------------------------------------) + 1) ) - 1) *2 ] = SEC Yield
[((((Average Dividend Shares x Public Offering Price) ) ) ) ]

[(((( $284,544.11 - $88,932.59 ) ) 6) ) ]
Class A Shares [((((-----------------------------------------------) + 1) ) - 1) *2 ] = 6.72%
[(((( 2,797,640.440 x $12.66 ) ) ) ) ]

Class A Shares [(((( $284,544.11 - $90,751.98 ) ) 6) ) ]
Without [((((-----------------------------------------------) + 1) ) - 1) *2 ] = 6.66%
Expense Waiver [(((( 2,797,640.440 x $12.66 ) ) ) ) ]

Waived Expense Adjustment (6.72%-6.66%) 0.06%

</TABLE>

<TABLE>
<CAPTION>
Class B Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential
<S> <C>
Class A Share Yield 6.72%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
4.75% x 6.72% .32%
- Expense Differential between Class A Shares and Class B Shares .75%
----
Class B Share SEC Yield 6.29%
====

Class C Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential

Class A Share Yield 6.72%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
4.75% x 6.72% .32%
- Expense Differential between Class A Shares and Class C Shares .75%
----
Class C Share SEC Yield 6.29%
====
</TABLE>

<PAGE> 1
EXHIBIT 17(a)

INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
OCTOBER 4, 1996

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 Balanced 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
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

<PAGE> 2

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 Texas Tax Free Income 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
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

<PAGE> 3
<TABLE>
<S> <C>
Emerging Markets Municipal Income Trust ........................................... Series 1
Insured Municipals Income Trust ................................................... Series 1 through 379
Insured Municipals Income Trust (Discount) ........................................ Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term) ......................... Series 1 through 105
1009 Insured Municipals Income Trust (Intermediate Term) .......................... Series 5 through 88
Insured Municipals Income Trust (Limited Term) .................................... Series 9 through 85
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 17
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 158
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 81
Colorado Investors' Quality Tax-Exempt Trust ...................................... Series 1 through 18
Connecticut Insured Municipals Income Trust ....................................... Series 1 through 31
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 107
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 81
Georgia Investors' Quality Tax-Exempt Trust ....................................... Series 1 through 16
Hawaii Investors' Quality Tax-Exempt 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 58
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 79
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 140
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 59
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 99
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 114
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 136
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 89
Ohio Insured Municipals Income Trust ............................................... Series 1 through 104
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 223
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 84
Stepstone Growth Equity and Treasury Securities Trust .............................. Series 1
Tennessee Insured Municipals Income Trust .......................................... Series 1-3 and 5-37
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 73
Van Kampen American Capital Equity Opportunity Trust ............................... Series 1 through 41
Van Kampen American Capital Utility Income Trust ................................... Series 1 through 8
Van Kampen American Capital Insured Income Trust ................................... Series 1 through 61
Van Kampen American Capital Insured Income Trust (Intermediate Term) ............... Series 1 through 60
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 3
Michigan Real Estate Income and Growth Trust ....................................... Series 1
Strategic Ten Trust, United States ................................................. Series 1 through 10
Strategic Ten Trust, United Kingdom ................................................ Series 1 through 10
Strategic Ten Trust, Hong Kong ..................................................... Series 1 through 10
Strategic Five Trust, United States ................................................ Series 1 through 4
Equity Opportunity Trust ........................................................... Series 1 through 42
Great International Firms Trust .................................................... Series 1
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
Global Energy Trust ................................................................ Series 1 through 2
</TABLE>

<PAGE> 1
EXHIBIT 17(b)

OFFICERS

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

<TABLE>
<S> <C> <C>
NAME OFFICE LOCATION
- ------------------------- ---------------------------------- --------------------

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
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
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Debra A. Nichols Sr. Vice President Houston, TX
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL

