VK AC HOLDINGS INC, S-1, 1996-06-06

VK AC HOLDINGS INC
S-1, 1996-06-06
INVESTMENT ADVICE

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<PAGE> 1
As filed with the Securities and Exchange Commission on June 6, 1996

Registration No. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

VK/AC HOLDING, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 6719 36-3852549
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
----------------------

VK/AC HOLDING, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(708) 684-6000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
RONALD A. NYBERG, ESQ.
VK/AC HOLDING, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(708) 684-6000
(Address, including zip code, and telephone
number, including area code, of agent for service)

----------------------
With copies to:

FRANCI J. BLASSBERG, ESQ. VALERIE FORD JACOB, ESQ.
DEBEVOISE & PLIMPTON FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
875 Third Avenue One New York Plaza
New York, New York 10022 New York, New York 10004
(212) 909-6000 (212) 859-8000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the Registration Statement becomes effective.

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

If any of the Securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
===========================================================================================
Title of each Amount Proposed Proposed Amount of
class of securities to be maximum offering maximum aggregate registration
to be registered registered price per share offering price(1) fee
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Class A Common Stock
($.01 par value) (2) (2) $250,000,000 $86,207
===========================================================================================

</TABLE>

(1) Estimated solely for purposes of calculating the registration fee.
(2) Omitted pursuant to Rule 457(o) under the Securities Act of 1933.
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2

VK/AC HOLDING, INC.

CROSS REFERENCE SHEET

PURSUANT TO ITEM 501(b) OF REGULATION S-K

<TABLE>
<S> <C>
REGISTRATION STATEMENT ITEM NUMBER AND HEADING CAPTION IN PROSPECTUS

1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus........ Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page; Outside Back
Prospectus.................................... Cover Page

3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Risk Factors;
Earnings to Fixed Charges..................... Selected Historical Consolidated
Financial Information; Business

4. Use of Proceeds............................... Not Applicable

5. Determination of Offering Price............... Underwriting

6. Dilution...................................... Risk Factors; Dilution

7. Selling Security Holders...................... Risk Factors; Selling Stockholders

8. Plan of Distribution.......................... Outside Front Cover Page; Underwriting

9. Description of Securities to Be Registered.... Outside Front Cover Page; Prospectus
Summary; Dividend Policy; Description
of Capital Stock

10. Interests of Named Experts and Counsel......... Validity of Common Stock; Experts

11. Information with Respect to the Registrant..... Front Cover Page; Prospectus Summary;
Risk Factors; Selected Historical
Consolidated Financial Information;
Selected Consolidated Pro Forma
Information; Management's Discussion
and Analysis of Financial Condition
and Results of Operations; Business;
Management; Security Ownership by
Management and Principal
Stockholders; Certain Relationships
and Related Transactions;
Consolidated Financial Statements

12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.. Not Applicable
</TABLE>

<PAGE> 3

EXPLANATORY NOTE

The Prospectus relating to the shares of Class A Common Stock being
registered hereby to be used in connection with a United States and Canadian
offering (the "U.S. Prospectus") is set forth following this page. The
Prospectus to be used in a concurrent international offering (the
"International Prospectus") will consist of alternate pages set forth following
the U.S. Prospectus and the balance of the pages included in the U.S.
Prospectus for which no alternate is provided. The U.S. Prospectus and the
International Prospectus are identical except that they contain different front
and back cover pages, different descriptions of the plan of distribution
(contained under the caption "Underwriting" in both the U.S. Prospectus and the
International Prospectus) and different descriptions under "Validity of Common
Stock." Alternate pages for the International Prospectus are separately
designated.

Prior to the commencement of the Offerings, VK/AC Holding, Inc. intends to
change its name to Van Kampen American Capital Group, Inc.

<PAGE> 4

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 6, 1996

PROSPECTUS [VKAC GROUP LOGO]

____________ SHARES
VAN KAMPEN AMERICAN CAPITAL GROUP, INC.
COMMON STOCK

All of the shares of Class A Common Stock (the "Common Stock") of Van
Kampen American Capital Group, Inc. (the "Company") offered hereby will be sold
by certain stockholders (the "Selling Stockholders") of the Company. See
"Selling Stockholders." The Company is not selling shares of Common Stock in
this offering and will not receive any of the proceeds from the sale of shares
of Common Stock offered hereby.

Of the shares offered hereby, shares are being offered in the
United States and Canada by the U.S. Underwriters (the "U.S. Offering") and
shares are being offered in a concurrent offering outside the United
States and Canada by the International Managers (the "International Offering,
" and together with the U.S. Offering, the "Offerings"). The price to public
and the underwriting discount per share will be identical for both Offerings.
See "Underwriting."

Prior to the Offerings there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $ and $ per share. For information relating to the
determination of the initial public offering price, see "Underwriting."

Application will be made for the Common Stock to be listed on the New York
Stock Exchange under the symbol " ."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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

<TABLE>
<CAPTION>
========================================================================
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) STOCKHOLDERS(2)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
========================================================================

</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."

(2) The Company will pay the expenses of the Offerings estimated to be $ .

(3) The Selling Stockholders have granted the U.S. Underwriters and the
International Managers options, exercisable within 30 days after the date
hereof, to purchase up to and additional shares of Common Stock,
respectively, solely to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Selling Stockholders will be $ , $ and
$ , respectively. See "Underwriting."

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made in New York, New York,
on or about , 1996.

MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.

The date of this Prospectus is , 1996

<PAGE> 5

[ARTWORK]

________________

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.

<PAGE> 6
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. The Company is a Delaware corporation that has as its primary
asset all the outstanding common stock of Van Kampen American Capital, Inc., a
Delaware corporation ("VKAC"). Hereinafter, references in this Prospectus to
the "Company" shall mean (a) Van Kampen American Capital Group, Inc. or (b) Van
Kampen American Capital Group, Inc. and VKAC and its subsidiaries, as the
context requires. Except where otherwise indicated, all pro forma financial
information included in this Prospectus and all share and per share data
(including data with respect to options to purchase shares of stock) in this
Prospectus give effect to (i) a stock dividend (the "Stock Split
Dividend") on the Common Stock and the Company's Class B Common Stock, par
value $.01 per share (the "Class B Common Stock" and, together with the Common
Stock, the "Company Common Stock"), which will occur prior to the commencement
of the Offerings and (ii) the distributions (the "Special Dividends"), to be
effected prior to the completion of the Offerings, by the Company to (x)
holders of Company Common Stock of the Company's interests in McCarthy,
Crisanti & Maffei, Inc. ("MCM"), a wholly owned subsidiary of the Company
engaged in the business of distributing research and financial information, and
Hansberger Global Investors, Inc. ("HGI"), a company in which the Company made
a minority investment in May 1996, and certain related cash amounts, and (y)
holders of the Company's Junior Non-Cumulative Participating Preferred Stock,
par value $200 per share (the "Junior Preferred Stock"), of certain cash
preferred dividends required to be paid thereon in connection with the Special
Dividends. In addition, unless otherwise indicated, all such data assume that
the over-allotment options granted by the Selling Stockholders to the
Underwriters are not exercised. See "Underwriting."

THE COMPANY

The Company is a leading marketer and provider of investment advisory and
administrative services to open-end and closed-end funds, unit investment trusts
and institutional clients ("Institutional Accounts"). As of March 31, 1996, the
Company had more than $57 billion of assets under management and/or supervision,
including approximately $40 billion in 65 open-end equity and fixed income funds
(the "Open End Funds"), 36 closed-end funds (the "Closed End Funds") and the Van
Kampen American Capital Prime Rate Income Trust (the "Prime Rate Trust" and,
together with the Open End Funds and the Closed End Funds, the "Funds"). The
Company was formed through the combination in December 1994 of The Van Kampen
Merritt Companies, Inc. ("VKM") and American Capital Management & Research, Inc.
("American Capital"), which was founded in 1926 as one of the first investment
management companies in the United States. This transaction significantly
expanded and upgraded the product offering, distribution and service
capabilities of both firms by (i) combining American Capital's expertise and
reputation in equity products and investor services with VKM's expertise and
reputation in tax-exempt and taxable fixed income products and (ii) enabling
each firm to cross-sell through the other firm's major distributors, given the
limited overlap between the two firms' major distributors prior to the
transaction.

Fund assets under management for the Company (as if VKM and American
Capital were combined as of 1991) have grown at a compound annual rate of 13.6%
from December 31, 1991 to December 31, 1995, which the Company attributes to
the rapid growth of the mutual fund industry generally and to investors' and
distributors' confidence in the Company's products, services and investment
philosophy. Such confidence has led to what the Company believes are lower
than average Fund redemption rates.

<PAGE> 7
The Company's business strategy is comprised of the following key
components:

* Diversified Product and Asset Base. The Company sponsors Open End Funds and
Closed End Funds, including four equity Funds and four fixed income
Funds each of which has assets of more than $ 1.0 billion, and more than
2,500 series of tax-exempt, taxable and equity unit investment trusts
("UITs"), making it one of only three mutual fund complexes today with a
major presence in all three of these areas. In addition, the Company
sponsors the Prime Rate Trust, which has grown from $1.0 billion at December
31, 1991 to $4.4 billion at March 31, 1996 and is the largest of only five
mutual funds in the United States that invest primarily in floating or
variable rate senior loans. These investment products give the Company one
of the most extensive product lines in the investment management industry.
Approximately 36% of the Fund assets under management consist of equity
securities, 30% consist of tax-exempt fixed income securities, 23% consist
of taxable fixed income securities and 11% consist of variable rate senior
loans. By providing a wide spectrum of clearly-defined risk/return options
in its Funds, the Company's investment products offer both distributors and
investors a broad "family of funds" to satisfy the full range of their
investment product needs. The Company believes that its comprehensive
product line, together with its broad-based and balanced distribution
network, has positioned the Company to achieve stability in assets and
earnings and limits the Company's exposure to a market downturn in any one
particular product or asset category.

* Extensive and Established Distribution Relationships. Today an investor
can buy the Company's investment products from an investment broker in
virtually any city in the United States. The Company has developed
significant distribution relationships with almost every major securities
distributor in the United States, including national and regional securities
firms (28% of 1995 sales), financial planners (25% of 1995 sales), banks
(24% of 1995 sales), and global securities firms (23% of 1995 sales). The
Company's products are distributed through more than 2,400 firms (the
"Retail Distribution Firms"), representing more than 100,000 investment
brokers. The Company has a "proprietary vendor" relationship with Smith
Barney Inc. ("Smith Barney") and has become a "preferred vendor" to a number
of major distribution firms, including PFS Investments, Inc. ("PFSI"), a
broker-dealer affiliate of The Travelers Inc. ("Travelers"), E.D. Jones &
Co. ("E.D. Jones"), A.G. Edwards & Sons, Inc. Prudential Securities
Incorporated, PaineWebber Incorporated, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and SunAmerica Inc. ("SunAmerica").
PFSI is also the sponsor, exclusive distributor and servicer of ten Open End
Funds advised by the Company (the "Common Sense Funds"). The Common Sense
Funds, which had assets of $4.5 billion as of March 31, 1996, are sold
exclusively through a distribution network of more than 20,000 PFSI sales
representatives located in communities throughout the United States. The
Company believes that it has created one of the industry's largest and most
effective sales forces with more than 100 wholesalers and sales associates
who are responsible for marketing the Company's products and services to
Retail Distribution Firms across the United States.

* Disciplined and Consistent Investment Philosophy. The Company is
recognized as a highly disciplined asset manager seeking to achieve
consistent superior long-term investment results within defined risk
profiles through a fully invested asset management approach. The Company's
investment philosophy is based on the view that distributors and investors
desire consistent, long-term, above average performance within chosen risk
profiles. Following the acquisition of American Capital in December 1994,
the Company adopted the specific goal of achieving long-term performance
rankings in the first quartile of all comparable rated funds by achieving
annual performance in at least the second quartile.

<PAGE> 8

programs for 401(k) plans and other retirement vehicles, and is
aggressively marketing these programs; (ii) has developed competitively
priced variable annuity programs and expanded its equity UIT offerings to
target specific market niches; and (iii) has created a number of new Funds
directed at specific market segments, such as the Van Kampen American
Capital Aggressive Growth Fund, an aggressive growth fund that the Company
launched in May 1996. The Company devotes considerable resources to
developing new investment products to respond to changing market conditions.

* Superior Customer Service. The Company also devotes considerable
resources to providing superior service to its customers. To this end, the
Company has (i) completed significant investments to establish full
service systems; (ii) trained a skilled managerial and employee base; and
(iii) implemented procedures and controls to monitor service quality. The
Company's outstanding customer service performance has been recognized by
DALBAR Financial Services, Inc. ("DALBAR"), an independent mutual fund
research organization, which awarded the DALBAR Quality Tested Service Award
to American Capital for each of the five years prior to the Company's
acquisition of American Capital and to the combined Company for 1995. In
1995, only six other mutual fund complexes received this award, and only one
other mutual fund complex has received the award for each of the past
six years.

The Company believes that the combination of VKM and American Capital has
positioned the Company for further growth. The Company began the integration
of the two companies at the beginning of 1995 by selecting the best talent
available from each company, training the new combined sales force with respect
to the full range of products offered and standardizing fund expense policies
and marketing materials to produce a fully exchangeable family of Funds. The
integration process was substantially completed by the end of 1995 and the
Company believes that it now has the necessary critical mass, product breadth
and expertise to further penetrate its combined distribution network and
cross-sell the full array of its products, as well as to develop new investment
products that can be sold through this network.

Background. The Company and VKAC were organized in 1992 under the laws of
the State of Delaware to acquire a company then named The Van Kampen Merritt
Companies, Inc. and certain of its subsidiaries (the "VKM Acquisition") from
Xerox Financial Services, Inc. ("Xerox Financial") in February 1993. In
December 1994, the Company acquired American Capital (the "AC Acquisition")
from Travelers. Principally as a consequence of these transactions,
as of , 1996, the Company's management beneficially owned % (or %
on a fully diluted basis) of the outstanding Company Common Stock. The
Company's executive offices are located at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181 and at 2800 Post Oak Boulevard, Houston, Texas
77253, and its telephone number is (708) 684-6000.

THE OFFERINGS

Of the shares of Common Stock offered hereby, shares are
initially being offered in the United States and Canada by the U.S.
Underwriters and shares are initially being offered outside the United
States and Canada by the International Managers.

<PAGE> 9

Common Stock offered by the Selling Stockholders...... shares(1)
Common Stock outstanding after the Offerings(2)....... shares
Proposed NYSE Symbol..................................

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

(1) Does not include shares that are subject to over-allotment
options granted by the Selling Stockholders to the Underwriters. See
"Underwriting."
(2) Based upon shares of Common Stock outstanding at , 1996,
including shares of Common Stock issuable upon conversion of the
same number of shares of Class B Common Stock, and excluding
shares of Company Common Stock issuable upon the exercise of outstanding
options (whether vested or unvested) and shares of Common Stock
issuable upon the vesting of outstanding deferred stock units.

The Company will not receive any of the proceeds from the sale of shares
sold by the Selling Stockholders. Pursuant to the Registration and
Participation Agreement (as defined herein), the Company is required to assume
the costs of the Offerings and to pay fees and expenses in connection with the
sale of shares by the Selling Stockholders. See "Selling Stockholders."

RISK FACTORS

Prospective purchasers of the Common Stock offered hereby should consider
carefully the factors set forth under "Risk Factors," as well as the other
information set forth in this Prospectus, before making an investment in the
Common Stock.

<PAGE> 10

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The summary historical consolidated financial and other data set forth
below should be read in conjunction with the Company's Consolidated Financial
Statements and notes thereto, which are included elsewhere in this Prospectus,
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED YEAR ENDED
MARCH 31, DECEMBER 31, 2/17/93 1/01/93 DECEMBER 31,
------------------ --------------------- TO TO ------------------
1996(2) 1995(2) 1995 1994 12/31/93(1) 2/16/93(1) 1992 1991
--------- -------- ---------- --------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS EXCEPT PER SHARE DATA)

STATEMENT OF INCOME DATA:
Revenues.......................... $ 82.2 $ 67.8 $ 297.7 $ 148.2 $ 128.1 $ 17.7 $ 119.4 $ 78.7

EXPENSES:
Compensation and benefits......... 23.9 21.5 93.7(3) 42.5 34.9 5.8 35.2 26.8
Amortization of deferred
Company funded
distribution costs.............. 14.6 11.7 50.2 29.0 19.6 2.5 13.4 5.1
Other expenses.................... 22.8 21.2 98.3(4) 46.6 42.0 5.6 40.0 28.7
Reimbursements.................... (13.9) (11.8) (51.6) (16.7) (14.2) (1.9) (14.5) (11.3)
------- -------- -------- -------- -------- ------- -------- -------
Operating income(5)............... 34.8 25.2 107.1 46.8 45.8 5.7 45.3 29.4
Interest expense.................. 9.4 11.5 44.2 23.7 19.7 0.2 1.4 0.2
Amortization of excess of
cost over fair value of
net assets acquired............. 4.3 4.5 17.2 6.0 5.2 0.4 3.2 3.2
------- -------- -------- -------- -------- ------- -------- -------

Income from continuing operations
before taxes and extraordinary
item............................ 21.1 9.2 45.7 17.1 20.9 5.1 40.7 26.0
Income tax provision.............. 8.6 3.7 18.3 3.2 8.1 1.8 13.5 6.0
------- -------- -------- -------- -------- ------- -------- -------
Income from continuing
operations before
extraordinary item.............. 12.5 5.5 27.4 13.9 12.8 3.3 27.2 20.0
Discontinued operations,
net of tax(6)................... 2.7 0.4 2.5 0.6 1.6 0.4 1.0 0.3

Extraordinary item, net of tax.... 0.0 0.0 0.0 (2.7) 0.0 0.0 0.0 0.0
------- -------- -------- -------- -------- ------- -------- -------
Net income........................ $ 15.2 $ 5.9 $ 29.9 $ 11.8 $ 14.4 $ 3.7 $ 28.2 $ 20.3
======= ======== ======== ======== ======== ======= ======== =======
PER SHARE DATA:
Net income per share from
continuing operations...........
Net income per share..............
Weighted average shares
outstanding.....................

<CAPTION>
DECEMBER 31,
PRO FORMA MARCH 31, MARCH 31, ------------------------
1996(7) 1996 1995 1994
------------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................ $ 1,046.1 $ 1,022.1 $ 1,040.4
Total long-term debt(8)..... 440.0 440.0 520.0
Total liabilities........... 652.9 644.1 701.6
Redeemable common stock..... 31.1 31.1 26.0
Stockholders' equity........ 362.1 346.9 312.8
</TABLE>

<PAGE> 11

<TABLE>
Three Months Ended Year Ended Year Ended
March 31, December 31, 2/17/93 1/01/93 December 31,
------------------ ----------------- to to -----------------
1996 1995 1995 1994 12/31/93(1) 2/16/93(1) 1992 1991
OTHER DATA: -------- -------- -------- ------ ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA(9)......................... $ 51.0 $ 38.3 $ 163.5 $ 78.2 $ 67.9 $ 8.5 $ 61.1 $ 36.8
Assets under management (at end
of period):
Funds:
Equity.......................... $ 14,211 $ 10,458 $ 13,156 $ 9,504 $ 178 $ 29 $ 28
Taxable fixed income............ 9,032 9,715 9,409 9,410 5,339 4,804 4,172
Tax-exempt fixed income......... 11,901 11,203 12,180 10,905 10,451 7,206 4,195
Prime Rate Trust................ 4,427 1,933 3,686 1,628 1,018 953 1,019
-------- -------- -------- ------- ------- ------- -------
Total Funds................. 39,571 33,309 38,431 31,447 16,986 12,992 9,414
Institutional Accounts.............. 5,849 5,591 5,610 5,285 6,676 5,554 4,293
-------- -------- -------- ------- ------- ------- -------
Total assets under
management................ 45,420 38,900 44,041 36,732 23,662 18,546 13,707
-------- -------- -------- ------- ------- ------- -------
Unit investment trusts.............. 11,900 12,800 12,400 12,900 14,800 15,500 16,600
-------- -------- -------- ------- ------- ------- -------
Total assets under
management and/or
supervision............... $ 57,320 $ 51,700 $56,441 $49,632 $38,462 $34,046 $30,307
======== ======== ======== ======= ======= ======= =======
</TABLE>

_________________

(2) Data for the three months ended March 31, 1995 and 1996 were derived
from interim financial statements that reflect, in the opinion of
the Company, all adjustments, which include only normal recurring
adjustments, necessary to a fair presentation of the financial data
for such periods. Results for interim periods are not necessarily indicative
of results for the full year or for any future period.

(3) Includes $3.7 million of combination-related costs arising from the AC
Acquisition, consisting of $2.4 million for elimination of redundant
international asset management capabilities and $1.3 million for severance
and compensation.

(4) Includes $8.1 million of combination-related costs arising from the AC
Acquisition, consisting of $4.6 million for combining the Fund boards of
trustees, $2.6 million for obsolete marketing materials and $0.9 million for
professional advisory fees.

(5) Operating income represents income before interest and acquisition
expenses, taxes, discontinued operations and extraordinary item.

(6) Discontinued operations consist of MCM for all periods and Advantage
Capital Corporation ("ACC") for periods subsequent to its acquisition on
December 20, 1994. The Company's interest in MCM will be distributed to
stockholders of the Company as part of the Special Dividends. ACC was
sold to SunAmerica in January 1996. Discontinued operations does not
include the Company's interests in HGI, which also will be distributed
to certain stockholders of the Company as part of the Special Dividends,
because the Company did not make its investment in HGI until May 1996.
See "Business--Discontinued Operations and Dispositions."

(7) Adjusted to give effect to the Offerings and the Special Dividends.

(8) Includes current portion of long-term debt.

(9) EBITDA represents income before income taxes, interest expense,
depreciation and amortization. EBITDA should not be construed as a
substitute for income from operations, net income or cash flow from
operating activities, for the purpose of analyzing the Company's operating
performance, financial position and cash flows. The Company has presented
EBITDA because it is commonly used by investors to analyze and compare
companies on the basis of operating performance and to determine a company's
ability to service debt.

<PAGE> 12

RISK FACTORS

Prospective investors should consider carefully the following factors
relating to the Company and the Offerings, together with the information and
financial data set forth elsewhere in this Prospectus, prior to making an
investment decision.

INDUSTRY AND COMPETITIVE FACTORS

The investment management business is highly competitive. Competition is
based on various factors, including the range of products offered, the
investment performance of such products, quality of service, fees charged
(including whether a sales charge or "load" is collected) and marketing and
distribution services, and there are relatively few barriers to entry. The
Company competes with many other investment managers and collective fund
sponsors, as well as with other companies that furnish investment management
services, including insurance companies, banks, savings and loan associations
and securities dealers. A number of the Company's principal competitors are
significantly larger, have greater financial resources and broader distribution
capabilities than the Company and offer a broader array of investment products.
See "Business--Competition."

The traditional distribution channel for mutual funds (the
"sales-assisted" channel) is through retail distribution firms that are not
affiliated with the sponsor of the funds or through a captive sales force.
Fund shares are only sold through the sales-assisted channel. The number of
mutual fund companies that market their mutual funds directly through mail and
telephone services and computer networks (the "direct channel"), often with a
reduced or no sales charge or "load," has increased in recent years. As of
March 31, 1996, approximately 43% of the total mutual fund assets under
management in the United States were in no load funds, and no load mutual funds
have been growing more rapidly than all other mutual funds over the past
several years, although this was not the case in 1995. Despite the recent
success of the direct channel, the Company believes that the sales-assisted
channel will continue to represent a significant percentage of sales in the
industry, as investors who are presented with an expanding menu of complex
investment choices and information will increasingly seek and rely on advice
from knowledgeable investment representatives. There can be no assurance,
however, that disproportionate growth in no load mutual fund sales or in
the direct channel, or other changes in mutual fund marketing practices,
would not have a material adverse effect on the Company's Fund sales.

Ongoing access to retail distribution channels, including through
proprietary or preferred vendor relationships, is essential to the Company's
future performance. The Company's Funds are distributed primarily through
independent broker-dealers and other financial intermediaries, including banks.
The maintenance and growth of assets under management by the Company will be
affected by the selling efforts of such firms. The sales representatives that
distribute the Company's investment products also distribute numerous competing
products, including products sponsored by the Retail Distribution Firms with
which they are associated, and their selling efforts are affected by various
factors, including investment performance, the amount and types of distribution
compensation, sales assistance and administrative services. A failure by the
Company to keep pace with the rapid rate of industry change in the factors that
motivate such sales representatives, or the loss of the Company's preferred
vendor relationship with certain of the Retail Distribution Firms, could have a
material adverse effect on the Company. In addition, the agreement
establishing the Company's "proprietary vendor" relationship with Smith Barney,
the Company's top distributor in 1995, expires in December 2001 (or earlier
under certain circumstances), and the agreement establishing the Company's
exclusive distribution relationship with PFSI in respect of the Common Sense
Funds may expire in December 2001 with respect to some or all of the Common
Sense Funds. Smith Barney and PFSI collectively accounted for 16.5% of Fund
sales in 1995. The expiration of these agreements could have a material
adverse effect on the Company. See "Business--Marketing and Distribution of
Investment Products."

<PAGE> 13

CHANGES IN ECONOMIC OR MARKET CONDITIONS

Changes in economic and market conditions may adversely affect the
profitability and performance of and demand for the Company's investment
products. A significant portion of the Company's revenue is derived from
investment advisory fees, which are generally based on the value of assets
under management and vary with the type of asset being managed. Consequently,
significant fluctuations in the prices of securities (e.g., as the result of
substantial changes in the equity and fixed income markets resulting from
changes in interest rates, inflation rates or other economic factors) or the
level of redemptions of Open End Funds may affect materially the amount of
assets under management and thus the Company's revenues and profitability. A
majority of the Company's assets under management are in Open End Funds, which
permit investors to redeem their investments at any time. See "Business--The
Funds."

Approximately 30% of the Company's Fund assets under management are
invested in tax-exempt fixed income securities, 23% are invested in taxable
fixed income securities and 11% are invested in floating or variable rate loans.
Industry sales of bond funds, particularly those that invest in long-term fixed
income tax-exempt municipal securities, are affected by the relationship between
long-term and short-term interest rates, the strength of the stock market, and
the perception of investors concerning certain proposed tax regulations and the
future direction of interest rates. Based on industry sales from 1994 to the
present, demand for municipal bond funds has decreased significantly and demand
for fixed income funds in general has slowed. The Company attributes this
decline primarily to a combination of several factors, including certain
proposed federal income tax proposals which may impact the future tax status of
municipal securities, the strength of the stock market and the general
uncertainty of investors over the future direction of interest rates. Since the
beginning of 1994, the Company has not brought any closed-end funds to market.
The Company believes that by significantly broadening its product offerings
through the AC Acquisition, it has helped to offset the potential negative
impact of declining interest in its fixed income Funds.

All of the Closed End Funds, representing less than 20% of the Company's
Fund assets under management, have a "leveraged" capital structure; these Funds
issue preferred stock that generally pays dividends at rates that approximate
short-term interest rates, while the capital raised by the sale of the
preferred stock is invested by the Fund in longer-term fixed income securities.
So long as the return provided by the longer-term investments, net of
expenses, exceeds the current dividend rate and expenses on the preferred
stock, investors in the common stock of a leveraged fund realize a higher rate
of return than if the fund were not leveraged. If the use of leverage would
result in a net return to the common stock investors that is lower than if such
leverage were not used, the affected Funds might seek to reduce leverage, which
would adversely affect the Company's investment advisory revenues from such
Funds. In addition, the leveraging of the Funds results in higher volatility
of the net asset value and market value of the Closed End Funds. The Company
attempts to reduce fluctuations by issuing longer term preferred stock and
employing certain portfolio management and hedging techniques.

CLOSED END FUND STRUCTURE

Closed End Fund common shares are not redeemable, but rather are in most
cases traded in the secondary market, generally on a stock exchange. The Board
of Trustees or Directors of each Closed End Fund has determined that, at least
quarterly, it will consider action that might be taken to reduce or eliminate
any material discount to net asset value at which such shares may be trading,
which may include the repurchase of such shares in the open market or in
private transactions, the making of a tender offer for such shares at net asset
value, or a proposal to the shareholders to convert the Closed End Fund to an
open end investment company. The consequence of any such action, if taken,
could be a reduction in both the aggregate net asset value of the Closed End
Funds and in the investment advisory fees paid to the Company by such Closed
End Funds.

<PAGE> 14

RETENTION OF KEY PERSONNEL

The Company's ability to compete effectively is related to its ability to
hire and retain the quality personnel needed to support and expand its
operations. A loss of key personnel, particularly members of senior management
or key portfolio managers, could have a material adverse effect on the Company.

REGULATION

Virtually all aspects of the Company's business are subject to extensive
federal and state and territorial laws and regulations. These laws and
regulations are primarily intended to benefit or protect the Company's clients
and the Funds' shareholders and generally grant supervisory agencies and bodies
broad administrative powers, including the power to limit or restrict the
Company's ability to carry on its business if it fails to comply with such laws
and regulations. In such event, the possible sanctions that may be imposed
include suspension of individual employees, limitations on engaging in certain
types of business for specified periods of time, revocation of the Company's
investment adviser and other registrations, censures and fines, any of which
could have a material adverse effect on the Company's business. The Company
believes that it is currently in substantial compliance with all applicable
laws and regulations. See "Business--Regulation."

Certain of the Company's subsidiaries are subject to net capital
requirements of various federal and state regulatory agencies. The net
capital, as defined, of such subsidiaries has consistently met or exceeded all
minimum requirements.

TERMINATION PROVISIONS OF INVESTMENT ADVISORY AGREEMENTS AND OTHER CONSEQUENCES
OF A CHANGE OF CONTROL

A large portion of the Company's revenues are derived from investment
advisory agreements with the Funds and institutional clients which are
generally terminable by the Funds upon 60 days' notice and by institutional
clients upon 30 days' notice without penalty. The termination of any of these
agreements representing a material portion of assets under management could
have a material adverse impact on the Company. In addition, each advisory
agreement with a Fund automatically terminates upon its "assignment," although
a new advisory agreement may be approved by the Fund's trustees and
shareholders. Advisory agreements with institutional clients are voidable upon
assignment unless the assignment is consented to by the institutional client.
Although the Offerings will not constitute a "change of control," a sale by The
Clayton & Dubilier Private Equity Fund IV Limited Partnership ("C&D Fund IV"),
the Company's majority stockholder, of a sufficient number of shares of Common
Stock to transfer control to a single person or group could be deemed to have
effected an "assignment" in certain circumstances. There can be no assurance
that the trustees and shareholders of the Funds would approve replacement of
the investment advisory agreements or that institutional clients would consent
to the assignment of investment advisory agreements in such an event.

Under Section 15(f) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), during the two-year period after a change of control
of an investment adviser of a registered investment company, there may not be
imposed an "unfair burden" on such company as a result of a change in control.
Section 15(f) could be interpreted to restrict increases in investment advisory
fees during such two-year period and, accordingly, may discourage potential
purchasers from acquiring any interest in the Company that might constitute a
change of control under the Investment Company Act. The investment advisory fee
rates paid to the Company by the Funds that were sponsored by American Capital
prior to the AC Acquisition have not been increased since prior to December
1994, when the AC Acquisition was consummated. After the second anniversary of
the AC Acquisition in December 1996, such Funds legally could increase the
investment advisory fee rates payable to the Company for the management of their
assets, although any such proposal would be required to be approved by the
Boards of Trustees and shareholders of the affected Funds.

<PAGE> 15

All of the Class B shares and Class C shares of the Open End Funds, the
Prime Rate Trust and most of the Closed End Funds use a pricing structure (the
"Company Funded Load Structure") pursuant to which the Company, rather than the
investor, pays the sales commission of the Retail Distribution Firm and the
Company recovers such payments over time. In the event that an investment
advisory agreement or administration agreement for any Closed End Fund, or any
distribution plan for any Open End Fund utilizing the Company Funded Load
Structure, is terminated (without a new agreement or plan being entered into)
or amended so as to reduce the fees payable to the Company thereunder, the
Company would be required to write off all or a portion of the unamortized
capital investment it had made in connection with the Company Funded Load
Structure for such Fund. As of March 31, 1996, deferred Company funded
distribution costs aggregated $279.1 million (net of amortization), with such
amounts ranging from $0.1 million to $979.9 million in deferred Company funded
distribution costs per Fund. The Company presently intends to continue
utilizing the Company Funded Load Structure.

The Company derives significant revenues from the advisory services
provided to the Common Sense Funds. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In connection with the
closing of the AC Acquisition, the Company entered into an agreement, dated as
of December 20, 1994, relating to the Common Sense Funds (the "Common Sense
Agreement"), pursuant to which the Company will be required to share certain
profits generated from the management, distribution and administration of the
Common Sense Funds with affiliates of Travelers for periods after December 31,
1996 (the "Common Sense Arrangements"). The Common Sense Arrangements may be
terminated by either the Company or Travelers after January 1, 2000, or after an
earlier sale of a majority interest in the Company to any of three insurance
companies or a public offering of 50% or more of the Company Common Stock (on a
fully diluted basis). The Common Sense Agreement also provides, among other
things, for the exclusive distribution through PFSI of Common Sense Fund shares
through December 20, 2001, and thereafter of Common Sense Funds meeting certain
criteria. These exclusive distribution arrangements may earlier terminate upon
a sale of a majority interest in the Company to any of three insurance companies
(but not upon a public offering). There can be no assurance that a termination
of the Common Sense Arrangements or of PFSI's exclusive distribution
arrangements would not have a material adverse effect upon the Company's results
of operations.

PRINCIPAL STOCKHOLDER

Upon completion of the Offerings, C&D Fund IV, a private investment fund
managed by Clayton, Dubilier & Rice, Inc. ("CD&R"), will own approximately
% of the then outstanding Company Common Stock (% on a fully diluted basis
assuming the exercise of all outstanding options (whether vested or unvested)
and vesting of all outstanding deferred stock units) and will retain the power
to control the Company's corporate policies, the persons constituting its
management and Board of Directors and the outcome of corporate actions
requiring stockholder approval. See "Management--Directors and Executive
Officers," "--Compensation Committee Interlocks and Insider Participation,"
"Certain Relationships and Related Transactions--CD&R and C&D Fund IV" and
"Security Ownership by Management and Principal Stockholders."

Each advisory agreement with a Fund automatically terminates upon its
"assignment," although a new advisory agreement may be approved by the Fund's
trustees and shareholders. Advisory agreements with institutional clients are
voidable upon assignment unless the assignment is consented to by the
institutional client. Although the Offerings will not constitute a "change of
control," a sale by C&D Fund IV of a sufficient number of shares of Common
Stock to transfer control to a single person or group could be deemed to have
effected an "assignment" in certain circumstances. There can be no assurance
that the trustees and shareholders of the Funds would approve replacement of
the investment advisory agreements or that institutional clients would consent
to the assignment of investment advisory agreements in such an event.

<PAGE> 16
RESTRICTIONS IMPOSED BY LENDERS

The discretion of the Company's management with respect to certain
business matters is limited by covenants in the Company's financing agreements.
Such covenants include, among other things, limitations on the acquisition of
new businesses, the sale of assets, the incurrence of additional debt,
investments or capital expenditures and the payment of dividends. The
Company's bank credit agreement also contains financial covenants requiring the
maintenance of certain financial ratios (including a minimum interest coverage
ratio and a maximum debt to earnings ratio) and net asset value levels.
Further, the Company's financing agreements contain certain change of
control-related provisions. For a discussion of how these covenants and
provisions may affect the Company's sources of liquidity and capital
expenditure plans, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offerings, (i) shares of Common Stock and
shares of Class B Common Stock will be issued and outstanding,
of which shares of Common Stock and shares of Class B Common Stock
will be held by the Company's current stockholders, (ii) shares of Common
Stock and shares of Class B Common Stock will be issuable upon the
exercise of outstanding stock options (whether vested or unvested) and vesting
and payment of outstanding deferred stock units and (iii) shares of
Common Stock will be issuable to the Van Kampen American Capital, Inc. Profit
Sharing and Savings Plan (the "Profit Sharing Plan") upon the exchange of the
Junior Preferred Stock currently held thereunder. of such outstanding shares
of Common Stock held by the Company's current stockholders were registered
under the Securities Act of 1933, as amended (the "Securities Act"), while the
remainder of such shares (including all of the shares issuable upon exercise of
stock options and vesting and payment of deferred shares) are "restricted"
shares as defined in Rule 144 under the Securities Act ("Rule 144") and,
accordingly, may not be sold unless they are registered under the Securities
Act or are sold pursuant to an exemption from registration. The Company and
certain of its current stockholders, including the Selling Stockholders and
certain officers and directors of the Company, have entered into "lock-up"
agreements pursuant to which they have agreed, during the period of [ ] days
from the date of this Prospectus, without the prior written consent of Merrill
Lynch, not to enter into any agreement providing for or effect any public sale,
distribution or other public disposition (including, without limitation, any
sale pursuant to Rule 144 or Rule 144A or Regulation S under the Securities
Act) of any shares of Company Common Stock or similar equity securities, or any
securities convertible into or exchangeable or exercisable for shares of
Company Common Stock or similar equity securities, or grant any public option
for any such sale, or, in the case of the Company, file any registration
statement under the Securities Act with respect to any of the foregoing, other
than the shares of Common Stock that may be sold by the Selling Stockholders in
the Offerings or, in the case of the Company, in respect of a registration
statement on Form S-8 for shares of Common Stock issuable upon exercise or
vesting and payment of employee equity awards granted under the Company's
employee equity programs and shares of Common Stock issuable upon exchange of
the Junior Preferred Stock held by the Profit Sharing Plan. Purchasers of any
such securities from such persons or entities in private transactions will also
be required to agree to substantially similar restrictions on public sales.
After such period, such holders will in general be entitled to dispose of their
registered shares, although the shares of Company Common Stock held by C&D Fund
IV and other affiliates of the Company will continue to be subject to the
volume and other restrictions of Rule 144 under the Securities Act. Virtually
all of the Company's current stockholders are bound by a similar 180-day
lock-up agreement, which may be waived by the Company. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur at the
expiration of such [ ]-day period, may materially adversely affect the market
price of the Common Stock prevailing from time to time. In addition, under the
Registration and Participation Agreement, dated as of February 17, 1993 (as
amended, the "Registration and Participation Agreement"), among the Company and
virtually all of the current stockholders of the Company, including C&D Fund
IV, such stockholders have certain demand and "piggy-back" registration rights
in connection with future offerings of Common Stock which may be exercised
after the expiration of the applicable lock-up period. See "Shares Eligible
for Future Sale" and "Underwriting."

<PAGE> 17
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offerings, there has been no public market for the Common
Stock. Although the Company will apply for listing of the Common Stock on the
New York Stock Exchange, no assurance can be given that an active trading
market will be created or sustained. The initial offering price will be
determined by negotiations among the Company, the Selling Stockholders and
representatives of the Underwriters based on several factors and will not
necessarily reflect the market price of the Common Stock following the
Offerings. Due to the absence of any prior public market for the shares of
Common Stock, there can be no assurance that the initial offering price will
correspond to the price at which the shares of Common Stock will trade in the
public market subsequent to the Offerings. See "Underwriting."

DILUTION

Purchasers of Common Stock offered hereby will purchase the shares at a
price substantially higher than their net tangible book value. The initial
offering price of the Common Stock exceeds the net tangible book value per
share of the Company Common Stock after the Offerings. See "Dilution."

DIVIDEND POLICY

Other than the Special Dividends and the Stock Split Dividend, the Company
has never declared or paid any dividends on the Company Common Stock and has no
current plans to pay dividends on the Company Common Stock. The Company
presently intends to retain earnings to support the growth of the Company's
business. The payment of any future dividends will be determined by the Board
of Directors of the Company in light of conditions then existing, including the
Company's earnings, financial condition and capital requirements, business
conditions, certain corporate law requirements and other factors. Payment of
dividends will also be subject to (i) the restrictions set forth in the
Company's financing agreements, which currently restrict the payment of cash
dividends to stockholders, except in certain specified circumstances or unless
certain financial tests are met, (ii) the preference and participation rights
of holders of the Junior Preferred Stock, and (iii) restrictions, if any,
imposed by other indebtedness outstanding from time to time. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Capital
Stock--Junior Preferred Stock."

The Company is a holding company and thus its ability to pay dividends on
the Company Common Stock depends on the Company's subsidiaries' ability to pay
dividends to the Company.

14
<PAGE> 18

The Company currently intends to declare and pay the Special Dividends
prior to the completion of the Offerings. See "Business--Discontinued
Operations and Dispositions."

<PAGE> 19
DILUTION

As of March 31, 1996, the Company's net tangible book value was $
, or $ per share. After giving effect to estimated expenses of $
payable by the Company in connection with the Offerings and
assuming the exchange of all of the outstanding shares of Junior Preferred
Stock for an equal number of shares of Common Stock (see "Description of
Capital Stock--Junior Preferred Stock"), pro forma net tangible book value of
the Company at March 31, 1996 would have been $ , or $
per share of Company Common Stock. This represents an immediate decrease in
net tangible book value of $ per share to existing stockholders. At an
initial offering price of $ per share of Common Stock (which represents
the midpoint of the anticipated range of offering prices), there would be an
immediate dilution of $ per share to purchasers of the shares of
Common Stock in the Offerings ("New Investors"). Dilution is determined by
subtracting adjusted net tangible book value per share after the Offerings from
the amount of cash paid by a New Investor for one common share. The following
table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial offering price per share.................................... $
Pro forma net tangible book value per share before the Offerings(1)......... $
Decrease in net tangible book value per share attributable to the
Offerings................................................................ ---------

Pro forma net tangible book value per share
after the Offerings(1)...................................................
----------
Dilution per share to New Investors(1)...................................... $
==========
</TABLE>

(1) Net tangible book value per share as of a specific date represents net
tangible assets (total tangible assets less total liabilities) divided
by the number of shares of Company Common Stock assumed to be then
outstanding. Substantially all of the Company's assets are intangible.
The net book value of the Company at March 31, 1996 was [$ ]
million or [$ ] per share. The pro forma net book value per
share of the Company at March 31, 1996 after giving effect to the sale
of shares of Common Stock offered hereby would have been [$ ]
million or [$ ] per share, representing an immediate [$ ] per
share dilution to New Investors purchasing shares of Common Stock
pursuant to the Offerings.

The following table summarizes on a pro forma basis as of March 31, 1996,
after giving effect to the completion of the Offerings and assuming the
exchange of all of the outstanding shares of Junior Preferred Stock for an
equal number of shares of Common Stock (see "Description of Capital
Stock--Junior Preferred Stock"), the differences between the Company's current
stockholders and the New Investors with respect to the number of shares of
Company Common Stock purchased, the total consideration paid and the average
price paid per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Current Stockholders % $ % $
New Investors % $ % $
Total 100.0% $ 100% $
======== ======= ========= =========
</TABLE>

As of March 31, 1996, an aggregate of shares of Company Common
Stock were issuable upon the exercise of outstanding stock options (whether
vested or unvested), at a weighted average exercise price of $ per share,
or the vesting and payment of outstanding deferred stock units. If all stock
options outstanding at March 31, 1996 were exercised and all deferred stock
units outstanding on such date were vested and paid and Common Stock was issued
in respect thereof, the pro forma net tangible book value per share immediately
after completion of the Offerings would be $ . This would represent an
immediate dilution of $ per share to New Investors.

16
<PAGE> 20

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1996 and the pro forma capitalization of the Company as of such date,
giving effect to the Special Dividends and the expenses to be paid by the
Company in connection with the Offerings. This table should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
Actual Pro Forma(1)
------- ------------
(IN MILLIONS)
<S> <C> <C>
Long-term debt: $ $
Senior secured credit agreement............................
9.75% Senior Secured Notes due 2003........................
------- ------------
Redeemable Common Stock, Class A, $.01 par value,
shares outstanding, at redemption value.................... 31.1 (2)
------- ------------
Stockholders' equity:
Junior Non-Cumulative Participating Preferred Stock,
$200.00 par value, 32,500 shares authorized; shares
issued and outstanding; shares pro forma issued
and outstanding(3).......................................
Class A Common Stock, $.01 par value, 3,250,000 shares
authorized; shares issued and outstanding;
shares pro forma issued and outstanding..................
Class B Common Stock, $.01 par value, 3,250,000 shares
authorized; shares issued and outstanding;
shares pro forma issued and outstanding..................
Additional paid-in-capital................................. 299.3
Retained earnings ........................................ 56.8
Less Treasury Stock,
Class A Common Stock, at cost ........................... (0.5)
------- ------------
Total stockholders' equity...............................
------- ------------
Total capitalization..................................... $ $
======= ============
</TABLE>
- ---------------
(1) Does not reflect the non-cash portion of the Special Dividends payable
in respect of HGI, because the Company's investment in HGI was made after
March 31, 1996.
(2) Reflects the pro forma reclassification of redeemable Common Stock to
Common Stock and additional paid-in capital upon the completion of the
Offerings. Such reclassification will occur because the obligation of the
Company to repurchase Common Stock held by management investors under
certain circumstances will terminate upon the completion of the Offerings.
(3) All of the outstanding shares of Junior Preferred Stock are held in the
trust fund established under the Company's Profit Sharing Plan. Under
the Profit Sharing Plan, at any time after or with respect to the completion
of the Offerings, the investment committee authorized to administer
certain of the investments of the Profit Sharing Plan (the "Investment
Committee") will be entitled to exchange all of the shares of Junior
Preferred Stock held under the trust for the same number of shares of Common
Stock. A portion of the Special Dividends will consist of certain cash
preferred dividends required to be paid to the holder of the Junior
Preferred Stock in connection with the other distributions to be made as
part of the Special Dividends.

