VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST/, 485BPOS, 1997-10-28

VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST/
485BPOS, 1997-10-28

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1997

REGISTRATION NOS. 33-8122
811-4805
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

<TABLE>
<CAPTION>
<S> <C>
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 28 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 29 [X]
</TABLE>

VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST

(Exact Name of Registrant as Specified in the Agreement and Declaration of
Trust)

One Parkview Plaza, Oakbrook Terrace, Illinois 60181

(Address of Principal Executive Offices) (Zip Code)

(630) 684-6000

Registrant's Telephone Number, including Area Code

RONALD A. NYBERG, ESQ.

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

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

Copies to:

WAYNE W. WHALEN, ESQ.

THOMAS A. HALE, ESQ.

Skadden, Arps, Slate, Meagher & Flom
333 W. Wacker Drive
Chicago, IL 60606
(312) 407-0700
------------------------

Approximate Date of Proposed Public Offering: As soon as practicable
following effectiveness of this Registration Statement.

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:

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

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

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

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

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

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

IF APPROPRIATE CHECK THE FOLLOWING BOX:

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

TITLE OF SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR VALUE
$0.01 PER SHARE.

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

EXPLANATORY NOTE

This Post-Effective Amendment No. 28 to the Registration Statement contains
six Prospectuses and six Statements of Additional Information describing the six
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 relating to the Applicable Series, in the following order:

Van Kampen American Capital Utility 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

Statements of Additional Information relating to the Applicable Series, in
the following order:

Van Kampen American Capital Utility 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

Part C Information

Exhibits
<PAGE> 3

VAN KAMPEN AMERICAN CAPITAL UTILITY 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

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; FUND PERFORMANCE; ADDITIONAL
INFORMATION
Item 4. General Description of
Registrant................ PROSPECTUS SUMMARY; THE FUND; INVESTMENT OBJECTIVE AND
POLICIES; INVESTMENT PRACTICES; DESCRIPTION OF SHARES OF
THE FUND
Item 5. Management of the
Fund...................... ANNUAL FUND OPERATING EXPENSES AND EXAMPLE; INVESTMENT
PRACTICES; INVESTMENT ADVISORY SERVICES; SHAREHOLDER
SERVICES
Item 6. Capital Stock and Other
Securities................ DISTRIBUTIONS FROM THE FUND; REDEMPTION OF SHARES; THE
DISTRIBUTION AND SERVICE PLANS; TAX STATUS; 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; SHAREHOLDER SERVICES; FUND PERFORMANCE
Item 8. Redemption or
Repurchase................ PURCHASE OF SHARES; REDEMPTION OF SHARES; SHAREHOLDER
SERVICES
Item 9. Pending Legal
Proceedings............... Not Applicable
</TABLE>

i
<PAGE> 4

<TABLE>
<CAPTION>
ITEM NUMBER OF LOCATION OR CAPTION
FORM N-1A IN PROSPECTUS
-------------- -------------------
<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
Item 14. Management of the
Fund...................... Officers and Trustees
Item 15. Control Persons and
Principal Holders of
Securities................ Officers and Trustees
Item 16. Investment Advisory and
Other Services............ Contained in Prospectus under captions: PURCHASE OF
SHARES; INVESTMENT ADVISORY SERVICES, THE DISTRIBUTION AND
SERVICE PLANS; Investment Advisory and Other Services;
Legal Counsel; Officers and Trustees; The Distributor
Item 17. Brokerage Allocation and
Other Practices........... 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
Item 19. Purchase, Redemption
and Pricing of
Securities Being
Offered................... Contained in the Prospectus under captions: ALTERNATIVE
SALES ARRANGEMENTS; PURCHASE OF SHARES; SHAREHOLDER
SERVICES; REDEMPTION OF SHARES
Item 20. Tax Status.................. Contained in Prospectus under captions: TAX STATUS;
PURCHASE OF SHARES; Tax Status of the Fund
Item 21. Underwriters................ The Distributor
Item 22. Calculation of Performance
Data...................... Contained in the Prospectus under the caption: FUND
PERFORMANCE; Performance Information
Item 23. Financial Statements........ Not Applicable
</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

- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
UTILITY FUND
- --------------------------------------------------------------------------------

Van Kampen American Capital Utility Fund (the "Fund") is a diversified,
open-end management investment company, commonly known as a mutual fund. The
Fund's investment objective is to seek to provide its shareholders with capital
appreciation and current income. The Fund seeks to achieve its investment
objective by investing in a diversified portfolio of common stocks and income
securities (as described in the Prospectus) issued by companies engaged in the
utilities industry ("Utility Securities"). Companies engaged in the utilities
industry include those involved in the production, transmission or distribution
of electric energy, gas, telecommunications services or the provision of other
utility or utility related goods or services. Under normal market conditions, at
least 80% of the Fund's assets will be invested in Utility Securities. The Fund
may invest up to 35% of its assets in securities issued by non-U.S. issuers.
There can be no assurance that the Fund will achieve its investment objective.
The Fund is organized as a separate series of Van Kampen American Capital Equity
Trust (the "Trust").

The Fund's investment adviser is Van Kampen American Capital Investment
Advisory Corp. (the "Adviser"). This Prospectus sets forth certain information
about the Fund 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.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
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, 1997, 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) 421-2833. 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, 1997.

<PAGE> 6

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Annual Fund Operating Expenses and Example.................. 6
Financial Highlights........................................ 8
The Fund.................................................... 9
Investment Objective and Policies........................... 9
Investment Practices........................................ 15
Investment Advisory Services................................ 21
Alternative Sales Arrangements.............................. 23
Purchase of Shares.......................................... 24
Shareholder Services........................................ 34
Redemption of Shares........................................ 38
Distribution and Service Plans.............................. 41
Distributions from the Fund................................. 43
Tax Status.................................................. 44
Fund Performance............................................ 48
Description of Shares of the Fund........................... 49
Additional Information...................................... 50
</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 DISTRIBUTORS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTORS TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.

2
<PAGE> 7

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

THE FUND. Van Kampen American Capital Utility Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity 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 for each subsequent investment (or less as described under "Purchase
of Shares").

INVESTMENT OBJECTIVE. The Fund's investment objective is to provide its
shareholders with capital appreciation and current income. There is no assurance
that the Fund will achieve its investment objective. See "Investment Objective
and Policies."

INVESTMENT POLICY AND RISKS. The Fund seeks to achieve its investment objective
by investing primarily in the securities summarized below.

Utility Securities. The Fund seeks to achieve its investment objective by
investing in a diversified portfolio of common stocks and income securities (as
described herein) issued by companies engaged in the utilities industry
("Utility Securities"). Companies engaged in the utilities industry include
those involved in the production, transmission, or distribution of electric
energy, gas, telecommunications services or the provision of other utility or
utility related goods or services. Under normal market conditions, at least 80%
of the Fund's assets are invested in Utility Securities. Because of the Fund's
policy of concentrating its investments in Utility Securities, the Fund may be
more susceptible than an investment company without such a policy to any single
economic, political or regulatory occurrence affecting the public utilities
industry. Under normal market conditions, the Fund may invest up to 20% of its
assets in securities other than Utility Securities, including common stocks and
income securities of issuers not engaged in the utilities industry, cash and
money market instruments.

Income Securities and Lower Grade Income Securities. The Fund's investments in
income securities 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 comparably rated by any other nationally recognized
statistical rating organization; provided, however, the Fund may invest up to
20% of its assets in income securities that are rated BB or B by S&P or Ba or B
by Moody's (or comparably rated by any other nationally recognized statistical
rating service) or in unrated income securities considered by the Fund's
investment adviser to be of comparable or higher quality. Such lower rated or
unrated 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. The
Fund does not invest in securities rated below B by S&P and below B by Moody's.
While offering opportunities for higher yields, lower-grade securities are
considered below "investment grade" and involve a greater degree of credit risk
than investment grade income securities; although the lower-grade income
securities of an issuer generally involve a lower degree of credit risk than its
common stock. For a discussion of lower grade securities, please see the section
of the prospectus captioned "Investment Objective

3
<PAGE> 8

and Policies -- Portfolio Securities -- Income Securities and Risks of Lower
Grade Income Securities."

Foreign Securities. The Fund may invest up to 35% of its assets in securities
issued by non-U.S. issuers. Investments in foreign securities involve certain
risks not ordinarily associated with investments in securities of domestic
issuers, including fluctuations in foreign exchange rates, future political and
economic developments, confiscatory taxation and the possible imposition of
exchange controls or other foreign governmental laws or restrictions.

The Fund's net asset value per share will fluctuate depending on market
conditions and other factors. See "Investment Objective and Policies."

INVESTMENT PRACTICES. The Fund also may use various investment techniques
including engaging in Strategic Transactions, as herein defined, entering into
when-issued or delayed delivery transactions, lending portfolio securities,
repurchase agreements and reverse repurchase agreements. Such transactions
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
different classes of shares permit an investor to choose the method of
purchasing shares that is most beneficial to the investor, taking into account
the amount of the purchase, the length of time the investor expects to hold the
shares and other circumstances. See "Purchase of Shares."

REDEMPTION. Class A Shares generally 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. (the
"Adviser") is the Fund's investment adviser.

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.

DISTRIBUTIONS FROM THE FUND. Distributions from net investment income are
declared and paid quarterly; net realized 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
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."

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

4
<PAGE> 9

- ------------------------------------------------------------------------------
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)........... 5.75%(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 $50,000 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 redemptions made
within one year of the purchase. See "Purchase of Shares -- Deferred Sales
Charge Alternatives -- Class A Share Purchases of $1 Million or More."

(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 "Distribution and Service Plans."

5
<PAGE> 10

- ------------------------------------------------------------------------------
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).......................... 0.65% 0.65% 0.65%

12b-1 Fees(1) (as a percentage of average
daily net assets).......................... 0.25% 1.00%(3) 1.00%(3)

Other Expenses(2) (as a percentage of average
daily net assets, after expense
reimbursement)............................. 0.51% 0.52% 0.52%

Total Expenses(2) (as a percentage of average
daily net assets, after expense
reimbursement)............................. 1.41% 2.17% 2.17%
</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 for distribution-related expenses. 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 "Distribution and Service Plans."

(2) Absent the Adviser's expense reimbursement for the fiscal year ending June
30, 1997, "Other Expenses" would have been 0.52% for Class A Shares, 0.52%
for Class B Shares and 0.53% for Class C Shares and "Total Expenses" would
have been 1.42% for Class A Shares, 2.17% for Class B Shares and 2.18% for
Class C Shares.

(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted as a Fund-level expense by NASD
Rules.

6
<PAGE> 11

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 1.41% for
Class A Shares, 2.17% for Class B
Shares and 2.17% for Class C Shares,
(ii) 5.00% annual return and (iii)
redemption at the end of each time
period:
Class A Shares......................... $71 $100 $130 $217
Class B Shares......................... $62 $103 $131 $231*
Class C Shares......................... $32 $ 68 $116 $250
An investor would pay the following
expenses on the same $1,000 investment
assuming no redemption at the end of
each period:
Class A Shares......................... $71 $100 $130 $217
Class B Shares......................... $22 $ 68 $116 $231*
Class C Shares......................... $22 $ 68 $116 $250
</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 and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. 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 CDSC 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 CDSC. 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 "Distribution and Service Plans."

7
<PAGE> 12

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for one share outstanding throughout the period)
- --------------------------------------------------------------------------------

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 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 CLASS B SHARES
-------------------------------------------- --------------------------------------------
FROM FROM
JULY 28, 1993 JULY 28, 1993
(COMMENCEMENT (COMMENCEMENT
YEAR ENDED JUNE 30, OF INVESTMENT YEAR ENDED JUNE 30, OF INVESTMENT
--------------------------- OPERATIONS) TO --------------------------- OPERATIONS) TO
1997 1996 1995 JUNE 30, 1994 1997 1996 1995 JUNE 30, 1994
------- ------- ------- -------------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $15.298 $13.386 $12.906 $14.300 $15.296 $13.356 $12.880 $14.300
------- ------- ------- ------- ------- ------- ------- -------
Net Investment Income............. .637 .538 .595 .479 .519 .426 .507 .394
Net Realized and Unrealized
Gain/Loss....................... 1.317 2.077 .485 (1.513) 1.314 2.080 .461 (1.519)
------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations... 1.954 2.615 1.080 (1.034) 1.833 2.506 .968 (1.125)
------- ------- ------- ------- ------- ------- ------- -------
Less:
Distributions from Net Investment
Income.......................... .610 .703 .600 .323 .494 .566 .492 .258
Distributions from Net Realized
Gain............................ .201 --0-- --0-- .037 .201 --0-- --0-- .037
------- ------- ------- ------- ------- ------- ------- -------
Total Distributions................ .811 .703 .600 .360 .695 .566 .492 .295
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period............................ $16.441 $15.298 $13.386 $12.906 $16.434 $15.296 $13.356 $12.880
======= ======= ======= ======= ======= ======= ======= =======
Total Return(a).................... 13.20% 19.93% 8.70% (7.38%)* 12.30% 19.08% 7.80% (8.02%)*
Net Assets at End of the Period (in
millions)......................... $52.5 $57.7 $50.4 $51.5 $83.3 $92.9 $81.0 $83.7
Ratio of Expenses to Average Net
Assets(b)......................... 1.41% 1.38% 1.34% 1.34% 2.17% 2.13% 2.05% 2.06%
Ratio of Net Investment Income to
Average Net Assets(b)............. 4.03% 3.61% 4.55% 4.10% 3.27% 2.86% 3.84% 3.36%
Portfolio Turnover................. 102% 121% 109% 102%* 102% 121% 109% 102%*
Average Commission Paid Per Equity
Share Traded(c)................... $.0601 $.0590 N/A N/A $.0601 $.0590 N/A N/A
- ---------------
*Non-Annualized
(a) Total return is based upon net asset value which does not include payment of the maximum sales charge or contingent deferred
sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average Net Assets due to the Adviser reimbursement of
certain expenses was less than 0.01%.
(c) Represents the average brokerage commissions paid per equity share traded during the period for trades where commissions
were applicable. This disclosure is not applicable for years beginning prior to June 30, 1995.
N/A = Not Applicable

<CAPTION>
CLASS C SHARES
----------------------------------------------
FROM
AUGUST 13, 1993
YEAR ENDED JUNE 30, (COMMENCEMENT OF
--------------------------- DISTRIBUTION) TO
1997 1996 1995 JUNE 30, 1994
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $15.290 $13.356 $12.868 $14.460
------- ------- ------- ------
Net Investment Income............. .503 .470 .482 .330
Net Realized and Unrealized
Gain/Loss....................... 1.328 2.030 .498 (1.627)
------- ------- ------- ------
Total from Investment Operations... 1.831 2.500 .980 (1.297)
------- ------- ------- ------
Less:
Distributions from Net Investment
Income.......................... .494 .566 .492 .258
Distributions from Net Realized
Gain............................ .201 --0-- --0-- .037
------- ------- ------- ------
Total Distributions................ .695 .566 .492 .295
------- ------- ------- ------
Net Asset Value, End of the
Period............................ $16.426 $15.290 $13.356 $12.868
======= ======= ======= ======
Total Return(a).................... 12.37% 19.00% 7.88% (9.11%)*
Net Assets at End of the Period (in
millions)......................... $4.9 $5.0 $1.3 $1.1
Ratio of Expenses to Average Net
Assets(b)......................... 2.17% 2.13% 2.09% 2.05%
Ratio of Net Investment Income to
Average Net Assets(b)............. 3.23% 2.78% 3.80% 3.38%
Portfolio Turnover................. 102% 121% 109% 102%*
Average Commission Paid Per Equity
Share Traded(c)................... $.0601 $.0590 N/A N/A
- ---------------
*Non-Annualized
(a) Total return is based upon net asset value which does not include payment of the maximum sales charge or contingent deferred
sales charge.
(b) The impact on the Ratios of Expenses and Net Investment Income to Average Net Assets due to the Adviser reimbursement of
certain expenses was less than 0.01%.
(c) Represents the average brokerage commissions paid per equity share traded during the period for trades where commissions
were applicable. This disclosure is not applicable for years beginning prior to June 30, 1995.
N/A = Not Applicable
</TABLE>

See Financial Statements and Notes Thereto.

8
<PAGE> 13

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

Van Kampen American Capital Utility Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity Trust (the "Trust").
The Trust is an open-end management investment company, organized as a Delaware
business trust.

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

The Fund's investment objective is to provide its shareholders with capital
appreciation and current income. The Fund will seek to achieve its investment
objective by investing in a diversified portfolio of common stock and income
securities issued by companies engaged in the utilities industry ("Utility
Securities"). Companies engaged in the utilities industry include those engaged
in the production, transmission, or distribution of electric energy, gas,
telecommunications services or the provision of other utility or utility related
goods or services. Under normal market conditions, at least 80% of the Fund's
assets will be invested in Utility Securities. Under normal market conditions,
the Fund may invest up to 20% of its assets in other than Utility Securities,
including common stock and income securities of issuers not engaged in the
utilities industry, cash and money market instruments. Income securities include
preferred stock and debt securities of various maturities. The Fund's
investments in income securities will be 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 comparably rated by any other nationally
recognized statistical rating organization ("NRSRO"); provided, however, the
Fund may invest up to 20% of its assets in income securities that are rated BB
or B by S&P or Ba or B by Moody's (or comparably rated by any other NRSRO) or
unrated income securities determined by the Fund's investment adviser to be of
comparable or higher quality. Such lower rated or unrated 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. While offering opportunities for
higher yields, lower-grade securities are considered below "investment grade"
and involve a greater degree of credit risk than investment grade income
securities; although the lower-grade income securities of an issuer generally
involve a lower degree of credit risk than its common stock. Such securities are
regarded by the rating agencies, on balance, as predominantly speculative with
respect to capacity to

9
<PAGE> 14

pay interest and repay principal in accordance with the terms of the obligation;
assurance of interest and principal payments or maintenance of other terms of
the securities over any long period of time may be small. The Fund may invest up
to 35% of its assets in securities issued by non-U.S. issuers. The foregoing
policies are fundamental and cannot be changed without approval of the
shareholders. 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 Adviser believes that the historical performance of Utility Securities,
together with ongoing developments in the utilities industry, indicate the
potential for achieving both capital appreciation and current income from
investment in a diversified portfolio of Utility Securities. The Adviser
believes that the historical characteristics of Utility Securities which are
common stocks indicate potential for capital appreciation. The Adviser also
believes that many companies engaged in the utilities industry have established
a reputation for paying regular quarterly dividends and for increasing their
common stock dividends over time, despite fluctuations in interest rates over
time. The annual dividends per share of the Utility Securities comprising the
S&P Utilities Index, for the four year period 1993 through 1997, have increased
while interest rates during such period, as measured by the six month U.S.
Treasury rate, have fluctuated widely. The Adviser believes that the historical
characteristics of Utility Securities which are income securities indicate the
potential for current income.

In evaluating particular issuers of Utility Securities, the Adviser will
consider a number of factors, including historical growth rates, rates of return
on capital, financial condition and resources, geographic location and service
area, management skills and such utilities industry factors as regulatory
environment, energy sources, the costs of alternative fuels and, in the case of
electric energy utilities, the extent and nature of their involvement with
nuclear powers. The Adviser will place special emphasis on the potential for
capital appreciation, current and projected yields, prospective growth in
earnings and dividends in relation to price or earnings ratios and risk. The
Adviser believes that Utility Securities provide above-average dividend returns
and below-average price or earnings ratios which in the view of the Adviser are
factors that not only provide current income but also generally tend to moderate
risk. The Adviser will buy and sell securities for the Fund's portfolio with a
view toward seeking capital appreciation together with current income and will
select securities which the Adviser believes entail reasonable credit risk
considered in relation to the investment policies of the Fund. As a result, the
Fund will not necessarily invest in the highest yielding Utility Securities
permitted by the investment policies if the Adviser determines that market risks
or credit risks associated with such investments would subject the Fund's
portfolio to excessive risk. Other than for tax purposes, frequency of portfolio
turnover generally will not

10
<PAGE> 15

be a limiting factor if the Fund considers it advantageous to purchase or sell
securities. 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 short-term capital gain than
if the Fund had a lower portfolio turnover rate. The Fund's annual portfolio
turnover rate is shown in the table of "Financial Highlights."

PORTFOLIO SECURITIES

UTILITY SECURITIES. Utility Securities are common stocks and income securities
of companies engaged in the utilities industry. Companies engaged in the
utilities industry include a variety of entities involved in (i) production,
transmission or distribution of electric energy, (ii) the provision of natural
gas, (iii) the provision of telephone, mobile communication and other
telecommunications services or (iv) the provision of other utility or utility
related goods or services, including entities engaged in cogeneration, waste
disposal system provision, solid waste electric generation, independent power
producers and non-utility generators.

The public utilities industry has experienced significant changes in recent
years. Many issuers of Utility Securities have been favorably effected by lower
fuel and financing costs, deregulation, the full or near completion of major
construction programs and an increasing customer base. In addition, many utility
companies have generated cash flows in excess of current operating expenses and
construction expenditures, permitting some degree of diversification into
unregulated businesses. Some electric utilities have also taken advantage of the
right to sell power outside of their historical territories.

The rate of return of issuers of Utility Securities generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes generally lag changes in
financing costs, and thus can favorably or unfavorably affect the earnings or
dividend payments on Utility Securities depending upon whether such rates and
costs are declining or rising.

Companies engaged in the public utilities industry historically have been
subject to a variety of risks depending, in part, on such factors as the type of
utility company involved and its geographic location. Such risks include
increases in fuel and other operating costs, high interest expenses for capital
construction programs, costs associated with compliance with environmental and
nuclear safety regulations, service interruption due to environmental,
operational or other mishaps, the effects of economic slowdowns, surplus
capacity, competition and changes in the overall regulatory climate. In
particular, regulatory changes with respect to nuclear and conventionally fueled
generating facilities could increase costs or impair the ability of utility
companies to operate such facilities, thus reducing utility companies' earnings
or resulting in losses. There can be no assurance that regulatory policies or
accounting standard changes will not negatively affect utility companies'
earnings or

11
<PAGE> 16

dividends. Companies engaged in the public utilities industry are subject to
regulation by various authorities and may be affected by the imposition of
special tariffs and changes in tax laws. To the extent that rates are
established or reviewed by governmental authorities, companies engaged in the
public utilities industry are subject to the risk that such authority will not
authorize increased rates. In addition, because of the Fund's policy of
concentrating its investments in Utility Securities, the Fund may be more
susceptible than an investment company without such a policy to any single
economic, political or regulatory occurrence affecting the public utilities
industry. Under market conditions that are unfavorable to the utilities
industry, the Adviser may significantly reduce the Fund's investment in that
industry.

TELECOMMUNICATIONS UTILITIES. The telecommunications industry is experiencing
significant changes as local and long distance telephone companies, wireless
communications companies and cable television providers begin to compete to
provide telecommunications services and as new technologies develop. The Adviser
anticipates that new telecommunications legislation also will have a significant
impact on the telecommunications industry. Although there can be no assurance
that increased competition and other structural changes will not adversely
affect the profitability of such utilities, or that other negative factors will
not develop in the future, in the Adviser's opinion, competition and
technological advances may over time provide better-positioned utility companies
with opportunities for enhanced profitability.

GAS AND ELECTRIC UTILITIES. Convergence of gas utilities and electric
utilities continues, as electric utilities begin to deregulate and customers
begin to use a single energy provider instead of multiple energy providers. Gas
companies have been deregulated to a greater extent than electric utilities and
have developed more of the business practices necessary to operate in a
non-monopoly environment. Electric utilities generally are just beginning to
deregulate and may be more likely to experience significant changes than gas
companies, which changes may increase the risk of investing in securities of
electric utilities. In addition, gas and electric utility companies will
continue to be affected by changes in fuel prices and interest rates.

OTHER UTILITIES. Other issuers of Utility Securities are emerging as new
technologies develop and as old technologies are refined. Such issuers include
entities engaged in cogeneration, waste disposal system provision, solid waste
electric generation, independent power producers and non-utility generators.

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

12
<PAGE> 17

focus both on the security's potential for appreciation and on its dividend
paying capacity.

The average dividend yield of Utility Securities which are common stocks
historically has exceeded the average dividend yield of common stocks of
industrial issuers by a significant amount. For example, the common stocks
comprising the S&P Utilities Index for calendar 1997 had an average dividend
yield of 4.81%, or more than twice the 1.49% average dividend yield for the
common stocks comprising the S&P 400 Industrials Index. However, the Fund's
portfolio will not necessarily reflect the securities which comprise the S&P
Utilities Index and there can be no assurance that the historical investment
performance for any industry (including the public utilities industry) is
indicative of future performance.

INCOME SECURITIES AND RISKS OF LOWER GRADE INCOME SECURITIES. The Fund may
invest its assets in income securities, which include preferred stocks, debt
securities of various maturities and securities convertible into, or ultimately
exchangeable for, common stocks. The Fund's investments in income securities
will be rated, at the time of investment, at least BBB by S&P, or at least Baa
by Moody's or comparably rated by any other NRSRO; provided, however, the Fund
may invest up to 20% of its assets in income securities that are rated BB or B
by S&P or Ba or B by Moody's (or comparably rated by any other NRSRO) or unrated
income securities determined by the Fund's investment adviser to be of
comparable or higher quality. Lower grade income securities in which the Fund
may invest are rated between BB and B by S&P or between Ba and B by Moody's.
Income securities with such ratings from S&P and Moody's 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 and/or repay principal
in accordance with their terms. Investment in lower grade securities involves
special risks as compared with investment in higher grade securities. The market
for lower grade securities is considered to be less liquid than the market for
investment grade securities which may adversely affect the ability of the Fund
to dispose of such securities in a timely manner at a price which reflects the
value of such security in the Adviser's judgment. Because issuers of lower grade
securities frequently choose not to seek a rating of their securities, the Fund
will rely more heavily on the Adviser's ability to determine the relative
investment quality of such securities than if the Fund invested exclusively in
higher grade securities. For a description of the ratings assigned to income
securities, including lower grade income securities, please see "Description of
Securities Ratings" in the Statement of Additional Information.

The net asset value of the Fund will change with changes in the value of its
portfolio securities. The values of income securities may change as interest
rate levels fluctuate. To the extent that the Fund invests in income securities,
the net asset value of the Fund can be expected to change as general levels of
interest rates fluctuate. When interest rates decline, the value of a portfolio
invested in income securities generally can be expected to rise. Conversely,
when interest rates rise, the

13
<PAGE> 18

value of a portfolio invested in income securities generally can be expected to
decline. Volatility may be greater during periods of general economic
uncertainty.

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) 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, in addition to the factors
described above, 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 nationally recognized statistical rating organizations.

FOREIGN SECURITIES. The Fund may invest up to 35% of its assets in securities
issued by non-U.S. issuers of similar quality as the securities described above
as determined by the Adviser. 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. 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 those countries. There may be less
publicly available information about a foreign security than about a United
States security, 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 income, withholding or other taxes, which would reduce the
Fund's total return on such investments and the amounts available for
distributions by the Fund to its shareholders. See "Tax Status."

14
<PAGE> 19

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 Adviser believes that many foreign issuers of Utility Securities have yet
to experience the growth that certain issuers of Utility Securities located in
the United States have experienced and that as such foreign issuers develop
their domestic markets, they may become attractive investments. In addition, the
Adviser believes that certain foreign governments may engage in programs of
privatization of issuers of Utility Securities and that the Utility Securities
issued by privatized companies may offer attractive investment opportunities
with the potential for long-term growth. However it is not possible to predict
the terms of offerings by privatized companies or the effect of privatizations
in the domestic securities market of such privatized companies. There can be no
assurance that securities of privatized companies will be offered to the public
or to foreign companies such as the Fund.

DEFENSIVE STRATEGIES. At times, conditions in the markets for Utility
Securities 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 taxable 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 NRSRO); commercial paper rated in the highest
grade by either rating service (or comparably rated by any other NRSRO);
certificates of deposit and bankers' acceptances; repurchase agreements with
respect to any of the foregoing investments; or any other fixed-income
securities that the Adviser considers consistent with such strategy.

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

In connection with the investment policies described above, the Fund may
engage in strategic transactions, enter into currency transactions, purchase and
sell securities on a "when issued" and "delayed delivery" basis, enter into
repurchase

15
<PAGE> 20

and reverse repurchase agreements and lend its portfolio securities in each
case, subject to the limitations set forth below. These investments entail
risks.

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 currency
transactions such as currency forward contracts, currency futures contracts,
currency swaps or options on currencies or currency 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. 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.

16
<PAGE> 21

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. 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."

REPURCHASE AGREEMENTS. The Fund may use up to 20% of its assets to enter into
repurchase agreements with selected 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. Repurchase agreements involve certain risks
in the event of default by the other party. 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. Repurchase
agreements that mature in more than seven days are treated by the Fund as
illiquid and are subject to the Fund's limitation on "illiquid" securities.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of 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.

17
<PAGE> 22

"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 or is earned by the Fund on portfolio 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 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 such 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. 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.

RESTRICTED AND ILLIQUID SECURITIES. 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 such 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 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 or illiquid securities by the Fund for
purposes of the investment limitations set forth above.

18
<PAGE> 23

these loans will be invested in short-term instruments. The Fund is the
beneficial owner of the loaned securities in that any gain or loss in the market
price during the loan inures to the Fund and its shareholders. Thus, when the
loan is terminated, the value of the securities may be more or less than their
value at the beginning of the loan. In determining whether to lend its portfolio
securities to a bank or broker-dealer, the Fund will take into account the
credit-worthiness of such borrower and will monitor such credit-worthiness on an
ongoing basis 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.

REVERSE REPURCHASE AGREEMENTS AND BORROWINGS. 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 create leverage and will be treated as borrowings for the
purposes of the Fund's investment restriction on borrowings.

The Fund is authorized to borrow money from banks or enter into reverse
repurchase agreements with banks in an amount up to 33 1/3% of the Fund's total
assets (after giving effect to any such borrowing) which amount includes no more
than 5% in borrowings and reverse repurchase agreements from any entity for
temporary purposes, such as clearances of portfolio transactions, share
repurchases and payment of dividends and distributions. The Fund has no current
intention to borrow money other than for such temporary purposes. Accordingly,
the Fund will not acquire additional Utility Securities during any period in
which its borrowings exceed 5% of the Fund's total assets. The Fund will borrow
only when the Adviser believes that such borrowings will benefit the Fund.

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<PAGE> 24

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
stockholders as dividends will be reduced.

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 Investment Company Act of 1940,
as amended (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 fixed-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.

20
<PAGE> 25

The Adviser may place portfolio transactions, to the extent permitted by law,
with brokerage firms affiliated with the Fund, the Adviser or the Distributor
and with firms participating in the distribution of the Fund's shares if it
reasonably believes that the quality of execution and the commission are
comparable to that available from other qualified firms. 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 $60 billion under management or
supervision. Van Kampen American Capital's more than 50 open-end and 37
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen American
Capital Distributors, Inc., the distributor of the Fund and the sponsor of the
funds mentioned above, is also a wholly-owned subsidiary of Van Kampen American
Capital. Van Kampen American Capital is an indirect wholly-owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. The Adviser's principal office is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

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

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 a fee

21
<PAGE> 26

computed based on an annual rate applied to average daily net assets of the Fund
as follows:

<TABLE>
<CAPTION>
% PER ANNUM
AVERAGE DAILY NET ASSETS --------------
<S> <C>
First $500 million..................... 0.65% of 1.00%
Next $500 million...................... 0.60% of 1.00%
Over $1 billion........................ 0.55% 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, Distributor or Van Kampen American
Capital), the charges and expenses of independent accountants, legal counsel,
transfer agent (ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned
subsidiary of Van Kampen American Capital) 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.

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
certain restrictions. Persons with access to certain sensitive information are
subject to preclearance and other procedures designed to prevent conflict of
interest.

PORTFOLIO MANAGEMENT. James Behrmann has been primarily responsible for the
day-to-day management of the Fund's portfolio since August of 1997, with the
assistance of Christine Drusch, since August of 1997. Since 1984, Mr. Behrmann
has been primarily responsible for managing the Van Kampen American Capital
Harbor Fund. He has been Vice President of Van Kampen American Capital Asset
Management, Inc. since August 1985 and Vice President of Van Kampen American
Capital Investment Advisory Corp. since June 1995. Since July of 1991, Ms.
Drusch has assisted with the management of Van Kampen American Capital Harbor
Fund and Van Kampen American Capital Convertible Securities Fund. Prior to
joining Van Kampen American Capital, she was an assistant Portfolio Manager with
Variable Annuity Life Insurance Co.

22
<PAGE> 27

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

The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial to the investor, taking
into account the amount of the purchase, the length of time the investor expects
to hold the shares, whether the investor wishes to receive dividends in cash or
to reinvest them in additional shares of the Fund, and other circumstances.
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 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 accounts under $1 million) or (b) on a contingent deferred basis (Class A
Share accounts of $1 million or more, Class B Shares and Class C Shares). Shares
purchased subject to a contingent deferred sales charge (a "CDSC") 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 which have a shorter CDSC period
(discussed below). Investors should weigh the benefits of deferring the sales
charge

23
<PAGE> 28

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 that (i) each class of
shares bears those distribution fees, service fees and administrative expenses
applicable to the respective class of shares as a result of its sales
arrangements, (ii) generally, each class of shares has exclusive voting rights
with respect to those provisions of the Fund's Rule 12b-1 distribution plan
which relate only to such class, (iii) each class of shares has different
exchange privileges, (iv) certain classes of shares have a conversion feature
and (v) certain classes of share have different shareholder service options
available. Generally, a class of shares subject to a higher ongoing distribution
fee 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) securities 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
Internal Revenue Code of 1986, as amended (the "Code").

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

24
<PAGE> 29

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 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. 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 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 seminar of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its sales of shares and increases in assets under
management. Such payments to brokers, dealers and financial intermediaries for
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. 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. These programs will not change the price an investor pays for shares or
the amount that the Fund will receive from such sale.

25
<PAGE> 30

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.

SALES CHARGE TABLE

<TABLE>
<CAPTION>
DEALER
CONCESSION
OR AGENCY
TOTAL SALES CHARGE COMMISSION
-------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
SIZE OF TRANSACTION OF OFFERING OF NET OF OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000....................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.......... 4.75 4.99 4.00
$100,000 but less than $250,000......... 3.75 3.90 3.00
$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. See "Purchase of
Shares -- Deferred Sales Charge Alternatives."

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 at the time of the purchase order 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.

26
<PAGE> 31

A person eligible for a reduced sales charge includes an individual, his or
her spouse and children under 21 years of age 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 trust
estate or a single fiduciary account; or a "company" as defined in section
2(a)(8) of the 1940 Act.

As used herein, "Participating Funds" refers to certain open-end investment
companies advised by the adviser or Van Kampen American Capital Asset
Management, Inc. and distributed by the Distributor as determined from time to
time by the Fund's Board of Trustees.

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

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

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the amount being invested over a
13-month period to determine the sales charge as outlined in the preceding sales
charge 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 sales charges applicable to the purchases made and the sales charges
previously paid. When an investor signs a Letter of Intent, shares equal to at
least 5% of the total purchase amount of the level selected will be restricted
from sale or redemption by the investor until the Letter of Intent is satisfied
or any additional sales charges have been paid; if the Letter of Intent is not
satisfied by the investor and any additional sales charges are not paid,
sufficient restricted shares will be redeemed by the Fund to pay such charges.
Additional information is contained in the application accompanying this
Prospectus.

27
<PAGE> 32

OTHER PURCHASE PROGRAMS

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

UNIT INVESTMENT TRUST REINVESTMENT PROGRAMS. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
Shares of the Fund at net asset valve 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 ACCESS with appropriate backup data
for each participating investor in a computerized format fully compatible with
ACCESS' 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. The Fund reserves the right to
modify or terminate this program at any time.

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 or directors of funds advised by the Adviser
or Van Kampen American Capital Asset Management, Inc. and such persons'
families and their beneficial accounts.

28
<PAGE> 33

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

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

(4) Registered investment advisers, trust companies and bank trust
departments investing on their own behalf or on behalf of their clients
provided that the aggregate amount invested in Class A Shares of the Fund
alone, or in any combination of shares of the Fund and shares of other
Participating Funds as described herein under "Purchase of Shares --
Class A Shares -- Quantity Discounts," during the 13-month period
commencing with the first investment pursuant hereto equals at least $1
million. The Distributor may pay brokers, dealers or financial
intermediaries through which purchases are made an amount up to 0.50% of
the amount invested, over a 12-month period following such transaction.

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

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

29
<PAGE> 34

American Capital Trust Company served as custodian will not be eligible
for net asset value purchases based on the aggregate investment made by
the plan or the number of eligible employees, except under certain uniform
criteria established by the Distributor from time to time. Prior to
February 1, 1997, a commission will be paid to authorized dealers who
initiate and are responsible for such purchases within a rolling
twelve-month period as follows: 1.00% on sales to $5 million, plus 0.50%
on the next $5 million and 0.25% on the excess over $10 million. For
purchases on February 1, 1997 and thereafter, a commission will be paid as
follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million,
plus 0.50% on the next $47 million and 0.25% on the excess over $50
million.

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

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

Purchase orders made pursuant to clause (4) may be placed either through
authorized brokers, dealers or financial intermediaries as described above or
directly with ACCESS, the investment adviser, trust company or bank trust
department, provided that ACCESS 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.

30
<PAGE> 35

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.

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. The CDSC schedule and holding period applicable to any CDSC Share
acquired through the exchange privilege is determined by reference to the
Participating Fund from which such share was originally purchased.

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 shares of the respective CDSC class. 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 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).

31
<PAGE> 36

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. 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 $1 million, plus 0.20% on the next $2 million and 0.08% on the
excess over $5 million; (ii) 4.00% with respect to Class B Shares; and (iii)
1.00% with respect to Class C Shares. Such compensation will not change the
price an investor will pay for CDSC Shares or the amount that the Fund will
receive from such sale.

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. Class A Shares redeemed thereafter will not be subject to a
CDSC.

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 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.

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<PAGE> 37

CONVERSION FEATURE. Class B shares purchased on or after June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares six years after the end of the calendar month in which the shares
were purchased. Class C shares purchased before January 1, 1997, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares ten years after the end of the calendar month in which such
shares were purchased. Such conversion will be on the basis of the relative net
asset values per share, without the imposition of any sales load, fee or other
charge. The conversion schedule applicable to any share acquired through the
exchange privilege is determined by reference to the Participating Fund from
which such share originally was purchased.

The conversion of such 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 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) the conversion of such shares
does not constitute a taxable event under federal income tax law. The conversion
may be suspended if such an opinion is no longer available and such shares might
continue to be subject to the higher aggregate fees applicable to such shares
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 required minimum
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 180 days after redemption. See "Shareholder Services" and "Redemption of
Shares" for further discussion of the waiver provisions.

NET ASSET VALUE

33
<PAGE> 38

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.

- ------------------------------------------------------------------------------
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. The
following 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 the investor's shares of the Fund are held by ACCESS. Except as
described in this Prospectus, after each share transaction in an account, the
shareholder receives a statement showing the activity in the account. Each
shareholder who has an account in any of the Participating Funds 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.

34
<PAGE> 39

shareholder will be required to surrender such certificates upon redemption
thereof. In addition, if such certificates are lost the shareholder must write
to Van Kampen American Capital Funds, c/o ACCESS, P.O. Box 418256, Kansas City,
MO 64141-9256, requesting an "affidavit of loss" and to obtain a Surety Bond in
a form acceptable to ACCESS. On the date the letter is received ACCESS will
calculate a fee for replacing the lost certificate equal to no more than 2.00%
of the net asset value of the issued shares and bill the party to whom the
replacement certificate was mailed.

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value per share (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) 421-2833
for the hearing impaired) or in writing to ACCESS. The investor may, on the
initial application or prior to any declaration, instruct that dividends be paid
in cash and capital gains distributions be reinvested at net asset value, or
that both dividends and capital gains distributions be paid in cash. For further
information, see "Distributions from the Fund."

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

RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP; and pension and profit sharing plans; 401(k) plans; or
Section 403(b)(7) plans in the case of employees of public school systems and
certain non-profit organizations. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
American Capital Trust Company 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 accompanying this
Prospectus or by calling (800) 421-5666 ((800) 421-2833 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 a Participating
Fund so long as the investor has a pre-existing account for such class of shares
of the other fund. Both accounts must be of the same type, either non-retirement
or retirement. 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

35
<PAGE> 40

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 for shares of the same
class of any Participating Fund based on the net asset values of each fund after
requesting the exchange without any sales charge, subject to certain
limitations. Shares of the Fund may be exchanged for shares of any Participating
Fund only if shares of the Participating Fund are available for sale; however,
during periods of suspensions of sales, shares of a Participating Fund may be
available for sale only to existing shareholders of the Participating Fund.
Shareholders seeking an exchange with a Participating Fund should obtain and
read the current prospectus of such fund.

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.

When Class B Shares and Class C Shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the
date of the initial purchase from a Participating Fund (the "original fund").
Upon redemption from the Participating Funds' complex of funds, Class B Shares
and Class C Shares are subject to the CDSC schedule imposed by the original
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 included in the tax basis of the
shares acquired.

A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684 ((800) 421-2833 for the hearing impaired). A shareholder automatically
has telephone exchange privileges unless otherwise designated in the application
form accompanying this Prospectus. 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,
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

36
<PAGE> 41

from which shares are exchanged, unless otherwise specified by the shareholder.
In order to establish a systematic withdrawal plan for the new account or
reinvest dividends from the new account into another fund, 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 modify restrict or terminate the exchange privilege at any time on 60 days'
notice to its shareholders of any termination or material amendment.

A prospectus of any of these mutual funds may be obtained from any broker,
dealer or financial intermediary or the Distributor. An investor considering an
exchange to one of such funds should refer to the prospectus for additional
information regarding such fund prior to investing.

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. Any investor whose shares in a single account total $5,000 or
more at the offering price next computed after receipt of instructions may
establish a 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."

Class B shareholders and Class C shareholders 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 at the time the election to participate in the plan is
made.

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. Any gain or loss
realized by the shareholder upon redemption of shares is a taxable event.

37
<PAGE> 42

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

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 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 120 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.