Timothy K. Brown 1st Vice President Laguna Niguel, CA
James S. Fosdick 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President San Francisco, CA
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
Mark T. McGannon 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
Patricia A. Bettlach Vice President St. Louis, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Thomas M. Byron Vice President Oakbrook Terrace, IL
Glenn M. Cackovic Vice President Laguna Niguel, CA
Joseph N. Caggiano Vice President New York, NY
Richard J. Charlino Vice President Houston, 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 Houston, TX
Tracey M. DeLusant Vice President Lynbrook, NY
</TABLE>

<PAGE> 2

<TABLE>
<S> <C> <C>
David B. Dibo Vice President Oakbrook Terrace, IL
Howard A. Doss Vice President Tampa, FL
Charles Edward Fisher Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhaven Vice President Denver, CO
Charles Friday Vice President Gibsonia, PA
Nori L. Gabert Vice President, Assoc. General Houston, TX
Counsel & Asst. Secretary
Erich P. Gerth Vice President Dallas, TX
Daniel Hamilton Vice President Houston, TX
John A. Hanhauser Vice President Philadelphia, PA
Eric J. Hargens Vice President Orlando, FL
Gregory Heffington Vice President Oakbrook Terrace, IL
Susan J. Hill Vice President Oakbrook Terrace, IL
Robert S. Hunt Vice President Baltimore, MD
Lowell Jackson Vice President Norcross, GA
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
S. William Lehew III Vice President Charlotte, NC
Robert C. Lodge Vice President Philadelphia, PA
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
Ruth L. McKeel Vice President Oakbrook Terrace, IL
John Mills Vice President Kenner, LA
Robert Muller, Jr. Vice President Houston, TX
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Oakbrook Terrace, IL
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
James B. Ross Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Lynbrook, NY
Lisa A. Schomer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey C. Shirk Vice President Boston, MA
Kimberly M. Spangler Vice President Atlanta, GA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
James D. Stevens Vice President Boston, MA
William C. Strafford Vice President Granger, IN
David A. Tabone Vice President Phoenix, AZ
James C. Taylor Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
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
James R. Yount Vice President Seattle, WA
Patrick M. Zacchea Vice President New York, NY

</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
Brian P. Arcara Asst. Vice President Philadelphia, PA
Christopher M. Bisaillon Asst. Vice President Oakbrook Terrace, IL
Eric J. Bridges Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Robert C. Brooks Asst. Vice President Manchester, MA
Richard B. Callaghan Asst. Vice President Oakbrook Terrace, IL
Deanna Margaret Chiaro Asst. Vice President San Jose, CA
Stephen M. Cutka Asst. Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Daniel R. DeJong Asst. Vice President Oakbrook Terrace, IL
Melissa B. Epstein Asst. Vice President Houston, TX
Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Joseph Hays Asst. Vice President Philadelphia, PA
Scott F. Heyer Asst. Vice President Tampa, FL
Jeffrey S. Kinney Asst. Vice President Oakbrook Terrace, IL
Michael B. Kollins Asst. Vice President Oakbrook Terrace, IL
Natalie N. Hurdle Asst. Vice President New York, NY
Laurie L. Jones Asst. Vice President Houston, TX
Patricia D. Lathrop Asst. Vice President Tampa, FL
Tony E. Leal Asst. Vice President Houston, TX
Ivan R. Lowe Asst. Vice President Houston, TX
Linda S. MacAyeal Asst. Vice President Oakbrook Terrace, IL
Ann Therese McGrath Asst. Vice President Laguna, CA
Stuart R. Moehlman Asst. Vice President Houston, TX
Peggy E. Moro Asst. Vice President Oakbrook Terrace, IL
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
Jeffrey S. Rourke Asst. Vice President Oakbrook Terrace, IL
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. Sorensen Asst. Vice President Oakbrook Terrace, IL
Gary Steele Asst. Vice President Philadelphia, PA
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Robert A. Watson Asst. Vice President Oakbrook Terrace, IL
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL

David C. Goodwin Asst. Secretary Oakbrook Terrace, IL
Gina M. Scumaci Asst. Secretary Oakbrook Terrace, IL

Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
Gina Grippo Officer Houston, TX
Sarah Kessler Officer Oakbrook Terrace, IL
Francis McGarvey Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Becky Newman Officer Houston, TX
Rosemary Pretty Officer Houston, TX
Colette Saucedo Officer Houston, TX
</TABLE>

<PAGE> 4

<TABLE>
<S> <C> <C>
Frederick Shepherd Officer Houston, TX
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>

<PAGE> 5

DIRECTORS

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

<TABLE>
<S> <C> <C>
NAME OFFICE LOCATION
- ------------------- ------------------------ ---------------------------------------------------

Don G. Powell Chairman & CEO 2800 Post Oak Blvd.Houston, TX 77056

William R. Molinari President & COO One Parkview Plaza
Oakbrook Terrace, IL 60181

Ronald A. Nyberg Executive Vice President One Parkview Plaza
& General Counsel Oakbrook Terrace, IL 60181

William R. Rybak Executive Vice President One Parkview Plaza
& CFO Oakbrook Terrace, IL 60181
</TABLE>

<PAGE> 1

EXHIBIT 18

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 and adopted
this Plan on January 26, 1996.

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) 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

d. 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

e. 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 TEXAS TAX FREE INCOME FUND
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 Van Kampen American
Capital Trust, a Delaware business trust (the "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 the
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: March 1, 1996

Signature Title
--------- -------

/s/ Fernando Sisto, Sc.D. Trustee
- ----------------------------------
Fernando Sisto, Sc.D.

/s/ Donald C. Miller Trustee
- ----------------------------------
Donald C. Miller

/s/ Don G. Powell Trustee
- ----------------------------------
Don G. Powell

/s/ Dennis J. McDonnell Trustee
- ----------------------------------
Dennis J. McDonnell

/s/ J. Miles Branagan Trustee
- ----------------------------------
J. Miles Branagan

/s/ Linda Hutton Heagy Trustee
- ----------------------------------
Linda Hutton Heagy

/s/ Roger Hilsman, Ph.D. Trustee
- ----------------------------------
Roger Hilsman, Ph.D.

/s/ William Stewart Woodside Trustee
- ----------------------------------
William Stewart Woodside

/s/ R. Craig Kennedy Trustee
- ----------------------------------
R. Craig Kennedy

/s/ Jack E. Nelson Trustee
- ----------------------------------
Jack E. Nelson

/s/ Wayne W. Whalen Trustee
- ----------------------------------
Wayne W. Whalen

/s/ Jerome L. Robinson Trustee
- ----------------------------------
Jerome L. Robinson

