VAN KAMPEN MERRITT PENNSYLVANIA TAX FREE INCOME FUND, 485BPOS, 1995-08-24

VAN KAMPEN MERRITT PENNSYLVANIA TAX FREE INCOME FUND
485BPOS, 1995-08-24

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1995

REGISTRATION NOS. 33-11384

811-4983
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 14 /X/
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 15 /X/
</TABLE>

VAN KAMPEN AMERICAN CAPITAL

PENNSYLVANIA TAX FREE INCOME FUND
(Exact Name of Registrant as Specified in Agreement and Declaration of Trust)

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

(708) 684-6000
(Registrant's Telephone Number)

Ronald A. Nyberg, Esq.

Executive Vice President,

General Counsel and Secretary,

Van Kampen American Capital, Inc.

One Parkview Plaza

Oakbrook Terrace, IL 60181

(Name and Address of Agent for Service)

Copies to:

Wayne W. Whalen, Esq.

Thomas A. Hale, Esq.

Skadden, Arps, Slate, Meagher & Flom

333 West 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: (CHECK APPROPRIATE
BOX)

/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)

/X/ ON SEPTEMBER 1, 1995 PURSUANT TO PARAGRAPH (B)

/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)

/ / ON (DATE) PURSUANT TO PARAGRAPH (A)(1)

/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)

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

IF APPROPRIATE CHECK THE FOLLOWING:

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

DECLARATION PURSUANT TO RULE 24F-2

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES AND WILL FILE WITH
THE SECURITIES AND EXCHANGE COMMISSION A RULE 24F-2 NOTICE FOR ITS FISCAL YEAR
ENDING DECEMBER 31, 1995 ON OR ABOUT FEBRUARY 28, 1996.

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<PAGE> 2

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA

TAX FREE INCOME FUND
CROSS REFERENCE SHEET
(AS REQUIRED BY ITEM 501(B) OF REGULATION S-K)

<TABLE>
<CAPTION>
ITEM NUMBER OF
FORM N-1A LOCATION OR CAPTION
----------------------------------------- ---------------------------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page.................... Cover Page
Item 2. Synopsis...................... PROSPECTUS SUMMARY; SHAREHOLDER TRANSACTION
EXPENSES; ANNUAL FUND OPERATING EXPENSES AND
EXAMPLE AFTER EXPENSE REIMBURSEMENT
Item 3. Condensed Financial
Information................. SHAREHOLDER TRANSACTION EXPENSES; ANNUAL FUND
OPERATING EXPENSES AND EXAMPLE AFTER EXPENSE
REIMBURSEMENT; FINANCIAL HIGHLIGHTS; FUND
PERFORMANCE; SHAREHOLDER SERVICES; ADDITIONAL
INFORMATION
Item 4. General Description of
Registrant.................. PROSPECTUS SUMMARY; THE FUND; INVESTMENT OBJECTIVE
AND POLICIES; MUNICIPAL SECURITIES; INVESTMENT
PRACTICES; SHAREHOLDER SERVICES; ADDITIONAL
INFORMATION
Item 5. Management of the Fund........ ANNUAL FUND OPERATING EXPENSES AND EXAMPLE AFTER
EXPENSE REIMBURSEMENT; INVESTMENT ADVISORY
SERVICES; ALTERNATIVE SALES ARRANGEMENTS; PURCHASE
OF SHARES; SHAREHOLDER SERVICES; ADDITIONAL
INFORMATION
Item 6. Capital Stock and
Other Securities............ DISTRIBUTIONS FROM THE FUND; REDEMPTION OF SHARES;
THE DISTRIBUTION AND SERVICE PLANS; TAX STATUS;
SHAREHOLDER SERVICES; ADDITIONAL INFORMATION
Item 7. Purchase of Securities
Being Offered............... SHAREHOLDER TRANSACTION EXPENSES; ALTERNATIVE SALES
ARRANGEMENTS; PURCHASE OF SHARES; THE DISTRIBUTION
AND SERVICE PLANS; FUND PERFORMANCE; SHAREHOLDER
SERVICES; ADDITIONAL INFORMATION
Item 8. Redemption or Repurchase...... ALTERNATIVE SALES ARRANGEMENTS; PURCHASE OF SHARES;
REDEMPTION OF SHARES; SHAREHOLDER SERVICES;
ADDITIONAL INFORMATION
Item 9. Pending Legal Proceedings..... Not Applicable
</TABLE>

i
<PAGE> 3

<TABLE>
<CAPTION>
ITEM NUMBER OF
FORM N-1A LOCATION OR CAPTION
----------------------------------------- ---------------------------------------------------
<S> <C> <C>
PART B
Item 10. Cover Page.................... Cover Page
Item 11. Table of Contents............. Table of Contents
Item 12. General Information
and History................. The Fund
Item 13. Investment Objectives
and Policies................ Investment Policies and Restrictions; Additional
Investment Considerations
Item 14. Management of the Fund........ Officers and Trustees
Item 15. Control Persons and Principal
Holders of Securities....... Shares of the Fund; Officers and Trustees
Item 16. Investment Advisory and
Other Services.............. Contained in Prospectus under captions: INVESTMENT
ADVISORY SERVICES; ALTERNATIVE SALES ARRANGEMENTS;
PURCHASE OF SHARES; THE DISTRIBUTION AND SERVICE
PLANS; Custodian; Legal Counsel and Independent
Auditors; Investment Advisory and Other Services;
Officers and Trustees; The Distributor; Notes to
Financial Statements
Item 17. Brokerage Allocation.......... Portfolio Transactions
Item 18. Capital Stock and
Other Securities............ Shares of the Fund
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................... Contained in Prospectus under captions: ALTERNATIVE
SALES ARRANGEMENTS; PURCHASE OF SHARES; SHAREHOLDER
SERVICES; REDEMPTION OF SHARES
Item 20. Tax Status.................... Contained in Prospectus under caption TAX STATUS;
Tax Status of the Fund
Item 21. Underwriters.................. The Distributor; Notes to Financial Statements
Item 22. Calculations of Performance
Data........................ Continued in Prospectus under caption: FUND
PERFORMANCE; Performance Information
Item 23. Financial Statements.......... Contained in the Prospectus under the caption:
FINANCIAL HIGHLIGHTS; Independent Auditors' Report;
Financial Statements; Notes to Financial
Statements; Officers and Trustees
</TABLE>

PART C

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

ii
<PAGE> 4

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

VAN KAMPEN AMERICAN CAPITAL

PENNSYLVANIA TAX FREE INCOME FUND
------------------------------------------------------------------------------

Van Kampen American Capital Pennsylvania Tax Free Income Fund, formerly known
as Van Kampen Merritt Pennsylvania Tax Free Income Fund (the "Fund"), is a
non-diversified, open-end management investment company, commonly known as a
"mutual fund," and is organized as a Pennsylvania trust. The Fund's investment
objective is to provide only Pennsylvania investors a high level of current
income exempt from federal and Pennsylvania state income taxes and, where
possible under local law, local income and personal property taxes, through
investment primarily in a varied portfolio of medium and lower grade municipal
securities. The Fund may invest in medium and lower grade municipal securities
rated between BBB and B- (inclusive) by Standard & Poor's Ratings Group, Baa and
B3 (inclusive) by Moody's Investors Service, Inc., comparably rated short-term
municipal obligations and municipal securities determined by the Fund's
investment adviser to be of comparable quality. Municipal securities in which
the Fund may invest include conventional fixed-rate municipal securities,
variable rate municipal securities and other types of municipal securities
described herein. See "Municipal Securities." There is no assurance that the
Fund will achieve its investment objective. THE FUND IS AVAILABLE FOR PURCHASE
ONLY BY RESIDENTS OF PENNSYLVANIA.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION 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 September 1, 1995, containing
additional information about the Fund has been filed with the Securities and
Exchange Commission and 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 Telecommunication
Device For the Deaf at (800) 772-8889.

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

VAN KAMPEN AMERICAN CAPITAL (SM)

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

THIS PROSPECTUS IS DATED SEPTEMBER 1, 1995.

<PAGE> 5

(Continued from previous page)

Investment in medium and lower grade municipal securities involves special
risks as compared with investment in higher grade municipal securities,
including potentially greater sensitivity to a general economic downturn or to a
significant increase in interest rates, greater market price volatility and less
liquid secondary market trading. See "Municipal Securities -- Special
Considerations Regarding Medium and Lower Grade Municipal Securities."
Investment in the Fund may not be appropriate for all investors.

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

The Fund currently offers three classes of its shares (the "Alternative Sales
Arrangements") which may be purchased at a price equal to their net asset value
per share, plus sales charges which, at the election of the investor, may be
imposed (i) at the time of purchase ("Class A Shares") or (ii) on a contingent
deferred basis (Class A Share accounts over $1 million, "Class B Shares" and
"Class C Shares"). The Alternative Sales Arrangements permit an investor to
choose the method of purchasing shares that is more beneficial to the investor,
taking into account the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances.

Each class of shares pays ongoing distribution and service fees at an
aggregate annual rate of (i) for Class A Shares, up to 0.25% of the Fund's
average daily net assets attributable to the Class A Shares, (ii) for Class B
Shares, up to 1.00% of the Fund's average daily net assets attributable to the
Class B Shares and (iii) for Class C Shares, up to 1.00% of the Fund's average
daily net assets attributable to the Class C Shares. Investors should understand
that the purpose and function of the deferred sales charge and the distribution
and service fees with respect to the Class A Share accounts over $1 million,
Class B Shares and Class C Shares are the same as those of the initial sales
charge and distribution and service fees with respect to the Class A Share
accounts below $1 million. Each share of the Fund represents an identical
interest in the investment portfolio 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, which will cause the different classes of shares to
have different expense ratios and to pay different rates of dividends, (ii) each
class has exclusive voting rights with respect to those provisions of the Fund's
Rule 12b-1 distribution plan which relate only to such class and (iii) the
classes have different exchange privileges. Class B Shares automatically will
convert to Class A Shares seven years after the end of the calendar month in
which the investor's order to purchase was accepted, in the circumstances and
subject to the qualifications described in this Prospectus. See "Alternative
Sales Arrangements" and "Purchase of Shares."

2
<PAGE> 6

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................................. 4
Shareholder Transaction Expenses............................... 8
Annual Fund Operating Expenses and Example After
Expense Reimbursement.......................................... 9
Financial Highlights........................................... 11
The Fund....................................................... 13
Investment Objective and Policies.............................. 13
Municipal Securities........................................... 16
Investment Practices........................................... 22
Investment Advisory Services................................... 24
Alternative Sales Arrangements................................. 26
Purchase of Shares............................................. 28
Shareholder Services........................................... 37
Redemption of Shares........................................... 42
The Distribution and Service Plans............................. 45
Distributions from the Fund.................................... 47
Tax Status..................................................... 48
Fund Performance............................................... 52
Description of Shares of the Fund.............................. 54
Additional Information......................................... 54
Appendix A: Description of Municipal Securities Ratings........ 55
</TABLE>

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

3
<PAGE> 7

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

THE FUND. Van Kampen American Capital Pennsylvania Tax Free Income Fund (the
"Fund") is a non-diversified, open-end management investment company, commonly
known as a "mutual fund," and is organized as a Pennsylvania trust. See "The
Fund."

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 provide only
Pennsylvania investors a high level of current income exempt from federal and
Pennsylvania state income taxes and, where possible under local law, local
income and personal property taxes, through investment primarily in a varied
portfolio of medium and lower grade municipal securities.

INVESTMENT POLICIES. The Fund invests in municipal securities issued by or on
behalf of the Commonwealth of Pennsylvania and its political subdivisions,
agencies and instrumentalities, certain interstate agencies and certain
territories of the United States. Municipal securities in which the Fund may
invest include fixed and variable rate securities, municipal notes, municipal
leases, tax exempt commercial paper, custodial receipts, participation
certificates, Pennsylvania tax exempt money market funds and derivative
municipal securities the terms of which include elements of, or are similar in
effect to, certain Strategic Transactions (as defined herein) in which the Fund
may engage. The Fund may invest up to 15% of its total assets in derivative
variable rate securities such as inverse floaters, whose rates vary inversely
with changes in market rates of interest or range or capped floaters, whose
rates are subject to periodic or lifetime caps. The Fund may invest in medium
and lower grade municipal securities rated at the time of investment between BBB
and B- (inclusive) by Standard & Poor's Ratings Group ("S&P"), Baa and B3
(inclusive) by Moody's Investors Service, Inc. ("Moody's"), comparably rated
short-term municipal obligations and municipal securities determined by Van
Kampen American Capital Investment Advisory Corp. (the "Adviser"), the Fund's
investment adviser, to be of comparable quality. There is no assurance that the
Fund will achieve its investment objective. THE FUND IS AVAILABLE FOR PURCHASE
ONLY BY RESIDENTS OF PENNSYLVANIA.

4
<PAGE> 8

considered by Moody's as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. In Moody's view, interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
In Moody's view, such securities lack outstanding investment characteristics and
have speculative characteristics as well.

The Fund may invest in lower grade municipal securities rated at the time of
investment either not lower than B- by S&P or not lower than B3 by Moody's, in
comparably rated short-term municipal obligations and in municipal securities
determined by the Adviser to be of comparable quality. Municipal securities
rated B by S&P generally are regarded by S&P, on balance, as predominantly
speculative with respect to capacity to pay interest or repay principal in
accordance with the terms of the obligation. While such securities will likely
have some quality and protective characteristics, in S&P's view these are
outweighed by large uncertainties or major risk exposure to adverse conditions.
Securities rated B by Moody's are viewed by Moody's as generally lacking
characteristics of the desirable investment. In Moody's view, assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.

The Fund will not make initial investments in municipal securities rated at
the time of investment below B- by S&P and below B3 by Moody's, in comparably
rated short-term municipal obligations or in municipal securities determined by
the Adviser to be of comparable quality. The Fund may retain municipal
securities which are downgraded after investment. There is no minimum rating
with respect to municipal securities which may be retained in the Fund's
portfolio, and the Fund may thus hold securities that are in default or with
respect to which payment of interest or repayment of principal is in arrears. A
complete description of the various S&P and Moody's rating categories is
included as Appendix A to this Prospectus.

Investment in medium and lower grade municipal securities involves special
risks as compared with investment in higher grade municipal securities,
including potentially greater sensitivity to a general economic downturn,
greater market price volatility and less liquid secondary market trading. The
net asset value per share of the Fund can be expected to increase or decrease
depending on real or perceived changes in the credit risks associated with its
portfolio investments, changes in interest rates and other factors affecting the
municipal credit markets generally. There is no assurance that the Fund will
achieve its investment objective. The Fund may not be an appropriate investment
for all investors. Furthermore, interest on certain "private activity"
obligations in which the Fund may invest up to 20% of its assets is treated as a
preference item for the purpose of calculating the alternative minimum tax and,
accordingly, a portion of the income produced by the Fund may be taxable under
the alternative minimum tax. The Fund may not be a suitable investment for
investors who are already subject to the federal alternative minimum tax or who
would become subject to the federal alternative minimum tax as a result

5
<PAGE> 9

of an investment in the Fund. See "Investment Objective and Policies,"
"Municipal Securities," "Appendix A" and "Tax Status."

INVESTMENT PRACTICES. Subject to certain limitations, the Fund may enter into
strategic transactions, lend its portfolio securities, and enter into
when-issued or delayed delivery transactions. These investments entail certain
risks. See "Municipal Securities" and "Investment Practices."

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

ALTERNATIVE SALES ARRANGEMENTS. The Alternative Sales Arrangements permit an
investor to choose the method of purchasing shares that is more beneficial to
the investor, taking into account the amount of the purchase, the length of time
the investor expects to hold the shares and other circumstances. Investors
should consider such factors together with the amount of sales charges and
accumulated 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. To assist investors in making this determination, the table under the
caption "Annual Fund Operating Expenses and Example After Expense Reimbursement"
sets forth examples of the charges applicable to each class of shares.

The Fund currently offers three classes of its shares which may be purchased
at a price equal to their net asset value per share plus sales charges which, at
the election of the investor, may be imposed either (i) at the time of purchase
("Class A Shares") or (ii) on a contingent deferred basis (Class A Share
accounts over $1 million, "Class B Shares" and "Class C Shares"). Class A Share
accounts over $1 million or otherwise subject to a contingent deferred sales
charge ("CDSC"), Class B Shares and Class C Shares sometimes are referred to
herein collectively as "CDSC Shares."

Class A Shares. Class A Shares are subject to an initial sales charge equal
to 4.75% of the public offering price (4.99% of the net amount invested),
reduced on investments of $100,000 or more. Class A Shares are subject to
ongoing distribution and service fees at an aggregate annual rate of up to 0.25%
of the Fund's average daily net assets attributable to the Class A Shares.
Certain purchases of Class A Shares qualify for reduced or no initial sales
charges and may be subject to a CDSC.

Class B Shares. Class B Shares do not incur a sales charge when they are
purchased, but are subject to a sales charge if redeemed within six years of
purchase. Class B Shares are subject to a CDSC equal to 4.00% of the lesser of
the then current net asset value or the original purchase price on Class B
Shares redeemed during the first year after purchase, which charge is reduced
each year thereafter. Class B Shares are subject to ongoing distribution and
service fees at an aggregate annual rate of up to 1.00% of the Fund's average
daily net assets attributable to the Class B Shares. Class B Shares will
automatically convert to Class A Shares seven years after the end of the
calendar month in which the

6
<PAGE> 10

investor's order to purchase was accepted, in the circumstances and subject to
the qualifications described in this Prospectus.

Class C Shares. Class C Shares do not incur a sales charge when they are
purchased, but are subject to a sales charge if redeemed within the first year
after purchase. Class C Shares are subject to a CDSC equal to 1.00% of the
lesser of the then current net asset value or the original purchase price on
Class C Shares redeemed during the first year after purchase. Class C Shares are
subject to ongoing distribution and service fees at an aggregate annual rate of
up to 1.00% of the Fund's average daily net assets attributable to the Class C
Shares.

REDEMPTION. Class A Shares may be redeemed at net asset value, without charge,
subject to conditions set forth herein. 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 redemption of shares if the value of an account is
$500 or less. See "Redemption of Shares."

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

DISTRIBUTOR. Van Kampen American Capital Distributors, Inc.

DISTRIBUTIONS FROM THE FUND. Distributions from net investment income are
declared daily and paid monthly. 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 above is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.

7
<PAGE> 11

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

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

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

(3) CDSC Shares received as reinvested dividends are subject to a 12b-1 fee, a
portion of which may indirectly pay for the initial sales commission
incurred on behalf of the investor. See "The Distribution and Service
Plans."

8
<PAGE> 12

------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE AFTER EXPENSE REIMBURSEMENT
------------------------------------------------------------------------------

<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).................................... 0.50% 0.50% 0.50%
12b-1 fees(2) (as a percentage of average daily
net assets).................................... 0.25% 1.00% 1.00%
Other expenses (as a percentage of average daily
net assets).................................... 0.23% 0.24% 0.24%
Total expenses(1) (as a percentage of average
daily net assets).............................. 0.98% 1.74% 1.74%
</TABLE>

----------------
(1) Expense projections include a waiver of $127,009 of "Management fees" by the
Adviser. Absent the Adviser's waiver of its fee, "Management fees" would
have been 0.60% for each class of shares and "Total expenses" would have
been 1.08% for Class A Shares and 1.84% for both Class B Shares and Class C
Shares.

(2) Includes a service fee of up to 0.25% (as a percentage of net asset value)
paid by the Fund as compensation for ongoing services rendered to investors.
With respect to each class of shares, amounts in excess of 0.25%, if any,
represent an asset based sales charge. The asset based sales charge with
respect to Class C Shares includes 0.75% (as a percentage of net asset
value) paid to investors' broker-dealers as sales compensation. As of June
30, 1995, the Board of Trustees of the Trust reduced 12b-1 and service fees
for the Fund's Class A Shares to 0.25%. See "Distribution and Service
Plans."

9
<PAGE> 13

EXAMPLE:

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (i) an operating expense
ratio of 0.98% for Class A Shares, 1.74% for
Class B Shares and 1.74% for Class C Shares,
(ii) 5% annual return and (iii) redemption at
the end of each time period
Class A Shares................................ $57 $77 $ 99 $ 162
Class B Shares................................ $58 $90 $ 109 $ 176*
Class C Shares................................ $28 $55 $ 94 $ 205
You would pay the following expenses on the same
$1,000 investment assuming no redemption at
the end of each period:
Class A Shares................................ $57 $77 $ 99 $ 162
Class B Shares................................ $18 $55 $ 94 $ 176*
Class C Shares................................ $18 $55 $ 94 $ 205
</TABLE>

----------------
* Based on conversion to Class A Shares after seven years.

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

10
<PAGE> 14

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

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

<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1992 1991
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................................. $ 18.062 $ 16.899 $ 16.373 $ 15.716
------ ------ ------ ------
Net Investment Income............................................... .965 1.027 1.074 1.081
Net Realized and Unrealized Gain/Loss on Investments................ (1.985) 1.164 .525 .696
------ ------ ------ ------
Total from Investment Operations..................................... (1.020) 2.191 1.599 1.777
------ ------ ------ ------
Less:
Distributions from Net Investment Income............................ .961 1.028 1.073 1.080
Distributions from Net Realized Gain on Investments................. -- -- -- .040
------ ------ ------ ------
Total Distributions.................................................. .961 1.028 1.073 1.120
------ ------ ------ ------
Net Asset Value, End of Period....................................... $ 16.081 $ 18.062 $ 16.899 $ 16.373
======== ======== ======== ========
Total Return (non-annualized)(1)..................................... (5.72%) 13.25% 10.09% 11.64%
Net Assets at End of Period (in millions)............................ $ 203.2 $ 221.7 $ 153.8 $ 103.1
Ratio of Expenses to Average Net Assets (annualized)(1).............. .90% .71% .72% .70%
Ratio of Net Investment Income to Average Net Assets
(annualized)(1)..................................................... 5.73% 5.80% 6.41% 6.70%
Portfolio Turnover................................................... 7.94% 1.35% 9.87% 48.47%
----------------
(1) If certain expenses had not been waived or assumed by the investment adviser, total return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets (annualized).............. 1.17% 1.09% 1.17% 1.26%
Ratio of Net Investment Income to Average Net Assets
(annualized).................................................... 5.46% 5.41% 5.95% 6.13%

MAY 1, 1987
(COMMENCEMENT
OF INVESTMENT
OPERATIONS)
YEAR ENDED YEAR ENDED YEAR ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1990 1989 1988 1987
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................................. $ 15.698 $ 15.204 $ 14.310 $14.265
------ ------ ------ ------
Net Investment Income............................................... 1.080 1.073 1.069 .707
Net Realized and Unrealized Gain/Loss on Investments................ .018 .518 .949 .026
------ ------ ------ ------
Total from Investment Operations..................................... 1.098 1.591 2.018 .733
------ ------ ------ ------
Less:
Distributions from Net Investment Income............................ 1.080 1.079 1.082 .688
Distributions from Net Realized Gain on Investments................. -- .018 .042 --
------ ------ ------ ------
Total Distributions.................................................. 1.080 1.097 1.124 .688
------ ------ ------ ------
Net Asset Value, End of Period....................................... $ 15.716 $ 15.698 $ 15.204 $14.310
======== ======== ======== =======
Total Return (non-annualized)(1)..................................... 7.33% 10.84% 14.54% 5.28%
Net Assets at End of Period (in millions)............................ $ 69.3 $ 47.1 $ 18.3 $ 10.2
Ratio of Expenses to Average Net Assets (annualized)(1).............. .61% .61% .69% .21%
Ratio of Net Investment Income to Average Net Assets
(annualized)(1)..................................................... 6.92% 6.81% 7.14% 6.89%
Portfolio Turnover................................................... 46.74% 16.48% 18.94% 1.62%
----------------
(1) If certain expenses had not been waived or assumed by the investment advisor, total return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets (annualized).............. 1.28% 1.45% 1.75% 1.91%

Ratio of Net Investment Income to Average Net Assets
(annualized).................................................... 6.25% 5.97% 6.09% 5.19%

</TABLE>

See Financial Statements and Notes Thereto

11
<PAGE> 15

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- continued (for a share outstanding throughout the
period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
SHARES
------------
YEAR ENDED
DECEMBER 31,
1994
------------
<S> <C>
Net Asset Value, Beginning of Period....................................................................... $ 18.055
------
Net Investment Income..................................................................................... .841
Net Realized and Unrealized Gain/Loss on Investments...................................................... (1.985)
------
Total from Investment Operations........................................................................... (1.144)
------
Less:
Distributions from Net Investment Income.................................................................. .831
Distributions from Net Realized Gain on Investments....................................................... --
------
Total Distributions........................................................................................ .831
------
Net Asset Value, End of Period............................................................................. $ 16.080
============
Total Return (non-annualized)(1)........................................................................... (6.39)
Net Assets at End of Period (in millions).................................................................. $ 37.6
Ratio of Expenses to Average Net Assets (annualized)(1).................................................... 1.64%
Ratio of Net Investment Income to Average Net Assets (annualized)(1)....................................... 4.98%
Portfolio Turnover......................................................................................... 7.94%

MAY 1, 1993
(COMMENCEMENT
OF
DISTRIBUTION)
TO DECEMBER 31,
1993
---------------
<S> <C>
Net Asset Value, Beginning of Period....................................................................... $17.460
------
Net Investment Income..................................................................................... .586
Net Realized and Unrealized Gain/Loss on Investments...................................................... .603
------
Total from Investment Operations........................................................................... 1.189
------
Less:
Distributions from Net Investment Income.................................................................. .594
Distributions from Net Realized Gain on Investments....................................................... --
------
Total Distributions........................................................................................ .594
------
Net Asset Value, End of Period............................................................................. $18.055
==============
Total Return (non-annualized)(1)........................................................................... 6.81%
Net Assets at End of Period (in millions).................................................................. $ 27.7
Ratio of Expenses to Average Net Assets (annualized)(1).................................................... 1.48%
Ratio of Net Investment Income to Average Net Assets (annualized)(1)....................................... 4.47%
Portfolio Turnover......................................................................................... 1.35%

<CAPTION>
CLASS C
SHARES
------------

YEAR ENDED
DECEMBER 31,
1994
------------
<S> <C>
Net Asset Value, Beginning of Period....................................................................... $ 18.045
------
Net Investment Income..................................................................................... .850
Net Realized and Unrealized Gain/Loss on Investments...................................................... (1.985)
------
Total from Investment Operations........................................................................... (1.135)
------
Less:
Distributions from Net Investment Income.................................................................. .831
Distributions from Net Realized Gain on Investments....................................................... --
------
Total Distributions........................................................................................ .831
------
Net Asset Value, End of Period............................................................................. $ 16.079
============
Total Return (non-annualized)(1)........................................................................... 6.34%
Net Assets at End of Period (in millions).................................................................. $ 2.2
Ratio of Expenses to Average Net Assets (annualized)(1).................................................... 1.63%
Ratio of Net Investment Income to Average Net Assets (annualized)(1)....................................... 4.97%
Portfolio Turnover......................................................................................... 7.94%

AUGUST 13, 1993
(COMMENCEMENT
OF
DISTRIBUTION)
TO DECEMBER 31,
1993
---------------
<S> <C>
Net Asset Value, Beginning of Period....................................................................... $17.850
------
Net Investment Income..................................................................................... .325
Net Realized and Unrealized Gain/Loss on Investments...................................................... .208
------
Total from Investment Operations........................................................................... .533
------
Less:
Distributions from Net Investment Income.................................................................. .338
Distributions from Net Realized Gain on Investments....................................................... --
------
Total Distributions........................................................................................ .338
------
Net Asset Value, End of Period............................................................................. $18.045
==============
Total Return (non-annualized)(1)........................................................................... 2.98%
Net Assets at End of Period (in millions).................................................................. $ 2.1
Ratio of Expenses to Average Net Assets (annualized)(1).................................................... 1.54%
Ratio of Net Investment Income to Average Net Assets (annualized)(1)....................................... 4.08%
Portfolio Turnover......................................................................................... 1.35%

</TABLE>

----------------
(1) If certain expenses had not been waived or assumed by the investment
adviser, total return would have been lower and the ratios would have been
as follows:

<TABLE>
<CAPTION>
Class B Shares
------------------------------
MAY 1, 1993
(COMMENCEMENT
YEAR ENDED OF DISTRIBUTION)
DECEMBER 31, TO DECEMBER 31,
1994 1993
------------ ---------------

<S> <C> <C>
Ratio of Expenses to Average Net Assets (annualized)......................... 1.90% 1.82%
Ratio of Net Investment Income to Average Net Assets (annualized)............ 4.71% 4.13%

Class C Shares
----------------------------
August 13, 1993
(Commencement
YEAR ENDED of Distribution)
DECEMBER 31, to December 31,
1994 1993
------------ ---------------
<C> <C>
Ratio of Expenses to Average Net Assets (annualized)......................... 1.90% 1.89%
Ratio of Net Investment Income to Average Net Assets (annualized)............ 4.70% 3.73%

</TABLE>

See Financial Statements and Notes Thereto

12
<PAGE> 16

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

Van Kampen American Capital Pennsylvania Tax Free Income Fund (the "Fund") is
a mutual fund which pools shareholders' money to seek to achieve a specific
investment objective. In technical terms the Fund is a non-diversified, open-end
management investment company, organized as a Pennsylvania trust. Mutual funds
sell their shares to investors and invest the proceeds in a portfolio of
securities. A mutual fund allows investors to pool their money with that of
other investors in order to obtain professional investment management. Mutual
funds generally make it possible for investors to obtain greater diversification
of their investments and to simplify their recordkeeping.

Van Kampen American Capital Investment Advisory Corp. (the "Adviser") provides
investment advisory and administrative services to the Fund. The Adviser and its
affiliates also manage 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 the Prospectus.

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

INVESTMENT OBJECTIVE AND POLICIES

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

The Fund's investment objective is to provide only Pennsylvania investors a
high level of current income exempt from federal and Pennsylvania state income
taxes and, where possible under local law, local income and personal property
taxes, through investment primarily in a varied portfolio of medium and lower
grade municipal securities. The Fund may invest in medium and lower grade
municipal securities rated at the time of investment between BBB and B-
(inclusive) by Standard & Poor's Ratings Group ("S&P"), Baa and B3 (inclusive)
by Moody's Investors Service, Inc. ("Moody's"), comparably rated short-term
municipal obligations and municipal securities determined by the Adviser to be
of comparable quality. There is no assurance that the Fund will achieve its
investment objective. THE FUND IS AVAILABLE FOR PURCHASE ONLY BY RESIDENTS OF
PENNSYLVANIA.

Municipal securities are obligations issued by or on behalf of states,
territories or possession of the United States, the District of Columbia and
their political subdivisions, agencies and instrumentalities, the interest on
which, in the opinion of bond counsel or other counsel to the issuer of such
securities, is exempt from federal income taxes. Pennsylvania municipal
securities are municipal securities the interest on which, in the opinion of
bond counsel or other counsel to the issuers of such securities, is at the time
of issuance exempt from Pennsylvania state income taxes. In normal circumstances
up to 100%, but not less than 80%, of the Fund's net assets will be invested in
Pennsylvania municipal securities. The foregoing is a fundamental policy and
cannot be changed without shareholder approval. Any "private activity"
obligations in which the Fund may invest will not be treated as municipal
securities for purposes of such 80% test. The Fund also may invest up to

13
<PAGE> 17

10% of its assets in Pennsylvania tax exempt money market funds that invest in
securities rated comparably to those in which the Fund may invest. Such
investments will be treated as municipal securities for purposes of such 80%
test.

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

Investment in medium and lower grade securities involves special risks as
compared with investment in higher grade securities, including potentially
greater sensitivity to a general economic downturn, greater market price
volatility and less liquid secondary market trading, among others. See
"Municipal Securities--Special

14
<PAGE> 18

Considerations Regarding Medium and Lower Grade Municipal Securities." The
net asset value per share of the Fund can be expected to increase or decrease
depending on real or perceived changes in the credit risks associated with its
portfolio investments, changes in interest rates and other factors affecting the
credit markets generally. There can be no assurance that the Fund will achieve
its investment objective. The Fund may not be an appropriate investment 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. Furthermore, interest on certain "private activity" obligations
in which the Fund may invest up to 20% of its assets is treated as a preference
item for the purpose of calculating the alternative minimum tax and,
accordingly, a portion of the income produced by the Fund may be taxable under
the alternative minimum tax. The Fund may not be a suitable investment for
investors who are already subject to the federal alternative minimum tax or who
would become subject to the federal alternative minimum tax as a result of an
investment in the Fund. See "Tax Status."

At times the Adviser may judge that conditions in the markets for medium and
lower grade municipal securities make pursuing the Fund's basic investment
strategy of investing primarily in such municipal securities inconsistent with
the best interests of shareholders. At such times, the Fund may invest all or a
portion of its assets in higher grade municipal securities and in municipal
securities determined by the Adviser to be of comparable quality. Although such
higher grade municipal securities generally entail less credit risk, such higher
grade municipal securities may have a lower yield than medium and lower grade
municipal securities and investment in such higher grade municipal securities
may result in a lower yield to Fund shareholders. The Adviser may also judge
that conditions in the markets for long- and intermediate-term municipal
securities in general make pursuing the Fund's basic investment strategy
inconsistent with the best interests of the Fund's shareholders. At such times,
the Fund may, consistent with its investment policies and restrictions, pursue
strategies primarily designed to reduce fluctuations in the value of the Fund's
assets, including investing the Fund's assets in high-quality, short-term
municipal securities and in high-quality, short-term taxable securities. See
"Tax Status."

The table below sets forth the percentages of the Fund's assets invested
during the fiscal year ended December 31, 1994 in the various Moody's and S&P
rating categories and in unrated securities determined by the Adviser to be of
comparable quality. The percentages are based on the dollar-weighted average of
credit ratings

15
<PAGE> 19

of all municipal securities held by the Fund during the fiscal year ended
December 31, 1994, computed on a monthly basis.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
------------------------------------------
UNRATED SECURITIES OF
RATED SECURITIES COMPARABLE QUALITY
RATING AS A PERCENTAGE OF AS A PERCENTAGE OF
CATEGORY PORTFOLIO VALUE PORTFOLIO VALUE
-------- ------------------ ---------------------
<S> <C> <C>
AAA/Aaa............................. 49.8% 0.7%
AA/Aa............................... 5.7% 0.0%
A/A................................. 14.1% 0.0%
BBB/Baa............................. 24.7% 0.9%
BB/Ba............................... 1.9% 1.1%
B/B................................. 0.0% 1.1%
CCC/Caa............................. 0.0% 0.0%
CC/Ca............................... 0.0% 0.0%
C/C................................. 0.0% 0.0%
D................................... 0.0% 0.0%
------ ------
Percentage of Rated and Unrated
Securities........................ 96.2% 3.8%
====== ======
</TABLE>

Securities rated D are in default, and payment of interest or repayment of
principal is in arrears. Securities that are in default or with respect to which
payment of interest or repayment of principal is in arrears present special risk
considerations. The Fund may incur additional expenses to the extent that it is
required to seek recovery of interest or principal, and the Fund may be unable
to obtain full recovery thereof. See "Municipal Securities--Special
Considerations Regarding Medium and Lower Grade Municipal Securities."

The portfolio composition shown in the table above reflects the allocation of
assets by the Fund during a period of relative instability in the market for
medium and lower grade securities. The percentage of the Fund's assets invested
in securities of various grades may from time to time vary substantially from
those set forth above.

------------------------------------------------------------------------------
MUNICIPAL SECURITIES
------------------------------------------------------------------------------

GENERAL. Municipal securities in which the Fund may invest are debt
obligations issued by or on behalf of the states, territories or possessions of
the United States, the District of Columbia and their political subdivisions,
agencies and instrumentalities, the interest on which, in the opinion of bond
counsel or other counsel to the issuer of such securities, is exempt from
federal income taxes. Pennsylvania municipal securities are municipal
securities, the interest on which, in the opinion of bond counsel or other
counsel to the issuers of such securities, is at the time of issuance exempt
from Pennsylvania state income taxes.

The two principal classifications of municipal securities are "general
obligation" and "revenue" securities. "General obligation" securities are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest.

16
<PAGE> 20

"Revenue" securities are usually payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Industrial development
bonds are usually revenue securities, the credit quality of which is normally
directly related to the credit standing of the industrial user involved.

Within these principal classifications of municipal securities, there are a
variety of categories of municipal securities, including fixed and variable rate
securities, municipal bonds, municipal notes, municipal leases, custodial
receipts, participation certificates and derivative municipal securities, the
terms of which include elements of, or are similar in effect to, certain
Strategic Transactions (as defined below) in which the Fund may engage. Variable
rate securities bear rates of interest that are adjusted periodically according
to formulae intended to reflect market rates of interest and include securities
whose rates vary inversely with changes in market rates of interest. The Fund
will not invest more than 15% of its total assets in derivative municipal
securities such as inverse floaters, whose rates vary inversely with changes in
market rates of interest, or range floaters or capped floaters whose rates are
subject to periodic or lifetime caps. Such securities may also pay a rate of
interest determined by applying a multiple to the variable rate. The extent of
increases and decreases in the value of securities whose rates vary inversely
with market rates of interest generally will be larger than comparable changes
in the value of an equal principal amount of a fixed rate municipal security
having similar credit quality, redemption provisions and maturity. Municipal
notes include tax, revenue and bond anticipation notes of short maturity,
generally less than three years, which are issued to obtain temporary funds for
various public purposes. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. Certain municipal lease obligations may include "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Custodial receipts are underwritten by
securities dealers or banks and evidence ownership of future interest payments,
principal payments or both on certain municipal securities. Participation
certificates are obligations issued by state or local governments or authorities
to finance the acquisition of equipment and facilities. They may represent
participation in a lease, an installment purchase contract, or a conditional
sales contract. Some municipal securities may not be backed by the faith, credit
and taxing power of the issuer. Certain of the municipal securities in which the
Fund may invest represent relatively recent innovations in the municipal
securities markets. While markets for such recent innovations progress through
stages of development, such markets may be less developed than more fully
developed markets for municipal securities. A more detailed description of the
types of municipal securities in which the Fund may invest is included in the
Statement of Additional Information.

The net asset value of each of the Funds will change with changes in the value
of their respective portfolio securities. Because the Funds will invest
primarily in fixed

17
<PAGE> 21

income municipal securities, the net asset value of each of the Funds 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
generally can be expected to rise. Conversely, when interest rates rise, the
value of a portfolio invested in fixed income securities generally can be
expected to decline. Volatility may be greater during periods of general
economic uncertainty.

From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the Fund
to pay tax exempt interest dividends might be adversely affected.

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

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

18
<PAGE> 22

volatile in response to changes in interest rates than debt securities which pay
interest periodically in cash. Investment in such securities also involves
certain tax considerations. See "Tax Status."

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

To the extent that there is no established retail market for some of the
medium or lower grade municipal securities in which the Fund may invest, trading
in such securities may be relatively inactive. The Adviser is responsible for
determining the net asset value of the Fund, subject to the supervision of the
Board of Trustees of the Trust. During periods of reduced market liquidity and
in the absence of readily available market quotations for medium and lower grade
municipal securities held in the Fund's portfolio, the ability of the Adviser to
value the Fund's securities becomes more difficult, and the Adviser's use of
judgment may play a greater role in the valuation of the Fund's securities due
to the reduced availability of reliable objective data. The effects of adverse
publicity and investor perceptions may be more pronounced for securities for
which no established retail market exists as compared with the effects on
securities for which such a market does exist. Further, the Fund may have more
difficulty selling such securities in a timely manner and at their stated value
than would be the case for securities for which an established retail market
does exist.

The Adviser seeks to minimize the risks involved in investing in medium
and lower grade municipal securities through investment in a varied portfolio
of municipal securities, careful investment analysis, and attention to current
developments and trends in the economy and financial and credit markets. The
Fund will rely on the Adviser's judgment, analysis and experience in evaluating
the creditworthiness of an issue. In its analysis, the Adviser will take into
consideration, among other things, the issuer's financial resources, its
sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. The Adviser may
utilize at its own expense credit analysis and research services provided by
its affiliate, McCarthy, Crisanti & Maffei, Inc. ("MCM"). The Adviser may
consider, although it does not rely primarily on, the credit ratings of Moody's
and S&P in evaluating municipal 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

19
<PAGE> 23

than is able to be timely reflected in changes in credit ratings, the Adviser
continuously monitors the issuers of municipal securities held in the Fund's
portfolio.

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

SPECIAL CONSIDERATIONS REGARDING CERTAIN MUNICIPAL SECURITIES. The Fund may
invest in zero coupon and payment-in-kind municipal securities. Zero coupon
securities are debt obligations that do not entitle the holder to any periodic
payment of interest prior to maturity or a specified date when the securities
begin paying current interest. They are issued and traded at a discount from
their face amounts or par value, which discount varies depending on the time
remaining until cash payments begin, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. The Internal Revenue
Code of 1986, as amended (the "Code"), requires that regulated investment
companies distribute at least 90% of their net investment income each year,
including tax-exempt and non-cash income. Accordingly, although the Fund will
receive no coupon payments on zero coupon securities prior to their maturity,
the Fund is required, in order to maintain its desired tax treatment, to include
in its distributions to shareholders in each year any income attributable to
zero coupon securities that is in excess of 10% of the Fund's net investment
income in that year. The Fund may be required to borrow or to liquidate
portfolio securities at a time that it otherwise would not have done so in order
to make such distributions. Payment-in-kind securities are securities that pay
interest through the issuance of additional securities. Such securities
generally are more volatile in response to changes in interest rates and are
more speculative investments than are securities that pay interest periodically
in cash. As of December 31, 1994, approximately 9.4% and less than 0.1% of the
Fund's total net assets were invested in zero coupon securities and
payment-in-kind municipal securities, respectively.

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

20
<PAGE> 24

income security having similar credit quality, redemption provisions and
maturity. The markets for such securities may be less developed than the markets
for conventional floating or variable rate municipal income securities.

CERTAIN CONSIDERATIONS REGARDING PENNSYLVANIA MUNICIPAL SECURITIES. Investors
should be aware of certain factors that might affect the financial condition of
issuers of Pennsylvania municipal securities. Pennsylvania historically has been
identified as a heavy industry state although that reputation has changed
recently as the industrial composition of Pennsylvania diversified when the
coal, steel and railroad industries began to decline. The major new sources of
growth in Pennsylvania are in the service sector, including trade, medical and
the health services, education and financial institutions. Pennsylvania's
agricultural industries are also an important component of the Commonwealth's
economic structure, accounting for more than $3.6 billion in crop and livestock
products annually, while agribusiness and food related industries support $39
billion in economic activity annually.

Pennsylvania operates under an annual budget which is formulated and submitted
for legislative approval by the Governor each February. The Pennsylvania
Constitution requires that the Governor's budget proposal consist of three
parts: (i) a balanced operating budget setting forth proposed expenditures and
estimated revenues from all sources and, if estimated revenues and available
surplus are less than proposed expenditures, recommending specific additional
sources of revenue sufficient to pay the deficiency; (ii) a capital budget
setting forth proposed expenditures to be financed from the proceeds of
obligations of the Commonwealth or its agencies or from operating funds; and
(iii) a financial plan for not less than the succeeding five fiscal years, which
includes for each year projected operating expenditures and estimated revenues
and projected expenditures for capital projects. The General Assembly may add,
change or delete any items in the budget prepared by the Governor, but the
Governor retains veto power over the individual appropriations passed by the
legislature. The Commonwealth's fiscal year begins on July 1 and ends on June
30.

All outstanding general obligation bonds of the Commonwealth of Pennsylvania
are rated AA- by S&P and A1 by Moody's. Local municipalities issuing
Pennsylvania municipal securities, although impacted in general by the economic
condition of the Commonwealth, have credit ratings that are determined with
reference to the economic condition of such local municipalities. For example,
as of the date hereof, the ratings on the long-term obligations of the City of
Philadelphia (the "City") supported by payments from the City's General Fund are
rated Baa by Moody's and BBB- by S&P.

Although revenue obligations of the Commonwealth or its political subdivisions
may be payable from a specific project or source, including lease rentals, there
can be no assurance that future economic difficulties and the resulting impact
on Commonwealth and local government finances will not adversely affect the
market value of the portfolio of the Fund or the ability of the respective
obligors to make timely payments of principal and interest on such obligations.

21
<PAGE> 25

More detailed information concerning Pennsylvania municipal securities and the
Commonwealth of Pennsylvania is set forth in the Statement of Additional
Information.

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

In connection with the investment policies described above, the Fund may also
engage in strategic transactions and purchase and sell securities on a "when
issued" and "delayed delivery" basis. These investments entail risk. Strategic
transactions generally will not be treated as investments in tax-exempt
municipal securities for purposes of the Fund's investment policy with respect
thereto.

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,
purchase and sell financial futures contracts and enter into various interest
rate transactions such as swaps, caps, floors or collars. Collectively, all of
the above are referred to as "Strategic Transactions." 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 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. 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.

22
<PAGE> 26

related portfolio position of the Fund creates the possibility that losses on
the hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the
contemplated use of these futures contracts and options thereon should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time they tend to limit any potential gain which might result from
an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if 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 be distributed to its shareholders in taxable distributions.
See "Tax Status."

"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Fund may also purchase
and sell municipal securities on a "when issued" and "delayed delivery" basis.
No income accrues to the Fund on municipal securities in connection with such
purchase transactions prior to the date the Fund actually takes delivery of such
securities. These transactions are subject to market fluctuation; the value of
the municipal securities at delivery may be more or less than their purchase
price, and yields generally available on municipal securities when delivery
occurs may be higher or lower than yields on the municipal 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 high-grade municipal portfolio securities having an
aggregate value equal to the amount of such purchase commitments until payment
is made. The Fund will make commitments to purchase municipal securities on such
basis only with the intention of actually acquiring these securities, but the
Fund may sell such securities prior to the settlement date if such sale is
considered to be advisable. No specific limitation exists as to the percentage
of the Fund's assets which may be used to acquire securities on a "when issued"
or "delayed delivery" basis. To the extent the Fund engages in "when issued" and
"delayed delivery" transactions, it will do so for the purpose of acquiring
securities for the Fund's portfolio consistent with the Fund's investment
objective and policies and not for the purposes of investment leverage.

23
<PAGE> 27

OTHER PRACTICES. The Fund has no restrictions on the maturity of municipal
bonds in which it may invest. The Fund will seek to invest in municipal bonds of
such maturities that, in the judgment of the Fund and the Adviser, will provide
a high level of current income consistent with liquidity requirements and market
conditions.

The Fund may borrow amounts up to 5% of its net assets in order to pay for
redemptions when liquidation of portfolio securities is considered
disadvantageous or inconvenient and may pledge up to 10% of its net assets to
secure such borrowings.

It is possible that the Fund will invest more than 25% of its assets in a
particular segment of the municipal bond market, such as Hospital Revenue Bonds,
Housing Agency Bonds, Airport Bonds or Industrial Development Bonds. In such
circumstances, economic, business, political or other changes affecting one bond
might also affect other bonds in the same segment, thereby potentially
increasing market risk with respect to the bonds in such segment. Such changes
could include, but are not limited to, proposed or suggested legislation
involving the financing of projects within such segments, declining markets or
needs for such projects and shortages or price increases of materials needed for
such projects.

The Fund intends to invest its assets in a broadly varied portfolio in order
to reduce the impact on the Fund of any loss on a particular portfolio security.
However, in order to attain economies of scale at relatively low asset size, the
Fund intends to invest more than 5% of its assets in at least five issuers and
may invest as much as 50% of its assets in as few as two issuers. With respect
to the remaining 50% of its assets, it may invest no more than 5% in the
securities of one issuer. Thus, the Fund's investments may be more concentrated
in fewer issuers than if it were a diversified fund and, if so, the Fund's net
asset value may increase or decrease more rapidly than a diversified fund if
these securities change in value.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION. In effecting purchases and
sales of the Fund's portfolio securities, the Adviser and the Fund may place
orders with and pay brokerage commissions to brokers, including brokers which
may be affiliated with the Fund, the Adviser, and the Distributor or dealers
participating in the offering of the Fund's shares. In addition, in selecting
among firms to handle a particular transaction, the Adviser and the Fund may
take into account whether the firm has sold or is selling shares of the Fund.

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

24
<PAGE> 28

for managing institutional portfolios, and over $50 billion under management or
supervision. Van Kampen American Capital's more than 40 open-end and 38
closed-end funds and more than 2,700 unit investment trusts are professionally
distributed by leading financial advisers nationwide.

Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc. a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital own, in the aggregate, not more than 7% of the common stock of
VK/AC Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an additional 11% of the common stock of VK/AC Holding, Inc.
Presently, and after giving effect to the exercise of such options, no officer
or trustee of the Fund owns or would own 5% or more of the common stock of VK/AC
Holding, Inc.

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

<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
------------------------ -----------
<S> <C>
First $500 million........................................ 0.60 of 1%
Over $500 million......................................... 0.50 of 1%
</TABLE>

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

25
<PAGE> 29

of the Fund under the federal securities laws, miscellaneous expenses and all
taxes and fees to federal, state or other governmental agencies.

PERSONAL INVESTING POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes permit trustees/directors, officers and
employees to buy and sell securities for their personal accounts subject to
procedures designed to prevent conflicts of interest including, in some
instances, preclearance of trades.

PORTFOLIO MANAGEMENT. Dennis S. Pietrzak, a Vice President of the Adviser, is
primarily responsible for the day-to-day management of the Fund's portfolio. Mr.
Pietrzak has been employed by the Adviser since August, 1995. Prior to joining
the Adviser, Mr. Pietrzak was employed by Merrill Lynch where he was in charge
of municipal underwriting and trading in Merrill Lynch's midwest region.

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

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

The Fund currently offers three classes of shares, designated Class A Shares,
Class B Shares and Class C Shares. Shares of each class are offered at a price
equal to their net asset value per share plus a sales charge which, at the
election of the purchaser, may be imposed (a) at the time of purchase ("Class A
Shares") or (b) on a contingent deferred basis (Class A Share accounts over $1
million, "Class B Shares" and "Class C Shares"). Class A Share accounts over $1
million or otherwise subject to a contingent deferred sales charge ("CDSC"),
Class B Shares and Class C Shares sometimes are referred to herein collectively
as "Contingent Deferred Sales Charge Shares" or "CDSC Shares."

The minimum initial investment with respect to each class of shares is $500.
The minimum subsequent investment with respect to each class of shares is $25.
It is presently the policy of the Distributor, not to accept any order for Class
B Shares or 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

26
<PAGE> 30

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

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

27
<PAGE> 31

Commission (the "SEC") registration fees incurred by a class of shares; (iv) the
expense of administrative personnel and services as required to support the
shareholders of a specific class; (v) Trustees' fees or expense incurred as a
result of issues relating to one class of shares; (vi) accounting expenses
relating solely to one class of shares; and (vii) any other incremental expenses
subsequently identified that should be properly allocated to one or more classes
of shares that shall be approved by the SEC pursuant to an amended exemptive
order. All such expenses incurred by a class will be borne on a pro rata basis
by the outstanding shares of such class. All allocations of administrative
expenses to a particular class of shares will be limited to the extent necessary
to preserve the Fund's qualification as a regulated investment company under the
Code.

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

PURCHASE OF SHARES

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

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

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

The Distributor may from time to time implement programs under which a broker,
dealer or financial intermediary's sales force may be eligible to win nominal
awards for certain sales efforts or under which the Distributor will reallow to
any broker, dealer or financial intermediary that sponsors sales contests or
recognition programs conforming to criteria established by the Distributor, or
participates in sales programs sponsored by the Distributor, an amount not
exceeding the total

28
<PAGE> 32

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 qualifying brokers, dealers or financial
intermediary for certain services or activities which are primarily intended to
result in sales of shares of the Fund. Fees may include payment for travel
expenses, including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to locations within or
outside of the United States for meetings or seminar of a business nature. Such
fees paid for such services and activities with respect to the Fund will not
exceed in the aggregate 1.25% of the average total daily net assets of the Fund
on an annual basis. In addition, the Distributor may provide additional
compensation to Edward D. Jones & Co. ("Edward D. Jones") or an affiliate
thereof based on a combination of its sales of shares and increases in assets
under management. Such payments to brokers, dealers and financial intermediaries
for sales contests, other sales programs and seminars are made by the
Distributor out of its own assets and not out of the assets of the Fund. These
programs will not change the price an investor will pay for shares or the amount
that the Fund will receive from such sale.

CLASS A SHARES

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

29
<PAGE> 33

SALES CHARGE TABLE

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

------------------------------------------------------------------------------
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a contingent
deferred sales charge of 1.00% on redemptions made within one year of the
purchase. A commission will be paid to dealers who initiate and are
responsible for purchases of $1 million or more as follows: 1.00% on sales to
$2 million, plus 0.80% on the next million, plus 0.20% on the next $2 million
and 0.08% on the excess over $5 million. See "Purchase of Shares -- Deferred
Sales Charge Alternatives" for additional information with respect to
contingent deferred sales charges.

QUANTITY DISCOUNTS

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

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

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

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

30
<PAGE> 34

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

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

LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the amount being invested over a
13-month period to determine the sales charge as outlined in the preceding
table. The size of investment shown in the preceding table includes the amount
of intended purchases of Class A Shares of the Fund with other shares of the
Fund and shares of the Participating Funds plus the value of all shares of the
Fund and other Participating Funds previously purchased during such 13-month
period and still owned. An investor may elect to compute the 13-month period
starting up to 90 days before the date of execution of a Letter of Intent. Each
investment made during the period receives the reduced sales charge applicable
to the total amount of the investment goal. If trades not initially made under a
Letter of Intent subsequently qualify for a lower sales charge through the
90-day back-dating provision, an adjustment will be made at the expiration of
the Letter of Intent to give effect to the lower charge. If the goal is not
achieved within the 13-month period, the investor must pay the difference
between the charges applicable to the purchases made and the charges previously
paid. When an investor signs a Letter of Intent, shares equal to at least 5% of
the total purchase amount of the level selected will be restricted from sale or
redemption by the investor until the Letter of Intent is satisfied or any
additional sales charges have been paid; if the Letter of Intent is not
satisfied by the investor and any additional sales charges are not paid,
sufficient restricted shares will be redeemed by the Fund to pay such charges.
Additional information is contained in the application accompanying this
Prospectus.

OTHER PURCHASE PROGRAMS

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

UNIT TRUST REINVESTMENT PROGRAMS. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund with no minimum initial or subsequent investment requirement, and
with a lower sales charge if the administrator of an investor's unit investment
trust

31
<PAGE> 35

program meets certain uniform criteria relating to cost savings by the Fund and
the Distributor. The total sales charge for all investments made from unit trust
distributions will be 1.00% of the offering price (1.01% of net asset value). Of
this amount, the Distributor will pay to the broker, dealer or financial
intermediary, if any, through which such participation in the qualifying program
was initiated 0.50% of the offering price as a dealer concession or agency
commission. Persons desiring more information with respect to this program,
including the applicable terms and conditions thereof, should contact their
broker, dealer or financial intermediary or the Distributor.

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

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

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

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

(2) Current or retired directors, officers and employees of VK/AC Holding,
Inc. and any of its subsidiaries, Clayton, Dubilier & Rice, Inc.,
employees of an investment subadviser to any fund described in (1) above
or an affiliate of such subadviser; and such persons' families and their
beneficial accounts.

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

(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

32
<PAGE> 36

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
twelve-month period following such transaction.

(5) Trustees and other fiduciaries purchasing shares for retirement plans of
organizations with retirement plan assets of $10 million or more. The
Distributor may pay commissions of up to 1.00% for such purchases.

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

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

(8) Full service participant directed profit sharing and money purchase plans,
full service 401(k) plans, or similar full service recordkeeping programs
made available through Van Kampen American Capital Trust Company with at
least 50 eligible employees or investing at least $250,000 in the
Participating Funds, Money Market Fund, Tax Free Money Fund or Reserve
Fund. For such investments the Fund imposes a contingent deferred sales
charge of 1.00% in the event of redemptions within one year of the
purchase other than redemptions required to make payments to participants
under the terms of the plan. The contingent deferred sales charge incurred
upon certain redemptions is paid to the Distributor in reimbursement for
distribution-related expenses. A commission will be paid to dealers who
initiate and are responsible for such purchases as follows: 1.00% on sales
to $5 million, plus 0.50% on the next $5 million, plus 0.25% on the excess
over $10 million.

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

Purchase orders made pursuant to clause (4) may be placed either through
authorized brokers, dealers or financial intermediaries as described above or
directly with the Fund's transfer agent, the investment adviser, trust company
or bank trust department, provided that the Fund's transfer agent receives
federal funds for the purchase by the close of business on the next business day
following acceptance of the order. An authorized broker, dealer or financial
intermediary may charge a transaction fee for placing an order to purchase
shares pursuant to this provision or for placing a redemption order with respect
to such shares. The Fund may

33
<PAGE> 37

terminate, or amend the terms of, offering shares of the Fund at net asset value
to such groups at any time.

DEFERRED SALES CHARGE ALTERNATIVES

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

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

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

In determining whether a 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

34
<PAGE> 38

applicable to such shares, third of Class A Shares in the shareholder's Fund
account that have converted from Class B Shares, if any, and fourth of CDSC
Shares held longest during the period of time that a 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 (as set
forth below) at $10 per share (at a cost of $1,000) and in the second year after
purchase, the net asset value per share is $12 and, during such time, the
investor has acquired 10 additional Class B Shares upon dividend reinvestment.
If at such time the investor makes his first redemption of 50 shares (proceeds
of $600), 10 shares will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 shares, the charge is applied
only to the original cost of $10 per share and not to the increase in net asset
value of $2 per share. Therefore, $400 of the $600 redemption proceeds will be
charged at a rate of 3.75% (the applicable rate in the second year after
purchase).