38
<PAGE> 43

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) 421-2833 for the hearing impaired) to request that a copy of the
Telephone Redemption Authorization form be sent to them for completion. To
redeem shares, contact the telephone transaction line at (800) 421-5684. VKAC
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, 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 an account has multiple owners, ACCESS
may rely on the instructions of any one owner.

39
<PAGE> 44

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.

In cases of disability, the CDSCs 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. Redemption 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, which
may take up to 15 days. Any gain or loss realized on the redemption of shares is
a taxable event. 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 involuntary redemption may
only occur if the shareholder account is less than the minimum investment due to
shareholder redemptions.

40
<PAGE> 45

leges") next determined after the order is received, which must be within 180
days after the date of the redemption. See "Purchase of Shares -- Waiver of
Contingent Deferred Sales Charge." Reinstatement at net asset value is also
offered to participants 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.

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

DISTRIBUTION AND SERVICE PLANS

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

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 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.

41
<PAGE> 46

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.

The Distributor's actual distribution-related expenses with respect to a class
of CDSC Shares (for purposes of this section, excluding any Class A Shares that
may be subject to a CDSC) for any given year may exceed the amounts payable to
the Distributor with respect to such class of CDSC Shares under the Distribution
Plan, the Service Plan and payments received pursuant to the 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, 1997, there
were $3,194,046 and $1,719 of unreimbursed distribution-related expenses
attributable to Class B Shares and Class C Shares respectively, representing
3.83% and less than 0.04% 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 CDSCs.

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<PAGE> 47

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 and pay quarterly to holders of each class of shares
distributions of all or substantially all net investment income of the Fund
attributable to the respective class. 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
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
quarterly 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.

Investors will be entitled to begin receiving dividends on their shares on the
business day after ACCESS receives payments for such shares. However, investors'
shares become entitled to dividends on the day ACCESS 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 or 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 dividend distributions and any annual net long-term capital gain
distributions

43
<PAGE> 48

to a shareholder's account in additional shares of the Fund valued at net asset
value, without a sales charge. Unless the Shareholder instructs otherwise, the
reinvestment plan is automatic. This instruction may be made by telephone by
calling (800) 421-5666 ((800) 421-2833 for the hearing impaired) or in writing
to ACCESS. See "Shareholder Services -- Reinvestment Plan."

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

The following discussion reflects applicable federal income tax laws, as of
the date of this Prospectus.

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

If the Fund so qualifies and distributes each year to its Shareholders at
least 90% of its net investment income (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

44
<PAGE> 49

required to recognize any net built-in gains (the excess of aggregate gains,
including items of income, over aggregate losses that would have been realized
if it had been liquidated) in order to qualify as a regulated investment company
in a subsequent year.

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

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

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. Under recently enacted legislation,
this requirement will no longer be applicable of the Fund beginning on July 1,
1998.

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: (i) at least
75% of its gross income is passive income or (ii) an average of at least 50% of
its assets produce, 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 (i) a portion of any "excess
distribution" received on such stock or (ii) any gain from a sale or disposition
of such stock (collectively, "PFIC income"), plus interest on such amounts, even
if the regulated investment company distributes the PFIC income as a taxable
dividend to its shareholders. 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

45
<PAGE> 50

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.

Under provisions of the Taxpayer Relief Act of 1997 (the "1997 Tax Act")
generally effective for taxable years ending after 1997, the Fund may make an
election to annually mark-to-market certain publicly traded PFIC stock (a "PFIC
Mark-to-Market Election"). "Marking-to-market," in this context, means
recognizing as ordinary income or loss each year an amount equal to the
difference between the Fund's adjusted tax basis in such PFIC stock and its fair
market value. Losses will be allowed only to the extent of net mark-to-market
gain previously included by the Fund pursuant to the election for prior taxable
years. The Fund may be required to include in its taxable income for the first
taxable year in which it makes a PFIC Mark-to-Market Election an amount equal to
the interest charge that would otherwise accrue with respect to distributions
on, or dispositions of, the PFIC stock. This amount would not be deductible from
the Fund's taxable income. The PFIC Mark-to-Market Election applies to the
taxable year for which made and to all subsequent taxable years, unless the PFIC
stock ceases to be publicly traded or the Internal Revenue Service consents to
revocation of the election. By making the PFIC Mark-to-Market Election, the Fund
could ameliorate the adverse tax consequences arising from its ownership of PFIC
stock, but in any particular year may be required to recognize income in excess
of the distributions it receives from the PFIC and proceeds from the
dispositions of PFIC stock.

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). For a summary of the tax rates applicable
to capital gains (including capital gains dividends), see "Capital Gains Rates
Under the 1997 Tax Act" below. The Fund will inform Shareholders of the source
and tax status of all distributions promptly after the close of each calendar
year. Some 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.

46
<PAGE> 51

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. Shareholders receiving distributions
in the form of additional Shares purchased by the Plan Agent under the Fund's
Dividend Reinvestment Plan will be treated for federal income tax purposes as
receiving the amount of cash received by the Plan Agent on their behalf. In
general, the basis of such Shares will equal the price paid by the Plan Agent
for such Shares.

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
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.

Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
Shareholders.

The Fund is required, in 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.

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. For a summary of the tax rates
applicable to capital gains, see "Capital Gains Rates Under the 1997 Tax Act"
below. Any loss recognized 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.

47
<PAGE> 52

CAPITAL GAINS RATES UNDER THE 1997 TAX ACT. Under the 1997 Tax Act, the
maximum tax rates applicable to net capital gains recognized by individuals and
other non-corporate taxpayers are (i) the same as ordinary income rates for
capital assets held for one year or less, (ii) 28% for capital assets held for
more than one year but not more than 18 months and (iii) 20% for capital assets
held for more than 18 months. Under the 1997 Tax Act, the Treasury is authorized
to issue regulations that address the application of the new capital gains rates
to sales and exchanges by regulated investment companies and to sales and
exchanges of interests in regulated investment companies, but no such
regulations have been issued as of the date hereof. It is expected that the new
tax rates for capital gains under the 1997 Tax Act described above will apply to
distributions of capital gains dividends by regulated investment companies such
as the Fund as well as to sales and exchanges of shares in regulated investment
companies such as the Fund. With respect to capital losses recognized on
dispositions of shares held six months or less where such losses are treated as
long-term capital losses to the extent of prior capital gains dividends received
on such shares (see "Sale of Shares" above), it is unclear how such capital
losses offset the capital gains referred to above. Shareholders should consult
their own tax advisors as to the application of the new capital gains rates to
their particular circumstances.

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 purchasing 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. In addition,
from time to time the Fund may compare its performance to certain securities and
unmanaged indices which may have different risk or 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.

48
<PAGE> 53

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. Distribution rate is determined by annualizing the
distributions per share for a stated period and dividing the result by the
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 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 its Annual
Report, Semi-Annual Report and Statement of Additional Information, each of
which can be obtained without charge by calling (800) 421-5666 ((800) 421-2833
for the hearing impaired).

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

The Fund is a series of the Van Kampen American Capital Equity 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. The Fund is permitted to issue an unlimited number of
classes of shares. Other classes may be established from time to time in
accordance with the Fund's Declaration of Trust.

Each class of shares represent 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.
Except as described herein, there are no conversion, preemptive or other
subscription rights. 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.

49
<PAGE> 54

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.

The Trusts' Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.

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

50
<PAGE> 55

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

NUMBER (800) 341-2911.

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

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

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

DIAL (800) 421-2833.

FOR AUTOMATED TELEPHONE

SERVICES DIAL (800) 847-2424.

VAN KAMPEN AMERICAN CAPITAL
UTILITY 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
Utility Fund

Custodian
STATE STREET BANK AND
TRUST COMPANY

225 West Franklin Street, P.O. Box 1713

Boston, MA 02105-1713
Attn: Van Kampen American Capital
Utility 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> 56

------------------------------------------------------------------------------
UTILITY FUND
------------------------------------------------------------------------------

P R O S P E C T U S

OCTOBER 28, 1997

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 57

- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
GROWTH FUND
- --------------------------------------------------------------------------------

Van Kampen American Capital Growth Fund (the "Fund") is a diversified, open-
end management investment company, commonly known as a mutual fund. The Fund's
investment objective is to seek capital growth. The Fund seeks to achieve its
investment objective by investing primarily in a diversified portfolio of common
stocks and other equity securities of growth companies. Growth companies
generally include companies with established records of growth in sales or
earnings and companies with new products, services or processes that the Fund's
investment adviser believes offer investors above average potential for capital
growth. Any income received on such securities is incidental to the objective of
capital growth. There is no assurance that the Fund will achieve its investment
objective. The Fund is organized as a series of Van Kampen American Capital
Equity Trust (the "Trust").

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

A Statement of Additional Information, dated October 28, 1997, containing
additional information about the Fund is hereby incorporated by reference in its
entirety into this prospectus. A copy of the Statement of Additional Information
may be obtained without charge by calling (800) 421-5666 or for
Telecommunications Device for the Deaf at (800) 421-2833. 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, 1997.

<PAGE> 58

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Estimated Annual Fund Operating Expenses and Example........ 6
Financial Highlights........................................ 8
The Fund.................................................... 9
Investment Objective and Policies........................... 9
Portfolio Securities........................................ 10
Investment Practices........................................ 13
Investment Advisory Services................................ 19
Alternative Sales Arrangements.............................. 20
Purchase of Shares.......................................... 22
Shareholder Services........................................ 32
Redemption of Shares........................................ 35
Distribution and Service Plans.............................. 38
Distributions from the Fund................................. 40
Tax Status.................................................. 41
Fund Performance............................................ 45
Description of Shares of the Fund........................... 46
Additional Information...................................... 47
</TABLE>

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

2
<PAGE> 59

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

THE FUND. Van Kampen American Capital Growth Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity 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 for each subsequent investment for each class of shares (or less as
described under "Purchase of Shares").

INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek capital
growth. There is no assurance that the Fund will achieve its investment
objective. See "Investment Objective and Policies."

INVESTMENT POLICY. The Fund seeks to achieve its investment objective by
investing primarily in a diversified portfolio of common stocks and other equity
securities of growth companies. Growth companies generally include companies
with established records of growth in sales or earnings and companies with new
products, services or processes that the Fund's investment adviser believes
offer investors above average potential for capital growth. The net asset value
per share of the Fund may increase or decrease depending on changes in the
securities markets, and other factors affecting the issuers of securities in
which the Fund may invest. See "Investment Objective and Policies."

INVESTMENT PRACTICES. The Fund may invest up to 25% of its assets in foreign
securities. Subject to certain limitations, the Fund may enter into strategic
transactions, lend its portfolio securities and enter into repurchase agreements
with selected commercial banks and broker-dealers. 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." The Fund's investment results are based on historical
performance and are not intended to indicate future performance. The Fund
commenced investment operations on December 27, 1995. From December 27, 1995 up
to February 3, 1997, the Fund operated with a limited amount of capital invested
by affiliates of the Fund's Adviser. Prior to February 3, 1997, the Fund had not
engaged in a broad continuous public offering of its shares, had sold shares to
only a limited number of investors and had not been subject to redemption
requests. The Fund commenced a broad public offering of its shares on February
3, 1997. The Fund was offered for a limited time and then was closed to new
investors on March 14, 1997 after raising new assets of approximately
$100,000,000. As discussed herein, the Fund may, from time to time, reopen and
close the offering of its shares to new investors as market conditions permit.
The Fund's Adviser believes that the Fund's portfolio prior to February 3, 1997
was managed in a manner substantially the same as if the Fund had been open for
a broader distribution to

3
<PAGE> 60

public investors. No assurances can be given, however, that the Fund's
investment performance would have been the same during such period if the Fund
had been broadly distributed.

Investment opportunities for growth company securities may be more limited than
those in other sectors of the market. In order to facilitate the management of
the Fund's portfolio, the Fund may, from time to time, reopen and close the
offering of its shares to new investors. Any such limited offerings of the Fund
may commence and terminate without any prior notice.

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

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.

DISTRIBUTIONS FROM THE FUND. Distributions from net investment income and
realized 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 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."

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

4
<PAGE> 61

- ------------------------------------------------------------------------------
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)...... 5.75%(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--5.00% 1--1.00%
Year After--None
2--4.00%
Year
3--3.00%
Year
4--2.50%
Year
5--1.50%
After--None
Redemption fees (as a
percentage of amount
redeemed)................... None None None
Exchange fees................. None None None
</TABLE>

- ------------------------------------------------------------------------------
(1) Reduced on investments of $50,000 or more. See "Purchase of Shares -- Class
A Shares."

5
<PAGE> 62

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

ESTIMATED(1) ANNUAL FUND OPERATING EXPENSES AND EXAMPLE

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management Fees(2) (as a percentage of
average daily net assets; after expense
reimbursement)........................... 0.00% 0.00% 0.00%
12b-1 Fees(3) (as a percentage of average
daily net assets)........................ 0.25% 1.00%(4) 1.00%(4)
Other Expenses(2) (as a percentage of
average daily net assets; after expense
reimbursement)........................... 1.05% 1.05% 1.05%
Total Expenses(2) (as a percentage of
average daily net assets; after expense
reimbursement)........................... 1.30% 2.05% 2.05%
</TABLE>

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

(1) The Fund commenced investment operations on December 27, 1995. From December
27, 1995 up to February 3, 1997, the Fund operated with a limited amount of
capital invested by affiliates of the Fund's Adviser. Prior to February 3,
1997, the Fund had not engaged in a broad continuous public offering of its
shares, had sold to only a limited number of public investors and had not
been subject to redemption requests. The Fund commenced a broad public
offering of its shares on February 3, 1997. The Fund was offered for a
limited time and then was closed to new investors on March 14, 1997 after
raising new assets of approximately $100,000,000. Thus, actual expenses for
the fiscal year ended June 30, 1997 are not considered representative for
future periods. The fees and expenses shown in the table are estimates.
Actual expenses may be more or less than those shown.

(2) The Adviser has agreed to waive management fees or reimburse other expenses
of the Fund through June 30, 1998 so that total estimated annual Fund
operating expenses for such period do not exceed 1.30%, 2.05% and 2.05% for
Class A Shares, Class B Shares and Class C Shares, respectively. Absent the
Adviser's waiver or reimbursement, "Management Fees" are 0.75% for each
class of shares, "Other Expenses" are estimated to be 0.85% for Class A
Shares, 0.85% for Class B Shares and 0.85% for Class C Shares and "Total
Expenses" are estimated to be 1.85% for Class A Shares, 2.60% for Class B
Shares and 2.60% for Class C Shares. Actual expenses may be more or less
than those shown. For the fiscal year ended June 30, 1997, absent the
Adviser's waiver or reimbursement, actual "Total Expenses" were 2.31% for
Class A Shares, 3.04% for Class B Shares and 3.04% for Class C Shares.

(3) 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 for distribution-related expenses. The
asset based sales charge with respect to Class C Shares includes 0.75% (as a
percentage of average daily net assets) paid to investors' broker-dealers as
sales compensation. See "Distribution and Service Plans."

(4) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted as a fund-level expense by NASD
Rules.

6
<PAGE> 63

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 1.30% for Class A Shares,
2.05% for Class B Shares and 2.05% for Class
C Shares, (ii) 5.00% annual return and (iii)
redemption at the end of each time period:
Class A Shares............................. $70 $96 $125 $205
Class B Shares............................. $71 $94 $125 $219*
Class C Shares............................. $31 $64 $110 $238
An investor would pay the following expenses
on the same $1,000 investment assuming no
redemption at the end of each period:
Class A Shares............................. $70 $96 $125 $205
Class B Shares............................. $21 $64 $110 $219*
Class C Shares............................. $21 $64 $110 $238
</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 and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. 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. As the Fund's assets increase, the
fees waived or expenses reimbursed by the Adviser are expected to decrease.
Accordingly, it is unlikely that future expenses as projected will remain
consistent with those determined based on the "Annual Fund Operating Expenses"
table. Class B Shares acquired through the exchange privilege are subject to the
CDSC 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 CDSC. 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
"Distribution and Service Plans."

7
<PAGE> 64

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

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 accountants, for the periods indicated and their report
thereon appears in the Fund's 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 CLASS B SHARES
----------------------------------- -----------------------------------
DECEMBER 27, 1995 DECEMBER 27, 1995
YEAR ENDED (COMMENCEMENT OF YEAR ENDED (COMMENCEMENT OF
JUNE 30, INVESTMENT OPERATIONS) JUNE 30, INVESTMENT OPERATIONS)
1997(A) TO JUNE 30, 1996 1997(A) TO JUNE 30, 1996
---------- ---------------------- ---------- ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $13.696 $10.000 $13.695 $10.000
------- ----- ------- -----
Net Investment Income/Loss........ 0.031 (0.044) (0.093) (0.045)
Net Realized and Unrealized
Gain............................ 4.810 3.740 4.853 3.740
------- ----- ------- -----
Total from Investment Operations... 4.841 3.696 4.760 3.695
------- ----- ------- -----
Less:
Distributions from and in Excess
of Net Realized Gain............ 0.353 0 0.353 0
Return of Capital Distribution.... 0.306 0 0.306 0
------- ----- ------- -----
Total Distributions................ 0.659 0 0.659 0
------- ----- ------- -----
Net Asset Value, End of the
Period............................ $17.878 $13.696 $17.796 $13.695
======= ===== ======= =====
Total Return*(b)................... 36.00% 37.00%** 35.32% 37.00%**
Net Assets at End of the Period (In
millions)......................... $ 53.1 $ 0.1 $ 55.0 $ 0.1
Ratio of Expenses to Average Net
Assets*(c)........................ 1.32% 1.46% 2.07% 1.46%
Ratio of Net Investment Income to
Average Net Assets*............... 0.19% (0.79%) (0.56%) (0.74%)
Portfolio Turnover................. 139% 94%** 139% 94%**
Average Commission Paid Per Equity
Share Traded(d)................... $0.0507 $0.0280 $0.0507 $0.0280
- ----------------
* 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(c)....................... 2.31% 15.69% 3.04% 15.70%
Ratio of Net Investment Income
to Average Net Assets........... (.80%) (15.02%) (1.53%) (14.97%)

<CAPTION>
CLASS C SHARES
-----------------------------------
DECEMBER 27, 1995
YEAR ENDED (COMMENCEMENT OF
JUNE 30, INVESTMENT OPERATIONS)
1997(A) TO JUNE 30, 1996
---------- ----------------------
<S> <C> <C>
Net Asset Value, Beginning of the
Period............................ $13.695 $10.000
------- -----
Net Investment Income/Loss........ (0.096) (0.045)
Net Realized and Unrealized
Gain............................ 4.853 3.740
------- -----
Total from Investment Operations... 4.757 3.695
------- -----
Less:
Distributions from and in Excess
of Net Realized Gain............ 0.353 0
Return of Capital Distribution.... 0.306 0
------- -----
Total Distributions................ 0.659 0
------- -----
Net Asset Value, End of the
Period............................ $17.793 $13.695
======= =====
Total Return*(b)................... 35.32% 37.00%**
Net Assets at End of the Period (In
millions)......................... $ 8.3 $ 0.1
Ratio of Expenses to Average Net
Assets*(c)........................ 2.07% 1.46%
Ratio of Net Investment Income to
Average Net Assets*............... (0.57%) (0.74%)
Portfolio Turnover................. 139% 94%**
Average Commission Paid Per Equity
Share Traded(d)................... $0.0507 $0.0280
- ----------------
* 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(c)....................... 3.04% 15.70%
Ratio of Net Investment Income
to Average Net Assets........... (1.55%) (14.97%)
</TABLE>

** Non-Annualized

(a) Based on average shares outstanding.

(b) Total return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by 0.02% and 0.16% for the periods
ended on June 30, 1997 and 1996, respectively.

(d) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.

See Financial Statements and Notes Thereto

8
<PAGE> 65

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

Van Kampen American Capital Growth Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity 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 OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------

The investment objective of the Fund is to seek capital growth. This objective
is fundamental and cannot be changed without approval of the shareholders of the
Fund. Any income received on such securities is incidental to the objective of
capital growth. There can be no assurance that the Fund will achieve its
investment objective.

The Fund seeks to achieve its investment objective by investing primarily in
common stocks and other equity securities of growth companies. Growth companies
generally include companies with established records of growth in sales or
earnings and companies with new products, services or processes that the Adviser
believes offer investors above average potential for capital growth. The Fund
may also invest in companies in cyclical industries during periods when the
Adviser believes that such investments offer an above average potential for
capital growth. The Fund may also invest in investment grade income securities
for purposes of capital growth and cash management or as a temporary defensive
measure. See "Portfolio Securities --Income Securities." The Fund may also
invest in shares of other investment companies that pursue investment objectives
consistent with that of the Fund to the extent and subject to the limitations
discussed below. The Fund may invest up to 25% of its total assets in securities
of foreign issuers.

The Fund's primary approach is to seek what the Adviser believes to be above
average growth opportunities on an individual company basis. Such growth company
securities may have above average price volatility. The Fund may also invest in
special situations involving new management, special products and techniques,
unusual developments, mergers or liquidations. Investments in special situations
and less seasoned companies often involve much greater risks than are inherent
in more conservative investments. The Fund attempts to reduce overall exposure
to risk from declines in individual security prices by spreading its investments
over many different companies in a variety of industries.

9
<PAGE> 66

An investment in the Fund may not be appropriate for all investors. Because
prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
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.

DEFENSIVE STRATEGIES. When, in the judgment of the Adviser, economic and
market conditions warrant, the Fund may invest temporarily for defensive
purposes up to 100% of its total assets in U.S. Government securities of various
maturities, investment grade corporate debt securities, preferred stocks,
convertible bonds, banker's acceptances and certificates of deposit.

- ------------------------------------------------------------------------------
PORTFOLIO SECURITIES
- ------------------------------------------------------------------------------

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 class of securities, including such
entity's debt securities, preferred stock and other senior equity security.
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 primarily on the security's potential for capital growth.

OTHER EQUITY SECURITIES. The Fund may invest in other equity securities,
including convertible securities or preferred stock. A convertible security is a
bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock or other equity
security of the same or a different issuer within a particular period of time at
a specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, convertible securities have characteristics similar to
nonconvertible income securities in that they ordinarily provide a stream of
income with generally higher yields than those of common stocks of the same or
similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable
nonconvertible securities. The Fund may invest in adjustable or fixed rate
preferred stock. Preferred stock generally has a preference as to dividends and
liquidation over an issuer's common stock but ranks junior to debt securities in
an issuer's capital structure. Unlike interest payments on debt securities,
preferred stock dividends are payable only if declared by the issuer's board of
directors. Preferred stock also may be subject to optional or mandatory
redemption provisions.

WARRANTS. The Fund may invest in warrants, which are securities permitting,
but not obligating, their holders to subscribe for other securities. Warrants do
not carry with them the right to dividends or voting rights with respect to the
securities that

10
<PAGE> 67

they entitle their holder to purchase, and they do not represent any rights in
the assets of the issuer. As a result, an investment in warrants may be
considered to be more speculative than most other types of equity investment. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date. The Fund may retain in its portfolio any
securities received upon the exercise of a warrant.

INVESTMENTS IN SPECIAL SITUATIONS AND LESS SEASONED COMPANIES. Investments in
special situations and securities of less seasoned companies may present greater
opportunities for growth but also involve greater risks than customarily are
associated with investments in securities of more established companies. Special
situations and securities of less seasoned companies may be subject to more
abrupt or erratic market movements than more established companies.
Additionally, these companies may have limited product lines, markets or
financial resources, may be dependent upon a limited management group, may be
subject to a greater degree of change in earnings and business prospects and may
be subject to greater uncertainties generally than more established companies.
In addition, securities of small capitalization companies are traded in lower
volume than those issued by larger companies.

FOREIGN SECURITIES. The Fund may invest up to 25% of the value of its total
assets in securities of foreign issuers. 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. 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 those countries.
There may be less publicly available information about a foreign security than
about a United States security, and foreign entities may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those of the United States entities. In addition, certain foreign
investments made by the Fund may be subject to foreign income, withholding or
other taxes, which would reduce the Fund's total return on such investments and
the amounts available for distributions by the Fund to its shareholders. 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

11
<PAGE> 68

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.

INCOME SECURITIES. The Fund may invest in income securities, which include
primarily debt securities of various maturities. The Fund will only invest in
income securities that are investment grade at the time of investment.
Investment grade securities are securities that are rated at least BBB by
Standard & Poor's Ratings Group ("S&P"), Baa by Moody's Investors Services, Inc.
("Moody's") or comparably rated by any nationally recognized statistical rating
organization, or, if unrated, are considered by the Adviser to be of comparable
quality to securities so rated. Income securities rated A or higher by S&P or A
or higher by Moody's generally are regarded as high grade and have a strong to
outstanding capacity to pay interest or dividends and repay principal or
capital. Medium grade securities (i.e., securities rated BBB by S&P or Baa by
Moody's) are regarded as having an adequate capacity to pay interest or
dividends, and repay principal, although adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make such
payments. Securities rated Baa are regarded by Moody's as having some
speculative characteristics. For a description of such ratings see the Statement
of Additional Information.

The net asset value of the Fund will change with changes in the value of its
portfolio securities. The values of income securities may change as interest
rate levels fluctuate. When interest rates decline, the value of a portfolio
invested in income securities generally can be expected to rise. Conversely,
when interest rates rise, the value of a portfolio invested in income securities
generally can be expected to decline. Volatility may be greater during periods
of general economic uncertainty.

12
<PAGE> 69

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 nationally recognized
statistical rating organizations.

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

In connection with the investment policies described above, the Fund may also
engage in the investment practices described below. These practices entail
risks. The investment practices described below are not fundamental and can be
changed without a vote of the shareholders of the Fund.

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 liquid securities, which collateral is equal at all times
to at least 100% of the value of the securities loaned, including accrued
interest. The Fund will receive amounts equal to earned income for having made
the loan. Any cash collateral pursuant to these loans will be invested in
short-term instruments. The Fund is the beneficial owner of the loaned
securities in that any gain or loss in the market price during the loan inures
to the Fund and its shareholders. Thus, when the loan is terminated, the value
of the securities may be more or less than their value at the beginning of the
loan. In determining whether to lend its portfolio securities to a bank or
broker-dealer, the Fund will take into account the credit-worthiness of such
borrower and will monitor such credit-worthiness on an ongoing basis 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.

13
<PAGE> 70

REPURCHASE AGREEMENTS. The Fund may use up to 20% of its assets to enter into
repurchase agreements with selected 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. Repurchase agreements involve certain risks
in the event of default by the other party. 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. Repurchase
agreements that mature in more than seven days are treated by the Fund as
illiquid securities and are subject to the Fund's limitation on "illiquid"
securities.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of 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 exemption 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.

14
<PAGE> 71

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 account of such purchase commitments
until payment is made. The Fund will make commitments to purchase securities on
such basis early with the intention of actually acquiring these securities, but
the Fund may sell such securities prior to the settlement date if such sale is
considered to be advisable. To the extent the Fund engages in "when issued" and
"delayed delivery" transactions, it will do so for the purpose of acquiring
securities for the Fund's portfolio consistent with the Fund's investment
objective and policies and not for the purpose of investment leverage. 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.

BORROWINGS. The Fund is authorized to borrow money from banks (including
entering into reverse repurchase agreements) in an amount up to 33 1/3% of the
Fund's total assets (after giving effect to any such borrowing) which amount
excludes up to 5% in borrowings and reverse repurchase agreements from any
entity for temporary purposes, such as clearances of portfolio transactions,
share repurchase and payment of dividends and distributions. If the Fund is
otherwise fully invested and the Adviser believes market conditions exist with
additional investment opportunities for capital growth, the Fund may use
borrowings to acquire additional portfolio securities. Utilization of such
investment leverage may result in higher returns but may also increase the
volatility of the Fund's net asset value and the effects of leverage in a
declining market would result in a greater decrease in net asset value than if
the Fund were not leveraged. The Fund has no current intention to borrow money
other than for temporary purposes. See the Fund's Statement of Additional
Information for a more complete discussion of borrowings and certain of the
associated risks.

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, equity and fixed-income indices and other financial
instruments and purchase and sell financial futures contracts and enter into
various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures.
Collectively, all of the above are referred to as "Strategic Transactions." 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 it may engage.
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, 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 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. Any
or all of these investment techniques may be used at any time and there is no

15
<PAGE> 72

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 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. To the extent that a futures contract or
an option thereon is used to protect against possible changes in the market
value of securities that the Fund anticipates acquiring and the Fund
subsequently does not acquire such securities, the Fund will have incurred the
transactional expenses associated with entering into such transaction and will
be subject to the risks inherent in an unhedged purchase of such futures
contract or option. 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.

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."

INVESTMENT IN INVESTMENT COMPANIES. The Fund may invest in one or more
investment companies advised by the Adviser and its affiliates, including Van

16
<PAGE> 73

Kampen American Capital Small Capitalization Fund ("Small Cap Fund") and Van
Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund"). The
shares of the Small Cap Fund and Foreign Securities Fund are available for
investment only by certain investment companies advised by the Adviser and its
affiliates. The Adviser believes that the use of the Small Cap Fund and Foreign
Securities Fund may, from time to time, provide the Fund with the most effective
exposure to the performance of the small capitalization sector of the stock
market and to foreign securities while at the same time minimizing costs. The
Adviser charges no advisory fee for managing the Small Cap Fund or the Foreign
Securities Fund, nor are there any sales load or other charges associated with
distribution of their shares. Other expenses incurred by the Small Cap Fund and
Foreign Securities Fund are borne by them, and thus indirectly by the Fund and
other funds that invest in them. With respect to such other expenses, the
Adviser anticipates that the efficiencies resulting from use of the Small Cap
Fund and Foreign Securities Fund will result in cost savings for the Fund and
other funds. In large part, these savings are attributable to the fact that
administrative actions that would have to be performed multiple times if each
fund held its own portfolio of small capitalization or foreign securities will
need to be performed only once. The Adviser expects that the Small Cap Fund and
Foreign Securities Fund will experience trading costs that will be substantially
less than the trading costs that would be incurred if small capitalization or
foreign securities were purchased separately for the Fund and other funds. The
Fund's investments in the Small Cap Fund and the Foreign Securities Fund are
subject to the terms and conditions set forth in the SEC exemptive orders
authorizing such investments.

The securities of small and medium sized companies that the Small Cap Fund may
invest in may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. In addition, small capitalization companies typically are subject to a
greater degree of change in earnings and business prospects than are larger,
more established companies. In light of these characteristics of small
capitalization companies and their securities, the Small Cap Fund may be subject
to greater investment risk than that assumed through investment in the equity
securities of larger capitalization companies. Risks associated with investing
in foreign securities are described under "Portfolio Securities -- Foreign
Securities."

For purposes of reviewing the Fund's portfolio diversification, the Fund will
be deemed to own a pro rata portion of each investment of the Small Cap Fund and
the Foreign Securities Fund. For example, if the Fund's investment in the Small
Cap Fund were $10 million, and the Small Cap Fund had 5% of its assets invested
in the electronics industry, the Fund would be considered to have an investment
of $500,000 in the electronics industry.

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 Investment Company Act of 1940,
as amended (the "1940 Act"). See "Investment Policies and Restrictions" in the
Statement of Additional Information.

17
<PAGE> 74

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. 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. If it is believed in the best interests of the Fund, the
Adviser may place portfolio transactions with brokers who provide research or
other services, even if the Fund will have to pay a higher commission than would
be the case if no weight were given to the broker's furnishing of such 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 and this
will be done only when, 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 to the Fund.

The Fund purchases securities which are believed by the Adviser to have
potential for capital growth. Common stocks are disposed of in situations where
it is believed that potential for such capital growth has lessened or that other
common stocks have a greater potential. Therefore, the Fund may purchase and
sell securities without regard to the length of time the security is to be, or
has been held. The Fund's annual portfolio turnover rate is shown in the table
of "Financial Highlights." The rate may exceed 100% in any given year, which is
higher than that of many other investment companies. A 100% turnover rate
occurs, for example, if all the Fund's portfolio securities are replaced during
one year. High portfolio activity increases the Fund's transaction costs,
including brokerage commissions, and may result in the realization of more
short-term capital gains than if the Fund had low portfolio activity. The
turnover rate will not be a limiting factor, however, if the Adviser deems
portfolio changes appropriate.

18
<PAGE> 75

- ------------------------------------------------------------------------------
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 $60 billion under management or
supervision. Van Kampen American Capital's more than 50 open-end and 37
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen American
Capital Distributors, Inc., the distributor of the Fund and sponsor of the funds
mentioned above, is a wholly-owned subsidiary of Van Kampen American Capital.
Van Kampen American Capital is an indirect wholly-owned subsidiary of Morgan
Stanley, Dean Witter, Discover & Co. The Adviser's principal office is located
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS PERCENTAGE 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>

19
<PAGE> 76

(ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned subsidiary of Van
Kampen American Capital) 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
certain restrictions. Persons with access to certain sensitive information are
subject to preclearance and other procedures designed to prevent conflicts of
interest.

PORTFOLIO MANAGEMENT. Jeff New has been the portfolio manager responsible for
the day-to-day management of the Fund's investment portfolio since its
inception. Mr. New has been a Vice President of the Adviser since June 1995 and
a Vice President of Van Kampen American Capital Asset Management, Inc. since
1994. Prior to that time, Mr. New was an associate portfolio manager with Van
Kampen American Capital Asset Management, Inc.

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

The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial to the investor, taking
into account the amount of the purchase, the length of time the investor expects
to hold the shares, whether the investor wishes to receive dividends in cash or
to reinvest them in additional shares of the Fund, and other circumstances.
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 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
Share accounts under $1 million) or (b) on a contingent deferred basis (Class A
Share accounts over $1 million, Class B Shares and Class C Shares). Shares
purchased subject to a

20
<PAGE> 77

contingent deferred sales charge (a "CDSC") sometimes are referred to herein
collectively as "Contingent Deferred Sales Charge Shares" or "CDSC 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
purchases 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 which have a shorter CDSC period
(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 that (i) each class of
shares bears those sales charges, distribution fees, service fees and
administrative expenses applicable to the respective class of shares as a result
of its sales arrangements, (ii) generally, each class of shares has exclusive
voting rights with respect to those provisions of the Fund's Rule 12b-1
distribution plan which relate only to such class, (iii) each class of shares
has different exchange privileges, (iv) certain classes of shares have a
conversion feature and (v) certain classes of shares have different shareholder
service options available. Generally, a class of shares subject to a higher
ongoing distribution fee 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 fee 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

21
<PAGE> 78

of the Fund will be determined as described in this Prospectus under "Purchase
of Shares -- Net Asset Value."

- ------------------------------------------------------------------------------
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 also are offered through members of the National Association of
Securities Dealers, Inc. ("NASD") acting as securities dealers ("dealers") and
through NASD members acting as brokers for investors ("brokers") or eligible
non-NASD members acting as agents for investors ("financial intermediaries").

Investment opportunities for growth company securities may be more limited
than those in other sectors of the market. In order to facilitate the management
of the Fund's portfolio, the Fund may, from time to time, reopen and close the
offering of its shares to new investors. Any such limited offerings of the Fund
may commence and terminate without any 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. It is the responsibility of the investor's broker, dealer or
financial intermediary to transmit the order to the Distributor. Because the
Fund generally determines 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

22
<PAGE> 79

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 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. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its sales of shares and increases in assets under
management. Such payments to brokers, dealers and financial intermediaries for
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. 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. These programs will not change the price an investor pays 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 or agency
commissions paid to brokers with respect to sales of Class A Shares. The sales
charge is allocated between an 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 and financial intermediaries who receive

23
<PAGE> 80

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
TOTAL SALES CHARGE COMMISSION
-------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
SIZE OF TRANSACTION OF OFFERING OF NET OF OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000.................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000....... 4.75 4.99 4.00
$100,000 but less than $250,000...... 3.75 3.90 3.00
$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 by the Distributor to brokers, dealers and financial intermediaries
who initiate and are responsible for purchases of $1 million or more. See
"Purchase of Shares -- Deferred Sales Charge Alternatives."

QUANTITY DISCOUNTS

As used herein, "Participating Funds" refers to certain open-end investment
companies advised by the Adviser or Van Kampen American Capital Asset
Management, Inc. and distributed by the Distributor as determined from time to
time by the Fund's Board of Trustees.

VOLUME DISCOUNTS. The size of investment shown in the preceding sales charge
table applies to the total dollar amount being invested by any person at any one
time

24
<PAGE> 81

in Class A Shares of the Fund, or in any combination of shares of the Fund and
shares of other Participating Funds, although other Participating Funds may have
different sales charges.

OTHER PURCHASE PROGRAMS

25
<PAGE> 82

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.

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

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

26
<PAGE> 83

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 $3 million or more and which
invest in multiple fund families through national wirehouse alliance
programs.

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

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

27
<PAGE> 84

Participating Funds, (iv) has a membership that the authorized dealer can
certify as to the group's members and (v) satisfies other uniform criteria
established by the Distributor for the purpose of realizing economies of
scale in distributing such shares. A qualified group does not include one
whose sole 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 $1 million and 0.50% on the
excess over $3 million.

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

DEFERRED SALES CHARGE ALTERNATIVES

28
<PAGE> 85

be aggregated and deemed to have been made on the last day of the month. The
CDSC schedule and holding period applicable to any CDSC Share acquired through
the exchange privilege is determined by reference to the Participating Fund from
which such share was originally purchased.

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 4.00% (the
applicable rate in the second year after purchase).

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. The Distributor will compensate brokers, dealers and financial
intermediaries participating in the continuous public offering of the CDSC
Shares out of its own assets, and not out of the assets of the Fund, at a
percentage rate of the dollar value of the CDSC Shares purchased from the Fund
by such brokers, dealers and financial intermediaries, which percentage rate is
equal to (i) with respect to Class A Shares, 1.00% on sales to $2 million, plus
0.80% on the next $1 million and 0.50% on the excess over $3 million; (ii) 4.00%
with respect to 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.

29
<PAGE> 86

year of the purchase. Class A Shares redeemed thereafter will not be subject to
a CDSC.

CLASS B SHARES. Class B Shares redeemed within five 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........................................ 5.00%
Second....................................... 4.00%
Third........................................ 3.00%
Fourth....................................... 2.50%
Fifth........................................ 1.50%
Sixth 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."

30
<PAGE> 87

minimum 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 180 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 the close of the daily trading session of the New
York Stock Exchange, 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.

The securities of the Fund that are listed on a securities exchange are valued
at their closing sales price on the day of the valuation. Price valuations for
listed securities are based on market quotations where the security is primarily
traded or, if actual trade information is not available on any valuation date,
are valued at the mean of the bid and asked prices. Unlisted securities in the
portfolio 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.

31
<PAGE> 88

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

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.

32
<PAGE> 89

EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset values of
each fund after requesting the exchange without any sales charge, subject to
certain limitations. Shares of the Fund may be exchanged for shares of any
Participating Fund only if shares of the Participating Fund are available for
sale; however, during periods of suspension of sales, shares of a Participating
Fund may be available for sale only to existing shareholders of the
Participating Fund. Shareholders seeking an exchange with a Participating Fund
should obtain and read the current prospectus of such fund.

33
<PAGE> 90

fund"). Upon redemption from the Participating Funds' complex of funds, Class B
Shares and Class C Shares are subject to the CDSC schedule imposed by the
original fund.

34
<PAGE> 91

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."

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

35
<PAGE> 92

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 120 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.

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.

36
<PAGE> 93

recording telephone communications, and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
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
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.

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.

37
<PAGE> 94

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 (without sales charge except as described under "Shareholder Services --
Exchange Privilege") next determined after the order is received, which must be
within 180 days after the date of the redemption. 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.

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

DISTRIBUTION AND SERVICE PLANS

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

38
<PAGE> 95

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 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.

39
<PAGE> 96

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, 1997 there were $1,672,196 and
$62,549 of unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares, respectively, representing 3.04% and 0.76% 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 the CDSC.

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 annually dividends to holders of each class of shares
from net investment income and net short-term capital gains attributable to each
respective class. The Fund also presently intends to make distributions of net
long-term capital gains, if any, annually. Dividends are composed of all or a
portion of investment income earned by each class of shares of the Fund plus all
or a portion of net short-term capital gains by the Fund on transactions in
securities and futures and options hedging transactions, less the expenses
attributable to the respective class. Long-term capital gains distributions
consist of the Fund's gain on transactions in securities and futures and options
hedging transactions, net of any realized capital losses, less any carryover
capital losses from previous years.

40
<PAGE> 97

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 ACCESS receives payments for such shares. However, shares
become entitled to dividends on the day ACCESS 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 or redemption.

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

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

- ------------------------------------------------------------------------------
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 source 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 (including tax-exempt
interest, taxable 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 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.

41
<PAGE> 98

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 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 shareholder (assuming such shares
are held as a capital asset). See the discussion below for a summary of the tax
rates applicable to capital gains (including capital gain dividends). The Fund
will inform shareholders of the source and tax status of such distributions
promptly after the close of each calendar year. Some portion of the
distributions made by the Fund generally 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.

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.

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 recognize gain or loss in an amount equal to
the difference between their basis in such sold shares of the Fund and the
amount received. If such shares are held as a capital asset, the gain or loss
will be a capital gain or loss. See the discussion below for a summary of the
tax rates applicable to capital gains. Any loss recognized 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

42
<PAGE> 99

holding one or more other positions in substantially similar or related property
or through certain options or short sales.

Under the Taxpayer Relief Act of 1997 (the "1997 Tax Act"), the maximum tax
rates applicable to net capital gains recognized by individuals and other non-
corporate taxpayers are (i) the same as ordinary income rates for capital assets
held for one year or less, (ii) 28% for capital assets held for more than one
year but not more than 18 months and (iii) 20% for capital assets held for more
than 18 months. Under the 1997 Tax Act, the Treasury is authorized to issue
regulations that address the application of the new capital gains rates to sales
and exchanges by regulated investment companies and to sales and exchanges of
interests in regulated investment companies, but no such regulations have been
issued as of the date hereof. It is expected that the new tax rates for capital
gains under the 1997 Tax Act described above will apply to distributions of
capital gains dividends by regulated investment companies such as the Fund as
well as to sales and exchanges of shares in regulated investment companies such
as the Fund. With respect to capital losses recognized on dispositions of shares
held six months or less where such losses are treated as long-term capital
losses to the extent of prior capital gains dividends received on such shares
(see discussion regarding the sale of shares above), it is unclear how such
capital losses offset the capital gains referred to above. Shareholders should
consult their own tax advisors as to the application of the new capital gains
rates to their particular circumstances.

