VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUN, 485BPOS, 1996-04-26

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUN
485BPOS, 1996-04-26

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 1996

REGISTRATION NOS. 33-11384
811-4983
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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. 15 /X/
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 16 /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 APRIL 29, 1996 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 INTENDS TO
FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A FORM 24F-2 FOR ITS FISCAL
YEAR ENDING DECEMBER 31, 1996 ON OR ABOUT FEBRUARY 28, 1997.

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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
Item 3. Condensed Financial
Information................. SHAREHOLDER TRANSACTION EXPENSES; ANNUAL FUND
OPERATING EXPENSES AND EXAMPLE; FINANCIAL
HIGHLIGHTS; FUND PERFORMANCE; SHAREHOLDER SERVICES;
ADDITIONAL INFORMATION
Item 4. General Description of
Registrant.................. 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;
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........ Trustees and Officers
Item 15. Control Persons and Principal
Holders of Securities....... Shares of the Fund; Trustees and Officers
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;
Trustees and Officers; 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; Trustees and Officers
</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

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VAN KAMPEN AMERICAN CAPITAL
PENNSYLVANIA TAX FREE INCOME FUND
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Van Kampen American Capital Pennsylvania Tax Free Income Fund is a non-
diversified, open-end management investment company, commonly known as a "mutual
fund." The Fund 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 REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

A Statement of Additional Information, dated April 29, 1996, 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 Telecommunications
Device for the Deaf at (800) 772-8889.

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

VAN KAMPEN AMERICAN CAPITAL (SM)

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

THIS PROSPECTUS IS DATED APRIL 29, 1996.

<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.

2
<PAGE> 6

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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................................. 4
Shareholder Transaction Expenses............................... 8
Annual Fund Operating Expenses and Example..................... 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.............................. 53
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

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PROSPECTUS SUMMARY
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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." The Fund is organized as a Pennsylvania trust. See
"The Fund."

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

INVESTMENT OBJECTIVE. The Fund's investment objective is to 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 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" 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
automatically convert to Class A

6
<PAGE> 10

Shares seven years after the end of the calendar month in which the investor's
order to purchase was accepted.

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. Class C Shares automatically convert to Class A Shares ten years after
the end of the calendar month in which the investor's order to purchase was
accepted.

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.

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

DISTRIBUTIONS FROM THE FUND. Distributions from net investment income are
declared daily and paid monthly. Capital gains, if any, are distributed at least
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

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SHAREHOLDER TRANSACTION EXPENSES
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<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------------ ------------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as percentage of the
offering price)................ 4.75%(1) None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of the offering
price)......................... None None(3) None(3)
Deferred sales charge (as a
percentage of the lesser of the
original purchase price or
redemption proceeds)........... None(2) Year 1--4.00% Year 1--1.00%
Year 2--3.75% After--None
Year 3--3.50%
Year 4--2.50%
Year 5--1.50%
Year 6--1.00%
After--None

Redemption fees (as a percentage
of amount redeemed)............ None None None
Exchange fees.................... None None None
</TABLE>

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

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

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

8
<PAGE> 12

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ANNUAL FUND OPERATING EXPENSES AND EXAMPLE

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management fees(1) (as a percentage of average
daily net assets).............................. 0.60% 0.60% 0.60%
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).................................... 0.29% 0.29% 0.30%
Total expenses(1) (as a percentage of average
daily net assets).............................. 1.14% 1.89% 1.90%
</TABLE>

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(1) For the year ended December 31, 1995, the "Management fees" were 0.46% for
each class of shares reflecting a waiver of $356,593 by the Adviser and
"Total expenses" were (i) 1.00% with respect to Class A Shares, (ii) 1.75%
with respect to Class B Shares and (iii) 1.75% with respect to Class C
Shares. The "Management fees" and "Total expenses" shown above do not
reflect any waiver of fees by the Adviser as it is anticipated that this
waiver will not be continued.

(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 1.14% for Class A Shares, 1.89% for
Class B Shares and 1.90% for Class C Shares,
(ii) 5% annual return and (iii) redemption at
the end of each time period
Class A Shares................................ $59 $87 $ 107 $ 180
Class B Shares................................ $59 $94 $ 117 $ 192*
Class C Shares................................ $29 $59 $ 102 $ 221
You would pay the following expenses on the same
$1,000 investment assuming no redemption at
the end of each period:
Class A Shares................................ $59 $82 $ 107 $ 180
Class B Shares................................ $19 $59 $ 102 $ 192*
Class C Shares................................ $19 $59 $ 102 $ 221
</TABLE>

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* 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 is included
to provide a means for the investor to compare expense levels of funds with
different fee structures over varying investment periods. 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

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FINANCIAL HIGHLIGHTS (for a share outstanding throughout the periods)

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

The following schedule presents financial highlights for one Class A Share, one
Class B Share and one Class C Share of the Fund outstanding throughout each of
the periods indicated. The financial highlights have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, for each of the periods
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 YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................. $ 16.081 $ 18.062 $ 16.899 $ 16.373 $ 15.716
------ ------ ------ ------ ------
Net Investment Income.................................... 0.946 0.965 1.027 1.074 1.081
Net Realized and Unrealized Gain/Loss on Investments..... 1.660 (1.985) 1.164 0.525 0.696
------ ------ ------ ------ ------
Total from Investment Operations.......................... 2.606 (1.020) 2.191 1.599 1.777
------ ------ ------ ------ ------
Less:
Distributions from and in excess of Net Investment
Income(1).............................................. 0.950 0.961 1.028 1.073 1.080
Distributions from Net Realized Gain on Investments...... -- -- -- -- 0.040
------ ------ ------ ------ ------
Total Distributions....................................... 0.950 0.961 1.028 1.073 1.120
------ ------ ------ ------ ------
Net Asset Value, End of the Period........................ $ 17.737 $ 16.081 $ 18.062 $ 16.899 $ 16.373
============ ============ ============ ============ ============
Total Return(2)........................................... 16.62% (5.72%) 13.25% 10.09% 11.64%
Net Assets at End of Period (in millions)................. $ 226.7 $ 203.2 $ 221.7 $ 153.8 $ 103.1
Ratio of Expenses to Average Net Assets(2 and 3)
(annualized)............................................. 1.00% 0.90% 0.71% 0.72% 0.70%
Ratio of Net Investment Income to Average Net Assets(2)
(annualized)............................................. 5.57% 5.73% 5.80% 6.41% 6.70%
Portfolio Turnover........................................ 27.66% 7.94% 1.35% 9.87% 48.47%
- ----------------
(1) See Note 1 to the Financial Statements.
(2) Effect of sales charges not reflected on Total Return. If certain expenses had not been waived or assumed, total return
would have been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets(3)
(annualized)......................................... 1.14% 1.17% 1.09% 1.17% 1.26%
Ratio of Net Investment Income to Average Net Assets
(annualized)......................................... 5.42% 5.46% 5.41% 5.95% 6.13%
(3) Beginning with the year ended December 31, 1995, the Ratios of Expenses to Average Net Assets are based upon expense
amounts which do not
reflect credits earned on overnight cash balances. See Note 1 to the Financial Statements.
* Non-Annualized

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 the Period.................. $ 15.698 $ 15.204 $ 14.310 $14.265
------ ------ ------ ------
Net Investment Income.................................... 1.080 1.073 1.069 0.707
Net Realized and Unrealized Gain/Loss on Investments..... 0.018 0.518 0.949 0.026
------ ------ ------ ------
Total from Investment Operations.......................... 1.098 1.591 2.018 0.733
------ ------ ------ ------
Less:
Distributions from and in excess of Net Investment
Income(1).............................................. 1.080 1.079 1.082 0.688
Distributions from Net Realized Gain on Investments...... -- 0.018 0.042 --
------ ------ ------ ------
Total Distributions....................................... 1.080 1.097 1.124 0.688
------ ------ ------ ------
Net Asset Value, End of the Period........................ $ 15.716 $ 15.698 $ 15.204 $14.310
============ ============ ============ ===============

Total Return(2)........................................... 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(2 and 3)
(annualized)............................................. 0.61% 0.61% 0.69% 0.21%
Ratio of Net Investment Income to Average Net Assets(2)
(annualized)............................................. 6.92% 6.81% 7.14% 6.89%
Portfolio Turnover........................................ 46.74% 16.48% 18.94% 1.62%
- ----------------
(1) See Note 1 to the Financial Statements.
(2) Effect of sales charges not reflected on Total Return.
would have been lower and the ratios would have been a
Ratio of Expenses to Average Net Assets(3)
(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%
(3) Beginning with the year ended December 31, 1995, the R
amounts which do not
reflect credits earned on overnight cash balances. See N
* Non-Annualized
</TABLE>

See Financial Statements and Notes Thereto

11
<PAGE> 15

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

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

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

<TABLE>
<CAPTION>
CLASS B SHARES
---------------------------------------------
MAY 1, 1993
(COMMENCEMENT
OF
YEAR ENDED YEAR ENDED DISTRIBUTION)
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1994 1993
------------ ------------ ---------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period............................................ $16.080 $18.055 $17.460
------- ------- -------
Net Investment Income.............................................................. 0.819 0.841 0.586
Net Realized and Unrealized Gain/Loss on Investments............................... 1.659 (1.985) 0.603
------- ------- -------
Total from Investment Operations.................................................... 2.478 (1.144) 1.189
------- ------- -------
Less Distributions from and in Excess of Net Investment Income(1)................... 0.827 0.831 0.594
------- ------- -------
Net Asset Value, End of the Period.................................................. $17.731 $16.080 $18.055
======= ======= =======
Total Return(2)..................................................................... 15.72% (6.39) 6.81%*
Net Assets at End of Period (in millions)........................................... $ 46.80 $ 37.60 $ 27.70
Ratio of Expenses to Average Net Assets(2 and 3) (annualized)....................... 1.75% 1.64% 1.48%
Ratio of Net Investment Income to Average Net Assets(2) (annualized)................ 4.81% 4.98% 4.47%
Portfolio Turnover.................................................................. 27.66% 7.94% 1.35%

<CAPTION>
CLASS C SHARES
---------------------------------------------
AUGUST 13, 1993
(COMMENCEMENT
OF
YEAR ENDED YEAR ENDED DISTRIBUTION)
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1994 1993
------------ ------------ ---------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period............................................ $16.079 $18.045 $17.850
------- ------- -------
Net Investment Income.............................................................. 0.812 0.850 0.325
Net Realized and Unrealized Gain/Loss on Investments............................... 1.665 (1.985) 0.208
------- ------- -------
Total from Investment Operations.................................................... 2.477 (1.135) 0.533
------- ------- -------
Less Distributions from and in Excess of Net Investment Income(1)................... 0.827 0.831 0.338
------- ------- -------
Net Asset Value, End of the Period.................................................. $17.729 $16.079 $18.045
======= ======= =======
Total Return(2)..................................................................... 15.72% 6.34% 2.98%*
Net Assets at End of Period (in millions)........................................... $ 3.40 $ 2.20 $ 2.10
Ratio of Expenses to Average Net Assets(2 and 3) (annualized)....................... 1.75% 1.63% 1.54%
Ratio of Net Investment Income to Average Net Assets(2) (annualized)................ 4.76% 4.97% 4.08%
Portfolio Turnover.................................................................. 27.66% 7.94% 1.35%
</TABLE>

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

(1) See Note 1 to the Financial Statements.

(2) Effect of sales charges not reflected on Total Return. If certain expenses
had not been waived or assumed, Total Return would have been lower and the
ratios would have been as follows:

</TABLE>

(3) Beginning with the year ended December 31, 1995, the Ratio of Expenses to
Average Net Assets are based upon expense amounts which do not reflect
credits earned on overnight cash balances. See Note 1 to the Financial
Statements.

* Non-Annualized

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. 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, 1995 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, 1995, computed on a monthly basis.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
------------------------------------------
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............................. 52.6% 0.5%
AA/Aa............................... 6.5% 0.0%
A/A................................. 13.3% 0.8%
BBB/Baa............................. 20.7% 0.2%
BB/Ba............................... 1.8% 0.7%
B/B................................. 0.0% 2.9%
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........................ 94.9% 5.1%
================ ===================
</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, 1995, approximately 8.7% and 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 $3.73 billion in crop and livestock
products annually, while agribusiness and food related industries support $37
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 more than $50 billion under
management or supervision. Van Kampen American Capital's more than 40 open-end
and 38 closed-end funds and more than 2,800 unit investment trusts are
professionally distributed by leading financial advisers nationwide. Van Kampen
American Capital Distributors, Inc., the distributor of the Fund and the sponsor
of the funds mentioned above, is also a wholly-owned subsidiary of Van Kampen
American Capital.

Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc. a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital and its subsidiaries (some of whom are officers or trustees of
the Fund) own, in the aggregate, not more than 7% of the common stock of VK/AC
Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an additional 13% 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 1.00%
Over $500 million....................................... 0.50 of 1.00%
</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

25
<PAGE> 29

share certificates, membership dues in the Investment Company Institute or any
similar organization, reports and notices to shareholders, costs of registering
shares of the Fund under the federal securities laws, miscellaneous expenses and
all taxes and fees to federal, state or other governmental agencies. The Adviser
reserves the right in its sole discretion from time-to-time to waive all or a
portion of its management fee or to reimburse the Fund for all or a portion of
its other expenses.

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,
has been primarily responsible for the day-to-day management of the Fund since
August 1995. 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 in an amount of $500,000 or more and not to accept any order for Class
C Shares in an

26
<PAGE> 30

amount of $1 million or more because it ordinarily will be more advantageous for
an investor making such an investment to purchase Class A Shares.

An investor should carefully consider the sales charges applicable to each
class of shares and the estimated period of their investment to determine which
class of shares is more beneficial for the investor to purchase. For example,
investors who would qualify for a significant purchase price discount from the
maximum sales charge on Class A Shares may determine that payment of such a
reduced front-end sales charge is superior to electing to purchase Class B
Shares or Class C Shares, each with no front-end sales charge but subject to a
CDSC and a higher aggregate distribution and service fee. However, because
initial sales charges are deducted at the time of purchase of Class A Share
accounts under $1 million, a purchaser of such Class A Shares would not have all
of his or her funds invested initially and, therefore, would initially own fewer
shares than if Class B Shares or Class C Shares had been purchased. On the other
hand, an investor whose purchase would not qualify for price discounts
applicable to Class A Shares and intends to remain invested until after the
expiration of the applicable CDSC 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).

Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except each class of shares (i)
bears those distribution fees, service fees and administrative expenses
applicable to the respective class of shares as a result of its sales
arrangements, (ii) has exclusive voting rights with respect to those provisions
of the Fund's Rule 12b-1 distribution plan which relate only to such class and
(iii) has a different exchange privilege. Generally, a class of shares subject
to a higher ongoing distribution fee or service fee or subject to a longer
conversion period 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. 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 currently offers 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 applicable sales charges on the sales generated by the
broker, dealer or financial

28
<PAGE> 32

intermediary at the public offering price during such programs. Other programs
provide, among other things and subject to certain conditions, for certain
favorable distribution arrangements for shares of the Fund. Also, the
Distributor in its discretion may from time to time, pursuant to objective
criteria established by it, pay fees to, and sponsor business seminars for,
qualifying brokers, dealers or financial intermediary for certain services or
activities which are primarily intended to result in sales of shares of the
Fund. Fees may include payment for travel expenses, including lodging, incurred
in connection with trips taken by invited registered representatives and members
of their families to locations within or outside of the United States for
meetings or 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. 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 brokers, dealers or
financial intermediaries who initiate and are responsible for purchases of
$1 million or more as follows: 1.00% on sales to $2 million, plus 0.80% on
the next million, 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
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 or in combination with 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 INVESTMENT TRUST REINVESTMENT PROGRAMS. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
Shares of the Fund at net asset value with no minimum initial or subsequent
investment requirement if the administrator of an investor's unit investment
trust program meets certain uniform criteria relating to cost savings by the
Fund and the

31
<PAGE> 35

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

32
<PAGE> 36

described herein under "Purchase of Shares -- Class A Shares -- Quantity
Discounts," during the thirteen-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, Tax Free Money Fund or Reserve Fund. For such
investments the Fund imposes a contingent deferred sales charge of 1.00%
in the event of redemptions within one year of the purchase other than
redemptions required to make payments to participants under the terms of
the plan. The contingent deferred sales charge incurred upon certain
redemptions is paid to the Distributor in reimbursement for distribution-
related expenses. A commission will be paid to dealers who initiate and
are responsible for such purchases as follows: 1.00% on sales to $5
million, plus 0.50% on the next $5 million, plus 0.25% on the excess over
$10 million.

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

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

33
<PAGE> 37

department, provided that the Fund's transfer agent receives federal funds for
the purchase by the close of business on the next business day following
acceptance of the order. An authorized broker, dealer or financial intermediary
may charge a transaction fee for placing an order to purchase shares pursuant to
this provision or for placing a redemption order with respect to such shares.
The Fund may terminate, or amend the terms of, offering shares of the Fund at
net asset value to such groups at any time.

DEFERRED SALES CHARGE ALTERNATIVES

Investors choosing the deferred sales charge alternative may purchase Class A
Shares in an amount of $1 million or more, Class B Shares or Class C Shares. The
public offering price of a CDSC Share is equal to the net asset value per share
without the imposition of a sales charge at the time of purchase. CDSC Shares
are sold without an initial sales charge so that the Fund may invest the full
amount of the investor's purchase payment. The Distributor 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

34
<PAGE> 38

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 applicable to such shares, third of Class A Shares in the shareholder's Fund
account that have converted from CDSC Shares, if any, and fourth of CDSC Shares
held longest during the period of time that a CDSC is applicable to such CDSC
Shares. The charge will not be applied to dollar amounts representing an
increase in the net asset value per share since the time of purchase.

To provide an example, assume an investor purchased 100 Class B Shares at $10
per share (at a cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor has acquired 10
additional Class B Shares upon dividend reinvestment. If at such time the
investor makes his first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to charge because of dividend reinvestment. With respect to
the remaining 40 shares, the charge is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 3.75% (the
applicable rate in the second year after purchase).

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>

35
<PAGE> 39

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

CLASS C SHARES. Class C Shares redeemed within the first twelve months of
purchase generally will be subject to a CDSC of 1.00% of the dollar amount
subject thereto. Class C Shares redeemed thereafter will not be subject to a
CDSC.

CONVERSION FEATURE. Seven years or ten years after the end of the month in
which a shareholder's order to purchase a Class B Share or Class C Share,
respectively, was accepted, such share automatically will convert to a Class A
Share and no longer will be subject to the higher aggregate distribution and
service fees applicable to Class B Shares and Class C Shares. The purpose of the
conversion feature is to relieve the holders of Class B Shares and Class C
Shares that have been outstanding for a period of time sufficient for the
Distributor to have been compensated for distribution expenses related to such
shares from most of the burden of such distribution-related expenses. The Fund
does not expect to issue any share certificates upon conversion.

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

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

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

WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC is waived on redemptions
of Class B Shares and Class C Shares (i) following the death or disability (as
defined in the Code) of a shareholder, (ii) in connection with certain
distributions

36
<PAGE> 40

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. 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.

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

37
<PAGE> 41

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

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

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, 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 Tax Free Money Fund or the Reserve Fund, subject to
certain limitations. Before effecting an exchange, shareholders in the Fund
should obtain and read a current prospectus of the fund into which the exchange
is to be made. SHAREHOLDERS MAY ONLY EXCHANGE INTO SUCH OTHER FUNDS AS ARE
LEGALLY AVAILABLE FOR SALE IN THEIR STATE.

To be eligible for exchange, shares of the Fund generally must have been
registered in the shareholder's name for at least 30 days prior to an exchange.
Shares of the Fund registered in a shareholder's name for less than 30 days may
only be exchanged upon receipt of prior approval of the Adviser. Under normal
circumstances, it is the policy of the Adviser not to approve such requests.

Class A Shares of Van Kampen American Capital funds that generally impose an
initial sales charge are not subject to any sales charge upon exchange into the
Fund. Class A Shares of Van Kampen American Capital funds that generally do not
impose an initial sales charge are subject to the appropriate sales charge
applicable to Class A Shares of the Fund.

No sales charge is imposed upon the exchange of a CDSC Share. The contingent
deferred sales charge schedule and conversion schedule applicable to a CDSC
Share acquired through the exchange privilege is determined by reference to the
Van Kampen American Capital fund from which such share originally was purchased.
The holding period of a CDSC Share acquired through the exchange privilege is
determined by reference to the date such share originally was purchased from a
Van Kampen American Capital Fund.

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.

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

39
<PAGE> 43

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."

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.

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<PAGE> 44

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 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.

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<PAGE> 45

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

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

42
<PAGE> 46

shareholder and dealer. Shareholders must submit a written redemption request in
proper form (as described above under "Written Redemption Requests") to the
dealer within three business days after calling the dealer with the sell order.
Payment for shares redeemed (less any sales charge, if applicable) will
ordinarily be made by check mailed within three business days to the dealer.

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

For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check sent to the shareholders'
address of record and amounts of at least $1,000 and up to $1 million may be
redeemed daily if the proceeds are to be paid by wire sent to the shareholder's
bank account of record. The proceeds must be payable to the shareholder(s) of
record. Proceeds from redemptions to be paid by check will ordinarily be mailed
within three business days to the shareholder's address of record. Proceeds from
redemptions to be paid by wire will ordinarily be wired on the next business day
to the shareholder's bank account of record. This privilege is not available if
the address of record has been changed within 30 days prior to a telephone
redemption request.

