SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Co-Registrants /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/Preliminary Proxy Statement / /Confidential, for Use of the Com-
mission Only (as permitted by Rule
14a-6(e)(2))
/ /Definitive Proxy Statement
/ /Definitive Additional Materials
/ /Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

VAN KAMPEN MERRITT U.S. GOVERNMENT TRUST
VAN KAMPEN MERRITT TAX FREE FUND
VAN KAMPEN MERRITT PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN MERRITT EQUITY TRUST
VAN KAMPEN MERRITT TRUST
VAN KAMPEN MERRITT TAX FREE MONEY FUND
VAN KAMPEN MERRITT MONEY MARKET TRUST

(Names of Co-Registrants as Specified in Their Charters)

Payment of Filing Fee (Check the appropriate box):

/X/ $125 per each Co-Registrant (an aggregate of $875 for the Co-Registrants
listed above) per Item 22(a)(2) of Schedule 14A.
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June 2, 1995

Dear Van Kampen Merritt Fund Shareholder:

As you may know, the merger of Van Kampen Merritt and American Capital was
completed in late December 1994. As part of our continuing effort to maximize
the merger's benefit to shareholders, we are proposing several items related to
your Fund(s), including board consolidations and business reorganizations. The
attached proxy statement seeks shareholder approval on these items.

While we encourage you to carefully read the full proxy statement, we have
created a brief question-and-answer section for your convenience.

Your vote is important and your participation in the affairs of your Fund(s)
does make a difference.

The proposals have been approved by the Trustees of the Fund(s), who
recommend you vote "FOR APPROVAL" on these proposals. YOUR IMMEDIATE RESPONSE
WILL HELP SAVE ON THE COSTS OF ADDITIONAL SOLICITATIONS. EACH FUND VOTES
SEPARATELY, SO PLEASE SIGN AND RETURN ALL YOUR FUND PROXY FORMS. We look forward
to your participation, and we thank you for your continued confidence in Van
Kampen American Capital.

PLEASE SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.

Sincerely,

Don G. Powell
Chief Executive Officer
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INFORMATION ABOUT YOUR PROXY STATEMENT

Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. Federal securities laws require a vote by Fund shareholders whenever there
are fundamental changes in a Fund's business and/or organizational
agreements. Among the proposed items your Fund is seeking shareholder
approval on are:

- consolidation of the Van Kampen and American Capital fund boards
- reorganization and conversion of the Van Kampen funds registered (with
the exception of the Pennsylvania Fund) from a Massachusetts business
trust into a Delaware business trust.
- amendment and restatement of the Declaration of Trust for the
Pennsylvania Fund.

Please refer to the proxy statement for a detailed explanation of the
proposed items.

Q. HOW WILL THIS AFFECT MY ACCOUNT?
A. Your Fund's investment objective(s) and shares will not change. You can
expect the same management expertise and high quality shareholder service
you've grown accustomed to.

By consolidating the Van Kampen and American Capital fund boards, you will
be able to take advantage of additional shareholder privileges such as
exchangeability of shares between Van Kampen funds and American Capital
funds. Additionally, by reorganizing the funds into Delaware business
trusts, you will benefit from greater protection from certain liabilities
related to the Fund.

Q. WHY DO I NEED TO VOTE?
A. Your vote is intended to ensure that a majority of shareholders is
represented at the shareholder meeting, so that the proposals can be acted
upon. Your immediate response to this proxy will help save on the costs of
any further solicitations for a shareholder vote. We encourage all
shareholders to participate in the affairs of their Fund(s).

Q. HOW DO THE BOARD MEMBERS OF MY FUND SUGGEST THAT I VOTE?
A. After careful consideration, the board members of your Fund recommend that
you vote "FOR APPROVAL" on all the items proposed on the enclosed proxy
card(s).

Q. WHO DO I CALL IF I HAVE QUESTIONS?
A. We will be happy to answer your questions about the proxy solicitation.
Please call us at 1-800-341-2911 between 7 a.m. and 7 p.m. Central time,
Monday through Friday.
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VAN KAMPEN MERRITT U.S. GOVERNMENT FUND
VAN KAMPEN MERRITT TAX FREE HIGH INCOME FUND
VAN KAMPEN MERRITT MUNICIPAL INCOME FUND
VAN KAMPEN MERRITT LIMITED TERM MUNICIPAL INCOME FUND
VAN KAMPEN MERRITT CALIFORNIA INSURED TAX FREE FUND
VAN KAMPEN MERRITT FLORIDA INSURED TAX FREE INCOME FUND
VAN KAMPEN MERRITT NEW JERSEY TAX FREE INCOME FUND
VAN KAMPEN MERRITT NEW YORK TAX FREE INCOME FUND
VAN KAMPEN MERRITT PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN MERRITT HIGH YIELD FUND
VAN KAMPEN MERRITT SHORT-TERM GLOBAL INCOME FUND
VAN KAMPEN MERRITT ADJUSTABLE RATE U.S. GOVERNMENT FUND
VAN KAMPEN MERRITT STRATEGIC INCOME FUND
VAN KAMPEN MERRITT EMERGING MARKETS INCOME FUND
VAN KAMPEN MERRITT GROWTH AND INCOME FUND
VAN KAMPEN MERRITT UTILITY FUND
VAN KAMPEN MERRITT BALANCED FUND
VAN KAMPEN MERRITT TAX FREE MONEY FUND
VAN KAMPEN MERRITT MONEY MARKET FUND
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
TELEPHONE (800) 341-2911

NOTICE OF JOINT MEETING OF SHAREHOLDERS
TO BE HELD JULY 21, 1995

To the Shareholders of each of the Funds listed below:

Notice is hereby given to the holders of shares of beneficial interest,
without par value (collectively, the "Shares"), of each of: Van Kampen Merritt
U.S. Government Fund (the "Government Fund"), a sub-trust of Van Kampen Merritt
U.S. Government Trust, a Massachusetts business trust (the "Government Trust");
Van Kampen Merritt Tax Free High Income Fund (the "Tax Free High Income Fund"),
Van Kampen Merritt Municipal Income Fund (the "Municipal Income Fund"), Van
Kampen Merritt Limited Term Municipal Income Fund (the "Limited Term Municipal
Fund"), Van Kampen Merritt California Insured Tax Free Fund (the "California
Fund"), Van Kampen Merritt Florida Insured Tax Free Income Fund (the "Florida
Fund"), Van Kampen Merritt New Jersey Tax Free Income Fund (the "New Jersey
Fund") and Van Kampen Merritt New York Tax Free Income Fund (the "New York
Fund"), each of which is a sub-trust of Van Kampen Merritt Tax Free Fund, a
Massachusetts business trust (the "Tax Free Trust"); Van Kampen Merritt
Pennsylvania Tax Free Income Fund (the "Pennsylvania Fund"), a Pennsylvania
trust; Van Kampen Merritt High Yield Fund (the "High Yield Fund"), Van Kampen
Merritt Short-Term Global Income Fund (the "Global Fund"), Van Kampen Merritt
Adjustable Rate U.S. Government Fund (the "Adjustable Rate Fund"), Van Kampen
Merritt Strategic Income Fund (the "Strategic Income Fund"), and Van Kampen
Merritt Emerging Markets Income Fund (the "Emerging Markets Fund"), each of
which is a sub-trust of Van Kampen Merritt Trust, a Massachusetts business trust
(the "VKM Trust"); Van Kampen Merritt Growth and Income Fund (the "Growth and
Income Fund"), Van Kampen Merritt Utility Fund (the
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"Utility Fund") and Van Kampen Merritt Balanced Fund (the "Balanced Fund"), each
of which is a sub-trust of Van Kampen Merritt Equity Trust, a Massachusetts
business trust (the "Equity Trust"); Van Kampen Merritt Tax Free Money Fund (the
"Tax Free Money Fund"), a Massachusetts business trust; and Van Kampen Merritt
Money Market Fund (the "Money Market Fund"), a series of Van Kampen Merritt
Money Market Trust, a Massachusetts business trust (the "Money Market Trust")
(collectively, the Government Fund, Tax Free High Income Fund, Municipal Income
Fund, Limited Term Municipal Fund, California Fund, Florida Fund, New Jersey
Fund, New York Fund, Pennsylvania Fund, High Yield Fund, Global Fund, Adjustable
Rate Fund, Strategic Income Fund, Emerging Markets Fund, Growth and Income Fund,
Utility Fund, Balanced Fund, Tax Free Money Fund and Money Market Fund are
hereinafter referred to as the "VK Funds") (collectively, the Government Trust,
Tax Free Trust, Pennsylvania Fund, VKM Trust, Equity Trust, Tax Free Money Fund
and Money Market Trust are hereinafter referred to as the "VK Trusts") that a
Joint Meeting of the Shareholders of the Funds (the "Meeting") will be held at
the offices of Van Kampen American Capital, Inc., One Parkview Plaza, Oakbrook
Terrace, IL 60181, on Friday, July 21, 1995, at 2:00 p.m., for the following
purposes:

1. For each VK Fund (except the Pennsylvania Fund), to approve or
disapprove such VK Fund's reorganization and conversion to a Delaware
business trust (or series thereof);

2. For the Pennsylvania Fund, to approve or disapprove the amendment
and restatement of its Agreement and Declaration of Trust;

3. For each VK Trust, to elect fifteen trustees to serve until their
respective successors are duly elected and qualified;

4. For the Global Fund, to approve or disapprove a change in the
fundamental investment policy with respect to the concentration of its
investments;

5. For each VK Fund, to ratify or reject the selection of KPMG Peat
Marwick LLP as independent public accountants for its current fiscal year;
and

6. To transact such other business as may properly come before the
Meeting.

Holders of record of the Shares of each of the VK Funds at the close of
business on May 26, 1995 are entitled to notice of, and to vote at, the Meeting
and any adjournment thereof.

By order of the Board of Trustees

RONALD A. NYBERG, Vice President and
Secretary
June 2, 1995

EACH OF THE VK FUNDS WILL FURNISH, WITHOUT CHARGE, A COPY OF THE MOST
RECENT ANNUAL REPORT (AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE
ANNUAL REPORT, IF ANY) TO A SHAREHOLDER UPON REQUEST. ANY SUCH REQUEST SHOULD BE
DIRECTED TO VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING (800) 341-2929 OR BY
WRITING TO THE RESPECTIVE VK FUND, ONE PARKVIEW PLAZA, OAKBROOK TERRACE,
ILLINOIS 60181.

SHAREHOLDERS OF EACH OF THE VK FUNDS ARE INVITED TO ATTEND THE MEETING IN
PERSON. IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE INDICATE YOUR VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY CARD WITH RESPECT TO EACH VK FUND IN WHICH
YOU WERE A SHAREHOLDER AS OF THE RECORD DATE, DATE AND SIGN
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IT, AND RETURN SUCH CARD(S) IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR
YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.

IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK
THAT YOU MAIL YOUR PROXY PROMPTLY.

MANAGEMENT OF EACH RESPECTIVE VK FUND RECOMMENDS THAT YOU CAST YOUR VOTE:

- FOR APPROVAL OF THE REORGANIZATION AND CONVERSION OF EACH VK FUND (EXCEPT
THE PENNSYLVANIA FUND) INTO A DELAWARE BUSINESS TRUST (OR SERIES
THEREOF);

- FOR APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE AGREEMENT AND
DECLARATION OF TRUST OF THE PENNSYLVANIA FUND;

- IN FAVOR OF THE NOMINEES FOR THE BOARD OF TRUSTEES LISTED IN THE PROXY
STATEMENT WITH RESPECT TO EACH VK TRUST;

- FOR APPROVAL OF A CHANGE IN THE FUNDAMENTAL INVESTMENT POLICY REGARDING
THE CONCENTRATION OF INVESTMENTS WITH RESPECT TO THE GLOBAL FUND; AND

- FOR THE RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE CURRENT FISCAL YEAR OF EACH VK
FUND.

YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD(S) PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
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PROXY STATEMENT

JOINT MEETING OF SHAREHOLDERS

JULY 21, 1995

This Proxy Statement is furnished in connection with the solicitation by
the Boards of Trustees (the "VK Board") of each of the VK Trusts (defined below)
of proxies to be voted at a Joint Meeting of Shareholders of the VK Funds
(defined below), and at any and all adjournments thereof (the "Meeting"), to be
held at Van Kampen American Capital, Inc., One Parkview Plaza, Oakbrook Terrace,
IL 60181, on Friday, July 21, 1995, at 2:00 p.m. The approximate mailing date of
this Proxy Statement and accompanying form of proxy is June 2, 1995.

Participating in the Meeting are holders of common shares of beneficial
interest, without par value (collectively, the "Shares"), of each of: Van Kampen
Merritt U.S. Government Trust, a Massachusetts business trust (the "Government
Trust"), on behalf of its sub-trust Van Kampen Merritt U.S. Government Fund (the
"Government Fund"); Van Kampen Merritt Tax Free Fund, a Massachusetts business
trust (the "Tax Free Trust"), on behalf of its sub-trusts Van Kampen Merritt Tax
Free High Income Fund (the "Tax Free High Income Fund"), Van Kampen Merritt
Municipal Income Fund ("the "Municipal Income Fund"),

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Van Kampen Merritt Limited Term Municipal Income Fund (the "Limited Term
Municipal Fund"), Van Kampen Merritt California Insured Tax Free Fund (the
"California Fund"), Van Kampen Merritt Florida Insured Tax Free Income Fund (the
"Florida Fund"), Van Kampen Merritt New Jersey Tax Free Income Fund (the "New
Jersey Fund") and Van Kampen Merritt New York Tax Free Income Fund (the "New
York Fund"); Van Kampen Merritt Pennsylvania Tax Free Income Fund, a
Pennsylvania trust (the "Pennsylvania Fund"); Van Kampen Merritt Trust, a
Massachusetts business trust (the "VKM Trust"), on behalf of its sub-trusts Van
Kampen Merritt High Yield Fund (the "High Yield Fund"), Van Kampen Merritt
Short-Term Global Income Fund (the "Global Fund"), Van Kampen Merritt Adjustable
Rate U.S. Government Fund (the "Adjustable Rate Fund"), Van Kampen Merritt
Strategic Income Fund (the "Strategic Income Fund") and Van Kampen Merritt
Emerging Markets Income Fund (the "Emerging Markets Fund"); Van Kampen Merritt
Equity Trust, a Massachusetts business trust (the "Equity Trust"), on behalf of
its sub-trusts Van Kampen Merritt Growth and Income Fund (the "Growth and Income
Fund"), Van Kampen Merritt Utility Fund (the "Utility Fund") and Van Kampen
Merritt Balanced Fund (the "Balanced Fund"); Van Kampen Merritt Tax Free Money
Fund, a Massachusetts business trust (the "Tax Free Money Fund"); and Van Kampen
Merritt Money Market Trust, a Massachusetts business trust (the "Money Market
Trust") on behalf of its series Van Kampen Merritt Money Market Fund (the "Money
Market Fund").