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 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 recognize income or gain 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.

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

43
<PAGE> 100

passive income. Under certain circumstances, a regulated investment company that
holds stock of a PFIC will be subject to federal income tax on (i) a portion of
any "excess distribution" received on such stock or (ii) any gain from a sale or
disposition of such stock (collectively, "PFIC income"), plus interest on such
amounts, even if the regulated investment company distributes the PFIC income as
a taxable dividend to its shareholders. 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.

Under provisions of the 1997 Tax Act generally effective for taxable years
ending after 1997, the Fund may make an election to annually mark-to-market
certain publicly traded PFIC stock (a "PFIC Mark-to-Market Election").
"Marking-to-market," in this context, means recognizing as ordinary income or
loss each year an amount equal to the difference between the Fund's adjusted tax
basis in such PFIC stock and its fair market value. Losses will be allowed only
to the extent of net mark-to-market gain previously included by the Fund
pursuant to the election for prior taxable years. The Fund may be required to
include in its taxable income for the first taxable year in which it makes a
PFIC Mark-to-Market Election an amount equal to the interest charge that would
otherwise accrue with respect to distributions on, or dispositions of, the PFIC
stock. This amount would not be deductible from the Fund's taxable income. The
PFIC Mark-to-Market Election applies to the taxable year for which made and to
all subsequent taxable years, unless the PFIC stock ceases to be publicly traded
or the Internal Revenue Service consents to revocation of the election. By
making the PFIC Mark-to-Market Election, the Fund could ameliorate the adverse
tax consequences arising from its ownership of PFIC stock, but in any particular
year may be required to recognize income in excess of the distributions it
receives from the PFIC and proceeds from the dispositions of PFIC stock.

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

44
<PAGE> 101

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
non-resident 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.

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 purchasing, 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 will include the average total return of the Fund calculated on a
compounded basis for specified periods of time. Such total return will be
calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. Such calculations are based on
historical information and are not intended to indicate future performance. In
lieu of or in addition to total return 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 or 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.

45
<PAGE> 102

of its shares, had sold shares to only a limited number of public investors and
had not been subject to redemption requests. The Fund commenced a broad public
offering of its shares on February 3, 1997. The Fund was offered for a limited
time and then was closed to new investors on March 14, 1997 after raising new
assets of approximately $100,000,000. As discussed herein, the Fund may, from
time to time, reopen and close the offering of its shares to new investors as
market conditions permit. The Fund's Adviser believes that the Fund's portfolio
prior to February 3, 1997 was managed in a manner substantially the same as if
the Fund had been open for a broader distribution to public investors. No
assurances can be given, however, that the Fund's investment performance would
have been the same during such period if the Fund had been broadly distributed.
The Fund's investment results are based on historical performance and are not
intended to indicate future performance.

- ------------------------------------------------------------------------------
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 of shares designated Class A Shares,
Class B Shares and Class C Shares. The Fund is permitted to issue an unlimited
number of classes of shares. Other classes may be established from time to time
in accordance with provisions of the Fund's Declaration of Trust.

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.
Except as described herein, there are no conversion, preemptive or other
subscription rights. 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.

46
<PAGE> 103

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.

The Trust's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.

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

47
<PAGE> 104

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE
CALL THE FUND'S TOLL-FREE
NUMBER (800) 341-2911.

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

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

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

DIAL (800) 421-2833

FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424
VAN KAMPEN AMERICAN CAPITAL

GROWTH 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
Growth Fund

Custodian

STATE STREET BANK AND

TRUST COMPANY

225 West Franklin Street, P.O. Box 1713

Boston, MA 02105-1713
Attn: Van Kampen American Capital
Growth 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> 105

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

GROWTH FUND

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

P R O S P E C T U S

OCTOBER 28, 1997

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 106

- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
VALUE FUND
- --------------------------------------------------------------------------------

Van Kampen American Capital Value Fund (the "Fund") is a diversified,
open-end management investment company, commonly known as a mutual fund. The
Fund's investment objective is to seek long-term growth of capital. The Fund
seeks to achieve its investment objective by investing primarily in a
diversified portfolio of common stocks and other equity securities of medium and
larger capitalization companies that the Fund's investment adviser believes are
selling below their intrinsic value and offer the opportunity for significant
growth of capital. Any income received on such securities is incidental to the
objective of long-term growth of capital. There is no assurance that the Fund
will achieve its investment objective. The fund is organized as a series of Van
Kampen American Capital Equity Trust (the "Trust").

A Statement of Additional Information, dated October 28, 1997, 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) 421-2833. 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, 1997.

<PAGE> 107

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Annual Fund Operating Expenses and Example.................. 6
Financial Highlights........................................ 8
The Fund.................................................... 9
Investment Objective and Policies........................... 9
Portfolio Securities........................................ 10
Investment Practices........................................ 12
Investment Advisory Services................................ 18
Alternative Sales Arrangements.............................. 20
Purchase of Shares.......................................... 22
Shareholder Services........................................ 31
Redemption of Shares........................................ 35
Distribution and Service Plans.............................. 38
Distributions from the Fund................................. 40
Tax Status.................................................. 41
Fund Performance............................................ 45
Description of Shares of the Fund........................... 45
Additional Information...................................... 46
</TABLE>

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

2
<PAGE> 108

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

THE FUND. Van Kampen American Capital Value Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity Trust (the "Trust").
The Trust is an open-end management investment company which is a Delaware
business trust.

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

INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek long-term
growth of capital. There is no assurance that the Fund will achieve its
investment objective. See "Investment Objective and Policies."

INVESTMENT POLICY. The Fund seeks to achieve its investment objective by
investing primarily in a diversified portfolio of common stocks and other equity
securities of medium and larger capitalization companies that the Fund's
investment adviser believes are selling below their intrinsic value and offer
the opportunity for significant growth of capital. The net asset value per share
of the Fund may increase or decrease depending on changes in the securities
markets, and other factors affecting the issuers of securities in which the Fund
may invest. See "Investment Objective and Policies."

INVESTMENT PRACTICES. The Fund may invest up to 25% of its assets in foreign
securities. Subject to certain limitations, the Fund may enter into strategic
transactions, lend its portfolio securities, and enter into repurchase
agreements with selected commercial banks and broker-dealers. 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."

3
<PAGE> 109

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. (the
"Adviser") is the Fund's investment adviser.

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.

DISTRIBUTIONS FROM THE FUND. Distributions from net investment income and
realized capital gains, if any, are made 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."

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

4
<PAGE> 110

- ------------------------------------------------------------------------------
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)...................... 5.75%(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--5.00% 1--1.00%
Year After--None
2--4.00%
Year
3--3.00%
Year
4--2.50%
Year
5--1.50%
Year 6--None
After--None
Redemption fees (as a
percentage of amount
redeemed)................... None None None
Exchange fees................. None None None
</TABLE>

- ------------------------------------------------------------------------------
(1) Reduced on investments of $50,000 or more. See "Purchase of Shares -- Class
A Shares."

5
<PAGE> 111

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management Fees(1) (as a percentage of
average daily net assets; after fee
waiver)............................... 0.00% 0.00% 0.00%
12b-1 Fees(2) (as a percentage of
average daily net assets)............. 0.00% 0.00%(3) 0.00%(3)
Other Expenses (as a percentage of
average daily net assets; after
expense reimbursement)................ 1.48% 1.48% 1.48%
Total Expenses(1) (as a percentage of
average daily net assets; after fee
waiver and expense reimbursement)..... 1.48% 1.48% 1.48%
</TABLE>

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

(1) Absent the Adviser's waiver of its fee or reimbursement of expenses,
"Management Fees" would have been 0.75% for each of the class of shares,
"Other Expenses" would have been 16.26% for each class of shares and "Total
Expenses" would have been 17.01% for each class of shares.

(2) No 12b-1 or service fees were accrued by the Fund for the period ended June
30, 1997 because the Fund was not actively distributing its shares during
such period. If the Fund had been actively distributing its shares during
the period ended June 30, 1997, 12b-1 and service fees would have been
0.25%, 1.00% and 1.00% for Class A Shares, Class B Shares and Class C
Shares, respectively. Such amounts include 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 for distribution-related expenses. The asset based sales charges with
resect to Class C Shares includes 0.75% (as a percentage of net assets) paid
to investors' broker-dealers as sales compensation. See "Distribution and
Service Plans."

(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted as a Fund-level expense by NASD
Rules.

6
<PAGE> 112

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 1.48% for
Class A Shares, 1.48% for Class B Shares
and 1.48% for Class C Shares, (ii) 5.00%
annual return and (iii) redemption at the
end of each time period:
Class A Shares........................... $ 72 $102 $134 $224
Class B Shares........................... $ 65 $ 77 $ 96 $177*
Class C Shares........................... $ 25 $ 47 $ 81 $177
An investor would pay the following
expenses on the same $1,000 investment
assuming no redemption at the end of each
period:
Class A Shares........................... $ 72 $102 $134 $224
Class B Shares........................... $ 15 $ 47 $ 81 $177*
Class C Shares........................... $ 15 $ 47 $ 81 $177
</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 and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. The ten year amount with respect to Class B Shares reflects
the lower aggregate 12b-1 and service fee applicable to such shares after
conversion to Class A Shares. As the Fund's assets increase, the fees waived or
expenses reimbursed by the Adviser are expected to decrease. Accordingly, it is
unlikely that future expenses as projected will remain consistent with those
determined based on the "Annual Fund Operating Expense" table. Class B Shares
acquired through the exchange privileges are subject to the CDSC 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 of the investors' Class B Shares
were exchanged from a fund with a higher CDSC. 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 "Distribution and
Service Plans."

7
<PAGE> 113

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 accountants, for 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 audited financial statements
and related notes thereto included in the Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
DECEMBER 27, DECEMBER 27,
1995 1995
(COMMENCEMENT (COMMENCEMENT
CLASS A SHARES OF INVESTMENT CLASS B SHARES OF INVESTMENT CLASS C SHARES
-------------- OPERATIONS) TO -------------- OPERATIONS) TO --------------
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
JUNE 30, 1997 1996 JUNE 30, 1997 1996 JUNE 30, 1997
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $ 11.409 $10.000 $11.410 $10.000 $11.410
-------- ------- ------- ------- -------
Net Investment Income/Loss........ (0.014) 0.018 (0.017) 0.024 (0.017)
Net Realized and Unrealized
Gain............................ 3.559 1.391 3.567 1.386 3.567
-------- ------- ------- ------- -------
Total from Investment Operations... 3.545 1.409 3.550 1.410 3.550
-------- ------- ------- ------- -------
Less:
Distributions from Net Investment
Income.......................... 0.017 -0- 0.017 -0- 0.017
Distributions from Net Realized
Gain............................ 0.616 -0- 0.616 -0- 0.616
-------- ------- -------
Total Distributions................ 0.633 -0- 0.633 -0- 0.633
-------- ------- -------
Net Asset Value, End of the
Period............................ $ 14.321 $11.409 $14.327 $11.410 $14.327
======== ======= ======= ======= =======
Total Return*(a)................... 32.39% 14.00%** 32.48% 14.00%** 32.48%
Net Assets at End of the Period (In
thousands)........................ $1,315.0 $ 117.2 $ 93.1 $ 74.2 $ 93.1
Ratio of Expenses to Average Net
Assets*(b)........................ 1.48% 1.38% 1.48% 1.38% 1.48%
Ratio of Net Investment Income/Loss
to Average Net Assets*............ (.31)% 0.38% (.14)% 0.44% (.14)%
Portfolio Turnover................. 85% 41%** 85% 41%** 85%
Average Commission Paid Per Equity
Share Traded(c)................... $ 0.0369 $0.0250 $0.0369 $0.0250 $0.0369
- ----------------
* 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(b)....................... 17.01% 17.57% 17.01% 17.57% 17.01%
Ratio of Net Investment
Income/Loss to Average Net
Assets*......................... (16.01)% (15.81)% (15.79)% (15.75)% (15.79)%
** Non-annualized.
(a) Total return is based upon net asset value which does not include payment of the maximum sales charge or contingent
deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned on overnight cash balances. If these
credits were reflected as a reduction of expenses, the ratios would decrease by 0.18% and 0.08% for the periods
ended on June 30, 1997 and June 30, 1996, respectively.
(c) Represents the average brokerage commissions paid per equity share traded during the period where commissions were
applicable.

<CAPTION>
CLASS C SHARES
--------------
DECEMBER 27,
1995
(COMMENCEMENT
OF INVESTMENT
OPERATIONS) TO
JUNE 30,
1996
--------------
<S> <C>
Net Asset Value, Beginning of the
Period............................ $10.000
-------
Net Investment Income/Loss........ 0.024
Net Realized and Unrealized
Gain............................ 1.386
-------
Total from Investment Operations... 1.410
-------
Less:
Distributions from Net Investment
Income.......................... -0-
Distributions from Net Realized
Gain............................ -0-
Total Distributions................ -0-
Net Asset Value, End of the
Period............................ $11.410
=======
Total Return*(a)................... 14.00%**
Net Assets at End of the Period (In
thousands)........................ $ 74.2
Ratio of Expenses to Average Net
Assets*(b)........................ 1.38%
Ratio of Net Investment Income/Loss
to Average Net Assets*............ 0.44%
Portfolio Turnover................. 41%**
Average Commission Paid Per Equity
Share Traded(c)................... $0.0250
- ----------------
* 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(b)....................... 17.57%
Ratio of Net Investment
Income/Loss to Average Net
Assets*......................... (15.75)%
** Non-annualized.
(a) Total return is based upon net asset value which does not include payment of the maximum sales charge or contingent
deferred sales charge.
(b) The Ratios of Expenses to Average Net Assets do not reflect credits earned on overnight cash balances. If these
credits were reflected as a reduction of expenses, the ratios would decrease by 0.18% and 0.08% for the periods
ended on June 30, 1997 and June 30, 1996, respectively.
(c) Represents the average brokerage commissions paid per equity share traded during the period where commissions were
applicable.
</TABLE>

See Notes to Financial Statements

8
<PAGE> 114

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

Van Kampen American Capital Value Fund (the "Fund") is a separate, diversified
series of Van Kampen American Capital Equity Trust (the "Trust"). The Fund is an
open-end management investment company, organized as a Delaware business trust.

The investment objective of the Fund is to seek long-term growth of capital.
This objective is fundamental and cannot be changed without approval of the
shareholders of the Fund. Any income received by the Fund is incidental to the
objective of long-term growth of capital. There can be no assurance that the
Fund will achieve its investment objective.

The Fund seeks to achieve its investment objective by investing primarily in a
diversified portfolio of common stocks and other equity securities of medium and
larger capitalization companies that the Fund's Adviser believes are selling
below their intrinsic value and offer the opportunity for significant growth of
capital. Medium and larger capitalization companies are those companies that at
the time of investment have a market capitalization at least as large as that of
the company having the smallest market capitalization of those companies then
included in the S&P MidCap 400 Index. The Adviser believes that a company's
equity securities have unrecognized intrinsic value when they sell at a
substantial discount to liquidation value, private market value, or going
concern value. Liquidation value is based on the sum of the company's assets,
less the present value of all liabilities. Private market value is determined by
the price at which comparable securities have been sold in arms length
transactions. Going concern value is determined by the present value of all cash
inflows and outflows, discounted at a rate that reflects the expected interest
rate environment and risk profile of the firm. In determining the intrinsic
value and investment suitability of particular issuers, the Adviser may consider
factors such as historical and expected growth rates of earnings, economic
earnings, expected levels of free cash flow, evidence of financial strength,
predictability of future prospects, and quality of management.

The Fund may also invest in investment grade income securities for purposes of
long-term growth of capital, cash management or as a temporary defensive
measure. See "Portfolio Securities -- Income Securities." The Fund may also

9
<PAGE> 115

invest in other investment companies that pursue investment objectives
consistent with that of the Fund, to the extent and subject to the limitations
discussed below. The Fund may invest up to 25% of its total assets in securities
of foreign issuers. See "Portfolio Securities -- Foreign Securities."

DEFENSIVE STRATEGIES. When, in the judgment of the Fund's Adviser, economic
and market conditions warrant, the Fund may invest temporarily for defensive
purposes up to 100% of its total assets in U.S. Government securities of various
maturities, investment grade corporate debt securities, preferred stocks,
convertible bonds, banker's acceptances and certificates of deposit.

- ------------------------------------------------------------------------------
PORTFOLIO SECURITIES
- ------------------------------------------------------------------------------

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 class of securities, including such
entity's debt securities, preferred stock and other senior equity security.
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 primarily on the security's potential for capital growth.

OTHER EQUITY SECURITIES. The Fund may invest in other equity securities,
including convertible securities or preferred stocks. A convertible security is
a bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock or other equity
security of the same or a different issuer within a particular period of time at
a specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, convertible securities have characteristics similar to
nonconvertible income securities in that they ordinarily provide a stream of
income with generally higher yields than those of common stocks of the same or
similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable
nonconvertible securities. The Fund may invest in adjustable or fixed rate
preferred stock. Preferred stock generally has a preference as to dividends and
liquidation over an issuer's common stock but ranks junior to debt securities in
an issuer's capital structure. Unlike interest payments on debt securities,
preferred stock dividends are payable only if declared by the issuer's

10
<PAGE> 116

board of directors. Preferred stock also may be subject to optional or mandatory
redemption provisions.

INCOME SECURITIES. The Fund may invest in income securities, which include
primarily debt securities of various maturities. The Fund will invest only in
income securities that are investment grade at the time of investment.
Investment grade securities are securities that are rated at least BBB by
Standard & Poor's Ratings Group ("S&P"), Baa by Moody's Investors Services, Inc.
("Moody's") or comparably rated by any other nationally recognized rating
organization, or, if unrated, considered by the Adviser to be of comparable
quality to securities so rated. Income securities rated A or higher by S&P or A
or higher by Moody's generally are regarded as high grade and have a strong to
outstanding capacity to pay interest or dividends and repay principal or
capital. Medium grade securities (i.e., securities rated BBB by S&P or Baa by
Moody's) are regarded as having an adequate capacity to pay interest or
dividends, and repay principal, although adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make such
payments. Securities rated Baa are regarded by Moody's as having some
speculative characteristics. For a description of such 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
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 nationally recognized
statistical rating organizations.

11
<PAGE> 117

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. 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 those countries. There may be less
publicly available information about a foreign security than about a United
States security, 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 income, withholding or other taxes, which would reduce the
Fund's total return on such investments and the amounts available for
distributions by the Fund to its shareholders. 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.

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

12
<PAGE> 118

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 liquid securities, which collateral is equal at all times to at least
100% of the value of the securities loaned, including accrued interest. The Fund
will receive amounts equal to earned income for having made the loan. Any cash
collateral pursuant to these loans will be invested in short-term instruments.
The Fund is the beneficial owner of the loaned securities in that any gain or
loss in the market price during the loan inures to the Fund and its
shareholders. Thus, when the loan is terminated, the value of the securities may
be more or less than their value at the beginning of the loan. In determining
whether to lend its portfolio securities to a bank or broker-dealer, the Fund
will take into account the credit-worthiness of such borrower and will monitor
such credit-worthiness on an ongoing basis 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.

13
<PAGE> 119

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.

"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 or is earned by the Fund on portfolio 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 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 such 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. 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. 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.

14
<PAGE> 120

excludes up to 5% in borrowings and reverse repurchase agreements from any
entity for temporary purposes, such as clearances of portfolio transactions,
share repurchases and payment of dividends and distributions. If the Fund is
otherwise fully invested and the Adviser believes market conditions exist with
additional investment opportunities for long-term growth of capital, the Fund
may use borrowings to acquire additional portfolio securities. Utilization of
such investment leverage may result in higher returns but also may increase the
volatility of the Fund's net asset value and the effects of leverage in a
declining market would result in a greater decrease in net asset value than if
the Fund were not leveraged. The Fund has no current intention to borrow money
other than for such temporary purposes. The Fund will not acquire additional
securities during any period in which its borrowings exceed 5% of the Fund's
total assets. See the Fund's Statement of Additional Information for a more
complete discussion of borrowings and certain of the associated risks.

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, equity and fixed-income indices and other financial
instruments and purchase and sell financial futures contracts and enter into
various currency transactions such as currency forward contracts, currency
future contracts, currency swaps or options on currencies or currency futures.
Collectively, all of the above are referred to as "Strategic Transactions." The
Fund may also invest in income securities the terms of which include the element
of or are similar in effect to Strategic Transactions in which it may engage.
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, 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 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. 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.

15
<PAGE> 121

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 specific 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. To the extent that a futures contract or
an option thereon is used to protect against possible changes in the market
value of securities that the Fund anticipates acquiring and the Fund
subsequently does not acquire such securities, the Fund will have incurred the
transactional expenses associated with entering into such transaction and will
be subject to the risks inherent in an unhedged purchase of such futures
contract or option. 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.

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."

INVESTMENT IN INVESTMENT COMPANIES. The Fund may invest in one or more
investment companies advised by the Adviser and its affiliates, including Van
Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund"). The
shares of the Foreign Securities Fund are available only to certain investment
companies advised by the Adviser and its affiliates. The Adviser believes that
use of the Foreign Securities Fund may, from time to time, provide the Fund with
the most effective exposure to the performance of foreign securities while at
the same time minimizing costs. The Adviser charges no advisory fee for managing
the Foreign Securities Fund, nor are there any sales load or other charges
associated with distribution of its shares. Other expenses incurred by the
Foreign Securities Fund are borne by them, and thus indirectly by those funds
that invest in them. With respect to such other expenses, the Adviser
anticipates that the efficiencies resulting from use of the Foreign Securities
Fund will result in cost savings for the Fund and other funds that will fully or
partially offset such expenses. In large part, these savings are attributable to
the fact that administrative actions that would have to be performed multiple
times if each fund held its own portfolio of foreign stocks

16
<PAGE> 122

will need to be performed only once. The Adviser expects that the Foreign
Securities Fund will experience trading costs that will be substantially less
than the trading costs that would be incurred if foreign stocks were purchased
separately for the Fund and other participating funds. The Fund's investments in
the Foreign Securities Fund are subject to the terms and conditions set forth in
SEC exemptive orders authorizing such investments. Risks associated with
investing in foreign securities are described under "Portfolio Securities
- --Foreign Securities."

The Fund will be deemed to own a pro rata portion of each investment of the
Foreign Securities Fund. For example, if the Fund's investment in the Foreign
Securities Fund were $10 million, and the Foreign Securities Fund had 5% of its
assets invested in the electronics industry, the Fund would be considered to
have an investment of $500,000 in the electronics industry.

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 Investment Company Act of 1940
(the "1940 Act"). See "Investment Policies and Restrictions" in the Statement of
Additional Information.

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. If it is believed in the best interests of
the Fund, the Adviser may place portfolio transactions with brokers who provide
research or other services, even if the Fund will have to pay a higher
commission than would be the case if no weight were given to the broker's
furnishing of such 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 and this will be done only when, in the opinion of the
Adviser, the amount of additional commission or increased costs is reasonable in
relation to the value of such services to the Fund.

The Adviser may place portfolio transactions, to the extent permitted by law,
with brokerage firms affiliated with the Fund, the Adviser or the Distributor
and

17
<PAGE> 123

with firms participating in the distribution of the Fund's shares if it
reasonably believes that the quality of execution and the commission are
comparable to that available from other qualified firms. See "Portfolio
Transactions and Brokerage Allocation" in the Statement of Additional
Information for more information.

PORTFOLIO TURNOVER. The Fund purchases securities which are believed by the
Adviser to have potential for long-term growth of capital. Securities are
disposed of in situations where it is believed that potential for such growth
has lessened or that other securities have a greater potential. Therefore, the
Fund may purchase and sell securities without regard to the length of time the
security is to be, or has been held. The rate may exceed 100%, which is higher
than that of many other investment companies. A 100% turnover rate occurs, for
example, if all the Fund's portfolio securities are replaced during one year.
High portfolio activity increases the Fund's transaction costs, including
brokerage commissions, and may result in the realization of more short-term
capital gains than if the Fund had low portfolio turnover. The Fund's annual
portfolio turnover rate is shown in the table of "Financial Highlights."

- ------------------------------------------------------------------------------
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 $60 billion under management or
supervision. Van Kampen American Capital's more than 50 open-end and 37
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen American
Capital Distributors, Inc., the distributor of the Fund and sponsor of the funds
mentioned above, is a wholly-owned subsidiary of Van Kampen American Capital.
Van Kampen American Capital is an indirect wholly-owned subsidiary of Morgan
Stanley, Dean Witter, Discover & Co. The Adviser's principal office is located
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

18
<PAGE> 124

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

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS PERCENTAGE 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>

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,
transfer agent (ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned
subsidiary of Van Kampen American Capital) 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.

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. James Gilligan and Bret Stanley are co-managers of the
Fund and have been primarily responsible for the day-to-day management of the
Fund's investment portfolio since its inception. Mr. Gilligan is currently a
Senior Vice President of the Adviser and has been Vice President -- Portfolio
Manager of

19
<PAGE> 125

Van Kampen American Capital Asset Management, Inc. since March 1990. Prior to
that time, he was a securities analyst with Van Kampen American Capital Asset
Management, Inc. Mr. Stanley is currently an Assistant Vice President of the
Adviser and has been an associate portfolio manager of Van Kampen American
Capital Asset Management, Inc. since January 1995. Prior to that time, he was a
securities analyst and portfolio manager with Gulf Investment Management. Prior
to that, he was an analyst at Lovett Underwood Neuhaus & Webb, and Rotan Mosle.
Each portfolio manager is an employee of the Adviser.

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

The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial to the investor, taking
into account the amount of the purchase, the length of time the investor expects
to hold the shares, whether the investor wishes to receive dividends in cash or
to reinvest them in additional shares of the Fund, and other circumstances.
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 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 accounts under $1 million) or (b) on a contingent deferred basis (Class A
Share accounts over $1 million, Class B Shares and Class C Shares). Shares
purchased subject to a contingent deferred sales charge (a "CDSC") sometimes are
referred to herein collectively as "Contingent Deferred Sales Charge Shares" or
"CDSC Shares."

20
<PAGE> 126

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
which have a shorter CDSC period (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 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 that (i) each class of
shares bears those sales charges, distribution fees, service fees and
administrative expenses applicable to the respective class of shares as a result
of its sales arrangements, (ii) generally, each class of shares has exclusive
voting rights with respect to those provisions of the Fund's Rule 12b-1
distribution plan which relate only to such class, (iii) each class of shares
has different exchange privileges, (iv) certain classes of shares have a
conversion feature and (v) certain classes have different shareholder service
options available. 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 fee 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."

21
<PAGE> 127

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

22
<PAGE> 128

outside of the United States for meetings or seminars of a business nature. In
some instances additional compensation or promotional incentives may be offered
to brokers, dealers or financial intermediaries that have sold or may sell
significant amounts of shares during specified periods of time. The Distributor
may provide additional compensation to Edward D. Jones & Co. or an affiliate
thereof based on a combination of its sales of shares and increases in assets
under management. Such payments to brokers, dealers and financial intermediaries
for 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. 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. These programs will not change the price an investor pays
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 or agency
commissions paid to brokers with respect to sales of Class A Shares. The sales
charge is allocated between an 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 and 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
TOTAL SALES CHARGE COMMISSION
-------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
SIZE OF TRANSACTION OF OFFERING OF NET OF OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000.................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000....... 4.75 4.99 4.00
$100,000 but less than $250,000...... 3.75 3.90 3.00
$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 by the Distributor to brokers, dealers and financial intermediaries
who initiate and are responsible for purchases of $1 million or more. See
"Purchase of Shares -- Deferred Sales Charge Alternatives."

23
<PAGE> 129

QUANTITY DISCOUNTS

24
<PAGE> 130

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 sales charges applicable to the purchases made and the sales charges
previously paid. When an investor signs a Letter of Intent, shares equal to at
least 5% of the total purchase amount of the level selected will be restricted
from sale or redemption by the investor until the Letter of Intent is satisfied
or any additional sales charges have been paid; if the Letter of Intent is not
satisfied by the investor and any additional sales charges are not paid,
sufficient restricted shares will be redeemed by the Fund to pay such charges.
Additional information is contained in the application accompanying this
Prospectus.

OTHER PURCHASE PROGRAMS

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.

25
<PAGE> 131

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. The Fund reserves the right to
modify or terminate this program at any time.

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

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

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

(4) Registered investment advisers, trust companies and bank trust departments
investing on their own behalf or on behalf of their clients provided that
the aggregate amount invested in Class A Shares of the Fund alone, or 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.

(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.

26
<PAGE> 132

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

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

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

Purchase orders made pursuant to clause (4) may be placed either through
authorized brokers, dealers or financial intermediaries as described above or
directly

27
<PAGE> 133

with ACCESS, the investment adviser, trust company or bank trust department,
provided that ACCESS 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

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.

28
<PAGE> 134

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 4.00% (the
applicable rate in the second year after purchase).

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. 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 Funds, 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 $1 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.

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

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
------------------- -------------------
<S> <C>
First...................................................... 5.00%
Second..................................................... 4.00%
Third...................................................... 3.00%
Fourth..................................................... 2.50%
Fifth...................................................... 1.50%
Sixth and after............................................ 0.00%
</TABLE>

29
<PAGE> 135

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

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 required minimum
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 180 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

30
<PAGE> 136

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
the close of the daily trading session of the New York Stock Exchange, 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.

The securities of the Fund that are listed on a securities exchange are valued
at their closing sales price on the day of the valuation. Price valuations for
listed securities are based on market quotations where the security is primarily
traded or, if actual trade information is not available on any valuation date,
are valued at the mean of the bid and asked prices. Unlisted securities in the
portfolio 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.

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

31
<PAGE> 137

shareholder who has an account in any of the Participating Funds 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.

32
<PAGE> 138

33
<PAGE> 139

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,
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 reinvest dividends from the new account
into another fund, 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 modify, restrict or terminate the
exchange privilege at any time on 60 days' notice to its shareholders of any
termination or material amendment.

34
<PAGE> 140

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. Any gain or loss realized by the shareholders upon
redemption of shares is a taxable event.

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

35
<PAGE> 141

a copy of the corporate resolution or other legal documentation appointing the
authorized signer and certified within the prior 120 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.

36
<PAGE> 142

available for shares represented by certificates. If an account has multiple
owners, ACCESS may rely on the instructions of any one owner.

37
<PAGE> 143

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 (without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 180 days after the date of the redemption. 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.

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

DISTRIBUTION AND SERVICE PLANS

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

38
<PAGE> 144

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 purposes of this section, excluding any Class A Shares that
may be subject to a CDSC) for any given year may exceed the amounts payable to
the Distributor with respect to such class of CDSC Shares under the Distribution
Plan, the Service Plan and payments received pursuant to the 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, 1997, there
were no unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares. If the Distribution Plan was terminated or not
continued, the Fund would not be

39
<PAGE> 145

contractually obligated to pay the Distributor for any expenses not previously
reimbursed by the Fund or recovered through CDSC.

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

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.

40
<PAGE> 146

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

41
<PAGE> 147

deduction for corporations if the Fund receives qualifying dividends during the
year and if certain other requirements of the Code are satisfied.

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.

42
<PAGE> 148

of shares in regulated investment companies such as the Fund. With respect to
capital losses recognized on dispositions of shares held six months or less
where such losses are treated as long-term capital losses to the extent of prior
capital gains dividends received on such shares (see the discussion regarding
the sale of shares above), it is unclear how such capital losses offset the
capital gains referred to above. Shareholders should consult their own tax
advisors as to the application of the new capital gains rates to their
particular circumstances.

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: (i) at least 75% of its gross income is passive income or (ii)
an average of at least 50% of its assets produce, 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 (i) a
portion of any "excess distribution" received on such stock or (ii) any gain
from a sale or disposition of such stock (collectively, "PFIC income"), plus
interest on such amounts, even if the regulated investment company distributes
the PFIC income as a taxable dividend to its shareholders. 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.

43
<PAGE> 149

In most instances it will be very difficult to make this election due to certain
requirements imposed with respect to the election.

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.

44
<PAGE> 150

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.

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 purchasing 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 will include the average total return of the Fund calculated on a
compounded basis for specified periods of time. Such total return will be
calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. Such calculations are based on
historical information and are not intended to indicate future performance. In
lieu of or in addition to total return 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.

- ------------------------------------------------------------------------------
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 of shares, designated Class A Shares,
Class B Shares and Class C Shares. The Fund is permitted to issue an unlimited
number of classes of shares. Other classes may be established from time to time
in accordance with provisions of the Fund's Declaration of Trust.

45
<PAGE> 151

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 "Distribution and Service Plans." Except as described herein. There are no
conversion, preemptive or other subscription rights. 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.

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

46
<PAGE> 152

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

NUMBER (800) 341-2911.

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

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

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

DIAL (800) 421-2833

FOR AUTOMATED TELEPHONE

SERVICES DIAL (800) 847-2424

VAN KAMPEN AMERICAN CAPITAL
VALUE 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
Value Fund

Custodian
STATE STREET BANK AND
TRUST COMPANY

225 West Franklin Street, P.O. Box 1713

Boston, MA 02105-1713
Attn: Van Kampen American Capital
Value 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> 153

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

VALUE FUND

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

P R O S P E C T U S

OCTOBER 28, 1997

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 154

- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
GREAT AMERICAN COMPANIES FUND
- --------------------------------------------------------------------------------

Van Kampen American Capital Great American Companies Fund (the "Fund") is a
diversified, open-end management investment company, commonly known as a mutual
fund. The Fund's investment objective is to seek long-term growth of capital.
The Fund seeks to achieve its investment objective by investing primarily in a
diversified portfolio of common stocks and other equity securities of U.S.
companies that, in the investment adviser's view, have achieved leading and
sustainable positions within their U.S. industrial sectors. Any income received
on such securities is incidental to the objective of long-term growth of
capital. There is no assurance that the Fund will achieve its investment
objective. The Fund is organized as a series of Van Kampen American Capital
Equity Trust (the "Trust").

A Statement of Additional Information, dated October 28, 1997, 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) 421-2833. 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 CAPITALSM

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

THIS PROSPECTUS IS DATED OCTOBER 28, 1997.

<PAGE> 155

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Annual Fund Operating Expenses and Example.................. 6
Financial Highlights........................................ 8
The Fund.................................................... 9
Investment Objective and Policies........................... 9
Portfolio Securities........................................ 10
Investment Practices........................................ 11
Investment Advisory Services................................ 17
Alternative Sales Arrangements.............................. 19
Purchase of Shares.......................................... 21
Shareholder Services........................................ 31
Redemption of Shares........................................ 34
Distribution and Service Plans.............................. 37
Distributions from the Fund................................. 39
Tax Status.................................................. 40
Fund Performance............................................ 43
Description of Shares of the Fund........................... 44
Additional Information...................................... 45
</TABLE>

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

2
<PAGE> 156

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

THE FUND. Van Kampen American Capital Great American Companies Fund (the
"Fund") is a separate, diversified series of Van Kampen American Capital Equity
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 for each subsequent investment for each class of shares (or less as
described under "Purchase of Shares").

INVESTMENT POLICY. The Fund seeks to achieve its investment objective by
investing primarily in a diversified portfolio of common stocks and other equity
securities of U.S. companies that, in the investment adviser's view, have
achieved leading and sustainable positions within their U.S. industrial sectors.
The net asset value per share of the Fund may increase or decrease depending on
changes in the securities markets, and other factors affecting the issuers of
securities in which the Fund may invest. See "Investment Objective and
Policies."

INVESTMENT PRACTICES. Subject to certain limitations, the Fund may enter into
strategic transactions, lend its portfolio securities, and enter into repurchase
agreements with selected commercial banks and broker-dealers. 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."

3
<PAGE> 157

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

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

DISTRIBUTIONS FROM THE FUND. Distributions from net investment income and
realized capital gains, if any, are made 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."

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

4
<PAGE> 158

- ------------------------------------------------------------------------------
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)... 5.75%(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--5.00% Year
Year 2--4.00% 1--1.00%
Year 3--3.00% After--None
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a
percentage of amount
redeemed)................ None None None
Exchange fees.............. None None None
</TABLE>

- ------------------------------------------------------------------------------
(1) Reduced on investments of $50,000 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 redemptions made
within one year of the purchase. See "Purchase of Shares--Deferred Sales
Charge Alternatives--Class A Share Purchases of $1 Million or More."

5
<PAGE> 159

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management Fees(1) (as a percentage of
average daily net assets; after fee
waiver)............................... 0.00% 0.00% 0.00%
12b-1 Fees(2) (as a percentage of
average daily net assets)............. 0.00% 0.00%(3) 0.00%(3)
Other Expenses (as a percentage of
average daily net assets; after
expense reimbursement)................ 1.59% 1.59% 1.59%
Total Expenses(1) (as a percentage of
average daily net assets; after fee
waiver and expense reimbursement)..... 1.59% 1.59% 1.59%
</TABLE>

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

(1) Absent the Adviser's waiver of fees or reimbursement of expenses,
"Management Fees" would have been 0.70% for each class of shares, "Other
Expenses" would have been 16.78% for each class of shares and "Total
Expenses" would have been 17.48% for each class of shares.

(2) No 12b-1 or service fees were accrued by the Fund for the period ended June
30, 1997 because the Fund was not actively distributing its shares during
such period. If the Fund had been actively distributing its shares during
the period ended June 30, 1997, 12b-1 and service fees would have been
0.25%, 1.00% and 1.00% for Class A Shares, Class B Shares and Class C
Shares, respectively. Such amounts include 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 for distribution-related expenses. The asset based sales charge with
respect to Class C Shares includes 0.75% (as a percentage of net assets)
paid to investors' broker-dealers as sales compensation. See "Distribution
and Service Plans."

(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted as a fund-level expense by NASD
Rules.

6
<PAGE> 160

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 1.59% for
Class A Shares, 1.59% for Class B Shares
and 1.59% for Class C Shares, (ii) 5.00%
annual return and (iii) redemption at the
end of each time period:
Class A Shares........................... $73 $105 $140 $236
Class B Shares........................... $66 $ 80 $102 $189*
Class C Shares........................... $26 $ 50 $ 87 $189
An investor would pay the following
expenses on the same $1,000 investment
assuming no redemption at the end of each
period:
Class A Shares........................... $73 $105 $140 $236
Class B Shares........................... $16 $ 50 $ 87 $189*
Class C Shares........................... $16 $ 50 $ 87 $189
</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 and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. The ten year amount with respect to Class B Shares reflects
the lower aggregate 12b-1 and service fees applicable to such shares after
conversion to Class A Shares. As the Fund's assets increase, the fees waived or
expenses reimbursed by the Adviser are expected to decrease. Accordingly, it is
unlikely that future expenses as projected will remain consistent with those
determined based on the "Annual Fund Operating Expense" table. Class B Shares
acquired through the exchange privileges are subject to the CDSC 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 CDSC. 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 "Distribution and
Service Plans".

7
<PAGE> 161

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 accountants, for 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 audited financial statements
and related notes thereto included in the Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
---------------------- ----------------------
DECEMBER 27, 1995 DECEMBER 27, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED INVESTMENT OPERATIONS) YEAR ENDED INVESTMENT OPERATIONS)
JUNE 30, 1997 TO JUNE 30, 1996 JUNE 30, 1997 TO JUNE 30, 1996
------------- ---------------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $ 11.622 $10.000 $11.622 $10.000
-------- ------ ------- ------
Net Investment Income/Loss........ (0.003) 0.019 (0.007) 0.019
Net Realized and Unrealized
Gain............................ 3.535 1.603 3.541 1.603
-------- ------ ------- ------
Total from Investment Operations... 3.532 1.622 3.534 1.622
-------- ------ ------- ------
Less:
Distributions from and in Excess
of Net Investment Income........ 0.019 -- 0.019 --
Distributions from Net Realized
Gain............................ 0.900 -- 0.900 --
-------- ------ ------- ------
Total Distributions................ 0.919 -- 0.919 --
-------- ------ ------- ------
Net Asset Value, End of the
Period............................ $ 14.235 $11.622 $14.237 $11.622
======== ====== ======= ======
Total Return* (a).................. 32.29% 16.10%** 32.29% 16.10%**
Net Assets at End of the Period (In
thousands)........................ $1,260.8 $ 81.4 $ 92.5 $ 75.5
Ratio of Expenses to Average Net
Assets* (b)....................... 1.59% 1.37% 1.59% 1.37%
Ratio of Net Investment Income to
Average Net Assets*............... (0.08)% 0.33% (0.05)% 0.33%
Portfolio Turnover................. 100% 48%** 100% 48%**
Average Commission Paid per Equity
Share Traded(c)................... $ 0.0320 $ 0.025 $0.0320 $ 0.025
- ----------------
* 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(b)....................... 17.48% 18.46% 17.48% 18.46%
Ratio of Net Investment Income to
Average Net Assets.............. (16.31)% (16.76)% (16.28)% (16.76)%

<CAPTION>
CLASS C SHARES
----------------------
DECEMBER 27, 1995
(COMMENCEMENT OF
YEAR ENDED INVESTMENT OPERATIONS)
JUNE 30, 1997 TO JUNE 30, 1996
------------- ----------------------
<S> <C> <C>
Net Asset Value, Beginning of the
Period............................ $11.622 $10.000
------- ------
Net Investment Income/Loss........ (0.007) 0.019
Net Realized and Unrealized
Gain............................ 3.541 1.603
------- ------
Total from Investment Operations... 3.534 1.622
------- ------
Less:
Distributions from and in Excess
of Net Investment Income........ 0.019 --
Distributions from Net Realized
Gain............................ 0.900 --
------- ------
Total Distributions................ 0.919 --
------- ------
Net Asset Value, End of the
Period............................ $14.237 $11.622
======= ======
Total Return* (a).................. 32.29% 16.10%**
Net Assets at End of the Period (In
thousands)........................ $ 98.2 $ 75.5
Ratio of Expenses to Average Net
Assets* (b)....................... 1.59% 1.37%
Ratio of Net Investment Income to
Average Net Assets*............... (0.05)% 0.33%
Portfolio Turnover................. 100% 48%**
Average Commission Paid per Equity
Share Traded(c)................... $0.0320 $ 0.025
- ----------------
* 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(b)....................... 17.48% 18.46%
Ratio of Net Investment Income to
Average Net Assets.............. (16.28)% (16.76)%
</TABLE>

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

(b) The Ratio of Expenses to Average Net Assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by 0.34% and 0.13% for the periods ended
June 30, 1997 and 1996, respectively.