CLASS A SHARE PURCHASES OF $1 MILLION OR MORE. No sales charge is payable at
the time of purchase on investments in Class A Shares of $1 million or more,
although for such investments the Fund imposes a CDSC of 1.00% on redemptions
made within one year of the purchase. A commission will be paid to dealers who
initiate and are responsible for purchases of $1 million or more as follows:
1.00% on sales to $2 million, plus 0.80% on the next million, plus 0.20% on the
next $2 million and 0.08% on the excess over $5 million.

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

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE 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."

Conversion Feature. Seven years after the end of the month in which a
shareholder's order to purchase a Class B Share of the Fund was accepted, such
Class B Share automatically will convert to a Class A Share and will no longer
be

35
<PAGE> 39

subject to the higher aggregate distribution and service fees. The purpose of
the conversion feature is to relieve the holders of Class B Shares that have
been outstanding for a period of time sufficient for the Distributor to have
been compensated for distribution expenses related to the Class B Shares from
most of the burden of such distribution-related expenses.

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

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

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. Class C Shares of the Fund do not convert to Class A Shares.

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

36
<PAGE> 40

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

Fixed income securities are valued by using market quotations, prices provided
by market makers or estimates of market values obtained from yield data relating
to instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Trustees of the Fund. Short-term
securities with remaining maturities of less than 60 days are valued at
amortized cost when amortized cost is determined in good faith by or under the
direction of the Board of Trustees of the Fund to be representative of the fair
value at which it is expected such securities may be resold. Other assets are
valued at fair value as determined in good faith by or under the direction of
the Trustees. The net asset values 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

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

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

SHAREHOLDER SERVICES APPLICABLE TO ALL CLASSES

INVESTMENT ACCOUNT. ACCESS Investor Services, Inc. ("ACCESS"), transfer agent
for the Fund and a wholly-owned subsidiary of Van Kampen American Capital,
performs bookkeeping, data processing and administration services related to the
maintenance of shareholder accounts. Each shareholder has an investment account
under which shares are held by ACCESS. Except as described herein, after each
share transaction in an account, the shareholder receives a statement showing
the activity in the account. Each shareholder will receive statements at least
quarterly from ACCESS showing any reinvestments of dividends and capital gains

37
<PAGE> 41

distributions and any other activity in the account since the preceding
statement. Such shareholders also will receive separate confirmations for each
purchase or sale transaction other than reinvestment of dividends and capital
gains distributions and systematic purchases or redemptions. Additions to an
investment account may be made at any time by purchasing shares through
authorized brokers, dealers or financial intermediaries or by mailing a check
directly to ACCESS.

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

REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge) on
the record date of such dividend or distribution. Unless the shareholder
instructs otherwise, the reinvestment plan is automatic. This instruction may be
made by telephone by calling (800) 421-5666 ((800) 772-8889 for the hearing
impaired) or in writing to ACCESS. The investor may, on the initial application
or prior to any declaration, instruct that dividends be paid in cash and capital
gains distributions be reinvested at net asset value, or that both dividends and
capital gains distributions be paid in cash. For further information, see
"Distributions from the Fund."

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

DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanied by this
Prospectus or by calling (800) 421-5666 ((800) 772-8889 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same class of any other
Participating Fund, Money Market Fund, Tax Free Money Fund or Reserve Fund so
long as a pre-existing account for such class of shares exists for such
shareholder.

38
<PAGE> 42

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

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

In general, shares of the Fund must have been registered in the shareholder's
name for at least 15 days prior to an exchange. Shares of the Fund registered in
a shareholder's name for less than 15 days may only be exchanged upon receipt of
prior approval of the Adviser; however, under normal circumstances, it is the
policy of the Adviser not to approve such requests. Upon 60 days after the date
of this prospectus, the Fund will increase the number of days shares must be
registered in a shareholder's name prior to an exchange to 30 days.

Exchanges of Class A Shares of the Fund that have been charged a sales charge
lower than the sales charge applicable to the other fund will have the sales
charge differential imposed upon the exchange into such fund. Similarly,
exchanges of any Class A Shares of other funds that have been charged a sales
charge lower than the sales charge applicable to the Fund will have the sales
charge differential imposed upon exchange into the Fund. Shares of other funds
which have not previously been charged a sales charge (except for shares
purchased via the reinvestment option) will be charged the sales charge
differential applicable to Class A Shares of the Fund upon exchange into the
Fund.

No sales charge is imposed upon the exchange of Class B Shares and Class C
Shares. Upon redemption of Class B Shares and Class C Shares from the Van Kampen
American Capital family of funds, Class B Shares and Class C Shares which have
been exchanged are subject to the contingent deferred sales charge imposed by
the initial Van Kampen American Capital fund purchased by the investor prior to
any exchanges. The holding period requirements for the contingent deferred sales
charge, and the conversion privilege for Class B Shares of the Fund, are
determined by the date of purchase into the initial Van Kampen American Capital
fund purchased by the investor prior to any exchanges.

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

39
<PAGE> 43

A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684 ((800) 772-8889 for the hearing impaired). A shareholder automatically
has telephone exchange privileges unless otherwise designated in the application
form accompanied by this Prospectus. The exchange will take place at the
relative net asset values of the shares next determined after receipt of such
request with adjustment for any additional sales charge. Any shares exchanged
begin earning dividends on the next business day after the exchange is affected.
Van Kampen American Capital and its subsidiaries, including ACCESS
(collectively, "VKAC"), and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape recording telephone
communications, and providing written confirmation of instructions communicated
by telephone. If reasonable procedures are employed, a shareholder agrees that
neither VKAC nor the Fund will be liable for following telephone instructions
which it reasonably believes to be genuine. VKAC and the Fund may be liable for
any losses due to unauthorized or fraudulent instructions if reasonable
procedures are not followed. If the exchanging shareholder does not have an
account in the fund whose shares are being acquired, a new account will be
established with the same registration, dividend and capital gains options
(except dividend diversification options) and broker, dealer or financial
intermediary of record as the account from which shares are exchanged, unless
otherwise specified by the shareholder. In order to establish a systematic
withdrawal plan for the new account or dividend diversification options for the
new account, an exchanging shareholder must file a specific written request. The
Fund reserves the right to reject any order to acquire its shares through
exchange. In addition, the Fund may restrict or terminate the exchange privilege
at any time on 60 days' notice to its shareholders of any termination or
material amendment.

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

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

40
<PAGE> 44

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.

SHAREHOLDER SERVICES APPLICABLE TO CLASS A SHAREHOLDERS ONLY

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

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

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

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

41
<PAGE> 45

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 contingent
deferred sales charge) at any time by sending a written request in proper form
directly to ACCESS, P. O. Box 418256, Kansas City, Missouri 64141-9256, by
placing the redemption request through an authorized dealer or by calling the
Fund.

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

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<PAGE> 46

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

TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. To establish
such privilege, a shareholder must complete the appropriate section of the
application form accompanying this Prospectus or call the Fund at (800) 421-5666
((800) 772-8889 for the hearing impaired) to request that a copy of the
Telephone Redemption Authorization form be sent to them for completion. To
redeem shares, contact the telephone transaction line at (800) 421-5684. VKAC
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, a shareholder agrees that neither VKAC nor the Fund
will be liable for following instructions which it reasonably believes to be
genuine. VKAC and the Fund may be liable for any losses due to unauthorized or
fraudulent instructions if reasonable procedures are not followed. Telephone
redemptions may not be available if the shareholder cannot reach ACCESS by
telephone, whether because all telephone lines are busy or for any other reason;
in such case, a shareholder would have to use the Fund's other redemption
procedures previously described. Requests received by ACCESS prior to 4:00 p.m.,
New York time, on a regular business day will be processed at the net asset
value per share determined that day. These privileges are available for all
accounts other than retirement accounts. The telephone redemption privilege is
not available for shares represented by certificates. If the shares to be
redeemed have been recently purchased by check, ACCESS may delay mailing a
redemption check or wiring redemption proceeds until it confirms that the
purchase check has cleared, usually a period of up to 15 days. If an account has
multiple owners, ACCESS may rely on the instructions of any one owner.

For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check sent to the shareholders'

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<PAGE> 47

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

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

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

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

REINSTATEMENT PRIVILEGE. Holders of Class A Shares or Class B Shares who have
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class A Shares of the Fund. Holders of Class C Shares who
have redeemed shares of the Fund may reinstate any portion or all of the net
proceeds

44
<PAGE> 48

of such redemption in Class C Shares of the Fund with credit given for any
contingent deferred sales charge paid upon such redemption. Such reinstatement
is made at the net asset value next determined after the order is received,
which must be within 120 days after the date of the redemption. See "Purchase of
Shares -- Waiver of Contingent Deferred Sales Charge." Reinstatement at net
asset value is also offered to participants in those eligible retirement plans
held or administered by Van Kampen American Capital Trust Company for repayment
of principal (and interest) on their borrowings on such plans.

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THE DISTRIBUTION AND SERVICE PLANS

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

CLASS A SHARES. The Fund may spend an aggregate amount up to 0.25% per year of
the average daily net assets attributable to the Class A Shares of the Fund
pursuant to the Distribution Plan and the Service Plan. 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 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 addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B Shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.

CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C Shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the

45
<PAGE> 49

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

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

The Distributor's actual expenses with respect to a class of CDSC Shares (for
purposes of this section, excluding any Class A Share that may be subject to a
CDSC) for any given year may exceed the amounts payable to the Distributor with
respect to such class of CDSC Shares under the Distribution Plan, the Service
Plan and payments received pursuant to the contingent deferred sales charge. In
such event, with respect to any such class of CDSC Shares, any unreimbursed
expenses will be carried forward and paid by the Fund (up to the amount of the
actual expenses incurred) in future years so long as such Distribution Plan is
in effect. Except as mandated by applicable law, the Fund does not impose any
limit with respect to the number of years into the future that such unreimbursed
expenses may be carried forward (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 a CDSC Share may be deemed to incur expenses attributable to
other shareholders of such class. As of December 31, 1994, there were $42,696
and $0 of unreimbursed distribution expenses with respect to Class B Shares and
Class C Shares, respectively, representing 0.02% and less than 0.01% of the
Fund's total net assets. If the Distribution Plan was terminated or not
continued, the Fund would not be contractually obligated to pay the Distributor
for any expenses not previously reimbursed by the Fund or recovered through
contingent deferred sales charges.

The Distributor will not use the proceeds from the contingent deferred sales
charge applicable to a particular class of CDSC Shares to defray distribution
related expenses attributable to any other class of CDSC Shares. Various federal
and state laws prohibit national banks and some state-chartered commercial banks
from underwriting or dealing in the Fund's shares. In addition, state securities
laws

46
<PAGE> 50

on this issue may differ from the interpretations of federal law, and banks and
financial institutions may be required to register as dealers pursuant to state
law. In the unlikely event that a court were to find that these laws prevent
such banks from providing such services described above, the Fund would seek
alternate providers and expects that shareholders would not experience any
disadvantage.

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

The Fund's policy is to declare daily and pay monthly distributions of all or
substantially all net investment income of the Fund, except that net realized
short-term capital gains, if any, are expected to be distributed annually. Net
investment income consists of all interest income, dividends and other ordinary
income earned by the Fund, less all expenses of the Fund. Expenses of the Fund
are accrued each day. Net short-term capital gains, if any, may be distributed
throughout the year. Net realized long-term capital gains, if any, are expected
to be distributed, to the extent permitted by applicable law, to shareholders at
least annually. Distributions cannot be assured, and the amount of each monthly
distribution may vary.

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

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

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

PURCHASE OF ADDITIONAL SHARES WITH DISTRIBUTIONS. The Fund will automatically
credit monthly distributions and any annual net long-term capital gain
distributions to a shareholder's account in additional shares of the Fund valued
at net asset value,

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<PAGE> 51

without a sales charge. Unless a shareholder instructs otherwise, the
reinvestment plan is automatic. This instruction may be made by telephone by
calling (800) 421-5666 ((800) 772-8889 for the hearing impaired) or in writing
to ACCESS.

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

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

In order to avoid a 4% excise tax the Fund will be required to distribute by
December 31 of each year at least 98% of its ordinary income for such year and
at least 98% of its capital gain net income (the latter of which is generally
computed on the basis of the one-year period ending on October 31 of such year),
plus any required distribution 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 taxes in the hands
of, the Fund will be treated as having been distributed.

If the Fund qualifies as a regulated investment company and satisfies the 90%
distribution requirement and if, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's total assets consists of
obligations exempt from federal income tax ("tax-exempt obligations"), the Fund
will be qualified to pay exempt-interest dividends to its shareholders to the
extent of its tax-exempt interest income (less expenses applicable thereto).
Exempt-interest dividends are excludable from a shareholder's gross income for
federal income tax purposes, but may be treated as taxable distributions for
state, local and other tax purposes. Exempt-interest dividends are included,
however, in determining what portion, if any, of a person's social security and
railroad retirement benefits will be includable in gross income subject to
federal income tax. Interest expense with respect to indebtedness incurred or
continued by a shareholder to purchase or carry shares of the Fund is not
deductible to the extent that such interest relates to exempt-interest dividends
received from the Fund.

Distributions of the Fund's investment company taxable income (which does not
include tax-exempt interest income) are taxable to shareholders as ordinary
income

48
<PAGE> 52

whether received in shares or in cash. Shareholders who receive distributions in
the form of additional shares will have a basis for federal income tax purposes
in each such share equal to the value thereof on the reinvestment date.
Distributions of the Fund's net capital gain ("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, such
as distributions of principal, will first reduce the adjusted tax basis of the
shares held by the shareholders and, after such adjusted tax basis is reduced to
zero, will constitute capital gains to such shareholders (assuming such shares
are held as a capital asset). The Fund will inform shareholders of the source
and tax status of such distributions promptly after the close of each calendar
year. Distributions from the Fund will not be eligible for the dividends
received deduction for corporations.

Exempt-interest dividends allocable to interest received by the Fund on
certain "private activity" obligations issued after August 7, 1986 will be
treated as interest on such obligations and thus will give rise to an item of
tax preference that will increase a shareholder's alternative minimum taxable
income. Unless otherwise provided in regulations, the portion of the Fund's
interest on such "private activity" obligations allocable to shareholders will
correspond to the portion of the Fund's total net tax-exempt income distributed
to shareholders. In addition, for corporations, alternative minimum taxable
income will be increased by a percentage of the amount by which a measure of
income that includes interest on tax-exempt obligations exceeds the amount
otherwise determined to be the alternative minimum taxable income. Accordingly,
investment in the Fund may cause shareholders to be subject to (or result in an
increased liability under) the alternative minimum tax.

Exempt-interest dividends will not be tax-exempt to the extent made to any
shareholder who is a "substantial user" of the facilities financed by tax-exempt
obligations held by the Fund or "related persons" of such substantial users.

Redemption or resale of shares of the Fund will be a taxable transaction for
federal income tax purposes. Redeeming shareholders will recognize gain or loss
in an amount equal to the difference between their basis in such redeemed 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 and will generally be long-term
if such shareholders have held their shares for more than one year. Any loss
realized on shares held for six months or less will be disallowed to the extent
of any exempt-interest dividends received with respect to such shares. If such
loss is not entirely disallowed, it will be treated as a long-term capital loss
to the extent of any capital gains dividends received with respect to such
shares.

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 gains or losses realized by the Fund. These provisions may also
require the Fund to

49
<PAGE> 53

mark-to-market some of the positions in its portfolio (i.e., treat them as if
they were closed out), which may cause the Fund to recognize income without
receiving the cash with which to make distributions in amounts necessary to
satisfy the 90% distribution requirement and the distribution requirement for
avoiding income 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 taxes. In order to
generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and avoid income taxes, the Fund may have to dispose of
securities that it would otherwise have continued to hold. Discount relating to
certain stripped tax-exempt obligations may constitute taxable income when
distributed to shareholders.

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

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 the 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 paid by the Fund (except for
purpose 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 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.

PENNSYLVANIA TAX STATUS. Under existing Pennsylvania law, since the Fund
intends to invest primarily in Pennsylvania municipal securities, in the opinion
of special Pennsylvania counsel to the Fund, interest income of the Fund derived
from these investments and distributed to the shareholders will be exempt from
Pennsylvania Personal Income Tax and (for residents of Philadelphia) from
Philadelphia

50
<PAGE> 54

School District Income Tax. To the extent the Fund invests in other permitted
investments, distributions to shareholders of income from these investments may
be subject to Pennsylvania Personal Income Tax and (for residents of
Philadelphia) to Philadelphia School District Income Tax. Shareholders of the
Fund will receive annual notification from the Fund as to the taxability of such
distributions in Pennsylvania.

Income of the Fund derived from Pennsylvania municipal securities and
distributed to corporate shareholders will be exempt from Pennsylvania Corporate
Net Income Tax as well as Pennsylvania Mutual Thrift Institutions Tax. Gains
realized by a corporate shareholder on a sale or disposition of shares will be
subject to Pennsylvania Corporate Net Income Tax or Pennsylvania Mutual Thrift
Institutions Tax, whichever is applicable. To the extent the Fund invests in
other permitted investments, distributions to corporate shareholders of income
from these investments may be subject to Pennsylvania Corporate Net Income Tax
or Pennsylvania Mutual Thrift Institutions Tax, whichever is applicable.
Shareholders of the Fund will receive annual notification from the Fund as to
the taxability of such distributions in Pennsylvania.

Gains realized by a shareholder on a sale or disposition of shares of the Fund
will be subject to Pennsylvania Personal Income Tax as well as Philadelphia
School District Income Tax (but under the Philadelphia School District Tax, only
as to sales occurring within six months of purchase).

In the opinion of special Pennsylvania counsel to the Fund, shares of the Fund
will be exempt from Pennsylvania County Personal Property Taxes and (as to
residents of Pittsburgh) from personal property taxes imposed by the City of
Pittsburgh and School District of Pittsburgh. This exemption, however, will not
apply to that portion of the Fund represented by each shareholder's shares that
is not invested in Pennsylvania municipal securities (or other securities exempt
from personal property taxes in Pennsylvania).

Shares of the Fund are subject to Pennsylvania Inheritance and Estate Tax.

Gains derived by the Fund from the sale, exchange or other disposition of
Pennsylvania municipal securities may be subject to Pennsylvania personal or
corporate income taxes. Those gains which are distributed by the Fund to
shareholders who are individuals will be subject to Pennsylvania Personal Income
Tax and, for residents of Philadelphia, to Philadelphia School District
Investment Income Tax. For shareholders which are corporations, the distributed
gains will be subject to Pennsylvania Corporate Net Income Tax or Pennsylvania
Mutual Thrift Institutions Tax, whichever is applicable. Gains which are not
distributed by the Fund will nevertheless be taxable to shareholders if derived
by the Fund from the sale, exchange or other disposition of Pennsylvania
municipal securities issued on or after February 1, 1994. Gains which are not
distributed by the Fund will not be taxable to shareholders if derived by the
Fund from the sale, exchange or other disposition of Pennsylvania municipal
securities issued prior to February 1, 1994.

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<PAGE> 55

GENERAL. The federal and Pennsylvania income tax discussions set forth above
are for general information only. Prospective investors should consult their tax
advisers regarding the specific federal and Pennsylvania tax consequences of
holding and disposing of shares as well as the effects of other state, local and
foreign tax laws.

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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., Business Week, Forbes or other industry publications.

The Fund's yield quotation is determined for each class of the Fund's shares
on a monthly basis with respect to the immediately preceding 30 day period.
Yield is computed by first dividing the Fund's net investment income per share
earned during such a 30 day period by the Fund's maximum offering price per
share on the last day of such period. Net investment income per share for a
class of shares is determined by taking the interest earned by the Fund during
the period and allocable to the class of shares, subtracting the expenses (net
of any reimbursements) accrued for the period and allocable to the class of
shares, and dividing the result by the product of (a) the average daily number
of such class of the Fund shares outstanding during the period that were
entitled to receive dividends and (b) the Fund's maximum offering price per
share on the last day of the period. The yield calculation formula assumes net
investment income is earned and reinvested at a constant rate annualized at the
end of a six month period.

Tax-equivalent yield demonstrates the taxable yield required to produce an
after-tax yield equivalent to that of the Fund's yield. The Fund's
tax-equivalent yield quotation for a 30 day period as described above is
computed for each class of the Fund's shares by dividing that portion of the
yield of the Fund (as computed above) which is tax-exempt by a percentage equal
to 100% minus a stated percentage income tax rate and adding the result to that
portion of the Fund's yield, if any, that is not tax-exempt.

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

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<PAGE> 56

charge) at the beginning of the period, annualizing the increase or decrease
over the specified period with respect to such initial investment and expressing
the result as a percentage.

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

The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
the Fund from a given date to a subsequent given date and including or
excluding, as the case may be, sales charges applicable to the respective class
of shares. Cumulative non-standardized total return is calculated by measuring
the value of an initial investment in the Fund at a given time, including or
excluding, as the case may be, the maximum sales charge applicable to the
respective class of shares, 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.

From time to time the Fund may include in its supplemental sales literature
and shareholder reports a quotation of the current "distribution rate" for the
Fund. Distribution rate is a measure of the level of income and short-term
capital gain dividends, if any, distributed for a specified period. Distribution
rate is determined by annualizing the distributions per share for a stated
period and dividing the result by the ending maximum public offering price for
the same period. It differs from yield, which is a measure of the income
actually earned by the Fund's investments, and from total return, which is a
measure of the income actually earned by, plus the effect of any realized and
unrealized appreciation or depreciation of, such investments during a stated
period. Distribution rate is, therefore, not intended to be a complete measure
of the Fund's performance. Distribution rate may sometimes be greater than yield
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
calculated separately for each class of the Fund's shares.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report and the Fund's Statement of Additional Information, each of which
can be obtained without charge by calling (800)421-5666 ((800) 772-8889 for the
hearing impaired).

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<PAGE> 57

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DESCRIPTION OF SHARES OF THE FUND

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The Fund is an unincorporated trust originally established under the laws of
the Commonwealth of Pennsylvania by a Declaration of Trust dated January 28,
1987. The Declaration of Trust was amended and restated as of August 1, 1995.
Shares of the Fund entitle their holders to one vote per share. Shares do not
have cumulative voting rights, preemptive rights or any conversion or exchange
rights. The Fund 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 Fund 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 Fund is set forth in the
Statement of Additional Information.

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ADDITIONAL INFORMATION

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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 Fund's fiscal year ends on December 31. 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 auditors, 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.

The fiscal year of the Fund ends December 31. 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 auditors, is sent to shareholders each year. After the
end of each year, shareholders will receive federal income tax information
regarding dividends and capital gains distributions.

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

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

54
<PAGE> 58

APPENDIX A

DESCRIPTION OF MUNICIPAL SECURITIES RATINGS

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

1. DEBT

A Standard & Poor's 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 default--capacity and willingness of the obligor as to the
timely payment of interest 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 creditors' rights.

<TABLE>
<S> <C>
AAA Debt rated 'AAA' has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.

AA Debt rated 'AA' has a very strong capacity to pay interest
and repay principal and differs from the higher rated
issues only in small degree.

A Debt rated 'A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
</TABLE>

55
<PAGE> 59

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

BB Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as
B having predominantly speculative characteristics with
CCC respect to capacity to pay interest and repay principal.
CC 'BB' indicates the least degree of speculation and 'C' the
C highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or large exposures to adverse conditions.

BB Debt rated 'BB' has less near-term vulnerability to
default than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and
principal payments. The 'BB' rating category is also used
for debt subordinated to senior debt that is assigned an
actual or implied 'BBB' rating.

B Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The 'B'
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'BB' or
'BB-' rating.

CCC Debt rated 'CCC' has a currently identifiable
vulnerability 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 The rating 'CC' typically is applied to debt subordinated
to senior debt that is assigned an actual or implied 'CCC'
rating.

C The rating 'C' typically is applied to debt subordinated
to senior debt which is assigned an actual or implied
'CCC-' debt rating. The 'C' rating may be used to cover a
situation where a bankruptcy petition has been filed, but
debt service payments are continued.

CI The rating 'CI' is reserved for income bonds on which no
interest is being paid.
</TABLE>

56
<PAGE> 60

<TABLE>
<S> <C>
D Debt rated 'D' is in payment default. The 'D' rating
category is used when interest payments or principal
payments are not made on the date due even if the
applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace
period. The 'D' rating also will be used upon the filing
of a bankruptcy petition if debt service payments are
jeopardized.

PLUS (+) or MINUS (-): The ratings from 'AA' to 'CCC' may
be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.

C The letter 'c' indicates that the holder's option to
tender the security for purchase may be canceled under
certain prestated conditions enumerated in the tender
option documents.

L The letter 'L' indicates that the rating pertains to the
principal amount of these bonds to the extent that the
underlying deposit collateral is federally insured and
interest is adequately collateralized. In the case of
certificates of deposit, the letter 'L' indicates that the
deposit, combined with other deposits being held in the
same right and capacity, will be honored for principal and
accrued pre-default interest up to the federal insurance
limits within 30 days after closing of the insured
institution or, in the event that the deposit is assumed
by a successor insured institution, upon maturity.

P The letter 'p' indicates that the rating is provisional. A
provisional rating assumes the successful completion of
the project being financed by the debt being rated and
indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and
timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or
the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to
such likelihood and risk.

*Continuance of the rating is contingent upon S&P's
receipt of an executed copy of the escrow agreement or
closing documentation confirming investments and cash
flows.

NR Indicates that no public 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.
</TABLE>

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.

57
<PAGE> 61

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. MUNICIPAL NOTES

A S&P note rating reflects the liquidity factors and market-access risks
unique to notes. Notes maturing in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:

-- Amortization schedule (the larger 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).

The note rating symbols and definitions are as follows:

<TABLE>
<S> <C>
SP-1 Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are 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.
</TABLE>

3. COMMERCIAL PAPER

A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from 'A-1' for the
highest-quality obligations to 'D' for the lowest. These categories are as
follows:

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

A-2 Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree
of safety is not as high as for issues designated 'A-1'.
</TABLE>

58
<PAGE> 62

<TABLE>
<S> <C>
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 only speculative
capacity for timely payment.

C This rating is assigned to short-term debt obligations
with a doubtful capacity for payment.

D Debt rated 'D' is in payment default. The 'D' rating
category is used when interest payments or principal
payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace
period.
</TABLE>

A commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to S&P by the
issuer or obtained from other sources it considers reliable. The ratings may
be changed, suspended, or withdrawn as a result of changes in or
unavailability of, such information.

4. TAX-EXEMPT DUAL RATINGS

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+').

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

1. LONG-TERM MUNICIPAL BONDS

<TABLE>
<S> <C>
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 edged." 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.
</TABLE>

59
<PAGE> 63

<TABLE>
<S> <C>
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 risk appear somewhat larger than the
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 some
time in the future.

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

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

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

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

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

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

60
<PAGE> 64

<TABLE>
<S> <C>
CON (..) Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated
conditionally and designated with the prefix "Con"
followed by the rating in parentheses. These are bonds
secured by: (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operating experi-
ence, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limiting
condition attaches. The parenthetical rating denotes the
probable credit stature upon completion of construction or
elimination of the basis of the condition.

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 company 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
company ranks in the lower end of its generic rating
category.
</TABLE>

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 EXEMPT NOTES

Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends for example, may be less important over
the short run. A short-term rating may also be assigned on an issue having a
demand feature-variable rate demand obligation. Such ratings will be
designated as VMIG, SG or, if the demand feature is not rated, as NR.

Moody's short-term ratings are designated Moody's Investment Grade as MIG 1
or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when

61
<PAGE> 65

Moody's assigns a MIG or VMIG rating, all categories define an investment
grade situation.

MIG 1/VMIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

MIG 2/VMIG 2. This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.

MIG 3/VMIG 3. This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

MIG 4/VMIG 4. This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.

SG. This designation denotes speculative quality. Debt instruments in this
category lack margins of protection.

3. TAX-EXEMPT COMMERCIAL PAPER

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of Indemnity are excluded unless explicitly rated.

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.

Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations.

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

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

62
<PAGE> 66

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

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

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

FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 772-8889.

FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 421-5666.
VAN KAMPEN AMERICAN CAPITAL
PENNSYLVANIA TAX FREE
INCOME FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181

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

Investment Adviser

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

Distributor

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

Transfer Agent

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

Custodian

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

Legal Counsel

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
333 West Wacker Drive
Chicago, IL 60606

Independent Auditors

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601
<PAGE> 67

PENNSYLVANIA TAX

FREE INCOME FUND

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

P R O S P E C T U S

SEPTEMBER 1, 1995

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 68

STATEMENT OF ADDITIONAL INFORMATION

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Prospectus of the Fund dated September 1, 1995 (the
"Prospectus"). This Statement of Additional Information does not include all
information that a prospective investor should consider before purchasing shares
of the Fund, and investors should obtain and read the Prospectus prior to
purchasing shares. A copy of the Prospectus may be obtained without charge by
calling the Fund's toll-free number: (800) 421-5666 (or (800) 772-8889 for the
hearing impaired).

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
The Fund................................................................................ B-2
Shares of the Fund...................................................................... B-2
Investment Policies and Restrictions.................................................... B-2
Additional Investment Considerations.................................................... B-4
Officers and Trustees................................................................... B-18
Custodian............................................................................... B-23
Legal Counsel and Independent Auditors.................................................. B-23
Investment Advisory and Other Services.................................................. B-23
Portfolio Transactions.................................................................. B-25
Tax Status of the Fund.................................................................. B-26
The Distributor......................................................................... B-26
Performance Information................................................................. B-27
Independent Auditors' Report............................................................ B-29
Financial Statements.................................................................... B-30
Notes to Financial Statements........................................................... B-40
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED SEPTEMBER 1, 1995.

B-1
<PAGE> 69

THE FUND

The Fund is a non-diversified, open-end management investment company,
commonly known as a mutual fund, and was originally organized as an
unincorporated trust established under the laws of the Commonwealth of
Pennsylvania by a Declaration of Trust dated January 28, 1987. The Declaration
of Trust was amended and restated as of August 1, 1995. The Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional shares,
$0.01 par value (prior to August 1, 1995, the shares had no par value).

Each share represents an equal proportionate interest in the assets of the
Fund with each other share in the Fund. The Declaration of Trust provides that
shareholders are not liable for any liabilities of the Fund and requires
inclusion of a clause to that effect in every agreement entered into by the Fund
and indemnifies shareholders against any such liability. Although shareholders
of an unincorporated trust established under Pennsylvania law may, under certain
limited circumstances, be held personally liable for the obligations of the
trust as though they were general partners in a partnership, the provisions of
the Declaration of Trust described in the foregoing sentence make the likelihood
of such personal liability remote.

Shares of the Fund entitle their holders to one vote per share. Shares do not
have cumulative voting rights, preemptive rights or any conversion or exchange
rights other than those described in the Prospectus. The Fund 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 Trustee may amend the Declaration of Trust in any manner without
shareholder approval, except that the Trustees may not adopt any amendment
adversely affecting the rights of shareholders without approval by a majority of
the shares present at a meeting of shareholders (or such higher vote as may be
required by the Investment Company Act of 1940, as amended (the "1940 Act"), or
other applicable law) and except that the Trustees cannot amend the Declaration
of Trust to impose any liability on shareholders, make any assessment on shares
or impose liabilities on the Trustees without approval from each affected
shareholder or Trustee, as the case may be.

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

SHARES OF THE FUND

The authorized stock of the Fund currently consists of an unlimited number of
shares of beneficial interest, without par value.

INVESTMENT POLICIES AND RESTRICTIONS

The Fund's investment objective is to provide only Pennsylvania investors a
high level of current income exempt from federal and Pennsylvania state income
taxes and, where possible under local law, local income and personal property
taxes, through investment primarily in a varied portfolio of medium and lower
grade Pennsylvania municipal securities. The Fund will generally invest its
assets in obligations issued by or on behalf of the Commonwealth of Pennsylvania
and its political subdivisions, agencies and instrumentalities, certain
interstate agencies and certain territories of the United States, the interest
on which is exempt from federal and Pennsylvania state income taxes in the
opinion of counsel.

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

1. Purchase any securities (other than tax exempt 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 (taken at current
value) would then be invested in securities of a single issuer or if as a
result the Fund would hold more than 10% of the outstanding voting
securities of any single issuer, except that with respect to 50% of the
Fund's total assets up to 25% may be invested in one issuer.

2. Invest more than 25% of its assets in a single industry. (As described in
the Prospectus, the Fund may from time to time invest more than 25% of its
assets in a particular segment of the municipal bond

B-2
<PAGE> 70

market; however, the Fund will not invest more than 25% of its assets in
industrial development bonds in a single industry.)

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

4. Make loans of money or property to any person, except to the extent the
securities in which the Fund may invest are considered to be loans and
except 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. Buy any securities "on margin." The deposit of initial or maintenance
margin in connection with municipal bond index and interest rate futures
contracts or related options transactions is not considered the purchase
of a security on margin.

6. 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 as described, from
time to time, under the heading "Investment Practices" in the Prospectus.

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

8. Make investments for the purpose of exercising control or participation in
management, except to the extent that exercise by the Fund of its rights
under agreements related to securities owned by the Fund would be deemed
to constitute such control or participation.

9. Invest in securities of other investment companies, except as part of a
merger, consolidation or other acquisition and except that the Fund may
temporarily invest up to 10% of the value of its assets in Pennsylvania
tax exempt money market funds.

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

11. Purchase or sell real estate, commodities or commodity contracts, except
to the extent the securities the Fund may invest in are considered to be
interest in real estate, commodities or commodity contracts or to the
extent the Fund exercises its rights under agreements relating to such
securities (in which case the Fund may own, hold, foreclose, liquidate or
otherwise dispose of real estate acquired as a result of a default on a
mortgage), and except to the extent the options and futures and index
contracts in which such Funds may invest for hedging and risk management
purposes are considered to be commodities or commodities contracts.

The Fund may not change any of these investment restrictions nor any other
fundamental policy without the approval of the lesser of (i) more than 50% of
the Fund's outstanding shares or (ii) 67% of the Fund's shares present at a
meeting at which the holders of more than 50% of the outstanding shares are
present in person or by proxy. As long as the percentage restrictions described
above are satisfied at the time of the investment or borrowing, the Fund will be
considered to have abided by those restrictions even if, at a later time, a
change in values or net assets causes an increase or decrease in percentage
beyond that allowed. Certain of the medium and lower grade municipal securities
in which the Fund may invest may be, subsequent to the Fund's investment in such
securities, downgraded by Moody's or S&P or may be deemed by the Adviser to be
of a lower quality as a result of impairment of the creditworthiness of the
issuer of such securities or of the project the revenues from which are the
source of payment of interest and repayment of principal with respect to such
securities. In such instances, the secondary market for such municipal
securities may become less liquid, with the possibility that more than 10% of
the Fund's assets would be invested in securities which are not readily
marketable. In such event, the Fund will take reasonable and appropriate steps
to reduce the percentage of the Fund's portfolio represented by securities that
are not readily marketable, together with any other securities

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subject to investment restriction eight above, to less than 10% of the Fund's
assets as soon as is reasonably practicable.

Frequent portfolio turnover is not anticipated. The Fund anticipates that the
annual portfolio turnover rate of the Fund will normally be less than 100%.
Portfolio turnover is calculated by dividing the lesser of purchases or sales of
portfolio securities by the monthly average value of the securities in the
portfolio during the year. Securities, including options, whose maturity or
expiration date at the time of acquisition were one year or less are excluded
from such calculation. The Fund will not seek capital gain or appreciation but
may sell securities held in its portfolio and, as a result, realize capital gain
or loss. Sales of portfolio securities will be made for the following purposes:
in order to eliminate unsafe investments and investments not consistent with the
preservation of the capital or tax status of the Fund; honor redemption orders,
meet anticipated redemption requirements and negate gains from discount
purchases; reinvest the earnings from portfolio securities in like securities;
or defray normal administrative expenses.

ADDITIONAL INVESTMENT CONSIDERATIONS

MUNICIPAL SECURITIES. Municipal securities include long-term obligations,
which are often called municipal bonds, as well as shorter term municipal notes,
municipal leases, and tax-exempt commercial paper. Under normal market
conditions, longer term municipal securities generally provide a higher yield
than shorter term municipal securities, and therefore the Fund generally expects
to be invested primarily in longer term municipal securities. The Fund will,
however, invest in shorter term municipal securities when yields are greater
than yields available on longer term municipal securities, for temporary
defensive purposes and when redemption requests are expected. The two principal
classifications of municipal bonds are "general obligation" and "revenue" or
"special obligation" bonds, which include "industrial revenue bonds." General
obligation bonds are secured by the issuer's pledge of its faith, credit, and
taxing power for the payment of principal and interest. Revenue or special
obligation bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special tax or other specific revenue source such as from the user of the
facility being financed. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase contract,
a conditional sales contract, or a participation certificate in any of the
above. Some municipal leases and participation certificates may not be
considered readily marketable. Such non-marketable municipal leases, together
with other restricted or non-marketable securities in the Fund's portfolio will
not at the time of purchase exceed 10% of the total assets of the Fund. The
"issuer" of municipal securities is generally deemed to be the governmental
agency, authority, instrumentality or other political subdivision, or the
non-governmental user of a facility, the assets and revenues of which will be
used to meet the payment obligations, or the guarantee of such payment
obligations, of the municipal securities.

The Fund may purchase floating and variable rate demand notes, which are
municipal securities normally having a stated maturity in excess of one year,
but which permit the holder to demand payment of principal at any time, or at
specified intervals. The issuer of such notes normally has a corresponding
right, after a given period, to prepay at its discretion upon notice to the
noteholders the outstanding principal amount of the notes plus accrued interest.
The interest rate on a floating rate demand note is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand note is adjusted
automatically at specified intervals. There generally is no secondary market for
these notes, although they are redeemable at face value. Each note purchase by
the Fund will meet the criteria established for the purchase of municipal
securities.

The Fund also may invest up to 15% of its total assets in variable rate
derivative municipal securities such as inverse floaters whose rates vary
inversely with changes in market rates of interest. Such variable rate
derivative municipal securities may pay a rate of interest determined by
applying a multiple to the variable rate. The extent of increases and decreases
in the value of derivative municipal securities whose rates vary inversely with
changes in market rates of interest in response to such changes in market rates
generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate municipal security having similar credit
quality, redemption provision and maturity. In addition, the Fund may invest in
derivative municipal securities the terms of which include elements of, or are
similar in effect to, certain

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Strategic Transactions in which the Fund may engage. Such municipal securities
may be their terms, for example, have economic characteristics comparable to,
among other things, a swap, cap, floor or collar transaction with respect to
such security for a period of time prior to its stated maturity. See "Additional
Investment Considerations--Strategic Transactions" in this Statement of
Additional Information.

The Fund may invest up to 15% of its total assets in illiquid securities,
securities the disposition of which is subject to substantial legal or
contractual restrictions on resale and securities that are not readily
marketable. The sale of restricted and illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Restricted securities salable among qualified
institutional buyers without restriction pursuant to Rule 144A under the
Securities Act of 1933, as amended, that are determined to be liquid by the
Adviser under guidelines adopted by the Board of Trustees of the Trust (under
which guidelines the Adviser will consider factors such as trading activities
and the availability of price quotations), will not be treated as restricted
securities by the Fund pursuant to such rules. The Fund may, from time to time,
adopt a more restrictive limitation with respect to investment in illiquid and
restricted securities in order to comply with the most restrictive state
securities law, currently 10%. This policy does not include restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended, which the Board of Trustees or the Fund's investment adviser
has determined under Board-approved guidelines to be liquid.

MEDIUM AND LOWER GRADE MUNICIPAL SECURITIES. Discussion concerning the
special risk factors relating to the Fund's investments in medium and lower
grade municipal securities appears in the "Municipal Securities" section of the
Prospectus under the subheading "Special Considerations Regarding Medium and
Lower Grade Municipal Securities."

SPECIAL CONSIDERATION REGARDING PENNSYLVANIA MUNICIPAL SECURITIES. As
described in the Prospectus, the Fund will invest primarily in Pennsylvania
municipal securities. In addition, the specific Pennsylvania municipal
securities in which the Fund will invest will change from time to time. The Fund
is therefore susceptible to political, economic, regulatory or other factors
affecting issuers of Pennsylvania municipal securities. The following
information constitutes only a brief summary of a number of the complex factors
which may impact issuers of Pennsylvania municipal securities and does not
purport to be a complete or exhaustive description of all adverse conditions to
which issuers of Pennsylvania municipal securities may be subject. Such
information is derived from official statements utilized in connection with the
issuance of Pennsylvania municipal securities, as well as from other publicly
available documents. Such information has not been independently verified by the
Fund and the Fund assumes no responsibility for the completeness or accuracy of
such information. Additionally, many factors, including national, economic,
social and environmental policies and conditions, which are not within the
control of such issuers, could have an adverse impact on the financial condition
of such issuers. The Fund cannot predict whether or to what extent such factors
or other factors may affect the issuers of Pennsylvania municipal securities,
the market value or marketability of such securities or the ability of the
respective issuers of such securities acquired by the Fund to pay interest on or
principal of such securities. The creditworthiness of obligations issued by
local Pennsylvania issuers may be unrelated to the creditworthiness of
obligations issued by the Commonwealth of Pennsylvania, and there is no
obligation on the part of the Commonwealth of Pennsylvania to make payments on
such local obligations. There may be specific factors that are applicable in
connection with investment in the obligations of particular issuers located
within Pennsylvania, and it is possible the Fund will invest in obligations of
particular issuers as to which such specific factors are applicable. However,
the information set forth below is intended only as a general summary and not as
a discussion of any specific factors that may affect any particular issuer of
Pennsylvania municipal securities.

Pennsylvania historically has been identified as a heavy industry state
although that reputation has changed recently as the industrial composition of
the Commonwealth diversified when the coal, steel and railroad industries began
to decline. The major new sources of growth in Pennsylvania are in the service
sector, including trade, medical and the health services, education and
financial institutions. Pennsylvania's agricultural industries are also an
important component of the Commonwealth's economic structure, accounting for

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more than $3.6 billion in crop and livestock products annually, while
agribusiness and food related industries support $39 billion in economic
activity annually.

The Commonwealth operates under an annual budget which is formulated and
submitted for legislative approval by the Governor each February. The
Pennsylvania Constitution requires that the Governor's budget proposal consist
of three parts; (i) a balanced operating budget setting forth proposed
expenditures and estimated revenues from all sources and, if estimated revenues
and available surplus are less than proposed expenditures, recommending specific
additional sources of revenue sufficient to pay the deficiency; (ii) a capital
budget setting fourth proposed expenditures to be financed from the proceeds of
obligations of the Commonwealth or its agencies or from operating funds; and
(iii) a financial plan for not less than the succeeding five fiscal years, which
includes for each year projected operating expenditures and estimated revenues
and projected expenditures for capital projects. The General Assembly may add,
change or delete any items in the budget prepared by the Governor, but the
Governor retains veto power over the individual appropriations passed by the
legislature. The Commonwealth's fiscal year begins on July 1 and ends on June
30.

The five year period from fiscal 1990 through fiscal 1994 was marked by public
health and welfare costs growing at a rate double the growth rate for all state
expenditures. Rising caseloads, increased utilization of services and rising
prices joined to produce the rapid rise of public health and welfare costs at a
time when a national recession caused tax revenues to stagnate and even decline.
During the period from fiscal 1990 through fiscal 1994, public health and
welfare costs rose by an average annual rate of 9.4 percent while tax revenues
were growing at an average annual rate of 5.8 percent. Consequently, spending on
other budget programs was restrained to a growth rate of 4.7 percent and sources
of revenues other than taxes became larger components of fund revenues. Among
those sources were transfers from other funds and hospital and nursing home
pooling of contributions to use as federal matching funds. Tax revenues declined
in fiscal 1991 as a result of the recession in the economy. A $2.7 billion tax
increase enacted for fiscal 1992 brought financial stability to the General
Fund. That tax increase included several taxes with retroactive effective dates
which generated some one-time revenues during fiscal 1992. The absence of those
revenues and a reduction in the personal income tax rate in fiscal 1993
contributed to the decline in tax revenues shown for fiscal 1993. Fiscal 1994
tax revenues increased by 4.1 percent, but a decline in other revenues caused by
the end of medical assistance pooled financing in fiscal 1993 held total
revenues to a 1.8 percent gain. Expenditures for fiscal 1994 rose by 4.3
percent.

Total revenues for the 1992 fiscal year were $14,516.8 million, a $2,654.5
million increase over cash revenues during fiscal 1991. Largely due to the tax
revisions enacted for the budget, corporate tax receipts totaled $3,761.2
million, up from $2,656.3 million in fiscal 1991, sales tax receipts increased
by $302.0 million to $4,499.7 million, and personal income tax receipts totaled
$4,807.4 million, an increase of $1,443.8 million over receipts in fiscal 1991.
Spending increases in the fiscal 1992 budget were largely accounted for by
increases for education, social services and corrections programs. Commonwealth
funds for the support of public schools were increased by 9.8 percent to provide
a $438.0 million increase to $4.9 billion for fiscal 1992. Child welfare
appropriations supporting county operated child welfare programs were increased
$67.0 million, more than 31.5 percent over fiscal 1991. Other social service
areas such as medical and cash assistance also received significant funding
increases as costs rose quickly as a result of the economic recession and high
inflation rates of medical care costs. The costs of corrections programs,
reflecting the marked increase in prisoner population, increased by 12.0
percent. Economic development efforts, largely funded from bond proceeds in
fiscal 1991, were continued with General Fund appropriations for fiscal 1992.
The budget included the use of several medical assistance pooled financing
transactions. These pooling transactions replaced $135.0 million of Commonwealth
funds, allowing total spending under the budget to increase by an equal amount.

The 1993 fiscal year closed with revenues higher than anticipated and
expenditures about as projected, resulting in an ending unappropriated balance
surplus (prior to the 10 percent transfer to the Tax Stabilization Reserve Fund)
of $242.3 million, slightly higher than estimated. Cash revenues were $41.5
million above the budget estimate and totaled $14.633 billion representing less
than a one percent increase over revenues for the 1992 fiscal year. A reduction
in the personal income tax rate in July 1992 and the one-time receipt of
revenues from retroactive corporate tax increases in fiscal 1992 were
responsible, in part, for the low revenue growth in fiscal 1993. Appropriations
less lapses totaled an estimated $13.870 billion representing a 1.1 percent
increase over those during fiscal 1992. The low growth in spending is a
consequence of a low rate of revenue growth,

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significant one-time expenses during fiscal 1992, increased tax refund reserves
to cushion against adverse decisions on pending litigations, and the receipt of
federal funds for expenditures previously paid out of Commonwealth funds. By
state statute, 10 percent of the budgetary basis unappropriated surplus at the
end of a fiscal year is to be transferred to the Tax Stabilization Reserve Fund.
The transfer for the fiscal 1993 balance is $24.2 million. The remaining
unappropriated surplus of $218.0 million was carried forward into the 1994
fiscal year.

Commonwealth revenues during the 1994 fiscal year totaled $15,210.7 million,
$38.6 million above the fiscal year estimate, and 3.9 percent over Commonwealth
revenues during the previous fiscal year. The sales tax was an important
contributor to the higher than estimated revenues. Collections from the sales
tax were $5.124 billion, a 6.1 percent increase from the prior fiscal year and
$81.3 million above estimate. The strength of collections from the sales tax
offset the lower than budgeted performance of the personal income tax which
ended the fiscal year $74.4 million below estimate. The shortfall in the
personal income tax was largely due to shortfalls in income not subject to
withholding such as interest, dividends and other income. Tax refunds in fiscal
1994 were reduced substantially below the $530 million amount provided in fiscal
1993. The higher fiscal 1993 amount and the reduced fiscal 1994 amount occurred
because reserves of approximately $160 million were added to fiscal 1993 tax
refunds to cover potential payments if the Commonwealth lost litigation known as
Philadelphia Suburban Corp. v. Commonwealth. Those reserves were carried into
fiscal 1994 until the litigation was decided in the Commonwealth's favor in
December 1993 and $147.3 million of reserves for tax refunds were released.
Expenditures, excluding pooled financing expenditures and net of all fiscal 1994
appropriation lapses, totaled $14,934.4 million representing a 7.2 percent
increase over fiscal 1993 expenditures. Medical assistance and corrections
spending contributed to the rate of spending growth for the fiscal year. The
Commonwealth maintained an operating balance on a budgetary basis for fiscal
1994 producing a fiscal year ending unappropriated surplus of $335.8 million. By
state statute, ten percent ($33.6 million) of that surplus transferred to the
Tax Stabilization Reserve Fund and the remaining balance was carried over into
the 1995 fiscal year. The balance in the Tax Stabilization Reserve Fund as of
March 31, 1995 was $65.3 million.

The approved fiscal 1995 budget provides for $15,665.7 million of
appropriations from Commonwealth funds, an increase of 4.0 percent over
appropriations, including supplemental appropriations, for fiscal 1994. Medical
assistance expenditures represent the largest single increase in the budget
($221 million) representing a nine percent increase over the prior fiscal year.
The budget includes a reform of the state-funded public assistance program that
added certain categories of eligibility to the program but also limited the
availability of such assistance to other eligible persons. Education subsidies
to local school districts were increased by $132.2 million to continue the
increased funding for the poorest school districts in the state. Several tax
reductions were enacted with the fiscal 1995 budget. Low income working families
will benefit from an increase to the dependent exemption to $3,000 from $1,500
for the first dependent and from $1,000 for all additional dependents. A
reduction to the corporate net income tax rate from 12.25 percent to 9.99
percent to be phased in over a period of four years was enacted. A net operating
loss provision has been added to the corporate net income tax and will be phased
in over three years with an annual $500,000 cap on losses used to offset
profits. Several other tax changes to the sales tax, the inheritance tax and the
capital stock and franchise tax also were enacted. Estimated Commonwealth
revenue reductions from these tax cuts have been raised from $166.4 million to
$173.4 million based on upward revised estimates of Commonwealth revenues for
the fiscal year. Estimated fiscal year revenues, net of the enacted tax cuts,
were increased $296.5 million in the revised projection for fiscal 1994. The
increase represents a 1.9 percentage point increase in the rate of growth
anticipated for fiscal 1995 to 6.3 percent, excluding the effect of the fiscal
1995 tax reductions, and is largely due to actual and anticipated higher
collections of the corporate net income tax, the sales and use tax and
miscellaneous collections. For the March 1995 fiscal year-to-date period,
Commonwealth revenue collections are $301 million (2.7 percent) above the fiscal
year-to-date official estimate used for enactment of the budget. Collections of
corporation taxes are $195.8 million (7.3 percent) above the official estimate
through March. The sales tax is also above estimate while the personal income
tax is $30.2 million (0.9 percent) under the official estimate through March.
After a review of the fiscal 1994 budget in January 1995, $64.9 million of
additional appropriation needs were identified for the fiscal year. Of this
amount, the largest are for medical assistance ($21.8 million) and general
assistance cash grants ($10.3 million). The balance of the additional
appropriation needs are for other public welfare programs, educational subsidies
and office relocation costs due

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to a fire. The supplemental appropriations requested are proposed to be funded
from appropriation lapses estimated to total $172 million for the fiscal year.
With the revised estimates for revenues, appropriations and lapses for the 1994
fiscal year, an unappropriated balance prior to transfers to the Tax
Stabilization Reserve Fund of $395.5 million is projected, an increase from the
$335.8 million fiscal year 1993 ending balance (prior to transfers). In his
fiscal 1996 proposed budget, the Governor has proposed legislation to increase
the percentage of the fiscal year-end unappropriated surplus transferred to the
Tax Stabilization Reserve Fund from 10 percent to 15 percent effective beginning
with the end of the 1995 fiscal year. Based on the Governor's proposal, the
projected transfer to the Tax Stabilization Reserve Fund for fiscal 1995 would
be $59.3 million rather than $39.5 million as under current law.

The proposed General Fund budget submitted by the Governor to the General
Assembly on March 7, 1995, is balanced on a modified cash basis assuming the
drawdown of approximately $333.0 million of the projected $336.2 million
year-end balance for fiscal 1994. Appropriations of Commonwealth funds are
proposed to be $16,094.9 million, a 2.3 percent increase over the estimated
$15,730.6 million total current fiscal year appropriations and supplemental
appropriations. The rate of increase is among the lowest rates of increase
proposed over the last decade. A major contribution to the overall low rate of
increase in appropriated Commonwealth funds is the proposed 1.8 percent increase
to medical assistance costs paid from those funds. In recent fiscal years such
costs increased an average 14.4 percent per year. The Governor's budget proposes
a number of cost reduction strategies for the medical assistance program that
total $322 million and are responsible for the small cost increase in fiscal
1996. Many of these cost reductions are unlikely to be repeated in subsequent
fiscal years while, absent actions to reduce actual program costs, program costs
will continue to increase. It is the Commonwealth's intent to use the additional
time afforded by the one-time resources to develop longer-term strategies and
policies for permanent cost containment which can be designed to bring medical
assistance cost increases closer to revenue growth trends. Other cost savings
items in the proposed budget are elimination of general assistance payments to
recipients able to work and without children. Currently an average of
approximately 16,500 recipients are receiving benefits in any given month.
Estimated cost savings are $35.7 million for fiscal 1996. Other cost initiatives
include promotion of community mental health and mental retardation services and
commensurate reductions in institutional based care. Educational subsidies to
local school districts are budgeted to receive $217 million of additional state
funding. Within this amount is a four percent increase for the basic education
subsidy with every school district receiving at least a one percent increase
over the current fiscal year. School districts with the largest increases in
enrollment will receive the largest subsidy increase. The revenue projections in
the proposed budget are based on an expectation for economic growth in the
nation to average 2.5 percent for the first half of 1995 gradually slowing to a
1.7 percent rate for 1996. The Commonwealth believes these rates of economic
growth are conservative estimates based on forecasts it has reviewed. The use of
a conservative economic projection is believed to better reflect the economic
trends in the Commonwealth and to lower the potential for overestimating
revenues during a period when the economic outlook is particularly uncertain.
Fiscal 1996 Commonwealth revenues are projected to increase 3.6 percent before
deducting the estimated costs of the various tax reductions approved in July
1994. Revenues on a cash basis, that is net of those 1994 tax reductions and the
proposed tax reductions for fiscal 1995, are estimated to increase by 1 percent
over current estimates for the 1994 fiscal year. Tax changes proposed by the
Governor for the fiscal 1996 budget are aimed at improving the competitiveness
of the Commonwealth's corporate tax rates and are estimated to reduce
commonwealth revenues for fiscal year 1996 by $214.8 million representing 1.3%
of anticipated revenues. The largest part of this cost is from a proposed
acceleration of the currently scheduled reduction of the corporate net income
tax rate to 9.99 percent. Under current law the corporate net income tax rate is
10.99 percent for the 1995 tax year and is scheduled to decline annually in
steps to 9.99 percent for the 1997 tax year. The proposal would reduce the tax
rate to 9.99 percent for tax year 1995 and beyond. This proposed change is
expected to reduce tax receipts by $143.3 million. The Governor has also
proposed the expansion of the net operating loss deduction for the corporate net
income tax from an annual cap of $500,000 imposed by the 1994 tax changes when
the deduction was reinstated, to an annual $1 million cap, effective for the
1995 tax year. Estimated costs of $6.9 million are projected. The third proposed
tax change affecting corporations is a provision for double weighting the sale
factor in the apportionment formula for the corporate net income tax. This
proposal permits the sales factor to be counted twice, along with payroll and
property factors, to determine Pennsylvania taxable income for corporations also
doing business in states other than Pennsylvania.

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This proposal is estimated to cost $35.7 million for fiscal 1995. The final
component of the proposed tax reduction is an acceleration of the termination of
inheritance tax on transfers of non-jointly held property to surviving spouses.
The tax rate currently is 3 percent and is being phased out over the next three
years. The proposal calls for the elimination of the tax in 1995 at a cost of
$28.9 million. Because two of the proposed tax changes represent the
acceleration of currently scheduled tax reductions, the future year's cost of
those tax reductions compared to current law declines over time. Only the costs
of the proposed increase to the net operating loss deduction cap and the double
weighting of the sales factor for income apportionment represent continuing tax
reduction costs compared to current law. The Governor's proposed budget is
currently being reviewed in committee hearings in the General Assembly. Upon
approval by an appropriation committee, appropriation bills will be considered
by the General Assembly for approval and presentation to the Governor for
enactment. The General Assembly may change, eliminate or add amounts and items
to the proposed budget submitted by the Governor and there can be no assurance
that the budget, as proposed by the Governor, will be enacted into law.

All outstanding general obligation bonds of the Commonwealth are rated AA- by
Standard & Poor's Ratings Group ("S&P") and A1 by Moody's Investors Service,
Inc. ("Moody's"). The City of Philadelphia's long-term obligations supported by
payments from the City's General Fund are rated Baa by Moody's and BBB- by S&P.
Any explanation concerning the significance of such ratings must be obtained
from the rating agencies. There is no assurance that any ratings will continue
for any period of time or that they will not be revised or withdrawn.