17
<PAGE> 21

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)

The following table sets forth selected historical consolidated financial
information of the Company on a consolidated basis. The consolidated financial
information of the Company as of and for the two years ended December 31, 1992,
as of February 16, 1993 and December 31, 1993, for the periods from January 1
to February 16, 1993 and February 17 to December 31, 1993, and as of and for
the two years ended December 31, 1995 were derived from the Consolidated
Financial Statements of the Company, which were audited by KPMG Peat Marwick
LLP, independent certified public accountants, whose report as of December 31,
1995 and 1994 and for the years ended December 31, 1995 and 1994 and for the
period February 17, 1993 through December 31, 1993 and for the period January
1, 1993 through February 16, 1993 (Predecessor period), is included elsewhere
in this Prospectus. The consolidated financial information of the Company as
of and for the three months ended March 31, 1996 and 1995 were derived from
unaudited interim financial statements that reflect, in the opinion of
management, all adjustments (consisting of only normal recurring accruals),
necessary to a fair presentation of the results of operations and financial
position for and as of such periods. The results of operations for the three
months are not necessarily indicative of results for the full year or for any
future period. The AC Acquisition significantly affected operating results of
the Company for periods after 1994 and will continue to significantly affect
the future operating results of the Company. The financial data below should
be read in conjunction with the Company's Consolidated Financial Statements and
notes thereto, which are included elsewhere in this Prospectus, and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

18
<PAGE> 22
<TABLE>
<CAPTION>

Three Months Ended Year Ended Year Ended
March 31, December 31, 2/17/93 1/01/93 December 31,
------------------ -------------- to to ------------
1996 1995 1995 1994 12/31/93(1) 2/16/93(1) 1992 1991
------------------ -------------- ----------- ---------- ------------
(unaudited)
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Investment advisory fees................. $ 71.5 $ 57.2 $ 249.9 $ 129.2 $ 101.2 $ 12.4 $ 82.8 $ 43.4
Distribution of investment products...... 6.8 7.2 31.8 14.3 21.8 4.7 27.0 23.4
Other revenues........................... 3.9 3.4 16.0 4.7 5.1 0.6 9.6 11.9
--- --- ---- --- --- --- --- ----
Total revenues........................... 82.2 67.8 297.7 148.2 128.1 17.7 119.4 78.7
---- ---- ----- ----- ----- ---- ----- ----
Expenses:
Compensation and benefits................ 23.9 21.5 93.7(2) 42.5 34.9 5.8 35.2 26.8
Amortization of deferred Company funded..
distribution costs....................... 14.6 11.7 50.2 29.0 19.6 2.5 13.4 5.1
Marketing and promotion.................. 7.6 7.8 32.7 22.1 17.6 2.3 15.3 9.3
Other expenses........................... 15.2 13.4 65.6(3 24.5 24.4 3.3 24.7 19.4
Reimbursements........................... (13.9) (11.8) (51.6) (16.7) (14.2) (1.9) (14.5) (11.3)
------ ------ ------ ------ ------ ----- ------ ------
Total operating expenses............... 47.4 42.8 190.6 101.4 82.3 12.0 74.1 49.3
---- ---- ----- ----- ---- ---- ---- ----
Operating income(4)...................... 34.8 25.2 107.1 48.8 45.8 5.7 45.3 29.4
Interest and acquisition expenses:.......
Interest expense......................... 9.4 11.5 44.2 23.7 19.7 0.2 1.4 0.2
Amortization of excess of cost over fair
value of net assets acquired............. 4.3 4.5 17.2 6.0 5.2 0.4 3.2 3.2
--- --- ---- --- --- --- --- ---
Income from continuing operations before
taxes and extraordinary item............. 21.1 9.2 45.7 17.1 20.9 5.1 40.7 26.0
Income tax provision..................... 8.6 3.7 18.3 3.2 8.1 1.8 13.5 6.0
--- --- ---- --- --- --- ---- ---
Income from continuing operations before
extraordinary item....................... 12.5 5.5 27.4 13.9 12.8 3.3 27.2 20.0
Discontinued operations, net of tax(5)... 2.7 0.4 2.5 0.6 1.6 0.4 1.0 0.3
Extraordinary item, net of tax........... 0.0 0.0 0.0 (2.7) 0.0 0.0 0.0 0.0
--- --- --- ----- --- --- --- ---
Net income............................... $ 15.2 $ 5.9 $ 29.9 $ 11.8 $ 14.4 $ 3.7 $ 28.2 $ 20.3
Per Share Data: ====== ===== ====== ====== ====== ===== ====== ======
Net income per share from continuing
operations
Net income per share from discontinued
operations
Net income per share from extraordinary item
Net income per share
Weighted average shares outstanding
</TABLE>

December 31,
Pro Forma March 31, ------------------------------------------------------
March 31, 1996(6) 1996 1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (unaudited)
Total assets............................. $1,046.1 $1,022.1 $1,040.4 $532.3 $382.8 $289.0
Total long-term debt(7).................. 440.0 440.0 520.0 240.0 -- --
Total liabilities........................ 652.9 644.1 701.6 349.6 135.9 64.4
Redeemable common stock.................. 31.1 31.1 26.0 12.8 -- --
Stockholders' equity..................... $ 362.1 $ 346.9 $ 312.8 $ 169.8 $ 246.9 $ 224.7
</TABLE>

(1) Two periods have been presented for 1993 to reflect the VKM
Acquisition. As a result of the VKM Acquisition, the consolidated
financial data for the period after the VKM Acquisition is presented on
a different cost basis than that for periods prior to the VKM
Acquisition and therefore is not comparable.
(2) Includes $3.7 million of combination-related costs arising from the
AC Acquisition, consisting of $2.4 million for elimination of redundant
international asset management capabilities and $1.3 million for
severance and compensation.
(3) Includes $8.1 million of combination-related costs arising from the
AC Acquisition, consisting of $4.6 million for combining the Fund
boards, $2.6 million for obsolete marketing materials and $0.9 million
for professional advisory fees.
(4) Operating income represents income before interest and acquisition
expenses, taxes, discontinued operations and extraordinary item.
(5) Discontinued operations consist of MCM for all periods and ACC, for
periods subsequent to its acquisition on December 20, 1994. The
Company's interest in MCM will be distributed to stockholders of the
Company as part of the Special Dividends. ACC was sold to SunAmerica in
January 1996. Discontinued operations does not include the Company's
interests in HGI, which also will be distributed to certain
stockholders of the Company as part of the Special Dividends, because
the Company did not make its investment in HGI until May 1996. See
"Business--Discontinued Operations and Dispositions."
(6) Adjusted to give effect to the Offerings and Special Dividends. See
"Capitalization"
(7) Includes current portion of long-term debt.

<PAGE> 23
SELECTED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION

The selected unaudited consolidated pro forma combined financial
information of the Company for the year ended December 31, 1994 set forth in
the table below are presented as if the AC Acquisition had been completed on
January 1, 1994, and were derived from the Consolidated Financial Statements of
the Company and the Consolidated Financial Statements of American Capital for
the year ended December 31, 1994. Certain pro forma adjustments, as reflected
in the following table, represent management's best estimates of the cost
savings that might have been realized if the AC Acquisition had occurred on
January 1, 1994. The pro forma financial information is not necessarily
indicative of the results that would have been reported had such events
actually occurred on the dates specified, nor is it indicative of the Company's
future results.

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME DATA
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS)

<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
Elimination of
VKM American Capital ACC(1) Other Adjustments Pro forma
---- ---------------- --------------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Investment advisory fees......... $129.2 $102.0 $ $ $231.2
Distribution of investment
products......................... 14.3 8.4 (5.8) 16.9
Other revenues .................. 4.7 9.2 (0.7) 1.3(2) 14.5
------- ------- ------- --------- -------
Total revenues................... 148.2 119.6 (6.5) 1.3 262.6
Expenses:
Compensation and benefits........ 42.5 54.1 (3.2) (7.4)(3) 86.0
Amortization of Company funded
distribution costs............... 29.0 14.8 43.8
Marketing and promotion.......... 22.1 10.8 (0.5) 32.4
Other expenses................... 24.5 25.4 (2.7) (4.7)(3) 42.5
Reimbursements................... (16.7) (27.1) 1.3 (2) (42.5)
------- ------- ------- --------- -------
Total operating expenses......... 101.4 78.0 (6.4) (10.8) 162.2
Operating income................. 46.8 41.6 (0.1) 12.1 100.4
Interest and acquisition expenses:
Interest expense................. 23.7 0.3 14.3 (4) 38.3
Amortization of excess of cost
over fair value of net assets
acquired......................... 6.0 9.4 1.4 (5) 16.8
------- ------- ------- --------- -------
Income from continuing operations
before taxes and extraordinary
item............................. $ 17.1 $ 31.9 $ (0.1) $ (3.6) $ 45.3
======== ======== ======== ========= =======
</TABLE>

- ---------------
(footnotes on following page)

20
<PAGE> 24
(footnotes from prior page)
- ---------------

(1) ACC was sold in January 1996 and is classified as a discontinued
operation in the Company's Consolidated Financial Statements included
herein.
(2) ACCESS profit has been reclassified to be consistent with subsequent
financial presentations.
(3) Reflects estimated costs that would have been saved during 1994 giving
effect to the AC Acquisition as if it had occurred on January 1, 1994.
These estimated cost savings primarily relate to the elimination of
redundant functions and duplicate marketing expense. The Company
believes that these estimates approximate the actual cost savings
realized by the Company during 1995.
(4) Reflects interest expense, including amortization of financing costs,
on $380 million of borrowings under the senior secured credit
facility incurred in connection with the AC Acquisition. A 5.2%
interest rate (comprised of a LIBOR rate of 4.2% plus a spread of
1.5%) has been assumed for the calculation. Also included in interest
expense is $150 million in Senior Secured Notes at a 9.75% interest rate.
(5) Reflects estimated increases in amortization expense related to excess
of cost over fair value of net assets acquired and interest expense
related to increased debt under the Company's secured credit facility,
giving effect to the AC Acquisition as if it had occurred on January 1,
1994. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

21
<PAGE> 25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company markets and provides investment advisory services to Open End
and Closed End Funds, UITs and Institutional Accounts. As of March 31, 1996,
the Company had more than $57 billion of assets under management and/or
supervision, including $35.1 billion in 101 Open End Funds and Closed End
Funds, $4.4 billion in the Prime Rate Trust, $5.8 billion in assets managed on
behalf of Institutional Account clients and $11.9 billion in UITs. The
Company's total assets under management rose from $40.4 billion at December
31, 1993 (assuming the AC Acquisition occurred prior to such date) to $45.4
billion at March 31, 1996 from increased market values of equity and fixed
income securities during this period and increased sales of Fund shares,
particularly Class B shares of certain Open End Funds and the Prime Rate Trust.

The investment management industry has exhibited rapid growth in recent
years, driven by a combination of favorable stock and bond market performance
and demographic trends. Industry sales of equity funds are affected by stock
market performance and, to a lesser extent, interest rates. A strong stock
market stimulates investment in equity funds; low interest rates also favor
equity investments because of the diminished attractiveness of fixed income
investment alternatives. Industry sales of bond funds, particularly those that
invest in long-term fixed income tax-exempt municipal securities, are affected
by the relationship between long-term and short-term interest rates, the
strength of the stock market and the perception of investors concerning certain
proposed tax regulations and the future direction of interest rates. Based on
industry sales from 1994 to the present, demand for municipal bond funds has
decreased significantly and demand for fixed income funds in general has
slowed. The Company attributes this decline primarily to the combination of
certain proposed changes in federal income tax regulations which may impact the
future tax status of municipal securities, the strength of the stock market and
the general uncertainty of investors over the future direction of interest
rates. The Company believes that by significantly broadening its product
offerings through the AC Acquisition (more than one-third of the Company's Fund
assets under management as of March 31, 1996 were in equity Funds), it has
helped to offset the potential negative impact of declining interest in its
fixed income Funds.

The Company's investment advisory fee revenues, which accounted for 84% of
the Company's total revenues in 1995 and 87% of its total revenues for the
quarter ended March 31, 1996, consist primarily of (i) fees for managing the
assets of the Funds (including the Common Sense Funds) and the Institutional
Accounts, (ii) "12b-1 fees" which arise from the reimbursement of certain
distribution expenses, including reimbursement of commissions paid to Retail
Distribution Firms for selling shares of Open End Funds under the Company
Funded Load Structure and (iii) administrative fees paid by the Closed End
Funds and the Prime Rate Trust. The Company's investment advisory fees
fluctuate due to changes in the total value of the assets under management and
are calculated based on daily, weekly or quarterly average balances, depending
on the Fund or Institutional Account. Variations in the level of the assets
under management are due to both net sales (gross sales less redemptions of
Fund shares) and market value changes. Consequently, significant fluctuations
in the prices of securities (e.g., as the result of substantial changes in the
equity and fixed income markets resulting from changes in interest rates,
inflation rates or other economic factors) or the level of redemptions of Open
End Funds may affect materially the amount of assets under management and thus
the Company's revenues and profitability.

The Company's investment advisory fee rates are affected in part by
Section 15 (f) of the Investment Company Act. Under Section 15(f) of the
Investment Company Act, during the two-year period after a change of control
of an investment adviser of a registered investment Company, there may not be
imposed an "unfair burden" on such Company as a result of a change in control.
Section 15 (f) could be interpreted to restrict increases in investment
advisory fees during such two-year period. The investment advisory fee
rates paid to the Company by the Funds that were sponsored by American Capital
prior to the AC Acquisition have not been increased since prior to December
1994, when the AC Acquisition was consummated. After the second anniversary of
the AC Acquisition in December 1996, such Funds legally could increase the
investment advisory fee rates payable to the Company for the management of their
assets, although any such proposal would be required to be approved by the
Boards of Trustees and shareholders of the affected Funds.

22
<PAGE> 26

In addition, any increase in fees payable by a Fund are required to be
approved by the Board of Trustees and shareholders of the Fund. A decision by
management to seek any such increase would be made on a case-by-case basis,
depending upon the competitive environment and other factors.

Revenues from the distribution of the Company's investment products are
primarily derived from (i) the sales charge, less an applicable concession to
dealers, for the sale of UIT units, which is the largest contributor to
distribution revenues, (ii) the net profit realized or net loss incurred to the
extent that the market price of securities deposited by the Company in a UIT
exceeds or is less than the original cost of the securities to the Company,
(iii) the net profit realized or net loss incurred to the extent that the
public offering price of UIT units increases or decreases before the UIT units
are sold, (iv) a portion of the sales charge paid by investors who buy Open End
Fund Class A shares and (v) certain concessions and fees that the Company
receives as U.S. distributor for the Govett Family of Funds (the "Govett
Funds").

A significant portion of the Company's operating expenses is attributable
to amortization of deferred Company funded distribution costs, which originates
primarily from the commissions and sales expense paid by the Company to
unaffiliated Retail Distribution Firms for selling Class B and Class C shares
of Open End Funds, the Prime Rate Trust and most of the Closed End Funds under
the Company Funded Load Structure. These up-front expenditures are capitalized
and amortized to match, through straight line amortization, future investment
advisory fee revenues derived from management advisory contracts for these
Funds. The amortization periods for these costs vary from four to ten years,
depending upon the Fund type. Over the past three years the amortization of
deferred distribution costs relating to the Company Funded Load Structure, as
reflected in the Company's statements of income, has grown from $22.1 million
in 1993 to $50.2 million in 1995. Because amounts capitalized in prior years
have not been fully amortized, this expense tends to grow each year as
amortization of current year additions to this expense item is added to that of
prior years.

The Company provides daily pricing and ongoing credit surveillance
services for its UITs and certain of the Funds. The Company also furnishes
accounting, legal, pricing, transfer agency and shareholder services to certain
of the Funds and UITs. The Company receives payments from such Funds and UITs
equal to the cost of providing these services, which payments are reflected as
"reimbursements." In July 1995, ACCESS Investor Service, Inc. ("ACCESS"), a
wholly owned subsidiary of VKAC which had been the transfer agent for only some
of the Open End Funds, was appointed the transfer agent for all of the Open End
Funds, which resulted in the addition of personnel and the incurrence of other
costs which are reimbursable by the Open End Funds.

The following table summarizes certain statement of income and other data
for the three months ended March 31, 1996 and 1995 and the years ended December
31, 1995, 1994 and 1993 and certain pro forma statement of income and other
data (giving effect to the AC Acquisition as if it had occurred on January 1,
1994 and treating ACC as a discontinued operation for such period) for the year
ended December 31, 1994. The data for the year ended December 31, 1993 is
shown on a combined basis, reflecting the combination of the periods from
January 1, 1993 to February 16, 1993 and February 17, 1993 to December 31,
1993. Such data were derived from, and should be read in conjunction with, the
Company's Consolidated Financial Statements included elsewhere in this
Prospectus and the Consolidated Financial Statements of American Capital.

<PAGE> 27

<TABLE>
<CAPTION>
Three Months Ended Pro Forma
March 31, Year Ended December 31, Year Ended
--------------------- ------------------------------------ December 31,
1996 1995 1995 1994 1993 1994 (1)
-------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
(in millions) (combined)

Statement of Income Data:
Revenues:
Investment advisory fees................ $ 71.5 $ 57.2 $ 249.9 $ 129.2 $ 113.6 $231.2
Distribution of investment products..... 6.8 7.2 31.8 14.3 26.5 16.9
Other revenues........................... 3.9 3.4 16.0 4.7 5.7 14.5
------ ------ ------- ------- ------- ------
Total revenues..................... 82.2 67.8 297.7 148.2 145.8 262.6
Operating expenses:
Compensation and benefits.............. 23.9 21.5 93.7(2) 42.5 40.7 86.0
Amortization of deferred Company
funded distribution costs............ 14.6 11.7 50.2 29.0 22.1 43.8
Marketing and promotion................ 7.6 7.8 32.7 22.1 19.9 32.4
Other expenses......................... 15.2 13.4 65.6(3) 24.5 27.7 42.5
Reimbursements......................... (13.9) (11.8) (51.6) (16.7) (16.1) (42.5)
------ ------ ------- ------- ------- ------

Total operating expenses........... 47.4 42.6 190.6 101.4 94.3 162.2
Operating income....................... 34.8 25.2 107.1 46.8 51.5 100.4
Interest and acquisition expenses:
Interest expense....................... 9.4 11.5 44.2 23.7 19.9 38.3
Amortization of excess of cost
over fair value of net assets
acquired (4)......................... 4.3 4.5 17.2 6.0 5.6 16.8
------ ------ ------- ------- ------- ------

Income from continuing operations
before taxes and extraordinary item.. $ 21.1 $ 9.2 $ 45.7 $ 17.1 $ 26.0 $ 45.3
====== ====== ======= ======= ======= ======

<CAPTION>
March 31, December 31,
--------------------- ------------------------------------
1996 1995 1995 1994(5) 1993
-------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT AND/OR
Supervision:
Assets under management:
Equity................................... $14,211 $ 10,458 $13,156 $ 9,504 $ 178
Taxable fixed income..................... 9,032 9,715 9,409 9,410 5,339
Tax-exempt fixed income.................. 11,901 11,203 12,180 10,905 10,451
Prime Rate Trust......................... 4,427 1,933 3,686 1,628 1,018
------- ------- ------- ------- -------
Total Funds............................ 39,571 33,309 38,431 31,447 16,986
Institutional Accounts................... 5,849 5,591 5,610 5,285 6,676
------- ------- ------- ------- -------
Total assets under management.......... 45,420 38,900 44,041 36,732 23,662
Unit investment trusts................... 11,900 12,800 12,400 12,900 14,800
------- ------- ------- ------- -------
Total assets under management
and/or supervision.................. $57,320 $51,700 $56,441 $49,632 $38,462
======= ======= ======= ======= =======

</TABLE>

(footnotes on following page)

24
<PAGE> 28
(footnotes from prior page)
- ---------------
(1) See "Selected Consolidated Pro Forma Financial Information."
(2) Includes $3.7 million of combination-related costs arising from the AC
Acquisition, consisting of $2.4 million for elimination of redundant
international asset management capabilities and $1.3 million for severance
and compensation.
(3) Includes $8.1 million of combination-related costs arising from the AC
Acquisition, consisting of $4.6 million for combining the Fund boards of
trustees, $2.6 million for obsolete marketing materials and $0.9 million
for professional advisory fees.
(4) As a result of the VKM Acquisition on February 17, 1993 and the AC
Acquisition on December 20, 1994, the Company's balance sheets as of
December 31, 1993, 1994 and 1995 include significant increases in excess of
cost over fair value of net assets acquired, as a result of the application
of purchase accounting, and in long-term debt, as a result of the financing
of such acquisitions. Operations of the Company following such
acquisitions include significant interest expense and substantial noncash
expenses, such as amortization of excess of cost over fair value of net
assets acquired and deferred financing costs. The expenses reflected in
the Company's Consolidated Financial Statements were based on studies of
the fair value of assets and liabilities of the Company made by an
independent appraiser.
(5) As a result of the AC Acquisition on December 20, 1994, assets under
management include both VKM and AC Funds. Excluding the impact of the AC
Acquisition at December 31, 1994, VKM's assets under management were:
equity, $0.2 billion; taxable fixed income, $4.3 billion; and tax-exempt
fixed income, $9.4 billion. The remaining product categories were not
affected by the AC Acquisition.

RESULTS OF OPERATIONS

The following discussion of the Company's results of operations for the
three months ended March 31, 1996 and March 31, 1995 and for the years ended
December 31, 1995, 1994 and 1993 addresses the historical results of the
Company for these periods along with the pro forma operating results (giving
effect to the AC Acquisition as if it had occurred on January 1, 1994 and
treating ACC as a discontinued operation for such period) for the year ended
December 31, 1994. The pro forma data are presented for informational purposes
and do not purport to show what the historical results of operations of the
Company would have been had the AC Acquisition actually occurred as of such
date, or to be any indication as to future results.

Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995

Fund assets under management increased by $6.3 billion, or 18.8%, from
March 31, 1995 to March 31, 1996, primarily as a result of increased equity Open
End Fund assets, which grew nearly 36% in the period due to $0.6 billion of net
sales and market value appreciation of $3.1 billion, and increased Prime Rate
Trust assets, which accounted for sales of $2.6 billion during such period.
Tax-exempt fixed income Fund assets increased by $0.7 billion, or 6.2%, from
March 31, 1995 to March 31, 1996, due primarily to market value increases, while
taxable fixed income Fund assets decreased by $0.7 billion, or 7.0 %, as a
result of net redemptions.

Institutional Account assets under management increased by approximately
5% from March 31, 1995 to March 31, 1996 as a result of new accounts,
additional sales to existing accounts and market value increases, which were
only partially offset by redemptions and the effect of a reduction
in Institutional Accounts that occurred in May 1995 in connection with the
transfer of certain accounts managed for certain affiliates of Xerox
Corporation (such affiliates, collectively, "Xerox Life") to OakRe Life
Insurance Company ("OakRe"), a subsidiary of Xerox Corporation. See
"Business--Investment Products--Institutional Accounts."

Revenues increased by $14.4 million, or 21%, primarily due to an increase
in investment advisory fees which more than offset a slight decline in fees
from distribution of investment products. Investment advisory fees increased
by $14.3 million, or 25%, due primarily to greater assets under management,
significant growth in the Prime Rate Trust, which has a higher investment
advisory fee

25
<PAGE> 29

rate than the other Funds, and increased sales of Class B shares of Open End
Funds, which generate 12b-1 fees to compensate for Company funded distribution
costs. Advisory fees earned under the Common Sense Arrangements were $6.7
million for the three months ended March 31, 1996, as compared to $5.3 million
for the three months ended March 31, 1995. Revenue from the distribution of
investment products decreased by $0.4 million or 6% in the first quarter of
1996, compared to the corresponding period in 1995, due to lower acquisition
profit on UITs resulting primarily from less favorable bond market conditions
in the first quarter of 1996 compared to the same period in 1995. Revenue from
the distribution of investment products during the first quarter were also
negatively affected by net redemptions of approximately $113 million in the
Govett Funds, which the Company attributes to the departure of the
long-standing portfolio manager of the Govett Smaller Companies Fund in
December 1995.

Operating expenses increased by $4.8 million, or 11%, over the
corresponding period in 1995. Amortization of deferred Company funded
distribution costs increased by $2.9 million, or 25%, due principally to
increased sales of shares of the Prime Rate Trust, which resulted in
approximately $2.6 million more in amortization expense for the first three
months of 1996. Compensation and benefits expense increased by $2.4 million,
or 11%, due primarily to annual salary increases and the additional costs and
personnel expense attributable to ACCESS. Other expenses grew by $1.8 million,
or 13%, due primarily to increased occupancy expense as a result of an increase
in data processing costs related to ACCESS becoming the transfer agent for all
of the Open End Funds. Reimbursements increased by $2.1 million, or 18%, due
primarily to increases in compensation and benefits and occupancy expenses, and
correspondingly in reimbursements, arising from the appointment of ACCESS
described above.

Operating income for the first quarter of 1996 increased by $9.6 million,
or 38%, over the corresponding period of 1995.

Interest and acquisition expenses decreased by $2.3 million, due largely
to a decrease in interest expense of $2.1 million, or 18%, resulting from lower
bank borrowings and lower interest rates. The Company's achievement of certain
financial ratios under its secured credit facility resulted in a reduction of
its effective interest rate for the three months ended March 31, 1996.

Income from continuing operations before taxes and extraordinary item for
the three months ended March 31, 1996 increased by $11.9 million over the
corresponding period in 1995, largely due to higher operating income and lower
interest and acquisition expenses.

Historical 1995 Compared to Pro Forma 1994

Fund assets under management increased by $7 billion, or 22%, from
December 31, 1994 to December 31, 1995, due primarily to an increase of $4.9
billion in the market value of Open End Fund assets (primarily increases in
equity assets) and $0.7 billion in the market value of Closed End Fund assets
(primarily tax-exempt fixed income assets), $0.2 billion in equity Open End
Fund net sales and $2.1 billion in Prime Rate Trust sales, which together
more than offset net redemptions of $0.6 billion in tax-exempt fixed income
Open End Funds and $1.8 billion in taxable fixed income Open End Funds.
Investors continued to show caution during 1995 in investing in long-term fixed
interest rate investments, due primarily to the perception of investors
concerning certain proposed tax regulations and uncertainty over the direction
of long-term interest rates.

26
<PAGE> 30

Institutional Account assets under management grew by $0.3 billion, or 6%,
as a result of new accounts, additional sales to existing accounts and market
value increases during 1995. Average Institutional Account assets under
management were lower in 1995 due primarily to a reduction of $0.6 billion of
assets in May 1995 in connection with the transfer of certain accounts managed
for Xerox Life to OakRe, the effect of which was not fully offset by new
accounts, sales and market value increases until the end of the period. See
"Business--Investment Products--Institutional Accounts."

Revenues increased by $35.2 million, or 13.4%, from pro forma 1994,
primarily due to an increase in investment advisory fees. Investment advisory
fees for 1995 increased by $18.7 million, or 8%, over pro forma 1994, due
primarily to greater average assets under management, higher 12b-1 fees
collected on Class B and Class C share assets and increased sales of the Prime
Rate Trust. Investment advisory fees earned for managing the assets of
Institutional Accounts decreased by $1.4 million, or 14%, due to lower average
Institutional Account assets under management during 1995 and slightly lower
advisory fee rates during this period. Fees earned under the Common Sense
Arrangements totalled $21.6 million for the year ended December 31, 1995,
as compared to $17.5 million for the year ended December 31, 1994 (pro forma).

Revenue from the distribution of investment products increased
significantly in 1995 to $31.8 million, an increase of $14.9 million, or 88%,
over pro forma 1994, due primarily to $3.2 million of trading profits and
market value appreciation on the Company's UIT inventory, market value
appreciation in the Company's Fund investments of $3.1 million and an increase
of approximately $4.3 million of distribution revenue on sales of the Govett
Funds, primarily the Govett Smaller Companies Fund, under an arrangement
between the Company and the Govett Funds that began on October 1, 1994.

Operating expenses increased by $28.4 million, or 18%, over pro forma
1994, of which $11.8 million is attributable to combination-related costs of
the AC Acquisition. Compensation and benefits expense was $93.7 million in
1995, $7.7 million, or 9.0%, more than pro forma 1994, due primarily to annual
salary increases, the additional costs and personnel expense attributable to
ACCESS and the effect of combination-related costs of approximately $3.7
million, $2.4 million of which was related to the elimination of redundant
international asset management capabilities, while the remainder was primarily
related to severance costs. ACCESS's compensation and benefits expense and
reimbursements for 1995 grew nearly $2.6 million as compared to pro forma 1994.
Amortization of deferred Company funded distribution costs was $50.2 million
for 1995, $6.4 million, or 15%, more than pro forma 1994, due principally to
sales of the Prime Rate Trust, which resulted in approximately $4.8 million
more in annual amortization expense in comparison to pro forma 1994.
Reimbursements for 1995 were greater than pro forma 1994 due to higher levels
of Fund assets for which services were provided and ACCESS's appointment as the
transfer agent for all of the Open End Funds.

Operating income for 1995 increased by $6.7 million, or 7%, over pro
forma 1994.

Interest and acquisition expenses increased by $6.3 million due to higher
interest rates, which were partially offset by lower average borrowings under
the Company's secured credit facility.

Income from continuing operations before taxes and extraordinary item
increased by $0.4 million in 1995 over pro forma 1994, largely due to higher
operating income, which was partially offset by the increase in interest and
acquisition expenses.

27
<PAGE> 31
Historical 1995 Compared to Historical 1994

The consummation of the AC Acquisition at the end of 1994 was the primary
factor underlying the changes in the Company's results of operations in 1995
compared to 1994 on a historical basis. Operating income for 1995 increased
significantly to $107.1 million, or $60.3 million more than in 1994. Revenues
for 1995 were $297.7 million, or $149.5 million more than in 1994. Operating
expenses for 1995 were $190.6 million, or $89.2 million greater than in 1994.

Interest and acquisition expenses were $61.4 million in 1995, compared to
$29.7 million for 1994. Such increase was due to financing costs and the
amortization of excess of cost over fair value of net assets acquired incurred
in connection with the AC Acquisition.

Historical 1994 Compared to Historical Combined 1/1/93 to 2/16/93 and
2/17/93 to 12/31/93

Fund assets under management increased by $14.5 billion, or 85%, from
December 31, 1993 to December 31, 1994, due primarily to the AC Acquisition in
December 1994, which increased the Open End Fund assets under management by
$15.5 billion and Closed End Fund assets under management by $0.4 billion.
Excluding the effect of the AC Acquisition, Fund assets under management
decreased by $1.4 billion, or 8%, primarily as a result of a negative market
value adjustment of approximately $2.0 billion in the amount of fixed income
Fund assets under management, due principally to rising long-term interest
rates. The Company believes that these rising interest rates also resulted
in slightly higher redemptions in the Funds of $1.4 billion in 1994 compared
to $0.9 billion in 1993.

Institutional Account assets under management decreased by $1.4 billion,
or 20%, at the end of 1994 compared to the end of 1993, due primarily to market
value decreases and the loss of two accounts in December 1994, which totaled
approximately $0.6 billion. Despite the decrease at year end, average
Institutional Account assets under management during 1994 remained higher than
in 1993.

Revenues for 1994 increased $2.4 million, or 2%, from 1993. Investment
advisory fees increased by $15.6 million, or 14%, due principally to an increase
in average assets under management and higher average investment advisory fee
rates which was partially offset by a decrease in revenue from the distribution
of investment products. Investment advisory fees earned for managing Fund assets
were $118.6 million in 1994, an increase of $14.2 million over 1993 which was
caused mainly by higher 12b-1 fees. Such increase was achieved despite a net
$2.0 billion negative market value adjustment on Fund assets in 1994, which
represented a reduction of investment advisory fee revenue of approximately
$11.6 million on an annualized basis. Investment advisory fees earned for
managing the assets of Institutional Accounts (including the Xerox Life
accounts) was $10.7 million in 1994, $1.4 million more than during 1993.

Revenue from the distribution of investment products was $14.3 million in
1994, a decrease of $12.2 million compared to 1993, principally as a result of
lower UIT and Fund sales and market value losses recorded on the Company's
inventory positions and investments in the Funds. The Company believes that
these decreases resulted primarily from rising interest rates during 1994
coupled with general uncertainty over the future direction of interest rates,
which slowed demand for UITs and Funds, resulting in lower sales, and
significantly negatively affected the Company's trading profits and its
investments in the Funds. Declining bond market values caused by the rising
interest rates accounted for approximately $0.5 million in market value losses
on the Company's trading inventory and Fund investments during 1994.

28
<PAGE> 32

Operating expenses for the year ended December 31, 1994 increased by $7.1
million, or 8%, over 1993, due primarily to greater amortization of deferred
Company funded distribution costs and increased compensation and benefits.
Compensation and benefits expense for 1994 increased by $1.8 million, or 4%,
over 1993, due to increased personnel in the marketing, wholesaling, portfolio
management and research areas. Amortization of deferred Company funded
distribution costs grew by $6.9 million, or 31%, over 1993, due to Closed End
Fund sales of approximately $1.2 billion in 1993 and Fund Class B share sales
of approximately $0.8 billion in 1993 and $0.4 billion in 1994.

Operating income for 1994 was $46.8 million, a decrease of $4.7 million, or
9%, from 1993.

Interest and acquisition expense increased by $4.2 million primarily as a
result of the full year impact in 1994 of the VKM Acquisition (which occurred
in February 1993) and an increased interest rate applicable to the Company's
borrowings.

Income from continuing operations before taxes and extraordinary item
decreased by $8.9 million for 1994, due primarily to increases in interest and
acquisition expense, and the decrease in operating income.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of liquidity during the first three months of
1996 and each of the years ended December 31, 1995 and 1994 was cash generated
from operations, which totalled $28.2 million (including $7.8 million in cash
proceeds from the sale of ACC), $156.1 million and $46.8 million, respectively.
Cash from operations permitted the Company to prepay $70 million of long-term
debt in 1995, fund the Company's working capital needs and finance its capital
expenditures, including the funding of deferred Company funded distribution
costs. The Company's cash flow from operations during the first three months
of 1996 also funded the payment in the first quarter of 1996 of approximately
$20 million in annual employee bonuses earned during 1995.

The Company incurred substantial indebtedness in connection with the VKM
Acquisition and the AC Acquisition. As of March 31, 1996, the Company had
outstanding $440 million of indebtedness (excluding $47.7 million of
collateralized borrowings of Van Kampen American Capital Distributors, Inc.
("VKAC Distributors"), VKAC's broker-dealer subsidiary, consisting of $150
million in the form of the Company's 9.75% Senior Secured Notes due 2003 (the
"Notes") and $290 million in borrowings pursuant to the Company's secured
credit facility, $250 million of which was outstanding under a term loan
facility and $40 million of which was outstanding under a $100 million
revolving credit facility. The revolving credit facility is available to meet
the ongoing working capital and business needs of the Company.

In 1995, the Company prepaid $70 million under the term loan facility, and
in March 1996 it prepaid an additional $40 million under the term loan facility
with $40 million of borrowings under the revolving credit facility, of which
$10 million was repaid in May 1996. Pursuant to waiver agreements, the parties
to the secured credit facility agreed to waive the requirement that any
prepayments be applied in reverse order of maturity and permitted such
prepayments to be applied to fully prepay the 1996 and 1997 principal payments,
and to prepay $35 million of the $71.25 million 1998 principal payment. With
respect to the remaining $250 million borrowed under the term loan facility,
the Company must make principal payments of $36.25 million in 1998 and $71.25
million in each year thereafter through the year 2001. All amounts outstanding
under the revolving credit facility will become due upon the final maturity of
the term loan facility. The $150 million aggregate principal amount of the
Notes matures in 2003 with no prior scheduled mandatory repayments.

29
<PAGE> 33

VKAC's obligations under the secured credit facility and the Notes are
secured by all of the issued and outstanding capital stock of its significant
subsidiaries, and certain cash and other collateral of VKAC, including certain
stock of certain future subsidiaries. VKAC's obligations under the secured
credit facility and the Notes are also guaranteed by the Company, which
guarantees are secured by a pledge of the Company of all of the outstanding
stock of VKAC and certain other collateral of the Company. The Company's
secured credit facility and the indenture governing the Notes (the "Indenture")
contain various events of default, various affirmative and negative covenants,
including restriction on the ability of the Company to incur indebtedness,
incur liens and other encumbrances, pay dividends or make other restricted
payments, become liable on guarantees and other contingent obligations, enter
into agreements with respect to mergers or consolidations, sell or transfer
assets, make investments or capital expenditures, make acquisitions, make loans
and advances, enter into transactions with affiliates, create subsidiaries or
engage in new types of business, a negative pledge with respect to unencumbered
assets, and, in the case of the secured credit facility, certain net worth,
leverage and fixed charge coverage restrictions. The Company was in compliance
with these restrictions as of March 31, 1996.

VKAC Distributors also incurs certain additional short-term bank loans to
fund the purchase of securities related to the UIT business for such
subsidiary's inventories. The $47.7 million outstanding at March 31, 1996 is
payable on demand and bears interest at approximately 1/2% over the federal
funds rate. This loan is secured by VKAC Distributor's UIT trading inventory.

The Company believes that cash generated from operations and borrowing
resources will be adequate to permit the Company to meet both its debt service
requirements and working capital needs in the foreseeable future, including the
funding of anticipated levels of future commissions in connection with sales of
shares of Closed End Funds, Open End Funds and the Prime Rate Trust. The
Company also anticipates that the letters of credit and trading inventory
financing facilities provided to VKAC Distributors in connection with its
sponsorship of new UITs and the overnight financing of its trading inventory,
respectively, will remain available. However, no assurance can be given as to
the adequacy of such funds or continued availability of such facilities.

The Company is a holding company formed for the purpose of effecting the
VKM Acquisition and has no substantial independent operations. VKAC is a
services company which primarily provides administrative services to its
operating subsidiaries and virtually all of its revenues are derived from such
operating subsidiaries. Payment by VKAC of interest and principal due on the
Notes or under the Company's secured credit facility and payment of the
Company's obligations under its guarantees of VKAC's obligations are dependent
upon cash payments from their subsidiaries. This cash flow is effected through
the payment of dividends and intercompany service charges, as required by the
Company's secured credit facility.

The Company received approximately $7.8 million in cash from the sale of
ACC in January 1996, resulting in a pretax gain of $3.4 million.

In March 1996, certain members of senior management entered into letter
agreements with the Company pursuant to which they will each receive a payment
in the event they remain employed by the Company for two years following a
"change in control" of the Company (generally defined therein as the
acquisition by any person or group of 50% or more of the combined voting power
of the Company's outstanding voting securities) or, if their employment earlier
terminates after such a change of control, under certain limited circumstances.
The aggregate amount of such payments which may be made pursuant to such
letter agreements would be approximately $7.8 million. The Offerings will not
constitute a "change of control" under such letter agreements.

30
<PAGE> 34

EFFECT OF HEDGING AGAINST MARKET VALUE CHANGES IN UIT INVENTORIES

The Company's broker-dealer subsidiary, VKAC Distributors, regularly
purchases and holds in inventory for its own account securities to be deposited
in UITs and holds for sale primary and secondary UIT units. These inventory
positions are regularly marked to market, resulting in profit or loss. The
market values of securities and UIT units fluctuate. In addition, in
connection with a primary UIT offering, if securities are sold or deposited
with UITs at a price below VKAC Distributor's cost, VKAC Distributors will
incur a loss in respect of such difference. The Company uses United States
Treasury and municipal bond index futures contracts, which are types of
derivative financial instruments, primarily to hedge against market value
changes in its UIT trading inventory. Although it is the Company's policy to
protect its inventory through hedging, it does not hedge the entire inventory,
nor does hedging provide total protection against market value loss. The
Company's hedging activities in respect to its UIT inventories during the
periods ended March 31, 1996 and December 31, 1995, 1994 and 1993 have not had a
material impact on the Company's revenues.

IMPACT OF INFLATION

Although inflation has not had a material impact on the Company's business
during the last three fiscal years, the Company is not able to predict what
effect inflation will have on interest rates or the perception of future
changes in interest rates and on the continued attractiveness to investors of
Funds managed and UITs distributed by the Company. Changes in inflation may
affect the amount of assets under management and, thus, the Company's revenues
and profitability.

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including statements regarding,
among other items, (i) the Company's business strategy, including its intention
to develop and introduce new investment products, (ii) continued growth
resulting from the combination of VKM and American Capital, (iii) cash flow
sufficient to fund the Company's debt service requirements and working capital
needs, and (iv) anticipated trends in the Company's business and the investment
management industry. Forward-looking statements are typically identified by
the words "believe," "expect," "anticipate," "intend," "estimate" and similar
expressions. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
certain of which are beyond the Company's control. Actual results could differ
materially from these forward-looking statements as a result of the factors
described in "Risk Factors" including, among others, (i) changes in the
investment management industry as a result of economic or regulatory influences
or (ii) changes in the competitive marketplace, including new products and
pricing changes by the Company's competitors. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this Prospectus will in fact transpire. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only
as of their dates. The Company undertakes no obligation to publicly update or
revise any forward-looking statements.

31
<PAGE> 35
BUSINESS

OVERVIEW

The Company

The Company is a leading marketer and provider of investment advisory and
administrative services to Open End Funds, Closed End Funds, UITs and
Institutional Account clients, including retirement plans, endowments and
foundations, municipalities, hospitals, insurance companies, banks credit
unions, savings and loans, mutual funds sponsored by third parties and separate
account management for high net worth individuals. As of March 31, 1996, the
Company had more than $57 billion of assets under management and/or supervision,
including approximately $40 billion in 65 equity and fixed income Open End
Funds, 36 Closed End Funds and the Prime Rate Trust. The Company was formed
through the combination in December 1994 of VKM and American Capital, which was
founded in 1926 as one of the first investment management companies in the
United States. This transaction significantly expanded and upgraded the product
offering, distribution and service capabilities of both firms by (i) combining
American Capital's expertise and reputation in equity products and investor
services with VKM's expertise and reputation in tax-exempt and taxable fixed
income products and (ii) enabling each firm to cross-sell through the other
firm's major distributors, given the limited overlap between the two firms'
major distributors prior to the transaction.

The Investment Management Industry

The investment management industry represents one of the fastest growing
segments within the financial services industry, with assets under management
growing from $ 1,395.5 billion in 1991 to $ 2,820.4 billion in 1995. The
Company believes that this industry is likely to continue to grow as a result of
several favorable trends, including (i) the aging of the members of the "baby
boom" generation who are expected to increase their savings and investments as
they approach retirement and (ii) the implementation of corporate and
government cost containment programs that encourage individuals to be
responsible for their own retirement planning.

The two primary markets for the investment management services offered by
the Company are the mutual fund market and the institutional market. Mutual
fund assets have grown from $809.8 billion in 1991 to $1,888.6 billion in 1995,
a compounded annual growth rate of 23.6%. The mutual fund industry has become a
consumer business in which the key competitive factors are marketing strategy,
distribution expertise, product reliability and quality of service. The
traditional distribution channel for mutual funds is the sales-assisted
channel, which is distribution through retail distribution firms that are not
affiliated with the sponsor of the funds or through a captive sales force. The
number of mutual fund companies that market their mutual funds directly through
mail and telephone services and computer networks, often with a reduced or no
sales load has increased in recent years. As of March 31, 1996, approximately
43% of the total mutual fund assets under management in the United States were
in no load funds, and no load mutual funds have been growing more rapidly than
all other mutual funds over the past several years, although this was not the
case in 1995. Despite the recent success of the direct channel, the Company
believes that the sales-assisted channel will continue to represent a
significant percentage of sales in the industry, as investors who are presented
with an expanding menu of complex investment choices and information will
increasingly seek and rely on advice from knowledgeable investment
representatives. There can be no assurance, however, that disproportionate
growth in no load mutual fund sales or in the direct channel, or other changes
in mutual fund marketing practices, would not have a material adverse effect on
the Company's Fund sales.

The institutional market for investment management services includes
primarily corporate, government and labor union pension plans, charitable
endowments and foundations and corporations purchasing investment management
services for their own account. The institutional market is highly

32
<PAGE> 36

fragmented and key competitive factors for success are investment
performance track record, focused marketing and client service. The
proliferation in recent years of private defined contribution pension plans is
expected to fuel increased demand for investment programs designed for 401(k)
plans and other investment vehicles. Due to its in-house transfer agent
capabilities, strong support services and broad Fund product offerings, the
Company believes that it is well-positioned to participate in the projected
growth of the retirement fund market.

Business Strategy

Fund assets under management for the Company (as if VKM and American
Capital were combined as of 1991) have grown at a compound annual rate of 13.6%
from December 31,1991 to December 31, 1995, which the Company attributes to
the rapid growth of the mutual fund industry generally and investors' and
distributors' confidence in the Company's products, services and investment
philosophy. Such confidence has led to what the Company believes are lower
than average Fund redemption rates.

The Company's business strategy is comprised of the following key
components:

* Diversified Product and Asset Base. The Company sponsors Open End Funds and
Closed End Funds, including four equity Funds and four fixed income
Funds each of which has assets of more than $1 billion, and more than 2,500
series of tax-exempt, taxable and equity UITs, making it one of only three
mutual fund complexes today with a major presence in all three of these
areas. In addition, the Company sponsors the Prime Rate Trust which has
grown from $1.0 billion at December 31, 1991 to $4.4 billion at March 31,
1996 and is the largest of only five mutual funds in the United States that
invest primarily in floating or variable rate senior loans. These investment
products give the Company one of the most extensive product lines in the
investment management industry. Approximately 36% of the Fund assets under
management consist of equity securities, 30% consist of tax-exempt fixed
income securities, 23% consist of taxable fixed income securities and 11%
consist of floating or variable senior rate loans. By providing a wide
spectrum of clearly-defined risk/return options in its Funds, the Company's
investment products offer both distributors and investors a broad "family of
funds" to satisfy the full range of their investment product needs. The
Company believes that its comprehensive product line, together with its
broad-based and balanced distribution network, has positioned the Company to
achieve stability in assets and earnings and limits the Company's exposure
to a market downturn in any one particular product or asset category.