(c) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable.

See Notes to Financial Statements

8
<PAGE> 162

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

Van Kampen American Capital Great American Companies Fund (the "Fund") is a
separate, diversified series of Van Kampen American Capital Equity Trust (the
"Trust"). The Trust is an open-end management investment company organized as a
Delaware business trust.

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

The investment objective of the Fund is to seek long-term growth of capital.
This objective is fundamental and cannot be changed without approval of the
shareholders of the Fund. Any income received on such securities is incidental
to the objective of long-term growth of capital. There can be no assurance that
the Fund will achieve its investment objective.

The Fund seeks to achieve its investment objective by investing primarily in a
diversified portfolio of common stocks and other equity securities of U.S.
companies that, in the Adviser's view, have achieved leading and sustainable
market positions within their U.S. industrial sectors. The Adviser believes that
leading U.S. companies are those companies who exhibit competitive and financial
superiority. Competitive superiority may be based on factors such as
manufacturing excellence, product innovation, marketing strength, or other
factors. Financial superiority may be seen in superior returns on equity and
other return measures, or in superior balance sheet measures, and other
financial flexibility measures. There ordinarily is more than one leading
company in an industrial sector. In selecting portfolio investments, the Adviser
will employ traditional valuation measures, such as price or earnings and price
or cash flow ratios to determine whether the common stock or other equity
securities of those companies with competitive and financial strength have
reasonable valuations relative to the overall market. The Fund ordinarily will
not invest in common stocks or other equity securities that the Adviser believes
are overvalued.

The Fund may also invest in investment grade income securities for purposes of
growth of capital and cash management or as a temporary defensive measure. See
"Portfolio Securities -- Income Securities". The Fund may invest up to 5% of its
total assets in securities of foreign issuers. See "Additional Investment
Considerations" in the Statement of Additional Information.

9
<PAGE> 163

- ------------------------------------------------------------------------------
PORTFOLIO SECURITIES
- ------------------------------------------------------------------------------

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 class of securities, including such
entity's debt securities, preferred stock and other senior equity security.
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 primarily on the security's potential for appreciation.

OTHER EQUITY SECURITIES. The Fund may invest in other equity securities,
including convertible securities or preferred stock. A convertible security is a
bond debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock or other equity
security of the same or a different issuer within a particular period of time at
a specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, convertible securities have characteristics similar to
nonconvertible income securities in that they ordinarily provide a stream of
income with generally higher yields than those of common stocks of the same or
similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable
nonconvertible securities. The Fund may invest in adjustable or fixed rate
preferred stock. Preferred stock generally has a preference as to dividends and
liquidation over an issuer's common stock but ranks junior to debt securities in
an issuer's capital structure. Unlike interest payments on debt securities,
preferred stock dividends are payable only if declared by the issuer's board of
directors. Preferred stock also may be subject to optional or mandatory
redemption provisions.

INCOME SECURITIES. The Fund may invest in income securities, which include
primarily debt securities of various maturities. The Fund will invest only in
income

10
<PAGE> 164

securities that are investment grade at the time of investment. Investment grade
securities are securities that are rated at least BBB by Standard & Poor's
Ratings Group ("S&P"), Baa by Moody's Investors Services, Inc. ("Moody's") or
comparably rated by any other nationally recognized rating organization, or, if
unrated, considered by the Adviser to be of comparable quality to securities so
rated. Income securities rated A or higher by S&P or A or higher by Moody's
generally are regarded as high grade and have a strong to outstanding capacity
to pay interest or dividends and repay principal or capital. Medium grade
securities (i.e., securities rated BBB by S&P or Baa by Moody's) are regarded as
having an adequate capacity to pay interest or dividends, and repay principal,
although adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make such payments. Securities rated Baa are
regarded by Moody's as having some speculative characteristics. For a
description of such 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
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 nationally recognized
statistical rating organizations.

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

In connection with the investment policies described above, the Fund may also
engage in the investment practices described below. These purchases entail
risks. The investment practices described below are not fundamental and can be
changed without a vote of the shareholders of the Fund.

11
<PAGE> 165

liquid securities, which collateral is equal at all times to at least 100% of
the value of the securities loaned, including accrued interest. The Fund will
receive amounts equal to earned income for having made the loan. Any cash
collateral pursuant to these loans will be invested in short-term instruments.
The Fund is the beneficial owner of the loaned securities in that any gain or
loss in the market price during the loan inures to the Fund and its
shareholders. Thus, when the loan is terminated, the value of the securities may
be more or less than their value at the beginning of the loan. In determining
whether to lend its portfolio securities to a bank or broker-dealer, the Fund
will take into account the credit-worthiness of such borrower and will monitor
such credit-worthiness on an ongoing basis 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.

12
<PAGE> 166

this practice, which conditions are designed to ensure the fair administration
of the joint account and to protect the amounts in that account.

"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 or is earned by the Fund on portfolio 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 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 such 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. 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. 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.

13
<PAGE> 167

for temporary purposes, such as clearances of portfolio transactions, share
repurchases and payment of dividends and distributions. If the Fund is otherwise
fully invested and the Adviser believes market conditions exist with additional
investment opportunities for long-term growth of capital, the Fund may use
borrowings to acquire additional portfolio securities. Utilization of such
investment leverage may result in higher returns but also may increase the
volatility of the Fund's net asset value and the effects of leverage in a
declining market would result in a greater decrease in net asset value than if
the Fund were not leveraged. The Fund has no current intention to borrow money
other than for such temporary purposes. The Fund will not acquire additional
securities during any period in which its borrowings exceed 5% of the Fund's
total assets. See the Fund's Statement of Additional Information for a more
complete discussion of borrowings and certain of the associated risks.

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, equity and fixed-income indices and other financial
instruments and purchase and sell financial futures contracts. Collectively, all
of the above are referred to as "Strategic Transactions." 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 it may engage. 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, to protect the Fund's unrealized gains in the
value of its portfolio securities, to facilitate the sale of such securities for
investment purposes, or to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. Any or all
of these investment techniques may be used at any time and there is no
particular strategy that dictates the use of one technique rather than another,
as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of the Fund to utilize these Strategic
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. The Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial futures
and options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not for
speculative purposes.

14
<PAGE> 168

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. To the extent that a futures contract or
an option thereon is used to protect against possible changes in the market
value of securities that the Fund anticipates acquiring and the Fund
subsequently does not acquire such securities, the Fund will have incurred the
transactional expenses associated with entering into such transaction and will
be subject to the risks inherent in an unhedged purchase of such futures
contract or option. 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.

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."

INVESTMENT IN INVESTMENT COMPANIES. The Fund may invest in one or more
investment companies advised by the Adviser and its affiliates, including Van
Kampen American Capital Small Capitalization Fund ("Small Cap Fund") and Van
Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund"). The
shares of the Small Cap Fund and the Foreign Securities Fund are available only
to investment companies advised by the Adviser or an affiliate. The Adviser
believes that the use of the Small Cap Fund and the Foreign Securities Fund may,
from time to time, provide the Fund with the most effective exposure to the
performance of the small capitalization sector of the stock market and to
foreign securities, while at the same time minimizing costs. The Adviser charges
no advisory fee for managing the Small Cap Fund or the Foreign Securities Fund,
nor are there any sales load or other charges associated with distribution of
their shares. Other expenses incurred by the Small Cap Fund and the Foreign
Securities Fund are borne by them, and thus indirectly by the Van Kampen
American Capital funds that invest in them. With respect to such other expenses,
the Adviser anticipates that the efficiencies resulting from use of such funds
will result in cost savings for the Fund and other Van Kampen American Capital
funds that will fully or partially offset such expenses. In large part, these
savings are attributable to the fact that administrative actions that would have
to be performed multiple times if each Van Kampen American Capital fund held its
own portfolio of small capitalization

15
<PAGE> 169

or foreign stocks will need to be performed only once. The Adviser expects that
the Small Cap Fund and Foreign Securities Fund will experience trading costs
that will be substantially less than the trading costs that would be incurred if
small capitalization or foreign stocks were purchased separately for the Fund
and other Van Kampen American Capital funds. The Fund's investments in the Small
Cap Fund and Foreign Securities Fund are subject to the terms and conditions set
forth in SEC exemptive orders authorizing such investments.

The Fund will be deemed to own a pro rata portion of each investment of the
Small Cap Fund and the Foreign Securities Fund. For example, if the Fund's
investment in the Small Cap Fund were $10 million, and the Small Cap Fund had 5%
of its assets invested in the electronics industry, the Fund would be considered
to have an investment of $500,000 in the electronics industry.

16
<PAGE> 170

is believed in the best interests of the Fund, the Adviser may place portfolio
transactions with brokers who provide research or other services, even if the
Fund will have to pay a higher commission than would be the case if no weight
were given to the broker's furnishing of such 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 and this will be done only when,
in the opinion of the Adviser, the amount of additional commission or increased
costs is reasonable in relation to the value of such services to the Fund.

PORTFOLIO TURNOVER. The Fund purchases securities which are believed by the
Adviser to have potential for long-term growth of capital. Securities are
disposed of in situations where it is believed that potential for such capital
growth has lessened or that other securities have a greater potential.
Therefore, the Fund may purchase and sell securities without regard to the
length of time the security is to be, or has been held. The rate may exceed
100%, which is higher than that of many other investment companies. A 100%
turnover rate occurs, for example, if all the Fund's portfolio securities are
replaced during one year. High portfolio activity increases the Fund's
transaction costs, including brokerage commissions and may result in the
realization of more short-term capital gains than if the Fund had low portfolio
turnover. The Fund's annual portfolio turnover rate is shown in the table of
"Financial Highlights."

- ------------------------------------------------------------------------------
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 $60 billion under management or
supervision. Van Kampen American Capital's more than 50 open-end and 37
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen American
Capital Distributors, Inc., the distributor of the Fund and sponsor of the funds
mentioned above, is also a wholly-owned subsidiary of Van Kampen American
Capital. Van Kampen American Capital is an indirect wholly-owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. The Adviser's principal office is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

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<PAGE> 171

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS PERCENTAGE PER ANNUM
------------------------ --------------------
<S> <C>
First $500 million................ 0.70 of 1.00%
Next $500 million................. 0.65 of 1.00%
Over $1 billion................... 0.60 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,
transfer agent (ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned
subsidiary of Van Kampen American Capital), 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.

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<PAGE> 172

PORTFOLIO MANAGEMENT. Stephen Boyd and Evan Harrel are co-managers of the Fund
and have been primarily responsible for the day-to-day management of the Fund's
investment portfolio since its inception. Mr. Boyd is currently Senior Vice
President of the Adviser and has been Senior Vice President -- Portfolio Manager
of Van Kampen American Capital Asset Management, Inc. since May 1989. Mr. Harrel
is currently an Assistant Vice President of the Adviser and has been associate
portfolio manager of Van Kampen American Capital Asset Management, Inc. since
May 1994. Prior to that time, he was a vice president with Fayez Sarofim & Co.

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

The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial to the investor, taking
into account the amount of the purchase, the length of time the investor expects
to hold the shares, whether the investor wishes to receive dividends in cash or
to reinvest them in additional shares of the Fund, and other circumstances.
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 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 accounts under $1 million) or (b) on a contingent deferred basis (Class A
Share purchases over $1 million, Class B Shares and Class C Shares). Shares
purchased subject to a contingent deferred sales charge (a "CDSC") sometimes are
referred to herein collectively as "Contingent Deferred Sales Charge Shares" or
"CDSC 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

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<PAGE> 173

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 purchases 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 which have a shorter CDSC period (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 that (i) each class of
shares bears those sales charges, distribution fees, service fees and
administrative expenses applicable to the respective class of shares as a result
of its sales arrangements, (ii) generally, each class of shares has exclusive
voting rights with respect to those provisions of the Fund's Rule 12b-1
distribution plan which relate only to such class, (iii) each class of shares
has different exchange privileges, (iv) certain classes of shares have a
conversion feature and (v) certain classes of shares have different shareholder
service options available. Generally, a class of shares subject to a higher
ongoing distribution 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."

20
<PAGE> 174

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

21
<PAGE> 175

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 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. In some instances additional compensation or promotional
incentives may be offered to brokers, dealers or financial intermediaries that
have sold or may sell significant amounts of shares during specified periods of
time. The Distributor may provide additional compensation to Edward D. Jones &
Co. or an affiliate thereof based on a combination of its sales of shares and
increases in assets under management. Such payments to brokers, dealers and
financial intermediaries for 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. 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. These programs will not change the price
an investor pays 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 or agency
commissions paid to brokers with respect to sales of Class A Shares. The sales
charge is allocated between an 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 and 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
TOTAL SALES CHARGE COMMISSION
-------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
SIZE OF TRANSACTION OF OFFERING OF NET OF OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000.................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000....... 4.75 4.99 4.00
$100,000 but less than $250,000...... 3.75 3.90 3.00
$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

22
<PAGE> 176

of 1.00% on redemptions made within one year of the purchase. A commission
will be paid by the Distributor to brokers, dealers and financial
intermediaries who initiate and are responsible for purchases of $1 million
or more. See "Purchase of Shares -- Deferred Sales Charge Alternatives."

QUANTITY DISCOUNTS

23
<PAGE> 177

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 sales charges applicable to the purchases made and the sales charges
previously paid. When an investor signs a Letter of Intent, shares equal to at
least 5% of the total purchase amount of the level selected will be restricted
from sale or redemption by the investor until the Letter of Intent is satisfied
or any additional sales charges have been paid; if the Letter of Intent is not
satisfied by the investor and any additional sales charges are not paid,
sufficient restricted shares will be redeemed by the Fund to pay such charges.
Additional information is contained in the application accompanying this
Prospectus.

OTHER PURCHASE PROGRAMS

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.

24
<PAGE> 178

each participating investor in a computerized format fully compatible with
ACCESS' processing system.

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

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

(4) Registered investment advisers, trust companies and bank trust departments
investing on their own behalf or on behalf of their clients provided that
the aggregate amount invested in Class A Shares of the Fund alone, or 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.

25
<PAGE> 179

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

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

26
<PAGE> 180

event of redemption within one year of purchase, and a commission will be
paid to authorized dealers who initiate and are responsible for such sales
to each individual as follows: 1.00% on sales to $2 million, plus 0.80% on
the next $1 million and 0.50% on the excess over $3 million.

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

DEFERRED SALES CHARGE ALTERNATIVES

27
<PAGE> 181

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 4.00% (the
applicable rate in the second year after purchase).

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. 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 $1 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.

28
<PAGE> 182

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:

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

29
<PAGE> 183

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 required minimum
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 180 days after redemption. See "Shareholder Services" and "Redemption of
Shares" for further discussion of the waiver provisions.

NET ASSET VALUE

The securities of the Fund that are listed on a securities exchange are valued
at their closing sales price on the day of the valuation. Price valuations for
listed securities are based on market quotations where the security is primarily
traded or, if actual trade information is not available on any valuation date,
are valued at the mean of the bid and asked prices. Unlisted securities in the
portfolio 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.

30
<PAGE> 184

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

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.

31
<PAGE> 185

DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying this
Prospectus or by calling (800) 421-5666 ((800) 421-2833 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 a Participating
Fund so long as the investor has a pre-existing account for such class of shares
of the other fund. Both accounts must be of the same type, either non-retirement
or retirement. If the accounts are retirement accounts, they must both be 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.

When Class B Shares and Class C Shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the

32
<PAGE> 186

date of the initial purchase from a Participating Fund (the "original fund").
Upon redemption from the Participating Funds' complex of funds, Class B Shares
and Class C Shares are subject to the CDSC schedule imposed by the original
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) 421-2833 for the hearing impaired). A shareholder automatically
has telephone exchange privileges unless otherwise designated in the application
form accompanying by this Prospectus. 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,
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 reinvest dividends from the new account
into another fund, 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 modify, restrict or terminate the
exchange privilege at any time on 60 days' notice to its shareholders of any
termination or material amendment.

33
<PAGE> 187

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."

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

34
<PAGE> 188

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

35
<PAGE> 189

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,
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
an account has multiple owners, ACCESS may rely on the instructions of any one
owner.

36
<PAGE> 190

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.

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 (without sales charge except as described under "Shareholder Services --
Exchange Privileges") next determined after the order is received, which must be
within 180 days after the date of the redemption. 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.

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

DISTRIBUTION AND SERVICE PLANS

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

37
<PAGE> 191

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

The Distributor's actual distribution-related expenses with respect to a class
of CDSC Shares (for purposes of this section, excluding any Class A Shares that
may

38
<PAGE> 192

be subject to a CDSC) for any given year may exceed the amounts payable to the
Distributor with respect to such class of CDSC Shares under the Distribution
Plan, the Service Plan and payments received pursuant to the 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, 1997, there
were no unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares. 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
CDSC.

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

39
<PAGE> 193

term capital gains distributions consist of the Fund's gain on transactions in
securities and futures and options hedging transactions, 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.

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

40
<PAGE> 194

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.

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.

41
<PAGE> 195

Any loss recognized 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.

Under the Taxpayer Relief Act of 1997 (the "1997 Tax Act"), the maximum tax
rates applicable to net capital gains recognized by individuals and other non-
corporate taxpayers are (i) the same as ordinary income rates for capital assets
held for one year or less, (ii) 28% for capital assets held for more than one
year but not more than 18 months and (iii) 20% for capital assets held for more
than 18 months. Under the 1997 Tax Act, the Treasury is authorized to issue
regulations that address the application of the new capital gains rates to sales
and exchanges by regulated investment companies and to sales and exchanges of
interests in regulated investment companies, but no such regulations have been
issued as of the date hereof. It is expected that the new tax rates for capital
gains under the 1997 Tax Act described above will apply to distributions of
capital gains dividends by regulated investment companies such as the Fund as
well as to sales and exchanges of shares in regulated investment companies such
as the Fund. With respect to capital losses recognized on dispositions of shares
held six months or less where such losses are treated as long-term capital
losses to the extent of prior capital gains dividends received on such shares
(see the discussion regarding the sale of shares above), it is unclear how such
capital losses offset the capital gains referred to above. Shareholders should
consult their own tax advisors as to the application of the new capital gains
rates to their particular circumstances.

42
<PAGE> 196

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

43
<PAGE> 197

return calculations, such information may include performance rankings and
similar information from independent organizations such as Lipper Analytical
Services, Inc., or nationally recognized financial publications.

- ------------------------------------------------------------------------------
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 of shares, designated Class A Shares,
Class B Shares and Class C Shares. The Fund is permitted to issue an unlimited
number of classes of shares. Other classes may be established from time to time
in accordance with provisions of the Fund's Declaration of Trust.

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 "Distribution and Service Plans." Except as described herein, there are no
conversion, preemptive or other subscription rights. 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 a 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.

44
<PAGE> 198

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

45
<PAGE> 199

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE
CALL THE FUND'S TOLL-FREE
NUMBER (800) 341-2911.

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

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

FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 421-2833

FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424

VAN KAMPEN AMERICAN CAPITAL
GREAT AMERICAN COMPANIES
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
Great American Companies Fund

Custodian
STATE STREET BANK AND
TRUST COMPANY

225 West Franklin Street, P.O. Box 1713

Boston, MA 02105-1713
Attn: Van Kampen American Capital
Great American Companies 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> 200

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

GREAT AMERICAN
COMPANIES FUND

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

P R O S P E C T U S

OCTOBER 28, 1997

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------------
<PAGE> 201

- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
PROSPECTOR FUND
- --------------------------------------------------------------------------------

Van Kampen American Capital Prospector Fund (the "Fund") is a diversified,
open-end management investment company, commonly known as a mutual fund. The
Fund's investment objective is to seek capital growth and income. The Fund will
seek to achieve its investment objective by investing primarily in a diversified
portfolio of income producing equity securities, including dividend paying
common and preferred stocks and income securities convertible into common or
preferred stocks. There is no assurance that the Fund will achieve its
investment objective. The Fund is organized as a separate series of Van Kampen
American Capital Equity Trust (the "Trust").

A Statement of Additional Information, dated October 28, 1997, containing
additional information about the Fund is hereby incorporated by reference 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) 421-2833. 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, 1997.

<PAGE> 202

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Annual Fund Operating Expenses and Example.................. 6
Financial Highlights........................................ 8
The Fund.................................................... 9
Investment Objective and Policies........................... 9
Portfolio Securities........................................ 10
Investment Practices........................................ 12
Investment Advisory Services................................ 18
Alternative Sales Arrangements.............................. 20
Purchase of Shares.......................................... 22
Shareholder Services........................................ 32
Redemption of Shares........................................ 35
Distribution and Service Plans.............................. 38
Distributions from the Fund................................. 40
Tax Status.................................................. 41
Fund Performance............................................ 45
Description of Shares of the Fund........................... 46
Additional Information...................................... 47
</TABLE>

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

2
<PAGE> 203

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

THE FUND. Van Kampen American Capital Prospector Fund (the "Fund") is a
separate, diversified series of Van Kampen American Capital Equity 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 for each subsequent investment for each class of shares (or less as
described under "Purchase of Shares").

INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek capital
growth and income. There is no assurance that the Fund will achieve its
investment objective. See "Investment Objective and Policies."

INVESTMENT POLICY. The Fund will seek to achieve its investment objective by
investing primarily in a diversified portfolio of income producing equity
securities, including dividend paying common and preferred stocks and income
securities convertible into common or preferred stock. The net asset value per
share of the Fund may increase or decrease depending on changes in the
securities markets, and other factors affecting the issuers of securities in
which the Fund may invest. See "Investment Objective and Policies."

INVESTMENT PRACTICES. The Fund may invest up to 25% of its assets in foreign
securities. Subject to certain limitations, the Fund may enter into strategic
transactions, lend its portfolio securities, and enter into repurchase
agreements with selected commercial banks and broker-dealers. 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."

3
<PAGE> 204

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

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.

DISTRIBUTIONS FROM THE FUND. Dividends from net investment income are
distributed quarterly. Realized capital gains, if any, are made 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
and may cause the distributions relating to the different classes of shares to
differ. See "Distributions from the Fund."

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

4
<PAGE> 205

- ------------------------------------------------------------------------------
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)........ 5.75%(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--5.00% Year
Year 2--4.00% 1--1.00%
Year 3--3.00% After--None
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a
percentage of amount
redeemed).............. None None None
Exchange fees............ None None None
</TABLE>

- ------------------------------------------------------------------------------
(1) Reduced on investments of $50,000 or more. See "Purchase of Shares -- Class
A Shares."

5
<PAGE> 206

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management Fees(1) (as a percentage of
average daily net assets; after fee
waiver)............................... 0.00% 0.00% 0.00%
12b-1 Fees(2) (as a percentage of
average daily net assets)............. 0.00% 0.00%(3) 0.00%(3)
Other Expenses(1) (as a percentage of
average daily net assets; after
expense reimbursement)................ 1.55% 1.55% 1.55%
Total Expenses(1) (as a percentage of
average daily net assets; after fee
waiver and expense reimbursement)..... 1.55% 1.55% 1.55%
</TABLE>

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

(1) If the Adviser did not waive its fees for the period ended June 30, 1997,
"Management Fees" would have been 0.70% for each class of shares, "Other
Expenses" would have been 17.71% for each class of shares and "Total
Expenses" would have been 18.41% for each class of shares.

(2) No 12b-1 fees or service fees were accrued by the Fund for the period ended
June 30, 1997 because the Fund was not actively distributing its shares
during such period. If the Fund had been actively distributing its shares
during the period ended June 30, 1997, 12b-1 and service fees would have
been 0.25%, 1.00% and 1.00% for Class A Shares, Class B Shares and Class C
Shares, respectively. Such amounts include 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
charges for distribution-related expenses. The asset based sales charge with
respect to Class C Shares includes 0.75% (as a percentage of net assets)
paid to investors' brokers-dealers as sales compensation. See "Distribution
and Service Plans."

(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted as a fund-level expense by NASD
Rules.

6
<PAGE> 207

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 1.55% for
Class A Shares, 1.55% for Class B Shares
and 1.55% for Class C Shares, (ii) 5.00%
annual return and (iii) redemption at the
end of each time period:
Class A Shares........................... $72 $104 $137 $231
Class B Shares........................... $56 $ 84 $ 99 $185*
Class C Shares........................... $26 $ 49 $ 84 $185
An investor would pay the following
expenses on the same $1,000 investment
assuming no redemption at the end of each
period:
Class A Shares........................... $72 $104 $137 $231
Class B Shares........................... $16 $ 49 $ 84 $185*
Class C Shares........................... $16 $ 49 $ 84 $185
</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 and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. The ten year amount with respect to Class B Shares reflects
the lower aggregate 12b-1 and service fees applicable to such shares after
conversion to Class A Shares. As the Fund's assets increase, the fees waived or
expenses reimbursed by the Adviser are expected to decrease. Accordingly, it is
unlikely that future expenses as projected will remain consistent with those
determined based on the "Annual Fund Operating Expense" table. Class B Shares
acquired through the exchange privilege are subject to the CDSC 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 CDSC. 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,"
"Investment Advisory Services," "Distribution and Service Plans" and "Redemption
of Shares."

7
<PAGE> 208

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 accountants, for 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 CLASS B SHARES
-------------------------------------------- --------------------------------------------
DECEMBER 27, 1995 DECEMBER 27, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED INVESTMENT OPERATIONS) TO YEAR ENDED INVESTMENT OPERATIONS) TO
JUNE 30, 1997(A) JUNE 30, 1996 JUNE 30, 1997(A) JUNE 30, 1996
---------------- ------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $11.285 $10.000 $11.285 $10.000
Net Investment Income............ 0.115 0.072 0.113 0.072
Net Realized and Unrealized
Gain........................... 2.996 1.239 3.020 1.239
------ ------ ------ ------
Total from Investment
Operations....................... 3.111 1.311 3.133 1.311
------ ------ ------ ------
Less:
Distributions from Net Investment
Income......................... 0.143 0.026 0.165 0.026
Distributions from Net Realized
Gain........................... 0.780 0.000 0.780 0.000
------ ------ ------ ------
Total Distributions............... 0.923 0.026 0.945 0.026
------ ------ ------ ------
Net Asset Value, End of the
Period........................... $13.473 $11.285 $13.473 $11.285
====== ====== ====== ======
Total Return*(b).................. 29.11% 13.10%** 29.11% 13.19%**
Net Assets at End of the Period
(In millions).................... $ 1.2 $ 0.1 $ 88.0 $ 73.4
Ratio of Expenses to Average Net
Assets*(c)....................... 1.55% 1.33% 1.55% 1.33%
Ratio of Net Investment Income to
Average Net Assets*.............. 1.19% 1.34% 0.86% 1.34%
Portfolio Turnover................ 104% 69%** 104% 69%**
Average Commission Paid Per Equity
Share Traded(d).................. $0.0388 $0.0319 $0.0388 $0.0319
- ----------------
* 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.......................... 18.41% 20.75% 18.41% 20.75%
Ratio of Net Investment Income to
Average Net Assets.............. (15.97)% (18.07)% (16.30)% (18.07)%
**Non-Annualized

<CAPTION>
CLASS C SHARES
--------------------------------------------
DECEMBER 27, 1995
(COMMENCEMENT OF
YEAR ENDED INVESTMENT OPERATIONS) TO
JUNE 30, 1997(A) JUNE 30, 1996
---------------- -------------------------
<S> <C> <C>
Net Asset Value, Beginning of the
Period........................... $11.285 $10.000
Net Investment Income............ 0.113 0.072
Net Realized and Unrealized
Gain........................... 3.020 1.239
------ ------
Total from Investment
Operations....................... 3.133 1.311
------ ------
Less:
Distributions from Net Investment
Income......................... 0.165 0.026
Distributions from Net Realized
Gain........................... 0.780 0.000
------ ------
Total Distributions............... 0.945 0.026
------ ------
Net Asset Value, End of the
Period........................... $13.473 $11.285
====== ======
Total Return*(b).................. 29.11% 13.19%**
Net Assets at End of the Period
(In millions).................... $ 88.0 $ 73.4
Ratio of Expenses to Average Net
Assets*(c)....................... 1.55% 1.33%
Ratio of Net Investment Income to
Average Net Assets*.............. 0.86% 1.34%
Portfolio Turnover................ 104% 69%**
Average Commission Paid Per Equity
Share Traded(d).................. $0.0388 $0.0319
- ----------------
* 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.......................... 18.41% 20.75%
Ratio of Net Investment Income to
Average Net Assets.............. (16.30)% (18.07)%
**Non-Annualized
</TABLE>

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

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by 0.30% and 0.04% for the periods
ending on June 30, 1997 and June 30, 1996, respectively.

(d) Represents the average brokerage commissions paid per equity share traded
during the periods for trades where commissions were applicable.

See Financial Statements and Notes Thereto

8
<PAGE> 209

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

Van Kampen American Capital Prospector Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity Trust (the "Trust").
The Trust is an open-end management investment company organized as a Delaware
business trust.

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

The investment objective of the Fund is to seek capital growth and income.
This objective is fundamental and cannot be changed without approval of the
shareholders of the Fund. There can be no assurance that the Fund will achieve
its investment objective.

The Fund will seek to achieve its investment objective by investing primarily
in a diversified portfolio of income producing equity securities, including
dividend paying common and preferred stocks and income securities convertible
into common or preferred stock. The Fund generally invests in dividend paying
equity securities of larger capitalization companies that are believed by the
Adviser to be selling at low valuations relative to historical norms and to
future earnings prospects. Larger capitalization companies generally are those
companies consisting of the approximately 500 largest capitalization companies
listed on national securities exchanges and automated trading systems.

The Fund may invest in investment grade income securities for purposes of
growth or income, cash management or as a temporary defensive measure. The Fund
may invest in shares of other investment companies that pursue investment
objectives consistent with that of the Fund, to the extent and subject to the
limitations discussed below. The Fund may invest up to 25% of its total assets
in securities of foreign issuers.

9
<PAGE> 210

- ------------------------------------------------------------------------------
PORTFOLIO SECURITIES
- ------------------------------------------------------------------------------

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 class of securities, including such
entity's debt securities, 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 primarily
on the security's potential for appreciation and on its dividend paying
capacity.

OTHER EQUITY SECURITIES. The Fund may invest in other equity securities,
including convertible securities and preferred stocks. A convertible security is
a bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock or other equity
security of the same or a different issuer within a particular period of time at
a specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, convertible securities have characteristics similar to
nonconvertible income securities in that they ordinarily provide a stable stream
of income with generally higher yields than those of common stocks of the same
or similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable
nonconvertible securities. The Fund may invest in adjustable or fixed rate
preferred stock. Preferred stock generally has a preference as to dividends and
liquidation over an issuer's common stock but ranks junior to debt securities in
an issuer's capital structure. Unlike interest payments on debt securities,
preferred stock dividends are payable only if declared by the issuer's board of
directors. Preferred stock also may be subject to optional or mandatory
redemption provisions.

INCOME SECURITIES. The Fund may invest in fixed-income securities which, at
the time of purchase, are rated at least BBB by Standard & Poor's Ratings Group
("S&P"), Baa by Moody's Investors Services, Inc. ("Moody's") or comparably rated
by a nationally recognized statistical rating organization, or if unrated, are
considered by the Adviser to be of comparable quality to securities so rated.
Income securities rated A by S&P or A by Moody's or higher generally are
regarded as high grade and have a strong to outstanding capacity to pay interest
or dividends and repay principal or capital. Medium grade securities (i.e.,
securities rated BBB by S&P or Baa by Moody's) are regarded as having an
adequate capacity to pay

10
<PAGE> 211

interest or dividends, and repay principal, although adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to make
such payments. Securities rated Baa are regarded by Moody's as having some
speculative characteristics. For a description of such 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
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 nationally recognized
statistical rating organizations.

11
<PAGE> 212

would reduce the Fund's total return on such investments and the amounts
available for distributions by the Fund to its shareholders. 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. The 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.

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

In connection with the investment policies described above, the Fund may
engage in the investment practices described below. These practices entail
risks. The investment practices described below are not fundamental and can be
changed without a vote of the shareholders of the Fund.

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 liquid securities, which collateral is equal at all times
to at least 100% of the value of the securities loaned, including accrued
interest. The Fund will receive amounts equal to earned income for having made
the loan. Any cash collateral pursuant to these loans will be invested in
short-term instruments. The Fund is the beneficial owner of the loaned
securities in that any gain or loss in the market price during the loan inures
to the Fund and its shareholders. Thus, when the loan is terminated, the value
of the securities may be more or less than their value at the beginning of the
loan. In determining whether to lend its portfolio securities to a bank or
broker-dealer, the Fund will take into account the credit-worthiness of such
borrower and

12
<PAGE> 213

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.

13
<PAGE> 214

generally available on such securities when delivery occurs may be higher or
lower than yields on such 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. 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. 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.

BORROWINGS. The Fund is authorized to borrow money from banks (including
entering into reverse repurchase agreements) in an amount up to 33 1/3% of the
Fund's total assets (after giving effect to any such borrowing) which amount
excludes up to 5% in borrowings and reverse repurchase agreements from any
entity for temporary purposes, such as clearances of portfolio transactions,
share repurchases and payment of dividends and distributions. If the Fund is
otherwise fully invested and the Adviser believes market conditions exist with
additional investment opportunities for long-term growth of capital, the Fund
may use borrowings to acquire additional portfolio securities. Utilization of
such investment leverage may result in higher returns but also may increase the
volatility of the Fund's net asset value and the effects of leverage in a
declining market would result in a greater decrease in net asset value than if
the Fund were not leveraged. The Fund has no current intention to borrow money
other than for such temporary purposes. The

14
<PAGE> 215

Fund will not acquire additional securities during any period in which its
borrowings exceed 5% of the Fund's total assets. See the Fund's Statement of
Additional Information for a more complete discussion of borrowings and certain
of the associated risks.

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, equity and fixed-income indices and other financial
instruments and purchase and sell financial futures contracts and enter into
various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options or currencies or currencies
futures. Collectively, all of the above are referred to as "Strategic
Transactions." The Fund may also invest in income securities the form of which
include the elements of or are similar in effect to Strategic Transactions in
which it may engage. 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, 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 protect
against changes in currency or exchange rates for investment purposes, or to
establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. Any or all of these investment
techniques may be used at any time and there is no particular strategy that
dictates the use of one technique rather than another, as use of any Strategic
Transaction is a function of numerous variables including market conditions. The
ability of the Fund to utilize these Strategic Transactions successfully will
depend on the Adviser's ability to predict pertinent market movements, which
cannot be assured. The Fund will comply with applicable regulatory requirements
when implementing these strategies, techniques and instruments.

15
<PAGE> 216

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. To the
extent that a futures contract or an option thereon is used to protect against
possible changes in the market value of securities that the Fund anticipates
acquiring and the Fund subsequently does not acquire such securities, the Fund
will have incurred the transactional expenses associated with entering into such
transaction and will be subject to the risks inherent in an unhedged purchase of
such futures contract or option. 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. 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."

INVESTMENT IN INVESTMENT COMPANIES. The Fund may invest in one or more
investment companies advised by the Adviser and its affiliates, including Van
Kampen American Capital Small Capitalization Fund ("Small Cap Fund") and Van
Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund"). The
shares of the Small Cap Fund and Foreign Securities Fund are available only to
certain investment companies advised by the Adviser or its affiliates. The
Adviser believes that the use of the Small Cap Fund and Foreign Securities Fund
may, from time to time, provide the Fund with the most effective exposure to the
performance of the small capitalization sector of the stock market and to
foreign securities, while at the same time minimizing costs. The Adviser charges
no advisory fee for managing the Small Cap Fund or the Foreign Securities Fund,
nor are there any sales load or other charges associated with distribution of
their shares. Other expenses incurred by the Small Cap Fund and Foreign
Securities Fund are borne by them, and thus indirectly by the funds that invest
in them. With respect to such other expenses, the Adviser anticipates that the
efficiencies resulting from use of such funds will result in cost savings for
the Fund and other funds that will fully or partially offset such expenses. In
large part, these savings are attributable to the fact that administrative
actions that would have to be performed multiple times if each fund held its own
portfolio of small capitalization or foreign stocks will need to be performed
only once. The Adviser expects that the Small Cap Fund and Foreign Securities
Fund will experience trading costs that will be substantially less than the
trading costs that would be incurred if small capitalization or foreign stocks
were purchased separately for the Fund and other participating funds. The Fund's
investments in the Small Cap Fund and Foreign

16
<PAGE> 217

Securities Fund are subject to the terms and conditions set forth in SEC
exemptive orders authorizing such investments.

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. If it is believed in the best interests of
the Fund, the Adviser may place portfolio transactions with brokers who provide
research or other services, even if the Fund will have to pay a higher
commission than would be the case if no weight were given to the brokers
furnishing of such services. However, it is not the policy of the Adviser,
absent special circumstances, to pay higher commissions to a firm because

17
<PAGE> 218

it has supplied such services and this will be done only when, in the opinion of
the Adviser, the amount of additional commission or increased costs is
reasonable in relation to the value of such services to the Fund.

PORTFOLIO TURNOVER. The Fund purchases securities which are believed by the
Adviser to have potential for capital growth and income. Securities are disposed
of in situations where it is believed that potential for such capital growth has
lessened or that other securities have a greater potential. Therefore, the Fund
may purchase and sell securities without regard to the length of time the
security is to be, or has been held. The rate may exceed 100%, which is higher
than that of many other investment companies. A 100% turnover rate occurs, for
example, if all the Fund's portfolio securities are replaced during one year.
High portfolio activity increases the Fund's transaction costs, including
brokerage commissions and may result in the realization of more short-term
capital gains than if the Fund had low portfolio turnover. The Fund's annual
portfolio turnover rate is shown in the table of "Financial Highlights."

- ------------------------------------------------------------------------------
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 $60 billion under management or
supervision. Van Kampen American Capital's more than 50 open-end and 37
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 an indirect wholly-owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. The Adviser's principal office is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

18
<PAGE> 219

corporate finance advisory activities; merchant banking; stock brokerage and
research services; credit services; asset management; trading of futures,
options, foreign exchange, commodities and swaps (involving foreign exchange,
commodities, indices and interest rates); real estate advice, financing and
investing; and global custody, securities clearance services and securities
lending.

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS PERCENTAGE PER ANNUM
------------------------ --------------------
<S> <C>
First $500 million.................. 0.70 of 1%
Next $500 million................... 0.65 of 1%
Over $1 billion..................... 0.60 of 1%
</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,
transfer agent (ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned
subsidiary of Van Kampen American Capital), 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.

PORTFOLIO MANAGEMENT. B. Robert Baker and Jason Leder are co-managers to the
Fund and are primarily responsible for the day-to-day management of the

19
<PAGE> 220

Fund's investment portfolio. Messrs. Baker and Leder have been primarily
responsible for managing the Fund's investment portfolio since its inception.
Mr. Baker has been portfolio manager of Van Kampen American Capital Asset
Management, Inc. since 1994. From 1991 to 1994, Mr. Baker was an associate
portfolio manager of Van Kampen American Capital Asset Management, Inc. Mr.
Leder has been an associate portfolio manager of Van Kampen American Capital
Asset Management, Inc. since April 1995. Prior to that time, he was a securities
analyst with Salomon Brothers, Inc., Fidelity Management and Research, Gabelli
and Company, and Austin, Calvert and Flavin. Each portfolio manager is an
employee of the Adviser.

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

The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial to the investor, taking
into account the amount of the purchase, the length of time the investor expects
to hold the shares, whether the investor wishes to receive dividends in cash or
to reinvest them in additional shares of the Fund, and other circumstances.
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 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 accounts under $1 million) or (b) on a contingent deferred basis (Class A
Share purchases over $1 million, Class B Shares and Class C Shares). Shares
purchased subject to a contingent deferred sales charge (a "CDSC") sometimes are
referred to herein collectively as "Contingent Deferred Sales Charge Shares" or
"CDSC Shares."

20
<PAGE> 221

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
which have a shorter CDSC period (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 that (i) each class of
shares bears those sales charges, distribution fees, service fees and
administrative expenses applicable to the respective class of shares as a result
of its sales arrangements, (ii) generally, each class of shares has exclusive
voting rights with respect to those provisions of the Fund's Rule 12b-1
distribution plan which relate only to such class, (iii) each class of shares
has different exchange privileges, (iv) certain classes of shares have a
conversion feature and (v) certain classes of shares have different shareholder
service options available. Generally, a class of shares subject to a higher
ongoing distribution fee 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 fee 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."

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<PAGE> 222

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

22
<PAGE> 223

amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its sales of shares and increases in assets under
management. Such payments to brokers, dealers and financial intermediaries for
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. 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. These programs will not change the price an investor pays 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 or agency
commissions paid to brokers with respect to sales of Class A Shares. The sales
charge is allocated between an 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 and 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
TOTAL SALES CHARGE COMMISSION
-------------------------- -----------
PERCENTAGE PERCENTAGE PERCENTAGE
SIZE OF TRANSACTION OF OFFERING OF NET OF OFFERING
AT OFFERING PRICE PRICE ASSET VALUE PRICE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000.................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000....... 4.75 4.99 4.00
$100,000 but less than $250,000...... 3.75 3.90 3.00
$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 by the Distributor to brokers, dealers and financial intermediaries
who initiate and are responsible for purchases of $1 million or more. See
"Purchase of Shares -- Deferred Sales Charge Alternatives."

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<PAGE> 224

QUANTITY DISCOUNTS

24
<PAGE> 225

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 sales
charges applicable to the purchases made and the sales charges previously paid.
When an investor signs a Letter of Intent, shares equal to at least 5% of the
total purchase amount of the level selected will be restricted from sale or
redemption by the investor until the Letter of Intent is satisfied or any
additional sales charges have been paid; if the Letter of Intent is not
satisfied by the investor and any additional sales charges are not paid,
sufficient restricted shares will be redeemed by the Fund to pay such charges.
Additional information is contained in the application accompanying this
Prospectus.

OTHER PURCHASE PROGRAMS

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.

25
<PAGE> 226

account activity statements to such participants on a monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.

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

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

(4) Registered investment advisers, trust companies and bank trust departments
investing on their own behalf or on behalf of their clients provided that
the aggregate amount invested in Class A Shares of the Fund alone, or 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.