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

<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> High Yield, Class A
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 367869087<F1>
<INVESTMENTS-AT-VALUE> 373473151<F1>
<RECEIVABLES> 11077446<F1>
<ASSETS-OTHER> 45015<F1>
<OTHER-ITEMS-ASSETS> 313<F1>
<TOTAL-ASSETS> 384595925<F1>
<PAYABLE-FOR-SECURITIES> 6444746<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2971284<F1>
<TOTAL-LIABILITIES> 9416030<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 372301052
<SHARES-COMMON-STOCK> 28557300
<SHARES-COMMON-PRIOR> 26951319
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 1835750<F1>
<ACCUMULATED-NET-GAINS> (105683980)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 5542049<F1>
<NET-ASSETS> 271105413
<DIVIDEND-INCOME> 458386<F1>
<INTEREST-INCOME> 35516846<F1>
<OTHER-INCOME> 510503<F1>
<EXPENSES-NET> 5189476<F1>
<NET-INVESTMENT-INCOME> 31296259<F1>
<REALIZED-GAINS-CURRENT> 5994371<F1>
<APPREC-INCREASE-CURRENT> (896955)<F1>
<NET-CHANGE-FROM-OPS> 36393675<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24518181
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7294414
<NUMBER-OF-SHARES-REDEEMED> (6692159)
<SHARES-REINVESTED> 1003726
<NET-CHANGE-IN-ASSETS> 17827058
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> (111386273)<F1>
<OVERDISTRIB-NII-PRIOR> 1895466<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2614970<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5207588<F1>
<AVERAGE-NET-ASSETS> 265587071
<PER-SHARE-NAV-BEGIN> 9.398
<PER-SHARE-NII> .878
<PER-SHARE-GAIN-APPREC> .147
<PER-SHARE-DIVIDEND> .880
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .050
<PER-SHARE-NAV-END> 9.493
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis
and not on a class basis.
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> High Yield, Class B
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 367869087<F1>
<INVESTMENTS-AT-VALUE> 373473151<F1>
<RECEIVABLES> 11077446<F1>
<ASSETS-OTHER> 45015<F1>
<OTHER-ITEMS-ASSETS> 313<F1>
<TOTAL-ASSETS> 384595925<F1>
<PAYABLE-FOR-SECURITIES> 6444746<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2971284<F1>
<TOTAL-LIABILITIES> 9416030<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 97806116
<SHARES-COMMON-STOCK> 10224423
<SHARES-COMMON-PRIOR> 5943391
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 1835750<F1>
<ACCUMULATED-NET-GAINS> (105683980)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 5542049<F1>
<NET-ASSETS> 97098815
<DIVIDEND-INCOME> 458386<F1>
<INTEREST-INCOME> 35516846<F1>
<OTHER-INCOME> 510503<F1>
<EXPENSES-NET> 5189476<F1>
<NET-INVESTMENT-INCOME> 31296259<F1>
<REALIZED-GAINS-CURRENT> 5994371<F1>
<APPREC-INCREASE-CURRENT> (896955)<F1>
<NET-CHANGE-FROM-OPS> 36393675<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6539545
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5691156
<NUMBER-OF-SHARES-REDEEMED> (1675635)
<SHARES-REINVESTED> 265511
<NET-CHANGE-IN-ASSETS> 41241405
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> (111386273)<F1>
<OVERDISTRIB-NII-PRIOR> 1895466<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2614970<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5207588<F1>
<AVERAGE-NET-ASSETS> 78047985
<PER-SHARE-NAV-BEGIN> 9.398
<PER-SHARE-NII> .797
<PER-SHARE-GAIN-APPREC> .160
<PER-SHARE-DIVIDEND> .812
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .046
<PER-SHARE-NAV-END> 9.497
<EXPENSE-RATIO> 2.07
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis
and not on a class basis.

</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> High Yield, Class C
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 367869087<F1>
<INVESTMENTS-AT-VALUE> 373473151<F1>
<RECEIVABLES> 11077446<F1>
<ASSETS-OTHER> 45015<F1>
<OTHER-ITEMS-ASSETS> 313<F1>
<TOTAL-ASSETS> 384595925<F1>
<PAYABLE-FOR-SECURITIES> 6444746<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2971284<F1>
<TOTAL-LIABILITIES> 9416030<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7050408
<SHARES-COMMON-STOCK> 734629
<SHARES-COMMON-PRIOR> 211927
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 1835750<F1>
<ACCUMULATED-NET-GAINS> (105683980)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 5542049<F1>
<NET-ASSETS> 6975667
<DIVIDEND-INCOME> 458386<F1>
<INTEREST-INCOME> 35516846<F1>
<OTHER-INCOME> 510503<F1>
<EXPENSES-NET> 5189476<F1>
<NET-INVESTMENT-INCOME> 31296259<F1>
<REALIZED-GAINS-CURRENT> 5994371<F1>
<APPREC-INCREASE-CURRENT> (896955)<F1>
<NET-CHANGE-FROM-OPS> 36393675<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 425515
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 717313
<NUMBER-OF-SHARES-REDEEMED> (215382)
<SHARES-REINVESTED> 20771
<NET-CHANGE-IN-ASSETS> 4984314
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> (111386273)<F1>
<OVERDISTRIB-NII-PRIOR> 1895466<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2614970<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5207588<F1>
<AVERAGE-NET-ASSETS> 5163531
<PER-SHARE-NAV-BEGIN> 9.396
<PER-SHARE-NII> .828
<PER-SHARE-GAIN-APPREC> .129
<PER-SHARE-DIVIDEND> .812
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .046
<PER-SHARE-NAV-END> 9.495
<EXPENSE-RATIO> 2.06
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis
and not on a class basis.