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<PAGE> 47

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 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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<PAGE> 48

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

The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan 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 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

45
<PAGE> 49

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, 1995, there were $1,272,644
and $3,395 of unreimbursed distribution expenses with respect to Class B Shares
and Class C Shares, respectively, representing 0.27% and 0.10% of the Fund's net
assets attributable to Class B Shares and Class C Shares, respectively. If the
Distribution Plan was terminated or not continued, the Fund would not be
contractually obligated to pay the Distributor for any expenses not previously
reimbursed by the Fund or recovered through contingent deferred sales charges.

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 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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<PAGE> 50

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

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<PAGE> 51

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

48
<PAGE> 52

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 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

49
<PAGE> 53

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 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

50
<PAGE> 54

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.

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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<PAGE> 55

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

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<PAGE> 56

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).

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

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 July 21, 1995.
Shares of

53
<PAGE> 57

the Fund entitle their holders to one vote per share. Except as described
herein, 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.

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

This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration Statement
may be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.

The fiscal year end of the Fund is 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.

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<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) 421-5684.

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

Pennsylvania Tax Free Income Fund

Custodian

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

Pennsylvania Tax Free Income Fund

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

APRIL 29, 1996

------ 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

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
Pennsylvania municipal securities. The Fund's portfolio is managed by Van Kampen
American Capital Investment Advisory Corp. (the "Adviser").

This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Prospectus of the Fund dated April 29, 1996 (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
Trustees and Officers................................................................... B-16
Custodian............................................................................... B-24
Legal Counsel and Independent Auditors.................................................. B-24
Investment Advisory and Other Services.................................................. B-24
Portfolio Transactions.................................................................. B-26
Tax Status of the Fund.................................................................. B-26
The Distributor......................................................................... B-27
Performance Information................................................................. B-28
Independent Auditors' Report............................................................ B-30
Financial Statements.................................................................... B-31
Notes to Financial Statements........................................................... B-44
</TABLE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL 29, 1996.

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 July 21, 1995. The Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional shares,
par value $0.01 per share (prior to July 21, 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, par value $0.01 per share.

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

B-3
<PAGE> 71

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 $3.73 billion in crop and livestock products annually, while
agribusiness and food related industries support $37 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.

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.

Commonwealth revenues for the 1995 fiscal year were above estimate and
exceeded fiscal year expenditures and encumbrances. Fiscal 1995 was the fourth
consecutive fiscal year the Commonwealth reported an increase in the fiscal
year-end unappropriated balance. Prior to reserves for transfer to the Tax
Stabilization Reserve Fund, the fiscal 1995 closing unappropriated surplus was
$540.0 million, an increase of $204.2 million over the

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fiscal 1994 closing unappropriated surplus prior to transfers. Commonwealth
revenues were $459.4 million, 2.9 percent, above the estimate of revenues used
at the time the fiscal 1995 budget was enacted. Corporation taxes contributed
$329.4 million of the additional receipts largely due to higher receipts from
the corporate net income tax. Fiscal 1995 revenues from the corporate net income
tax were 22.6 percent over collections in fiscal 1994 and include the effects of
the reduction of the tax rate from 12.25 percent to 11.99 percent that became
effective with tax years beginning on and after January 1, 1994. The sales and
use tax and miscellaneous revenues also showed strong year-over-year growth that
produced above-estimate revenue collections. Sales and use tax revenues were
$5,526.9 million, $128.8 million above the enacted budget estimate and 7.9
percent over fiscal 1994 collections. Tax receipts from both motor vehicle and
non-motor vehicle sales contributed to the higher collections. Miscellaneous
revenue collections for fiscal 1995 were $183.5 million, $44.9 million above
estimate and were largely due to additional investment earnings, escheat
revenues and other miscellaneous revenues. Personal income tax receipts for
fiscal 1995 were slightly above the budgeted estimate. Receipts totaled $5,083.2
million, $5.1 million above the estimate and 4.3 percent over collections for
fiscal 1994. The higher than estimated revenues from tax sources were due to
faster economic growth in the national and state economy than had been projected
when the budget was adopted. The higher rate of economic growth for the nation
and the state gave rise to increases in employment, income and sales higher than
expected which translated into above-estimate tax revenues. Tax revenue refunds
were also higher than estimated in the budget. The reserve for tax refunds was
increased during the fiscal year from $410 million to $460 million, a 110
percent increase over refunds budgeted in fiscal 1994 which were unusually low
due to a carryover of $160 million of reserves for tax refunds from fiscal 1993.
An acceleration of the tax refund process for corporation taxes, litigation
settlements, and an increase in the personal income tax poverty exemption
contributed to tax refunds being higher than initially budgeted. Expenditures
from Commonwealth revenues, (excluding pooled financing expenditures) including
$65.5 million of supplemental appropriations enacted at the close of the 1995
fiscal year, totaled $15,674.7 million, representing an increase of 5 percent
over spending during fiscal 1994. Funds held in reserve at the end of fiscal
1995 for transfer to the Tax Stabilization Reserve Fund totaled $111.0 million.
Of this total, $54.0 million represents the 10 percent transfer of the fiscal
year-end balance prescribed in state law. The remaining $57.0 million represents
an additional 5 percent of the year-end balance and an additional $30 million
proposed by the Governor to be transferred to the Tax Stabilization Reserve
Fund. These additional reserves for transfer are authorized in legislation
pending in the General Assembly. Upon approval by the General Assembly of the
additional transfers and the completion of the required and proposed transfers,
the Tax Stabilization Reserve Fund is anticipated to have an available balance
of $177.3 million representing approximately 1.1 percent of General Fund annual
Commonwealth revenues.

The enacted fiscal 1996 budget provides for expenditures from Commonwealth
revenues of $16,161.7 million, a 2.7 percent increase over total appropriations
from Commonwealth revenues in fiscal 1995. The appropriations increase for
fiscal 1996 is one of the lowest rates in recent years. The fiscal 1996 budget
is based on anticipated Commonwealth revenues, net of enacted tax changes, of
$16,268.7 million, an increase over actual fiscal 1995 Commonwealth revenues of
0.3 percent. Excluding the estimated effects of the tax changes enacted in 1994
and 1995, Commonwealth revenues for fiscal 1996 are estimated to increase by
approximately 2.9 percent. The fiscal 1995 revenue estimate is based on a
forecast of the national economy for gross domestic product growth to slow from
4.1 percent in 1994 to an average annual rate for 1995 of 2.4 percent and then
to 1.3 percent in 1996. The lower rate of growth is a consequence of anticipated
smaller rates of increases for consumer spending, business fixed investment and
exports. The anticipated decline in the rate of economic growth is also expected
to lead to an increase in the national unemployment rate to a rate above 6
percent by the end of 1995 and above a rate of 6.5 percent by the end of fiscal
1996. Tax changes enacted with the fiscal 1996 budget totaled $282.9 million,
representing an approximate 1.7 percent of base revenues. The largest dollar
value changes were in the corporate net income tax where the scheduled 1997
reduction of the tax rate to 9.99 percent was accelerated to the 1995 tax year;
a double-weighting was provided for the sales factor of the corporate net income
apportionment calculation; and the maximum annual allowance for the net
operating loss deduction was increased from $500 thousand to $1 million. The
fiscal 1996 cost of these corporate income tax changes is estimated to be $210.8
million representing approximately 75 percent of the fiscal year's tax
reduction. Other major components of the tax reduction include a $12.1 million
decrease for the capital stock and franchise tax from an increase in the basic
exemption; $24.7 million from the repeal of the tax on

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annuities; and $27.9 million from an acceleration of the scheduled phase-out of
the inheritance tax on transfers of certain property to a surviving spouse. A 90
day amnesty program was also authorized in the tax bill. The amnesty program
will be available to taxpayers from October 1995 through January 1996. Tax and
interest revenues received from the tax amnesty program after payment of
administration costs are to be credited to the appropriate fund. Receipts
credited to the General Fund in excess of $67 million, plus any shortfall in
delinquent tax collections below those in fiscal 1995, will be deposited into a
restricted account in the General Fund for later distribution. Increases in
authorized spending for fiscal 1996 emphasize education. Appropriations for the
basic subsidy for public schools were increased $143 million representing a 4.4
percent increase. This increase reversed a four-year trend of a declining budget
share for education. A limited program to permit certain residents to choose the
school district or private school to provide their children's education was
funded in the budget, but enabling legislation for the program has yet to be
enacted. The budget also contemplates several changes to certain public welfare
programs. Changes made by the General Assembly include the termination of the
category of transitionally needy for cash assistance after June 30, 1995. Newly
qualifying members of this category would no longer be eligible for cash
payments for up to two months every two years, but would continue to be eligible
for foods stamps and medical assistance benefits. The legislation also
eliminated cash assistance payments for certain other limited recipients.
Estimated savings are approximately $27 million based on a caseload of
approximately 90,000 persons per year. The enacted budget also included most of
the Governor's proposed consolidation and elimination of several organizations
and appropriations. The consolidated programs were absorbed within existing
organizations. Savings of $5.2 million are anticipated to result from these
consolidations and eliminations. For the 1996 fiscal year through October,
revenue receipts have totaled $24.2 million above estimate representing
approximately 0.5 percent over the estimate for the period. The above-estimate
receipts are due to corporate tax collections during the period that were $27.0
million above estimate. Expenditures in certain items have been above estimated
levels during the first four months of the fiscal year. These areas are being
analyzed for any potential need for supplemental appropriation for the fiscal
year.

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 November 28, 1995 describing General
Obligation Bonds, Second 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 1996 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

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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.

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 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

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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 former Governor Robert P. Casey and former Secretary of
Education Donald M. Carroll, Jr. to challenge the constitutionality of the
Commonwealth's system for funding local 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 was scheduled for February 22, 1996.

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.

Attorneys' fees for the three year monitoring period will not exceed $60,000
in any one year.

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. 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 filed a Statement of Claim with the Pennsylvania Board of Claims by
May 10, 1995 and filed a complaint with the Commonwealth Court on May 15, 1995
to preserve its position. In these pleadings, Envirotest asserted damages in
excess of $350 million. 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

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facilities. The Office of General Counsel believes it is premature at this time
to estimate the nature and size of Envirotest's potential recovery 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
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

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<PAGE> 79

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.

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

B-12
<PAGE> 80

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 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.

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<PAGE> 81

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 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

B-14
<PAGE> 82

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 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

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<PAGE> 83

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 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.

TRUSTEES AND OFFICERS

The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and their principal occupations for the last five
years and their affiliations, if any, with Van Kampen American Capital
Investment Advisory Corp. (the "VK Adviser" 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,

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<PAGE> 84

Inc. (the "Distributor"), Van Kampen American Capital, Inc. ("Van Kampen
American Capital" or "VKAC") 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 Explorer
Institutional Trust) and each of the open-end investment companies advised by
the AC Adviser (excluding the American Capital Exchange Fund and the Common
Sense Trust).

TRUSTEES

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
Strafford Hall President of MDT Corporation, a company which develops,
Suite 200 manufactures, markets and services medical and scientific
1009 Slater Road equipment. A Trustee of each of the Van Kampen American
Harrisville, NC 27560 Capital Funds.
Date of Birth: 07/14/32
Linda Hutton Heagy................. Managing Partner, Paul Ray Berndston, an executive
10 South Riverside Plaza recruiting and management consulting firm. Formerly,
Suite 720 Executive Vice President of ABN AMRO, N.A., a Dutch bank
Chicago, IL 60606 holding company. Prior to 1992, Executive Vice President
Date of Birth: 06/03/49 of La Salle National Bank. A Trustee of each of the Van
Kampen American Capital Funds.
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. A Trustee of each of the
Lyme, CT 06371 Van Kampen American Capital Funds.
Date of Birth: 11/23/19
R. Craig Kennedy................... President and Director, German Marshall Fund of the
11 Du Pont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and member of the Investment Committee
of the Joyce Foundation, a private foundation. A 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. Executive Vice President and a
Date of Birth: 06/20/42 Director of VK/AC Holding, Inc. and Van Kampen American
Capital. Chief Executive Officer of McCarthy, Crisanti &
Maffei, Inc. Chairman and a Director of MCM Asia Pacific
Company, Ltd. Executive Vice President and a Trustee of
each of the Van Kampen American Capital Funds. President
of the closed-end investment companies 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
Date of Birth: 03/31/20 Trust Company of Chicago and Continental Illinois
Corporation. A Trustee of each of the Van Kampen American
Capital Funds and Chairman of each Van Kampen American
Capital Fund 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
Date of Birth: 02/13/36 Services Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and Securities
Investors Protection Corp. A Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>

B-17
<PAGE> 85

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Don G. Powell*..................... President, Chief Executive Officer and a Director of
2800 Post Oak Blvd. VK/AC Holding, Inc. and Van Kampen American Capital and
Houston, TX 77056 Chairman, Chief Executive Officer and a Director of the
Date of Birth: 10/19/39 Distributor, the VK Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc. and Van Kampen American
Capital Advisors, Inc. Chairman, President and a Director
of Van Kampen American Capital Exchange Corporation,
American Capital Contractual Services, Inc. and American
Capital Shareholders Corporation. Chairman and a Director
of ACCESS Investor Services, Inc. ("ACCESS"), Van Kampen
Merritt Equity Advisors Corp., Van Kampen Merritt Equity
Holdings Corp., and VCJ Inc., McCarthy, Crisanti &
Maffei, Inc., McCarthy, Crisanti & Maffei Acquisition,
and Van Kampen American Capital Trust Company. Chairman,
President and a Director of Van Kampen American Capital
Services, Inc. President, Chief Executive Officer and a
Trustee of each of the Van Kampen American Capital Funds.
Director, Trustee or Managing General Partner of other
open-end investment companies and closed-end investment
companies advised by the VK Adviser or the AC Adviser.
Jerome L. Robinson................. President of Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director of Pacesetter Software, a
Date of Birth:10/10/22 software programming company specializing in white collar
productivity. Director of Panasia Bank. A 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. A Trustee of each of the Van Kampen American
Date of Birth: 08/02/24 Capital Funds and Chairman of the Van Kampen American
Capital 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 the Van Kampen American Capital
Chicago, IL 60606 Funds. A Trustee of each of the Van Kampen American
Date of Birth: 08/22/39 Capital Funds. He also is a Trustee of The Explorer 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
Date of Birth: 01/31/22 of paper products. Trustee, and former President of
Whitney Museum of American Art. Formerly, Chairman of
Institute for Educational Leadership, Inc., Board of
Visitors, Graduate School of The City University of New
York, Academy of Political Science. Trustee of Committee
for Economic Development. Director of Public Education
Fund Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's Council,
Harvard School of Public Health. Member of Mental Health
Task Force, Carter Center. A Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>

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

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

B-18
<PAGE> 86

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

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

OFFICERS

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
William N. Brown........ Vice President Executive Vice President of the VK Adviser,
Date of Birth: AC Adviser, VK/AC Holding, Inc., VKAC, Van
05/26/53 Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, ACCESS Investor Services,
Inc., and Van Kampen American Capital Trust
Company. Director of American Capital
Shareholders Corporation. Vice President of
each of the Van Kampen American Capital
Funds.
Peter W. Hegel.......... Vice President Executive Vice President of the VK Adviser,
Date of Birth: AC Adviser, Van Kampen American Capital
06/25/56 Advisors, Inc. Director of McCarthy,
Crisanti & Maffei, Inc. and McCarthy,
Crisanti & Maffei Acquisition Corporation.
Vice President of each of the Van Kampen
American Capital Funds. Vice President of
the closed-end funds advised by the VK
Adviser.
Curtis W. Morell........ Vice President and Vice President and Chief Accounting Officer
Date of Birth: Chief Accounting of each of the Van Kampen American Capital
08/04/46 Officer Funds. Vice President and Treasurer of
other investment companies advised by the
AC Adviser.
Ronald A. Nyberg........ Vice President and Executive Vice President, General Counsel
Date of Birth: Secretary and Secretary of Van Kampen American
07/29/53 Capital and VK/AC Holding, Inc. Executive
Vice President, General Counsel and a
Director of the Distributor. Executive Vice
President and General Counsel of the VK
Adviser and the AC Adviser, Van Kampen
American Capital Management, Inc., VSM Inc.
VCJ, Inc., Van Kampen Merritt Equity
Advisors Corp., and Van Kampen Merritt
Equity Holdings Corp. Executive Vice
President, General Counsel and Assistant
Secretary of Van Kampen American Capital
Advisors, Inc., American Capital
Contractual Services, Inc., Van Kampen
American Capital Exchange Corporation,
ACCESS Investor Services, Inc., American
Capital Shareholders Corporation, and Van
Kampen American Capital Trust Company.
General Counsel of McCarthy, Crisanti &
Maffei, Inc. and McCarthy, Crisanti &
Maffei Acquisition Corp. Vice President and
Secretary of each of the Van Kampen
American Capital Funds. Secretary of the
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.
</TABLE>

B-19
<PAGE> 87

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------ ----------------------- -------------------------------------------
<S> <C> <C>
Robert C. Peck, Jr...... Vice President Executive Vice President of the VK Adviser.
Date of Birth: Executive Vice President and Director of
10/01/46 the AC Adviser. Vice President of each of
the Van Kampen American Capital Funds.
Alan T. Sachtleben...... Vice President Executive Vice President of the VK Adviser.
Date of Birth: Executive Vice President and a Director of
04/20/42 the AC Adviser. Vice President of each of
the Van Kampen American Capital Funds.
Paul R. Wolkenberg...... Vice President Executive Vice President of the VK Adviser
Date of Birth: and the AC Adviser. President, Chief
11/10/44 Executive Officer and a Director of Van
Kampen American Capital Trust Company and
ACCESS. Vice President of each of the Van
Kampen American Capital Funds.
Edward C. Wood III...... Vice President and Senior Vice President of VK Adviser and the
Date of Birth: Chief Financial Officer AC Adviser. Vice President and Chief
01/11/56 Financial Officer of each of the Van Kampen
American Capital Funds. Vice President,
Treasurer and Chief Financial Officer of
the closed-end funds advised by VK Adviser.
John L. Sullivan........ Treasurer First Vice President of the VK Adviser and
Date of Birth: AC Adviser. Treasurer of each of the Van
08/20/55 Kampen American Capital Funds. Controller
of the closed-end funds advised by the VK
Adviser. Formerly Controller of open-end
funds advised by VK Adviser.
Tanya M. Loden.......... Controller Controller of each of the Van Kampen
Date of Birth: American Capital Funds. Vice President and
11/19/59 Controller of other investment companies
advised by the AC Adviser. Formerly Tax
Manager/Assistant Controller of investment
companies advised by the AC Adviser.
Nicholas Dalmaso........ Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of VKAC. Assistant Vice President
03/01/65 and Assistant Secretary of the Distributor,
the VK Adviser, the AC Adviser, and Van
Kampen American Capital Management, Inc.
Assistant Vice President of Van Kampen
American Capital Advisors, Inc. Assistant
Secretary of each of the Van Kampen
American Capital Funds. Assistant Secretary
of the closed-end funds advised by the VK
Adviser. Prior to May 1992, attorney for
Cantwell & Cantwell, a Chicago law firm.
Huey P. Falgout, Jr..... Assistant Secretary Assistant Vice President and Senior
Date of Birth: Attorney of VKAC. Assistant Vice President
11/15/63 and Assistant Secretary of the Distributor,
the VK Adviser, the AC Adviser, Van Kampen
American Capital Management, Inc., Van
Kampen American Capital Advisors, Inc.,
American Capital Contractual Services,
Inc., Van Kampen American Capital Exchange
Corporation, ACCESS, and American Capital
Shareholders Corporation. Assistant
Secretary of each of the Van Kampen
American Capital Funds.
</TABLE>

B-20
<PAGE> 88

Each of the foregoing trustees and officers holds the same position with each
of 46 other Van Kampen American Capital mutual funds (the "Fund Complex"). Each
trustee who is not an affiliated person of the VK Adviser and the AC Adviser,
the Distributor or VKAC (each a "Non-Affiliated Trustee") is compensated by an
annual retainer and meeting fees for services to the funds in the Fund Complex.
Each fund in the Fund Complex provides a deferred compensation plan to its
Non-Affiliated Trustees that allows trustees to defer receipt of his or her
compensation and earn a return on such deferred amounts based upon the return of
the common shares of the funds in the Fund Complex as more fully described
below.

The compensation of each Non-Affiliated Trustee includes a retainer from the
Fund in an amount equal to $2,500 per calendar year, due in four quarterly
installments on the first business day of each calendar quarter. Each
Non-Affiliated Trustee receives a per meeting fee from the Fund in the amount of
$125 per regular quarterly meeting attended by the Non-Affiliated Trustee, due
on the date of such meeting, plus reasonable expenses incurred by the
Non-Affiliated Trustee in connection with his or her services as a trustee. Each
Non-Affiliated Trustee receives a per meeting fee from the Fund in the amount of
$125 per special meeting attended by the Non-Affiliated Trustee, due on the date
of such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee
in connection with his or her services as a trustee, provided that no
compensation will be paid in connection with certain telephonic special
meetings.

The trustees have approved an aggregate compensation cap with respect to the
Fund Complex of $84,000 per Non-Affiliated Trustee per year (excluding any
retirement benefits) for the period July 22, 1995 through December 31, 1996,
subject to the net assets and the number of mutual funds in the Fund Complex as
of

B-21
<PAGE> 89

July 21, 1995 and certain other exceptions. In addition, the Adviser has agreed
to reimburse each fund in the Fund Complex through December 31, 1996 for any
increase in the trustee's aggregate compensation over the aggregate compensation
paid by such fund in its 1994 fiscal year, provided that if a fund did not exist
for the entire 1994 fiscal year appropriate adjustments will be made.