Collectively, the Government Trust, Tax Free Trust, Pennsylvania Fund, VKM
Trust, Equity Trust, Tax Free Money Fund and Money Market Trust are hereinafter
referred to as the "VK Trusts". Collectively, the Government Fund, Tax Free High
Income Fund, Municipal Income Fund, Limited Term Municipal Fund, California
Fund, Florida Fund, New Jersey Fund, New York Fund, Pennsylvania Fund, High
Yield Fund, Global Fund, Adjustable Rate Fund, Strategic Income Fund, Emerging
Markets Fund, Growth and Income Fund, Utility Fund, Balanced Fund, Tax Free
Money Fund, Money Market Fund and Van Kampen Merritt Insured Tax Free Income
Fund (the "Insured Fund"), a sub-trust of the Tax Free Trust, are hereinafter
referred to as the "VK Funds".

The Meeting is scheduled as a joint meeting of the respective shareholders
of the VK Funds, excluding the Insured Fund, because the shareholders of each of
the VK Funds, excluding the Insured Fund, are expected to consider and vote on
similar matters. The VK Board has determined that the use of a joint Proxy
Statement for the Meeting is in the best interest of the shareholders of each of
the VK Funds, excluding the Insured Fund. In the event that any shareholder of
any VK Fund present at the Meeting objects to the holding of a joint meeting and
moves for an adjournment of the meeting of such VK Fund to a time immediately
after the Meeting, so that such VK Fund's meeting may be held separately, the
persons named as proxies will vote in favor of such adjournment. Except as
described below in connection with the election of trustees of each respective
VK Trust, shareholders of each VK Fund will vote separately on each of the
proposals relating to their VK Fund, and an unfavorable vote on a proposal by
the shareholders of one VK Fund will not affect the implementation of such a
proposal by another VK Fund if the proposal is approved by the shareholders of
that VK Fund.

The shareholders of the Insured Fund, a sub-trust of the Tax Free Trust,
will meet separately to vote on proposals substantially identical to Proposals
1, 3 and 5 set forth herein. The VK Board has determined that it is in the best
interest of shareholders of the Insured Fund to meet separately. The votes of
shareholders of the Insured Fund will be combined with the votes of shareholders
of Tax Free High Income Fund, Municipal Income Fund, Limited Term Municipal
Income Fund, California Fund, Florida Fund, New Jersey Fund and

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New York Fund, the other sub-trusts of the Tax Free Trust, with respect to the
proposed election of the nominees set forth in Proposal 3 to the Board of
Trustees of the Tax Free Trust.

All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Abstentions do not constitute votes "for" or "against" a
matter and will be disregarded in determining the "votes cast" on an issue.
Broker non-votes (i.e., proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other person
entitled to vote shares on a particular matter with respect to which the broker
or nominees do not have discretionary power) will be treated the same as
abstentions. A majority of the outstanding Shares entitled to vote on a proposal
must be present in person or by proxy to have a quorum to conduct business at
the Meeting. Abstentions and broker non-votes will be deemed present for quorum
purposes. Unless instructions to the contrary are marked, Shares represented by
a proxy will be voted "FOR" each proposal as to which it is entitled to vote.

The VK Board has fixed the close of business on May 26, 1995, as the record
date (the "Record Date") for the determination of holders of Shares of each VK
Fund entitled to vote at the Meeting. Shareholders of a VK Fund on the Record
Date will be entitled to one vote with respect to each proposal submitted to the
shareholders of such VK Fund for each Share of such VK Fund then held, with no
Share having cumulative voting rights.

The following table summarizes each proposal to be presented at the Meeting
and the VK Funds solicited with respect to such proposal:

PROPOSAL AFFECTED TRUSTS/FUNDS
---------------------------------------------- ------------------------------------------

1. Reorganization and Conversion to a Delaware
Business Trust (or series thereof)............ Each VK Fund, except the Pennsylvania Fund
2. Amendment and Restatement of Agreement and
Declaration of Trust.......................... Pennsylvania Fund only
3. Election of Trustees.......................... Each VK Trust(1)
4. Amendment of Fundamental Investment Policy.... Global Fund only
5. Ratification of Independent Public
Accountants................................... Each VK Fund

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

(1) The shareholders of all of the VK Funds organized under each respective VK
Trust vote together as a single class on this proposal.

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At the close of business on May 26, 1995, there were issued and outstanding
Shares of each of the VK Funds, excluding the Insured Fund, set forth below:

CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES
VK FUND NAME OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING
- ----------------------------------------- -------------- -------------- -------------- --------------

Government Fund..........................
Tax Free High Income Fund................
Municipal Income Fund....................
Limited Term Municipal Fund..............
California Fund..........................
Florida Fund.............................
New Jersey Fund..........................
New York Fund............................
Pennsylvania Fund........................
High Yield Fund..........................
Global Fund..............................
Adjustable Rate Fund.....................
Strategic Income Fund....................
Emerging Markets Fund....................
Growth and Income Fund...................
Utility Fund.............................
Balanced Fund............................
Tax Free Money Fund......................
Money Market Fund........................

As of May 26, 1995, to the knowledge of management of the VK Funds, the
following persons owned beneficially more than 5% of any class of any VK Fund's
outstanding Shares: [To be determined].

VOTING

Unless specified otherwise, all Shares of a VK Fund affected by a proposal
will vote together as a single class on such proposal. The voting requirement
for passage of a particular proposal depends on the nature of the particular
proposal.

With respect to Proposal 1, the affirmative vote of a majority of the
Shares of the respective VK Fund (excluding the Pennsylvania Fund) present in
person or by proxy at the Meeting and entitled to vote on the proposal is
required to approve the reorganization of the respective VK Fund.

With respect to Proposal 2, a vote of not less than a majority of the
Shares of the Pennsylvania Fund is required to approve the proposed Amended and
Restated Agreement and Declaration of Trust.

With respect to Proposal 3, the Shares of all the VK Funds organized as
sub-trusts or series of a VK Trust shall vote together as a single class of such
VK Trust and an affirmative vote of a plurality of the Shares of a VK Trust,
voting together as a single class, is required to elect the trustees of such VK
Trust. With respect to the Tax Free Trust, Shares of the Tax Free High Income
Fund, Municipal Income Fund, Limited Term Municipal Fund, California Fund,
Florida Fund, New Jersey Fund and New York Fund will vote together as a

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single class, together with the Shares of the Insured Fund, who will vote at a
separate meeting. With respect to the VKM Trust, Shares of the High Yield Fund,
Global Fund, Adjustable Rate Fund, Strategic Income and Emerging Markets Fund
will vote together as a single class. With respect to the Equity Trust, Shares
of the Growth and Income Fund, Utility Fund, and Balanced Fund will vote
together as a single class.

With respect to Proposal 4, a vote of the "majority of the outstanding
voting securities" is required which shall mean the lesser of (i) 67% or more of
the voting securities of the Global Fund entitled to vote thereon present in
person or by proxy at the Meeting, if holders of more than 50% of the
outstanding voting securities entitled to vote thereon are present in person or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Global Fund entitled to vote thereon.

With respect to Proposal 5, an affirmative vote of a majority of the Shares
of a VK Fund present in person or by proxy is necessary to ratify the selection
of the independent public accountants for such VK Fund.

On the matters coming before the Meeting as to which a choice has been
specified by the Shareholders by means of the ballot on the proxy, the Shares
will be voted accordingly. Management of each respective VK Fund recommends that
you cast your vote:

- FOR APPROVAL of the reorganization and conversion of each VK Fund (except
the Pennsylvania Fund) to a Delaware business trust (or series thereof);

- FOR APPROVAL of the amendment and restatement of the Agreement and
Declaration of Trust of the Pennsylvania Fund;

- IN FAVOR of the nominees for the Boards of Trustees listed in this Proxy
Statement with respect to each VK Trust;

- FOR APPROVAL of a change in the fundamental investment policy regarding
the concentration of investments with respect to the Global Fund;

- FOR the ratification of the selection of KPMG Peat Marwick LLP as
independent public accountants for the current fiscal year of each VK
Fund.

Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the respective VK Fund a written notice of revocation, by
delivering a duly executed proxy bearing a later date, or by attending the
Meeting and voting in person.

The VK Funds know of no business other than that mentioned in proposals one
through five of the Notice which will be presented for consideration at the
Meeting. If any other matters are properly presented, it is the intention of the
persons named on the enclosed proxy to vote proxies in accordance with their
best judgment. In the event a quorum is present at the Meeting but sufficient
votes to approve any of the proposals with respect to one or more VK Funds or VK
Trusts are not received, the persons named as proxies may propose one or more
adjournments of the meeting of the concerned VK Fund or VK Trust to permit
further solicitation of proxies provided they determine that such an adjournment
and additional solicitation is reasonable and in the interest of shareholders
based on a consideration of all relevant factors, including the nature of the
relevant proposal, the percentage of votes then cast, the percentage of negative
votes then cast, the nature of the proposed solicitation activities and the
nature of the reasons for such further solicitation.

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BACKGROUND FOR PROPOSALS 1, 2 AND 3

On December 20, 1994, The Van Kampen Merritt Companies Inc. acquired from
The Travelers Inc. all of the outstanding capital stock of American Capital
Management & Research, Inc., the parent company of Van Kampen Merritt Investment
Advisory Corp. At the time of the Acquisition American Capital Management &
Research, Inc., was the parent company of American Capital Asset Management,
Inc. Immediately after the acquisition, each of the foregoing entities was
renamed. The following table sets forth the old name, the new name and the
abbreviated name used in this Proxy Statement to refer to each such entity:

OLD NAME NEW NAME ABBREVIATED NAME
- ---------------------------- ---------------------------------- ----------------------------

The Van Kampen Merritt Van Kampen American Capital, Inc. Van Kampen American Capital
Companies Inc.
American Capital Asset Van Kampen American Capital AC Adviser
Management, Inc. Asset Management, Inc.
Van Kampen Merritt Van Kampen American Capital VK Adviser
Investment Advisory Corp. Investment Advisory Corp.

The VK Adviser and the AC Adviser currently are each wholly-owned
subsidiaries of Van Kampen American Capital. The VK Adviser serves as investment
adviser for each of the VK Funds. Nineteen of the VK Funds are organized as
Massachusetts business trusts (or subtrusts thereof) and the Pennsylvania Fund
is organized for tax purposes as a Pennsylvania trust. The VK Board, which
supervises the operations of each of the VK Funds, currently consists of the
same seven members for each VK Fund.

The AC Adviser serves as the investment adviser for twenty-nine open-end
investment companies (the "AC Funds") as well as for other registered investment
companies. Ten of the AC Funds are organized as Massachusetts business trusts
(or series thereof), and nineteen of the AC Funds are organized as Maryland
corporations (or series thereof). The Board of Directors/Trustees, which
supervises the operations of each of the AC Funds, currently consists of the
same eight members (the "AC Board") for each AC Fund.

On February 10, 1995, the VK Board and the AC Board held a joint meeting to
discuss with management ("Management") of the VK Adviser and the AC Adviser the
costs and potential benefits to shareholders of, among other things, (i)
permitting exchangeability of shares between the VK Funds and the AC Funds, (ii)
selecting a common transfer agent to facilitate exchangeability and enhance
shareholder services, (iii) merging certain of the VK Funds and the AC Funds in
order to achieve certain economies of scale and efficiencies, and (iv)
consolidating the VK Board and the AC Board into a combined board of directors
(collectively, the "Consolidation").

The VK Board and the AC Board created a joint committee (the "Joint
Committee") to consider the possible costs and benefits to shareholders
associated with the Consolidation. The Joint Committee met on February 20, 1995
to identify and discuss the possible costs and benefits of the Consolidation to
the shareholders. Following such meeting, the Joint Committee requested certain
additional information from Management with respect to those possible costs and
benefits identified by the Joint Committee.

The VK Board and the AC Board held a joint meeting on March 14, 1995 for
the purpose of, among other things, reviewing the findings of the Joint
Committee and reviewing the additional information requested from Management. At
the meeting, the VK Board and the AC Board each approved in principle certain

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elements of the Consolidation, including the combination of the VK Board and the
AC Board, subject to the favorable resolution of certain outstanding
administrative matters with respect to the operation of a combined board and
subject to receiving certain additional information from Management. The VK
Board and the AC Board also considered reorganizing the VK Funds (excluding the
Pennsylvania Fund) and the AC Funds in one jurisdiction under substantially
similar charter documents, as part of the Consolidation.

The Joint Committee met again on March 27, 1995 and April 3, 1995 to
address the open administrative matters and to review the additional information
provided by Management. Following a discussion of such matters and a review of
the additional information provided by Management, the Joint Committee
recommended to the VK Board that it approve and propose to the shareholders of
the VK Funds: (i) combining the VK Board and the AC Board, (ii) reorganizing
each of the VK Funds (excluding the Pennsylvania Fund) into Delaware business
trusts (or series thereof) in order to facilitate governance of such funds under
uniform organizational documents following the Consolidation and in order to
take advantage of certain beneficial aspects of Delaware law with respect to
business trusts and (iii) the amendment and restatement of the Agreement and
Declaration of Trust of the Pennsylvania Fund to conform it to the extent
practicable with the new trust instrument of the Delaware business trusts while
maintaining the tax benefits of operating as a Pennsylvania trust. The Joint
Committee also made analogous recommendations to the AC Board.