</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> VKAC Short Term Global Income Fund, Class A
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 119166291<F1>
<INVESTMENTS-AT-VALUE> 119819836<F1>
<RECEIVABLES> 14780855<F1>
<ASSETS-OTHER> 5397<F1>
<OTHER-ITEMS-ASSETS> 6950<F1>
<TOTAL-ASSETS> 134613038<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 1862000<F1>
<OTHER-ITEMS-LIABILITIES> 1410831<F1>
<TOTAL-LIABILITIES> 3272831<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71847960
<SHARES-COMMON-STOCK> 6575159
<SHARES-COMMON-PRIOR> 9590434
<ACCUMULATED-NII-CURRENT> (358000)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (64524990)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (284565)<F1>
<NET-ASSETS> 50118757
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 12560652<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2894836)<F1>
<NET-INVESTMENT-INCOME> 9665816<F1>
<REALIZED-GAINS-CURRENT> (16200811)<F1>
<APPREC-INCREASE-CURRENT> 20009929<F1>
<NET-CHANGE-FROM-OPS> 13474934<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (4481275)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 162018
<NUMBER-OF-SHARES-REDEEMED> (3533398)
<SHARES-REINVESTED> 356105
<NET-CHANGE-IN-ASSETS> (22427987)
<ACCUMULATED-NII-PRIOR> (588190)<F1>
<ACCUMULATED-GAINS-PRIOR> (65458526)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 882054<F1>
<INTEREST-EXPENSE> 42719<F1>
<GROSS-EXPENSE> 2939309<F1>
<AVERAGE-NET-ASSETS> 58195207
<PER-SHARE-NAV-BEGIN> 7.56
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.62
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 1243000<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis and
not on a class basis.
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> VKAC Short Term Global Income Fund, Class B
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 119166291<F1>
<INVESTMENTS-AT-VALUE> 119819836<F1>
<RECEIVABLES> 14780855<F1>
<ASSETS-OTHER> 5397<F1>
<OTHER-ITEMS-ASSETS> 6950<F1>
<TOTAL-ASSETS> 134613038<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 1862000<F1>
<OTHER-ITEMS-LIABILITIES> 1410831<F1>
<TOTAL-LIABILITIES> 3272831<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124493824
<SHARES-COMMON-STOCK> 10639329
<SHARES-COMMON-PRIOR> 16910386
<ACCUMULATED-NII-CURRENT> (358000)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (64524990)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (284565)<F1>
<NET-ASSETS> 81057362
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 12560652<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2894836)<F1>
<NET-INVESTMENT-INCOME> 9665816<F1>
<REALIZED-GAINS-CURRENT> (16200811)<F1>
<APPREC-INCREASE-CURRENT> 20009929<F1>
<NET-CHANGE-FROM-OPS> 13474934<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (7116453)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 153961
<NUMBER-OF-SHARES-REDEEMED> (6899452)
<SHARES-REINVESTED> 474434
<NET-CHANGE-IN-ASSETS> (46848180)
<ACCUMULATED-NII-PRIOR> (588190)<F1>
<ACCUMULATED-GAINS-PRIOR> (65458526)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 882054<F1>
<INTEREST-EXPENSE> 42719<F1>
<GROSS-EXPENSE> 2939309<F1>
<AVERAGE-NET-ASSETS> 101895587
<PER-SHARE-NAV-BEGIN> 7.56
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.62
<EXPENSE-RATIO> 2.09
<AVG-DEBT-OUTSTANDING> 1243000<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis and
not on a class basis.
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 023
<NAME> VKAC Short Term Global Income Fund, Class C
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 119166291<F1>
<INVESTMENTS-AT-VALUE> 119819836<F1>
<RECEIVABLES> 14780855<F1>
<ASSETS-OTHER> 5397<F1>
<OTHER-ITEMS-ASSETS> 6950<F1>
<TOTAL-ASSETS> 134613038<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 1862000<F1>
<OTHER-ITEMS-LIABILITIES> 1410831<F1>
<TOTAL-LIABILITIES> 3272831<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 165978
<SHARES-COMMON-STOCK> 21536
<SHARES-COMMON-PRIOR> 22678
<ACCUMULATED-NII-CURRENT> (358000)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (64524990)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (284565)<F1>
<NET-ASSETS> 164088
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 12560652<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2894836)<F1>
<NET-INVESTMENT-INCOME> 9665816<F1>
<REALIZED-GAINS-CURRENT> (16200811)<F1>
<APPREC-INCREASE-CURRENT> 20009929<F1>