Each Non-Affiliated Trustee can elect to defer receipt of all or a portion of
the compensation earned by such Non-Affiliated Trustee until retirement. Amounts
deferred are retained by the Fund and earn a rate of return determined by
reference to the return on common shares of the Fund or other mutual funds in
the Fund Complex as selected by the respective Non-Affiliated Trustee. To the
extent permitted by the 1940 Act, the Fund will invest in securities of those
mutual funds selected by the Non-Affiliated Trustees in order to match the
deferred compensation obligation. The deferred compensation plan is not funded
and obligations thereunder represent general unsecured claims against the
general assets of each Fund.

Under the Fund's retirement plan, a Non-Affiliated Trustee who is receiving
trustee's fees from the Fund prior to such Non-Affiliated Trustee's retirement,
has at least ten years of service and retires at or after attaining the age of
60, is eligible to receive a retirement benefit from the Fund equal to $2,500
per year for each of the ten years following such trustee's retirement. Under
certain conditions, reduced benefits are available for early retirement provided
the trustee has served at least five years. As of the date hereof, the
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.

Additional information regarding compensation before deferral from the Fund
and the other funds in the Fund Complex is set forth in the table below.

COMPENSATION TABLE(1)

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR BEFORE
RETIREMENT DEFERRAL FROM
AGGREGATE BENEFITS ESTIMATED REGISTRANT
COMPENSATION ACCRUED AS ANNUAL AND FUND
BEFORE DEFERRAL PART OF BENEFITS COMPLEX PAID
FROM REGISTRANT UPON TO
NAME(2) REGISTRANT(3) EXPENSES(4) RETIREMENT(5) TRUSTEES(6)
- --------------------------------------------- ----------------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
J. Miles Branagan............................ $ 1,500 $ -0- $2,250 $84,250
Dr. Richard E. Caruso........................ 750 -0- -0- 57,250
Philip P. Gaughan............................ 3,138 10,941 1,750 76,500
Linda Hutton Heagy........................... 1,500 -0- 2,500 38,417
Dr. Roger Hilsman............................ 1,500 -0- -0- 91,250
R. Craig Kennedy............................. 3,513 520 2,500 92,625
Donald C. Miller............................. 3,513 13,721 2,250 94,625
Jack E. Nelson............................... 3,513 5,785 2,500 93,625
David Rees................................... 1,500 -0- -0- 83,250
Jerome L. Robinson........................... 3,513 9,694 1,250 89,375
Lawrence J. Sheehan.......................... 1,500 -0- -0- 91,250
Dr. Fernando Sisto........................... 1,500 -0- 1,250 98,750
Wayne W. Whalen.............................. 3,500 3,415 2,500 93,375
William S. Woodside.......................... 1,375 -0- -0- 79,125
</TABLE>

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

(1) The "Registrant" is the Trust, which currently consists of eight operating
series. As indicated in the other explanatory notes, the amounts in the
table relate to the applicable trustees during the Registrant's last fiscal
year ended December 31, 1995 or the Fund Complex' last calendar year ended
December 31, 1995.

(2) Messrs. Powell and McDonnell, trustees of the Trust, are affiliated persons
of the VK Adviser, the AC Adviser and the Distributor and are not eligible
for compensation or retirement benefits from the Registrant. Messrs.
Branagan, Caruso, Hilsman, Powell, Rees, Sheehan, Sisto and Woodside were
elected by shareholders to the Board of Trustees on July 21, 1995. Ms. Heagy
was appointed to the Board of Trustees on September 7, 1995. Mr. Gaughan
retired from the Board of Trustees on January 26, 1996. Messrs. Caruso, Rees
and Sheehan were removed from the Board of Trustees effective September 7,
1995, January 29, 1996 and January 29, 1996, respectively.

(3) The amounts shown in this column represent the sum of the Aggregate
Compensation before Deferral with respect to each series in operation during
the Registrant's fiscal year ended December 31, 1995. The following trustees
deferred compensation from the Trust during the fiscal year ended December
31, 1995: Mr. Gaughan, $3,138; Mr. Kennedy, $3,513; Mr. Miller, $3,513; Mr.
Nelson, $3,513; Mr. Rees, $1,375;

B-22
<PAGE> 90

Mr. Robinson, $3,513; and Mr. Whalen, $3,500. Amounts deferred are
retained by the Fund and earn a rate of return determined by reference to
the return on the common shares of the Fund or other mutual funds in the
Fund Complex as selected by the respective Non-Affiliated Trustee. To the
extent permitted by the 1940 Act, its is anticipated that the Fund will
invest in securities of those mutual funds selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
cumulative deferred compensation (including interest) accrued with respect
to each trustee from the Trust as of December 31, 1995 is as follows: Mr.
Gaughan, $3,309; Mr. Kennedy, $5,157; Mr. Miller, $5,004; Mr. Nelson,
$5,157; Mr. Rees, $1,375; Mr. Robinson, $5,044; and Mr. Whalen, $3,837. The
deferred compensation plan is described above the Compensation Table.

(4) The amounts shown in this column represent the sum of the Retirement
Benefits accrued by each series in operation during the Registrant's fiscal
year ended December 31, 1995. Retirement Benefits were not accrued for those
trustees elected or appointed during the Registrant's fiscal year ended
December 31, 1995 because such trustees were ineligible for retirement
benefits or such amounts are considered immaterial for the Registrant's
fiscal year ended December 31, 1995. The retirement plan is described above
the Compensation Table.

(5) The amounts shown in this column are the Estimated Annual Benefits payable
per year for the 10-year period commencing in the year of such trustee's
retirement from the Registrant (based on $2,500 per series for each series
of the Registrant in operation) assuming: the trustee has 10 or more years
of service on the Board of the respective series and retires at or after
attaining the age of 60. Trustees retiring prior to the age of 60 or with
fewer than 10 years but more than five years of service may receive reduced
retirement benefits from a series. The actual annual benefit may be less if
the trustee is subject to the Fund Complex retirement benefit cap.

(6) The amounts shown in this column represent the sum of the Aggregate
Compensation before Deferral with respect to each of the 46 mutual funds in
the Fund Complex as of December 31, 1995. The following trustees deferred
compensation from the Fund Complex (including the Registrant) during the
calendar year ended December 31, 1995 as follows: Dr. Caruso, $41,750; Mr.
Gaughan, $57,750; Ms. Heagy, $8,750; Mr. Kennedy, $65,875; Mr. Miller,
$65,875; Mr. Nelson, $65,875; Mr. Rees, $8,375; Mr. Robinson, $62,375; Dr.
Sisto, $30,260; and Mr. Whalen, $65,625. Amounts deferred are retained by
the respective fund and earn a rate of return determined by reference to the
return of the common shares of such fund or other mutual funds in the Fund
Complex as selected by the respective Non-Affiliated Trustee. To the extent
permitted by the 1940 Act, it is anticipated that each fund will invest in
securities of those mutual funds selected by the Non-Affiliated Trustees in
order to match the deferred compensation obligation. The trustees' Fund
Complex compensation cap commenced on July 22, 1995 and covered the period
between July 22, 1995 and December 31, 1995. Compensation received prior to
July 22, 1995 was not subject to the cap. For the calendar year ended
December 31, 1995, while certain trustees received compensation over $84,000
in the aggregate, no trustee received compensation in excess of the pro rata
amount of the Fund Complex cap for the period July 22, 1995 through December
31, 1995. In addition to the amounts set forth above, certain trustees
received lump sum retirement benefit distributions not subject to the cap in
1995 related to three mutual funds that ceased investment operations during
1995 as follows: Mr. Gaughan, $22,136; Mr. Miller, $33,205; Mr. Nelson,
$30,851; Mr. Robinson, $11,068; and Mr. Whalen, $27,332. The VK Adviser and
its affiliates also serve as investment adviser for other investment
companies; however, with the exception of Messrs. Powell, McDonnell and
Whalen, the trustees were not trustees of such investment companies.
Combining the Fund Complex with other investment companies advised by the VK
Adviser and its affiliates, Mr. Whalen received Total Compensation of
$268,857 during the calendar year ended December 31, 1995.

As of April 10, 1996, the trustees and officers as a group owned less than 1%
of the shares of the Fund. As of April 10, 1996, no trustee or officer of the
Fund owns or would be able to acquire 5% or more of the common stock of VK/AC
Holding, Inc.

B-23
<PAGE> 91

As of April 10, 1996, no person was known by the Fund to own beneficially or
to hold of record as much as 5% of the outstanding Class A Shares, Class B
Shares or Class C Shares of the Fund, except as follows:

<TABLE>
<CAPTION>
AMOUNT OF
OWNERSHIP AT CLASS OF PERCENTAGE
NAME AND ADDRESS OF HOLDER APRIL 10, 1996 SHARES OWNERSHIP
- --------------------------------------------------------- -------------- -------- ---------
<S> <C> <C> <C>
M. Simon Zook & Elsie S. Zook JT/WROS.................... 15,038 C 7.82%
Rd. 2 Box 128
Honeybrook, PA 19344-9802
Donaldson Lufkin Jenrette Securities Corporation Inc. ... 12,152 C 6.32%
P.O. Box 2052
Jersey City, NJ 07303-2052
Stifel Nicolaus & Co. Inc. .............................. 26,388 C 13.71%
A/C 8806-5995
Wise Business Forms Inc.
500 North Broadway
St. Louis, MO 63102-2110
</TABLE>

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, 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 13% of the common stock of
VK/AC Holding, Inc.

B-24
<PAGE> 92

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, 1995, 1994 and 1993, the Fund paid advisory
expenses of $1,212,968, $832,111 and $448,065, 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, 1995, 1994 and 1993, the Fund paid expenses
of approximately $15,300, $8,333 and $5,580, 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, 1995, 1994 and 1993, the Fund paid expenses
of approximately $43,500, $117,234 and $78,180, 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 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, 1995, 1994 and 1993, the Fund paid expenses
of approximately $16,800, $14,500 and $15,000, respectively, representing Van
Kampen American Capital's cost of providing legal services.

B-25
<PAGE> 93

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.

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.

B-26
<PAGE> 94

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.

1995 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>
$ 0-24,000 $ 0-40,100 17.40% 3.63% 4.24% 4.84% 5.45% 6.05% 6.66% 7.26% 7.87%
24,000-58,150 40,100-96,900 30.00% 4.29 5.00 5.71 6.43 7.14 7.86 8.57 9.29
58,150-121,300 96,900-147,700 32.90% 4.47 5.22 5.96 6.71 7.45 8.20 8.94 9.69
121,300-263,750 147,700-263,750 37.80% 4.62 5.63 6.43 7.23 8.04 8.84 9.65 10.45
Over 263,750 Over 263,750 41.30% 5.11 5.98 6.81 7.67 8.52 9.37 10.22 11.07

SINGLE
RETURN 7.0% 7.5% 8.0%
- ---------------- ----- ----- -----
<S> <C> <C> <C>
$ 0-24,000 8.47% 9.08% 9.69%
24,000-58,150 10.00 10.71 11.43
58,150-121,300 10.43 11.18 11.92
121,300-263,750 11.25 12.06 12.86
Over 263,750 11.93 12.78 13.63
</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 13% 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 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."

B-27
<PAGE> 95

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, 1995, the Fund has paid expenses under the
Plans of $567,231, $425,761 and $29,106 for the Class A Shares, Class B Shares
and Class C Shares, respectively, of which $534,252 and $105,564 represent
payments to financial intermediaries under the Selling Agreements for Class A
Shares and Class B Shares, respectively. For the year ended December 31, 1995,
the Fund has reimbursed the Distributor $46,950, and $6,602, for advertising
expenses, and $10,524, and $3,669 for compensation of the Distributor's sales
personnel for the Class A Shares and Class B Shares, respectively.

PERFORMANCE INFORMATION

From time to time marketing materials may provide a portfolio manager update,
an adviser update and/or discuss general economic conditions and outlooks. The
Fund's marketing materials may also show the Fund's asset class diversification,
top five sectors, ten largest holdings and other Fund asset structures, such as
duration, maturity, coupon, NAV, rating breakdown, AMT exposure and number of
issues in the portfolio. Materials may also mention how Van Kampen American
Capital believes the Fund compares relative to other Van Kampen American Capital
funds. Materials may also discuss the Dalbar Financial Services study from 1984
to 1994 which studied investor cash flow into and out of all types of mutual
funds. The ten year study found that investors who bought mutual fund shares and
held such shares outperformed investors who bought and sold. The Dalbar study
conclusions were consistent regardless of if shareholders purchased their funds
in direct or sales force distribution channels. The study showed that investors
working with a professional representative have tended over time to earn higher
returns than those who invested directly. The Fund will also be marketed on the
Internet.

CLASS A SHARES

The average total return including payment of maximum sales charge with
respect to the Class A Shares for (i) the one year period ending December 31,
1995 was 11.08%; (ii) the 5 year period ending December 31, 1995 was 7.83%; and
(iii) the approximately 8 year, 8 month period from May 1, 1987 (the
commencement of investment operations of the Fund) through December 31, 1995 was
8.89%.

The Fund's yield for the 30 day period ending December 30, 1995 (calculated in
the manner described in the Prospectus under the heading "Fund Performance") was
4.52%. The Fund's tax-equivalent yield for the 30 day period ending December 30,
1995 (calculated in the manner described in the Prospectus under the heading
"Fund Performance" and assuming a 37.8% tax rate) was 7.27%. The Fund's current
distribution rate

B-28
<PAGE> 96

for the month ending December 31, 1995 (calculated in the manner described in
the Prospectus under the heading "Fund Performance") was 5.10%.

The Class A Share's cumulative non-standardized total return, including
payment of the maximum sales charge, from its inception to December 31, 1995 (as
calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 109.13%.

The Class A Shares cumulative non-standardized total return, excluding payment
of any sales charge, was 119.53%.

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, 1995 was
11.72% and (ii) the approximately 2 year, 8 month period from May 1, 1993 (the
commencement of the sale of Class B Shares) through December 31, 1995 was 4.41%.

The Class B Share's yield for the 30 day period ending December 30, 1995
(calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 3.98%. The Class B Share's tax-equivalent yield for the 30 day
period ending December 30, 1995 (calculated in the manner described in the
Prospectus under the heading "Fund Performance" and assuming a 37.8% tax rate)
was 6.40%. The Class B Share's current distribution rate for the month ending
December 31, 1995 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 4.66%.

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,
1995 (as calculated in the manner described in the Prospectus under the heading
"Fund Performance") was 12.21%.

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,
1995 was 15.71%.

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, 1995 was
14.72% and (ii) the approximately 2 year, 5 month period from August 13, 1993
(the commencement of the sale of Class C Shares) through December 31, 1995 was
4.65%.

The Class C Share's yield for the 30 day period ending December 30, 1995
(calculated in the manner described in the Prospectus under the heading "Fund
Performance") was 3.98%. The Class C Share's tax-equivalent yield for the 30 day
period ending December 30, 1995 (calculated in the manner described in the
Prospectus under the heading "Fund Performance" and assuming a 37.8% tax rate)
was 6.40%. The Class C Share's current distribution rate for the month ending
December 31, 1995 (calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 4.66%.

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, 1995 (as calculated in the manner described in the Prospectus under
the heading "Fund Performance") was 11.62%.

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,
1995 was 11.62%.

B-29
<PAGE> 97

Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Van Kampen American Capital Pennsylvania Tax Free Income Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Pennsylvania Tax Free Income Fund (the "Fund"),
including the portfolio of investments, as of December 31, 1995, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen American Capital Pennsylvania Tax Free Income Fund as of December 31,
1995, 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
February 13, 1996

B-30

<PAGE> 98

Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds
Pennsylvania 95.4%

$ 3,500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt
Ser B (FSA Insd) ....................................... 6.625% 01/01/22 $ 3,761,695
500 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt
Ser C (MBIA Insd) ...................................... 8.250 01/01/16 545,275
1,000 Allegheny Cnty, PA Arpt Rev Gtr Pittsburgh Intl Arpt
Ser C (FSA Insd) ....................................... 5.625 01/01/23 997,240
1,625 Allegheny Cnty, PA C-34 Conv Cap Apprec <F2> ........... 0/8.625 02/15/04 1,738,474
265 Allegheny Cnty, PA Hosp Dev Auth Rev ................... 7.375 04/01/15 272,078
2,500 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Cent
Presbyterian Univ Ser A (MBIA Insd) .................... 6.000 11/01/12 2,591,125
2,500 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Cent
Presbyterian Univ Ser A (MBIA Insd) .................... 6.250 11/01/23 2,629,425
2,140 Allegheny Cnty, PA Hosp Dev Auth Rev Hlth Fac Allegheny
Vly Sch ................................................ 7.750 02/01/15 2,228,639
990 Allegheny Cnty, PA Indl Dev Auth Med Cent Rev
Presbyterian Med Cent Rfdg (FHA Gtd) ................... 6.750 02/01/26 1,045,658
2,500 Allegheny Cnty, PA Indl Dev Auth Rev Environmental Impt
Ser A Rfdg ............................................. 6.700 12/01/20 2,606,450
3,000 Allegheny Cnty, PA Residential Fin Auth Mtg Rev 1983
Ser B .................................................. * 10/01/15 369,960
2,000 Allegheny Cnty, PA Residential Fin Auth Mtg Rev Single
Family Ser Z (GNMA Collateralized) ..................... 6.875 05/01/26 2,110,020
2,380 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ........ * 12/01/10 1,096,728
1,365 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ........ * 12/01/11 592,574
2,350 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ........ * 12/01/13 914,667
2,835 Allegheny Cnty, PA San Auth Swr Rev (FGIC Insd) ........ * 12/01/14 1,045,860
1,250 Allegheny County, PA Hosp Dev Auth Rev Magee Womens
Hosp (FGIC Insd) ....................................... 5.625 10/01/20 1,259,212
2,500 Allentown, PA Area Hosp Auth Rev Sacred Heart Hosp Ser
A Rfdg ................................................. 6.750 11/15/14 2,557,575
2,060 Allentown, PA Area Hosp Auth Rev Sacred Heart Hosp Ser B 6.750 11/15/15 2,092,404
2,000 Beaver Cnty, PA Hosp Auth Rev Med Cent Beaver, PA Inc
Ser A (AMBAC Insd) ..................................... 6.250 07/01/22 2,126,620
1,000 Beaver Cnty, PA Indl Dev Auth Environmental Impt Rev PA
Pwr Co Proj A Rfdg (FSA Insd) .......................... 5.400 10/01/13 1,015,450
4,500 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev OH Edison
Proj Ser A Rfdg ........................................ 7.750 09/01/24 4,823,370
6,000 Berks Cnty, PA (Inverse Fltg) (FGIC Insd) .............. 8.270 11/10/20 7,417,500
3,300 Berks Cnty, PA Muni Auth College Rev Albright College
(Cap Guar Insd) ........................................ 5.250 10/01/13 3,311,187
</TABLE>

See Notes to Financial Statements

B-31

<PAGE> 99

Portfolio of Investments (Continued)
December 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania (Continued)

$ 2,000 Berks Cnty, PA Muni Auth Rev Highlands at Wyomissing
Proj B ................................................. 6.875% 10/01/17 $ 2,166,680
1,500 Bradford Cnty, PA Indl Dev Auth Solid Waste Disposal
Rev Intl Paper Co Proj A ............................... 6.600 03/01/19 1,588,635
4,000 Bradford County, PA Indl Dev Auth Solid Waste Disp Rev
Ser B .................................................. 5.900 12/01/19 4,006,560
2,600 Bristol Twp, PA Sch Dist Ser A (MBIA Insd) ............. 5.250 02/15/12 2,619,500
500 Bucks Cnty, PA Wtr & Swr Auth Rev Neshaminy Interceptor
Sys (Prerefunded @ 12/01/98) (FGIC Insd)................ 7.500 12/01/13 548,515
1,650 Butler Cnty, PA Indl Dev Auth First Mtg Rev Sherwood
Oaks Proj Ser A Rfdg (Crossover Rfdg @ 06/01/96) ....... 8.750 06/01/16 1,716,165
1,000 Cambria Cnty, PA Hosp Dev Auth Hosp Rev Conemaugh Vly
Mem Hosp Ser B Rfdg (Prerefunded @ 07/01/98) ........... 8.875 07/01/18 1,131,950
1,000 Cambria Cnty, PA Indl Dev Auth Pollutn Ctl Rev
Bethlehem Steel Corp Proj Rfdg ......................... 7.500 09/01/15 1,054,700
1,000 Cambria Cnty, PA Indl Dev Auth Res Recovery Rev Cambria
Cogen Proj Ser F ....................................... 7.750 09/01/19 1,070,730
2,000 Cambria County, PA Indl Dev Auth Pollutn Ctl Rev
PA Elec Co Proj Ser B Rfdg (MBIA Insd) ................. 6.050 11/01/25 2,077,840
835 Canon McMillan Sch Dist PA (AMBAC Insd) ................ * 02/01/13 340,989
575 Canon McMillan Sch Dist PA (AMBAC Insd) ................ * 02/01/14 221,651
1,000 Canon McMillan Sch Dist PA (AMBAC Insd) ................ * 02/01/15 365,690
1,000 Chester Cnty, PA Hlth & Edl Fac Auth Hlth Sys Rev
Registered Fixed Airs (AMBAC Insd) ..................... 5.650 05/15/20 1,003,030
90 Chester Cnty, PA Hosp Auth Rev Brandywine Hosp ......... 7.000 07/01/10 93,484
760 Chichester Sch Dist PA Ser 1989 (MBIA Insd) ............ * 06/01/01 597,573
860 Chichester Sch Dist PA Ser 1989 (MBIA Insd) ............ * 06/01/02 644,071
1,130 Clearfield Cnty, PA Indl Dev Auth Coml Dev Rev First
Mtg Kmart Corp Ser A Rfdg .............................. 7.200 07/01/07 1,050,019
2,230 Cumberland Cnty, PA Muni Auth Rev First Mtg Carlisle
Hosp & Hlth ............................................ 6.800 11/15/23 2,243,380
2,000 Delaware Cnty, PA Auth Hosp Rev Cmnty Hosp Crozer
Chester Mem Hosp ....................................... 6.000 12/15/20 1,898,500
2,000 Delaware Cnty, PA Auth Hosp Rev Crozer Chester Med Cent
Ser A, B & C (Prerefunded @ 12/15/00) (MBIA Insd) ...... 7.500 12/15/20 2,330,200
3,000 Delaware Cnty, PA Auth Hosp Rev Crozer Chester Med Cent
(MBIA Insd) ............................................ 5.300 12/15/20 2,940,930
3,000 Delaware Cnty, PA Auth Hosp Rev Delaware Cnty Mem Hosp
Rfdg (MBIA Insd) ....................................... 5.500 08/15/19 2,997,810
2,475 Delaware Cnty, PA Auth Rev Elwyn Inc Proj .............. 8.350 06/01/15 2,767,669
</TABLE>