The VK Board and the AC Board held a joint meeting on April 6-7, 1995 and
separate meetings on May 8-9, 1995 and May 11-12, 1995, respectively, at which
each of the VK Board and the AC Board unanimously approved proposals for
combining the VK Board and the AC Board and reorganizing each of the VK Funds
(excluding the Pennsylvania Fund) and each of the AC Funds as Delaware business
trusts (or series thereof). The VK Board also unanimously approved the proposal
to amend and restate the Agreement and Declaration of Trust for the Pennsylvania
Fund to conform it to the extent practicable with the new trust instrument of
the Delaware business trusts while maintaining the tax benefits of operating as
a Pennsylvania Trust. Each of the VK Board and the AC Board also approved
submitting such proposals to the respective shareholders of the VK Funds and the
AC Funds for the requisite shareholder approvals. Proposal 1 of this Proxy
Statement seeks shareholder approval to reorganize each of the VK Funds (except
the Pennsylvania Fund) into Delaware business trusts (or series thereof).
Proposal 2 of this Proxy Statement seeks shareholder approval to amend and
restate the Agreement and Declaration of Trust of the Pennsylvania Fund to
conform it to the extent possible to the form of new trust instrument of the
Delaware business trusts to be adopted by each other VK Fund and each AC Fund.
Proposal 3 of this Proxy Statement seeks shareholder approval for each of the VK
Trusts to expand the number of its trustees from seven to fifteen and to
re-elect to the VK Board each of the incumbent trustees and to elect each of the
eight members of the AC Board. The VK Board has determined that reorganizing
each of the VK Funds (except the Pennsylvania Fund) into Delaware business
trusts (or series thereof), amending and restating the Agreement and Declaration
of Trust of the Pennsylvania Fund and consolidating the VK Board and the AC
Board are essential elements of the Consolidation and recommend that
Shareholders vote FOR Proposal 1, FOR Proposal 2 and IN FAVOR of each of the
nominees in Proposal 3.

This Proxy Statement has been prepared and mailed to the shareholders of
each VK Fund (excluding the Insured Fund, for which separate proxy materials are
being mailed) to obtain the necessary shareholder approvals for each of such VK
Funds to complete the Consolidation. A substantially similar proxy statement
with respect to such proposals has been prepared and mailed to the shareholders
of each AC Fund to obtain

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the necessary shareholder approvals for each of the AC Funds to complete the
Consolidation. Certain additional proposals not related to the Consolidation are
included in this Proxy Statement and the Insured Fund Proxy Statement, which
additional proposals differ between the VK Funds, the Insured Fund and the AC
Funds.

PROPOSAL 1: APPROVAL OF THE REORGANIZATION AND CONVERSION
OF EACH VK FUND (EXCLUDING THE PENNSYLVANIA FUND)
TO A DELAWARE BUSINESS TRUST (OR SERIES THEREOF)

The VK Board has unanimously approved an Agreement and Plan of
Reorganization and Liquidation (a "Plan of Reorganization") substantially in the
form attached hereto as Appendix D with respect to each VK Fund, excluding the
Pennsylvania Fund. The Plan of Reorganization provides for the reorganization
(the "Reorganization") of each VK Fund other than the Pennsylvania Fund (each a
"Massachusetts Fund") into a series (each a "Delaware Fund") of a Delaware
business trust (each a "Delaware Trust"). The Pennsylvania Fund will not
reorganize as a Delaware business trust for tax purposes, but Proposal No. 2 in
this Proxy is being submitted to the shareholders of the Pennsylvania Fund to
amend and restate its organizational document to conform it, to the extent
practicable, to the proposed organizational documents of the proposed Delaware
Funds. Each of the AC Funds also is seeking approval from its respective
shareholders to reorganize as a Delaware business trust (or series thereof).

REASONS FOR THE REORGANIZATIONS

The principal purposes of the Reorganizations are to take advantage of
certain beneficial aspects of Delaware law with respect to business trusts and
to facilitate governance of the VK Funds and the AC Funds under uniform
organizational documents following the Consolidation.

Delaware law provides that the shareholders of a Delaware business trust
shall not be subject to liability for obligations of the trust. Under
Massachusetts law, Massachusetts Fund shareholders are potentially liable for
obligations of the Massachusetts Fund. Although the risk of such liability is
remote, the VK Board has determined that Delaware law affords greater protection
against potential shareholder liability. Similarly, Delaware law provides that,
should the Delaware Funds issue multiple series of shares, each series shall not
be liable for the debts of any other series, which liability is another
potential, although remote, risk in the case of a Massachusetts business trust.

The VK Board believes that the Delaware business trust form of organization
may enable the Delaware Funds to adopt new methods of operations and employ new
technologies that are expected to reduce costs of operation when, and if,
implemented. Delaware law, for example, explicitly authorizes electronic or
telephonic communications between a Delaware Fund and its shareholders. The VK
Board hopes to take advantage of this provision to improve shareholder voting
procedures and reduce costs. Under Delaware law and the proposed trust
instrument of the Delaware Trusts, the Delaware Funds may be required to have
fewer shareholder meetings, potentially further reducing costs, although neither
Massachusetts business trusts nor Delaware business trusts are required to hold
annual shareholder meetings. Of course, the investment objectives and the
fundamental investment restrictions of both the Massachusetts Funds and Delaware
Funds will remain fundamental, and may be changed only by shareholder vote. The
VK Board and the AC Board also have determined that substantially uniform
organizational documents will facilitate their ability to jointly

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govern the VK Funds and the AC Funds in an efficient and timely manner and will
enhance the ability of the VK Funds and the AC Funds to react in a consistent
manner when faced with similar corporate governance issues.

For a more detailed comparison of the Massachusetts Funds' declarations of
trust and the proposed Delaware Funds' trust instrument, see "Certain
Comparative Information About Massachusetts Funds and Delaware Funds" below.

PROCEDURES FOR REORGANIZATIONS

In order to accomplish the Reorganizations, each VK Trust other than the
Pennsylvania Fund (each a "Massachusetts Trust") has organized a corresponding
Delaware Trust. Each Delaware Trust was formed as a Delaware business trust
pursuant to an Agreement and Declaration of Trust (the "Trust Instrument") which
authorizes the issuance of shares in different series. Each Massachusetts Trust
has caused its corresponding Delaware Trust to create a series (i.e., a Delaware
Fund) that corresponds to each series (i.e., each Massachusetts Fund) of the
Massachusetts Trust. The investment objectives and policies of each Delaware
Fund are the same as those of its corresponding Massachusetts Fund.

To facilitate the Reorganizations, one share of each class of each Delaware
Fund has been issued to its corresponding Massachusetts Fund. If the
Reorganization of a Massachusetts Fund is approved by its shareholders, such
approval shall authorize the Massachusetts Fund, as sole shareholder of the
corresponding Delaware Fund, to (i) elect as trustees of the Delaware Trust the
nominees elected as trustees of the Massachusetts Trust pursuant to Proposal 3
hereof, (ii) approve or disapprove the selection of the independent public
accountants described in Proposal 5 hereof, (iii) approve an investment advisory
agreement between the respective Delaware Fund and the VK Adviser substantially
identical to the investment advisory agreement currently in effect between the
Massachusetts Fund and the VK Adviser and (iv) approve a Rule 12b-1 plan and a
service plan between the respective Delaware Fund and Van Kampen American
Capital Distributors, Inc. (the "Distributor") substantially identical to the
plans currently in effect between the Massachusetts Fund and the Distributor.

On the closing date of each Reorganization approved by shareholders, each
Massachusetts Fund will transfer all of its assets and liabilities to its
corresponding Delaware Fund in exchange for shares of such Delaware Fund having
an equal net asset value. The Massachusetts Fund will then be liquidated and
each shareholder of the Massachusetts Fund will receive for his or her shares of
the Massachusetts Fund an equal number of shares of the corresponding Delaware
Fund. A shareholder's investment in the Massachusetts Fund will remain exactly
the same after the Reorganization and the corresponding Delaware Fund will
operate in the same manner and with the same investment objectives, policies and
restrictions as the corresponding Massachusetts Fund had in the past.

If shareholders of a Massachusetts Fund do not approve the Reorganization,
the Massachusetts Fund will continue in business as a Massachusetts business
trust (or sub-trust thereof, as applicable). The consummation of the
Reorganization of any one Massachusetts Fund is not contingent upon the
consummation of the Reorganization of other Massachusetts Funds or the AC Funds,
individually or as a group.

It will not be necessary for holders of certificates of the Massachusetts
Funds to exchange their certificates for new certificates of the corresponding
Delaware Funds following consummation of the Reorganizations. Certificates for
shares of the Massachusetts Funds issued prior to the Reorganizations shall
represent outstanding shares of the corresponding Delaware Funds after the
Reorganizations. New certificates

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will not be issued by the Delaware Funds after the Reorganizations to
shareholders of the Delaware Funds unless specifically requested in writing.
Shareholders of the Massachusetts Funds who have not been issued certificates
and whose shares are held in an open account will automatically have those
shares designated similarly as shares of the corresponding Delaware Fund.

Each Reorganization approved by shareholders will become effective at the
later of August 1, 1995 or as soon as practicable following receipt of such
approval, taking into consideration all of the elements of the Consolidation. At
such time, each new advisory agreement, new Rule 12b-1 plan and new service plan
will become effective and will continue thereafter if approved as required by
the Investment Company Act of 1940, as amended ("1940 Act").

CERTAIN COMPARATIVE INFORMATION ABOUT MASSACHUSETTS FUNDS AND DELAWARE FUNDS

Summary of the Trust Instrument. Each Delaware Trust has been established
pursuant to a Trust Instrument under the laws of the State of Delaware. The
Trust Instrument of each Delaware Trust was created in connection with the
Reorganizations of the Massachusetts Funds and is identical, except for the
names of the respective Delaware Trusts. The investment objectives, policies and
limitations of each Delaware Fund after the reorganization will be the same as
those of its corresponding Massachusetts Fund, including the revised policies
and limitations, if approved, adopted by shareholders of the Global Fund
pursuant to Proposal 4 of this Proxy. Prior to the Reorganizations, each
Delaware Fund will not have any material assets or liabilities. During the
Reorganization, the Massachusetts Fund will be the sole shareholder of its
corresponding Delaware Fund immediately prior to the distribution of Delaware
Fund shares to Massachusetts Fund shareholders.

As a Delaware business trust, each Delaware Trust's operations will be
governed by its Trust Instrument, its Bylaws and applicable Delaware law rather
than by the Massachusetts Trust's Declaration of Trust, Bylaws and applicable
Massachusetts law. The operations of each Delaware Trust will continue to be
subject to the provisions of the 1940 Act, the rules and regulations of the
Securities and Exchange Commission (the "SEC") thereunder, and applicable state
securities law.

Trustees of the Delaware Trusts. Subject to the provisions of the Trust
Instrument, the business of each Delaware Trust is supervised by its trustees.
The responsibilities, powers, and fiduciary duties of the trustees of the
Delaware Trusts will be substantially the same as those of the trustees of the
Massachusetts Trusts, except that Delaware trustees would have the additional
authority to remove a trustee from office without cause upon the approval of
two-thirds of the trustees in office prior to such removal. The trustees of each
Delaware Trust will be all of the trustees elected by respective Massachusetts
Trust pursuant to Proposal 3.

Series of Delaware Trusts and Massachusetts Trusts. The Trust Instrument of
each Delaware Trust permits the trustees to create one or more series of the
Delaware Trust and, with respect to each series, to issue an unlimited number of
full or fractional shares of that series or of one or more classes of shares of
that series. The trustees of each Massachusetts Trust have identical rights
under the Declaration of Trust of the Massachusetts Trusts. Each share of a
series of a Delaware Trust, like each share of a series of a Massachusetts
Trust, represents an equal proportionate interest with each other share in that
series, none having priority or preference over another.

Delaware Trust Shareholder Liability and Massachusetts Trust Shareholder
Liability. One area of difference between the Delaware business trusts and the
Massachusetts business trusts is the potential liability

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of shareholders. Generally, shareholders of each Delaware Trust will not be
personally liable for obligations of such Delaware Trust under Delaware law. The
Delaware Business Trust Act (the "Delaware Act") provides that a shareholder of
a Delaware business trust shall be entitled to the same limitation of liability
extended to shareholders of private corporations for profit. However, no similar
statutory or other authority limiting shareholder liability of business trusts
applies in many other states, including Massachusetts. As a result, to the
extent that the Delaware Trust or a shareholder is subject to the jurisdiction
of courts in those states, the courts may not apply Delaware law, and may
thereby subject the Delaware Trust shareholders to liability. To guard against
this risk, the Trust Instrument (i) contains an express disclaimer of
shareholder liability for acts or obligations of the Delaware Trust and requires
that notice of such disclaimer be given in each agreement, obligation, and
instrument entered into as executed by the Delaware Trust or its trustees and
(ii) provides for indemnification out of the series or fund property of any
shareholder held personally liable for the obligations of the Delaware Trust.
Thus, the risk of a Delaware Trust shareholder incurring financial loss beyond
his or her investment because of shareholder liability is limited to
circumstances in which (1) a court refused to apply Delaware law, (2) no
contractual limitation of liability was in effect, and (3) the series itself
would be unable to meet its obligations. In light of Delaware law, the nature of
the Delaware Trust's business, and the nature of its assets, the VK Adviser
believes that the risk of personal liability to a Delaware Trust shareholder is
extremely remote.

Shareholders of a Massachusetts business trust may, in certain
circumstances, be held personally liable under Massachusetts law for the
obligations of such Massachusetts business trust. The Massachusetts Declaration
of Trust, like the Delaware Trust Instrument, contains an express disclaimer of
shareholder liability and requires that notice of such disclaimer be given in
each agreement entered into or executed by the Massachusetts Trusts or the
trustees. The Massachusetts Declaration of Trust also provides for
indemnification out of the respective Massachusetts Fund's property. Thus, the
VK Adviser believes the risk of shareholder liability is also remote for
shareholders of Massachusetts business trusts. Shareholders of a Massachusetts
business trust, however, do not benefit from a statutory limitation of liability
that is available to shareholders of a Delaware business trust.

Liability of Trustees. The Delaware Trust Instrument provides that the
trustees shall not be liable to any person other than the Delaware Trust or a
shareholder thereof and that a trustee shall not be liable for any act as a
trustee; but nothing in the Delaware Trust Instrument protects a trustee against
any liability to the Delaware Trust or its shareholders to which they would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of their
office. The Massachusetts Declaration of Trust provides that its trustees shall
not be liable for errors of judgment or mistakes of fact or law, subject to
substantially similar provisions concerning willful misfeasance, bad faith,
gross negligence, and reckless disregard as those described above.