* Extensive and Established Distribution Relationships. Today an investor can
buy the Company's investment products from an investment broker in
virtually any city in the United States. The Company has developed
significant distribution relationships with almost every major securities
distributor in the United States, including national and regional securities
firms (28% of 1995 sales), financial planners (25% of 1995 sales), banks
(24% of 1995 sales), and global securities firms (23% of 1995 sales). The
Company's products are distributed through more than 2,400 Retail
Distribution Firms, representing more than 100,000 investment brokers. The
Company has a "proprietary vendor" relationship with Smith Barney and has
become a "preferred vendor" to a number of major distribution firms,
including PFSI, a broker-dealer affiliate of Travelers, E.D. Jones, A.G.
Edwards & Sons, Inc., Prudential Securities Incorporated, PaineWebber
Incorporated, Merrill Lynch and SunAmerica. PFSI is also the sponsor,
exclusive distributor and servicer of the Common Sense Funds. The Common
Sense Funds, which had assets of $4.5 billion as of March 31, 1996, are sold
exclusively through a distribution network of more than 20,000 PFSI sales
representatives located in communities throughout the United States. The
Company believes that it has created one of the industry's largest and most
effective sales forces with more than 100 wholesalers and sales

<PAGE> 37

associates who are responsible for marketing the Company's products and
services to Retail Distribution Firms across the United States.

* Disciplined and Consistent Investment Philosophy. The Company is recognized
as a highly disciplined asset manager seeking to achieve consistent
superior long-term investment results within defined risk profiles through a
fully invested asset management approach. The Company's investment
philosophy is based on the view that distributors and investors desire
consistent, long-term, above average performance within chosen risk
profiles. Following the acquisition of American Capital in December 1994,
the Company adopted the specific goal of achieving long-term performance
rankings in the first quartile of all comparable rated funds by achieving
annual performance in at least the second quartile.

* Focus on Growth Opportunities. The Company continually explores
opportunities to expand its investment product offerings in higher
growth areas. In recent years, the Company (i) has established the
infrastructure necessary to package the Funds into investment programs for
401(k) plans and other retirement vehicles, and is aggressively marketing
these programs; (ii) has developed competitively priced variable annuity
programs and expanded its equity UIT offerings to target specific market
niches; and (iii) has created a number of new Funds directed at specific
market segments, such as the Van Kampen American Capital Aggressive Growth
Fund, an aggressive growth fund that the Company launched in May 1996. The
Company devotes considerable resources to developing new investment products
to respond to changing market conditions.

* Superior Customer Service. The Company also devotes considerable resources
to providing superior service to its customers. To this end, the
Company has (i) completed significant investments to establish full
service systems; (ii) trained a skilled managerial and employee base; and
(iii) implemented procedures and controls to monitor service quality. The
Company's outstanding customer service performance has been recognized by
DALBAR, an independent mutual fund research organization, which awarded the
DALBAR Quality Tested Service Award to American Capital for each of the five
years prior to the Company's acquisition of American Capital and to the
combined Company for 1995. In 1995, only six other mutual fund complexes
received this award, and only one other mutual fund complex has received the
award for each of the past six years.

INVESTMENT PRODUCTS

The following tables show net assets under management and/or supervision
as of March 31, 1996 and December 31, 1995, 1994, 1993, 1992 and 1991 for the
Funds, Institutional Accounts and UITs:

<PAGE> 38

NET ASSETS UNDER MANAGEMENT AND/OR SUPERVISION

<TABLE>
<CAPTION>
December 31,
March 31, -------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- --------- ------- ------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Assets under management and/or under supervision:
(1) Equity..................................... $ 14,211 $ 13,156 $ 9,504 $ 178 $ 29 $ 28

Taxable fixed income........................... 9,032 9,409 9,410 5,339 4,804 4,172
Tax exempt fixed income........................ 11,901 12,180 10,905 10,451 7,206 4,195
Prime Rate Trust............................... 4,427 3,686 1,628 1,018 953 1,019
-------- -------- ------- ------- ------- -------
Total Funds................................ 39,571 38,431 31,447 16,986 12,992 9,414
Institutional Accounts......................... 5,849 5,610 5,285 6,676 5,554 4,293
-------- -------- ------- ------- ------- -------
Total assets under management.............. 45,420 44,041 36,732 23,662 18,546 13,707
Unit investment trusts......................... 11,900 12,400 12,900 14,800 15,500 16,600
-------- -------- ------- ------- ------- -------
Total assets under management and/
or supervision........................... $ 57,320 $ 56,441 $49,632 $38,462 $34,046 $30,307
======== ======== ======= ======= ======= =======
Open End Funds................................. $ 27,633 $ 27,023 $22,777 $ 8,451 $ 6,919 $ 5,940

Prime Rate Trust............................... 4,427 3,686 1,628 1,018 953 1,019
Closed End Funds............................... 7,511 7,722 7,042 7,517 5,120 2,455
-------- -------- ------- ------- ------- -------
Total Funds................................ 39,571 38,431 31,447 16,986 12,992 9,414

</TABLE>

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

(1) Does not include the assets of the Govett Funds, which had $543.7
million in assets as of March 31, 1996 and for which the Company acts as
the exclusive U.S. distributor.

The Funds

The Company serves as investment adviser and/or distributor for a "full
family" of more than 100 Funds, consisting of 65 Open End Funds, 36 Closed End
Funds and the Prime Rate Trust. Fund assets under management totalled $39.6
billion at March 31, 1996 and are invested in equity, tax-exempt fixed income
taxable fixed income, securities and floating or variable rate senior loans.
Investment objectives span the entire spectrum of risk profiles.

Open-end funds are actively managed funds that continuously offer new
shares to the public, allowing investors to purchase and redeem shares at
prices based on the net asset value of the fund's portfolio. Shares of
open-end funds are generally redeemable at any time and are generally not
traded in the secondary market. The Company offers one of the broadest
families of open-end funds in the industry--including equity funds, tax-exempt
and taxable fixed income funds, as well as global and international funds--with
portfolios designed to meet the needs of almost every category of investor.
The Company offers Open End Fund shares to investors through three alternative
share classes. See "--Marketing and Distribution of Investment
Products--Distribution."

Closed-end funds generally have actively managed portfolios but do not
continuously offer to sell and redeem their securities. The Company is one of
the three largest issuers of closed-end funds, with its 36 Closed-End Funds
invested primarily in both tax-exempt and taxable fixed income securities. A
majority of the Closed-End Funds seek a high level of current income consistent
with preservation of capital. All of the Closed End Funds have a moderately
"leveraged" capital structure; these Closed End Funds issue preferred stock
that generally pays dividends at rates that approximate short-term interest
rates, while the capital raised by the sale of the preferred stock is invested
by the Closed End Funds in longer-term fixed income securities. Closed End
Fund common shares are not redeemable, but rather are in most cases traded in
the secondary market, generally on a stock exchange.

<PAGE> 39

The Prime Rate Trust, which was introduced in October 1989, is one of the
Company's most successful products, with approximately $4.4 billion in assets
as of March 31, 1996. The Prime Rate Trust is the largest of only five mutual
funds in the United States that invest primarily in floating or variable rate
senior loans. Although classified as a closed-end fund, the Prime Rate Trust
is continuously offered and, as the shares are not publicly traded, provides
liquidity through periodic tender offers when authorized by its Board of
Trustees. In an effort to provide investors with a high level of current
income, consistent with preservation of capital, the Prime Rate Trust seeks to
achieve, over time, an effective yield which approximates the average published
prime rate of major U.S. banks, by investing primarily in floating or variable
rate senior loans to U.S. corporations, partnerships and other entities that
operate in a variety of industries and geographical regions. Although the
Prime Rate Trust's net assets will vary, its policy of acquiring interests in
floating or variable rate senior loans is intended to minimize fluctuations in
its net asset value which may result from changes in interest rates. The Prime
Rate Trust is diversified with holdings of 208 issues spread across 21
industries.

The Company continues to devote resources to the development of new types
of funds. Examples of such initiatives include the Company's Luxembourg-based
Navigator Funds launched in 1995, which are global equity and fixed income
Funds for international investors, four new equity Open End Funds created by
the Company in 1995, the Explorer Institutional Funds, which are targeted to
institutional investors and were created by the Company in 1995, the
Van Kampen American Capital Aggressive Growth Fund launched by the Company in
May 1996, the addition of new portfolios to the Van Kampen American Capital
Life Investment Trust (an Open End Fund sold only to insurance companies to
fund benefits under variable annuity or variable life insurance policies) and
the Company's negotiations with an AAA-rated insurance company to distribute
newly designed fixed and variable annuity contracts. However, there can be no
assurance that the Company's strategy will be successful or that changing
market conditions will not have a negative impact on sales of the Company's
investment products.

Fund Investment Advisory Fees

Investment Management Fees. The Company provides investment advisory
services to the Funds, pursuant to investment advisory agreements, and receives
fees based on the applicable Fund's average daily or weekly net assets. As of
March 31, 1996, no Fund other than the Prime Rate Trust accounted for more than
10% of the total Fund net assets under management. The investment advisory
agreements are approved by Fund shareholders and their continuance must be
approved annually by the trustees of the respective Funds, including a majority
of the trustees who are not "interested persons" of such Fund, as defined in
the Investment Company Act. Amendments to such agreements must be approved by
Fund shareholders. Each agreement may be terminated without penalty by either
party upon 60 days' written notice, and terminates automatically upon its
assignment. Generally, the Company's investment management fee schedules in
respect of the Funds provide for fees based upon a percentage of net assets
ranging from 0.24 to 1.00 of 1% per annum in the case of fixed income Open End
Funds, from 0.35 to 1.00 of 1% per annum in the case of equity Open End Funds
and from 0.48 to 0.95 of 1% per annum in the case of the Closed End Funds.
The combined investment management fees and administrative fees (discussed
below) for certain of the Closed End Funds are higher than the fees paid by
many closed-end funds, although they are comparable to fees paid by some
closed-end funds with similar investment objectives. Most of the Open End
Fund investment management fee schedules provide for reductions in the fee rate
at specified asset levels. In addition, the Company may, from time to time,
waive all or a portion of its investment management fee for a Fund and assume
expenses of such Fund to assist smaller Funds in attaining a critical mass or
to achieve certain other objectives. In 1995, the Company waived $2.6 million
in investment management fees. Such waivers and expense assumptions, which the
Company makes from time to time, have not had a significant negative effect on
the Company's revenues and have contributed to building the Company's assets
under management and broadening its product line.

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<PAGE> 40

Administrative Fees. The Company provides administrative services to most
of the Closed End Funds pursuant to administrative agreements and receives
administrative fees based on each such Fund's average daily or weekly net
assets ranging from 0.20 to 0.25 of 1%. From time to time, the Company may
enter into arrangements with sub-administrators to provide all or a portion of
such administrative services with respect to certain Funds in exchange for all
or a portion of such administrative fees. In addition, the Company provides
certain services to the Funds, including shareholder services, transfer agency
services, legal services, accounting services and pricing services, at cost or
cost plus a fixed profit. Each Fund bears almost all expenses associated with
its operation and the issuance and repurchase or redemption of its securities,
except for the compensation of trustees affiliated with the Company and
officers of the Fund who are interested persons of the Company or its
subsidiaries.

Reimbursement of Distribution Expenses. The Company also receives
reimbursement (i.e., 12b-1 fees) pursuant to a Rule 12b-1 distribution plan
from each Open End Fund (except the Van Kampen American Capital Life Investment
Trust) for certain distribution expenses, including reimbursement of
commissions paid to unaffiliated broker-dealers selling Class B and Class C
shares of Open End Funds via the Company Funded Load Structure. This
distribution reimbursement is 0.75 of 1% per annum of average daily assets
under management with respect to such Funds.

Institutional Accounts

Institutional asset management is a highly competitive and fragmented
business that requires a successful track record, often at least five years,
and a minimum threshold of assets under management to gain broad market access.
The Company began managing assets for Institutional Accounts in 1987 and
currently manages $5.6 billion of assets for 90 Institutional Accounts as of
March 31, 1996. In the institutional market, the Company concentrates on fixed
income asset management, and leverages already existing resources and expertise
such as portfolio management, research and administrative capabilities.

The Company began its institutional asset management business by managing
assets generated by the sales of fixed and variable annuities sold by
affiliates of Xerox Financial, which were affiliated with the Company prior to
the VKM Acquisition. Through May 1995, Institutional Accounts consisted
predominantly of Xerox Life accounts. However, during the second quarter of
1995, substantially all of the assets in the Xerox Life accounts were
transferred to OakRe, a subsidiary of Xerox Corporation, in connection with the
sale of Xerox Life by Xerox Financial. Concurrent with such transfer, the
Company entered into an investment advisory agreement with OakRe. At
December 31, 1995, assets under management in the OakRe account and remaining
Xerox Life accounts were $2.7 billion, compared to $3.5 billion for the Xerox
Life accounts at December 31, 1994. The Company expects the assets under
management in the OakRe and Xerox Life accounts to continue to decline as such
assets are used to fund scheduled maturities of OakRe and Xerox Life's
obligations under fixed annuity contracts.

Over the past five years, Institutional Account assets under management
have grown from approximately $4.3 billion for 24 Institutional Accounts at
December 31, 1991 to approximately $5.9 billion for 90 Institutional Accounts
at March 31, 1996. At March 31, 1996, approximately $ 0.8 billion of
Institutional Account assets were in six mutual funds sponsored and distributed
by two institutions and for which the Company serves as investment sub-adviser.
The following table shows the number of Institutional Accounts and level of
assets managed by the Company for the three months ended March 31, 1996 and the
years ended December 31, 1995, 1994, 1993, 1992 and 1991:

37
<PAGE> 41

<TABLE>
<CAPTION>
INSTITUTIONAL ACCOUNTS
Three Months Ended Year Ended December 31,
March 31,
1996 1995 1994 1993 1992 1991
--------------- -------- ------- --------- ------- -------

(In millions, except for number of accounts)
<S> <C> <C> <C> <C> <C> <C>
Number of accounts................... 90 75 57 38 24
Assets under management:
Xerox Life and OakRe accounts..... $ 2,700 $ 3,460 $ 4,046 $ 3,879 $ 3,468
Other accounts..................... 2,910 1,825 2,669 1,713 825
------- ------- ------- ------- -------
Total Institutional Account
assets under management............ $ 5,610 $ 5,285 $ 6,715 $ 5,592 $ 4,293
======= ======= ======= ======= =======
</TABLE>

Investment Management Fees - Institutional Accounts. The Company provides
investment advisory services to its Institutional Accounts pursuant to
investment advisory agreements and receives management fees based on each
account's average monthly or quarterly net assets. Institutional Account
assets under management increased slightly in 1995 as a result of new accounts
and additional sales, as well as market value increases during 1995, although
investment management fees earned for managing the assets of Institutional
Accounts decreased in 1995 compared to pro forma 1994. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Unit Investment Trusts

The Company began to sponsor and market UITs in 1976, has become a
recognized industry leader in the UIT business and is one of the three major
market participants in this product category. The Company has deposited over
$26.7 billion in UITs through March 31, 1996 in over 3,000 separate series, and
as of March 31, 1996, the Company provides evaluation and credit surveillance
services for $11.9 billion of UITs in over 2,500 separate series, representing
approximately 470,000 unitholders. The Company sponsors UITs backed by
government securities portfolios, insured and uninsured corporate and municipal
debt securities portfolios, global fixed-income securities portfolios and equity
securities portfolios. In recent years, the industry has experienced
substantial growth in equity UIT products. The Company has recently begun to
leverage the equity management capabilities acquired in connection with the AC
Acquisition to enhance the Company's UIT product line. In 1995, equity UITs
constituted 23% of the Company's UIT issuances, more than double compared to
1994. Based on cumulative assets deposited, the Company believes that it has
sponsored more insured municipal UITs than any other sponsor in the United
States.

Each UIT consists of a fixed portfolio of investment securities selected
and purchased by the Company and deposited in a trust with an unaffiliated
trustee. Units of undivided beneficial interest in the portfolio are sold to
investors at a price equal to the per unit market price of the investment
securities deposited in the trust plus a sales charge. UIT portfolios are not
actively traded and once the

38
<PAGE> 42

initial portfolio is deposited, investment securities can be sold only for the
purpose of raising cash to pay for units that have been redeemed or pursuant to
the Company's credit surveillance program. No new investment securities may be
added, and investment securities may be exchanged or substituted only under
extremely limited circumstances. Units are generally redeemable at any time,
but are more typically resold in the secondary market.

The Company believes that UIT products are important to the Company
because they (i) complement its Fund products in offering Retail Distribution
Firms a wide variety of investment options, (ii) provide convenient vehicles
through which the Company can capture favorable market conditions and trends
and (iii) generate the majority of their cash receipts at the time units are
sold, thereby balancing the cash flow profile of the Company's Fund sales. The
Company has also actively facilitated reinvestment of interest and principal
distributions from the UITs into the Funds. In 1995, this program directed
approximately $112 million of additional assets into the Company's Open End
Funds.

Recently, the Company expanded its UIT product line by forming joint
ventures with several of its customers, including E.D. Jones, to create
"private label" trusts. These ventures combine the administrative, marketing,
and sales expertise of VKAC with the research capabilities of selected firms to
provide UITs exclusively for the brokers and investors of those firms. In
1995, sales in these UITs totaled $115 million. Substantially all of the firms
that have participated in these ventures have significantly increased their
level of UIT business with VKAC, several of which have more than doubled their
1994 sales levels.

The Company markets the UITs through sales representatives associated with
Retail Distribution Firms. See "--Marketing and Distribution of Investment
Products--Distribution." Such of these firms that underwrite a minimum number
of units of certain UITs may also share 50% of the acquisition profit relating
to such UIT, if any, on a pro rata basis among all underwriters of that UIT
(including the Company). The Company may also negotiate additional
compensation for managing underwriters of particular UITs in certain
circumstances.

In connection with the accumulation of securities for deposit into newly
created UITs, the Company attempts to manage its exposure to interest rate
fluctuations by, among other practices, attempting to match inventory levels to
the rate of sales of various types of UITs and by hedging and by scheduling
accumulation and deposit so as to meet anticipated demand. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Effect of Hedging Against Market Value Changes in UIT Inventories."
The Company also maintains a secondary market in units of many of the UITs
sponsored by it, generally buying units at a price equal to their redemption
value (equal to the per unit "bid" side market price of the securities in the
UIT) and selling them to other dealers and financial intermediaries at a price
equal to the per unit "bid" side market price of the investment securities in
the trust plus a sales charge based on the respective UIT's dollar weighted
average maturity and less a dealer concession. The Company, like any other
unitholder, can also tender units it holds to the UIT trustee for redemption at
their redemption value.

UIT Evaluation and Surveillance Cost Reimbursement. The Company provides
ongoing evaluation and credit surveillance of the investment securities in the
UITs. The Company is reimbursed at no more than its costs in providing these
services, as required by applicable law.

PORTFOLIO MANAGEMENT AND RESEARCH

Investments for the Funds are made by the Company's portfolio managers.
The majority of the Company's portfolio managers have devoted most of their
professional careers to the fixed income and equity securities markets and have
significant experience in financial analysis, research and surveillance,
institutional sales and/or securities trading.

<PAGE> 43

The Company's investment philosophy is based on the view that distributors
and investors desire consistent, long-term, above average performance within
chosen risk profiles. Following the AC Acquisition, the Company's specific goal
is to achieve long-term performance rankings in the first quartile of all
comparable rated funds by achieving annual performance in at least the second
quartile. The Company believes that these investment results can be attained
through portfolio diversification, full investment and research-based security
selection, and has developed a highly disciplined and institutionalized
investment process across its entire spectrum of Funds to implement the
Company's investment philosophy. This process involves the creation of benchmark
portfolios and indices which represent the appropriate risk/reward profile of
each Fund and includes extensive monitoring and measuring of actual portfolios
relative to the benchmark. The Company strives for stable and consistent
performance (within the risk/reward profile of each Fund) over long periods of
time and avoids market timing or sector weighting strategies which lead to
volatility in returns. The Company's investment process is bolstered by a
team-oriented, interactive approach and is supported by a staff of over 70
professionals--equally divided between portfolio managers and research analysts.
A portfolio manager's incentive compensation is based in part upon his or her
ability to maintain his or her fund within its designated risk/reward profile.
The Company believes that its large and experienced research department enables
it to respond more quickly to developments in the securities markets and to
engage in a more thorough analysis of prospective investments than many of its
competitors.

The equity investment process consists of two major components. The first
component involves the use of quantitative analysis and techniques. These
tools are used to identify appropriate risk profiles and construct benchmark
model portfolios for each fund. The second component involves traditional
qualitative, fundamental analysis by the portfolio manager, who exercises
considerable discretion in selecting securities for the Fund. The portfolio
managers, however, must maintain an overall portfolio profile consistent with
the characteristics and diversification of the fund's model portfolio.
The Company attempts to fully invest Fund assets at all times, with Standard
& Poors' 500 Index futures being utilized when necessary to maintain market
exposure. The portfolios are continuously monitored by senior management of
the equity division for compliance with designated fund benchmarks.

The Company believes it utilizes a unique approach in conducting its
municipal research that enhances the investment decision-making process.
Traditionally, research analysts are assigned responsibility for one sector of
the municipal market or one region of the country. The Company, however,
requires analysts to develop their expertise on two fronts: in addition to
their specific industry sectors, analysts are responsible for monitoring and
analyzing the political, social and economic trends and issues pertaining to a
particular region of the country. In addition, the Company's research
department conducts original issue research, utilizing such sources as
independent review of market and issuer activities, issuer-prepared information
and publicly available information.

The Company pursues a disciplined value-added approach to active fixed
income management of Institutional Account assets. The Company limits its
dependence on interest rate timing and seeks to control the risk/return profile
of client portfolios with the objective of consistently outperforming either
the widely followed fixed income investment performance benchmarks such as the
Lehman Brothers Government/Corporate Index, or benchmarks established by the
client. On an annualized basis (in each case since the Company began managing
assets of Institutional Accounts, both before and after subtracting advisory
fees and other expenses) the total return on Institutional Accounts managed by
the Company has generally exceeded the applicable investment index.

<PAGE> 44

MARKETING AND DISTRIBUTION OF INVESTMENT PRODUCTS

Distribution

To market its investment products, the Company has developed significant
distribution relationships with almost every major securities distributor in
the United States. The Company's products are distributed through more than
2,400 Retail Distribution Firms, representing more than 100,000 investment
brokers. Today an investor can buy the Company's investment products from an
investment broker in virtually any city in the United States. The Company
seeks to develop close working relationships with both the home office of each
Retail Distribution Firm and with the individual broker. The Company has made
a concerted effort to diversify its distribution system by developing a strong
presence in all four major distribution channels, creating a significant scale
of distribution which the Company believes provides the foundation for
continued growth of investment product sales and assets under management. In
addition, the combination of VKAC's and American Capital's distribution
networks has positioned the Company to strengthen significantly its
relationships with a number of Retail Distribution Firms. Prior to the AC
Acquisition, there was limited overlap between VKAC's and American Capital's
respective top twenty Retail Distribution Firms (by sales). In 1995,
distribution by channel of the Company's investment products were set forth
below:

<TABLE>
<CAPTION>
Channel of Distribution Percentage of 1995 Sales
----------------------- ------------------------
<S> <C>
National and regional securities firms(1)...... 28%
Financial planners............................. 25%
Banks.......................................... 24%
Global securities firms(2)..................... 23%
</TABLE>

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

(1) Includes firms such as E.D. Jones and A.G. Edwards & Sons, Inc.

(2) Includes firms such as Smith Barney and Merrill Lynch.

The Company employs a sales force of over 100 wholesalers and sales
associates to develop and maintain close working relationships with both the
home office and individual brokers of each of its Retail Distribution Firms.
Wholesalers are regionally-based, full-time employees of the Company whose
primary responsibility is to market the Company's products and services to the
Retail Distribution Firms' individual brokers. The Company believes its
wholesaler force, which has a low turnover rate, to be among the largest in the
industry. The Company markets and services the Company's 401(k) and
retirement plan business through its retirement plan consultants. The Company
believes that the depth and quality of its sales force is an important asset.

The Company views its relationships with its Retail Distribution Firms as
one of its major strengths. These relationships have enabled the Company to
achieve significant levels of investment product sales and assets under
management. The Company builds and maintains its distribution relationships by
providing sales representatives with a wide variety of investment products,
product education, sales assistance, customer service and marketing support
designed to enhance the business of the Retail Distribution Firms and their
sales representatives as well as to enhance the attractiveness and convenience
of the Funds and UITs. Ten Retail Distribution Firms accounted for
approximately 43% of Fund sales volume for 1995. The largest distributors of
the Funds are Smith Barney and PFSI, both wholly owned subsidiaries of
Travelers, which together accounted for approximately 16.5% of Fund sales in
1995.

<PAGE> 45

As more fully described below under "--Marketing and Distribution of
Investment Products--Proprietary and Preferred Distribution Relationships," the
Company expects to continue to maintain and benefit from its relationships with
Smith Barney and PFSI through certain distribution arrangements which generally
provide that all of the Funds and the Govett Funds will receive proprietary
status in the Smith Barney distribution system and preferred status in the PFSI
distribution system through December 20, 2001.

Through the Company's acquisition of transfer agent and trust company
capabilities as part of the AC Acquisition and through its negotiation of an
arrangement with DST Systems, Inc. to provide the Company with low-cost
processing of orders, the Company has established the infrastructure necessary
to package the Funds into investment programs for 401(k) plans and other
retirement vehicles, and is aggressively marketing these programs through the
Retail Distribution Firms. The Company believes that significant
opportunities exist to increase its 401(k) and retirement plan business among
small- to medium-sized companies, and that its distribution network could be an
effective channel to reach such companies. The Company currently offers a
turn-key 401(k) program, which includes a broad family of Funds and a
management style consistent with the goals of retirement plan investments.
This program allows plans with a certain level of assets or number of eligible
employees to purchase Fund shares at net asset value.

The Company currently offers Open End Fund shares generally through three
alternative share classes to investors, each utilizing a different mechanism
for the investor's payment of a sales charge:

Class A Shares. Class A shares are offered at the Open End Fund's net
asset value plus an up front sales charge of a percentage of the public
offering price of the Fund generally ranging up to 5.75% in the case of
equity Funds and up to 4.75% in the case of fixed income Funds (of which
the Company generally receives between 0.25% and 0.75%), with a reduced load
for volume purchasers.

Class B Shares. All of the Open End Funds (other than the Van Kampen
American Capital Life Investment Trust) also offer Class B shares and
utilize the Company Funded Load Structure for these shares. The Company
pays Retail Distribution Firms at the time of the sale of Class B shares an
amount between 3.0% to 4.0% of the Fund's then current net asset value.
These Funds do not impose a sales charge upon the purchase of Class B
shares but impose a sales charge on redemption (a "back end load") which is
between 3.0% and 5.0% of the amount redeemed during the first year
following purchase, and declines on a graduated basis to 0% over specified
periods thereafter. In addition, each Open End Fund has adopted a Rule
12b-1 distribution plan which, subject to applicable law, reimburses the
Company for the payment of the commissions to Retail Distribution Firms
through the payment of a periodic asset-based sales charge (i.e., a 12b-1
fee of 0.75% of average daily net assets). The sale of these Class B
shares does not create distribution revenue for the Company at the time of
sale. Class B shares currently convert to Class A shares after six or
seven years, although Class B shares sold on or after June 1, 1996 will
convert to Class A shares after eight years.

Class C Shares. All of the Open End Funds (excluding money market
funds) also offer Class C shares, which are not subject to a sales
charge upon their purchase but with respect to which a sales charge is
imposed of 1.0% of any amount redeemed during the first year following
purchase. Class C shares redeemed after the first year thereafter are
not subject to a sales charge. The Company pays Retail Distribution
Firms at the time of the sale of Class C shares 1.0% of the Fund's
then current net asset value. In addition, after the first anniversary
of the purchase of any Class C Shares, Retail Distribution Firms
generally are paid an asset-based sales charge from assets of the Fund
in

<PAGE> 46

an amount equal to 0.75% of average daily net assets in Class C shares of
the Fund. The Company generally receives from the Fund during the first
year a distribution and service fee of 1.0% of the average daily net assets
of the Class C shares. Currently, Class C shares of Funds convert to
Class A shares after ten years.

As of March 31, 1996, 79.8% of the outstanding Open End Fund shares were
Class A shares, 18.6% were Class B shares and 1.6% were Class C shares (in each
case by assets under management).

Each Retail Distribution Firm is entitled to receive from the Funds an
ongoing service fee of 0.25 of 1% per annum based on each Open End Fund's
average quarterly net assets attributable to shares sold by such firm.

In connection with periodic tenders for its shares, the Prime Rate Trust
imposes an early withdrawal fee of 3.0% on certain shares tendered for
repurchase during the first year following their purchase. This early
withdrawal fee is reduced on a graduated basis in subsequent years to 0% in the
sixth year and beyond. In addition, the Company compensates broker-dealers for
sales based on a percentage of the value of shares of the Prime Rate Trust
which is 0.0% during the first year following purchase, and increases on a
graduated basis to 0.35% during the sixth year following purchase and
thereafter.

During the initial offering period for a UIT, sales charges typically
range from between 2.7% and 4.9% of the public offering price, of which 53% to
75% is typically paid to the Company. The sales charge applicable to
purchasers during the initial offering period is, however, reduced on a
graduated basis to any purchaser acquiring more than a specified number of
units.

Proprietary and Preferred Distribution Relationships

The Company participates in certain distribution arrangements which it
believes enhance sales of the Company's investment products. The Company has
entered into a proprietary vendor relationship with Smith Barney and has
established a preferred vendor relationship with almost every global retail
broker-dealer and with many of the nation's largest banks. "Proprietary
vendor relationships" generally afford the Funds equivalent treatment with a
distribution network's proprietary funds, including with regard to payments of
selling compensation, as such distribution network affords to sales of
comparable proprietary funds. "Preferred vendor relationships," on the other
hand, generally afford Funds the same preferred treatment as any other
non-proprietary fund on the "preferred list" within a distribution network,
including with regard to payments of selling compensation, as such distribution
network affords with respect to sales of comparable non-proprietary funds on
the "preferred list," as well as being accorded a high profile in the
distribution system. There has been an increasing trend by broker-dealers who
sell mutual fund shares towards consolidation of their proprietary and
preferred vendor arrangements with mutual fund complexes. The Retail
Distribution Firms that to date have engaged in such consolidation have
retained their proprietary or preferred vendor arrangements with the Company.
Certain of the Company's preferential distribution arrangements are described
below.

Smith Barney. In connection with the AC Acquisition, the Company entered
into an agreement, dated as of December 20, 1994 (the "Smith Barney
Agreement"), relating to sales by Smith Barney or its subsidiaries of Open End
Funds and the Govett Funds. Pursuant to the terms of the Smith Barney
Agreement, through December 20, 2001 (unless earlier terminated as a result of
the sale of a majority interest in the Company to any of certain specified
entities) the Open End Funds and the Govett Funds will be accorded equivalent
treatment within the Smith Barney retail system (which for

<PAGE> 47

this purpose includes all retail broker-dealers owned by Smith Barney or any
subsidiary thereof) to that of comparable open-end mutual funds advised by
Smith Barney or any other Travelers' entity.

PFSI. The Common Sense Funds are sold exclusively through a
distribution network of more than 20,000 PFSI sales representatives located in
communities throughout the United States. In connection with the closing of
the AC Acquisition, the Company entered into the Common Sense Agreement which
provides for, among other things, such exclusive distribution through PFSI of
the Common Sense Funds initially for a period of seven years ending December
20, 2001 (unless earlier terminated as a result of the sale of a majority
interest in the Company to any one of three insurance companies), and
thereafter as to any Common Sense Fund that is designated by PFSI or that
continues to achieve certain performance standards. Also, during such initial
seven-year period, PFSI will accord to sales of shares of the Common Sense
Funds sold to accounts established after the AC Acquisition a more favorable
broker-payout percentage than that accorded to all other comparable mutual
funds sold by PFSI. In addition to the proprietary status of the Common Sense
Funds, PFSI will also accord the Funds and the Govett Funds (together with
funds distributed by Smith Barney which shall receive equivalent treatment), a
more favorable broker-payout percentage than that accorded to all other
comparable mutual funds sold by PFSI, with the exception of the Common Sense
Funds. Unlike the Common Sense Arrangements, these exclusive distribution
arrangements are not terminable upon a public offering.

Under the Common Sense Agreement, the Company provides investment advisory
services to the Common Sense Funds while certain affiliates of Travelers
provide distribution, transfer agency and custodial services. Commencing after
December 31, 1996, with respect to periods beginning after such date, either
the Company or a Travelers affiliate will be required to pay to the other a
profit sharing payment determined pursuant to a formula based generally upon
the Company's operating earnings from the provision of investment advisory
services to the Common Sense Funds, on the one hand, and the operating earnings
of the Travelers affiliates from providing distribution, transfer agency and
custodial services with respect to the Common Sense Funds, on the other hand.
The Company currently anticipates that it will be required to pay to such
Travelers affiliate between $1.0 million and $1.5 million annually under the
Common Sense Arrangements. The Common Sense Arrangements may be terminated by
either the Company or Travelers after January 1, 2000, or after an earlier sale
of a majority interest in the Company to any one of three entities or a public
offering of 50% or more of the Company Common Stock (on a fully diluted basis),
subject to a termination payment to be agreed upon by the Company and Travelers
or, if they cannot agree within 60 days, by a panel of three investment banks,
and to be paid by the party whose Common Sense business has the greater value.
The termination payment is designed to split the value of the Company's and
Travelers' Common Sense businesses, taken together, equally between the Company
and Travelers. The Offerings will not constitute a public offering of the
magnitude that would give rise to a right to terminate the Common Sense
Arrangements. While the events that may result in termination of the Common
Sense Arrangements are similar to those that may result in termination of
PFSI's exclusive distribution arrangements, the continuance of either of these
arrangements is not conditioned upon continuance of the other arrangement.
Under the Common Sense Agreement, the Company also shares with a Travelers
affiliate half of certain 12b-1 fees received in respect of sales of
Common Sense Fund shares and pays to such affiliate half of the imputed
carrying costs associated with the funding of the payment by such affiliate of
broker commissions. While this sharing arrangement will not terminate upon a
termination of Common Sense Arrangements, the Company may be required after
such a termination to pay half of the broker commissions paid after such
termination, rather than half of their imputed carrying cost.

SunAmerica. In connection with the sale of ACC to SunAmerica, until
January 2001, the Funds have been granted preferred status by SunAmerica's
affiliated broker-dealers (including ACC),

<PAGE> 48

and will receive the same preferred status as SunAmerica's other "preferred
list members" in SunAmerica's distribution systems. Further, under this
arrangement, the Company will not be required to pay basis points as a
marketing allowance based on sales through ACC, and asset-based maintenance
fees for the Company's investment products sold by and through SunAmerica and
its affiliates will be waived by SunAmerica through January 2001. This
preferred status arrangement will be automatically extended for an additional
two years if total net sales of the Open End Funds by SunAmerica and its
affiliates have not reached $1.75 billion in the aggregate during the initial
five-year period.

Govett Agreement

The Company has entered into an agreement (the "Govett Agreement") with
John Govett & Co. Limited ("Govett"). Pursuant to the Govett Agreement, among
other things, (i) Govett acts as sub-investment adviser to the three existing
Open End Funds whose assets are invested primarily in global securities (the
"VKAC Global Funds"), (ii) the Company serves as exclusive U.S. principal
underwriter for the Govett Funds, and (iii) the Company serves as transfer
agent for the Govett Funds. The Govett Agreement also provides that under
certain circumstances the Company will finance the marketing and distribution
of Class B shares and Class C shares of the Govett Funds. However, currently
the Govett Funds offer only Class A shares. Further, in order to reimburse
each respective party for its activities contemplated by the Govett Agreement,
the Company and Govett have agreed to share equally in advisory fee and
distribution fee revenues received from the VKAC Global Funds and the Govett
Funds.

Other Arrangements Affecting Distribution

The Company currently has stock option agreements with affiliates of each
of Travelers and E.D. Jones for which the vesting schedules are contingent
upon, and thus are intended to enhance increased Fund assets under management.
Under the agreement with the Travelers affiliate, the Company granted such
affiliate an option to purchase up to 120,222 shares of Class B Common Stock at
a purchase price of $200.00 per share (the "Travelers Option"). The Travelers
Option vests in December 1999 unless there is a sale of a majority interest in
the Company after January 1997, in which case the Travelers Option will vest on
the date of such sale. The Travelers Option will be exercisable for two years
after the date on which it vests. The number of shares of Class B Common Stock
for which the Travelers Option will be exercisable will be determined at the
time the option vests, and will be based upon the percentage of net asset value
growth of Open End Fund shares sold by Smith Barney or PFSI from the second
anniversary of the closing of the AC Acquisition to the vesting date.

Under the stock option agreement with the E.D. Jones affiliate, the
Company granted it an option to purchase up to 57,750 shares of Common Stock at
a purchase price of $200.00 per share (the "E.D. Jones Option"). The E.D.
Jones Option vests in May 2000 and will be exercisable until September 2000,
unless there is a sale of all of the Company, in which case the E.D. Jones
Option will vest on the date of such sale and will be exercisable only during a
ten business day period beginning on the date of such sale. The number of
shares of Common Stock for which the E.D. Jones Option will be exercisable will
be determined at the time the option vests, and will be based upon the
percentage of net asset value growth of Fund shares sold by E.D. Jones from
June 1, 1995 to the date the option vests.

<PAGE> 49
FUND SERVICES

The Company provides comprehensive mutual fund services and information
technology systems to support the operation, administration and recordkeeping
of all of the Funds.

The Company devotes considerable resources to providing customer service
that is discernibly superior to that of its competitors. The Company has
trained a skilled managerial and employee base, has established full service
systems and has implemented procedures and controls to monitor service quality.
In addition, the Company maintains its own transfer agent through ACCESS.
ACCESS, a registered transfer agent, provides mutual fund shareholder
recordkeeping, including the taking of purchase and redemption orders, entering
orders into the shareholder recordkeeping system and providing trade
information to portfolio management and fund accounting. Its 250 associates
manage all transaction processing for approximately 1.6 million shareholder
accounts. The Company's outstanding customer service performance has been
recognized by DALBAR, an independent mutual fund research organization, which
awarded the DALBAR Quality Tested Service Award to American Capital for each of
the five years prior to the AC Acquisition and to the combined Company for 1995.

The Company also provides 401(k) and other retirement plan customers with
a full range of retirement plan services, an extensive offering of Funds and
integrated recordkeeping and administrative services. Recordkeeping and
administration services are provided with respect to plan documents, plan
conversion, employee enrollment, contribution processing, daily trading and
reconciliation, participant servicing, statements, IRS reporting and regular
discrimination testing to ensure plan compliance.

EMPLOYEES

At March 31, 1996, the Company had approximately 1,200 full-time
employees. The Company has added personnel to support its expanded
distribution channels and to provide investment advisory services to increased
amounts of assets under management. Employees generally are compensated with a
combination of salary, discretionary bonus and fringe benefits. The
compensation of the Company's portfolio managers, wholesalers and sales
associates is primarily incentive-based.

COMPETITION

The Company believes that it has a broad and diversified investment
product mix in terms of both asset categories and product categories including
tax exempt and taxable fixed income and equity products. The Company believes
this diversification, along with a significant presence in every major
distribution channel, positions the Company to more effectively compete in the
investment products market and reduces its sensitivity to trends favoring one
or more of these types of investment products over the others. However, there
can be no assurance in this regard.

<PAGE> 50

force. Fund shares are only sold through the sales-assisted channel. The
number of mutual fund companies that market their mutual funds directly through
mail and telephone services and computer networks (the "direct channel"), often
with a reduced or no sales charge or "load," have increased in recent years.
As of March 31, 1996, approximately 43% of the total mutual fund assets under
management in the United States were in no load funds, and no load mutual funds
have been growing more rapidly than all other mutual funds over the past
several years, although this was not the case in 1995. Despite the recent
success of the direct channel, the Company believes that the sales-assisted
channel will continue to represent a significant percentage of sales in the
industry, as investors who are presented with an expanding menu of complex
investment choices and information will increasingly seek and rely on advice
from knowledgeable investment representatives. There can be no assurance,
however, that disproportionate growth in no load mutual fund sales or in the
direct channel, or other changes in mutual fund share marketing practices,
would not have a material adverse effect on the Company's Fund sales.

The Company markets Fund shares primarily through the sales-assisted
channel and its business is therefore highly dependent on its ability to
maintain access for its investment products to the distribution systems of
various Retail Distribution Firms, including its proprietary vendor or preferred
vendor relationships with Retail Distribution Firms. Distribution of the
Company's investment products is concentrated, with relatively fewer Retail
Distribution Firms accounting for a large percentage of the Company's total
sales. See "--Marketing and Distribution of Investment Products--
Distribution." Retail Distribution Firms generally offer competing internally
and externally sponsored or managed investment products and access to
their distribution systems is limited. The Company's ability to gain and
maintain access to these distribution systems is largely dependent on the
investment performance of the Company's products, the development of investment
structures and techniques as well as marketing and pricing strategies that
serve the needs of investors and the Retail Distribution Firms, and the level
of service provided by the Company. Although the Company historically has been
successful in these aspects of its business, there can be no assurance that the
Company can continue to maintain such access for its products. The Company
primarily markets its investment products and services directly to
Institutional Accounts. See "Risk Factors - Industry and Competitive Factors."

REGULATION

Van Kampen American Capital Investment Advisory Corp. ("Investment
Advisory Corp."), Van Kampen American Capital Management, Inc. ("VKAC
Management"), Van Kampen American Capital Asset Management, Inc. ("VKAC Asset
Management") and Van Kampen American Capital Advisors,

<PAGE> 51

Inc. ("VKAC Advisors") are registered as investment advisers with the
Securities and Exchange Commission (the "Commission") under the Investment
Advisers Act of 1940, as amended (the "Advisers Act") and various state and
territorial securities laws. In addition, Investment Advisory Corp. is
registered with the Commodity Futures Trading Commission as a commodity trading
adviser. Generally, each Fund and UIT is registered with the Commission under
the Securities Act and the Investment Company Act and each national Fund is
qualified for sale (or not required to be so qualified) in all states in the
United States and the District of Columbia; each single-state Fund is qualified
for sale (or not required to be so qualified) in the state for which it is
named and other designated states. Virtually all aspects of the Company's
investment advisory business are subject to various federal, state and
territorial laws and regulations. These laws and regulations are primarily
intended to benefit the investment product holder and generally grant
supervisory agencies and bodies broad administrative powers, including the
power to limit or restrict the Company from carrying on its investment advisory
business in the event that it fails to comply with such laws and regulations.
In such event, the possible sanctions which may be imposed include the
suspension of individual employees, limitations on the Company's engaging in
the investment business for specified periods of time, the revocation of
Investment Advisory Corp., VKAC Management, VKAC Asset Management and VKAC
Advisors' registrations under applicable laws or other censures and fines.

VKAC Distributors is registered as a broker-dealer under the Exchange Act
and is subject to regulation by the Commission, the National Association of
Securities Dealers, Inc. (the "NASD") and the Municipal Securities Rulemaking
Board and other federal and state agencies and self-regulatory organizations.
VKAC Distributors is subject to the Commission's Uniform Net Capital Rule,
designed to enforce minimum standards regarding the general financial condition
and liquidity of a broker-dealer. Under certain circumstances, this rule
limits the ability of the Company to make withdrawals of capital and receive
dividends from VKAC Distributors. VKAC Distributors' regulatory net capital
has consistently exceeded such minimum net capital requirements. At March 31,
1996, VKAC Distributors had net capital of $ 18.2 million, which exceeded the
regulatory minimum requirements by 17.8 million. The broker-dealer industry
is one of the most highly regulated in the United States, and failure to comply
with related laws and regulations can result in the revocation of broker-dealer
licenses, the imposition of censures or fines and the suspension or expulsion
from the securities business of a firm, its officers or employees.

Van Kampen American Capital Trust Company ("VKAC Trust Company") is a
Texas-chartered trust company and is subject to regulation by the Texas
Department of Banking. VKAC Trust Company is required to maintain net capital
in excess of approximately $1.0 million. This requirement limits the ability
of the Company to make withdrawals of capital and receive dividends from VKAC
Trust Company. At March 31, 1996, VKAC Trust Company had net capital in excess
of the required amount.

The Company's officers, directors, and employees may from time to time own
securities which are also held by one or more of the Funds. The Company's
internal policies with respect to individual investments require reporting of
certain securities transactions and restrict certain transactions so as to
avoid the possibility of conflicts of interest.

PROPERTIES

The Company, which is headquartered in Oakbrook Terrace, Illinois and in
Houston, Texas, conducts its principal operations through leased offices
located there and in other cities in the United States. The Company's lease
for its approximately 191,000 square foot corporate headquarters located in
Oakbrook Terrace, Illinois expires in 2006. The Company's lease for its
approximately 173,000 square foot corporate headquarters located in Houston,
Texas expires in 2000. The Company also

<PAGE> 52

leases over 128,000 square feet of additional office space for its operations.
Management believes that the Company's facilities are adequate to serve its
currently anticipated business needs.

DISCONTINUED OPERATIONS AND DISPOSITIONS

Prior to the completion of the Offerings, the Company intends to spin off
to stockholders its interests in MCM and HGI by declaring and paying the
Special Dividends. Pursuant to the Company's Third Restated Certificate of
Incorporation, the Company may not pay the Special Dividends unless and until
it declares and pays a cash preference dividend on the Junior Preferred Stock
in an amount equal to $5 per share of Junior Preferred Stock for each calendar
quarter of 1996 prior to and including the calendar quarter in which the
Special Dividends are paid. The Company anticipates that such preference
dividend will be made concurrently with the spin-off of MCM and HGI and the
payment of the Special Dividends. It is expected that the aggregate amount of
the cash preference dividend paid on the Junior Preferred Stock will eliminate
the requirement that any of the Special Dividends be paid with respect to the
Junior Preferred Stock.