See Notes to Financial Statements

B-32

<PAGE> 100

$ 1,500 Delaware Cnty, PA Auth Rev First Mtg Riddle Village Proj. 9.250% 06/01/22 $ 1,664,175
1,900 Delaware Cnty, PA Rfdg .................................. 6.000 11/15/22 1,953,105
2,000 Erie Cnty, PA Hosp Auth Rev Saint Vincent Hlth Cent Proj
Ser A (MBIA Insd) ....................................... 6.375 07/01/22 2,137,920
2,130 Erie, PA Sch Dist Ser C (Cap Guar Insd) ................. * 09/01/09 1,054,350
2,140 Greene Cnty, PA Unlimited Tax (Prerefunded @ 08/01/00)... 8.500 08/01/10 2,513,494
1,045 Harrisburg, PA Wtr & Swr Auth Swr Rev Second Ser Rfdg
(FGIC Insd) ............................................. * 10/15/08 549,325
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/11 804,135
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/12 763,085
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/13 721,501
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/14 683,394
1,000 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/15 349,970
1,840 Hollidaysburg, PA Area Sch Dist (MBIA Insd) ............. * 10/15/16 604,532
1,260 Lackawanna Cnty, PA Multi-Purp Stadium Auth Stadium Rev
Gtd (Prerefunded @ 08/15/98) ............................ 8.625 08/15/07 1,424,695
1,000 Lancaster Cnty, PA Solid Waste Mgmt Auth Res Recovery
Sys Rev Ser A ........................................... 8.375 12/15/04 1,076,320
2,000 Lancaster Cnty, PA Solid Waste Mgmt Auth Res Recovery
Sys Rev Ser A ........................................... 8.500 12/15/10 2,165,500
4,100 Lehigh Cnty, PA Genl Purp Auth Rev Muhlenberg Hosp Ser A
Rfdg .................................................... 8.100 07/15/10 4,470,517
1,000 Lehigh Cnty, PA Indl Dev Auth Pollutn Ctl Rev PA Pwr &
Lt Co Proj Ser A Rfdg (MBIA Insd) ....................... 6.400 11/01/21 1,075,420
1,000 Luzerne Cnty, PA Ser A (FGIC Insd) ...................... 5.350 11/15/20 988,950
2,000 Lycoming Cnty, PA Auth Hosp Lease Rev Divine Providence
Sisters Ser A ........................................... 6.500 07/01/22 2,047,000
2,500 Lycoming Cnty, PA Auth Hosp Lease Rev Divine Providence
Sisters Ser A (Prerefunded @ 07/01/00) .................. 7.750 07/01/16 2,874,475
400 Lycoming Cnty, PA Auth Hosp Lease Rev Williamsport Hosp
Ser B (AMBAC Insd) ...................................... 7.000 11/01/15 419,320
5,000 Lycoming Cnty, PA Auth Hosp Rev Divine Providence Hosp
Rfdg (Connie Lee Insd) .................................. 5.250 11/15/15 4,840,900
1,000 McKean Cnty, PA Hosp Auth Hosp Rev Bradford Hosp Proj
(Crossover Rfdg @ 10/01/00) ............................. 8.875 10/01/20 1,201,500
750 McKeesport, PA Indl Dev Auth Rev The Kroger Corp
Allegheny Cnty Rfdg ..................................... 8.650 06/01/11 848,317
1,750 Meadville, PA Area Wtr Auth Wtr Rev Rfdg (FSA Insd) ..... 5.350 07/01/22 1,738,975
3,000 Monroeville, PA Hosp Auth Hosp Rev Forbes Hlth Sys Rfdg.. 6.250 10/01/15 3,029,490
</TABLE>

See Notes to Financial Statements

B-33

<PAGE> 101

$ 500 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp Rev
Suburban Genl Hosp Bonds (AMBAC Insd) ................ 7.250% 05/01/16 $ 529,780
415 Montgomery Cnty, PA Higher Edl & Hlth Auth Nursing
Home Rev Delco Sys Svcs Proj A ....................... 9.875 11/01/18 421,590
2,500 Montgomery Cnty, PA Indl Dev Auth Rev Pollutn Ctl
Philadelphia Elec Co Ser A Rfdg ...................... 7.600 04/01/21 2,742,825
3,000 Montgomery Cnty, PA Indl Dev Auth Rev Res Recovery.... 7.500 01/01/12 3,290,190
1,000 North Penn, PA Wtr Auth Wtr Rev (FGIC Insd) .......... 6.875 11/01/19 1,185,550
1,500 North Penn, PA Wtr Auth Wtr Rev (FGIC Insd) .......... 6.200 11/01/22 1,585,065
1,000 Northampton Cnty, PA Indl Dev Auth Rev Moravian Hall
Square Proj Rfdg ..................................... 7.450 06/01/14 1,087,740
2,500 Northampton Cnty, PA Indl Dev Auth Rev Pollutn Ctl
Bethlehem Steel Rfdg ................................. 7.550 06/01/17 2,655,450
1,000 Northeastern PA Hosp & Edl Auth College Rev Gtd
Luzerne Cnty Cmnty College (AMBAC Insd) .............. 6.625 08/15/15 1,122,920
2,362 Oil City, PA Towne Tower Proj ........................ 6.750 05/01/20 2,531,342
2,000 Pennsylvania Econ Dev Fin Auth Exempt Fac Rev
Macmillan Ltd Partnership Proj ....................... 7.600 12/01/20 2,249,140
3,000 Pennsylvania Econ Dev Fin Auth Recycling Rev
Ponderosa Fibres Proj Ser A .......................... 9.250 01/01/22 3,132,600
1,500 Pennsylvania Econ Dev Fin Auth Res Recovery Rev
Colver Proj Ser D .................................... 7.050 12/01/10 1,617,285
2,700 Pennsylvania Econ Dev Fin Auth Res Recovery Rev
Northampton Generating Ser A ......................... 6.600 01/01/19 2,707,830
4,000 Pennsylvania Hsg Fin Agy (Inverse Fltg) .............. 9.534 10/03/23 4,450,000
1,000 Pennsylvania Hsg Fin Agy Rental Hsg Rfdg (FNMA
Collateralized) ...................................... 6.500 07/01/23 1,031,580
1,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 40 .... 6.900 04/01/25 1,055,520
2,500 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 42 .... 6.850 04/01/25 2,633,900
850 Pennsylvania Infrastructure Invt Auth Rev Pennvest
Subser B ............................................. 6.800 09/01/10 954,499
2,000 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City of
Philadelphia Funding Pgm (MBIA Insd) ................. 5.600 06/15/15 2,010,220
1,500 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City of
Philadelphia Funding Pgm (MBIA Insd) ................. 5.625 06/15/23 1,509,945
4,000 Pennsylvania St Ctfs Partn (FSA Insd) ................ 6.250 05/01/16 4,250,040
2,000 Pennsylvania St Higher Edl Assistance Agy Student Ln
Rev Rfdg (Inverse Fltg) (AMBAC Insd) ................. 9.533 09/01/26 2,292,500
2,500 Pennsylvania St Higher Edl Assistance Agy Student Ln
Rev Ser B (Inverse Fltg) (MBIA Insd) ................. 10.515 03/01/20 2,934,375
</TABLE>

See Notes to Financial Statements

B-34

<PAGE> 102

$ 4,000 Pennsylvania St Higher Edl Assistance Agy Student Ln Rev
Ser C (AMBAC Insd) ...................................... 6.400% 03/01/22 $ 4,212,880
60 Pennsylvania St Higher Edl Fac Auth College & Univ Rev
Drexel Univ First Ser (MBIA Insd) ....................... 7.700 05/01/12 61,999
105 Pennsylvania St Higher Edl Fac Auth College & Univ Rev
Trustees Univ Ser A ..................................... 6.625 01/01/17 107,164
2,500 Pennsylvania St Higher Edl Fac Auth Rev Drexel Univ Rfdg. 6.375 05/01/17 2,601,375
1,000 Pennsylvania St Higher Edl Fac Auth Rev Med College PA
Ser A ................................................... 8.375 03/01/11 1,092,630
650 Pennsylvania St Higher Edl Fac Auth Rev Med College PA
Ser A ................................................... 7.500 03/01/14 677,794
2,500 Pennsylvania St Tpk Comm Tpk Rev Ser P (AMBAC Insd) ..... 5.750 12/01/12 2,601,575
1,250 Philadelphia, PA Auth for Indl Dev Coml Dev Philadelphia
Arpt Rev Rfdg ........................................... 7.750 12/01/17 1,309,950
2,000 Philadelphia, PA Auth for Indl Dev Rev Long Term Care.... 8.000 01/01/24 2,156,240
3,000 Philadelphia, PA Gas Wks Rev Fourteenth Ser (FSA Insd)... 6.250 07/01/08 3,253,050
250 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Albert Einstein Med Cent ................................ 7.000 10/01/21 266,488
2,800 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Chestnut Hill Hosp ...................................... 6.500 11/15/22 2,897,944
2,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Frankford Hosp Ser A .................................... 6.000 06/01/14 1,985,580
4,500 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Frankford Hosp Ser A .................................... 6.000 06/01/23 4,443,120
4,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Friends Hosp ............................................ 6.200 05/01/11 4,036,240
4,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Temple Univ Hosp Ser A .................................. 6.625 11/15/23 4,170,320
1,500 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) .................................. * 03/15/08 815,940
3,750 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) .................................. * 03/15/11 1,689,750
3,775 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) .................................. * 03/15/12 1,614,152
4,500 Philadelphia, PA Muni Auth Rev Muni Svcs Bldg Lease Cap
Apprec (Cap Guar Insd) .................................. * 03/15/13 1,824,705
2,155 Philadelphia, PA Muni Auth Rev Rfdg (Prerefunded @
04/01/00) (FGIC Insd) ................................... 7.800 04/01/18 2,463,273
220 Philadelphia, PA Muni Auth Rev Rfdg (Prerefunded @
04/01/98) (FGIC Insd) ................................... 7.800 04/01/18 241,965
</TABLE>

See Notes to Financial Statements

B-35

<PAGE> 103

$ 1,500 Philadelphia, PA Sch Dist Ser B (AMBAC Insd) ........... 5.500% 09/01/25 $ 1,500,510
1,800 Philadelphia, PA Wtr & Swr Rev Sixteenth Ser
(Prerefunded @ 08/01/01) ............................... 7.500 08/01/10 2,117,664
2,000 Philadelphia, PA Wtr & Wastewtr Rev Reg Fixed Airs
(FGIC Insd) ............................................ 5.650 06/15/12 2,021,800
2,000 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (MBIA Insd).... 5.625 06/15/08 2,110,100
1,425 Pittsburgh, PA Sch Dist Ser B (AMBAC Insd) ............. * 08/01/08 758,242
4,070 Pittsburgh, PA Sch Dist Ser B (AMBAC Insd) ............. * 08/01/09 2,036,750
50 Pittsburgh, PA Urban Redev Auth Mtg Rev Ser A .......... 8.750 10/01/19 53,101
1,470 Pittsburgh, PA Urban Redev Auth Mtg Rev Ser C-1 ........ 6.800 10/01/25 1,530,167
960 Pittsburgh, PA Urban Redev Auth Single Family Mtg Rev
Ser A (GNMA Collateralized) ............................ 8.000 12/01/20 1,027,747
2,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A
Rfdg (FGIC Insd) ....................................... * 09/01/06 1,206,540
1,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A
Rfdg (FGIC Insd) ....................................... * 09/01/07 567,690
1,500 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser A
Rfdg (FGIC Insd) ....................................... * 09/01/08 800,250
2,485 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser B
(FSA Insd) ............................................. 5.700 09/01/20 2,517,032
1,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Sys Rev Ser B
(FSA Insd) ............................................. 5.750 09/01/25 1,018,100
1,500 Ridley Park, PA Hosp Auth Rev Taylor Hosp Ser A ........ 6.125 12/01/20 1,392,660
250 Scranton-Lackawanna, PA Hlth & Welfare Auth Rev Cmnty
Med Cent Proj (BIGI Insd) .............................. 7.875 07/01/10 275,793
3,500 Seneca Vly, PA Sch Dist Ser A (FGIC Insd) .............. 5.500 07/01/14 3,514,210
2,650 Sharon, PA Regl Hlth Sys Auth Hosp Rev Sharon Regl Hlth
Sys Proj A Rfdg ........................................ 6.875 12/01/09 2,823,310
355 Somerset Cnty, PA Indl Dev Auth Coml Dev Rev First Mtg
Kmart Corp Ser A Rfdg .................................. 7.200 04/01/07 330,146
2,180 State Pub Sch Bldg Auth PA Sch Rev Burgettstown Sch
Dist Ser D (MBIA Insd) ................................. 6.500 02/01/14 2,410,513
1,035 Unity Twp, PA Muni Auth Gtd Swr Cap Apprec (AMBAC Insd). * 11/01/17 320,540
1,035 Unity Twp, PA Muni Auth Gtd Swr Cap Apprec (AMBAC Insd). * 11/01/18 301,226
1,875 Unity Twp, PA Muni Auth Gtd Swr Cap Apprec (AMBAC Insd). * 11/01/20 488,381
2,725 Upper Merion, PA Muni Util Auth Swr Rev Gtd ............ 6.000 08/15/16 2,875,556
1,500 Washington Cnty, PA Auth Lease Rev Muni Fac Pool Cap
Ser C Subser C-1D (Prerefunded @ 06/15/00) (AMBAC Insd). 7.450 12/15/18 1,737,135

</TABLE>

See Notes to Financial Statements

B-36

<PAGE> 104

$ 1,000 Wayne Cnty, PA Hosp & Hlth Fac Auth Cnty Gtd Hosp Rev
Wayne Mem Hosp Rfdg (MBIA Insd) ........................ 5.375% 07/01/12 $ 1,006,130
2,935 West Shore, PA Area Auth Hlth Cent Rev United Methodist
Homes Aging Inc (Prerefunded @ 06/01/01)................ 7.400 06/01/16 3,418,923
410 West View, PA Muni Auth Wtr Rev (FGIC Insd) ............ 7.500 11/15/17 415,916
350 Westmoreland Cnty, PA Indl Dev Auth Rev Citizens Genl
Hosp Proj A Rfdg ....................................... 8.250 07/01/13 371,588
-------------
264,079,562
-------------

Guam 1.0%

2,750 Guam Govt Ser A ........................................ 5.750 09/01/04 2,774,035
-------------
Puerto Rico 1.9%

205 Puerto Rico Comwlth Pub Impt Rfdg ...................... 7.125 07/01/02 216,213
1,445 Puerto Rico Elec Pwr Auth Pwr Rev Ser Z Rfdg ........... 5.500 07/01/13 1,463,438
1,720 Puerto Rico Elec Pwr Auth Pwr Rev Ser Z Rfdg ........... 5.500 07/01/14 1,734,586
2,000 Puerto Rico Elec Pwr Auth Pwr Rev Ser Z Rfdg ........... 5.500 07/01/16 1,991,480
-------------
5,405,717
-------------

Total Long-Term Investments 98.3%
(Cost $248,677,085) <F1>.......................................................... 272,259,314

Short-Term Investments at Amortized Cost 0.7%....................................... 1,800,000

Other Assets in Excess of Liabilities 1.0%.......................................... 2,810,586
-------------
Net Assets 100%.................................................................... $ 276,869,900
==============
*Zero coupon bond

<FN>
<F1> At December 31, 1995, cost for federal income tax purposes is
$248,677,085; the aggregate gross unrealized appreciation is $23,855,957
and the aggregate gross unrealized depreciation is $273,728, resulting
in net unrealized appreciation of $23,582,229.

<F2> Currently is a zero coupon bond which will convert to a coupon paying bond
at a predetermined date.
</FN>
</TABLE>

The following table summarizes the portfolio composition at December 31, 1995,
based upon quality ratings issued by Standard & Poor's. For securities not rated
by Standard & Poor's, the Moody's rating is used.

<TABLE>
<CAPTION>
Portfolio Composition by Credit Quality
<S> <C>
AAA.......................... 49.1%
AA........................... 7.2
A............................ 14.6
BBB.......................... 18.7
BB........................... 3.9
Non-Rated.................... 6.5
------
100.0%
======
</TABLE>

See Notes to Financial Statements

B-37

<PAGE> 105

Statement of Assets and Liabilities
December 31, 1995
- -------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at Market Value (Cost $248,677,085) (Note 1).............................. $ 272,259,314
Short-Term Investments (Note 1)........................................................ 1,800,000
Cash................................................................................... 47,509
Receivables:
Interest............................................................................. 3,827,287
Fund Shares Sold..................................................................... 220,449
Other.................................................................................. 6,986
---------------
Total Assets...................................................................... 278,161,545
---------------

Liabilities:
Payables:
Income Distributions ................................................................ 473,881
Investment Advisory Fee (Note 2)..................................................... 239,198
Fund Shares Repurchased.............................................................. 49,791
Accrued Expenses....................................................................... 528,775
---------------
Total Liabilities................................................................. 1,291,645
---------------
Net Assets............................................................................. $ 276,869,900
===============

Net Assets Consist of:
Paid in Surplus (Note 3)............................................................... $ 258,939,706
Net Unrealized Appreciation on Investments............................................. 23,582,229
Accumulated Distributions in Excess of Net Investment Income (Note 1).................. (7,423)
Accumulated Net Realized Loss on Investments........................................... (5,644,612)
---------------
Net Assets............................................................................. $ 276,869,900
===============

Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets of $226,675,514
and 12,779,959 shares of beneficial interest issued and outstanding) (Note 3)..... $ 17.74

Maximum sales charge (4.75%* of offering price)................................... .88
---------------
Maximum offering price to public.................................................. $ 18.62
===============

Class B Shares:
Net asset value and offering price per share (Based on net assets of $46,795,869
and 2,639,237 shares of beneficial interest issued and outstanding) (Note 3)...... $ 17.73
===============

Class C Shares:
Net asset value and offering price per share (Based on net assets of $3,398,517
and 191,696 shares of beneficial interest issued and outstanding) (Note 3)........ $ 17.73
===============
*On sales of $100,000 or more, the sales charge will be reduced.
</TABLE>

See Notes to Financial Statements

B-38

<PAGE> 106

<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended December 31, 1995
- ----------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest..................................................................... $ 17,122,479
---------------

Expenses:
Investment Advisory Fee (Note 2)............................................. 1,569,561
Distribution (12b-1) and Service Fees (Allocated to Classes A, B, C and D of
$567,231, $425,761, $29,106 and $2, respectively) (Note 6) ................ 1,022,100
Shareholder Services (Note 2) ............................................... 327,273
Custody (Note 1)............................................................. 128,189
Legal (Note 2)............................................................... 48,300
Trustees Fees and Expenses (Note 2).......................................... 43,504
Other........................................................................ 187,527
---------------
Total Expenses.......................................................... 3,326,454
Less: Fees Waived and Expenses Reimbursed ($356,593 and $13,125)........ 369,718
Earnings Credits on Cash Balances (Note 1)........................ 26,522
---------------
Net Expenses............................................................ 2,930,214
---------------
Net Investment Income........................................................ $ 14,192,265
===============

Realized and Unrealized Gain/Loss on Investments:
Realized Gain/Loss on Investments:
Proceeds from Sales........................................................ $ 65,043,601
Cost of Securities Sold.................................................... (70,678,682)
---------------
Net Realized Loss on Investments (Including realized loss on futures
transactions of $4,651,926)................................................ (5,635,081)
---------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period.................................................... (7,446,092)
End of the Period.......................................................... 23,582,229
---------------
Net Unrealized Appreciation on Investments During the Period................. 31,028,321
---------------
Net Realized and Unrealized Gain on Investments.............................. $ 25,393,240
===============

Net Increase in Net Assets from Operations................................... $ 39,585,505
===============
</TABLE>

See Notes to Financial Statements

B-39

<PAGE> 107

Statement of Changes in Net Assets
For the Years Ended December 31, 1995 and 1994