<NET-CHANGE-FROM-OPS> 13474934<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (11560)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1057
<NUMBER-OF-SHARES-REDEEMED> (3684)
<SHARES-REINVESTED> 1485
<NET-CHANGE-IN-ASSETS> (7450)
<ACCUMULATED-NII-PRIOR> (588190)<F1>
<ACCUMULATED-GAINS-PRIOR> (65458526)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 882054<F1>
<INTEREST-EXPENSE> 42719<F1>
<GROSS-EXPENSE> 2939309<F1>
<AVERAGE-NET-ASSETS> 166408
<PER-SHARE-NAV-BEGIN> 7.56
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.62
<EXPENSE-RATIO> 2.07
<AVG-DEBT-OUTSTANDING> 1243000<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis and
not on a class basis.
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> VKAC Strategic Income Fund - Class A
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 113946239<F1>
<INVESTMENTS-AT-VALUE> 113733636<F1>
<RECEIVABLES> 16363560<F1>
<ASSETS-OTHER> 87438<F1>
<OTHER-ITEMS-ASSETS> 247000<F1>
<TOTAL-ASSETS> 130431634<F1>
<PAYABLE-FOR-SECURITIES> 14330183<F1>
<SENIOR-LONG-TERM-DEBT> 15913433<F1>
<OTHER-ITEMS-LIABILITIES> 1319250<F1>
<TOTAL-LIABILITIES> 31562866<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36670209
<SHARES-COMMON-STOCK> 2803579
<SHARES-COMMON-PRIOR> 2531907
<ACCUMULATED-NII-CURRENT> 22912<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (7887999)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (794446)<F1>
<NET-ASSETS> 33826436
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11358305<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (4192063)<F1>
<NET-INVESTMENT-INCOME> 7166242<F1>
<REALIZED-GAINS-CURRENT> 2088097<F1>
<APPREC-INCREASE-CURRENT> (794446)<F1>
<NET-CHANGE-FROM-OPS> 10439789<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2908823)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 751977
<NUMBER-OF-SHARES-REDEEMED> (575267)
<SHARES-REINVESTED> 94962
<NET-CHANGE-IN-ASSETS> 4193267
<ACCUMULATED-NII-PRIOR> (407598)<F1>
<ACCUMULATED-GAINS-PRIOR> (8823743)<F1>
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 927893<F1>
<INTEREST-EXPENSE> 2065824<F1>
<GROSS-EXPENSE> 4267109<F1>
<AVERAGE-NET-ASSETS> 31846511
<PER-SHARE-NAV-BEGIN> 11.704
<PER-SHARE-NII> 1.013
<PER-SHARE-GAIN-APPREC> .446
<PER-SHARE-DIVIDEND> (1.098)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.065
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 32784900<F1>
<AVG-DEBT-PER-SHARE> 4<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis
and not on a class basis.
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> VKAC Strategic Income Fund - Class B
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 113946239<F1>
<INVESTMENTS-AT-VALUE> 113733636<F1>
<RECEIVABLES> 16363560<F1>
<ASSETS-OTHER> 87438<F1>
<OTHER-ITEMS-ASSETS> 247000<F1>
<TOTAL-ASSETS> 130431634<F1>
<PAYABLE-FOR-SECURITIES> 14330183<F1>
<SENIOR-LONG-TERM-DEBT> 15913433<F1>
<OTHER-ITEMS-LIABILITIES> 1319250<F1>
<TOTAL-LIABILITIES> 31562866<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67432261
<SHARES-COMMON-STOCK> 5132287
<SHARES-COMMON-PRIOR> 4494004
<ACCUMULATED-NII-CURRENT> 22912<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (7887999)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (794446)<F1>
<NET-ASSETS> 61941303
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11358305<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (4192063)<F1>
<NET-INVESTMENT-INCOME> 7166242<F1>
<REALIZED-GAINS-CURRENT> 2088097<F1>
<APPREC-INCREASE-CURRENT> (794446)<F1>
<NET-CHANGE-FROM-OPS> 10439789<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4768059)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1498860
<NUMBER-OF-SHARES-REDEEMED> (1024433)
<SHARES-REINVESTED> 163856
<NET-CHANGE-IN-ASSETS> 9333634
<ACCUMULATED-NII-PRIOR> (407598)<F1>
<ACCUMULATED-GAINS-PRIOR> (8823743)<F1>
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 927893<F1>
<INTEREST-EXPENSE> 2065824<F1>
<GROSS-EXPENSE> 4267109<F1>
<AVERAGE-NET-ASSETS> 56987279
<PER-SHARE-NAV-BEGIN> 11.706
<PER-SHARE-NII> .926
<PER-SHARE-GAIN-APPREC> .443
<PER-SHARE-DIVIDEND> (1.006)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.069
<EXPENSE-RATIO> 2.26
<AVG-DEBT-OUTSTANDING> 32784900<F1>
<AVG-DEBT-PER-SHARE> 4<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis
and not on a class basis.
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 033
<NAME> VKAC Strategic Income Fund - Class C
<MULTIPLIER> 1