The Company currently holds all of the capital stock of MCM. The Special
Dividend in respect of MCM will be effected through the payment of a dividend
in the form of [one] share of MCM stock for every share of Company Common Stock
outstanding on the record date for such distribution.

The Company currently holds 2,666,000 shares of the capital stock of HGI,
which it acquired for an aggregate purchase price of $1,333,000 in May 1996,
and has entered into a subordinated credit agreement pursuant to which the
Company has extended to HGI a commitment to loan to HGI up to $3,333,000, which
loans will be evidenced by a promissory note. It is expected that prior to or
concurrently with the payment of the Special Dividends, HGI will borrow the
full amount under the Company's loan commitment. Due to certain provisions in
a shareholders' agreement with HGI and Thomas Hansberger, the majority
shareholder of HGI and a director of the Company, which prohibit transfers of
the capital stock of HGI held by the Company to persons or entities other than
certain enumerated persons or entities, the Special Dividend in respect of HGI
will be effected through (i) payment of a dividend to the Company's ten largest
stockholders (by number of shares) consisting of the capital stock and
promissory note of HGI held by the Company and (ii) payment of a cash dividend
in the amount of $ per share to the Company's remaining holders of Common Stock.

In January 1996, the Company sold ACC, a retail broker-dealer, to
SunAmerica following a determination by management of the Company that the
retail broker-dealer business was not part of the Company's strategic plan.
The Company currently has no intention of re-entering the retail broker-dealer
business. See "--Marketing and Distribution of Investment Products--
Proprietary and Preferred Distribution Relationships--SunAmerica" above.

LEGAL PROCEEDINGS

The Company is party to various lawsuits and other proceedings arising out
of the conduct of its operating businesses. In addition, ACC is currently
subject to various lawsuits relating to its business. The Company has agreed
to indemnify SunAmerica for certain losses or expenses incurred by SunAmerica
relating to ACC in respect of lawsuits arising during the time that ACC was
owned by the Company. Although the Company is unable to reasonably estimate
any loss regarding such matters, the Company does not believe that any of these
matters would be likely to have a material adverse effect upon the business,
financial condition or results of operations of the Company. Further, the
Company has been indemnified by Travelers and certain of its subsidiaries with
respect to, among other things, certain pre-closing liabilities relating to
American Capital and lawsuits relating to specified

<PAGE> 53

ACC representatives which arose during the time that ACC was owned by the
Company. The Company is also involved in various litigation relating to
discontinued operations of the Company. The Company has been indemnified by
Xerox Financial with respect to, among other things, litigation arising from
its discontinued capital markets operations, which indemnification obligation
is guaranteed by Xerox Corporation.

<PAGE> 54

MANAGEMENT

The names, ages and positions of the directors and executive officers of
the Company are set forth below. All directors and executive officers are
elected annually and hold office until their successors are elected and
qualified, or until their earlier removal or resignation. Unless specified
otherwise, all positions are with the Company and VKAC.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- -----------------------------------------------------
<S> <C> <C>
Alberto Cribiore 50 Chairman of the Board and Director
Don G. Powell 56 President, Chief Executive Officer and Director
William N. Brown 43 Executive Vice President
Douglas B. Gehrman 55 Senior Vice President
Dennis J. McDonnell 54 Executive Vice President and Director; President and
Chief Operating Officer of Investment Advisory
Corp., a subsidiary of the Company
William R. Molinari 43 Executive Vice President and Director;
President and Chief Operating Officer of VKAC
Distributors, a subsidiary of the Company
Ronald A. Nyberg 42 Executive Vice President, General Counsel and
Secretary
William R. Rybak 45 Executive Vice President and Chief Financial Officer
Paul R. Wolkenberg 50 Executive Vice President;
President and Chief Executive Officer of VKAC Trust
Company and ACCESS, subsidiaries of the Company
Max C. Chapman 52 Director
Michael C. Delaney 55 Director
Donald J. Gogel 47 Director
Thomas L. Hansberger 63 Director
Gordon McMahon 43 Director
Joseph L. Rice, III 64 Director
</TABLE>

ALBERTO CRIBIORE, CHAIRMAN OF THE BOARD--Mr. Cribiore has been a director
of the Company and VKAC since 1992 and has been Chairman of the Board of the
Company and VKAC since July 1995. Mr. Cribiore is also Chairman of the
Compensation Committee of the Company and VKAC and is a member of the Executive
Committees of the Company and VKAC. He has been a principal of CD&R since 1985
and a President since 1995. Mr. Cribiore is also a general partner of Clayton
& Dubilier

<PAGE> 55

Associates IV Limited Partnership, a Connecticut limited partnership
("Associates IV"), the general partner of C&D Fund IV, the majority stockholder
of the Company. In 1995, Mr. Cribiore became a director of Riverwood Holding,
Inc. and RIC Holding, Inc., and in March 1996 he became a director of Riverwood
International Corporation. Mr. Cribiore also serves as a director of WESCO
Distribution, Inc. and its parent CDW Holding Corporation, each of which is a
corporation in which C&D Fund IV has invested. Mr. Cribiore received his
Dottore in Economia e Commercio from the Universita Commerciale L. Bocconi,
Milano.

DON G. POWELL, PRESIDENT AND CHIEF EXECUTIVE OFFICER--Mr. Powell has been
President, Chief Executive Officer and a director of the Company and VKAC since
December 1994. Mr. Powell is a member of the Executive Committee of the Board
and also holds the following offices: (i) Chairman and Chief Executive Officer
of VKAC Distributors, Investment Advisory Corp., VKAC Asset Management, VKAC
Management, and VKAC Advisors; (ii) Chairman of ACCESS, VKAC Trust Company, and
MCM; and (iii) Chairman and President of Van Kampen American Capital Exchange
Corporation ("VKAC Exchange Corp."). He is also President, Chairman and
Trustee of each of the VKAC Funds and is President of the Common Sense Funds.
Prior to the AC Acquisition, Mr. Powell held the following positions with
American Capital at various dates beginning June 1987: (i) Chairman of the
Board, Chief Executive Officer and Director of American Capital; (ii)
President, Chief Executive Officer and Director of VKAC Asset Management, VKAC
Advisors and VKAC Exchange Corp.; (iii) Executive Vice President and Director
of VKAC Distributors, ACCESS, VKAC Trust Company and Advantage Capital. Mr.
Powell received his B.A. in Business Administration from the University of
Kansas and an M.B.A. in Finance from the University of Michigan. Mr. Powell is
also a Chartered Financial Analyst. Mr. Powell is also a member of the Board
and Executive Committee member of the Investment Company Institute, and is
Chairman of the Federal Legislation Committee of the Investment Company
Institute. He is also a member of the following additional committees of the
Investment Company Institute: Institutional Funds Advisory Committee,
International Committee, and the Investment Issues Committee.

DENNIS J. MCDONNELL, EXECUTIVE VICE PRESIDENT AND DIRECTOR, AND PRESIDENT
AND CHIEF OPERATING OFFICER OF INVESTMENT ADVISORY CORP., A SUBSIDIARY OF
VKAC--Mr. McDonnell has been a director of the Company and VKAC since February
1993 and has been an Executive Vice President of the Company and VKAC since
December 1993. Mr. McDonnell has been with the Company since 1983 and has
primary responsibility for the investment advisory and research businesses of
the Company, and is President, Chief Operating Officer and director of
Investment Advisory Corp., VKAC Asset Management, VKAC Management and VKAC
Advisors. Mr. McDonnell is also a Vice President and a Trustee of the Funds,
including the Common Sense Funds. Mr. McDonnell received his M.A. degree in
Economic Theory from U.C.L.A. and his B.S. degree in Economics from Loyola
University of Chicago. Mr. McDonnell serves on the Investment Advisers
Committee of the Investment Company Institute.

WILLIAM R. MOLINARI, EXECUTIVE VICE PRESIDENT AND DIRECTOR, PRESIDENT AND
CHIEF OPERATING OFFICER OF VKAC DISTRIBUTORS, A SUBSIDIARY OF VKAC--Mr.
Molinari has been a director of the Company and VKAC since February 1993 and
has been an Executive Vice President of the Company and VKAC since December
1993. Mr. Molinari has been with the Company since 1977 and has primary
responsibility for the marketing and distribution of investment products
sponsored by the Company, and is President, Chief Operating Officer and a
director of VKAC Distributors, a subsidiary of VKAC. Mr. Molinari is a
graduate of Illinois Wesleyan University and received his M.B.A. from Illinois
State University.

RONALD A. NYBERG, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY--Mr. Nyberg has been an Executive Vice President of the Company and
VKAC since February 1993 and was also appointed General Counsel and Secretary
of the Company and VKAC in December 1994. Mr. Nyberg has been with the Company
since 1982 and has primary responsibility for the Company's legal affairs,

<PAGE> 56
compliance and risk management. Mr. Nyberg is Executive Vice President and
General Counsel of VKAC Distributors, Investment Advisory Corp., VKAC Asset
Management and VKAC Management; Executive Vice President, General Counsel and
Assistant Secretary of VKAC Advisors, ACCESS, VKAC Trust Company, Van Kampen
American Capital Services, Inc. ("VKAC Services") and VKAC Exchange Corp. Mr.
Nyberg is also a director of VKAC Management, VKAC Distributors, Investment
Advisory Corp., VKAC Asset Management and VKAC Trust Company. Mr. Nyberg
serves as Vice President and Secretary for each of the VKAC Funds and is a Vice
President of the Common Sense Funds. Mr. Nyberg received his B.A. degree from
Augustana College and his Juris Doctor degree from IIT Chicago-Kent College of
Law. Mr. Nyberg is a director of ICI Mutual Insurance Co., a provider of
insurance to members of the Investment Company Institute. Mr. Nyberg is also a
member of the following committees of the Investment Company Institute: the
Closed-end Investment Company Committee, the Federal Legislation Committee, and
the SEC Rules Committee.

WILLIAM R. RYBAK, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER--Mr.
Rybak has been Executive Vice President and Chief Financial Officer of the
Company and VKAC since February 1993 and was Treasurer (through December 1993)
of the Company and VKAC. Mr. Rybak joined the Company in 1986, and has primary
responsibility for the Company's finance and accounting departments and its New
York operations. Mr. Rybak is also an Executive Vice President and Chief
Financial Officer and a director of VKAC Management, VKAC Distributors,
Investment Advisory Corp., VKAC Asset Management and VCJ Inc. Mr. Rybak is also
Executive Vice President and Chief Financial Officer of VKAC Advisors, ACCESS,
VKAC Trust Company, VKAC Exchange Corp. and VSM Inc. Mr. Rybak is also the
Chief Financial Officer and Treasurer of MCM. Mr. Rybak graduated from Lewis
University with a B.A. degree in Accounting and is a Certified Public
Accountant. Mr. Rybak is also Chairman of the Board of Hinsdale Financial
Corp., a savings and loan holding company.

PAUL R. WOLKENBERG, EXECUTIVE VICE PRESIDENT--Mr. Wolkenberg has been an
Executive Vice President of the Company and VKAC since December 1994. Mr.
Wolkenberg has primary responsibility for the service and technology
departments of the Company, as well as the Company's trust company operations.
Mr. Wolkenberg is also President, Chief Executive Officer and a director of
ACCESS and VKAC Trust Company and an Executive Vice President of VKAC
Distributors. Mr. Wolkenberg is also a Vice President of many of the VKAC
Funds and is Vice President of the Common Sense Funds. Prior to the AC
Acquisition, Mr. Wolkenberg was at various times a Senior Vice President of
VKAC Asset Management, a Director and Executive Vice President of ACCESS,
President, Chief Operating Officer and Director of VKAC Services, and Executive
Vice President, Chief Operating Officer and Director of VKAC Trust Company. In
addition, Mr. Wolkenberg was also Executive Vice President of American Capital
and Executive Vice President, Chief Operating Officer and Director of American
Capital Marketing, Inc. Mr. Wolkenberg received a Bachelor of Science degree
in Electrical Engineering from Manhattan College. He is a graduate of the
Pennsylvania Trust School and has completed graduate work in computer science
from George Washington University in Washington, D.C. He also earned a Master
of Science degree in Industrial Administration at Carnegie-Mellon University.
Mr. Wolkenberg has also been a member of the Technical Staff in Logistics for
the Research Analysis Corporation and is a member of the Operations Committee
of the Investment Company Institute.

WILLIAM N. BROWN, EXECUTIVE VICE PRESIDENT--Mr. Brown has been an
Executive Vice President of the Company and VKAC since October 1995 and was
Senior Vice President of the Company and VKAC since December 1994. Mr. Brown
has primary responsibility for Corporate Administration, internal audit and the
Company's re-engineering project. Subsequent to joining American Capital in
August 1988 and at various times during his tenure, Mr. Brown has also been a
Vice President, Chief Financial Officer (through the date of the AC
Acquisition) and a director of ACC, Senior Vice President of VKAC Asset
Management, and a director and Vice President of ACCESS, VKAC Exchange Corp.,
VKAC Services, VKAC Advisors and VKAC Trust Company. In addition, Mr. Brown
has been a Senior

53
<PAGE> 57
Vice President of VKAC Asset Management since May 1989, and was also Chief
Financial Officer and Treasurer of VKAC Asset Management from May 1989 to
December 1994. Further, Mr. Brown was Vice President and Chief Financial
Officer of American Capital Marketing, Inc. prior to the AC Acquisition. Mr.
Brown received his B.S. in Accounting from Auburn University and an M.B.A. in
Finance from the University of Alabama. In addition, Mr. Brown is a Certified
Public Accountant and a Certified Management Accountant.

DOUGLAS B. GEHRMAN, SENIOR VICE PRESIDENT--Mr. Gehrman has been a Senior
Vice President of the Company and VKAC since December 1994. Mr. Gehrman has
primary responsibility for the Human Resources function for the Company. Mr.
Gehrman is also Senior Vice President of VKAC Management, VKAC Distributors,
Investment Advisory Corp., VKAC Asset Management, VKAC Advisors, ACCESS, and is
Senior Vice President and a director of VKAC Trust Company. Prior to the AC
Acquisition, Mr. Gehrman was a Senior Vice President and director of American
Capital. Mr. Gehrman received his B.S. in Chemical Engineering from Arizona
State University and an M.B.A. in Operations Management from the University of
California at Berkeley.

MAX C. CHAPMAN, DIRECTOR--Mr. Chapman became a director of the Company and
VKAC in April 1993. Mr. Chapman is also a member of the Compensation
Committees of both entities. He has been Co-Chairman of Nomura Securities
International, Inc. and Nomura Holding America Inc. since 1989, Chief Executive
Officer since 1992, and director of The Nomura Securities Co., Ltd. since 1990.
Mr. Chapman is also a member of the Board of Directors of the American Stock
Exchange; a Trustee of the Endowment Fund and Investment Fund of the University
of North Carolina at Chapel Hill; a member of the Bond Club; a Director of the
Futures Industry Association; and in May 1989, was elected to the Board of
Directors of O'Sullivan Corporation, an American Stock Exchange Company and has
served as a director of the Chicago Mercantile Exchange. Mr. Chapman received
his B.A. from the University of North Carolina and an M.B.A. from Columbia
University.

MICHAEL C. DELANEY, DIRECTOR--Mr. Delaney has been a director of the
Company and VKAC since July 1994. Mr. Delaney is also a member of the Audit
Committees of the Company and VKAC. He was employed by Goldman, Sachs & Co.
from September 1980 to November 1986. From November 1986 to November 1993, Mr.
Delaney was a general partner of Goldman, Sachs & Co. and has been a limited
partner of that firm since December 1993. Mr. Delaney received his B.S. from
Fairfield University.

DONALD J. GOGEL, DIRECTOR--Mr. Gogel has been a director of the Company
and VKAC since 1992. Mr. Gogel is also a member of the Executive and Audit
Committees of the Company and VKAC. Mr. Gogel is currently a President of CD&R
and has been a principal of CD&R since he joined the firm in 1989. He is a
general partner of Associates IV. Mr. Gogel is also a director of A.P.S., Inc.
and its parent APS Holding, Inc., Lexmark International, Inc. and its parent
Lexmark International Group, Inc., and Alliant Foodservice, Inc. and its parent
CDRF Holding, Inc., each of which is a corporation in which C&D Fund IV has
invested. Mr. Gogel also serves as a director of TurboChef, Inc. Mr. Gogel
received his B.A. from Harvard University and received a bachelor's degree in
Philosophy from Oxford University's Balliol College. Mr. Gogel also received
his Juris Doctor degree from Harvard Law School.

THOMAS L. HANSBERGER, DIRECTOR--Mr. Hansberger became a director of the
Company and VKAC in December 1994. Mr. Hansberger has been the Chairman and
Chief Executive Officer of HGI since April 1994. Before forming HGI, Mr.
Hansberger had served as Chairman, President and Chief Executive Officer of
Templeton Worldwide, Inc., the parent holding company of the Templeton group of
companies where Mr. Hansberger was employed since 1979. Mr. Hansberger is
Chairman of the International Society of Financial Analysts, Vice Chairman of
the Association for Investment Management and Research and a Trustee for the
Institute of Chartered Financial Analysts. Mr.

54
<PAGE> 58
Hansberger is also a director of the Bangkok Fund, the Schroder Korea Fund, and
a member of the Advisory Board of the India Fund. He is a Chartered Financial
Analyst and Chartered Investment Counselor. Mr. Hansberger received his B.S.
in Business from Miami University.

GORDON MCMAHON, DIRECTOR--Mr. McMahon has been a director of the Company
and VKAC since July 1994. Mr. McMahon is also the Chairman of the Audit
Committee of the Company and VKAC. He was employed by Goldman, Sachs & Co.
from 1976 to 1984. From 1984 to 1993, Mr. McMahon was a general partner of
Goldman, Sachs & Co. and was a limited partner of that firm from December 1993
to April 1996. Since May 1996, Mr. McMahon has been a professional employee of
CD&R. Mr. McMahon is a graduate of Yale University and received his M.B.A.
from Harvard University.

JOSEPH L. RICE III, DIRECTOR--Mr. Rice has been a director of the Company
and VKAC since July 1995. Mr. Rice is currently Chairman and Chief Executive
Officer of CD&R and has been a principal of CD&R since 1979. He is a general
partner of Associates IV. Mr. Rice is also a director of Remington Arms
Company, Inc. and its parent RACI Holding, Inc., and Lexmark International,
Inc. and its parent Lexmark International Group, Inc. Mr. Rice is a graduate
of Williams College and received his L.L.B. degree from Harvard Law School.

COMPOSITION OF AUDIT COMMITTEE

After the completion of the Offerings, the Audit Committee will consist of
Messrs. and , with Mr. serving as Chairman. The Audit
Committee is responsible for recommending the firm to be appointed as
independent accountants to audit the Company's financial statements and to
perform services related to the audit; renewing the scope and results of the
audit with the independent accountants; reviewing with management and the
independent accountants the Company's year-end operating results; considering
the adequacy of the internal accounting and control procedures of the Company;
reviewing the non-audit services to be performed by the independent
accountants, if any; and considering the effect of such performance on such
accountants' independence.

COMPENSATION OF DIRECTORS

Non-employee directors who are not affiliated with CD&R are paid an annual
fee of $25,000 as compensation for their services on the boards of directors of
the Company and VKAC. Directors who are also employees of the Company are not
separately compensated for serving as directors. Four of the Company's
directors are principals of CD&R, to which the Company will pay fees for
advisory and management consulting services. See "Certain Relationships and
Related Transactions--CD&R and C&D Fund IV." Such directors do not receive any
direct compensation from the Company.

EXECUTIVE COMPENSATION

The following summary compensation table sets forth a summary of
compensation for services in all capacities rendered to the Company during the
fiscal year ended December 31, 1995 paid to (i) the Company's Chief Executive
Officer, and (ii) each of the Company's other four most highly compensated
executive officers (other than the Chief Executive Officer) whose total annual
salary and bonus for such fiscal year exceeded $100,000 (collectively, the
"Named Executives").

<PAGE> 59
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------------------
Awards
-----------
Securities
Underlying All Other
Year Salary(1) Bonus(2) Options (#) Compensation(4)
---- ---------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Don G. Powell 1995 $650,000 $1,560,000 $45,000 (3) $37,811
President and Chief Executive
Officer

Dennis J. McDonnell 1995 $368,000 $ 830,000 -- $51,383
Executive Vice President and
Director; President and Chief
Operating Officer of
Investment Advisory Corp.

William R. Molinari 1995 $368,000 $ 880,000 -- $51,261
Executive Vice President and
Director; President and Chief
Operating Officer of VKAC
Distributors

Ronald A. Nyberg 1995 $283,000 $ 530,000 -- $36,173
Executive Vice President,
General Counsel and
Secretary

Paul R. Wolkenberg 1995 $254,500 $ 680,000 $5,610(3) $22,267
Executive Vice President;
President and Chief Executive
Officer of VKAC Trust
Company and ACCESS(4)
</TABLE>

- ---------------
Options shown under the heading "Securities Underlying Options (#)" give
effect to the stock split described herein.

(1) Salary and bonus is reported in the year it was earned even if not
actually paid until the following year. Amounts reflected in "Salary"
include the Named Executive's salary deferral contributions to the
Company's qualified and nonqualified profit sharing plans and any salary
deferred by a Named Executive pursuant to the Company's executive deferred
compensation plan.

(2) Amounts reflected for Messrs. Powell, McDonnell, Molinari, Nyberg and
Wolkenberg include deferred bonus awards of $312,000, $166,000, $176,000,
$106,000 and $136,000, respectively, which become payable on January 2,
1997.

(3) Messrs. Powell and Wolkenberg received a grant of options on January 11,
1995 pursuant to their respective employment agreements with the Company.
See "--Employment and Change-in-Control Arrangements."

(4) Amounts shown reflect profit sharing and matching contributions (or
credits) to the Company's qualified and nonqualified profit sharing plans
on behalf of Messrs. Powell, McDonnell, Molinari, Nyberg and Wolkenberg
in the amounts of $37,811, $51,383, $51,261, $36,173 and $22,267,
respectively.

The following table sets forth information regarding grants of stock
options under the Stock Option Plan during the fiscal year ended December 31,
1995 to the Named Executives.

56
<PAGE> 60
OPTION GRANTS IN LAST FISCAL YEAR

Individual Grants
------------------------------------------------------
<TABLE>
Potential
Realizable Value at
Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options Appreciation
Underlying Granted to Exercise for Option Term(4)
Options Employees in Price Expiration ----------------------
Name Granted(#)(1) Fiscal Year (3) ($/Share) Date 5% ($) 10% ($)
- ------------------- -------------- ---------------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Don G. Powell 45,000(2) 24.8% $ (2) Jan.11, 2005 $5,660,100 $14,343,750

Paul R. Wolkenberg 5,610(2) 3.1% $ (2) Jan.11, 2005 $ 705,626 $ 1,788,188
</TABLE>

- ---------------
(1) In the event of a Named Executive's termination (other than for cause (as
defined)) of employment with the Company, any portion of options not
exercisable on or before the effective date of such termination shall
expire. If such termination is for cause, all options expire, whether or
not any portion is then exercisable. Following a Named Executive's
termination of employment for any reason prior to the date of an
underwritten public offering of Common Stock, all options that are then
exercisable are subject to successive repurchase rights of the Company and
C&D Fund IV for an amount in cash equal to the excess of (i) the fair
market value of the underlying Common Stock, as determined by the
Company's Board, over (ii) the aggregate exercise price for such Common
Stock (the "Vested Option Price"). In the event of the termination of the
Named Executive's employment prior to the date of an underwritten public
offering of Common Stock by reason of death, disability or retirement, or
by the Company without cause, or by the Named Executive for good reason
(as defined), the Named Executive will have the right to require the
Company to purchase any options that are then exercisable for the Vested
Option Price. Any purchases to be made by the Company will be subject to
any restrictions in the Company's financing agreements or applicable law.
The stock options granted to Messrs. Powell and Wolkenberg will become
exercisable in five equal annual installments on each of the first five
anniversaries of the date of grant, subject to their continued employment.

(2) Messrs. Powell and Wolkenberg received a grant of options on January 11,
1995 pursuant to their employment agreements with the Company. See
"--Employment and Change-in-Control Arrangements." Represents the number
of options and exercise price per share, after giving effect to the stock
split described herein.

(3) Includes option grants to employees of the Company's direct and indirect
wholly owned subsidiaries in 1995.

(4) Amounts for the Named Executives shown in these columns have been derived
by (x) multiplying the exercise price by the annual appreciation rate
shown (compounded for the term of the options), (y) multiplying the result
obtained under clause (x) by the number of shares of Common Stock
underlying the options, and (2) subtracting from the product derived under
clause (y) the aggregate exercise price for such Common Stock. The dollar
amounts set forth under this heading are the result of calculations at the
5% and 10% rates set by the Commission and are not intended to forecast
possible future appreciation, if any, of the stock price of the Company
Common Stock.

The following table sets forth the aggregate value as of December 31,
1995 of unexercised stock options held by the Named Executives.

<PAGE> 61

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR

AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Value of Unexercised
Options at Fiscal in-the-Money Options
Year-End (#) at Fiscal Year-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#)(1) Realized($) Unexercisable(2) Unexercisable(3)
- ---------------- ----------------- ----------- -------------------- -----------------------
<S> <C> <C> <C> <C>
Don G. Powell -- -- 9,000/36,000 (4)
Dennis J. McDonnell -- -- 16,726/10,668 $1,661,740 /$1,066,800
William R. Molinari -- -- 16,726/10,668 $1,661,740 / $1,066,800
Ronald A. Nyberg -- -- 9,756/6,223 $969,270 / $622,300
Paul R. Wolkenberg -- -- 1,122/4,488 (4)
</TABLE>

(1) No options were exercised during the 1995 fiscal year.
(2) Represents the number of shares subject to outstanding options, after
giving effect to the stock split described herein. Messrs. Powell and
Wolkenberg received a grant of options on January 11, 1995 pursuant to the
terms of their respective employment agreements with the Company, 20% of
which became exercisable on January 11, 1996. See "--Employment and
Change-in-Control Arrangements." Includes options which became exercisable
on February 17, 1996 with respect to Messrs. McDonnell, Molinari and Nyberg.
(3) Based upon a price of $ per share, which was the price at which
the Company sold shares of Common Stock in December 1995, after giving
effect to the stock split described herein.
(4) None of the options granted to Messrs. Powell and Wolkenberg were
"in-the-money" on December 31, 1995.

EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

In connection with the closing of the VKM Acquisition, the Company entered
into employment agreements with Messrs. McDonnell, Molinari and Nyberg. Under
these agreements, each such Named Executive (i) is paid an annual base salary
which is reflected in the Summary Compensation Table, with such increases as
may be determined from time to time by the Board of Directors of the Company,
(ii) was provided with a one time opportunity to purchase a specified number of
shares of Common Stock, (iii) was granted options to purchase additional shares
of Common Stock, which options will vest in five equal installments over the
term of his employment agreement, and (iv) is entitled to receive incentive
compensation, employee benefits and perquisites consistent with the Company's
plans, policies and arrangements as in effect from time to time. In the event
that any such Named Executive's employment is terminated during the term of the
employment agreement by the Company without "cause" or by the Named Executive
for "good reason" (as such terms are defined in the employment agreements), the
Named Executive will generally receive his base salary for the remaining term
of the agreement and continued welfare benefits, for a period not exceeding
twelve months, subject to reduction for any cash compensation or welfare
benefits received from other employment. The agreements also provide that a
Named Executive may not enter into competitive employment, solicit clients or
employees of the Company or disclose confidential information during the term
of the agreements and, generally, for one year following termination of the
Named Executive's employment. Such agreements have terms of five years ending
in February 1998. See "Certain Relationships and Related
Transactions--Management."

58
<PAGE> 62

In addition, in connection with the closing of the AC Acquisition, the
Company entered into employment agreements with Messrs. Powell and Wolkenberg
generally containing terms substantially similar to the terms of the employment
agreements entered into in connection with the VKM Acquisition described above.
The employment agreements for Messrs. Powell and Wolkenberg have a term of
five years ending in December 1999. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Certain Relationships
and Related Transactions--Management."

Further, in March 1996, each of Messrs. Powell, McDonnell, Molinari,
Nyberg and Wolkenberg, entered into a letter agreement with the Company and
VKAC pursuant to which they will be paid an amount equal to $1,300,000,
$736,000, $736,000, $566,000 and $550,000, respectively, in the event they
remain employed by the Company for two years following a transaction that
constitutes a "change in control" of the Company (as defined therein) or, if
their employment earlier terminates following such a change of control, under
certain limited circumstances. See "Certain Relationships and Related
Transactions--Management."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee, which reviews and makes recommendations to the
full Board with respect to salaries, bonuses and other compensation of officers
and other executives, is comprised of Alberto Cribiore, Max C. Chapman and
Donald J. Gogel. Mr. Cribiore is Chairman of the Board of the Company and,
prior to the VKM Acquisition, he was the President of the Company. Mr. Gogel
is a director of the Company and, prior to the VKM Acquisition, he was a Vice
President of the Company. Mr. Chapman is a director of the Company.

In addition, the Compensation Committee also administers the VK/AC
Holding, Inc. Stock Option Plan (the "Stock Option Plan") and has discretion to
determine the terms of stock options awarded to key employees of the Company
and its subsidiaries. None of Messrs. Cribiore, Chapman or Gogel participate
in the Stock Option Plan.

The following paragraphs describe certain transactions between the Company
and either of Messrs. Cribiore or Gogel or persons with whom they are related
or entities in which they have an interest.

59
<PAGE> 63

consulting services being provided, the fees being paid to CD&R by other
companies for which it provides such services and the fees charged by other
managers with comparable organizations for similar services provided to
companies in which investment funds managed by such managers have invested.
The Company expects to continue to pay CD&R similar fees for such services in
the future. Such fees may not exceed $500,000 per year under the terms of the
Company's secured credit facility and, unless certain requirements are met,
the Indenture governing the Notes.

CD&R, C&D Fund IV and the Company have entered into an indemnification
agreement, pursuant to which the Company agreed to indemnify CD&R, C&D Fund IV,
Associates IV and their respective directors, officers, partners, employees,
agents and controlling persons against certain liabilities arising under the
federal securities laws, other laws regulating the business of the Company and
certain other claims and liabilities.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CD&R AND C&D FUND IV

C&D Fund IV, which is the Company's largest stockholder, is a private
investment fund managed by CD&R. Amounts contributed to C&D Fund IV by its
limited partners are invested at the discretion of the general partner, in
equity or equity-related securities of entities formed to effect leveraged
buy-out transactions and in the equity of corporations where the infusion of
capital coupled with the provision of managerial assistance by CD&R can be
expected to generate returns on investments comparable to returns historically
achieved in leveraged buy-out transactions. Associates IV is the general
partner of C&D Fund IV. Alberto Cribiore, President and shareholder of CD&R
and general partner of Associates IV, serves as Chairman of the Board of the
Company and, prior to the VKM Acquisition, served as the President of the
Company. Donald J. Gogel, a principal of CD&R and a general partner of
Associates IV, serves as a director of the Company and prior to the VKM
Acquisition, served as Vice President. Joseph L. Rice, III, Chairman of the
Board, Chief Executive Officer and shareholder of CD&R and a general partner of
Associates IV, serves as director of the Company and prior to the VKM
Acquisition, served as Vice President and Secretary, and as a director of the
Company. Gordon McMahon, a professional employee of CD&R, serves as a director
of the Company. See also "Management--Compensation Committee Interlocks and
Insider Participation."

CD&R receives an annual fee for management and financial consulting
services provided to the Company and reimbursement of out-of-pocket expenses.
Such services include helping the Company to establish effective banking, legal
and other business relationships, and assisting management in developing and
implementing strategies for improving the operational, marketing and financial
performance of the Company. The consulting fees paid to CD&R in 1995 totaled
$466,667, in the aggregate, and the Company reimbursed CD&R $80,492 for
out-of-pocket expenses. Such consulting fees will be reviewed on an annual
basis and will be calculated with reference to the size and complexity of the
Company's business, the type and magnitude of the advisory and management
consulting services being provided, the fees being paid to CD&R by other
companies for which it provides such services and the fees charged by other
managers with comparable organizations for similar services provided to
companies in which investment funds managed by such managers have been
invested. The Company expects to continue to pay CD&R similar fees for such
services in the future. Such fees may not exceed $500,000 per year under the
terms of the Company's secured credit facility and, unless certain
requirements are met, the Indenture governing the Notes.

During 1995, Gordon McMahon, a director of the Company and a professional
employee of CD&R since May 1996, was retained by the Company to serve as a
financial advisor in connection with

60
<PAGE> 64

the sale of ACC to SunAmerica. Mr. McMahon was paid $100,000 and was
indemnified by the Company relating to his services pursuant to this engagement
to the fullest extent permitted by the Company's By-Laws and the General
Corporation Law of the State of Delaware.

The Company has paid fees to the law firm of Debevoise & Plimpton from
time to time for legal services rendered. Franci J. Blassberg, Esq., a member
of Debevoise & Plimpton, is married to Joseph L. Rice, III, a director of the
Company, a principal of CD&R and a general partner of Associates IV.

OUTSIDE DIRECTORS

Goldman, Sachs & Co. has been engaged by the Company as an underwriter
with respect to the Offerings. Michael Delaney, a director of the Company, is
a limited partner of Goldman, Sachs & Co.

In May 1996, the Company invested $1.3 million in HGI in the form of
common stock and made a commitment to loan up to $3.3 million to HGI. Subject
to certain conditions, the Company's commitment to make such loans to HGI will
terminate upon the completion of the Offerings. Max Chapman, a director of the
Company, has also invested $471,000 in HGI in the form of common stock and has
a commitment to loan up to $1,178,000 to HGI. Thomas L. Hansberger, also a
director of the Company, owns or controls, directly or indirectly, a majority
of the common stock of HGI, and has invested $3.7 million in HGI in the form of
common stock. The Company intends to distribute its investments in HGI to
certain of the Company's stockholders as part of the Special Dividends. See
"Business-Discontinued Operations and Dispositions."

MANAGEMENT

In connection with the VKM Acquisition and the AC Acquisition, the Company
entered into employment agreements with certain key executives. The employment
agreements provided each such executive with the opportunity to purchase a
stated number of shares of Common Stock for a stated purchase price. See
"Management--Employment and Change-in-Control Arrangements" above.

The major portion of the purchase price for the stock purchased by these
key executives and other members of management of the Company in connection with
the VKM Acquisition and the AC Acquisition was financed by loans from a major
bank on customary terms. To help those purchasers obtain a more favorable rate
and more favorable terms for such financings, the Company guaranteed such
indebtedness in the amount of $12.0 million, approximately $8.7 million of
which was outstanding at December 31, 1995. The Company guaranteed
indebtedness incurred by Messrs. McDonnell, Molinari, Nyberg and Wolkenberg in
the amounts of $1,219,200, $1,219,200, $711,200, and $272,000, respectively.
At February 17, 1996, the outstanding balance of such guaranteed indebtedness
incurred by Messrs. McDonnell, Molinari and Wolkenberg was $997,280, $1,097,280
and $272,000, respectively, and all of such guaranteed indebtedness incurred by
Mr. Nyberg had been repaid.

61
<PAGE> 65

In March 1996, each member of the Company's Senior Management Committee,
consisting of Messrs. Powell, McDonnell, Molinari, Nyberg, Rybak, Wolkenberg,
Brown and Gehrman, entered into a letter agreement with the Company and VKAC
pursuant to which they will be paid an amount equal to $1,300,000, $736,000,
$736,000, $566,000, $566,000, $550,000, $400,000 and $300,000, respectively, in
the event they remain employed by the Company for two years following a "change
in control" of the Company (as defined therein) or, if their employment earlier
terminates following such a change of control, under certain limited
circumstances. The Offerings will not constitute a change of control under
these agreements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Management--Employment and Change-in-Control Arrangements."

The Special Dividends

Prior to the completion of the Offerings, the Company intends to spin off
to its stockholders its interests in MCM and HGI by declaring and paying the
Special Dividends.

SECURITY OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS

The following table sets forth information as of March 31, 1996 and as
adjusted to reflect the sale of the Common Stock offered hereby, regarding the
beneficial ownership of Company Common Stock by (a) the persons known by the
Company to be the beneficial owners of more than 5% of the outstanding shares
of Company Common Stock, (b) each director of the Company, (c) each Named
Executive and (d) all directors and executive officers of the Company as a
group. The information set forth in the table as to directors and officers is
based upon information furnished to the Company by them in connection with the
preparation of this Prospectus. Except where otherwise indicated, the mailing
address of each of the stockholders named in the table is: c/o Van Kampen
American Capital Group, One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
See "Description of Capital Stock."

62
<PAGE> 66

<TABLE>
<CAPTION>
PRIOR TO THE OFFERINGS(1) AFTER THE OFFERINGS(1)
--------------------------------------- ------------------------------------
NUMBER PERCENT OF NUMBER PERCENT
OF SHARES CLASS OF SHARES OF CLASS
NAME OF BENEFICIAL OWNER --------------- ---------------- ---------------- --------------

<S> <C> <C> <C> <C>
The Clayton & Dubilier Private
Equity Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, CT 06830 2,118,264 91.4% %

B. Charles Ames(2) 2,118,264 91.4% %

William A. Barbe(2) 2,118,264 91.4% %

Alberto Cribiore(2) 2,118,264 91.4% %

Donald J. Gogel(2) 2,118,264 91.4% %

Leon J. Hendrix, Jr.(2) 2,118,264 91.4% %

Hubbard C. Howe(2) 2,118,264 91.4% %

Joseph L. Rice, III(2) 2,118,264 91.4% %

Andrall E. Pearson(2) 2,118,264 91.4% %

Max C. Chapman(3) 1,000 * *

Michael C. Delaney(4) 1,000 * *

Thomas L. Hansberger(5) 1,000 * *

Gordon McMahon(6) 1,000 * *

Dennis J. McDonnell 31,966 1.4 (7) 1.4%

William R. Molinari 31,966 1.4 (7) 1.4%

Ronald A. Nyberg 18,646 * (7) *

Don G. Powell 18,000 * (7) *

Paul R. Wolkenberg 2,822 * (7) *

Officers and directors as a group (15
persons) 2,247,635 94.4 (7)(8) 94.4%

</TABLE>

- -------------------------------------
* Less than 1 percent.

(1) The shares owned by each person, or by the group, and the shares included in
the total number of shares outstanding have been adjusted, and the percentage
owned has been computed, in accordance with Rule 13d-3(d)(1) under the
Exchange Act.

(2) Messrs. Ames, Barbe, Cribiore, Gogel, Hendrix, Howe, Pearson and Rice may be
deemed to share beneficial ownership of the shares owned of record by C&D Fund
IV by virtue of their status as general partners of the general partner of C&D
Fund IV, but each expressly disclaims such beneficial ownership of such shares.
Messrs. Ames, Barbe, Cribiore, Gogel, Hendrix, Howe, Pearson and Rice share
investment and voting power with respect to securities owned by C&D Fund IV.
The business address for each of them is c/o Clayton, Dubilier & Rice, Inc., 375
Park Avenue, 18th Floor, New York, New York 10152.

(3) Mr. Chapman's business address is c/o Nomura Securities International Inc.,
2 World Financial Center, Building B, 22nd Floor, New York, New York 10281-1198.

(4) Mr. Delaney's business address is c/o Goldman, Sachs & Co., 85 Broad Street,
24th Floor, New York, New York 10004.

(5) Mr. Hansberger's business address is c/o Hansberger Global Investors, Inc.
515 East Las Olas, Suite 1300, Ft. Lauderdale, Florida 33301.

(6) Mr. McMahon's business address is c/o Clayton, Dubilier & Rice, Inc., 375
Park Avenue, New York, New York 10152.

(7) Includes shares which may be acquired upon the exercise of outstanding stock
options as follows: , , , , and shares
for Messrs. McDonnell, Molinari, Nyberg, Powell, Wolkenberg and the group,
respectively.

(8) Includes shares owned of record by C&D Fund IV as to which Messrs.
Cribiore, Gogel and Rice each expressly disclaims beneficial ownership.

<PAGE> 67
(8) Includes shares owned of record by C&D Fund IV as to which
Messrs. Cribiore, Gogel and Rice each expressly disclaims beneficial ownership.

SELLING STOCKHOLDERS

Most of the Selling Stockholders received their shares of Company Common
Stock in connection with the VKM Acquisition or the AC Acquisition. The
transferability of the shares held by the Selling Stockholders is restricted by
the Registration and Participation Agreement, by the stock subscription
agreements pursuant to which such shares were purchased and, in the case of the
shares that were acquired in connection with the AC Acquisition, by federal and
state securities laws. Under the Registration and Participation Agreement, the
Selling Stockholders have certain rights to require the Company to register
shares of Company Common Stock under the federal securities laws, and to
register or qualify such shares for resale under state securities laws. All
the shares of Common Stock offered by the Selling Stockholders hereby are being
registered pursuant to such registration rights. The Registration and
Participation Agreement requires the Company to pay all expenses incurred by
the Selling Stockholders with respect to the Offerings, other than underwriting
discounts and commissions, transfer taxes applicable to the Common Stock to be
sold by the Selling Stockholders and certain legal fees. Pursuant to the
Registration and Participation Agreement, the Company is required to pay the
fees and expenses of one law firm to represent certain Selling Stockholders in
connection with the Offerings. The Company has agreed to indemnify the Selling
Stockholders and the Underwriters as to certain information included in this
Prospectus, and each of the Selling Stockholders has agreed to indemnify the
Company, its directors, controlling persons and officers who have signed the
Registration Statement of which this Prospectus is a part and the Underwriters
as to certain information relating to such Selling Stockholder. Upon
registration and sale, such shares of Common Stock will be free of the
restrictions noted above other than restrictions under the Securities Act with
respect to any person who may be deemed to be an affiliate of the Company for
purposes of the Securities Act.

The following table sets forth certain information with respect to the
Selling Stockholders and their beneficial ownership of the Company Common Stock
as of [ ], 1996 and as adjusted to reflect the sale of the Common
Stock offered by the Selling Stockholders hereby, and other than as noted
below, includes information with respect to positions, offices or other
material relationships of the Selling Stockholders with the Company or any
predecessor or affiliate thereof, other than as a stockholder thereof, during
the past three years. For information with respect to material relationships
between the Company and C&D Fund IV, see "Certain Relationships and Related
Transactions." Unless otherwise indicated, each Selling Stockholder named has
sole voting and dispositive power with respect to its shares.

As of [ ], 1996, each of the Selling Stockholders listed
below had given notice of its intent to sell shares of Common Stock in the
Offerings. The number of shares of Common Stock that each Selling Stockholder
listed below is selling in the Offerings is equal to its pro rata portion
(based on the number of shares such Selling Stockholder has indicated it would
propose to sell in the Offerings relative to the total number of shares all
such Selling Stockholders would propose to sell in the Offerings) of the [ ]
million shares of Common Stock to be sold by all of the Selling
Stockholders in the Offerings.

All information with respect to beneficial ownership has been furnished by
the respective Selling Stockholders.

The information presented in the preceding discussion and in the following
table assumes that the over-allotment options granted by the Selling
Stockholders to the Underwriters are exercised in full.

<PAGE> 68
[Share numbers below to be adjusted for stock split.]

<TABLE>
Shares Number of Shares
Beneficially Owned Shares Beneficially Owned
Prior to the Offerings(1) Offered After the Offerings(1)
------------------------- --------- ----------------------
Name and address of Selling Stockholder Number Percent Number Percent
------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
The Clayton & Dubilier Private
Equity Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, CT 06830 2,118,264 91.4%

______ other Selling Stockholders,
each of whom is selling less than ___
shares in the Offerings or
beneficially owns less than 1% of the
outstanding Common Stock prior to the
Offerings ............................
</TABLE>
- -----------------------

(1) The shares owned by each person, or by the group, and the shares
included in the total number of shares outstanding have been adjusted, and the
percentage owned has been computed, in accordance with Rule 13d-3(d)(1) under
the Exchange Act. Represents shares outstanding after giving effect to the
stock split described herein.

SHARES ELIGIBLE FOR FUTURE SALE

After completion of the Offerings, the Company will have [ ]
shares of Common Stock outstanding, [ ] shares of Common Stock
subject to stock options issued pursuant to the Stock Option Plan (whether
vested or unvested) or issuable upon vesting and payment of deferred stock
units, up to shares of Common Stock subject to the E.D. Jones Option,
shares of Common Stock subject to other stock options (whether vested or
unvested), [ ] shares of Class B Common Stock outstanding and up to
shares of Class B Common Stock subject to the Travelers Option. Of these
shares, the [ ] shares of Common Stock sold in the
Offerings and additional shares of outstanding Common Stock will be
freely tradeable without restriction under the Securities Act, except by persons
who may be deemed to be "affiliates" of the Company, as that term is defined in
Rule 144. All the remaining shares of Common Stock (including any shares
issued upon exercise of such stock options or vesting and payment of such
deferred stock units) and any shares of Class B Common Stock for which any such
shares of Common Stock are exchanged ("Restricted Shares") may not be sold
unless they are registered under the Securities Act or are sold pursuant to an
exemption from registration, including an exemption contained in Rule 144 or
Rule 144A under the Securities Act.