Voting Rights of Delaware Trust Shareholders and Massachusetts Trust
Shareholders. Neither Massachusetts business trusts nor Delaware business trusts
are required to hold annual meetings. The Declaration of Trust of each
Massachusetts Trust requires the affirmative vote of two-thirds of the shares of
a Massachusetts Trust to remove a trustee of such Massachusetts Trust. The
proposed Trust Instruments of the Delaware Trusts would require the affirmative
vote of a majority of the shares of a Delaware Trust to remove a trustee. The
Massachusetts Declaration of Trust provides that a meeting of shareholders may
be called by the holders of 51% or more of the outstanding shares; however, if
the meeting is called for the purpose of voting on the question whether to
remove a trustee, only the holders of 10% of the outstanding shares of a
Massachusetts

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Trust need request to hold a shareholders meeting. The Delaware Trust Instrument
provides, in substance, that a meeting of shareholders may be called by the
request of holders of 10% of the outstanding shares of the Delaware Trust.

Each Delaware Trust, like its corresponding Massachusetts Trust, will
operate as an open-end management investment company registered with the SEC
under the 1940 Act. Shareholders of each Delaware Fund will, therefore, have the
power to vote at special meetings with respect to, among other things, changes
in fundamental investment policies and limitations of their respective Delaware
Fund; ratification of the selection by the trustees of the independent
accountants for the Delaware Fund; and such additional matters relating to the
Delaware Fund as may be required by law, or which the trustees consider
desirable. If, at any time, less than two-thirds of the trustees holding office
have been elected by shareholders, the trustees then in office will promptly
call a meeting of shareholders of the affected Delaware Trust for the purpose of
electing a board of trustees. Each Massachusetts Trust intends to notify the SEC
that its corresponding Delaware Trust will succeed to the shares registered by
the Massachusetts Trust under the Securities Act of 1933.

The Delaware Trust Instrument, like its corresponding Massachusetts
Declaration of Trust, provides that shareholders shall have the power to vote
only with respect to (i) the election or removal of trustees as provided
therein, (ii) the approval or termination of investment advisory distribution or
shareholder services contracts, or, (iii) the termination or reorganization of
the Delaware Trust or any series of the Delaware Trust, (iv) with respect to any
amendment of the Delaware Trust Instrument, (v) to the same extent as the
stockholders of a Delaware business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Delaware Trust or any series,
and (vi) with respect to such additional matters relating to the Delaware Trust
as may be required by the 1940 Act, the Delaware Trust Instrument, the Bylaws or
any registration of the Delaware Trust with the SEC. The Delaware Trust
Instrument and the Massachusetts Declaration of Trust also permit the trustees
to amend the respective trust document, provided that the amendment does not
adversely affect shareholders. The Delaware Trust Instrument and the
Massachusetts Declaration of Trust each provides that a majority of the affected
shares must approve a change that adversely affects the rights of the shares.
Each of the Delaware Trust Instrument and the Massachusetts Declaration of Trust
requires a majority of shares to establish quorum for a meeting.

The foregoing is only a summary of certain of the differences between the
Massachusetts Funds, their Declarations of Trust, Bylaws and Massachusetts law
and the Delaware Funds, their Trust Instruments, Bylaws and Delaware law. It is
not a complete list of differences. Shareholders should refer to the provisions
of such Declarations of Trust, Bylaws and Massachusetts law, and the Trust
Instruments, Bylaws and Delaware law directly for a more thorough comparison.

TEMPORARY AMENDMENT TO INVESTMENT LIMITATIONS

During the period prior to its Reorganization, each Massachusetts Fund will
own the only outstanding share of its corresponding Delaware Fund. By acquiring
a nominal share of its corresponding Delaware Fund, each Massachusetts Fund can
then vote to elect as trustees of such Delaware Trust those nominees elected in
Proposal 3 below, approve a substantially identical but new investment advisory
agreement, approve a substantially identical but new distribution plan and new
service plan and ratify the selection of independent public accountants in order
to comply with provisions of the 1940 Act requiring such shareholder approvals.

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Certain of the Massachusetts Funds have investment restrictions which
require shareholder approval before they can be changed and which might
otherwise preclude such Massachusetts Funds from completing the Reorganizations
including (for example) restrictions which prohibit such Massachusetts Fund from
purchasing any securities (other than tax-exempt obligations issued or
guaranteed by the United States Government or by its agencies or
instrumentalities), if, as a result, more than 5% of a Massachusetts Fund's
total assets (taken at current value) would then be invested in securities of a
single issuer or, if, as a result, such Massachusetts Fund would hold more than
10% of the outstanding voting securities of an issuer, or a prohibition against
making investments for the purpose of exercising control or participating in
management. By approving the Reorganizations, the shareholders will be
authorizing a suspension of any and all of these restrictions only to the extent
necessary to permit the Reorganizations to take place.

FEDERAL INCOME TAX CONSEQUENCES

It is anticipated that the transactions contemplated by the Plan of
Reorganization will be tax-free. Consummation of each Reorganization is subject
to receipt of an opinion of Skadden, Arps, Slate, Meagher & Flom, counsel to
each Massachusetts Fund that, under the Internal Revenue Code of 1986, as
amended (the "Code"), the reorganization of the respective Massachusetts Fund
into a corresponding Delaware Fund pursuant to the Plan of Reorganization will
not give rise to the recognition of income, gain or loss for federal income tax
purposes to the Massachusetts Fund, the Massachusetts Trust or the shareholders
of the Massachusetts Fund. A shareholder's adjusted basis for tax purposes in
shares of a Delaware Fund after the Reorganization will be the same as such
shareholder's adjusted basis for tax purposes in the shares of the corresponding
Massachusetts Fund immediately before the Reorganizations. Shareholders should
consult their own tax adviser with respect to the state and local tax
consequences of the proposed transaction.

EXPENSES

The expenses related to the Reorganization of each Massachusetts Fund will
be borne by the respective Massachusetts Fund and the VK Adviser as set forth
under "EXPENSES" below.

RECOMMENDATION OF TRUSTEES

The VK Board has unanimously approved the proposed Reorganization of each
Massachusetts Fund, has determined that participation in the Reorganization is
in the best interests of each Massachusetts Fund and that the interests of
existing shareholders of each Massachusetts Fund will not be diluted as a result
of the Reorganization. The VK Board recommends that shareholders of each
Massachusetts Fund vote FOR Proposal 1.

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REQUIRED VOTE

In accordance with the Declaration of Trust of each Massachusetts Fund, an
affirmative vote of a majority of the shares of such Massachusetts Fund present
in person or by Proxy at the Meeting and entitled to vote on the proposal is
required to approve the respective Reorganization and subsequent liquidation and
dissolution of such Massachusetts Fund.

PROPOSAL 2: APPROVAL OF AMENDED AND RESTATED AGREEMENT AND
DECLARATION OF TRUST OF THE PENNSYLVANIA FUND

The VK Board of the Pennsylvania Fund has unanimously approved a proposal
to amend and restate the Agreement and Declaration of Trust (the "Amended
Declaration of Trust") with respect to the Pennsylvania Fund in order to conform
its current Agreement and Declaration of Trust (the "Current Declaration of
Trust"), to the extent practicable, to the Trust Instruments of the Delaware
Trusts, as described in Proposal 1. The Pennsylvania Fund will continue to
operate as a trust under the laws of the Commonwealth of Pennsylvania. The
Pennsylvania Trust is not being reorganized as a Delaware business trust in
order to maintain the tax benefits of operating as a Pennsylvania trust.

REASONS FOR AMENDMENT

The principal purpose of the amendment and restatement of the Current
Declaration of Trust of the Pennsylvania Fund is to facilitate governance of the
Pennsylvania Fund, the other VK Funds and the AC Funds under substantially
uniform charter documents following the Consolidation.

The Amended Declaration of Trust, if approved by shareholders, will become
effective at the later of August 1, 1995 or as soon as practicable following
receipt of such approval, taking into consideration all of the elements of the
Consolidation.

CERTAIN COMPARATIVE INFORMATION ABOUT THE AMENDED DECLARATION OF TRUST
AND THE CURRENT DECLARATION OF TRUST

Operations of the Pennsylvania Fund Under the Amended Declaration of
Trust. The investment objective, policies and limitations of the Pennsylvania
Fund under the Amended Declaration of Trust will be identical to those under the
Current Declaration of Trust. The Pennsylvania Fund's operations will be
governed by the Amended Declaration of Trust and its amended Bylaws, and also by
Pennsylvania law, the provisions of the 1940 Act, the rules and regulations of
the SEC thereunder and applicable state securities law.

Trustees and Officers of the Pennsylvania Fund. Subject to the provisions
of the Amended Declaration of Trust, the business of the Pennsylvania Fund will
be supervised by its trustees. The responsibilities, powers, and fiduciary
duties of the trustees of the Pennsylvania Fund under the Amended Declaration of
Trust will be substantially the same as those of the trustees under the Current
Declaration of Trust, except that the trustees would have the additional
authority to remove a trustee from office without cause upon the approval of
two-thirds of the trustees in office prior to such removal.

Shareholder Liability. No statutory or other authority limits the liability
of shareholders of a Pennsylvania trust. To guard against this risk, the Amended
Declaration of Trust (i) contains an express disclaimer of shareholder liability
for acts or obligations of the Pennsylvania Fund and requires that notice of
such

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disclaimer be given in each agreement, obligation, and instrument entered into
as executed by the Pennsylvania Fund or its trustees and (ii) provides for
indemnification out of the property of the Pennsylvania Fund for any shareholder
held personally liable for the obligations of the Pennsylvania Fund. Thus, the
risk of a Pennsylvania Fund shareholder under the Amended Declaration of Trust
incurring financial loss beyond his or her investment because of shareholder
liability is limited to circumstances in which (1) no contractual limitation of
liability was in effect and (2) the series or fund itself would be unable to
meet its obligations. The provisions limiting shareholder liability in the
Amended Declaration of Trust are substantially identical to those contained in
the Current Declaration of Trust.

Liability of Trustees. The Amended Declaration of Trust provides that the
trustees shall not be liable to any person other than the Pennsylvania Fund or a
shareholder thereof and that a trustee shall not be liable for any act as a
trustee, but nothing in the Amended Declaration of Trust protects a trustee
against any liability to the trust or its shareholders to which they would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of their
office. The Current Declaration of Trust provides that the trustees of the
Pennsylvania Fund shall not be liable for errors of judgment or mistakes of fact
or law, subject to substantially similar provisions concerning willful
misfeasance, bad faith, gross negligence, and reckless disregard of those
described above.

Voting Rights of Pennsylvania Trust Shareholders. Pennsylvania Trusts are
not required to hold annual meetings. The Declaration of Trust of the
Massachusetts Trusts require the affirmative vote of two-thirds of the shares of
a Massachusetts Trust to remove a trustee of a Massachusetts Trust. The proposed
Trust Instrument of a Delaware Trust would require the affirmative vote of a
majority of the Shares of a Delaware Trust to remove a trustee. The Amended
Declaration of Trust provides that a special meeting of shareholders may be
called by the holders of 10% or more of the shares. The Amended Declaration of
Trust also provides that 10 or more holders of record (who have been such for
six months), and who hold in the aggregate either shares having a net asset
value of at least $25,000 or at least 1% of the shares, whichever is greater,
may apply to the trustees stating that they wish to communicate with
shareholders in order to obtain the call of 10% of the outstanding shares, in
which case the trustees shall cooperate with such shareholders and required
under Section 16(c) of the 1940 Act.

The Pennsylvania Fund will continue to operate as an open-end management
investment company registered with the SEC under the 1940 Act. Shareholders of
the Pennsylvania Fund will, therefore, have the power to vote at special
meetings with respect to, among other things, changes in fundamental investment
policies and limitations; ratification of the selection by the trustees of the
independent public accounts for the Pennsylvania Fund; and such additional
matters relating to the Pennsylvania Fund as may be required by law, or which
the trustees consider desirable. If, at any time, less than a majority of the
trustees holding office have been elected by shareholders, the trustees then in
office will promptly call a meeting of shareholders of the Pennsylvania Trust
for the purpose of electing a board of trustees.

The Amended Declaration of Trust provides that shareholders shall have the
power to vote only with respect to (i) the election or removal of trustees as
provided therein, (ii) the approval or termination of investment advisory,
distribution or shareholder services contracts, (iii) the termination or
reorganization of the Pennsylvania Fund or any series of the Pennsylvania Fund,
and (iv) with respect to such additional matters as may be required by law or
the trustees may consider desirable. The Amended Declaration of Trust also
permits the Trustees to amend the Amended Declaration of Trust without a
shareholder vote provided that the rights of the shareholders would not be
adversely affected.

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TAX CONSIDERATIONS

The Pennsylvania Fund's investment objective is to provide Pennsylvania
investors a high level of current income exempt from federal and Pennsylvania
income taxes and, where possible under local law, local income and personal
property taxes, through investment primarily in a varied portfolio of medium and
lower grade municipal securities. In order to provide investors with income
exempt from Pennsylvania taxes, Pennsylvania tax law requires that the
Pennsylvania Fund be organized in Pennsylvania. Accordingly, the Pennsylvania
Fund will not reorganize as a Delaware business trust.

EXPENSES

The expenses related to the Amended Declaration of Trust will be borne by
Van Kampen American Capital and the Pennsylvania Fund as set forth under
"EXPENSES" below.

RECOMMENDATION OF TRUSTEES

The VK Board has unanimously approved the proposed Amended Declaration of
Trust and has determined that it is in the best interests of the Pennsylvania
Fund. The VK Board recommends that shareholders of the Pennsylvania Fund vote
FOR Proposal 2.

REQUIRED VOTE

In accordance with the Current Declaration of Trust of the Pennsylvania
Fund, an affirmative vote of the holders of a majority of the outstanding shares
of the Pennsylvania Fund is required to approve the Amended Declaration of
Trust.

PROPOSAL 3: ELECTION OF TRUSTEES

At meetings held on April 6-7, 1995 and May 8-9, 1995, the VK Board
unanimously approved increasing the number of trustees for each VK Trust from
seven to fifteen and nominated each of the incumbent trustees for re-election
and also nominated Messrs. J. Miles Branagan, Dr. Richard E. Caruso, Dr. Roger
Hilsman, Don G. Powell, David Rees, Lawrence J. Sheehan, Dr. Fernando Sisto and
William S. Woodside to fill the new trustee positions. Each of the new nominees
currently serves on the AC Board. The AC Board has also unanimously approved
increasing the number of members of the AC Board from eight to fourteen and
nominated each of its incumbent trustees for re-election and each of the
trustees of the VK Board, except for Mr. McDonnell, to fill such new positions.
Mr. McDonnell, an interested person of the VK Adviser and the AC Adviser, will
not join the AC Board so that the AC Board will remain in compliance with
Section 15(f) of the 1940 Act.