(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.

26
<PAGE> 227

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

(8) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and Participating Funds, (iv) has a membership that the authorized
dealer can certify as to the group's members and (v) satisfies other
uniform criteria established by the Distributor for the purpose of
realizing economies of scale in distributing such shares. A qualified
group does not include one whose sole 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 $1 million and 0.50% on the excess over $3 million.

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

27
<PAGE> 228

DEFERRED SALES CHARGE ALTERNATIVES

In determining whether a CDSC is applicable to a redemption of CDSC Shares, it
is 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.

28
<PAGE> 229

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 4.00% (the
applicable rate in the second year after purchase).

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. 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 $1 million and 0.50% on the excess over $3 million; (ii) 4.00%
with respect to Class B Shares; and (iii) 1.00% with respect to Class C Shares.
Such compensation will not change the price an investor will pay for CDSC Shares
or the amount that the Fund will receive from such sale.

29
<PAGE> 230

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

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT TO CHARGE
YEAR SINCE PURCHASE --------------------------------
- ----------------------------------------------------------------------------
<S> <C>
First..................................... 5.00%
Second.................................... 4.00%
Third..................................... 3.00%
Fourth.................................... 2.50%
Fifth..................................... 1.50%
Sixth 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."

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

30
<PAGE> 231

defined in the Code) of a shareholder, (ii) in connection with required minimum
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 180 days after redemption. See "Shareholder Services" and "Redemption of
Shares" for further discussion of the waiver provisions.

NET ASSET VALUE

The securities of the Fund that are listed on a securities exchange are valued
at their closing sales price on the day of the valuation. Price valuations for
listed securities are based on market quotations where the security is primarily
traded or, if actual trade information is not available on any valuation date,
are valued at the mean of the bid and asked prices. Unlisted securities in the
portfolio 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.

31
<PAGE> 232

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

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.

32
<PAGE> 233

DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying this
Prospectus or by calling (800) 421-5666 ((800) 421-2833 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 a Participating
Fund so long as the investor has 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. If the accounts are retirement accounts, they must
both be for the same class and of 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.

33
<PAGE> 234

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) 421-2833 for the hearing impaired). A shareholder automatically
has telephone exchange privileges unless otherwise designated in the application
form accompanied by this Prospectus. 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,
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 reinvest dividends from the new account
into another fund, 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 modify, restrict or terminate the
exchange privilege at any time on 60 days' notice to its shareholders of any
termination or material amendment.

34
<PAGE> 235

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."

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. Any gain or loss
realized by the Shareholder upon redemption of shares is a taxable event.

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

35
<PAGE> 236

P. O. Box 418256, Kansas City, Missouri 64141-9256, by placing the redemption
request through an authorized dealer or by calling the Fund.

36
<PAGE> 237

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,
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
an account has multiple owners, ACCESS may rely on the instructions of any one
owner.

37
<PAGE> 238

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 (without sales charge except as described under "Shareholder Services --
Exchange Privileges") next determined after the order is received, which must be
within 180 days after the date of the redemption. 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.

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

DISTRIBUTION AND SERVICE PLANS

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

38
<PAGE> 239

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.

39
<PAGE> 240

The Distributor's actual distribution-related expenses with respect to a class
of CDSC Shares (for purposes of this section, excluding any Class A Shares that
may be subject to a CDSC) for any given year may exceed the amounts payable to
the Distributor with respect to such class of CDSC Shares under the Distribution
Plan, the Service Plan and payments received pursuant to the 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, 1997, there
were no unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares. 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
CDSC.

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

The Fund's present policy, which may be changed at any time by the Board of
Trustees, is to declare dividends quarterly to holders of each class of shares
from net investment income and net short-term capital gains attributable to each
respective class. The Fund also presently intends to make distributions of net
long-term capital gains, if any, annually. Dividends are composed of all or a
portion of investment income earned by each class of shares of the Fund plus all
or a portion of net short-term capital gains by the Fund on transactions in
securities and futures and options

40
<PAGE> 241

hedging transactions, less the expenses attributable to the respective class.
Long-term capital gains distributions consist of the Fund's gain on transactions
in securities and futures and options hedging transactions, 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.

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

41
<PAGE> 242

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.

42
<PAGE> 243

Under the Taxpayer Relief Act of 1997 (the "1997 Tax Act"), the maximum tax
rates applicable to net capital gains recognized by individuals and other
noncorporate taxpayers are (i) the same as ordinary income rates for capital
assets held for one year or less, (ii) 28% for capital assets held for more than
one year but not more than 18 months and (iii) 20% for capital assets held for
more than 18 months. Under the 1997 Tax Act, the Treasury is authorized to issue
regulations that address the application of the new capital gains rates to sales
and exchanges by regulated investment companies and to sales and exchanges of
interests in regulated investment companies, but no such regulations have been
issued as of the date hereof. It is expected that the new tax rates for capital
gains under the 1997 Tax Act described above will apply to distributions of
capital gains dividends by regulated investment companies such as the Fund as
well as to sales and exchange of shares in regulated investment companies such
as the Fund. With respect to capital losses recognized on dispositions of shares
held six months or less where such losses are treated as long-term capital
losses to the extent of prior capital gains dividends received on such shares
(see the discussion regarding the sale of shares above), it is unclear how such
capital losses offset the capital gains referred to above. Shareholders should
consult their own tax advisors as to the application of the new capital gains
rates to their particular circumstances.

43
<PAGE> 244

44
<PAGE> 245

- ------------------------------------------------------------------------------
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 total return will be
calculated pursuant to rules established by the SEC and will be computed
separately for each class of the Fund's shares. Such calculations are based on
historical information and are not intended to indicate future performance. In
lieu of or in addition to total return calculations, such information may
include performance rankings and similar information from independent
organizations such as Lipper Analytical Services, Inc. or other nationally
recognized financial publications. In addition, from time to time the Fund may
compare its performance to certain securities and unmanaged

45
<PAGE> 246

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 of shares, designated Class A Shares,
Class B Shares and Class C Shares. The Fund is permitted to issue an unlimited
number of classes of shares. Other classes may be established from time to time
in accordance with provisions of the Fund's Declaration of Trust.

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 "Distribution and Service Plans". Except as described herein, there are no
conversion, preemptive or other subscription rights. 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's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their

46
<PAGE> 247

private property for the satisfaction of any obligation or liability of the Fund
but the assets of the Fund only shall be liable.

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

47
<PAGE> 248

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE
CALL THE FUND'S TOLL-FREE
NUMBER (800) 341-2911.

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

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

FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 421-2833

FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424

VAN KAMPEN AMERICAN CAPITAL
PROSPECTOR 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
Prospector Fund

Custodian
STATE STREET BANK AND
TRUST COMPANY

225 West Franklin Street, P.O. Box 1713

Boston, MA 02105-1713
Attn: Van Kampen American Capital
Prospector 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> 249

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

PROSPECTOR FUND

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

P R O S P E C T U S

OCTOBER 28, 1997

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------------
<PAGE> 250

- ------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
AGGRESSIVE GROWTH FUND
- ------------------------------------------------------------------------------

Van Kampen American Capital Aggressive Growth Fund (the "Fund") is a
diversified, open-end management investment company, commonly known as a mutual
fund. The Fund's investment objective is to seek capital growth. The Fund will
seek to achieve its investment objective by investing primarily in a diversified
portfolio of common stocks and other equity securities. The Fund expects to
often have a substantial portion of its assets invested in small and medium
sized companies. There can be no assurance that the Fund will achieve its
investment objective. The Fund is a separate series of Van Kampen American
Capital Equity Trust (the "Trust").

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

A Statement of Additional Information, dated October 28, 1997, 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) 421-2833. 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, 1997.

<PAGE> 251

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Annual Fund Operating Expenses and Example.................. 6
Financial Highlights........................................ 8
The Fund.................................................... 9
Investment Objective and Policies........................... 9
Portfolio Securities........................................ 10
Investment Practices........................................ 13
Investment Advisory Services................................ 19
Alternative Sales Arrangements.............................. 21
Purchase of Shares.......................................... 23
Shareholder Services........................................ 32
Redemption of Shares........................................ 36
Distribution and Service Plans.............................. 39
Distributions from the Fund................................. 41
Tax Status.................................................. 42
Fund Performance............................................ 46
Description of Shares of the Fund........................... 46
Additional Information...................................... 47
</TABLE>

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

2
<PAGE> 252

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

THE FUND. Van Kampen American Capital Aggressive Growth Fund (the "Fund") is a
separate, diversified series of Van Kampen American Capital Equity 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 for each 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 capital
growth. There is no assurance that the Fund will achieve its investment
objective. See "Investment Objective and Policies."

INVESTMENT POLICIES AND RISKS. The Fund will seek to achieve its investment
objective by investing in a diversified portfolio of common stocks and, when
viewed appropriate, in other securities such as debt securities, preferred
stocks, convertible securities and warrants. Under normal market conditions, the
Fund will invest at least 65% of its total assets in common stock or other
equity securities believed by the Adviser at the time of investment to have an
above average potential for capital growth. The Fund expects that it often will
have a substantial portion of its assets invested in equity securities of small
and medium size companies, although the Fund is free to invest any portion of
its assets in securities of larger companies that the Adviser believes have an
above average potential for capital growth. Small and medium size companies are
companies that have a total market capitalization not greater than that of any
of the 500 largest companies whose securities are listed or admitted for trading
on a national securities exchange or market system.

The Fund's primary approach is to seek what the Adviser believes to be
unusually attractive growth opportunities on an individual company basis. The
Adviser will utilize a bottom-up, disciplined approach in selecting companies
for investment. The Fund generally will seek companies that appear to be
positioned to produce an attractive level of future earnings through the
development of new products, services or markets or as a result of changing
market or industry conditions. The Adviser expects that many of the companies in
the Fund's portfolio will at the time of investment be experiencing high rates
of earnings growth. Investments in such companies may offer greater
opportunities for growth of capital than do companies having more established
products, services or markets or in later stages of the growth cycle, but also
involve special risks.

Such companies often have limited or cyclical product lines, markets, or
financial resources, and may be dependent upon one or a few key people for
management. Common stock of such companies may trade at high price to earnings
ratios relative to more established companies, and rates of earnings growth may
be volatile. The securities of such companies may be subject to more abrupt or
erratic market movements than securities of more established companies or the
market averages in general.

Although the Fund will not make any investment if as a result more than 25% of
its total assets will be invested in any single industry, a significant portion
of the Fund's

3
<PAGE> 253

assets may from time to time be invested in securities of companies in the same
sector of the market. To the extent that the Fund invests a significant portion
of its assets in a limited number of market sectors, the Fund will be more
susceptible to economic, political, regulatory and other factors influencing
such sectors.

The Fund's net asset value per share will fluctuate depending on market
conditions and other factors. See "Investment Objective and Policies."

INVESTMENT PRACTICES AND RISKS. The Fund may invest up to 20% of its assets in
securities issued by non-U.S. issuers. Investments in foreign securities involve
certain risks not ordinarily associated with investments in securities of
domestic issuers, including fluctuations in foreign exchange rates, future
political and economic developments, confiscatory taxation and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions.

Subject to certain limitations, the Fund also may use various investment
techniques including options, futures and other derivatives, entering into
when-issued or delayed delivery transactions, lending portfolio securities and
entering into repurchase agreements. Such transactions entail certain risks. See
"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. (the
"Adviser") is the Fund's investment adviser.

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.

DISTRIBUTIONS FROM THE FUND. Distributions from net investment income and net
realized 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 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."

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

4
<PAGE> 254

- ------------------------------------------------------------------------------
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).......... 5.75%(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--5.00% Year 1--1.00%
Year 2--4.00% After--None
Year 3--3.00%
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a
percentage of amount
redeemed)................ None None None
Exchange fees.............. None None None
</TABLE>

- ------------------------------------------------------------------------------
(1) Reduced on investments of $50,000 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 redemptions made
within one year of the purchase. See "Purchase of Shares--Deferred Sales
Charge Alternatives--Class A Share Purchases of $1 Million or More."

5
<PAGE> 255

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management Fees(1) (as a percentage of
average daily net assets; after fee
waiver)................................... 0.44% 0.44% 0.44%
12b-1 Fees(2) (as a percentage of average
daily net assets)......................... 0.25% 1.00%(3) 1.00%(3)
Other Expenses(1) (as a percentage of
average daily net assets; after expense
reimbursement)............................ 0.61% 0.61% 0.61%
Total Expenses(1) (as a percentage of
average daily net assets; after fee
waiver and expense reimbursement)......... 1.30% 2.05% 2.05%
</TABLE>

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

(1) Absent the Adviser's waiver of a portion of its fees and assumption of a
portion of the expenses of the Fund, "Management Fees" would be 0.75% for
each class of shares, and "Total Expenses" would be 1.61%, 2.35% and 2.35%
for Class A Shares, Class B Shares and Class C Shares, respectively.

(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 for distribution-related expenses. 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 "Distribution and Service Plans."

(3) Long-term Shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted as a Fund-level expense by NASD
Rules.

6
<PAGE> 256

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 1.30% for Class A Shares, 2.05% for
Class B Shares and 2.05% for Class C Shares,
(ii) 5.00% annual return and (iii) redemption
at the end of each time period:
Class A Shares................................ $70 $96 $125 $206
Class B Shares................................ $71 $94 $125 $219*
Class C Shares................................ $31 $64 $110 $238
You would pay the following expenses on the same
$1,000 investment assuming no redemption at
the end of each period:
Class A Shares................................ $70 $96 $125 $206
Class B Shares................................ $21 $64 $110 $219*
Class C Shares................................ $21 $64 $110 $238
</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 and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. 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. As Fund assets increase, the fees
waived or expenses reimbursed by the Adviser are expected to decrease.
Accordingly, it is unlikely that future expenses as projected will remain
consistent with those determined based on the "Annual Fund Operating Expenses"
table. Class B Shares acquired through the exchange privilege are subject to the
CDSC 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 CDSC. 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
"Distribution and Service Plans."

7
<PAGE> 257

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 accountants, for the periods indicated, and their report thereon
appears in the Fund's Statement of Additional Information. This information
should be read in conjunction with the audited financial statements and related
notes thereto included in the Statement of Additional Information.

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C
----------------------------- ----------------------------- -----------------------------
MAY 29, 1996 MAY 29, 1996 MAY 29, 1996
(COMMENCEMENT OF (COMMENCEMENT OF (COMMENCEMENT OF
INVESTMENT INVESTMENT INVESTMENT
YEAR ENDED OPERATIONS) YEAR ENDED OPERATIONS) YEAR ENDED OPERATIONS)
JUNE 30, TO JUNE 30, JUNE 30, TO JUNE 30, JUNE 30, TO JUNE 30,
1997 1996 1997 1996 1997 1995
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $9.118 $9.430 $9.112 $9.430 $9.113 $9.430
------ ----- ------ ----- ------ -----
Net Investment Loss.............. (.065) (.002) (.105) (.006) (.103) (.006)
Net Realized and Unrealized
Gain/Loss...................... .895 (.310) .860 (.312) .859 (.311)
------ ----- ------ ----- ------ -----
Total from Investment
Operations....................... .830 (.312) .755 (.318) .756 (.317)
------ ----- ------ ----- ------ -----
Net Asset Value, End of the
Period........................... $9.948 $9.118 $9.867 $9.112 $9.869 $9.113
------ ----- ------ ----- ------ -----
Total Return(a)................... 9.10% (3.29)%** 8.34% (3.39)%** 8.34% (3.39)%**
====== ===== ====== ===== ====== =====
Net Assets at End of the Period
(In millions).................... $ 84.0 $ 30.3 $ 94.2 $ 25.5 $ 10.8 $ 3.9
Ratio of Expenses to Average Net
Assets*.......................... 1.30% 1.29% 2.05% 2.06% 2.05% 2.05%
Ratio of Net Investment Loss to
Average Net Assets*.............. (.81)% (.50)% (1.55)% (1.28)% (1.54)% (1.28)%
Portfolio Turnover................ 186% 4%** 186% 4%** 186% 4%**
Average Commission Paid Per Equity
Share Traded(b).................. $.0568 $.0310 $.0568 $.0310 $.0568 $.0310
- ----------------
* 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 (Annualized)..... 1.61% 2.05% 2.35% 2.81%
Ratio of Net Investment Income to Average Net Assets
(Annualized)........................................... (1.12)% (1.25)% (1.86)% (2.04)%
Ratio of Expenses to Average Net Assets (Annualized)..... 2.35% 2.81%
Ratio of Net Investment Income to Average Net Assets
(Annualized)........................................... (1.85)% (2.04)%
** Non-Annualized.
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable.
</TABLE>

See Notes to Financial Statements.

8
<PAGE> 258

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

Van Kampen American Capital Aggressive Growth Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity 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 capital growth. This objective is
fundamental and cannot be changed without approval of the shareholders of the
Fund. Any income received on investments is incidental to the objective of
capital growth. There can be no assurance that the Fund will achieve its
investment objective and full consideration should be given to the risks
inherent in the investment techniques that the Fund may use.

Under normal market conditions, the Fund will invest at least 65% of its total
assets in common stock or other equity securities believed by the Adviser at the
time of investment to have an above average potential for capital growth. The
Fund expects that it often will have a substantial portion of its assets
invested in equity securities of small and medium size companies, although the
Fund is free to invest any portion of its assets in securities of larger
companies that the Adviser believes have an above average potential for capital
growth. Small and medium size companies are companies that have a total market
capitalization not greater than that of any of the 500 largest companies whose
securities are listed or admitted for trading on a national securities exchange
or market system. The Fund may invest up to 20% of its total assets (measured at
the time of investment) in securities of foreign issuers. While the Fund will
invest primarily in common stocks, it also may invest in other securities such
as debt securities, preferred stocks, convertible securities and warrants.

9
<PAGE> 259

companies may offer greater opportunities for growth of capital than do
companies having more established products, services or markets or in later
stages of the growth cycle, but also involve special risks. Such companies often
have limited or cyclical product lines, markets, or financial resources, and may
be dependent upon one or a few key people for management. Common stock of such
companies may trade at high price to earnings ratios relative to more
established companies, and rates of earnings growth may be volatile. The
securities of such companies may be subject to more abrupt or erratic market
movements than securities of more established companies or the market averages
in general. In addition, securities of small capitalization companies generally
are traded in lower volume than those issued by larger companies.

The companies and industries in which the Fund invests will change over time
depending on the Adviser's analyses of growth opportunities. Although the Fund
will not make any investment if as a result more than 25% of its total assets
will be invested in any single industry, a significant portion of the Fund's
assets may from time to time be invested in securities of companies in the same
sector of the market. This may occur, for example, when the Adviser believes
that several companies in the same sector each offer unusually attractive growth
opportunities. To the extent that the Fund invests a significant portion of its
assets in a limited number of market sectors, the Fund will be more susceptible
to economic, political, regulatory and other factors influencing such sectors.

The Fund may also invest in special situations. Special situations typically
involve new management, special products and techniques, unusual developments,
mergers or liquidations. Investments in unseasoned companies and special
situations often involve much greater risks than are inherent in ordinary
investments, because securities of such companies may be more likely to
experience unexpected fluctuations in price. There is no direct limitation on
the Fund's ability to invest in special situations as a class. The Fund's
investments in special situations will be subject to the Fund's investment
policies and restrictions, including its fundamental investment restrictions.
These policies and restrictions may restrict the Fund's ability to make
particular special situation investments. See "Investment Policies and
Restrictions" in the Statement of Additional Information. Because prices of
common stocks and other securities fluctuate, the value of an investment in the
Fund will vary based upon the Fund's investment performance.

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 the Fund should not be used as a
trading vehicle.
- ------------------------------------------------------------------------------
PORTFOLIO SECURITIES
- ------------------------------------------------------------------------------

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

10
<PAGE> 260

preference over any other security holder or class of shareholders, including
holders of such entity's debt securities, preferred stock and other senior
equity security. 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 primarily on the security's potential for
capital growth.

INCOME SECURITIES. The Fund may invest in income securities, which include
primarily debt securities of various maturities. The Fund will only invest in
income securities that are investment grade at the time of investment.
Investment grade securities are securities that are rated as least BBB by
Standard & Poor's Ratings Group ("S&P"), Baa by Moody's Investors Service, Inc.
("Moody's") or comparably rated by any nationally recognized rating
organization, or, if unrated, are considered by the Adviser to be of comparable
quality to securities so rated. Income securities A or higher by S&P or A or
higher by Moody's generally are regarded as high grade and have a strong to
outstanding capacity to pay interest or dividends and repay principal or
capital. Medium grade securities (i.e. securities rated BBB by S&P or Baa by
Moody's) are regarded as having an adequate capacity to pay interest or
dividends, and repay principal, although adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make such
payments. Securities rated Baa are regarded by Moody's as having some
speculative

11
<PAGE> 261

characteristics. For a description of such ratings see the Statement of
Additional Information incorporated by reference into this Prospectus.

The net asset value of the Fund will change with changes in the value of the
portfolio securities. The values of income securities may change as interest
rate levels fluctuate. When interest rates decline, the value of a portfolio
invested in income securities generally can be expected to rise. Conversely,
when interest rates rise, the value of a portfolio invested in income securities
can be expected to decline. Volatility may be greater during periods of general
economic uncertainty.

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
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 nationally recognized
statistical rating organizations.

WARRANTS. The Fund may invest up to 5% of its assets in warrants (measured at
the time of investment), which are securities permitting, but not obligating,
their holders to subscribe for other securities. 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, an investment in warrants may be considered
to be more speculative than most other types of equity investment. In addition,
the value of a warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not exercised
prior to its expiration date. The Fund may retain in its portfolio any
securities received upon the exercise of a warrant.

FOREIGN SECURITIES. The Fund may invest up to 20% of the value of its total
assets in securities of foreign issuers (measured at the time of investment).
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.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic develop-

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<PAGE> 262

ments which could affect investment in those countries. There may be less
publicly available information about a foreign security than about a United
States security, and foreign entities may not be subject to accounting, auditing
and financial reporting standards and requirements comparable to those of the
United States entities. In addition, certain foreign investments made by the
Fund may be subject to foreign income, withholding or other taxes, which would
reduce the Fund's total return on such investments and the amounts available for
distributions by the Fund to its shareholders. 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.

- ------------------------------------------------------------------------------
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, enter into
repurchase and reverse repurchase agreements and lend its portfolio securities
in each case, subject to the limitations set forth below. These investments
entail risks.

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<PAGE> 263

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.

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.

The Fund expects to utilize options, futures contracts and options thereon in
several different ways, depending upon the status of the Fund's portfolio and
the Adviser's expectations concerning the securities markets. In times of stable
or rising stock prices, the Fund generally seeks to obtain maximum exposure to
the stock market, i.e., to be "fully invested." Nevertheless, even when the Fund
is fully invested, prudent management requires that at least a small portion of
assets be available as cash to honor redemption requests and for other
short-term needs. The Fund may also have cash on hand that has not yet been
invested. The portion of the Fund's assets that is invested in cash equivalents
does not fluctuate with stock market prices, so that, in times of rising market
prices, the Fund may underperform the market in proportion to the amount of cash
equivalents in its portfolio. By purchasing stock index futures contracts,
however, the Fund can "equitize" the cash portion of its assets and obtain
equivalent performance to investing 100% of its assets in equity securities.

If the Adviser forecasts a market decline, the Fund may take a defensive
position, reducing its exposure to the stock market by increasing its cash
position. By selling stock index futures contracts instead of portfolio
securities, a similar result can be achieved to the extent that the performance
of the stock index futures contracts correlates to the performance of the Fund's
portfolio securities. Sale of futures contracts could frequently be accomplished
more rapidly and at less cost than the sale of actual securities in the Fund's
portfolio. Once the desired hedged position has been effected, the Fund could
then liquidate securities in a more deliberate manner, reducing its futures
position simultaneously to maintain the desired balance, or it could maintain
the hedged position.

As an alternative to selling stock index futures contracts, the Fund can
purchase stock index puts (or stock index futures puts) to hedge the portfolio's
risk in a declining market. Since the value of a put increases as the index
declines below a specified level, the portfolio's value is protected against a
market decline to the degree the performance of the index correlates with the
performance of the Fund's investment portfolio. If the market remains stable or
advances, the Fund can refrain

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<PAGE> 264

from exercising the put and its portfolio will participate in the advance,
having incurred only the premium cost for the put.

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. Certain Strategic Transactions may provide the
opportunity for increased income, but may have characteristics similar to
leverage. As a result, increases and decreases in the net asset value of the
Fund may be larger than comparable changes in the net asset value of the Fund if
the Fund did not engage in such Strategic Transactions. 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.

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."

REPURCHASE AGREEMENTS. The Fund may use up to 25% of its assets to enter into
repurchase agreements with selected 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

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<PAGE> 265

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. Repurchase agreements involve certain risks in the
event of default by the other party. 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. Repurchase
agreements that mature in more than seven days are treated by the Fund as
illiquid securities and are subject to the Fund's limitations on "illiquid"
securities.

"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 or is earned by the Fund on portfolio 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 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 such 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. To the extent
the Fund engages in "when issued" and "delayed

16
<PAGE> 266

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.

BORROWINGS. The Fund is authorized to borrow money (including entering into
reverse repurchase agreements) to the full extent permitted under the Investment
Company Act of 1940, as amended (the "1940 Act"), although it has no intention
to do so in an amount exceeding 5% of the Fund's total assets or for other than
temporary purposes, such as clearances of portfolio transactions, share
repurchase and payment of dividends and distributions. Accordingly, the Fund
will not acquire additional securities during any period in which its borrowings
exceed 5% of the Fund's total assets. Borrowing by the Fund creates an
opportunity for increased net

17
<PAGE> 267

income but, at the same time, creates special risk considerations. See the
Fund's Statement of Additional Information for a more complete discussion of
borrowings and certain of the associated risks.

SHORT-TERM TRADING. Under certain market conditions, the Fund may seek
profits by engaging in short-term trading. The length of time the Fund has held
a particular security is not generally a consideration in investment decisions.
A change in the securities owned by the Fund is known as "portfolio turnover."
The Fund anticipates that the annual portfolio turnover rate of the Fund's
portfolio may exceed 100% but should generally be less than 200%. Portfolio
turnover generally involves expense to the Fund, including brokerage commissions
or dealer mark-ups and other transaction costs on the sale of securities and
reinvestment in other securities. To the extent short-term trading strategies
are used, the Fund's portfolio turnover rate and expenses may be higher than
that of other mutual funds. Such transactions may also result in realization of
taxable capital gains. See "Tax Status."

SHORT SALES. The Fund may engage in "short-sales against the box." A short
sale is a transaction in which the Fund would sell securities it does not own
(but has borrowed) in anticipation of a decline in the market price of
securities. A short-sale against the box is a transaction where at all times
when the short position is open the Fund owns an equal amount of such securities
or securities convertible or exchangeable into such securities without payment
of additional consideration. The Fund will not engage in short sales other than
against the box.

RISKS. The Fund's investment in certain portfolio securities and other
investment practices entail certain risks. Please see the discussion of such
risks contained under "Investment Objective and Policies", "Portfolio
Securities" and "Investment Practices."

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.

The Adviser is also 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

18
<PAGE> 268

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.

The Adviser may place portfolio transactions, to the extent permitted by law,
with brokerage firms affiliated with the Fund, the Adviser or the Distributor or
with firms participating in the distribution of the Fund's shares if it
reasonably believes that the quality of execution and the Commission are
comparable to that available from other qualified firms. 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 $60 billion under management or
supervision. Van Kampen American Capital's more than 50 open-end and 37
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen American
Capital Distributors, Inc., the distributor of the Fund and 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 Morgan Stanley, Dean
Witter, Discover & Co. The address of the Adviser is One Parkview Plaza,
Oakbrook Terrace, Illinois 60181.

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<PAGE> 269

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 a fee computed based on an annual rate applied to the
average daily net assets of the Fund as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET 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>

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,
transfer agent (ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned
subsidiary of Van Kampen American Capital) 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 charge 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.

PORTFOLIO MANAGEMENT. Gary M. Lewis is primarily responsible for the day-to-
day management of the Fund's investment portfolio. Mr. Lewis has been Senior
Vice President and Portfolio Manager with Van Kampen American Capital Asset
Management, Inc., an affiliate of the Adviser, since October 31, 1995, and
Senior Vice President and Portfolio Manager with the Adviser since December,
1995. From December, 1987 to December, 1995, Mr. Lewis was a Vice President and

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<PAGE> 270

Portfolio Manager of Van Kampen American Capital Asset Management, Inc. Mr.
Lewis has been primarily responsible for managing the Fund's investment
portfolio since its inception.

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

The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial to the investor, taking
into account the amount of the purchase, the length of time the investor expects
to hold the shares, whether the investor wishes to receive dividends in cash or
to reinvest them in additional shares of the Fund, and other circumstances.
Investors should consider such factors together with the amount of sales charges
and the 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
Share accounts under $1 million) or (b) on a contingent deferred basis (Class A
Share accounts over $1 million, Class B Shares and Class C Shares). Shares
purchased subject to a contingent deferred sales charge (a "CDSC") sometimes are
referred to herein collectively as "Contingent Deferred Sales Charge Shares" or
"CDSC 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

21
<PAGE> 271

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 which have a shorter CDSC period
(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 that (i) each class of
shares bears those distribution fees, service fees and administrative expenses
applicable to the respective class of shares as a result of its sales
arrangements, (ii) generally, each class of shares has exclusive voting rights
with respect to those provisions of the Fund's Rule 12b-1 distribution plan
which relate only to such class, (iii) each class of shares has different
exchange privileges, (iv) certain classes of shares have a conversion feature
and (v) certain classes of shares have different shareholder service options
available. 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) securities 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; and (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").

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<PAGE> 272

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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 of its shares 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 with the Distributor, plus any applicable sales
charge. It is the responsibility of the investor's broker, dealer or financial
intermediary to transmit the order to the Distributor. Because the Fund
generally determines 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 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. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a

23
<PAGE> 273

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. 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. These programs will not change the price an investor pays 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. 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

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

* 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. See "Purchase of Shares --
Deferred Sales Charge Alternatives".

QUANTITY DISCOUNTS

24
<PAGE> 274

As used herein, "Participating Funds" refers to certain open-end investment
companies advised by the Adviser of Van Kampen American Capital Asset
Management, Inc. and distributed by the Distributor as determined from time to
time by the Fund's Board of Trustees.

25
<PAGE> 275

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 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.

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

26
<PAGE> 276

purposes and that the shares will not be resold except through redemption by the
Fund, by:

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

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

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

(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.

27
<PAGE> 277

plan with more than 100 eligible employees. Such plans that have been
established with a Participating Fund or have received proposals from the
Distributor prior to February 1, 1997 based on net asset value purchase
privileges previously in effect will be qualified to purchase shares of
the Participating Funds at net asset value for accounts established on or
before May 1, 1997. Section 403(b) and similar accounts for which Van
Kampen American Capital Trust Company serves as custodian will not be
eligible for net asset value purchases based on the aggregate investment
made by the plan or the number of eligible employees, except under certain
uniform criteria established by the Distributor from time to time. Prior
to February 1, 1997, a commission will be paid to authorized dealers who
initiate and are responsible for such purchases within a rolling
twelve-month period as follows: 1.00% on sales to $5 million, plus 0.50%
on the next $5 million, plus 0.25% on the excess over $10 million. For
purchases on February 1, 1997 and thereafter, a commission will be paid as
follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million,
plus 0.50% on the next $47 million, plus 0.25% on the excess over $50
million.

(8) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and Participating Funds, (iv) has a membership that the authorized
dealer can certify as to the group's members and (v) satisfies other
uniform criteria established by the Distributor for the purpose of
realizing economies of scale in distributing such shares. A qualified
group does not include one whose sole 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 $1 million and 0.50% on the excess over $3 million.

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

28
<PAGE> 278

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

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.

29
<PAGE> 279

proceeds will be charged at a rate of 4.00% (the applicable rate in the second
year after purchase).

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. 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 $1 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.

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

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- ------------------- -------------------
<S> <C>
First................................................... 5.00%
Second.................................................. 4.00%
Third................................................... 3.00%
Fourth.................................................. 2.50%
Fifth................................................... 1.50%
Sixth 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."

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<PAGE> 280

CONVERSION FEATURE. Class B shares purchased on or after June 1, 1996, and
any dividend reinvestment plan shares received thereon, automatically convert to
Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares six years after the end of the calendar month in which the shares
were purchased. Class C shares purchased before January 1, 1997, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares ten years after the end of the calendar month in which such
shares were purchased. Such conversion will be on the basis of the relative net
asset values per share, without the imposition of any sales load, fee or other
charge. The conversion schedule applicable to a CDSC share acquired through the
exchange privilege is determined by reference to the Participating Fund from
which such share was originally purchased.

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 required minimum
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 180 days after redemption. See "Shareholder Services" and "Redemption of
Shares" for further discussion of the waiver provisions.

NET ASSET VALUE

31
<PAGE> 281

dividing the result by the number of shares of such class outstanding. Such
computation is made by using prices as of the close of trading on the New York
Stock Exchange and (i) valuing securities listed or traded on a national
securities exchange at the last reported sale price, or if there has been no
sale that day at the mean between the last reported bid and asked prices, (ii)
valuing over-the-counter securities for which the last sale price is available
from the National Association of Securities Dealers Automated Quotations
("NASDAQ") at that price and (iii) valuing any securities for which market
quotations are not readily available and any other assets at fair value as
determined in good faith by the Trustees of the Fund. The net asset value for
the Fund is computed once daily as of the close of the daily trading session of
the New York Stock Exchange, 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.
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------

32
<PAGE> 282

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.

DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanying this
Prospectus or by calling (800) 421-5666 ((800) 421-2833 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 a Participating
Fund so long as the investor has a pre-existing account for such class of shares
of the other fund. Both accounts must be of the same type, either non-retirement
or retirement. If the accounts are retirement accounts, they must both be 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

33
<PAGE> 283

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 for shares of the
same class of any Participating Fund based on the net asset values of each fund
after requesting the exchange without any sales charge, subject to certain
limitations. Shares of the Fund may be exchanged for shares of any Participating
Fund only if shares of the Participating Fund are available for sale; however,
during periods of suspensions of sales, shares of a Participating Fund may be
available for sale only to existing shareholders of the Participating Fund.
Shareholders seeking an exchange with a Participating Fund should obtain and
read the current prospectus of such fund.

34
<PAGE> 284

tion 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 reinvest dividends from the new account into another fund, 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 modify, restrict or terminate the exchange privilege at
any time on 60 days' notice to its shareholders of any termination or material
amendment.

AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A Shares can use
ACH to have redemption proceeds deposited electronically into their bank

35
<PAGE> 285

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

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

36
<PAGE> 286

37
<PAGE> 287

GENERAL REDEMPTION INFORMATION. Redemption 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, which
may take up to 15 days. Any gain or loss realized on the redemption of shares is
a taxable event. 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. An involuntary redemption may
only occur if the shareholder account is less than the minimum investment due to
shareholder redemptions.

38
<PAGE> 288

within 180 days after the date of the redemption. 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.

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

DISTRIBUTION AND SERVICE PLANS

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

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.

39
<PAGE> 289

tor 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 purposes of this section, excluding any Class A Shares that
may be subject to a CDSC) for any given year may exceed the amounts payable to
the Distributor with respect to such class of CDSC Shares under the Distribution
Plan, the Service Plan and payments received pursuant to the 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, 1997, there
were $3,574,082 and $117,808 of unreimbursed distribution-related expenses with
respect to Class B Shares and Class C Shares, respectively, representing 3.79%
and 1.09% 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 CDSC.

40
<PAGE> 290

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 annually dividends to holders of each class of shares of
all or substantially all net investment income attributable to the respective
class. 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 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 annually. Distributions cannot be assured,
and the amount of each 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 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.

41
<PAGE> 291

otherwise, the reinvestment plan is automatic. This instruction may be made by
telephone by calling (800) 421-5666 ((800) 421-2833 for the hearing impaired) or
in writing to ACCESS. See "Shareholder Services -- Reinvestment Plan."

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

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

42
<PAGE> 292

Some of the Fund's investment practices are subject to special provisions of
the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund recognize income or gain 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.

43
<PAGE> 293

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.

DISTRIBUTIONS. Distributions of the Fund's net investment income are taxable
to Shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional Shares. Distributions
of the Fund's net capital gains ("capital gains dividends"), if any, are taxable
to Shareholders as long-term capital gains regardless of the length of time
Shares of the Fund have been held by such Shareholders. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's Shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such Shares are held as a
capital asset). For a summary of the tax rates applicable to capital gains
(including capital gains dividends), see "Capital Gains Rates Under the 1997 Tax
Act" below. Tax-exempt Shareholders not subject to federal income tax on their
income generally will not be taxed on distributions from the Fund.

The Fund will inform Shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund will be eligible for the dividends received
deduction for

44
<PAGE> 294

corporations if the Fund receives qualifying dividends during the year and if
certain other requirements of the Code are satisfied.

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

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

45
<PAGE> 295

interests in regulated investment companies, but no such regulations have been
issued as of the date hereof. It is expected that the new tax rates for capital
gains under the 1997 Tax Act described above will apply to distributions of
capital gains dividends by regulated investment companies such as the Fund as
well as to sales and exchanges of shares in regulated investment companies such
as the Fund. With respect to capital losses recognized on dispositions of shares
held six months or less where such losses are treated as long-term capital
losses to the extent of prior capital gains dividends received on such shares
(see "Sale of Shares" above), it is unclear how such capital losses offset the
capital gains referred to above. Shareholders should consult their own tax
advisors as to the application of the new capital gains rates to their
particular circumstances.

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 purchasing, 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 total return 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 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 or 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
- ------------------------------------------------------------------------------

46
<PAGE> 296

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. The Fund is permitted to issue an unlimited number of
class of shares. Other classes of shares may be established from time to time in
accordance with the Fund's Declaration of Trust.

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

dividends and capital gains distributions.

47
<PAGE> 297

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

NUMBER--(800) 341-2911.

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

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

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

DIAL (800) 421-2833.

FOR AUTOMATED TELEPHONE

SERVICES DIAL (800) 847-2424.

VAN KAMPEN AMERICAN CAPITAL
AGGRESSIVE GROWTH 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
Aggressive Growth Fund

Custodian

STATE STREET BANK AND
TRUST COMPANY

225 West Franklin Street, P.O. Box 1713

Boston, MA 02105-1713
Attn: Van Kampen American Capital
Aggressive Growth 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> 298

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

AGGRESSIVE GROWTH

FUND

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

P R O S P E C T U S

OCTOBER 28, 1997

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 299

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN AMERICAN CAPITAL UTILITY FUND

Van Kampen American Capital Utility Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity Trust (the "Trust"), an
open-end investment company. The Fund seeks to provide its shareholders with
capital appreciation and current income. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of common stocks
and income securities issued by companies engaged in the utilities industry
("Utility Securities"). Companies engaged in the utilities industry include
those involved in the production, transmission, or distribution of electric
energy, gas, telecommunications services or the provision of other utility or
utility related goods and services. Under normal market conditions, at least 80%
of the Fund's total assets will be invested in Utility Securities. The Fund may
invest up to 35% of its assets in foreign currency denominated securities issued
by non-U.S. issuers. There can be 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 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
writing or calling Van Kampen American Capital Distributors, Inc. at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181 at (800) 421-5666 ((800)
421-2833 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-3
Additional Investment Considerations........................ B-4
Description of Securities Ratings........................... B-14
Trustees and Officers....................................... B-20
Investment Advisory and Other Services...................... B-29
Custodian and Independent Accountants....................... B-30
Portfolio Transactions and Brokerage Allocation............. B-30
Tax Status of the Fund...................................... B-31
The Distributor............................................. B-32
Distribution and Service Plans.............................. B-32
Legal Counsel............................................... B-33
Transfer Agency............................................. B-33
Performance Information..................................... B-33
Report of Independent Accountants........................... B-36
Financial Statements........................................ B-37
Notes to Financial Statements............................... B-46
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED OCTOBER 28, 1997.

<PAGE> 300

THE FUND AND THE TRUST

Van Kampen American Capital Utility Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity Trust (the "Trust"), an
open-end management investment company. The Trust is a Delaware business trust
established under the laws of the State of Delaware by a Declaration of Trust
dated May 10, 1995 (the "Declaration of Trust"). At present, the Fund, Van
Kampen American Capital Growth Fund, Van Kampen American Capital Value Fund, Van
Kampen American Capital Prospector Fund, Van Kampen American Capital Great
American Companies Fund and Van Kampen American Capital Aggressive Growth 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 Declaration of Trust permits the Trustees to create one or more separate
investment portfolios and issue a series of shares for each portfolio. The
Trustee can further sub-divide each series of shares into one or more classes of
shares for each portfolio. The Trust can issue an unlimited number of shares
with $0.01 par value. Each share represents an equal proportionate interest in
the assets of the series with each other share in such series and no interest in
any other series. No series is subject to the liabilities of any other series.
The Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.

Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon by shareholders of only the series involved. 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 a 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 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 Equity Trust, a
Massachusetts business trust, created by a Declaration of Trust dated March 26,
1987 (the "Massachusetts Trust"). The Massachusetts Trust was reorganized into
the Trust and adopted its present name 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 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 adopted
its present name.

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

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

1. With respect to 75% of its total assets, purchase any securities (other
than obligations 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 (determined at the time of investment) would then be
invested in securities of a single issuer or, if, as a result, the Fund
would hold more than 10% of the outstanding voting securities of an
issuer, except that the Fund may purchase securities of other investment
companies without regard to such limitation to the extent permitted by (i)
the 1940 Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to time,
or (iii) an exemption or other relief from the provisions of the 1940 Act.

2. Issue senior securities, borrow money from banks or enter into reverse
repurchase agreements with banks in the aggregate in excess of 33 1/3% of
the Fund's total assets (after giving effect to any such borrowing); which
amount includes no more than 5% in borrowings and reverse repurchase
agreements with any entity for temporary purposes. The Fund will not
mortgage, pledge or hypothecate any assets other than in connection with
issuances, borrowings, hedging transactions and risk management
techniques.

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, 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 any securities "on margin." Neither the deposit of initial or
maintenance margin in connection with Strategic Transactions nor short
term credits as may be necessary for the clearance of transactions is
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 interest rate or other financial
futures or index contracts or related options, except in connection with
Strategic 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, 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 and except that the Fund may
purchase securities of other investment companies to the extent permitted
by (i) the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief from the provisions of
the 1940 Act.