According to the Official Statement dated May 9, 1995 describing General
Obligation Bonds, First Series of 1995 of the Commonwealth of Pennsylvania, the
Office of Attorney General and the Office of General Counsel have reviewed the
status of pending litigation against the Commonwealth, its officers and
employees, and have identified the following cases as ones where an adverse
decision may have a material effect on governmental operations of the
Commonwealth and consequently, the Commonwealth's ability to pay debt service on
its obligations. Under Act No. 1978-152 approved September 28, 1978, as amended,
the General Assembly approved a limited waiver of sovereign immunity. Damages
for any loss are limited to $250,000 for each person and $1 million for each
accident. The Supreme Court of Pennsylvania held that this limitation is
constitutional. Approximately 3,500 suits against the Commonwealth remain open.
Tort claim payments for the departments and agencies, other than the Department
of Transportation, are paid from departmental and agency operating and program
appropriations. Tort claim payments for the Department of Transportation are
paid from an appropriation from the Motor License Fund. The Motor License Fund
tort claim appropriation for fiscal 1995 is $27 million.

Baby Neal v. Commonwealth, et al.

In April of 1990, the American Civil Liberties Union (the "ACLU") and various
named plaintiffs filed a lawsuit against the Commonwealth in federal court
seeking an order that would require the Commonwealth to provide additional
funding for child welfare services. No figures for the amount of funding sought
are available. A similar lawsuit filed in the Commonwealth Court, captioned as
the City of Philadelphia, Hon. Wilson Goode, et al. v. Commonwealth of
Pennsylvania, Hon. Robert P. Casey, et al., was resolved through a court
approved settlement that provides, inter alia, for more Commonwealth funding for
these services for fiscal year 1991 as well as a commitment to pay to counties
$30 million over five years. The Commonwealth then sought dismissal of the
federal action based on, among other things, the settlement of the Commonwealth
Court case. In January of 1992, the U.S. District Court, per Judge Kelly, denied
the ACLU's motion for class certification and held that the "next friends"
seeking to represent the interests of the 16 minor plaintiffs in the case were
inadequate representatives. The Commonwealth filed a motion for summary judgment
on most of the counts in the ACLU's complaint on the basis of, among other
things, Suter v. Artist M. After the motion for summary judgment was filed, the
ACLU filed a renewed motion to certify sub-classes. In December of 1994, the
Third Circuit reversed Judge Kelly's ruling, finding that he erred in refusing
to certify the class. Consistent with the Third Circuit's ruling, the District
Court recently certified the class, and the parties have resumed discovery.

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County of Allegheny v. Commonwealth of Pennsylvania

On December 7, 1987, the Supreme Court of Pennsylvania held in County of
Allegheny v. Commonwealth of Pennsylvania, that the statutory scheme for county
funding of the judicial system is in conflict with the Pennsylvania
Constitution. However, the Supreme Court of Pennsylvania stayed its judgment to
afford the General Assembly an opportunity to enact appropriate funding
legislation consistent with its opinion and ordered that the prior system of
county funding shall remain in place until this is done. Allegheny County, on
February 12, 1991, filed a motion in the Supreme Court of Pennsylvania to lift
the stay and enforce the judgment. The Supreme Court subsequently denied the
motion. On February 14, 1991, the Pennsylvania State Association of County
Commissioners and the Counties of Blair, Bucks, Erie, Huntington and Perry filed
an action in the Commonwealth Court of Pennsylvania for declaratory judgment
requesting an order that the Commonwealth be required to provide funds for the
operation of the courts of common pleas in accordance with the County of
Allegheny decision. These parties also requested the Supreme Court of
Pennsylvania to assume plenary jurisdiction over their case. The Supreme Court
of Pennsylvania refused to do so, and these parties have withdrawn the
Commonwealth Court action. On October 5, 1992, the Pennsylvania State
Association of County Commissioners, along with Allegheny, Beaver, Clarion,
Forest, Tioga and Washington counties, filed in the Supreme Court of
Pennsylvania a motion to enforce judgment seeking an order that would direct the
Commonwealth to restore funding for local courts and district justices to levels
existing in 1987. By order dated May 26, 1993, the motion to enforce judgment
was denied. On December 7, 1992, the State Association of County Commissioners
filed a new action in mandamus seeking to compel the Commonwealth to comply with
the decision in County of Allegheny. The Commonwealth has filed a response in
opposition to the new action. The counties have requested a continuance until
April 30, 1995. The Court has not acted on the new action. The General Assembly
has yet to consider legislation implementing the Supreme Court of Pennsylvania's
judgment.

Fidelity Bank v. Commonwealth of Pennsylvania

On November 30, 1989, Fidelity Bank, N.A. ("Fidelity") filed a declaratory
judgment action in the Commonwealth Court of Pennsylvania in which Fidelity
raised various challenges to the constitutional validity of the Amended Bank
Shares Act (Act No. 1989-21) and related legislation. After the Commonwealth
Court ruled in favor of the Commonwealth, finding no constitutional
deficiencies, Fidelity, the Commonwealth, and certain intervenor banks filed
Notices of Appeal to the Pennsylvania Supreme Court on August 5, 1994. Pursuant
to a Settlement Agreement dated as of April 21, 1995, the Commonwealth agreed to
enter a credit in favor of Fidelity in the amount of $4,100,000 in settlement of
the constitutional and non-constitutional issues, including interest. This
credit represents a credit of approximately five percent (5%) of the potential
claim of Fidelity, had the constitutional issues been resolved in favor of
Fidelity. Pursuant to a separate Settlement Agreement dated as of April 21,
1995, the Commonwealth settled with the intervening banks, referred to as "New
Banks," in connection with issues concerning the New Bank Tax Credit law which
were raised in the above-referenced Pennsylvania Supreme Court appeal. As part
of the settlement, the Commonwealth agreed neither to assess nor attempt to
recoup any new bank tax credits which had been granted or taken by any of the
intervening banks. No expenditure of Commonwealth funds is required in order to
implement this aspect of the settlement with the intervening banks, since the
credits have already been claimed by said banks. Although the described
settlements have quantified the Commonwealth's exposure to Fidelity and the
intervening banks, other banks have filed protective Petitions which are
currently pending with the Board of Appeals or Board of Finance and Revenue.
Depending upon the outcomes of these administrative appeals, one or more of
these banks may seek to raise the issues which were advanced by Fidelity,
although not brought to final resolution by the Pennsylvania Supreme Court.
Based upon the favorable decision of the Commonwealth Court on the
constitutional issues and the terms of the settlement with Fidelity, it is not
expected that substantial liability remains under the Amended Bank Shares Act
cases.

Pennsylvania Association of Rural and Small Schools (PARSS) v. Casey

In January of 1991, an association of rural and small schools, several
individual school districts, and a group of parents and students instituted
litigation against Governor Robert P. Casey and Secretary of Education Donald M.
Carroll, Jr. to challenge the constitutionality of the Commonwealth's system for
funding local

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school districts. The litigation consists of two parallel cases, one in the
Commonwealth Court of Pennsylvania, and one in the United States District Court
for the Middle District of Pennsylvania. The federal court case has been
indefinitely stayed, pending resolution of the state court case. The state court
case has been assigned to Judge Pellegrini, and is in the pre-trial discovery
stage. The trial has not yet been scheduled. Following a status conference among
counsel, Judge Pellegrini issued an Order, dated April 6, 1995, in which certain
deadlines were established for exchange of information and depositions of expert
witnesses. An additional status conference is scheduled for July 10, 1995.

Austin v. Department of Corrections, et al.

In November 1990, the American Civil Liberties Union ("ACLU") brought a class
action lawsuit on behalf of the inmate populations in thirteen Commonwealth
correctional institutions. The lawsuit challenged the conditions of confinement
at each institution and included specific allegations of over-crowding,
deficiencies in medical and mental health services, inadequate environmental
conditions, disparate treatment of HIV positive prisoners and other assorted
claims. No damages were sought. The ACLU sought injunctive relief which would
modify conditions, change practices and procedures and increase the number of
staff deployment. On August 1, 1994, the parties submitted a proposed settlement
agreement to the Court for its review. The Court held hearings on the proposed
Settlement Agreement in December 1994. The Court approved the Settlement
Agreement with a January 17, 1995 Memorandum. On February 3, 1995, the
Commonwealth paid $1.3 million in attorneys' fees to the plaintiffs' attorneys
in accordance with the Agreement. The remaining $100,000 in attorneys' fees will
be paid upon dismissal of the preliminary injunction relating to certain health
issues. The parties are currently complying with monitoring provisions outlined
in the Agreement. The monitoring phase will expire on January 6, 1998.

Scott v. Snider

In 1991, a consortium of public interest law firms filed a class action suit
in the U.S. District Court for the Eastern District of Pennsylvania, Scott v.
Snider, against various Commonwealth officers, alleging that the Commonwealth of
Pennsylvania had failed to comply with a 1989 federal mandate to provide and pay
for early and periodic screening, diagnostic, and treatment services for all
Medicaid-eligible children under the age of 21. If the federal court were to
grant all of the relief that plaintiffs are seeking, the Commonwealth would be
obligated, among other things, (1) to substantially revise the methods by which
it presently identifies children in need of treatment and (2) to expand the
scope of services and treatment presently provided to such children; and to
increase fees paid to pediatric providers. In July 1994, the Court denied the
plaintiffs' request to proceed as a class action and dismissed five of the
eighteen plaintiff organizations from the case. The parties have reached a
tentative settlement agreement which they have submitted to the court for
approval.

Pennsylvania Medical Society v. Karen F. Snider

The Pennsylvania Medical Society sued the Commonwealth for payment of the full
Medicare co-pay and deductible for outpatient services provided to medical
assistance clients who are also eligible for Medicare. The federal Medicare
program has an established fee schedule for services under Part B of which
Medicare pays 80 percent and the patient is responsible for the 20 percent
co-pay. For medical assistance eligible clients the medical assistance program
pays the 20 percent patient co-pay amount up to the maximum fee for service set
under the Commonwealth's medical assistance program. Consequently, when the 80
percent portion paid by Medicare equals or exceeds the state established medical
assistance fee for that service, the Commonwealth did not pay the remaining 20
percent portion of the fee. It was the position of the Commonwealth that the
medical assistance fee has precedence and the service provider should not be
paid more than the Commonwealth's fee schedule. The Commonwealth received a
favorable decision in the United States District Court but the Pennsylvania
Medical Society appealed that decision and won a reversal in the United States
Third Circuit Court. After similarly unfavorable decisions by every other
appellate court that addressed the issue, the Commonwealth implemented the new
payment system effective January 23, 1995. Preliminary estimated costs to the
Commonwealth are approximately $50 million per year.

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Envirotest/Synterra Partners

On November 11, 1993, the Commonwealth of Pennsylvania, Department of
Transportation and Envirotest/Synterra Partners ("Envirotest"), a partnership,
entered into a "Contract for Centralized Emissions Inspection Facilities."
Thereafter, Envirotest acquired certain land and constructed approximately 85
automobile emissions inspection facilities throughout various regions of the
Commonwealth. By Act of the General Assembly in October 1994 (Act No. 1994-95),
the emissions testing program was suspended and the Department of Transportation
was directed to consider other alternatives to the centralized testing program.
Former Governor Robert P. Casey vetoed the legislation and the General Assembly
overrode the veto in November 1994. As a result, the program was suspended and
the Department of Transportation was prohibited from expending funds to
implement the program. Revised regulations from the Environmental Protection
Agency are expected in August 1995. On April 12, 1995, Envirotest Systems
Corporation, Envirotest Partners (successor to Envirotest/Synterra Partners) and
the Commonwealth of Pennsylvania entered into a Standstill Agreement pursuant to
which the parties will proceed to discuss the resolution of claims which
Envirotest might have against the Commonwealth arising from the suspension of
the emissions testing program. The said Standstill Agreement authorizes
Envirotest to file a Statement of Claim with the Pennsylvania Board of Claims by
May 10, 1995 to preserve its position before said Board. Although a formal
Statement of Claim has not been filed and a formal demand has not been
submitted, the Office of General Counsel has been informed by representatives of
Envirotest that it has expended approximately $200 million to date to acquire
land and construct and maintain the inspection facilities. The Office of General
Counsel believes it is premature at this time to estimate the nature and size of
Envirotest's potential claim in this matter.

INVESTMENT PRACTICES. If the Adviser deems it appropriate to seek to hedge the
Fund's portfolio against market value changes, the Fund may buy or sell
financial futures contracts and related options, such as municipal bond index
futures contracts and the related put or call options contracts on such index
futures. A tax exempt bond index fluctuates with changes in the market values of
the tax exempt bonds included in the index. An index future is an agreement
pursuant to which two parties agree to receive or deliver at settlement an
amount of cash equal to a specified dollar amount multiplied by the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the future was originally written. A financial
future is an agreement between two parties to buy and sell a security for a set
price on a future date. An index future has similar characteristics to a
financial future except that settlement is made through delivery of cash rather
than the underlying securities. An example is the Long-Term Municipal Bond
futures contract traded on the Chicago Board of Trade. It is based on the Bond
Buyer's Municipal Bond Index, which represents an adjusted average price of the
forty most recent long-term municipal issues of $50 million or more ($75 million
in the instance of housing issues) rated A or better by either Moody's or S&P,
maturing in no less than nineteen years, having a first call in no less than
seven nor more than sixteen years, and callable at par.

The Fund may engage in "when issued" and "delayed delivery" transactions and
utilize futures contracts and options thereon for hedging purposes. The SEC
generally requires that when mutual funds, such as the Fund, effect transactions
of the foregoing nature, such funds must either segregate cash or readily
marketable portfolio securities with its custodian in an amount of its
obligations under the foregoing transactions, or cover such obligations by
maintaining positions in portfolio securities, futures contracts or options that
would serve to satisfy or offset the risk of such obligations. When effecting
transactions of the foregoing nature, the Fund will comply with such segregation
or cover requirements.

The Fund may enter into reverse repurchase agreements with selected commercial
banks or broker-dealers, under which the Fund sells securities and agrees to
repurchase them at an agreed upon time and at an agreed upon price. The
difference between the amount the Fund receives for the securities and the
amount it pays on repurchase is deemed to be a payment of interest by the Fund.
The Fund will maintain, in a segregated account having an aggregate value with
its custodian, cash or other readily marketable portfolio securities having an
aggregate value equal to the amount of such commitment to repurchase, including
accrued interest, until payment is made. Reverse repurchase agreements are
treated as a borrowing by the Fund and will be used by it as a source of funds
on a short-term basis, in an amount not exceeding 5% of the net assets of the

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Fund at the time of entering into any such agreement. The Fund will enter into
reverse repurchase agreements only with commercial banks whose deposits are
insured by the Federal Deposit Insurance Corporation and whose assets exceed
$500 million or broker-dealers who are registered with the SEC. In determining
whether to enter into a reverse repurchase agreement with a bank or
broker-dealer, the Fund will take into account the creditworthiness of such
party and will monitor such creditworthiness on an ongoing basis.

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

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

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

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

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

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

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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 S&P or "P-1"
from Moody's or an equivalent rating from any other nationally recognized
statistical rating organization ("NRSRO"). The staff of the SEC currently takes
the position that, in general, OTC options on securities other than U.S.
Government securities purchased by the Fund, and portfolio securities "covering"
the amount of the Fund's obligation pursuant to an OTC option sold by it (the
cost of the sell-back plus the in-the-money amount, if any) are illiquid, and
are subject to the Fund's limitation on investing no more than 15% of its assets
in illiquid securities.

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

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

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

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

The Fund's use of financial futures and options thereon will in all cases be
consistent with applicable regulatory requirements and in particular the rules
and regulations of the Commodity Futures Trading Commission and will be entered
into only for bona fide hedging, risk management (including duration management)
or other portfolio management purposes. Typically, maintaining a futures
contract or selling an

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option thereon requires the Fund to deposit with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount of
the contract (but may be higher in some circumstances). Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. The purchase of
options on financial futures involves payment of a premium for the option
without any further obligation on the part of the Fund. If the Fund exercises an
option on a futures contract it will be obligated to post initial margin (and
potential subsequent variation margin) for the resulting futures position just
as it would for any position. Futures contracts and options thereon are
generally settled by entering into an offsetting transaction but there can be no
assurance that the position can be offset prior to settlement at an advantageous
price nor that delivery will occur.

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

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

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

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

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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.

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

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

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

With respect to swaps, the Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid

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high-grade securities having a value equal to the accrued excess. Caps, floors
and collars require segregation of assets with a value equal to the Fund's net
obligation, if any.

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

The Fund's activities involving Strategic Transactions may be limited by the
requirements of Subchapter M of the Code for qualification as a regulated
investment company. See "Tax Status" in the Prospectus.

OFFICERS AND TRUSTEES

The tables below list the trustees and officers of the Fund and their
principal occupations for the last five years and their affiliations, if any,
with Van Kampen American Capital Investment Advisory Corp. (the "VK Adviser" or
"Adviser"), Van Kampen American Capital Asset Management, Inc. (the "AC
Adviser"), Van Kampen American Capital Management, Inc., McCarthy, Crisanti &
Maffei, Inc., MCM Asia Pacific Company, Limited, Van Kampen American Capital
Distributors, Inc. (the "Distributor"), Van Kampen American Capital, Inc. ("Van
Kampen American Capital") or VK/AC Holding, Inc. For purposes hereof, the term
"Van Kampen American Capital Funds" includes each of the open-end investment
companies advised by the VK Adviser (excluding the Van Kampen Merritt Series
Trust) and each of the open-end investment companies advised by the AC Adviser.

TRUSTEES

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
2300 205th Street President of MDT Corporation, a company which develops
Torrance, CA 90501 manufactures, markets and services medical and scientific
Age: 63 equipment. Trustee of each of the Van Kampen American
Capital Funds.
Richard E. Caruso.................. Founder, Chairman and Chief Executive Officer, Integra
Two Randor Station, Suite 314 Life Sciences Corporation, a firm specializing in life
King of Prussia Road sciences. Trustee of Susquehanna University and First
Radnor, PA 19087 Vice President, The Baum School of Art; Founder and
Age: 52 Director of Uncommon Individual Foundation, a youth
development foundation. Director of International Board
of Business Performance Group, London School of
Economics. Formerly, Director of First Sterling Bank, and
Executive Vice President and a Director of LFC Financial
Corporation, a provider of lease and project financing.
Trustee of each of the Van Kampen American Capital Funds.
Philip P. Gaughan.................. Prior to February, 1989, Managing Director and Manager of
9615 Torresdale Avenue Municipal Bond Department, W. H. Newbold's Sons & Co.
Philadelphia, PA 19114 Trustee of each of the Van Kampen American Capital Funds.
Age: 66
</TABLE>

B-18
<PAGE> 86

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. Trustee of each of the Van
Lyme, CT 06371 Kampen American Capital Funds.
Age: 75
R. Craig Kennedy................... President and Director, German Marshall Fund of the
1341 E. 50th Street United States. Formerly, advisor to the Dennis Trading
Chicago, IL 60615 Group Inc. Prior to 1992, President and Chief Executive
Age: 43 Officer, Director and member of the Investment Committee
of the Joyce Foundation, a private foundation. Trustee of
each of the Van Kampen American Capital Funds.
Dennis J. McDonnell*............... President, Chief Operating Officer and a Director of the
One Parkview Plaza VK Adviser, the AC Adviser and Van Kampen American
Oakbrook Terrace, IL 60181 Capital Management, Inc. Director of VK/AC Holding, Inc,
Age: 53 Van Kampen American Capital, and McCarthy, Crisanti &
Maffei, Inc. Chairman and a Director of MCM Asia Pacific
Company, Ltd. President, Chief Executive Officer and
Trustee of each of the funds advised by the VK Adviser.
Prior to December, 1991, Senior Vice President of Van
Kampen Merritt Inc.
Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a company
415 North Adams in insurance related businesses. Formerly Vice Chairman
Hinsdale, IL 60521 and Director of Continental Illinois National Bank and
Age: 75 Trust Company of Chicago and Continental Illinois
Corporation. Trustee of each of the Van Kampen American
Capital Funds and Chairman of the Board of each of the
open-end funds (except the Van Kampen Merritt Series
Trust) advised by the VK Adviser.
Jack E. Nelson..................... President of Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President of Nelson Investment Brokerage
Age: 59 Services Inc., a member of the National Association of
Securities Dealers, Inc. (NASD) and Securities Investors
Protection Corp. (SIPC). Trustee of each of the Van
Kampen American Capital Funds.
Don G. Powell*..................... President, Chief Executive Officer and a Director of
2800 Post Oak Blvd. VK/AC Holding, Inc. and Van Kampen American Capital.
Houston, TX 77056 Chairman, Chief Executive Officer and a Director of the
Age: 55 Distributor, the VK Adviser, the AC Adviser and Van
Kampen American Capital Management, Inc. Director,
President and Chief Executive Officer of Van Kampen
American Capital Advisers, Inc. and Van Kampen American
Capital Exchange Corp. Director and Executive Vice
President of Advantage Capital Corporation, ACCESS
Investor Services, Inc., Van Kampen American Capital
Services, Inc. and Van Kampen American Capital Trust
Company. Director of McCarthy, Crisanti & Maffei, Inc.
President and Director, Trustee or Managing General
Partner of each of the funds advised by the AC Adviser
and Trustee of each of the funds advised by the VK
Adviser. He is also Chairman of the Board of the Van
Kampen Merritt Series Trust and closed-end investment
companies advised by the VK Adviser.
</TABLE>

B-19
<PAGE> 87

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
David Rees......................... Contributing Columnist and, prior to 1995, Senior Editor
1601 Country Club Drive of Los Angeles Business Journal. A director of Source
Glendale, CA 91208 Capital, Inc., a closed-end investment company
Age: 71 unaffiliated with Van Kampen American Capital, a director
and the second vice president of International Institute
of Los Angeles. Trustee of each of the Van Kampen
American Capital Funds.
Jerome L. Robinson................. President of Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director of Pacesetter Software, a
Age: 72 software programming company specializing in white collar
productivity. Director of Panasia Bank. Trustee of each
of the Van Kampen American Capital Funds.
Lawrence J. Sheehan*............... Of Counsel to and formerly Partner (from 1969 to 1994) of
1999 Avenue of the Stars the law firm of O'Melveny & Myers, legal counsel to the
Suite 700 funds advised by the AC Adviser. Director, FPA Capital
Los Angeles, CA 90067 Fund, Inc.; FPA New Income Fund, Inc.; FPA Perennial
Age: 63 Fund, Inc.; Source Capital, Inc.; and TCW Convertible
Security Fund, Inc. Trustee of each of the Van Kampen
American Capital Funds.
Fernando Sisto..................... George M. Bond Chaired Professor and, prior to 1995, Dean
Stevens Institute of Graduate School and Chairman, Department of Mechanical
of Technology Engineering, Stevens Institute of Technology. Director of
Castle Point Station Dynalysis of Princeton, a firm engaged in engineering
Hoboken, NJ 07030 research. Trustee of each of the Van Kampen American
Age: 70 Capital Funds and Chairman of the Board of each of the
open-end funds advised by the AC Adviser.
Wayne W. Whalen*................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom, legal counsel to funds advised by the VK Adviser.
Chicago, IL 60606 Trustee of each of the Van Kampen American Capital Funds.
Age: 55 He also is a Trustee of the Van Kampen Merritt Series
Trust and closed-end investment companies advised by the
VK Adviser.
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently known as The Traveler's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a producer
Age: 73 of paper products. Trustee, and former President of
Whitney Museum of American Art. Formerly, Chairman of
Institute for Educational Leadership, Inc., Board of
Visitors, Graduate School of The City University of New
York, Academy of Political Science. Trustee of Committee
for Economic Development. Director of Public Education
Fund Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's Council,
Harvard School of Public Health. Member of Mental Health
Task Force, Carter Center. Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>

B-20
<PAGE> 88

OFFICERS

<TABLE>
<CAPTION>
POSITIONS AND OTHER PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND IN PAST 5 YEARS
------------ ----------------- ---------------------------
<S> <C> <C>
Peter W. Hegel....... Vice President Executive Vice President and Portfolio
Age: 39 Manager of the Adviser. Executive Vice
President of the AC Adviser. Vice President
of each of the Van Kampen American Capital
Funds and closed-end funds advised by the VK
Adviser.

Ronald A. Nyberg..... Vice President and Executive Vice President, General Counsel and
Age: 41 Secretary Secretary of Van Kampen American Capital.
Executive Vice President and a Director of
the VK Adviser and the Distributor. Executive
Vice President of the AC Adviser. Vice
President and Secretary of each of the Van
Kampen American Capital Funds and closed-end
funds advised by the VK Adviser. Director of
ICI Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute. Prior to March 1990,
Secretary of Van Kampen Merritt Inc., the VK
Adviser and McCarthy, Crisanti & Maffei, Inc.

Edward C. Wood III... Vice President, Treasurer Senior Vice President of the VK Adviser. Vice
Age: 39 and Chief Financial President, Treasurer and Chief Financial
Officer Officer of each of the Van Kampen American
Capital Funds and closed-end funds advised by
the VK Adviser.

Nicholas Dalmaso..... Assistant Secretary Assistant Vice President and Attorney of Van
Age: 30 Kampen American Capital. Assistant Secretary
of each of the Van Kampen American Capital
Funds and closed-end funds advised by the VK
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.

Scott E. Martin...... Assistant Secretary Senior Vice President, Deputy General Counsel
Age: 38 and Assistant Secretary of Van Kampen
American Capital. Senior Vice President,
Deputy General Counsel and Secretary of the
VK Adviser and the Distributor. Assistant
Secretary of each of the Van Kampen American
Capital Funds and closed-end funds advised by
the VK Adviser.
Weston B.
Wetherell............Assistant Secretary Vice President, Associate General Counsel and
Age 39 Assistant Secretary of Van Kampen American
Capital, the VK Adviser and the Distributor.
Assistant Secretary of McCarthy, Crisanti &
Maffei, Inc. Assistant Secretary of each of
the Van Kampen American Capital Funds and
closed-end funds advised by the VK Adviser.
John L. Sullivan..... Controller First Vice President of the VK Adviser.
Age: 39 Controller of each of the Van Kampen American
Capital Funds and closed-end funds advised by
the VK Adviser.
</TABLE>

B-21
<PAGE> 89

<TABLE>
<CAPTION>
POSITIONS AND OTHER PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND IN PAST 5 YEARS
--------------------- -------------------------- ---------------------------------------------
<S> <C> <C>
Steven M. Hill....... Assistant Treasurer Assistant Vice President of the VK Adviser.
Age: 30 Assistant Treasurer of each of the Van Kampen
American Capital Funds and closed-end funds
advised by the VK Adviser.
</TABLE>

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

* Such Trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Messrs. Powell and McDonnell are interested persons of the
VK Adviser and the Fund by reason of their positions with the VK Adviser. Mr.
Sheehan is an interested person of the VK Adviser and the Fund by reason of
his firm having acted as legal counsel to the VK Adviser. Mr. Whalen is an
interested person of the Fund by reason of his firm acting as legal counsel
for the Fund.

Messrs. Powell and McDonnell own, or have the opportunity to purchase, an
equity interest in VK/AC Holding, Inc., the parent company of Van Kampen
American Capital, and have entered into employment contracts (for a term of five
years) with Van Kampen American Capital.

The Fund will pay trustees who are not affiliated persons of the VK Adviser,
the Distributor or Van Kampen American Capital an annual retainer of $2,500 per
year and $125 per regular quarterly meeting of the Fund, plus expenses. No
additional fees are proposed at the present time to be paid for special
meetings, committee meetings or to the chairman of the board. The trustees have
approved an aggregate annual compensation cap from the combined fund complex of
$84,000 per trustee (excluding any retirement benefits) until December 31, 1996,
based upon the current net assets and the current number of Van Kampen American
Capital funds (except that Mr. Whalen, who is also a trustee of the closed-end
funds advised by the VK Adviser would receive additional compensation for
serving as a trustee of such funds). In addition, the VK Adviser has agreed to
reimburse the Fund through December 31, 1996, for any increase in the aggregate
trustees' compensation over the aggregate compensation paid by the Fund in its
1994 fiscal year.

COMPENSATION TABLE(1)

<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FROM FUND AND FUND
COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID TO
NAME FROM FUND(2) EXPENSES(3) RETIREMENT(4) TRUSTEE(5)
---- ------------ ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
R. Craig Kennedy................... $3,785 $ 45 $2,500 $ 62,362
Philip G. Gaughan.................. 3,778 990 2,500 63,250
Donald C. Miller................... 3,774 1,494 2,500 62,178
Jack A. Nelson..................... 3,785 466 2,500 62,362
Jerome L. Robinson................. 3,778 830 2,500 58,475
Wayne W. Whalen.................... 2,903 312 2,500 49,875
</TABLE>

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

(1) Messrs. McDonnell and Powell, trustees of the Fund, are affiliated persons
of the VK Adviser and are not eligible for compensation or retirement
benefits from the Fund. Messrs. Branagan, Caruso, Hilsman, Rees, Sheehan,
Sisto and Woodside were elected as trustees of the Fund at a shareholders
meeting held July 21, 1995 and thus received no compensation or retirement
benefits from the Fund during its fiscal year ended December 31, 1994.

(2) The amounts shown in this column are accumulated from the Aggregate
Compensation of the Fund during its fiscal year ended December 31, 1994.
Beginning in October 1994 each Trustee, except Messrs. Gaughan and Whalen,
began deferring his entire aggregate compensation paid by the Fund. The
total combined amount of deferred compensation (including interest) accrued
with respect to each Trustee as of December 31, 1994 from the Fund Complex
(defined below) is as follows: Mr. Kennedy $14,737; Mr. Miller $14,553; Mr.
Nelson $14,737; and Mr. Robinson $13,725.

(3) The Retirement Plan commenced as of August 1, 1994 for the Fund. The amounts
in this column are the retirement benefits accrued during the Fund's fiscal
year ended December 31, 1994.

B-22
<PAGE> 90

(4) This is the estimated annual benefits payable per year for the 10-year
period commencing in the year of such Trustee's retirement by a Fund
assuming: the Trustee has 10 or more years of service on the Board of
Trustees of the Fund and retires at or after attaining the age of 60.
Trustees retiring prior to the age of 60 or with fewer than 10 years of
service for the Fund may receive reduced retirement benefits from such Fund.

(5) As of December 31, 1994, the Fund Complex consisted of 20 mutual funds
advised by the VK Adviser which had the same members on each funds' Board of
Trustees as of December 31, 1994. The amounts shown in this column are
accumulated from the Aggregate Compensation of each of these 20 mutual funds
in the Fund Complex during the calendar year ended December 31, 1994. The VK
Adviser also serves as investment adviser for other investment companies;
however, with the exception of Messrs. Powell, McDonnell and Whalen, such
investment companies do not have the same trustees as the Fund Complex.
Combining the Fund with other investment companies advised by the VK
Adviser, Mr. Whalen received total compensation of $161,850.

As of August 11, 1995, the trustees and officers as a group own less than 1%
of the shares of the Fund.

To the knowledge of the Fund, as of August 11, 1995, no person owned of record
or beneficially 5% or more of the Fund's Class A Shares or Class B Shares.

As of August 11, 1995, the following persons owned of record or beneficially
5% or more of the Fund's Class C Shares: PaineWebber For the Benefit of Wise
Business Forms Inc., Bonnie Brook Industrial Park, P.O. Box 1666, Butler, PA
16003-1666, 13%; Donaldson Lufkin Jenrette Securities Corporation Inc., P.O. Box
2052, Jersey City, NJ 07303-2052, 6%; and M. Simon Zook & Elsie S. Zook, Rd. 2,
Box 128, Honeybrook, PA 19344-9231, 5%.

CUSTODIAN

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

LEGAL COUNSEL AND INDEPENDENT AUDITORS

Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom, Chicago,
Illinois. Saul, Ewing, Remick & Saul has acted as special counsel to the Fund
for Pennsylvania tax matters and passes on the legality of the Fund's shares.

The independent auditors for the Fund are KPMG Peat Marwick LLP, Chicago,
Illinois. The selection of independent auditors will be subject to ratification
by the shareholders of the Fund at any annual meeting of shareholders.

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISORY AGREEMENT

Van Kampen American Capital Investment Advisory Corp. (the "Adviser") is the
Fund's investment adviser. The Adviser was incorporated as a Delaware
corporation in 1982 (and through December 31, 1987 transacted business under the
name of American Portfolio Advisory Service Inc.). The Adviser's principal
office is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

The Adviser is a wholly-owned subsidiary of Van Kampen American Capital, Inc.
("Van Kampen American Capital"), which in turn is a wholly-owned subsidiary of
VK/AC Holding, Inc. VK/AC Holding,

B-23
<PAGE> 91

Inc. is controlled, through the ownership of a substantial majority of its
common stock, by The Clayton & Dubilier Private Equity Fund IV Limited
Partnership ("C&D L.P."), a Connecticut limited partnership, C&D L.P. is managed
by Clayton, Dubilier & Rice, Inc., a New York based private investment firm. The
General Partner of C&D L.P. is Clayton & Dubilier Associates IV Limited
Partnership ("C&D Associates L.P."). The general partners of C&D Associates L.P.
are Joseph L. Rice, III, B. Charles Ames, William A. Barbe, Alberto Cribiore,
Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson,
each of whom is a principal of Clayton, Dubilier & Rice, Inc. In addition,
certain officers, directors and employees of Van Kampen American Capital own, in
the aggregate, not more than 7% of the common stock of VK/AC Holding, Inc. and
have the right to acquire, upon the exercise of options, approximately an
additional 11% of the common stock of VK/AC Holding, Inc.

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

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

For the years ended December 31, 1994, 1993 and 1992, the Fund recognized
advisory expenses of $832,111, $448,065 and $187,410, respectively.

OTHER AGREEMENTS

FUND ACCOUNTING AGREEMENT. The Fund has also entered into a fund accounting
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 with the other Van Kampen American Capital mutual funds advised
by the Adviser and distributed by the Distributor in the cost of providing such
services, with 25% of such costs shared proportionately based on the respective
number of classes of securities issued per fund and the remaining 75% of such
cost based proportionally on their respective net assets per fund.

For the years ended December 31, 1994, 1993 and 1992, the Fund recognized
expenses of approximately $8,333, $5,580 and $4,525, respectively, representing
the Adviser's cost of providing accounting services.

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

For the years ended December 31, 1994, 1993 and 1992, the Fund recognized
expenses of approximately $117,234, $78,180 and $53,023, respectively,
representing the Distributor's cost of providing certain support services.

LEGAL SERVICES AGREEMENT. The Fund and each of the other Van Kampen American
Capital funds advised by the VK Adviser and distributed by the Distributor have
entered into Legal Services Agreements pursuant to which Van Kampen American
Capital provides legal services, including without limitation: 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 insurances and
other regular wages for the

B-24
<PAGE> 92

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 December 31, 1994, 1993 and 1992, the Fund recognized
expenses of approximately $14,500, $15,000 and $4,300, respectively,
representing Van Kampen American Capital's cost of providing legal services.

PORTFOLIO TRANSACTIONS

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

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

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

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

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

B-25
<PAGE> 93

TAX STATUS OF THE FUND

The Fund will be treated as a separate corporation for income tax purposes.
The Fund may be subject to tax if it fails to distribute net capital gains, or
if its annual distributions, as a percentage of its income, are less than the
distributions required by tax laws.

The table below illustrates approximate equivalent taxable and tax-free yields
at the 1994 federal individual income tax rates in effect on the date of this
Statement of Additional Information, including the 36% and 39.6% rates enacted
in August 1993 as part of the Revenue Reconciliation Act of 1993.

The table shows, for example, that a couple with a taxable income of $90,000,
or a single individual with a taxable income of $55,000, whose investments earn
a 6% tax-free yield, would have to earn approximately an 8.57% taxable yield at
current federal income tax rates to receive the same benefit.

The table does not reflect the effect of the exemption of the Fund from local
personal property taxes and from the Philadelphia School District Investment Net
Income Tax; accordingly, residents of Pennsylvania subject to such taxes would
need a higher taxable equivalent estimated current return than those shown to
equal the tax-exempt estimated current return of the Fund.

1994 FEDERAL AND PENNSYLVANIA STATE TAXABLE VS. TAX-FREE YIELDS
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT ESTIMATED CURRENT RETURN
SINGLE JOINT TAX ---------------------------------------------------------------------
RETURN RETURN BRACKET 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
---------------- ---------------- ------- ---- ---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-22,800 $ 0-38,000 17.40% 3.63% 4.24% 4.84% 5.45% 6.05% 6.66% 7.26% 7.87%
22,800-55,100 38,000-91,900 30.00% 4.29 5.00 5.71 6.43 7.14 7.86 8.57 9.29
55,100-115,000 91,900-140,000 32.90% 4.47 5.22 5.96 6.71 7.45 8.20 8.94 9.69
115,000-250,000 140,000-250,000 37.80% 4.62 5.63 6.43 7.23 8.04 8.84 9.65 10.45
Over 250,000 Over 250,000 41.30% 5.11 5.98 6.81 7.67 8.52 9.37 10.22 11.07

SINGLE
RETURN 7.0%
---------------- -----
<S> <C>
$ 0-22,800 8.47%
22,800-55,100 10.00
55,100-115,000 10.43
115,000-250,000 11.25
Over 250,000 11.93
</TABLE>

THE DISTRIBUTOR

The Distributor offers one of the industry's broadest lines of investments --
encompassing mutual funds, closed-end funds and unit investment trusts -- and is
currently the nation's 5th largest broker-sold mutual fund group according to
Strategic Insight. Van Kampen American Capital's roots in money management
extend back to 1926. Today, Van Kampen American Capital manages or supervises
more than $50 billion in mutual funds, closed-end funds and unit investment
trusts -- assets which have been entrusted to Van Kampen American Capital in
more than 2 million investor accounts. Van Kampen American Capital has one of
the largest research teams (outside of the rating agencies) in the country, with
86 analysts devoted to various specializations.

Shares of the Fund are offered on a continuous basis through the Distributor,
One Parkview Plaza, Oakbrook Terrace, IL 60181. The Distributor is a wholly
owned subsidiary of Van Kampen American Capital, which is a subsidiary of VK/AC
Holding, Inc., a Delaware corporation that is controlled through an ownership of
a substantial majority of its common stock, by The Clayton & Dubilier Private
Equity Fund IV Limited Partnership ("C & D L.P."), a Connecticut limited
partnership. In addition, certain officers, directors and employees of Van
Kampen American Capital, and its subsidiaries own, in the aggregate not more
than 7% of the common stock of VK/AC Holding, Inc. and have the right to
acquire, upon the exercise of options, approximately an additional 11% of the
common stock of VK/AC Holding, Inc. C & D L.P. is managed by Clayton, Dubilier &
Rice, Inc. Clayton & Dubilier Associates IV Limited Partnership ("C & D
Associates L.P.") is the general partner of C & D L.P. Pursuant to a
distribution agreement, the Distributor will purchase shares of the Fund for
resale to the public, either directly or through securities dealers, and is
obligated to purchase only those shares for which it has received purchase
orders. A discussion of how to purchase and redeem the Fund's shares and how the
Fund's shares are priced is contained in the Prospectus.

The Fund has adopted a distribution and services 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

B-26
<PAGE> 94

are referred to herein collectively as the Plans. The Plans provide that the
Fund may spend a portion of the Fund's average daily net assets attributable to
each class of its 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 of each class of the Fund's shares, and sub-agreements between the
Distributor and members of the NASD acting as securities dealers and NASD
members or eligible non-members who are acting as brokers or agents
(collectively, "Selling Agreements") that may provide for their customers or
clients certain services or assistance, which may include, but not be limited
to, processing purchase and redemption transactions, establishing and
maintaining shareholder accounts regarding the Fund, and such other services as
may be agreed to from time to time and as may be permitted by applicable
statute, rule or regulation. Brokers, dealers and financial intermediaries that
have entered into sub-agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."

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

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

For the year ended December 31, 1994, the Fund has recognized expenses under
the Plans of $645,671, $346,761 and $24,693 for the Class A Shares, Class B
Shares and Class C Shares, respectively, of which $532,238 and $86,374 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares and Class B Shares, respectively. For the year ended December 31, 1994,
the Fund has reimbursed the Distributor $53,718 and $5,711 for advertising
expenses, and $26,899 and $13,434 for compensation of the Distributor's sales
personnel for the Class A Shares and Class B Shares, respectively.

PERFORMANCE INFORMATION

CLASS A SHARES

The average total return including payment of maximum sales charge with
respect to the Class A Shares for (i) the one year period ending December 31,
1994 was (10.10%); (ii) the 5 year period ending December 31, 1994 was 6.08%;
and (iii) the approximately 7 year, 8 month period from May 1, 1987 (the
commencement of investment operations of the Fund) through December 31, 1994 was
7.92%.

The Fund's yield for the 30 day period ending December 30, 1994 (calculated in
the manner described in the Prospectus under the heading "Fund Performance") was
5.73%. The Fund's tax-equivalent yield for the 30 day period ending December 30,
1994 (calculated in the manner described in the Prospectus under the heading
"Fund Performance" and assuming a 37.8% tax rate) was 9.21%. The Fund's current
distribution rate

B-27
<PAGE> 95

for the month ending December 31, 1994 (calculated in the manner described in
the Prospectus under the heading "Fund Performance") was 5.64%.

The Class A Share's cumulative non-standardized total return, including
payment of the maximum sales charge, from its inception to December 31, 1994 (as
calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 79.44%.

The Class A Shares cumulative non-standardized total return, excluding payment
of any sales charge, was 88.24%.

CLASS B SHARES

The average annual total return including payment of the CDSC with respect to
the Class B Shares for (i) the one year period ended December 31, 1994 was
(9.95%) and (ii) the approximately 1 year, 8 month period from May 1, 1993 (the
commencement of the sale of Class B Shares) through December 31, 1994 was
(2.09%).

The Class B Share's yield for the 30 day period ending December 30, 1994
(calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 5.29%. The Class B Share's tax-equivalent yield for the 30 day
period ending December 30, 1994 (calculated in the manner described in the
Prospectus under the heading "Fund Performance" and assuming a 37.8% tax rate)
was 8.50%. The Class B Share's current distribution rate for the month ending
December 31, 1994 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 5.14%.

The Class B Shares cumulative non-standardized total return including payment
of the CDSC from the commencement of the sale of Class B Shares to December 31,
1994 (as calculated in the manner described in the Prospectus under the heading
"Fund Performance") was (3.46%).

The Class B Shares cumulative non-standardized total return excluding payment
of the CDSC from the commencement of the sale of Class B Shares to December 31,
1994 was (0.01%).

CLASS C SHARES

The average total annual return including payment of the CDSC with respect to
the Class C Shares for (i) the one year period ended December 31, 1994 was
(7.23%) and (ii) the approximately 1 year, 5 month period from August 13, 1993
(the commencement of the sale of Class C Shares) through December 31, 1994 was
(2.52%).

The Class C Share's yield for the 30 day period ending December 30, 1994
(calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 5.29%. The Class C Share's tax-equivalent yield for the 30 day
period ending December 30, 1994 (calculated in the manner described in the
Prospectus under the heading "Fund Performance" and assuming a 37.8% tax rate)
was 8.50%. The Class C Share's current distribution rate for the month ending
December 31, 1994 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 5.14%.

The Class C Share's cumulative non-standardized total return, including
payment of the CDSC from the commencement of the sale of Class C Shares to
December 31, 1994 (as calculated in the manner described in the Prospectus under
the heading "Fund Performance") was (3.55%).

The Class C Shares cumulative non-standardized total return excluding payment
of the CDSC from the commencement of the sale of Class C Shares to December 31,
1994 was (3.55%).

B-28
<PAGE> 96

Van Kampen Merritt Pennsylvania Tax Free Income Fund

--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------

The Board of Trustees and Shareholders of
Van Kampen Merritt Pennsylvania Tax Free Income Fund

We have audited the accompanying statement of assets and liabilities of
Van Kampen Merritt Pennsylvania Tax Free Income Fund (the "Fund"),
including the portfolio of investments, as of December 31, 1994, 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 state-
ments and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994, 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 Merritt Pennsylvania Tax Free Income Fund as of December 31, 1994, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 31, 1995

B-29
<PAGE> 97

Van Kampen Merritt Pennsylvania Tax Free Income Fund
--------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1994
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount S & P Moody's
(000) Description Rating Rating Coupon Maturity Market Value
------------------------------------------------------------------------------------------------------------------------------
Municipal Bonds
Pennsylvania 96.5%
<S> <C> <C> <C> <C> <C> <C>
$ 3,500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt Ser B
(FSA Insd) ...................................................... AAA Aaa 6.625% 1/01/22 $ 3,393,215
500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt
Ser C (MBIA Insd) ............................................... AAA Aaa 8.250 1/01/16 537,865
1,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt
Ser C (FSA Insd) ................................................ AAA Aaa 5.625 1/01/23 834,290
1,625 Allegheny Cnty, PA C-34 Conv Cap Apprec <F4> .................... AA A1 0/8.625 2/15/04 1,484,340
265 Allegheny Cnty, PA Hosp Dev Auth Rev ............................ A+ A1 7.375 4/01/15 269,802
2,500 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Cent Presbyterian
Univ Ser A (MBIA Insd) .......................................... AAA Aaa 6.000 11/01/12 2,337,625
2,500 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Cent Presbyterian
Univ Ser A (MBIA Insd) .......................................... AAA Aaa 6.250 11/01/23 2,350,850
1,000 Allegheny Cnty, PA Indl Dev Auth Med Cent Rev Presbyterian
Med Cent Rfdg ................................................... AAA NR 6.750 2/01/26 949,080
2,500 Allegheny Cnty, PA Indl Dev Auth Rev Environmental Impt
Ser A Rfdg ...................................................... BB+ Baa3 6.700 12/01/20 2,267,400
4,240 Allegheny Cnty, PA Residential Fin Auth Mtg Rev 1983 Ser B ...... AA- NR * 10/01/15 475,686
2,000 Allegheny Cnty, PA Residential Fin Auth Mtg Rev
Single Family Ser Z (GNMA Collateralized) ....................... NR Aaa 6.875 5/01/26 1,980,680
2,380 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ................. AAA Aaa * 12/01/10 846,661
1,365 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ................. AAA Aaa * 12/01/11 454,313
2,350 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ................. AAA Aaa * 12/01/13 681,735
2,835 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ................. AAA Aaa * 12/01/14 767,406
2,500 Allentown, PA Area Hosp Auth Rev Sacred Heart Hosp Ser A Rfdg ... BBB NR 6.750 11/15/14 2,177,850
2,060 Allentown, PA Area Hosp Auth Rev Sacred Heart Hosp Ser B ........ BBB NR 6.750 11/15/15 1,787,400
1,000 Antrim Twp, PA Muni Auth Gtd Swr Rev (AMBAC Insd) ............... AAA Aaa 5.800 5/01/20 885,330
2,000 Beaver Cnty, PA Hosp Auth Rev Med Cent Beaver, PA Inc
Ser A (AMBAC Insd) .............................................. AAA Aaa 6.250 7/01/22 1,875,700
1,000 Beaver Cnty, PA Indl Dev Auth Environmental Impt Rev PA
Pwr Co Proj A Rfdg (FSA Insd) ................................... AAA Aaa 5.400 10/01/13 867,030
4,500 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev Ohio Edison
Proj Ser A Rfdg ................................................. BB+ Baa3 7.750 9/01/24 4,531,725
1,940 Bedford, PA Area Sch Dist (MBIA Insd) ........................... AAA Aaa 5.500 4/15/17 1,666,285
6,000 Berks Cnty, PA (Inverse Fltg) (FGIC Insd) ....................... AAA Aaa 8.875 11/10/20 6,390,000
3,300 Berks Cnty, PA Muni Auth College Rev Albright College
(Cap Guar Insd) ................................................. AAA Aaa 5.250 10/01/13 2,796,090
2,000 Berks Cnty, PA Muni Auth Rev Highlands at Wyomissing Proj B ..... A+ A1 6.875 10/01/17 1,980,420

</TABLE>

See Notes to Financial Statements

B-30
<PAGE> 98

Van Kampen Merritt Pennsylvania Tax Free Income Fund
--------------------------------------------------------------------------------
Portfolio of Investments (Continued)
December 31, 1994
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount S & P Moody's
(000) Description Rating Rating Coupon Maturity Market Value
--------------------------------------------------------------------
Pennsylvania (Continued)
<S> <C> <C> <C> <C> <C> <C>
$ 5,000 Berks Cnty, PA Second Ser (FGIC Insd) ................................ AAA Aaa * % 5/15/18 $ 1,083,750
1,500 Berks Cnty, PA Solid Waste Auth Cnty Gtd Rev (FGIC Insd) ............. AAA Aaa 6.000 4/01/17 1,387,380
2,600 Bristol Twp, PA Sch Dist Ser A (MBIA Insd) ........................... AAA Aaa 5.250 2/15/12 2,242,864
500 Bucks Cnty, PA Wtr & Swr Auth Rev Neshaminy Interceptor
Sys (Prerefunded @ 12/01/98) (FGIC Insd) ............................. AAA Aaa 7.500 12/01/13 535,885
1,650 Butler Cnty, PA Indl Dev Auth First Mtg Rev Sherwood Oaks Proj
Ser A Rfdg (Crossover Rfdg @ 06/01/96) <F3> .......................... A- NR 8.750 6/01/16 1,753,851
3,000 Butler Cnty, PA Indl Dev Auth Pollutn Ctl Rev Witco Corp Proj Rfdg ... A A3 5.850 12/01/23 2,484,990
1,000 Cambria Cnty, PA Hosp Dev Auth Hosp Rev Conemaugh Vly Mem
Hosp Ser B Rfdg (Prerefunded @ 07/01/98) ............................. BBB+ Baa1 8.875 7/01/18 1,124,100
1,000 Cambria Cnty, PA Indl Dev Auth Pollutn Ctl Rev Bethlehem
Steel Corp Proj Rfdg ................................................. NR NR 7.500 9/01/15 966,300
1,000 Cambria Cnty, PA Indl Dev Auth Res Recovery Rev Cambria
Cogen Proj Ser F ..................................................... A+ A1 7.750 9/01/19 1,036,470
1,550 Cambria Cnty, PA Ser A (FGIC Insd) ................................... AAA Aaa 6.625 8/15/14 1,554,200
835 Canon McMillan Sch Dist PA (AMBAC Insd) .............................. AAA Aaa * 2/01/13 255,811
575 Canon McMillan Sch Dist PA (AMBAC Insd) .............................. AAA Aaa * 2/01/14 164,393
1,000 Canon McMillan Sch Dist PA (AMBAC Insd) .............................. AAA Aaa * 2/01/15 266,710
1,000 Chartiers Vly, PA Indl & Coml Dev Auth First Mtg Rev United
Methodist Home (Prerefunded @10/01/95) <F3> .......................... NR NR 12.000 10/01/15 1,081,060
90 Chester Cnty, PA Hosp Auth Rev Brandywine Hosp ....................... A- NR 7.000 7/01/10 82,680
760 Chichester Sch Dist PA Ser 1989 (MBIA Insd) .......................... AAA Aaa * 6/01/01 524,309
860 Chichester Sch Dist PA Ser 1989 (MBIA Insd) .......................... AAA Aaa * 6/01/02 556,325
500 Clearfield Cnty, PA Indl Dev Auth Coml Dev Rev First Mtg
Kmart Corp Ser A Rfdg ................................................ BBB+ NR 7.200 7/01/07 504,095
2,230 Cumberland Cnty, PA Muni Auth Rev First Mtg Carlisle
Hosp & Hlth .......................................................... BBB- Baa 6.800 11/15/23 1,938,851
2,000 Delaware Cnty, PA Auth Hosp Rev Cmnty Hosp Crozer Chester
Mem Hosp ............................................................. BBB+ Baa1 6.000 12/15/20 1,587,840
3,000 Delaware Cnty, PA Auth Hosp Rev Crozer Chester Med Cent
(MBIA Insd) .......................................................... AAA Aaa 5.300 12/15/20 2,445,420
2,000 Delaware Cnty, PA Auth Hosp Rev Crozer Chester Med Cent
Ser A, B & C (Prerefunded @ 12/15/00) (MBIA Insd) .................... AAA Aaa 7.500 12/15/20 2,215,760
3,000 Delaware Cnty, PA Auth Hosp Rev Riddle Mem Hosp ...................... A- NR 6.500 1/01/22 2,661,030
2,475 Delaware Cnty, PA Auth Rev Elwyn Inc Proj ............................ NR Baa 8.350 6/01/15 2,645,849
2,500 Delaware Cnty, PA Auth Univ Rev Villanova Univ (MBIA Insd) ........... AAA Aaa 5.625 8/01/13 2,234,850
1,900 Delaware Cnty, PA Rfdg ............................................... AA Aa 6.000 11/15/22 1,739,602

</TABLE>

See Notes to Financial Statements

B-31
<PAGE> 99

<TABLE>
<CAPTION>
Par
Amount S & P Moody's
(000) Description Rating Rating Coupon Maturity Market Value
-----------------------------------------------------------------------------------------------------------------------------
Pennsylvania (Continued)
<S> <C> <C> <C> <C> <C> <C>
$ 2,000 Erie Cnty, PA Hosp Auth Rev Saint Vincent Hlth Cent
Proj Ser A (MBIA Insd) .......................................... AAA Aaa 6.375% 7/01/22 $ 1,906,780
2,745 Erie, PA Higher Edl Bldg Auth Univ Rev Gannon Univ Proj
Ser D Rfdg ...................................................... BBB Baa 5.850 6/01/15 2,396,440
105 Erie, PA Pkg Auth Pkg Fac Rev Bonds Rfdg
(Prerefunded @ 09/01/97) (AMBAC Insd) ........................... AAA Aaa 6.875 9/01/13 109,187
2,130 Erie, PA Sch Dist Ser C (Cap Guar Insd) ......................... AAA Aaa * 9/01/09 829,997
1,000 Fayette Cnty, PA Hosp Auth Hosp Rev Uniontown Hosp Proj
(Crossover Rfdg @ 07/01/95) ..................................... BBB Baa 9.750 7/01/15 1,045,000
2,210 Greene Cnty, PA Unlimited Tax (Prerefunded @ 08/01/00) .......... NR Aaa 8.500 8/01/10 2,482,117
1,045 Harrisburg, PA Wtr & Swr Auth Swr Rev Second Ser
Rfdg (FGIC Insd) ................................................ AAA Aaa * 10/15/08 434,887
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ..................... AAA Aaa * 10/15/11 617,522
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ..................... AAA Aaa * 10/15/12 576,638
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ..................... AAA Aaa * 10/15/13 538,274
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ..................... AAA Aaa * 10/15/14 502,265
1,000 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ..................... AAA Aaa * 10/15/15 254,610
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ..................... AAA Aaa * 10/15/16 436,798
1,880 Johnsonburg, PA Area Sch Dist Elk Cnty (AMBAC Insd) ............. AAA Aaa 5.100 5/15/18 1,513,908
1,260 Lackawanna Cnty, PA Multi-Purp Stadium Auth Stadium Rev Gtd
(Prerefunded @ 08/15/98) ........................................ BBB Baa 8.625 8/15/07 1,420,511
3,000 Lancaster Cnty, PA Hosp Auth Rev Hlth Cent Masonic Homes
Proj Rfdg (AMBAC Insd) .......................................... AAA Aaa 5.000 11/15/20 2,334,330
1,000 Lancaster Cnty, PA Solid Waste Mgmt Auth Res Recovery
Sys Rev Ser A ................................................... BBB A1 8.375 12/15/04 1,002,300
2,000 Lancaster Cnty, PA Solid Waste Mgmt Auth Res Recovery
Sys Rev Ser A <F3> .............................................. BBB A1 8.500 12/15/10 2,039,880
400 Lehigh Cnty, PA Genl Purp Auth Rev Horizon Hlth Sys Inc
Ser B Rfdg (Prerefunded @ 07/01/97) ............................. NR NR 8.250 7/01/13 429,660
4,100 Lehigh Cnty, PA Genl Purp Auth Rev Muhlenberg Hosp Ser A Rfdg ... NR Baa1 8.100 7/15/10 4,212,381
1,000 Lehigh Cnty, PA Indl Dev Auth Pollutn Ctl Rev PA Pwr & Lt Co
Proj Ser A Rfdg (MBIA Insd) ..................................... AAA Aaa 6.400 11/01/21 967,570
2,500 Lycoming Cnty, PA Auth Hosp Lease Rev Divine Providence
Sisters Ser A ................................................... A- NR 7.750 7/01/16 2,577,175
2,000 Lycoming Cnty, PA Auth Hosp Lease Rev Divine Providence
Sisters Ser A ................................................... A- NR 6.500 7/01/22 1,795,080
400 Lycoming Cnty, PA Auth Hosp Lease Rev Williamsport Hosp
Ser B (AMBAC Insd) .............................................. AAA Aaa 7.000 11/01/15 407,016
1,000 McKean Cnty, PA Hosp Auth Hosp Rev Bradford Hosp Proj
(Crossover Rfdg @ 10/01/00) ..................................... BBB- NR 8.875 10/01/20 1,156,440