The VK Board together with the AC Board evaluated the benefits to
shareholders resulting from the proposed combination of the VK Board and the AC
Board. Each of the VK Board and the AC Board determined that a combined board
could more effectively seek to maximize the benefits of a unified fund complex
including: implementation of exchangeability of shares among the VK Funds and
the AC Funds; positioning the unified fund complex to maximize benefits for
marketing; more effective supervision of the implementation of improved
shareholder service programs across the unified fund complex; combining
historical knowledge and experience of the two fund complexes; more effective
evaluation of potential mergers

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of similar funds thereby achieving economies of scale for shareholders; and the
elimination of overlapping expenses and demands on Management's attention from
two separate boards.

The VK Board evaluated the costs to shareholders of the VK Funds resulting
from the combination of the VK Board and the AC Board. The principal cost
associated with the combination of the two boards would be the added expense of
compensating seven of the eight additional trustees who are not interested
persons of the VK Adviser. In order to alleviate such additional expense, the
trustees approved a reduction in the compensation per trustee paid by each VK
Fund. Because the number of members of the VK Board will increase from seven to
fifteen, the aggregate compensation paid by each VK Fund to the trustees will
increase, except that the VK Adviser has agreed to reimburse each VK Fund
through December 31, 1996 for any increase in the aggregate trustees'
compensation over such fund's 1994 fiscal year aggregate compensation. [It is
anticipated that by December 31, 1996, reductions in the number of trustees on
the combined board is expected to reduce the aggregate compensation of the
combined board to approximately the current aggregate compensation of the VK
Board.] Because each trustee will serve on the boards of more funds after the
combination of the boards, each trustee's aggregate compensation from all of the
Funds will increase. A comparison of each trustee's compensation for the 1994
calendar year (prior to the consolidation of the boards) and his pro forma
compensation following the combination of the boards is presented below in the
1994 Compensation Table and the Pro Forma Compensation Table and also is
discussed in the text preceding such tables.

THE TRUSTEES

The following schedule sets forth the initial election or appointment of
each incumbent trustee to the VK Board for each VK Trust listed below:

VK TRUST MR. MCDONNELL MR. GAUGHAN MR. KENNEDY* MR. MILLER MR. NELSON MR. ROBINSON MR. WHALEN
- -------------------- ------------- ----------- --------------- ------------- ------------- ------------- --------------

Government Trust.... May, 1987 April, 1989 September, 1993 May, 1987 May, 1987 October, 1992 May, 1987
Tax Free Trust...... May, 1987 April, 1989 September, 1993 May, 1987 May, 1987 October, 1992 May, 1987
Pennsylvania Fund... May, 1987 April, 1989 September, 1993 May, 1987 May, 1987 October, 1992 May, 1987
VKM Trust........... May, 1987 April, 1989 September, 1993 May, 1987 May, 1987 October, 1992 May, 1987
Equity Trust........ May, 1987 April, 1989 September, 1993 May, 1987 May, 1987 October, 1992 May, 1987
Tax Free Money
Fund.............. [August, 1986] April, 1989 September, 1993 [August, 1986] [August, 1986] August, 1986 [August, 1986]
Money Market
Trust............. January, 1986 April, 1989 September, 1993 January, 1986 January, 1986 October, 1992 January, 1986

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

* Mr. Kennedy was appointed by the trustees to the VK Board in September, 1993,
in order to fill a vacancy created by the resignation of John Dailey and has
not previously been elected by the shareholders. Each of the other incumbent
trustees was last approved by shareholders of the respective VK Trust at a
joint meeting of shareholders held on January 14, 1993.

With respect to each VK Trust, fifteen trustees are to be elected at the
Meeting to serve until reaching their designated retirement age or until their
successors are duly elected and qualified. The election of each nominee to the
board of a VK Trust requires the affirmative vote of a plurality of all Shares
of such VK Trust present in person or by proxy. The shareholders of all VK Funds
organized as sub-trust or series of a VK Trust will vote together as a single
class to elect the trustees of the respective VK Trust. It is the intention of
the persons named in the enclosed proxy to vote the Shares represented by them
for the election of the nominees listed below unless the proxy is marked
otherwise.

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24

The proposed Trust Instrument for each Delaware Trust and the proposed
Amended Declaration of Trust for the Pennsylvania Fund (as discussed in
Proposals 1 and 2, respectively) provides that the VK Board shall consist of not
more than twenty trustees. In the event a vacancy occurs on the VK Board, the
Bylaws of each Delaware Trust and the Amended By-Laws of the Pennsylvania Trust
provide that the size of the board will be reduced over time until the number of
trustees is eight. Thereafter subject to the provisions of the 1940 Act, the
remaining trustees shall appoint a person to fill the vacancy.

Following the Meeting, the VK Funds do not contemplate holding regular
meetings of shareholders to elect trustees or otherwise. When an investment
company does not hold regular annual meetings, it is the position of the staff
of the SEC and a policy of each VK Trust that holders of record of two-thirds of
the outstanding shares of such VK Trust may file a declaration in writing or may
vote at a special meeting for the purpose of removing a trustee. The VK Board
will be required to promptly call a meeting of shareholders for the purpose of
voting upon the question of removal of any trustee when requested in writing to
do so by the record holders of not less than 10% of the total outstanding shares
of such VK Trust. In addition, the VK Board will comply with the requirements of
Section 16(c) of the 1940 Act with respect to communications with shareholders.

With respect to each VK Trust, each nominee named below has agreed to serve
as a trustee if elected; however, should any nominee(s) become unable or
unwilling to accept nomination or election, the proxies will be voted for one or
more substitute nominee(s) designated by the present VK Board.

The following sets forth the names, ages, principal occupations and other
information respecting the trustee nominees.

PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- --------------------------------- -----------------------------------------------------------

J. Miles Branagan................ Co-founder, Chairman, Chief Executive Officer and President
2300 205th Street of MDT Corporation, a company which develops, manufactures,
Torrance, CA 90501 markets and services medical and scientific equipment. A
Age 62: director or trustee of each of the AC Funds.
Richard E. Caruso................ Chairman and Chief Executive Officer, Integra Life Sciences
Two Radnor Station, Suite 314 Corporation, a firm specializing in biotechnology and life
King of Prussia Road sciences. Trustee of Susquehanna University. Trustee,
Radnor, PA 19087 Susquehanna University Trustee and First Vice President,
Age: 52 The Baum School of Art; Founder and Director of Uncommon
Individual Foundation, a youth development foundation.
Director of International Board of Business Performance
Group, London School of Economics. A director or trustee of
each of the AC Funds. Prior to [ ], Director of
First Sterling Bank, and prior to [ ], Executive
Vice President and a director of LFC Financial Corporation,
a provider of leasing financing.
Philip P. Gaughan................ Trustee of each of the VK Funds. Prior to February, 1989,
9615 Torresdale Avenue Managing Director and Manager of Municipal Bond Department,
Philadelphia, PA 19114 W. H. Newbold's Sons & Co.
Age: 66

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25

PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- --------------------------------- -----------------------------------------------------------

Roger Hilsman.................... A director or trustee of each of the AC Funds. Professor of
251-1 Hamburg Cove Government and International Affairs Emeritus, Columbia
Lyme, CT 06371 University.
Age: 75
R. Craig Kennedy................. Advisor to the Dennis Trading Group Inc. Prior to 1993,
1341 E. 50th Street President and Chief Executive Officer, Director and member
Chicago, IL 60615 of the Investment Committee of the Joyce Foundation, a
Age: 43 private foundation. Trustee of each of the VK Funds.
Dennis J. McDonnell*............. President, Chief Operating Officer and a Director of the VK
One Parkview Plaza Adviser, the AC Adviser and Van Kampen American Capital
Oakbrook Terrace, IL 60181 Management, Inc. Director of VK/AC Holding, Inc. and Van
Age: 53 Kampen American Capital. Director of McCarthy, Crisanti &
Maffei, Inc. and Chairman and a Director of MCM Asia
Pacific Company, Ltd. President, Chief Executive Officer
and a Trustee of each of the VK Funds. He is also a trustee
of the Van Kampen Merritt Series Trust and closed-end
investment companies advised by the VK Adviser. Prior to
December, 1991, Senior Vice President of Van Kampen Merritt
Inc.
Donald C. Miller................. Chairman and Trustee of each of the VK Funds. Prior to
415 North Adams 1992, Director of Royal Group, Inc., a company in insurance
Hinsdale, IL 60515 related businesses.
Age: 75
Jack E. Nelson................... President of Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company. Trustee of each of the VK
Winter Park, FL 32789 Funds.
Age: 59
Don G. Powell*................... President, Chief Executive Officer and a Director of VKAC
2800 Post Oak Blvd. Holding, Inc. and Van Kampen American Capital and Chairman,
Houston, TX 77056 Chief Executive Officer and a Director of Van Kampen
Age: 55 American Capital Distributors, Inc., the VK Adviser, Van
Kampen American Capital Management, Inc. and VCJ Inc.;
Director, President and Chief Executive Officer of Van
Kampen American Capital Advisers, Inc., the AC Adviser and
Van Kampen American Capital Exchange Corp.; Director and
Executive Vice President of Advantage Capital Corporation,
ACCESS Investor Services, Inc., Van Kampen American Capital
Services, Inc. and Van Kampen American Capital Trust
Company; Director of McCarthy, Crisanti & Maffei, Inc.;
Director, Trustee or Managing General Partner of each of
the AC Funds and other open-end investment companies and
closed-end investment companies advised by the AC Adviser.
He is also Chairman and a Trustee of the Van Kampen Merritt
Series Trust and closed-end investment companies advised by
the VK Adviser.

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26

PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- --------------------------------- -----------------------------------------------------------

David Rees....................... Contributing Columnist and prior to 1995 Senior Editor of
1601 Country Club Drive Los Angeles Business Journal. A director or trustee of each
Glendale, CA 91208 of the AC Funds. A director of Source Capital, Inc., a
Age: 71 closed-end investment company unaffiliated with Van Kampen
American Capital, a director and the second vice president
of International Institute of Los Angeles.
Jerome L. Robinson*.............. President of Robinson Technical Products Corporation, a
115 River Road processor and distributor of welding alloys, supplies and
Edgewater, NJ 07020 equipment. Director of Pacesetter Software, a software
Age: 72 programming company specializing in white collar
productivity. Director and majority shareholder Hilarius
Haarlem B.V., Haarlem, Holland, a manufacturer and
distributor of welding alloys. Trustee of each of the VK
Funds.
Lawrence J. Sheehan*............. Of Counsel to and formerly Partner (from 1969 to 1994) of
1999 Avenue of the Stars the law firm of O'Melveny & Myers, legal counsel to the AC
Suite 700 Funds. A director or trustee of each of the AC Funds.
Los Angeles, CA 90067
Age: 62
Fernando Sisto................... George M. Bond Professor and, prior to [ ],
Stevens Institute of Technology Dean of Graduate School and Chairman, Department of
Castle Point Station Mechanical Engineering, Stevens Institute of Technology.
Hoboken, NJ 07030 Director of Dynalysis of Princeton, [a firm engaged in]
Age: 70 engineering research. Chairman of the Board and a director
or trustee of each of the AC Funds.
Wayne W. Whalen*................. Partner in the law firm of Skadden, Arps, Slate, Meagher &
333 West Wacker Drive Flom, counsel to the Fund. Trustee of each of the VK Funds.
Chicago, IL 60606 He is also a trustee to the Van Kampen Merritt Series Trust
Age: 55 and closed-end investment companies advised by the VK
Adviser.
William S. Woodside.............. Vice Chairman of the Board of Sky Chefs, Inc., a caterer of
712 Fifth Avenue airline food. Prior to [ ], Director of
40th Floor Primerica Corporation (currently known as Travelers). Prior
New York, NY 10019 to [ ], Director of James River Corporation, [a
Age: 73 producer of] paper products. Trustee, and prior to
[ ] President, of Whitney Museum of American
Art. Chairman of Institute for Educational Leadership,
Inc., Board of Visitors, Graduate School of The City
University of New York, Academy of Political Science.
[Member of?] Committee for Economic Development. Director
of Public Education Fund Network, Fund for New York City
Public Education. Trustee of Barnard College. Member of
Dean's Council, Harvard School of Public Health. [Member
of?] Mental Health Task Force, Carter Center. A director or
trustee of each of the AC Funds.

- ---------------
* Such nominees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Messrs. Powell and McDonnell are interested persons of the
VK Adviser and each VK Fund by reason of their positions with the VK Adviser.
Mr. Robinson is an interested person of the Tax Free Money Fund by reason of
his ownership of over 5% of the Shares of such VK Fund, but is not an
interested person of any other VK Fund. Mr. Sheehan is an interested person of
the VK Adviser and each VK Fund by reason of his

20
27

firm having acted as legal counsel to the VK Adviser. Mr. Whalen is an
interested person of each VK Fund by reason of his firm acting as legal counsel
for such VK Funds.

As of May 26, 1995, certain nominees owned, directly or beneficially, the
number of Class A Shares of each Fund as set forth in the table below. As of May
26, 1995, no nominee owned any Class B Shares or Class C Shares of any VK Fund.

[REDUCE TABLE TO LIST ONLY THOSE FUNDS AND THOSE NOMINEES APPLICABLE]

CLASS A SHARES OWNED(1)

FUND NAME MR. BRANAGAN MR. CARUSO MR. GAUGHAN MR. HILSMAN MR. KENNEDY MR. MCDONNELL MR. MILLER
- ------------------------------- ------------ ---------- ----------- ----------- ----------- ------------- ----------

Adjustable Rate Fund...........
Balanced Fund..................
California Fund................
Emerging Markets Fund..........
Florida Fund...................
Global Fund....................
Government Fund................
Growth and Income Fund.........
High Yield Fund................
Limited Term Municipal Fund....
Money Market Fund..............
Municipal Income Fund..........
New Jersey Fund................
New York Fund..................
Pennsylvania Fund..............
Strategic Income Fund..........
Tax Free High Income Fund......
Tax Free Money Fund............
Utility Fund...................

FUND NAME MR. NELSON MR. POWELL MR. REES MR. ROBINSON MR. SHEEHAN MR. SISTO MR. WHALEN MR. WOODSIDE
- ----------------------- ---------- ---------- --------- ------------ ----------- --------- ---------- ------------

Adjustable Rate Fund...
Balanced Fund..........
California Fund........
Emerging Markets
Fund.................
Florida Fund...........
Global Fund............
Government Fund........
Growth and Income
Fund.................
High Yield Fund........
Limited Term Municipal
Fund.................
Money Market Fund......
Municipal Income
Fund.................
New Jersey Fund........
New York Fund..........
Pennsylvania Fund......
Strategic Income
Fund.................
Tax Free High Income
Fund.................
Tax Free Money Fund....
Utility Fund...........

