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VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
SUPPLEMENT DATED JULY 1, 1996, TO THE PROSPECTUS DATED
NOVEMBER 13, 1995, AS PREVIOUSLY SUPPLEMENTED ON DECEMBER 14, 1995.
On June 24, 1996, VK/AC Holding, Inc. announced it had entered into an
Agreement and Plan of Merger among Morgan Stanley Group Inc., MSAM Holdings II,
Inc. and MSAM Acquisition Inc., pursuant to which MSAM Acquisition Inc. will be
merged with and into VK/AC Holding, Inc. and VK/AC Holding, Inc. will be the
surviving corporation. Van Kampen American Capital, Inc. is a wholly owned
subsidiary of VK/AC Holding, Inc. The Fund's investment adviser, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser"), is a wholly owned
subsidiary of Van Kampen American Capital, Inc.
The proposed transaction may be deemed to cause an assignment, within the
meaning of the Investment Company Act of 1940 and the Investment Advisers Act of
1940, of the investment advisory agreement between the Adviser and the Fund.
Accordingly, the completion of the transaction is contingent upon, among other
things and subject to certain de minimis exceptions, the approval of both the
Board of Trustees of the Fund and the shareholders of the Fund of a new
investment advisory agreement between the Fund and the Adviser. Management of
the Fund currently anticipates recommending to the Fund's board of trustees that
a special meeting of shareholders be called to obtain such approval and that the
record date for such shareholder meeting be a date in late August. Management of
the Fund also anticipates that investment advisory fees under the new investment
advisory agreement to be voted on at such meeting will be in the same amount as
those paid under the current investment advisory agreement between the Fund and
the Adviser.
MSAM Acquisition Inc. is a wholly owned subsidiary of MSAM Holdings II, Inc.
which, in turn, is a wholly owned subsidiary of Morgan Stanley Group Inc.
Subject to a number of conditions being met, it is currently anticipated that a
closing will occur on or about November 29, 1996. Thereafter, VK/AC Holding,
Inc. and its affiliated entities shall be part of Morgan Stanley Group Inc.