</TABLE>

See Notes to Financial Statements

B-32
<PAGE> 100

<TABLE>
<CAPTION>
Par
Amount S & P Moody's
(000) Description Rating Rating Coupon Maturity Market Value
-----------------------------------------------------------------------------------------------------------------------------
Pennsylvania (Continued)
<S> <C> <C> <C> <C> <C> <C>
$ 750 McKeesport, PA Indl Dev Auth Rev The Kroger Corp
Allegheny Cnty Rfdg .............................................. NR Ba2 8.650% 6/01/11 $ 796,328
400 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp Rev Bryn Mawr
Hosp Proj (Prerefunded @ 12/01/97) ............................... AAA Aaa 9.375 12/01/19 448,536
500 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp Rev Suburban
Genl Hosp Bonds (AMBAC Insd) ..................................... AAA Aaa 7.250 5/01/16 509,945
420 Montgomery Cnty, PA Higher Edl & Hlth Auth Nursing Home Rev
Delco Sys Svcs Proj A ............................................ NR NR 9.875 11/01/18 427,665
2,500 Montgomery Cnty, PA Indl Dev Auth Rev Pollutn Ctl Philadelphia
Elec Co Ser A Rfdg ............................................... BBB+ Baa2 7.600 4/01/21 2,525,425
3,000 Montgomery Cnty, PA Indl Dev Auth Rev Res Recovery ............... A NR 7.500 1/01/12 3,059,460
1,000 North Penn, PA Wtr Auth Wtr Rev (FGIC Insd) ...................... AAA Aaa 6.875 11/01/19 1,016,470
1,500 North Penn, PA Wtr Auth Wtr Rev (FGIC Insd) ...................... AAA Aaa 6.200 11/01/22 1,411,140
1,000 Northampton Cnty, PA Indl Dev Auth Rev Moravian Hall
Square Proj Rfdg ................................................. NR A1 7.450 6/01/14 1,019,760
2,500 Northampton Cnty, PA Indl Dev Auth Rev Pollutn Ctl Bethlehem
Steel Rfdg ....................................................... NR NR 7.550 6/01/17 2,423,750
1,000 Northeastern PA Hosp & Edl Auth College Rev Gtd Luzerne Cnty
Cmnty College (AMBAC Insd) <F2> .................................. AAA Aaa 6.625 8/15/15 992,680
2,399 Oil City, PA Towne Tower Proj .................................... NR NR 6.750 5/01/20 2,204,367
1,465 Penn Hills, PA Ser B Rfdg (AMBAC Insd) ........................... AAA Aaa * 12/01/08 604,737
1,465 Penn Hills, PA Ser B Rfdg (AMBAC Insd) ........................... AAA Aaa * 12/01/09 561,769
1,100 Penn Hills, PA Ser B Rfdg (AMBAC Insd) ........................... AAA Aaa * 12/01/11 366,113
2,000 Pennsylvania Convention Cent Auth Rev Ser A (FGIC Insd) .......... AAA Aaa 6.000 9/01/19 1,848,880
3,800 Pennsylvania Convention Cent Auth Rev Ser A Rfdg ................. BB Ba 6.750 9/01/19 3,457,582
1,000 Pennsylvania Economic Dev Fin Auth Res Recovery Rev
Northampton Generating Ser A ..................................... NR NR 6.600 1/01/19 855,380
4,000 Pennsylvania Hsg Fin Agy (Inverse Fltg) .......................... AA Aa 9.315 10/01/23 3,680,000
1,000 Pennsylvania Hsg Fin Agy Rental Hsg Rfdg (FNMA Collateralized) ... AAA Aaa 6.500 7/01/23 956,390
1,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 40 ................ AA Aa 6.900 4/01/25 979,960
2,500 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 42 ................ AA Aa 6.850 4/01/25 2,434,375
850 Pennsylvania Infrastructure Invt Auth Rev Pennvest Subser B ...... AA NR 6.800 9/01/10 865,547
2,000 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City Of Philadelphia
Funding Pgm (MBIA Insd) .......................................... AAA Aaa 5.600 6/15/15 1,756,840
1,500 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City of Philadelphia
Funding Pgm (MBIA Insd) .......................................... AAA Aaa 5.625 6/15/23 1,286,055
4,000 Pennsylvania St Ctfs Partn ....................................... AAA Aaa 6.250 5/01/16 3,809,760
1,000 Pennsylvania St Ctfs Partn Ser A Rfdg (AMBAC Insd) ............... AAA Aaa 5.000 7/01/15 806,260

</TABLE>

See Notes to Financial Statements

B-33
<PAGE> 101

<TABLE>
<CAPTION>
Par
Amount S & P Moody's
(000) Description Rating Rating Coupon Maturity Market Value
------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania (Continued)
<S> <C> <C> <C> <C> <C> <C>
$ 2,000 Pennsylvania St Higher Edl Assistance Agy Student Ln Rev
Rfdg (Inverse Fltg) (AMBAC Insd) ...................................... AAA Aaa 10.534% 9/03/26 $ 1,927,500
2,500 Pennsylvania St Higher Edl Assistance Agy Student Ln Rev Ser B
(Inverse Fltg) (MBIA Insd) ............................................ AAA Aaa 10.341 3/01/20 2,650,000
4,000 Pennsylvania St Higher Edl Assistance Agy Student Ln Rev Ser C
(AMBAC Insd) .......................................................... AAA Aaa 6.400 3/01/22 3,811,960
80 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Drexel
Univ 1st Ser (Prerefunded @ 11/01/95) (MBIA Insd) ..................... AAA Aaa 7.700 5/01/12 83,358
60 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Drexel
Univ 1st Ser (MBIA Insd) .............................................. AAA Aaa 7.700 5/01/12 61,855
105 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Trustees
Univ Ser A ............................................................ AA Aa 6.625 1/01/17 103,034
1,000 Pennsylvania St Higher Edl Fac Auth Rev Med College PA Ser A .......... BBB Baa1 8.375 3/01/11 1,027,060
650 Pennsylvania St Higher Edl Fac Auth Rev Med College PA Ser A .......... BBB Baa1 7.500 3/01/14 629,408
4,000 Pennsylvania St Higher Edl Fac Auth Rev Med College PA Ser A .......... BBB Baa1 7.375 3/01/21 3,785,360
575 Pennsylvania St Tpk Comm Tpk Rev Ser A
(Prerefunded @ 12/01/96) .............................................. AAA Aaa 7.875 12/01/15 613,353
2,500 Pennsylvania St Tpk Comm Tpk Rev Ser P (AMBAC Insd) ................... AAA Aaa 5.750 12/01/12 2,313,000
610 Philadelphia, PA Auth for Indl Dev Rev Baptist Home of Philadelphia ... NR NR 10.000 4/01/02 628,495
250 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Albert Einstein Med Cent .............................................. BBB+ A 7.000 10/01/21 238,100
2,800 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev Chestnut
Hill Hosp ............................................................. A- A 6.500 11/15/22 2,577,904
4,500 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev Frankford
Hosp Ser A ............................................................ BBB Baa1 6.000 6/01/23 3,639,600
4,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Friends Hosp .......................................................... BBB Baa 6.200 5/01/11 3,443,720
4,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev Temple
Univ Hosp Ser A ....................................................... BBB+ Baa1 6.625 11/15/23 3,520,720
1,750 Philadelphia, PA Muni Auth Rev Lease Ser D Rfdg ....................... BB Ba 6.300 7/15/17 1,526,577
1,500 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) ................................................ AAA Aaa * 3/15/08 647,820
3,750 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) ................................................ AAA Aaa * 3/15/11 1,307,175
3,775 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) ................................................ AAA Aaa * 3/15/12 1,228,951
4,500 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) ................................................ AAA Aaa * 3/15/13 1,367,640
2,155 Philadelphia, PA Muni Auth Rev Rfdg (Prerefunded @ 04/01/00)
(FGIC Insd) ........................................................... AAA Aaa 7.800 4/01/18 2,321,237

</TABLE>

See Notes to Financial Statements

B-34
<PAGE> 102

<TABLE>
<CAPTION>
Par
Amount S & P Moody's
(000) Description Rating Rating Coupon Maturity Market Value
---------------------------------------------------------------------------------------------------------------------------
Pennsylvania (Continued)
<S> <C> <C> <C> <C> <C> <C>
$ 220 Philadelphia, PA Muni Auth Rev Rfdg (Prerefunded @ 04/01/98)
(FGIC Insd) .................................................... AAA Aaa 7.800% 4/01/18 $ 238,473
775 Philadelphia, PA Muni Auth Rev Rfdg (Prerefunded @ 07/15/97) ... AAA Aaa 7.875 7/15/17 834,257
1,150 Philadelphia, PA Rfdg (Prerefunded @ 02/15/96) (FGIC Insd) ..... AAA Aaa 8.250 2/15/09 1,211,778
2,210 Philadelphia, PA Wtr & Swr Rev 11th Ser Subser A
(Prerefunded @ 12/01/95) ....................................... AAA Aaa 8.400 12/01/96 2,326,798
1,800 Philadelphia, PA Wtr & Swr Rev Ser 16 .......................... BBB Baa 7.500 8/01/10 1,865,394
5,000 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (Cap Guar Insd) ....... AAA Aaa 5.500 6/15/14 4,333,150
1,425 Pittsburgh, PA Sch Dist Ser B (AMBAC Insd) ..................... AAA Aaa * 8/01/08 600,823
4,070 Pittsburgh, PA Sch Dist Ser B (AMBAC Insd) ..................... AAA Aaa * 8/01/09 1,594,504
85 Pittsburgh, PA Urban Redev Auth Mtg Rev Ser A .................. A A1 8.750 10/01/19 89,947
1,500 Pittsburgh, PA Urban Redev Auth Mtg Rev Ser C-1 ................ A A1 6.800 10/01/25 1,418,835
960 Pittsburgh, PA Urban Redev Auth Single Family Mtg Rev Ser A .... NR Aaa 8.000 12/01/20 1,003,334
2,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A Rfdg
(FGIC Insd) .................................................... AAA Aaa * 9/01/06 979,860
1,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A Rfdg
(FGIC Insd) .................................................... AAA Aaa * 9/01/07 458,610
1,500 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A Rfdg
(FGIC Insd) .................................................... AAA Aaa * 9/01/08 643,425
2,645 Ridley Park, PA Hosp Auth Rev Taylor Hosp Ser A ................ BBB Baa 6.125 12/01/20 2,115,656
250 Scranton-Lackawanna, PA Hlth & Welfare Auth Rev Cmnty
Med Cent Proj (MBIA Insd) ...................................... AAA Aaa 7.875 7/01/10 266,308
3,500 Seneca Vly, PA Sch Dist Ser A (FGIC Insd) ...................... AAA Aaa 5.500 7/01/14 3,098,550
2,650 Sharon, PA Regl Hlth Sys Auth Hosp Rev Sharon Regl Hlth Sys
Proj A Rfdg .................................................... BBB+ NR 6.875 12/01/09 2,557,727
355 Somerset Cnty, PA Indl Dev Auth Coml Dev Rev First Mtg
Kmart Corp Ser A Rfdg .......................................... BBB+ NR 7.200 4/01/07 357,080
1,500 South Fork Muni Auth PA Hosp Rev Lee Hosp Proj Ser A ........... A- NR 5.500 7/01/23 1,160,505
2,180 State Pub Sch Bldg Auth PA Sch Rev Burgettstown Sch Dist Ser D
(MBIA Insd) <F2> ............................................... AAA Aaa 6.500 2/01/14 2,165,699
2,725 Upper Merion, PA Muni Util Auth Swr Rev Gtd .................... NR Aa 6.000 8/15/16 2,567,686
1,500 Washington Cnty, PA Auth Lease Rev Muni Fac Pool Cap Ser C
Subser C-1D (Prerefunded @ 06/15/00) (AMBAC Insd) .............. AAA Aaa 7.450 12/15/18 1,659,945
190 Washington Cnty, PA Hosp Auth Rev Washington Hosp Proj
(Prerefunded @ 07/01/97) ....................................... NR NR 9.500 7/01/17 209,954
1,000 Wayne Cnty, PA Hosp & Hlth Fac Auth Cnty Gtd Hosp Rev Rfdg
Wayne Mem Hosp (MBIA Insd) ..................................... AAA Aaa 5.375 7/01/12 868,340
1,825 West Middlesex Area Sch Dist PA (MBIA Insd) .................... AAA Aaa 5.400 6/15/23 1,513,126

</TABLE>

See Notes to Financial Statements

B-35
<PAGE> 103

3,465 Westmoreland Cnty, PA Ser G Rfdg (FGIC Insd) ................. AAA Aaa * 12/01/13 1,005,197
-----------
234,480,164
-----------
Puerto Rico 0.1%
45 Puerto Rico Commonwealth (Prerefunded @ 07/01/97) ........... AAA NR 7.125 7/01/02 47,844
205 Puerto Rico Commonwealth Rfdg ............................... A Baa1 7.125 7/01/02 217,031
-----------
264,875
-------

</TABLE>

<TABLE>
<S> <C>
Total Long-Term Investments 96.6%
(Cost $242,135,582) <F1>............................................................................ 234,745,039

Short-Term Investments at Amortized Cost 3.4%...................................................... 8,200,000

Liabilities in Excess of Other Assets 0.0%........................................................ (40,762)
------------
Net Asset 100%..................................................................................... $242,904,277
------------

</TABLE>

*Zero coupon bond

[FN]

<F1> At December 31, 1994, cost for federal income tax purposes is
$242,135,582; the aggregate gross unrealized appreciation is $6,123,831
and the aggregate gross unrealized depreciation is $13,569,923, resulting
in net unrealized depreciation including futures transactions of
$7,446,092.
<F2> Securities purchased on a when issued or delayed delivery basis.
<F3> Assets segregated as collateral for when issued or delayed
delivery purchase commitments and open futures transactions.
<F4> Currently is a zero coupon bond which will convert to a coupon paying bond
at a predetermined date.

See Notes to Financial Statements

B-36

<PAGE> 104

Van Kampen Merritt Pennsylvania Tax Free Income Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1994
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at Market Value (Cost $242,135,582) <F1>....................................... $ 234,745,039
Short-Term Investments <F1>................................................................. 8,200,000
Cash........................................................................................ 31,917
Receivables:
Interest.................................................................................... 3,533,825
Investments Sold............................................................................ 453,731
Fund Shares Sold............................................................................ 278,652
Margin on Futures........................................................................... 93,750
Other....................................................................................... 2,705
---------------
Total Assets................................................................................ 247,339,619
---------------
Liabilities:
Payables:
Investments Purchased....................................................................... 3,128,485
Income Distributions ....................................................................... 460,811
Fund Shares Repurchased..................................................................... 406,433
Investment Advisory Fee <F2>................................................................ 61,720
Accrued Expenses............................................................................ 377,893
---------------
Total Liabilities........................................................................... 4,435,342
---------------
Net Assets.................................................................................. $ 242,904,277
---------------
Net Assets Consist of:
Paid in Surplus <F3>........................................................................ $ 250,292,601
Accumulated Undistributed Net Investment Income............................................. 67,299
Accumulated Net Realized Loss on Investments................................................ (9,531)
Net Unrealized Depreciation on Investments.................................................. (7,446,092)
---------------
Net Assets.................................................................................. $ 242,904,277
---------------
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of $203,160,479 and
12,633,499 shares of beneficial interest issued and outstanding) <F3>....................... $ 16.08
Maximum sales charge (4.65%* of offering price)............................................. .78
---------------
Maximum offering price to public............................................................ $ 16.86
---------------
Class B Shares:
Net asset value and offering price per share (Based on net assets of $37,570,971 and
2,336,564 shares of beneficial interest issued and outstanding) <F3>........................ $ 16.08
---------------
Class C Shares:
Net asset value and offering price per share (Based on net assets of $2,171,025 and
135,023 shares of beneficial interest issued and outstanding) <F3>.......................... $ 16.08
---------------
Class D Shares:
Net asset value and offering price per share (Based on net assets of $1,802 and
112 shares of beneficial interest issued and outstanding) <F3>.............................. $ 16.09
---------------

</TABLE>

*On sales of $100,000 or more, the sales charge will be reduced.
Effective January 16, 1995, the maximum sales charge was changed to 4.75%.

See Notes to Financial Statements

B-37
<PAGE> 105

Van Kampen Merritt Pennsylvania Tax Free Income Fund
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended December 31, 1994
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest........................................................................................................... $ 16,801,029
Amortization of Premium........................................................................................... (92,684)
-----------
Total Income...................................................................................................... 16,708,345
-----------
Expenses:
Investment Advisory Fee <F2>...................................................................................... 1,514,222
Distribution (12b-1) and Service Fees (Allocated to Classes A, B, C and D of $645,671, $346,761, $24,693 and $4,
respectively)<F6>.............................................................................................. 1,017,129
Shareholder Services ............................................................................................ 312,803
Custody.......................................................................................................... 137,018
Legal <F2>....................................................................................................... 34,448
Trustees Fees and Expenses <F2>.................................................................................. 20,250
Other............................................................................................................ 186,897
-------------
Total Expenses................................................................................................... 3,222,767
Less Fees Waived................................................................................................. 682,111
-------------
Net Expenses..................................................................................................... 2,540,656
-------------
Net Investment Income............................................................................................ $ 14,167,689
-------------
Realized and Unrealized Gain/Loss on Investments:
Realized Gain/Loss on Investments:
Proceeds from Sales.............................................................................................. $ 20,562,434
Cost of Securities Sold.......................................................................................... (18,973,309)
-------------
Net Realized Gain on Investments (Including realized gain on futures transactions of $2,649,066)................. 1,589,125
-------------
Net Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period.......................................................................................... 23,742,044
End of the Period (Including unrealized depreciation on open futures transactions of $55,549).................... (7,446,092)
-------------
Net Unrealized Depreciation on Investments During the Period..................................................... (31,188,136)
-------------
Net Realized and Unrealized Loss on Investments.................................................................. $ (29,599,011)
-------------
Net Decrease in Net Assets from Operations....................................................................... $ (15,431,322)
-------------

</TABLE>

See Notes to Financial Statements

B-38
<PAGE> 106

Van Kampen Merritt Pennsylvania Tax Free Income Fund
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the Years Ended December 31, 1994 and 1993
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1994 December 31, 1993

------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income....................................................... $ 14,167,689 $ 11,574,527
Net Realized Gain/Loss on Investments....................................... 1,589,125 (1,496,437)
Net Unrealized Appreciation/Depreciation on Investments During the Period... (31,188,136) 13,955,476
----------------- -----------------
Change in Net Assets from Operations ....................................... (15,431,322) 24,033,566
----------------- -----------------
Distributions from Net Investment Income:
Class A Shares.............................................................. (12,279,314) (11,117,083)
Class B Shares.............................................................. (1,704,000) (450,424)
Class C Shares.............................................................. (120,704) (22,974)
Class D Shares.............................................................. (86) -0-
----------------- -----------------
Total Distributions......................................................... (14,104,104) (11,590,481)
----------------- -----------------
Net Change in Net Assets from Investment Activities......................... (29,535,426) 12,443,085
----------------- -----------------
From Capital Transactions <F3>:
Proceeds from Shares Sold................................................... 45,228,180 96,648,072
Net Asset Value of Shares Issued Through Dividend Reinvestment.............. 8,518,915 7,020,021
Cost of Shares Repurchased.................................................. (32,797,611) (18,479,645)
----------------- -----------------
Net Change in Net Assets from Capital Transactions.......................... 20,949,484 85,188,448
----------------- -----------------
Total Increase/Decrease in Net Assets....................................... (8,585,942) 97,631,533
Net Assets:
Beginning of the Period..................................................... 251,490,219 153,858,686
----------------- -----------------
End of the Period (Including undistributed net investment income of
$67,299 and $3,714, respectively) .......................................... $ 242,904,277 $ 251,490,219
----------------- -----------------

</TABLE>

See Notes to Financial Statements

B-39
<PAGE> 107

Van Kampen Merritt Pennsylvania Tax Free Income Fund
--------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1994
--------------------------------------------------------------------------------

1. Significant Accounting Policies

Van Kampen Merritt Pennsylvania Tax Free Income Fund (the "Fund")
was organized as a Pennsylvania trust on January 28, 1987, and is regis-
tered as a non-diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund com-
menced investment operations on May 1, 1987. On May 1, 1993, the
Fund commenced distribution of its Class B shares. The distribution of
the Fund's Class C shares, which were initially introduced as Class D
shares and subsequently renamed Class C shares on March 7, 1994,
commenced on August 13, 1993. The distribution of the Fund's fourth
class of shares, Class D shares, commenced on March 14, 1994.

The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.

A. Security Valuation-Investments are stated at value using market
quotations or, if such valuations are not available, estimates obtained
from yield data relating to instruments or securities with similar
characteristics in accordance with procedures established in good faith by
the Board of Trustees. Short-term securities with remaining maturities of
less than 60 days are valued at amortized cost.

B. Security Transactions-Security transactions are recorded on a
trade date basis. Realized gains and losses are determined on an identified
cost basis. The Fund may purchase and sell securities on a "when
issued" and "delayed delivery" basis, with settlement to occur at a later
date. The value of the security so purchased is subject to market fluctua-
tions 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.

C. Investment Income-Interest income is recorded on an accrual
basis. Bond premium and original issue discount are amortized over the
expected life of each applicable security.

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

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of loss and offset such losses against any future realized capital gains.
At December 31, 1994, the Fund had an accumulated capital loss carryforward for
tax purposes of $9,531 which will expire on December 31, 2001. Net realized
gains or losses may differ for financial and tax reporting purposes primarily as
a result of post October 31 losses which are not recognized for tax purposes
until the first day of the following fiscal year.

E. Distribution of Income and Gains-The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included in ordinary income for
tax purposes.

2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement,
Van Kampen American Capital Investment Advisory Corp. (the "Adviser") will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
Average Net Assets % Per Annum
----------------------------------
<S> <C>
First $500 million... .600 of 1%
Over $500 million.... .500 of 1%

</TABLE>

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom, counsel
to the Fund, of which a trustee of the Fund is an affiliated person.
For the year ended December 31, 1994, the Fund recognized expenses of
approximately $140,000 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' ("VKAC") cost of providing accounting, legal and
certain shareholder services to the Fund.

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.

B-40
<PAGE> 108

Van Kampen Merritt Pennsylvania Tax Free Income Fund
--------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
December 31, 1994
--------------------------------------------------------------------------------

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

At December 31, 1994, VKAC owned 100 shares each of Classes B, C and D.

3. Capital Transactions
The Fund has outstanding four classes of common shares, Classes A, B, C and D.
There are an unlimited number of shares of each class without par value
authorized. At December 31, 1994, paid in surplus aggregated $206,707,535,
$41,140,560, $2,442,579 and $1,927 for Classes A, B, C and D, respectively. For
the year ended December 31, 1994, transactions were as follows:

<TABLE>

<CAPTION>
Shares Value
--------------------------------------------------------------
<S> <C> <C>
Sales:
Class A....................... 1,647,629 $ 28,038,358
Class B....................... 919,103 15,718,097
Class C....................... 85,268 1,469,806
Class D....................... 112 1,919
------------ ----------------
Total Sales................... 2,652,112 $ 45,228,180
------------ ----------------
Dividend Reinvestment:
Class A....................... 444,194 $ 7,432,733
Class B....................... 59,918 998,687
Class C....................... 5,238 87,487
Class D....................... -0- 8
------------ ----------------
Total Dividend Reinvestment... 509,350 $ 8,518,915
------------ ----------------
Repurchases:
Class A....................... (1,733,757) $ (28,705,184)
Class B....................... (177,182) (2,922,282)
Class C....................... (70,025) (1,170,145)
Class D....................... -0- -0-
------------ ----------------
Total Repurchases............. (1,980,964) $ (32,797,611)
------------ ----------------

</TABLE>

At December 31, 1993, paid in surplus aggregated $199,941,628, $27,346,058 and
$2,055,431 for Classes A, B and C, respectively. For the year ended December 31,
1993, transactions were as follows:

Shares Value
--------------------------------------------------------------
<S> <C> <C>
Sales:
Class A....................... 3,773,265 $ 66,417,202
Class B....................... 1,541,341 27,465,643
Class C....................... 153,884 2,765,227
------------ ----------------
Total Sales................... 5,468,490 $ 96,648,072
------------ ----------------
Dividend Reinvestment:
Class A....................... 381,133 $ 6,746,665
Class B....................... 14,483 259,718
Class C....................... 760 13,638
------------ ----------------
Total Dividend Reinvestment... 396,376 $ 7,020,021
------------ ----------------
Repurchases:
Class A....................... (983,572) $ (17,376,908)
Class B....................... (21,099) (379,303)
Class C....................... (40,102) (723,434)
------------ ----------------
Total Repurchases............. (1,044,773) $ (18,479,645)
------------ ----------------

</TABLE>

Class B, C and D 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 Classes C and D as detailed in the following schedule.
The Class B, C and D shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.

Contingent Deferred
Sales Charge

<TABLE>
<CAPTION>
Year of Redemption Class B Class C Class D
----------------------------------------------------
<S> <C> <C> <C>
First ................... 4.00% 1.00% 0.75%
Second .................. 3.75% None None
Third ................... 3.50% None None
Fourth .................. 2.50% None None
Fifth ................... 1.50% None None
Sixth ................... 1.00% None None
Seventh and Thereafter .. None None None

</TABLE>

B-41
<PAGE> 109

Van Kampen Merritt Pennsylvania Tax Free Income Fund
--------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
December 31, 1994
--------------------------------------------------------------------------------

For the year ended December 31, 1994, VKAC, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $161,700 and CDSC on the redeemed shares of Classes
B, C and D of approximately $75,800. Sales charges do not represent
expenses of the Fund.

4. Investment Transactions
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the year ended December 31, 1994, were
$37,920,892 and $18,973,309, respectively.

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

The Fund has a variety of reasons to use derivative instruments,
such as to attempt to protect the Fund against possible changes in the
market value of its portfolio and to manage the portfolio's effective yield,
maturity and duration. All of the Fund's portfolio holdings, including
derivative instruments, are marked to market each day with the change
in value reflected in the unrealized appreciation/depreciation on invest
ments. Upon disposition, a realized gain or loss is recognized
accordingly.

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

A. Futures Contracts-A futures contract is an agreement involving
the delivery of a particular asset on a specified future date at an agreed
upon price. The Fund generally invests in futures on U.S. Treasury Bonds
and the Municipal Bond index and typically closes the contract prior to
the delivery date. These contracts are generally used to manage the port
folio's effective maturity and duration.

The fluctuation in market value of the contracts is settled daily
through a cash margin account. Realized gains and losses are recognized
when the contracts are closed or expire.

Transactions in futures contracts, each with a par value of $100,000, for the
year ended December 31, 1994, were as follows:

<TABLE>
<CAPTION>
Contracts
-----------------------------------------------
<S> <C>
Outstanding at December 31, 1993... 0
Futures Opened..................... 1,500
Futures Closed..................... (1,200)
--------
Outstanding at December 31, 1994... 300
--------

</TABLE>

The futures contracts outstanding as of December 31, 1994, and the descriptions
and unrealized depreciation are as follows:

<TABLE>
<CAPTION>
Unrealized
Contracts Depreciation
----------------------------------------------------
<S> <C> <C>
US Treasury Bond Futures
Mar 1995 - Sells to Open... 300 $ ($55,549)
--------- -----------

</TABLE>

B. Indexed Securities-These instruments are identified in the port
folio of investments. The price of these securities may be more volatile than
the price of a comparable fixed rate security.

An Inverse Floating security is one where the coupon is inversely indexed to a
short-term floating interest rate multiplied by a specified factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. These instruments are typically used by the
Fund to enhance the yield of the portfolio.

6. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and a service plan (the "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 .30% each of Class A and Class D shares and
1.00% each of Class B and Class C shares are accrued daily. Included in these
fees for the year ended December 31, 1994, are payments to VKAC of approximately
$364,500.

B-42
<PAGE> 110

PART C: OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

List all financial statements and exhibits as part of the Registration
Statement.

(a) FINANCIAL STATEMENTS:

Included in Part A of the Registration Statement:

Financial Highlights

Included in Part B of the Registration Statement:

Independent Auditors' Report

Financial Statements

Notes to Financial Statements

(b) EXHIBITS:

(1) Form of Amended and Restated Agreement and Declaration of Trust+

(2) Form of Amended and Restated By-Laws+

(4) Form of Specimen of Share Certificate

(i) Class A Shares+

(ii) Class B Shares+

(iii) Class C Shares+

(5) Form of Investment Advisory Agreement+

(6) (a) Form of Distribution Agreement+

(b) Form of Dealer Agreement+

(d) Form of Bank Agreement+

(e) Underwriting Agreement(1)

(f) Agreement Among Underwriters(1)

(g) Selected Dealer Agreement(1)

(8) (a) Form of Custodian Agreement(1)

(b) Form of Transfer Agency Agreement+

(9) (a) Form of Fund Accounting Agreement+

(b) Form of Legal Services Agreement+

(10) Opinion and Consent of Saul, Ewing, Remick & Saul(11)

(11) Consent of KPMG Peat Marwick LLP+

(13) Letter of Understanding relating to initial capital(1)

(15) (a) Form of Distribution Plan Pursuant to Rule 12b-1+

(b) Form of Shareholder Assistance Agreement+

(d) Form of Service Plan+

(16) Computation of Performance Quotations(13)

(17) (a) List of certain investment companies in response to Item 29(a)+

(b) List of Officers and Directors of Van Kampen American
Capital Distributors, Inc. in response to Item 29(b)+

(24) Power of attorney+

(27) Financial Data Schedules+

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

(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File Number 33-11384,
filed March 4, 1987.

(11) Incorporated herein by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on Form N-1A, File No. 33-11384, filed
on February 25, 1994.

(13) Incorporated herein by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A, File No. 33-11384, filed
on April 24, 1995.

+ Filed herewith.

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

Not applicable.

C-1
<PAGE> 111

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

As of August 11, 1995:

<TABLE>
<CAPTION>
(2)
NUMBER
OF
RECORD
TITLE OF CLASS* HOLDERS
-------------- -----
<S> <C>
Shares of beneficial interest, $0.01 par value:
Class A Shares................................. 6,998
Class B Shares................................. 1,562
Class C Shares................................. 57
</TABLE>

---------------
* Prior to May 1, 1995, the Fund also offered Class D Shares.

ITEM 27. INDEMNIFICATION.

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

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

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

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

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

C-2
<PAGE> 112

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

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

ITEM 29. PRINCIPAL UNDERWRITERS.

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

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

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, ACCESS Investor Services, Inc., 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, MA 02105; (ii) by the Adviser,
will be maintained at its offices, located at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181 and (iii) all such accounts, books and other documents
required to be maintained by Van Kampen American Capital Distributors, Inc., the
principal underwriter, will be maintained at its offices located at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181.

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

ITEM 32. UNDERTAKINGS.

(a) Not applicable.

(b) Not applicable.

C-3
<PAGE> 113

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT, VAN KAMPEN AMERICAN CAPITAL
PENNSYLVANIA TAX FREE INCOME FUND, CERTIFIES THAT IT MEETS ALL THE REQUIREMENTS
FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER
THE SECURITIES ACT OF 1933, HAS DULY CAUSED THIS AMENDMENT TO THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN THE CITY OF OAKBROOK TERRACE, AND THE STATE OF ILLINOIS ON THE
16TH DAY OF AUGUST, 1995.

VAN KAMPEN AMERICAN CAPITAL

PENNSYLVANIA TAX FREE INCOME FUND

By: /s/ RONALD A. NYBERG
------------------------------------
Ronald A. Nyberg, Vice President and
Secretary

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON AUGUST 16, 1995 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED.

<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ DONALD C. MILLER * Chairman of the Board and Trustee
---------------------------------------------
Donald C. Miller
Chief Executive Officer:

/s/ DENNIS J. McDONNELL * President and Trustee
---------------------------------------------
Dennis J. McDonnell
Chief Financial and Accounting Officer:

/s/ EDWARD C. WOOD, III * Vice President and Treasurer
---------------------------------------------
Edward C. Wood, III
Trustees:

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

/s/ RICHARD E. CARUSO * Trustee
---------------------------------------------
Richard E. Caruso

/s/ PHILIP P. GAUGHAN * Trustee
---------------------------------------------
Philip P. Gaughan

/s/ ROGER HILSMAN * Trustee
---------------------------------------------
Roger Hilsman

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

/s/ JACK E. NELSON * Trustee
---------------------------------------------
Jack E. Nelson
</TABLE>

C-4
<PAGE> 114

<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C> <C>
/s/ DON G. POWELL * Trustee
---------------------------------------------
Don G. Powell

/s/ DAVID REES * Trustee
---------------------------------------------
David Rees

/s/ JEROME L. ROBINSON * Trustee
---------------------------------------------
Jerome L. Robinson

/s/ LAWRENCE J. SHEEHAN * Trustee
---------------------------------------------
Lawrence J. Sheehan

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

/s/ WAYNE W. WHALEN * Trustee
---------------------------------------------
Wayne W. Whalen

/s/ WILLIAM S. WOODSIDE * Trustee
---------------------------------------------
William S. Woodside
---------------
*Signed by Ronald A. Nyberg pursuant to a power of attorney.

/s/ RONALD A. NYBERG August 16, 1995
---------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>

C-5
<PAGE> 115

SCHEDULE OF EXHIBITS TO

POST-EFFECTIVE AMENDMENT 14 TO FORM N-1A

SUBMITTED TO THE SECURITIES AND EXCHANGE

COMMISSION ON AUGUST 24, 1995

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
--------- ------- -----------
<S> <C> <C>
(1) Form of Amended and Restated Agreement and Declaration of Trust+.........
(2) Form of Amended and Restated By-Laws+....................................
(4) Form of Specimen of Share Certificate....................................
(i) Class A Shares+..........................................................
(ii) Class B Shares+..........................................................
(iii) Class C Shares+..........................................................
(5) Form of Investment Advisory Agreement+...................................
(6)(a) Form of Distribution Agreement+..........................................
(b) Form of Dealer Agreement+................................................
(c) Form of Broker Agreement+................................................
(d) Form of Bank Agreement+..................................................
(e) Underwriting Agreement(1)................................................
(f) Agreement Among Underwriters(1)..........................................
(g) Selected Dealer Agreement(1).............................................
(8)(a) Form of Custodian Agreement(1)...........................................
(b) Form of Transfer Agency Agreement+.......................................
(9)(a) Form of Fund Accounting Agreement+.......................................
(b) Form of Legal Services Agreement+........................................
(10) Opinion and Consent of Saul, Ewing, Remick & Saul(11)....................
(11) Consent of KPMG Peat Marwick LLP+........................................
(13) Letter of understanding relating to initial capital(1)...................
(15)(a) Form of Distribution Plan pursuant to Rule 12b-1+........................
(b) Form of Shareholder Assistance Agreement+................................
(c) Form of Administrative Services Agreement+...............................
(d) Form of Service Plan+....................................................
(16) Computation of Performance Quotations(13)................................
(17)(a) List of certain investment companies in response to Item 29(a)+..........
(b) List of Officers and Directors of Van Kampen American Capital
Distributors, Inc. in response to Item 29(b)+............................
(24) Power of Attorney+.......................................................
(27) Financial Data Schedules+................................................
</TABLE>

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

(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File Number 33-11384,
filed March 4, 1987.

(11) Incorporated herein by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on Form N-1A, File Number 33-11384,
filed on February 25, 1994.

(13) Incorporated herein by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A, File Number 33-11384,
filed on April 24, 1995.

+ Filed herewith.

C-6

<PAGE> 1
EXHIBIT 1

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

FIRST AMENDED AND RESTATED

AGREEMENT AND DECLARATION OF TRUST

AUGUST 1, 1995

<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

FIRST AMENDED AND RESTATED

AGREEMENT AND DECLARATION OF TRUST

Index

RECITALS 1

ARTICLE I THE TRUST 2

SECTION 1.1 Name 2

SECTION 1.2. Location 2

SECTION 1.3. Nature of Trust 2

SECTION 1.4. Definitions 2

SECTION 1.5. Real Property to be Converted into Personal Property 5

ARTICLE 2 PURPOSE OF THE TRUST 5

ARTICLE 3 POWERS OF THE TRUSTEES 6

SECTION 3.1. Powers in General 6

(a) Investments 6

(b) Disposition of Assets 7

(d) Form of Holding 7

(e) Reorganization, etc. 7

(f) Voting Trusts, etc. 7

<PAGE> 3

(g) Contracts, etc. 7

(h) Guarantees, etc. 7

(i) Partnerships, etc. 8

(j) Insurance 8

(k) Pensions, etc 8

(I) Power of Collection and Litigation 8

(m) Issuance and Repurchase of Shares 8

(n) Offices 8

(o) Expenses 8

(p) Agents, etc. 9

(q) Accounts 9

(r) Valuation 9

(s) Indemnification 9

(t) General 9

SECTION 3.2. Borrowings; Financings; Issuance of Securities 9

<PAGE> 4

SECTION 3.3. Deposits 9

SECTION 3.4. Allocations 10

SECTION 3.5. Further Powers; Limitations 10

ARTICLE 4 TRUSTEES AND OFFICERS 10

SECTION 4.1. Number, Designation, Election, Term, etc 10

(a) Initial Trustee 10

(b) Number 10

(d) Resignation and Retirement 11

(e) Removal 11

(f) Vacancies 11

(g) Acceptance of Trusts 11

(h) Effect of Death, Resignation, etc. 12

(i) Conveyance 12

(j) No Accounting 12

SECTION 4.2. Trustees' Meetings; Participation by Telephone, etc. 12

SECTION 4.3. Committees; Delegation 12

SECTION 4.4. Officers 13

SECTION 4.5. Compensation of Trustees and Officers 13

SECTION 4.6. Ownership of Shares and Securities of the Trust 13

<PAGE> 5

SECTION 4.7. Right of Trustees and Officers to Own Property or
to Engage in Business; Authority of Trustees to Permit
Others to Do Likewise 13

SECTION 4.8. Reliance on Experts 13

SECTION 4.9. Surety Bonds 14

SECTION 4.10. Apparent Authority of Trustees and Officers 14

SECTION 4.11. Other Relationships Not Prohibited 14

SECTION 4.12. Payment of Trust Expenses 14

SECTION 4.13. 0wnership of the Trust Property 15

<PAGE> 6

SECTION 4.14. By-Laws 15

ARTICLE 5 DELEGATION OF MANAGERIAL RESPONSIBILITIES 15

SECTION 5.1. Appointment; Action by Less than All Trustees 15

SECTION 5.2. Certain Contracts 15

(a) Advisory 16

(b) Administration 16

(d) Custodian 16

(e) Transfer and Dividend Disbursing Agent 17

(f) Shareholder Servicing 17

(g) Accounting 17

Section 5.3. Distribution Arrangements 17

Section 5.4. Service Arrangements 17

ARTICLE 6 SERIES AND SHARES 17

SECTION 6.1. Description of Series and Shares 17

(a) General 17

(b) Establishment, etc. of Series; Authorization of Shares 18

(d) Consideration for Shares 18

(e) Assets Belonging to Series 19

(f) Liabilities of Series 19

(g) Dividends 19

(h) Liquidation 20

(i) Voting 20

<PAGE> 7

(j) Redemption by Shareholder 20

(k) Redemption at the Option of the Trust 21

(I) Net Asset Value 21

(m) Transfer 21

(n) Equality 21

(o) Rights of Fractional Shares 22

(p) Conversion Rights 22

SECTION 6.2. Ownership of Shares 22

SECTION 6.3. Investments in the Trust 23

SECTION 6.4. No Pre-emptive Rights 23

iii

<PAGE> 8

SECTION 6.5. Status of Shares 23

ARTICLE 7 SHAREHOLDERS' VOTING POWERS AND MEETINGS 23

SECTION 7.1. Voting Powers 23

SECTION 7.2. Number of Votes and Manner of Voting; Proxies 24

SECTION 7.3. Meetings 24

SECTION 7.4. Record Dates 24

SECTION 7.5. Quorum and Required Vote 25

SECTION 7.6. Action by Written Consent 25

SECTION 7.7. Inspection of Records 25

SECTION 7.8. Additional Provisions 25

ARTICLE 8 LIMITATION OF LIABILITY; INDEMNIFICATION 25

SECTION 8.1. Trustees, Shareholders, etc. Not Personally
Liable; Notice 25

SECTION 8.2. Trustees' Good Faith Action; Expert Advice; No
Bond or Surety 26

SECTION 8.3. Indemnification of Shareholders 26

SECTION 8.4. Indemnification of Trustees, Officers, etc. 27

<PAGE> 9

SECTION 8.5. Compromise Payment 27

SECTION 8.6. Indemnification Not Exclusive, etc. 28

SECTION 8.7. Liability of Third Persons Dealing with Trustees 28

ARTICLE 9 DURATION; REORGANIZATION; INCORPORATION;

AMENDMENTS 28

SECTION 9.1. Duration of Trust 28

SECTION 9.2. Termination of Trust 28

SECTION 9.3. Reorganization 29

SECTION 9.4. Incorporation 29

<PAGE> 10

SECTION 9.5. Amendments; etc. 29

SECTION 9.6. Filing of Copies of Declaration and Amendments 30

ARTICLE 10 MISCELLANEOUS 30

SECTION 10.1. Notices 30

SECTION 10.2. Governing Law 30

SECTION 10.3. Counterparts 30

SECTION 10.4. Reliance by Third Parties 30

SECTION 10.5. References; Headings 31

SECTION 10.6. Provisions in Conflict With Law or Regulation 31

SECTION 10.7. Use of the Name "Van Kampen American Capital" 31

Signature 32

Acknowledgments 33

<PAGE> 11

FIRST AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

As amended and restated as of August 1, 1995

This CONSENT TO AMENDMENT AND RESTATMENT, made as of this 1st day of
August, 1995, by the Trustees whose signatures are set forth below:

W I T N E S S E T H T H A T:

WHEREAS, the AGREEMENT AND DECLARATION OF TRUST of Van Kampen Merritt
Pennsylvania Tax Free Income Fund, a trust organized as a common law trust
under Pennsylvania law (the "Trust"), was originally executed on January 28,
1987, and

WHEREAS, Article IX, Section 11.3(a) of the Declaration provides certain
procedures for the amendment and restatement thereof; and

WHEREAS, the Trustees have determined that it is desirable and in the
best interests of the Trust and the Shareholders that the Declaration be
amended and restated as herein provided; and

WHEREAS, holders of Shares in excess of a majority of those Shares of the
Trust outstanding as of May 26, 1995, approved the amendment and restatement of
the Declaration at a meeting of shareholders held on July 21, 1995;

<PAGE> 12

NOW, THEREFORE, the undersigned, being at least a Majority of the
Trustees, do hereby consent, pursuant to Section 11.3(c) of the original
Declaration, to the first amendment and restatement of the Agreement and
Declaration of Trust, and hereby declare, for the benefit of all Persons who
shall hereafter become holders of Shares of the Trust (or of any Series
thereof), that the Trustees will hold the sum delivered to the Initial Trustee
upon his execution of the Declaration, and all other and further cash,
securities and other property of every type and description which they may in
any way acquire in their capacity as such Trustees, together with the income
therefrom and the proceeds thereof, IN TRUST NEVERTHELESS, to manage and
dispose of the same for the benefit of the holders from time to time of the
Shares being issued and to be issued hereunder and in the manner and subject to
the provisions hereof, to wit:

<PAGE> 13

ARTICLE I

THE TRUST

SECTION 1.1 Name. The name of the Trust shall be

"VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME TRUST"

and so far as may be practicable, the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever used
in this Agreement and Declaration of Trust, except where the
context otherwise requires) shall refer to the Trustees in their
capacity as Trustees, and not individually or personally, and
shall not refer to the officers, agents or employees of the
Trust or of such Trustees, or to the holders of the Shares of
Beneficial Interest of the Trust or any Series. If the Trustees
determine that the use of such name is not practicable, legal or
convenient at any time or in any jurisdiction, or if the Trust
is required to discontinue the use of such name pursuant to
Section 10.7 hereof, then subject to that Section, the Trustees
may use such other designation, or they may adopt such other
name for the Trust as they deem proper, and the Trust may hold
property and conduct its activities under such designation or
name.

SECTION 1.2. Location. The Trust shall maintain a
registered office in the Commonwealth of Pennsylvania and may have such
other offices or places of business as the Trustees may from
time to time determine to be necessary or expedient.

SECTION 1.3. Nature of Trust. The Trust shall be a trust
with transferable shares under the laws of the Commonwealth of
Pennsylvania as a business trust. The Trust is not intended to
be, shall not be deemed to be, and shall not be treated as, a
general partnership, limited partnership, joint venture,
corporation or joint stock company. The Shareholders shall be
beneficiaries and their relationship to the Trustees shall be
solely in that capacity in accordance with the rights conferred
upon them hereunder.

SECTION 1.4. Definitions. As used in this Agreement and
Declaration of Trust, the following terms shall have the
meanings set forth below unless the context thereof otherwise
requires:

<PAGE> 14

"Accounting Agent" shall have the meaning designated in
Section 5.2(g) hereof.

"Administrator" shall have the meaning designated in
Section 5.2(b) hereof.

"Affiliated Person" shall have the meaning assigned to it
in the 1940 Act.

"By-Laws" shall mean the By-Laws of the Trust, as amended
from time to time.

"Certificate of Designation" shall have the meaning
designated in Section 6.1 hereof.

"Certificate of Termination" shall have the meaning
designated in Section 6.1 hereof.

"Class" or "Classes" shall mean, with respect to any
Series, any unissued Shares of such Series in respect of which
the Trustees shall from time to time fix and determine any
special provisions relating to sales charges, any rights of
redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund
provisions, conversion rights, and conditions under which the
Shareholders of such Class shall have separate voting rights or
no voting rights.

"Commission" shall have the same meaning as in the 1940
Act.

"Contracting Party" shall have the meaning designated in
the preamble to Section 5.2 hereof.

"Conversion Date" shall mean with respect to Shares of any
Class that are convertible automatically into Shares of any
other Class of a Series the date fixed by the Trustees for such
conversion.

"Covered Person" shall have the meaning designated in
Section 8.4 hereof.

<PAGE> 15

"Custodian" shall have the meaning designated in Section
5.2(d) hereof.

"Declaration" and "Declaration of Trust" shall mean this
Agreement and Declaration of Trust and all amendments or
modifications thereof as from time to time in effect. This
Agreement and Declaration of Trust is the "governing instrument"
of the Trust within the meaning of the laws of the Commonwealth
of Pennsylvania. References in this Agreement and Declaration
of Trust to "hereof", "herein" and "hereunder" shall be deemed
to refer to the Declaration of Trust generally, and shall not
be limited to the particular text, Article or Section in which
such words appear.

"Disabling Conduct" shall have the meaning designated in
Section 8.4 hereof.

"Distributor" shall have the meaning designated in Section
5.2(c) hereof.

"Dividend Disbursing Agent" shall have the meaning designated
in Section 5.2(e) hereof.

"General Items" shall have the meaning defined in Section
6.2(a) hereof.

"Initial Trustee" shall have the meaning defined in the
preamble hereto.

"Investment Advisor" shall have the meaning defined in Section
5.2(a) hereof.

"Majority of the Trustees" shall mean a majority of the
Trustees in office at the time in question. At any time at which
there shall be only one (1) Trustee in office, such term shall
mean such Trustee.

"Majority Shareholder Vote," as used with respect to (a)
the election of any Trustee at a meeting of Shareholders, shall
mean the vote for the election of such Trustee of a plurality of
all outstanding Shares of the Trust, without regard to Series,
represented in person or by proxy and entitled to vote thereon,
provided that a quorum (as determined in accordance with the

<PAGE> 16

By-Laws) is present, (b) any other action required or permitted
to be taken by Shareholders, shall mean the vote for such action
of the holders of that majority of all outstanding Shares (or,
where a separate vote of Shares of any particular Series is to
be taken, the affirmative vote of that majority of the
outstanding Shares of that Series) of the Trust which consists
of: (i) a majority of all Shares (or of Shares of the particular
Series) represented in person or by proxy and entitled to vote
on such action at the meeting of Shareholders at which such
action is to be taken, provided that a quorum (as determined in
accordance with the By-Laws) is present; or (ii) if such action
is to be taken by written consent of Shareholders, a majority of
all Shares (or of Shares of the particular Series) issued and
outstanding and entitled to vote on such action; provided that
(iii) as used with respect to any action requiring the
affirmative vote of "a majority of the outstanding voting
securities," as the quoted phrase is defined in the 1940 Act, of
the Trust or of any Series, "Majority Shareholder Vote" means
the vote for such action at a meeting of Shareholders of the
smallest majority of all outstanding Shares of the Trust (or of
Shares of the particular Series) entitled to vote on such action
which satisfies such 1940 Act voting requirement.

"1940 Act" shall mean the provisions of the Investment Company
Act of 1940 and the rules and regulations thereunder, both as
amended from time to time, and any order or orders thereunder
which may from time to time be applicable to the Trust.

"Person" shall mean and include individuals, as well as
corporations, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, banks, trust
companies, land trusts, business trusts or other organizations
established under the laws of any jurisdiction, whether or not
considered to be legal entities, and governments and agencies
and political subdivisions thereof.

"Principal Underwriter" shall have the meaning designated
in Section 5.2(c) hereof.

"Prospectus," as used with respect to the Trust (or the
Shares of a particular Series), shall mean the prospectus
relating to the Trust (or such Series) which constitutes part of
the currently effective Registration Statement of the Trust
under the Securities Act of 1933, as such prospectus may be
amended or supplemented from time to time.

"Securities" shall have the same meaning ascribed to that term
in the Securities Act of 1993.

"Series" shall mean one or more of the series of Shares
authorized by the Trustees to represent the beneficial interest

<PAGE> 17

in one or more separate components of the assets of the Trust
which are now or hereafter established and designated under or
in accordance with the provisions of Article 6 hereof.

"Settlor" shall have the meaning defined in the preamble
hereto.

"Shareholder" shall mean as of any particular time any
Person shown of record at such time on the books of the Trust as
a holder of outstanding Shares of any Series, and shall include
a pledgee into whose name any such Shares are transferred in
pledge.

"Shareholder Servicing Agent" shall have the meaning
designated in Section 5.2(f) hereof.

"Shares" shall mean the transferable units into which the
beneficial interest in the Trust and each Series of the Trust
(as the context may require) shall be divided from time to time,
and includes fractions of Shares as well as whole Shares. All
references herein to "Shares" which are not accompanied by a
reference to any particular Series or Class shall be deemed to
apply to outstanding Shares without regard to Series or Class.

"Single Class Voting," as used with respect to any matter
to be acted upon at a meeting or by written consent of
Shareholders, shall mean a style of voting in which each holder
of one or more Shares shall be entitled to one vote on the
matter in question for each Share standing in his name on the
records of the Trust, irrespective of Series or Class of a
Series, and all outstanding Shares of all Series vote as a
single class.

"Statement of Additional Information," as used with
respect to the Trust (or any Series), shall mean the statement
of additional information relating to the Trust (or such Series)
which constitutes part of the currently effective Registration
Statement of the Trust under the Securities Act of 1933, as such
statement of additional information may be amended or
supplemented from time to time.

"Transfer Agent" shall have the meaning defined in Section
5.2(e) hereof.

"Trust" shall mean the trust named in Section 1.1 hereof.

<PAGE> 18

"Trust Property" shall mean, as of any particular time,
any and all property which shall have been transferred, conveyed
or paid to the Trust or the Trustees, and all interest,
dividends, income, earnings, profits and gains therefrom, and
proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, and which at such time is owned or held by, or
for the account of, the Trust or the Trustees, without regard to
the Series to which such property is allocated.

"Trustees" shall mean, collectively, the Initial Trustee,
so long as he shall continue in office, and all other
individuals who at the time in question have been duly elected
or appointed as Trustees of the Trust in accordance with the
provisions hereof and who have qualified and are then in office.
At any time at which there shall be only one (I) Trustee in
office, such term shall mean such single Trustee.

SECTION 1.5. Real Property to be Converted into Personal
Property. Notwithstanding any other provision hereof, any real
property at any time forming part of the Trust Property shall be
held in trust for sale and conversion into personal property at
such time or times and in such manner and upon such terms as the
Trustees shall approve, but the Trustees shall have power until
the termination of this Trust to postpone such conversion as
long as they in their uncontrolled discretion shall think fit,
and for the purpose of determining the nature of the interest of
the Shareholders therein, all such real property shall at all
times be considered as personal property.

ARTICLE 2

PURPOSE OF THE TRUST

The purpose of the Trust shall be to (a) manage, conduct,
operate and carry on the business of an investment company; (b)
subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise deal in or dispose of any and all sorts
of property, tangible or intangible, including but not limited
to Securities of any type whatsoever, whether equity or
nonequity, of any issuer, evidences of indebtedness of any
person and any other rights, interest, instruments or property
of any sort to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all
such investment of every kind and description, including without
limitation, the right to consent and otherwise act with respect
thereto, with power to designate one or more Persons to exercise
any of said rights, powers and privileges in respect of any of
said investments. The Trustees shall not be limited by any law

<PAGE> 19

limiting the investments which may be made by fiduciaries.

ARTICLE 3

POWERS OF THE TRUSTEES

SECTION 3.1. Powers in General. The Trustees shall have,
without other or further authorization, full, entire, exclusive
and absolute power, control and authority over, and management
of, the business of the Trust and over the Trust Property, to
the same extent as if the Trustees were the sole owners of the
business and property of the Trust in their own right, and with
such powers of delegation as may be permitted by this
Declaration, subject only to such limitations as may be
expressly imposed by this Declaration of Trust or by applicable
law. The enumeration of any specific power or authority herein
shall not be construed as limiting the aforesaid power or
authority or any specific power or authority. Without limiting
the foregoing; they may select, and from time to time change,
the fiscal year of the Trust; they may adopt and use a seal for
the Trust, provided that unless otherwise required by the
Trustees, it shall not be necessary to place the seal upon, and
its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf
of the Trust; they may from time to time in accordance with the
provisions of Section 6.1 hereof establish one or more Series to
which they may allocate such of the Trust Property, subject to
such liabilities, as they shall deem appropriate, each such
Series to be operated by the Trustees as a separate and distinct
investment medium and with separately defined investment
objectives and policies and distinct investment purposes, all as
established by the Trustees, or from time to time changed by
them; they may as they consider appropriate elect and remove
officers and appoint and terminate agents and consultants and
hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee; they may appoint from their own
number, and terminate, any one or more committees consisting of
one or more Trustees, including without implied limitation an
Executive Committee, which may, when the Trustees are not in
session and subject to the 1940 Act, exercise some or all of the
power and authority of the Trustees as the Trustees may
determine; in accordance with Section 5.2 they may employ one or
more Investment Advisers, Administrators and Custodians and may
authorize any such service provider to employ one or more other
service providers and to deposit all or any part of such assets
in a system or systems for the central handling of Securities,
retain Transfer, Dividend Disbursing, Accounting or Shareholder

<PAGE> 20

Servicing Agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more
Distributors, Principal Underwriters or otherwise, set record
dates or times for the determination of Shareholders entitled to
participate in, benefit from or act with respect to various
matters; and in general they may delegate to any officer of the
Trust, to any Committee of the Trustees and to any employee,
Investment Adviser, Administrator, Distributor, Custodian,
Transfer Agent, Dividend Disbursing Agent, or any other agent or
consultant of the Trust, such authority, powers, functions and
duties as they consider desirable or appropriate for the conduct
of the business and affairs of the Trust, including without
implied limitation the power and authority to act in the name of
the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees. Without limiting the
foregoing and to the extent not inconsistent with the 1940 Act
or other applicable law, the Trustees shall have power and
authority:

(a) Investments. To subscribe for, invest in, reinvest
in, purchase or otherwise acquire, hold, pledge, sell, assign,
transfer, exchange, distribute or otherwise deal in or dispose
of any and all sorts of property, tangible or intangible,
including but not limited to Securities of any type whatsoever,
whether equity or nonequity, of any issuer, evidences of
indebtedness of any person and any other rights, interest,
instruments or property of any sort, to exercise any and all
rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and
description, including without limitation the right to consent
and otherwise act with respect thereto, with power to designate
one or more Persons to exercise any of said rights, powers and
privileges in respect of any of said investments, in every case
without being limited by any law limiting the investments which
may be made by fiduciaries;

(b) Disposition of Assets. Upon such terms and conditions
as they deem best, to lend, sell, exchange, mortgage, pledge,
hypothecate, grant security interests in, encumber, negotiate,
convey, transfer or otherwise dispose of, and to trade in, any
and all of the Trust Property, free and clear of all trusts, for
cash or on terms, with or without advertisement, and on such
terms as to payment, security or otherwise, all as they shall
deem necessary or expedient;

(c) Ownership Powers. To vote or give assent, or exercise
any and all other rights, powers and privileges of ownership
with respect to, and to perform any and all duties and
obligations as owners of, any Securities or other property
forming part of the Trust Property, the same as any individual
might do; to exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
Securities, and to receive powers of attorney from, and to
execute and deliver proxies or powers of attorney to, such
Person or Persons as the Trustees shall deem proper, receiving
from or granting to such Person or Persons such power and
discretion with relation to Securities or other property of the

<PAGE> 21

Trust, all as the Trustees shall deem proper;

(d) Form of Holding. To hold any Security or other
property in a form not indicating any trust, whether in bearer,
unregistered or other negotiable form, or in the name of the
Trustees or of the Trust, or of the Series to which such
Securities or property belong, or in the name of a Custodian,
subcustodian or other nominee or nominees, or otherwise, upon
such terms, in such manner or with such powers, as the Trustees
may determine, and with or without indicating any trust or the
interest of the Trustees therein;

(e) Reorganizations etc. To consent to or participate in
any plan for the reorganization, consolidation or merger of any
corporation or issuer, any Security of which is or was held in
the Trust or any Series; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or
issuer, and to pay calls or subscriptions with respect to any
Security forming part of the Trust Property;

(f) Voting Trusts, etc. To join with other holders of any
Securities in acting through a committee, depository, voting
trustee or otherwise, and in that connection to deposit any
Security with, or transfer any Security to, any such committee,
depository or trustee, and to delegate to them such power and
authority with relation to any Security (whether or not so
deposited or transferred) as the Trustees shall deem proper, and
to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depository or trustee as the
Trustees shall deem proper;

(g) Contracts. etc. To enter into, make and perform all
such obligations, contracts, agreements and undertakings of
every kind and description, with any Person or Persons, as the
Trustees shall in their discretion deem expedient in the conduct
of the business of the Trust, for such terms as they shall see
fit, whether or not extending beyond the term of office of the
Trustees, or beyond the possible expiration of the Trust; to
amend, extend, release or cancel any such obligations,
contracts, agreements or understandings; and to execute,
acknowledge, deliver and record all written instruments which
they may deem necessary or expedient in the exercise of their
powers;

(h) Guarantees. etc. To endorse or guarantee the payment
of any notes or other obligations of any Person; to make
contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof; and to mortgage and pledge the
Trust Property or any part thereof to secure any of or all such
obligations;

<PAGE> 22

(i) Partnerships, etc. To enter into joint ventures,
general or limited partnerships and any other combinations or
association;

(j) Insurance. To purchase and pay for entirely out of
Trust Property such insurance as they may deem necessary or
appropriate for the conduct of the business, including, without
limitation, insurance policies insuring the assets of the Trust
and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants, Investment
Advisers, managers, Administrators, Distributors, Principal
Underwriters, or other independent contractors, or any thereof
(or any Person connected therewith), of the Trust, individually,
against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken
or omitted by any such Person in any such capacity, whether or
not the Trust would have the power to indemnify such Person
against such liability;

(k) Pensions, etc. To pay pensions for faithful service,
as deemed appropriate by the Trustees, and to adopt, establish
and carry out pension, profit sharing, share bonus, share
purchase, savings, thrift, deferred compensation and other
retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts
as a means of providing such retirement and other benefits, for
any or all of the Trustees, officers, employees and agents of
the Trust;

(I) Power of Collection and Litigation. To collect, sue
for and receive all sums of money coming due to the Trust, to
employ counsel, and to commence, engage in, prosecute, intervene
in, join, defend, compound, compromise, adjust or abandon, in
the name of the Trust, any and all actions, suits, proceedings,
disputes, claims, controversies, demands or other litigation or
legal proceedings relating to the Trust, the business of the
Trust, the Trust Property, or the Trustees, officers, employees,
agents and other independent contractors of the Trust, in their
capacity as such, at law or in equity, or before any other
bodies or tribunals, and to compromise, arbitrate or otherwise
adjust any dispute to which the Trust may be a party, whether or
not any suit is commenced or any claim shall have been made or
asserted. Except to the extent required for a Delaware business
trust, the Shareholders shall have no power to vote as to
whether or not a court action, legal proceeding or claim should
or should not be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders.