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Year Ended Year Ended
December 31, 1995 December 31, 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.............................................. $ 14,192,265 $ 14,167,689
Net Realized Gain/Loss on Investments.............................. (5,635,081) 1,589,125
Net Unrealized Appreciation/Depreciation on Investments
During the Period................................................ 31,028,321 (31,188,136)
----------------- -----------------
Change in Net Assets from Operations .............................. 39,585,505 (15,431,322)
----------------- -----------------
Distributions from Net Investment Income........................... (14,259,564) (14,104,104)
Distributions in Excess of Net Investment Income (Note 1).......... (7,423) -0-
----------------- -----------------
Distributions from and in Excess of Net Investment Income*......... (14,266,987) (14,104,104)
----------------- -----------------
Net Change in Net Assets from Investment Activities................ 25,318,518 (29,535,426)
----------------- -----------------
From Capital Transactions (Note 3):
Proceeds from Shares Sold.......................................... 27,514,827 45,228,180
Net Asset Value of Shares Issued Through Dividend Reinvestment..... 8,632,984 8,518,915
Cost of Shares Repurchased......................................... (27,500,706) (32,797,611)
----------------- -----------------
Net Change in Net Assets from Capital Transactions................. 8,647,105 20,949,484
----------------- -----------------
Total Increase/Decrease in Net Assets.............................. 33,965,623 (8,585,942)

Net Assets:
Beginning of the Period............................................ 242,904,277 251,490,219
----------------- -----------------
End of the Period (Including undistributed net investment income
of $(7,423) and $67,299, respectively) .......................... $ 276,869,900 $ 242,904,277
================= =================

</TABLE>

<TABLE>
<CAPTION> Year Ended Year Ended
*Distributions by Class December 31, 1995 December 31, 1994
-------------------------------------------------------------------------
<S> <C> <C>
Distributions from and in Excess of Net Investment Income:
Class A Shares........... $ (12,063,809) $ (12,279,314)
Class B Shares........... (2,062,857) (1,704,000)
Class C Shares........... (140,285) (120,704)
Class D Shares........... (36) (86)
---------------- ----------------
$ (14,266,987) $ (14,104,104)
================ ================

</TABLE>

See Notes to Financial Statements

B-40

<PAGE> 108

Financial Highlights

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Year Ended December 31
-------------------------------------------------------------
Class A Shares 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period........................... $16.081 $18.062 $16.899 $16.373 $15.716
------- ------- ------- ------- -------
Net Investment Income................... .946 .965 1.027 1.074 1.081
Net Realized and Unrealized Gain/Loss
on Investments....................... 1.660 (1.985) 1.164 .525 .696
------- ------- ------- ------- -------
Total from Investment Operations.......... 2.606 (1.020) 2.191 1.599 1.777
------- ------- ------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income (Note 1)......... .950 .961 1.028 1.073 1.080
Distributions from Net Realized
Gain on Investments ............... -0- -0- -0- -0- .040
------ ------- ------- ------- -------
Total Distributions..................... .950 .961 1.028 1.073 1.120
------ ------- ------- ------- -------
Net Asset Value, End of the Period...... $17.737 $16.081 $18.062 $16.899 $16.373
======= ======= ======= ======= =======

Total Return*........................... 16.62% (5.72%) 13.25% 10.09% 11.64%
Net Assets at End of the Period
(In Millions)......................... $ 226.7 $ 203.2 $ 221.7 $ 153.8 $ 103.1
Ratio of Expenses to Average
Net Assets* (Annualized) (1).......... 1.00% .90% .71% .72% .70%
Ratio of Net Investment Income to
Average Net Assets* (Annualized)...... 5.57% 5.73% 5.80% 6.41% 6.70%
Portfolio Turnover...................... 27.66% 7.94% 1.35% 9.87% 48.47%

*If certain expenses had not been assumed
by VKAC, total return would have been
lower and the ratios would have been as
follows:

Ratio of Expenses to Average Net
Assets (Annualized) (1)................ 1.14% 1.17% 1.09% 1.17% 1.26%
Ratio of Net Investment Income to
Average Net Assets (Annualized)........ 5.42% 5.46% 5.41% 5.95% 6.13%

</TABLE>

(1) Beginning with the year ended December 31, 1995, the Ratios of Expenses to
Average Net Assets are based upon expense amounts which do not reflect
credits earned on overnight cash balances. (Note 1)

See Notes to Financial Statements

B-41

<PAGE> 109

Financial Highlights (Continued)

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------

May 1, 1993
Year Year (Commencement of
Ended Ended Distribution) to
December 31, December 31, December 31,
Class B Shares 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $16.080 $18.055 $17.460
------- ------- -------
Net Investment Income.......................... .819 .841 .586
Net Realized and Unrealized Gain/Loss on
Investments................................. 1.659 (1.985) .603
------- ------- -------
Total from Investment Operations................. 2.478 (1.144) 1.189
Less Distributions from and in Excess of Net
Investment Income (Note 1).................. .827 .831 .594
------- ------- -------
Net Asset Value, End of the Period............... $17.731 $16.080 $18.055
======= ======= =======

Total Return*.................................... 15.72% (6.39%) 6.81%**
Net Assets at End of the Period (In millions).... $ 46.8 $ 37.6 $ 27.7
Ratio of Expenses to Average Net
Assets* (Annualized) (1)....................... 1.75% 1.64% 1.48%
Ratio of Net Investment Income to
Average Net Assets* (Annualized) .............. 4.81% 4.98% 4.47%
Portfolio Turnover............................... 27.66% 7.94% 1.35%

*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:

Ratio of Expenses to Average Net
Assets (Annualized) (1).......................... 1.89% 1.90% 1.82%
Ratio of Net Investment Income to
Average Net Assets (Annualized).................. 4.66% 4.71% 4.13%

</TABLE>

**Non-Annualized

See Notes to Financial Statements

B-42

<PAGE> 110

Financial Highlights (Continued)

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
May 1, 1993
Year Year (Commencement of
Ended Ended Distribution) to
December 31, December 31, December 31,
Class C Shares 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period.......... $16.079 $18.045 $17.850
------- ------- -------
Net Investment Income........................... .812 .850 .325
Net Realized and Unrealized Gain/Loss on
Investments.................................. 1.665 (1.985) .208
------- ------- -------
Total from Investment Operations.................. 2.477 (1.135) .533
Less Distributions from and in Excess of
Net Investment Income (Note 1).................. .827 .831 .338
------- ------- -------
Net Asset Value, End of the Period................ $17.729 $16.079 $18.045
======= ======= =======

Total Return*..................................... 15.72% (6.34%) 2.98%**
Net Assets at End of the Period (In millions)..... $ 3.4 $ 2.2 $ 2.1
Ratio of Expenses to Average Net
Assets* (Annualized) (1)........................ 1.75% 1.63% 1.54%
Ratio of Net Investment Income to
Average Net Assets* (Annualized)................ 4.76% 4.97% 4.08%
Portfolio Turnover................................ 27.66% 7.94% 1.35%

*If certain expenses had not been assumed by VKAC,
total return would have been lower and the ratios
would have been as follows:

Ratio of Expenses to Average Net
Assets (Annualized) (1)........................... 1.90% 1.90% 1.89%
Ratio of Net Investment Income to
Average Net Assets (Annualized)................... 4.61% 4.70% 3.73%

</TABLE>

**Non-Annualized

See Notes to Financial Statements

B-43

<PAGE> 111

Notes to Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------

1. Significant Accounting Policies

Van Kampen American Capital Pennsylvania Tax Free Income Fund (the
"Fund") is organized as a Pennsylvania trust and is registered as a
non-diversified open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to provide
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 commenced
investment operations on May 1, 1987. The distribution of the Fund's Class B and
Class C shares commenced on May 1, 1993, and August 13, 1993, respectively. On
May 2, 1995, all Class D shareholders redeemed their shares and the class was
eliminated. The Fund will no longer offer Class D shares.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.

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

B. Security Transactions-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. As of December 31, 1995, there were
no when issued or delayed delivery purchase commitments.

C. Investment Income and Expenses-Interest income and expenses are recorded on
an accrual basis. Bond premium and original issue discount are amortized over
the expected life of each applicable security.
During the year ended December 31, 1995, the Fund's custody fee was reduced by
approximately $26,500 as a result of credits earned on overnight cash balances.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported

B-44

<PAGE> 112

Notes to Financial Statements (Continued)
December 31, 1995
- --------------------------------------------------------------------------------

amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

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, 1995, the Fund had an accumulated capital loss carryforward for
tax purposes of $5,644,612, of which $9,531 and $5,635,081 will expire on
December 31, 2001 and 2003, respectively. Net realized gains or losses may
differ for financial and tax reporting purposes primarily as a result of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.

E. Distribution of Income and Gains-The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included as ordinary income for
tax purposes. Due to inherent differences in the recognition of certain expenses
under generally accepted accounting principles and federal income tax purposes,
the amount of distributable net investment income may differ between book and
federal income tax purposes for a particular period. These differences are
temporary in nature, but may result in book basis distribution in excess of net
investment income for certain periods.

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>

B-45

<PAGE> 113

Notes to Financial Statements (Continued)
December 31, 1995
- --------------------------------------------------------------------------------

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, 1995, the Fund recognized expenses of
approximately $75,600 representing VKAC's cost of providing accounting, cash
management, legal and certain shareholder services (prior to July, 1995) to the
Fund.
In July, 1995, the Fund began using ACCESS Investor Services, Inc., an
affiliate of the Adviser, as the transfer agent of the Fund. For the year ended
December 31, 1995, the Fund recognized expenses of approximately $118,400,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC. The Fund's liability under the
deferred compensation and retirement plans at December 31, 1995, was
approximately $45,500.
At December 31, 1995, VKAC owned 100 shares each of Classes B and C.

B-46
<PAGE> 114

Notes to Financial Statements (Continued)
December 31, 1995
- --------------------------------------------------------------------------------

3. Capital Transactions

The Fund has outstanding three classes of common shares, Classes A, B and C.
There are an unlimited number of shares of each class without par value
authorized. At December 31, 1995, paid in surplus aggregated $209,246,584,
$46,293,822 and $3,399,300 for Classes A, B and C, respectively. For the year
ended December 31, 1995, transactions were as follows:

<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------------------------
<S> <C> <C>
Sales:
Class A....................... 1,119,488 $ 19,063,890
Class B....................... 432,811 7,360,052
Class C....................... 64,263 1,090,885
Class D....................... -0- -0-
------------ ----------------
Total Sales................... 1,616,562 $ 27,514,827
============ ================

Dividend Reinvestment:
Class A....................... 429,117 $ 7,328,175
Class B....................... 70,444 1,203,406
Class C....................... 5,929 101,400
Class D....................... -0- 3
------------ ----------------
Total Dividend Reinvestment... 505,490 $ 8,632,984
============ ================

Repurchases:
Class A....................... (1,402,145) $ (23,853,016)
Class B....................... (200,582) (3,410,196)
Class C....................... (13,519) (235,564)
Class D....................... (112) (1,930)
------------ ----------------
Total Repurchases............. (1,616,358) $ (27,500,706)
============ ================
</TABLE>

B-47
<PAGE> 115

Notes to Financial Statements (Continued)
December 31, 1995
- --------------------------------------------------------------------------------

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>

B-48

<PAGE> 116

Notes to Financial Statements (Continued)
December 31, 1995
- -------------------------------------------------------------------------------
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within six years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.

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

For the year ended December 31, 1995, VKAC, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$89,100 and CDSC on the redeemed shares of Classes B and C of approximately
$87,700. 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, 1995, were $75,663,800 and
$70,678,682, 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 investments. Upon disposition, a realized gain or
loss is recognized accordingly.

B-49

<PAGE> 117

Notes to Financial Statements (Continued)
December 31, 1995
- -------------------------------------------------------------------------------
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 portfolio'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, 1995, were as follows:

<TABLE>
<CAPTION>
Contracts
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1994...................................... 300
Futures Opened........................................................ 400
Futures Closed........................................................ (700)
------
Outstanding at December 31, 1995...................................... -0-
======
</TABLE>

B. Indexed Securities-These instruments are identified in the portfolio 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 .25% of Class A 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, 1995, are payments to VKAC of approximately $377,000.

B-50

<PAGE> 118

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) First Amended and Restated Agreement and Declaration of Trust(14)

(2) Amended and Restated By-Laws+

(4) Specimen of Share Certificate

(i) Class A Shares+
(ii) Class B Shares+
(iii) Class C Shares+

(5) Investment Advisory Agreement+

(6) (a) Distribution Agreement+

(b) Form of Dealer Agreement(14)

(d) Form of Bank Agreement(14)

(e) Underwriting Agreement(1)
(f) Agreement Among Underwriters(1)
(g) Selected Dealer Agreement(1)
(8) (a) Form of Custodian Agreement(1)

(b) Transfer Agency Agreement+

(9) (a) Fund Accounting Agreement+

(b) 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) Distribution Plan Pursuant to Rule 12b-1+

(b) Form of Shareholder Assistance Agreement(14)

(d) Service Plan+

(16) Computation of Performance Quotations+

(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(14)

(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. 13 to
Registrant's Registration Statement on Form N-1A, File No. 33-11384, filed
on April 24, 1995.

(14) Incorporated herein by reference to Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form N-1A, File No. 33-11384, filed
on August 24, 1995.

+ Filed herewith.

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

Not applicable.

C-1
<PAGE> 119

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

As of April 10, 1996:

<TABLE>
<CAPTION>
(2)
NUMBER
OF
RECORD
TITLE OF CLASS* HOLDERS
--------------- -----
<S> <C>
Shares of beneficial interest, par value $0.01 per
share:
Class A Shares...................................... 6,823
Class B Shares...................................... 1,602
Class C Shares...................................... 66
</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> 120

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" 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 "Trustees and Officers" in Part B of this Registration Statement, none
of such persons has any position or office with Registrant.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required 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> 121

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 of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Oakbrook Terrace and the State of Illinois, on the
19th day of April, 1996.

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 April 19, 1996 by the following
persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
Principal Executive Officer:
/s/ DON G. POWELL* President and Trustee
- ---------------------------------------------
Don G. Powell
Principal Financial Officer:
/s/ EDWARD C. WOOD III Vice President and Chief Financial Officer
- ---------------------------------------------
Edward C. Wood III
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- ---------------------------------------------
J. Miles Branagan
Trustee
- ---------------------------------------------
Linda Hutton Heagy
/s/ ROGER HILSMAN* Trustee
- ---------------------------------------------
Roger Hilsman
/s/ R. CRAIG KENNEDY* Trustee
- ---------------------------------------------
R. Craig Kennedy
/s/ DENNIS J. MCDONNELL* Trustee
- ---------------------------------------------
Dennis J. McDonnell
/s/ DONALD C. MILLER* Trustee
- ---------------------------------------------
Donald C. Miller
/s/ JACK E. NELSON* Trustee
- ---------------------------------------------
Jack E. Nelson
/s/ JEROME L. ROBINSON* Trustee
- ---------------------------------------------
Jerome L. Robinson
/s/ FERNANDO SISTO* Trustee
- ---------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
- ---------------------------------------------
Wayne W. Whalen
/s/ WILLIAM S. WOODSIDE* Trustee
- ---------------------------------------------
William S. Woodside
- ------------
* Signed by Ronald A. Nyberg pursuant to a power of attorney.
/s/ RONALD A. NYBERG April 19, 1996
- ---------------------------------------------
Ronald A. Nyberg
Attorney-in-Fact
</TABLE>

<PAGE> 122

SCHEDULE OF EXHIBITS TO

POST-EFFECTIVE AMENDMENT 15 TO FORM N-1A

SUBMITTED TO THE SECURITIES AND EXCHANGE

COMMISSION ON APRIL 26, 1996

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
(2) Amended and Restated By-Laws
(4) Specimen of Share Certificate
(i) Class A Shares
(ii) Class B Shares
(iii) Class C Shares
(5) Investment Advisory Agreement
(6) (a) Distribution Agreement
(8) (b) Transfer Agency Agreement
(9) (a) Fund Accounting Agreement
(b) Legal Services Agreement
(11) Consent of KPMG Peat Marwick LLP
(15) (a) Distribution Plan pursuant to Rule 12b-1
(d) Service Plan
(16) Computation of Performance Quotations
(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)
(27) Financial Data Schedules
</TABLE>

<PAGE> 1
EXHIBIT (2)

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

<TABLE>
<S> <C>
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 .................................................... 2

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 .......................................................... 3

Section 2.12. Tenure of Trustees .................................................... 3

</TABLE>

<PAGE> 3

<TABLE>
<S> <C>
ARTICLE 3 OFFICERS ........................................................................ 3

Section 3.1. Officers of the Trust ................................................. 3

Section 3.2. Time and Terms of Election ............................................ 3

Section 3.3. Resignation and Removal ............................................... 3

Section 3.4. Fidelity Bond ......................................................... 4

Section 3.5. President ............................................................. 4

Section 3.6. Vice Presidents ....................................................... 4

Section 3.7. Treasurer and Assistant Treasurers .................................... 4

Section 3.8. Controller and Assistant Controllers .................................. 4

Section 3.9. Secretary and Assistant Secretaries ................................... 4

Section 3.10. Substitutions ......................................................... 4

Section 3.11. Execution of Deeds, etc. .............................................. 4

Section 3.12. Power to Vote Securities .............................................. 5

ARTICLE 4 COMMITTEES ...................................................................... 5

Section 4.1. Power of Trustees to Designate Committees ............................. 5

Section 4.2. Rules for Conduct of Committee Affairs ................................ 5

Section 4.3. Trustees May Alter, Abolish, etc., Committees ......................... 5

Section 4.4. Minutes; Review by Trustees ........................................... 5

ARTICLE 5 SEAL ............................................................................ 6

ARTICLE 6 SHARES .......................................... ............................... 6

Section 6.1. Issuance of Shares .................................................... 6

Section 6.2. Uncertificated Shares ................................................. 6

Section 6.3. Share Certificates .................................................... 6

Section 6.4. Lost, Stolen, etc., Certificates ...................................... 6

</TABLE>

<PAGE> 4

<TABLE>
<S> <C>
ARTICLE 7 STOCK TRANSFERS ................................................................. 6

Section 7.1. Transfer Agents, Registrars, etc. ..................................... 6

Section 7.2. Transfer of Shares .................................................... 7

Section 7.3. Registered Shareholders ............................................... 7

ARTICLE 8 AMENDMENTS ...................................................................... 7

Section 8.1. Bylaws Subject to Amendment ........................................... 7

Section 8.2. Notice of Proposal to Amend Bylaws Required ........................... 7
</TABLE>

<PAGE> 5

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

AMENDED AND RESTATED
BYLAWS

These are the Amended and Restated 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 21st day of July, 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 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

<PAGE> 6

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.

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 of action proposed to be taken by unanimous written consent.

<PAGE> 7

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.

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.

<PAGE> 8

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.

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.

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,

<PAGE> 9

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

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> 10

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 Pennsylvania 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
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.

<PAGE> 11

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 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 STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 920902-103
_________________

fully paid and nonassessable shares of beneficial interest of the par value
of $0.01 per share 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
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL 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 STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 920902-202
_________________

fully paid and nonassessable shares of beneficial interest of the par
value of $0.01 per share 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
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL 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 STATE OF DELAWARE

THIS CERTIFIES that is the owner of

*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________

CUSIP 920902-301
_________________

fully paid and nonassessable shares of beneficial interest of the par
value of $0.01 per share 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
DELAWARE SEAL]

RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT

KC 002717

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

COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256

TRANSFER AGENT

By
----------------------------------------------------
AUTHORIZED OFFICER

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

PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED

VAN KAMPEN AMERICAN CAPITAL 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)

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT dated as of April 7, 1995, 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.

2. (a) Fee. For the services and facilities described in Section 1, the
Fund will accrue daily and pay to the Adviser at the end of each calendar month
an investment management fee equal to a percentage of the average daily net
assets of the Fund as follows:

<TABLE>
<CAPTION>
FEE PERCENT OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
------------------ ---------------
<S> <C>
First $500 million .60% of 1%
Over $500 million .50% of 1%
</TABLE>

(b) Expense Limitation. The Adviser's compensation for any fiscal year
of the Fund shall be reduced by the amount, if any, by which the Fund's expense
for such fiscal year exceeds the most restrictive applicable expense
jurisdiction in which the Fund's shares are qualified for offer and sale, as
such limitations set forth in the most recent notice thereof furnished by the
Adviser to the Fund. For purposes of this paragraph there shall be excluded
from computation of the Fund's expenses any amount borne directly or indirectly
by the Fund which is permitted to be excluded from the computation of such
limitation by such statute or regulatory authority. If for any month expenses
of the Fund properly included in such calculation exceed 1/12 of the amount
permitted annually by the most restrictive applicable expense limitation, the
payment to the Adviser for that month shall be reduced, and, if necessary, the
Adviser shall make a refund payment to the Fund, so that the total net expense
for the month will not exceed 1/12 of such amount. As of the end of the Fund's
fiscal year, however, the computations and payments shall be readjusted so that
the aggregate compensation payable to the Adviser for the year is equal to the
fee set forth in subsection (a) of this Section 2, diminished to the extent
necessary so that the expenses for the year do not exceed those permitted by
the applicable expense limitation.

(c) Determination of Net Asset Value. The net asset value of the Fund
shall be calculated as of the close of the New York Stock Exchange on each day
the Exchange is open for trading or such other time or times as the trustees
may determine in accordance with the provisions of applicable law and of the
Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of
Trustees of the Fund as from time to time in force. For the purpose of the
foregoing computations, on each such day when net asset value is not
calculated, the net 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.
<PAGE> 2
(d) Proration. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Adviser's fee on the basis of the number of days that the Agreement is in
effect during such month and year, respectively.