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

9. 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.

10. 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

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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 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.

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. Frequency
of portfolio turnover will not be a limiting factor if the Fund considers it
advantageous to purchase or sell securities. 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.

ADDITIONAL INVESTMENT CONSIDERATIONS

UTILITY SECURITIES

Entities that issue Utility Securities may be subject to a variety of risks
depending, in part, on such factors as the type of utility involved and its
geographic location. Such risks may include potential increases in operating
costs, increases in interest expenses for capital construction programs,
government regulation of rates charged to customers, costs associated with
compliance with environmental and other regulations, service interruption due to
environmental, operational or other mishaps, the effects of economic slowdowns,
surplus capacity and increased competition from other providers of utility
services. Issuers of Utility Securities generally have their rates determined by
state utility commissions or other governmental authorities or, depending on the
jurisdiction and the nature of the issuer, such issuers may set their own rates.
Changes in service rates generally lag changes in financing costs, and thus can
favorably or unfavorably affect the ability of issuers of Utility Securities to
maintain or increase dividend rates on such securities, depending upon whether
such rates and costs are declining or rising. To the extent that rates are
established or reviewed by governmental authorities, the utility is subject to
the risk that such authority will not authorize increased rates. Issuers of
Utility Securities are subject to regulation by various authorities and may be
affected by the imposition of special tariffs and charges. There can be no
assurance that regulatory policies or accounting standard changes will not
negatively affect the ability of issuers of Utility Securities to service
principal, interest and dividend payments. Because of the Trust's policy of
investing at least 80% of its total assets in Utility Securities, the Trust is
more susceptible than an investment company without such a policy to economic,
political, environmental or regulatory occurrences affecting issuers of Utility
Securities. See "Investment Objective and Policies" in the Prospectus.

Electric Utilities. Certain electric utilities ("Electric Utilities") with
uncompleted nuclear power facilities may have problems completing and licensing
such facilities, and there is public, regulatory and governmental concern with
the cost and safety of nuclear power facilities in general. Regulatory changes
with respect to nuclear and conventionally fueled generating facilities could
increase costs or impair the ability of such Electric Utilities to operate such
facilities, thus reducing their ability to service dividend payments with
respect to Utility Securities. Electric Utilities that utilize nuclear power
facilities must apply for recommissioning from the Nuclear Regulatory Commission
after 40 years. Failure to obtain recommissioning could result in an
interruption of service or the need to purchase more expensive power from other
entities and could subject the utility to significant capital construction costs
in connection with building new nuclear or alternative-fuel power facilities,
upgrading existing facilities or converting such facilities to alternative
fuels. Electric Utilities that utilize coal in connection with the production of
electric power are particularly susceptible to environmental regulation,
including the requirements of the federal Clean Air Act and of similar

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state laws. Such regulation may necessitate large capital expenditures in order
for the utility to achieve compliance.

Gas Utilities. Many gas utilities ("Gas Utilities") generally have been
adversely affected by oversupply conditions, and by increased competition from
other providers of utility services. In addition, some Gas Utilities entered
into long-term contracts with respect to the purchase or sale of gas at fixed
prices, which prices have since changed significantly in the open market. In
many cases, such price changes have been to the disadvantage of the Gas Utility.
Gas Utilities are particularly susceptible to supply and demand imbalances due
to unpredictable climate conditions and other factors and are subject to
regulatory risks as well.

Telecommunications Utilities. Telecommunications regulation typically limits
rates charged, returns earned, providers of services, types of services,
ownership, areas served and terms for dealing with competitors and customers.
Telecommunications regulation generally has tended to be less stringent for
newer services, such as mobile services, than for traditional telephone service,
although there can be no assurances that such newer services will not be heavily
regulated in the future. Regulation may limit rates based on an authorized level
of earnings, a price index, or another formula. Telephone rate regulation may
include government-mandated cross-subsidies that limit the flexibility of
existing service providers to respond to competition. Regulation may also limit
the use of new technologies and hamper efficient depreciation of existing
assets. If regulation limits the use of new technologies by established carriers
or forces cross-subsidies, large private networks may emerge.

LOWER GRADE SECURITIES

The Fund may invest up to 20% of its assets in lower-grade income securities,
including lower-grade fixed-income Utility Securities. Such lower grade
securities are rated BB or B by S&P or Ba or B by Moody's. Investment in such
securities involves special risks, as described herein. Liquidity relates to the
ability of a Fund to sell a security in a timely manner at a price which
reflects the value of that security. As discussed below, the market for lower
grade securities is considered generally to be less liquid than the market for
investment grade securities. The relative illiquidity of some of the Fund's
portfolio securities may adversely affect the ability of the Fund to dispose of
such securities in a timely manner and at a price which reflects the value of
such security in the Adviser's judgment. The market for less liquid securities
tends to be more volatile than the market for more liquid securities and market
values of relatively illiquid securities may be more susceptible to change as a
result of adverse publicity and investor perceptions than are the market values
of higher grade, more liquid securities.

The Fund's net asset value will change with changes in the value of its
portfolio securities. Because the Fund will invest in fixed income securities,
the Fund's net asset value can be expected to change as general levels of
interest rates fluctuate. When interest rates decline, the value of a portfolio
invested in fixed income securities can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio invested in fixed income
securities can be expected to decline. Net asset value and market value may be
volatile due to the Fund's investment in lower grade and less liquid securities.
Volatility may be greater during periods of general economic uncertainty.

The Adviser values the Fund's investments pursuant to guidelines adopted and
periodically reviewed by the Board of Trustees. To the extent that there is no
established retail market for some of the securities in which the Fund may
invest, there may be relatively inactive trading in such securities and the
ability of the Adviser to accurately value such securities may be adversely
affected. During periods of reduced market liquidity and in the absence of
readily available market quotations for securities held in the Fund's portfolio,
the responsibility of the Adviser to value the Fund's securities becomes more
difficult and the Adviser's judgment may play a greater role in the valuation of
the Fund's securities due to the reduced availability of reliable objective
data. To the extent that the Fund invests in illiquid securities and securities
which are restricted as to resale, the Fund may incur additional risks and
costs. Illiquid and restricted securities are particularly difficult to dispose
of.

Lower grade securities generally involve greater credit risk than higher grade
securities. A general economic downturn or a significant increase in interest
rates could severely disrupt the market for lower grade securities and adversely
affect the market value of such securities. In addition, in such circumstances,
the ability of

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issuers of lower grade securities to repay principal and to pay interest, to
meet projected financial goals and to obtain additional financing may be
adversely affected. Such consequences could lead to an increased incidence of
default for such securities and adversely affect the value of the lower grade
securities in the Fund's portfolio and thus the Fund's net asset value. The
secondary market prices of lower grade securities are less sensitive to changes
in interest rates than are those for higher rated securities, but are more
sensitive to adverse economic changes or individual issuer developments. Adverse
publicity and investor perceptions, whether or not based on rational analysis,
may also affect the value and liquidity of lower grade securities.

Yields on the Fund's portfolio securities can be expected to fluctuate over
time. In addition, periods of economic uncertainty and changes in interest rates
can be expected to result in increased volatility of the market prices of the
lower grade securities in the Fund's portfolio and thus in the net asset value
of the Fund. Net asset value and market value may be volatile due to the Fund's
investment in lower grade and less liquid securities. Volatility may be greater
during periods of general economic uncertainty. The Fund may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of interest or a repayment of principal on its portfolio holdings, and
the Fund may be unable to obtain full recovery thereof. 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 capital with respect to such issuer or the project or projects
to which the Fund's portfolio securities relate.

The Fund will rely on the Adviser's judgment, analysis and experience in
evaluating the creditworthiness of an issue. In this evaluation, 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. The
Adviser also may consider, although it does not rely primarily on, the credit
ratings of S&P and Moody's in evaluating fixed-income securities. 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 such securities held in the Fund's
portfolio. The Fund may, if deemed appropriate by the Adviser, retain a security
whose rating has been downgraded below B by S&P or below B by Moody's, or whose
rating has been withdrawn.

MONEY MARKET INSTRUMENTS

Money market instruments include (a) obligations of or guaranteed by the U.S.
government, its agencies or instrumentalities ("Government Money Market
Securities"), (b) obligations of banks subject to U.S. government regulation as
well as such other bank obligations as are insured by a U.S. government agency
("Bank Obligations"), (c) commercial paper (including variable amount master
demand notes) rated at least A-3 by S&P or Prime-3 by Moody's or, if not so
rated, issued by a corporation which has outstanding debt obligations rated at
least AA by S&P or Aa by Moody's and (d) debt obligations (other than commercial
paper) of corporate issuers which obligations are rated at least AA by S&P or Aa
by Moody's. Money market securities are subject, however, to the limitation that
they mature within one year of the date of their purchase or are subject to
repurchase agreements maturing within one year. Government Money Market
Securities include treasury bills, notes and bonds issued by the U.S. government
and backed by the full faith and credit of the United States, as well as
securities issued or guaranteed as to principal and interest by agencies and
instrumentalities of the U.S. government. Bank Obligations include certificates
of deposit and banker's acceptances of domestic banks (or Euro-dollar
obligations of foreign branches of such domestic banks) subject to U.S.
government regulation and time deposits of federal and state banks whose
accounts are insured by a government agency as well as such accounts themselves.

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 S&P or Moody's (or any other
NRSRO) 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, in addition to the factors
described in the Prospectus under the heading "Investment Objective and
Policies," the Adviser may consider such factors as the Adviser's assessment of
the credit

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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 any other NRSRO.

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. 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 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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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, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.

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

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

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (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.

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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 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.

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

The Fund may purchase and sell call options on securities, including U.S.
Treasury and agency securities, municipal obligations, mortgage-backed
securities corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments that are traded on U.S. and foreign
securities exchanges and in the over-the-counter markets and or 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.

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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 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.

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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.

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 cross hedging and 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 the 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. 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 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

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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 cashflows 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 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.

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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
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 liquid securities 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.

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 Subchapter M of the Internal Revenue Code for qualification as a
regulated investment company. See "Tax Status" in the Prospectus.

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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 Standard & Poor's Ratings Group) 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 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

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 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.

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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," "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
overwhelming as for issues designated "A-1".

A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.

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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 option 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. 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 debt 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;

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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.

<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
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 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

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.

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.

B-17
<PAGE> 316

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 by 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.

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.

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.

B-18
<PAGE> 317

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability 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.

-- 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. 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 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 protection 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
payments.

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.

B-19
<PAGE> 318

Moody's applies numerical modifiers 1, 2 and 3 in each 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.

TRUSTEES AND OFFICERS

The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and other executive officers of the Fund's investment
adviser and their principal occupations for the last five years and their
affiliations, if any, with VK/AC Holding, Inc. ("VKAC Holding"), Van Kampen
American Capital, Inc. ("Van Kampen American Capital" or "VKAC"), Van Kampen
American Capital Investment Advisory Corp. ("Advisory Corp."), Van Kampen
American Capital Asset Management, Inc. ("Asset Management"), Van Kampen
American Capital Distributors, Inc., the distributor of the Fund's shares (the
"Distributor") and ACCESS Investors Services Inc., the Fund's transfer agent
("ACCESS"). Advisory Corp. and Asset Management sometimes are referred to herein
collectively as the "Advisers". For purposes hereof, the term "Fund Complex"
includes each of the open-end investment companies advised by the Advisers
(excluding the 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......................... Private investor. Co-founder, and prior to August 1996,
1632 Morning Mountain Road Chairman, Chief Executive Officer and President, MDT
Raleigh, NC 27614 Corporation (now known as Getinge/Castle, Inc., a
Date of Birth: 07/14/32 subsidiary of Getinge Industrier AB), a company which
develops, manufactures, markets and services medical and
scientific equipment. Trustee/Director of each of the
funds in the Fund Complex.
Richard M. DeMartini*..................... President and Chief Operating Officer, Individual Asset
Two World Trade Center Management Group, a division of Morgan Stanley, Dean
66th Floor Witter, Discover & Co. Mr. DeMartini is a Director of
New York, NY 10048 InterCapital Funds, Dean Witter Distributors, Inc. and
Date of Birth: 10/12/52 Dean Witter Trust Company. Trustee of the TCW/DW Funds.
Director of the National Healthcare Resources, Inc.
Formerly Vice Chairman of the Board of the National
Association of Securities Dealers, Inc. and Chairman of
the Board of the Nasdaq Stock Market, Inc.
Trustee/Director of each of the funds in the Fund
Complex.
Linda Hutton Heagy........................ Co-Managing Partner of Heidrick & Stuggles, an executive
Sears Tower search firm. Prior to 1997, Partner, Ray & Berndtson,
233 South Wacker Drive Inc., an executive recruiting and management consulting
Suite 7000 firm. Formerly, Executive Vice President of ABN AMRO,
Chicago, IL 60606 N.A., a Dutch bank holding company. Prior to 1992,
Date of Birth: 06/03/48 Executive Vice President of La Salle National Bank.
Trustee on the University of Chicago Hospitals Board, The
International House Board and the Women's Board of the
University of Chicago. Trustee/Director of each of the
funds in the Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation.
Trustee/Director of each of the funds in the Fund
Complex.
</TABLE>

B-20
<PAGE> 319

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Jack E. Nelson............................ President, Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President, Nelson Ivest Brokerage Services Inc.,
Date of Birth: 02/13/36 a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors
Protection Corp. ("SIPC"). Trustee/Director of each of
the funds in the Fund Complex.
Don G. Powell*............................ Chairman, President, Chief Executive Officer and a
2800 Post Oak Blvd. Director of VKAC. Chairman, Chief Executive Officer and a
Houston, TX 77056 Director of the Advisers and the Distributor. Chairman
Date of Birth: 10/19/39 and a Director of ACCESS. Director or officer of certain
other subsidiaries of VKAC. Chairman of the Board of
Governors and the Executive Committee of the Investment
Company Institute. Prior to November, 1996, President,
Chief Executive Officer and a Director of VKAC Holding.
Trustee/Director of funds in the Fund Complex advised by
Advisory Corp. and prior to July 1996, President, Chief
Executive Officer and a Trustee of the funds in the Fund
Complex.
Jerome L. Robinson........................ President, Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director, Pacesetter Software, a software
Date of Birth: 10/10/22 programming company specializing in white collar
productivity. Director, Panasia Bank. Trustee/Director of
each of the funds in the Fund Complex.
Phillip B. Rooney......................... Vice Chairman and Director of The ServiceMaster Company,
One ServiceMaster Way a business and consumer services. Director of Illinois
Downers Grove, IL 60515 Tool Works, Inc., a manufacturing company; the Urban
Date of Birth: 07/08/44 Shopping Centers Inc., a retail mall management company;
and Stone Container Corp., a paper manufacturing company.
Trustee, University of Notre Dame. Formerly, President
and Chief Executive Officer, Waste Management Inc., an
environmental services company, and prior to that
President and Chief Operating Officer, Waste Management
Inc. Trustee/Director of each of the funds in the Fund
Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of the
155 Hickory Lane Graduate School, Stevens Institute of Technology.
Closter, NJ 07624 Director, Dynalysis of Princeton, a firm engaged in
Date of Birth: 08/02/24 engineering research. Trustee/Director of each of the
funds in the Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom (Illinois), legal counsel to the funds in the Fund
Chicago, IL 60606 Complex, open-end funds advised by Van Kampen American
Date of Birth: 08/22/39 Capital Management, Inc. and closed-end funds advised by
Advisory Corp. Trustee/Director of each of the funds in
the Fund Complex, open-end funds advised by Van Kampen
American Capital Management, Inc. and closed-end funds
advised by Advisory Corp.
</TABLE>

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

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

B-21
<PAGE> 320

OFFICERS

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

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Dennis J. McDonnell......... President President and a Director of VKAC.
Date of Birth: 05/20/42 President, Chief Operating Officer and a
Director of the Advisers. Director or
officer of certain other subsidiaries of
VKAC. Prior to November 1996, Executive
Vice President and a Director of VKAC
Holding. President of each of the funds in
the Fund Complex. President, Chairman of
the Board and Trustee of other investment
companies advised by the Advisers or their
affiliates.

Peter W. Hegel.............. Vice President Executive Vice President of the Advisers.
Date of Birth: 06/25/56 Director of Asset Management. Officer of
certain other subsidiaries of VKAC. Vice
President of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.

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

Ronald A. Nyberg............ Vice President and Secretary Executive Vice President, General Counsel
Date of Birth: 07/29/53 and Secretary of VKAC. Executive Vice
President, General Counsel, Assistant
Secretary and a Director of the Advisers
and the Distributor. Executive Vice
President, General Counsel and Assistant
Secretary of ACCESS. Director or officer of
certain other subsidiaries of VKAC.
Director of ICI Mutual Insurance Co., a
provider of insurance to members of the
Investment Company Institute. Prior to
November 1996, Executive Vice President,
General Counsel and Secretary of VKAC
Holding. Vice President and Secretary of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.

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

B-22
<PAGE> 321

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

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

John L. Sullivan............ Treasurer First Vice President of the Advisers.
Date of Birth: 08/20/55 Treasurer of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.

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

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

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

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

B-23
<PAGE> 322

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Weston B. Wetherell......... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: 06/15/56 and Assistant Secretary of VKAC, the
Advisers and the Distributor. Officer of
certain other subsidiaries of VKAC.
Assistant Secretary of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.

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

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

Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 65 operating funds in the Fund Complex. For purposes of the following
compensation and benefits discussion, the Fund Complex is divided into the
following three groups: the funds advised by Asset Management (the "AC Funds"),
the funds advised by Advisory Corp. excluding funds organized as series of the
Morgan Stanley Fund, Inc. (the "VK Funds") and the funds advised by Advisory
Corp. organized as series of the Morgan Stanley Fund, Inc. (the "MS Funds").
Each trustee/director who is not an affiliated person of VKAC, the Advisers, the
Distributor, ACCESS or Morgan Stanley (each a "Non-Affiliated Trustee") is
compensated by an annual retainer and meeting fees for services to the funds in
the Fund Complex. Each fund in the Fund Complex provides a deferred compensation
plan to its Non-Affiliated Trustees that allows trustees/directors to defer
receipt of their compensation and earn a return on such deferred amounts.
Deferring compensation has the economic effect as if the Non-Affiliated Trustee
reinvested his or her compensation into the funds. As of the date hereof, each
AC Fund and VK Fund 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. As of January 1, 1998, it is anticipated that each fund in the Fund
Complex, except the money market series of the MS Funds, will provide such a
retirement plan to its Non-Affiliated Trustees.

The trustees recently reviewed and adopted a standardized compensation and
benefits program for each fund in the Fund Complex. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes an annual retainer in
an amount equal to $50,000 per calendar year, due in four quarterly installments
on the first business day of each quarter. Payment of the annual retainer is
allocated among the funds in the Fund Complex (except the money market series of
the MS Funds) on the basis of the relative net assets of each fund as of the
last business day of the preceding calendar quarter. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes a per meeting fee from
each fund in the Fund Complex (except the money market series of the MS Funds)
in the amount of $200 per quarterly or special meeting attended by the
Non-Affiliated Trustee, due on the date of the 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-24
<PAGE> 323

each AC Fund, in each case as of the last business day of the preceding calendar
quarter. Each AC Fund which is the subject of a special meeting of the trustees
generally pays each Non-Affiliated Trustee a per meeting fee in the amount of
$125 per special meeting attended by the Non-Affiliated Trustee, due on the date
of such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee
in connection with his or her services as a trustee, provided that no
compensation will be paid in connection with certain telephonic special
meetings.

For each VK Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from each VK
Fund includes an annual retainer in an amount equal to $2,500 per calendar year,
due in four quarterly installments on the first business day of each calendar
quarter. Each Non-Affiliated Trustee receives a per meeting fee from each VK
Fund in the amount of $125 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Each Non-Affiliated Trustee receives a per meeting fee
from each VK Fund in the amount of $125 per special meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee, provided that no compensation will be paid in connection
with certain telephonic special meetings.

For the period from July 2, 1997 up to and including December 31, 1997, the
compensation of each Non-Affiliated Trustee from the MS Funds is intended to be
based generally on the compensation amounts and methodology used by such funds
prior to their joining the current Fund Complex on July 2, 1997. Each
trustee/director was elected as a director of the MS Funds on July 2, 1997.
Prior to July 2, 1997, the MS Funds were part of another fund complex (the
"Prior Complex") and the former directors of the MS Funds were paid an aggregate
fee allocated among the funds in the Prior Complex that resulted in individual
directors receiving total compensation between approximately $8,000 to $10,000
from the MS Funds during such funds' last fiscal year.

The trustees/directors were subject to a voluntary aggregate compensation cap
with respect to funds in the Fund Complex of $84,000 per Non-Affiliated Trustee
per year (excluding any retirement benefits) for the period July 22, 1995
through December 31, 1996, subject to the net assets and the number of funds in
the Fund Complex as of July 21, 1995 and certain other exceptions. For the
calendar year ended December 31, 1996, certain trustees/directors received
aggregate compensation from the funds in the Fund Complex over $84,000 due to
compensation received but not subject to the cap, including compensation from
new funds added to the Fund Complex after July 22, 1995 and certain special
meetings in 1996. In addition, each of Advisory Corp. or Asset Management, as
the case may be, agreed to reimburse each fund in the Fund Complex through
December 31, 1996 for any increase in the aggregate 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.

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

Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated 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 such Fund. Each
trustee/director has served as a member of the Board of Trustees of the Fund
since he or she was first appointed or elected in the year set forth below. The

B-25
<PAGE> 324

retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year. Asset Management had reimbursed each AC Fund for the expenses related to
the retirement plan through December 31, 1996.

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

COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR ESTIMATED MAXIMUM BEFORE DEFERRAL
AGGREGATE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS FROM FUND
BEFORE DEFERRAL FROM THE ACCRUED AS PART OF FROM THE TRUST UPON COMPLEX PAID
NAME(1) TRUST(2) EXPENSES(3) RETIREMENT(4) TO TRUSTEE(5)
------- ------------------------ ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
J. Miles Branagan* $16,625 $3,627 $15,000 $104,875
Linda Hutton Heagy* 16,625 391 15,000 104,875
Dr. Roger Hilsman 8,000 0 0 103,750
R. Craig Kennedy* 16,625 259 15,000 104,875
Donald C. Miller 8,000 0 0 104,875
Jack E. Nelson* 13,875 1,808 15,000 97,875
Jerome L. Robinson* 16,625 2,331 1,250 101,625
Phillip B. Rooney* 3,250 0 15,000 0
Dr. Fernando Sisto* 16,625 6,239 10,250 104,875
Wayne W. Whalen* 16,625 1,268 15,000 104,875
William S. Woodside 8,000 0 0 104,875
</TABLE>

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

* Currently a member of the Board of Trustees. Mr. Phillip B. Rooney became a
member of the Board of Trustees effective April 14, 1997 and thus does not
have a full fiscal year of information to report.

(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the Fund's
most recently completed fiscal year. Messrs. Hilsman, Miller and Woodside
retired from the Board of Trustees on December 31, 1996. Messrs. DeMartini,
McDonnell and Powell, also trustees of the Fund during all or a portion of
the Fund's last fiscal year, are not included in the compensation table
because they are affiliated persons of the Advisers and are not eligible for
compensation or retirement benefits from the Fund.

(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral from all six series of the Trust, including the Fund, with respect
to the Trust's fiscal year ended June 30, 1997. The detail of aggregate
compensation before deferral for each series, including the Fund, is shown
in Table A below. The following trustees deferred compensation from the
Trust during the fiscal year ended June 30, 1997; the aggregate compensation
deferred from all six series of the Trust, including the Fund, is as
follows: Mr. Branagan, $9,875; Ms. Heagy, $8,375; Mr. Kennedy, $2,938; Mr.
Miller, $6,625; Mr. Nelson, $12,500; Mr. Robinson, $12,500; Dr. Sisto,
$2,938; and Mr. Whalen, $12,500. The details of amounts deferred for each
series, including the Fund, are shown in Table B below. Amounts deferred are
retained by the Fund and earn a rate of return determined by reference to
either the return on the common shares of the Fund or other funds in the
Fund Complex as selected by the respective Non-Affiliated Trustee, with the
same economic effect as if such Non-Affiliated Trustee had invested in one
or more funds in the Fund Complex. To the extent permitted by the 1940 Act,
each Fund may invest in securities of those funds selected by the
Non-Affiliated Trustees in order to match the deferred compensation
obligation. The cumulative deferred compensation (including interest)
accrued with respect to each trustee, including former trustees, from all
six series of the Trust, including the Fund, as of the Trust's fiscal year
ended June 30, 1997, is as follows: Mr. Branagan, $10,987; Mr. Gaughan,
$3,743; Ms. Heagy, $10,952; Mr. Kennedy, $14,576; Mr. Miller, $16,927; Mr.
Nelson, $25,550; Mr. Rees, $2,735; Mr. Robinson, $24,693; Dr. Sisto, $4,243;
and Mr. Whalen, $23,966. The details of cumulative deferred compensation
(including interest) for each series, including the Fund, are shown in Table
C below. The deferred compensation plan is described above the Compensation
Table.

B-26
<PAGE> 325

(3) The amounts shown in this column represent the Retirement Benefits accrued
by all six series of the Trust, including the Fund, for each trustee with
respect to the Trust's fiscal year ended June 30, 1997. The details of
retirement benefits accrued for each series, including the Fund, are shown
in Table D below. The retirement plan is described above the Compensation
Table.

(4) For Messrs. Hilsman, Miller and Woodside, this is the actual annual benefits
payable from all six series of the Trust, including the Fund, in each year
of the 10-year period since such trustee's retirement. For the remaining
trustees, this is the estimated maximum annual benefits payable from all six
series of the Trust, including the Fund, in each year of the 10-year period
commencing in the year of such trustee's retirement from the Trust based on
the earlier of the trustee's anticipated retirement date or the trustee
having 10 or more years of service on the Board of Trustees (including years
of service prior to the adoption of the retirement plan) and retiring at or
after attaining the age of 60. Trustees retiring prior to the age of 60 or
with fewer than 10 years of service for the Fund may receive reduced
retirement benefits from the Fund. The actual annual benefit may be less if
the trustee is subject to the Fund Complex retirement benefit cap or if the
trustee is not fully vested at the time of retirement. Each Non-Affiliated
Trustee of the Board of Trustees has served as a member of the Board of
Trustees since he or she was first appointed or elected in the year set
forth in Table E below.

(5) The amounts shown in this column represent the aggregate compensation paid
by all 51 operating investment companies in the Fund Complex as of December
31, 1996 before deferral by the trustees under the deferred compensation
plan. Because the funds in the Fund Complex have different fiscal year ends,
the amounts shown in this column are presented on a calendar year basis. As
described in the narrative preceding the table, the Fund Complex has
increased in size since December 31, 1996. It is likely the aggregate
compensation from the Fund Complex for the calendar year ending December 31,
1997 will be higher due to the increased size of the Fund Complex during
1997. The trustees recently reviewed and adopted a standardized compensation
and benefits program to become effective January 1, 1998 which program is
described in more detail in the narrative preceding this table. Certain
trustees deferred all or a portion of their aggregate compensation from the
Fund Complex during the calendar year ended December 31, 1996. The deferred
compensation earns a rate of return determined by reference to the return on
the shares of the funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those investment companies selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
trustees' Fund Complex compensation cap covered the period July 22, 1995
through December 31, 1996. For the calendar year ended December 31, 1996,
certain trustees received compensation over $84,000 in the aggregate due to
compensation received but not subject to the cap, including compensation
from new funds added to the Fund Complex after July 22, 1995 and certain
special meetings in 1996. The Advisers and their affiliates also serve as
investment adviser for other investment companies; however, with the
exception of Messrs. McDonnell, Powell and Whalen, the trustees were not
trustees of such investment companies. Combining the Fund Complex with other
investment companies advised by the Advisers and their affiliates, Mr.
Whalen received Total Compensation of $243,375 during the calendar year
ended December 31, 1996.

TABLE A

FISCAL YEAR 1997 AGGREGATE COMPENSATION FROM THE TRUST AND EACH SERIES

<TABLE>
<CAPTION>
TRUSTEE
FISCAL -----------------------------------------------------------------------------
FUND NAME YEAR-END BRANAGAN HEAGY HILSMAN KENNEDY MILLER NELSON ROBINSON ROONEY
--------- -------- -------- ----- ------- ------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund.................. 06/30 $ 4,500 $ 4,500 $2,250 $ 4,500 $2,250 $ 4,000 $ 4,500 $ 875
Great American Companies Fund........... 06/30 2,000 2,000 1,000 2,000 1,000 1,500 2,000 250
Growth Fund............................. 06/30 2,625 2,625 1,000 2,625 1,000 2,125 2,625 875
Prospector Fund......................... 06/30 2,000 2,000 1,000 2,000 1,000 1,500 2,000 250
Utility Fund............................ 06/30 3,500 3,500 1,750 3,500 1,750 3,250 3,500 750
Value Fund.............................. 06/30 2,000 2,000 1,000 2,000 1,000 1,500 2,000 250
Trust Total........................... 16,625 16,625 8,000 16,625 8,000 13,875 16,625 3,250

<CAPTION>
TRUSTEE
----------------------------
FUND NAME SISTO WHALEN WOODSIDE
--------- ----- ------ --------
<S> <C> <C> <C>
Aggressive Growth Fund.................. $ 4,500 $ 4,500 $2,250
Great American Companies Fund........... 2,000 2,000 1,000
Growth Fund............................. 2,625 2,625 1,000
Prospector Fund......................... 2,000 2,000 1,000
Utility Fund............................ 3,500 3,500 1,750
Value Fund.............................. 2,000 2,000 1,000
Trust Total........................... 16,625 16,625 8,000
</TABLE>

B-27
<PAGE> 326

TABLE B

FISCAL YEAR 1997 AGGREGATE COMPENSATION DEFERRED FROM

THE TRUST AND EACH SERIES

<TABLE>
<CAPTION>
TRUSTEE
FISCAL ----------------------------------------------------------------------------
FUND NAME YEAR-END BRANAGAN HEAGY HILSMAN KENNEDY MILLER NELSON ROBINSON ROONEY
--------- -------- -------- ----- ------- ------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund.................... 06/30 $2,875 $3,000 $0 $ 875 $2,000 $ 3,750 $ 3,750 $0
Great American Companies Fund............. 06/30 1,000 500 0 250 750 1,250 1,250 0
Growth Fund............................... 06/30 1,625 1,125 0 563 750 1,875 1,875 0
Prospector Fund........................... 06/30 1,000 500 0 250 750 1,250 1,250 0
Utility Fund.............................. 06/30 2,375 2,750 0 750 1,625 3,125 3,125 0
Value Fund................................ 06/30 1,000 500 0 250 750 1,250 1,250 0
Trust Total............................. 9,875 8,375 0 2,938 6,625 12,500 12,500 0

<CAPTION>
TRUSTEE
---------------------------
FUND NAME SISTO WHALEN WOODSIDE
--------- ----- ------ --------
<S> <C> <C> <C>
Aggressive Growth Fund.................... $ 875 $ 3,750 $0
Great American Companies Fund............. 250 1,250 0
Growth Fund............................... 563 1,875 0
Prospector Fund........................... 250 1,250 0
Utility Fund.............................. 750 3,125 0
Value Fund................................ 250 1,250 0
Trust Total............................. 2,938 12,500 0
</TABLE>

TABLE C

FISCAL YEAR 1997 CUMULATIVE COMPENSATION DEFERRED (PLUS INTEREST)

FROM THE TRUST AND EACH SERIES

<TABLE>
<CAPTION>
TRUSTEE
FISCAL ------------------------------------------------------------------------------
FUND NAME YEAR-END BRANAGAN HEAGY HILSMAN KENNEDY MILLER NELSON ROBINSON ROONEY
--------- -------- -------- ----- ------- ------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund.................. 06/30 $ 3,197 $ 3,391 $0 $ 962 $ 2,141 $ 4,158 $ 4,219 $0
Great American Companies Fund........... 06/30 1,114 546 0 915 1,366 2,038 2,016 0
Growth Fund............................. 06/30 1,809 1,231 0 1,266 1,366 2,754 2,720 0
Prospector Fund......................... 06/30 1,114 546 0 915 1,366 2,038 2,016 0
Utility Fund............................ 06/30 2,639 4,692 0 9,603 9,322 12,524 11,706 0
Value Fund.............................. 06/30 1,114 546 0 915 1,366 2,038 2,016 0
Trust Total........................... 10,987 10,952 0 14,576 16,927 25,550 24,693 0

<CAPTION>
TRUSTEE
---------------------------
FUND NAME SISTO WHALEN WOODSIDE
--------- ----- ------ --------
<S> <C> <C> <C>
Aggressive Growth Fund.................. $ 951 $ 4,284 $0
Great American Companies Fund........... 272 2,076 0
Growth Fund............................. 611 2,770 0
Prospector Fund......................... 272 2,076 0
Utility Fund............................ 1,865 10,684 0
Value Fund.............................. 272 2,076 0
Trust Total........................... 4,243 23,966 0
</TABLE>

TABLE D

FISCAL YEAR 1997 RETIREMENT BENEFITS ACCRUED AS PART OF EXPENSES

FOR THE TRUST AND EACH SERIES

<TABLE>
<CAPTION>
TRUSTEE
FISCAL -----------------------------------------------------------------
FUND NAME YEAR-END BRANAGAN HEAGY HILSMAN KENNEDY MILLER NELSON ROBINSON
--------- -------- -------- ----- ------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund........................ 06/30 $ 556 $ 62 $ 0 $ 40 $ 0 $ 293 $ 0
Great American Companies Fund................. 06/30 616 66 0 43 0 303 0
Growth Fund................................... 06/30 616 66 0 43 0 303 0
Prospector Fund............................... 06/30 616 66 0 43 0 303 0
Utility Fund.................................. 06/30 607 65 0 47 0 303 2,331
Value Fund.................................... 06/30 616 66 0 43 0 303 0
Trust Total................................. 3,627 391 0 259 0 1,808 2,331

<CAPTION>
TRUSTEE
-----------------------------------
FUND NAME ROONEY SISTO WHALEN WOODSIDE
--------- ------ ----- ------ --------
<S> <C> <C> <C> <C>
Aggressive Growth Fund........................ $0 $ 955 $ 196 $0
Great American Companies Fund................. 0 1,060 213 0
Growth Fund................................... 0 1,060 213 0
Prospector Fund............................... 0 1,060 213 0
Utility Fund.................................. 0 1,044 220 0
Value Fund.................................... 0 1,060 213 0
Trust Total................................. 0 6,239 1,268 0
</TABLE>

TABLE E

YEAR OF ELECTION OR APPOINTMENT TO EACH SERIES OF THE TRUST

<TABLE>
<CAPTION>
TRUSTEE
-----------------------------------------------------------------------------
FUND NAME BRANAGAN HEAGY HILSMAN KENNEDY MILLER NELSON ROBINSON ROONEY SISTO
- --------- -------- ----- ------- ------- ------ ------ -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund.................... 1996 1996 1996 1996 1996 1996 1996 1997 1996
Great American Companies Fund............. 1995 1995 1995 1995 1995 1995 1995 1997 1995
Growth Fund............................... 1995 1995 1995 1995 1995 1995 1995 1997 1995
Prospector Fund........................... 1995 1995 1995 1995 1995 1995 1995 1997 1995
Utility Fund.............................. 1995 1995 1995 1993 1993 1993 1993 1997 1995
Value Fund................................ 1995 1995 1995 1995 1995 1995 1995 1997 1995

FUND NAME WHALEN WOODSIDE
- --------- ------ --------
<S> <C> <C>
Aggressive Growth Fund.................... 1996 1996
Great American Companies Fund............. 1995 1995
Growth Fund............................... 1995 1995
Prospector Fund........................... 1995 1995
Utility Fund.............................. 1993 1995
Value Fund................................ 1995 1995
</TABLE>

As of October 6, 1997, the trustees and officers of the Fund as a group owned
less than 1% of the shares of the Fund. As of October 6, 1997, no trustee or
officer of the Fund owns or would be able to acquire 5% or more of the common
stock of Morgan Stanley, Dean Witter, Discover & Co. Mr. McDonnell owns, or has
the opportunity to purchase, an equity interest in Morgan Stanley, Dean Witter,
Discover & Co., the parent

B-28
<PAGE> 327

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.

As of October 6, 1997, no person was known by the Fund to own beneficially or
to hold of record as much as 5% of the outstanding Class A Shares, Class B
Shares or Class C Shares of the Fund, except as follows:

<TABLE>
<CAPTION>
AMOUNT OF
OWNERSHIP AT CLASS OF PERCENTAGE
NAME AND ADDRESS OF HOLDER OCTOBER 6, 1997 SHARES OWNERSHIP
-------------------------- --------------- -------- ----------
<S> <C> <C> <C>
Van Kampen American Capital Trust Company..... 265,967 A 9.05%
2800 Post Oak Blvd. 376,178 B 8.17%
Houston, TX 77056 14,864 C 5.29%
Smith Barney Inc. ............................ 31,459 C 11.19%
00167318495
388 Greenwich Street
New York, NY 10013-2375
</TABLE>

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

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISORY AGREEMENT

Van Kampen American Capital Investment Advisory Corp. (the "Adviser") is the
Fund's investment adviser. The Adviser'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., which is an indirect
wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co.

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

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

The investment advisory agreement 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 offered for sale. 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.

B-29
<PAGE> 328

For the years ended June 30, 1997, 1996, and 1995 the Fund recognized advisory
expenses of $937,503, $1,009,003, and $874,190, respectively.

OTHER AGREEMENTS

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 funds advised by the Adviser or
its affiliates 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, 1997, 1996 and 1995 the Fund recognized expenses
of approximately $30,200, $12,300, and $8,800, respectively, representing the
Adviser's cost of providing accounting services.

LEGAL SERVICES AGREEMENT. The Fund and other funds advised by the Adviser and
distributed by the Distributor have entered into Legal Services Agreement
pursuant to which Van Kampen American Capital provides legal services, including
without limitation: 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 fund's. 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 years ended June 30, 1997, 1996 and 1995 the Fund recognized expenses
of approximately $9,800, $10,100, and $9,200, respectively, representing Van
Kampen American Capital, Inc.'s cost of providing legal services.

CUSTODIAN AND INDEPENDENT ACCOUNTANTS

State Street Bank and Trust Company, 225 West 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

B-30
<PAGE> 329

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.

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 Trust, of which the Fund is a separate series.

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.

During the year ended June 30, 1997, the Fund paid no brokerage commissions to
brokers selected primarily on the basis of research services provided to the
Adviser.

Effective October 31, 1996, Morgan Stanley Group Inc. ("Morgan Stanley")
became an affiliate of the Adviser. Effective May 31, 1997, Dean Witter Discover
& Co. ("Dean Witter") became an affiliate of the Adviser.

<TABLE>
<CAPTION>
AFFILIATED BROKERS
----------------------------
BROKERS MORGAN STANLEY DEAN WITTER
-------- -------------- -----------
<S> <C> <C> <C>
Commissions paid:
Fiscal year 1995....................................... $497,132 N/A N/A
Fiscal year 1996....................................... $630,128 N/A N/A
Fiscal year 1997....................................... $ 85,572 $ 0 $ 0
Fiscal year 1997 Percentages:
Commissions with affiliate to total commissions........ 0% 0%
Value of brokerage transactions with affiliate to total
transactions........................................ 0% 0%
</TABLE>

TAX STATUS OF THE FUND

The Trust and each of its series, including the Fund, will be treated as
separate corporations for 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.

B-31
<PAGE> 330

THE DISTRIBUTOR

The Distributor offers one of the industry's broadest lines of
investments -- encompassing 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.

The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
dealers. The Distributor's obligation is an agency or "best efforts" arrangement
under which the Distributor is required to take and pay for only such shares of
the Fund as may be sold to the public. The Distributor is not obligated to sell
any stated number of shares. The Distributor bears the cost of printing (but not
typesetting) prospectuses used in connection with this offering and certain
other costs, including the cost of supplemental sales literature and
advertising. The Distribution and Service Agreement is renewable from year to
year if approved (a) by the Fund's Trustees or by a vote of a majority of the
Fund's outstanding voting securities and (b) by the affirmative vote of a
majority of Trustees who are not parties to the Distribution and Service
Agreement or interested persons of any party, by votes cast in person at a
meeting called for such purpose. The Distribution and Service Agreement provides
that it will terminate if assigned, and that it may be terminated without
penalty by either party on 90 days' written notice. Total underwriting
commissions on the sale of shares of the fund for the fiscal periods indicated
are as follows:

<TABLE>
<CAPTION>
AMOUNTS
TOTAL UNDERWRITING RETAINED
COMMISSIONS BY DISTRIBUTOR
------------------ --------------
<S> <C> <C>
Fiscal Year Ended June 30, 1997............................. $ 57,814 $10,057
Fiscal Year Ended June 30, 1996............................. $108,745 $20,800
</TABLE>

DISTRIBUTION AND SERVICE PLANS

The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan 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, distributor of each
class of the Fund's shares, sub-agreements between the Distributor and members
of the NASD who are 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 who are 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 Distribution Plan provides
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

B-32
<PAGE> 331

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 fiscal year ended June 30, 1997, the Fund's aggregate expenses under
the Class B Plan were $812,346 or 1.00% of the Class B shares' average net
assets. Such expenses were paid to reimburse the Distributor for the following
payments: $593,366 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class B shares of the Fund and $218,980
for fees paid to financial intermediaries for servicing Class B shareholders and
administering the Plans. For the fiscal year ended June 30, 1997, the Fund's
aggregate expenses under the Plans for Class C shares were $32,584 or 1.00% of
the Class C shares' average net assets. Such expenses were paid to reimburse the
Distributor for the following payments: $0 for commissions and transaction fees
paid to financial intermediaries in respect of sales of Class C shares of the
Fund and $0 for fees paid to financial intermediaries for servicing Class C
shareholders and administering the Class C Plan.

For the period ended June 30, 1997, the Fund recognized expenses under the
Plans of $135,884, $859,843 and $33,797 for the Class A Shares, Class B Shares
and Class C Shares, respectively, of which $135,884, $219,617 and $32,622
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, 1996, the Fund recognized expenses under the Plans
of $145,428, $930,703 and $40,805 for the Class A Shares, Class B Shares and
Class C Shares, respectively, of which $120,117, $191,546 and $17,100 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).