In general, under Rule 144, if two years have elapsed since the Restricted
Shares have been acquired from the Company or from an affiliate of the Company
(whichever is later), the holder of such Restricted Shares, including for this
purpose persons who may be deemed "affiliates" of the Company whether or not
they hold Restricted Shares, would be entitled to sell, within any three-month
period, up to a number of Restricted Shares that does not exceed the greater of
(x) 1% of the then outstanding shares of Common Stock (approximately [ ]
shares immediately after the Offerings) and (y) the average weekly
trading volume of the Common Stock on the New York Stock Exchange during the
four calendar weeks preceding the date on which notice of the sale is filed
with the Commission. Sales under Rule 144 are subject to certain restrictions
relating to manner of sale, notice and the availability

<PAGE> 69
of current public information about the Company and may be effected only
through unsolicited brokers' transactions. A person who is not deemed an
"affiliate" of the Company at any time during the 90 days preceding a sale
would (but for the "lock-up" arrangements described below) be entitled to sell
such Restricted Shares immediately after the Offerings under Rule 144 without
regard to the volume or other limitations described above, provided that two
years have elapsed since such Restricted Shares were acquired from the Company
or an affiliate of the Company. As of May 31, 1996, of the Restricted
Shares had been held for more than two years by the holders thereof, of which
[ ] shares are held by persons who may be deemed to be "affiliates"
of the Company. As of December 20, 1996, of the Restricted Shares will
have been held for at least two years and, accordingly, may be sold publicly
following the expiration of the 180-day "lock-up" arrangements described
below.

The Company currently has stock option agreements with affiliates of each
of Travelers and E.D. Jones for which the vesting schedules are contingent
upon increased Fund assets under management. Under the agreement with the
Travelers affiliate, the Company granted such affiliate the Travelers Option
to purchase up to 120,222 shares of Class B Common Stock at a purchase price of
$200.00 per share. The Travelers Option vests in December 1999 unless
there is a sale of a majority interest in the Company after January 1997, in
which case the Travelers Option will vest on the date of such sale. The
Travelers Option will be exercisable for two years after the date on which it
vests. The number of shares of Class B Common Stock for which the Travelers
Option will be exercisable will be determined at the time the option vests, and
will be based upon the percentage of net asset value growth of Open End Fund
shares sold by Smith Barney or PFSI from the second anniversary of the closing
of the AC Acquisition to the vesting date.

Under the stock option agreement with the E.D. Jones affiliate, the
Company granted it the E.D. Jones Option to purchase up to 57,750 shares of
Common Stock at a purchase price of $200.00 per share. The E.D. Jones Option
vests in May 2000 and will be exercisable until September 2000, unless there is
a sale of 100% of the voting stock or assets of the Company, in which case the
E.D. Jones Option will vest on the date of such sale and will be
exercisable only during a ten business day period beginning on the date of such
sale. The number of shares of Common Stock for which the E.D. Jones Option
will be exercisable will be determined at the time the option vests, and will
be based upon the percentage of net asset value growth of Fund shares sold by
E.D. Jones from June 1, 1995 to the date the option vests.

Within one year from the effective date of the Registration Statement of
which this Prospectus forms a part, the Company will register on Form S-8 under
the Securities Act (i) [ ] shares of Common Stock issuable upon
the exercise of the stock options granted under the VK/AC Holding, Inc. Stock
Option Plan for management and key employees. [The Company also intends to
register on Form S-8 under the Securities Act the 32,500 shares of Common
Stock that will be held by the Profit Sharing Plan following the Offerings].

"LOCK-UP" ARRANGEMENTS

<PAGE> 70
in the case of the Company, file any registration statement under the
Securities Act with respect to any of the foregoing, other than the shares of
Common Stock that may be sold by the Selling Stockholders in the Offerings or,
in the case of the Company, in respect of a registration statement on Form S-8.
Purchasers of any such securities from such persons or entities in private
transactions will also be required to agree to substantially similar
restrictions on public sales. After the expiration of such -- day period,
such stockholders (other than "affiliates" of the Company) will, to the extent
that they hold shares that have been registered under the Securities Act, be
entitled to dispose of their shares without regard to volume or other
restrictions of Rule 144. Virtually all of the Company's current stockholders
are bound by a similar 180-day lock-up agreement, which may be waived by the
Company.

REGISTRATION AND PARTICIPATION AGREEMENT

Pursuant to the terms of the Registration and Participation Agreement,
existing stockholders of the Company who will collectively own ______ shares of
Common Stock and ______ shares of Class B Common Stock after the Offerings have
certain registration rights with respect to their shares of Company Common
Stock (subject to certain "lock-up" arrangements). Certain existing management
stockholders have agreed not to make any demand for or exercise any rights with
respect to the registration of their Common Stock, and have waived all rights
to register Common Stock owned by them, in connection with the Offerings, in
return for a one-year extension of their right (which otherwise would terminate
upon the completion of the Offerings) to participate in certain private sales
by C&D Fund IV of Company Common Stock. After completion of the Offerings and
the expiration of the applicable "lock-up" period, the holders of at least 20%
of the Company's Registrable Securities (as defined in the Registration and
Participation Agreement) may request that the Company register some or all of
their shares of Common Stock. In addition, if the Company decides to register
additional shares of Common Stock (other than, among other limitations, shares
of Common Stock to be issued pursuant to employee benefit or option plans),
such existing stockholders are entitled to participate in such registration.

Prior to the Offerings, there has been no public market for the Common
Stock and no prediction can be made as to the effect, if any, that market sales
of Restricted Shares, the availability of such Restricted Shares for such
sales, or the existing stockholders' registration rights will have on the
market price of the Common Stock prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock, or the perception that such sales
could occur, could adversely affect prevailing market prices for the Common
Stock and could impair the Company's future ability to raise capital through an
offering of its equity securities.

DESCRIPTION OF CAPITAL STOCK

The following description of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to
applicable Delaware law and to the provisions of the Company's Third Restated
Certificate of Incorporation and By-laws, as amended and restated. Copies of
the Third Restated Certificate of Incorporation and By-laws have been filed or
incorporated by reference as exhibits to the Registration Statement of which
this Prospectus forms a part.

The Company's authorized capital stock consists of 3,250,000 shares of
Common Stock, 3,250,000 shares of Class B Common Stock and 32,500 shares of
Junior Preferred Stock. As of ______, 1996, the Company had outstanding ______
shares of Common Stock ______ shares of Class B Common Stock and shares of
Junior Preferred Stock. As of May 31, 1996 there were 174 holders of record of
Common Stock, one holder of record of Class B Common Stock and one holder of
record of Junior Preferred Stock.

67
<PAGE> 71
COMMON STOCK

Voting Rights. Each holder of shares of the Common Stock is entitled to
one vote per share on all matters to be voted on by stockholders. Holders of
the Common Stock are not entitled to cumulative votes in the election of
directors. Any director may be removed at any time, either for or without
cause, upon the affirmative vote of the holders of a majority of the
outstanding shares of the Company's capital stock entitled to vote for the
election of such director, cast at a special meeting of stockholders called for
that purpose. C&D Fund IV, therefore, will be able to effect the removal of
any director so long as C&D Fund IV holds a majority of the outstanding shares
of the Company's capital stock entitled to vote.

Dividend Rights. The holders of Common Stock are entitled to dividends
and other distributions if, as and when declared by the Board of Directors of
the Company out of assets legally available therefor, subject to (i) the
restrictions set forth in the Company's secured credit facility and the
Indenture, (ii) the dividend rights of holders of the Junior Preferred Stock
described below and (iii) the restrictions, if any, imposed by other
indebtedness outstanding from time to time. See "Dividend Policy." The
holders of the Common Stock and Class B Common Stock are entitled to equivalent
per share dividends and distributions.

In addition, the Company may not declare or pay dividends on any shares of
Company Common Stock in any calendar year until the Company has declared and
paid dividends equal to $5.00 per share with respect to the Junior Preferred
Stock for each calendar quarter during such calendar year to and including the
calendar quarter in which such dividend on shares of Company Common Stock is
paid. In addition, holders of Junior Preferred Stock will also share equally
with the holders of Company Common Stock in any dividends with respect to
Company Common Stock to the extent the value of such dividends exceeds the value
of dividends paid to holders of the Junior Preferred Stock in such calendar
year.

Other Rights. Subject to the liquidation preference of holders of the
Junior Preferred Stock described below, upon the liquidation, dissolution or
winding up of the Company, the holders of shares of the Common Stock would be
entitled to share pro rata (on an equal basis with the holders of the Class B
Common Stock) in the distribution of all of the Company's assets remaining
available for distribution after satisfaction of all its liabilities, up to an
amount equal to $200 per share. After each holder of Common Stock and Class B
Common Stock has received a distribution upon any liquidation, dissolution or
winding up of the Company of an amount equal to $200 per share, the holders of
Junior Preferred Stock also shall be entitled to share equally, share for
share, with the holders of Common stock in any other cash or non-cash
distributions payable to holders of the capital stock of the Company. The
holders of the Common Stock have no statutory preemptive rights to purchase
shares of stock of the Company, nor are they entitled to the benefits of any
sinking fund provisions.

Exchange Rights. Each record holder of the Common Stock is entitled at
its option to exchange any or all of the shares of such holder's Common Stock
for the same number of shares of Class B Common Stock, if such holder or its
affiliates would otherwise directly or indirectly own, control or have power to
vote a greater quantity of Common Stock than such holder and its affiliates are
permitted to own, control or have power to vote under applicable laws or
regulations. See "--Class B Common Stock."

CLASS B COMMON STOCK

The Class B Common Stock is identical to the Common Stock in all respects
except as to voting and conversion rights. The holders of Class B Common Stock
have no right to vote. Each

68
<PAGE> 72
holder of record of Class B Common Stock is entitled at its option to convert
any or all of such shares into the same number of shares of Common Stock,
provided that such conversion would not result in such holder and its
affiliates, directly or indirectly, owning, controlling or having the power to
vote a greater quantity of Common Stock than such holder and its affiliates
are permitted to own, control or have power to vote under applicable laws and
regulations. The Class B Common Stock is intended to meet the needs of several
investors in C&D Fund IV which may be subject to limitations under the Bank
Holding Company Act of 1956, as amended, on their ability to hold more than 5%
of the voting stock of the Company in the event C&D Fund IV distributed its
shares of Common Stock to such investors. C&D Fund IV has no present plans to
make any such distributions. Currently, Travelers is the only holder of Class
B Common Stock. Travelers or any of its affiliates holding Class B Common
Stock are restricted, pursuant to the Company's Third Restated Certificate of
Incorporation, from converting shares of Class B Common Stock to Common Stock.
Upon the sale of such shares by Travelers to any entity other than Travelers
or its affiliate, such shares of Class B Common Stock will automatically
convert without further action into an equal number of shares of Common Stock.
Any issuance of shares of Common Stock upon conversion of Class B Common
Stock would result in a decrease of an equal number of shares of Class B
Common Stock. Accordingly, the issuance of shares of Common Stock upon such
conversion would not increase the total number of shares of Company Common
Stock outstanding on such date.

JUNIOR PREFERRED STOCK

Generally, the holders of Junior Preferred Stock do not have any voting
rights. However, the Company may not change the dividend rights with respect to
Junior Preferred Stock without the unanimous affirmative vote of the holders of
outstanding Junior Preferred Stock. In addition, the Company may not alter or
change the powers, preferences or special rights of the Junior Preferred Stock
so as to adversely affect the holders of the Junior Preferred Stock without the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Junior Preferred Stock. Holders of shares of Junior Preferred Stock are
entitled to receive if, when and as declared by the Company's Board of Directors
quarterly cash "preferred" dividends at a rate of $20.00 per share per annum.
Dividends on the Junior Preferred Stock are noncumulative and do not accrue if
they are not declared. Before any distribution or payment may be made in any
calendar year upon any share of Company Common Stock, however, holders of shares
of Junior Preferred Stock are entitled to be paid in cash an amount equal to
$5.00 per share per quarter for each quarter during such calendar year prior to
and including the calendar quarter in which such distribution or payment is
made. In addition, if the value of the distribution or payment to be made in
respect of a share of Company Common Stock is greater than the value per share
of the preferred dividends previously paid to the holders of the Junior
Preferred Stock in that calendar year, such holders will also be entitled to
share equally, share for share, with the holders of the Company Common Stock in
such distribution or payment to the extent of the excess. Upon any liquidation,
dissolution or winding up of the Company, the holders of the Junior Preferred
Stock are entitled to a liquidation preference of $200 per share prior to any
distributions to holders of Company Common Stock. After each holder of Common
Stock and Class B Common Stock has received a distribution upon any liquidation,
dissolution or winding up of the Company of an amount equal to $200 per share,
the holders of Junior Preferred Stock also shall be entitled to share equally,
share for share, with the holders of Common Stock in any other cash or non-cash
distributions payable to holders of the capital stock of the Company.

<PAGE> 73
TRANSFER AGENT AND REGISTRAR

[ ] has been appointed as the transfer agent and
registrar for the shares of Common Stock.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

After consummation of the Offerings, the Company will have [ ]
unissued and unreserved shares of Common Stock. These additional shares may
be utilized for a variety of corporate purposes, including future public
offerings to raise additional capital and for facilitating corporate
acquisitions. Except pursuant to the stock option plan, deferred stock units
and stock option agreements referred to under "Shares Eligible for Future
Sale," the Company does not currently have any plans to issue additional shares
of Common Stock. One of the effects of unissued and unreserved shares of
capital stock may be to enable the Board of Directors to render more difficult
or discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby to protect the continuity
of the Company's management. If, for example, the Board of Directors of the
Company were to determine that a takeover proposal was not in the Company's
best interests, such shares could be issued by the Board of Directors without
stockholder approval in one or more private transactions or other transactions
that might prevent or render more difficult or costly the completion of the
takeover transactions by diluting the voting or other rights of the proposed
acquirer or insurgent stockholder group, by creating a substantial voting block
in institutional or other hands that might undertake to support the position of
the incumbent Board of Directors of the Company, by effecting an acquisition
that might complicate or preclude the takeover, or otherwise.

<PAGE> 74

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by
non-U.S. holders. As used herein, "non-U.S. holder" means a person or entity
that is, as to the U.S., a foreign corporation, a non-resident alien individual
or a foreign partnership, and any estate or trust the income of which is not
subject to U.S. taxation regardless of source.

The discussion is based on provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the regulations promulgated thereunder (the
"Treasury Regulations"), and administrative and judicial interpretations as of
the date hereof, all of which are subject to change, possibly with retroactive
effect. Furthermore, the discussion does not address tax consequences to
special classes of non-U.S. holders and does not consider specific facts and
circumstances that may be relevant to a particular holder's tax position.

Proposed Treasury Regulations were issued on April 15, 1996 (the "Proposed
Regulations") which, if adopted, would affect U.S. taxation of dividends paid
to a non-U.S. holder of Common Stock. The Proposed Regulations are generally
proposed to be effective with respect to dividends paid after December 31,
1997, subject to certain transition rules. The discussion below is not
intended to be a complete discussion of the provisions of the Proposed
Regulations.

Prospective purchasers are urged to consult a tax adviser with respect to
the U.S. federal (including the effect of the Proposed Regulations if adopted)
and state income tax consequences of owning and disposing of Common Stock as
well as any tax consequences under the laws of any other taxing jurisdiction.

INCOME TAX

DIVIDENDS. Dividends paid to a non-U.S. holder of Common Stock generally
will be subject to withholding of U.S. federal income tax at a 30% rate (the
"Withholding Tax") or such lower rate as may be specified by an applicable
income tax treaty, unless the dividends are effectively connected with the
conduct of a trade or business within the U.S. or, if an income tax treaty
applies, are attributable to a U.S. permanent establishment maintained by the
non-U.S. holder. Currently, dividends paid to an address in a foreign country
are presumed to be paid to a resident of such country in determining the
applicability of an income tax treaty for such purposes unless the Company has
definite or actual knowledge. However, under the Proposed Regulations, to
obtain a reduced rate of withholding under an income tax treaty, a non-U.S.
holder would generally be required to provide a valid Internal Revenue Service
(the "Service") Form W-8 certifying such non-U.S. holder's entitlement to
benefits under an income tax treaty. The Proposed Regulations also provide
special rules to determine whether, for purposes of determining the
applicability of an income tax treaty, dividends paid to a non-U.S. holder that
is an entity be treated as paid to the entity or those persons holding an
interest in that entity.

Except as may otherwise be provided in an applicable income tax treaty,
dividends that are effectively connected with the conduct of a trade or
business within the U.S. or, if an income tax treaty applies, are attributable
to a U.S. permanent establishment maintained by the non-U.S. holder generally
will be taxed at ordinary U.S. federal income tax rates, which tax is not
collected by withholding (except as described below under "Backup Withholding
and Information Reporting"). All or part of any effectively connected
dividends received by a foreign corporation may also, under certain
circumstances, be subject to an additional "branch profits" tax at 30% rate or
such lower rate as may

<PAGE> 75
be specified by an applicable income tax treaty. Non-U.S. Holders of Common
Stock must comply with certain certification and disclosure requirements to
claim an exemption from withholding under the rules described in this
paragraph.

A non-U.S. holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for refund
with the Service.

DISPOSITION OF COMMON STOCK. Non-U.S. holders generally will not be
subject to U.S. federal income tax (or withholding thereof) in respect of gain
recognized on a disposition of Common Stock unless (a) the gain is effectively
connected with a trade or business of the non-U.S. holder in the U.S. or, if an
income tax treaty applies, is attributable to a U.S. permanent establishment
maintained by such non-U.S. holder (in which case the branch profits tax
described above may also apply to a holder that is a foreign corporation), (b)
in the case of a non-U.S. holder who is a nonresident alien individual and
holds Common Stock as a capital asset, such holder is present in the U.S. for
183 or more days in the taxable year of the sale and certain other conditions
are met, or (c) the Company is or has been a "U.S. real property holding
company" for U.S. federal income tax purposes (which the Company does not
believe it has been or is currently) and the non-U.S. holder has held directly
or constructively more than 5% of the outstanding Common Stock within the
five-year period ending on the date of the disposition.

ESTATE TAXES

Common Stock held by an individual non-U.S. holder at the time of death
will be included in such holder's gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.

BACKUP WITHHOLDING AND INFORMATION REPORTING

DIVIDENDS. The Company must report annually to the Service and to each
non-U.S. holder the amount of dividends paid to, and the tax withheld with
respect to, each non-U.S. holder. These information reporting requirements
apply regardless of whether withholding was reduced by an applicable income tax
treaty. Under certain circumstances, copies of these information returns may
be made available under provisions of a specified income tax treaty or
agreement with the tax authorities in the country in which the non-U.S. holder
resides. Dividends that are subject to the Withholding Tax and dividends that
are effectively connected with the conduct of a trade or business in the United
States by a non-U.S. holder (provided certain certification and disclosure
requirements are met) are exempt from backup withholding of U.S. federal income
tax. Generally, dividends paid on Common Stock to a non-U.S. holder at an
address outside the United States will be exempt from backup withholding and
U.S. information reporting requirements (but not from the Withholding Tax
discussed above).

The Proposed Regulations will, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations provide certain
presumptions under which non-U.S. holders may be subject to backup withholding
in the absence of required certifications.

BROKER SALES. Payment of the proceeds of a sale of the Common Stock by a
non-U.S. holder made to or through a United States office of a broker is
subject to both information reporting and backup withholding at a rate of 31%
unless the holder certifies its non-U.S. status under penalties of perjury or
otherwise establishes an exemption. Payments of proceeds from the sale of
Common Stock by a non-U.S. holder made to or through a foreign office

<PAGE> 76
of a broker generally will not be subject to information reporting or backup
withholding. However, certain foreign offices, including foreign offices of a
U.S. broker, are subject to information reporting unless the holder certifies
its non-U.S. status under penalty of perjury or otherwise establishes its
entitlement to an exemption. The holder may obtain a refund of any amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the Service.

<PAGE> 77

UNDERWRITING

Merrill Lynch and Goldman, Sachs & Co. are acting as representatives (the
"U.S. Representatives") of each of the Underwriters named below (the "U.S.
Underwriters"). Subject to the terms and conditions set forth in a U.S.
purchase agreement (the "U.S. Purchase Agreement") among the Company, the
Selling Stockholders and the U.S. Underwriters, and concurrently with the sale
of shares of Common Stock to the International Managers (as defined
below), the Selling Stockholders severally have agreed to sell to the U.S.
Underwriters, and each of the U.S. Underwriters severally has agreed to
purchase from the Selling Stockholders, the number of shares of Common Stock
set forth opposite its name below.

<TABLE>

U.S. Underwriters Number of Shares
----------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .................

Goldman, Sachs & Co. ..................

Total .......................
=========
</TABLE>

The Company and the Selling Stockholders have also entered into an
international purchase agreement (the "International Purchase Agreement") with
Merrill Lynch International and Goldman Sachs International (collectively, the
"International Managers" and, together with the U.S. Underwriters, the
"Underwriters"). Subject to the terms and conditions set forth in the
International Purchase Agreement, and concurrently with the sale of
shares of Common Stock to the U.S. Underwriters pursuant to the U.S. Purchase
Agreement, the Selling Stockholders severally have agreed to sell to the
International Managers, and the International Managers severally have agreed to
purchase from the Selling Stockholders, an aggregate of shares of
Common Stock. The initial public offering price per share of Common Stock and
the underwriting discount per share of Common Stock are identical under the
U.S. Purchase Agreement and the International Purchase Agreement.

In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
such agreement are purchased. Under certain circumstances, the commitments of
non-defaulting U.S. Underwriters or International Managers (as the case may be)
may be increased. The closings with respect to the sales of Common Stock to
the U.S. Underwriters and the International Managers are conditioned upon one
another.

The U.S. Representatives have advised the Company and the Selling
Stockholders that the U.S. Underwriters propose initially to offer the shares
of Common Stock to the public at the initial public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share of Common Stock. The U.S.
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of Common Stock on sales

<PAGE> 78
to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.

The Selling Stockholders have each granted an option to the U.S.
Underwriters, exercisable within 30 days after the date of this Prospectus, to
purchase up to an aggregate of additional shares of Common Stock at the
initial public offering price set forth on the cover page of this Prospectus,
less the underwriting discount. The U.S. Underwriters may exercise this option
only to cover over-allotments, if any, made on the sale of the Common Stock
offered hereby. To the extent that the U.S. Underwriters exercise this option,
each U.S. Underwriter will be obligated, subject to certain conditions, to
purchase a number of additional shares of Common Stock proportionate to such
U.S. Underwriter's initial amount reflected in the foregoing table. The
Selling Stockholders also have each granted an option to the International
Managers, exercisable within 30 days after the date of this Prospectus, to
purchase up to an aggregate of additional shares of Common Stock to
cover over-allotments, if any, on terms similar to those granted to the U.S.
Underwriters.

At the request of the Company, the U.S. Underwriters have reserved for
sale, at the initial public offering price, up to [ ] of the shares to
be issued by the Company and offered hereby for directors, officers, employees,
business associates and related persons of the Company. The number of shares
of Common Stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares which
are not so purchased will be offered by the Underwriters to the general public
on the same basis as the other shares offered hereby. Certain of such persons
will be required to agree not to sell or otherwise dispose of any shares of
Common Stock, or securities convertible into or exchangeable or exercisable for
Common Stock, for a period of three months following the date of this
Prospectus.

The Company and certain of its current stockholders, including the Selling
Stockholders and certain officers and directors of the Company, have entered
into "lock-up" agreements pursuant to which they have agreed, during the period
of days from the date of this Prospectus, without the prior written
consent of Merrill Lynch, not to enter into any agreement providing for or
effect any public sale, distribution or other public disposition (including,
without limitation, any sale pursuant to Rule 144 or Rule 144A or Regulation S
under the Securities Act) of any shares of Company Common Stock or similar
equity securities, or any securities convertible into or exchangeable or
exercisable for shares of Company Common Stock or similar equity securities, or
grant any public option for any such sale, or, in the case of the Company, file
any registration statement under the Securities Act with respect to any of the
foregoing, other than the shares of Common Stock that may be sold by the
Selling Stockholders in the Offerings or, in the case of the Company, in
respect of a registration statement on Form S-8. Purchasers of any such
securities from such persons or entities in private transactions will also be
required to agree to substantially similar restrictions on public sales.
Virtually all of the Company's current stockholders are bound by a similar
180-day lock-up agreement, which may be waived by the Company. In addition,
certain management stockholders of the Company have agreed not to make any
demand for or exercise any rights with respect to the registration of their
Common Stock, and have waived all rights to register Common Stock owned by them,
in connection with the Offerings, in return for a one-year extension of their
right (which otherwise would terminate upon the completion of the Offerings) to
participate in certain private sales by C&D Fund IV of Company Common Stock.
See "Shares Eligible for Future Sales."

The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the terms of the Intersyndicate
Agreement, the Underwriters are permitted to sell shares of Common Stock to
each other for purposes of resale at the initial public offering price, less an
amount not greater than the selling concession. Under the terms of the
Intersyndicate Agreement, the U.S.

<PAGE> 79

Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons who
are non-U.S. or non-Canadian persons, and the International Managers and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to U.S. persons or to Canadian persons or to persons
they believe intend to resell to U.S. persons or Canadian persons, except, in
each case, for transactions pursuant to the Intersyndicate Agreement.

Prior to the Offerings, there has been no public market for the shares of
Common Stock. The initial public offering price will be determined through
negotiations among the Company, the Selling Stockholders and the U.S.
Representatives and the International Managers. Among the factors considered
in determining the initial public offering price, in addition to prevailing
market conditions, are price-earnings ratios of publicly traded companies that
the U.S. Representatives and the International Managers believe to be
comparable to the Company, certain financial information of the Company, the
history of, and the prospects for, the Company and the industry in which it
competes, an assessment of the Company's management, its past and present
operations, the prospects for, and timing of, future revenues of the Company,
the present state of the Company's development, and the above factors in
relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. There can be no assurance given
as to the liquidity of the trading market for the Common Stock or that an
active public market will develop for the Common Stock or that the Common Stock
will trade in the public market subsequent to the Offerings at or above the
initial public offering price. If an active public market for the Common Stock
does not develop, the market price and liquidity of the Common Stock may be
adversely affected.

An application will be made to list the Common Stock on the New York Stock
Exchange under the symbol " ." In order to meet the requirements for
listing of the Common Stock on that exchange, the U.S. Underwriters have
undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial
holders.

The Underwriters do not intend to confirm sales of the Common Stock
offered hereby to any accounts over which they exercise discretionary
authority.

The Company and the Selling Stockholders have agreed to indemnify the
several U.S. Underwriters and International Managers against certain
liabilities, including liabilities under the Securities Act.

Certain of the Underwriters, including the U.S. Representatives, perform
services for the Company and its affiliates from time to time for which they
receive customary compensation. Merrill Lynch distributes the Company's
investment products in the ordinary course of business, for which it receives
customary compensation.

<PAGE> 80

VALIDITY OF COMMON STOCK

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Debevoise & Plimpton, New York, New York. Certain
legal matters will be passed upon for the Underwriters by Fried, Frank, Harris,
Shriver & Jacobson (a partnership which includes professional corporations),
New York, New York. Franci J. Blassberg, Esq., a member of Debevoise &
Plimpton, is married to Joseph L. Rice, III, who is a general partner of the
general partner of C&D Fund IV, a principal of CD&R and a director of the
Company and VKAC.

EXPERTS

The consolidated financial statements of the Company, as of December 31,
1995 and 1994 and for the years ended December 31, 1995 and 1994 and for the
period February 17, 1993 through December 31, 1993 and for the period January
1, 1993 through February 16, 1993 (Predecessor period) included in this
Prospectus and the consolidated financial statement schedule filed as part of
the Registration Statement have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, to the extent and for the periods
indicated in their reports, which reports appear herein and elsewhere in the
Registration Statement. Such consolidated financial statements have been
included herein and therein in reliance upon their reports and the authority of
said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company files reports and other information with the Commission in
accordance with the informational requirements of the Exchange Act. Such
reports and other information filed by the Company can be inspected and copied
at the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies may be obtained at prescribed rates.

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock being offered
hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained in this Prospectus
concerning the provisions of documents filed with the Registration Statement as
exhibits are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
document filed as an exhibit to the Registration Statement. The Registration
Statement and the exhibits and schedules thereto filed by the Company with the
Commission, as well as such reports and other information filed by the Company
with the Commission, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; at its Chicago Regional Office, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511; and at its New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the public reference section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. For
further information pertaining to the Company and the Common Stock being
offered hereby, reference is made to the Registration Statement, including the
exhibits thereto, and the financial statements, notes and schedules filed as a
part thereof.

<PAGE> 81

The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements. [Quarterly reports for
the first three quarters of each fiscal year containing unaudited consolidated
summary financial information will be made available to stockholders upon your
request addressed to the Secretary of the Company at its executive offices.]

<PAGE> 82

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report .............................................................. F-2
Consolidated Balance Sheets at December 31, 1995 and 1994 ................................. F-3
Consolidated Statements of Income for the periods
January 1 through February 16, 1993 and February 17
through December 31, 1993, and for the years ended December 31, 1995 and 1994 ............ F-4
Consolidated Statements of Changes in Stockholders' Equity for the
periods January 1 through February 16, 1993 and February 17 through
December 31,1993, and for the years ended December 31, 1995 and 1994 ..................... F-5
Consolidated Statements of Cash Flows for the periods
January 1 through February 16, 1993 and February 17
through December 31, 1993, and for the years ended December 31, 1995 and 1994 ............ F-6
Notes to Consolidated Financial Statements ................................................ F-7
Consolidated Balance Sheet at March 31, 1996 (unaudited) ..................................F-21
Consolidated Statements of Income for the quarters ended March 31, 1996 and
1995 (unaudited).........................................................................F-22
Consolidated Statement of Changes in Stockholders' Equity for the quarter
ended March 31, 1996 (unaudited) ........................................................F-23
Consolidated Statements of Cash Flows for the quarters ended March 31, 1996
and 1995 (unaudited).....................................................................F-24
Notes to Consolidated Financial Statements (unaudited).....................................F-25

</TABLE>

F-1
<PAGE> 83

INDEPENDENT AUDITORS' REPORT

The Board of Directors
VK/AC Holding, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of VK/AC Holding,
Inc. and subsidiaries (the Company or Successor) as of December 31, 1995 and
1994, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the years ended December 31, 1995 and
1994 and for the period February 17, 1993 through December 31, 1993 and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows of The Van Kampen Merritt Companies, Inc. and subsidiaries
(Predecessor) for the period January 1, 1993 through February 16, 1993
(Predecessor period). These consolidated financial statements are the
responsibility of the Company and Predecessor management. Our responsibility
is to express an opinion on these consolidated financial statements 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 are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 aforementioned Company consolidated financial statements
present fairly, in all material respects, the financial position of VK/AC
Holding, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years ended December
31, 1995 and 1994 and for the period February 17, 1993 through December 31,
1993, in conformity with generally accepted accounting principles. Further, in
our opinion, the aforementioned Predecessor consolidated financial statements
present fairly, in all material respects, the results of the Predecessor's
operations and its cash flows for the Predecessor period, in conformity with
generally accepted accounting principles.

As discussed in Note 3 to the consolidated financial statements, effective
February 17, 1993, The Van Kampen Merritt Companies, Inc. was acquired in a
business combination accounted for as a purchase. As a result of the
acquisition, the consolidated financial information for the periods after the
acquisition is presented on a different cost basis than that for the period
before the acquisition and, therefore, is not comparable.

KPMG Peat Marwick LLP

Chicago, Illinois
January 26, 1996
except for the second and following paragraphs of Note 15,
as to which the date is June 4, 1996

F-2
<PAGE> 84
VK/AC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT FOR PAR VALUE AND SHARES)

12/31/95 12/31/94
-------- --------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1.6 $ 21.1
Cash Equivalents Segregated Under Regulation or Collateral Agreement 10.0 10.0
Short-Term Investments - Mutual Funds, at market 27.5 31.7
Receivables 41.7 40.4
Trading Inventory, at market 71.9 93.4
Furniture, Equipment, and Leasehold Improvements, net 22.3 23.0
Deferred Company Funded Distribution Costs, net 259.8 226.4
Deferred Financing Costs, net 13.0 15.0
Excess of Cost over Fair Value of Net Assets Acquired, net 526.9 537.0
Net Assets of Discontinued Operations 25.8 25.5
Other Assets 21.6 16.4
-------- --------
Total Assets $1,022.1 $1,039.9
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Bank Loans $ 331.1 $ 423.7
Senior Secured Notes 150.0 150.0
Accounts Payable and Accrued Expenses 77.0 63.2
Payable to Affiliates 2.8 2.0
Payable to Trustee 5.6 7.1
Deferred Compensation 22.0 14.9
Deferred Income Taxes 55.6 40.2
-------- --------
Total Liabilities 644.1 701.1
-------- --------

REDEEMABLE COMMON STOCK
At redemption value of $200 per share; 155,673 shares outstanding
at December 31, 1995; 129,850 shares outstanding at December 31, 1994 31.1 26.0
-------- --------

STOCKHOLDERS' EQUITY
Junior Non-Cumulative Participating Preferred Stock, $200 par value,
32,500 shares authorized; 32,500 shares issued and outstanding
at December 31, 1995; 14,000 shares issued and outstanding at
December 31, 1994 6.5 2.8
Class A Common Stock, $.01 par value; 3,250,000 shares authorized,
2,163,792 nonredeemable shares issued, 2,161,264 nonredeemable
shares outstanding at December 31, 1995; 2,160,803 nonredeemable
shares issued, 2,156,764 nonredeemable shares outstanding at
December 31, 1994 -- --
Class B Common Stock, $.01 par value, nonvoting, 3,250,000 shares
authorized; 117,817 shares issued and outstanding at December 31, 1995;
107,267 shares issued and outstanding at December 31, 1994 -- --
Additional Paid-In Capital 299.3 297.1
Retained Earnings 41.6 13.3
-------- --------
347.4 313.2
Less Treasury Stock, Class A Common Stock, at cost; 2,528 shares at
December 31, 1995; 4,039 shares at December 31, 1994 (0.5) (0.4)
-------- --------
Total Stockholders' Equity 346.9 312.8
-------- --------
Total Liabilities & Stockholders' Equity $1,022.1 $1,039.9
======== ========

</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 85

VK/AC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS EXCEPT SHARES AND PER SHARE DATA)

<TABLE>
<CAPTION>
For the Year
Ended December 31
--------------------- 2/17- 1/1-
1995 1994 12/31/93 2/16/93
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Investment Advisory Fees $ 249.9 $ 129.2 $ 101.2 $ 12.4
Distribution of Investment Products 31.8 14.3 21.8 4.7
Other Revenues 16.0 4.7 5.1 0.6
--------- -------- -------- -------
Total Revenues 297.7 148.2 128.1 17.7
--------- -------- -------- -------
EXPENSES:
Compensation and Benefits 93.7 42.5 34.9 5.8
Amortization of Deferred Company
Funded Distribution Costs 50.2 29.0 19.6 2.5
Marketing and Promotion 32.7 22.1 17.6 2.3
Other Expenses 65.6 24.5 24.4 3.3
Reimbursements (51.6) (16.7) (14.2) (1.9)
Interest Expense 44.2 23.7 19.7 0.2
Amortization of Excess of Cost over
Fair Value of Net Assets Acquired 17.2 6.0 5.2 0.4
--------- -------- -------- -------
Total Expenses 252.0 131.1 107.2 12.6
--------- -------- -------- -------

Income From Continuing Operations Before
Taxes and Extraordinary Item 45.7 17.1 20.9 5.1
Income Tax Provision 18.3 3.2 8.1 1.8
--------- -------- -------- -------
Income From Continuing Operations Before
Extraordinary Item 27.4 13.9 12.8 3.3
Discontinued Operations:
Income From Discontinued Operations,
net of tax 2.5 0.6 1.6 0.4
--------- -------- -------- -------
Income Before Extraordinary Item 29.9 14.5 14.4 3.7
Extraordinary Item, net of tax of $1,803 -- (2.7) -- --
--------- -------- -------- -------

Net Income $ 29.9 $ 11.8 $ 14.4 $ 3.7
========= ======== ======== =======
Earnings per share:
Primary:
Net Income From Continuing Operations
Before Extraordinary Item Available to
Common Shareholders $ 10.13 $ 0.62 $ 7.68
Income From Discontinued Operations 0.95 0.35 0.92
Extraordinary Item -- (1.54) --
--------- -------- --------
Net Income (Loss) Available to Common
Shareholders $ 11.08 $ (0.57) $ 8.60
========= ======== ========
Assuming Full Dilution:
Net Income From Continuing Operations
Before Extraordinary Item Available to
Common Shareholders $ 10.13 $ 0.59
Income From Discontinued Operations 0.95 0.33
Extraordinary Item -- (1.46)
--------- --------
Net Income (Loss) Available to Common
Shareholders $ 11.08 $ (0.54)
========= ========
Weighted Average Common Shares and
Common Share Equivalents: (In 000's)
Primary 2,549 1,754 1,670
Assuming Full Dilution 2,549 1,858 --
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 86

VK/AC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN MILLIONS)

<TABLE>
<CAPTION>
Junior Class A Class B Additional
Preferred Common Common Paid-In Retained Treasury
Stock Stock Stock Capital Earnings Stock Total
--------- ------- -------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Predecessor
Balance at December 31, 1992 $ $ -- $ $ 169.9 $ 77.0 $ $ 246.9
Net Income 3.7 3.7
-------- --------- -------- --------- ------- -------- ---------
Balance at February 16, 1993 -- -- -- 169.9 80.7 -- 250.6
-------- --------- -------- --------- ------- -------- ---------
Elimination of Historical Equity -- (169.9) (80.7) (250.6)

Company
Issuance of New Shares -- $ 155.5 155.5
Purchase of Class A Common Stock
for Treasury -- -- --
Net Income 14.4 14.4
-------- --------- -------- --------- ------- -------- ---------
Balance at December 31, 1993 $ -- $ -- -- 155.5 $ 14.4 $ -- $ 169.9
-------- --------- -------- --------- ------- -------- ---------
Purchase of Class A Common Stock
for Treasury 0.8 (0.9) (0.1)
Issuance of Treasury Stock (0.5) 0.5 --
Issuance of New Shares 2.8 -- -- 141.3 144.1
Net Income 11.8 11.8
Accretion of Redeemable Stock
to Redemption Value (12.9) (12.9)
-------- --------- -------- -------- ------- -------- ---------
Balance at December 31, 1994 $ 2.8 $ -- -- $ 297.1 $ 13.3 $ (0.4) $ 312.8
-------- --------- -------- -------- ------- -------- ---------
Purchase of Class A Common Stock
for Treasury 4.7 (4.7) --
Issuance of Treasury Stock (3.9) 4.6 0.7
Issuance of New Shares 3.7 1.4 5.1
Net Income 29.9 29.9
Accretion of Redeemable Stock
to Redemption Value (1.6) (1.6)
-------- --------- -------- -------- ------- -------- ---------
Balance at December 31, 1995 $ 6.5 $ -- $ -- $ 299.3 $ 41.6 $ (0.5) $ 346.9
======== ========= -------- -------- ------- -------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 87
VK/AC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
For the Year
Ended December 31
----------------- 2/17- 1/1-
1995 1994 12/31/93 2/16/93
------ ------ -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 29.9 $ 11.8 $ 14.4 $ 3.7
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 6.2 2.4 2.4 0.3
Amortization:
Deferred Company Funded Distribution Costs 50.2 29.0 19.6 2.5
Excess of Cost over Fair Value of
Net Assets Acquired 17.1 6.0 5.2 0.4
Deferred Financing Costs 2.0 1.8 1.9 --
Extraordinary Item -- 4.5 -- --
Net Change in:
Cash Segregated -- 5.0 5.0 --
Short-Term Investments - Mutual Funds 4.2 (6.4) 3.4 (0.8)
Receivables (1.3) (5.8) 4.9 2.8
Trading Inventory 21.5 3.3 (29.7) 26.3
Net Assets of Discontinued Operations (0.3) (0.6) (1.5) (0.3)
Other Assets (5.0) (15.9) 2.4 0.2
Accounts Payable and Accrued Expenses 13.8 (2.8) 4.8 5.3
Payable to Affiliates 0.8 (1.5) 4.7 (6.9)
Payable to Trustee (1.5) 0.9 (5.3) 3.1
Deferred Compensation 7.1 13.6 (0.1) 0.7
Income Taxes Payable -- (2.7) (7.1) 1.1
Deferred Income Taxes 11.4 4.2 6.7 (0.1)
------- ------- ------- -------
Total Adjustments 126.2 35.0 17.3 34.6
------- ------- ------- -------
Net Cash Provided by Operating Activities 156.1 46.8 31.7 38.3
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred Company Funded Distribution Costs (83.6) (33.6) (64.4) (2.7)
Sale of Investments -- -- 2.5 --
Acquisition Consideration Paid, net of cash acquired (3.2) (409.3) (350.6) --
Net Dispositions (Additions) of Fixed Assets (5.5) (2.1) (3.7) 0.1
------- ------- ------- -------
Net Cash Used by Investing Activities (92.3) (445.0) (416.2) (2.6)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in Note Payable to XFSI -- -- (10.0) --
Proceeds from Borrowings, net -- 486.9 6.8 --
Loan Principal Payments (92.6) (205.0) (7.0) (28.2)
Issuance of Senior Secured Notes -- -- 150.0 --
Initial Loans with Bank of New York -- -- 97.0 --
Stock Issuance 14.0 145.2 168.3 --
Purchase of Redeemable Stock for Treasury (4.7) (0.9) -- --
Financing and Acquisition Costs -- (7.4) (20.1) --
------- ------- ------- -------
Net Cash Provided (Used) by Financing Activities (83.3) 418.8 385.0 (28.2)
------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (19.5) 20.6 0.5 7.5
CASH AND CASH EQUIVALENTS:
Beginning of Period 21.1 0.5 -- 1.0
------- ------- ------- ------
End of Period $ 1.6 $ 21.1 $ 0.5 $ 8.5
======= ======= ======= ======

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for: Income Taxes 3.2 0.8 5.1 (0.1)
Interest 42.9 21.8 12.6 --

Non-Cash Reduction of Excess of Cost over Fair Value
of Net Assets Acquired 1.6 -- -- --

</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 88
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

NOTE 1 - GENERAL INFORMATION AND ACCOUNTING POLICIES

The consolidated financial statements for periods after the VKM Acquisition,
described in Note 3 to these consolidated financial statements, include the
accounts of VK/AC Holding, Inc. (formerly VKM Holding, Inc.) ("VK/AC Holding")
and its subsidiaries. The consolidated financial statements for the period
prior to the VKM Acquisition include the accounts of the company then named The
Van Kampen Merritt Companies, Inc. ("VKM") and its subsidiaries. The
subsidiaries of VK/AC Holding include Van Kampen American Capital, Inc.
(formerly The Van Kampen Merritt Companies, Inc.) ("VKAC"). All material
intercompany accounts and transactions have been eliminated in consolidation.
The term "Company" as used herein means, for the period prior to the VKM
Acquisition, VKM and its subsidiaries ("Predecessor"), and for periods after
the VKM Acquisition, VK/AC Holding and its subsidiaries. The Company's
consolidated financial statements incorporate the AC Acquisition, described in
Note 2, as of December 20, 1994 and thus the Company's balance sheet at
December 31, 1994 reflects the assets and liabilities resulting from the AC
Acquisition. Because the AC Acquisition was accounted for as a purchase, the
results of operations prior to the AC Acquisition are not included in the
Company's statements of income for periods prior to the AC Acquisition.

Prior to the closing of the VKM Acquisition, certain assets of the Company were
transferred to Xerox Financial Services, Inc. ("Xerox Financial") or its
affiliates. These assets consisted of the Company's remaining interest in its
discontinued capital markets business ("Capital Markets") and its investment in
Xerox Financial Services Life Insurance Company ("Xerox Life"). The historical
financial results of Capital Markets and the investment in Xerox Life are
excluded from these consolidated financial statements in order to present the
ongoing business of the Company.

The Company primarily consists of the following subsidiaries: Van Kampen
American Capital Distributors, Inc. ("VKAC Distributors"), a registered broker
and dealer in securities under the Securities Exchange Act of 1934, is a
sponsor of Unit Investment Trusts ("UITs") and open and closed end funds (the
"Funds"). American Capital Marketing, Inc., renamed Van Kampen American
Capital Marketing, Inc. subsequent to the AC Acquisition, was a broker/dealer
that was merged into VKAC Distributors effective January 1, 1995. Van Kampen
American Capital Investment Advisory Corp. ("Investment Advisory Corp.") is a
registered investment advisor under the Investment Advisers Act of 1940 and its
business is providing investment advisory, evaluation, research and
administrative services to registered investment companies. Van Kampen
American Capital Management, Inc. is also a registered investment advisor
under the Investment Advisers Act of 1940. Van Kampen American Capital Asset
Management, Inc. is a registered investment advisor under the Investment
Advisers Act of 1940 and provides investment advisory, evaluation, and research
services to registered investment companies. ACCESS Investor Services, Inc.
("ACCESS") provides transfer agency services to the Funds. Van Kampen American
Capital Trust Company provides trust and administrative services to 401(k) and
IRA accounts in the Funds.

The following is a summary of significant accounting policies:

- - Cash and Cash Equivalents include demand deposits held in banks and money
market investments.

- - Cash Equivalents Segregated Under Regulation or Collateral Agreement
includes certificates of deposit which are segregated in a special reserve
bank account for the benefit of customers under Rule 15c3-3 of the
Securities and Exchange Commission and certificates of deposit
collateralizing the Payable to Trustee backed by letters of credit.

- - Short-Term Investments consist primarily of investments in Funds and also
T-Bills and commercial paper, which are recorded at market value.

F-7

<PAGE> 89

VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

- - Security transactions are recorded in the accounts on a settlement date
basis which is generally three business days after the trade date. The use
of settlement date rather than trade date does not have a material effect on
the Company's consolidated financial statements. Trading Inventory is
stated at market value and realized and unrealized gains and losses are
reflected in income. At December 31, 1995 the Company's trading inventory
did not contain significant concentrations of credit risk relating to issues
or issuers located in any state or region of the country.