- ---------------
(1)Ownership of the trustees and officers as a group constitutes less than 1% of
the outstanding Shares of the respective VK Fund, except for the Tax Free
Money Fund where Mr. Robinson owns shares, or % of such fund's
outstanding shares.

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28

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

During each VK Fund's respective fiscal year ended in 1994, the VK Board of
each VK Fund held [four] meetings. All of the Trustees of each VK Fund,
including former trustee John C. Merritt who resigned from the board of each
fund on January 28, 1995, attended at least 75% of the meetings of the
respective VK Board and all committee meetings thereof of which such trustee was
a member during such fiscal year. During each VK Fund's 1994 fiscal year, the VK
Fund had no standing committees with the exception of an audit committee. Mr.
Merritt, who had been a trustee and chairman of each of the VK Funds, Van Kampen
Merritt Series Trust and closed-end investment companies advised by the VK
Adviser, also resigned as the chairman of the board, chief executive officer and
a director of the VK Adviser, Van Kampen Merritt Management Inc., Van Kampen
Merritt Inc., and chairman, chief executive officer, president, chief operating
officer and director of The Van Kampen Merritt Companies, Inc. and VKM Holding,
Inc. Mr. Merritts' resignation from these Van Kampen Merritt-related entities
was related to the Acquisition. At or subsequent to the closing of the
Acquisition, Mr. Merritt exercised options and sold approximately 49,740 shares
of the common stock of Van Kampen American Capital at a purchase price of $200
per share. In addition, Mr. Merritt has a severance agreement with Van Kampen
American Capital entitling him to approximately $550,000 payable during 1995.
Mr. Merritt was also a Director of McCarthy, Crisanti & Maffei, Inc., MCM Asia
Pacific Company, Limited, a limited partner of R.L. Renck & Co., Inc., and Vice
Chairman of the Municipal Securities Rulemaking Board.

As of the end of each VK Fund's 1994 fiscal year, each VK Fund's audit
committee consisted of Messrs. Kennedy, Gaughan, Miller and Nelson
(collectively, the "Disinterested Trustees"). The audit committee makes
recommendations to the VK Board concerning the selection of the VK Fund's
independent public accountants, reviews with such accountants the scope and
results of the VK Fund's annual audit and considers any comments that the
accountants may have regarding the VK Fund's financial statements or books of
account. The Disinterested Trustees also are responsible for the annual review
of each VK Fund's investment advisory agreement and any other matters requiring
the approval of the Disinterested Trustees under the 1940 Act. During each VK
Fund's 1994 fiscal year, the audit committee of each VK Fund held two meetings.

The VK Funds anticipate that, following the Meeting, the combined board
will have two standing committees: an Audit Committee and a Brokerage Review
Committee. The Audit Committee makes recommendations to the combined board
concerning the selection of independent public accountants, reviews with such
accountants the scope and results of the annual audit and considers any comments
which the accountants may have regarding the financial statements or books of
account. The Brokerage Review Committee monitors the respective adviser's
brokerage practices. Each trustee not affiliated with the VK Funds or the AC
Funds will serve on one of the committees, but no trustee shall serve on more
than one committee and not receive additional compensation for serving on a
committee.

The Disinterested Trustees of each VK Fund are required to select and
nominate Disinterested Trustees and are prepared to review nominations from
shareholders to fill any vacancies in trusteeships. Nominations from
shareholders should be in writing and addressed to the Disinterested Trustees at
the respective VK Trust's office. The Disinterested Trustees of each VK Trust
expect to be able to identify from their own resources an ample number of
qualified candidates.

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29

The compensation of trustees who are affiliated persons (as defined in the
1940 Act) of the VK Adviser, the Distributor or Van Kampen American Capital is
paid by the respective entity. Each of the VK Funds pays compensation to all
other trustees. During each VK Fund's 1994 fiscal year, each VK Fund paid
trustees who were not affiliated persons of the VK Adviser, the Distributor or
Van Kampen American Capital, $2,500 per year, and $250 per meeting of the VK
Board, plus expenses. Members of the Audit Committee received $250 for each
meeting of such committee. The VK Funds anticipate that, after the Meeting, each
VK Fund will pay trustees who are not affiliated persons of the VK Adviser, the
Distributor, or Van Kampen American Capital $2,500 per year, and $125 per
regularly quarterly meeting of the combined board, plus expenses. No additional
fees are proposed to be paid for special meetings, committee meetings or the
chairmanship of the board. Under each VK Fund's retirement plan, trustees who
are not affiliated with the Adviser, the Distributor or Van Kampen American
Capital, have at least ten years of service and retire at or after attaining the
age of 60 are eligible to receive a retirement benefit equal to [$2,500] per
year for each of the ten years following such trustee's retirement. Under
certain conditions, reduced benefits are available for early retirement. Under
each VK Fund's deferred compensation plan, a trustee who is not affiliated with
the VK Adviser, the Distributor or Van Kampen American Capital can elect to
defer receipt of all or a portion of the trustee's fees earned by such trustee
until such trustee's retirement. The deferred compensation earns a rate of
return determined by reference to the respective VK Fund's return or the return
of other funds advised by the VK Adviser as selected by the trustee. To the
extent permitted by the 1940 Act, each VK Fund may invest in securities of other
funds in order to match the deferred compensation obligation. The deferred
compensation plan is not funded and obligations thereunder represent general
unsecured claims against the general assets of the respective VK Fund.

The following table provides summary compensation information for each of
the incumbent trustees of each VK Fund:

1994 COMPENSATION TABLE(1)

PENSION OR
RETIREMENT
BENEFITS ACCRUAL
AGGREGATE PER FUND ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION AS PART BENEFITS FROM THE FUND
FROM EACH OF FUND PER FUND UPON COMPLEX PAID
TRUSTEE VK FUND EXPENSES(2) RETIREMENT(3) TO TRUSTEES(4)
- ----------------------------------- ------------ ---------------- ---------------- ------------------

R. Craig Kennedy................... (5) $0 2,500 $62,362
Philip P. Gaughan.................. (5) $0 2,500 $63,250
Donald C. Miller................... (5) $0 2,500 $62,178
Jack E. Nelson..................... (5) $0 2,500 $62,362
Jerome L. Robinson................. (5) $0 2,500 $58,475
Wayne W. Whalen.................... (5) $0 2,500 $49,875

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

(1)Messrs. Merritt and McDonnell, members of the VK Board during fiscal year
1994, were affiliated person of the VK Adviser and did not receive
compensation or retirement benefits directly from the VK Funds.

(2)The Retirement Plan commenced as of August 1, 1994 for each of the VK Funds.
As of the end of each VK Fund's 1994 fiscal year, no amounts had been accrued
for retirement benefits because such amounts were either zero or considered
to be immaterial to the net assets of such VK Fund at such time. During each
VK

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30

Fund's 1995 fiscal year, each VK Fund will accrue amounts for retirement
benefits and include an amount, if any, for such VK Fund's 1994 fiscal year.

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

(4)Prior to the Consolidation, the Fund Complex consists of the 20 VK Funds. The
amounts shown in this column are accumulated from the Aggregate Compensation
of such funds in the Fund Complex during the calendar year ended December 31,
1994. The VK Adviser also serves as investment adviser for other investment
companies; however, with the exception of Messrs. McDonnell and Whalen, the
trustees of the VK Board are not trustees of such investment companies.
Combining the Fund Complex with the other investment companies advised by the
VK Adviser, Mr. Whalen received Total Compensation of $161,850 during the
calendar year ended December 31, 1994.

(5)The Aggregate Compensation from each individual VK Fund during its 1994
fiscal year is shown in Appendix A. Beginning in September 1994, each
Trustee, except Mr. Whalen, began deferring his aggregate compensation paid
by the VK Funds. The total amount of deferred compensation (including
interest) accrued with respect to each trustee from the VK Fund Complex as of
December 31, 1994 is as follows: Mr. Kennedy $14,737; Mr. Miller $14,553; Mr.
Nelson $14,737; and Mr. Robinson $13,725. Compensation deferred by a trustee
is invested in one or more VK Funds until it is distributed to the trustee.

The following table provides pro forma compensation information assuming
the election of each nominee to the VK Board and the AC Board:

PRO FORMA COMPENSATION TABLE(1)

PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUAL ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION PER FUND BENEFITS FROM THE FUND
FROM EACH AS PART OF FUND PER FUND UPON COMPLEX PAID
TRUSTEE FUND EXPENSES(2) RETIREMENT(3) TO TRUSTEES(4)
- ------------------------------------ ------------ ---------------- ---------------- ------------------

J. Miles Branagan................... (5) [$84,000]
Dr. Richard E. Caruso............... (5) [$84,000]
Philip P. Gaughan................... (5) [$84,000]
Dr. Roger Hilsman................... (5) [$84,000]
R. Craig Kennedy.................... (5) [$84,000]
Donald C. Miller.................... (5) [$84,000]
Jack E. Nelson...................... (5) [$84,000]
David Rees.......................... (5) [$84,000]
Jerome L. Robinson.................. (5) [$84,000]
Lawrence J. Sheehan................. (5) [$84,000]
Dr. Fernando Sisto.................. (5) [$84,000]
Wayne W. Whalen..................... (5) [$84,000]
William S. Woodside................. (5) [$84,000]

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

(1)Messrs. McDonnell and Powell, members of the combined board, are affiliated
persons of the VK Adviser and the AC Adviser and will not receive
compensation or retirement benefits directly from the VK Fund or AC Funds.

(2)The anticipated Pension or Retirement Benefits Accrual As Part of Fund
Expenses for each individual VK Fund during its next full fiscal year is
shown in Appendix C.

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

(4)Following the Consolidation, the combined Fund Complex will consist of 49
mutual funds advised by the VK Adviser or the AC Adviser that have the same
members on such funds' boards of trustees who are not affiliated with the VK
Adviser or the AC Adviser. The amounts shown in this column are accumulated
from the anticipated Aggregate Compensation of the funds in the combined Fund
Complex during such funds' next full calendar year after the date of this
Joint Proxy. The VK Adviser and the AC Adviser also serve as investment
adviser for other investment companies; however, with the exception of
Messrs. McDonnell, Powell and Whalen, the members of the combined board of
trustees will not be trustees of such investment companies. Combining the
Fund Complex with the other investment companies advised by the VK Adviser
and the AC Adviser, it is anticipated that Mr. Whalen will receive Total
Compensation of $ during such funds' next full calendar year after
the date of this Joint Proxy Statement.

(5)The anticipated Aggregate Compensation from each individual fund during its
next full fiscal year is shown in Appendix B. [Each Trustee will defer his
aggregate compensation paid by the funds, except that Mr. Gaughan, Mr. Whalen
and will defer $ , $ and , respectively.]

SHAREHOLDER APPROVAL

The affirmative vote of a plurality of the Shares of a VK Trust present in
person or by proxy is required to elect the nominees to such VK Trust. THE
BOARDS OF TRUSTEES OF EACH VK TRUST RECOMMEND A VOTE IN FAVOR OF ALL OF THE
NOMINEES.

PROPOSAL 4. APPROVAL OF CHANGE IN THE GLOBAL FUND'S FUNDAMENTAL
INVESTMENT POLICY WITH RESPECT TO CONCENTRATION OF INVESTMENTS

The Global Fund, at its inception, designated as fundamental its policy of
concentrating its investment in the banking industry. Specifically, the Global
Fund's prospectus, dated April 28, 1995, states the following:

In normal circumstances, and as a matter of fundamental policy, the Global
Fund "concentrates" at least 25% of its assets in obligations of or issued
by domestic and foreign companies engaged in the banking
industry . . . . However, for temporary purposes when, as determined by the
Adviser, business or financial conditions warrant, the Global Fund may
invest less than 25% of its assets in such industry.

Several significant changes have occurred in the banking industry since the
Global Fund adopted its fundamental policy with respect to concentration.
Competition in the industry for debt products has

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32

substantially narrowed profit margins from traditional lending activities.
Moreover, the returns from traditional lending activities have also lagged
behind the rising costs of funds due to recent interest rate increases
engineered by the Federal Reserve Board of Governors.

In light of such changes, the VK Adviser determined that business and
financial conditions warrant investing less than 25% of the Global Fund's assets
in the banking industry on a temporary basis and, accordingly, the Global Fund
currently invests less than 25% of its assets in the banking industry. The VK
Adviser now believes that the best interest of shareholders of the Global Fund
would be served if the Global Fund adopted a fundamental policy of not investing
more than 25% of its assets in the banking industry. The adoption of such a
policy would permit the Global Fund to effectively reduce its exposure to the
risks associated with the banking industry and also enable the Global Fund to
swiftly react to other market opportunities, but would limit the Global Fund's
ability to invest in the banking industry to 25% of its assets should investment
opportunities in the banking industry improve.

At a meeting of the VK Board on April 7, 1995, the VK Adviser recommended
that the Global Fund amend its fundamental policy with respect to concentration
such that the Global Fund would no longer be permitted to invest more than 25%
of its assets in the banking industry or in any other industry. Section 13(a) of
the 1940 Act states that unless authorized by a vote of a "majority of the
outstanding voting securities", an investment company may not deviate from,
among other things, its policy in respect to concentration of investments in a
particular industry, as recited in its prospectus. Although the prospectus of
the Global Fund allows it to invest less than 25% of its assets in the banking
industry, such level of investment is only for temporary purposes. In order to
maximize flexibility with respect the management of the Global Fund's portfolio,
and based on the recommendation of the VK Adviser, the VK Board unanimously
voted to seek authorization from shareholders to eliminate the Global Fund's
fundamental policy regarding concentration in the banking industry.

SHAREHOLDER APPROVAL

The affirmative vote of a "majority of the outstanding voting securities"
of the Global Fund is required for approval of this Proposal 4. The affirmative
vote of a "majority of the outstanding voting securities" is defined in the 1940
Act as the lesser of (i) 67% or more of the voting securities entitled to vote
thereon present in person or by proxy at a meeting, if holders of more than 50%
of the outstanding voting securities are present in person or represented by
proxy at such meeting, or (ii) more than 50% of the outstanding voting
securities of a fund. The holders of Shares of the Global Fund will vote
together as a single class for this Proposal 4. THE BOARD OF TRUSTEES OF THE
GLOBAL FUND RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL 4.