3. Expenses. In addition to the fee of the Adviser, the Fund shall assume
and pay any expenses for services rendered by a custodian for the safekeeping
of the Fund's securities or other property, for keeping its books of account,
for any other charges of the custodian and for calculating the net asset value
of the Fund as provided above. The Adviser shall not be required to pay, and
the Fund shall assume and pay, the charges and expenses of its operations,
including compensation of the trustees (other than those who are interested
persons of the Adviser and other than those who are interested persons of the
distributor of the Fund but not of the Adviser, if the distributor has agreed
to pay such compensation), charges and expenses of independent accountants, of
legal counsel and of any transfer or dividend disbursing agent, costs

of acquiring and disposing of portfolio securities, cost of listing shares of
the New York Stock Exchange or other exchange interest (if any) on obligations
incurred by the Fund, costs of share certificates, membership dues in the
Investment Company Institute or any similar organization, costs of reports and
notices to shareholders, costs of registering shares of the Fund under the
federal securities laws, miscellaneous expenses and all taxes and fees to
federal, state or other governmental agencies on account of the registration of
securities issued by the Fund, filing of corporate documents or otherwise. The
Fund shall not pay or incur any obligation for any management or administrative
expenses for which the Fund intends to seek reimbursement from the Adviser
without first obtaining the written approval of the Adviser. The Adviser shall
arrange, if desired by the Fund, for officers or employees of the Adviser to
serve, without compensation from the Fund, as trustees, officers or agents of
the Fund if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law.

4. Interested Persons. Subject to applicable statutes and regulations, it
is understood that trustees, officers, shareholders and agents of the Fund are
or may be interested in the Adviser as directors, officers, shareholders,
agents or otherwise and that the directors, officers, shareholders and agents
of the Adviser may be interest in the Fund as trustees, officers, shareholders,
agents or otherwise.

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

6. (a) Term. This Agreement shall become effective on the date hereof
and shall remain in full force until the second anniversary of the date hereof
unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter, but only as long as such
continuance is specifically approved as least annually in the manner required
by the Investment Company Act of 1940, as amended.

(b) Termination. This Agreement shall automatically terminate in the
event of its assignment. This Agreement may be terminated at any time without
the payment of any penalty by the Fund or by the Adviser on sixty (60) days
written notice to the other party. The Fund may effect termination by action
of the Board of Trustees or by vote of a majority of the outstanding shares of
stock of the Fund, accompanied by appropriate notice. This Agreement may be
terminated at any time without the payment of any penalty and without advance
notice by the Board of Trustees or by vote of a majority of the outstanding
shares of the Fund in the event that it shall have been established by a court
of competent jurisdiction that the Adviser or any officer or director of the
Adviser has taken any action which results in a breach of the covenants of the
Adviser set forth herein.

(c) Payment upon Termination. Termination of this Agreement shall not
affect the right of the Adviser to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.

7. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall
not thereby affected.

8. Notices. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.

9. Disclaimer. The Adviser acknowledges and agrees that, as provided by
Section 8.1 of the Declaration of Trust of the Trust, (i) this Agreement has
been executed by officers of the Trust in their capacity as officers, and not
individually, and (ii) the shareholders, trustees, officers, employees and
other agents of the Trust and the Fund shall not personally be bound by or
liable hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder and that any such resort may
only be had upon the assets and property of the Fund.
<PAGE> 3

10. Governing Law. All questions concerning the validity, meaning and
effect of this Agreement shall be determined in accordance with the laws
(without giving effect to the conflict-of-law principles thereof) of the State
of Delaware applicable to contracts made and to be performed in that state.

<PAGE> 4

IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year first above written.

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.

By: /S/ Dennis J. McDonnell
-------------------------------------
Dennis J. McDonnell, President

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME
FUND

By: /S/ Dennis J. McDonnell
--------------------------------------
Dennis J. McDonnell, President

<PAGE> 1
EXHIBIT (6)(a)

DISTRIBUTION AND SERVICE AGREEMENT

THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of April 7, 1995 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE
INCOME FUND, a Pennsylvania trust (the "Trust"), and VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").

1. Appointment of Distributor. The Fund appoints the Distributor as a
principal underwriter and exclusive distributor of each class of its shares of
beneficial interest (the "Shares") offered for sale from time to time pursuant
to the then current prospectus of the Fund, subject to different combinations
of front-end sales charges, distribution fees, service fees and contingent
deferred sales charges. Classes of shares, if any, subject to a front-end
sales charge and a distribution and/or service fee are referred to herein as
"FESC Classes" and the Shares of such classes are referred to herein as "FESC
Shares." Classes of shares, if any, subject to a contingent-deferred sales
charge and a distribution and/or a service fee are referred to herein as "CDSC
Classes" and Shares of such classes are referred to herein as "CDSC Shares."
Classes of shares, if any, subject to a front-end sales charge, a
contingent-deferred sales charge and a distribution and/or service fee are
referred to herein as "Combination Classes" and Shares of such class are
referred to herein as "Combination Shares." The Fund reserves the right to
refuse at any time or times to sell Shares hereunder for any reason deemed
adequate by the Board of Trustees of the Fund.

The Distributor will use its best efforts to sell, through its
organization and through other dealers and agents, the Shares which the
Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares.

The Distributor agrees that it will not take any long or short positions
in the Shares, except for long positions in those Shares purchased by the
Distributor in accordance with any systematic sales plan described in the then
current Prospectus of the Fund and except as permitted by Section 2 hereof, and
that so far as it can control the situation, it will prevent any of its
trustees, officers or shareholders from taking any long or short positions in
the Shares, except for legitimate investment purposes.

2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth. Such
exclusive right hereby granted shall not apply to Shares issued or transferred
or sold at net asset value: (a) in connection with the merger or consolidation
of the Fund with any other investment company or the acquisition by the Fund of
all or substantially all of the assets of or the outstanding Shares of any
investment company; (b) in connection with a pro rata distribution directly to
the holders of Fund Shares in the nature of a stock dividend or stock split or
in connection with any other recapitalization approved by the Board of
Trustees; (c) upon the exercise of purchase or subscription rights granted to
the holders of Shares on a pro rata basis; (d) in connection with the automatic
reinvestment of dividends and distributions from the Fund; or (e) in connection
with the issue and sale of Shares to trustees, officers and employees of the
Fund; to directors, officers and employees of the investment adviser of the
Fund or any principal underwriter (including the Distributor) of the Fund; to
retirees of the Distributor that purchased shares of any mutual fund
distributed by the Distributor prior to retirement; to directors, officers and
employees of Van Kampen American Capital, Inc. (formerly The Van Kampen Merritt
Companies, Inc.) (the parent of the Distributor), VK/AC Holding, Inc. (formerly
VKM Holdings, Inc.)(the parent of The Van Kampen Merritt Companies, Inc.) and
to the subsidiaries of VK/AC Holding, Inc.; and to any trust, pension,
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

1
<PAGE> 2

from dealers, agents and investors during each period when particular net asset
values and public offering prices are in effect as provided in Section 3
hereof; and the price which the Distributor shall pay for the Shares so
purchased shall be the respective net asset value used in determining the
public offering price on which such orders were based. The Distributor shall
notify the Fund at the end of each such period, or as soon thereafter on that
business day as the orders received in such period have been compiled, of the
number of Shares of each class that the Distributor elects to purchase
hereunder.

3. Public Offering Price. The public offering price per Share shall be
determined in accordance with the then current Prospectus of the Fund. In no
event shall the public offering price exceed the net asset value per Share,
plus, with respect to the FESC Shares, a front-end sales charge not in excess
of the applicable maximum sales charge permitted under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., as in effect
from time to time. The net asset value per share for each class of Shares,
respectively, shall be determined in the manner provided in the Declaration of
Trust and By-Laws of the Trust as then amended, the Certificate of Designation
with respect to the Fund, as amended, and in accordance with the then current
Prospectus of the Fund consistent with the terms and conditions of the
exemptive order with respect to the Fund (Release No. IC-19600) issued by the
Securities and Exchange Commission on July 28, 1993, as it may be amended from
time to time or succeeded by other exemptive orders or rules promulgated by the
Securities and Exchange Commission under the 1940 Act. The Fund will cause
immediate notice to be given to the Distributor of each change in net asset
value as soon as it is determined. Discounts to dealers purchasing FESC Shares
from the Distributor for resale and to brokers and other eligible agents making
sales of FESC Shares to investors and compensation payable from the Distributor
to dealers, brokers and other eligible agents making sales of CDSC Shares and
Combination Shares shall be set forth in the selling agreements between the
Distributor and such dealers or agents, respectively, as from time to time
amended, and, if such discounts and compensation are described in the then
current Prospectus for the Fund, shall be as so set forth.

4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund Shares,
the Distributor will in all respects duly comply with all state and federal
laws relating to the sale of such securities and with all applicable rules and
regulations of all regulatory bodies, including without limitation the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., and all
applicable rules and regulations of the Securities and Exchange Commission
under the 1940 Act, and will indemnify and save the Fund harmless from any
damage or expense on account of any unlawful act by the Distributor or its
agents or employees. The Distributor is not, however, to be responsible for
the acts of other dealers or agents, except to the extent that they shall be
acting for the Distributor or under its direction or authority. None of the
Distributor, any dealer, any agent or any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus heretofore or hereafter
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act") (as any such Registration Statement and
Prospectus may have been or may be amended from time to time), covering the
Shares, and in any supplemental information to any such Prospectus approved by
the Fund in connection with the offer or sale of Shares. None of the
Distributor, any dealer, any broker or any other person is authorized to act as
agent for the Fund in connection with the offering or sale of Shares to the
public or otherwise. All such sales shall be made by the Distributor as
principal for its own account.

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.

2
<PAGE> 3

5. Expenses.

(a) The Fund will pay or cause to be paid:

(i) all expenses in connection with the registration
of Shares under the federal securities laws, and the Fund will
exercise its best efforts to obtain said registration and
qualification;

(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 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

3
<PAGE> 4

pursuant to this Agreement and the Service Plan shall provide
to the Fund's Board of Trustees, and the Trustees shall review, at least
quarterly, a written report with respect to each of the classes of Shares of
the amounts paid as service fees for each such class of Shares.

6. Redemption of Shares. In connection with the Fund's redemption of its
Shares, the Fund hereby authorizes the Distributor to repurchase, upon the
terms and conditions hereinafter set forth, as the Fund's agent and for the
Fund's account, such Shares as may be offered for sale to the Fund from time to
time by holders of such Shares or their agents.

(a) Subject to and in conformity with all applicable federal and state
legislation, any applicable rules of the National Association of Securities
Dealers, Inc., and any applicable rules and regulations of the Securities and
Exchange Commission under the 1940 Act, the Distributor may accept offers of
holders of Shares to resell such Shares to the Fund on such terms and
conditions and at such prices as described and provided for in the then current
Prospectus of the Fund.

(b) The Distributor agrees to notify the Fund at such times as the Fund
may specify of the number of each class of Shares, respectively, repurchased
for the Fund's account and the time or times of such repurchases, and the Fund
shall notify the Distributor of the prices and, in the case of a class of CDSC
Shares or Combination Shares, of the deferred sales charge as described below,
if any, applicable to repurchases of Shares of such class.

(c) The Fund shall have the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by
telegraph or by written instrument from any of the Fund's officers. In the
event that the Distributor's authorization is, by the terms of such notice,
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.

4
<PAGE> 5

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 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

5
<PAGE> 6

written notification giving information of the nature of the claim shall have
been served upon the Fund or person (or after the Fund or such person shall
have received notice of service on any designated agent). However, failure to
notify the Distributor of any claim shall not relieve the Distributor from any
liability which it may have to the Fund or any person against whom the action
is brought otherwise than on account of its indemnity agreement contained in
this paragraph. In the case of any notice to the Distributor, it shall be
entitled to participate, at its own expense, in the defense, or, if it so
elects, to assume the defense, of any suit brought to enforce the claim, but if
the Distributor elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Fund, to its officers and trustees
and to any controlling person or persons, defendant or defendants in the suit.
In the event that the Distributor elects to assume the defense of any suit and
retain counsel, the Fund or controlling persons, defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it will reimburse
the Fund, officers and trustees or controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Distributor agrees to notify the Fund promptly of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any of the Shares.

8. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect year to year with respect to each class of
Shares so long as such continuance is approved at least annually (i) by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the
Fund, on written notice to the Distributor; (b) this Agreement shall
immediately terminate in the event of its assignment; and (c) this Agreement
may be terminated by the Distributor on ninety (90) days' written notice to the
Fund. Upon termination of this Agreement with respect to either class of
Shares of the Fund, the obligations of the parties hereunder shall cease and
terminate with respect to such class of Shares as of the date of such
termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination.

This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.

For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall
have the meanings defined in the 1940 Act, as amended.

9. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.

10. Notice. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office
of such party or at such other address as such party shall have designated in
writing.

11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY,

6
<PAGE> 7

THE LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.

VAN KAMPEN AMERICAN CAPITAL
PENNSYLVANIA TAX FREE INCOME FUND

By: /s/ Ronald A. Nyberg
---------------------------------
Name: Ronald A. Nyberg
Title: Vice President and Secretary

VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.

By: /s/ Ronald A. Nyberg
---------------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President

<PAGE> 1

Exhibit 8(b)

TRANSFER AGENCY AND SERVICE AGREEMENT

AGREEMENT made as of the 10th day of July, 1995 by and between each of
THE VAN KAMPEN MERRITT OPEN END FUNDS set forth on Schedule "A" hereto, which
are organized under the laws of the Commonwealth of Massachusetts, having their
principal office and place of business at Oakbrook Terrace, Illinois
(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, ACCESS
agrees to provide and maintain quantitative performance objectives, including
maximum target turn-around times and

1
<PAGE> 2
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 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

3
<PAGE> 4
of the monthly transfer agency fee next payable in an amount equal to
prior payments and fee 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 of Massachusetts.

4.02 It is empowered under applicable laws and regulations and by
its Declaration of Trust 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 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

7
<PAGE> 8
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 December 31, 1996; provided, however, that this Agreement may be
terminated by any party with respect to that party for good and reasonable
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
<PAGE> 9
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 Declarations of Trust establishing each Fund as a
Massachusetts Business Trust (each a "Trust"), copies of which, together with
all amendments thereto (the "Declarations") are on file in the office of the
Secretary of the Commonwealth of Massachusetts, provide that the names of each
Fund refer to the Trustees under each of the Declarations collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of any such Trust shall be held to any personal
liability, nor shall resort be had to their respective private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of any such Trust, but that each respective Trust's Estate only shall
be liable.

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 MERRITT OPEN END
FUNDS LISTED ON SCHEDULE "A" HERETO

BY: /s/ SCOTT E. MARTIN
------------------------------------
Scott E. Martin, Assistant Secretary

ATTEST:

/s/ DAVID L. KITE
- ------------------------------------

ACCESS INVESTOR SERVICES, INC.

BY: /s/ PAUL R. WOLKENBERG
------------------------------------
Paul R. Wolkenberg, President and
Chief Executive Officer

ATTEST:

/s/ DAVID L.KITE
- ------------------------------------

10
<PAGE> 11
SCHEDULE "A"

VAN KAMPEN MERRITT OPEN-END FUNDS

<TABLE>
<CAPTION>
State of Type
Fund Name Organization [Business Trust "T"]
===========================================================================================================
<S> <C> <C>
Van Kampen Merritt U. S. Government Fund(1) MA T

Van Kampen Merritt Insured Tax Free Income Fund(2) MA T

Van Kampen Merritt Tax Free High Income Fund(2) MA T

Van Kampen Merritt California Insured Tax Free Fund(2) MA T

Van Kampen Merritt Municipal Income Fund(2) MA T

Van Kampen Merritt Limited Term Municipal Income Fund(2) MA T

Van Kampen Merritt Florida Insured Tax Free Income Fund(2) MA T

Van Kampen Merritt New Jersey Tax Free Income Fund(2) MA T

Van Kampen Merritt New York Tax Free Income Fund(2) MA T

Van Kampen Merritt High Yield Fund(3) MA T

Van Kampen Merritt Short-Term Global Income Fund(3) MA T

Van Kampen Merritt Adjustable Rate U.S. Government Fund(3) MA T

Van Kampen Merritt Strategic Income Fund(3) MA T

Van Kampen Merritt Emerging Markets Income Fund(3) MA T

Van Kampen Merritt Growth and Income Fund(4) MA T

Van Kampen Merritt Utility Fund(4) MA T

Van Kampen Merritt Balanced Fund(4) MA T

Van Kampen Merritt Pennsylvania Tax Free Income Fund PA T

Van Kampen Merritt Money Market Fund(5) MA T

Van Kampen Merritt Tax Free Money Fund MA T

</TABLE>
____________________________________________________

(1) A sub-trust of Van Kampen Merritt U. S. Government Trust

(2) A sub-trust of Van Kampen Merritt Tax Free Fund

(3) A sub-trust of Van Kampen Merritt Trust

(4) A sub-trust of Van Kampen Merritt Equity Trust

(5) A series of Van Kampen Merritt Money Market Trust

11
<PAGE> 12
SCHEDULE "A" (CONTINUED)

VAN KAMPEN MERRITT OPEN-END FUNDS

</TABLE>

<PAGE> 1
EXHIBIT (9)(a)

AMENDED AND RESTATED

FUND ACCOUNTING AGREEMENT

THIS AGREEMENT, dated May 12, 1995, 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.

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> 2

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 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> 3

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 12, 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. This Agreement may be modified or
amended from time to time by mutual agreement between the parties hereto and
may be terminated after May 12, 1996, 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 the Agreement and Declaration of
Trust of the various Funds, under which the Funds are organized as
unincorporated trusts, the shareholders, trustees, officers, employees and
other agents of the Fund shall not personally be found by or liable for the
matters set forth hereto, nor shall resort be had to their private property for
the satisfaction of any obligation or claim hereunder.

15. Interpretative Provisions. In connection with the operation of this
Agreement, Advisory Corp. and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor of this
Agreement.

16. State Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Illinois.

17. Captions. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.

<PAGE> 4

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: /s/ Dennis J. McDonnell
---------------------------------
Dennis J. McDonnell, President

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.

By: /s/ Dennis J. McDonnell
---------------------------------
Dennis J. McDonnell, President

<PAGE> 5

SCHEDULE A

1. VAN KAMPEN MERRITT U.S. GOVERNMENT TRUST, on behalf of its sub-trust, Van
Kampen Merritt U.S. Government Fund

2. VAN KAMPEN MERRITT TAX FREE FUND, on behalf of its sub-trusts, 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 New Jersey Tax Free Income Fund,
Van Kampen Merritt New York Tax Free Income Fund, Van Kampen Merritt
Florida Insured Tax Free Income Fund, Van Kampen Merritt California Tax
Free Income Fund, Van Kampen Merrit Michigan Tax Free Income Fund, Van
Kampen Merritt Missouri Tax Free Income Fund and Van Kampen Merritt Ohio
Tax Free Income Fund

3. VAN KAMPEN MERRITT TRUST, on behalf of its sub-trusts, 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 and Van Kampen Merritt Emerging Markets Income Fund
(formerly Van Kampen Merritt Global High Income Fund; formerly Van Kampen
Merritt Global Income Opportunity Fund)

4. VAN KAMPEN MERRITT EQUITY TRUST, on behalf of its sub-trusts, Van Kampen
Merritt Growth and Income Fund, Van Kampen Merritt Utility Fund and Van
Kampen Merritt Balanced Fund

5. VAN KAMPEN MERRITT PENNSYLVANIA TAX FREE INCOME FUND

6. VAN KAMPEN MERRITT MONEY MARKET TRUST, on behalf of its series, Van
Kampen Merritt Money Market Fund

7. VAN KAMPEN MERRITT TAX FREE MONEY FUND

8. VAN KAMPEN MERRITT SERIES TRUST, on behalf of its series, Quality Income
Portfolio, High Yield Portfolio, Growth and Income Portfolio, Money
Market Portfolio, Stock Index Portfolio, World Equity Portfolio and
Utility Portfolio

9. VAN KAMPEN MERRITT MUNICIPAL INCOME TRUST

10. VAN KAMPEN MERRITT CALIFORNIA MUNICIPAL TRUST

11. VAN KAMPEN MERRITT INTERMEDIATE TERM HIGH INCOME TRUST

12. VAN KAMPEN MERRITT LIMITED TERM HIGH INCOME TRUST

13. VAN KAMPEN MERRITT INVESTMENT GRADE MUNICIPAL TRUST

14. VAN KAMPEN MERRITT MUNICIPAL TRUST

15. VAN KAMPEN MERRITT CALIFORNIA QUALITY MUNICIPAL TRUST

16. VAN KAMPEN MERRITT FLORIDA QUALITY MUNICIPAL TRUST

17. VAN KAMPEN MERRITT NEW YORK QUALITY MUNICIPAL TRUST

18. VAN KAMPEN MERRITT OHIO QUALITY MUNICIPAL TRUST

<PAGE> 6

19. VAN KAMPEN MERRITT PENNSYLVANIA QUALITY MUNICIPAL TRUST

20. VAN KAMPEN MERRITT TRUST FOR INSURED MUNICIPALS

21. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE MUNICIPALS

22. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS

23. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS

24. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS

25. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS

26. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS

27. VAN KAMPEN MERRITT MUNICIPAL OPPORTUNITY TRUST

28. VAN KAMPEN MERRITT ADVANTAGE MUNICIPAL INCOME TRUST

29. VAN KAMPEN MERRITT ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST

30. VAN KAMPEN MERRITT STRATEGIC SECTOR MUNICIPAL TRUST

31. VAN KAMPEN MERRITT VALUE MUNICIPAL INCOME TRUST

32. VAN KAMPEN MERRITT CALIFORNIA VALUE MUNICIPAL INCOME TRUST

33. VAN KAMPEN MERRITT MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
(formerly known as Van Kampen Merritt Advantage Massachusetts Municipal
Income Trust)

34. VAN KAMPEN MERRITT NEW JERSEY VALUE MUNICIPAL INCOME TRUST
(formerly known as Van Kampen Merritt Advantage New Jersey Municipal
Income Trust)

35. VAN KAMPEN MERRITT NEW YORK VALUE MUNICIPAL INCOME TRUST

36. VAN KAMPEN MERRITT OHIO VALUE MUNICIPAL INCOME TRUST
(formerly known as Van Kampen Merritt Florida Value Municipal Income
Trust and Van Kampen Merritt Advantage Virginia Municipal Income Trust)

37. VAN KAMPEN MERRITT PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST

38. VAN KAMPEN MERRITT MUNICIPAL OPPORTUNITY TRUST II

39. VAN KAMPEN MERRITT FLORIDA MUNICIPAL OPPORTUNITY TRUST
(formerly known as Van Kampen Merritt Florida Value Municipal Income Trust)

40. VAN KAMPEN MERRITT ADVANTAGE MUNICIPAL INCOME TRUST II

41. VAN KAMPEN MERRITT SELECT SECTOR MUNICIPAL TRUST

<PAGE> 1
EXHIBIT (9)(b)

AMENDED AND RESTATED
LEGAL SERVICES AGREEMENT

THIS AMENDED AND RESTATED AGREEMENT, dated as of January 1, 1995, by and
between the parties as set forth in Schedule 1, attached hereto and
incorporated by reference (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.