The Company uses U.S. Treasury and municipal bond index futures contracts,
which are types of derivative financial instruments, primarily to hedge
against market value changes in its Trading Inventory. Open futures
contracts are marked to market monthly and recorded in Other Assets in the
accompanying consolidated balance sheets, with the resulting gain or loss
included in Distribution of Investment Products in the accompanying
consolidated statements of income. The number of contracts outstanding at
December 31, 1995 and 1994 is 357 and 596, respectively. The loss on open
contracts at December 31, 1995 and 1994 is approximately $.9 million and $1
million, respectively.

- - Furniture, equipment and leasehold improvements are carried at cost and
depreciated using primarily the straight line method over their estimated
useful lives.

- - Deferred Company Funded Distribution Costs consist of commissions and sales
expenses related to sales of certain Funds. These costs are deferred to be
appropriately matched, through straight line amortization, against future
fee revenues. Deferred Company Funded Distribution Costs for open end
Funds are amortized over a four to seven year period and for the Prime Rate
Income Trust over a six year period based, in each case, on the period for
which a redemption fee is charged. Deferred Company Funded Distribution
Costs for other closed end Funds are amortized over ten years.

- - The estimated life of Excess of Cost Over Fair Value of Net Assets Acquired
for the VKM Acquisition and the AC Acquisition was determined by an
independent study. The Company assesses impairment of this asset based on
several factors including probable fair market value, cash flows and the
aggregate value of the business as a whole.

- - Net Assets of Discontinued Operations includes McCarthy, Crisanti & Maffei,
Inc. ("MCM") and Advantage Capital Corporation ("Advantage Capital").
Discontinued Operations are described in Note 15 to these consolidated
financial statements.

- - Payable to Trustee represents the Company's open contractual commitments to
deliver bonds to the UITs that it sponsors.

- - Xerox Corporation's consolidated federal income tax return includes the
Company for the period prior to February 17, 1993. Pursuant to a tax
allocation arrangement with Xerox Corporation, income taxes, except for
certain tax benefits arising from Xerox Corporation's 1984 acquisition of
the Company, were provided at statutory rates on a separate return basis.
The Company has filed and will file consolidated federal income tax returns
for the periods after February 17, 1993.

The Company calculates tax expense reported in its financial statements
pursuant to the provisions of Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes", which it adopted as of
February 17, 1993. Under this standard, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. As a consequence, the portion of the tax expense which is a
result of the change in the deferred tax asset or liability may not always
be consistent with the income reported on the income statement.

F-8

<PAGE> 90
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

Under Accounting Principles Board Opinion No. 11 (APB 11), the accounting
rules used by the Predecessor, deferred income taxes are recognized for
income and expense items that are reported in different years for financial
reporting purposes and income tax purposes using the tax rate applicable for
the year of the calculation. Under the deferred method, deferred taxes are
not adjusted for subsequent changes in tax rates.

- - Investment Advisory Fees represent management fees, administrative fees and
certain reimbursement fees pursuant to distribution plans charged to the
Funds and management fees charged to institutional accounts. Fees accrue
quarterly, monthly or weekly based on average net assets and the fee rate
per the related investment advisory agreement. Distribution of Investment
Products includes UIT sponsor, acquisition and trading profits (net of
related expenses) and selling concessions on Funds.

- - The Company is reimbursed for expenses incurred in providing evaluation,
surveillance and other support services to Company sponsored UITs and the
Funds and transfer agency services to Company sponsored Funds. Costs
related to these reimbursements are included in the Company's various
expense categories.

- - Primary and fully diluted earnings (loss) per share are computed based upon
the weighted average number of shares outstanding during the period,
including shares of redeemable common stock. Net income is reduced by the
accretion of redeemable common stock to redemption value to determine the
net income (loss) available to common stockholders.

- - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities 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.

- - Certain prior year amounts have been reclassified to conform to the current
year presentation.

NOTE 2 - THE AC ACQUISITION

Effective December 20, 1994, VK/AC Holding acquired American Capital Management
& Research, Inc. ("ACM&R") from The Travelers Inc. and certain of its
subsidiaries by means of the purchase by VKAC of the capital stock of ACM&R
(The "AC Acquisition"). Immediately following the AC Acquisition, ACM&R merged
into VKAC.

These consolidated financial statements reflect the application of purchase
accounting principles as a result of the AC Acquisition. At December 31, 1994
the purchase cost was allocated to the assets and liabilities of the Company
based on management's estimate of fair value, with the remainder allocated to
Excess of Cost Over Fair Value of Net Assets Acquired. Subsequent to December
31, 1994, an independent appraisal (the "Appraisal") was performed. The
Appraisal determined that the total excess of purchase cost over the fair value
of net assets acquired was approximately $357 million, with a useful life of 30
years. This amount is being amortized over its useful life on a straight line
basis. The AC Acquisition was financed in part through the incurrence of
certain indebtedness described in Note 5 to these consolidated financial
statements.

NOTE 3 - THE VKM ACQUISITION

Pursuant to a stock purchase agreement dated as of October 13, 1992 between
VKAC and Xerox Financial, VKAC purchased all of the capital stock of VKM from
Xerox Financial effective February 17, 1993 for a cash purchase price of $359.1
million (the "VKM Acquisition"). Excess of Cost Over Fair Value of Net Assets
Acquired at February 17, 1993 was approximately $218 million and is being
amortized over its useful lives of 25 to 34 years on a straight line basis.
Following the VKM Acquisition, VKM merged with and into VKAC. VKAC is a wholly
owned subsidiary of VK/AC Holding. VK/AC Holding and VKAC were organized in
1992 to acquire VKM. The VKM Acquisition was financed in part through the
incurrence of certain indebtedness described in Note 5 to these consolidated
financial statements.

F-9

<PAGE> 91
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

The VKM Acquisition closed on February 17, 1993, and therefore all amounts
prior to February 17, 1993 are labeled as "Predecessor" in the accompanying
consolidated financial statements. As a result of the VKM Acquisition, the
consolidated financial information for the periods after the VKM Acquisition is
presented on a different cost basis than that for the periods before the VKM
Acquisition and therefore may not be comparable.

NOTE 4 - DEFERRED COMPANY FUNDED DISTRIBUTION COSTS

Deferred Company Funded Distribution Costs, net of accumulated amortization,
consisted of the following at the dates indicated: (in millions)

December 31
----------------------
1995 1994
-------- --------
<S> <C> <C>
Prime Rate Income Trust $ 77.9 $ 28.2
Other closed end funds 79.9 92.2

Open end funds ($61.8 million of 1994
amount resulted from the AC Acquisition) 102.0 106.0
-------- --------
$ 259.8 $ 226.4
======== ========

</TABLE>

NOTE 5 - DEBT AND STOCKHOLDERS' EQUITY

Debt at December 31, 1995 consisted of: (in millions)
-----------
<S> <C>
Bank Inventory Loans, 5.65%, due 1996 $ 41.1
Bank Term Loans, 6.99%, due 1997 through 2001 290.0
--------
Bank Loans 331.1
Senior Secured Notes, 9.75%, due 2003 150.0
--------
Total Debt $ 481.1
========

Debt at December 31, 1994 consisted of:

Bank Inventory Loans, 5.50%, due 1995 $ 53.7
Bank Revolving Loans, 7.63%, due 2001 10.0
Bank Term Loans, 7.82%, due 1996 through 2001 360.0
--------
Bank Loans 423.7
Senior Secured Notes, 9.75%, due 2003 150.0
--------
Total Debt $ 573.7
========

</TABLE>

F-10

<PAGE> 92

VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

Inventory loans bear interest at fluctuating rates equal to approximately .50%
over the federal funds rate. Revolving and term loans bear interest at
fluctuating rates. At December 31, 1995 such rates were equal to 1.25% over
the London Interbank Offered Rate (LIBOR), adjusted at 30 and 90 day periods,
respectively.

Scheduled aggregate maturities of the bank loans and senior secured notes are
as follows:

<TABLE>
Year (in millions)
---------- -------------
<S> <C>
1996 $ 41.1
1997 5.0
1998 71.2
1999 71.2
2000 71.2
Thereafter 221.4
-------------
Total Debt $ 481.1
=============

</TABLE>

The Acquisitions described in Notes 2 and 3 significantly changed the Company's
debt and equity structure. On February 17, 1993, in connection with the VKM
Acquisition, VKAC entered into a credit agreement providing for an aggregate
maximum borrowing of $110 million. In addition, VKAC sold $150 million
principal amount of its 9.75% Senior Secured Notes due 2003 (the "Notes") in a
public offering. The proceeds from the public offering of the Notes and the
borrowings under the credit agreement were used to finance a portion of the VKM
Acquisition.

On December 20, 1994, in connection with the AC Acquisition, VKAC amended and
restated its existing credit agreement (the "Amended Credit Agreement") with
VK/AC Holding as guarantor and a group of lenders, providing for an aggregate
maximum borrowing by VKAC of $460 million. VKAC borrowed the full $360 million
available under the Amended Credit Agreement's term loan facility, $290 million
of which was outstanding at December 31, 1995, and $100 million under the
Amended Credit Agreement's revolving credit facility, none of which was
outstanding at December 31, 1995. The proceeds from the borrowings under the
Amended Credit Agreement were used to repay previously outstanding loans of
$100 million and to finance a portion of the AC Acquisition.

In connection with the Amended Credit Agreement, $4.5 million of deferred
financing costs relating to the original credit agreement were recognized as a
charge to income and reflected as an extraordinary item, net of the income tax
benefit of $1.8 million, in the 1994 consolidated statement of income.

VKAC's obligations under the Amended Credit Agreement and the Notes are
guaranteed by VK/AC Holding and each such guarantee is secured by a pledge of
the capital stock of VKAC. VKAC's obligations under the Amended Credit
Agreement and the Notes are also secured by a pledge by VKAC of the capital
stock of certain of its subsidiaries and by certain cash and other collateral
of VKAC. Substantially all of the net assets of the Company are net assets of
VKAC and its subsidiaries, which are restricted by the Amended Credit
Agreement. The Amended Credit Agreement and Notes generally restrict the
dividends from VKAC to VK/AC Holding to: (a) specified amounts to repurchase
redeemable common stock and options as described in Note 6 to these
consolidated financial statements, (b) costs incurred to comply with reporting
obligations under federal and state laws, (c) expenses incurred in connection
with any public offering of VK/AC Holding's equity securities that has been
terminated by its board of directors, (d) taxes for which VK/AC Holding is
liable, (e) $1 million per year for bona fide operational expenses, or (f) $2
million per year for investment or capital contributions to any subsidiary of
VK/AC Holding. VK/AC Holding is prohibited by the Amended Credit Agreement
from paying cash dividends.

During 1995, VKAC Distributors also incurred certain additional bank loans
which were used to fund the purchase of fixed income securities and VKAC
Distributors sponsored unit investment trusts. These loans are fully
collateralized, primarily by VKAC Distributors' fixed income and UIT inventory.
The amount outstanding at December 31, 1995 was $41.1 million.

F-11

<PAGE> 93
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

In connection with the VKM Acquisition, VK/AC Holding sold 1,650,000 shares of
its Class A Common Stock for $165 million. The proceeds were used in part to
finance a portion of the VKM Acquisition. During the second quarter of 1993,
VK/AC Holding sold 33,000 shares of Class A Common Stock for $3.3 million to
the parent company of a major distributor of the Company's products, which
shares were subsequently assigned to such major distributor.

In 1994 and 1995 the Company issued options to purchase up to 177,972 shares of
its common stock to two of the Company's major distributors. The
exercisability of the options is contingent upon achievement of certain
performance criteria. Assuming such criteria are met, the options are
exercisable in 1999 and 2001 or earlier in certain circumstances involving a
change of control of the Company. The Company may elect to pay the cost
equivalent of an amount equal to the excess of the fair value of the stock over
the exercise price of $200.

In connection with the AC Acquisition, the Company issued 599,893 shares of
Class A Common Stock for $120.0 million, 102,057 shares of Class B Common Stock
for $20.0 million, and 14,000 shares of Junior Non-Cumulative Participating
Preferred Stock for $2.9 million.

During 1995 the Company issued 18,500 shares of Junior Non-Cumulative
Participating Preferred Stock for $3.9 million. See Note 11 to these
consolidated financial statements.

NOTE 6 - REDEEMABLE COMMON STOCK

VK/AC Holding has sold 155,673 shares of its Class A Common Stock, par value
$.01 per share ("Common Stock"), to members of management and other key
employees of the Company ("Management Investors"). VK/AC Holding has agreed to
repurchase these shares at fair market value under certain defined conditions,
such as death, disability, retirement at normal retirement age, or termination
of employment without cause. Fair market value is periodically estimated by
VK/AC Holding's board of directors considering, among other factors, the value
as determined by an independent appraisal. Pursuant to requirements of the
Securities and Exchange Commission, the shares of Class A Common Stock held by
Management Investors have been presented as redeemable common stock and
excluded from stockholders' equity.

The change in the number of shares outstanding and the value of the redeemable
common stock are as follows for the years ended December 31, 1995 and 1994 and
for the period ended December 31, 1993:

<TABLE>
<CAPTION> 1995 1994 1993
---------------------------- -------------------------- -----------------------------
(in 000's) (in millions) (in 000's) (in millions) (in 000's) (in millions)
Shares Amount Shares Amount Shares Amount
--------- ---------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of Period 130 $ 26.0 128 $ 12.8 129 $ 12.9
Shares Redeemed for Treasury (23) (4.7) (8) (0.8) (1) (0.1)
Shares Reissued from Treasury 21 4.3 5 0.5 -- --
New Shares issued 28 3.9 5 0.6 -- --
Accretion to redemption value -- 1.6 -- 12.9 -- --
-------- --------- ---------- ----------- ---------- -----------
Balance at December 31 156 $ 31.1 130 $ 26.0 128 $ 12.8
======== ========= ========== =========== ========== ===========

</TABLE>

The shares of redeemable common stock are reported on the balance sheets at
redemption value, which is the estimated fair market value of the stock. The
accretion to redemption value has been reflected as a reduction of retained
earnings.

F-12

<PAGE> 94
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

Options to purchase shares of Common Stock were granted to the Management
Investors pursuant to a stock option plan, under which such options will vest
over a period of time up to five years, generally 20% on each anniversary of
the option grant date. Fair market value of the stock and the exercise price
of the options were equal at the grant date for all options granted.

Stock option transactions consisted of the following:

<TABLE>
<S> <C>
Balance, February 17, 1993 --
Granted; exercise price $100 220,026
Cancelled (1,272)
-------
Balance, December 31, 1993 218,754
Granted; exercise price $115 21,686
Exercised (5,299)
Cancelled (14,536)
-------
Balance, December 31, 1994 220,605
Granted; exercise price $200 181,407
Exercised (26,750)
Cancelled (9,430)
-------
Balance, December 31, 1995 365,832
=======

</TABLE>

As of December 31, 1995, 71,864 options had vested.

On January 11, 1995, in connection with the AC Acquisition, certain executive
officers of the Company who were previously officers of ACM&R purchased an
aggregate of 17,450 shares of Class A Common Stock and were granted a total of
72,375 options to purchase additional shares of Class A Common Stock. Of the
17,450 shares, 1,250 were purchased from VK/AC Holding and 16,200 were
purchased from another stockholder of the Company.

In December, 1995, the Company granted an aggregate of 2,284 deferred stock
units to certain employees. Each unit represents the employee's right, subject
to certain terms and conditions, to receive in cash, shares of Common Stock of
the Company, or a combination thereof on January 1, 1999, an amount equal to
the fair market value of a share of Common Stock as of December 31, 1998.

NOTE 7 - COMMITMENTS

In the normal course of business, the Company enters into when-issued, delayed
delivery and underwriting commitments. At December 31, 1995 and 1994 the net
purchase commitments were approximately $8.7 and $5.9 million, respectively. In
management's opinion, these commitments will settle without a material adverse
effect on the Company's financial condition.

Rental expense for office space for the years ended December 31, 1995 and 1994,
and for the periods February 17, 1993 through December 31, 1993 and January 1,
1993 to February 16, 1993, was approximately $12.7 million, $6.0 million, $5.2
million and $.7 million, respectively.

F-13

<PAGE> 95

VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

Minimum rental commitments under noncancelable long-term leases, expiring in
various years to 2009, are as follows:

Year (in millions)
---- -------------
<S> <C>
1996 $ 11.9
1997 11.2
1998 10.6
1999 10.2
2000 10.1
2001 through 2009 21.2
-------
$ 75.2
=======

</TABLE>

NOTE 8 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

XEROX FINANCIAL

Through May, 1995, Investment Advisory Corp. had investment advisory agreements
with Xerox Life, an affiliate of the Company until the closing of the VKM
Acquisition, pursuant to which Investment Advisory Corp. provided investment
advisory services to Xerox Life and managed all of the Xerox Life general
account assets. During the second quarter of 1995, Xerox Corporation completed
the sale of Xerox Financial Services Life Insurance Company, Xerox Financial
Life Insurance Company and First Xerox Life Insurance Company (together "Xerox
Life") to General American Life Insurance Company ("General American"). In
connection with the sale of Xerox Life, substantially all of the Xerox Life
accounts were terminated effective May 31, 1995. Concurrent with such
terminations, the Company entered into an investment advisory agreement with
OakRe Life Insurance Company, a subsidiary of Xerox Corporation which was not
sold to General American. Unlike the advisory agreements applicable to the
terminated Xerox Life accounts which were to expire on December 31, 1996 and
included a buy-out provision, the advisory agreement with OakRe is terminable
at any time upon 30 days prior notice and does not include the benefit of a
buy-out provision. Under the buy-out provision, the Company would have
received a payment to compensate for the early termination. However, the
Company agreed to waive this payment in connection with its becoming the
investment advisor to OakRe with respect to the management of OakRe's assets.
At December 31, 1995, the OakRe and Xerox Life accounts represented
approximately $2.7 billion of a total of approximately $44.0 billion of assets
under the Company's management.

In connection with the VKM Acquisition, the Company transferred all of its
remaining Capital Markets inventory to VRN Inc., a subsidiary of Xerox
Financial, the capital stock of which was transferred to Xerox Financial. The
Company continues to provide certain investment advisory and workout related
services for and on behalf of VRN Inc. related to the Capital Markets
inventory.

The Stock Purchase Agreement provides for indemnification by Xerox Financial to
the Company for inaccuracies in the representations and warranties contained
therein, for failure to comply with covenants contained therein, for certain
pre-closing matters and for certain tax liabilities. The amount of
indemnification Xerox Financial may be required to pay with respect to
inaccuracies in representations and warranties is limited to aggregate claims
in excess of $3.6 million and Xerox Financial's maximum liability for
indemnification under the Stock Purchase Agreement (except with respect to
indemnification for certain tax liabilities) is limited to $359.1 million. The
Company also received an indemnity agreement for all liabilities relating to
certain pre-acquisition transactions and discontinued operations, including
litigation with respect thereto.

F-14

<PAGE> 96
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

CD&R AND C&D FUND IV

C&D Fund IV, which is the Company's largest stockholder, is a private
investment fund managed by Clayton, Dubilier & Rice, Inc. ("CD&R"). CD&R
receives an annual fee for management and financial consulting services
provided to the Company and reimbursement of out-of-pocket expenses. The
consulting fees paid to CD&R in 1995 and 1994 totaled $466,667 and $400,000,
respectively, in the aggregate. The Company expects to continue to pay CD&R
similar fees for such services in the future. Such fees will be reviewed
annually, and may not exceed $500,000 per year under the terms of the Bank
Agreements and, unless certain requirements are met, the Indenture governing
the Notes. In connection with the AC Acquisition and arranging financing
thereof, at the closing of the AC Acquisition, the Company paid CD&R a fee of
$4.3 million and reimbursed CD&R for its out-of-pocket expenses which totaled
approximately $31,000.

CD&R, C&D Fund IV and the Company have entered into an indemnification
agreement, pursuant to which the Company agreed to indemnify CD&R, C&D Fund IV,
Clayton & Dubilier Associates IV Limited Partnership (the general partner of
C&D Fund IV) and their respective directors, officers, partners, employees,
agents and controlling persons against certain liabilities arising under the
federal securities laws, other laws regulating the business of the Company and
certain other claims and liabilities.

MANAGEMENT

The major portion of the purchase price for the stock purchased by certain
Management Investors in connection with the VKM Acquisition was financed by
loans from a major bank on customary terms. To help those purchasers obtain a
more favorable rate and more favorable terms for such financing, the Company
has guaranteed such indebtedness, approximately $8.7 million of which was
outstanding at December 31, 1995. See Note 6 to these consolidated financial
statements.

In connection with the closing of the AC Acquisition, the Company entered into
a severance agreement with its former chairman, pursuant to which the Company
repurchased 17,780 shares of Class A Common Stock for $3.6 million and made
payments to the former chairman totaling approximately $.6 million.

NOTE 9 - NET CAPITAL REQUIREMENTS

The Company's broker/dealer subsidiaries are subject to the Securities and
Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1), which requires
the maintenance of minimum net capital. At December 31, 1995, the
broker/dealer subsidiaries had aggregate net capital of $31.5 million and each
met all requirements, which aggregated $.7 million. Of the $31.5 million,
$30.3 million was that of VKAC Distributors.

NOTE 10 - FINANCIAL INSTRUMENTS

Substantially all of the Company's financial instruments are carried at fair
value or amounts that approximate fair value. Trading inventory is valued
using quoted market or dealer prices.

Bank loans bear variable rates and are carried at amounts which approximate
their fair values. See Note 5 to these consolidated financial statements for
further details. The aggregate market value of the Company's Senior Secured
Notes at December 31, 1995, based upon quoted market prices on that date, was
approximately $155 million.

F-15
<PAGE> 97
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

NOTE 11 - PROFIT SHARING

The Company has a defined contribution profit sharing plan (the "Plan")
covering all eligible employees. Under the Plan, the Company contributes to a
trust, that is qualified under the Internal Revenue Code, an amount which may
not exceed the amount allowable as a deduction for federal income tax purposes.
The Company's contributions to the Plan were approximately $3.9 million, $1.8
million, $1.9 million and $.3 million for the years ended December 31, 1995 and
1994, and for the periods February 17 through December 31, 1993 and January 1
through February 16, 1993, respectively. The 1995 contribution was made in
Junior Non-Cumulative Participating Preferred Stock. The contribution for 1994
was made in cash and Junior Non-Cumulative Participating Preferred Stock. The
contributions for 1993 were made in cash.

NOTE 12 - INCOME TAXES

<TABLE>
<CAPTION>
Income tax expense consists of (in millions): Year Year February 17 January 1
Ended Ended through through
December December December February
31, 1995 31, 1994 31, 1993 16, 1993
Company Company Company Predecessor
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Current:
U.S. federal $ - $ - $ - $ 1.3
State and local 1.8 (2.3) 0.2 -
------ ------ ----- ------
$ 1.8 $ (2.3) $ 0.2 $ 1.3
====== ====== ===== ======

Deferred:
U.S. federal S 13.9 $ 2.8 $ 7.1 $ 0.3
State and local 3.5 1.4 2.1 0.4
------ ------- ------ ------
17.4 4.2 9.2 0.7
------ ------- ------ ------
Total Income Tax Expense $ 19.2 $ 1.9 $ 9.4 $ 2.0
====== ======= ====== ======

</TABLE>

<TABLE>
<CAPTION>
The reconciliation of the federal statutory rate to the effective rate is set
forth in the table below:

Year Year February 17 January 1
Ended Ended through through
December December December February
31, 1995 31, 1994 31, 1993 16, 1993
Company Company Company Predecessor
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Expected federal income tax expense 35.0% 35.0% 35.0% 35.0%

Tax-exempt interest income, net (2.1) (10.7) (5.0) (3.7)

State and local income taxes,
net of federal income tax effect 7.1 2.0 6.2 4.5

Reduction in previous years' state
tax provision - (9.6) - -

Other, net (0.8) (3.1) 3.3 (0.5)
Effective tax rate ----- ----- ---- ----
39.2% 13.6% 39.5% 35.3%
----- ----- ---- ----
</TABLE>

F-16
<PAGE> 98
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

The tax effects of temporary differences that give rise to significant portions
of the deferred tax liability recorded on the Company's consolidated balance
sheet at December 31, 1995 and 1994 are shown below:

<TABLE>
<CAPTION> December 31
--------------------------
1995 1994
(in millions) (in millions)
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 18.1 $ 21.4
Deferred Compensation 9.8 --
Other, net 6.0 --
Less - Valuation allowance (1.4) (3.7)
------ ------
Net deferred tax asset 32.5 17.7
------ ------

Deferred tax liabilities:
Excess of Cost Over Fair Value of Net Assets Acquired,
principally due to differences in amortization 14.0 5.3
Deferred Company Funded Distribution Costs,
principally due to differences in amortization 74.6 52.6
------ ------
Total gross deferred tax liability 88.6 57.9
------ ------
Net deferred tax liability $ 56.1 $ 40.2
====== ======

</TABLE>

The valuation allowance was adjusted in the current year based upon the receipt
of the Appraisal. In addition, a charge in lieu of taxes was incurred which
resulted from the initial recognition of acquired tax benefits that were
allocated to reduce excess of cost over fair value of net assets acquired
related to the AC Acquisition.

At December 31, 1995, the Company has net operating loss carryforwards for
federal income tax purposes of $44.6 million, of which $10.2 million is
available to offset future federal taxable income, if any, through 2009 and
$34.4 million is available to offset future federal taxable income, if any,
through 2008.

NOTE 13 - POSTRETIREMENT BENEFITS

The Company provides certain health care benefits for retired employees and
their eligible dependents. A portion of the cost of these benefits is shared
by the Company and the retiree.

As of the VKM Acquisition date, the Company implemented Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other than Pensions." This standard changed the method of accounting for
postretirement benefits from a cash basis to the accrual basis. Postretirement
benefits expense is now accrued during the period that the employee renders the
service to earn the benefits. A transition obligation of approximately
$1,653,000 representing the cumulative liability was recorded as of the VKM
Acquisition date.

Net postretirement benefits expense includes the following components (in
millions):

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service Cost $ 0.3 $ 0.3 $ 0.1
Interest Cost 0.2 0.1 0.1
------ ------ ------
Net postretirement benefits expense $ 0.5 $ 0.4 $ 0.2
====== ====== ======

</TABLE>

F-17

<PAGE> 99

VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

The following table sets forth the plan's funded status reconciled with amounts
reported in the Company's consolidated balance sheets at December 31 (in
millions):

<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Accumulated Postretirement Benefit Obligation:
Active participants $ 3.0 $ 2.4 $ 1.9
Retired participants 0.2 0.2 0.2
Unrecognized prior service cost (0.4) -- --
Unrecognized net gain 0.3 -- --
------ ------ ------
Accrued postretirement benefit cost $ 3.1 $ 2.6 $ 2.1
====== ====== ======

</TABLE>

A 9% and 8% annual rate of increase in the per capita costs of covered medical
benefits for pre-65 and post-65 participants was assumed for 1995. These rates
decrease by 1% each year, to 6% and 5%. Increasing the assumed health care
cost trend rates by one percentage point in each year would result in an
increase in the Accumulated Postretirement Benefit Obligation (APBO) as of
December 31, 1995 of approximately $736,000, and an increase in the aggregate
of the service cost and interest cost for the year ended December 31, 1995 of
approximately $184,000. A weighted average discount rate of 7.00% was used to
determine the APBO.

NOTE 14 - LEGAL PROCEEDINGS

The Company is party to various lawsuits and proceedings arising out of the
conduct of its operating businesses. Pursuant to the AC Acquisition, the
Company is indemnified by Travelers for losses arising out of the AC
Acquisition as follows: losses from $4.3 million to $14.3 million, 80%; losses
from $14.3 million to $429.2 million, 100%; losses below $4.3 million or over
$429.2 million are not covered by the indemnity. The amount of any liability
which might finally exist cannot reasonably be estimated and no provision for
loss has been made in the accompanying financial statements. However, the
Company does not believe that any of these lawsuits or proceedings, if
adversely determined, would have a material adverse effect upon the business,
financial condition or results of operations of the Company.

The Company is also involved in various litigation relating to discontinued
operations of the Company. Pursuant to the VKM Acquisition, the Company is
indemnified by Xerox Financial with respect to this litigation, which
indemnification obligation is guaranteed by Xerox Corporation. Accordingly,
the Company does not expect that the outcome of any such actions will have any
material effect on the Company's business, financial condition or results of
operations.

NOTE 15 - SUBSEQUENT EVENT

On January 2, 1996 Advantage Capital, a retail broker-dealer, was sold to
SunAmerica, Inc. following a determination by management of the Company that
the retail broker-dealer business was not part of the Company's strategic plan.
Advantage Capital will continue to operate under its existing name. By
agreement with SunAmerica, Inc., the federal and state income tax assets and
liabilities of Advantage Capital were assumed by VKAC as of December 31, 1995.
The Company currently has no intention of re-entering the retail broker-dealer
business.

F-18

<PAGE> 100

VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

On June 4, 1996, by resolution of the Board of Directors, the Company
formalized its intent to dispose of MCM, a registered investment advisor under
the Investment Advisers Act of 1940, through a distribution to stockholders.
Accordingly, the consolidated financial statements of the Company have been
reclassified to report separately the net assets and operating results of the
discontinued operations.

The results of operations for Advantage Capital, from December 20, 1994 and
thereafter, and MCM, which are classified separately as discontinued operations
in the accompanying consolidated statements of income, are summarized as
follows: (In millions)

<TABLE>
<CAPTION>
For the Year Ended
December 31 2/17- 1/1/93-
-------------------- ---------- ---------
1995 1994 12/31/93 2/16/93
------ ------ --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 39.9 $ 26.6 $ 18.5 $ 2.6
====== ====== ====== =======

Income Before Income Taxes 3.4 1.1 2.8 0.6
Income Taxes 0.9 0.5 1.2 0.2
------ ------ ------ -------

Net Income $ 2.5 $ 0.6 $ 1.6 $ 0.4
====== ====== ====== =======

</TABLE>

Net assets of discontinued operations consist principally of accounts
receivable and excess of cost over fair value of net assets acquired.

F-19

<PAGE> 101
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

NOTE 16 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

The following condensed balance sheets at December 31, 1995 and 1994 and
condensed statements of income and cash flows or the years ended December 31,
1995 and 1994, and for the period February 17 through December 31, 1993 for
VK/AC Holding should be read in conjunction with the consolidated financial
statements and notes thereto (in millions except for par value and shares):

<TABLE>
<CAPTION>
Balance Sheet
-------------
12/31/95 12/31/94
--------- --------
<S> <C> <C>
Assets:
Cash $ 0.2 $ --
Investment in Subsidiaries 375.6 336.1
Intercompany Receivable 2.2 2.7
Other Assets -- --
-------- -------
$ 378.0 $ 338.8
======== =======
Redeemable Common Stock
155,673 shares outstanding at December 31, 1995; 129,850 shares
outstanding at December 31, 1994 $ 31.1 $ 26.0
Stockholders' Equity
Junior Non-Cumulative Participating Preferred Stock, $200 par value,
32,500 shares authorized, 32,500 shares issued and outstanding
at December 31, 1995; 14,000 shares issued and outstanding at
December 31, 1994 6.5 2.8
Class A Common Stock, $.01 par value, 3,250,000 shares authorized,
2,163,792 nonredeemable shares issued, 2,161,264 nonredeemable
shares outstanding at December 31, 1995; 2,160,803 nonredeemable
shares issued, 2,156,764 nonredeemable shares outstanding at
December 31, 1994 -- --
Class B Common Stock, $.01 par value, nonvoting, 3,250,000 shares authorized,
117,817 shares issued and outstanding at December 31, 1995; 107,267
shares issued and outstanding at December 31, 1994 -- --
Additional Paid-In Capital 299.3 297.1
Retained Earnings 41.6 13.4
-------- -------
347.4 313.3
Less Treasury Stock, Class A Common Stock, at cost; 2,528 shares
at December 31, 1995; 4,039 shares at December 31, 1994 (0.5) (0.5)
-------- -------
$ 378.0 $ 338.8
======== =======

Statement of Income For the Year Ended
------------------- December 31
------------------------ 2/17 -
1995 1994 12/31/93
--------- -------- --------
<S> <C> <C> <C>
Equity in Earnings of Subsidiaries $ 29.9 $ 11.8 $ 14.4
-------- ------- -------
Net Income $ 29.9 $ 11.8 $ 14.4
======== ======= =======
<CAPTION>

Statement of Cash Flows
-----------------------
For the Year Ended
December 31
------------------------ 2/17 -
Operating Activities: 1995 1994 12/31/93
--------- -------- --------
<S> <C> <C> <C>
Net Income $ 29.9 $ 11.8 $ 14.4
Net Change in Investment in Subsidiaries (29.9) (11.8) (14.4)
Net Change in Intercompany 0.5 (2.8) 0.7
Net Change in Other Assets -- -- --
-------- ------- -------
Net Cash Provided (Used) by Operating Activities 0.5 (2.8) 0.7
-------- ------- -------
Investing Activities:
Subsidiaries Acquired -- (25.4) --
Capital Contributed to Subsidiary, net of Assets Assigned (9.7) (116.0) --
Stock Redeemed -- -- (0.7)
-------- ------- -------
Net Cash Used by Investing Activities (9.7) (141.4) (0.7)
-------- ------- -------
Financing Actvities:
Proceeds from Issuance of Stock 14.1 145.1 --
Common Stock Purchased for Treasury (4.7) (0.9) --
-------- ------- -------
Net Cash Provided by Financing Activities 9.4 144.2 --
-------- ------- -------
Net Change in Cash 0.2 -- --
Cash at Beginning of Year -- -- --
-------- ------- -------
Cash at End of Year $ 0.2 $ -- $ --
======== ======= =======
</TABLE>

F-20
<PAGE> 102
VK/AC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(IN MILLIONS EXCEPT FOR PAR VALUE AND SHARES)

<TABLE>
<S> <C>
ASSETS
Cash and Cash Equivalents $ 0.7
Cash Equivalents Segregated Under Regulation or Collateral Agreement 10.0
Short-Term Investments - Mutual Funds, at market 26.6
Receivables 59.1
Trading Inventory, at market 67.0
Furniture, Equipment, and Leasehold Improvements, net 22.4
Deferred Company Funded Distribution Costs, net 279.1
Deferred Financing Costs, net 12.5
Excess of Cost over Fair Value of Net Assets Acquired, net 522.6
Net Assets of Discontinued Operations 24.6
Other Assets 21.5
--------
Total Assets $1,046.1
========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Bank Loans $ 337.7
Senior Secured Notes 150.0
Accounts Payable and Accrued Expenses 52.2
Payable to Affiliates 4.8
Payable to Trustee 19.0
Deferred Compensation 24.1
Deferred Income Taxes 65.1
--------
Total Liabilities 652.9
--------
REDEEMABLE COMMON STOCK
At redemption value of $200 per share; 155,673 shares outstanding
at March 31, 1996 31.1
--------
STOCKHOLDERS' EQUITY
Junior Non-Cumulative Participating Preferred Stock, $200 par value,
32,500 shares authorized; 32,500 shares issued and outstanding
at March 31, 1996 6.5
Class A Common Stock, $.01 par value; 3,250,000 shares authorized,
2,163,792 nonredeemable shares issued, 2,161,264 nonredeemable
shares outstanding at March 31, 1996 --
Class B Common Stock, $.01 par value, nonvoting, 3,250,000 shares
authorized; 117,817 shares issued and outstanding at March 31, 1996 --
Additional Paid-In Capital 299.3
Retained Earnings 56.8
--------
362.6
Less Treasury Stock, Class A Common Stock, at cost; 2,528 shares at
March 31, 1996 (0.5)
--------
Total Stockholders' Equity 362.1
--------
Total Liabilities & Stockholders' Equity $1,046.1
========
</TABLE>

See accompanying notes to consolidated financial statements.

F-21
<PAGE> 103
VK/AC HOLDING, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(In millions except shares and per share data)

<TABLE>
<CAPTION>
For The Quarter Ended
March 31
-------------------
1996 1995
------ ------
<S> <C> <C>
Revenues
Investment Advisory Fees $ 71.5 $ 57.2
Distribution of Investment Products 6.8 7.2
Other Revenue 3.9 3.4
------ ------
Total Revenues 82.2 67.8
------ ------
Expenses
Compensation and Benefits 23.9 21.5
Amortization of Deferred Company
Funded Distribution Costs 14.6 11.7
Marketing and Promotion 7.6 7.8
Other Expenses 15.2 13.4
Reimbursements (13.9) (11.8)
Interest and Acquisition Expenses:
Amortization of Excess of Cost over
Fair Value of Net Assets Acquired 4.3 4.5
Interest Expense 9.4 11.5
------ ------
Total Expenses 61.1 58.6
------ ------
Income From Continuing Operations Before Taxes 21.1 9.2
Income Tax Provision 8.6 3.7
------ ------
Income From Continuing Operations 12.5 5.5
Discontinued Operations:
Income From Discontinued Operations, net of tax 0.7 0.4
Gain on Disposal of Discontinued Operations,
net of tax of $1.4 2.0 --
------ ------

Net Income $ 15.2 $ 5.9
====== ======
Earnings per share:
Primary:
Net Income From Continuing Operations Available
to Common Shareholders $ 4.87 $ 1.50
Income From Discontinued Operations 0.26 0.16
Gain on Disposal of Discontinued Operations 0.79 --
------ ------
Net Income Available to Common Shareholders $ 5.92 $ 1.66
====== ======
Assuming Full Dilution:
Net Income From Continuing Operations Available
to Common Shareholders $ 4.87 $ 1.50
Income From Discontinued Operations 0.26 0.16
Gain on Disposal of Discontinued Operations 0.79 --
------ ------
Net Income Available to Common Shareholders $ 5.92 $ 1.66
====== ======
Weighted Average Common Shares and
Common Share Equivalents: (In 000's)
Primary 2,560 2,565
Assuming Full Dilution 2,560 2,565

</TABLE>

See accompanying notes to consolidated financial statements.

F-22
<PAGE> 104

VK/AC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN MILLIONS)

Net Income 15.2 15.2
--------- --------- ---------- ---------- -------- -------- ---------
Balance at March 31, 1996 $ 6.5 $ -- $ -- $ 299.3 $ 56.8 $ (0.5) $ 362.1
========= ========= ========== ========== ======== ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-23
<PAGE> 105
VK/AC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)

<TABLE>
<CAPTION>
For The Quarter Ended
March 31
------------------------
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 15.2 $ 5.9
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 1.6 1.4
Amortization:
Deferred Company Funded Distribution Costs 14.6 11.7
Excess of Cost over Fair Value of
Net Assets Acquired 4.3 4.5
Deferred Financing Costs 0.5 0.5
Gain on Sale of Subsidiary (3.4) --
Net Change in:
Short-Term Investments - Mutual Funds 0.9 (1.9)
Receivables (17.4) (2.8)
Trading Inventory 4.9 27.8
Net Assets of Discontinued Operations 1.2 (0.3)
Other Assets (3.1) (6.0)
Accounts Payable and Accrued Expenses (25.8) (14.2)
Payable to Affiliates 2.0 (3.2)
Payable to Trustee 13.4 3.0
Deferred Compensation 2.1 (0.4)
Income Taxes Payable -- 3.9
Deferred Income Taxes 9.5 (2.6)
------- -------
Total Adjustments 5.3 21.4
------- -------
Net Cash Provided by Operating Activities 20.5 27.3
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Subsidiary 7.6 --
Deferred Company Funded Distribution Costs (33.9) (11.4)
Net Additions of Fixed Assets (1.7) (0.9)
------- -------
Net Cash Used by Investing Activities (28.0) (12.3)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Borrowings, net 6.6 --
Loan Principal Payments -- (36.3)
Stock Issuance -- 7.0
Purchase of Treasury Stock -- (4.0)
------- -------
Net Cash Provided (Used) by Financing Activities 6.6 (33.3)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (0.9) (18.3)
CASH AND CASH EQUIVALENTS:
Beginning of Period 1.6 21.1
------- -------
End of Period $ 0.7 $ 2.8
======= =======

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for: Income Taxes 0.4 0.2
Interest 12.9 14.9

</TABLE>

See accompanying notes to consolidated financial statements.

F-24
<PAGE> 106
VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996

NOTE 1 - BASIS OF PRESENTATION

The consolidated financial statements include the accounts of VK/AC Holding,
Inc. ("VK/AC Holding") and its subsidiaries, Van Kampen American Capital, Inc.
("VKAC") (VK/AC Holding together with its subsidiaries, the "Company"). All
material intercompany accounts and transactions have been eliminated in
consolidation.

The consolidated financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission with respect to quarterly financial statements. Certain information
and note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. VK/AC Holding's Annual Report
on Form 10-K for the year ended December 31, 1995, filed with the Securities
and Exchange Commission, includes the information and note disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles and should be referred to for further
information. The Company believes that the accompanying consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the Company's consolidated financial position as of
March 31, 1996, its consolidated results of operations for the three months
ended March 31, 1996 and 1995, and its consolidated cash flows for the three
months ended March 31, 1996 and 1995.

Primary and fully diluted earnings per share are computed based upon the
weighted average number of shares outstanding during the period, including
shares of redeemable common stock. Net income available to common stockholders
is reduced by the accretion of redeemable common stock to redemption value.

NOTE 2 - REDEEMABLE COMMON STOCK

Options to purchase shares of Class A Common Stock were granted to certain
members of management and other employees of the Company pursuant to a stock
option plan, under which 1,762 of such options will vest after 3 years and 150
of such options will vest over a period of time up to five years, 33.33% on
each of the third, fourth and fifth anniversaries of the option grant date.

F-25
<PAGE> 107

VK/AC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996

Stock options transactions consisted of the following:

<TABLE>
<CAPTION>
Number
of
Options
-------
<S> <C>
Balance, December 31, 1995 365,832
Granted; exercise price $200 1,912
Cancelled (8,509)
-------
Balance, March 31, 1996 359,235
=======
</TABLE>

As of March 31, 1996, 120,119 options had vested and the Company granted an
aggregate of 3,350 deferred stock units to certain employees.

NOTE 3 - DISCONTINUED OPERATIONS

On January 2, 1996 Advantage Capital Corporation ("Advantage Capital"), a
retail broker-dealer, was sold to SunAmerica, Inc. following a determination by
management of the Company that the retail broker-dealer business was not part
of the Company's strategic plan. Advantage Capital will continue to operate
under its existing name. By agreement with SunAmerica, Inc., the federal and
state income tax assets and liabilities of Advantage Capital were assumed by
VKAC as of December 31, 1995. The Company currently has no intention of
re-entering the retail broker-dealer business.

On June 4, 1996, by resolution of the Board of Directors, the Company
formalized its intent to dispose of McCarthy, Crisanti & Maffei, Inc. ("MCM"),
a registered investment advisor under the Investment Advisers Act of 1940,
through a distribution to stockholders. Accordingly, the consolidated
financial statements of the Company have been reclassified to report separately
the net assets and operating results of the discontinued operations.

The results of operations for Advantage Capital and MCM for the quarter ended
March 31, 1996 and 1995, which are classified separately as discontinued
operations in the accompanying consolidated statements of income, are
summarized as follows: (in millions)

<TABLE>
<CAPTION>
For the Quarter
Ended
March 31
----------------
1996 1995
------ ------
<S> <C> <C>
Revenues $ 8.8 $ 9.2
====== ======

Income Before Income Taxes 1.2 0.5
Income Taxes .5 .1
------ ------
Net Income $ .7 $ .4
====== ======

</TABLE>

Net assets of discontinued operations consist principally of accounts
receivable and excess of cost over fair value of net assets acquired.

F-26
<PAGE> 108
================================================================================

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

____________________

TABLE OF CONTENTS

PAGE

<TABLE>
<S> <C>
Prospectus Summary ...............................................
Risk Factors .....................................................
The Company ......................................................
Dividend Policy ...................................................
Dilution .........................................................
Use of Proceeds ..................................................
Capitalization ....................................................
Selected Historical Consolidated Financial Information ............
Selected Consolidated Pro Forma Financial Information .............
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .....................................................
Business .........................................................
Management .......................................................
Certain Relationships and Related
Transactions ...................................................
Security Ownership by Management and
Principal Stockholders .........................................
Selling Stockholders .............................................
Shares Eligible for Future Sale ...................................
Description of Capital Stock ......................................
Certain United States Federal Tax
Considerations For Non-U.S. Holders ............................
Underwriting .....................................................
Validity of Common Stock .........................................
Experts ...........................................................
Additional Information ............................................
Index to Financial Statements ..................................... F-1
</TABLE>

THROUGH AND INCLUDING , 1996 (THE __ DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS OR WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

_______ SHARES

VAN KAMPEN AMERICAN
CAPITAL GROUP, INC.

[LOGO]

COMMON STOCK

______________

PROSPECTUS
______________

MERRILL LYNCH & CO.

GOLDMAN, SACHS & CO.

______________ , 1996

================================================================================
<PAGE> 109

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

SUBJECT TO COMPLETION, DATED JUNE 6, 1996

PROSPECTUS [LOGO]

____________ SHARES

VAN KAMPEN AMERICAN CAPITAL GROUP, INC.

COMMON STOCK
_______________________

All of the _____ shares of Class A Common Stock (the "Common Stock"), of
Van Kampen American Capital Group, Inc. (the "Company") offered hereby will be
sold by certain stockholders (the "Selling Stockholders") of the Company. See
"Principal and Selling Stockholders." The Company is not selling shares of
Common Stock in this offering and will not receive any of the proceeds from the
sale of shares of Common Stock offered hereby.

Of the ____ shares offered hereby, _____ shares are being offered outside
the United States and Canada by the International Managers (the "International
Offering") and ____ shares are being offered in a concurrent offering in the
United States and Canada by the U.S. Underwriters (the "U.S. Offering," and
together with the International Offering, the "Offerings"). The price to
public and the underwriting discount per share will be identical for both
Offerings. See "Underwriting."