TRANSFER AGENCY

During the fiscal periods ended June 30, 1997 and 1996, ACCESS, shareholder
service agent and dividend disbursing agent for the Fund, received fees
aggregating $196,000 and $217,100, respectively, for these services. These
services are provided at cost plus a profit.

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 CDSC in a maximum amount equal to
4.00% and 1.00%, respectively, of the lesser of the then current net asset value
of the shares redeemed or their initial purchase price from the Fund. Yield
quotations do not reflect the imposition of a CDSC, and if any such CDSC imposed
at the time of redemption were reflected, it would reduce the performance
quoted.

B-33
<PAGE> 332

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 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 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.

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 sector holdings and ten largest holdings. Materials may also mention
how Van Kampen American Capital believes the Fund compares relative to other
funds advised by the Adviser or its affiliates. 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 average total return, including the payment of the maximum front-end sales
charge, with respect to the Class A Shares for (i) the one year period ended
June 30, 1997 was 6.71% and (ii) the period from July 28, 1993 (the commencement
of investment operations of the Fund) through June 30, 1997 was 6.66%.

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
their inception through June 30, 1997 (as calculated in the Prospectus under the
heading "Fund Performance") was 28.84%.

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
their inception through June 30, 1997 (as calculated in the Prospectus under the
heading "Fund Performance") was 36.68%.

CLASS B SHARES

The average total return, including the payment of the CDSC, with respect to
the Class B Shares for (i) the one year period ended June 30, 1997 was 8.30% and
(ii) the period from July 28, 1993 (the commencement of investment operations of
the Fund) through June 30, 1997 was 6.92%.

The Fund's cumulative non-standardized total return, including the payment of
the CDSC, with respect to the Class B Shares from their inception through June
30, 1997 (as calculated in the Prospectus under the heading "Fund Performance")
was 30.08%.

B-34
<PAGE> 333

The Fund's cumulative non-standardized total return, excluding the payment of
the CDSC, with respect to the Class B Shares from their inception through June
30, 1997 (as calculated in the Prospectus under the heading "Fund Performance")
was 32.58%.

CLASS C SHARES

The average total return, including the payment of the CDSC, with respect to
the Class C Shares for (i) the one year period ended June 30, 1997 was 11.37%
and (ii) the period from August 13, 1993 (the commencement of distribution of
the Class C Shares) through June 30, 1997 was 7.23%.

The Fund's cumulative non-standardized total return, including the payment of
the CDSC, with respect to the Class C Shares from their inception through June
30, 1997 (as calculated in the Prospectus under the heading "Fund Performance")
was 31.13%.

The Fund's cumulative non-standardized total return, excluding the payment of
the CDSC, with respect to the Class C Shares from their inception through June
30, 1997 (as calculated in the Prospectus under the heading "Fund Performance")
was 31.13%.

B-35
<PAGE> 334

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Utility Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1997, 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, 1997, by correspondence with the custodian and broker. 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 Utility Fund as of June 30, 1997, 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 11, 1997

B-36

<PAGE> 335

PORTFOLIO OF INVESTMENTS

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 85.0%
ELECTRIC UTILITIES 44.1%
AES Corp. (a)............................................... 50,000 $ 3,537,500
Boston Edison Co. .......................................... 120,000 3,165,000
Cinergy Corp. .............................................. 93,000 3,237,562
CMS Energy Corp. ........................................... 110,000 3,877,500
DTE Energy Co. ............................................. 50,000 1,381,250
Duke Power Co. ............................................. 66,420 3,184,009
Edison International........................................ 157,000 3,905,375
Florida Progress Corp. ..................................... 96,000 3,006,000
FPL Group, Inc. ............................................ 74,000 3,408,625
GPU, Inc. .................................................. 104,175 3,737,278
Houston Industries, Inc. ................................... 129,000 2,765,438
Illinova Corp. ............................................. 65,000 1,430,000
MDU Resources Group, Inc. .................................. 56,000 1,344,000
OGE Energy Corp. ........................................... 72,000 3,276,000
Ohio Edison Co. ............................................ 138,000 3,010,125
Pinnacle West Capital Corp. ................................ 93,400 2,807,838
Public Service Co. of Colorado ............................. 79,000 3,278,500
Public Service Co. of New Mexico ........................... 78,000 1,394,250
SCANA Corp. ................................................ 139,000 3,448,937
Sierra Pacific Resources.................................... 100,000 3,200,000
Southern Co. ............................................... 163,000 3,565,625
------------
61,960,812
------------
NATURAL GAS PIPELINE AND DISTRIBUTION 2.9%
Equitable Resources, Inc. .................................. 50,000 1,418,750
National Fuel Gas Co. NJ ................................... 31,000 1,300,063
Wicor, Inc. ................................................ 36,000 1,401,750
------------
4,120,563
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 8.2%
Coastal Corp. .............................................. 34,000 1,808,375
Columbia Gas Systems, Inc. ................................. 28,000 1,827,000
El Paso Natural Gas Co. .................................... 50,000 2,750,000
Nicor, Inc. ................................................ 50,000 1,793,750
Southwest Gas Corp. ........................................ 100,000 1,987,500
Williams Cos., Inc. - Convertible Preferred................. 13,000 1,339,000
------------
11,505,625
------------
</TABLE>

See Notes to Financial Statements

B-37
<PAGE> 336

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS 4.0%
Excel Reality Trust, Inc. - Convertible Preferred........... 50,000 $ 1,362,500
Meditrust................................................... 75,000 2,985,937
Prentiss Properties Trust................................... 50,000 1,281,250
------------
5,629,687
------------
TELECOMMUNICATIONS 25.8%
Airtouch Communications, Inc. (a)........................... 50,000 1,368,750
Ameritech Corp. ............................................ 48,000 3,261,000
AT&T Corp. ................................................. 38,600 1,353,413
BellSouth Corp. ............................................ 67,000 3,107,125
Cable & Wireless, PLC - ADR (United Kingdom)................ 136,000 3,799,500
Cincinnati Bell, Inc. ...................................... 86,000 2,709,000
Nynex Corp. ................................................ 51,000 2,938,875
Portugal Telecom SA - ADR (Portugal)........................ 58,000 2,327,250
SBC Communications, Inc. ................................... 53,000 3,279,375
Sprint Corp. ............................................... 33,000 1,736,625
Stet Societa' Finanziaria Telefonica - ADR (Italy).......... 37,000 2,159,875
Tele Danmark A/S ADR (Denmark).............................. 50,000 1,306,250
Telecomunicacoes Brasileiras - ADR (Brazil)................. 12,000 1,821,000
Teleport Communications Group Class A (a)................... 62,000 2,115,750
U.S. West Media Group....................................... 81,000 3,052,687
------------
36,336,475
------------
TOTAL COMMON AND PREFERRED STOCKS..................................... 119,553,162
------------
</TABLE>

See Notes to Financial Statements

B-38
<PAGE> 337

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED INCOME SECURITIES 11.6%
CABLE TELEVISION 1.5%
$1,000 Continental Cablevision, Inc. .................. 8.300% 05/15/06 $ 1,062,580
1,000 Cox Communications, Inc. ....................... 6.875 06/15/05 990,300
------------
2,052,880
------------
ELECTRIC UTILITIES 3.1%
500 Idaho Power Co. ................................ 8.000 03/15/04 530,775
700 Iowa Electric Light & Pwr Co. .................. 8.625 05/15/01 740,320
1,000 Texas Utilities Electric Co. ................... 8.250 04/01/04 1,070,480
1,000 Union Electric Co. ............................. 7.375 12/15/04 1,027,650
1,000 Virginia Electric & Pwr Co. .................... 6.625 04/01/03 994,800
------------
4,364,025
------------
OIL, GAS, PIPELINE AND DISTRIBUTION 3.7%
500 Colorado Interstate Gas Co. .................... 10.000 06/15/05 592,100
1,000 Enron Corp. .................................... 7.125 05/15/07 1,010,700
330 Laclede Gas Co. ................................ 8.500 11/15/04 360,294
1,000 NGC Corp. ...................................... 6.750 12/15/05 978,700
500 Panhandle Eastern Pipeline Co. ................. 7.875 08/15/04 529,850
400 Southwest Gas Corp. ............................ 9.750 06/15/02 444,920
100 Texas Eastern Transmission Corp. ............... 8.000 07/15/02 103,715
1,090 Texas Gas Transmission Corp. ................... 8.625 04/01/04 1,191,261
------------
5,211,540
------------
TELECOMMUNICATIONS 3.3%
1,000 360 Communications.............................. 7.125 03/01/03 1,001,000
900 GTE Corp. ...................................... 9.375 12/01/00 973,620
1,000 Sprint Corp. ................................... 8.125 07/15/02 1,055,300
617 United Telecommunications Kansas................ 9.750 04/01/00 663,738
1,000 Worldcom, Inc. ................................. 7.750 04/01/07 1,024,250
------------
4,717,908
------------
TOTAL FIXED INCOME SECURITIES............................................... 16,346,353
------------
TOTAL LONG-TERM INVESTMENTS 96.6%
(Cost $122,992,481)....................................................... 135,899,515
SHORT-TERM INVESTMENTS 3.6%
(Cost $5,064,156)......................................................... 5,064,156
------------
TOTAL INVESTMENTS 100.2%
(Cost $128,056,637)....................................................... 140,963,671
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%)............................... (288,340)
------------
NET ASSETS 100.0%.......................................................... $140,675,331
===========
</TABLE>

(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements

B-39
<PAGE> 338

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $128,056,637)....................... $140,963,671
Cash........................................................ 4,144
Receivables:
Fund Shares Sold.......................................... 2,225,227
Dividends................................................. 382,759
Interest.................................................. 237,429
Unamortized Organizational Costs............................ 24,658
Other....................................................... 4,734
------------
Total Assets.......................................... 143,842,622
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,598,716
Fund Shares Repurchased................................... 208,176
Distributor and Affiliates................................ 154,534
Investment Advisory Fee................................... 74,259
Accrued Expenses............................................ 50,179
Deferred Compensation and Retirement Plans.................. 81,427
------------
Total Liabilities..................................... 3,167,291
------------
NET ASSETS.................................................. $140,675,331
============
NET ASSETS CONSIST OF:
Capital..................................................... $119,920,894
Net Unrealized Appreciation................................. 12,907,034
Accumulated Net Realized Gain............................... 7,464,449
Accumulated Undistributed Net Investment Income............. 382,954
------------
NET ASSETS.................................................. $140,675,331
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $52,481,801
and 3,192,071 shares of beneficial interest issued and
outstanding)............................................ $ 16.44
Maximum sales charge (5.75%* of offering price)......... 1.00
------------
Maximum offering price to public........................ $ 17.44
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $83,275,491 and
5,067,268 shares of beneficial interest issued and
outstanding)............................................ $ 16.43
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $4,918,039 and
299,404 shares of beneficial interest issued and
outstanding)............................................ $ 16.43
============
</TABLE>

*On sales of $50,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

B-40
<PAGE> 339

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $163,806).... $ 6,439,432
Interest.................................................... 1,414,846
-----------
Total Income............................................ 7,854,278
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $133,260, $859,236 and $48,593,
respectively)............................................. 1,041,089
Investment Advisory Fee..................................... 937,503
Shareholder Services........................................ 269,499
Merger Costs................................................ 156,573
Custody..................................................... 60,590
Trustees Fees and Expenses.................................. 37,907
Legal....................................................... 23,985
Amortization of Organizational Costs........................ 22,995
Other....................................................... 182,840
-----------
Total Expenses.......................................... 2,732,981
Less Expenses Reimbursed................................ 5,041
-----------
Net Expenses............................................ 2,727,940
-----------
NET INVESTMENT INCOME....................................... $ 5,126,338
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $10,817,404
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 11,904,947
End of the Period:
Investments............................................. 12,907,034
-----------
Net Unrealized Appreciation During the Period............... 1,002,087
-----------
NET REALIZED AND UNREALIZED GAIN............................ $11,819,491
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $16,945,829
===========
</TABLE>

See Notes to Financial Statements

B-41
<PAGE> 340

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended June 30, 1997 and 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 5,126,338 $ 4,873,693
Net Realized Gain........................................ 10,817,404 12,374,245
Net Unrealized Appreciation
During the Period...................................... 1,002,087 11,585,780
----------- -----------
Change in Net Assets from Operations..................... 16,945,829 28,833,718
----------- -----------
Distributions from Net Investment Income:
Class A Shares......................................... (2,064,034) (2,717,536)
Class B Shares......................................... (2,700,742) (3,509,438)
Class C Shares......................................... (153,673) (129,256)
----------- -----------
(4,918,449) (6,356,230)
----------- -----------
Distributions from Net Realized Gain:
Class A Shares......................................... (683,737) -0-
Class B Shares......................................... (1,114,278) -0-
Class C Shares......................................... (63,379) -0-
----------- -----------
(1,861,394) -0-
----------- -----------
Total Distributions...................................... (6,779,843) (6,356,230)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 10,165,986 22,477,488
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 50,324,196 44,796,872
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 5,538,900 5,057,133
Cost of Shares Repurchased............................... (80,912,740) (49,434,577)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... (25,049,644) 419,428
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS.................... (14,883,658) 22,896,916
NET ASSETS:
Beginning of the Period.................................. 155,558,989 132,662,073
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of $382,954 and $17,591,
respectively).......................................... $140,675,331 $155,558,989
============ ============

</TABLE>

See Notes to Financial Statements

B-42

<PAGE> 341

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
Year Ended June 30, of Investment
--------------------------- Operations) to
Class A Shares 1997 1996 1995 June 30, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.... $15.298 $13.386 $12.906 $ 14.300
------ ------ ------ ------
Net Investment Income....................... .637 .538 .595 .479
Net Realized and Unrealized Gain/Loss....... 1.317 2.077 .485 (1.513)
------ ------ ------ ------
Total from Investment Operations............ 1.954 2.615 1.080 (1.034)
------ ------ ------ ------
Less:
Distributions from Net Investment
Income.................................. .610 .703 .600 .323
Distributions from Net Realized Gain...... .201 -0- -0- .037
------ ------ ------ ------
Total Distributions......................... .811 .703 .600 .360
------ ------ ------ ------
Net Asset Value, End of the Period.......... $16.441 $15.298 $13.386 $ 12.906
====== ====== ====== ======
Total Return (a)............................ 13.20% 19.93% 8.70% (7.38%)*
Net Assets at End of the Period
(In millions)............................. $52.5 $57.7 $50.4 $51.5
Ratio of Expenses to Average Net Assets
(b)....................................... 1.41% 1.38% 1.34% 1.34%
Ratio of Net Investment Income to Average
Net Assets (b)............................ 4.03% 3.61% 4.55% 4.10%
Portfolio Turnover.......................... 102% 121% 109% 102%*
Average Commission Paid Per Equity Share
Traded (c)................................ $.0601 $.0590 -- --
</TABLE>

*Non-Annualized

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

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

(c) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure is not applicable for years beginning prior to June 30, 1995.

See Notes to Financial Statements

B-43
<PAGE> 342

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
From July 28, 1993
(Commencement
Year Ended June 30, of Investment
--------------------------- Operations) to
Class B Shares 1997 1996 1995 June 30, 1994
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period.... $15.296 $13.356 $12.880 $ 14.300
------- ------- ------- -------
Net Investment Income....................... .519 .426 .507 .394
Net Realized and Unrealized Gain/Loss....... 1.314 2.080 .461 (1.519)
------- ------- ------- -------
Total from Investment Operations............ 1.833 2.506 .968 (1.125)
------- ------- ------- -------
Less:
Distributions from Net Investment
Income.................................. .494 .566 .492 .258
Distributions from Net Realized Gain...... .201 -0- -0- .037
------- ------- ------- -------
Total Distributions......................... .695 .566 .492 .295
------- ------- ------- -------
Net Asset Value, End of the Period.......... $16.434 $15.296 $13.356 $ 12.880
======= ======= ======= =======
Total Return (a)............................ 12.30% 19.08% 7.80% (8.02%)*
Net Assets at End of the Period
(In millions)............................. $83.3 $92.9 $81.0 $83.7
Ratio of Expenses to Average Net Assets
(b)....................................... 2.17% 2.13% 2.05% 2.06%
Ratio of Net Investment Income to Average
Net Assets (b)............................ 3.27% 2.86% 3.84% 3.36%
Portfolio Turnover.......................... 102% 121% 109% 102%*
Average Commission Paid Per Equity Share
Traded (c)................................ $.0601 $.0590 -- --
</TABLE>

*Non-Annualized

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

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

See Notes to Financial Statements

B-44
<PAGE> 343

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
From August 13, 1993
Year Ended June 30, (Commencement
--------------------------- Distribution) to
Class C Shares 1997 1996 1995 June 30, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period................................ $15.290 $13.356 $12.868 $14.460
------- ------- ------- -------
Net Investment Income................... .503 .470 .482 .330
Net Realized and Unrealized Gain/Loss... 1.328 2.030 .498 (1.627)
------- ------- ------- -------
Total from Investment Operations........ 1.831 2.500 .980 (1.297)
------- ------- ------- -------
Less:
Distributions from Net Investment
Income.............................. .494 .566 .492 .258
Distributions from Net Realized
Gain................................ .201 -0- -0- .037
------- ------- ------- -------
Total Distributions..................... .695 .566 .492 .295
------- ------- ------- -------
Net Asset Value, End of the Period...... $16.426 $15.290 $13.356 $12.868
======= ======= ======= =======
Total Return (a)........................ 12.37% 19.00% 7.88% (9.11%)*
Net Assets at End of the Period (In
millions)............................. $4.9 $5.0 $1.3 $1.1
Ratio of Expenses to Average Net Assets
(b)................................... 2.17% 2.13% 2.09% 2.05%
Ratio of Net Investment Income to
Average Net Assets (b)................ 3.23% 2.78% 3.80% 3.38%
Portfolio Turnover...................... 102% 121% 109% 102%*
Average Commission Paid Per Equity Share
Traded (c)............................ $.0601 $.0590 -- --
</TABLE>

*Non-Annualized

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

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

See Notes to Financial Statements

B-45
<PAGE> 344

NOTES TO FINANCIAL STATEMENTS

June 30, 1997
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Utility Fund (the "Fund") is organized as a series
of the Van Kampen American Capital Equity Trust, a Delaware business trust and
is registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to provide its shareholders with capital appreciation and current income,
through investment in common stocks and income securities of companies engaged
in the utilities industry. The Fund commenced investment operations on July 28,
1993, with two classes of common shares, Class A and Class B shares. The
distribution of the Fund's Class C shares commenced on August 13, 1993.

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--Portfolio securities are valued by using market
quotations or prices provided by market makers. Any securities for which current
market quotations are not readily available are valued at their fair value as
determined in good faith using procedures established by the Board of Trustees.
Securities with remaining maturities of 60 days or less are valued at amortized
cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may 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. At June 30, 1997, there were no when
issued or delayed delivery purchase commitments.

C. INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date;
interest income is recorded on an accrual basis. Bond discount is amortized over
the expected life of each applicable security.

B-46
<PAGE> 345

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

D. ORGANIZATIONAL COSTS--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 $115,000. These costs
are being amortized on a straight line basis over the 60 month period ending
July 28, 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 by the Fund during the amortization
period, the Fund will be reimbursed for any unamortized organizational costs in
the same proportion as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.

At June 30, 1997, for federal income tax purposes, cost of long- and
short-term investments is $128,056,637; the aggregate gross unrealized
appreciation is $14,626,362 and the aggregate gross unrealized depreciation is
$1,719,328, resulting in net unrealized appreciation of $12,907,034.

F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
quarterly from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on foreign currency
transactions. 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 these items totaling $901 were reclassified from
accumulated net realized gain/loss to accumulated undistributed net investment
income. Additional permanent differences relating to the recognition of Fund
merger expenses totaling $156,573 were reclassified from accumulated
undistributed net investment income to capital.

Net realized gains, if any, are distributed annually. Distributions from net
realized gains for book purposes may include short-term capital gains and gains
on option and futures transactions. All short-term capital gains and a portion
of option and futures gains are included as ordinary income for tax purposes.

For the year ended June 30, 1997, $608,705 of the distributions from
realized gains made by the Fund were long-term capital gains. In January, 1998,
the Fund will provide tax information to shareholders for the 1997 calendar
year.

B-47
<PAGE> 346

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ------------------------------------------------------------------------
<S> <C>
First $500 million...................................... .65 of 1%
Next $500 million....................................... .60 of 1%
Over $1 billion......................................... .55 of 1%
</TABLE>

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $10,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $40,000 representing VKAC's cost of providing accounting, cash
management and legal services to the Fund.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended June
30, 1997, the Fund recognized expenses of approximately $196,000, 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. During the period, the Adviser reimbursed the Fund for certain trustees'
compensation in connection with the July, 1995 increase in the number of
trustees of the Fund.

The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Fund. The maximum annual
benefit per Trustee under the plan is equal to $2,500.

At June 30, 1997, VKAC owned 100 shares each of Classes A, B and C,
respectively.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.

B-48
<PAGE> 347

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

At June 30, 1997, capital aggregated $44,783,868, $71,029,312 and $4,107,714
for Classes A, B and C, respectively. For the year ended June 30, 1997,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.......................................... 2,620,830 $ 41,844,771
Class B.......................................... 496,213 7,650,734
Class C.......................................... 55,249 828,691
---------- ------------
Total Sales........................................ 3,172,292 $ 50,324,196
========== ============
Dividend Reinvestment:
Class A.......................................... 146,956 $ 2,266,380
Class B.......................................... 203,976 3,135,954
Class C.......................................... 8,882 136,566
---------- ------------
Total Dividend Reinvestment........................ 359,814 $ 5,538,900
========== ============
Repurchases:
Class A.......................................... (3,344,356) $(53,090,333)
Class B.......................................... (1,709,336) (26,459,861)
Class C.......................................... (89,228) (1,362,546)
---------- ------------
Total Repurchases.................................. (5,142,920) $(80,912,740)
========== ============
</TABLE>

B-49
<PAGE> 348

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

At June 30, 1996, capital aggregated $53,821,005, $86,795,620 and $4,510,486
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.......................................... 1,081,909 $ 14,643,191
Class B.......................................... 1,829,596 24,638,568
Class C.......................................... 391,241 5,515,113
---------- ------------
Total Sales........................................ 3,302,746 $ 44,796,872
========== ============
Dividend Reinvestment:
Class A.......................................... 150,482 $ 2,178,398
Class B.......................................... 193,231 2,794,761
Class C.......................................... 5,689 83,974
---------- ------------
Total Dividend Reinvestment........................ 349,402 $ 5,057,133
========== ============
Repurchases:
Class A.......................................... (1,228,535) $(17,887,971)
Class B.......................................... (2,010,741) (29,087,995)
Class C.......................................... (167,791) (2,458,611)
---------- ------------
Total Repurchases.................................. (3,407,067) $(49,434,577)
========== ============
</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

B-50
<PAGE> 349

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

the expense of their respective deferred sales arrangements, including higher
distribution and service fees and incremental transfer agency costs.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------------------------------------------------
<S> <C> <C>
First.............................................. 4.00% 1.00%
Second............................................. 3.75% None
Third.............................................. 3.50% None
Fourth............................................. 2.50% None
Fifth.............................................. 1.50% None
Sixth.............................................. 1.00% None
Seventh and Thereafter............................. None None
</TABLE>

For the year ended June 30, 1997, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$3,700 and CDSC on redeemed shares of approximately $164,400. 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 $141,749,073 and $169,893,143,
respectively.

5. 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 net assets and 1.00%
each for Class B and Class C net assets are accrued daily. Included in these
fees for the year ended June 30, 1997, are payments to VKAC of approximately
$620,500.

B-51

<PAGE> 350

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

6. FUND MERGERS

On September 27, 1995, the Fund acquired all of the assets and liabilities
of the Van Kampen American Capital Utilities Income Fund (the "AC Fund"),
through a tax free reorganization approved by AC Fund shareholders on September
21, 1995. The Fund issued 606,825, 1,173,732 and 219,180 shares of Classes A, B
and C valued at $8,495,564, $16,432,324 and $3,068,523, respectively, in
exchange for AC Fund's net assets. Included in these net assets was a capital
loss carryforward of $357,695 which is included in accumulated net realized
gain/loss on securities and cumulative book and tax basis timing differences of
$2,408 which is a component of undistributed net investment income. The shares
issued in connection with this transaction are included in common share sales
for the current period. Combined net assets on the date of acquisition were
$160,940,399.

B-52
<PAGE> 351

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN AMERICAN CAPITAL GROWTH FUND

Van Kampen American Capital Growth Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity Trust (the "Trust"), an
open-end investment company. The Fund seeks capital growth. The Fund seeks to
achieve this investment objective by investing primarily in a diversified
portfolio of common stocks and other equity securities of growth companies.
Growth companies generally include companies with established records of growth
in sales or earnings and companies with new products, services or processes that
the Fund's investment adviser believes offer investors above average potential
for capital growth. 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 October 28,
1997, (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 writing or calling Van Kampen American Capital Distributors,
Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois 60181 at (800) 421-5666
((800) 421-2833 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 (the "SEC"), Washington, D.C. 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-3
Additional Investment Considerations........................ B-4
Description of Securities Ratings........................... B-11
Trustees and Officers....................................... B-17
Legal Counsel............................................... B-26
Transfer Agency............................................. B-26
Investment Advisory and Other Services...................... B-27
Custodian and Independent Accountants....................... B-28
Portfolio Transactions and Brokerage Allocation............. B-28
Tax Status of the Fund...................................... B-29
The Distributor............................................. B-29
Distribution and Service Plans.............................. B-30
Performance Information..................................... B-30
Report of Independent Accountants........................... B-33
Financial Statements........................................ B-34
Notes to Financial Statements............................... B-43
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED OCTOBER 28, 1997

<PAGE> 352

THE FUND AND THE TRUST

Van Kampen American Capital Growth Fund (the "Fund") is a separate,
diversified series of Van Kampen American Capital Equity Trust (the "Trust"), an
open-end management investment company. The Fund was established pursuant to a
Designation of Series dated September 7, 1995. At present, the Fund, Van Kampen
American Capital Utility Fund, Van Kampen American Capital Value Fund, Van
Kampen American Capital Great American Companies Fund, Van Kampen American
Capital Prospector Fund and Van Kampen American Capital Aggressive Growth 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 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, 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 Merrit Equity Trust, a
Massachusetts business trust created by a Declaration of Trust dated March 26,
1987 (the "Massachusetts Trust"). The Massachusetts Trust was reorganized into
the Trust and adopted its present name 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.

B-2
<PAGE> 353

INVESTMENT POLICIES AND RESTRICTIONS

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, such 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 and except that the
Fund may purchase securities of other investment companies without regard
to such limitation to the extent permitted by (i) the 1940 Act, as amended
from time to time, (ii) the rules and regulations promulgated by the SEC
under the 1940 Act, as amended from time to time, or (iii) an exemption or
other relief from the provisions of the 1940 Act.

2. Invest more than 25% of its assets in a single industry, provided,
however, that this limitation excludes shares of other open-end investment
companies owned by the Fund but includes the Fund's pro rata portion of
the securities and other assets owned by any such company. (Neither the
U.S. Government nor any of its agencies or instrumentalities will be
considered an industry for purposes of this restriction.)

3. Issue senior securities, borrow money from banks or enter into reverse
repurchase agreements with banks in the aggregate in excess of 33 1/3% of
the Fund's total assets (after giving effect to any such borrowing); which
amount excludes no more than 5% in borrowings and reverse repurchase
agreements with any entity for temporary purposes. The Fund will not
mortgage, pledge or hypothecate any assets other than in connection with
issuances of senior securities, borrowings, delayed delivery and when
issued transactions and strategic transactions.

4. 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, 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.

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. 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. The Fund may not invest in securities issued by other investment companies
except as part of a merger, reorganization or other acquisition and except
to the extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the SEC under the 1940 Act,
as amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act.

9. Invest in 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.

B-3
<PAGE> 354

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.

For purposes of the concentration policy of the Fund contained in limitation
(2) above, the Fund intends to comply with the SEC staff position that
securities issued or guaranteed as to principal and interest by any one single
foreign government, or by all supranational organizations in the aggregate, are
considered to be securities of issuers in the same industry.

The Fund may not change any of these investment restrictions nor any other
fundamental policy as they apply to the Fund without the approval of the lesser
of (i) more than 50% of the Fund's outstanding voting shares or (ii) 67% or more
of the Fund's voting shares present at a meeting at which the holders of more
than 50% of the outstanding voting shares are present in person or by proxy. As
long as the percentage restrictions described above are satisfied at the time of
the investment or borrowing, the Fund will be considered to have abided by those
restrictions even if, at a later time, a change in values or net assets causes
an increase or decrease in percentage beyond that allowed.

The Fund may invest up to 15% of its total assets in illiquid securities,
securities the disposition of which is subject to substantial legal or
contractual restrictions on resale and securities that are not readily
marketable. The sale of such 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
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
illiquid or restricted securities by the Fund for purposes of the limitation set
forth above. 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. Also excluded from this limitation set forth above are
securities of other investment companies to the extent permitted by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations promulgated by
the SEC under the 1940 Act, as amended from time to time, and (iii) an exemption
or other relief from the provisions of the 1940 Act.

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.

ADDITIONAL INVESTMENT CONSIDERATIONS

BORROWING

The Fund may borrow up to 33 1/3% of the value of its total assets from banks
(including entering into reverse repurchase agreements) which amount excludes no
more than 5% in borrowings and reverse repurchase agreements with any entity for
temporary purposes. The Fund has no current intention to borrow money other than
for temporary purposes.

Borrowing by the Fund creates an opportunity for increased net income but, at
the same time, creates special risk considerations such as potential changes in
the net asset value of the Shares and in the yield on the Fund's portfolio. To
the extent that the Fund is otherwise fully invested and the Adviser believes
that additional investment opportunities exist with the potential for capital
growth, the Fund may employ leverage for the purpose of acquiring portfolio
securities. Such utilization of leverage is considered speculative, and involves
risks. The assets of the Fund, including any additional assets which may be
purchased with the proceeds of any borrowings, will consist primarily of common
stocks and other equity securities of growth companies, the prices of which are
volatile. In the event that the values of the Fund's portfolio securities do not
appreciate or, in fact, depreciate, the Fund would be forced to liquidate a
portion of its portfolio, which could be significant depending upon the
magnitude of the decline in value of the Fund's assets, to pay interest

B-4
<PAGE> 355

on, and repay the principal of, any such borrowings. Even in the event that any
assets purchased with the proceeds of such borrowings appreciate as anticipated
by the Adviser, a portion of the Fund's assets may be required to be liquidated
to meet scheduled principal and interest payments with respect to such
borrowings. Any such liquidations may be at inopportune times and prices.
Utilization of investment leverage would result in a higher volatility of the
net asset value of the Fund. The effect of leverage in a declining market would
result in a greater decrease in net asset value to holders of the Fund's shares
than if the Fund were not leveraged.

STRATEGIC TRANSACTIONS

The Fund may, but is not required to, utilize various other investment
strategies as described below. 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 fixed-income indices and other
financial instruments and purchase and sell financial futures contracts and
options thereon and enter into various currency transactions such as currency
forward contracts, currency futures contracts, currency swaps and 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
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 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 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

B-5
<PAGE> 356

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.

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

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seven days. The Fund expects generally to enter into OTC options that have cash
settlement provisions, although it is not required to do so.

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

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) that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets. All calls sold by the Fund must be "covered" (i.e.,
the Fund must own the securities or futures contract subject to the call) or
must meet the asset segregation requirements described below as long as the call
is outstanding. Even though the Fund will receive the option premium to help
protect it against loss, a call sold by the Fund exposes the Fund during the
term of the option to possible loss of opportunity to realize appreciation in
the market price of the underlying security or instrument and may require the
Fund to hold a security or instrument which it might otherwise have sold. 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) (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 fixed-income market
changes 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,
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, the net cash amount). Options on
futures contracts are similar to options on securities except that an option on
a futures

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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 the futures commission merchant or with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount of
the contract (but may be higher in some circumstances). Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. The purchase of
options on financial futures involves payment of a premium for the option
without any further obligation on the part of the Fund. If the Fund exercises an
option on a futures contract it will be obligated to post initial margin (and
potential subsequent variation margin) for the resulting futures position just
as it would for any position. Futures contracts and options thereon are
generally settled by entering into an offsetting transaction but there can be no
assurance that the position can be offset prior to settlement at an advantageous
price nor that delivery will occur.

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

The Fund also may invest in foreign stock index futures traded outside the
United States. Foreign stock index futures traded outside the United States
include the Nikkei Index of 225 Japanese stocks traded on the Singapore
International Monetary Exchange ("Nikkei Index"), Osaka Index of 50 Japanese
stocks traded on the Osaka Exchange, Financial Times Stock Exchange Index of the
100 largest stocks on the London Stock Exchange, the All Ordinaries Share Price
Index of 307 stocks on the Sydney, Melbourne Exchanges, Hang Seng Index of 33
stocks on the Hong Kong Stock Exchange, Barclays Share Price Index of 40 stocks
on the New Zealand Stock Exchange and Toronto Index of 35 stocks on the Toronto
Stock Exchange. Futures and futures options on the Nikkei Index are traded on
the Chicago Mercantile Exchange and United States commodity exchanges may
develop futures and futures options on other indices of foreign securities.
Futures and options on United States devised index of foreign stocks are also
being developed. 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.

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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 of 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.

RISK 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.

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COMBINED TRANSACTIONS. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, multiple
currency transactions and 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 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.

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.

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
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, and the Fund will segregate an
amount of assets equal to the full value of the option. OTC options settling
with physical delivery, or with an election of either physical delivery or cash
settlement, will be treated the same as other options settling with physical
delivery.

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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. To the extent such
assets are other than cash or cash equivalents, such assets will be marked to
market on a daily basis. To the extent that the Fund segregates assets other
than cash or cash equivalents in connection with the purchase or sale of a
futures contract or the sale of an option thereon, the Fund will be subject to
market risks with respect to the open futures or option position as well as with
respect to the portfolio securities segregated against such position. To the
extent that the market value of such position and of such portfolio securities
have a high degree of positive correlation, market fluctuations may adversely
affect both the value of such position and the value of such portfolio
securities, which has the effect of leveraging the Fund's portfolio assets and
increasing the Fund's investment risk.

The Fund's activities involving Strategic Transactions may be limited by the
requirements of Subchapter M of the Code for qualification as a regulated
investment company. See "Tax Status" in the Prospectus.

DESCRIPTION OF SECURITIES RATINGS

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 and repayment of principal 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

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.

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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 major exposures
to adverse conditions.

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.

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.

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.

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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
overwhelming 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.

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.

4. NOTES

-- 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).

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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

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 law 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
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>

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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.

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 by 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.

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.

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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 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.

--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 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 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.

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.

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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 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.

TRUSTEES AND OFFICERS

TRUSTEES

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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Linda Hutton Heagy........................ Co-Managing Partner of Heidrick & Stuggles, an executive
Sears Tower search firm. Prior to 1997, Partner, Ray & Berndtson,
233 South Wacker Drive Inc., an executive recruiting and management consulting
Suite 7000 firm. Formerly, Executive Vice President of ABN AMRO,
Chicago, IL 60606 N.A., a Dutch bank holding company. Prior to 1992,
Date of Birth: 06/03/48 Executive Vice President of La Salle National Bank.
Trustee on the University of Chicago Hospitals Board, The
International House Board and the Women's Board of the
University of Chicago. Trustee/Director of each of the
funds in the Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation.
Trustee/Director of each of the funds in the Fund
Complex.
Jack E. Nelson............................ President, Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President, Nelson Ivest Brokerage Services Inc.,
Date of Birth: 02/13/36 a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors
Protection Corp. ("SIPC"). Trustee/Director of each of
the funds in the Fund Complex.
Don G. Powell*............................ Chairman, President, Chief Executive Officer and a
2800 Post Oak Blvd. Director of VKAC. Chairman, Chief Executive Officer and a
Houston, TX 77056 Director of the Advisers and the Distributor. Chairman
Date of Birth: 10/19/39 and a Director of ACCESS. Director or officer of certain
other subsidiaries of VKAC. Chairman of the Board of
Governors and the Executive Committee of the Investment
Company Institute. Prior to November, 1996, President,
Chief Executive Officer and a Director of VKAC Holding.
Trustee/Director of funds in the Fund Complex advised by
Advisory Corp. and prior to July 1996, President, Chief
Executive Officer and a Trustee of the funds in the Fund
Complex.
Jerome L. Robinson........................ President, Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director, Pacesetter Software, a software
Date of Birth: 10/10/22 programming company specializing in white collar
productivity. Director, Panasia Bank. Trustee/Director of
each of the funds in the Fund Complex.
Phillip B. Rooney......................... Vice Chairman and Director of The ServiceMaster Company,
One ServiceMaster Way a business and consumer services. Director of Illinois
Downers Grove, IL 60515 Tool Works, Inc., a manufacturing company; the Urban
Date of Birth: 07/08/44 Shopping Centers Inc., a retail mall management company;
and Stone Container Corp., a paper manufacturing company.
Trustee, University of Notre Dame. Formerly, President
and Chief Executive Officer, Waste Management Inc., an
environmental services company, and prior to that
President and Chief Operating Officer, Waste Management
Inc. Trustee/Director of each of the funds in the Fund
Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of the
155 Hickory Lane Graduate School, Stevens Institute of Technology.
Closter, NJ 07624 Director, Dynalysis of Princeton, a firm engaged in
Date of Birth: 08/02/24 engineering research. Trustee/Director of each of the
funds in the Fund Complex.
</TABLE>

B-18
<PAGE> 369

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom (Illinois), legal counsel to the funds in the Fund
Chicago, IL 60606 Complex, open-end funds advised by Van Kampen American
Date of Birth: 08/22/39 Capital Management, Inc. and closed-end funds advised by
Advisory Corp. Trustee/Director of each of the funds in
the Fund Complex, open-end funds advised by Van Kampen
American Capital Management, Inc. and closed-end funds
advised by Advisory Corp.
</TABLE>

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

OFFICERS

B-19
<PAGE> 370

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

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

B-20
<PAGE> 371

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

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

B-21
<PAGE> 372

includes an annual retainer in an amount equal to $50,000 per calendar year, due
in four quarterly installments on the first business day of each quarter.
Payment of the annual retainer is allocated among the funds in the Fund Complex
(except the money market series of the MS Funds) on the basis of the relative
net assets of each fund as of the last business day of the preceding calendar
quarter. Effective January 1, 1998, the compensation of each Non-Affiliated
Trustee includes a per meeting fee from each fund in the Fund Complex (except
the money market series of the MS Funds) in the amount of $200 per quarterly or
special meeting attended by the Non-Affiliated Trustee, due on the date of the
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.

For each AC Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from the AC
Funds includes an annual retainer in an amount equal to $35,000 per calendar
year, due in four quarterly installments on the first business day of each
calendar quarter. The AC Funds pay each Non-Affiliated Trustee a per meeting fee
in the amount of $2,000 per regular quarterly meeting attended by the
Non-Affiliated Trustee, due on the date of such meeting, plus reasonable
expenses incurred by the Non-Affiliated Trustee in connection with his or her
services as a trustee. Payment of the annual retainer and the regular meeting
fee is allocated among the AC Funds (i) 50% on the basis of the relative net
assets of each AC Fund to the aggregate net assets of all the AC Funds and (ii)
50% equally to each AC Fund, in each case as of the last business day of the
preceding calendar quarter. Each AC Fund which is the subject of a special
meeting of the trustees generally pays each Non-Affiliated Trustee a per meeting
fee in the amount of $125 per special meeting attended by the Non-Affiliated
Trustee, due on the date of such meeting, plus reasonable expenses incurred by
the Non-Affiliated Trustee in connection with his or her services as a trustee,
provided that no compensation will be paid in connection with certain telephonic
special meetings.

B-22
<PAGE> 373

COMPENSATION TABLE

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

B-23
<PAGE> 374

1997; the aggregate compensation deferred from all six series of the Trust,
including the Fund, is as follows: Mr. Branagan, $9,875; Ms. Heagy, $8,375;
Mr. Kennedy, $2,938; Mr. Miller, $6,625; Mr. Nelson, $12,500; Mr. Robinson,
$12,500; Dr. Sisto, $2,938; and Mr. Whalen, $12,500. The details of amounts
deferred for each series, including the Fund, are shown in Table B below.
Amounts deferred are retained by the Fund and earn a rate of return
determined by reference to either the return on the common shares of the
Fund or other funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, each Fund may invest in
securities of those funds selected by the Non-Affiliated Trustees in order
to match the deferred compensation obligation. The cumulative deferred
compensation (including interest) accrued with respect to each trustee,
including former trustees, from all six series of the Trust, including the
Fund, as of the Trust's fiscal year ended June 30, 1997, is as follows: Mr.
Branagan, $10,987; Mr. Gaughan, $3,743; Ms. Heagy, $10,952; Mr. Kennedy,
$14,576; Mr. Miller, $16,927; Mr. Nelson, $25,550; Mr. Rees, $2,735; Mr.
Robinson, $24,693; Dr. Sisto, $4,243; and Mr. Whalen, $23,966. The details
of cumulative deferred compensation (including interest) for each series,
including the Fund, are shown in Table C below. The deferred compensation
plan is described above the Compensation Table.

B-24
<PAGE> 375

trustees were not trustees of such investment companies. Combining the Fund
Complex with other investment companies advised by the Advisers and their
affiliates, Mr. Whalen received Total Compensation of $243,375 during the
calendar year ended December 31, 1996.