PROPOSAL 5: RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

The VK Board, including a majority of the Disinterested Trustees, have
selected the firm of KPMG Peat Marwick LLP, independent certified public
accountants, to examine the financial statements for the current fiscal year of
each VK Fund. Each VK Fund knows of no direct or indirect financial interest of
such firm in such VK Fund. Such appointment is subject to ratification or
rejection by the shareholders of each VK Fund. Unless a contrary specification
is made, the accompanying proxy will be voted in favor of ratifying the
selection of such accountants. It is expected that KPMG Peat Marwick LLP will
also act as independent

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certified public accountants for VK/AC Holding, Inc., Van Kampen American
Capital, the VK Adviser and the Distributor.

Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting and will be available to respond to questions from shareholders and will
have the opportunity to make a statement if they so desire.

SHAREHOLDER APPROVAL

The shareholders of each VK Fund, voting with respect to such VK Fund as a
single class, are entitled to vote on this issue. An affirmative vote of a
majority of the Shares of a VK Fund present in person or by proxy and voting is
required to ratify the selection of the accountants for such VK Fund. THE BOARDS
OF TRUSTEES OF EACH VK FUND RECOMMEND A VOTE "FOR" RATIFICATION OF KPMG PEAT
MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE CURRENT FISCAL YEAR OF
EACH VK FUND.

OFFICERS OF THE VK FUNDS

The following table sets forth certain information concerning the principal
executive officers of each of the VK Funds (other than information concerning
Messrs. McDonnell and Powell, which is set forth above), each of whom holds the
same office with each of the VK Funds.

The officers of the VK Funds serve for one year or until their respective
successors are chosen and qualified. The officers receive no compensation from
the VK Funds but are also officers or employees of the VK Adviser, the
Distributor or Van Kampen American Capital and receive compensation in such
capacities. The address of each of the following persons is One Parkview Plaza,
Oakbrook Terrace, Illinois 60181.

POSITIONS AND OTHER PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH EACH VK FUND IN PAST 5 YEARS
- ------------------------- ---------------------------- -------------------------------------

Peter W. Hegel........... Vice President Senior Vice President and Portfolio
Age: 38 Manager of the VK Adviser and Vice
President of closed-end investment
companies advised by the VK
Adviser.

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

27
34

POSITIONS AND OTHER PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH EACH VK FUND IN PAST 5 YEARS
- ------------------------- ---------------------------- -------------------------------------

Edward C. Wood III....... Vice President, Treasurer First Vice President of the VK
Age: 39 and Chief Financial and Adviser. Vice President, Treasurer
Accounting Officer and Chief Financial and Accounting
Officer of closed-end investment
companies advised by the VK
Adviser.

Nicholas Dalmaso......... Assistant Secretary Attorney, Van Kampen American
Age: 30 Capital. Prior to May, 1992, attorney
for Cantwell & Cantwell; a Chicago
law firm.

Scott E. Martin.......... Assistant Secretary First Vice President, Deputy General
Age: 38 Counsel and Assistant Secretary of
Van Kampen American Capital. First
Vice President, Deputy General
Counsel and Secretary of the VK
Adviser and the Distributor. [Other
offices]. Assistant Secretary of
closed-end investment companies
advised by the VK Adviser.

Weston B. Wetherell...... Assistant Secretary Vice President, Associate General
Age: 38 Counsel and Assistant Secretary of
Van Kampen American Capital, the VK
Adviser and the Distributor and an
Assistant Secretary of McCarthy,
Crisanti & Maffei, Inc. Assistant
Secretary of closed-end investment
companies advised by the VK
Adviser.

John L. Sullivan......... Controller Vice President of the VK Adviser.
Age: 39 Controller of closed-end investment
companies advised by the VK
Adviser.

Stephen M. Hill.......... Assistant Treasurer Assistant Vice President of the VK
Age: 30 Adviser. Assistant Treasurer of
closed-end investment companies
advised by the VK Adviser.

28
35

PROXY SOLICITATION EXPENSES

Van Kampen American Capital will initially bear the expense of preparing,
printing and mailing the enclosed form of proxy, the accompanying Notice, this
Proxy Statement and all other related costs in connection with the solicitation
of proxies with respect to the Consolidation, which shall include reimbursement
to banks, brokers and others for their reasonable expenses in forwarding proxy
solicitation material to the beneficial owners of the Shares of each VK Fund
(the "Proxy Expense"). During the five-year period ending on the fifth
anniversary of the consummation of the Consolidation, if a VK Fund realizes a
benefit resulting from the Consolidation, the VK Fund will reimburse Van Kampen
American Capital in an amount equal to the lesser of (i) the amount of such
benefit or (ii) such VK Fund's pro rata share of the Proxy Expense. In no event
shall the unreimbursed Proxy Expense born by Van Kampen American Capital accrue
interest or bear any other type of carrying charge. No VK Fund shall reimburse
Van Kampen American Capital from any benefit received after the fifth
anniversary of the consummation of the Consolidation.

In order to obtain the necessary quorum at the Meeting, additional
solicitation may be made by mail, telephone, telegraph or personal interview by
representatives of each of the VK Funds, the VK Adviser or Van Kampen American
Capital, or by dealers or their representatives or by Applied Mailing Systems, a
solicitation firm located in [ ].

SHAREHOLDER PROPOSALS

As a general matter, each VK Fund does not hold regular annual meetings of
shareholders. Any shareholder who wishes to submit proposals for consideration
at a meeting of such shareholder's VK Fund should send such proposal to the
respective VK Fund at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. To
be considered for presentation at a shareholders' meeting, rules promulgated by
the SEC require that, among other things, a shareholder's proposal must be
received at the offices of such VK Fund a reasonable time before a solicitation
is made. Timely submission of a proposal does not necessarily mean that such
proposal will be included.

29
36

GENERAL

Management of each VK Fund does not intend to present and does not have
reason to believe that others will present any other items of business at the
Meeting. However, if other matters are properly presented to the Meeting for a
vote, the proxies will be voted upon such matters in accordance with the
judgment of the persons acting under the proxies.

A list of shareholders of each VK Fund entitled to be present and vote at
the Meeting will be available at the offices of the respective VK Fund, One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, for inspection by any
shareholder during regular business hours for ten days prior to the date of the
Meeting.

Failure of a quorum to be present at the Meeting for any VK Fund will
necessitate adjournment and will subject such VK Fund to additional expense.

IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.

RONALD A. NYBERG, Vice President and
Secretary

June 2, 1995

30
37

APPENDIX A

1994 AGGREGATE COMPENSATION FROM EACH VK FUND

The following schedule sets forth the aggregate compensation paid to each
incumbent trustee by each VK Fund during its respective 1994 fiscal year.

TRUSTEE
---------------------------------------------------------------
VK FUND NAME GAUGHAN KENNEDY MILLER NELSON ROBINSON WHALEN
- -------------------------------------------------------- -------- -------- -------- -------- -------- --------

Adjustable Rate Fund....................................
Balanced Fund...........................................
California Fund.........................................
Emerging Markets Fund...................................
Florida Fund............................................
Global Fund.............................................
Government Fund.........................................
Growth and Income Fund..................................
High Yield Fund.........................................
Insured Fund............................................
Limited Term Municipal Fund.............................
Money Market Fund.......................................
Municipal Income Fund...................................
New Jersey Fund.........................................
New York Fund...........................................
Pennsylvania Fund.......................................
Strategic Income Fund...................................
Tax Free High Income Fund...............................
Tax Free Money Fund.....................................
Utility Fund............................................

31
38

APPENDIX B

PRO FORMA AGGREGATE COMPENSATION FROM EACH VK FUND
AND AC FUND

The following schedule sets forth the pro forma aggregate compensation
anticipated to be paid to each nominee by each VK Fund and AC Fund during its
next full 1995 fiscal year after the Consolidation.

TRUSTEE
--------------------------------------------------------------------------------------------------------
FUND BRANAGAN CARUSO GAUGHAN HILSMAN KENNEDY MILLER NELSON POWELL REES ROBINSON SHEEHAN
- --------------------------- -------- ------ ------- ------- ------- ------ ------ ------ ------ -------- -------

Adjustable Rate Fund.......
Balanced Fund..............
California Fund............
Emerging Markets Fund......
Florida Fund...............
Global Fund................
Government Fund............
Growth and Income Fund.....
High Yield Fund............
Insured Fund...............
Limited Term Municipal
Fund.....................
Money Market Fund..........
Municipal Income Fund......
New Jersey Fund............
New York Fund..............
Pennsylvania Fund..........
Strategic Income Fund......
Tax Free Money Fund........
Tax Free High Income
Fund.....................
Utility Fund...............
[Addition of American
Capital Funds to Follow]

TRUSTEE
--------------------------
FUND SISTO WHALEN WOODSIDE
- --------------------------- ------ ------ --------

32
39

APPENDIX C

PRO FORMA PENSION OR RETIREMENT BENEFITS ACCRUED AS PART OF VK FUND
AND AC FUND EXPENSES

The following schedule sets forth the pro forma pension or retirement
benefits anticipated to be accrued for each nominee by each VK Fund and AC Fund
during its next full 1995 fiscal year after the Consolidation.

TRUSTEE
----------------------------------------------------------------------------------------------
FUND BRANAGAN CARUSO GAUGHAN HILSMAN KENNEDY MILLER NELSON POWELL REES ROBINSON SHEEHAN
- ------------------------------------- -------- ------ ------- ------- ------- ------ ------ ------ ------ -------- -------

Adjustable Rate Fund.................
Balanced Fund........................
California Fund......................
Emerging Markets Fund................
Florida Fund.........................
Global Fund..........................
Government Fund......................
Growth and Income Fund...............
High Yield Fund......................
Insured Fund.........................
Limited Term Municipal Fund..........
Money Market Fund....................
Municipal Income Fund................
New Jersey Fund......................
New York Fund........................
Pennsylvania Fund....................
Strategic Income Fund................
Tax Free High Income Fund............
Tax Free Money Fund..................
Utility Fund.........................
[Addition of American Capital Funds
to Follow]

TRUSTEE
------------------------
FUND SISTO WHALEN WOODSIDE
- ------------------------------------- ------ ------ --------

33
40

APPENDIX D

AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION

AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated as of ,
1995 (the "Agreement") between Van Kampen Merritt a
Massachusetts business trust (the "Van Kampen Trust"), on behalf of its
sub-trust, Van Kampen Merritt (the "Van Kampen Fund"), and Van
Kampen Merritt , a Delaware business trust (the "New Trust"), on
behalf of its series, Van Kampen Merritt Fund (the "New
Fund").

WHEREAS the Van Kampen Fund is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and

WHEREAS the Van Kampen Trust is authorized to issue an unlimited number of
shares of beneficial interest without par value;

WHEREAS the New Trust was organized pursuant to an Agreement and
Declaration of Trust dated May , 1995, and is presently authorized to
establish and designate separate series thereof which may issue shares of
beneficial interest, without par value, including shares of a series such as the
New Fund;

WHEREAS, for good and sufficient business reasons the parties desire to
change the place of organization of the Van Kampen Trust and Van Kampen Fund;
and

WHEREAS, the parties intend that this transaction (the "Reorganization")
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").

NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:

1. Plan of Reorganization. The Van Kampen Fund shall, prior to the
Effective Time of the Reorganization, as defined below, transfer all of its
business and assets and assign all of its liabilities to the New Fund, and the
New Fund shall acquire all such business and assets and shall assume all such
liabilities of the Van Kampen Fund in exchange for delivery to the Van Kampen
Fund of a number of shares of the New Fund (both full and fractional) equivalent
to the number of shares of the Van Kampen Fund outstanding immediately prior to
the Effective Time of the Reorganization. All debts, liabilities, obligations
and duties of the Van Kampen Fund, to the extent that they exist at or after the
Effective Time of the Reorganization, shall after the Effective Time of the
Reorganization attach to the New Fund and may be enforced against the New Fund
to the same extent as if the same had been incurred by the New Fund.

2. Liquidation and Dissolution of the Van Kampen Fund. At the Effective
Time of the Reorganization, the Van Kampen Fund will liquidate and the shares of
the New Fund (both full and fractional) received by the Van Kampen Fund will be
distributed to the shareholders of the Van Kampen Fund in exchange for their
shares of the Van Kampen Fund, each shareholder to receive a number of shares of
the New Fund equal to the number of shares of the Van Kampen Fund held by such
person. Such liquidation and distribution will be accompanied by the
establishment of an open account on the share records of the New Fund in the
name of each shareholder of the Van Kampen Fund and representing the respective
pro rata number of shares of the New Fund due such shareholder. Certificates for
shares of the Van Kampen Fund issued prior to the Reorganization shall represent
outstanding shares of the New Fund after the Effective Time of the

D-1
41

Reorganization. As soon as practicable after the Effective Time of the
Reorganization, the Van Kampen Trust shall file with the Trust Division of the
Secretary of State of the Commonwealth of Massachusetts (the "Division") a copy
of the resolutions of its Trustees to terminate the Van Kampen Trust, in such
form as shall be satisfactory to the Division, and which resolutions shall
include the exact date of the Van Kampen Trust's termination and shall take, in
accordance with Massachusetts law, all other steps as shall be necessary and
proper to effect a complete dissolution of the Van Kampen Trust and the Van
Kampen Fund.

3. Issued Share. Prior to the Effective Time of the Reorganization and
after the Van Kampen Fund has taken the actions authorized by shareholders of
the Van Kampen Fund pursuant to Section 4(f) hereof, the single share of the New
Fund heretofore held by the Van Kampen Fund shall be redeemed and canceled by
the New Fund.

4. Conditions Precedent. The obligations of the Van Kampen Fund, the New
Trust and the New Fund to effectuate the Plan of Reorganization and Liquidation
hereunder shall be subject to the satisfaction of each of the following
conditions:

(a) Such authority, including "no-action" letters and orders from the
Securities and Exchange Commission (the "Commission") and state securities
commissions as may be necessary to permit the parties to carry out the
transactions contemplated by this Agreement, shall have been received.