Prior to the Offerings there has been no public market for the Common
Stock. It is presently estimated that the initial public offering price will be
between $____ and $____ per share. For information relating to the
determination of the initial public offering price, see "Underwriting."

Application will be made for the Common Stock to be listed on the New York
Stock Exchange under the symbol " ."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
_______________________

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

_______________________

<TABLE>
<CAPTION>
=============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) STOCKHOLDERS(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share .................... [$ ] [$ ] [$ ]
- -------------------------------------------------------------------------------------------------------------
Total(3) .................... [$ ] [$ ] [$ ]
=============================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933. See "Underwriting."

(2) The Company will pay the expenses of the Offerings estimated to be
$________.

(3) The Selling Stockholders have granted the International Managers and the
U.S. Underwriters options, exercisable within 30 days after the date hereof, to
purchase up to _____ and _____ additional shares of Common Stock, respectively,
solely to cover over-allotments, if any. If such options are exercised in
full, the total Price to Public, Underwriting Discount and Proceeds to Selling
Stockholders will be $ , $ and $ ,
respectively. See "Underwriting."

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected
that delivery of certificates for the shares of Common Stock will be made in
New York, New York, on or about ________, 1996.

_______________________

MERRILL LYNCH INTERNATIONAL GOLDMAN SACHS INTERNATIONAL

The date of this Prospectus is ________, 1996

<PAGE> 110

[Alternate Pages for International Prospectus]

UNDERWRITING

Merrill Lynch International and Goldman Sachs International are acting as
representatives (the "International Representatives") of each of the
International Managers named below (the "International Managers"). Subject to
the terms and conditions set forth in an international purchase agreement (the
"International Purchase Agreement") among the Company, each of the Selling
Stockholders and the International Managers, and concurrently with the sale of
_______ shares of Common Stock to the U.S. Underwriters (as defined below), the
Selling Stockholders severally have agreed to sell to the International
Managers, and each of the International Managers severally has agreed to
purchase from the Selling Stockholders, the number of shares of Common Stock
set forth opposite its name below.

<TABLE>
<CAPTION>
INTERNATIONAL MANAGERS NUMBER OF SHARES
---------------------- ----------------
<S> <C>
Merrill Lynch International ................................ ___________
Goldman Sachs International ................................ ___________

Total ...................................................... ===========
</TABLE>

The Company and the Selling Stockholders have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement") with certain underwriters in
the United States and Canada (the "U.S. Underwriters" and, together with the
International Managers, the "Underwriters") for whom Merrill Lynch and Goldman,
Sachs & Co. are acting as representatives (the "U.S. Representatives").
Subject to the terms and conditions set forth in the U.S. Purchase Agreement,
and concurrently with the sale of _______ shares of Common Stock to the
International Managers pursuant to the International Purchase Agreement, the
Selling Stockholders severally have agreed to sell to the U.S. Underwriters,
and the U.S. Underwriters severally have agreed to purchase from the Selling
Stockholders, an aggregate of ________ shares of Common Stock. The initial
public offering price per share and the total underwriting discount per share
of Common Stock are identical under the International Purchase Agreement and
the U.S. Purchase Agreement.

In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
such agreement are purchased. Under certain circumstances, the commitments of
non-defaulting International Managers or U.S. Underwriters (as the case may be)
may be increased. The closings with respect to the sales of shares of Common
Stock to be purchased by the International Managers and the U.S. Underwriters
are conditioned upon one another.

The International Representatives have advised the Company and the Selling
Stockholders that the International Managers propose initially to offer the
shares of Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ __ per share of Common Stock. The
International Managers may allow, and such dealers may reallow, a discount not
in excess of $ __ per share of Common Stock on sales to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.

81
<PAGE> 111

The Selling Stockholders have granted an option to the International
Managers, exercisable within 30 days after the date of this Prospectus, to
purchase up to an aggregate of _______ additional shares of Common Stock at the
initial public offering price set forth on the cover page of this Prospectus,
less the underwriting discount. The International Managers may exercise this
option only to cover over-allotments, if any, made on the sale of Common Stock
offered hereby. To the extent that the International Managers exercise this
option, each International Manager will be obligated, subject to certain
conditions, to purchase a number of additional shares of Common Stock
proportionate to such International Manager's initial amount reflected in the
foregoing table. The Selling Stockholders also have each granted an option to
the U.S. Underwriters, exercisable within 30 days after the date of this
Prospectus, to purchase up to an aggregate of _______ additional shares of
Common Stock to cover over-allotments, if any, on terms similar to those
granted to the International Managers.

At the request of the Company, the U.S. Underwriters have reserved for
sale, at the initial public offering price, up to __________ of the shares to
be issued by the Company and offered hereby for directors, officers, employees,
business associates and related persons of the Company. The number of shares
of Common Stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares which
are not so purchased will be offered by the Underwriters to the general public
on the same basis as the other shares offered hereby. Certain of such persons
will be required to agree not to sell or otherwise dispose of any shares of
Common Stock, or securities convertible into or exchangeable or exercisable for
Common Stock, for a period of three months following the date of this
Prospectus.

The Company and certain of its current stockholders, including the Selling
Stockholders and certain officers and directors of the Company, have entered
into "lock-up" agreements pursuant to which they have agreed, during the period
of ____ days from the date of this Prospectus, without the prior written
consent of Merrill Lynch, not to enter into any agreement providing for or
effect any public sale, distribution or other public disposition (including,
without limitation, any sale pursuant to Rule 144 or Rule 144A or Regulation S
under the Securities Act) of any shares of Company Common Stock or similar
equity securities, or any securities convertible into or exchangeable or
exercisable for shares of Company Common Stock or similar equity securities, or
grant any public option for any such sale, or, in the case of the Company, file
any registration statement under the Securities Act with respect to any of the
foregoing, other than the shares of Common Stock that may be sold by the
Selling Stockholders in the Offerings or, in the case of the Company, in
respect of a registration statement on Form S-8. Purchasers of any such
securities from such persons or entities in private transactions will also be
required to agree to substantially similar restrictions on public sales.
Virtually all of the Company's current stockholders are bound by a similar
180-day lock-up agreement, which may be waived by the Company. In addition,
certain management stockholders of the Company have agreed not to make any
demand for or exercise any rights with respect to the registration of their
Common Stock, and have waived all rights to register Common Stock owned by
them, in connection with the Offerings, in return for a one-year extension
of their right (which otherwise would terminate upon the completion of the
Offerings) to participate in certain private sales by C&D Fund IV of Company
Common Stock. See "Shares Eligible for Future Sale."

The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement,
the International Managers and the U.S. Underwriters are permitted to sell
shares of Common Stock to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to persons who are non-U.S. or non-Canadian persons or
to persons they believe intend to resell to persons who are non-U.S. or non-

82
<PAGE> 112
Canadian persons, and the International Managers and any dealer to whom they
sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to U.S. persons or to Canadian persons or to persons they believe intend
to resell to United States or Canadian persons, except, in each case, for
transactions pursuant to the Intersyndicate Agreement.

Prior to the Offerings, there has been no public market for the Common
Stock. The initial offering price was determined through negotiations among
the Company, the Selling Stockholders and the U.S. Representatives and the
International Managers. Among the factors considered in determining the
initial offering price, in addition to prevailing market conditions, are
price-earnings ratios of publicly traded companies that the International
Managers and the U.S. Underwriters believe to be comparable to the Company,
certain financial information of the Company, the history of, and the prospects
for, the Company and the industry in which it competes, and assessment of the
Company's management, its past and present operations, the prospects for, and
timing of, future revenues of the Company, the present state of the Company's
development, and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to the
Company. There can be no assurance given as to the liquidity of the trading
market for the Common Stock or that an active public market will develop for
the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offerings at or above the initial public offering price. If
an active public market for the Common Stock does not develop, the market price
and liquidity of the Common Stock may be adversely affected.

An application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "________." In order to meet the requirements for
listing of the Common Stock on that exchange, the U.S. Underwriters have
undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial
owners.

The Underwriters do not intend to confirm sales of the Common Stock
offered hereby to any accounts over which they exercise discretionary authority.

The Company and the Selling Stockholders have agreed to indemnify the
International Managers and the U.S. Underwriters against certain liabilities,
including liabilities under the Securities Act.

Certain of the Underwriters perform services for the Company and its
affiliates from time to time for which they receive customary compensation.
Merrill Lynch distributes the Company's investment products in the ordinary
course of business, for which it receives customary compensation.

Each International Manager has agreed that (i) it has not offered or sold
and, prior to the expiration of the period of six months from the Closing Date,
will not offer or sell any shares of Common Stock to persons in the United
Kingdom, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received
by it in connection with the issuance of Common Stock to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such document
may otherwise lawfully be issued or passed on.

83
<PAGE> 113

No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or any
other material relating to the Company, the Selling Stockholders or shares of
Common Stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of Common Stock may not be offered or sold, directly or
indirectly, and neither this Prospectus nor any other offering material or
advertisements in connection with the shares of Common Stock may be distributed
or published, in or from any country or jurisdiction except in compliance with
any applicable rules and regulations of any such country or jurisdiction.

Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.

VALIDITY OF COMMON STOCK

The validity of the Common Stock will be passed upon for the Company by
Debevoise & Plimpton, New York, New York. Certain legal matters will be passed
upon for the Underwriters by Fried, Frank, Harris, Shriver & Jacobson (a
partnership which includes professional corporations), New York, New York.
Franci J. Blassberg, Esq., a member of Debevoise & Plimpton, is married to
Joseph L. Rice, III, who is a general partner of the general partner of C&D
Fund IV, a principal of CD&R and a director of the Company and VKAC.

84
<PAGE> 114

================================================================================

IN THE PROSPECTUS, REFERENCES TO "DOLLARS" OR "$" ARE TO UNITED STATES
DOLLARS.

____________________

TABLE OF CONTENTS

PAGE

================================================================================

[Alternate Page for International Prospectus]

_______ SHARES

VAN KAMPEN AMERICAN
CAPITAL GROUP, INC.

[LOGO]

COMMON STOCK

______________

PROSPECTUS
______________

MERRILL LYNCH INTERNATIONAL

GOLDMAN SACHS INTERNATIONAL

______________ , 1996

================================================================================
<PAGE> 115
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $86,207
NYSE listing fee ................................................... *
NASD Fee ........................................................... 20,500
Printing Expenses .................................................. *
Blue Sky fees and expenses ......................................... *
Legal fees and expenses ............................................ *
Miscellaneous ..................................................... *
-------
Total ........................................................ *
=======
</TABLE>

- ---------------
* To be filed by amendment.

All amounts, except for the Securities and Exchange Commission
registration fee, the NYSE listing fee and the NASD fee, are estimates.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director
for violations of the director's fiduciary duty, except (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of the law, (iii) pursuant to Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from which
a director derived an improper personal benefit. The Third Restated
Certificate of Incorporation and By-laws of the Company (filed as Exhibits [3.1
and 3.2]) contain provisions limiting the liability of directors to the extent
permitted by Section 102(b)(7) of the DGCL.

The Company is empowered by Section 145 of the DGCL, subject to the
procedures and limitations stated therein, to indemnify any person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
any threatened, pending or completed action, suit or proceeding in which such
person is made a party by reason of his or her being or having been a director,
officer, employee or agent of the Company. The statute provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors, or otherwise. Article VI of
the By-laws of the Company provides for indemnification of each of the
Company's directors, officers and employees to the full extent permitted by the
DGCL.

The Company has agreed to indemnify certain controlling persons against
liability pursuant to an Indemnification Agreement, among CD&R, C&D Fund IV,
the Company and VKAC, pursuant to which the Company and VKAC agreed to
indemnify CD&R, C&D Fund IV, Associates IV and their

II-1

<PAGE> 116
respective directors, officers, partners, employees, agents and controlling
persons against certain liabilities arising under the federal securities laws
and certain other claims and liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

During the three-year period ending June 30, 1996, the Registrant issued
shares of its capital stock without registration under the Securities Act, as
follows. Descriptions of issuances of Common Stock do not give effect to the
Stock Dividend that will occur prior to the completion of the Offerings.

On October 8, 1993, the Company issued and sold 1,000 shares of its Common
Stock to Max C. Chapman, a director of the Company and an "accredited"
investor, for a purchase price of $100,000 in a private transaction exempt from
registration under Section 4(2) of the Securities Act.

From May through August 1994, the Company issued and sold an aggregate of
11,413 shares of its Common Stock to certain directors, members of
management and other key employees of the Company or its affiliates, no more
than 35 of which were "unaccredited" investors, for an aggregate purchase price
of $1,312,495 pursuant to an offering exempt from registration under
Regulation D,Rule 701 and/or Section 4(2) under or of the Securities Act.

On December 14, 1994, the Company issued and sold 89 shares of its Common
Stock to Andrew S. Veasey, a former employee who exercised stock options to
purchase such shares, for a purchase price of $8,900 in a private transaction
exempt from registration under Section 4(2) of the Securities Act of 1933.

On December 20, 1994, in connection with the AC Acquisition, the Company
issued and sold 599,893 shares of its Common Stock to C&D Fund IV, its majority
stockholder, for a purchase price of $119,978,600. On that date, the Company
also issued and sold 5,210 shares of its Common Stock to John C. Merritt,
former Chairman and Chief Executive Officer of the Company, who exercised stock
options to purchase such shares, for a purchase price of $533,675. In
addition, on December 20, 1994, the Company also issued and sold 117,817 shares
of its Class B Common Stock to The Travelers Indemnity Company, an affiliate
of Travelers, for a purchase price of $23,563,400. Also, in connection with
the AC Acquisition, on January 11, 1995 the Company issued and sold 1,250
shares of its Common Stock to William N. Brown, a member of senior management
of the Company and an "accredited" investor, for a purchase price of $250,000
and the Company also issued and sold 26,750 shares of its Common Stock to Mr.
Merritt, who exercised stock options to purchase such shares, for a purchase
price of $2,675,000. In each case, the sale by the Company of shares of its
Common Stock was made in a private transaction exempt from registration under
Section 4(2) of the Securities Act.

On January 31, 1995, the Company issued and sold 1,000 shares of its
Common Stock to Thomas L. Hansberger, a director of the Company and an
"accredited" investor, for a purchase price of $115,000 in a private
transaction exempt from registration under Section 4(2) of the Securities Act.

On June 2, 1995 and September 29, 1995, the Company issued and sold an
aggregate of 17,730 shares of its Common Stock to certain members of
management and other key employees of the Company or its affiliates, as well as
certain unaffiliated high net worth individuals, no more than 35 of which were
"unaccredited" investors, for an aggregate purchase price of $3,546,000
pursuant to an offering exempt from registration under Regulation D under or
Section 4(2) of the Securities Act of 1933.

II-2
<PAGE> 117
On June 16, 1995 and December 29, 1995, the Company issued and sold an
aggregate of 14,012 shares of its Common Stock to certain members of
management and other key employees of the Company or its affiliates pursuant to
a stock purchase plan, for an aggregate purchase price of $2,802,400 pursuant
to an offering exempt from registration under Rule 701 under the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

EXHIBITS

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*

1.2 Form of the letter agreement of certain stockholders of the Company with respect
to the public sale of equity securities of the Company.*

2.1 Stock Purchase Agreement, dated as of October 13, 1992, between CDV Acquisition
Corporation and Xerox Financial (incorporated herein by reference to Exhibit 2.1
to the Registration Statement on Form S-1 of CDV Acquisition Corporation and CDV
Holding, Inc., Registration No. 33-55676).

2.2 Form of Amendment No. 1 to the Stock Purchase Agreement between CDV Acquisition
Corporation and Xerox Financial (incorporated by reference to Exhibit 2.2 to VKM
Holding, Inc.'s Form 10-K for the fiscal year ended December 31, 1993, Commission
File No. 33-56334).

2.3 Stock Purchase Agreement, dated as of August 24, 1994, by and among VK/AC Holding,
Inc. (formerly VKM Holding, Inc.), Van Kampen American Capital, Inc. (formerly The
Van Kampen Merritt Companies, Inc.), Associated Madison Companies, Inc. and The
Travelers Inc. (incorporated by reference to Exhibit 2.3 of VKM Holding, Inc.'s
Quarterly Report on Form 10-Q for the third quarter ended September 30, 1994,
Commission File No. 33-56334).

2.4 Amendment No. 1 to the Stock Purchase Agreement dated as of December 20, 1994, by
and among VK/AC Holding, Inc., Van Kampen American Capital, Inc. (formerly The Van
Kampen Merritt Companies, Inc.), Associated Madison Companies, Inc., The Travelers
Inc. and Primerica Finance Corporation (incorporated by reference to Exhibit 2.2
of VK/AC Holding, Inc.'s Report on Form 8-K dated December 20, 1994, filed with
the Commission on January 4, 1995, Commission File No. 33-56334).

2.5 Stock Purchase Agreement between VK/AC Holding, Inc. (formerly VKM Holding, Inc.),
as Buyer, and Van Kampen/American Capital, Inc. (formerly The Van Kampen Merritt
Companies, Inc.), as Seller, dated as of December 20, 1994 (incorporated by
reference to Exhibit 2.3 of VK/AC Holding, Inc.'s Report on Form 8-K dated
December 20, 1994, filed with the Commission on January 4, 1995, Commission File
No. 33-56334).

2.6 Stock Purchase Agreement Between VK/AC Holding, Inc., as Seller, and SunAmerica
Inc., as Buyer, dated as of December 21, 1995 (incorporated by reference to
Exhibit 2.6 of VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

</TABLE>

II-3
<PAGE> 118

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
3.1 Third Restated Certificate of Incorporation of VKM Holding, Inc. (incorporated by
reference to Exhibit 3.2 of VK/AC Holding, Inc.'s Report on Form 8-K dated
December 20, 1994, filed with the Commission on January 4, 1995, Commission File
No. 33-56334).

3.2 Bylaws of VKM Holding, Inc., as amended (incorporated by reference to Exhibit 3.2
of VK/AC Holding, Inc.'s Quarterly Report on Form 10-Q for the first quarter ended
March 31, 1995, Commission File No. 33-56334).

3.3 Certificate of Amendment, dated as of December 20, 1994, of The Van Kampen Merritt
Companies, Inc. (incorporated by reference to Exhibit 3.1 of VK/AC Holding, Inc.'s
Report on Form 8-K dated December 20, 1994, filed with the Commission on January
4, 1995, Commission File No. 33-56334).

3.4 Certificate of Amendment, dated as of January 19, 1995, of Van Kampen/American
Capital, Inc. (incorporated by reference to Exhibit 3.4 to VK/AC Holding, Inc.'s
Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.1 Third Restated Certificate of Incorporation of VKM Holding, Inc. (See Exhibit 3.1).

4.2 Bylaws of VKM Holding, Inc., as amended (See Exhibit 3.2).

4.3 Form of Stock Certificate of VK/AC Holding, Inc. for Class A Common Stock, par
value $.01 per share (incorporated by reference to Exhibit 4.3 to VK/AC Holding,
Inc.'s Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.4 Form of Stock Certificate of VK/AC Holding, Inc. for Class B Common Stock, par
value $.01 per share (incorporated by reference to Exhibit 4.4 to VK/AC Holding,
Inc.'s Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.5 Stock Subscription Agreement between VKM Holding, Inc. and The Clayton & Dubilier
Private Equity Fund IV Limited Partnership (incorporated by reference to Exhibit
4.5 to VKM Holding, Inc.'s Form 10-K for the year ended December 31, 1993,
Commission File No. 33-56334).

4.6 Form of Management Stock Subscription Agreement between CDV Holding, Inc. and the
purchasers named therein, dated February 17, 1993. (incorporated by reference to
Exhibit 4.6 to VKM Holding, Inc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No. 33-56334).

4.7 Form of Management Stock Option Agreement between CDV Holding, Inc. and the
parties named therein, dated February 17, 1993. (incorporated by reference to
Exhibit 4.7 to VKM Holding, Inc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No. 33-56334).

4.8 Form of Stock Subscription Agreement between CDV Holding, Inc. and certain
investors, dated February 17, 1993. (incorporated by reference to Exhibit 4.8 to
VKM Holding, Inc.'s Form 10-K for the fiscal year ended December 31, 1993,
Commission File No. 33-56334).

</TABLE>

II-4
<PAGE> 119

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
4.9 Management Stock Purchase Agreement between John C. Merritt and Don G. Powell,
dated December 20, 1994 (including a schedule of additional Management Stock
Purchase Agreements) (incorporated by reference to Exhibit 4.11 to VK/AC Holding,
lnc.'s Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.10 Management Stock Subscription Agreement between VK/AC Holding, Inc. and William N.
Brown, dated January 11, 1995 (incorporated by reference to Exhibit 4.12 to VK/AC
Holding, Inc.'s Form 10-K for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).

4.11 Letter Agreement between VK/AC Holding, Inc., Van Kampen/American Capital, Inc.
and Don G. Powell, dated January 9, 1995 (incorporated by reference to Exhibit
4.13 to VK/AC Holding, Inc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

4.12 Management Stock Option Agreement between VK/AC Holding, Inc. and Don G. Powell,
dated January 11, 1995 (including a schedule of additional Management Stock Option
Agreements) (incorporated by reference to Exhibit 4.14 to VK/AC Holding, lnc.'s
Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.13 Registration and Participation Agreement among CDV Holding, Inc., The Clayton &
Dubilier Private Equity Fund IV Limited Partnership and certain stockholders of
CDV Holding, Inc. (incorporated by reference to Exhibit 4.9 to VKM Holding,
lnc.'s Form 10-K for the fiscal year ended December 31, 1993, Commission File No.
33-56334).

4.14 Amendment No. 1, dated as of April 15, 1994, to the Registration and
Participation Agreement among VK/AC Holding, Inc. (formerly VKM Holding, Inc.),
The Clayton & Dubilier Private Equity Fund IV Limited Partnership and certain
stockholders of VK/AC Holding, Inc. (incorporated by reference to Exhibit 4.16 to
VK/AC Holding, Inc.'s Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 33-56334).

4.15 Amendment No. 2, dated as of December 20, 1994, to the Registration and
Participation Agreement among VK/AC Holding, Inc. (formerly VKM Holding, Inc.),
The Clayton & Dubilier Private Equity Fund IV Limited Partnership and certain
stockholders of VK/AC Holding, Inc. (incorporated by reference to Exhibit 4.12 of
VK/AC Holding, lnc.'s Report on Form 8-K dated December 20, 1994, filed with the
Commission on January 4, 1995, Commission File No. 33-56334).

4.16 Third Restated Certificate of Incorporation of VKM Holding, Inc. (See Exhibit 3.4)

4.17 Certificate of Ownership and Merger dated as of December 20, 1994, merging
American Capital into Van Kampen/American Capital, Inc. (incorporated by reference
to Exhibit 4.2 of VK/AC Holding, lnc.'s Report on Form 8-K dated December 20,
1994, filed with the Commission on January 4, 1995, Commission File No. 33-56334).

</TABLE>

II-5
<PAGE> 120

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
4.18 Stock Subscription Agreement between VK/AC Holding, Inc. (formerly VKM Holding,
Inc.) and The Clayton & Dubilier Private Equity Fund IV Limited Partnership,
dated as of December 20, 1994. (incorporated by reference to Exhibit 4.3 of VK/AC
Holding, lnc.'s Report on Form 8-K dated December 20, 1994, filed with the
Commission on January 4, 1995, Commission File No. 33-56334).

4.19 Stock Subscription Agreement between VK/AC Holding, Inc. (formerly VKM Holding,
Inc.) and The Travelers Indemnity Company, dated as of December 20, 1994
(incorporated by reference to Exhibit 4.4 of VK/AC Holding, lnc.'s Report on Form
8-K dated December 20, 1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).

4.20 Stock Subscription Agreement between VK/AC Holding, Inc. (formerly VKM Holding,
Inc.) and The Travelers Insurance Company, dated as of December 20, 1994
(incorporated by reference to Exhibit 4.5 of VK/AC Holding, lnc.'s Report on Form
8-K dated December 20, 1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).

4.21 Stock Purchase Agreement between VK/AC Holding, Inc. (formerly VKM Holding, Inc.),
The Travelers Inc. and John C. Merritt dated as of December 20, 1994 (incorporated
by reference to Exhibit 4.6 of VK/AC Holding, Inc.'s Report on Form 8-K dated
December 20, 1994, filed with the Commission on January 4, 1995, Commission File
No. 33-56334).

4.22 Stock Option Agreement between VK/AC Holding, Inc. (formerly VKM Holding, Inc.)
and The Travelers Inc. dated as of December 20, 1994 (incorporated by reference
to Exhibit 4.7 of VK/AC Holding, lnc.'s Report on Form 8-K dated December 20,
1994, filed with the Commission on January 4, 1995, Commission File No. 33-56334).

4.23 Amended and Restated Credit Agreement, dated as of December 20, 1994, among Van
Kampen/American Capital, Inc. (formerly The Van Kampen Merritt Companies, Inc.),
VK/AC Holding, Inc. (formerly VKM Holding, Inc.), as guarantor, the banks named
therein, Chemical Bank as Administrative Agent, Collateral Agent and Issuing Bank
and Chemical Bank and The Chase Manhattan Bank, N.A. as Managing Agents
(incorporated by reference to Exhibit 4.8 of VK/AC Holding, lnc.'s Report on Form
8-K dated December 20, 1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).

4.24 Resignation and Appointment under the lntercreditor Agreement, dated as of
December 20, 1994, among The Bank of New York, as resigning Sharing Agent, and
Chemical Bank, as successor Sharing Agent, successor Collateral Agent and
successor Cash Collateral Agent (incorporated by reference to Exhibit 4.9 of VK/AC
Holding, lnc.'s Report on Form 8-K dated December 20, 1994, filed with the
Commission on January 4, 1995, Commission File No. 33-56334).

</TABLE>

II-6
<PAGE> 121

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
4.25 Resignation and Appointment under the Pledge and Security Agreement, dated as of
December 20, 1994, among Van Kampen/American Capital, Inc. (formerly The Van
Kampen Merritt Companies, Inc.), VK/AC Holding, Inc. (formerly VKM Holding,
Inc.), and The Bank of New York, as Collateral Agent and Administrative Agent
(incorporated by reference to Exhibit 4.10 of VK/AC Holding, lnc.'s Report on Form
8-K dated December 20, 1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).

4.26 Resignation and Appointment under the Cash Collateral Agreement, dated as of
December 20, 1994, among Van Kampen/American Capital, Inc. (formerly The Van
Kampen Merritt Companies, Inc.), VK/AC Holding, Inc. (formerly VKM Holding,
Inc.), The Bank of New York, as resigning Cash Collateral Agent, and Chemical
Bank, as successor Cash Collateral Agent (incorporated by reference to Exhibit
4.11 of VK/AC Holding, lnc.'s Report on Form 8-K dated December 20, 1994, filed
with the Commission on January 4, 1995, Commission File No. 33-56334).

4.27 Debt Registration Agreement, dated as of December 20, 1994, between Chemical Bank,
as Administrative Agent under the Amended and Restated Credit Agreement, and
Chemical Bank, as Sharing Agent under the lntercreditor Agreement (incorporated by
reference to Exhibit 4.13 of VK/AC Holding, lnc.'s Report on Form 8-K dated
December 20, 1994, filed with the Commission on January 4, 1995, Commission File
No. 33-56334).

4.28 Management Stock Subscription Agreement between VKM Holding, Inc. and David J.
Rogers, dated May 5, 1994 (including a schedule of additional Management Stock
Subscription Agreements) (incorporated by reference to Exhibit 4.30 to VK/AC
Holding, lnc.'s Form 10-K for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).

4.29 Management Stock Option Agreement between VKM Holding, Inc. and David J. Rogers,
dated May 5, 1994 (including a schedule of additional Management Stock Option
Agreements) (incorporated by reference to Exhibit 4.31 to VK/AC Holding, Inc.'s
Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.30 Management Stock Option Agreement between VKM Holding, Inc. and Richard Callaghan,
dated May 5, 1994 (including a schedule of additional Management Stock Option
Agreements) (incorporated by reference to Exhibit 4.32 to VK/AC Holding, Inc.'s
Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.31 Form of Management Stock Option Agreement between VKM Holding, Inc. and John C.
Merritt, dated January 1, 1994 (including a schedule of additional Management
Stock Option Agreements) (incorporated by reference to Exhibit 4.33 to VK/AC
Holding, lnc.'s Form 10-K for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).

</TABLE>

II-7
<PAGE> 122

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
4.32 Stock Subscription Agreement between VKM Holding, Inc. and Michael C. Delaney,
dated July 29, 1994 (including a schedule of additional Stock Subscription
Agreements) (incorporated by reference to Exhibit 4.34 to VK/AC Holding, lnc.'s
Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.33 Stock Subscription Agreement between VKM Holding, Inc. and Thomas L. Hansberger,
dated January 20, 1995 (incorporated by reference to Exhibit 4.35 to VK/AC
Holding, lnc.'s Form 10-K for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).

4.34 VKM Holding, Inc. Stock Purchase Plan (incorporated by reference to Exhibit 4.36
to VK/AC Holding, Inc.'s Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 33-56334).

4.35 Management Stock Subscription Agreement between VK/AC Holding, Inc. and Robert C.
Peck, Jr., dated June 2, 1995. (including a schedule of additional Management
Stock Subscription Agreements) (incorporated by reference to Exhibit 4.2 of VK/AC
Holding, lnc.'s Quarterly Report on Form 10-Q for the second quarter ended June
30, 1995, Commission File No. 33-56334).

4.36 Management Stock Option Agreement between VK/AC Holding, Inc. and Robert C. Peck,
Jr., dated June 2, 1995 (including a schedule of additional Management Stock
Option Agreements) (incorporated by reference to Exhibit 4.3 of VK/AC Holding,
Inc.'s Quarterly Report on Form 10-Q for the second quarter ended June 30, 1995,
Commission File No. 33-56334).

4.37 Management Stock Subscription Agreement between VK/AC Holding, Inc. and Richard D.
Humphrey, dated June 16, 1995. (including a schedule of additional Management
Stock Subscription Agreements) (incorporated by reference to Exhibit 4.4 of VK/AC
Holding, Inc.'s Quarterly Report on Form 10-Q for the second quarter ended June
30, 1995, Commission File No. 33-56334).

4.38 Management Stock Option Agreement between VK/AC Holding, Inc. and Richard D.
Humphrey, dated June 16, 1995 (including a schedule of additional Management Stock
Option Agreements) (incorporated by reference to Exhibit 4.5 of VK/AC Holding,
Inc.'s Quarterly Report on Form 10-Q for the second quarter ended June 30, 1995,
Commission File No. 33-56334).

4.39 Stock Subscription Agreement between VK/AC Holding, Inc. and F. Blake Wallace,
dated June 2, 1995. (including a schedule of additional Stock Subscription
Agreements) (incorporated by reference to Exhibit 4.6 of VK/AC Holding, Inc.'s
Quarterly Report on Form 10-Q for the second quarter ended June 30,1995,
Commission File No. 33-56334).

4.40 Amended and Restated Stock Option Agreement dated as of June 1, 1995, amending and
restating the Stock Option Agreement dated as of May 31, 1995, as amended, between
VK/AC Holding, Inc. and The Jones Financial Companies (incorporated by reference
to Exhibit 4.7 of VK/AC Holding, lnc.'s Quarterly Report on Form 10-Q for the
second quarter ended June 30, 1995, Commission File No. 33-56334).

</TABLE>

II-8
<PAGE> 123

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
4.41 Amendment No. 3, dated as of May 1, 1995, to the Registration and Participation
Agreement among VK/AC Holding, Inc., The Clayton & Dubilier Private Equity Fund IV
Limited Partnership and certain stockholders of VK/AC Holding, Inc. (incorporated
by reference to Exhibit 4.8 of VK/AC Holding, lnc.'s Quarterly Report on Form 10-Q
for the second quarter ended June 30, 1995, Commission File No. 33-56334).

4.42 Amendment No. 1 to VK/AC Holding, Inc. Stock Purchase Plan (incorporated by
reference to Exhibit 4.9 of VK/AC Holding, Inc.'s Quarterly Report on Form 10-Q
for the second quarter ended June 30, 1995, Commission File No. 33-56334).

4.43 Management Stock Subscription Agreement between VK/AC Holding, Inc. and Robert J.
Froehlich, dated September 28, 1995 (incorporated by reference to Exhibit 4.2 of
VK/AC Holding, lnc.'s Quarterly Report on Form 10-Q for the third quarter ended
September 30, 1995, Commission File No. 33-56334).

4.44 Management Stock Option Agreement between VK/AC Holding, Inc. and Robert J.
Froehlich, dated September 28, 1995 (incorporated by reference to Exhibit 4.3 of
VK/AC Holding, Inc.'s Quarterly Report on Form 10-Q for the third quarter ended
September 30, 1995, Commission File No. 33-56334).

4.45 First Waiver, dated as of September 19, 1995, to the Amended and Restated Credit
Agreement, dated as of December 20, 1994, among Van Kampen American Capital, Inc.,
VK/AC Holding, Inc., as guarantor, the banks named therein, Chemical Bank as
Administrative Agent, Collateral Agent and Issuing Bank and Chemical Bank and The
Chase Manhattan Bank, N.A. as Managing Agents (incorporated by reference to
Exhibit 4.4 of VK/AC Holding, lnc.'s Quarterly Report on Form 10-Q for the third
quarter ended September 30, 1995, Commission File No. 33-56334).

4.46 Second Waiver, dated as of December 13, 1995, to the Amended and Restated Credit
Agreement, dated as of December 20, 1994, among Van Kampen American Capital, Inc.,
VK/AC Holding, Inc., as guarantor, the banks named therein, Chemical Bank as
Administrative Agent, Collateral Agent and Issuing Bank and Chemical Bank and The
Chase Manhattan Bank, N.A. as Managing Agents (incorporated by reference to
Exhibit 4.46 of VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

4.47 Management Stock Subscription Agreement between VK/AC Holding, Inc. and Dominic
Martellaro, dated December 29, 1995 (incorporated by reference to Exhibit 4.47 of
VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 33-56334).

4.48 Management Stock Option Agreement between VK/AC Holding, Inc. and Dominic
Martellaro, dated December 29, 1995 (incorporated by reference to Exhibit 4.48 of
VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 33-56334).

</TABLE>

II-9

<PAGE> 124
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
4.49 Deferred Stock Agreement between VK/AC Holding, Inc. and Stephen L. Boyd, dated
December 29, 1995 (including a schedule of additional Deferred Stock Agreements)
(incorporated by reference to Exhibit 4.49 of VK/AC Holding, Inc.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, Commission File No.
33-56334).

4.50 Management Stock Option Agreement between VK/AC Holding, Inc. and Stephen L. Boyd,
dated December 29, 1995 (including a schedule of additional Management Stock
Option Agreements) (incorporated by reference to Exhibit 4.50 of VK/AC Holding,
Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
Commission File No. 33-56334).

4.51 Acknowledgment, Waiver and Agreement between VK/AC Holding, Inc. and Stephen L.
Boyd, dated December 29, 1995 (including a schedule of additional Acknowledgment,
Waiver and Agreements) (incorporated by reference to Exhibit 4.51 of VK/AC
Holding, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31,
1995, Commission File No. 33-56334).

4.52 Management Stock Option Agreement between VK/AC Holding, Inc. and Patrick Zacchea,
dated January 2, 1996 (incorporated by reference to Exhibit 4.52 of VK/AC Holding,
Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
Commission File No. 33-56334).

4.53 Assumption Agreement and Undertaking, dated as of December 4, 1995, among VK/AC
Holding, Inc., Don G. Powell and Northern Trust Bank, as Trustee of the Michael
Scott Powell 1995 Children's Trust (including a schedule of an additional
Assumption Agreement and Undertaking) (incorporated by reference to Exhibit 4.53
of VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 33-56334).

4.54 Amendment, dated as of December 31, 1995, to Assumption Agreements and
Undertakings, dated as of December 4, 1995, among VK/AC Holding, Inc., Don G.
Powell and Northern Trust Bank, as Trustee of the Michael Scott Powell 1995
Children's Trust and the Jeffrey John Powell 1995 Children's Trust (incorporated
by reference to Exhibit 4.54 of VK/AC Holding, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, Commission File No. 33-56334).

5.1 Opinion of Debevoise & Plimpton.*

6-9 None

10.1 Amended and Restated Credit Agreement, dated as of December 20, 1994, among Van
Kampen/American Capital, Inc. (formerly The Van Kampen Merritt Companies, Inc.),
VK/AC Holding, Inc. (formerly VKM Holding, Inc.), as guarantor, the banks named
therein, Chemical Bank as Administrative Agent, Collateral Agent and Issuing Bank
and Chemical Bank and The Chase Manhattan Bank, N.A. as Managing Agents (See
Exhibit 4.25 above) (incorporated by reference to Exhibit 10.1 of VK/AC Holding,
Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
Commission File No. 33-56334).

</TABLE>

II-10
<PAGE> 125

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.2 Credit Agreement among CDV Acquisition Corporation, CDV Holding, Inc., the lenders
named therein, and The Bank of New York, Bankers Trust Company, The Chase
Manhattan Bank, N.A. and Chemical Bank as Co-Agents and The Bank of New York, as
Issuing Bank, Administrative Agent, and Collateral Agent. (incorporated by
reference to Exhibit 10.1 to VKM Holding, lnc.'s Form 10-K for the fiscal year
ended December 31, 1993, Commission File No. 33-56334) (incorporated by reference
to Exhibit 10.2 of VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

10.3 Credit Agreement among CDV Acquisition Corporation, CDV Holding, Inc., The Bank of
New York, as Administrative Agent and The Bank of New York, Bankers Trust Company,
The Chase Manhattan Bank, N.A. and Chemical Bank as lenders. (incorporated by
reference to Exhibit 10.2 to VKM Holding, lnc.'s Form 10-K for the fiscal year
ended December 31, 1993, Commission File No. 33-56334).

10.4 Indenture among CDV Acquisition Corporation, as issuer, CDV Holding, Inc., as
guarantor, and Shawmut Bank Connecticut, National Association, as trustee,
relating to the Notes (including form of Note). (incorporated by reference to
Exhibit 10.3 to VKM Holding, lnc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No. 33-56334).

10.5 Indemnification Agreement made by Xerox Financial Services, Inc. in favor of VKM
Holding, Inc., CDV Acquisition Corporation, The Van Kampen Merritt Companies,
Inc., Van Kampen Merritt Inc., Van Kampen Merritt Investment Advisory Corp., Van
Kampen Merritt Management Inc., McCarthy, Crisanti & Maffei, Inc., Duff &
Phelps/MCM Investment Research Co., Fintrend S.A., MCM Asia Pacific Company,
Limited, Van Kampen Merritt Equity Holdings Corp., Van Kampen Merritt Equity
Advisors Corp. and VSM Inc. (incorporated by reference to Exhibit 10.4 to VKM
Holding, lnc.'s Form 10-K for the fiscal year ended December 31, 1993, Commission
File No. 33-56334).

10.6 Non-Solicitation and Non-Competition Agreement among Xerox Corporation, Xerox
Financial Services, Inc. and CDV Acquisition Corporation. (incorporated by
reference to Exhibit 10.5 to VKM Holding, lnc.'s Form 10-K for the fiscal year
ended December 31, 1993, Commission File No. 33-56334).

10.7 Indemnification Agreement among CDV Holding, Inc., CDV Acquisition Corporation,
Clayton, Dubilier & Rice, Inc. and The Clayton & Dubilier Private Equity Fund IV
Limited Partnership. (incorporated by reference to Exhibit 10.6 to VKM Holding,
lnc.'s Form 10-K for the fiscal year ended December 31, 1993, Commission File No.
33-56334).

10.8 Form of Employment Agreements with Dennis J. McDonnell, William R. Molinari,
Ronald A. Nyberg, William R. Rybak and Peter W. Hegel. (incorporated by reference
to Exhibit 10.7 to VKM Holding, lnc.'s Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 33-56334).

</TABLE>

II-11
<PAGE> 126
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.9 Employment Agreement with Don G. Powell (including a schedule of additional
Employment Agreements with Alan T. Sachtleben and Paul R. Wolkenberg)
(incorporated by reference to Exhibit 10.10 to VK/AC Holding, lnc.'s Form 10-K for
the fiscal year ended December 31, 1994, Commission File No. 33-56334).

10.10 Letter Agreement between VK/AC Holding, Inc., Van Kampen/American Capital, Inc.
and Don G. Powell, dated January 9, 1995. (See Exhibit 4.13 above) (incorporated
by reference to Exhibit 10.10 of VK/AC Holding, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, Commission File No. 33-56334).

10.11 Employment Agreement with William N. Brown (incorporated by reference to Exhibit
10.12 to VK/AC Holding, lnc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

10.12 Investment Advisory Agreement between Van Kampen Merritt Investment Advisory Corp.
and Xerox Financial Services Life Insurance Company (incorporated herein by
reference to Exhibit 10.12 to the Registration Statement on Form S-1 of CDV
Acquisition Corporation and CDV Holding, Inc., Registration No. 33-55676).

10.13 Investment Advisory Agreement between Van Kampen Merritt Investment Advisory Corp.
and Xerox Financial Life Insurance Company (incorporated herein by reference to
Exhibit 10.14 to the Registration Statement on Form S-1 of CDV Acquisition
Corporation and CDV Holding, Inc., Registration No. 33-55676).

10.14 Optional Service Delivery Agreement between McCarthy, Crisanti & Maffei, Inc. and
Telerate Systems Incorporated (incorporated herein by reference to Exhibit 10.17
to the Registration Statement on Form S-1 of CDV Acquisition Corporation and CDV
Holding, Inc., Registration No. 33-55676).

10.15 Van Kampen American Capital, Inc. Profit Sharing and Savings Plan (as Amended and
Restated Effective as of January 1, 1995) (incorporated by reference to Exhibit
10.15 of VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, Commission File No. 33-56334).

10.16 Van Kampen American Capital, Inc. Supplemental Profit Sharing and Savings Plan
(Restated Effective as of January 1, 1995) (incorporated by reference to Exhibit
10.16 of VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, Commission File No. 33-56334).

10.17 Master Defined Contribution Trust Agreement between Van Kampen American Capital,
Inc. and Van Kampen American Capital Trust Company, dated as of December 20, 1994
(incorporated by reference to Exhibit 10.17 of VK/AC Holding, Inc.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, Commission File No.
33-56334).

10.18 The Van Kampen Merritt Companies, Inc. Annual Incentive Plan (incorporated herein
by reference to Exhibit 10-19 to the Registration Statement on Form S-1 of CDV
Acquisition Corporation and CDV Holding, Inc., Registration No. 33-55676).

</TABLE>

II-12
<PAGE> 127
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.19 The Van Kampen Merritt Companies, Inc. Long-Term Incentive Plan (incorporated
herein by reference to Exhibit 10.20 to the Registration Statement on Form S-1 of
CDV Acquisition Corporation and CDV Holding, Inc., Registration No. 33-55676).

10.20 VKM Holding, Inc. Stock Option Plan (incorporated herein by reference to Exhibit
10.21 to the Registration Statement on Form S-1 of CDV Acquisition Corporation and
CDV Holding, Inc., Registration No. 33-55676).

10.21 Amendment No. 1 to the VKM Holding, Inc. Stock Option Plan (incorporated by
reference to Exhibit 10.25 to VK/AC Holding, lnc.'s Form 10-K for the fiscal year
ended December 31, 1994, Commission File No. 33-56334).

10.22 Intercorporate Services Agreement between The Van Kampen Merritt Companies, Inc.,
Van Kampen Merritt Inc., Van Kampen Merritt Management Inc., Van Kampen Merritt
Investment Advisory Corp., McCarthy Crisanti & Maffei, Inc., Van Kampen Merritt
Equity Holdings Corp., Van Kampen Merritt Equity Advisors Corp. and VSM Inc.
(incorporated by reference to Exhibit 10.19 to VKM Holding, lnc.'s Form 10-K for
the fiscal year ended December 31, 1993, Commission File No. 33-56334).

10.23 Distribution Fee Purchase Agreement between Van Kampen Merritt Inc. and The Van
Kampen Merritt Companies, Inc. (incorporated by reference to Exhibit 10.20 to VKM
Holding, lnc.'s Form 10-K for the fiscal year ended December 31, 1993, Commission
File No. 33-56334).

10.24 Cash Collateral Agreement between CDV Acquisition Corporation, VKM Holding, Inc.
and The Bank of New York as Collateral Agent. (incorporated by reference to
Exhibit 10-21 to VKM Holding, lnc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No. 33-56334).

10.25 Pledge and Security Agreement between VKM Holding, Inc., CDV Acquisition
Corporation and The Bank of New York as Collateral Agent. (incorporated by
reference to Exhibit 10.22 to VKM Holding, lnc.'s Form 10-K for the fiscal year
ended December 31, 1993, Commission File No. 33-56334).

10.26 lntercreditor Agreement between Shawmut Bank Connecticut, National Association,
each of the banks party to the Credit Agreement filed as Exhibit 10.1 and The Bank
of New York as Administrative Agent, Collateral Agent and Cash Collateral Agent.
(incorporated by reference to Exhibit 10.23 to VKM Holding, Inc.'s Form 10-K for
the fiscal year ended December 31, 1993, Commission File No. 33-56334).

10.27 Waiver to the Credit Agreement dated September 20, 1993 (incorporated by reference
to Exhibit 10 to the Registrant's Form 10-Q for the Third Quarter Ended September
30, 1993, Commission File No. 33-55676)

10.28 Capital Call Agreement between The Clayton & Dubilier Private Equity Fund IV
Limited Partnership, VKM Holding, Inc. and CDV Acquisition Corporation
(incorporated by reference to Exhibit 10.25 to VKM Holding, Inc.'s Form 10-K for
the fiscal year ended December 31, 1993, Commission File No. 33-56334).