TABLE A

FISCAL YEAR 1997 AGGREGATE COMPENSATION FROM THE TRUST AND EACH SERIES

TABLE B

FISCAL YEAR 1997 AGGREGATE COMPENSATION DEFERRED FROM

THE TRUST AND EACH SERIES

TABLE C

FISCAL YEAR 1997 CUMULATIVE COMPENSATION DEFERRED (PLUS INTEREST)

FROM THE TRUST AND EACH SERIES

TABLE D

FISCAL YEAR 1997 RETIREMENT BENEFITS ACCRUED AS PART OF EXPENSES

FOR THE TRUST AND EACH SERIES

B-25
<PAGE> 376

TABLE E

YEAR OF ELECTION OR APPOINTMENT TO EACH SERIES OF THE TRUST

<TABLE>
<CAPTION>
TRUSTEE
---------------------------------------------
FUND NAME BRANAGAN HEAGY HILSMAN KENNEDY MILLER
- --------- -------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund... 1996 1996 1996 1996 1996
Great American Companies
Fund................... 1995 1995 1995 1995 1995
Growth Fund.............. 1995 1995 1995 1995 1995
Prospector Fund.......... 1995 1995 1995 1995 1995
Utility Fund............. 1995 1995 1995 1993 1993
Value Fund............... 1995 1995 1995 1995 1995

<CAPTION>
TRUSTEE
------------------------------------------------------
FUND NAME NELSON ROBINSON ROONEY SISTO WHALEN WOODSIDE
- --------- ------ -------- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund... 1996 1996 1997 1996 1996 1996
Great American Companies
Fund................... 1995 1995 1997 1995 1995 1995
Growth Fund.............. 1995 1995 1997 1995 1995 1995
Prospector Fund.......... 1995 1995 1997 1995 1995 1995
Utility Fund............. 1993 1993 1997 1995 1993 1995
Value Fund............... 1995 1995 1997 1995 1995 1995
</TABLE>

<TABLE>
<CAPTION>
AMOUNT OF
OWNERSHIP AT CLASS OF PERCENTAGE
NAME AND ADDRESS OF HOLDER OCTOBER 6, 1997 SHARES OWNERSHIP
-------------------------- --------------- -------- ----------
<S> <C> <C> <C>
BENEFICIAL AND RECORD HOLDER:
Goodness Limited............................................ 233,781 A 7.79%
Lyford Cay
P.O. Box N-7776
Nassau Bahamas
MLPF&S for the Sole Benefit of Its Customers................ 96,334 C 22.31%
Attn: Fund Administration
4800 Deer Lake Dr. E. 3rd Fl.
Jacksonville, FL 32246-6484
Prudential Securities Inc. FBO.............................. 29,292 C 6.78%
Mr. Charles J. Greco
Equity Account
1155 Bodine Rd.
Chester Springs, PA 19425-2006
RECORD HOLDER ONLY:
Van Kampen American Capital Trust Company................... 605,806 A 20.19%
2800 Post Oak Blvd. 534,151 B 17.13%
Houston, TX 77056
</TABLE>

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

LEGAL COUNSEL

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

TRANSFER AGENCY

During the fiscal periods ended June 30, 1997 and 1996, ACCESS, shareholder
service agent and dividend disbursing agent for the Fund, received fees
aggregating $215,900, and $0, respectively, for these services. These services
are provided at cost plus a profit.

B-26
<PAGE> 377

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'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 is an indirect wholly-owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co.

The investment advisory agreement between the Adviser and the Fund provides
that the Adviser will administer the business affairs of the Fund, supervise the
Fund's overall investment activities in the context of implementing the Fund's
investment objectives, furnish offices, necessary facilities and equipment,
provide administrative services, and permit 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
Trustees to whom the Adviser renders periodic reports of the Fund's investment
activities.

The investment advisory agreement remains in effect from year to year if
specifically approved by the Trustees (including the independent Trustees) on
behalf of the Fund or the Fund's shareholders 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. 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 year ended June 30, 1997 and the period ended June 30, 1996, the Fund
recognized advisory expenses after fee waivers of $0 and $0, respectively.

OTHER AGREEMENTS

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 funds advised by the Adviser or
its affiliates and distributed by the Distributor in 25% of the cost of
providing such services, with 25% of the remaining 75% of such cost being paid
by the Fund and such other funds based proportionally on their respective net
assets.

For the year ended June 30, 1997 and the period ended June 30, 1996, the Fund
paid expenses of approximately $19,600 and $0, representing the Adviser's cost
of providing accounting services, respectively.

LEGAL SERVICES AGREEMENT. The Fund and other 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: 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-27
<PAGE> 378

For the year ended June 30, 1997 and the period ended June 30, 1996, the Fund
paid expenses of approximately $0 and $0, representing Van Kampen American
Capital's cost of providing legal services, respectively.

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. In selecting among the firms believed to meet the criteria for
handling a particular transaction, the Fund's Adviser may take into
consideration that certain firms have sold or are selling shares of the Fund and
that certain firms provide market, statistical or other research information to
the Fund and the Adviser, and may select firms that are affiliated with the
Fund, its Adviser or its Distributor.

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 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 size 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.

B-28
<PAGE> 379

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.

During the year ended June 30, 1997, the Fund paid no brokerage commissions on
transactions to brokers related to research services provided to the Adviser.

<TABLE>
<CAPTION>
AFFILIATED BROKERS
----------------------------
BROKERS MORGAN STANLEY DEAN WITTER
-------- -------------- -----------
<S> <C> <C> <C>
Commissions paid:
Fiscal year 1995......................................... N/A N/A N/A
Fiscal year 1996......................................... $ 247 N/A N/A
Fiscal year 1997......................................... $131,274 $6 $ 0
Fiscal year 1997 Percentages:
Commissions with affiliate to total commissions.......... 0.01% 0%
Value of brokerage transactions with affiliate to total
transactions.......................................... 0% 0%
</TABLE>

TAX STATUS OF THE FUND

THE DISTRIBUTOR

The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
dealers. The Distributor's obligation is an agency or "best efforts" arrangement
under which the Distributor is required to take and pay for only such shares of
the Fund as may be sold to the public. The Distributor is not obligated to sell
any stated number of shares. The Distributor bears the cost of printing (but not
typesetting) prospectuses used in connection with this offering and certain
other costs, including the cost of supplemental sales literature and
advertising. The Distribution and Service Agreement is renewable from year to
year if approved (a) by the Fund's Trustees or by a vote of a majority of the
Fund's outstanding voting securities and (b) by the affirmative vote of a
majority of Trustees who are not parties to the Distribution and Service
Agreement or interested persons of any party, by votes cast in person at a
meeting called for such purpose. The Distribution and Service Agreement provides
that it will terminate if assigned, and that it may be

B-29
<PAGE> 380

terminated without penalty be either party on 90 days' written notice. Total
underwriting commissions on the sale of shares of the Fund for the last fiscal
periods indicated are as follows:

<TABLE>
<CAPTION>
AMOUNTS
TOTAL UNDERWRITING RETAINED
COMMISSIONS BY DISTRIBUTOR
------------------ --------------
<S> <C> <C>
Fiscal Year Ended June 30, 1997............................. $1,336,549 $204,700
Fiscal Year Ended June 30, 1996............................. $ 0 $ 0
</TABLE>

DISTRIBUTION AND SERVICE PLANS

The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan 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 the Distribution and
Service Agreement with the Distributor, sub-agreements between the Distributor
and members of the NASD who are 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 who are 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 they will
continue in full force and effect from year to year so long as such continuance
is specifically approved by a vote of the Trustees, and also by a vote of the
disinterested Trustees, cast in person at a meeting called for the purpose of
voting on the Plans. Each of the Plans may not be amended to increase materially
the amount to be spent for the services described therein with respect to either
class of shares without approval by a vote of a majority of the outstanding
voting shares of such class, and all material amendments to either of the Plans
must be approved by the Trustees and also by the disinterested Trustees. The
Plans may be terminated with respect to either class of shares at any time by a
vote of a majority of the disinterested Trustees or by a vote of a majority of
the outstanding voting shares of such class.

For the fiscal year ended June 30, 1997, the Fund's aggregate expenses under
the Class B Plan were $161,218 or 1.00% of the Class B shares' average net
assets. Such expenses were paid to reimburse the Distributor for the following
payments: $137,128 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class B shares of the Fund and $24,090 for
fees paid to financial intermediaries for servicing Class B shareholders and
administering the Plans. For the fiscal year ended June 30, 1997, the Fund's
aggregate expenses under the Plans for Class C shares were $29,692 or 1.00% of
the Class C shares' average net assets. Such expenses were paid to reimburse the
Distributor for the following payments: $29,692 for commissions and transaction
fees paid to financial intermediaries in respect of sales of Class C shares of
the Fund and $0 for fees paid to financial intermediaries for servicing Class C
shareholders and administering the Class C Plan.

PERFORMANCE INFORMATION

B-30
<PAGE> 381

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 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
five years after their issuance and Class C Shares redeemed during the first
year after their issuance may be subject to a CDSC 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 CDSC, and if
any such CDSC 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 CDSC) 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 CDSC, and if any
such CDSC with respect to the CDSC Shares imposed at the time of redemption were
reflected, it would reduce the performance quoted.

From time to time marketing materials may provide a portfolio manager update,
an adviser update and discuss general economic conditions and outlooks. The
Fund's marketing materials may also show the Fund's 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
funds advised by the Adviser or its affiliates. Materials may also discuss the
Dalbar Financial Services study from 1984 to 1994 which examined investor cash
flow into and out of all type 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 commenced investment operations on December 27, 1995. From December
27, 1995 up to February 3, 1997, the Fund operated with a limited amount of
capital being invested by affiliates of the Fund's Adviser. Prior to February 3,
1997, the Fund had not engaged in a broad continuous public offering of its
shares, had sold shares to only a limited number of public investors and had not
been subject to redemption requests. The Fund commenced a broad public offering
of its shares on February 3, 1997. The Fund was offered for a limited time and
then was closed to new investors on March 14, 1997 after raising new assets of
approximately $100,000,000. As discussed herein, the Fund may, from time to
time, reopen and close the offering of its shares to new investors as market
conditions permit. The Fund's Adviser believes that the

B-31
<PAGE> 382

Fund's portfolio prior to February 3, 1997 was managed in a manner substantially
the same as if the Fund had been open for a broader distribution to public
investors. No assurances can be given, however, that the Fund's investment
performance would have been the same during such period if the Fund had been
broadly distributed. The Fund's investment results are based on historical
performance and are not intended to indicate future performance.

CLASS A SHARES

The Fund's average total return, including payment of the maximum sales
charge, for (i) the one year period ended June 30, 1997 was 28.15% and (ii) the
approximate one year, six month period from December 27, 1995, the commencement
of investment operations for Class A Shares of the Fund, through June 30, 1997
was 45.20%

The Fund's cumulative non-standardized total return, excluding payment of the
maximum front-end sales charge, with respect to the Class A Shares from their
inception through June 30, 1997 (as calculated in the Prospectus under the
heading "Fund Performance") was 86.33%.

CLASS B SHARES

The Fund's average total return, including payment of the maximum sales
charge, for (i) the one year period ended June 30, 1997 was 30.32% and (ii) the
approximate one year, six month period from December 27, 1995, the commencement
of investment operations for Class A Shares of the Fund, through June 30, 1997
was 48.34%

The Fund's cumulative non-standardized total return, including the payment of
the maximum CDSC, with respect to the Class B Shares from their inception
through June 30, 1997 (as calculated in the Prospectus under the heading "Fund
Performance") was 81.39%.

The Fund's cumulative non-standardized total return, excluding payment of the
maximum CDSC, with respect to Class A Shares from their inception through June
30, 1997 (as calculated in the Prospectus under the heading "Fund Performance")
was 85.39%.

CLASS C SHARES

The Fund's average total return, including payment of the maximum sales
charge, for (i) the one year period ended June 30, 1997 was 34.32% and (ii) the
approximate one year, six month period from December 27, 1995, the commencement
of investment operations for Class A Shares of the Fund, through June 30, 1997
was 50.50%

The Fund's cumulative non-standardized total return, including the payment of
the maximum CDSC, with respect to the Class C Shares from their inception
through June 30, 1997 (as calculated in the Prospectus under the heading "Fund
Performance") was 85.39%.

The Fund's cumulative non-standardized total return, excluding payment of the
maximum CDSC, with respect to the Class A Shares from their inception through
June 30, 1997 (as calculated in the Prospectus under the heading "Fund
Performance") was 85.39%.

B-32
<PAGE> 383

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Growth Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1997, and the related statement of operations for
the year then ended, the statement of changes in net assets for the year then
ended and the period from December 27, 1995 (commencement of investment
operations) to June 30, 1996, 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, 1997, 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 Growth Fund as of June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the period from December 27, 1995 (commencement of investment
operations) to June 30, 1996, and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
August 11, 1997

B-33
<PAGE> 384

PORTFOLIO OF INVESTMENTS

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 87.8%
CONSUMER DISTRIBUTION 11.1%
Bed Bath & Beyond, Inc. (a)................................. 21,350 $ 648,506
CDW Computer Centers, Inc. (a).............................. 20,000 1,061,250
Eagle Hardware & Garden, Inc. (a)........................... 37,000 846,375
Home Depot, Inc............................................. 18,000 1,240,875
Ross Stores, Inc............................................ 38,900 1,271,544
Safeway, Inc. (a)........................................... 24,200 1,116,225
Stein Mart, Inc. (a)........................................ 35,000 1,050,000
Tech Data Corp. (a)......................................... 55,500 1,744,781
TJX Cos., Inc............................................... 93,800 2,473,975
U.S. Office Products Co. (a)................................ 48,300 1,476,169
------------
12,929,700
------------
CONSUMER NON-DURABLES 7.8%
Borders Group, Inc. (a)..................................... 33,000 796,125
Intimate Brands, Inc. Class A............................... 45,000 945,000
Nautica Enterprises, Inc. (a)............................... 40,100 1,060,143
Philip Morris Cos., Inc..................................... 117,000 5,191,875
Tommy Hilfiger Corp. (a).................................... 25,700 1,032,819
------------
9,025,962
------------
CONSUMER SERVICES 6.1%
AccuStaff, Inc. (a)......................................... 63,000 1,492,313
Firstplus Financial Group, Inc. (a)......................... 30,000 1,020,000
HFS, Inc. (a)............................................... 35,500 2,059,000
Imperial Credit Industries, Inc. (a)........................ 56,100 1,153,556
Metro Networks, Inc. (a).................................... 33,200 805,100
Rental Service Corp. (a).................................... 20,000 525,000
------------
7,054,969
------------
ENERGY 0.5%
Hanover Compressor Co. (a).................................. 30,000 585,000
------------
FINANCE 10.1%
AMBAC, Inc.................................................. 17,200 1,313,650
Conseco, Inc................................................ 122,800 4,543,600
Everest Reinsurance Holdings, Inc........................... 32,000 1,268,000
Finova Group, Inc........................................... 22,900 1,751,850
Green Tree Financial Corp................................... 34,700 1,236,187
Money Store, Inc............................................ 19,600 562,275
SunAmerica, Inc............................................. 22,400 1,092,000
------------
11,767,562
------------
</TABLE>

See Notes to Financial Statements

B-34
<PAGE> 385

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>

HEALTHCARE 19.1%
Bristol-Myers Squibb Co..................................... 27,100 $ 2,195,100
ESC Medical Systems Ltd. (a)................................ 56,300 1,435,650
HBO & Co.................................................... 18,000 1,239,750
Health Management Assn., Inc., Class A (a).................. 39,000 1,111,500
Healthsouth Corp. (a)....................................... 67,500 1,683,281
Hologic, Inc. (a)........................................... 43,900 1,168,838
Jones Medical Industries, Inc............................... 13,700 650,750
Lincare Holdings, Inc. (a).................................. 34,100 1,466,300
Medicis Pharmaceutical Corp., Class A (a)................... 11,400 568,575
Merck & Co., Inc............................................ 17,050 1,764,675
PacifiCare Health Systems, Class B (a)...................... 10,000 638,750
Pfizer, Inc................................................. 8,200 979,900
Renal Treatment Centers, Inc. (a)........................... 28,800 774,000
Schering-Plough Corp........................................ 28,000 1,340,500
Tenet Healthcare Corp. (a).................................. 40,000 1,182,500
Universal Health Services, Inc., Class B (a)................ 50,900 1,959,650
Wellpoint Health Networks, Inc., Class A (a)................ 44,200 2,027,675
------------
22,187,394
------------
PRODUCER MANUFACTURING 3.4%
Thermo Instrument Systems, Inc. (a)......................... 31,200 955,500
United Waste Systems, Inc. (a).............................. 36,700 1,504,700
USA Waste Services, Inc. (a)................................ 39,300 1,517,963
------------
3,978,163
------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.7%
Praxair, Inc................................................ 21,300 1,192,800
Safeskin Corp. (a).......................................... 67,200 1,978,200
------------
3,171,000
------------
TECHNOLOGY 27.0%
Adaptec, Inc (a)............................................ 8,000 278,000
ADC Telecommunications, Inc. (a)............................ 7,500 250,313
Altera Corp. (a)............................................ 13,000 656,500
Applied Materials, Inc. (a)................................. 12,600 892,238
BMC Industries, Inc......................................... 43,200 1,479,600
BMC Software, Inc. (a)...................................... 50,000 2,768,750
Cisco Systems, Inc. (a)..................................... 15,000 1,006,875
Compaq Computer Corp. (a)................................... 29,100 2,888,175
Compuware Corp. (a)......................................... 19,200 916,800
Data General Corp. (a)...................................... 50,000 1,300,000
Dell Computer Corp. (a)..................................... 10,000 1,174,375

</TABLE>

See Notes to Financial Statements

B-35
<PAGE> 386

PORTFOLIO OF INVESTMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Security
Description Shares Market Value
- ------------------------------------------------------------------------------------
<S> <C> <C>

TECHNOLOGY (CONTINUED)
International Business Machines Corp........................ 18,000 $ 1,623,375
KLA-Tencor Corp. (a)........................................ 20,100 979,875
LSI Logic Corp. (a)......................................... 31,100 995,200
McAfee Associates, Inc. (a)................................. 20,300 1,281,437
National Instruments Corp. (a).............................. 29,800 1,050,450
National Semiconductor Corp. (a)............................ 37,000 1,133,125
Oracle Systems Corp. (a).................................... 20,500 1,032,688
Radisys Corp. (a)........................................... 47,000 1,868,250
Sanmina Corp. (a)........................................... 28,200 1,790,700
SCI Systems, Inc. (a)....................................... 21,200 1,351,500
Scientific Atlanta, Inc..................................... 45,200 988,750
Spectrian Corp. (a)......................................... 28,000 1,032,500
Tellabs, Inc. (a)........................................... 13,750 768,281
Waters Corp. (a)............................................ 54,900 1,969,537
------------
31,477,294
------------
TOTAL LONG-TERM INVESTMENTS 87.8%
(Cost $94,598,859)................................................. 102,177,044
------------
SHORT-TERM INVESTMENTS 13.3%

U.S. GOVERNMENT AGENCIES 7.6%
Federal National Mortgage Assn., ($2,940,000 par, yielding 5.519%,
08/15/97 maturity) (b).......................................... 2,919,488
Tennessee Valley Authority Discount Notes, ($6,000,000 par,
yielding 5.489%, 09/11/97 maturity).............................. 5,934,300
------------
TOTAL U.S. GOVERNMENT AGENCIES....................................... 8,853,788

REPURCHASE AGREEMENT 5.7%
SBC Warburg, Corp. ($6,635,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 06/30/97, to
be sold on 07/01/97 at $6,636,032)................................. 6,635,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $15,488,545)................................................. 15,488,788
------------
TOTAL INVESTMENTS 101.1%
(Cost $110,087,404)................................................ 117,665,832

LIABILITIES IN EXCESS OF OTHER ASSETS (1.1)%........................ (1,242,704)
------------
NET ASSETS 100.0%................................................... $116,423,128
============

</TABLE>

(a) Non-income producing security as this stock currently does not declare
dividends.

(b) Assets segregated for open option and futures transactions.

See Notes to Financial Statements

B-36
<PAGE> 387

STATEMENT OF ASSETS AND LIABILITIES

June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $110,087,404)....................... $117,665,832
Cash........................................................ 4,934
Receivables:
Fund Shares Sold.......................................... 61,098
Dividends................................................. 57,915
Unamortized Organizational Costs............................ 28,103
------------
Total Assets............................................ 117,817,882
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 585,000
Distributor and Affiliates................................ 300,742
Fund Shares Repurchased................................... 282,571
Organizational Costs...................................... 39,250
Variation Margin on Futures............................... 50,250
Accrued Expenses............................................ 113,823
Deferred Compensation and Retirement Plans.................. 23,118
------------
Total Liabilities....................................... 1,394,754
------------
NET ASSETS.................................................. $116,423,128
============
NET ASSETS CONSIST OF:
Capital..................................................... $110,686,302
Net Unrealized Appreciation................................. 7,542,991
Accumulated Net Investment Loss............................. (23,118)
Accumulated Net Realized Loss............................... (1,783,047)
------------
NET ASSETS.................................................. $116,423,128
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $53,137,178 and 2,972,290 shares of
beneficial interest issued and outstanding)............. $ 17.88
Maximum sales charge (5.75%* of offering price)......... 1.09
------------
Maximum offering price to public........................ $ 18.97
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $55,014,556 and 3,091,364 shares of
beneficial interest issued and outstanding)............. $ 17.80
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $8,271,394 and 464,855 shares of
beneficial interest issued and outstanding)............. $ 17.79
=============
</TABLE>

* On sales of $50,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

B-37

<PAGE> 388

STATEMENT OF OPERATIONS

For the Year Ended June 30, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 441,633
Dividends................................................... 158,417
-----------
Total Income............................................ 600,050
-----------
EXPENSES:
Investment Advisory Fee..................................... 297,312
Distribution (12b-1) and Service Fees (Attributed to Class
A, B, and C of $45,628, $183,191 and $29,799,
respectively)............................................. 258,618
Shareholder Services........................................ 251,382
Registration and Filing Fees................................ 130,049
Shareholder Reports......................................... 44,669
Trustees Fees and Expenses.................................. 28,453
Legal....................................................... 24,576
Custody..................................................... 8,036
Amortization of Organizational Costs........................ 7,997
Other....................................................... 37,361
-----------
Total Expenses.......................................... 1,088,453
Less:
Fees Waived and Expenses Reimbursed ($297,312 and
$97,532, respectively).............................. 394,844
Credits Earned on Cash Balances....................... 7,335
-----------
Net Expenses.......................................... 686,274
-----------
NET INVESTMENT LOSS......................................... $ (86,224)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(3,305,944)
Futures................................................... 1,548,750
-----------
Net Realized Loss........................................... (1,757,194)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 58,219
-----------
End of the Period:
Investments............................................. 7,578,428
Futures................................................. (35,437)
-----------
7,542,991
-----------
Net Unrealized Appreciation During the Period............... 7,484,772
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 5,727,578
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 5,641,354
===========
</TABLE>

See Notes to Financial Statements

B-38
<PAGE> 389

STATEMENT OF CHANGES IN NET ASSETS

For the Year Ended June 30, 1997 and the Period from
December 27, 1995 (Commencement of Investment Operations)
to June 30, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------

Year Ended Period Ended
June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss...................................... $ (86,224) $ (1,030)
Net Realized Gain/Loss................................... (1,757,194) 23,514
Net Unrealized Appreciation During the Period............ 7,484,772 58,219
------------ ----------
Change in Net Assets from Operations..................... 5,641,354 80,703
------------ ----------
Distributions from Net Realized Gain..................... (23,514) -0-
Distributions in Excess of Net Realized Gain............. (1,799) -0-
------------ ----------
Distributions from and in Excess of Net Realized
Gain*................................................ (25,313) -0-
Return of Capital Distribution*.......................... (21,887) -0-
------------ ----------
Total Distributions.................................... (47,200) -0-
------------ ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 5,594,154 80,703
------------ ----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 122,206,757 35,843
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 2,031 -0-
Cost of Shares Repurchased............................... (11,696,360) -0-
------------ ----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... 110,512,428 35,843
------------ ----------
TOTAL INCREASE IN NET ASSETS............................. 116,106,582 116,546
NET ASSETS:
Beginning of the Period.................................. 316,546 200,000
------------ ----------
End of the Period (Including accumulated net investment
loss of $23,118 and $-0-, respectively)................ $116,423,128 $ 316,546
============ ==========
</TABLE>

<TABLE>
<CAPTION>
Year Ended Period Ended
*Distributions by Class June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of Net
Realized Gain:
Class A Shares............................. $ (24,246) $ -0-
Class B Shares............................. (537) -0-
Class C Shares............................. (530) -0-
---------- ---
$ (25,313) $ -0-
========== ========
Return of Capital Distribution:
Class A Shares............................. $ (20,964) $ -0-
Class B Shares............................. (465) -0-
Class C Shares............................. (458) -0-
---------- ---
$ (21,887) $ -0-
========== ========
</TABLE>

See Notes to Financial Statements

B-39
<PAGE> 390

FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------

December 27, 1995
(Commencement of
Year Ended Investment Operations)
Class A Shares June 30, 1997(a) to June 30, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............ $13.696 $10.000
------- -------
Net Investment Income/Loss........................ .031 (.044)
Net Realized and Unrealized Gain.................. 4.810 3.740
------- -------
Total from Investment Operations.................... 4.841 3.696
Less:
Distributions from and in Excess of Net Realized
Gain............................................ .353 -0-
Return of Capital Distribution.................... .306 -0-
------- -------
Total Distributions................................. .659 -0-
------- -------
Net Asset Value, End of the Period.................. $17.878 $13.696
======= =======
Total Return* (b)................................... 36.00% 37.00%**
Net Assets at End of the Period (In millions)....... $ 53.1 $ .1
Ratio of Expenses to Average Net Assets* (c)........ 1.32% 1.46%
Ratio of Net Investment Income to Average Net
Assets*........................................... .19% (.79%)
Portfolio Turnover.................................. 139% 94%**
Average Commission Paid Per Equity Share Traded
(d)............................................... $ .0507 $ .0280
* If certain fees had not been assumed by VKAC,
Total Return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets (c)......... 2.31% 15.69%
Ratio of Net Investment Income to Average Net
Assets............................................ (.80%) (15.02%)
</TABLE>

** Non-Annualized

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .02% and .16% for the periods
ended on June 30, 1997 and 1996, respectively.

(d) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.

See Notes to Financial Statements

B-40
<PAGE> 391

FINANCIAL HIGHLIGHTS (CONTINUED)

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

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------

December 27, 1995
(Commencement of
Year Ended Investment Operations)
Class B Shares June 30, 1997(a) to June 30, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............. $13.695 $10.000
------- -------
Net Investment Loss................................ (.093) (.045)
Net Realized and Unrealized Gain................... 4.853 3.740
------- -------
Total from Investment Operations..................... 4.760 3.695
Less:
Distributions from and in Excess of Net Realized
Gain............................................. .353 -0-
Return of Capital Distribution..................... .306 -0-
------- -------
Total Distributions.................................. .659 -0-
------- -------
Net Asset Value, End of the Period................... $17.796 $13.695
======= =======
Total Return* (b).................................... 35.32% 37.00%**
Net Assets at End of the Period (In millions)........ $ 55.0 $ .1
Ratio of Expenses to Average Net Assets* (c)......... 2.07% 1.46%
Ratio of Net Investment Income to Average Net
Assets*............................................ (.56%) (.74%)
Portfolio Turnover................................... 139% 94%**
Average Commission Paid Per Equity Share Traded
(d)................................................ $ .0507 $ .0280
* If certain fees had not been assumed by VKAC, Total
Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (c).......... 3.04% 15.70%
Ratio of Net Investment Income to Average Net
Assets............................................. (1.53%) (14.97%)
</TABLE>

** Non-Annualized

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .02% and .16% for the periods
ended on June 30, 1997 and 1996, respectively.

(d) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.

See Notes to Financial Statements

B-41
<PAGE> 392

FINANCIAL HIGHLIGHTS (CONTINUED)

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

<TABLE>
<CAPTION>
December 27, 1995
(Commencement of
Year Ended Investment Operations)
Class C Shares June 30, 1997(a) to June 30, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period............. $13.695 $10.000
------- -------
Net Investment Loss................................ (.096) (.045)
Net Realized and Unrealized Gain................... 4.853 3.740
------- -------
Total from Investment Operations..................... 4.757 3.695
Less:
Distributions from and in Excess of Net Realized
Gain............................................. .353 -0-
Return of Capital Distribution..................... .306 -0-
------- -------
Total Distributions.................................. .659 -0-
------- -------
Net Asset Value, End of the Period................... $17.793 $13.695
======= =======
Total Return* (b).................................... 35.32% 37.00%**
Net Assets at End of the Period (In millions)........ $8.3 $.1
Ratio of Expenses to Average Net Assets* (c)......... 2.07% 1.46%
Ratio of Net Investment Income to Average Net
Assets*............................................ (.57%) (.74%)
Portfolio Turnover................................... 139% 94%**
Average Commission Paid Per Equity Share Traded
(d)................................................ $ .0507 $ .0280
* If certain fees had not been assumed by VKAC, Total
Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (c).......... 3.04% 15.70%
Ratio of Net Investment Income to Average Net
Assets............................................. (1.55%) (14.97%)
</TABLE>

** Non-Annualized

(a) Based on average shares outstanding.

(b) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(c) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .02% and .16% for the periods
ended on June 30, 1997 and 1996, respectively.

(d) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.

See Notes to Financial Statements

B-42
<PAGE> 393

NOTES TO FINANCIAL STATEMENTS

June 30, 1997
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital Growth Fund (the "Fund") is organized as a Delaware
business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek capital growth by investing primarily in
a diversified portfolio of common stocks and other equity securities of growth
companies. The Fund commenced investment operations on December 27, 1995, with
three classes of common shares, Class A, Class B and Class C.

A. SECURITY VALUATION--Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Investments in securities not listed on a securities exchange are valued based
on their last quoted bid price or, if not available, their fair value as
determined by the Board of Trustees. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade basis.
Realized gains and losses are determined on an identified cost basis.

The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.

B-43
<PAGE> 394

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

C. INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discount on debt
securities purchased are amortized over the expected life of each applicable
security. Premiums on debt securities are not amortized. Market discounts are
recognized at the time of sale as realized gains for book purposes and ordinary
income for tax purposes.

D. ORGANIZATIONAL COSTS--The Fund has agreed to reimburse 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 $40,000.
These costs are being amortized on a straight line basis over the 60 month
period ending December 27, 2000. 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 costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.

Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of losses from wash sales and post October 31
losses which are not recognized for tax purposes until the first day of the
following fiscal year.

At June 30, 1997, for federal income tax purposes the cost of long- and
short-term investments is $110,413,419; the aggregate gross unrealized
appreciation is $7,578,428 and the aggregate gross unrealized depreciation is
$361,452, resulting in net unrealized appreciation of $7,216,976.

F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays dividends
annually from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purposes may include
short-term capital gains and gains on futures transactions. All short-term
capital gains are included in ordinary income for tax purposes.

B-44
<PAGE> 395

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, the following permanent differences between book and tax
basis reporting for the 1997 fiscal year have been identified and appropriately
reclassified as follows:

<TABLE>
<S> <C>
Accumulated Undistributed Net Investment Income... $ 63,106(a)(b)
Accumulated Net Realized Gain/Loss on
Securities...................................... $ (1,137)(b)(c)
Capital........................................... $(61,969)(a)(c)
</TABLE>

(a) Represents $40,082 of tax basis net operating losses which are not
deductible for tax purposes.

(b) Represents short-term gains of $23,024 recognized by the Fund which may be
used as an offset against the net operating loss for tax purposes.

(c) $21,887 represents the portion of total distributions paid by the Fund which
were recharacterized for tax purposes as return of capital distributions.

G. EXPENSE REDUCTIONS--During the year ended June 30, 1997, the Fund's custody
fee was reduced by $7,335 as a result of credits earned on overnight balances.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $500 million...................................... .75 of 1%
Next $500 million....................................... .70 of 1%
Over $1 billion......................................... .65 of 1%
</TABLE>

VKAC has agreed to waive fees or reimburse certain expenses through June 30,
1998 to the extent necessary so that the net expense based upon Average Net
Assets would not exceed 1.30%, 2.05% and 2.05% for Classes A, B and C shares,
respectively.

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $24,600 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

For the year ended June 30, 1997, the Fund recognized expenses of
approximately $19,600 representing VKAC's cost of providing accounting services
to the Fund. These services are provided by VKAC at cost.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended June
30, 1997, the Fund recognized expenses of approximately $215,900, representing
ACCESS' cost of providing transfer agency and shareholder services plus a
profit.

B-45
<PAGE> 396

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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, 1997, VKAC owned 7,000 shares of Class A and 6,500 shares each
of Classes B and C, respectively.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized.

B-46
<PAGE> 397

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

At June 30, 1997, capital aggregated $50,593,110, $52,263,425, and
$7,829,767 for Classes A, B, and C, respectively. For the year ended June 30,
1997, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................. 3,381,843 $ 57,414,786
Class B.................................. 3,282,280 55,512,272
Class C.................................. 548,147 9,279,699
--------- ------------
Total Sales................................ 7,212,270 $122,206,757
========= ============
Dividend Reinvestment:
Class A.................................. 132 $ 2,031
Class B.................................. -0- -0-
Class C.................................. -0- -0-
--------- ------------
Total Dividend Reinvestment................ 132 $ 2,031
========= ============
Repurchases:
Class A.................................. (419,798) $ (6,901,267)
Class B.................................. (197,416) (3,284,564)
Class C.................................. (89,792) (1,510,529)
--------- ------------
Total Repurchases.......................... (707,006) $(11,696,360)
========= ============
</TABLE>

For the period ended June 30, 1996, transactions were as follows:

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 for Class B and C
shares will be imposed on most redemptions made within five 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

B-47

<PAGE> 398

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

shares bear the expense of their respective deferred sales arrangements,
including higher distribution and service fees and incremental transfer agency
costs.

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -----------------------------------------------------------------------------
<S> <C> <C>
First.......................................... 5.00% 1.00%
Second......................................... 4.00% None
Third.......................................... 3.00% None
Fourth......................................... 2.50% None
Fifth.......................................... 1.50% None
Sixth and thereafter........................... None None
</TABLE>

For the year ended June 30, 1997, VKAC, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$204,700 and CDSC on the redeemed shares of Classes B and C of approximately
$67,000. 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 $142,025,453 and $44,359,839,
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 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. Upon
disposition, a realized gain or loss is recognized accordingly, except when
taking delivery of a security underlying a futures contract. In these instances,
the recognition of gain or loss is postponed until the disposal of the security
underlying futures contract.

During the period, the Fund invested in futures contracts, a type of
derivative. 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 stock index futures. These contracts are generally used as
a substitute for purchasing and selling specific securities. Upon entering into
futures contracts, the Fund maintains, in a segregated

B-48
<PAGE> 399

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 30, 1997
- --------------------------------------------------------------------------------

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).

Transactions in futures contracts for the year ended June 30, 1997, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1996................................ -0-
Futures Opened.............................................. 45
Futures Closed.............................................. 30
---
Outstanding at June 30, 1997................................ 15
===
</TABLE>

The futures contracts outstanding as of June 30, 1997, and the description
and unrealized depreciation are as follows:

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C>
Long Contracts - S&P 500 Index Futures
December 1997
(Current notional value of $449,950 per
contract).................................... 15 $35,437
==== ========

</TABLE>

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% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended June 30, 1997, are payments to VKAC of approximately
$167,500.

B-49

<PAGE> 400

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN AMERICAN CAPITAL VALUE FUND

Van Kampen American Capital Value Fund (the "Fund") is a separate, diversified
series of Van Kampen American Capital Equity Trust (the "Trust"), an open-end
investment company. The Fund seeks long-term growth of capital. The Fund will
attempt to achieve this investment objective by investing primarily in a
diversified portfolio of common stocks and other equity securities of medium and
larger capitalization companies that are believed by the Fund's investment
adviser to be selling below their intrinsic value and to offer the opportunity
for significant growth of capital. 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 of the Fund. A copy of the Prospectus may
be obtained without charge by writing or calling Van Kampen American Capital
Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, IL 60181 at (800)
421-5666 ((800) 421-2833 for the hearing impaired). This Statement of Additional
Information incorporates by reference the entire Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<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-11
Trustees and Officers....................................... B-18
Legal Counsel............................................... B-27
Transfer Agency............................................. B-27
Investment Advisory and Other Services...................... B-27
Custodian and Independent Accountants....................... B-28
Portfolio Transactions and Brokerage Allocation............. B-28
Tax Status of the Fund...................................... B-29
The Distributor............................................. B-30
Distribution and Service Plans.............................. B-30
Performance Information..................................... B-31
Report of Independent Accountants........................... B-33
Financial Statements........................................ B-34
Notes to Financial Statements............................... B-42
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED OCTOBER 28, 1997.

<PAGE> 401

THE FUND AND THE TRUST

Van Kampen American Capital Value Fund (the "Fund") is a separate, diversified
series of the Van Kampen American Capital Equity 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 Utility Fund, Van Kampen American Capital Growth Fund, Van
Kampen American Capital Great American Companies Fund, Van Kampen American
Capital Prospector Fund and Van Kampen American Capital Aggressive Growth Fund
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.

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 (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 Equity Trust, a
Massachusetts business trust, created by a Declaration of Trust dated March 26,
1987 (the "Massachusetts Trust"). The Massachusetts Trust was reorganized into
the Trust and adopted its present name 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.

B-2
<PAGE> 402

INVESTMENT POLICIES AND RESTRICTIONS

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, such 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 and except that the
Fund may purchase securities of other open-end investment companies
without regard to such limitations to the extent permitted by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to time,
or (iii) an exemption or other relief from the provisions of the 1940 Act.

2. Invest more than 25% of its assets in a single industry, provided,
however, that this limitation excludes shares of other open-end investment
companies owned by the Fund but includes the Fund's pro rata portion of
the securities and other assets owned by any such company. Neither the
U.S. Government nor any of its agencies or instrumentalities will be
considered an industry for purposes of this restriction.

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

9. Invest in 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.

B-3
<PAGE> 403

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 nor any other
fundamental policy as they apply to the Fund without the approval of the lesser
of (i) more than 50% of the Fund's outstanding shares or (ii) 67% of the Fund's
shares present at a meeting at which the holders of more than 50% of the
outstanding shares are present in person or by proxy. As long as the percentage
restrictions described above are satisfied at the time of the investment or
borrowing, the Fund will be considered to have abided by those restrictions even
if, at a later time, a change in values or net assets causes an increase or
decrease in percentage beyond that allowed.

The Fund may invest up to 15% of its total assets in illiquid securities,
securities the disposition of which is subject to substantial legal or
contractual restrictions on resale and securities that are not readily
marketable. The sale of such 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
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
illiquid or restricted securities by the Fund for purposes of the limitation set
forth above. 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. 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. Also excluded from
this limitation set forth above are securities of other investment companies to
the extent permitted by (i) the 1940 Act as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief from the provisions of the
1940 Act.

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.

ADDITIONAL INVESTMENT CONSIDERATIONS

BORROWING

Borrowing by the Fund creates an opportunity for increased net income but, at
the same time, creates special risk considerations such as potential 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.

B-4
<PAGE> 404

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, equity and fixed-income indices and other
financial instruments and purchase and sell financial futures contracts and
options thereon and enter into various currency transactions such as currency
forward contracts, currency futures contracts, currency swaps and 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
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 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 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.

B-5
<PAGE> 405

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 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 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.

B-6
<PAGE> 406

that the terms of the OTC option will be satisfied. The Fund will engage in OTC
option transactions only with United States government securities dealers
recognized by the Federal Reserve Bank of New York as "primary dealers", or
broker dealers, domestic or foreign banks or other financial institutions which
have received (or the guarantors of the obligation of which have received) a
short-term credit rating of "A-1" from Standard & Poor's Ratings Group ("S&P")
or "P-1" from Moody's Investor Services, Inc. ("Moody's") or an equivalent
rating from any other nationally recognized statistical rating organization
("NRSRO"). The staff of the SEC currently takes the position that, in general,
OTC options on securities other than U.S. Government securities purchased by the
Fund, and portfolio securities "covering" the amount of the Fund's obligation
pursuant to an OTC option sold by it (the cost of the sell-back plus the
in-the-money amount, if any) are illiquid, and are subject to the Fund's
limitation on investing no more than 15% of its assets in illiquid securities.

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 fixed-income market
changes 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,
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, 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.

B-7
<PAGE> 407

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 also may invest in foreign stock index futures traded outside the
United States. Foreign stock index futures traded outside the United States
include the Nikkei Index of 225 Japanese stocks traded on the Singapore
International Monetary Exchange ("Nikkei Index"), Osaka Index of 50 Japanese
stocks traded on the Osaka Exchange, Financial Times Stock Exchange Index of the
100 largest stocks on the London Stock Exchange, the All Ordinaries Share Price
Index of 307 stocks on the Sydney, Melbourne Exchanges, Hang Seng Index of 33
stocks on the Hong Kong Stock Exchange, Barclays Share Price Index of 40 stocks
on the New Zealand Stock Exchange and Toronto Index of 35 stocks on the Toronto
Stock Exchange. Futures and futures options on the Nikkei Index are traded on
the Chicago Mercantile Exchange and United States commodity exchanges may
develop futures and futures options on other indices of foreign securities.
Futures and options on United States devised index of foreign stocks are also
being developed. 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.

B-8
<PAGE> 408

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.

COMBINED TRANSACTIONS. The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, multiple
currency transactions and 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 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

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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.

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
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, and the Fund will segregate an
amount of assets equal to the full value of the option. OTC options settling
with physical delivery, or with an election of either physical delivery or cash
settlement, will be treated the same as other options settling with physical
delivery.

In the case of a futures contract or an option thereon, the Fund must deposit
initial margin and possible daily variation margin in addition to segregating
assets sufficient to meet its obligation to purchase or provide securities or
currencies, or to pay the amount owed at the expiration of an index- based
futures contract. Such assets may consist of cash, cash equivalents, liquid debt
or equity securities or other acceptable assets. To the extent such assets are
other than cash or cash equivalents, such assets will be marked to market on a
daily basis. To the extent that the Fund segregates assets other than cash or
cash equivalents in connection with the purchase or sale of a futures contract
or the sale of an option thereon, the Fund will be subject to market risks with
respect to the open futures or option position as well as with respect to the
portfolio securities segregated

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against such position. To the extent that the market value of such position and
of such portfolio securities have a high degree of positive correlation, market
fluctuations may adversely affect both the value of such position and the value
of such portfolio securities, which has the effect of leveraging the Fund's
portfolio assets and increasing the Fund's investment risk.

DESCRIPTION OF SECURITIES RATINGS

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

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.

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SPECULATIVE GRADE

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.

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.

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.

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