(m) Issuance and Repurchase of Shares. To authorize,
issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in
Shares of any Series, and, subject to Article 6 hereof, to apply
to any such repurchase, redemption, retirement, cancellation or

<PAGE> 23

acquisition of Shares of any Series, any of the assets belonging
to the Series to which such Shares relate, whether constituting
capital or surplus or otherwise, to the full extent now or
hereafter permitted by applicable law; provided that any Shares
belonging to the Trust shall not be voted, directly or
indirectly;

(n) Offices. To have one or more offices, and to carry on
all or any of the operations and business of the Trust, in any
of the States, Districts or Territories of the United States,
and in any and all foreign countries, subject to the laws of
such State, District, Territory or country;

(o) Expenses. To incur and pay any and all such expenses
and charges as they may deem advisable (including without
limitation appropriate fees to themselves as Trustees), and to
pay all such sums of money for which they may be held liable by
way of damages, penalty, fine or otherwise;

(p) Agents, etc. To retain and employ any and all such
servants, agents, employees, attorneys, brokers, Investment
Advisers, accountants, architects, engineers, builders, escrow
agents, depositories, consultants, ancillary trustees,
custodians, agents for collection, insurers, banks and officers,
as they think best for the business of the Trust or any Series,
to supervise and direct the acts of any of the same, and to fix
and pay their compensation and define their duties;

(q) Accounts. To determine, and from time to time change,
the method or form in which the accounts of the Trust or any
Series shall be kept;

(r) Valuation. Subject to the requirements of the 1940
Act, to determine from time to time the value of all or any part
of the Trust Property and of any services, Securities, property
or other consideration to be furnished to or acquired by the
Trust, and from time to time to revalue all or any part of the
Trust Property in accordance with such appraisals or other
information as is, in the Trustees' sole judgment, necessary and
satisfactory;

(s) Indemnification. In addition to the mandatory
indemnification provided for in Article 8 hereof and to the
extent permitted by law, to indemnify or enter into agreements
with respect to indemnification with any Person with whom this
Trust has dealings, including, without limitation, any
independent contractor, to such extent as the Trustees shall
determine; and

<PAGE> 24

(t) General. Subject to the fundamental policies in effect
from time to time with respect to the Trust, to do all such
other acts and things and to conduct, operate, carry on and
engage in such other lawful businesses or business activities as
they shall in their sole and absolute discretion consider to be
incidental to the business of the Trust or any Series as an
investment company, and to exercise all powers which they shall
in their discretion consider necessary, useful or appropriate to
carry on the business of the Trust or any Series, to promote any
of the purposes for which the Trust is formed, whether or not
such things are specifically mentioned herein, in order to
protect or promote the interests of the Trust or any Series, or
otherwise to carry out the provisions of this Declaration.

SECTION 3.2. Borrowings; Financings: Issuance of
Securities. The Trustees have power, subject to the fundamental
policies in effect from time to time with respect to the Trust,
to borrow or in any other manner raise such sum or sums of
money, and to incur such other indebtedness for goods or
services, or for or in connection with the purchase or other
acquisition of property, as they shall deem advisable for the
purposes of the Trust, in any manner and on any terms, and to
evidence the same by negotiable or nonnegotiable Securities
which may mature at any time or times, even beyond the possible
date of termination of the Trust; to issue Securities of any
type for such cash, property, services or other considerations,
and at such time or times and upon such terms, as they may deem
advisable; and to reacquire any such Securities. Any such
Securities of the Trust may, at the discretion of the Trustees,
be made convertible into Shares of any Series, or may evidence
the right to purchase, subscribe for or otherwise acquire Shares
of any Series, at such times and on such terms as the Trustees
may prescribe.

SECTION 3.3. Deposits. Subject to the requirements of the
1940 Act, the Trustees shall have power to deposit any moneys or
Securities included in the Trust Property with any one or more
banks, trust companies or other banking institutions, whether or
not such deposits will draw interest. Such deposits are to be
subject to withdrawal in such manner as the Trustees may
determine, and the Trustees shall have no responsibility for any
loss which may occur by reason of the failure of the bank, trust
company or other banking institution with which any such moneys
or Securities have been deposited, except as provided in Section
8.2 hereof.

SECTION 3.4. Allocations. The Trustees shall have power to
determine whether moneys or other assets received by the Trust
shall be charged or credited to income or capital, or allocated
between income and capital, including the power to amortize or
fail to amortize any part or all of any premium or discount, to
treat any part or all of the profit resulting from the maturity
or sale of any asset, whether purchased at a premium or at a
discount, as income or capital, or to apportion the same between
income and capital, to apportion the sale price of any asset
between income and capital, and to determine in what manner any
expenses or disbursements are to be borne as between income and

<PAGE> 25

capital, whether or not in the absence of the power and
authority conferred by this Section 3.4 such assets would be
regarded as income or as capital or such expense or disbursement
would be charged to income or to capital; to treat any dividend
or other distribution on any investment as income or capital, or
to apportion the same between income and capital; to provide or
fail to provide reserves, including reserves for depreciation,
amortization or obsolescence in respect of any Trust Property in
such amounts and by such methods as they shall determine; to
allocate less than all of the consideration paid for Shares of
any Series to surplus with respect to the Series to which such
Shares relate and to allocate the balance thereof to paid-in
capital of that Series, and to reallocate such amounts from time
to time; all as the Trustees may reasonably deem proper.

SECTION 3.5. Further Powers: Limitations. The Trustees
shall have power to do all such other matters and things, and to
execute all such instruments, as they deem necessary, proper or
desirable in order to carry out, promote or advance the
interests of the Trust, although such matters or things are not
herein specifically mentioned. Any determination as to what is
in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this
Declaration of Trust, the presumption shall be in favor of a
grant of power to the Trustees. The Trustees shall not be
required to obtain any court order to deal with the Trust
Property. The Trustees may limit their right to exercise any of
their powers through express restrictive provisions in the
instruments evidencing or providing the terms for any Securities
of the Trust or in other contractual instruments adopted on
behalf of the Trust.

ARTICLE 4

TRUSTEES AND OFFICERS

SECTION 4.1. Number. Designation, Election. Term, etc.

(a) Initial Trustee. Upon his execution of this
Declaration of Trust or a counterpart hereof or some other
writing in which he accepts such Trusteeship and agrees to the
provisions hereof, the individual whose signature is affixed
hereto as Initial Trustee shall become the Initial Trustee
hereof.

(b) Number. The Trustees serving as such, whether named
above or hereafter becoming Trustees, may increase (to not more
than twenty (20)) or decrease the number of Trustees to a number
other than the number theretofore determined by a written

<PAGE> 26

instrument signed by a Majority of the Trustees (or by an
officer of the Trust pursuant to the vote of a Majority of the
Trustees). No decrease in the number of Trustees shall have the
effect of removing any Trustee from office prior to the
expiration of his term, but the number of Trustees may be
decreased in conjunction with the removal of a Trustee pursuant
to subsection (e) of this Section 4.1.

(c) Election and Term. The Trustees shall be elected by
the Shareholders of the Trust at the first meeting of
Shareholders immediately prior to the initial public offering of
Shares of the Trust, and the term of office of any Trustees in
office before such election shall terminate at the time of such
election. Subject to Section 16(a) of the 1940 Act and to the
preceding sentence of this subsection (c), the Trustees shall
have the power to set and alter the terms of office of the
Trustees, and at any time to lengthen or shorten their own terms
or make their terms of unlimited duration, to elect their own
successors and, pursuant to subsection (f) of this Section 4.1,
to appoint Trustees to fill vacancies; provided that Trustees
shall be elected by a Majority Shareholder Vote at any such time
or times as the Trustees shall determine that such action is
required under Section 16(a) of the 1940 Act or, if not so
required, that such action is advisable; and further provided
that, after the initial election of Trustees by the
Shareholders, the term of office of any incumbent Trustee shall
continue until the termination of this Trust or his earlier
death, resignation, retirement, bankruptcy, adjudicated
incompetency or other incapacity or removal, or if not so
terminated, until the election of such Trustee's successor in
office has become effective in accordance with this subsection
(c).

(d) Resignation and Retirement. Any Trustee may resign his
trust or retire as a Trustee, by a written instrument signed by
him and delivered to the other Trustees or to any officer of the
Trust, and such resignation or retirement shall take effect upon
such delivery or upon such later date as is specified in such
instrument.

(e) Removal. Any Trustee may be removed with or without
cause at any time: (i) by written instrument, signed by at least
two thirds (2/3) of the number of Trustees prior to such
removal, specifying the date upon which such removal shall
become effective; or (ii) by vote of Shareholders holding not
less than two thirds (2/3) of the Shares of each Series then
outstanding, cast in person or by proxy at any meeting called
for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two thirds (2/3) of the
Shares of each Series then outstanding. Upon incapacity or
death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees
shall require in order to effect the purpose of this Paragraph.

(f) Vacancies. Any vacancy or anticipated vacancy

<PAGE> 27

resulting from any reason, including an increase in the number
of Trustees, may (but need not unless required by the 1940 Act)
be filled by a Majority of the Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, through the
appointment in writing of such other individual as such
remaining Trustees in their discretion shall determine; provided
that if there shall be no Trustees in office, such vacancy or
vacancies shall be filled by Majority Shareholders Vote. Any
such appointment or election shall be effective upon such
individual's written acceptance of his appointment as a Trustee
and his agreement to be bound by the provisions of this
Declaration of Trust, except that any such appointment in
anticipation of a vacancy to occur by reason of retirement,
resignation or increase in the number of Trustees to be
effective at a later date shall become effective only at or
after the effective date of said retirement, resignation or
increase in the number of Trustees.

(g) Acceptance of Trusts. Whenever any conditions to the
appointment or election of any individual as a Trustee hereunder
who was not, immediately prior to such appointment or election,
acting as a Trustee shall have been satisfied, such individual
shall become a Trustee and the Trust estate shall vest in the
new Trustee, together with the continuing Trustees, without any
further act or conveyance. Such new Trustee shall accept such
appointment or election in writing and agree in such writing to
be bound by the provisions hereof, but the execution of such
writing shall not be requisite to the effectiveness of the
appointment or election of a new Trustee.

(h) Effect of Death. Resignation, etc. No vacancy, whether
resulting from the death, resignation, retirement, bankruptcy,
adjudicated incompetency, incapacity, or removal of any Trustee,
an increase in the number of Trustees or otherwise, shall
operate to annul or terminate the Trust hereunder or to revoke
or terminate any existing agency or contract created or entered
into pursuant to the terms of this Declaration of Trust. Until
such vacancy is filled as provided in this Section 4.1, the
Trustees in office (if any), regardless of their number, shall
have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration.

(i) Convevance. In the event of the resignation or
removal of a Trustee or his otherwise ceasing to be a Trustee,
such former Trustee or his legal representative shall, upon
request of the continuing Trustees, execute and deliver such
documents as may be required for the purpose of consummating or
evidencing the conveyance to the Trust or the remaining Trustees
of any Trust Property held in such former Trustee's name, but
the execution and delivery of such documents shall not be
requisite to the vesting of title to the Trust Property in the
remaining Trustees, as provided in subsection (g) of this
Section 4.1 and in Section 4.13 hereof.

(j) No Accounting. Except to the extent required by the

<PAGE> 28

1940 Act or under circumstances which would justify his removal
for cause, no Person ceasing to be a Trustee (nor the estate of
any such Person) shall be required to make an accounting to the
Shareholders or remaining Trustees upon such cessation.

SECTION 4.2. Trustees' Meetings: Participation by
Telephone. etc. Annual and special meetings may be held from
time to time, in each case, upon the call of such officers as
may be thereunto authorized by the By-Laws or vote of the
Trustees, or by any three (3) Trustees, or pursuant to a vote of
the Trustees adopted at a duly constituted meeting of the
Trustees, and upon such notice as shall be provided in the
By-Laws. Any such meeting may be held within or without the
state of Delaware. The Trustees may act with or without a
meeting, and a written consent to any matter, signed by a
Majority of the Trustees, shall be equivalent to action duly
taken at a meeting of the Trustees, duly called and held. Except
as otherwise provided by the 1940 Act or other applicable law,
or by this Declaration of Trust or the By-Laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at
least a Majority of the Trustees, being present), within or
without Delaware. If authorized by the By-Laws, all or any one
or more Trustees may participate in a meeting of the Trustees or
any Committee thereof by means of conference telephone or
similar means of communication by means of which all Persons
participating in the meeting can hear each other, and
participation in a meeting pursuant to such means of
communication shall constitute presence in person at such
meeting. The minutes of any meeting thus held shall be prepared
in the same manner as a meeting at which all participants were
present in person.

SECTION 4.3. Committees; Delegation. The Trustees shall
have power, consistent with their ultimate responsibility to
supervise the affairs of the Trust, to delegate from time to
time to one or more other Committees, or to any single Trustee,
the doing of such things and the execution of such deeds or
other instruments, either in the name of the Trust or the names
of the Trustees or as their attorney or attorneys in fact, or
otherwise as the Trustees may from time to time deem expedient,
and any agreement, deed, mortgage, lease or other instrument or
writing executed by the Trustee or Trustees or other Person to
whom such delegation was made shall be valid and binding upon
the Trustees and upon the Trust.

SECTION 4.4. Officers. The Trustees shall annually elect
such officers or agents, who shall have such powers, duties and
responsibilities as the Trustees may deem to be advisable, and
as they shall specify by resolution or in the By-Laws. Except as
may be provided in the By-Laws, any officer elected by the
Trustees may be removed at any time with or without cause. Any
two (2) or more offices may be held by the same individual.

SECTION 4.5. Compensation of Trustees and Officers. The

<PAGE> 29

Trustees shall fix the compensation of all officers and
Trustees. Without limiting the generality of any of the
provisions hereof, the Trustees shall be entitled to receive
reasonable compensation for their general services as such, and
to fix the amount of such compensation, and to pay themselves or
any one or more of themselves such compensation for special
services, including legal, accounting, or other professional
services, as they in good faith may deem reasonable. No Trustee
or officer resigning (except where a right to receive
compensation for a definite future period shall be expressly
provided in a written agreement with the Trust, duly approved by
the Trustees) and no Trustee or officer removed shall have any
right to any compensation as such Trustee or officer for any
period following his resignation or removal, or any right to
damages on account of his removal, whether his compensation be
by the month, or the year or otherwise.

SECTION 4.6. Ownership of Shares and Securities of the
Trust. Any Trustee, and any officer, employee or agent of the
Trust, and any organization in which any such Person is
interested, may acquire, own, hold and dispose of Shares of any
Series and other Securities of the Trust for his or its
individual account, and may exercise all rights of a holder of
such Shares or Securities to the same extent and in the same
manner as if such Person were not such a Trustee, officer,
employee or agent of the Trust; subject, in the case of Trustees
and officers, to the same limitations as directors or officers
(as the case may be) of a Delaware business corporation; and the
Trust may issue and sell or cause to be issued and sold and may
purchase any such Shares or other Securities from any such
Person or any such organization, subject only to the general
limitations, restrictions or other provisions applicable to the
sale or purchase of Shares of such Series or other Securities of
the Trust generally.

SECTION 4.7. Right of Trustees and Officers to Own
Property or to Engage in Business; Authority of Trustees to
Permit Others to Do Likewise. The Trustees, in their capacity as
Trustees, and (unless otherwise specifically directed by vote of
the Trustees) the officers of the Trust in their capacity as
such, shall not be required to devote their entire time to the
business and affairs of the Trust. Except as otherwise
specifically provided by vote of the Trustees, or by agreement
in any particular case, any Trustee or officer of the Trust may
acquire, own, hold and dispose of, for his own individual
account, any property, and acquire, own, hold, carry on and
dispose of, for his own individual account, any business entity
or business activity, whether similar or dissimilar to any
property or business entity or business activity invested in or
carried on by the Trust, and without first offering the same as
an investment opportunity to the Trust, and may exercise all
rights in respect thereof as if he were not a Trustee or officer
of the Trust. The Trustees shall also have power, generally or
in specific cases, to permit employees or agents of the Trust to
have the same rights (or lesser rights) to acquire, hold, own
and dispose of property and businesses, to carry on businesses,
and to accept investment opportunities without offering them to
the Trust, as the Trustees have by virtue of this Section 4.7.

<PAGE> 30

SECTION 4.8. Reliance on Experts. The Trustees and
officers may consult with counsel, engineers, brokers,
appraisers, auctioneers, accountants, investment bankers,
securities analysts or other Persons (any of which may be a firm
in which one or more of the Trustees or officers is or are
members or otherwise interested) whose profession gives
authority to a statement made by them on the subject in
question, and who are reasonably deemed by the Trustees or
officers in question to be competent, and the advice or opinion
of such Persons shall be full and complete personal protection
to all of the Trustees and officers in respect of any action
taken or suffered by them in good faith and in reliance on or in
accordance with such advice or opinion. In discharging their
duties, Trustees and officers, when acting in good faith, may
rely upon financial statements of the Trust represented to them
to be correct by any officer of the Trust having charge of its
books of account, or stated in a written report by an
independent certified public accountant fairly to present the
financial position of the Trust. The Trustees and officers may
rely, and shall be personally protected in acting, upon any
instrument or other document believed by them to be genuine.

SECTION 4.9. Surety Bonds. No Trustee, officer, employee
or agent of the Trust shall, as such, be obligated to give any
bond or surety or other security for the performance of any of
his duties, unless required by applicable law or regulation, or
unless the Trustees shall otherwise determine in any particular
case.

SECTION 4.10. Apparent Authority of Trustees and Officers.
No purchaser, lender, transfer agent or other Person dealing
with the Trustees or any officer of the Trust shall be bound to
make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by such officer, or to
make inquiry concerning or be liable for the application of
money or property paid, loaned or delivered to or on the order
of the Trustees or of such officer.

SECTION 4.11. Other Relationships Not Prohibited. The fact
that:

(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, adviser, principal underwriter or distributor
or agent of or for any Contracting Party (as defined in Section
5.2 hereof), or of or for any parent or affiliate of any
Contracting Party, or that the Contracting Party or any parent
or affiliate thereof is a Shareholder or has an interest in the
Trust or any Series, or that

(ii) any Contracting Party may have a contract providing
for the rendering of any similar services to one or more other

<PAGE> 31

corporations, trusts, associations, partnerships, limited
partnerships or other organizations, or have other business or
interests, shall not affect the validity of any contract for the
performance and assumption of services, duties and
responsibilities to, for or of the Trust and/or the Trustees or
disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or
accountability to the Trust or to the holders of Shares of any
Series; provided that, in the case of any relationship or
interest referred to in the preceding clause (i) on the part of
any Trustee or officer of the Trust, either (x) the material
facts as to such relationship or interest have been disclosed to
or are known by the Trustees not having any such relationship or
interest and the contract involved is approved in good faith by
a majority of such Trustees not having any such relationship or
interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (y) the material
facts as to such relationship or interest and as to the contract
have been disclosed to or are known by the Shareholders entitled
to vote thereon and the contract involved is specifically
approved in good faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as of the time
it is authorized, approved or ratified by the Trustees or by the
Shareholders.

SECTION 4.12. Payment of Trust Expenses. The Trustees are
authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out
of income, and according to any allocation to a particular
Series and Class made by them pursuant to Section 6.1(f) hereof,
all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the business and affairs of the Trust
or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees,
Investment Adviser, Administrator, Distributor, Principal
Underwriter, auditor, counsel, Custodian, Transfer Agent,
Dividend Disbursing Agent, Accounting Agent, Shareholder
Servicing Agent, and such other agents, consultants, and
independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.

SECTION 4.13. Ownership of the Trust Property. Legal title
to all the Trust Property shall be vested in the Trustees as
joint tenants, except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the
Trust, or of any particular Series, or in the name of any other
Person as nominee, on such terms as the Trustees may determine;
provided that the interest of the Trust and of the respective
Series therein is appropriately protected. The right, title and
interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee.
Upon the termination of the term of office of a Trustee as
provided in Section 4.1(c), (d) or (e) hereof, such Trustee
shall automatically cease to have any right, title or interest
in any of the Trust Property, and the right, title and interest
of such Trustee in the Trust Property shall vest automatically
in the remaining Trustees. Such vesting and cessation of title

<PAGE> 32

shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to Section 4.1(i) hereof.

SECTION 4.14. By-Laws. The Trustees may adopt and from
time to time amend or repeal By-Laws for the conduct of the
business of the Trust.

ARTICLE 5

DELEGATION OF MANAGERIAL RESPONSIBILITIES

SECTION 5.1. Appointment; Action by Less than All
Trustees. The Trustees shall be responsible for the general
operating policy of the Trust and for the general supervision of
the business of the Trust conducted by officers, agents,
employees or advisers of the Trust or by independent
contractors, but the Trustees shall not be required personally
to conduct all the business of the Trust and, consistent with
their ultimate responsibility as stated herein, the Trustees may
appoint, employ or contract with one or more officers, employees
and agents to conduct, manage and/or supervise the operations of
the Trust, and may grant or delegate such authority to such
officers, employees and/or agents as the Trustees may, in their
sole discretion, deem to be necessary or desirable, without
regard to whether such authority is normally granted or
delegated by trustees. With respect to those matters of the
operation and business of the Trust which they shall elect to
conduct themselves, except as otherwise provided by this
Declaration or the By-Laws, if any, the Trustees may authorize
any single Trustee or defined group of Trustees, or any
committee consisting of a number of Trustees less than the whole
number of Trustees then in office without specification of the
particular Trustees required to be included therein, to act for
and to bind the Trust, to the same extent as the whole number of
Trustees could do, either with respect to one or more particular
matters or classes of matters, or generally.

SECTION 5.2. Certain Contracts. Subject to compliance with
the provisions of the 1940 Act, but notwithstanding any
limitations of present and future law or custom in regard to
delegation of powers by trustees generally, the Trustees may, at
any time and from time to time in their discretion and without
limiting the generality of their powers and authority otherwise
set forth herein, enter into one or more contracts with any one
or more corporations, trusts, associations, partnerships,
limited partnerships or other types of organizations, or
individuals ("Contracting Party"), to provide for the
performance and assumption of some or all of the following
services, duties and responsibilities to, for or on behalf of
the Trust and/or any Series, and/or the Trustees, and to provide
for the performance and assumption of such other services,

<PAGE> 33

duties and responsibilities in addition to those set forth
below, as the Trustees may deem appropriate:

(a) Advisory. An investment advisory or management
agreement whereby the agent shall undertake to furnish each
Series of the Trust such management, investment advisory or
supervisory, statistical and research facilities and services,
and such other facilities and services, if any, as the Trustees
shall from time to time consider desirable, all upon such terms
and conditions as the Trustees may in their discretion determine
to be not inconsistent with this Declaration, the applicable
provisions of the 1940 Act or any applicable provisions of the
By-Laws (any such agent being herein referred to as an
"Investment Adviser"). To the extent required by the 1940 Act,
any such advisory or management agreement and any amendment
thereto shall be subject to approval by a Majority Shareholder
Vote at a meeting of the Shareholders of the applicable Series
of the Trust. Notwithstanding any provisions of this
Declaration, the Trustees may authorize the Investment Adviser
(subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges of securities of the Trust on behalf
of the Trustees or may authorize any officer or employee of the
Trust or any Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of the Investment Adviser
(and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have
been authorized by all of the Trustees. The Trustees may, in
their sole discretion, call a meeting of Shareholders in order
to submit to a vote of Shareholders of the applicable Series of
Trust at such meeting the approval of continuance of any such
investment advisory or management agreement.

(b) Administration. An agreement whereby the agent,
subject to the general supervision of the Trustees and in
conformity with any policies of the Trustees with respect to the
operations of the Trust and each Series, will supervise all or
any part of the operations of the Trust and each Series, and
will provide all or any part of the administrative and clerical
personnel, office space and office equipment and services
appropriate for the efficient administration and operations of
the Trust and each Series (any such agent being herein referred
to as an "Administrator").

(c) Underwriting. An agreement providing for the sale of
Shares of any one or more Series to net the Trust not less than
the net asset value per Share (as described in Section 6.2(l)
hereof) and pursuant to which the Trust may appoint the other
party to such agreement as its principal underwriter or sales
agent for the distribution of such Shares. The agreement shall
contain such terms and conditions as the Trustees may in their
discretion determine to be not inconsistent with this
Declaration, the applicable provisions of the 1940 Act and any
applicable provisions of the By-Laws (any such agent being
herein referred to as a "Distributor" or a "Principal
Underwriter," as the case may be).

<PAGE> 34

(d) Custodian. The appointment of an agent meeting the
requirements for a custodian for the assets of Investment
Companies contained in the 1940 Act as custodian of the
Securities and cash of the Trust and of each Series and of the
accounting records in connection therewith (any such agent being
herein referred to as a "Custodian").

(e) Transfer and Dividend Disbursing Agent. An agreement
with an agent to maintain records of the ownership of
outstanding Shares, the issuance and redemption and the transfer
thereof (any such agent being herein referred to as a "Transfer
Agent"), and to disburse any dividends declared by the Trustees
and in accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest any such
dividends (any such agent being herein referred to as a
"Dividend Disbursing Agent").

(f) Shareholder Servicing. An agreement with an agent to
provide service with respect to the relationship of the Trust
and its Shareholders, records with respect to Shareholders and
their Shares, and similar matters (any such agent being herein
referred to as a "Shareholder Servicing Agent").

(g) Accounting. An agreement with an agent to handle all
or any part of the accounting responsibilities, whether with
respect to the Trust's properties, Shareholders or otherwise
(any such agent being herein referred to as an "Accounting
Agent").

In addition, the Trustees may from time to time cause the Trust
or any Series thereof to enter into agreements with respect to
such other services and upon such other terms and conditions as
they may deem necessary, appropriate or desirable. The same
Person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust
and/or the Trustees, and the contracts with respect thereto may
contain such terms interpretive of or in addition to the
delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent
with the 1940 Act relating to the standard of duty of and the
rights to indemnification of the Contracting Party and others,
as the Trustees may determine. Nothing herein shall preclude,
prevent or limit the Trust or a Contracting Party from entering
into subcontractual arrangements relative to any of the matters
referred to in subsections (a) through (g) of this Section 5.2.

Section 5.3. Distribution Arrangements. Subject to
compliance with the 1940 Act, the Trustees may adopt and amend
or repeal from time to time and implement one or more plans of
distribution pursuant to Rule 12b-1 of the 1940 Act which
plan(s) will provide for the payment of specified marketing,
distribution and shareholder relations expenses of the Trust and

<PAGE> 35

any or all Series and their agents and the agents of such agents.

Section 5.4. Service Arrangements. Subject to
compliance with the 1940 Act, the Trustees may adopt and amend
or repeal from time to time and implement one or more service
plans which plans will provide for the payment of ongoing
services to holders of the shares of such Trust or any Series
thereof and in connection with the maintanence of such
shareholders' accounts.

ARTICLE 6

SERIES AND SHARES

SECTION 6.1. Description of Series and Shares.

(a) General. The beneficial interest in the Trust shall be
divided into Shares (either full or fractional) having $ 0.01
par value per Share, of which an unlimited number may be issued.
The Trustees shall have the authority from time to time to
establish and designate one or more separate, distinct and
independent Series of Shares (each of which Series, including
without limitation each Series authorized in Section 6.2 hereof,
shall represent interests only in the asset attributed by the
Trustees to such Series), and to authorize separate Classes of
Shares of any such Series, as they deem necessary or desirable.
All Shares shall be of one class, provided that the Trustees
shall have the power to classify or reclassify any unissued
Shares of any Series into any number of additional Classes of
such Series as set forth in Section 6.2.

(b) Establishment. etc. of Series; Authorization of
Shares. The establishment and designation of any Series and the
authorization of the Shares thereof shall be effective upon the
execution by a Majority of the Trustees (or by an officer of the
Trust pursuant to the vote of a Majority of the Trustees) of an
instrument setting forth such establishment and designation and
the relative rights and preferences of the Shares of such Series
and the manner in which the same may be amended (a "Certificate
of Designation"), and may provide that the number of Shares of
such Series which may be issued is unlimited, or may limit the
number issuable. At any time that there are no Shares
outstanding of any particular Series previously established and
designated, the Trustees may by an instrument executed by a
Majority of the Trustees (or by an officer of the Trust pursuant
to the vote of a Majority of the Trustees) terminate such Series
and the establishment and designation thereof and the
authorization of its Shares (a "Certificate of Termination").
Each Certificate of Designation, Certificate of Termination and

<PAGE> 36

any instrument amending a Certificate of Designation shall have
the status of an amendment to this Declaration of Trust.

(c) Character of Separate Series and Shares Thereof. Each
Series established hereunder shall represent beneficial
interests in a separate component of the assets of the Trust.
Holders of Shares of a Series shall be considered Shareholders
of such Series, but such Shareholders shall also be considered
Shareholders of the Trust for purposes of receiving reports and
notices and, except as otherwise provided herein or in the
Certificate of Designation of a particular Series, or as
required by the 1940 Act or other applicable law, the right to
vote, all without distinction by Series. The Trustees shall have
exclusive power without the requirement of Shareholder approval
to establish and designate such separate and distinct Series,
and to fix and determine the relative rights and preferences as
between the shares of the respective Series, and as between the
Classes of any Series, as to rights of redemption and the price,
terms and manner of redemption, special and relative rights as
to dividends and other distributions and on liquidation, sinking
or purchase fund provisions, conversion rights, and conditions
under which the Shareholders of the several Series or the
several Classes of any Series of Shares shall have separate
voting rights or no voting rights. Except as otherwise provided
as to a particular Series herein, or in the Certificate of
Designation therefor, the Trustees shall have all the rights and
powers, and be subject to all the duties and obligations, with
respect to each such Series and the assets and affairs thereof
as they have under this Declaration with respect to the Trust
and the Trust Property in general. Separate and distinct
records shall be maintained for each Series of Shares and the
assets and liabilities attributable thereto.

(d) Consideration for Shares. The Trustees may issue
Shares of any Series for such consideration (which may include
property subject to, or acquired in connection with the
assumption of, liabilities) and on such terms as they may
determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined
by the Trustees shall be fully paid and nonassessable (but may
be subject to mandatory contribution back to the Trust as
provided in Section 6.1(l) hereof. The Trustees may classify or
reclassify any unissued Shares, or any Shares of any Series
previously issued and reacquired by the Trust, into Shares of
one or more other Series that may be established and designated
from time to time.

(e) Assets Belonging to Series. Any portion of the Trust
Property allocated to a particular Series, and all consideration
received by the Trust for the issue or sale of Shares of such
Series, together with all assets in which such consideration is
invested or reinvested, all interest, dividends, income,
earnings, profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same

<PAGE> 37

may be, shall be held by the Trustees in trust for the benefit
of the holders of Shares of that Series and shall irrevocably
belong to that Series for all purposes, and shall be so recorded
upon the books of account of the Trust, and the Shareholders of
such Series shall not have, and shall be conclusively deemed to
have waived, any claims to the assets of any Series of which
they are not Shareholders. Such consideration, assets, interest,
dividends, income, earnings, profits, gains and proceeds,
together with any General Items allocated to that Series as
provided in the following sentence, are herein referred to
collectively as assets "belonging to" that Series. In the event
that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series
(collectively, "General Items"), the Trustees shall allocate
such General Items to and among any one or more of the Series
established and designated from time to time in such manner and
on such basis as they, in their sole discretion, deem fair and
equitable; and any General Items so allocated to a particular
Series shall belong to and be part of the assets belonging to
that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for
all purposes.

(f) Liabilities of Series. The assets belonging to each
particular Series shall be charged with the liabilities in
respect of that Series and all expenses, costs, charges and
reserves attributable to that Series, and any general
liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as pertaining to any
particular Series shall be allocated and charged by the Trustees
to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable.
The indebtedness, expenses, costs, charges and reserves
allocated and so charged to a particular Series are herein
referred to as "liabilities of" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders
of all Series for all purposes. Any creditor of any Series may
look only to the assets belonging to that Series to satisfy such
creditor's debt.

(g) Dividends. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise pursuant
to a standing resolution or resolutions adopted only once or
with such frequency as the Trustees may determine, to the
Shareholders of that Series, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of
the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities of
that Series. All dividends and distributions on Shares of a
particular Series shall be distributed pro rata to the
Shareholders of that Series in proportion to the number of such
Shares held by such holders at the date and time of record
established for the payment of such dividends or distributions,
except that the dividends and distributions of investment income
and capital gains with respect to each Class of Shares of a

<PAGE> 38

particular Series shall be in such amount as may be declared
from time to time by the Trustees, and such dividends and
distributions may vary as between such Classes to reflect
differing allocations of the expenses of the Series between the
Shareholders of such several Classes and any resultant
differences between the net asset value of such several Classes
to such extent and for such purposes as the Trustees may deem
appropriate and further except that, in connection with any
dividend or distribution program or procedure, the Trustees may
determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established
by the Trustees under such program or procedure, or that
dividends or distributions shall be payable on Shares which have
been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which
have not yet been paid to such Shareholder. Such dividends and
distributions may be made in cash, property or Shares of any
Class of that Series or a combination thereof as determined by
the Trustees, or pursuant to any program that the Trustees may
have in effect at the time for the election by each Shareholder
of the mode of the making of such dividend or distribution to
that Shareholder. Any such dividend or distribution paid in
Shares will be paid at the net asset value thereof as determined
in accordance with subsection (l) of this Section 6.1.

(h) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Series of
which Shares are outstanding shall be entitled to receive, when
and as declared by the Trustees, the excess of the assets
belonging to that Series over the liabilities of such Series.
The assets so distributable to the Shareholders of any
particular Series shall be distributed among such Shareholders
in proportion to the number of Shares of that Series held by
them and recorded on the books of the Trust. The liquidation of
any particular Series may be authorized by vote of a Majority of
the Trustees, subject to the affirmative vote of "a majority of
the outstanding voting securities" of that Series, as the quoted
phrase is defined in the 1940 Act, determined in accordance with
clause (iii) of the definition of "Majority Shareholder Vote" in
Section 1.4 hereof.

(i) Voting. The Shareholders shall have the voting rights
set forth in or determined under Article 7 hereof.

(j) Redemption by Shareholder. Each holder of Shares of a
particular Series shall have the right at such times as may be
permitted by the Trust, but no less frequently than required by
the 1940 Act, to require the Series to redeem all or any part of
his Shares of that Series at a redemption price equal to the net
asset value per Share of that Series next determined in
accordance with subsection (l) of this Section 6.1 after the
Shares are properly tendered for redemption; provided, that the
Trustees may from time to time, in their discretion, determine
and impose a fee for such redemption and that the proceeds of
the redemption of Shares (including a fractional Share) of any
Class of a particular Series shall be reduced by the amount of

<PAGE> 39

any applicable contingent deferred sales charge or other sales
charge, if any, payable on such redemption to the distributor of
Shares of such Class pursuant to the terms of the initial
issuance of the Shares of such Class (to the extent consistent
with the 1940 Act or regulations or exemptions thereunder) and
the Trust shall promptly pay to such distributor the amount of
such deferred sales charge. Payment of the redemption price
shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or
undesirable, the Trust may make payment wholly or partly in
Securities or other assets belonging to such Series at the value
of such Securities or assets used in such determination of net
asset value. Notwithstanding the foregoing, the Trust may
postpone payment of the redemption price and may suspend the
right of the holders of Shares of any Series to require the
Trust to redeem Shares of that Series during any period or at
any time when and to the extent permissible under the 1940 Act.

(k) Redemption at the Option of the Trust. The Trustees
shall have the power to redeem Shares of any Series at a
redemption price determined in accordance with Section 6.1(j),
if at any time (i) the total investment in such account does not
have a value of at least such minimum amount as may be specified
in the Prospectus for such Series from time to time (ii) the
number of Shares held in such account is equal to or in excess
of a specified percentage of Shares of the Trust or any Series
as set forth from time to time in the applicable Prospectus. In
the event the Trustees determine to exercise their power to
redeem Shares provided in this Section 6.1(k), the Shareholder
shall be notified that the value of his account is less than the
applicable minimum amount and shall be allowed 30 days to make
an appropriate investment before redemption is processed.

(I) Net Asset Value. The net asset value per Share of any
Series at any time shall be the quotient obtained by dividing
the value of the net assets of such Series at such time (being
the current value of the assets belonging to such Series, less
its then existing liabilities) by the total number of Shares of
that Series then outstanding, all determined in accordance with
the methods and procedures, including without limitation those
with respect to rounding, established by the Trustees from time
to time in accordance with the requirements of the 1940 Act. The
net asset value of the several Classes of a particular Series
shall be separately computed, and may vary from one another. The
Trustees shall establish procedures for the allocation of
investment income or capital gains and expenses and liabilities
of a particular Series between the several Classes of such
Series. The Trustees may determine to maintain the net asset
value per Share of any Series at a designated constant dollar
amount and in connection therewith may adopt procedures not
inconsistent with the 1940 Act for the continuing declaration of
income attributable to that Series as dividends payable in
additional Shares of that Series at the designated constant
dollar amount and for the handling of any losses attributable to
that Series. Such procedures may provide that in the event of
any loss each Shareholder shall be deemed to have contributed to
the shares of beneficial interest account of that Series his pro
rata portion of the total number of Shares required to be

<PAGE> 40

canceled in order to permit the net asset value per Share of
that Series to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Trust
shall be deemed to have expressly agreed, by his investment in
any Series with respect to which the Trustees shall have adopted
any such procedure, to make the contribution referred to in the
preceding sentence in the event of any such loss.

(m) Transfer. All Shares of each particular Series shall
be transferable, but transfers of Shares of a particular Series
will be recorded on the Share transfer records of the Trust
applicable to that Series only at such times as Shareholders
shall have the right to require the Trust to redeem Shares of
that Series and at such other times as may be permitted by the
Trustees.

(n) Equality. All Shares of each particular Series shall
represent an equal proportionate interest in the assets
belonging to that Series (subject to the liabilities of that
Series), and each Share of any particular Series shall be equal
to each other Share thereof; but the provisions of this sentence
shall not restrict any distinctions between the several Classes
of a Series permissible under this Section 6.1 or under Section
7.1 hereof nor any distinctions permissible under subsection
(g) of this Section 6.1 that may exist with respect to dividends
and distributions on Shares of the same Series. The Trustees may
from time to time divide or combine the Shares of any class of
particular Series into a greater or lesser number of Shares of
that class of a Series without thereby changing the
proportionate beneficial interest in the assets belonging to
that Series or in any way affecting the rights of the holders of
Shares of any other Series.

(o) Rights of Fractional Shares. Any fractional Share of
any Series shall carry proportionately all the rights and
obligations of a whole Share of that Series, including rights
and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the
Trust or of the Series to which they pertain.

(p) Conversion Rights. (i) Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the
authority to provide that holders of Shares of any Series shall
have the right to convert said Shares into Shares of one or more
other Series, that holders of any Class of a Series of Shares
shall have the right to convert said Shares of such Class into
Shares of one or more other Classes of such Series, and that
Shares of any Class of a Series shall be automatically converted
into Shares of another Class of such Series, in each case in
accordance with such requirements and procedures as the Trustees
may establish.

(ii) The number of Shares of into which a convertible Share

<PAGE> 41

shall convert shall equal the number (including for this purpose
fractions of a Share) obtained by dividing the net asset value
per Share for purposes of sales and redemptions of the
converting Share on the Conversion Date by the net asset value
per Share for purposes of sales and redemptions of the Class of
Shares into which it is converting on the Conversion Date.

(iii) On the Conversion Date, the Share converting into
another share will cease to accrue dividends and will no longer
be deemed outstanding and the rights of the holders thereof
(except the right to receive the number of target Shares into
which the converting Shares have been converted and declared but
unpaid dividends to the Conversion Date) will cease.
Certificates representing Shares resulting from the conversion
need not be issued until certificates representing Shares
converted, if issued, have been received by the Trust or its
agent duly endorsed for transfer.

(vi) The Trust will appropriately reflect the conversion
of Shares of one Class of a Series into Shares of another Class
of such Series on the first periodic statements of account sent
to Shareholders of record affected which provide account
information with respect to a reporting period which includes
the date such conversion occured.

SECTION 6.2. Ownership of Shares. The ownership of
Shares shall be recorded on the books of the Trust or of a
Transfer Agent or similar agent for the Trust, which books shall
be maintained separately for the Shares of each Series that has
been authorized. Certificates evidencing the ownership of Shares
need not be issued except as the Trustees may otherwise
determine from time to time, and the Trustees shall have power
to call outstanding Share certificates and to replace them with
book entries. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar
matters. The record books of the Trust as kept by the Trust or
any Transfer Agent or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders and as to the
number of Shares of each Series held from time to time by each
such Shareholder.

The holders of Shares of each Series shall upon demand
disclose to the Trustees in writing such information with
respect to their direct and indirect ownership of Shares of such
Series as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code, or to comply with the
requirements of any other authority.

SECTION 6.3. Investments in the Trust. The Trustees may
accept investments in any Series of the Trust from such Persons
and on such terms and for such consideration, not inconsistent
with the provisions of the 1940 Act, as they from time to time

<PAGE> 42

authorize. The Trustees may authorize any Distributor, Principal
Underwriter, Custodian, Transfer Agent or other Person to accept
orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares,
whether or not conforming to such authorized terms.

SECTION 6.4. No Preemptive Rights. No Shareholder, by
virtue of holding Shares of any Series, shall have any
preemptive or other right to subscribe to any additional Shares
of that Series, or to any shares of any other Series, or any
other Securities issued by the Trust.

SECTION 6.5. Status of Shares. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. Shares shall be deemed to be personal
property, giving only the rights provided herein. Ownership of
Shares shall not entitle the Shareholder to any title in or to
the whole or any part of the Trust Property or right to call for
a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders
partners. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust or any
Series, nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.

ARTICLE 7

SHAREHOLDERS' VOTING POWERS AND MEETINGS

SECTION 7.1. Voting Powers. The Shareholders shall have
power to vote only (i) for the election or removal of Trustees
as provided in Sections 4.1(c) and (e) hereof, (ii) with respect
to the approval or termination in accordance with the 1940 Act
of any contract with a Contracting Party as provided in Section
5.2 hereof as to which Shareholder approval is required by the
1940 Act, (iii) with respect to any termination or
reorganization of the Trust or any Series to the extent and as
provided in Sections 9.2, 9.3 and 9.4 hereof, (iv) with respect
to any amendment of this Declaration of Trust to the extent and
as provided in Section 9.5 hereof, (v) to the same extent as the
stockholders of a Delaware business corporation as to whether or
not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on
behalf of the Trust or any Series, or the Shareholders of any of
them (provided. however, that a Shareholder of a particular
Series shall not in any event be entitled to maintain a
derivative or class action on behalf of any other Series or the
Shareholders thereof), and (vi) with respect to such additional

<PAGE> 43

matters relating to the Trust as may be required by the 1940
Act, this Declaration of Trust, the By-Laws or any registration
of the Trust with the Commission (or any successor agency) or
any State, or as the Trustees may consider necessary or
desirable. If and to the extent that the Trustees shall
determine that such action is required by law or by this
Declaration, they shall cause each matter required or permitted
to be voted upon at a meeting or by written consent of
Shareholders to be submitted to a separate vote of the
outstanding Shares of each Series entitled to vote thereon;
provided, that (i) when expressly required by the 1940 Act or by
other law, actions of Shareholders shall be taken by Single
Class Voting of all outstanding Shares whose holders are
entitled to vote thereon; and (ii) when the Trustees determine
that any matter to be submitted to a vote of Shareholders
affects only the rights or interests of Shareholders of one or
more but not all Series or of one or more but not all Classes of
a single Series (including without limitation any distribution
plan pursuant to Rule 12b-1 of the 1940 Act applicable to such
Class), then only the Shareholders of the Series or Classes so
affected shall be entitled to vote thereon. Any matter required
to be submitted to shareholders and affecting one or more Series
shall require separate approval by the required vote of
Shareholders of each affected Series; provided, however, that to
the extent required by the 1940 Act, there shall be no separate
Series votes on the election or removal of Trustees, the
selection of auditors for the Trust and its Series or approval
of any agreement or contract entered into by the Trust or any
Series. Shareholders of a particular Series shall not be
entitled to vote on any matter that affects only one or more
other Series.

SECTION 7.2. Number of Votes and Manner of Voting:
Proxies. On each matter submitted to a vote of the Shareholders,
each holder of Shares of any Series shall be entitled to a
number of votes equal to the number of Shares of such Series
standing in his name on the books of the Trust. There shall be
no cumulative voting in the election or removal of Trustees.
Shares may be voted in person or by proxy. A proxy with respect
to Shares held in the name of two (2) or more Persons shall be
valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written
notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until
Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this
Declaration of Trust or the By-Laws to be taken by Shareholders.

SECTION 7.3. Meetings. Meetings of Shareholders may be
called by the Trustees from time to time for the purpose of
taking action upon any matter requiring the vote or authority of
the Shareholders as herein provided, or upon any other matter
deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least
seven (7) days before such meeting, postage prepaid, stating the
time, place and purpose of the meeting, to each Shareholder at

<PAGE> 44

the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a
meeting of Shareholders for the purpose of voting upon removal
of any Trustee of the Trust when requested to do so in writing
by Shareholders holding not less than ten percent (10%) of the
Shares then outstanding. If the Trustees shall fail to call or
give notice of any meeting of Shareholders for a period of
thirty (30) days after written application by Shareholders
holding at least ten percent (10%) of the Shares then
outstanding requesting that a meeting be called for any other
purpose requiring action by the Shareholders as provided herein
or in the By-Laws, then Shareholders holding at least ten
percent (10%) of the Shares then outstanding may call and give
notice of such meeting, and thereupon the meeting shall be held
in the manner provided for herein in case of call thereof by the
Trustees. Any meetings may be held within or without The State
of Delaware. Shareholders may only act with respect to matters
set forth in the notice to Shareholders.

SECTION 7.4. Record Dates. For the purpose of
determining the Shareholders who are entitled to vote or act at
any meeting or any adjournment thereof, or who are entitled to
participate in any dividend or distribution, or for the purpose
of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding thirty (30)
days (except at or in connection with the termination of the
Trust), as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date and time not more
than ninety (90) days prior to the date of any meeting of
Shareholders or other action as the date and time of record for
the determination of Shareholders entitled to vote at such
meeting or any adjournment thereof or to be treated as
Shareholders of record for purposes of such other action, and
any Shareholder who was a Shareholder at the date and time so
fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action, even though he has since that
date and time disposed of his Shares, and no Shareholder
becoming such after that date and time shall be so entitled to
vote at such meeting or any adjournment thereof or to be treated
as a Shareholder of record for purposes of such other action.

SECTION 7.5. Quorum and Required Vote. A majority of the
Shares entitled to vote shall be a quorum for the transaction of
business at a Shareholders' meeting, but any lesser number shall
be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set
for the original meeting without the necessity of further
notice. A Majority Shareholder Vote at a meeting of which a
quorum is present shall decide any question, except when a
different vote is required or permitted by any provision of the
1940 Act or other applicable law or by this Declaration of Trust
or the By-Laws, or when the Trustees shall in their discretion
require a larger vote or the vote of a majority or larger
fraction of the Shares of one or more particular Series.

SECTION 7.6. Action By Written Consent. Subject to the

<PAGE> 45

provisions of the 1940 Act and other applicable law, any action
taken by Shareholders may be taken without a meeting if a
majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof or of the Shares of any particular
Series as shall be required by the 1940 Act or by any express
provision of this Declaration of Trust or the By-Laws or as
shall be permitted by the Trustees) consent to the action in
writing and if the writings in which such consent is given are
filed with the records of the meetings of Shareholders, to the
same extent and for the same period as proxies given in
connection with a Shareholders' meeting. Such consent shall be
treated for all purposes as a vote taken at a meeting of
Shareholders.

SECTION 7.7. Inspection of Records. The records of the
Trust shall be open to inspection by Shareholders to the same
extent as is permitted stockholders of a Pennsylvania
corporation under Pennsylvania corporation law.

SECTION 7.8. Additional Provisions. The By-Laws may
include further provisions for Shareholders' votes and meetings
and related matters not inconsistent with the provisions hereof.

ARTICLE 8

LIMITATION OF LIABILITY: INDEMNIFICATION

SECTION 8.1. Trustees. Shareholders. etc. Not Personally
Liable; Notice. The Trustees, officers, employees and agents of
the Trust, in incurring any debts, liabilities or obligations,
or in limiting or omitting any other actions for or in
connection with the Trust, are or shall be deemed to be acting
as Trustees, officers, employees or agents of the Trust and not
in their own capacities. No Shareholder shall be subject to any
personal liability whatsoever in tort, contract or otherwise to
any other Person or Persons in connection with the assets or the
affairs of the Trust or of any Series, and subject to Section
8.4 hereof, no Trustee, officer, employee or agent of the Trust
shall be subject to any personal liability whatsoever in tort,
contract, or otherwise, to any other Person or Persons in
connection with the assets or affairs of the Trust or of any
Series, save only that arising from his own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office or the discharge of his
functions. The Trust (or if the matter relates only to a
particular Series, that Series) shall be solely liable for any
and all debts, claims, demands, judgments, decrees, liabilities
or obligations of any and every kind, against or with respect to
the Trust or such Series in tort, contract or otherwise in
connection with the assets or the affairs of the Trust or such
Series, and all Persons dealing with the Trust or any Series

<PAGE> 46

shall be deemed to have agreed that resort shall be had solely
to the Trust Property of the Trust or the Series Assets of such
Series, as the case may be, for the payment or performance
thereof.

The Trustees shall use their best efforts to ensure that
every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that the Declaration of Trust is on
file with the Secretary of the Trust and shall recite to the
effect that the same was executed or made by or on behalf of the
Trust or by them as Trustees or Trustee or as officers or officer,
and not individually, and that the obligations of such instrument
are not binding upon any of them or the Shareholders individually
but are binding only upon the assets and property of the Trust,
or the particular Series in question, as the case may be, but
the omission thereof shall not operate to bind any Trustees or
Trustee or officers or officer or Shareholders or Shareholder
individually, or to subject the Series Assets of any Series to
the obligations of any other Series.

SECTION 8.2. Trustees' Good Faith Action; Expert Advice:
No Bond or Surety. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. Subject to Section 8.4 hereof, a Trustee shall be
liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact
or law. Subject to the foregoing, (i) the Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing
of any officer, agent, employee, consultant, Investment Adviser,
Administrator, Distributor or Principal Underwriter, Custodian
or Transfer Agent, Dividend Disbursing Agent, Shareholder
Servicing Agent or Accounting Agent of the Trust, nor shall any
Trustee be responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this
Declaration of Trust and their duties as Trustees, and shall be
under no liability for any act or omission in accordance with
such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good
faith, shall be entitled to rely upon the books of account of
the Trust and upon written reports made to the Trustees by any
officer appointed by them, any independent public accountant,
and (with respect to the subject matter of the contract
involved) any officer, partner or responsible employee of a
Contracting Party appointed by the Trustees pursuant to Section
5.2 hereof. The Trustees as such shall not be required to give
any bond or surety or any other security for the performance of
their duties.

SECTION 8.3. Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall be
charged or held to be personally liable for any obligation or
liability of the Trust solely by reason of being or having been

<PAGE> 47

a Shareholder and not because of such Shareholder's acts or
omissions or for some other reason, the Trust (upon proper and
timely request by the Shareholder) may assume the defense
against such charge and satisfy any judgment thereon or may
reimburse the Shareholders for expenses, and the Shareholder or
former Shareholder (or the heirs, executors, administrators or
other legal representatives thereof, or in the case of a
corporation or other entity, its corporate or other general
successor) shall be entitled (but solely out of the assets of
the Series of which such Shareholder or former Shareholder is or
was the holder of Shares) to be held harmless from and
indemnified against all loss and expense arising from such
liability.

SECTION 8.4. Indemnification of Trustees. Officers, etc.
Subject to the limitations, if applicable, hereinafter set forth
in this Section 8.4, the Trust shall indemnify (from the assets
of the Series or Series to which the conduct in question
relates) each of its Trustees, officers, employees and agents
(including Persons who serve at the Trust's request as
directors, officers or trustees of another organization in which
the Trust has any interest as a shareholder, creditor or
otherwise (hereinafter, together with such Person's heirs,
executors, administrators or personal representative, referred
to as a "Covered Person")) against all liabilities, including
but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party
or otherwise or with which such Covered Person may be or may
have been threatened, while in office or thereafter, by reason
of being or having been such a Trustee or officer, director or
trustee, except with respect to any matter as to which it has
been determined that such Covered Person (i) did not act in good
faith in the reasonable belief that such Covered Person's action
was in or not opposed to the best interests of the Trust; (ii)
had acted with willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of
such Covered Person's office (iii) for a criminal proceeding,
had reasonable cause to believe that his conduct was unlawful
(the conduct described in (i), (ii) and (iii) being referred to
hereafter as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be made by (i)
a final decision on the merits by a court or other body before
whom the proceeding was brought that the Covered Person to be
indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding
against a Covered Person for insufficiency of evidence of
Disabling Conduct, or (iii) a reasonable determination, based
upon a review of the facts, that the indemnitee was not liable
by reason of Disabling Conduct by (a) a vote of a majority of a
quorum of Trustees who are neither "interested persons" of the
Trust as defined in Section 2(a)(19) of the 1940 Act nor parties
to the proceeding (the "Disinterested Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid

<PAGE> 48

from time to time by one or more Series to which the conduct in
question related in advance of the final disposition of any such
action, suit or proceeding; provided that the Covered Person
shall have undertaken to repay the amounts so paid to such
Series if it is ultimately determined that indemnification of
such expenses is not authorized under this Article 8 and (i) the
Covered Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses
arising by reason of any lawful advances, or (iii) a majority of
a quorum of the disinterested Trustees, or an independent legal
counsel in a written opinion, shall have determined, based on a
review of readily available facts (as opposed to a full trial
type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.

SECTION 8.5. Compromise Payment. As to any matter disposed
of by a compromise payment by any such Covered Person referred
to in Section 8.4 hereof, pursuant to a consent decree or
otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum
of the disinterested Trustees or (ii) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant
to clause (i) or by independent legal counsel pursuant to clause
(ii) shall not prevent the recovery from any Covered Person of
any amount paid to such Covered Person in accordance with either
of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction
not to have acted in good faith in the reasonable belief that
such Covered Person's action was in or not opposed to the best
interests of the Trust or to have been liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of the Covered Person's office.