</TABLE>

II-13
<PAGE> 128

<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.29 Note Purchase Agreement between The Clayton & Dubilier Private Equity Fund IV
Limited Partnership, The Bank of New York, Bankers Trust Company, The Chase
Manhattan Bank N.A. and Chemical Bank as lenders and The Bank of New York as
Administrative Agent. (incorporated by reference to Exhibit 10.26 to VKM Holding,
lnc.'s Form 10-K for the fiscal year ended December 31, 1993, Commission File No.
33-56334).

10.30 General Guarantee among CDV Holding, Inc., CDV Acquisition Corporation and The
Bank of New York dated February 17, 1993. (incorporated by reference to Exhibit
10.27 to VKM Holding, lnc.'s Form 10-K for the fiscal year ended December 31,
1993, Commission File No. 33-56334).

10.31 General Guarantee among VK/AC Holding, Inc., Van Kampen American Capital, Inc. and
The Bank of New York, dated May 5, 1994 (incorporated by reference to Exhibit
10.35 to VK/AC Holding, Inc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

10.32 General Guarantee among VK/AC Holding, Inc., Van Kampen American Capital, Inc. and
The Bank of New York, dated January 3, 1995 (incorporated by reference to Exhibit
10.36 to VK/AC Holding, lnc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

10.33 Employment Agreement between Van Kampen American Capital Investment Advisory Corp.
and Jeffrey W. Maillet, dated as of March 3, 1995. (incorporated by reference to
Exhibit 10.3 of VK/AC Holding, Inc.'s Quarterly Report on Form 10-Q for the first
quarter ended March 31, 1995, Commission File No. 33-56334).

10.34 General Guarantee among VK/AC Holding, Inc., Van Kampen American Capital, Inc. and
The Bank of New York, dated June 2, 1995 (incorporated by reference to Exhibit
10.1 of VK/AC Holding, lnc.'s Quarterly Report on Form 10-Q for the second quarter
ended June 30, 1995, Commission File No. 33-56334).

10.35 General Guarantee among VK/AC Holding, Inc., Van Kampen American Capital, Inc.
and The Bank of New York, dated June 16, 1995 (incorporated by reference to
Exhibit 10.2 of VK/AC Holding, Inc.'s Quarterly Report on Form 10-Q for the second
quarter ended June 30, 1995, Commission File No. 33-56334).

10.36 Amendment No. 2 to the VK/AC Holding, Inc. Stock Option Plan (incorporated by
reference to Exhibit 10.3 of VK/AC Holding, lnc.'s Quarterly Report on Form 10-Q
for the second quarter ended June 30, 1995, Commission File No. 33-56334).

10.37 Letter of Amendment, dated September 27, 1995, to the General Guarantee among
VK/AC Holding, Inc., Van Kampen American Capital, Inc. and The Bank of New York,
dated June 2, 1995 (incorporated by reference to Exhibit 10.1 of VK/AC Holding,
Inc.'s Quarterly Report on Form 10-Q for the third quarter ended September 30,
1995, Commission File No. 33-56334).

</TABLE>

II-14
<PAGE> 129
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.38 Letter of Amendment, dated December 27, 1995, to the General Guarantee among VK/AC
Holding, Inc., Van Kampen American Capital, Inc. and The Bank of New York, dated
June 16, 1995 (incorporated by reference to Exhibit 10.38 of VK/AC Holding, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission
File No. 33-56334).

10.39 Retention Letter Agreement between VK/AC Holding, Inc., Van Kampen American
Capital, Inc. and Don G. Powell, dated March 6, 1996. (including a schedule of
additional Retention Letter Agreements) (incorporated by reference to Exhibit
10.39 of VK/AC Holding, Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, Commission File No. 33-56334).

10.40 Retention Letter Agreement between VK/AC Holding, Inc., Van Kampen American
Capital, Inc. and Douglas B. Gehrman, dated March 6, 1996 (incorporated by
reference to Exhibit 10.40 of VK/AC Holding, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, Commission File No. 33-56334).

21.1 List of Subsidiaries of the Company.*

23.1 Consent of Debevoise & Plimpton (filed as part of Exhibit 5).

23.2 Consent of KPMG Peat Marwick.

24 Powers of Attorney (see page II-17).
</TABLE>

- ----------------------------
* To be filed by amendment.

FINANCIAL STATEMENTS

The consolidated financial statements of the Company filed as part of this
Registration Statement are listed in the Index to Consolidated Financial
Statements found on page F-1 hereof.

FINANCIAL STATEMENT SCHEDULES

The financial statement schedules of the Company have been omitted because
they are not applicable or the required information is shown in the
consolidated financial statements or notes thereto.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities 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 a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted
against the Registrant by such director, officer or controlling person in
connection with the securities being

II-15
<PAGE> 130
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 Securities Act and will be governed
by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-16
<PAGE> 131
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on this 4th day of June, 1996.

VK/AC HOLDING, INC.

By: /s/ Don G. Powell
-------------------------------------
Don G. Powell
President and Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ronald A. Nyberg and William R. Rybak, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead in
any and all capacities, to sign any or all amendments to this Registration
Statement, and any or all other Registration Statements and amendments thereto
that relate to the same offering described in this Registration Statement and
that are to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.

NAME TITLE DATE
- ---- ----- ----

/s/ Alberto Cribiore Chairman of the Board and June 4, 1996
- ------------------------ Director
Alberto Cribiore

/s/ Don G. Powell President, Chief Executive Officer and June 4, 1996
- ------------------------ Director
Don G. Powell

/s/ William R. Rybak Executive Vice President and Chief June 5, 1996
- ------------------------- Financial Officer (Principal Financial
William R. Rybak Officer)

/s/ Charles G. Millington Senior Vice President and Treasurer June 5, 1996
- ------------------------- (Principal Accounting Officer)
Charles G. Millington

/s/ Dennis J. McDonnell Executive Vice President and Director June 5, 1996
- -------------------------
Dennis J. McDonnell

II-17
<PAGE> 132

/s/ William R. Molinari Executive Vice President and Director June 4, 1996
- ------------------------
William R. Molinari

/s/ Max C. Chapman Director June 5, 1996
- ------------------------
Max C. Chapman

/s/ Michael C. Delaney Director June 4, 1996
- ------------------------
Michael C. Delaney

/s/ Donald J. Gogel Director June 4, 1996
- ------------------------
Donald J. Gogel

/s/ Thomas L. Hansberger Director June 4, 1996
- ------------------------
Thomas L. Hansberger

/s/ Gordon McMahon Director June 4, 1996
- ------------------------
Gordon McMahon

/s/ Joseph L. Rice, III Director June 4, 1996
- ------------------------
Joseph L. Rice, III

II-18
<PAGE> 133

VK/AC HOLDING, INC.

EXHIBIT INDEX

(Pursuant to Item 601 of Regulation S-K)

EXHIBITS

Exhibit Number Description
- -------------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*

1.2 Form of the letter agreement of certain stockholders of the
Company with respect to the public sale of equity securities
of the Company.*

2.1 Stock Purchase Agreement, dated as of October 13, 1992,
between CDV Acquisition Corporation and Xerox Financial
(incorporated herein by reference to Exhibit 2.1 to the
Registration Statement on Form S-1 of CDV Acquisition
Corporation and CDV Holding, Inc., Registration No.
33-55676).

2.2 Form of Amendment No. 1 to the Stock Purchase Agreement
between CDV Acquisition Corporation and Xerox Financial
(incorporated by reference to Exhibit 2.2 to VKM Holding,
Inc.'s Form 10-K for the fiscal year ended December 31,
1993, Commission File No. 33-56334).

2.3 Stock Purchase Agreement, dated as of August 24, 1994, by
and among VK/AC Holding, Inc. (formerly VKM Holding, Inc.),
Van Kampen American Capital, Inc. (formerly The Van Kampen
Merritt Companies, Inc.), Associated Madison Companies, Inc.
and The Travelers Inc. (incorporated by reference to Exhibit
2.3 of VKM Holding, Inc.'s Quarterly Report on Form 10-Q for
the third quarter ended September 30, 1994, Commission File
No. 33-56334).

</TABLE>

<PAGE> 134
e

Exhibit Number Description
- -------------- -----------
<S> <C>
2.4 Amendment No. 1 to the Stock Purchase Agreement dated as of
December 20, 1994, by and among VK/AC Holding, Inc., Van
Kampen American Capital, Inc. (formerly The Van Kampen
Merritt Companies, Inc.), Associated Madison Companies,
Inc., The Travelers Inc. and Primerica Finance Corporation
(incorporated by reference to Exhibit 2.2 of VK/AC Holding,
Inc.'s Report on Form 8-K dated December 20, 1994, filed
with the Commission on January 4, 1995, Commission File No.
33-56334).

2.5 Stock Purchase Agreement between VK/AC Holding, Inc.
(formerly VKM Holding, Inc.), as Buyer, and Van
Kampen/American Capital, Inc. (formerly The Van Kampen
Merritt Companies, Inc.), as Seller, dated as of December
20, 1994 (incorporated by reference to Exhibit 2.3 of VK/AC
Holding, Inc.'s Report on Form 8-K dated December 20, 1994,
filed with the Commission on January 4, 1995, Commission
File No. 33-56334).

2.6 Stock Purchase Agreement Between VK/AC Holding, Inc., as
Seller, and SunAmerica Inc., as Buyer, dated as of December
21, 1995 (incorporated by reference to Exhibit 2.6 of VK/AC
Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

3.1 Third Restated Certificate of Incorporation of VKM Holding,
Inc. (incorporated by reference to Exhibit 3.2 of VK/AC
Holding, Inc.'s Report on Form 8-K dated December 20, 1994,
filed with the Commission on January 4, 1995, Commission
File No. 33-56334).

3.2 Bylaws of VKM Holding, Inc., as amended (incorporated by
reference to Exhibit 3.2 of VK/AC Holding, Inc.'s Quarterly
Report on Form 10-Q for the first quarter ended March 31,
1995, Commission File No. 33-56334).

3.3 Certificate of Amendment, dated as of December 20, 1994, of
The Van Kampen Merritt Companies, Inc. (incorporated by
reference to Exhibit 3.1 of VK/AC Holding, Inc.'s Report on
Form 8-K dated December 20, 1994, filed with the Commission
on January 4, 1995, Commission File No. 33-56334).

</TABLE>

(ii)
<PAGE> 135

Exhibit Number Description
- -------------- -----------
<S> <C>

3.4 Certificate of Amendment, dated as of January 19, 1995, of
Van Kampen/American Capital, Inc. (incorporated by reference
to Exhibit 3.4 to VK/AC Holding, Inc.'s Form 10-K for the
fiscal year ended December 31, 1994, Commission File No.
33-56334).

4.1 Third Restated Certificate of Incorporation of VKM Holding,
Inc. (See Exhibit 3.1).

4.2 Bylaws of VKM Holding, Inc., as amended (See Exhibit 3.2).

4.3 Form of Stock Certificate of VK/AC Holding, Inc. for Class A
Common Stock, par value $.01 per share (incorporated by
reference to Exhibit 4.3 to VK/AC Holding, Inc.'s Form 10-K
for the fiscal year ended December 31, 1994, Commission File
No. 33-56334).

4.4 Form of Stock Certificate of VK/AC Holding, Inc. for Class B
Common Stock, par value $.01 per share (incorporated by
reference to Exhibit 4.4 to VK/AC Holding, Inc.'s Form 10-K
for the fiscal year ended December 31, 1994, Commission File
No. 33-56334).

4.5 Stock Subscription Agreement between VKM Holding, Inc. and
The Clayton & Dubilier Private Equity Fund IV Limited
Partnership (incorporated by reference to Exhibit 4.5 to VKM
Holding, Inc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No.
33-56334).

4.6 Form of Management Stock Subscription Agreement between CDV
Holding, Inc. and the purchasers named therein, dated
February 17, 1993. (incorporated by reference to Exhibit
4.6 to VKM Holding, Inc.'s
Form 10-K for the year ended December 31, 1993,
Commission File No. 33-56334).

4.7 Form of Management Stock Option Agreement between CDV
Holding, Inc. and the parties named therein, dated February
17, 1993. (incorporated by reference to Exhibit 4.7 to VKM
Holding, Inc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No. 33-56334).

</TABLE>

(iii)
<PAGE> 136
<TABLE>
<CAPTION>

Exhibit Number Description
- -------------- -----------
<S> <C>
4.8 Form of Stock Subscription Agreement between CDV Holding,
Inc. and certain investors, dated February 17, 1993.
(incorporated by reference to Exhibit 4.8 to VKM Holding,
Inc.'s Form 10-K for the fiscal year ended December 31,
1993, Commission File No. 33-56334).

4.9 Management Stock Purchase Agreement between John C. Merritt
and Don G. Powell, dated December 20, 1994 (including a
schedule of additional Management Stock Purchase Agreements)
(incorporated by reference to Exhibit 4.11 to VK/AC Holding,
lnc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

4.10 Management Stock Subscription Agreement between VK/AC
Holding, Inc. and William N. Brown, dated January 11, 1995
(incorporated by reference to Exhibit 4.12 to VK/AC Holding,
Inc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

4.11** Letter Agreement between VK/AC Holding, Inc., Van
Kampen/American Capital, Inc. and Don G. Powell, dated
January 9, 1995 (incorporated by reference to Exhibit 4.13
to VK/AC Holding, Inc.'s Form 10-K for the fiscal year ended
December 31, 1994, Commission File No. 33-56334).

4.12 Management Stock Option Agreement between VK/AC Holding,
Inc. and Don G. Powell, dated January 11, 1995 (including
a schedule of additional Management Stock Option Agreements)
(incorporated by reference to Exhibit 4.14 to VK/AC Holding,
lnc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

4.13 Registration and Participation Agreement among CDV Holding,
Inc., The Clayton & Dubilier Private Equity Fund IV Limited
Partnership and certain stockholders of CDV Holding, Inc.
(incorporated by reference to Exhibit 4.9 to VKM Holding,
lnc.'s Form 10-K for the fiscal year ended December 31,
1993, Commission File No. 33-56334).

</TABLE>

(iv)
<PAGE> 137
<TABLE>
<CAPTION>

Exhibit Number Description
- -------------- -----------
<S> <C>
4.14 Amendment No. 1, dated as of April 15, 1994, to the
Registration and Participation Agreement among VK/AC
Holding, Inc. (formerly VKM Holding, Inc.), The Clayton &
Dubilier Private Equity Fund IV Limited Partnership and
certain stockholders of VK/AC Holding, Inc. (incorporated
by reference to Exhibit 4.16 to VK/AC Holding, Inc.'s Form
10-K for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).

4.15 Amendment No. 2, dated as of December 20, 1994, to the
Registration and Participation Agreement among VK/AC
Holding, Inc. (formerly VKM Holding, Inc.), The Clayton &
Dubilier Private Equity Fund IV Limited Partnership and
certain stockholders of VK/AC Holding, Inc. (incorporated
by reference to Exhibit 4.12 of VK/AC Holding, lnc.'s Report
on Form 8-K dated December 20, 1994, filed with the
Commission on January 4, 1995, Commission File No.
33-56334).

4.16 Third Restated Certificate of Incorporation of VKM Holding,
Inc. (See Exhibit 3.4)

4.17 Certificate of Ownership and Merger dated as of December 20,
1994, merging American Capital into Van Kampen/American
Capital, Inc. (incorporated by reference to Exhibit 4.2 of
VK/AC Holding, lnc.'s Report on Form 8-K dated December 20,
1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).

4.18 Stock Subscription Agreement between VK/AC Holding, Inc.
(formerly VKM Holding, Inc.) and The Clayton & Dubilier
Private Equity Fund IV Limited Partnership, dated as of
December 20, 1994. (incorporated by reference to Exhibit 4.3
of VK/AC Holding, lnc.'s Report on Form 8-K dated December
20, 1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).

4.19 Stock Subscription Agreement between VK/AC Holding, Inc.
(formerly VKM Holding, Inc.) and The Travelers Indemnity
Company, dated as of December 20, 1994 (incorporated by
reference to Exhibit 4.4 of VK/AC Holding, lnc.'s Report on
Form 8-K dated December 20, 1994, filed with the Commission
on January 4, 1995, Commission File No. 33-56334).

</TABLE>

(v)
<PAGE> 138

Exhibit Number Description
- -------------- -----------
<S> <C>
4.20 Stock Subscription Agreement between VK/AC Holding, Inc.
(formerly VKM Holding, Inc.) and The Travelers Insurance
Company, dated as of December 20, 1994 (incorporated by
reference to Exhibit 4.5 of VK/AC Holding, lnc.'s Report on
Form 8-K dated December 20, 1994, filed with the Commission
on January 4, 1995, Commission File No. 33-56334).

4.21 Stock Purchase Agreement between VK/AC Holding, Inc.
(formerly VKM Holding, Inc.), The Travelers Inc. and John C.
Merritt dated as of December 20, 1994 (incorporated by
reference to Exhibit 4.6 of VK/AC Holding, Inc.'s Report on
Form 8-K dated December 20, 1994, filed with the Commission
on January 4, 1995, Commission File No. 33-56334).

4.22 Stock Option Agreement between VK/AC Holding, Inc. (formerly
VKM Holding, Inc.) and The Travelers Inc. dated as of
December 20, 1994 (incorporated by reference to Exhibit 4.7
of VK/AC Holding, lnc.'s Report on Form 8-K dated December
20, 1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).

4.23 Amended and Restated Credit Agreement, dated as of December
20, 1994, among Van Kampen/American Capital, Inc. (formerly
The Van Kampen Merritt Companies, Inc.), VK/AC Holding, Inc.
(formerly VKM Holding, Inc.), as guarantor, the banks named
therein, Chemical Bank as Administrative Agent, Collateral
Agent and Issuing Bank and Chemical Bank and The Chase
Manhattan Bank, N.A. as Managing Agents (incorporated by
reference to Exhibit 4.8 of VK/AC Holding, lnc.'s Report on
Form 8-K dated December 20, 1994, filed with the Commission
on January 4, 1995, Commission File No. 33-56334).

4.24 Resignation and Appointment under the lntercreditor
Agreement, dated as of December 20, 1994, among The Bank of
New York, as resigning Sharing Agent, and Chemical Bank, as
successor Sharing Agent, successor Collateral Agent and
successor Cash Collateral Agent (incorporated by reference
to Exhibit 4.9 of VK/AC Holding, lnc.'s Report on Form 8-K
dated December 20, 1994, filed with the Commission on
January 4, 1995, Commission File No. 33-56334).

</TABLE>

(vi)
<PAGE> 139

Exhibit Number Description
- -------------- -----------
<S> <C>
4.25 Resignation and Appointment under the Pledge and Security
Agreement, dated as of December 20, 1994, among Van
Kampen/American Capital, Inc. (formerly The Van Kampen
Merritt Companies, Inc.), VK/AC Holding, Inc. (formerly VKM
Holding, Inc.), and The Bank of New York, as Collateral
Agent and Administrative Agent (incorporated by reference to
Exhibit 4.10 of VK/AC Holding, lnc.'s Report on Form 8-K
dated December 20, 1994, filed with the Commission on
January 4, 1995, Commission File No. 33-56334).

4.26 Resignation and Appointment under the Cash Collateral
Agreement, dated as of December 20, 1994, among Van
Kampen/American Capital, Inc. (formerly The Van Kampen
Merritt Companies, Inc.), VK/AC Holding, Inc. (formerly VKM
Holding, Inc.), The Bank of New York, as resigning Cash
Collateral Agent, and Chemical Bank, as successor Cash
Collateral Agent (incorporated by reference to Exhibit 4.11
of VK/AC Holding, lnc.'s Report on Form 8-K dated December
20, 1994, filed with the Commission on January 4, 1995,
Commission File No. 33-56334).

4.27 Debt Registration Agreement, dated as of December 20, 1994,
between Chemical Bank, as Administrative Agent under the
Amended and Restated Credit Agreement, and Chemical Bank, as
Sharing Agent under the lntercreditor Agreement
(incorporated by reference to Exhibit 4.13 of VK/AC Holding,
lnc.'s Report on Form 8-K dated December 20, 1994, filed
with the Commission on January 4, 1995, Commission File No.
33-56334).

4.28 Management Stock Subscription Agreement between VKM Holding,
Inc. and David J. Rogers, dated May 5, 1994 (including a
schedule of additional Management Stock Subscription
Agreements) (incorporated by reference to Exhibit 4.30 to
VK/AC Holding, lnc.'s Form 10-K for the fiscal year ended
December 31, 1994, Commission File No. 33-56334).

</TABLE>

(vii)
<PAGE> 140
<TABLE>
<CAPTION>

Exhibit Number Description
- -------------- -----------
<S> <C>
4.29 Management Stock Option Agreement between VKM Holding, Inc.
and David J. Rogers, dated May 5, 1994 (including a
schedule of additional Management Stock Option Agreements)
(incorporated by reference to Exhibit 4.31 to VK/AC Holding,
Inc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

4.30 Management Stock Option Agreement between VKM Holding, Inc.
and Richard Callaghan, dated May 5, 1994 (including a
schedule of additional Management Stock Option Agreements)
(incorporated by reference to Exhibit 4.32 to VK/AC Holding,
Inc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No. 33-56334).

4.31 Form of Management Stock Option Agreement between VKM
Holding, Inc. and John C. Merritt, dated January 1, 1994
(including a schedule of additional Management Stock Option
Agreements) (incorporated by reference to Exhibit 4.33 to
VK/AC Holding, lnc.'s Form 10-K for the fiscal year ended
December 31, 1994, Commission File No. 33-56334).

4.32 Stock Subscription Agreement between VKM Holding, Inc. and
Michael C. Delaney, dated July 29, 1994 (including a
schedule of additional Stock Subscription Agreements)
(incorporated by reference to Exhibit 4.34 to VK/AC Holding,
lnc.'s Form 10-K for the fiscal year ended December 31,
1994, Commission File No.
33-56334).

4.33 Stock Subscription Agreement between VKM Holding, Inc. and
Thomas L. Hansberger, dated January 20, 1995 (incorporated
by reference to Exhibit 4.35 to VK/AC Holding, lnc.'s Form
10-K for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).

4.34 VKM Holding, Inc. Stock Purchase Plan (incorporated by
reference to Exhibit 4.36 to VK/AC Holding, Inc.'s Form 10-K
for the fiscal year ended December 31, 1994, Commission File
No. 33-56334).

</TABLE>

(viii)
<PAGE> 141

Exhibit Number Description
- -------------- -----------
<S> <C>
4.35 Management Stock Subscription Agreement between VK/AC
Holding, Inc. and Robert C. Peck, Jr., dated June 2, 1995.
(including a schedule of additional Management Stock
Subscription Agreements) (incorporated by reference to
Exhibit 4.2 of VK/AC Holding, lnc.'s Quarterly Report on
Form 10-Q for the second quarter ended June 30, 1995,
Commission File No. 33-56334).

4.36 Management Stock Option Agreement between VK/AC Holding,
Inc. and Robert C. Peck, Jr., dated June 2, 1995 (including
a schedule of additional Management Stock Option Agreements)
(incorporated by reference to Exhibit 4.3 of VK/AC Holding,
Inc.'s Quarterly Report on Form 10-Q for the second quarter
ended June 30, 1995, Commission File No. 33-56334).

4.37 Management Stock Subscription Agreement between VK/AC
Holding, Inc. and Richard D. Humphrey, dated June 16, 1995.
(including a schedule of additional Management Stock
Subscription Agreements) (incorporated by reference to
Exhibit 4.4 of VK/AC Holding, Inc.'s Quarterly Report on
Form 10-Q for the second quarter ended June 30, 1995,
Commission File No. 33-56334).

4.38 Management Stock Option Agreement between VK/AC Holding,
Inc. and Richard D. Humphrey, dated June 16, 1995 (including
a schedule of additional Management Stock Option Agreements)
(incorporated by reference to Exhibit 4.5 of VK/AC Holding,
Inc.'s Quarterly Report on Form 10-Q for the second quarter
ended June 30, 1995, Commission File No. 33-56334).

4.39 Stock Subscription Agreement between VK/AC Holding, Inc. and
F. Blake Wallace, dated June 2, 1995. (including a
schedule of additional Stock Subscription Agreements)
(incorporated by reference to Exhibit 4.6 of VK/AC Holding,
Inc.'s Quarterly Report on Form 10-Q for the second quarter
ended June 30,1995, Commission File No. 33-56334).

</TABLE>

(ix)
<PAGE> 142
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
4.40 Amended and Restated Stock Option Agreement dated as of June
1, 1995, amending and restating the Stock Option Agreement
dated as of May 31, 1995, as amended, between VK/AC Holding,
Inc. and The Jones Financial Companies (incorporated by
reference to Exhibit 4.7 of VK/AC Holding, lnc.'s Quarterly
Report on Form 10-Q for the second quarter ended June 30,
1995, Commission File No. 33-56334).

4.41 Amendment No. 3, dated as of May 1, 1995, to the
Registration and Participation Agreement among VK/AC
Holding, Inc., The Clayton & Dubilier Private Equity Fund IV
Limited Partnership and certain stockholders of VK/AC
Holding, Inc. (incorporated by reference to Exhibit 4.8 of
VK/AC Holding, lnc.'s Quarterly Report on Form 10-Q for the
second quarter ended June 30, 1995, Commission File No.
33-56334).

4.42 Amendment No. 1 to VK/AC Holding, Inc. Stock Purchase Plan
(incorporated by reference to Exhibit 4.9 of VK/AC Holding,
Inc.'s Quarterly Report on Form 10-Q for the second quarter
ended June 30, 1995, Commission File No. 33-56334).

4.43 Management Stock Subscription Agreement between VK/AC
Holding, Inc. and Robert J. Froehlich, dated September 28,
1995 (incorporated by reference to Exhibit 4.2 of VK/AC
Holding, lnc.'s Quarterly Report on Form 10-Q for the third
quarter ended September 30, 1995, Commission File No.
33-56334).

4.44 Management Stock Option Agreement between VK/AC Holding,
Inc. and Robert J. Froehlich, dated September 28, 1995
(incorporated by reference to Exhibit 4.3 of VK/AC Holding,
Inc.'s Quarterly Report on Form 10-Q for the third quarter
ended September 30, 1995, Commission File No. 33-56334).

</TABLE>

(x)
<PAGE> 143
<TABLE>
<CAPTION>

Exhibit Number Description
- -------------- -----------
<S> <C>
4.45 First Waiver, dated as of September 19, 1995, to the Amended
and Restated Credit Agreement, dated as of December 20,
1994, among Van Kampen American Capital, Inc., VK/AC
Holding, Inc., as guarantor, the banks named therein,
Chemical Bank as Administrative Agent, Collateral Agent and
Issuing Bank and Chemical Bank and The Chase Manhattan Bank,
N.A. as Managing Agents (incorporated by reference to
Exhibit 4.4 of VK/AC Holding, lnc.'s Quarterly Report on
Form 10-Q for the third quarter ended September 30, 1995,
Commission File No. 33-56334).

4.46 Second Waiver, dated as of December 13, 1995, to the Amended
and Restated Credit Agreement, dated as of December 20,
1994, among Van Kampen American Capital, Inc., VK/AC
Holding, Inc., as guarantor, the banks named therein,
Chemical Bank as Administrative Agent, Collateral Agent and
Issuing Bank and Chemical Bank and The Chase Manhattan Bank,
N.A. as Managing Agents (incorporated by reference to
Exhibit 4.46 of VK/AC Holding, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1995, Commission
File No. 33-56334).

4.47 Management Stock Subscription Agreement between VK/AC
Holding, Inc. and Dominic Martellaro, dated December 29,
1995 (incorporated by reference to Exhibit 4.47 of VK/AC
Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

4.48 Management Stock Option Agreement between VK/AC Holding,
Inc. and Dominic Martellaro, dated December 29, 1995
(incorporated by reference to Exhibit 4.48 of VK/AC Holding,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 33-56334).

4.49 Deferred Stock Agreement between VK/AC Holding, Inc. and
Stephen L. Boyd, dated December 29, 1995 (including a
schedule of additional Deferred Stock Agreements)
(incorporated by reference to Exhibit 4.49 of VK/AC Holding,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 33-56334).

</TABLE>

(xi)
<PAGE> 144
<TABLE>
<CAPTION>

Exhibit Number Description
- -------------- -----------
<S> <C>
4.50 Management Stock Option Agreement between VK/AC Holding,
Inc. and Stephen L. Boyd, dated December 29, 1995 (including
a schedule of additional Management Stock Option Agreements)
(incorporated by reference to Exhibit 4.50 of VK/AC Holding,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 33-56334).

4.51 Acknowledgment, Waiver and Agreement between VK/AC Holding,
Inc. and Stephen L. Boyd, dated December 29, 1995 (including
a schedule of additional Acknowledgment, Waiver and
Agreements) (incorporated by reference to Exhibit 4.51 of
VK/AC Holding, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, Commission File No.
33-56334).

4.52 Management Stock Option Agreement between VK/AC Holding,
Inc. and Patrick Zacchea, dated January 2, 1996
(incorporated by reference to Exhibit 4.52 of VK/AC Holding,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 33-56334).

4.53 Assumption Agreement and Undertaking, dated as of December
4, 1995, among VK/AC Holding, Inc., Don G. Powell and
Northern Trust Bank, as Trustee of the Michael Scott Powell
1995 Children's Trust (including a schedule of an additional
Assumption Agreement and Undertaking) (incorporated by
reference to Exhibit 4.53 of VK/AC Holding, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31,
1995, Commission File No. 33-56334).

4.54 Amendment, dated as of December 31, 1995, to Assumption
Agreements and Undertakings, dated as of December 4, 1995,
among VK/AC Holding, Inc., Don G. Powell and Northern Trust
Bank, as Trustee of the Michael Scott Powell 1995 Children's
Trust and the Jeffrey John Powell 1995 Children's Trust
(incorporated by reference to Exhibit 4.54 of VK/AC Holding,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 33-56334).

5.1 Opinion of Debevoise & Plimpton.*

6-9 None

</TABLE>

(xii)

Exhibit Number Description
- -------------- -----------
<S> <C>
10.1 Amended and Restated Credit Agreement, dated as of December
20, 1994, among Van Kampen/American Capital, Inc. (formerly
The Van Kampen Merritt Companies, Inc.), VK/AC Holding, Inc.
(formerly VKM Holding, Inc.), as guarantor, the banks named
therein, Chemical Bank as Administrative Agent, Collateral
Agent and Issuing Bank and Chemical Bank and The Chase
Manhattan Bank, N.A. as Managing Agents (See Exhibit 4.25
above) (incorporated by reference to Exhibit 10.1 of VK/AC
Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

10.2 Credit Agreement among CDV Acquisition Corporation, CDV
Holding, Inc., the lenders named therein, and The Bank of
New York, Bankers Trust Company, The Chase Manhattan Bank,
N.A. and Chemical Bank as Co-Agents and The Bank of New
York, as Issuing Bank, Administrative Agent, and Collateral
Agent. (incorporated by reference to Exhibit 10.1 to VKM
Holding, lnc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No. 33-56334) (incorporated by
reference to Exhibit 10.2 of VK/AC Holding, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31,
1995, Commission File No. 33-56334).

10.3 Credit Agreement among CDV Acquisition Corporation, CDV
Holding, Inc., The Bank of New York, as Administrative Agent
and The Bank of New York, Bankers Trust Company, The Chase
Manhattan Bank, N.A. and Chemical Bank as lenders.
(incorporated by reference to Exhibit 10.2 to VKM Holding,
lnc.'s Form 10-K for the fiscal year ended December 31,
1993, Commission File No. 33-56334).

10.4 Indenture among CDV Acquisition Corporation, as issuer, CDV
Holding, Inc., as guarantor, and Shawmut Bank Connecticut,
National Association, as trustee, relating to the Notes
(including form of Note). (incorporated by reference to
Exhibit 10.3 to VKM Holding, lnc.'s Form 10-K for the fiscal
year ended December 31, 1993, Commission File No. 33-56334).

</TABLE>

(xiii)
<PAGE> 146

Exhibit Number Description
- -------------- -----------
<S> <C>
10.5 Indemnification Agreement made by Xerox Financial Services,
Inc. in favor of VKM Holding, Inc., CDV Acquisition
Corporation, The Van Kampen Merritt Companies, Inc., Van
Kampen Merritt Inc., Van Kampen Merritt Investment Advisory
Corp., Van Kampen Merritt Management Inc., McCarthy,
Crisanti & Maffei, Inc., Duff & Phelps/MCM Investment
Research Co., Fintrend S.A., MCM Asia Pacific Company,
Limited, Van Kampen Merritt Equity Holdings Corp., Van
Kampen Merritt Equity Advisors Corp. and VSM Inc.
(incorporated by reference to Exhibit 10.4 to VKM Holding,
lnc.'s Form 10-K for the fiscal year ended December 31,
1993, Commission File No. 33-56334).

10.6 Non-Solicitation and Non-Competition Agreement among Xerox
Corporation, Xerox Financial Services, Inc. and CDV
Acquisition Corporation. (incorporated by reference to
Exhibit 10.5 to VKM Holding, lnc.'s Form 10-K for the fiscal
year ended December 31, 1993, Commission File No.
33-56334).

10.7 Indemnification Agreement among CDV Holding, Inc., CDV
Acquisition Corporation, Clayton, Dubilier & Rice, Inc. and
The Clayton & Dubilier Private Equity Fund IV Limited
Partnership. (incorporated by reference to Exhibit 10.6 to
VKM Holding, lnc.'s Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 33-56334).

10.8 Form of Employment Agreements with Dennis J. McDonnell,
William R. Molinari, Ronald A. Nyberg, William R. Rybak and
Peter W. Hegel. (incorporated by reference to Exhibit 10.7
to VKM Holding, lnc.'s Form 10-K for the fiscal year ended
December 31, 1993, Commission File No. 33-56334).

10.9 Employment Agreement with Don G. Powell (including a
schedule of additional Employment Agreements with Alan T.
Sachtleben and Paul R. Wolkenberg) (incorporated by
reference to Exhibit 10.10 to VK/AC Holding, lnc.'s Form
10-K for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).

</TABLE>

(xiv)
<PAGE> 147

Exhibit Number Description
- -------------- -----------
<S> <C>
10.10 Letter Agreement between VK/AC Holding, Inc., Van
Kampen/American Capital, Inc. and Don G. Powell, dated
January 9, 1995. (See Exhibit 4.13 above) (incorporated by
reference to Exhibit 10.10 of VK/AC Holding, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31,
1995, Commission File No. 33-56334).

10.11 Employment Agreement with William N. Brown (incorporated by
reference to Exhibit 10.12 to VK/AC Holding, lnc.'s Form
10-K for the fiscal year ended December 31, 1994, Commission
File No. 33-56334).

10.12 Investment Advisory Agreement between Van Kampen Merritt
Investment Advisory Corp. and Xerox Financial Services Life
Insurance Company (incorporated herein by reference to
Exhibit 10.12 to the Registration Statement on Form S-1 of
CDV Acquisition Corporation and CDV Holding, Inc.,
Registration No. 33-55676).

10.13 Investment Advisory Agreement between Van Kampen Merritt
Investment Advisory Corp. and Xerox Financial Life
Insurance Company (incorporated herein by reference to
Exhibit 10.14 to the Registration Statement on Form S-1 of
CDV Acquisition Corporation and CDV Holding, Inc.,
Registration No. 33-55676).

10.14 Optional Service Delivery Agreement between McCarthy,
Crisanti & Maffei, Inc. and Telerate Systems Incorporated
(incorporated herein by reference to Exhibit 10.17 to the
Registration Statement on Form S-1 of CDV Acquisition
Corporation and CDV Holding, Inc., Registration No.
33-55676).

10.15 Van Kampen American Capital, Inc. Profit Sharing and Savings
Plan (as Amended and Restated Effective as of January 1,
1995) (incorporated by reference to Exhibit 10.15 of VK/AC
Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

10.16 Van Kampen American Capital, Inc. Supplemental Profit
Sharing and Savings Plan (Restated Effective as of January
1, 1995) (incorporated by reference to Exhibit 10.16 of
VK/AC Holding, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, Commission File No.
33-56334).

</TABLE>

(xv)
<PAGE> 148
<TABLE>
<CAPTION>

Exhibit Number Description
- -------------- -----------
<S> <C>
10.17 Master Defined Contribution Trust Agreement between Van
Kampen American Capital, Inc. and Van Kampen American
Capital Trust Company, dated as of December 20, 1994
(incorporated by reference to Exhibit 10.17 of VK/AC
Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

10.18 The Van Kampen Merritt Companies, Inc. Annual Incentive Plan
(incorporated herein by reference to Exhibit 10-19 to the
Registration Statement on Form S-1 of CDV Acquisition
Corporation and CDV Holding, Inc., Registration No.
33-55676).

10.19 The Van Kampen Merritt Companies, Inc. Long-Term Incentive
Plan (incorporated herein by reference to Exhibit 10.20 to
the Registration Statement on Form S-1 of CDV Acquisition
Corporation and CDV Holding, Inc., Registration No.
33-55676).

10.20 VKM Holding, Inc. Stock Option Plan (incorporated herein by
reference to Exhibit 10.21 to the Registration Statement on
Form S-1 of CDV Acquisition Corporation and CDV Holding,
Inc., Registration No. 33-55676).

10.21 Amendment No. 1 to the VKM Holding, Inc. Stock Option Plan
(incorporated by reference to Exhibit 10.25 to VK/AC
Holding, lnc.'s Form 10-K for the fiscal year ended December
31, 1994, Commission File No.
33-56334).

10.22 Intercorporate Services Agreement between The Van Kampen
Merritt Companies, Inc., Van Kampen Merritt Inc., Van Kampen
Merritt Management Inc., Van Kampen Merritt Investment
Advisory Corp., McCarthy Crisanti & Maffei, Inc., Van Kampen
Merritt Equity Holdings Corp., Van Kampen Merritt Equity
Advisors Corp. and VSM Inc. (incorporated by reference to
Exhibit 10.19 to VKM Holding, lnc.'s Form 10-K for the
fiscal year ended December 31, 1993, Commission File No.
33-56334).

10.23 Distribution Fee Purchase Agreement between Van Kampen
Merritt Inc. and The Van Kampen Merritt Companies, Inc.
(incorporated by reference to Exhibit 10.20 to VKM Holding,
lnc.'s Form 10-K for the fiscal year ended December 31,
1993, Commission File No. 33-56334).

</TABLE>

(xvi)
<PAGE> 149

Exhibit Number Description
- -------------- -----------
<S> <C>
10.24 Cash Collateral Agreement between CDV Acquisition
Corporation, VKM Holding, Inc. and The Bank of New York as
Collateral Agent. (incorporated by reference to Exhibit
10-21 to VKM Holding, lnc.'s Form 10-K for the fiscal year
ended December 31, 1993, Commission File No. 33-56334).

10.25 Pledge and Security Agreement between VKM Holding, Inc., CDV
Acquisition Corporation and The Bank of New York as
Collateral Agent. (incorporated by reference to Exhibit
10.22 to VKM Holding, lnc.'s Form 10-K for the fiscal year
ended December 31, 1993, Commission File No. 33-56334).

10.26 lntercreditor Agreement between Shawmut Bank Connecticut,
National Association, each of the banks party to the Credit
Agreement filed as Exhibit 10.1 and The Bank of New York as
Administrative Agent, Collateral Agent and Cash Collateral
Agent. (incorporated by reference to Exhibit 10.23 to VKM
Holding, Inc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No. 33-56334).

10.27 Waiver to the Credit Agreement dated September 20, 1993
(incorporated by reference to Exhibit 10 to the Registrant's
Form 10-Q for the Third Quarter Ended September 30, 1993,
Commission File No. 33-55676)

10.28 Capital Call Agreement between The Clayton & Dubilier
Private Equity Fund IV Limited Partnership, VKM Holding,
Inc. and CDV Acquisition Corporation (incorporated by
reference to Exhibit 10.25 to VKM Holding, Inc.'s Form 10-K
for the fiscal year ended December 31, 1993, Commission File
No. 33-56334).

10.29 Note Purchase Agreement between The Clayton & Dubilier
Private Equity Fund IV Limited Partnership, The Bank of New
York, Bankers Trust Company, The Chase Manhattan Bank N.A.
and Chemical Bank as lenders and The Bank of New York as
Administrative Agent. (incorporated by reference to Exhibit
10.26 to VKM Holding, lnc.'s Form 10-K for the fiscal year
ended December 31, 1993, Commission File No. 33-56334).

</TABLE>

(xvii)
<PAGE> 150

Exhibit Number Description
- -------------- -----------
<S> <C>
10.30 General Guarantee among CDV Holding, Inc., CDV Acquisition
Corporation and The Bank of New York dated February 17,
1993. (incorporated by reference to Exhibit 10.27 to VKM
Holding, lnc.'s Form 10-K for the fiscal year ended December
31, 1993, Commission File No. 33-56334).

10.31 General Guarantee among VK/AC Holding, Inc., Van Kampen
American Capital, Inc. and The Bank of New York, dated May
5, 1994 (incorporated by reference to Exhibit 10.35 to VK/AC
Holding, Inc.'s Form 10-K for the fiscal year ended December
31, 1994, Commission File No. 33-56334).

10.32 General Guarantee among VK/AC Holding, Inc., Van Kampen
American Capital, Inc. and The Bank of New York, dated
January 3, 1995 (incorporated by reference to Exhibit 10.36
to VK/AC Holding, lnc.'s Form 10-K for the fiscal year ended
December 31, 1994, Commission File No. 33-56334).

10.33 Employment Agreement between Van Kampen American Capital
Investment Advisory Corp. and Jeffrey W. Maillet, dated as
of March 3, 1995. (incorporated by reference to Exhibit 10.3
of VK/AC Holding, Inc.'s Quarterly Report on Form 10-Q for
the first quarter ended March 31, 1995, Commission File No.
33-56334).

10.34 General Guarantee among VK/AC Holding, Inc., Van Kampen
American Capital, Inc. and The Bank of New York, dated June
2, 1995 (incorporated by reference to Exhibit 10.1 of VK/AC
Holding, lnc.'s Quarterly Report on Form 10-Q for the second
quarter ended June 30, 1995, Commission File No. 33-56334).

10.35 General Guarantee among VK/AC Holding, Inc., Van Kampen
American Capital, Inc. and The Bank of New York, dated June
16, 1995 (incorporated by reference to Exhibit 10.2 of VK/AC
Holding, Inc.'s Quarterly Report on Form 10-Q for the second
quarter ended June 30, 1995, Commission File No. 33-56334).

10.36 Amendment No. 2 to the VK/AC Holding, Inc. Stock Option Plan
(incorporated by reference to Exhibit 10.3 of VK/AC Holding,
lnc.'s Quarterly Report on Form 10-Q for the second quarter
ended June 30, 1995, Commission File No. 33-56334).

</TABLE>

(xviii)
<PAGE> 151
<TABLE>
<CAPTION>

Exhibit Number Description
- -------------- -----------
<S> <C>
10.37 Letter of Amendment, dated September 27, 1995, to the
General Guarantee among VK/AC Holding, Inc., Van Kampen
American Capital, Inc. and The Bank of New York, dated June
2, 1995 (incorporated by reference to Exhibit 10.1 of VK/AC
Holding, Inc.'s Quarterly Report on Form 10-Q for the third
quarter ended September 30, 1995, Commission File No.
33-56334).

10.38 Letter of Amendment, dated December 27, 1995, to the General
Guarantee among VK/AC Holding, Inc., Van Kampen American
Capital, Inc. and The Bank of New York, dated June 16, 1995
(incorporated by reference to Exhibit 10.38 of VK/AC
Holding, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission File No. 33-56334).

10.39 Retention Letter Agreement between VK/AC Holding, Inc., Van
Kampen American Capital, Inc. and Don G. Powell, dated
March 6, 1996. (including a schedule of additional
Retention Letter Agreements) (incorporated by reference to
Exhibit 10.39 of VK/AC Holding, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1995, Commission
File No. 33-56334).

10.40 Retention Letter Agreement between VK/AC Holding, Inc., Van
Kampen American Capital, Inc. and Douglas B. Gehrman, dated
March 6, 1996 (incorporated by reference to Exhibit 10.40 of
VK/AC Holding, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, Commission File No.
33-56334).

21.1 List of Subsidiaries of the Company.*

23.1 Consent of Debevoise & Plimpton (filed as part of Exhibit 5).*

23.2 Consent of KPMG Peat Marwick LLP.

24 Powers of Attorney (see page II-17).

27 Financial Data Schedule
</TABLE>

- ----------------------------
* To be filed by amendment.

(xix)

<PAGE> 1
EXHIBIT 23.2

The Board of Directors
VK/AC Holding, Inc. and Subsidiaries:

We consent to the use of our report included herein and to the reference to
our firm under the headings "Experts" and "Selected Historical Consolidated
Financial Information" in the prospectus.

KPMG Peat Marwick LLP

Chicago, Illinois
June 5, 1996

<ARTICLE> 5
<MULTIPLIER> 1,000,000

<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 11 12
<SECURITIES> 27 28
<RECEIVABLES> 59 42
<ALLOWANCES> 0 0
<INVENTORY> 67 72
<CURRENT-ASSETS> 0<F1> 0<F1>
<PP&E> 22 22
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1046 1022
<CURRENT-LIABILITIES> 0<F1> 0<F1>
<BONDS> 150 150
0 0
7 7
<COMMON> 31 31
<OTHER-SE> 356 341
<TOTAL-LIABILITY-AND-EQUITY> 1046 1022
<SALES> 0 0
<TOTAL-REVENUES> 82 298
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9 44
<INCOME-PRETAX> 21 46
<INCOME-TAX> 9 18
<INCOME-CONTINUING> 13 27
<DISCONTINUED> 3 3
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 15 30
<EPS-PRIMARY> 5.92 11.08
<EPS-DILUTED> 5.92 11.08
<FN>
<F1>Industry does not use a classified balance sheet.
</FN>

</TABLE>