(b) One or more post-effective amendments to the Registration
Statement of the Van Kampen Trust on Form N-1A under the Securities Act of
1933 and the 1940 Act, containing (i) such amendments to such Registration
Statement as are determined by the Board of Trustees of the Van Kampen
Trust to be necessary and appropriate as a result of the Plan of
Reorganization and Liquidation and (ii) the adoption by the New Trust of
such Registration Statement as its own, on behalf of the New Fund, shall
have been filed with the Commission and such post-effective amendment or
amendments to the Registration Statement shall have become effective, and
no stop-order suspending the effectiveness of the Registration Statement
shall have been issued, and no proceeding for that purpose shall have been
initiated or threatened by the Commission (and not withdrawn or
terminated).

(c) Each party shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom that both the New Trust and New Fund are duly formed and
existing under the laws of the State of Delaware and that the shares of the
New Trust to be issued pursuant to the terms of this Agreement have been
duly authorized, and, when issued and delivered as provided in this
Agreement, will have been validly issued, fully paid and nonassessable.

(d) Each party shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom to the effect that the reorganization contemplated by this
Agreement qualifies as a "reorganization" under Section 368(a)(1) of the
Code, and each party shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom to the effect that each series established pursuant
to the Agreement and Declaration of Trust of the New Trust will be treated
as a separate association taxable as a corporation for federal income tax
purposes which potentially qualifies as a regulated investment company
under the Code to the extent that the New Fund complies with the
requirements of Section 851 of the Code.

(e) The Shares of the New Fund shall have been duly qualified for
offering to the public in all states of the United States, the Commonwealth
of Puerto Rico and the District of Columbia (except where

D-2
42

such qualifications are not required) so as to permit the transfers
contemplated by this Agreement to be consummated.

(f) A vote approving this Agreement and the reorganization
contemplated hereby shall have been adopted by at least a majority of the
outstanding shares of beneficial interest of the Van Kampen Fund entitled
to vote at an annual or special meeting and the shareholders of the Van
Kampen Fund shall have voted at such meeting to direct the Van Kampen Fund
to vote, and the Fund shall have voted, as the sole shareholder of the New
Fund to:

(1) elect the Nominees set forth in the Proxy Statement delivered
to the shareholders of the Van Kampen Fund as Trustees of the Trust;

(2) approve an Investment Advisory Agreement (the "Advisory
Agreement") between the New Fund and Van Kampen American Capital
Investment Advisory Corp.;

(3) approve a Plan of Distribution under Rule 12b-1 with respect to
each class of shares of the New Fund (the "Plans of Distribution"); and

(4) ratify the selection of KPMG Peat Marwick LLP as the New Fund's
independent auditors for the fiscal year ending .

(g) The Trustees of the New Trust shall have taken the following
actions at a meeting duly called for such purposes:

(1) approval of the Advisory Agreement;

(2) approval of an Underwriting Agreement between the New Fund and
Van Kampen American Capital Distributors, Inc.;

(3) approval of the Plans of Distribution;

(4) selection of KPMG Peat Marwick LLP as the New Fund's
independent auditors for the fiscal year ending ;

(5) authorization of the issuance by the New Trust, prior to the
Effective Time of the Reorganization, of one share of the New Fund to
the Van Kampen Fund in consideration for the payment of [$15.00] for the
purpose of enabling the Van Kampen Fund to vote on the matters referred
to in paragraph (f) in this Section 4;

(6) submission of the matters referred to in paragraph (f) of this
Section 4 to the Van Kampen Fund as the sole shareholder of the New
Fund; and

(7) authorization of the issuance by the New Trust of shares of the
New Fund at the Effective Time of the Reorganization in exchange for the
assets of the Fund pursuant to the terms and provisions of this
Agreement.

At any time prior to the Effective Time of the Reorganization, any of the
foregoing conditions may be waived by the Board of Trustees of the Van Kampen
Trust if, in the judgment of such Board, such waiver will not have a material
adverse effect on the benefits intended under this Agreement to the shareholders
of the Van Kampen Fund.

D-3
43

5. Effective Time of the Reorganization. The exchange of the Van Kampen
Fund's business and assets for shares of the New Fund shall be effective as of
5:00 P.M., Delaware Time on , 1995 or at such other time and date as
fixed by the mutual consent of the parties (the "Effective Time of the
Reorganization").

6. Termination. The Trustees of the Van Kampen Trust and the Trustees of
the New Trust may terminate this Agreement and abandon the reorganization
contemplated hereby, notwithstanding approval thereof by the shareholders of the
Van Kampen Fund at any time prior to the Effective Time of the Reorganization,
if circumstances should develop that, in their judgment, make proceeding with
this Agreement inadvisable.

7. Limitation of Liability of the Trustees and Shareholders. Each of the
Van Kampen Trust and the New Trust acknowledge and agree that, pursuant to the
Agreement and Declaration of Trust of both the Van Kampen Trust and the New
Trust, shareholders, trustees, officers, employees or agents of the Trust shall
not personally be bound by or liable under this Agreement, nor shall resort be
had to their private property for the satisfaction of any obligation or claim
hereunder.

IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be
executed and delivered by their duly authorized officers as of the day and year
first written above.

---------------------------------
By:
---------------------------------
Its:
---------------------------------

D-4
44

FORM OF PROXY CARD FOR EACH VK FUND
EXCEPT PENNSYLVANIA FUND AND GLOBAL FUND:
----------------------------------------------------------------

VAN KAMPEN MERRITT
U.S. GOVERNMENT FUND
JOINT MEETING OF SHAREHOLDERS -- JULY 21, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of common shares of beneficial interest, without par
value, of VAN KAMPEN MERRITT U.S. GOVERNMENT FUND (the "Fund"), a sub-trust of
Van Kampen Merritt U.S. Government Trust (the "Trust"), a Massachusetts business
trust, hereby appoints Ronald A. Nyberg and Edward C. Wood, III, and each of
them, with full power of substitution and revocation, as proxies to represent
the undersigned at the Meeting of Shareholders to be held at the offices of Van
Kampen American Capital, Inc., One Parkview Plaza, Oakbrook Terrace, IL 60181,
on Friday, July 21, 1995 at 2:00 p.m., and at any and all adjournments thereof
(the "Meeting"), and thereat to vote all common shares of the Fund which the
undersigned would be entitled to vote, with all powers the undersigned would
possess if personally present, in accordance with the following instructions.

If more than one of the proxies, or their substitutes, are present at the
Meeting or any adjournment thereof, they jointly (or, if only one is present and
voting, then that one) shall have authority and may exercise all powers granted
hereby. This Proxy, when properly executed, will be voted in accordance with the
instructions marked hereon by the undersigned. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS DESCRIBED ABOVE AND IN THE
DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.

The undersigned hereby acknowledges receipt of the accompanying Notice of
Meeting and Proxy Statement for the meeting to be held on July 21, 1995.

PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.

Please sign this proxy exactly as your name appears on the books of the Fund. Joint owners should each sign personally.
Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a
majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her
title.

HAS YOUR ADDRESS CHANGED?

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

-----------------------------------
45

- ------- PLEASE MARK VOTES
X AS IN THIS EXAMPLE
- -------

For Against Abstain
1.) As to the proposal to approve ---- ---- ----
the Fund's reorganization and
conversion to a series of a ---- ---- ----
Delaware business trust:

2.) Not Applicable to the Fund.

For
For Withhold All
All Except
3.) Authority to vote to elect ---- ---- ----
fifteen trustees of the Trust to
serve until their respective ---- ---- ----
successors are duly elected and
qualified:
INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), CHECK THE
"FOR ALL EXCEPT" BOX AND STRIKE
A LINE THROUGH THE NAME(S) OF
SUCH NOMINEE(S) FOR WHICH YOU
WITHHOLD AUTHORITY. YOUR SHARES
WILL BE VOTED FOR THE REMAINING
NOMINEE(S).
J. Miles Branagan Don G. Powell
Dr. Richard E. Caruso David Rees
Philip P. Gaughan Jerome L. Robinson
Dr. Roger Hilsman Lawrence J. Sheehan
R. Craig Kennedy Dr. Fernando Sisto
Dennis J. McDonnell Wayne W. Whalen
Donald C. Miller William S. Woodside
Jack E. Nelson
Mark box at right if comments or ----
address change have been noted
on the reverse side of this ----
card.

4.) Not Applicable to the Fund.
For Against Abstain
5.) As to the proposal to ratify the ---- ---- ----
selection of KPMG Peat Marwick
LLP as independent public ---- ---- ----
accountants for the current
fiscal year of the Fund:

The undersigned hereby acknowledges receipt of the
accompanying Notice of Joint Meeting and Proxy Statement
for the Joint Meeting to be held on July 21, 1995.
-------------------
PLEASE BE SURE TO SIGN AND DATE Date
THIS PROXY.

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

SHAREHOLDER SIGN HERE CO-OWNER SIGN HERE
46

FORM OF PROXY CARD FOR PENNSYLVANIA FUND ONLY:
-------------------------------------------------------------------------

VAN KAMPEN MERRITT
PENNSYLVANIA TAX FREE INCOME FUND
JOINT MEETING OF SHAREHOLDERS -- JULY 21, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of common shares of beneficial interest, without par
value, of VAN KAMPEN MERRITT PENNSYLVANIA TAX FREE INCOME FUND (the "Fund"), a
Pennsylvania trust, hereby appoints Ronald A. Nyberg and Edward C. Wood, III,
and each of them, with full power of substitution and revocation, as proxies to
represent the undersigned at the Meeting of Shareholders to be held at the
offices of Van Kampen American Capital, Inc., One Parkview Plaza, Oakbrook
Terrace, IL 60181, on Friday, July 21, 1995 at 2:00 p.m., and at any and all
adjournments thereof (the "Meeting"), and thereat to vote all common shares of
the Fund which the undersigned would be entitled to vote, with all powers the
undersigned would possess if personally present, in accordance with the
following instructions.

The undersigned hereby acknowledges receipt of the accompanying Notice of
Meeting and Proxy Statement for the meeting to be held on July 21, 1995.

PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.

HAS YOUR ADDRESS CHANGED?

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

-----------------------------------
47

- ------- PLEASE MARK VOTES
X AS IN THIS EXAMPLE
- -------

1.) Not Applicable to the Fund.

For Against Abstain
2.) As to the proposal to approve ---- ---- ----
the amendment and restatement of
the Fund's Agreement and ---- ---- ----
Declaration of Trust:

For
For Withhold All
All Except
3.) Authority to vote to elect ---- ---- ----
fifteen trustees of the Fund to
serve until their respective ---- ---- ----
successors are duly elected and
qualified:
INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S) CHECK THE
"FOR ALL EXCEPT" BOX AND STRIKE
A LINE THROUGH THE NAME(S) OF
SUCH NOMINEE(S) FOR WHICH YOU
WITHHOLD AUTHORITY. YOUR SHARES
WILL BE VOTED FOR THE REMAINING
NOMINEE(S).
J. Miles Branagan Don G. Powell
Dr. Richard E. Caruso David Rees
Philip P. Gaughan Jerome L. Robinson
Dr. Roger Hilsman Lawrence J. Sheehan
R. Craig Kennedy Dr. Fernando Sisto
Dennis J. McDonnell Wayne W. Whalen
Donald C. Miller William S. Woodside
Jack E. Nelson
Mark box at right if comments or ----
address change have been noted
on the reverse side of this
card. ----
4.) Not Applicable to the Fund.
For Against Abstain
5.) As to the proposal to ratify the ---- ---- ----
selection of KPMG Peat Marwick
LLP as independent public ---- ---- ----
accountants for the current
fiscal year of the Fund:

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

SHAREHOLDER SIGN HERE CO-OWNER SIGN HERE
48

FORM OF PROXY CARD FOR GLOBAL FUND ONLY:
---------------------------------------------------------------

VAN KAMPEN MERRITT
SHORT-TERM GLOBAL INCOME FUND
JOINT MEETING OF SHAREHOLDERS -- JULY 21, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of common shares of beneficial interest, without par
value, of VAN KAMPEN MERRITT SHORT-TERM GLOBAL INCOME FUND (the "Fund"), a
sub-trust of Van Kampen Merritt Trust (the "Trust"), a Massachusetts business
trust, hereby appoints Ronald A. Nyberg and Edward C. Wood, III, and each of
them, with full power of substitution and revocation, as proxies to represent
the undersigned at the Meeting of Shareholders to be held at the offices of Van
Kampen American Capital, Inc., One Parkview Plaza, Oakbrook Terrace, IL 60181,
on Friday, July 21, 1995 at 2:00 p.m., and at any and all adjournments thereof
(the "Meeting"), and thereat to vote all common shares of the Fund which the
undersigned would be entitled to vote, with all powers the undersigned would
possess if personally present, in accordance with the following instructions.

The undersigned hereby acknowledges receipt of the accompanying Notice of
Meeting and Proxy Statement for the meeting to be held on July 21, 1995.

PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.

HAS YOUR ADDRESS CHANGED?

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

-----------------------------------
49

- ------- PLEASE MARK VOTES
X AS IN THIS EXAMPLE
- -------

For Against Abstain
1.) As to the proposal to approve ---- ---- ----
the Fund's reorganization and
conversion to a series of a ---- ---- ----
Delaware business trust:

2.) Not Applicable to the Fund.
For
For Withhold All
All Except
3.) Authority to vote to elect ---- ---- ----
fifteen trustees of the Trust to
serve until their respective ---- ---- ----
successors are duly elected and
qualified:
INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S) CHECK THE
"FOR ALL EXCEPT" BOX AND STRIKE
A LINE THROUGH THE NAME(S) OF
SUCH NOMINEE(S) FOR WHICH YOU
WITHHOLD AUTHORITY. YOUR SHARES
WILL BE VOTED FOR THE REMAINING
NOMINEE(S).
J. Miles Branagan Don G. Powell
Dr. Richard E. Caruso David Rees
Philip P. Gaughan Jerome L. Robinson
Dr. Roger Hilsman Lawrence J. Sheehan
R. Craig Kennedy Dr. Fernando Sisto
Dennis J. McDonnell Wayne W. Whalen
Donald C. Miller William S. Woodside
Jack E. Nelson
Mark box at right if comments or ----
address change have been noted
on the reverse side of this ----
card.

For Against Abstain
4.) As to the proposal to approve a ---- ---- ----
change in the Fund's fundamental
investment policy with respect ---- ---- ----
to the concentration of its
investments:
For Against Abstain
5.) As to the proposal to ratify the ---- ---- ----
selection of KPMG Peat Marwick
LLP as independent public ---- ---- ----
accountants for the current
fiscal year of the Fund:

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SHAREHOLDER SIGN HERE CO-OWNER SIGN HERE