SECTION 8.6. Indemnification Not Exclusive, etc. The right
of indemnification provided by this Article 8 shall not be
exclusive of or affect any other rights to which any such
Covered Person or shareholder may be entitled. As used in this
Article 8, a "disinterested" Person is one against whom none of
the actions, suits or other proceedings in question, and no
other action, suit or other proceeding on the same or similar
grounds is then or has been pending or threatened. Nothing
contained in this Article 8 shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees and officers, and other Persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
Person.

SECTION 8.7. Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made
or to be made by the Trustees or to see to the application of
any payments made or property transferred to the Trust or upon
its order.

<PAGE> 49

ARTICLE 9

DURATION: REORGANIZATION: INCORPORATION; AMENDMENTS

SECTION 9.1. Duration of Trust. Unless terminated as
provided herein, the Trust shall have perpetual existence.

SECTION 9.2. Termination of Trust. The Trust may be
terminated at any time by a Majority of the Trustees, subject to
the favorable vote of the holders of not less than a majority of
the Shares outstanding and entitled to vote of each Series of
the Trust, or by an instrument or instruments in writing without
a meeting, consented to by the holders of not less than a
majority of such Shares, or by such greater or different vote of
Shareholders of any Series as may be established by the
Certificate of Designation by which such Series was authorized.
Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued
or anticipated as may be determined by the Trustees, the Trust
shall in accordance with such procedures as the Trustees
consider appropriate reduce the remaining assets to
distributable form in cash, Securities or other property, or any
combination thereof, and distribute the proceeds to the
Shareholders, in conformity with the provisions of Section
6.1(h) hereof. After termination of the Trust or any Series and
distribution to the Shareholders as herein provided, a majority
of the Trustees shall execute and lodge among the records of the
Trust an instrument in writing setting forth the fact of such
termination. Upon termination of the Trust, the Trustees shall
thereupon, be discharged from all further liabilities and duties
hereunder, and the rights and interests of all Shareholders
shall thereupon cease. Upon termination of any Series, the
Trustees shall thereupon be discharged from all further
liabilities and duties with respect to such Series, and the
rights and interests of all Shareholders of such Series shall
thereupon cease.

SECTION 9.3. Reorganization. The Trustees may sell,
convey and transfer all or substantially all of the assets of
the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association, corporation or other
entity organized under the laws of any state of the United
States, or may transfer such assets to another Series of the
Trust, in exchange for cash, Shares or other Securities
(including, in the case of a transfer to another Series of the
Trust, Shares of such other Series), or to the extent permitted
by law then in effect may merge or consolidate the Trust or any
Series with any other Trust or any corporation, partnership, or
association organized under the laws of any state of the United
States, all upon such terms and conditions and for such
consideration when and as authorized by vote or written consent
of a Majority of the Trustees and approved by the affirmative

<PAGE> 50

vote of the holders of not less than a majority of the Shares
outstanding and entitled to vote of each Series whose assets are
affected by such transaction, or by an instrument or instruments
in writing without a meeting, consented to by the holders of not
less than a majority of such Shares, and/or by such other vote
of any Series as may be established by the Certificate of
Designation with respect to such Series. Following such
transfer, the Trustees shall distribute the cash, Shares or
other Securities or other consideration received in such
transaction (giving due effect to the assets belonging to and
indebtedness of, and any other differences among, the various
Series of which the assets have so been transferred) among the
Shareholders of the Series of which the assets have been so
transferred; and if all of the assets of the Trust have been so
transferred, the Trust shall be terminated. Nothing in this
Section 9.3 shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships,
associations or other organizations, and to sell, convey or
transfer less than substantially all of the Trust Property or
the assets belonging to any Series to such organizations or
entities.

SECTION 9.4. Incorporation. Upon approval by Majority
Shareholder Vote, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the
laws of any jurisdiction or any other trust, partnership,
association or other organization to take over all of the Trust
Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey
and transfer the Trust Property to any such corporation, trust,
association or organization, in exchange for the shares or
securities thereof, or otherwise, and to lend money to,
subscribe for the shares of securities of, and enter into any
contracts with any such corporation, trust, partnership,
association or organization in which the Trust holds or is about
to acquire shares or any other interests. The Trustees may also
cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted
by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in
organizing one or more corporation, trusts, partnerships,
associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such
organizations or entities.

SECTION 9.5. Amendments; etc. All rights granted to the
Shareholders under this Declaration of Trust are granted subject
to the reservation of the right to amend this Declaration of
Trust as herein provided, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or
Trustee or the prohibition of assessment upon the Shareholders
(otherwise than as permitted under Section 6.1(l)) without the
express consent of each Shareholder or Trustee involved. Subject
to the foregoing, the provisions of this Declaration of Trust
(whether or not related to the rights of Shareholders) may be
amended at any time, so long as such amendment does not

<PAGE> 51

adversely affect the rights of any Shareholder with respect to
which such amendment is or purports to be applicable and so long
as such amendment is not in contravention of applicable law,
including the 1940 Act, by an instrument in writing signed by a
Majority of the Trustees (or by an officer of the Trust pursuant
to the vote of a Majority of the Trustees). Any amendment to
this Declaration of Trust that adversely affects the rights of
all Shareholders may be adopted at any time by an instrument in
writing signed by a Majority of the Trustees (or by an officer
of the Trust pursuant to a vote of a Majority of the Trustees)
when authorized to do so by the vote in accordance with Section
7.1 hereof of Shareholders holding a majority of all the Shares
outstanding and entitled to vote, without regard to Series, or
if said amendment adversely affects the rights of the
Shareholders of less than all of the Series, by the vote of the
holders of a majority of all the Shares entitled to vote of each
Series so affected.

SECTION 9.6. Filing of Copies of Declaration and
Amendments. The original or a copy of this Declaration and of
each amendment hereto (including each Certificate of Designation
and Certificate of Termination) shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A
restated Declaration, integrating into a single instrument all
of the provisions of this Declaration which are then in effect
and operative, may be executed from time to time by a Majority
of the Trustees and shall, upon execution, be conclusive
evidence of all amendments contained therein and may thereafter
be referred to in lieu of the original Declaration and the
various amendments thereto.

ARTICLE 10

MISCELLANEOUS

SECTION 10.1. Notices. Any and all notices to which any
Shareholder hereunder may be entitled and any and all
communications shall be deemed duly served or given if mailed,
postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the applicable register of the
Trust.

SECTION 10.2. Governing Law. This Declaration of Trust is,
with reference to the laws thereof, and the rights of all
parties and the construction and effect of every provision
hereof shall be, subject to and construed according to the laws
of the Commonwealth of Pennsylvania.

<PAGE> 52

SECTION 10.3. Counterparts. This Declaration of Trust and
any amendment thereto may be simultaneously executed in several
counterparts, each of which so executed shall be deemed to be an
original, and such counterparts, together, shall constitute but
one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.

SECTION 10.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the
Trust is a Trustee hereunder, certifying to: (a) the number or
identity of Trustees or Shareholders, (b) the due authorization
of the execution of any instrument or writing, (c) the form of
any vote passed at a meeting of Trustees or Shareholders, (d)
the fact that the number of Trustees or Shareholders present at
any meeting or executing any written instrument satisfies the
requirements of this Declaration of Trust, (e) the form of any
By-Law adopted, or the identity of any officers elected, by the
Trustees, (f) the existence or nonexistence of any fact or facts
which in any manner relate to the affairs of the Trust, or (g)
the name of the Trust or the establishment of a Series shall be
conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees, or any of them, and the
successors of such Person.

SECTION 10.5. References; Headings. The masculine gender
shall include the feminine and neuter genders. Headings are
placed herein for convenience of reference only and shall not be
taken as a part of this Declaration or control or affect the
meaning, construction or effect hereof.

SECTION 10.6. Provisions in Conflict With Law or
Regulation. (a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice
of counsel, that any of such provisions is in conflict with the
1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986 or with other applicable laws and
regulations, the conflicting provision shall be deemed never to
have constituted a part of this Declaration; provided, however,
that such determination shall not affect any of the remaining
provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.

(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision
in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.

SECTION 10.7. Use of the Name "Van Kampen American
Capital". Van Kampen American Capital, Inc. ("Van Kampen
American Capital") has consented to the use by the Trust and by
each Series and each Series thereof to the identifying words

<PAGE> 53

"Van Kampen" or "Van Kampen Merritt" or any combination thereof
in the name of the Trust and of each Series and Series thereof.
Such consent is conditioned upon the Trust's employment of Van
Kampen American Capital, its successors or a subsidiary or
affiliate thereof as investment adviser to the Trust and to each
Series and each Series thereof. As between Van Kampen American
Capital and the Trust, Van Kampen American Capital shall control
the use of such name insofar as such name contains the
identifying words "Van Kampen" or "Van Kampen Merritt". Van
Kampen American Capital may from time to time use the
identifying words "American Capital," "Van Kampen" or "Van
Kampen Merritt" in other connections and for other purposes,
including without limitation in the names of other investment
companies, corporations or businesses that it may manage,
advise, sponsor or own or in which it may have a financial
interest. Van Kampen American Capital may require the Trust or
any Series or Series thereof to cease using the identifying
words "Van Kampen" or "Van Kampen Merritt" in the name of the
Trust or any Series or any Series thereof if the Trust or any
Series or Series thereof ceases to employ Van Kampen American
Capital, its successors or a subsidiary or affiliate thereof as
investment adviser.

<PAGE> 54

IN WITNESS WHEREOF, the undersigned, being at least a majority of the
Trustees of the Trust, have set their hands and seal, for themselves and their
assigns, unto this First Amended and Restated Agreement and Declaration of
Trust of Van Kampen American Capital Pennsylvania Tax Free Income Fund, as of
the day and year first above written.

------------------------ -------------------------
J. Miles Branagan Richard E. Caruso

------------------------ -------------------------
Philip P. Gaughan Roger Hilsman

------------------------ -------------------------
R. Craig Kennedy Dennis J. McDonnell

------------------------ -------------------------
Donald C. Miller Jack E. Nelson

------------------------ -------------------------
Don G. Powell David Rees

------------------------ -------------------------
Jerome L. Robinson Lawrence J. Sheehan

------------------------ -------------------------
Fernando Sisto Wayne. W. Whalen

------------------------
William S. Woodside
<PAGE> 55

A C K N O W L E D G M E N T

STATE OF ILLINOIS)

) ss

COUNTY OF DUPAGE)

______________________

August 1, 1995

Then personally appeared the above named Trustees and
acknowledged the foregoing instrument to be his free act and
deed.

Before me,

_______________________________

(Notary Public)

My commission expires:___________

<PAGE> 1
EXHIBIT 2

FORM OF VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX
FREE INCOME FUND -- AMENDED AND RESTATED BYLAWS

<PAGE> 2
Van Kampen American Capital Pennsylvania Tax Free
Income Fund

Amended and Restated Bylaws

Index

ARTICLE 1 SHAREHOLDERS AND SHAREHOLDERS' MEETINGS 1

Section 1.1. Meetings 1

Section 1.2. Presiding Officer; Secretary 1

Section 1.3. Authority of Chairman of Meeting to Interpret
Declaration and Bylaws 1

Section 1.4. Voting; Quorum 1

Section 1.5. Inspectors 2

Section 1.6 Records at Shareholder Meetings 2

Section 1.7. Shareholders Action in Writing 2

ARTICLE 2 TRUSTEES AND TRUSTEES' MEETINGS 2

Section 2.1. Number of Trustees 2

Section 2.2. Regular Meetings of Trustees 2

Section 2.3. Special Meetings of Trustees 2

Section 2.4. Notice of Meetings 3

<PAGE> 3

Section 2.5. Quorum; Presiding Trustee 3

Section 2.6. Participation by Telephone 3

Section 2.7. Location of Meetings 3

Section 2.8. Actions by Trustees 3

Section 2.9. Rulings of Presiding Trustee 3

Section 2.10. Trustees' Action in Writing 3

Section 2.11. Resignations 4

Section 2.12. Tenure of Trustees 4

<PAGE> 4

ARTICLE 3 OFFICERS 4

Section 3.1. Officers of the Trust 4

Section 3.2. Time and Terms of Election 4

Section 3.3. Resignation and Removal 4

Section 3.4. Fidelity Bond 4

Section 3.5. President 4

Section 3.6. Vice Presidents 4

Section 3.7. Treasurer and Assistant Treasurers 5

Section 3.8. Controller and Assistant Controllers 5

Section 3.9. Secretary and Assistant Secretaries 5

Section 3.10. Substitutions 5

Section 3.11. Execution of Deeds, etc. 6

Section 3.12. Power to Vote Securities 6

ARTICLE 4 COMMITTEES 6

Section 4.1. Power of Trustees to Designate Committees 6

Section 4.2. Rules for Conduct of Committee Affairs 6

Section 4.3. Trustees May Alter, Abolish, etc., Committees 6

<PAGE> 5

Section 4.4. Minutes; Review by Trustees 6

ARTICLE 5 SEAL 7

ARTICLE 6 SHARES .......................................... 7

Section 6.1. Issuance of Shares 7

Section 6.2. Uncertificated Shares 7

Section 6.3. Share Certificates 7

Section 6.4. Lost, Stolen, etc., Certificates 7

<PAGE> 6

ARTICLE 7 STOCK TRANSFERS 8

Section 7.1. Transfer Agents, Registrars, etc. 8

Section 7.2. Transfer of Shares 8

Section 7.3. Registered Shareholders 8

ARTICLE 8 AMENDMENTS 8

Section 8.1. Bylaws Subject to Amendment 8

Section 8.2. Notice of Proposal to Amend Bylaws Required 8

<PAGE> 7

Van Kampen American Capital Pennsylvania Tax Free Income Fund
Amended and Restated Bylaws

These are the Bylaws of Van Kampen American Capital Pennsylvania Tax
Free Income Fund, a trust with transferable shares established under the laws
of the Commonwealth of Pennsylvania (the "Trust"), pursuant to the First
Amended and Restated Agreement and Declaration of Trust of the Trust (the
"Declaration") made the 1st day of August, 1995. These Bylaws have been adopted
by the Trustees pursuant to the authority granted by Section 4.14 of the
Declaration.

All words and terms capitalized in these Bylaws, unless
otherwise defined herein, shall have the same meanings as they
have in the Declaration.

ARTICLE 1

SHAREHOLDERS AND SHAREHOLDERS' MEETINGS

SECTION 1.1. Meetings. A meeting of the Shareholders of the
Trust shall be held whenever called by the Chairman, the
President or a majority of the Trustees and whenever election of
a Trustee or Trustees by Shareholders is required by the
provisions of the 1940 Act. Meetings of Shareholders shall also
be called by the Trustees when requested in writing by
Shareholders holding at least ten percent (10%) of the Shares
then outstanding for the purpose of voting upon removal of any
Trustee, or if the Trustees shall fail to call or give notice of
any such meeting of Shareholders for a period of thirty (30)
days after such application, then Shareholders holding at least
ten percent (10%) of the Shares then outstanding may call and
give notice of such meeting. Notice of Shareholders' meetings
shall be given as provided in the Declaration.

SECTION 1.2. Presiding Officer; Secretary. The President
shall preside at each Shareholders' meeting as chairman of the
meeting, or in the absence of the President, the Trustees
present at the meeting shall elect one of their number as
chairman of the meeting. Unless otherwise provided for by the
Trustees, the Secretary of the Trust shall be the secretary of
all meetings of Shareholders and shall record the minutes

<PAGE> 8

thereof.

SECTION 1.3. Authority of Chairman of Meeting to
Interpret_Declaration and Bylaws. At any Shareholders' meeting
the chairman of the meeting shall be empowered to determine the
construction or interpretation of the Declaration or these
Bylaws, or any part thereof or hereof, and his ruling shall be
final.

SECTION 1.4. Voting; Quorum. At each meeting of Shareholders,
except as otherwise provided by the Declaration, every holder of
record of Shares entitled to vote shall be entitled to a number
of votes equal to the number of Shares standing in his name on
the Share register of the Trust on the record date of the
meeting. Shareholders may vote by proxy and the form of any
such proxy may be prescribed from time to time by the Trustees.
A quorum shall exist if the holders of a majority of the
outstanding Shares of the Trust entitled to vote are present in
person or by proxy, but any lesser number shall be
sufficient for adjournments. At all meetings of the
Shareholders, votes shall be taken by ballot for all matters
which may be binding upon the Trustees pursuant to Section 7.1
of the Declaration. On other matters, votes of Shareholders
need not be taken by ballot unless otherwise provided for by the
Declaration or by vote of the Trustees, or as required by the
1940 Act, but the chairman of the meeting may in his discretion
authorize any matter to be voted upon by ballot.

SECTION 1.5. Inspectors. At any meeting of Shareholders, the
chairman of the meeting may appoint one or more Inspectors of
Election or Balloting to supervise the voting at such meeting or
any adjournment thereof. If Inspectors are not so appointed,
the chairman of the meeting may, and on the request of any
Shareholder present or represented and entitled to vote shall,
appoint one or more Inspectors for such purpose. Each
Inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of
Inspector of Election or Balloting, as the case may be, at
such meeting with strict impartiality and according to the
best of his ability. If appointed, Inspectors shall take
charge of the polls and, when the vote is completed, shall make
a certificate of the result of the vote taken and of such other
facts as may be required by law.

SECTION 1.6. Records at Shareholder Meetings. At each
meeting of the Shareholders there shall be open for inspection
the minutes of the last previous Meeting of Shareholders of the
Trust and a list of the Shareholders of the Trust, certified to
be true and correct by the Secretary or other proper agent of
the Trust, as of the record date of the meeting or the date of
closing of transfer books, as the case may be. Such list of
Shareholders shall contain the name of each Shareholder.
Shareholders shall have such other rights and procedures of
inspection of the books and records of the Trust as are granted
to shareholders of a Delaware corporation.

<PAGE> 9

SECTION 1.7. Shareholders' Action in Writing. Nothing in this
Article 1 shall limit the power of the Shareholders to take any
action by means of written instruments without a meeting, as
permitted by Section 7.6 of the Declaration.

ARTICLE 2

TRUSTEES AND TRUSTEES' MEETINGS

SECTION 2.1. Number of Trustees. There shall initially be one
(1) Trustee, and the number of Trustees shall thereafter be such
number, authorized by the Declaration, as from time to time
shall be fixed by a vote adopted by a Majority of the Trustees.

SECTION 2.2. Regular Meetings of Trustees. Regular meetings
of the Trustees may be held without call or notice at such
places and at such times as the Trustees may from time to time
determine; provided, that notice of such determination, and of
the time and place of the first regular meeting thereafter,
shall be given to each absent Trustee in accordance with Section
2.4 hereof.

SECTION 2.3. Special Meetings of Trustees. Special meetings
of the Trustees may be held at any time and at any place when
called by the President or the Treasurer or by three (3) or
more Trustees, or if there shall be less than three (3)
Trustees, by any Trustee; provided, that notice of the time and
place thereof is given to each Trustee in accordance with
Section 2.4 hereof by the Secretary or an Assistant Secretary or
by the officer or the Trustees calling the meeting.

SECTION 2.4. Notice of Meetings. Notice of any regular or
special meeting of the Trustees shall be sufficient if given in
writing to each Trustee, and if sent by mail at least five (5)
days, by a nationally recognized overnigh delivery service at
least two (2) days or by facsimile at least twenty-four (24)
hours, before the meeting, addressed to his usual or last known
business or residence address, or if delivered to him in person
at least twenty-four (24) hours before the meeting. Notice of a
special meeting need not be given to any Trustee who was present
at an earlier meeting, not more than thirty-one (31) days prior
to the subsequent meeting, at which the subsequent meeting was
called. Unless statute, these bylaws or a resolution of the
Trustees might otherwise dictate, notice need not state the
business to be transacted at or the purpose of any meeting of
the Board of Trustees. Notice of a meeting may be waived by any
Trustee by written waiver of notice, executed by him before or
after the meeting, and such waiver shall be filed with the
records of the meeting. Attendance by a Trustee at a meeting
shall constitute a waiver of notice, except where a Trustee
attends a meeting for the purpose of protesting prior thereto or
at its commencement the lack of notice. No notice need be given

<PAGE> 10

of action proposed to be taken by unanimous written consent.

SECTION 2.5. Quorum: Presiding Trustee. At any meeting of the
Trustees, a Majority of the Trustees shall constitute a quorum.
Any meeting may be adjourned from time to time by a majority of
the votes cast upon the question, whether or not a quorum is
present, and the meeting may be held as adjourned without
further notice. Unless the Trustees shall otherwise elect,
generally or in a particular case, the Chairman shall be the
presiding Trustee at each meeting of the Trustees or in the
absence of the Chairman, the President shall preside over the
meeting. In the absence of both the Chairman and the President,
the Trustees present at the meeting shall elect one of their
number as presiding Trustee of the meeting.

SECTION 2.6. Participation by Telephone. One or more of the
Trustees may participate in a meeting thereof or of any
Committee of the Trustees by means of a conference telephone or
similar communications equipment allowing all persons
participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in
person at a meeting.

SECTION 2.7. Location of Meetings. Trustees' meetings may be
held at any place, within or without the State of Delaware.

SECTION 2.8. Actions by Trustees. Unless statute, the
charter or bylaws requires a greater proportion, action of a
majority of the Trustees present at a meeting at which a quorum
is present is action of the Board of Trustees. Voting at
Trustees' meetings may be conducted orally, by show of hands,
or, if requested by any Trustee, by written ballot. The
results of all voting shall be recorded by the Secretary in the
minute book.

SECTION 2.9. Rulings of Presiding Trustee. All other rules of
conduct adopted and used at any Trustees' meeting shall be
determined by the presiding Trustee of such meeting, whose
ruling on all procedural matters shall be final.

SECTION 2.10. Trustees' Action in Writing. Nothing in this
Article 2 shall limit the power of the Trustees to take action
by means of a written instrument without a meeting, as provided
in Section 4.2 of the Declaration.

SECTION 2.11. Resignations. Any Trustee may resign at any
time by written instrument signed by him and delivered to the
Chairman, the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time.

<PAGE> 11

SECTION 2.12. Chairman of the Board. The Trustees may from
time to time elect on of the Trustees to serve as Chairman of
the Board of Trustees.

ARTICLE 3

OFFICERS

SECTION 3.1. Officers of the Trust. The officers of the Trust
shall consist of a President, a Treasurer and a Secretary, and
may include one or more Vice Presidents, Assistant Treasurers
and Assistant Secretaries, and such other officers as the
Trustees may designate. Any person may hold more than one
office.

SECTION 3.2. Time and Terms of Election. The President, the
Treasurer and the Secretary shall be elected by the Trustees at
their first meeting and thereafter at the annual meeting of the
Trustees, as provided in Section 4.2 of the Declaration. Such
officers shall hold office until the next annual meeting of the
Trustees and until their successors shall have been duly elected
and qualified, and may be removed at any meeting by the
affirmative vote of a Majority of the Trustees. All other
officers of the Trust may be elected or appointed at any meeting
of the Trustees. Such officers shall hold office for any term,
or indefinitely, as determined by the Trustees, and shall be
subject to removal, with or without cause, at any time by the
Trustees.

SECTION 3.3. Resignation and Removal. Any officer may resign
at any time by giving written notice to the Trustees. Such
resignation shall take effect at the time specified therein,
and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
If the office of any officer or agent becomes vacant by reason
of death, resignation, retirement, disqualification, removal
from office or otherwise, the Trustees may choose a successor,
who shall hold office for the unexpired term in respect of which
such vacancy occurred. Except to the extent expressly provided
in a written agreement with the Trust, no officer resigning or
removed shall have any right to any compensation for any period
following such resignation or removal, or any right to damage on
account of such removal.

SECTION 3.4. Fidelity Bond. The Trustees may, in their
discretion, direct any officer appointed by them to furnish at
the expense of the Trust a fidelity bond approved by the
Trustees, in such amount as the Trustees may prescribe.

<PAGE> 12

SECTION 3.5. President. The President shall be the chief
executive officer of the Trust and, subject to the supervision
of the Trustees, shall have general charge and supervision of
the business, property and affairs of the Trust and such other
powers and duties as the Trustees may prescribe.

SECTION 3.6. Vice Presidents. In the absence or disability of
the President, the Vice President or, if there shall be more
than one, the Vice Presidents in the order of their seniority or
as otherwise designated by the Trustees, shall exercise all of
the powers and duties of the President. The Vice Presidents
shall have the power to execute bonds, notes, mortgages and
other contracts, agreements and instruments in the name of the
Trust, and shall do and perform such other duties as the
Trustees or the President shall direct.

SECTION 3.7. Treasurer and Assistant Treasurers. The
Treasurer shall be the chief financial officer of the Trust, and
shall have the custody of the Trust's funds and Securities, and
shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Trust and shall deposit
all moneys, and other valuable effects in the name and to the
credit of the Trust, in such depositories as may be designated
by the Trustees, taking proper vouchers for such disbursements,
shall have such other duties and powers as may be prescribed
from time to time by the Trustees, and shall render to the
Trustees, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the
Trust. If no Controller is elected, the Treasurer shall also
have the duties and powers of the Controller, as provided in
these Bylaws. Any Assistant Treasurer shall have such duties
and powers as shall be prescribed from time to time by the
Trustees or the Treasurer, and shall be responsible to and shall
report to the Treasurer. In the absence or disability of the
Treasurer, the Assistant Treasurer or, if there shall be more
than one, the Assistant Treasurers in the order of their
seniority or as otherwise designated by the Trustees or the
Chairman, shall have the powers and duties of the Treasurer.

SECTION 3.8. Controller and Assistant Controllers. If a
Controller is elected, he shall be the chief accounting officer
of the Trust and shall be in charge of its books of account and
accounting records and of its accounting procedures, and shall
have such duties and powers as are commonly incident to the
office of a controller, and such other duties and powers as may
be prescribed from time to time by the Trustees. The
Controller shall be responsible to and shall report to the
Trustees, but in the ordinary conduct of the Trust's business,
shall be under the supervision of the Treasurer. Any Assistant
Controller shall have such duties and powers as shall be
prescribed from time to time by the Trustees or the Controller,
and shall be responsible to and shall report to the Controller.
In the absence or disability of the Controller, the Assistant
Controller or, if there shall be more than one, the Assistant
Controllers in the order of their seniority or as otherwise
designated by the Trustees, shall have the powers and duties of
the Controller.

<PAGE> 13

SECTION 3.9. Secretary and Assistant Secretaries. The
Secretary shall, if and to the extent requested by the Trustees,
attend all meetings of the Trustees, any Committee of the
Trustees and/or the Shareholders and record all votes and the
minutes of proceedings in a book to be kept for that purpose,
shall give or cause to be given notice of all meetings of the
Trustees, any Committee of the Trustees, and of the
Shareholders and shall perform such other duties as may be
prescribed by the Trustees. The Secretary, or in his absence any
Assistant Secretary, shall affix the Trust's seal to any
instrument requiring it, and when so affixed, it shall be
attested by the signature of the Secretary or an Assistant
Secretary. The Secretary shall be the custodian of the Share
records and all other books, records and papers of the Trust
(other than financial) and shall see that all books, reports,
statements, certificates and other documents and records
required by law are properly kept and filed. In the absence or
disability of the Secretary, the Assistant Secretary or, if
there shall be more than one, the Assistant Secretaries in the
order of their seniority or as otherwise designated by the
Trustees, shall have the powers and duties of the Secretary.

SECTION 3.10. Substitutions. In case of the absence or
disability of any officer of the Trust, or for any other reason
that the Trustees may deem sufficient, the Trustees may
delegate, for the time being, the powers or duties, or any of
them, of such officer to any other officer, or to any Trustee.

SECTION 3.11. Execution of Deeds, etc. Except as the
Trustees may generally or in particular cases otherwise
authorize or direct, all deeds, leases, transfers, contracts,
proposals, bonds, notes, checks, drafts and other obligations
made, accepted or endorsed by the Trust shall be signed or
endorsed on behalf of the Trust by its properly authorized
officers or agents as provided in the Declaration.

SECTION 3.12. Power to Vote Securities. Unless otherwise
ordered by the Trustees, the Treasurer shall have full power and
authority on behalf of the Trust to give proxies for, and/or to
attend and to act and to vote at, any meeting of stockholders of
any corporation in which the Trust may hold stock, and at any
such meeting the Treasurer or his proxy shall possess and may
exercise any and all rights and powers incident to the ownership
of such stock which, as the owner thereof, the Trust might have
possessed and exercised if present. The Trustees, by resolution
from time to time, or, in the absence thereof, the Treasurer,
may confer like powers upon any other person or persons as
attorneys and proxies of the Trust.

ARTICLE 4

COMMITTEES

<PAGE> 14

SECTION 4.1. Power of Trustees to Designate Committees. The
Trustees, by vote of a Majority of the Trustees, may elect from
their number an Executive Committee and any other Committees and
may delegate thereto some or all of their powers except those
which by law, by the Declaration or by these Bylaws may
not be delegated; provided, that an Executive Committee shall
not be empowered to elect the President, the Treasurer or the
Secretary, to amend the Bylaws, to exercise the powers of the
Trustees under this Section 4.1 or under Section 4.3 hereof, or
to perform any act for which the action of a Majority of the
Trustees is required by law, by the Declaration or by these
Bylaws. The members of any such Committee shall serve at the
pleasure of the Trustees.

SECTION 4.2. Rules for Conduct of Committee Affairs. Except
as otherwise provided by the Trustees, each Committee elected or
appointed pursuant to this Article 4 may adopt such standing
rules and regulations for the conduct of its affairs as it may
deem desirable, subject to review and approval of such
rules and regulations by the Trustees at the next succeeding
meeting of the Trustees, but in the absence of any such action
or any contrary provisions by the Trustees, the business of each
Committee shall be conducted, so far as practicable, in the same
manner as provided herein and in the Declaration for the
Trustees.

SECTION 4.3. Trustees May Alter, Abolish, etc., Committees
Trustees may at any time alter or abolish any Committee, change
membership of any Committee, or revoke, rescind, waive or
modify action of any Committee or the authority of any Committee
with respect to any matter or class of matters; provided, that
no such action shall impair the rights of any third parties.

SECTION 4.4. Minutes: Review by Trustees. Any Committee to
which the Trustees delegate any of their powers or duties shall
keep records of its meetings and shall report its actions to the
Trustees.

<PAGE> 15

ARTICLE 5

SEAL

The seal of the Trust, if any, may be affixed to any
instrument, and the seal and its attestation may be
lithographed, engraved or otherwise printed on any document with
the same force and effect as if had been imprinted and affixed
manually in the same manner and with the same force and effect
as if done by a Delaware corporation. Unless otherwise
required by the Trustees, the seal shall not be necessary to be
placed on, and its absence shall not impair the validity of, any
document, instrument or other paper executed and delivered by or
on behalf of the Trust.

ARTICLE 6

SECTION 6.1. Issuance of Shares. The Trustees may issue an
unlimited number of Classes of Shares of any or all Series
either in certificated or uncertificated form, they may issue
certificates to the holders of a Class of Shares of a Series
which was originally issued in uncertificated form, and if they
have issued Shares of any Series in certificated form, they may
at any time discontinue the issuance of Share certificates for
such Series and may, by written notice to such Shareholders of
such Series require the surrender of their Share certificates to
the Trust for cancellation, which surrender and cancellation
shall not affect the ownership of Shares for such Series.

SECTION 6.2. Uncertificated Shares. For any Class of Shares
for which the Trustees issue Shares without certificates, the
Trust or the Transfer Agent may either issue receipts therefor
or may keep accounts upon the books of the Trust for the record
holders of such Shares, who shall in either case be deemed, for
all purposes hereunder, to be the holders of such Shares as if
they had received certificates therefor and shall be held to
have expressly assented and agreed to the terms hereof and of
the Declaration.

SECTION 6.3. Share Certificates. For any Class of Shares for
which the Trustees shall issue Share certificates, each
Shareholder of such Class shall be entitled to a certificate
stating the number of Shares owned by him in such form as shall
be prescribed from time to time by the Trustees. Such

<PAGE> 16

certificate shall be signed by the President or a Vice
President, and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Trust. Such
signatures may be facsimiles if the certificate is
countersigned by a Transfer Agent, or by a Registrar,
other than a Trustee, officer or employee of the Trust. In case
any officer who has signed or whose facsimile signature has been
placed on such certificate shall cease to be such officer before
such certificate is issued, it may be issued by the Trust with
the same effect as if he were such officer at the time of its
issue.

SECTION 6.4. Lost, Stolen, etc., Certificates. If any
certificate for certificated Shares shall be lost,
stolen, destroyed or mutilated, the Trustees may authorize the
issuance of a new certificate of the same tenor and for the same
number of Shares in lieu thereof. The Trustees shall require
the surrender of any mutilated certificate in respect of which a
new certificate is issued, and may, in their discretion, before
the issuance of a new certificate, require the owner of a lost,
stolen or destroyed certificate, or the owner's legal
representative, to make an affidavit or affirmation setting
forth such facts as to the loss, theft or destruction as they
deem necessary, and to give the Trust a bond in such reasonable
sum as the Trustees direct, in order to indemnify the Trust.

ARTICLE 7

TRANSFER OF SHARES

SECTION 7.1. Transfer Agents, Registrars, etc. As approved in
Section 5.2(e) of the Declaration, the Trustees shall have the
authority to employ and compensate such transfer agents and
registrars with respect to the Shares of the Trust as the
Trustees shall deem necessary or desirable. In addition, the
Trustees shall have the power to employ and compensate such
dividend dispersing agents, warrant agents and agents for
reinvestment of dividends as they shall deem necessary or
desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustees.

SECTION 7.2 Transfer of Shares. The Shares of the Trust shall
be transferable on the books of the Trust only upon delivery to
the Trustees or a transfer agent of the Trust of proper
documentation as provided in Section 6.1(m) of the Declaration.
The Trust, or its transfer agents, shall be authorized to refuse
any transfer unless and until presentation of such evidence as
may be reasonably required to show that the requested transfer
is proper.

SECTION 7.3 Registered Shareholders. The Trust may deem and
treat the holder of record of any Shares the absolute owner

<PAGE> 17

thereof for all purposes and shall not be required to take any
notice of any right or claim of right of any other person.

ARTICLE 8

AMENDMENTS

SECTION 8.1. Bylaws Subject to Amendment. These Bylaws may be
altered, amended or repealed, in whole or in part, at any time
by vote of the holders of a majority of the Shares issued,
outstanding and entitled to vote. The Trustees, by vote of a
Majority of the Trustees, may alter, amend or repeal these
Bylaws, in whole or in part, including Bylaws adopted by the
Shareholders, except with respect to any provision hereof which
by law, the Declaration or these Bylaws requires action by the
Shareholders. Bylaws adopted by the Trustees may be altered,
amended or repealed by the Shareholders.

SECTION 8.2. Notice of Proposal to Amend Bylaws Required. No
proposal to amend or repeal these Bylaws or to adopt new Bylaws
shall be acted upon at a meeting unless either (i) such proposal
is stated in the notice or in the waiver of notice, as the case
may be, of the meeting of the Trustees or Shareholders at which
such action is taken, or (ii) all of the Trustees or
Shareholders, as the case may be, are present at such meeting
and all agree to consider such proposal without protesting the
lack of notice.

<PAGE> 1
EXHIBIT 4(i)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

CLASS A

ORGANIZED AND EXISTING UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP
_________________

fully paid and nonassessable shares of beneficial interest with $0.01 par value
of Van Kampen American Capital Pennsylvania Tax Free Income Fund, transferable
on the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERICAN CAPITAL
PENNSYLVANIA TAX FREE INCOME FUND
SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

NUMBER CLASS A SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
--------------------------------------------------------------------------------

REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:

A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT 4(ii)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

CLASS B

ORGANIZED AND EXISTING UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP
_________________

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERICAN CAPITAL
PENNSYLVANIA TAX FREE INCOME FUND
SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

NUMBER CLASS B SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT 4(iii)

NUMBER SHARES

__________ __________

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

CLASS C

ORGANIZED AND EXISTING UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP
_________________

WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.

Dated

[VAN KAMPEN AMERICAN CAPITAL
PENNSYLVANIA TAX FREE INCOME FUND
SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

NUMBER CLASS C SHARES
KC

ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.

TRADE DATE CONFIRM DATE BATCH I.D. NO.

CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:

ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256

THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:

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

For value received, hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate, and do hereby

irrevocably constitute and appoint _____________________________________________

_______________________________________________________________________ Attorney

to transfer the said stock on the books of the within-named Corporation with

full power of substitution in the premises.

Dated, _________________________________________ 19 ______

__________________________________________________________________
Owner

__________________________________________________________________
Signature of Co-Owner, if any

IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) guaranteed by:

________________________________________________________________________________

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

*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

Additional abbreviations may also be used though not in the above list

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

________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE> 1
EXHIBIT 5

FORM OF

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT dated as of _________, 199_, by and
between VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND (the
"Fund"), a Pennsylvania trust (the "Trust"), and VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP. (the "Adviser"), a Delaware corporation.

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

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

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

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

1
<PAGE> 2

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

FEE PERCENT OF

AVERAGE DAILY AVERAGE DAILY

NET ASSETS NET ASSETS

____________________ ____________________

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

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

2
<PAGE> 3

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

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

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

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

6. (a) Term. This Agreement shall become effective on the
date hereof and shall remain in full force until the second
anniversary of the date hereof unless sooner terminated as
hereinafter provided. This Agreement shall continue in force

3
<PAGE> 4

from year to year thereafter, but only as long as such
continuance is specifically approved as least annually in the
manner required by the Investment Company Act of 1940, as
amended.

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

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

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

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

9. Disclaimer. The Adviser acknowledges and agrees that, as
provided by Article 8, Section 8.1 of the Agreement and Declaration of Trust of
the Trust, the shareholders, trustees, officers, employees and other agents of
the Trust and the Fund shall not personally be bound by or liable hereunder,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim hereunder.

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

<PAGE> 5

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

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.

By:_____________________________________________

Dennis J. McDonnell, President

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

By:_____________________________________________

Dennis J. McDonnell, President

<PAGE> 1
EXHIBIT 6(a)

FORM OF

DISTRIBUTION AND SERVICE AGREEMENT

THIS DISTRIBUTION AND SERVICE AGREEMENT
dated as of

, 199_ (the "Agreement") by and between
VAN KAMPEN AMERICAN CAPITAL__________ TRUST, a Delaware
business trust (the "Trust"), on behalf of its series VAN
KAMPEN AMERICAN CAPITAL__________________ FUND (the "Fund"), and VAN
KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").

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

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

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

1
<PAGE> 2

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

The Distributor shall have the right to buy from the Fund the
Shares needed, but not more than the Shares needed (except for
reasonable allowances for clerical errors, delays and errors of
transmission and cancellation of orders) to fill unconditional
orders for Shares received by the Distributor from dealers,
agents and investors during each period when particular net
asset values and public offering prices are in effect as
provided in Section 3 hereof; and the price which the
Distributor shall pay for the Shares so purchased shall be the
respective net asset value used in determining the public
offering price on which such orders were based. The Distributor
shall notify the Fund at the end of each such period, or as soon
thereafter on that business day as the orders received in such
period have been compiled, of the number of Shares of each class
that the Distributor elects to purchase hereunder.

3. Public Offering Price. The public offering price per Share
shall be determined in accordance with the then current
Prospectus of the Fund. In no event shall the public offering
price exceed the net asset value per Share, plus, with respect
to the FESC Shares, a front-end sales charge not in excess of
the applicable maximum sales charge permitted under the Rules of
Fair Practice of the National Association of Securities Dealers,
Inc., as in effect from time to time. The net asset value per
share for each class of Shares, respectively, shall be
determined in the manner provided in the Declaration of Trust
and By-Laws of the Trust as then amended, the Designation of
Sub-trust with respect to the Fund, as amended, and in
accordance with the then current Prospectus of the Fund
consistent with the terms and conditions of the exemptive order
with respect to the Fund (Release No. IC- ) issued

<PAGE> 3
by the Securities and Exchange Commission on
, 1993, as it may be amended from time to time or
succeeded by other exemptive orders or rules promulgated by the
Securities and Exchange Commission under the 1940 Act. The Fund
will cause immediate notice to be given to the Distributor of
each change in net asset value as soon as it is determined.
Discounts to dealers purchasing FESC Shares from the Distributor
for resale and to brokers and other eligible agents making sales
of FESC Shares to investors and compensation payable from the
Distributor to dealers, brokers and other eligible agents making
sales of CDSC Shares and Combination Shares shall be set forth
in the selling agreements between the Distributor and such
dealers or agents, respectively, as from time to time amended,
and, if such discounts and compensation are described in the
then current Prospectus for the Fund, shall be as so set forth.

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

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

<PAGE> 4

5. Expenses.

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

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

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

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

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

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

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

<PAGE> 5

paid and the purposes for which such expenditures were made for
each such class of Shares.

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

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

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

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

<PAGE> 6

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

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

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

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

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

<PAGE> 7

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

The Distributor also covenants and agrees that it will
indemnify and hold harmless the Fund and each of its trustees

<PAGE> 8

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

8. Continuation, Amendment or Termination of This Agreement.
This Agreement shall become effective on the Effective Date and
thereafter shall continue in full force and effect year to year
with respect to each class of Shares so long as such continuance
is approved at least annually (i) by the Board of Trustees of
the Fund or by a vote of a majority of the outstanding voting
securities of the respective class of Shares of the Fund, and

<PAGE> 9

(ii) by vote of a majority of the Trustees who are not parties
to this Agreement or interested persons in any such party (the
"Independent Trustee") cast in person at a meeting called for
the purpose of voting on such approval, provided, however, that
(a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any
penalty either by vote of a majority of the Disinterested
Trustees, or by vote of a majority of the outstanding voting
securities of the respective class of Shares of the Fund, on
written notice to the Distributor; (b) this Agreement shall
immediately terminate in the event of its assignment; and (c)
this Agreement may be terminated by the Distributor on ninety
(90) days' written notice to the Fund. Upon termination of this
Agreement with respect to either class of Shares of the Fund,
the obligations of the parties hereunder shall cease and
terminate with respect to such class of Shares as of the date of
such termination, except for any obligation to respond for a
breach of this Agreement committed prior to such termination.

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

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

9. Limited Liability of Shareholder. Notwithstanding anything
to the contrary contained in this Agreement, you acknowledge and
agree that, as provided by Article 8, Section 8.1 of the Agreement and
Declaration of Trust of the Trust, this Agreement is executed by
the Trustees of the Trust and/or Officers of the Fund by them
not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of
the Trustees, Officers or Shareholders individually, but bind
only the trust estate.

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

11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES
HERETO SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS
WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.

IN WITNESS WHEREOF, the parties hereto have caused this

<PAGE> 10
Agreement to be executed by their officers designated below on
the day and year first above written.

VAN KAMPEN AMERICAN CAPITAL ____________ TRUST, on
behalf of its series, VAN KAMPEN AMERICAN CAPITAL __________________ FUND

By:

Name:

Title:

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

By:

Name:

Title:

<PAGE> 1
EXHIBIT 6(b)

DEALER AGREEMENT

WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

REGARDING VAN KAMPEN AMERICAN CAPITAL

OPEN-END AND CLOSED-END INVESTMENT COMPANIES

Ladies and Gentlemen:

As dealer for our own account, we offer to sell to you shares
of any of the Van Kampen American Capital open-end investment companies
(the "Open-End Funds" or, individually, an "Open-End Fund") and
Van Kampen American Capital closed-end investment companies (the
"Closed-End Funds" or, individually, a "Closed-End Fund")
distributed by Van Kampen American Capital Distributors, Inc.
("VKAC") pursuant to the terms and conditions contained herein.
Collectively, the Open-End Funds and Closed-End Funds sometimes
are referred to herein as the "Funds" or, individually, as a
"Fund".

VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for
each Fund with respect to its offering of one or more classes of
shares as described in each Fund's Prospectus. Pursuant to this
Agreement, VKAC offers to sell to you shares of each Open-End
Fund and each Closed-End Fund prior to the Effective Date (as
defined herein) of each Fund's Registration Statement (as
defined herein) (the "Initial Offering Period") and after the
Effective Date of each Fund's Registration Statement (the
"Continuous Offering Period") (if any) as described in each
respective Fund's Prospectus.

As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of
Additional Information included in the registration statement
for the fund on the effective date and as from time to time
thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any
preliminary prospectus and any preliminary Statement of
Additional Information included at any time as a part of the
registration statement for any Fund prior to the effective date
and which is authorized by VKAC for use in connection with the
offering of shares.

In consideration of the mutual obligations contained herein,

<PAGE> 2

the sufficiency of which is hereby acknowledged by you, the
terms of the Agreement are as follows:

GENERAL TERMS AND CONDITIONS

1. Your acceptance of this Agreement constitutes a
representation that you are a broker-dealer registered with the
Securities and Exchange Commission (the "SEC") and a member in
good standing of the National Association of Securities Dealers,
Inc. (the "NASD") or, in the alternative, that you are a foreign
dealer or bank, not required to be registered as a broker-dealer
with the SEC and not required or eligible for membership in the
NASD. If you are such an NASD member, you agree that in making
sales of shares of the one or more classes of shares of each
Fund you will comply with all applicable rules of the NASD,
including without limitation rules pertaining to the opening,
approval, supervision and monitoring of customer accounts, the
NASD's Interpretation with Respect to Free-Riding and
Withholding and Sections 8, 24 and 36 of Article III of the
NASD's Rules of Fair Practice. If you are such an unregistered
foreign dealer or bank, you agree not to offer or sell, or to
agree to offer or sell, directly or indirectly, except through
VKAC, any shares to any party to whom such shares may not be
sold unless you are so registered and a member of the NASD, and
in making sales of such shares you agree to comply with the
NASD's Interpretation with Respect to Free-Riding and
Withholding and Sections 8, 24 and 36 of Article III of the
NASD's Rules of Fair Practice as though you were a member in
good standing of the NASD and to comply with Section 25 of such
Article III as it applies to a nonmember broker or dealer in a
foreign country. You and we agree to abide by all other Rules
and Regulations of the NASD, including Section 26 of its Rules
of Fair Practice, and all applicable state and Federal laws,
rules and regulations. Your acceptance also constitutes a
representation that you have been duly authorized by proper
corporate or partnership action to enter into this Agreement and
to perform your obligations hereunder. You will not accept any
orders from any broker, dealer or financial institution who is
purchasing from you with a view toward distribution unless you
have obtained such person's or entity's written consent to be
bound by the terms of this Agreement.

2. In all sales of shares of the Funds to the public you
shall act as dealer for your own account, and you shall have no
authority in any transaction to act as agent for the Fund or for
VKAC.

3. Each Fund has filed with the SEC and the securities
commissions of one or more states a Registration Statement (the
"Registration Statement") on the SEC Form applicable to the
respective Fund. The date on which the Registration Statement
is declared effective by the SEC is referred to herein as the
"Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you
expressly acknowledge and understand that with respect to such
Fund:

<PAGE> 3

(a) Shares of such Fund may not be sold,
nor may offers to buy be accepted, (i) in any state prior to the
Effective Date of the Registration Statement with respect thereto
or (ii) in any state in which such offer or sale would be unlawful
prior to registration or qualification under the securities laws of such
state.

(b) The Fund's Preliminary Prospectus,
together with any sales material distributed for use in connection with the
offering of shares of such Fund, does not constitute an offer to
sell or the solicitation of an offer to buy shares of such Fund
and is subject to completion and modification by the Prospectus.
You agree that you will distribute to the public only (a) the
Preliminary Prospectus, the Prospectus and any amendment or
supplement thereto and (b) sales literature or other documents
expressly authorized for such distribution by VKAC.

(c) In the event that you transmit indications
of interest to VKAC for accumulation prior to the Effective Date, you will
be responsible for confirming such indications of interest with
your customers following the Effective Date. Indications of
interest with respect to shares of a class of a Fund's shares
transmitted to VKAC prior to the Effective Date will be
conditioned upon the occurrence of the Effective Date and the
registration or qualification of the respective class of shares
in the respective state.

(d) Indications of interest with respect to shares of a
class of a Fund's shares which are not canceled by you prior to
the latter of the Effective Date and the registration or
qualification of the respective class of the Fund's shares in
the respective state, and accepted by VKAC will be deemed by
VKAC to be orders for shares of such class of shares of the Fund.

(e) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Prospectus
and this Agreement.

4. After the Effective Date, you will not offer shares of a
class of the Fund's shares for sale in any state where they are
not qualified for sale under the "blue sky" laws and regulations
of such state or where you are not qualified to act as a dealer,
except for states in which they are exempt from qualification.

5. In the event that you offer shares of the Fund for sale
outside the United States, you agree to comply with the
applicable laws, rules and regulations of the foreign government
having jurisdiction over such sales, including any regulations
of the United States military authorities applicable to
solicitations to military personnel.

<PAGE> 4

6. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been
qualified for sale under the respective securities or "blue sky"
laws of such jurisdictions. VKAC understands and agrees that
qualification of any shares of a Fund for sale in such
jurisdictions shall be solely VKAC's responsibility and that you
assume no responsibility or obligation with respect to such
eligibility. You understand and agree that your compliance with
the requirements of the securities or "blue sky" laws in each
jurisdiction with respect to your right to sell the shares in
such jurisdiction shall be solely your responsibility.

7. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained
in the Fund's current Preliminary Prospectus or Prospectus, as
the case may be. In purchasing shares from us you shall rely
solely on the representations contained in such Prospectus.
VKAC will furnish additional copies of a Fund's current
Prospectus and sales literature issued by VKAC in reasonable
quantities upon request.

8. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified
in the then-current Fund Prospectus. The minimum dollar
purchase of any shares of each Fund by any person shall be the
applicable minimum dollar amount described in the then-current
Fund Prospectus for that class of shares, and no order for less
than such amount will be accepted hereunder. The procedures
relating to the handling of orders shall be subject to
instructions that VKAC shall communicate from time to time to
you. All orders are subject to acceptance or rejection by VKAC
in its sole discretion.

9. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office
of VKAC's clearing agent, by check payable to the order of the
Fund which reserves VKAC's right to delay issuance or transfer
of shares until such check has cleared. If such payment is not
received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the sale or, at its option, to sell
the shares ordered back to the Fund, and in either case, VKAC
may hold you responsible for any loss suffered by the Fund. You
agree that in transmitting investors' funds, you will comply
with Rule 15c2-4 under the Securities Exchange Act of 1934, as
amended.

10. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such
withholding; e.g., by a change in the net asset value from that
used in determining the public offering price to your customers.

11. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.

<PAGE> 5

12. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8
under the Securities Exchange Act of 1934, as amended, as it
relates to the distribution of Preliminary Prospectuses (and not
Statements of Additional Information) and Prospectuses (and not
Statements of Additional Information) for each Fund and agree
that you will comply therewith. You agree that if an investor
or potential investor places a request with you to receive a
Statement of Additional Information, you will (i) provide such
person with a Statement of Additional Information without charge
and notify the Fund that you have done so, (ii) notify the Fund
of the request so that the Fund can fulfill the request or (iii)
tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on
the cover of the current Prospectus or Preliminary Prospectus.
You also agree to keep an accurate record of your distribution
(including dates, number of copies and persons to whom sent) of
copies of any Preliminary Prospectus (and any Statement of
Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or
supplement to either) and, promptly upon request by VKAC, to
bring all subsequent changes to such Preliminary Prospectus or
Prospectus to the attention of anyone to whom such material
shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund
a copy of the Prospectus (and not the Statement of Additional
Information) for such Fund filed pursuant to Rule 497 under the
Securities Act of 1933, as amended.

13. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares of Funds sold to you shall be issued
only if specifically requested.

14. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this
Agreement.

15. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund
Department. Any notice to you shall be duly given if sent to
you at the address specified by you below or such other address
as you may designate to VKAC in writing.

16. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture
or partnership between VKAC and you.

17. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the
choice-of-law principles thereof.

18. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend
or withdraw the offering of any shares of a Fund entirely. VKAC

<PAGE> 6

reserves the right, without notice, to amend, modify or cancel
the Agreement. The Agreement may not be assigned by either
party without prior written consent of the other party.

19. This Agreement may be terminated at any time by either
party.

TERMS AND CONDITIONS APPLICABLE ONLY TO OPEN-END FUNDS

20. Each of the Open-End Fund's is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as
described in such Fund's then-current Prospectus pursuant to
which the Open-End Fund may sell multiple classes of its shares
with varying combinations of front-end service charges (each a
"FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion
rights, voting rights, expenses allocations and investment
requirements. As used herein, classes of shares of a Fund
subject to a FESC will be referred to as FESC Shares, and
classes of shares of a Fund subject to a CDSC will be referred
to as CDSC Shares.

21.(a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares
shall be the net asset value per share plus a FESC, expressed as
a percentage of the applicable public offering price, as
determined and effective as of the time specified in the
then-current Prospectus of such Open-End Fund. The dealer
discount applicable to any sale of shares of a class of FESC
Shares of an Open-End Fund shall be a percentage of the
applicable public offering price for such shares as provided for
in the then-current Prospectus of such Open-End Fund or, if not
so provided, as provided to you from time to time in writing by
VKAC.

(b) With respect to any shares of a class
of CDSC Shares of an Open-End Fund, the public offering price for such shares
shall be the net asset value per share as determined and
effective as of the time specified in the then-current
Prospectus of such Open-End Fund. The dealer sales compensation
payable by VKAC applicable to any sale of shares of a class of
CDSC Shares of an Open-End Fund shall be the percentage of the
applicable public offering price for such shares as provided for
in the then-current Prospectus of such Open-End Fund or, if not
so provided, as provided to you from time to time in writing by
VKAC.

22. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund
pursuant to Rule 12b-1 ("Rule 12b-1 Plan") under the Investment
Company Act of 1940, as amended, or the Service Plan with
respect to a class of shares, it is understood that you must be
approved by the Board of Directors of such Open-End Fund and
execute a Distribution Assistance Agreement.

<PAGE> 7

23. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt
policies and procedures in the form of the policies and
procedures attached hereto as Exhibit A with respect to when you
may appropriately sell the various classes of shares of the
Open-End Funds to investors and that you will sell such shares
only in accordance therewith.

24.(a) You agree to purchase shares of an Open-End Fund only
from VKAC or from your customers. If you purchase shares of an
Open-End Fund from VKAC, you agree that all such purchases shall
be made only: (i) to cover orders already received by you from
your customers or (ii) for your own bona fide investment. If
you purchase shares of an Open-End Fund from your customers, you
agree to pay such customers not less than the applicable
repurchase price for such shares as established by the
then-current Prospectus for such Open-End Fund. VKAC in turn
agrees that it will not purchase any shares from an Open-End
Fund except for the purpose of covering purchase orders that it
has already received.

(b) With respect to shares of a class of CDSC Shares
of an Open-End Fund purchased from your customers, you additionally
agree to resell such shares only to VKAC as agent for the Fund
at the repurchase price for such shares as established by the
then-current Prospectus of such Open-End Fund. You acknowledge
and understand that shares of a class of CDSC Shares of an
Open-End Fund may be subject to a CDSC payable to VKAC as set
forth in the Prospectus for such Open-End Fund in effect at the
time of the original purchase of such shares from the Open-End
Fund and that the repurchase price for such shares that will be
paid by VKAC will reflect the imposition of any applicable CDSC.

25.(a) You shall sell shares of a class of shares of an
Open-End Fund only: (i) to customers at the applicable public
offering price or (ii) to VKAC as agent for the Open-End Fund at
the repurchase price in the then-current Prospectus of such
Open-End Fund. In such a sale to VKAC, you may act either as
principal for your own account or as agent for your customer.
If you act as principal for your own account in purchasing
shares of a class of shares of an Open-End Fund for resale to
VKAC, you agree to pay your customer not less than the price
that you receive from VKAC. If you act as agent for your
customer in selling shares of a class of shares of an Open-End
Fund to VKAC, you agree not to charge your customer more than a
fair commission for handling the transaction. You acknowledge
and understand that CDSC Shares of an Open-End Fund may be
subject to a CDSC payable to VKAC as set forth in the Prospectus
of such Open-End Fund in effect at the time of the original
purchase of such CDSC Shares and that the repurchase price that
will be paid by VKAC for such CDSC Shares will reflect the
imposition of any such CDSC.

26. If any shares of a class of FESC Shares of an Open-End
Fund sold to or by you under the terms of this Agreement are

<PAGE> 8

repurchased by the Fund or by VKAC as agent for the Fund or are
tendered for redemption within seven business days after the
date of VKAC's confirmation of the original purchase, it is
agreed that you shall forfeit your right to any dealer discount
received by you on such FESC Shares. VKAC will notify you of
any such repurchase or redemption within ten business days from
the date on which the repurchase or redemption order in proper
form is delivered to VKAC or to the Fund, and you shall
forthwith refund to VKAC the full dealer discount allowed to you
on such sale. VKAC agrees, in the event of any such repurchase
or redemption, to refund to the Fund its share of any discount
allowed to VKAC and, upon receipt from you of the refund of the
discount allowed to you, to pay such refund forthwith to the
Fund.

TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS

27. No Closed-End Fund will issue fractional shares.

28. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers and dealers participating in the
Initial Offering Period or among brokers, dealers and banks in
the Continuous Offering Period, as the case may be, on other
than a pro rata basis, which may result in certain brokers,
dealers and banks not being allocated the full amount of shares
of such fund sold by them while certain other brokers, dealers
and banks may receive their full allocation.

29. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received during
the Initial Offering Period to VKAC within the time period as
specified in such Closed-End Fund's Prospectus (or in the time
period as extended by VKAC in writing). You also agree to
transmit any customer order received during the Continuous
Offering Period to VKAC prior to the time that the public
offering price for such Closed-End Fund is next determined after
your receipt of such order as set forth in the Closed-End Fund's
Prospectus. There is no assurance that each Closed-End Fund
will engage in a continuous offering of shares.

30. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of
VKAC's own assets as set forth in the then-current Prospectus of
such Closed-End Fund (exclusive of additional compensation that
may be payable pursuant to sales programs, if any, that may be
established from time to time as described in the Prospectus for
such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no
event will any Closed-End Fund reimburse VKAC for any such sales
concessions or other additional compensation or pay any such
concession or other additional compensation or allowance
directly to you. VKAC will specify for each Closed-End Fund a
period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock
Exchange or another national securities market system (which
period will end no later that the first dividend payment date

<PAGE> 9

with respect to such Closed-End Fund) during which sales
concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the
"Forfeiture Period"). During the Forfeiture Period for any
Closed-End Fund, physical delivery of certificates representing
shares will be required to transfer ownership of such shares.
In the event that any shares of a Closed-End Fund sold through
an order received from you in the Initial Offering Period or the
Continuous Offering Period are resold in the open market or
otherwise during the Forfeiture Period, VKAC reserves the right
to require you to forfeit any sales concessions and other
additional compensation with respect to such shares. In the
event of a forfeiture, VKAC may withhold any forfeited sales
concessions and other additional compensation that has not yet
been paid or from other amounts yet to be paid to you (whether
or not payable with respect to such shares) and you agree to
repay to VKAC, promptly upon demand, any forfeited sales
concessions and other compensation that has been paid.
Determinations of the amounts to be paid to you or by you to
VKAC shall be made by VKAC and shall be conclusive.

31. During the Initial Offering Period and any Continuous
Offering Period for any Closed-End Fund, you agree to supply
VKAC, not less frequently than once a week by Friday, 5:00 p.m.
Eastern Time, during such Closed-End Fund's Initial Offering
Period, a list setting forth by state and in the aggregate all
indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during
such week (or lesser period of time), and a list setting forth
by name and location each registered representative making said
sales and indicating the amount of all sales per Closed-End Fund
to date.

32. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.

33. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the
Closed-End Funds (other than through tender offers from time to
time, if any) or by VKAC and that no secondary market for such
shares is expected to develop until the shares have begun
trading on a national exchange or national market system. You
hereby covenant that, until notified by VKAC that the
distribution of such shares has been completed or that the
Forfeiture Period has ended, you (a) will not make a secondary
market in any shares of such a Closed-End Fund, (b) will not
purchase or hold shares of such Closed-End Fund in inventory for
the purpose of resale in the open market or to your customers
and (c) without VKAC's consent, will not repurchase shares of
such Closed-End Fund in the open market or from your customers
for any account in which you have a beneficial interest.

34. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen Merritt Prime
Rate Income Trust (the "Prime Rate Fund") may continue
indefinitely. The offer to sell shares of the Prime Rate Fund
is subject to further terms and conditions in addition to those
set forth above as follows:

<PAGE> 10

(a) You expressly acknowledge and understand that
shares of the Prime Rate Fund will not be repurchased by either the Prime
Rate Fund (other than through tender offers from time to time,
if any) or VKAC, and that no secondary market for the shares of
the Prime Rate Fund exists currently, or is expected to develop.
You also expressly acknowledge and agree that, in the event
your customer cancels their order for shares after confirmation,
such shares may not be repurchased, remarketed or otherwise
disposed of by or through VKAC.

(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering
for all or a portion of the Prime Rate Fund's shares on a
quarterly basis, there is no assurance the Prime Rate Fund will
tender for shares at any time or, following such a tender offer,
that shares so tendered will be repurchased by the Prime Rate
Fund. You acknowledge and understand that an early withdrawal
charge payable to VKAC will be imposed on most shares accepted
for tender by the Prime Rate Fund which have been held for less
than five years, as set forth in the Prime Rate Fund's
Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME
RATE FUND'S CURRENT PROSPECTUS IS EXPRESSLY PROHIBITED.

Please accept the foregoing by signing this Dealer Agreement,
keeping a copy for your files and returning the original to us.

Accepted and Agreed to:

(PRINT OR TYPE)

Dated: By: Keith K. Furlong

Its: Senior Vice President

Broker-Dealer Name

Broker-Dealer Taxpayer ID Number

<PAGE> 11

Address

City, State, Zip

By:

Signature

Name

Title

Phone

<PAGE> 12

EXHIBIT A

Policies and Procedures

with Respect to Sales under the

Alternative Distribution Plan

As certain Van Kampen American Capital open-end
investment companies (the "Funds") offer multiple classes of
shares subject to either front-end sales charges ("FESC Shares")
or contingent deferred sales charges ("CDSC Shares"), it is
important for an investor not only to choose the Fund that best
suits his or her investment objectives, but also to choose the
alternative distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the
selling firm) are instituting the following policy:

1. Any purchase order for $1 million or more must be
for Class A Shares.

2. Any purchase order for $100,000 but
less than $1 million is subject to approval by [appropriate selling firm
supervisor], who must approve the purchase order ticket for the appropriate
class of shares in light of the relevant facts and
circumstances, including:

(a) the specific purchase order dollar amount;

(b) the length of time the investor expects to hold his
shares; and

(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of
Intent or a Quantity Discount.

There are instances when one financing method may be more
appropriate than the other. For example, investors who would
qualify for a significant purchase price discount from the
maximum sales charge on shares of a class of FESC Shares that
has such purchase price discounts may determine that payment of
such a reduced front-end sales charge is superior to electing to
purchase shares of a class of CDSC Shares with no front-end
service charge but subject to a higher aggregate distribution
and service fee. On the other hand, an investor whose order
would not qualify for such purchase price discounts and intends
to remain invested until after the expiration of the applicable
CDSC may wish to defer the sales charge and have all his funds

<PAGE> 13

invested in Class B Shares initially. In addition, 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, depending on the amount of his
purchase, wish to acquire Class C Shares. However, investors
who intend to hold their shares for a significantly long time
may not wish to continue to bear the ongoing distribution and
service expenses of shares of Class C Shares, irrespective of
the fact that a contingent deferred sales charge would
eventually not apply to a redemption of such shares.

[The appropriate selling firm supervisor] must ensure that all
employees receiving investor inquiries about the purchase of
shares from funds subject to Van Kampen American Capital
Distributors, Inc.'s alternative distribution plan advise the
investor of the available alternative distribution methods
offered by such funds and the impact of choosing one method over
another. It may be appropriate for [the appropriate selling
firm supervisor] to discuss the purchase with the investor.

This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen
American Capital Distributors, Inc.'s alternative distribution
plan.

Questions relating to this policy should be directed to
[appropriate selling firm supervisor].

Van Kampen American Capital

One Parkview Plaza

Oakbrook Terrace, Illinois 60181

5/95

VAN KAMPEN AMERICAN CAPITAL

DISTRIBUTORS, INC.

<PAGE> 1
EXHIBIT 6(c)

BROKER FULLY DISCLOSED CLEARING AGREEMENT

WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

REGARDING VAN KAMPEN AMERICAN CAPITAL

OPEN-END AND CLOSED-END INVESTMENT COMPANIES

Ladies and Gentlemen:

As dealer for our own account, we offer to make available to
you shares of any of the

Van Kampen American Capital open-end investment companies (the
"Open-End Funds" or, individually, an "Open-End Fund") and Van Kampen
American Capital closed-end investment companies (the "Closed-End Funds"
or, individually, a "Closed-End Fund") distributed by Van Kampen
American Capital Distributors, Inc. ("VKAC") pursuant to the
terms and conditions contained herein. Collectively, the
Open-End Funds and Closed-End Funds sometimes are referred to
herein as the "Funds" or, individually, as a "Fund". You are a
broker-dealer that desires to make available shares of such
Funds to your customers on a fully disclosed basis wherein VKAC
would confirm transactions of your customers in a Fund directly
to them.

VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for
each Fund with respect to its offering of one or more classes of
shares as described in each Fund's Prospectus. Pursuant to this
Agreement, VKAC offers to make available to you shares of each
Open-End Fund and each Closed-End Fund, prior to the Effective
Date (as defined herein) of each Fund's Registration Statement
(the "Initial Offering Period") and after the Effective Date of
each Fund's Registration Statement (as defined herein) (the
"Continuous Offering Period") (if any) as described in each
respective Fund's Prospectus.

As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of
Additional Information included in the registration statement
for the fund on the effective date and as from time to time
thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any
preliminary prospectus and any preliminary Statement of
Additional Information included at any time as a part of the
registration statement for any Fund prior to the effective date
and that is authorized by VKAC for use in connection with the
offering of shares.

<PAGE> 2

In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the
terms of the Agreement are as follows:

GENERAL TERMS AND CONDITIONS

1. Your acceptance of this Agreement constitutes a
representation that you are a securities broker-dealer
registered with the Securities and Exchange Commission (the
"SEC") and a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD"). You agree to abide by
the laws, rules and regulations of the SEC and NASD, including
without limitation rules pertaining to the opening, approval,
supervision and monitoring of customer accounts, the NASD's
Interpretation with Respect to Free-Riding and Withholding and
Sections 8, 24 and 36 of Article III of the NASD's Rules of Fair
Practice. You and we agree to abide by all other Rules and
Regulations of the NASD, including Section 26 of its Rules of
Fair Practice. Your acceptance also constitutes a
representation that you have been duly authorized by proper
corporate or partnership action to enter into this Agreement and
to perform your obligations hereunder. You will not accept any
orders from any broker, dealer or financial institution who is
purchasing from you with a view toward distribution unless you
have obtained such person's or entity's written consent to be
bound by the terms of this Agreement.

2. For the purposes of the Securities and Exchange
Commission's Financial Responsibility Rules and the Securities
Investor's Protection Act, your customers will be considered
customers of VKAC and not of your firm. VKAC has been granted
an exemption from the NASD rules of Fair Practice, Article III
Section 45 requirements to send customer statements and thus
will not due so. Customer statements showing account activity
and balances will be mailed to the customer by the Funds each
time a financial transaction occurs in their account and on a
monthly basis. Nothing herein shall cause your firm's customers
to be interpreted as customers of VKAC for any other purpose, or
to negate the intent of any other section of this agreement,
including, but not limited to, the delineation of
responsibilities as set forth elsewhere in this agreement.

3. In transactions where you make available shares of the
Funds to the public, you shall have no authority to act as agent
for the Fund or for VKAC.

4. Each Fund has filed with the SEC and the securities
commissions of one or more states a Registration Statement (the
"Registration Statement") on the SEC form applicable to the
respective Fund. The date on which the Registration Statement
is declared effective by the SEC is referred to herein as the
"Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you
expressly acknowledge and understand that with respect to such

2
<PAGE> 3

Fund:

(a) Shares of such Fund may not be sold, nor may
offers to buy be accepted, (i) prior to the Effective Date of the
Registration Statement or (ii) in any state in which such offer
or sale would be unlawful prior to registration or qualification
under the securities laws of such state.

(c) In the event that you transmit indications of
interest to VKAC for accumulation prior to the Effective Date, upon your
instruction VKAC will send confirmation of such indications of
interest directly to your customers in writing, together with
copies of the Preliminary Prospectus for the Fund, and send
copies of the confirmations to you. Indications of interest
with respect to shares of a class of a Fund's shares transmitted
to VKAC prior to the Effective Date are subject to acceptance or
rejection by VKAC in its sole discretion and are conditioned
upon the occurrence of (i) the Effective Date and (ii) the
registration or qualification of the respective class of shares
in the respective state.

(d) Indications of interest with respect to shares of a
class of a Fund's shares not cancelled by you prior to or on the
later of (i) the Effective Date and (ii) the registration or
qualification of the respective class of shares in the
respective state, and accepted by VKAC will be deemed by VKAC to
be orders for Shares.

(e) Upon your instruction, VKAC will send
confirmations of orders accepted by VKAC (including indications of interest
deemed orders) directly to your customers in writing, together
with copies of the Prospectus for the Fund, and send copies of
the confirmations to you.

(f) Upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or discrepancies
that you discover and will promptly bring to VKAC's attention
any errors in such confirmations claimed by your customers. All
confirmations to your customers will indicate that orders were
placed on a fully disclosed basis.

(g) All indications of interest and orders
transmitted to VKAC are subject to the terms and conditions of the Fund's
Prospectus and this Agreement and are subject to acceptance or
rejection by VKAC in its sole discretion.

3
<PAGE> 4

5. After the Effective Date, you will not make shares of a
class of the Fund's shares available in any state where they are
not qualified for sale under the "blue sky" laws and regulations
of such state, except for states in which they are exempt from
qualification.

6. In the event that you make shares of the Fund available
outside the United States, you agree to comply with the
applicable laws, rules and regulations of the foreign government
having jurisdiction over such sales, including any regulations
of the United States military authorities applicable to
solicitations to military personnel.

7. Upon application to VKAC, VKAC will inform you as to the
jurisdictions in which VKAC believes shares of a Fund have been
qualified for sale under the respective securities or "blue sky"
laws of such jurisdictions. VKAC understands and agrees that
qualification of any shares of a Fund for sale in such
jurisdictions shall be solely VKAC's responsibility and that you
assume no responsibility or obligation with respect to such
eligibility. You understand and agree that your compliance with
the requirements of the securities or "blue sky" laws in each
jurisdiction with respect to your right to make the shares
available in such jurisdiction shall be solely your
responsibility.

8. No person is authorized to make any representations
concerning any class of shares of a Fund except those contained
in the Fund's current Preliminary Prospectus or Prospectus, as
the case may be. In purchasing shares from us you shall rely
solely on the representations contained in such Prospectus.
VKAC will furnish additional copies of a Fund's current
Prospectus and sales literature issued by VKAC in reasonable
quantities upon request.

9. You agree that you will distribute to the public only (a)
the Preliminary Prospectus, the Prospectus and any amendment or
supplement thereto and (b) sales literature or other documents
expressly authorized for such distribution by VKAC.

10. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified
in the then-current Fund Prospectus. The minimum dollar
purchase of any shares of each Fund by any person shall be the
applicable minimum dollar amount described in the then-current
Fund Prospectus for that class of shares, and no order for less
than such amount will be accepted hereunder. The procedures
relating to the handling of orders shall be subject to
instructions that VKAC shall communicate from time to time to
you. All orders are subject to acceptance or rejection by VKAC
in its sole discretion. Upon acceptance of an order, we shall
confirm directly to the customer in writing upon your
instruction and send a copy of the confirmation to you. In
addition, we will send a Fund Prospectus with the confirmation.

4
<PAGE> 5

You agree that upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or
discrepancies that you discover and shall promptly bring to
VKAC's attention any errors in such confirmations claimed by
your customers. All confirmations to your customers will
indicate that orders were placed on a fully disclosed basis.

11. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office
of VKAC's clearing agent, by check payable to the order of the
Fund which reserves VKAC's right to delay issuance of transfer
of shares until such check has cleared. If such payment is not
received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the trade at our option or as
required by the provisions of Regulation T, and in either case,
VKAC may hold you responsible for any loss suffered by the Fund.
You agree that in transmitting investors' funds, you will
comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.

12. You shall not withhold placing orders with VKAC from your
customers so as to profit yourself as a result of such
withholding; e.g., by a change in the net asset value from that
used in determining the public offering price to your customers.

13. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.

14. You represent that you are familiar with Release No. 4968
under the Securities Act of 1933, as amended, and Rule 15c2-8
under the Securities Exchange Act of 1934, as amended, as it
relates to the distribution of Preliminary Prospectuses (and not
Statements of Additional Information) and Prospectuses (and not
Statements of Additional Information) for each Fund and agree
that you will comply therewith. You agree that if an investor
or potential investor places a request with you to receive a
Statement of Additional Information, you will (i) provide such
person with a Statement of Additional Information without charge
and notify the Fund that you have done so, (ii) notify the Fund
of the request so that the Fund can fulfill the request or (iii)
tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on
the cover of the current Prospectus or Preliminary Prospectus.
You also agree to keep an accurate record of your distribution
(including dates, number of copies and persons to whom sent) of
copies of any Preliminary Prospectus (and any Statement of
Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or
supplement to either) and, promptly upon request by VKAC, to
bring all subsequent changes to such Preliminary Prospectus or
Prospectus to the attention of anyone to whom such material
shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund
a copy of the Prospectus for such Fund filed pursuant to Rule
497 under the Securities Act of 1933, as amended. Upon your
request, VKAC will furnish to such persons a copy of the
Prospectus for such Fund filed pursuant to Rule 497 Under the
Securities Act of 1993, as amended.

5
<PAGE> 6

15. The names of your customers shall remain your sole
property and shall not be used by VKAC for any purpose except
for servicing and informational mailings in the normal course of
business to Fund shareholders.

16. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares sold will be issued to your customers
only if specifically requested.

17. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this
Agreement.

18. All communications to VKAC shall be sent to One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: Mutual Fund
Department. Any notice to you shall be duly given if sent to
you at the address specified by you below or such other address
as you may designate to VKAC in writing.

19. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture
or partnership between VKAC and you.

20. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the
choice-of-law principles thereof.

21. The Fund reserves the right in its discretion and VKAC
reserves the right in its discretion, without notice, to suspend
or withdraw the offering of any shares of a Fund entirely. VKAC
reserves the right, without notice, to amend, modify or cancel
the Agreement. The Agreement may not be assigned by either
party without prior written consent of the other party.

22. This Agreement may be terminated at any time by either
party.

TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS

23. Each of the Open-End Funds is subject to an alternative
distribution plan (the "Alternative Distribution Plan") as
described in such Fund's then-current Prospectus pursuant to
which the Open-End Fund may sell multiple classes of its shares
with varying combinations of front-end service charges (each a
"FESC"), distributions fees, service fees, contingent deferred
sales charges (each a "CDSC"), exchange features, conversion
rights, voting rights, expenses allocations and investment

6
<PAGE> 7

requirements. As used herein, classes of shares of a Fund
subject to a FESC will be referred to as FESC Shares, and
classes of shares of a Fund subject to a CDSC will be referred
to as CDSC Shares.

24.(a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares
shall be the net asset value per share plus a FESC, expressed as
a percentage of the applicable public offering price, as
determined and effective as of the time specified in the
then-current Prospectus of such Open-End Fund. On each order
for shares of a class of FESC Shares of an Open-End Fund
accepted by us, you will be entitled to receive the applicable
agency commission for such shares as provided for in the
then-current Prospectus of such Open-End Fund or, if not so
provided, as provided to you from time to time in writing by
VKAC.

(b) With respect to any shares of a class of CDSC
Shares of an Open-End Fund, the public offering price for such shares
shall be the net asset value per share as determined and
effective as of the time specified in the then-current
Prospectus of such Open-End Fund. You will remit payment of the
aggregate public offering price to VKAC for the CDSC Shares
sold, and on each order accepted by us, you will be entitled to
receive the applicable selling compensation for such shares as
provided for in the then-current Prospectus of such Open-End
Fund or, if not so provided, as provided to you from time to
time in writing by VKAC.

25. Should you wish to participate in the Distribution Plan
with respect to a class of shares adopted by an Open-End Fund
pursuant to Rule 12b-1 ("Rule 12b-1 Plan") under the Investment
Company Act of 1940, as amended, or the Service Plan with
respect to a class of shares, it is understood that you must be
approved by the Board of Directors of such Open-End Fund and
execute a Distribution Assistance Agreement.

26. With respect to the Open-End Funds, your acceptance of
this Agreement constitutes a representation that you will adopt
policies and procedures in the form of the policies and
procedures attached hereto as Exhibit A with respect to when you
may appropriately make available the various classes of shares
of the Open-End Funds to investors and that you will make
available such shares only in accordance therewith.

27. You agree to make shares of an Open-End Fund available to
your customers only: (i) at the applicable public offering
price, (ii) from VKAC and (iii) to cover orders already received
by you from your customers. VKAC in turn agrees that it will
not purchase any shares from an Open-End Fund except for the
purpose of covering purchase orders that it has already received.

28.(a) If any shares of a class of FESC Shares of an Open-End
Fund sold to your customers under the terms of this Agreement
are repurchased by the Fund or by VKAC as agent for the Fund or

7
<PAGE> 8

are tendered for redemption within seven business days after the
date of VKAC's confirmation of the original purchase, it is
agreed that you shall forfeit your right to any agency
commission received by you on such FESC Shares. VKAC will
notify you of any such repurchase or redemption within ten
business days from the date on which the repurchase or
redemption order in proper form is delivered to VKAC or to the
Fund, and you shall forthwith refund to VKAC the full agency
commission allowed to you on such sale. VKAC agrees, in the
event of any such repurchase or redemption, to refund to the
Fund its share of any discount allowed to VKAC and, upon receipt
from you of the refund of the agency commission allowed to you,
to pay such refund forthwith to the Fund.

(b) If any shares of a class of CDSC Shares sold to
your customers under the terms of this Agreement are repurchased by
the Fund or by VKAC as agent for the Fund or are tendered for
redemption within seven business days after the date of VKAC's
confirmation of the original purchase, it is agreed that you
shall forfeit your right to any sales compensation received by
you on such CDSC Shares. We will notify you of any such
repurchase or redemption within ten business days from the date
on which the repurchase or redemption order in proper form is
delivered to VKAC or to the Fund, and you shall forthwith refund
to VKAC the full sales compensation paid to you.

TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS

29. No Closed-End Fund will issue fractional shares.

30. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers, dealers and, if permitted by
applicable laws, banks participating in the Initial Offering
Period or among brokers, dealers and banks in the Continuous
Offering Period, as the case may be, on other than a pro rata
basis, which may result in certain brokers, dealers and banks
not being allocated the full amount of shares of such Fund sold
by them while certain other brokers, dealers and banks may
receive their full allocation.

31. You agree that with respect to orders for shares of a
Closed-End Fund, you will transmit such orders received during
the Initial Offering Period to VKAC within the time period as
specified in such Closed-End Fund's Prospectus (or in the time
period as extended by VKAC in writing). You also agree to
transmit any customer order received during the Continuous
Offering Period to VKAC prior to the time that the public
offering price for such Closed-End Fund is next determined after
your receipt of such order, as set forth in the Closed-End
Fund's Prospectus. There is no assurance that each Closed-End
Fund will engage in a continuous offering of shares.

32. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of

8
<PAGE> 9

VKAC's own assets as set forth in the then-current Prospectus of
such Closed-End Fund (exclusive of additional compensation that
may be payable pursuant to sales programs, if any, that may be
established from time to time as described in the Prospectus for
such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no
event will any Closed-End Fund reimburse VKAC for any such sales
concessions or other additional compensation or pay any such
concession or other additional compensation or allowance
directly to you. VKAC will specify for each Closed-End Fund a
period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock
Exchange or another national securities market system (which
period will end no later than the first dividend payment date
with respect to such Closed-End Fund) during which sales
concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the
"Forfeiture Period"). During the Forfeiture Period for any
Closed-End Fund, physical delivery of certificates representing
shares will be required to transfer ownership of such shares.
In the event that any shares of a Closed-End Fund sold through
an order received from you in the Initial Offering Period or the
Continuous Offering Period are resold in the open market or
otherwise during the Forfeiture Period, VKAC reserves the right
to require you to forfeit any sales concessions and other
additional compensation with respect to such shares. In the
event of a forfeiture, VKAC may withhold any forfeited sales
concessions and other additional compensation that has not yet
been paid or from other amounts yet to be paid to you (whether
or not payable with respect to such shares), and you agree to
repay to VKAC, promptly upon demand, any forfeited sales
concessions and other compensation that has been paid.
Determinations of the amounts to be paid to you or by you to
VKAC shall be made by VKAC and shall be conclusive.

33. During the Initial Offering Period and any Continuous
Offering Period for any Closed-End Fund, you agree to supply
VKAC, not less frequently than once a week by Friday, 5:00 p.m.
Eastern Time, during such Closed-End Fund's Initial Offering
Period, a list setting forth by state and in the aggregate all
indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during
such week (or lesser period of time) and a list setting forth by
name and location each registered representative making said
sales and indicating the amount of all sales per Closed-End Fund
to date.

34. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.

9
<PAGE> 10

purchase or hold shares of such Closed-End Fund in inventory for
the purpose of resale in the open market or to your customers
and, (c) without VKAC's consent, will not repurchase shares of
such Closed-End Fund in the open market or from your customers
for any account in which you have a beneficial interest.

36. Unlike the other Closed-End Funds, the Continuous
Offering period with respect to the Van Kampen Merritt Prime
Rate Income Trust (the "Prime Rate Fund") may continue
indefinitely. The offer to make available to you shares of the
Prime Rate Fund is subject to further terms and conditions in
addition to those set out above, as follows:

(a) You expressly acknowledge and understand that shares of
the Prime Rate Fund will not be repurchased by either the Prime
Rate Fund (other than through tender offers from time to time,
if any) or VKAC and that no secondary market for the shares of
the Prime Rate Fund exists currently or is expected to develop.
You also expressly acknowledge and agree that, in the event your
customer cancels their order for shares after confirmation, such
shares may not be repurchased, remarketed or otherwise disposed
of by or through VKAC.

(b) You acknowledge and understand that, while the Board of
Trustees of the Prime Rate Fund intends to consider tendering
for all or a portion of the Prime Rate Fund's shares on a
quarterly basis, there is no assurance the Prime Rate Fund will
tender for shares at any time or, following such a tender offer,
that shares so tendered will be repurchased by the Prime Rate
Fund. You acknowledge and understand that an early withdrawal
charge payable to VKAC will be imposed on most shares accepted
for tender by the Prime Rate Fund that have been held for less
than five years, as set forth in the Prime Rate Fund's
Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME
RATE FUND'S CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.

Please accept the foregoing by signing this Broker Fully
Disclosed Clearing Agreement, keeping a copy for your files and
returning the original to us.

Accepted and Agreed to: (PRINT OR TYPE)

Dated: By: Keith K. Furlong

Its: Senior Vice President

<PAGE> 11

Broker-Dealer Name

Broker-Dealer Taxpayer ID Number

Address

City, State, Zip

By:

Signature

Name

Title

Phone

11
<PAGE> 12

EXHIBIT A

Policies and Procedures

with Respect to Sales under the

Alternative Distribution Plan

As certain Van Kampen American Capital open-end investment
companies (the "Funds") offer multiple classes of shares subject to either
front-end sales charges ("FESC Shares") or contingent deferred
sales charges ("CDSC Shares"), it is important for an investor
not only to choose the Fund that best suits his or her
investment objectives, but also to choose the alternative
distribution method that best suits his or her particular
situation. To assist investors in these decisions, we (the
selling firm) are instituting the following policy:

1. Any purchase order for $1 million or more must be for Class
A Shares.

2. Any purchase order for $100,000 but less than $1 million
is subject to approval by [appropriate selling firm supervisor],
who must approve the purchase order ticket for the appropriate
class of shares in light of the relevant facts and
circumstances, including:

(a) the specific purchase order dollar amount;

(b) the length of time the investor expects to hold his
shares; and

(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of
Intent or a Quantity Discount.

<PAGE> 13

purchase, wish to acquire Class C Shares. However, investors
who intend to hold their shares for a significantly long time
may not wish to continue to bear the ongoing distribution and
service expenses of shares of Class C Shares, irrespective of
the fact that a contingent deferred sales charge would
eventually not apply to a redemption of such shares.

This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen
American Capital Distributors, Inc.'s alternative distribution
plan.

Questions relating to this policy should be directed to
[appropriate selling firm supervisor].

Van Kampen American Capital

One Parkview Plaza

Oakbrook Terrace, Illinois 60181

5/94

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

<PAGE> 1
EXHIBIT 6(d)

BANK FULLY DISCLOSED CLEARING AGREEMENT

WITH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

REGARDING VAN KAMPEN AMERICAN CAPITAL

OPEN-END AND CLOSED-END INVESTMENT COMPANIES

Ladies and Gentlemen:

As dealer for our own account, we offer to make available to
you shares of any of the

Van Kampen American Capital open-end investment companies (the "Open-End
Funds" or, individually, an "Open-End Fund") and Van Kampen
American Capital closed-end investment companies (the "Closed-End Funds"
or, individually, a "Closed-End Fund") distributed by Van Kampen
American Capital Distributors, Inc. ("VKAC") pursuant to the
terms and conditions contained herein. Collectively, the
Open-End Funds and Closed-End Funds sometimes are referred to
herein as the "Funds" or, individually, as a "Fund". You are a
bank that desires to make available shares of such Funds to your
customers on a fully disclosed basis wherein VKAC would confirm
transactions of your customers in a Fund directly to them. You
agree not to make available shares of such Funds during any
fixed price offering of such shares.

VKAC acts as the principal underwriter (as such term is
defined in the Investment Company Act of 1940, as amended) for
each Fund with respect to its offering of one or more classes of
shares as described in each Fund's Prospectus. Pursuant to this
Agreement, VKAC offers to make available to you shares of each
Open-End Fund and each Closed-End Fund prior to the Effective
Date (as defined herein) of each Fund's Registration Statement
(as defined herein) (the "Initial Offering Period"), to the
extent permitted by applicable law, and after the Effective Date
of each Fund's Registration Statement (the "Continuous Offering
Period") (if any) as described in such Closed-End Fund's
Prospectus.

As used herein unless otherwise indicated, the term
"Prospectus" means the final prospectus and Statement of
Additional Information included in the Registration Statement
for the Fund on the Effective Date and as from time to time
thereafter amended or supplemented. As used herein unless
otherwise indicated, the term "Preliminary Prospectus" means any
preliminary prospectus and any Statement of Additional
Information included at any time as a part of the Registration
Statement for any Fund prior to the Effective Date and that is
authorized by VKAC for use in connection with the offering of
shares.

<PAGE> 2

In consideration of the mutual obligations contained herein,
the sufficiency of which is hereby acknowledged by you, the
terms of the Agreement are as follows:

GENERAL TERMS AND CONDITIONS

1. Your acceptance of this Agreement constitutes a
representation that you are a bank as defined in Section 3(a)(6)
of the Securities Exchange Act of 1934, as amended, and have
been duly authorized to enter into this Agreement and perform
your obligations hereunder. This Agreement as well as your
authority to make shares available to your customers will
automatically terminate if you shall cease to be a bank as
defined above. You agree not to offer or sell shares of any
Fund except through VKAC. You will not accept any orders from
any broker, dealer or financial institution who is purchasing
from you with a view toward distribution unless you have
obtained such person's or entity's written consent to be bound
by the terms of this Agreement.

3. In transactions where you make available shares of the
Funds to the public, you shall have no authority to act as agent
for the Fund or for VKAC. The customers in question are for all
purposes your customers and not customers of VKAC. We will
clear transactions for each of your customers only upon your
authorization, it being understood in all cases that (a) you are
acting as the agent for the customer; (b) the transactions are
without recourse against you by the customer except to the
extent that your failure to transmit orders in a timely fashion
results in a loss to your customer; (c) as between you and the
customer, the customer will have full beneficial ownership of
the Fund shares; (d) each transaction is initiated solely upon
the order of the customer; and (e) each transaction is for the
account of the customer and not for your account.

4. Each Fund has filed with the Securities and Exchange
Commission (the "SEC") and the securities commissions of one or
more states a Registration Statement (the "Registration
Statement") on the SEC form applicable to the respective Fund.

2
<PAGE> 3

The date on which the Registration Statement is declared
effective by the SEC is hereinafter referred to as the
"Effective Date". Prior to the Effective Date of the
Registration Statement with respect to a particular Fund, you
expressly acknowledge and understand that with respect to such
Fund:

(a) Shares of such Fund may not be sold, nor may offers to
buy be accepted, (i) prior to the Effective Date of the
Registration Statement or (ii) in any state in which such offer
or sale would be unlawful prior to registration or qualification
under the securities laws of such state.

(b) Except to the extent permitted by law, you will not
solicit or transmit to VKAC any indications of interest to
purchase shares during any fixed-price offering.

(c) The Fund's Preliminary Prospectus, together with any
sales material distributed for use in connection with the
offering of shares of such Fund, does not constitute an offer to
sell or the solicitation of an offer to buy shares of such Fund
and is subject to completion and modification by the Prospectus.

(d) In the event and to the extent permitted by applicable
law you transmit indications of interest to VKAC for
accumulation prior to the Effective Date, upon your instruction
VKAC will send confirmation of such indications of interest
directly to your customers in writing, together with copies of
the Preliminary Prospectus for the Fund, and send copies of the
confirmations to you. Indications of interest with respect to
shares of a class of a Fund's shares transmitted to VKAC prior
to the Effective Date are subject to acceptance or rejection by
VKAC in its sole discretion and are conditioned upon the
occurrence of (i) the Effective Date and (ii) the registration
or qualification of the respective class of shares in the
respective state.

(e) Indications of interest with respect to shares of a
class of a Fund's shares not canceled by you prior to or on the
later of (i) the Effective Date and (ii) the registration or
qualification of the respective class of shares in the
respective state, and accepted by VKAC will be deemed by VKAC to
be orders for Shares solely to the extent permitted by
applicable law.

(f) Upon your instruction, VKAC will send confirmations of
orders accepted by VKAC (including indications of interest
deemed orders) directly to your customers in writing, together
with copies of the Prospectus for the Fund, and send copies of
the confirmations to you.

(g) Upon receipt of duplicate confirmations you will examine

3
<PAGE> 4

the same and promptly notify VKAC of any errors or discrepancies
that you discover and will promptly bring to VKAC's attention
any errors in such confirmations claimed by your customers. All
confirmations to your customers will indicate that orders were
placed on a fully disclosed basis.

(h) All indications of interest and orders transmitted to
VKAC are subject to the terms and conditions of the Fund's
Prospectus and this Agreement and are subject to acceptance or
rejection by VKAC in its sole discretion.

9. You agree that you will distribute to the public only (i)
the Prospectus and any amendment or supplement thereto and (ii)
sales literature or other documents expressly authorized for
such distribution by VKAC.

10. Orders received from you will be accepted by VKAC only at
the public offering price applicable to each order as specified
in the then-current Fund Prospectus. The minimum dollar

4
<PAGE> 5

purchase of any shares of each Fund by any person shall be the
applicable minimum dollar amount described in the then-current
Fund Prospectus for that class of shares, and no order for less
than such amount will be accepted hereunder. The procedures
relating to the handling of orders shall be subject to
instructions that VKAC shall communicate from time to time to
you. All orders are subject to acceptance or rejection by VKAC
in its sole discretion. Upon acceptance of an order, we shall
confirm directly to the customer in writing upon your
instruction and send a copy of the confirmation to you. In
addition, we will send a Fund Prospectus with the confirmation.
You agree that upon receipt of duplicate confirmations you will
examine the same and promptly notify VKAC of any errors or
discrepancies that you discover and shall promptly bring to
VKAC's attention any errors in such confirmations claimed by
your customers. All confirmations to your customers will
indicate that orders were placed on a fully disclosed basis.

11. Payment for Fund shares shall be made on or before the
settlement date specified in the VKAC confirmation at the office
of VKAC's clearing agent, by check payable to the order of the
Fund which reserves VKAC's right to delay issuance or transfer
of shares until such check has cleared. If such payment is not
received by VKAC, VKAC reserves the right, without notice,
forthwith either to cancel the trade at our option or as
required by the provisions of Regulation T, and in either case,
VKAC may hold you responsible for any loss suffered by the Fund.
You agree that in transmitting investors' funds, you will
comply with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended.

13. VKAC will not accept from you any conditioned orders for
shares, except at a definite, specified price.

5
<PAGE> 6

Additional Information) for each Fund (or any amendment or
supplement to either) and, promptly upon request by VKAC, to
bring all subsequent changes to such Preliminary Prospectus or
Prospectus to the attention of anyone to whom such material
shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund
a copy of the Prospectus for such Fund filed pursuant to Rule
497 under the Securities Act of 1933, as amended. Upon your
request, VKAC will furnish to such persons a copy of the
Prospectus for such Fund filed pursuant to Rule 497 Under the
Securities Act of 1993, as amended.

16. Unless otherwise indicated in a Fund's Prospectus, stock
certificates for shares sold will be issued to your customers
only if specifically requested.

17. VKAC will have no liability to you, except for lack of
good faith and for obligations expressly assumed by VKAC in this
Agreement.

19. Neither this Agreement nor the performance of the
services hereunder shall be considered to create a joint venture
or partnership between VKAC and you.

20. This Agreement shall be construed in accordance with the
laws of the State of Illinois without reference to the
choice-of-law principles thereof.

22. This Agreement may be terminated at any time by either
party.

<PAGE> 7

TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS

24. (a) With respect to any shares of a class of FESC Shares
of an Open-End Fund, the public offering price for such shares
shall be the net asset value per share plus a FESC, expressed as
a percentage of the applicable public offering price, as
determined and effective as of the time specified in the
then-current Prospectus of such Open-End Fund. On each order
for shares of a class of FESC Shares of an Open-End Fund
accepted by us, you will be entitled to receive the applicable
agency commission for such shares as provided for in the
then-current Prospectus of such Open-End Fund or, if not so
provided, as provided to you from time to time in writing by
VKAC.

(b) With respect to any shares of a class of CDSC Shares of
an Open-End Fund, the public offering price for such shares
shall be the net asset value per share as determined and
effective as of the time specified in the then-current
Prospectus of such Open-End Fund. You will remit payment of the
aggregate public offering price to VKAC for the CDSC Shares
sold, and on each order accepted by us, you will be entitled to
receive the applicable selling compensation for such shares as
provided for in the then-current Prospectus of such Open-End
Fund or, if not so provided, as provided to you from time to
time in writing by VKAC.

<PAGE> 8

28. (a) If any shares of a class of FESC Shares of an
Open-End Fund sold to your customers under the terms of this
Agreement are repurchased by the Fund or by VKAC as agent for
the Fund or are tendered for redemption within seven business
days after the date of VKAC's confirmation of the original
purchase, it is agreed that you shall forfeit your right to any
agency commission received by you on such FESC Shares. VKAC
will notify you of any such repurchase or redemption within ten
business days from the date on which the repurchase or
redemption order in proper form is delivered to VKAC or to the
Fund, and you shall forthwith refund to VKAC the full agency
commission allowed to you on such sale. VKAC agrees, in the
event of any such repurchase or redemption, to refund to the
Fund its share of any discount allowed to VKAC and, upon receipt
from you of the refund of the agency commission allowed to you,
to pay such refund forthwith to the Fund.

(b) If any shares of a class of CDSC Shares sold to your
customers under the terms of this Agreement are repurchased by
the Fund or by VKAC as agent for the Fund or are tendered for
redemption within seven business days after the date of VKAC's
confirmation of the original purchase, it is agreed that you
shall forfeit your right to any sales compensation received by
you on such CDSC Shares. We will notify you of any such
repurchase or redemption within ten business days from the date
on which the repurchase or redemption order in proper form is
delivered to VKAC or to the Fund, and you shall forthwith refund
to VKAC the full sales compensation paid to you.

TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS

29. No Closed-End Fund will issue fractional shares.

30. VKAC may, in its sole discretion, allocate shares of a
Closed-End Fund among brokers, dealers and, to the extent
permitted by applicable law, banks participating in the Initial
Offering Period or among brokers, dealers and banks
participating in the Continuous Offering Period, as the case may
be, on other than a pro rata basis, which may result in certain
brokers, dealers and banks not being allocated the full amount
of shares of such Fund sold by them while certain other brokers,
dealers and banks may receive their full allocation.

31. You agree that with respect to orders for shares of a

8
<PAGE> 9

Closed-End Fund, you will transmit such orders received, to the
extent permitted by applicable law, during the Initial Offering
Period to VKAC within the time period as specified in such
Closed-End Fund's Prospectus (or in the time period as extended
by VKAC in writing). You also agree to transmit any customer
order received during the Continuous Offering Period to VKAC
prior to the time that the public offering price for such
Closed-End Fund is next determined after your receipt of such
order, as set forth in the Closed-End Fund's Prospectus. There
is no assurance that each Closed-End Fund will engage in a
continuous offering of shares.

32. On each order accepted by VKAC for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of
VKAC's own assets as set forth in the then-current Prospectus of
such Closed-End Fund (exclusive of additional compensation that
may be payable pursuant to sales programs, if any, that may be
established from time to time as described in the Prospectus for
such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no
event will any Closed-End Fund reimburse VKAC for any such sales
concessions or other additional compensation or pay any such
concession or other additional compensation or allowance
directly to you. VKAC will specify for each Closed-End Fund a
period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock
Exchange or another national securities market system (which
period will end no later than the first dividend payment date
with respect to such Closed-End Fund) during which sales
concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the
"Forfeiture Period"). During the Forfeiture Period for any
Closed-End Fund, physical delivery of certificates representing
shares will be required to transfer ownership of such shares.
In the event that any shares of a Closed-End Fund sold through
an order received from you, to the extent permitted by
applicable law, in the Initial Offering Period or the Continuous
Offering Period are resold in the open market or otherwise
during the Forfeiture Period, VKAC reserves the right to require
you to forfeit any sales concessions and other additional
compensation with respect to such shares. In the event of a
forfeiture, VKAC may withhold any forfeited sales concessions
and other additional compensation that has not yet been paid or
from other amounts yet to be paid to you (whether or not payable
with respect to such shares), and you agree to repay to VKAC,
promptly upon demand, any forfeited sales concessions and other
compensation that has been paid. Determinations of the amounts
to be paid to you or by you to VKAC shall be made by VKAC and
shall be conclusive.

33. During the Initial Offering Period or any Continuous
Offering Period for any Closed-End Fund, you agree to supply
VKAC, not less frequently than once a week by Friday, 5:00 p.m.
Eastern Time, during such Closed-End Fund's Initial Offering
Period, a list setting forth by state and in the aggregate all
indications of interest and, during any Continuous Offering
Period, all shares sold by you of such Closed-End Fund during
such week (or lesser period of time) and a list setting forth by
name and location each registered representative making said
sales and indicating the amount of all sales per Closed-End Fund
to date.

<PAGE> 10

34. You expressly acknowledge and understand that there is no
Rule 12b-1 Plan for the Closed-End Funds.

35. You expressly acknowledge and understand that shares of
the Closed-End Funds will not be repurchased by either the
Closed-End Funds (other than through tender offers from time to
time, if any) or by VKAC and that no secondary market for such
shares is expected to develop until the shares have begun
trading on a national exchange or national market system. You
hereby covenant that, until notified by VKAC that the
distribution of such shares has been completed or that the
Forfeiture Period has ended, you (a) will not make a secondary
market in any shares of such a Closed-End Fund, (b) will not
purchase or hold shares of such Closed-End Fund in inventory for
the purpose of resale in the open market or to your customers
and, (c) without VKAC's consent, will not repurchase shares of
such Closed-End Fund in the open market or from your customers
for any account in which you have a beneficial interest.

(a) You expressly acknowledge and understand that shares of
the Prime Rate Fund will not be repurchased by either the Prime
Rate Fund (other than through tender offers from time to time,
if any) or VKAC and that no secondary market for the shares of
the Prime Rate Fund exists currently or is expected to develop.
You also expressly acknowledge and agree that, in the event your
customer cancels their order for shares after confirmation, such
shares may not be repurchased, remarketed or otherwise disposed
of by or through VKAC.

(b) You acknowledge and understand that, while the
Board of Trustees of the Prime Rate Fund intends to consider tendering
for all or a portion of the Prime Rate Fund's shares on a
quarterly basis, there is no assurance the Prime Rate Fund will
tender for shares at any time or, following such a tender offer,
that shares so tendered will be repurchased by the Prime Rate
Fund. You acknowledge and understand that an early withdrawal
charge payable to VKAC will be imposed on most shares accepted
for tender by the Prime Rate Fund that have been held for less
than five years, as set forth in the Prime Rate Fund's
Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY THE
PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME
RATE FUND'S CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.

Please accept the foregoing by signing this Bank Fully
Disclosed Clearing Agreement, keeping a copy for your files and
returning the original to us.

<PAGE> 11

Accepted and Agreed to: (PRINT OR TYPE)

Dated: By: Keith K. Furlong

Its: Senior Vice President

Bank Name

Bank Taxpayer ID Number

Address

<PAGE> 12

EXHIBIT A

Policies and Procedures

with Respect to Sales under the

Alternative Distribution Plan

1. Any purchase order for $1 million or more must be for class
A Shares

2. Any purchase order for $100,000 but less than $1 million
is subject to approval by [appropriate selling firm supervisor],
who must approve the purchase order ticket for the appropriate
class of shares in light of the relevant facts and
circumstances, including:

(a) the specific purchase order dollar amount;

(b) the length of time the investor expects to hold his
shares; and

(c) any other relevant circumstances, such as the
availability of purchase price discounts under a Letter of
Intent or a Quantity Discount.

<PAGE> 13

This policy is effective immediately with respect to any order
for the purchase of shares from a fund subject to Van Kampen
American Capital Distributors, Inc.'s alternative distribution
plan.

Questions relating to this policy should be directed to
[appropriate selling firm supervisor].

Van Kampen American Capital

One Parkview Plaza

Oakbrook Terrace, Illinois 60181

5/95

City, State, Zip

Phone

Signature

<PAGE> 14

Name

Title

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

<PAGE> 1
EXHIBIT 8(b)

TRANSFER AGENCY AND SERVICE AGREEMENT

AGREEMENT made as of the ___ day of _______, 1995 by and between each
of the VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS set forth on Schedule "A"
hereto, which are organized under the laws of the state and as the entities set
forth in Schedule "A" hereto, having their principal office and place of
business at Houston, Texas (collectively, the "Funds"), and ACCESS INVESTOR
SERVICES, INC., a Delaware corporation, having its principal office at Houston,
Texas, and its principal place of business at Kansas City, Missouri ("ACCESS").

R E C I T A L:

WHEREAS, each of the Funds desires to appoint ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent and ACCESS
desires to accept such appointments;

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

ARTICLE 1. TERMS OF APPOINTMENT; DUTIES OF ACCESS.

1.01 Subject to the terms and conditions set forth in this
Agreement, each of the Funds hereby employs and appoints ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent.

1.02 ACCESS hereby accepts such employment and appointments and
agrees that on and after the effective date of this Agreement it will act as
the transfer agent, dividend disbursing agent and shareholder service agent for
each of the Funds on the terms and conditions set forth herein.

1.03 ACCESS agrees that its duties and obligations hereunder will
be performed in a competent, efficient and workmanlike manner with due
diligence in accordance with reasonable industry practice, and that the
necessary facilities, equipment and personnel for such performance will be
provided.

1.04 In order to assure compliance with section 1.03 and to
implement a cooperative effort to improve the quality of transfer agency and
shareholder services received by each of the Funds and its shareholders,

1
<PAGE> 2
ACCESS agrees to provide and maintain quantitative performance objectives,
including maximum target turn-around times and maximum target error rates, for
the various services provided hereunder. ACCESS also agrees to provide a
reporting system designed to provide the Board of Trustees or Board of
Directors of each of the Funds (the "Board") on a quarterly basis with
quantitative data comparing actual performance for the period with the
performance objectives. The foregoing procedures are designed to provide a
basis for continuing monitoring by the Board of the quality of services
rendered hereunder.

ARTICLE 2. FEES AND EXPENSES.

2.01 For the services to be performed by ACCESS pursuant to this
Agreement, each of the Funds agrees to pay ACCESS the fees provided in the fee
schedules agreed upon from time to time by each of the Funds and ACCESS.

2.02 In addition to the amounts paid under section 2.01 above, each
of the Funds agrees to reimburse ACCESS promptly for such Fund's reasonable
out-of-pocket expenses or advances paid on its behalf by ACCESS in connection
with its performance under this Agreement for postage, freight, envelopes,
checks, drafts, continuous forms, reports and statements, telephone, telegraph,
costs of outside mailing firms, necessary outside record storage costs, media
for storage of records (e.g., microfilm, microfiche and computer tapes) and
printing costs incurred due to special requirements of such Fund. In addition,
any other special out-of-pocket expenses paid by ACCESS at the specific request
of any of the Funds will be promptly reimbursed by the requesting Fund.
Postage for mailings of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to ACCESS by the concerned Fund
three business days prior to the mailing date of such materials.

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ACCESS.

ACCESS represents and warrants to each of the Funds that:

3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.

3.02 It is duly qualified to carry on its business in the states of
Texas and Missouri.

3.03 It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement.

2
<PAGE> 3
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.

3.05 It has and will continue to have during the term of this
Agreement access to the necessary facilities, equipment and personnel to
perform its duties and obligations hereunder.

3.06 It will maintain a system regarding "as of" transactions as
follows:

(a) Each "as of" transaction effected at a price other
than that in effect on the day of processing for which an estimate has
not been given to any of the affected Funds and which is necessitated
by ACCESS' error, or delay for which ACCESS is responsible or which
could have been avoided through the exercise of reasonable care, will
be identified, and the net effect of such transactions determined, on
a daily basis for each such Fund.

(b) The cumulative net effect of the transactions
included in paragraph (a) above will be determined each day throughout
each month. If, on any day during the month, the cumulative net
effect upon any Fund is negative and exceeds an amount equivalent to
1/2 of 1 cent per share of such Fund, ACCESS shall promptly make a
payment to such Fund (in cash or through use of a credit as described
in paragraph (c) below) in such amount as necessary to reduce the
negative cumulative net effect to less than 1/2 of 1 cent per share of
such Fund. If on the last business day of the month the cumulative
net effect (adjusted by the amount of any payments pursuant to the
preceding sentence) upon any Fund is negative, such Fund shall be
entitled to a reduction in the monthly transfer agency fee next
payable by an equivalent amount, except as provided in paragraph (c)
below. If on the last business day of the month the cumulative net
effect (similarly adjusted) upon any Fund is positive, ACCESS shall be
entitled to recover certain past payments and reductions in fees, and
to a credit against all future payments and fee reductions made under
this paragraph to such Fund, as described in paragraph (c) below.

(c) At the end of each month, any positive cumulative net
effect upon any Fund shall be deemed to be a credit to ACCESS which
shall first be applied to recover any payments and fee reductions made
by ACCESS to such Fund under paragraph (b) above during the calendar
year by increasing the amount of the monthly transfer agency fee next
payable in an amount equal to prior payments and fee

3
<PAGE> 4
reductions made during such year, but not exceeding the sum of that
month's credit and credits arising in prior months during such year to
the extent such prior credits have not previously been utilized as
contemplated by this paragraph (c). Any portion of a credit to ACCESS
not so used shall remain as a credit to be used as payment against the
amount of any future negative cumulative net effects that would
otherwise require a payment or fee reduction to such Fund pursuant to
paragraph (b) above.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE FUNDS.

Each of the Funds hereby represents and warrants on behalf of
itself only and not any other Funds that are a party to this Agreement that:

4.01 It is duly organized and existing and in good standing under
the laws of the commonwealth or state set forth in Schedule "A" hereto.

4.02 It is empowered under applicable laws and regulations and by
its Declaration of Trust or Articles of Incorporation and by-laws to enter into
and perform this Agreement.

4.03 All requisite proceedings have been taken by its Board to
authorize it to enter into and perform this Agreement.

4.04 It is an open-end, diversified, management investment company
registered under the Investment Company Act of 1940, as amended.

4.05 A registration statement under the Securities Act of 1933, as
amended, is currently effective and will remain effective, and appropriate
state securities laws filings have been made and will continue to be made, with
respect to all of its shares being offered for sale.

ARTICLE 5. INDEMNIFICATION.

5.01 ACCESS shall not be responsible for and each of the Funds
shall indemnify and hold ACCESS harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liabilities arising out of or attributable to:

4
<PAGE> 5
(a) All actions of ACCESS required to be taken by ACCESS
for the benefit of such Fund pursuant to this Agreement, provided
ACCESS has acted in good faith with due diligence and without
negligence or willful misconduct.

(b) The reasonable reliance by ACCESS on, or reasonable
use by ACCESS of, information, records and documents which have been
prepared or maintained by or on behalf of such Fund or have been
furnished to ACCESS by or on behalf of such Fund.

(d) The offer or sale of such Fund's shares in violation
of any requirement under the federal securities laws or regulations or
the securities laws or regulations of any state or in violation of any
stop order or other determination or ruling by any federal agency or
any state with respect to the offer or sale of such shares in such
state unless such violation results from any failure by ACCESS to
comply with written instructions of such Fund that no offers or sales
of such Fund's shares be made in general or to the residents of a
particular state.

(e) Such Fund's refusal or failure to comply with the
terms of this Agreement, or such Fund's lack of good faith, negligence
or willful misconduct or the breach of any representation or warranty
of such Fund hereunder.

5.02 ACCESS shall indemnify and hold each of the Funds harmless
from and against any and all losses, damages, costs, charges, reasonable
counsel fees, payments, expenses and liability arising out of or attributable
to ACCESS' refusal or failure to comply with the terms of this Agreement, or
ACCESS' lack of good faith, negligence or willful misconduct, or the breach of
any representation or warranty of ACCESS hereunder.

5.03 At any time ACCESS may apply to any authorized officer of any
of the Funds for instructions, and may consult with any of the Funds' legal
counsel, at the expense of such concerned Fund, with respect to any matter
arising in connection with the services to be performed by ACCESS under this
Agreement, and ACCESS shall not be liable and shall be indemnified by such
concerned Fund for any action taken or omitted by it in good faith in
reasonable reliance upon such instructions or upon the opinion of such counsel.
ACCESS shall be protected and

5
<PAGE> 6
indemnified in acting upon any paper or document reasonably believed by ACCESS
to be genuine and to have been signed by the proper person or persons and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the concerned Fund. ACCESS shall also
be protected and indemnified in recognizing stock certificates which ACCESS
reasonably believes to bear the proper manual or facsimile signatures of the
officers of the concerned Fund, and the proper countersignature of any former
transfer agent or registrar, or of a co-transfer agent or co-registrar.

5.04 In the event any party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.

5.05 In no event and under no circumstances shall any party to this
Agreement be liable to another party for consequential damages under any
provision of this Agreement or for any act or failure to act hereunder.

5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which one party may be
required to indemnify another, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the other party
advised with respect to all developments concerning such claim. The party who
may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in
any case in which the other party may be required to indemnify it except with
the other party's prior written consent.

ARTICLE 6. COVENANTS OF EACH OF THE FUNDS AND ACCESS.

6.01 Each of the Funds shall promptly furnish to ACCESS the
following:

(a) Certified copies of the resolution of its Board
authorizing the appointment of ACCESS and the execution and delivery
of this Agreement.

(b) Certified copies of its Declaration of Trust or
Articles of Incorporation and by-laws and all amendments thereto.

6
<PAGE> 7
6.02 ACCESS hereby agrees to maintain facilities and procedures
reasonably acceptable to each of the Funds for safekeeping of share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.

6.03 ACCESS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable; provided,
however, that all accounts, books and other records of each of the Funds
(hereinafter referred to as "Fund Records") prepared or maintained by ACCESS
hereunder shall be maintained and kept current in compliance with Section 31 of
the Investment Company Act of 1940 and the Rules thereunder (such Section and
Rules being hereinafter referred to as the "1940 Act Requirements"). To the
extent required by the 1940 Act Requirements, ACCESS agrees that all Fund
Records prepared or maintained by ACCESS hereunder are the property of the
concerned Fund and shall be preserved and made available in accordance with the
1940 Act Requirements, and shall be surrendered promptly to the concerned Fund
on its request. ACCESS agrees at such reasonable times as may be requested by
the Board and at least quarterly to provide (i) written confirmation to the
Board that all Fund Records are maintained and kept current in accordance with
the 1940 Act Requirements, and (ii) such other reports regarding its
performance hereunder as may be reasonably requested by the Board.

6.04 ACCESS and each of the Funds agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.

6.05 In case of any requests or demands for the inspection of any
of the Fund Records, ACCESS will endeavor to notify each of the concerned Funds
and to secure instructions from an authorized officer of each of the concerned
Funds as to such inspection. ACCESS reserves the right, however, to exhibit
such Fund Records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit such Fund Records to such person.

ARTICLE 7. TERM AND TERMINATION OF AGREEMENT.

7.01 This Agreement shall remain in effect from the date hereof
through June 30, 1995; provided, however, that this Agreement may be terminated
by any party with respect to that party for good and reasonable

7
<PAGE> 8
cause at any time by giving written notice to the other party at least 120 days
prior to the date on which such termination is to be effective. Any unpaid
fees or reimbursable expenses payable to ACCESS shall be due on any such
termination date. ACCESS agrees to use its best efforts to cooperate with each
of the Funds and the successor transfer agent or agents in accomplishing an
orderly transition.

7.02 Subject to the prior approval of the Board, this Agreement
shall be renewed and extended for periods of not more than one year each,
unless and until this Agreement is terminated in accordance with section 7.01
above.

ARTICLE 8. MISCELLANEOUS.

8.01 Except as provided in section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by any party
without the written consent of ACCESS or the concerned Fund, as the case may
be; provided, however, that no consent shall be required for any merger of any
of the Funds with, or any sale of all or substantially all the assets of any of
the Funds to, another investment company.

8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.

8.03 ACCESS may, without further consent on the part of any of the
Funds, subcontract with DST, Inc., a Missouri corporation, or any other
qualified servicer, for the performance of data processing activities;
provided, however, that ACCESS shall be as fully responsible to each of the
Funds for the acts and omissions of DST, Inc., or other qualified servicer as
it is for its own acts and omissions.

8.04 ACCESS may, without further consent on the part of any of the
Funds, provide services to its affiliated companies. Such services may be
provided at cost.

8.05 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes any
prior agreement with respect thereto, whether oral or written, and this
Agreement may not be modified except by written instrument executed by the
affected parties.