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

1
<PAGE> 2

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 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

2
<PAGE> 3

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 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

3
<PAGE> 4

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.

4
<PAGE> 5

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 1
ATTACHED HERETO

By: /s/ Dennis J. McDonnell
-------------------------------
Dennis J. McDonnell
President

VAN KAMPEN AMERICAN CAPITAL, INC.

By: /s/ Ronald A. Nyberg
-------------------------------
Ronald A. Nyberg
Executive Vice President

5
<PAGE> 6

SCHEDULE 1

1. VAN KAMPEN MERRITT U.S. GOVERNMENT TRUST, on behalf of its sub-trust, Van
Kampen Merritt U.S. Government Fund

2. VAN KAMPEN MERRITT TAX FREE FUND, on behalf of its sub-trust, 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 New York Tax Free Income Fund,
Van Kampen Merritt New Jersey Tax Free Income Fund, Van Kampen Merritt
Florida Insured Tax Free Income Fund, Van Kampen Merritt California Tax
Free Income Fund, Van Kampen Merritt Michigan Tax Free Income Fund, Van
Kampen Merritt Missouri Tax Free Income Fund and Van Kampen Merritt Ohio
Tax Free Income Fund

3. VAN KAMPEN MERRITT TRUST, on behalf of its sub-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 and Van Kampen Merritt Emerging Markets Income Fund
(formerly known as Van Kampen Merritt High Income Fund; formerly known as
Van Kampen Merritt Global Income Opportunity Fund)

4. VAN KAMPEN MERRITT EQUITY TRUST, on behalf of its sub-trust, Van Kampen
Merritt Growth and Income Fund, Van Kampen Merritt Utility Fund and Van
Kampen Merritt Balanced Fund

5. VAN KAMPEN MERRITT PENNSYLVANIA TAX FREE INCOME FUND

6. VAN KAMPEN MERRITT MONEY MARKET TRUST, on behalf of its series, Van
Kampen Merritt Money Market Fund

7. VAN KAMPEN MERRITT TAX FREE MONEY FUND

8. VAN KAMPEN MERRITT SERIES TRUST, on behalf of its series, Quality Income
Portfolio, High Yield Portfolio, Growth and Income Portfolio, Money Market
Portfolio, Stock Index Portfolio, World Equity Portfolio, and Utility
Portfolio

9. VAN KAMPEN MERRITT MUNICIPAL INCOME TRUST

10. VAN KAMPEN MERRITT CALIFORNIA MUNICIPAL TRUST

11. VAN KAMPEN MERRITT INTERMEDIATE TERM HIGH INCOME TRUST

12. VAN KAMPEN MERRITT LIMITED TERM HIGH INCOME TRUST

13. VAN KAMPEN MERRITT PRIME RATE INCOME TRUST

14. VAN KAMPEN MERRITT INVESTMENT GRADE MUNICIPAL TRUST

15. VAN KAMPEN MERRITT MUNICIPAL TRUST

16. VAN KAMPEN MERRITT CALIFORNIA QUALITY MUNICIPAL TRUST

17. VAN KAMPEN MERRITT FLORIDA QUALITY MUNICIPAL TRUST

18. VAN KAMPEN MERRITT NEW YORK QUALITY MUNICIPAL TRUST

6
<PAGE> 7

19. VAN KAMPEN MERRITT OHIO QUALITY MUNICIPAL TRUST

20. VAN KAMPEN MERRITT PENNSYLVANIA QUALITY MUNICIPAL TRUST

21. VAN KAMPEN MERRITT TRUST FOR INSURED MUNICIPALS

22. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE MUNICIPALS

23. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS

24. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS

25. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS

26. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS

27. VAN KAMPEN MERRITT TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS

28. VAN KAMPEN MERRITT MUNICIPAL OPPORTUNITY TRUST

29. VAN KAMPEN MERRITT ADVANTAGE MUNICIPAL INCOME TRUST

30. VAN KAMPEN MERRITT ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST

31. VAN KAMPEN MERRITT STRATEGIC SECTOR MUNICIPAL TRUST

32. VAN KAMPEN MERRITT VALUE MUNICIPAL INCOME TRUST

33. VAN KAMPEN MERRITT CALIFORNIA VALUE MUNICIPAL INCOME TRUST

34. VAN KAMPEN MERRITT MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST

35. VAN KAMPEN MERRITT NEW JERSEY VALUE MUNICIPAL INCOME TRUST

36. VAN KAMPEN MERRITT NEW YORK VALUE MUNICIPAL INCOME TRUST

37. VAN KAMPEN MERRITT OHIO VALUE MUNICIPAL INCOME TRUST

38. VAN KAMPEN MERRITT PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST

39. VAN KAMPEN MERRITT MUNICIPAL OPPORTUNITY TRUST II

40. VAN KAMPEN MERRITT FLORIDA MUNICIPAL OPPORTUNITY TRUST

41. VAN KAMPEN MERRITT ADVANTAGE MUNICIPAL INCOME TRUST II

42. VAN KAMPEN MERRITT SELECT SECTOR MUNICIPAL TRUST

<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
April 23, 1996

<PAGE> 1
EXHIBIT 15(a)

PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the VAN KAMPEN AMERICAN CAPITAL
PENNSYLVANIA TAX FREE INCOME FUND (the "Fund"). This Distribution Plan
describes the material terms and conditions under which assets of the Fund may
be used in connection with financing distribution related activities with
respect to each of its classes of shares of beneficial interest (the "Shares"),
each of which is offered and sold subject to a different combination of
front-end sales charges, distribution fees, service fees and contingent
deferred sales charges.(1) Classes of shares, if any, subject to a front-end
sales charge and a distribution and/or service fee are referred to herein as
"Front-End Classes" and the Shares of such classes are referred to herein as
"Front-End Shares." Classes of shares, if any, subject to a
contingent-deferred sales charge and a distribution and/or a service fee are
referred to herein as "CDSC Classes" and Shares of such classes are referred to
herein as "CDSC Shares." Classes of shares, if any, subject to a front-end
sales charge, a contingent-deferred sales charge and a distribution and/or
service fee are referred to herein as "Combination Classes" and Shares of such
class are referred to herein as "Combination Shares."

The Fund has adopted a service plan (the "Service Plan") pursuant to which
the Fund is authorized to expend on an annual basis a portion of its average
net assets attributable to any or each class of Shares in connection with the
provision by the principal underwriter (within the meaning of the 1940 Act) of
the Shares and by brokers, dealers and other financial intermediaries
(collectively, "Financial Intermediaries") of personal services to holders of
Shares and/or the maintenance of shareholder accounts. The Fund also has
entered into a distribution and services agreement (the "Distribution and
Services Agreement") with Van Kampen American Capital Inc. (the "Distributor"),
pursuant to which the Distributor acts as the principal underwriter with
respect to each class of Shares and provides services to the Fund and acts as
agent on behalf of the Fund in connection with the implementation of the
Service Plan. The Distributor may enter into selling agreements (the "Selling
Agreements") with Financial Intermediaries in order to implement the
Distribution and Services Agreement, the Service Plan and this Distribution
Plan.

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

- ---------------
(1) The Fund is authorized to offer multiple classes of shares pursuant to an
order of the Securities and Exchange Commission exempting the Fund from
certain provisions of the 1940 Act.

1
<PAGE> 2

shareholder accounts of all classes of Shares, including paying interest on and
incurring other carrying costs on funds borrowed to pay such initial outlays;
and (f) acting as agent for the Fund in connection with implementing this
Distribution Plan pursuant to the Selling Agreements.

The amount of the distribution fee hereby authorized with respect to each
class of Shares of the Fund shall be as follows:

With respect to Class A Shares, the distribution fee authorized hereby and
the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.25% of the Fund's average daily net
assets attributable to Class A Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to Class A Shares. The
Fund may pay a distribution fee as determined from time to time by its Board of
Trustees in an annual amount not to exceed the lesser of (i) (A) 0.25% of the
Fund's average daily net asset value during such year attributable to Class A
Shares sold on or after the date on which this Distribution Plan was first
implemented with respect to Class A Shares minus (B) the amount of the service
fee with respect to the Class A Shares actually expended during such year by
the Fund pursuant to the Service Plan and (ii) the actual amount of
distribution related expenses incurred by the Distributor with respect to Class
A Shares.

With respect to Class B Shares, the distribution fee authorized hereby and
the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 1.00% of the Fund's average daily net
assets attributable to Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class B Shares. The
Fund may pay a distribution fee with respect to the Class B Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class B Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class B
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class B Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class B Shares.

With respect to Class C Shares, the distribution fee authorized hereby and
the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 1.00% of the Fund's average daily net
assets attributable to Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class C Shares. The
Fund may pay a distribution fee with respect to the Class C Shares as
determined from time to time by its Board of Trustees in an 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

2
<PAGE> 3

and regulations. Reimbursements for distribution related expenses payable
hereunder with respect to a particular class of Shares may not be used to
subsidize the sale of Shares of any other class of Shares.

The Fund shall not compensate the Distributor, and neither the Fund nor
the Distributor shall compensate any Financial Intermediary, for any
distribution related expenses incurred with respect to a class of Shares prior
to the later of (a) the implementation of this Distribution Plan with respect
to such class of Shares or (b) the date that such Financial Intermediary enters
into a Selling Agreement with the Distributor.

The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Trust and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. The Distributor may reallocate all or a
portion of its distribution fee to such Financial Intermediaries as
compensation for the above-mentioned activities and services. Such
reallocation shall be in an amount as set forth from time to time in the Fund's
prospectus. Such Selling Agreements shall provide that the Financial
Intermediaries shall provide the Distributor with such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Paragraphs 3 and 8 hereof.

Subject to the provisions of this Distribution Agreement, the Fund is
hereby authorized to pay a distribution fee to any person that is not an
"affiliated person" or "interested person" of the Fund or its "investment
adviser" or "principal underwriter" (as such terms are defined in the 1940 Act)
who provides any of the foregoing services for the Fund. Such fee shall be
paid only pursuant to written agreements between the Fund and such other person
the terms of which permit payments to such person only in accordance with the
provisions of this Distribution Agreement and which have the approval of a
majority of the Disinterested Trustees by vote cast separately with respect to
each class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.

The Fund and the Distributor shall prepare separate written reports for
each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Distribution Plan, the Service
Plan and the agreements contemplated hereby, the purposes for which such
payments were made and such other information as the Board of Trustees or the
Disinterested Trustees may reasonably request from time to time, and the Board
of Trustees shall review such reports and other information.

This Distribution Plan shall become effective upon its approval by (a) a
majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at
a meeting called for the purpose of voting on this Distribution Plan, and (b)
with respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.

This Distribution Plan and any agreement contemplated hereby shall
continue in effect beyond the first anniversary of its adoption by the Board of
Trustees of the Fund only so long as (a) its continuation is approved at least
annually in the manner set forth in clause (a) of paragraph 9 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.

This Distribution Plan may be terminated with respect to a class of Shares
without penalty at any time by a majority of the Disinterested Trustees or by a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund.

This Distribution Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund and may not be amended in any other material

3
<PAGE> 4

respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Distribution Plan to changes in the
Rule or to other changes in the 1940 Act or the rules and regulations
thereunder shall not be deemed to be material amendments.

To the extent any service fees paid by the Fund pursuant to the Service
Plan are deemed to be payments for the financing of any activity primarily
intended to result in the sale of Shares issued by the Fund within the meaning
of the Rule, the terms and provisions of such plan and any payments made
pursuant to such plan hereby are authorized pursuant to this Distribution Plan
in the amounts and for the purposes authorized in the Service Plan without any
further action by the Board of Trustees or the shareholders of the Fund. To
the extent the terms and provisions of the Service Plan conflict with the terms
and provisions of this Distribution Plan, the terms and provisions of the
Service Plan shall prevail with respect to amounts payable pursuant thereto.
This paragraph 13 is adopted solely due to the uncertainty that may exist with
respect to whether payments to be made by the Fund pursuant to the Service Plan
constitute payments primarily intended to result in the sale of Shares issued
by the Fund within the meaning of the Rule.

The Trustees of the Trust have adopted this Distribution Plan as trustees
under the Declaration of Trust of the Trust and the policies of the Trust
adopted hereby are not binding upon any of the Trustees or shareholders of the
Trust individually, but bind only the trust estate.

<PAGE> 1
EXHIBIT 15(d)

VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND

SERVICE PLAN

The plan set forth below (the "Service Plan") for the VAN KAMPEN
AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME (the "Fund"), a series of the
Van Kampen American Capital Pennsylvania Tax Free Income Trust (the "Trust")
describes the material terms and conditions under which assets of the Fund may
be used to compensate the Fund's principal underwriter, within the meaning of
the Investment Company Act of 1940, as amended (the "1940 Act"), brokers,
dealers and other financial intermediaries (collectively "Financial
Intermediaries") for providing personal services to shareholders and/or the
maintenance of shareholder accounts with respect to each of its Class A Shares
of beneficial interest (the "Class A Shares"), its Class B Shares of beneficial
interest (the "Class B Shares"), and its Class C Shares of beneficial interest
(the "Class C Shares"). The Class A Shares, Class B Shares and Class C Shares
sometimes are referred to herein collectively as the "Shares." Each class of
Shares is offered and sold subject to a different combination of front-end
sales charges, distribution fees, service fees and contingent deferred sales
charges.(1) Classes of shares, if any, subject to a front-end sales charge and
a distribution and/or service fee are referred to herein as "Front-End Classes"
and the Shares of such classes are referred to herein as "Front-End Shares."
Classes of shares, if any, subject to a contingent-deferred sales charge and a
distribution and or a service fee are referred to herein as "CDSC Classes" and
Shares of such classes are referred to herein as "CDSC Shares." Classes of
shares, if any, subject to a front-end sales charge, a contingent-deferred
sales charge and a distribution and/or service fee are referred to herein as
"Combination Classes" and Shares of such class are referred to herein as
"Combination Shares."

The Fund has adopted a distribution plan (the "Distribution Plan")
pursuant to which the Fund is authorized to expend on an annual basis a portion
of its average net assets attributable to each class of Shares in connection
with financing distribution related activities. The Fund also has entered into
a distribution and services agreement (the "Distribution and Services
Agreement") with Van Kampen American Capital Distributors, Inc. (formerly Van
Kampen Merritt, Inc.) (the "Distributor"), pursuant to which the Distributor
acts as agent on behalf of the Fund in connection with the implementation of
the Service Plan and acts as the principal underwriter with respect to each
class of Shares. The Distributor may enter into selling agreements (the
"Selling Agreements") with brokers, dealers and other financial intermediaries
("Financial Intermediaries") in order to implement the Distribution Agreement,
the Distribution Plan and this Service Plan.

The Fund hereby is authorized to pay a service fee with respect to its
Class A Shares, Class B Shares and Class C Shares to any person who sells such
Shares and provides personal services to shareholders and/or maintains
shareholder accounts in an annual amount not to exceed 0.25% of the average
annual net asset value of the Shares maintained in the Fund by such person that
were sold on or after the date on which this Service Plan was first
implemented. The aggregate annual amount of all such payments with respect to
each such class of Shares may not exceed 0.25% of the Fund's average annual net
assets attributable to the respective class of Shares sold on or after the date
on which this Service Plan was first implemented and maintained in the Fund
more than one year.

- --------------------
(1) The Fund is authorized to offer multiple classes of shares pursuant to
an order of the Securities and Exchange Commission exempting the Fund
from certain provisions of the 1940 Act.

1
<PAGE> 2
Payments pursuant to this Service Plan may be paid or prepaid on
behalf of the Fund by the Distributor acting as the Fund's agent.

Payments by the Fund to the Distributor pursuant to this Service Plan
shall not be made more often than monthly upon receipt by the Fund of a
separate written expense report with respect to each class of Shares setting
forth the expenses qualifying for such reimbursement allocated to each class
of Shares and the purposes thereof.

In the event that amounts payable hereunder with respect to a class of
Shares do not fully reimburse the Distributor for pre-paid service fees, such
unreimbursed service fee expenses will be carried forward and paid by the Fund
hereunder in future years so long as this Service Plan remains in effect,
subject to applicable laws and regulations. Reimbursements for service fee
related expenses payable hereunder with respect to a particular class of Shares
may not be used to subsidize services provided with respect to any other class
of Shares.

The Fund shall not compensate the Distributor, and neither the Fund nor
the Distributor shall compensate any Financial Intermediary, for any service
related expenses incurred with respect to a class of Shares prior to the later
of (a) the implementation of this Service Plan with respect to such class of
Shares or (b) the date that such Financial Intermediary enters into a Selling
Agreement with the Distributor.

The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to such
Financial Intermediaries for activities and services of the type referred to in
Paragraph 1 hereof. Prior to the implementation of a Selling Agreement, such
agreement shall be approved by a majority of the Board of Trustees of the Trust
and a majority of the Disinterested Trustees (within the meaning of the 1940
Act) by a vote cast in person at a meeting called for the purpose of voting on
such Selling Agreements. Such Selling Agreements shall provide that the
Financial Intermediaries shall provide the Distributor with such information
as is reasonably necessary to permit the Distributor to comply with the
reporting requirements set forth in Paragraphs 3 and 8 hereof.

Subject to the provisions of this Service Agreement, the Fund is hereby
authorized to pay a service fee to any person that is not an "affiliated
person" or "interested person" of the Fund or its "investment adviser" or
"principal underwriter" (as such terms are defined in the 1940 Act) who
provides any of the foregoing services for the Fund. Such fee shall be paid
only pursuant to written agreements between the Fund and such other person the
terms of which permit payments to such person only in accordance with the
provisions of this Service Agreement and which have the approval of a majority
of the Disinterested Trustees by vote cast separately with respect to each
class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.

The Fund and the Distributor shall prepare separate written reports for
each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Service Plan and the
agreements contemplated hereby, the purposes for which such payments were made
and such other information as the Board of Trustees or the Disinterested
Trustees may reasonably request from time to time, and the Board of Trustees
shall review such reports and other information.

This Service Plan may be terminated with respect to a class of Shares
without penalty at any time by a majority of the Disinterested Trustees or by a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund.

This Service Plan shall become effective upon its approval by (a) a
majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at a
meeting called for the purpose of voting on this Distribution Plan, and (b)
with respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.

2
<PAGE> 3
This Service Plan and any agreement contemplated hereby shall continue in
effect beyond the first anniversary of its adoption by the Board of Trustees
of the Fund only so long as (a) its continuation is approved at least annually
in the manner set forth in clause (a) of paragraph 10 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.

This Service Plan may not be amended to increase materially the maximum
amounts permitted to be expended hereunder except with the approval of a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund. This Service Plan may not be amended in any material
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Service Plan to changes in Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "1940 Act"), the 1940 Act,
the rules and regulations thereunder or the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall not be deemed to be
material amendments.

The Trustees of the Trust have adopted this Service Plan as trustees under
the Declaration of Trust of the Trust and the policies of the Trust adopted
hereby are not binding upon any of the Trustees or shareholders of the Trust
individually, but bind only the trust estate.