<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 113946239<F1>
<INVESTMENTS-AT-VALUE> 113733636<F1>
<RECEIVABLES> 16363560<F1>
<ASSETS-OTHER> 87438<F1>
<OTHER-ITEMS-ASSETS> 247000<F1>
<TOTAL-ASSETS> 130431634<F1>
<PAYABLE-FOR-SECURITIES> 14330183<F1>
<SENIOR-LONG-TERM-DEBT> 15913433<F1>
<OTHER-ITEMS-LIABILITIES> 1319250<F1>
<TOTAL-LIABILITIES> 31562866<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3425831
<SHARES-COMMON-STOCK> 257163
<SHARES-COMMON-PRIOR> 147376
<ACCUMULATED-NII-CURRENT> 22912<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (7887999)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (794446)<F1>
<NET-ASSETS> 3101029
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11358305<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (4192063)<F1>
<NET-INVESTMENT-INCOME> 7166242<F1>
<REALIZED-GAINS-CURRENT> 2088097<F1>
<APPREC-INCREASE-CURRENT> (794446)<F1>
<NET-CHANGE-FROM-OPS> 10439789<F1>
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (211202)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 178450
<NUMBER-OF-SHARES-REDEEMED> (78275)
<SHARES-REINVESTED> 9612
<NET-CHANGE-IN-ASSETS> 1376898
<ACCUMULATED-NII-PRIOR> (407598)<F1>
<ACCUMULATED-GAINS-PRIOR> (8823743)<F1>
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 927893<F1>
<INTEREST-EXPENSE> 2065824<F1>
<GROSS-EXPENSE> 4267109<F1>
<AVERAGE-NET-ASSETS> 2547805
<PER-SHARE-NAV-BEGIN> 11.699
<PER-SHARE-NII> .944
<PER-SHARE-GAIN-APPREC> .422
<PER-SHARE-DIVIDEND> (1.006)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.059
<EXPENSE-RATIO> 2.22
<AVG-DEBT-OUTSTANDING> 32784900<F1>
<AVG-DEBT-PER-SHARE> 4<F1>
<FN>
<F1>
This item relates to the fund on a composite level basis
and not on a class basis.
</FN>

</TABLE>