8.06 The execution of this Agreement has been authorized by the
Funds' Trustees. This Plan is executed on
behalf of the Funds or the Trustees of the Funds as Trustees and not
individually and that the obligations of this Agreement are not binding upon
any of

8
<PAGE> 9
the Trustees, officers or shareholders of the Funds individually but are
binding only upon the assets and property of the Funds. A Certificate of Trust
in respect of each of the Funds is on file with the Secretary of the State of
Delaware.

8.07 For each of those Funds that have one or more portfolios as
set forth in Schedule "A" hereto, all obligations of those Funds under this
Agreement shall apply only on a portfolio-by-portfolio basis and the assets of
one portfolio shall not be liable for the obligations of any other.

8.08 In the event of a change in the business or regulatory
environment affecting all or any portion of this Agreement, the parties hereto
agree to renegotiate such affected portions in good faith.

9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf and through their duly
authorized officers, as of the date first above written.

EACH OF THE VAN KAMPEN AMERICAN
CAPITAL OPEN END FUNDS LISTED ON
SCHEDULE "A" HERETO

BY:____________________________________
Vice President

ATTEST:

____________________________
Secretary

ACCESS INVESTOR SERVICES, INC.

BY:____________________________________
President

ATTEST:

____________________________
Secretary

10
<PAGE> 11
SCHEDULE "A"

VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS

<TABLE>
<CAPTION>
Type
[Corporation "C"/
Fund Name State of Business Trust "T"/
(including Portfolios) Organization Partnership "P"]
===============================================================================================================
<S> <C> <C>

[TO BE PROVIDED]
</TABLE>

11
<PAGE> 12
PRICING SCHEDULE

PRICE PER ACCOUNT PLUS OUT-OF-POCKET

______________, 1995

[TO BE PROVIDED]

<PAGE> 1
EXHIBIT 9(a)

FORM OF

FUND ACCOUNTING AGREEMENT

THIS AGREEMENT, dated _________, 199__, by and between the parties
set forth in Schedule A hereto (designated collectively
hereafter as the "Funds") and VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP., a Delaware corporation ("Advisory
Corp.").

W I T N E S S E T H:

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

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

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

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

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

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

<PAGE> 2

2. Accounting Services to be Provided. Advisory Corp. will
provide to the Funds the following accounting related services,
including without limitation, accurate maintenance of the
specific Fund's books and records such as are within the scope
of control of Advisory Corp. and are required by the applicable
securities statutes and regulations, preparation of each Fund's
financial reports and other accounting and tax related notice
information to shareholders, the assimilation and interpretation
of accounting data for meaningful management review. Advisory
Corp. shall hire persons (collectively the "Accounting Service
Group") as needed to provide such Accounting Services and in
such numbers as the parties to this Agreement may agree from
time to time.

3. Expenses and Reimbursements. The Accounting Service expenses
(the "Accounting Service Expenses") for which Advisory Corp. may
be reimbursed are salary and salary related benefits, including
but not limited to bonuses, group insurances and other regular
wages ("Salaries") paid to the personnel of the Accounting
Service Group as discussed from time to time with the Board of
Trustees of each of the Funds.

<PAGE> 3

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

4. Payment for Accounting Service Expenses Among the Funds. As
to one quarter (25%) of the Accounting Service Expenses incurred
under the Agreement, the expense shall be allocated between all
Funds based on the number of classes of shares of beneficial
interest that each respective Fund has issued.

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

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

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

8. Indemnification By Advisory Corp. Advisory Corp. will
indemnify and hold harmless each Fund from all loss, cost,
damage and expense, including reasonable expenses for legal

<PAGE> 4

counsel, incurred by the Fund resulting from any claim, demand,
action or suit arising out of Advisory Corp.'s failure to comply
with the terms of this Agreement or which arises out of the
negligence or willful misconduct of Advisory Corp. or its agents
or contractors; provided that such negligence or misconduct is
not attributable to the Funds, their agents or contractors.
Prior to confessing any claim against it which may be subject to
this indemnification, the Fund shall give Advisory Corp.
reasonable opportunity to defend against said claim in its own
name or in the name of such Fund.

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

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

<PAGE> 5

11. Execution, Amendment and Termination. The term of this
Agreement shall begin as of the date first above written, and
unless sooner terminated as herein provided, this Agreement
shall remain in effect through _______, 199___, and thereafter
from year to year, if such continuation is specifically approved
at least annually by the Board of Trustees of each Fund,
including a majority of the independent Trustees of each Fund.
This Agreement may be modified or amended from time to time by
mutual agreement between the parties hereto and may be
terminated after _______, 199___, by at least sixty (60) days'
written notice given by one party to the others. Upon
termination hereof, each Fund shall pay to Advisory Corp. such
compensation as may be due as of the date of such termination
and shall likewise reimburse Advisory Corp. for its costs,
expenses and disbursements payable under this Agreement to such
date. This Agreement may be amended in the future to include as
additional parties to the Agreement other investment companies
for with Advisory Corp., any subsidiary or affiliate serves as
investment advisor or distributor if such amendment is approved
by the President of each Fund.

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

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

14. Personal Liability. As provided for in Article 8, Section 8.1
of the Agreement and Declaration of Trust of the various Funds, under
which the Funds are organized as unincorporated trusts, the shareholders,
trustees, officers, employees and other agents of the Fund shall
not personally be found by or liable for the matters set forth
hereto, nor shall resort be had to their private property for
the satisfaction of any obligation or claim hereunder.

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

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

<PAGE> 6

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

<PAGE> 7

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

ALL OF THE PARTIES SET FORTH IN SCHEDULE A

By:__________________________________________________

Dennis J. McDonnell, President

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.

By:__________________________________________________

Dennis J. McDonnell, President

<PAGE> 1
EXHIBIT 9(b)

LEGAL SERVICES AGREEMENT

THIS AGREEMENT, dated as of January 1, 1995, by
and between the parties hereto (designated collectively
hereafter as the "Funds") and VAN KAMPEN AMERICAN CAPITAL,
INC., (formerly Van Kampen Merritt Holdings Corp., a
Delaware corporation ("Van Kampen").

W I T N E S S E T H:

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

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

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

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

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

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

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

<PAGE> 2

3. Expenses and Reimbursement. The Legal Services expenses (the
"Legal Services Expenses") for which Van Kampen may be
reimbursed are salary and salary related benefits, including but
not limited to bonuses, group insurance and other regular wages
paid to the personnel of the Legal Services Group, as well as
overhead and expenses related to office space and necessary
equipment. The Legal Services Expenses will be paid by Van
Kampen and reimbursed by the Funds. Van Kampen will tender to
each Fund a monthly invoice as of the last business day of each
month which shall certify the total Legal Service Expenses
expended. Except as provided herein, Van Kampen will receive no
other compensation in connection with Legal Services rendered in
accordance with this Agreement, and Van Kampen will be
responsible for all other expenses relating to the providing of
Legal Services.

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

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

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

7. Indemnification By Funds. Each Fund will indemnify and hold
Van Kampen harmless from all loss, cost, damage and expense,
including reasonable expenses for legal counsel, incurred by Van

<PAGE> 3

Kampen resulting from (a) any claim, demand, action or suit in
connection with Van Kampen's acceptance of this Agreement; (b)
an action or omission by Van Kampen in the performance of its
duties hereunder; (c) Van Kampen's acting upon instructions
believed by it to have been executed by a duly authorized office
of the Fund; or (d) Van Kampen's acting upon information
provided by the Fund in form and under policies agreed to by Van
Kampen and the Fund. Van Kampen shall not be entitled to such
indemnification in respect of action or omissions constituting
negligence or willful misconduct of Van Kampen or its agents or
contractors. Prior to confessing any claim against it which may
be subject to this indemnification, Van Kampen shall give the
Fund reasonable opportunity to defend against said claim on its
own name or in the name of Van Kampen.

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

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

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

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

12. Assignment. Any interest of Van Kampen under this Agreement

<PAGE> 4

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

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

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

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

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

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

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

<PAGE> 1
EXHIBIT 11

CONSENT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholders
Van Kampen American Capital Pennsylvania Tax Free Income Fund:

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

KPMG Peat Marwick LLP

Chicago, Illinois
August 17, 1995

<PAGE> 1
EXHIBIT 15(a)

FORM OF

PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1

VAN KAMPEN AMERICAN CAPITAL FUND

The plan set forth below (the "Distribution Plan") is the
written plan contemplated by Rule 12b-1 (the "Rule") under the
Investment Company Act of 1940, as amended (the "1940 Act"), for
the VAN KAMPEN AMERICAN CAPITAL FUND (the "Fund"), a
Series of the Van Kampen AMERICAN CAPITAL Trust (the
"Trust"). This Distribution Plan describes the material terms
and conditions under which assets of the Fund may be used in
connection with financing distribution related activities with
respect to each of its classes of shares of beneficial interest
(the "Shares"), each of which is offered and sold subject to a
different combination of front-end sales charges, distribution
fees, service fees and contingent deferred sales charges.1
Classes of shares, if any, subject to a front-end sales charge
and a distribution and/or service fee are referred to herein as
"Front-End Classes" and the Shares of such classes are referred
to herein as "Front-End Shares." Classes of shares, if any,
subject to a contingent-deferred sales charge and a distribution
and/or a service fee are referred to herein as "CDSC Classes"
and Shares of such classes are referred to herein as "CDSC
Shares." Classes of shares, if any, subject to a front-end
sales charge, a contingent-deferred sales charge and a
distribution and/or service fee are referred to herein as
"Combination Classes" and Shares of such class are referred to
herein as "Combination Shares."

The Fund has adopted a service plan (the "Service Plan")
pursuant to which the Fund is authorized to expend on an annual
basis a portion of its average net assets attributable to any or
each class of Shares in connection with the provision by the
principal underwriter (within the meaning of the 1940 Act) of
the Shares and by brokers, dealers and other financial
intermediaries (collectively, "Financial Intermediaries") of
personal services to holders of Shares and/or the maintenance of
shareholder accounts. The Fund also has entered into a
distribution and services agreement (the "Distribution and
Services Agreement") with Van Kampen American Capital Distributors,
Inc. (the "Distributor"), pursuant to which the Distributor acts as
the principal underwriter with respect to each class of Shares and
provides services to the Fund and acts as agent on behalf of the
Fund in connection with the implementation of the Service Plan.

<PAGE> 2

The Distributor may enter into selling agreements (the "Selling
Agreements") with Financial Intermediaries in order to implement
the Distribution and Services Agreement, the Service Plan and
this Distribution Plan.

The Fund hereby is authorized to pay the Distributor a
distribution fee with respect to each class of its Shares to
compensate the Distributor for activities which are primarily
intended to result in the sale of such Shares ("distribution
related activities") performed by the Distributor with respect
to the respective class of Shares of the Fund. Such
distribution related activities include without limitation: (a)
printing and distributing copies of any prospectuses and annual
and interim reports of the Fund (after the Fund has prepared and
set in type such materials) that are used by such Distributor in
connection with the offering of Shares; (b) preparing, printing
or otherwise manufacturing and distributing any other literature
or materials of any nature used by such Distributor in
connection with promoting, distributing or offering the Shares;
(c) advertising, promoting and selling Shares to broker-dealers,
banks and the public; (d) distribution related overhead and the
provision of information programs and shareholder services
intended to enhance the attractiveness of investing in the Fund;
(e) incurring initial outlay expenses in connection with
compensating Financial Intermediaries for (i) selling CDSC
Shares and Combination Shares and (ii) providing personal
services to shareholders and the maintenance of shareholder
accounts of all classes of Shares, including paying interest on
and incurring other carrying costs on funds borrowed to pay such
initial outlays; and (f) acting as agent for the Fund in
connection with implementing this Distribution Plan pursuant to
the Selling Agreements.

The amount of the distribution fee hereby authorized with
respect to each class of Shares of the Fund shall be as follows:

With respect to Class A Shares, the distribution fee authorized
hereby and the service fee authorized pursuant to the Service
Plan, in the aggregate, shall not exceed on an annual basis
0.25% of the Fund's average daily net assets attributable to
Class A Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to Class A
Shares. The Fund may pay a distribution fee as determined from
time to time by its Board of Trustees in an annual amount not to
exceed the lesser of (i) (A) 0.25% of the Fund's average daily
net asset value during such year attributable to Class A Shares
sold on or after the date on which this Distribution Plan was
first implemented with respect to Class A Shares minus (B) the
amount of the service fee with respect to the Class A Shares
actually expended during such year by the Fund pursuant to the
Service Plan and (ii) the actual amount of distribution related
expenses incurred by the Distributor with respect to Class A
Shares.

With respect to Class B Shares, the distribution fee authorized
hereby and the service fee authorized pursuant to the Service
Plan, in the aggregate, shall not exceed on an annual basis
1.00% of the Fund's average daily net assets attributable to

<PAGE> 3

Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class
B Shares. The Fund may pay a distribution fee with respect to
the Class B Shares as determined from time to time by its Board
of Trustees in an annual amount not to exceed the lesser of (A)
0.75% of the Fund's average daily net asset value during such
year attributable to Class B Shares sold on or after the date on
which this Distribution Plan is first implemented with respect
to the Class B Shares and (B) the actual amount of distribution
related expenses incurred by the Distributor during such year
plus prior unreimbursed distribution related expenses less the
amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class B Shares
sold on or after the date on which this Distribution Plan is
first implemented with respect to the Class B Shares.

With respect to Class C Shares, the distribution fee authorized
hereby and the service fee authorized pursuant to the Service
Plan, in the aggregate, shall not exceed on an annual basis
1.00% of the Fund's average daily net assets attributable to
Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class
C Shares. The Fund may pay a distribution fee with respect to
the Class C Shares as determined from time to time by its Board
of Trustees in an annual amount not to exceed the lesser of (A)
0.75% of the Fund's average daily net asset value during such
year attributable to Class C Shares sold on or after the date on
which this Distribution Plan is first implemented with respect
to the Class C Shares and (B) the actual amount of distribution
related expenses incurred by the Distributor during such year
plus prior unreimbursed distribution related expenses less the
amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class C Shares
sold on or after the date on which this Distribution Plan is
first implemented with respect to the Class C Shares.

Payments pursuant to this Distribution Plan shall not be made
more often than monthly upon receipt by the Fund of a separate
written expense report with respect to each class of Shares
setting forth the expenses qualifying for such reimbursement
allocated to each class of Shares and the purposes thereof.

In the event that amounts payable hereunder with respect to
shares of a Front-End Class do not fully reimburse the
Distributor for its actual distribution related expenses with
respect to the Shares of such class, there is no carryforward of
reimbursement obligations to succeeding years. In the event the
amounts payable hereunder with respect to a shares of a CDSC
Class or a Combination Class do not fully reimburse the
Distributor for its actual distribution related expenses with
respect to the Shares of the respective class, such unreimbursed
distribution expenses will be carried forward and paid by the
Fund hereunder in future years so long as this Distribution Plan
remains in effect, subject to applicable laws and regulations.
Reimbursements for distribution related expenses payable
hereunder with respect to a particular class of Shares may not
be used to subsidize the sale of Shares of any other class of
Shares.

<PAGE> 4

The Fund shall not compensate the Distributor, and neither the
Fund nor the Distributor shall compensate any Financial
Intermediary, for any distribution related expenses incurred
with respect to a class of Shares prior to the later of (a) the
implementation of this Distribution Plan with respect to such
class of Shares or (b) the date that such Financial Intermediary
enters into a Selling Agreement with the Distributor.

The Fund hereby authorizes the Distributor to enter into
Selling Agreements with certain Financial Intermediaries to
provide compensation to such Financial Intermediaries for
activities and services of the type referred to in Paragraph 1
hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of
Trustees of the Trust and a majority of the Disinterested
Trustees (within the meaning of the 1940 Act) by a vote cast in
person at a meeting called for the purpose of voting on such
Selling Agreements. The Distributor may reallocate all or a
portion of its distribution fee to such Financial Intermediaries
as compensation for the above-mentioned activities and services.
Such reallocation shall be in an amount as set forth from time
to time in the Fund's prospectus. Such Selling Agreements shall
provide that the Financial Intermediaries shall provide the
Distributor with such information as is reasonably necessary to
permit the Distributor to comply with the reporting requirements
set forth in Paragraphs 3 and 8 hereof.

Subject to the provisions of this Distribution Agreement, the
Fund is hereby authorized to pay a distribution fee to any
person that is not an "affiliated person" or "interested person"
of the Fund or its "investment adviser" or "principal
underwriter" (as such terms are defined in the 1940 Act) who
provides any of the foregoing services for the Fund. Such fee
shall be paid only pursuant to written agreements between the
Fund and such other person the terms of which permit payments to
such person only in accordance with the provisions of this
Distribution Agreement and which have the approval of a majority
of the Disinterested Trustees by vote cast separately with
respect to each class of Shares and cast in person at a meeting
called for the purpose of voting on such written agreement.

The Fund and the Distributor shall prepare separate written
reports for each class of Shares and shall submit such reports
to the Fund's Board of Trustees on a quarterly basis summarizing
all payments made by them with respect to each class of Shares
pursuant to this Distribution Plan, the Service Plan and the
agreements contemplated hereby, the purposes for which such
payments were made and such other information as the Board of
Trustees or the Disinterested Trustees may reasonably request
from time to time, and the Board of Trustees shall review such
reports and other information.

This Distribution Plan shall become effective upon its approval
by (a) a majority of the Board of Trustees and a majority of the
Disinterested Trustees by vote cast separately with respect to
each class of Shares cast in person at a meeting called for the
purpose of voting on this Distribution Plan, and (b) with

<PAGE> 5

respect to each class of Shares, a "majority of the outstanding
voting securities" (as such phrase is defined in the 1940 Act)
of such class of Shares voting separately as a class.

This Distribution Plan and any agreement contemplated hereby
shall continue in effect beyond the first anniversary of its
adoption by the Board of Trustees of the Fund only so long as
(a) its continuation is approved at least annually in the manner
set forth in clause (a) of paragraph 9 above and (b) the
selection and nomination of those trustees of the Fund who are
not "interested persons" of the Fund are committed to the
discretion of such trustees.

This Distribution Plan may be terminated with respect to a
class of Shares without penalty at any time by a majority of the
Disinterested Trustees or by a "majority of the outstanding
voting securities" of the respective class of Shares of the
Fund.

This Distribution Plan may not be amended to increase
materially the maximum amounts permitted to be expended
hereunder except with the approval of a "majority of the
outstanding voting securities" of the respective class of Shares
of the Fund and may not be amended in any other material respect
except with the approval of a majority of the Disinterested
Trustees. Amendments required to conform this Distribution Plan
to changes in the Rule or to other changes in the 1940 Act or
the rules and regulations thereunder shall not be deemed to be
material amendments.

To the extent any service fees paid by the Fund pursuant to the
Service Plan are deemed to be payments for the financing of any
activity primarily intended to result in the sale of Shares
issued by the Fund within the meaning of the Rule, the terms and
provisions of such plan and any payments made pursuant to such
plan hereby are authorized pursuant to this Distribution Plan in
the amounts and for the purposes authorized in the Service Plan
without any further action by the Board of Trustees or the
shareholders of the Fund. To the extent the terms and
provisions of the Service Plan conflict with the terms and
provisions of this Distribution Plan, the terms and provisions
of the Service Plan shall prevail with respect to amounts
payable pursuant thereto. This paragraph 13 is adopted solely
due to the uncertainty that may exist with respect to whether
payments to be made by the Fund pursuant to the Service Plan
constitute payments primarily intended to result in the sale of
Shares issued by the Fund within the meaning of the Rule.

The Trustees of the Trust have adopted this Distribution Plan
as trustees under the Declaration of Trust of the Trust and the
policies of the Trust adopted hereby are not binding upon any of
the Trustees or shareholders of the Trust individually, but bind
only the trust estate.

1 The Fund is authorized to offer multiple classes of shares
pursuant to an order of the Securities and Exchange Commission

<PAGE> 6

exempting the Fund from certain provisions of the 1940 Act.

<PAGE> 1
EXHIBIT 15(b)

FORM OF

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

SHAREHOLDER ASSISTANCE AGREEMENT

This Agreement is entered into as of the _____day of _____,
1995, by and between Van Kampen American Capital Distributors,
Inc. (formerly Van Kampen Merritt, Inc.) (the "Company") and the
undersigned (the "Broker-Dealer").

WHEREAS, the Company is the principal underwriter of the
open-end investment companies listed on Schedule 1 to this
Agreement (hereinafter individually the "Fund" or collectively
the "Funds"); and

WHEREAS, the Broker-Dealer is registered as a broker-dealer
with the National Association of Securities Dealers, Inc.; and

WHEREAS, each respective Fund has adopted a Distribution Plan
(the "Distribution Plan") and a service plan (the "Service
Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), relating to
such Fund, the Distribution Plans being described in the Fund's
Prospectus and Statement of Additional Information; and

WHEREAS, each respective Fund's Distribution Plans authorize
the Company to enter into distribution assistance agreements
such as this Agreement with broker-dealers selected by the
Company, and the Broker-Dealer has been so selected; and

WHEREAS, each respective Fund's Distribution Plans authorize
the Company to make payments at a rate specified in an agreement
such as this Agreement varying directly with the aggregate
average daily net asset value of shares of each respective Fund
sold by such broker-dealer on or after the effective date of
this Agreement, as determined pursuant to Section 4 hereof, and
held at the close of each day in accounts of clients or
customers of a particular broker-dealer, such amount being
referred to herein as the "Holding Level"; for purposes of
calculating the Holding Level, shares of such Fund which are
redeemed or otherwise disposed of from any account existing
prior to such effective date shall be deemed to have been shares
sold prior to such effective date to the extent of the number of
shares held in such account immediately after the close of
business on the day prior to such effective date; and

1
<PAGE> 2

WHEREAS, this Agreement is a "related agreement" to the
Distribution Plan as that term is used in the Rule and is
subject to all of the provisions of the Rule as to such
agreements;

NOW, THEREFORE, the Company and the Broker-Dealer agree as
follows:

1. Subject to continuing compliance with its obligations
pursuant to Section 2 hereof, the Broker-Dealer shall be
entitled distribution fee and service fee to payments, if any,
to be paid by the Company at the annual percentage rate of the
Holding Level set forth from time to time in the then current
Prospectus of the Fund on a quarterly basis (prorated for any
portion of such period during which this Agreement is in effect
for less than the full amount of such period); it is understood
and agreed that the Company may make final and binding
determinations as to whether such continuing compliance and as
to whether or not any Fund shares are to be considered in
determining the Holding Level of any particular broker-dealer
and what Fund shares, if any, are to be attributed to such
purpose to a particular broker-dealer, to a different
broker-dealer or to no broker-dealer. Payments shall be made to
the Broker-Dealer named above and portions of the payments may
be, in the discretion of the Broker-Dealer, paid over to
individual registered representatives of said Broker-Dealer to
whom there have been assigned accounts of clients or customers
of the Broker-Dealer with respect to which the respective
Holding Level was determined.

2. The distribution fee payments with respect to a class of
the Fund's shares to be made in accordance with Section 1
hereof, if any, shall be paid to the Broker-Dealer as
compensation for selling shares of the respective class.

3. In consideration for the service fee payments to be made in
accordance with Section 1 hereof, the Broker-Dealer shall
provide to its clients or customers who hold shares of each
respective Fund with respect to which payments to the
Broker-dealer may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be
reasonably requested by the Company, including but not limited
to answering inquiries regarding the Fund, providing information
programs regarding the fund, assisting in selected dividend payment
options, account designations and addresses and maintaining the
investment of such customer or client in the Fund.

4. The Company shall have the right at any time and from time
to time without notice to the Broker-Dealer to amend its
Prospectus with respect to the amount of the service free and
the amount of the distribution fee to be paid pursuant hereto.

<PAGE> 3

Such amendments shall be effective as of the date of the amended
Prospectus.

5. This Agreement shall go into effect on the later of the date set
forth above or the date on which it is approved by a vote of each Fund's Board
of Trustees, and of those Trustees (the "Qualified Trustees") who are not
interested persons (as defined in the 1940 Act), of the Fund and have no direct
or indirect financial interest in the operations of the Distribution Plan or
any agreement related to the Distribution Plan cast in person at a meeting
called for the purpose of voting on this Agreement and shall continue in effect
(unless terminated) until the June 30th next succeeding such effective date and
will continue thereafter only if such continuance is specifically approved at
least annually in the manner heretofore specified for initial approval. This
agreement will terminate automatically in the event of its assignment (as that
term is used in the Rule) or if the Distribution Plan is terminated. This
Agreement may also be terminated at any time, without the payment of any
penalty, on sixty (60) days written notice to the Broker-dealer, by vote of a
majority of the Qualified Trustees or by vote of a majority (as that term is
used in the Rule) of the outstanding voting securities of the Fund.

IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.

VAN KAMPEN AMERICAN CAPITAL

Broker-dealer Firm Name

By:______________________________

Firm Address Senior Vice President

By:

Title:

<PAGE> 1

EXHIBIT 15(c)
FORM OF

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

ADMINISTRATIVE SERVICES AGREEMENT

This Agreement is entered into as of the ____ day of ____,
19__, by and between Van Kampen American Capital Distributors,
Inc. (formerly Van Kampen Merritt, Inc.) (the "Company") and the
undersigned (the "Intermediary").

WHEREAS, the Company is the principal underwriter of the
open-end investment companies listed on Schedule 1 to this
Agreement (hereinafter individually the "Fund" or collectively
the "Funds"); and

WHEREAS, each respective Fund has adopted a Distribution Plan
(the "Distribution Plan") pursuant to Rule 12b-1 (the "Rule")
under the Investment Company Act of 1940, as amended (the "1940
Act"), and a Service Plan (the "Service Plan") relating to such
Fund, the Distribution Plans being described in the Fund's
Prospectus and Statement of Additional Information; and

WHEREAS, each respective Fund's Distribution Plans authorize
the Company to enter into distribution services agreements such
as this Agreement with certain financial intermediaries selected
by the Company, and the Intermediary has been so selected; and

WHEREAS, each respective Fund's Distribution Plans authorize
the Company to make payments at a rate specified in an agreement
such as this Agreement varying directly with the aggregate
average daily net asset value of shares of each respective Fund
sold by such financial intermediary on or after the effective
date of this Agreement, as determined pursuant to Section 4
hereof, and held at the close of each day in accounts of clients
or customers of particular intermediary, such amount being
referred to herein as the "Holding Level"; for purposes of
calculating the Holding Level, shares of such Fund which are
redeemed or otherwise disposed of from any account existing
prior to such effective date shall be deemed to have been shares
sold prior to such effective date to the extent of the number of
shares held in such account immediately after the close of
business on the day prior to such effective date; and

WHEREAS, this Agreement is a "related agreement" to the
Distribution Plan as that term is used in the Rule and is
subject to all of the provisions of the Rule as to such
agreements;

<PAGE> 2

NOW, THEREFORE, the Company and the Intermediary agree as
follows:

1. Subject to continuing compliance with its obligations
pursuant to Section 2 hereof, the Intermediary shall be entitled
to distribution fee and service fee payments, if any, to be paid
by the Company with respect to each class of the Fund's shares
at the annual percentage rate of the Holding Level set forth
from time to time in the then current Prospect of the Fund on a
quarterly basis (prorated for any portion of such period during
which this Agreement is in effect for less than the full amount
of such period); it is understood and agreed that the Company
may make final and binding determinations as to whether such
continuing compliance and as to whether or not any Fund shares
are to be considered in determining the Holding Level of any
particular financial intermediary and what Fund shares, if any,
are to be attributed to such purpose to a particular financial
intermediary, to a different financial intermediary or to no
financial intermediary.

<PAGE> 3

3. In consideration for the service fee payments to be made in
accordance with Section 1 hereof, the Intermediary shall provide
to its clients or customers who hold shares of each respective
Fund with respect to which payments to the Intermediary may be
made under such Fund's Distribution Plan such services and other
assistance as may from time to time be reasonably requested by
the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the
Fund, assisting in selected dividend payment options, account
designations and addresses and maintaining the investment of
such customer or client in the Fund.

5. This Agreement shall go into effect on the later of the
date set forth above or the date on which it is approved by a
vote of each Fund's Board of Trustees and of those Trustees (the
"Qualified Trustees") who are not interested persons (as defined
in the 1940 Act) of the Fund and have no direct or indirect
financial interest in the operations of the Distribution Plan or
any agreement related to the Distribution Plan cast in person at
a meeting called for the purpose of voting on this Agreement and
shall continue in effect (unless terminated) until the June 30th
next succeeding such effective date and will continue thereafter
only if such continuance is specifically approved at least
annually in the manner heretofore specified for initial
approval. This agreement will terminate automatically in the
event of its assignment (as that term is used in the Rule) or if
the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on
sixty (60) days written notice to the Intermediary, by vote of a
majority of the Qualified Trustees or by vote of a majority
(as that term is used in the Rule) of the outstanding
voting securities of the Fund.

IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.

VAN KAMPEN AMERICAN CAPITAL

By:

Intermediary Senior Vice President

<PAGE> 4

Address

By:

Title

<PAGE> 1
EXHIBIT 15(d)

FORM OF

VAN KAMPEN AMERICAN CAPITAL [FUND NAME]

SERVICE PLAN

The plan set forth below (the "Service Plan") for the VAN
KAMPEN AMERICAN CAPITAL [FUND NAME] (the "Fund"), a series of the Van
Kampen American Capital [Trust Name] (the "Trust") describes the material
terms and conditions under which assets of the Fund may be used
to compensate the Fund's principal underwriter, within the
meaning of the Investment Company Act of 1940, as amended (the
"1940 Act"), brokers, dealers and other financial intermediaries
(collectively "Financial Intermediaries") for providing personal
services to shareholders and/or the maintenance of shareholder
accounts with respect to each of its Class A Shares of
beneficial interest (the "Class A Shares"), its Class B Shares
of beneficial interest (the "Class B Shares"), and its Class C
Shares of beneficial interest (the "Class C Shares") The Class
A Shares, Class B Shares and Class C Shares sometimes are
referred to herein collectively as the "Shares." Each class of
Shares is offered and sold subject to a different combination of
front-end sales charges, distribution fees, service fees and
contingent deferred sales charges.1 Classes of shares, if any,
subject to a front-end sales charge and a distribution and/or
service fee are referred to herein as "Front-End Classes" and
the Shares of such classes are referred to herein as "Front-End
Shares." Classes of shares, if any, subject to a
contingent-deferred sales charge and a distribution and or a
service fee are referred to herein as "CDSC Classes" and Shares
of such classes are referred to herein as "CDSC Shares."
Classes of shares, if any, subject to a front-end sales charge,
a contingent-deferred sales charge and a distribution and/or
service fee are referred to herein as "Combination Classes" and
Shares of such class are referred to herein as "Combination
Shares."

The Fund has adopted a distribution plan (the "Distribution
Plan") pursuant to which the Fund is authorized to expend on an
annual basis a portion of its average net assets attributable to
each class of Shares in connection with financing distribution
related activities. The Fund also has entered into a
distribution and services agreement (the "Distribution and
Services Agreement") with Van Kampen American Capital
Distributors, Inc. (formerly Van Kampen Merritt, Inc.) (the
"Distributor"), pursuant to which the Distributor acts as agent
on behalf of the Fund in connection with the implementation of
the Service Plan and acts as the principal underwriter with
respect to each class of Shares. The Distributor may enter into
selling agreements (the "Selling Agreements") with brokers,

<PAGE> 2

dealers and other financial intermediaries ("Financial
Intermediaries") in order to implement the Distribution
Agreement, the Distribution Plan and this Service Plan.

The Fund hereby is authorized to pay a service fee with respect
to its Class A Shares, Class B Shares and Class C Shares to any
person who sells such Shares and provides personal services to
shareholders and/or maintains shareholder accounts in an annual
amount not to exceed 0.25% of the average annual net asset value
of the Shares maintained in the Fund by such person that were
sold on or after the date on which this Service Plan was first
implemented. The aggregate annual amount of all such payments
with respect to each such class of Shares may not exceed 0.25%
of the Fund's average annual net assets attributable to the
respective class of Shares sold on or after the date on which
this Service Plan was first implemented and maintained in the
Fund more than one year.

Payments pursuant to this Service Plan may be paid or prepaid
on behalf of the Fund by the Distributor acting as the Fund's
agent.

Payments by the Fund to the Distributor pursuant to this
Service Plan shall not be made more often than monthly upon
receipt by the Fund of a separate written expense report with
respect to each class of Shares setting forth the expenses
qualifying for such reimbursement allocated to each class of
Shares and the purposes thereof.

In the event that amounts payable hereunder with respect to a
class of Shares do not fully reimburse the Distributor for
pre-paid service fees, such unreimbursed service fee expenses
will be carried forward and paid by the Fund hereunder in future
years so long as this Service Plan remains in effect, subject to
applicable laws and regulations. Reimbursements for service fee
related expenses payable hereunder with respect to a particular
class of Shares may not be used to subsidize services provided
with respect to any other class of Shares.

The Fund shall not compensate the Distributor, and neither the
Fund nor the Distributor shall compensate any Financial
Intermediary, for any service related expenses incurred with
respect to a class of Shares prior to the later of (a) the
implementation of this Service Plan with respect to such class
of Shares or (b) the date that such Financial Intermediary
enters into a Selling Agreement with the Distributor.

<PAGE> 3

Trustees (within the meaning of the 1940 Act) by a vote cast in
person at a meeting called for the purpose of voting on such
Selling Agreements. Such Selling Agreements shall provide that
the Financial Intermediaries shall provide the Distributor with
such information as is reasonably necessary to permit the
Distributor to comply with the reporting requirements set forth
in Paragraphs 3 and 8 hereof.

Subject to the provisions of this Service Agreement, the Fund
is hereby authorized to pay a service fee to any person that is
not an "affiliated person" or "interested person" of the Fund or
its "investment adviser" or "principal underwriter" (as such
terms are defined in the 1940 Act) who provides any of the
foregoing services for the Fund. Such fee shall be paid only
pursuant to written agreements between the Fund and such other
person the terms of which permit payments to such person only in
accordance with the provisions of this Service Agreement and
which have the approval of a majority of the Disinterested
Trustees by vote cast separately with respect to each class of
Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.

The Fund and the Distributor shall prepare separate written
reports for each class of Shares and shall submit such reports
to the Fund's Board of Trustees on a quarterly basis summarizing
all payments made by them with respect to each class of Shares
pursuant to this Service Plan and the agreements contemplated
hereby, the purposes for which such payments were made and such
other information as the Board of Trustees or the Disinterested
Trustees may reasonably request from time to time, and the Board
of Trustees shall review such reports and other information.

This Service Plan may be terminated with respect to a class of
Shares without penalty at any time by a majority of the
Disinterested Trustees or by a "majority of the outstanding
voting securities" of the respective class of Shares of the
Fund.

This Service Plan shall become effective upon its approval by
(a) a majority of the Board of Trustees and a majority of the
Disinterested Trustees by vote cast separately with respect to
each class of Shares cast in person at a meeting called for the
purpose of voting on this Distribution Plan, and (b) with
respect to each class of Shares, a "majority of the outstanding
voting securities" (as such phrase is defined in the 1940 Act)
of such class of Shares voting separately as a class.

This Service Plan and any agreement contemplated hereby shall
continue in effect beyond the first anniversary of its adoption
by the Board of Trustees of the Fund only so long as (a) its
continuation is approved at least annually in the manner set
forth in clause (a) of paragraph 10 above and (b) the selection
and nomination of those trustees of the Fund who are not
"interested persons" of the Fund are committed to the discretion
of such trustees.

<PAGE> 4

This Service Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with
the approval of a "majority of the outstanding voting
securities" of the respective class of Shares of the Fund. This
Service Plan may not be amended in any material respect except
with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Service Plan to changes in
Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), the 1940 Act, the rules and regulations
thereunder or the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. shall not be deemed to
be material amendments.

The Trustees of the Trust have adopted this Service Plan as
trustees under the Declaration of Trust of the Trust and the
policies of the Trust adopted hereby are not binding upon any of
the Trustees or shareholders of the Trust individually, but bind
only the trust estate.

1 The Fund is authorized to offer multiple classes of shares
pursuant to an order of the Securities and Exchange Commission
exempting the Fund from certain provisions of the 1940 Act.

<PAGE> 1

EXHIBIT 17 (a)

INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN/AMERICAN CAPITAL DISTRIBUTORS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
AUGUST 17, 1995

Van Kampen Merritt U.S. Government Trust
Van Kampen Merritt Tax Free Fund
Van Kampen Merritt Insured Tax Free Income Fund
Van Kampen Merritt Tax Free High Income Fund
Van Kampen Merritt California Insured Tax Free Fund
Van Kampen Merritt Municipal Income Fund
Van Kampen Merritt Limited Term Municipal Income Fund
Van Kampen Merritt Florida Insured Tax Free Income Fund
Van Kampen Merritt New Jersey Tax Free Income Fund
Van Kampen Merritt New York Tax Free Income Fund
Van Kampen Merritt Trust
Van Kampen Merritt High Yield Fund
Van Kampen Merritt Short-Term Global Income Fund
Van Kampen Merritt Adjustable Rate U.S. Government Fund
Van Kampen Merritt Strategic Income Fund
Van Kampen Merritt Emerging Markets Income Fund
Van Kampen Merritt Growth Fund
Van Kampen Merritt Equity Trust
Van Kampen Merritt Growth and Income Fund
Van Kampen Merritt Utility Fund
Van Kampen Merritt Balanced Fund
Van Kampen Merritt Total Return Fund
Van Kampen Merritt Pennsylvania Tax Free Income Fund
Van Kampen Merritt Money Market Trust
Van Kampen Merritt Money Market Fund
Van Kampen Merritt Tax Free Money Fund
Van Kampen Merritt Prime Rate Income Trust
Van Kampen Merritt Series Trust
American Capital Comstock Fund, Inc.
American Capital Corporate Bond Fund, Inc.
American Capital Emerging Growth Fund, Inc.
American Capital Enterprise Fund, Inc.
American Capital Equity Income Fund, Inc.
American Capital Federal Mortgage Trust
American Capital Global Managed Assets Fund, Inc.
American Capital Government Securities, Inc.
American Capital Government Target Series
American Capital Growth and Income Fund, Inc.
American Capital Harbor Fund, Inc.
American Capital High Yield Investments, Inc.
American Capital Life Investment Trust
American Capital Municipal Bond Fund, Inc.
American Capital Pace Fund, Inc.
American Capital Real Estate Securities Fund, Inc.
American Capital Reserve Fund, Inc.
American Capital Tax-Exempt Trust
American Capital Texas Municipal Securities, Inc.
American Capital U.S. Government Trust for Income
American Capital Utilities Income Fund, Inc.
American Capital World Portfolio Series, Inc.
<PAGE> 2

<TABLE>
<S> <C>
Emerging Markets Municipal Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 353
Insured Municipals Income Trust (Discount) . . . . . . . . . . . . . . . . . . . . . . . . . Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term) . . . . . . . . . . . . . . . . . . Series 1 through 1009
Insured Municipals Income Trust (Intermediate Term) . . . . . . . . . . . . . . . . . . . . . Series 5 through 84
Insured Municipals Income Trust (Limited Term) . . . . . . . . . . . . . . . . . . . . . . . Series 9 through 80
Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . . . . . . Series 1 through 3
Insured Municipals Income Trust (Intermediate Laddered Maturity) . . . . . . . . . . . . . . Series 1 and 2
Insured Tax Free Bond Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 6
Insured Tax Free Bond Trust (Limited Term) . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through
Investors' Quality Tax-Exempt Trust-Intermediate . . . . . . . . . . . . . . . . . . . . . . Series 1
Investors' Corporate Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 12
Investors' Governmental Securities Income Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 7
Van Kampen Merritt International Bond Income Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Alabama Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 9
Arizona Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 16
Arizona Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 12
Arkansas Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 2
Arkansas Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1
California Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 144
California Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . Series 1
California Insured Municipals Income Trust (1st Intermediate Series) . . . . . . . . . . . . Series 1 through 3
California Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 21
California Insured Municipals Income Trust (Intermediate Laddered) . . . . . . . . . . . . . Series 1 through 20
Colorado Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 75
Colorado Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 18
Connecticut Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 27
Connecticut Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1
Delaware Investor's Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 and 2
Florida Insured Municipal Income Trust - Intermediate . . . . . . . . . . . . . . . . . . . . Series 1 and 2
Florida Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 95
Florida Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 and 2
Florida Insured Municipals Income Trust (Intermediate Laddered) . . . . . . . . . . . . . . . Series 1 through 13
Georgia Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 76
Georgia Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 16
Hawaii Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Investors' Quality Municipals Trust (AMT) . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 9
Kansas Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 11
Kentucky Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 55
Louisiana Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 13
Maine Investor's Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Maryland Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 73
Massachusetts Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 31
Massachusetts Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . Series 1
Michigan Financial Institutions Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Michigan Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 130
Michigan Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . Series 1
Michigan Insured Municipals Income Trust (1st Intermediate Series) . . . . . . . . . . . . . Series 1 through 3
Michigan Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 30
Minnesota Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 55
Minnesota Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 21
Missouri Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 92
Missouri Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . Series 1
Missouri Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 15
Missouri Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Nebraska Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 9
</TABLE>

<PAGE> 3

<TABLE>
<S> <C>
New Mexico Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 18
New Jersey Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 105
New Jersey Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 22
New Jersey Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 and 4
New York Insured Municipals Income Trust-Intermediate . . . . . . . . . . . . . . . . . . . . Series 1 through 6
New York Insured Municipals Income Trust (Limited Term) . . . . . . . . . . . . . . . . . . . Series 1
New York Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 127
New York Insured Tax-Free Bond Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
New York Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 15
New York Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1
North Carolina Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 83
Ohio Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 98
Ohio Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . . . Series 1 and 2
Ohio Insured Municipals Income Trust (Intermediate Term) . . . . . . . . . . . . . . . . . . Series 1
Ohio Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 3 through 6
Ohio Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 16
Oklahoma Insured Municipal Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 17
Oregon Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 53
Pennsylvania Insured Municipals Income Trust - Intermediate . . . . . . . . . . . . . . . . . Series 1 through 6
Pennsylvania Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 204
Pennsylvania Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . Series 1
Pennsylvania Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . Series 1 through 14
South Carolina Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 79
Tennessee Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1-3 and 5-32
Texas Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 40
Texas Insured Municipal Income Trust (Intermediate Ladder) . . . . . . . . . . . . . . . . . Series 1
Virginia Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 67
Van Kampen Merritt Utility Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 6
Van Kampen Merritt Insured Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 45
Van Kampen Merritt Insured Income Trust (Intermediate Term) . . . . . . . . . . . . . . . . . Series 1 through 44
Van Kampen Merritt Select Equity Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Van Kampen Merritt Select Equity and Treasury Trust . . . . . . . . . . . . . . . . . . . . . Series 1
Washington Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
West Virginia Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 5

</TABLE>

<PAGE> 1

EXHIBIT 17(b)

OFFICERS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

<TABLE>
<CAPTION>
NAME OFFICE LOCATION
---- ------ --------
<S> <C> <C>
Don G. Powell Chairman & Chief Executive Officer Houston, TX

William R. Molinari President & Chief Operating Oakbrook Terrace, IL
Officer

Ronald A. Nyberg Executive Vice President & General Oakbrook Terrace, IL
Counsel
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX

Robert A. Broman Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL
Douglas B. Gehrman Sr. Vice President Houston, TX
Richard D. Humphrey Sr. Vice President Houston, TX
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Debra A. Nichols Sr. Vice President Houston, TX
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Frederick Shepherd Sr. Vice President Houston, TX
Robert S. West Sr. Vice President Oakbrook Terrace, IL
John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL

Timothy K. Brown 1st Vice President Laguna Niguel, CA
James S. Fosdick 1st Vice President Oakbrook Terrace, IL
Edward F. Lynch 1st Vice President Oakbrook Terrace, IL
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
Mark T. McGannon 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
Michael L. Stallard 1st Vice President Oakbrook Terrace, IL
David M. Swanson 1st Vice President Oakbrook Terrace, IL

Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Patricia A. Bettlach Vice President St. Louis, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
Linda Mae Brown Vice President Oakbrook Terrace, IL
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Thomas M. Byron Vice President Oakbrook Terrace, IL
Glenn M. Cackovic Vice President Laguna Niguel, CA
Joseph N. Caggiano Vice President New York, NY
Richard J. Charlino Vice President Oakbrook Terrace, IL
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
</TABLE>

<PAGE> 2

<TABLE>
<S> <C> <C>
Suzanne Cummings Vice President Houston, TX
David B. Dibo Vice President Oakbrook Terrace, IL
Howard A. Doss Vice President Tampa, FL
Jonathan Eckhard Vice President Boulder, CO
Charles Edward Fisher Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Charles Friday Vice President Gibsonia, PA
Nori L. Gabert Vice President, Assoc. General Houston, TX
Counsel & Asst. Secretary
Erich P. Gerth Vice President Dallas, TX
Jack Glaw Vice President Fairhope, AL
Daniel Hamilton Vice President Houston, TX
John A. Hanhauser Vice President Philadelphia, PA
Eric J. Hargens Vice President Orlando, FL
J. Christopher Jackson Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
Lowell Jackson Vice President Norcross, GA
Dana R. Klein Vice President Oakbrook Terrace, IL
Ann Marie Klingenhagen Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
S. William Lehew III Vice President Charlotte, NC
Robert C. Lodge Vice President Philadelphia, PA
Walter Lynn Vice President Flower Mound, TX
Michele L. Manley Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Carl Mayfield Vice President Lakewood, CO
Ruth L. McKeel Vice President Oakbrook Terrace, IL
John Mills Vice President Kenner, LA
Robert Muller, Jr. Vice President Houston, TX
Gary Polson Vice President Overland Park, KS
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Oakbrook Terrace, IL
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
James B. Ross Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, VA
Colette Saucedo Vice President Houston, TX
Stephanie Scarlata Vice President Lynbrook, NY
Lisa A. Schomer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Kimberly M. Spangler Vice President Atlanta, GA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
William C. Strafford Vice President Granger, IN
James C. Taylor Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Sandra A. Waterworth Vice President and Assistant Oakbrook Terrace, IL
Secretary
Steven T. West Vice President Wayne, PA
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
James R. Yount Vice President Seattle, WA
Richard P. Zgonina Vice President Oakbrook Terrace, IL

James J. Boyne Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Eric J. Bridges Asst. Vice President Oakbrook Terrace, IL
Richard B. Callaghan Asst. Vice President Oakbrook Terrace, IL
Stephen M. Cutka Asst. Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Gerald A. Davis Asst. Vice President Oakbrook Terrace, IL
Jerome M. Dybzinski Asst. Vice President Oakbrook Terrace, IL
Melissa B. Epstein Asst. Vice President Houston, TX
Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX
Rocco Fiordelisi III Asst. Vice President St. Louis, MO
Robert D. Gorski Asst. Vice President Oakbrook Terrace, IL
Joseph Hays Asst. Vice President Philadelphia, PA
Susan J. Hill Asst. Vice President Oakbrook Terrace, IL
Hunter Knapp Asst. Vice President Laguna, CA
Natalie N. Hurdle Asst. Vice President New York, NY
Laurie L. Jones Asst. Vice President Houston, TX
Brian T. Levinson Asst. Vice President Houston, TX
Peggy E. Moro Asst. Vice President Oakbrook Terrace, IL
David R. Niemi Asst. Vice President Oakbrook Terrace, IL
Daniel J. O'Keefe Asst. Vice President Oakbrook Terrace, IL
Allison Okun Asst. Vice President Oakbrook Terrace, IL
David B. Partain Asst. Vice President Oakbrook Terrace, IL
Scott M. Pulkrabek Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Michael Quinn Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Andrew J. Scherer Asst. Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Asst. Vice President Philadelphia, PA
Traci T. Sorensen Asst. Vice President Oakbrook Terrace, IL
Gary Steele Asst. Vice President Philadelphia, PA
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Kathleen M. Wennerstrum Asst. Vice President Oakbrook Terrace, IL
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL
Melinda K. Yeager Asst. Vice President Houston, TX

David C. Goodwin Asst. Secretary Oakbrook Terrace, IL
Gina M. Scumaci Asst. Secretary Oakbrook Terrace, IL
</TABLE>

<PAGE> 4

DIRECTORS

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

<TABLE>
<CAPTION>
NAME OFFICE LOCATION
---- ------ --------
<S> <C> <C>
Don G. Powell Chairman & CEO 2800 Post Oak Blvd
Houston, TX 77056

William R. Molinari President & COO One Parkview Plaza
Oakbrook Terrace, IL 60181

Ronald A. Nyberg Executive Vice President One Parkview Plaza
& General Counsel Oakbrook Terrace, IL 60181

William R. Rybak Executive Vice President One Parkview Plaza
& CFO Oakbrook Terrace, IL 60181
</TABLE>

<PAGE> 1

EXHIBIT 24
POWER OF ATTORNEY

The undersigned, being officers and trustees of Van Kampen American
Capital Pennsylvania Tax Free Income Fund, a Pennsylvania trust (the "Trust"),
do hereby, in the capacities shown below, individually appoint Dennis
J. McDonnell and Ronald A. Nyberg, each of Oakbrook Terrace, Illinois, and
each of them, as the agents and attorneys-in-fact with full power of
substitution and resubstitution, for each of the undersigned, to execute and
deliver, for and on behalf of the undersigned, any and all amendments to the
Registration Statement on Form N-1A filed by the Trust with the Securities and
Exchange Commission pursuant to the provisions of the Securities Act of 1933
and the Investment Company Act of 1940.

This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.

Dated: July 25, 1995

Signature Title

/s/ J. Miles Branagan
------------------------------------- Trustee

J. Miles Branagan

<PAGE> 2

/s/ Richard E. Caruso
----------------------------- Trustee
Richard E. Caruso

/s/ Philip P. Gaughan
----------------------------- Trustee
Philip P. Gaughan

/s/ Roger Hilsman
------------------------ Trustee
Roger Hilsman

/s/ R. Craig Kennedy
------------------------------------- Trustee

R. Craig Kennedy

/s/ Dennis J. McDonnell
----------------------- President, Chief Executive Officer and Trustee
Dennis J. McDonnell

/s/ Donald C. Miller
--------------------- Chairman and Trustee
Donald C. Miller

<PAGE> 3

/s/ Jack E. Nelson
--------------------------- Trustee
Jack E. Nelson

/s/ Don G. Powell
------------------------------------- Trustee

Don G. Powell

/s/ David Rees
--------------------- Trustee
David Rees

/s/ Jerome L. Robinson
----------------------- Trustee
Jerome L. Robinson

/s/ Lawrence J. Sheehan
------------------------- Trustee
Lawrence J. Sheehan

/s/ Fernando Sisto
------------------------------------- Trustee

Fernando Sisto

<PAGE> 4

/s/ Wayne W. Whalen
-------------------- Trustee
Wayne W. Whalen

/s/ Edward C. Wood III
----------------------- Chief Financial and Accounting Officer
Edward C. Wood III

/s/ William S. Woodside Trustee
-------------------------------------

William S. Woodside

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 250,335,582<F1>
<INVESTMENTS-AT-VALUE> 242,945,039<F1>
<RECEIVABLES> 4,267,136<F1>
<ASSETS-OTHER> 1,777<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 247,245,870<F1>
<PAYABLE-FOR-SECURITIES> 3,128,485<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,213,108<F1>
<TOTAL-LIABILITIES> 4,341,593<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 199,941,628
<SHARES-COMMON-STOCK> 12,633,499
<SHARES-COMMON-PRIOR> 12,275,432
<ACCUMULATED-NII-CURRENT> 67,299<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,531)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (7,446,092)<F1>
<NET-ASSETS> 203,160,478
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 16,490,190<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 2,540,657<F1>
<NET-INVESTMENT-INCOME> 14,167,689<F1>
<REALIZED-GAINS-CURRENT> 1,589,125<F1>
<APPREC-INCREASE-CURRENT> (31,188,136)<F1>
<NET-CHANGE-FROM-OPS> (15,431,322)
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (12,279,314)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1,647,629
<NUMBER-OF-SHARES-REDEEMED> (1,733,757)
<SHARES-REINVESTED> 444,194
<NET-CHANGE-IN-ASSETS> (18,553,727)
<ACCUMULATED-NII-PRIOR> 3,714<F1>
<ACCUMULATED-GAINS-PRIOR> (1,598,656)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,514,222<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,222,767<F1>
<AVERAGE-NET-ASSETS> 215,060,917
<PER-SHARE-NAV-BEGIN> 18.062
<PER-SHARE-NII> .965
<PER-SHARE-GAIN-APPREC> (1.985)
<PER-SHARE-DIVIDEND> .961
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.081
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>This Item relates to the Fund on a composite basis and not on a class basis.
</FN>

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 250,335,582<F1>
<INVESTMENTS-AT-VALUE> 242,945,039<F1>
<RECEIVABLES> 4,267,136<F1>
<ASSETS-OTHER> 1,777<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 247,245,870<F1>
<PAYABLE-FOR-SECURITIES> 3,128,485<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,213,108<F1>
<TOTAL-LIABILITIES> 4,341,593<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 27,346,058
<SHARES-COMMON-STOCK> 2,336,564
<SHARES-COMMON-PRIOR> 1,534,725
<ACCUMULATED-NII-CURRENT> 67,299<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,531)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (7,446,092)<F1>
<NET-ASSETS> 37,570,971
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 16,490,190<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 2,540,657<F1>
<NET-INVESTMENT-INCOME> 14,167,689<F1>
<REALIZED-GAINS-CURRENT> 1,589,125<F1>
<APPREC-INCREASE-CURRENT> (31,188,136)<F1>
<NET-CHANGE-FROM-OPS> (15,431,322)
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,704,000)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 919,103
<NUMBER-OF-SHARES-REDEEMED> (177,182)
<SHARES-REINVESTED> 59,918
<NET-CHANGE-IN-ASSETS> 9,861,814
<ACCUMULATED-NII-PRIOR> 3,714<F1>
<ACCUMULATED-GAINS-PRIOR> (1,598,656)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,514,222<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,222,767<F1>
<AVERAGE-NET-ASSETS> 34,566,865
<PER-SHARE-NAV-BEGIN> 18.055
<PER-SHARE-NII> .841
<PER-SHARE-GAIN-APPREC> (1.985)
<PER-SHARE-DIVIDEND> .831
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.080
<EXPENSE-RATIO> 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>This Item relates to the Fund on a composite basis and not on a class basis.
</FN>

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 250,335,582<F1>
<INVESTMENTS-AT-VALUE> 242,945,039<F1>
<RECEIVABLES> 4,267,136<F1>
<ASSETS-OTHER> 1,777<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 247,245,870<F1>
<PAYABLE-FOR-SECURITIES> 3,128,485<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,213,108<F1>
<TOTAL-LIABILITIES> 4,341,593<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 2,055,431
<SHARES-COMMON-STOCK> 135,023
<SHARES-COMMON-PRIOR> 114,542
<ACCUMULATED-NII-CURRENT> 67,299<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,531)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (7,446,092)<F1>
<NET-ASSETS> 2,171,025
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 16,490,190<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 2,540,657<F1>
<NET-INVESTMENT-INCOME> 14,167,689<F1>
<REALIZED-GAINS-CURRENT> 1,589,125<F1>
<APPREC-INCREASE-CURRENT> (31,188,136)<F1>
<NET-CHANGE-FROM-OPS> (15,431,322)
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (120,704)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 85,268
<NUMBER-OF-SHARES-REDEEMED> (70,025)
<SHARES-REINVESTED> 5,238
<NET-CHANGE-IN-ASSETS> 104,167
<ACCUMULATED-NII-PRIOR> 3,714<F1>
<ACCUMULATED-GAINS-PRIOR> (1,598,656)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,514,222<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,222,767<F1>
<AVERAGE-NET-ASSETS> 2,474,346
<PER-SHARE-NAV-BEGIN> 18.045
<PER-SHARE-NII> .850
<PER-SHARE-GAIN-APPREC> (1.985)
<PER-SHARE-DIVIDEND> .831
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.079
<EXPENSE-RATIO> 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>
This Item relates to the Fund on a composite basis and not on a class basis.
</FN>

</TABLE>

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> MAR-14-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 250,335,582<F1>
<INVESTMENTS-AT-VALUE> 242,945,039<F1>
<RECEIVABLES> 4,267,136<F1>
<ASSETS-OTHER> 1,777<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 247,245,870<F1>
<PAYABLE-FOR-SECURITIES> 3,128,485<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,213,108<F1>
<TOTAL-LIABILITIES> 4,341,593<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 1,926
<SHARES-COMMON-STOCK> 112
<SHARES-COMMON-PRIOR> 100
<ACCUMULATED-NII-CURRENT> 67,299<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (9,531)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (7,446,092)<F1>
<NET-ASSETS> 1,804
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 16,490,190<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 2,540,657<F1>
<NET-INVESTMENT-INCOME> 14,167,689<F1>
<REALIZED-GAINS-CURRENT> 1,589,125<F1>
<APPREC-INCREASE-CURRENT> (31,188,136)<F1>
<NET-CHANGE-FROM-OPS> (15,431,322)
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (86)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 112
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 88
<ACCUMULATED-NII-PRIOR> 3,714<F1>
<ACCUMULATED-GAINS-PRIOR> (1,598,656)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,514,222<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,222,767<F1>
<AVERAGE-NET-ASSETS> 1,848
<PER-SHARE-NAV-BEGIN> 17.190
<PER-SHARE-NII> .755
<PER-SHARE-GAIN-APPREC> (1.097)
<PER-SHARE-DIVIDEND> .759
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.089
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>This Item relates to the Fund on a composite basis and not on a class basis.
</FN>

</TABLE>