<PAGE> 1
EXHIBIT (16)

PENNSYLVANIA TAX FREE INCOME FUND
30 DAY SEC YIELD WORKSHEET
FOR PERIOD ENDING DECEMBER 30, 1995

Class A Shares

Formula Total Income - Total Expenses 6
[((((------------------------ ----------------------)+1) )-1)*2]= SEC Yield
Class A Shares Average Dividend Shares X Public Offering Price ---------

$1,086,104.27 - $197,765.09 6
Class A Shares [((((------------------------ ----------------------)+1) )-1)*2]= 4.52%
12,773,778.390 X $18.62 -----

Class A Shares $1,086,104.27 - $217,662.97 6
Without [((((------------------------ ----------------------)+1) )-1)*2]= 4.42%
Expense Waiver 12,773,778.390 X $18.62 -----

Waived Expense Adjustment (4.52%-4.42%) 0.10%
-----

</TABLE>

<TABLE>
<S> <C>
Class B Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential

Class A Share Yield 4.52%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
4.75% x 4.52% .21%
- Expense Differential between Class A Shares and Class B Shares .75%
-----
Class B Share SEC Yield 3.98%
=====

- Waived Expense Adjustment .10%
-----
Class B Share SEC Yield (Without Expense Waiver) 3.88%
=====
Class C Shares

Formula

Class A Share Yield + Sales Charge Effect - Expense Differential

Class A Share Yield 4.52%
+ Sales Charge Effect (Maximum Sales Charge x Class A Share SEC Yield)
4.75% x 4.52% .21%
- Expense Differential between Class A Shares and Class C Shares .75%
-----
Class C Share SEC Yield 3.98%
=====

- Waived Expense Adjustment .10%
-----
Class C Share SEC Yield (Without Expense Waiver) 3.88%
=====

</TABLE>

<PAGE> 2
PENNSYLVANIA TAX FREE INCOME FUND
CALCULATION OF DISTRIBUTION RATE
PERIOD ENDED DECEMBER 31, 1995

Current Annual Income Per Share
-------------------------------
Current Offering Price

<TABLE>
<S> <C> <C>
Class A Shares

$.9504
------
$18.62 =5.10%

Class B Shares
$.8268
------
$17.73 =4.66%

Class C Shares
$.8268
------
$17.73 =4.66%

</TABLE>

<PAGE> 3
PENNSYLVANIA TAX FREE INCOME FUND
CALCULATION OF TAXABLE EQUIVALENT SEC YIELD

<TABLE>
<S> <C> <C>
Formula

SEC Yield
------------
1 - Tax Rate

Class A Shares 4.52%
-------
1-37.8% =7.27%

Class B Shares
3.98%
-------
1-37.8% =6.40%

Class C Shares
3.98%
-------
1-37.8% =6.40%

</TABLE>

CALCULATION OF TAXABLE EQUIVALENT DISTRIBUTION RATE

<TABLE>
<S> <C> <C>
Formula

Distribution Rate
-----------------
1 - Tax Rate

Class A Shares 5.10%
-------
1-37.8% =8.20%

Class B Shares
4.66%
-------
1-37.8% =7.49%

Class C Shares
4.66%
-------
1-37.8% =7.49%

</TABLE>

<PAGE> 4
PENNSYLVANIA TAX FREE INCOME FUND - CLASS A SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
n
Formula P(1+T) = ERV

Including Payment of the Sales Charge
Net Asset Value $17.74
Initial Investment $1,882.67 = P
Ending Redeemable Value $2,091.28 = ERV
One year period ended 12/31/95 = (12 Mos.) 1 = n

TOTAL RETURN FOR THE PERIOD 11.08% = T

Excluding Payment of the Sales Charge
Net Asset Value $17.74
Initial Investment $1,793.24 = P
Ending Redeemable Value $2,091.28 = ERV
One year period ended 12/31/95 = (12 Mos.) 1 = n

TOTAL RETURN FOR THE PERIOD 16.62% = T

<CAPTION>
TOTAL RETURN CALCULATION FIVE YEARS ENDED DECEMBER 31, 1995

<S> <C>
n
Formula P(1+T) = ERV

Including Payment of the Sales Charge
Net Asset Value $17.74
Initial Investment $1,434.55 = P
Ending Redeemable Value $2,091.28 = ERV
Five years ended 12/31/95 = (60 Mos.) 5 = n

TOTAL RETURN FOR THE PERIOD 7.83% = T

Excluding Payment of the Sales Charge
Net Asset Value $17.74
Initial Investment $1,366.41 = P
Ending Redeemable Value $2,091.28 = ERV
Five years ended 12/31/95 = (60 Mos.) 5 = n

TOTAL RETURN FOR THE PERIOD 8.88% = T

</TABLE>

<PAGE> 5
PENNSYLVANIA TAX FREE INCOME FUND - CLASS A SHARES

TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1995

<TABLE>
<S> <C>
n
Formula P(1+T) = ERV

Including Payment of the Sales Charge
Net Asset Value $17.74
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,091.28 = ERV
Inception through 12/31/95 = (104 Mos.) 8.6667 = n

TOTAL RETURN FOR THE PERIOD 8.89% = T

Excluding Payment of the Sales Charge
Net Asset Value $17.74
Initial Investment $952.61 = P
Ending Redeemable Value $2,091.28 = ERV
Inception through 12/31/95 = (104 Mos.) 8.6667 = n

TOTAL RETURN FOR THE PERIOD 9.50% = T

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH DECEMBER 31, 1995

Formula ERV - P
---------
P = T

Including Payment of the Sales Charge
Net Asset Value $17.74
Initial Investment $1,000.00 = P
Ending Redeemable Value $2,091.28 = ERV

TOTAL RETURN FOR THE PERIOD 109.13% = T

Excluding Payment of the Sales Charge
Net Asset Value $17.74
Initial Investment $952.61 = P
Ending Redeemable Value $2,091.28 = ERV

TOTAL RETURN FOR THE PERIOD 119.53% = T
</TABLE>

<PAGE> 6
PENNSYLVANIA TAX FREE INCOME FUND - CLASS B SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $17.73
Initial Investment $999.89 = P
Ending Redeemable Value $1,117.08 = ERV
One year period ended 12/31/95 = (12 Mos.) 1 = n

TOTAL RETURN FOR THE PERIOD 11.72% = T

Excluding Payment of the CDSC
Net Asset Value $17.73
Initial Investment $999.89 = P
Ending Redeemable Value $1,157.08 = ERV
One year period ended 12/31/95 = (12 Mos.) 1 = n

TOTAL RETURN FOR THE PERIOD 15.72% = T

</TABLE>

TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1995

<TABLE>
<S> <C>
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $17.73
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,122.08 = ERV
Inception through 12/31/95 = (32 Mos.) 2.6667 = n

TOTAL RETURN FOR THE PERIOD 4.41% = T

Excluding Payment of the CDSC
Net Asset Value $17.73
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,157.08 = ERV
Inception through 12/31/95 = (32 Mos.) 2.6667 = n

TOTAL RETURN FOR THE PERIOD 5.62% = T
</TABLE>

<PAGE> 7
PENNSYLVANIA TAX FREE INCOME FUND - CLASS B SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH DECEMBER 31, 1995

<TABLE>
<S> <C>
Formula ERV - P
---------
P = T

Including Payment of the CDSC
Net Asset Value $17.73
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,122.08 = ERV

TOTAL RETURN FOR THE PERIOD 12.21% = T

Excluding Payment of the CDSC
Net Asset Value $17.73
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,157.08 = ERV

TOTAL RETURN FOR THE PERIOD 15.71% = T
</TABLE>

<PAGE> 8
PENNSYLVANIA TAX FREE INCOME FUND - CLASS C SHARES

TOTAL RETURN CALCULATION ONE YEAR PERIOD ENDED DECEMBER 31, 1995

<TABLE>

<S> <C>
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $17.73
Initial Investment $964.53 = P
Ending Redeemable Value $1,106.52 = ERV
One year period ended 12/31/95 = (12 Mos.) 1 = n

TOTAL RETURN FOR THE PERIOD 14.72% = T

Excluding Payment of the CDSC
Net Asset Value $17.73
Initial Invesetment $964.53 = P
Ending Redeemable Value $1,116.17 = ERV
One year period ended 12/31/95 = (12 Mos.) 1 = n

TOTAL RETURN FOR THE PERIOD 15.72% = T

<CAPTION>
TOTAL RETURN CALCULATION INCEPTION THROUGH DECEMBER 31, 1995

<S> <C>
n
Formula P(1+T) = ERV

Including Payment of the CDSC
Net Asset Value $17.73
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,116.17 = ERV
Inception through 12/31/95 = (29 Mos.) 2.4167 = n

TOTAL RETURN FOR THE PERIOD 4.65% = T

Excluding Payment of the CDSC
Net Asset Value $17.73
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,116.17 = ERV
Inception through 12/31/95 = (29 Mos.) 2.4167 = n

TOTAL RETURN FOR THE PERIOD 4.65% = T

</TABLE>

<PAGE> 9
PENNSYLVANIA TAX FREE INCOME FUND - CLASS C SHARES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN CALCULATION
INCEPTION THROUGH DECEMBER 31, 1995

<S> <C>
Formula ERV - P
------- = T
P
Including Payment of the CDSC
Net Asset Value $17.73
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,116.17 = ERV

TOTAL RETURN FOR THE PERIOD 11.62% = T

Excluding Payment of the CDSC
Net Asset Value $17.73
Initial Investment $1,000.00 = P
Ending Redeemable Value $1,116.17 = ERV

TOTAL RETURN FOR THE PERIOD 11.62% = T

</TABLE>

<PAGE> 1
EXHIBIT 17(a)

INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
MARCH 21, 1996

Van Kampen American Capital U.S. Government Trust
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Tax Free Trust
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Trust
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Emerging Markets Income Fund
Van Kampen American Capital Equity Trust
Van Kampen American Capital Utility Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Tax Free Money Fund
Van Kampen American Capital Prime Rate Income Trust
Van Kampen Merritt Series Trust
Van Kampen Merritt Quality Income Portfolio
Van Kampen Merritt High Yield Portfolio
Van Kampen Merritt Growth and Income Portfolio
Van Kampen Merritt Money Market Portfolio
Van Kampen Merritt Stock Index Portfolio
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Common Stock Fund
Van Kampen American Capital Domestic Strategic Income Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Government Fund
Van Kampen American Capital Money Market Fund
Van Kampen American Capital Multiple Strategy Fund
Van Kampen American Capital Real Estate Securities Fund
<PAGE> 2
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Tax-Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Texas Tax Free Income Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
Internet Trust
Michigan Real Estate Income and Growth Trust
Van Kampen American Capital Insured Income Trust
Strategic Ten Trust, United States
Strategic Ten Trust, United Kingdom
Strategic Ten Trust, Hong Kong
Strategic Five Trust, United States
Van Kampen American Capital Equity Opportunity Trust
Principal Trust Princor Emerging Growth and Treasury
International Assets Advisory Corporation Global Blue Chip Trust
<PAGE> 3
<TABLE>
<S> <C>

Emerging Markets Municipal Income Trust . . . . . . . . . . . . . . . . . . . Series 1
Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 368
Insured Municipals Income Trust (Discount) . . . . . . . . . . . . . . . . . Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term) . . . . . . . . . . Series 1 through 103
1000 Insured Municipals Income Trust (Intermediate Term) . . . . . . . . . . Series 5 through 86
Insured Municipals Income Trust (Limited Term) . . . . . . . . . . . . . . . Series 9 through 83
Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . Series 1 through 3
Insured Municipals Income Trust (Intermediate Laddered Maturity) . . . . . . Series 1 and 2
Insured Tax Free Bond Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 6
Insured Tax Free Bond Trust (Limited Term) . . . . . . . . . . . . . . . . . Series 1
Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 93
Investors' Quality Tax-Exempt Trust-Intermediate . . . . . . . . . . . . . . Series 1
Investors' Corporate Income Trust . . . . . . . . . . . . . . . . . . . . . . Series 1 through 12
Investors' Governmental Securities Income Trust . . . . . . . . . . . . . . . Series 1 through 7
Van Kampen Merritt International Bond Income Trust . . . . . . . . . . . . . Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . Series 1
Alabama Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . Series 1 through 9
Arizona Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . Series 1 through 18
Arizona Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . Series 1 through 15
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 150
California Insured Municipals Income Trust (Premium Bond Series) . . . . . . Series 1
California Insured Municipals Income Trust (1st Intermediate Series) . . . . Series 1 through 3
California Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . Series 1 through 21
California Insured Municipals Income Trust (Intermediate Laddered) . . . . . Series 1 through 22
Colorado Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . Series 1 through 79
Colorado Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . Series 1 through 18
Connecticut Insured Municipals Income Trust . . . . . . . . . . . . . . . . . Series 1 through 29
Connecticut Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . Series 1
Delaware Investors' 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 101
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 78
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 57
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 75
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 135
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 57
Minnesota Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . Series 1 through 21
Missouri Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . Series 1 through 94
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> 4
<TABLE>
<S> <C>

New Mexico Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . Series 1 through 18
New Jersey Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . Series 1 through 109
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 131
New York Insured Tax-Free Bond Trust . . . . . . . . . . . . . . . . . . . . . . Series 1
New York Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 17
New York Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . Series 1
North Carolina Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . Series 1 through 85
Ohio Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . Series 1 through 101
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 215
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 81
Stepstone Growth Equity and Treasury Securities Trust . . . . . . . . . . . . . Series 1
Tennessee Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . Series 1-3 and 5-34
Texas Insured Municipal Income Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 40
Texas Insured Municipals Income Trust (Intermediate Ladder) . . . . . . . . . . Series 1
Virginia Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . Series 1 through 69
Van Kampen American Capital Equity Opportunity Trust . . . . . . . . . . . . . . Series 1 through 28
Van Kampen Merritt Utility Income Trust . . . . . . . . . . . . . . . . . . . . Series 1 through 6
Van Kampen American Capital Insured Income Trust . . . . . . . . . . . . . . . . Series 1 through 53
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 6
Principal Financial Institutions Trust . . . . . . . . . . . . . . . . . . . . . Series 1
Internet Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Michigan Real Estate Income and Growth Trust . . . . . . . . . . . . . . . . . . Series 1
Strategic Ten Trust, United States . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 7
Strategic Ten Trust, United Kingdom . . . . . . . . . . . . . . . . . . . . . . Series 1 through 7
Strategic Ten Trust, Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 7
Strategic Five Trust, United States . . . . . . . . . . . . . . . . . . . . . . Series 1
Equity Opportunity Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 29
Emerging Growth and Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Global Blue Chip Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1

</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
Colette Saucedo 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
Dominic C. Martellaro 1st Vice President San Francisco, CA
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
Mark T. McGannon 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
Michael L. Stallard 1st Vice President Oakbrook Terrace, IL

Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Patricia A. Bettlach Vice President St. Louis, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
James J. Boyne Vice President & Assistant Secretary 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
Suzanne Cummings Vice President Houston, TX
David B. Dibo Vice President Oakbrook Terrace, IL

</TABLE>

<PAGE> 2

<TABLE>
<S> <C> <C>
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
Nicholas Joseph Foxhoven Vice President Denver, CO
Charles Friday Vice President Gibsonia, PA
Nori L. Gabert Vice President, Assoc. General Houston, TX
Counsel & Asst. Secretary
Erich P. Gerth Vice President Dallas, TX
Daniel Hamilton Vice President Houston, TX
John A. Hanhauser Vice President Philadelphia, PA
Eric J. Hargens Vice President Orlando, FL
Susan J. Hill Vice President Oakbrook Terrace, IL
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
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Oakbrook Terrace, IL
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
James B. Ross Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, Va
Stephanie Scarlata Vice President Lynbrook, NY
Lisa A. Schomer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey C. Shirk Vice President Boston, MA
Kimberly M. Spangler Vice President Atlanta, GA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
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
Jeff Warland Vice President Oakbrook Terrace, IL
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
James R. Yount Vice President Seattle, WA
Richard P. Zgonina Vice President Oakbrook Terrace, IL

Brian P. Arcara Asst. Vice President Philadelphia, PA
Christopher M. Bisaillon Asst. Vice President Oakbrook Terrace, IL
Eric J. Bridges Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Robert C. Brooks Asst. Vice President Manchester, MA
Richard B. Callaghan Asst. Vice President Oakbrook Terrace, IL

</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
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
Daniel R. DeJong 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
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Joseph Hays Asst. Vice President Philadelphia, PA
Hunter Knapp Asst. Vice President Laguna, CA
Natalie N. Hurdle Asst. Vice President New York, NY
Laurie L. Jones Asst. Vice President Houston, TX
Jeffrey Scott Kinney Asst. Vice President Oakbrook Terrace, IL
Patricia D. Lathrop Asst. Vice President Tampa, FL
Tony E. Leal Asst. Vice President Houston, TX
Linda S. MacAyeal Asst. Vice President Oakbrook Terrace, IL
Ann Therese McGrath Asst. Vice President Oakbrook Terrace, IL
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
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Michael Quinn Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Jeffrey S. Rourke Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
Andrew J. Scherer Asst. Vice President Oakbrook Terrace, IL
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
Robert A. Watson 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

Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
Gina Grippo Officer Houston, TX
Sarah Kessler Officer Oakbrook Terrace, IL
Francis McGarvey Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Becky Newman Officer Houston, TX
Rosemary Pretty Officer Houston, TX
Colette Saucedo Officer Houston, TX
Frederick Shepherd Officer Houston, TX
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX

</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>

<ARTICLE> 6
<CIK> 0000809592
<NAME> PENNSYLVANIA TAX FREE INCOME CLASS A
<SERIES>
<NUMBER> 011
<NAME> INCOME A

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 250,477,085<F1>
<INVESTMENTS-AT-VALUE> 274,059,314<F1>
<RECEIVABLES> 4,047,736<F1>
<ASSETS-OTHER> 6,986<F1>
<OTHER-ITEMS-ASSETS> 47,509<F1>
<TOTAL-ASSETS> 278,161,545<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,291,645<F1>
<TOTAL-LIABILITIES> 1,291,645<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 209,246,584
<SHARES-COMMON-STOCK> 12,779,959
<SHARES-COMMON-PRIOR> 12,633,499
<ACCUMULATED-NII-CURRENT> (7,423)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (5,644,612)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 23,582,229<F1>
<NET-ASSETS> 226,675,514
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 17,122,479<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,930,214)<F1>
<NET-INVESTMENT-INCOME> 14,192,265<F1>
<REALIZED-GAINS-CURRENT> (5,635,081)<F1>
<APPREC-INCREASE-CURRENT> 31,028,321<F1>
<NET-CHANGE-FROM-OPS> 39,585,505<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (12,063,809)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,119,488
<NUMBER-OF-SHARES-REDEEMED> (1,402,145)
<SHARES-REINVESTED> 429,117
<NET-CHANGE-IN-ASSETS> 23,515,035
<ACCUMULATED-NII-PRIOR> 67,299<F1>
<ACCUMULATED-GAINS-PRIOR> (9,531)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,569,561<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,326,454<F1>
<AVERAGE-NET-ASSETS> 215,834,829
<PER-SHARE-NAV-BEGIN> 16.081
<PER-SHARE-NII> .946
<PER-SHARE-GAIN-APPREC> 1.660
<PER-SHARE-DIVIDEND> (.950)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.737
<EXPENSE-RATIO> 1.00
<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
<CIK> 0000809592
<NAME> PENNSYLVANIA TAX FREE INCOME B
<SERIES>
<NUMBER> 012
<NAME> INCOME B

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 250,477,085<F1>
<INVESTMENTS-AT-VALUE> 274,059,314<F1>
<RECEIVABLES> 4,047,736<F1>
<ASSETS-OTHER> 6,986<F1>
<OTHER-ITEMS-ASSETS> 47,509<F1>
<TOTAL-ASSETS> 278,161,545<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,291,645<F1>
<TOTAL-LIABILITIES> 1,291,645<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 46,293,822
<SHARES-COMMON-STOCK> 2,639,237
<SHARES-COMMON-PRIOR> 2,336,564
<ACCUMULATED-NII-CURRENT> (7,423)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (5,644,612)<F1>
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,582,229<F1>
<NET-ASSETS> 46,795,869
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 17,122,479<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,930,214)<F1>
<NET-INVESTMENT-INCOME> 14,192,265<F1>
<REALIZED-GAINS-CURRENT> (5,635,081)<F1>
<APPREC-INCREASE-CURRENT> 31,028,321<F1>
<NET-CHANGE-FROM-OPS> 39,585,505<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,062,857)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 432,811
<NUMBER-OF-SHARES-REDEEMED> (200,582)
<SHARES-REINVESTED> 70,444
<NET-CHANGE-IN-ASSETS> 9,224,898
<ACCUMULATED-NII-PRIOR> 67,299<F1>
<ACCUMULATED-GAINS-PRIOR> (9,531)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,569,561<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,326,454<F1>
<AVERAGE-NET-ASSETS> 42,481,809
<PER-SHARE-NAV-BEGIN> 16.080
<PER-SHARE-NII> .816
<PER-SHARE-GAIN-APPREC> 1.659
<PER-SHARE-DIVIDEND> (.827)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.731
<EXPENSE-RATIO> 1.75
<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
<CIK> 0000809592
<NAME> PENNSYLVANIA TAX FREE INCOME C
<SERIES>
<NUMBER> 013
<NAME> INCOME C

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 250,477,085<F1>
<INVESTMENTS-AT-VALUE> 274,059,314<F1>
<RECEIVABLES> 4,047,736<F1>
<ASSETS-OTHER> 6,986<F1>
<OTHER-ITEMS-ASSETS> 47,509<F1>
<TOTAL-ASSETS> 278,161,545<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,291,645<F1>
<TOTAL-LIABILITIES> 1,291,645<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 3,399,300
<SHARES-COMMON-STOCK> 191,696
<SHARES-COMMON-PRIOR> 135,023
<ACCUMULATED-NII-CURRENT> (7,423)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (5,644,612)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 23,582,229<F1>
<NET-ASSETS> 3,398,517
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 17,122,479<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,930,214)<F1>
<NET-INVESTMENT-INCOME> 14,192,265<F1>
<REALIZED-GAINS-CURRENT> (5,635,081)<F1>
<APPREC-INCREASE-CURRENT> 31,028,321<F1>
<NET-CHANGE-FROM-OPS> 39,585,505<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (140,285)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64,263
<NUMBER-OF-SHARES-REDEEMED> (13,519)
<SHARES-REINVESTED> 5,929
<NET-CHANGE-IN-ASSETS> 1,227,492
<ACCUMULATED-NII-PRIOR> 67,299<F1>
<ACCUMULATED-GAINS-PRIOR> (9,531)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,569,561<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,326,454<F1>
<AVERAGE-NET-ASSETS> 2,893,262
<PER-SHARE-NAV-BEGIN> 16.079
<PER-SHARE-NII> .812
<PER-SHARE-GAIN-APPREC> 1.665
<PER-SHARE-DIVIDEND> (.827)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.729
<EXPENSE-RATIO> 1.75
<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>