1
 
                            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 AMERICAN CAPITAL MUNICIPAL INCOME TRUST
             VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
        VAN KAMPEN AMERICAN CAPITAL INTERMEDIATE TERM HIGH INCOME TRUST
           VAN KAMPEN AMERICAN CAPITAL LIMITED TERM HIGH INCOME TRUST
          VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
                  VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
         VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
          VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST
        VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST
          VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST
            VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST
            VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
       VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
  VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
   VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS
 VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS
   VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
  VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS
          VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
   VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
            VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
      VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL INCOME TRUST
         VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
     VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
       VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME TRUST
      VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL INCOME TRUST
     VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
            VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
        VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST
           VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II
        VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
           VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST
          VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
                        THE EXPLORER INSTITUTIONAL TRUST
 
            (Names of Co-Registrants as Specified in Their Charters)
 
Payment of Filing Fee (Check the appropriate box):
 
[X] No fee required.
 
[ ] Fee computed per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
[ ] Fee paid previously with preliminary materials.
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                                 - April 1997 -

                                IMPORTANT NOTICE

                         TO VAN KAMPEN AMERICAN CAPITAL
                               FUND SHAREHOLDERS

QUESTIONS
  & ANSWERS

- --------------------------------------------------------------------------------
   Although we recommend that you read the complete Proxy Statement, for your
  convenience, we have provided a brief overview of the issues to be voted on.
- --------------------------------------------------------------------------------

Q  WHY AM I RECEIVING THIS PROXY STATEMENT?

A  Morgan Stanley Group, Inc., the indirect corporate parent of your Fund's
investment adviser, has entered into an agreement to merge with and in to Dean
Witter, Discover & Co.  Your Fund is seeking shareholder approval of a new
investment advisory agreement, to take effect following the merger.  Certain
other proposals also are included in the Proxy Statement.  Please refer to the
proxy statement for a detailed explanation of the proposed items.

Q  HOW WILL THIS AFFECT MY ACCOUNT?

A  You can expect the same level of management expertise and high-quality
shareholder service you've grown accustomed to.  The new investment advisory
agreement between your Fund and its investment adviser will be substantially
similar to the Fund's current investment advisory agreement, except for certain
provisions added at the request of your trustees.

Q  WILL MY VOTE MAKE A DIFFERENCE?

A  Your vote is needed to ensure that the proposals can be acted upon.  Your
immediate response on the enclosed proxy card(s) will help save on the costs of
any further solicitations for a shareholder vote.  We encourage all
shareholders to participate in the governance of their Fund(s).

Q  HOW DO THE TRUSTEES OF MY FUND SUGGEST THAT I VOTE?

A  After careful consideration, the trustees of your Fund unanimously recommend
that you vote "FOR" each of the items proposed on the enclosed proxy card(s).

Q  WHO IS PAYING FOR EXPENSES RELATED TO THE SHAREHOLDERS MEETING?

A  Morgan Stanley Group, Inc. or its affiliates will pay for those expenses
relating to the shareholder meeting.

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 1-800-341-2929 (1-800-421-5666 for shareholders of the
Explorer Funds) between 7:00 a.m. and 7:00 p.m. Central time, Monday through
Friday.  (TDD users call 1-800-772-8889.)

Q  Where do I mail my proxy card(s).

A  You may use the enclosed postage paid envelope or mail your proxy card(s) to:

Proxy Tabulator
P.O. Box 9111
Hingham, MA 02043
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                              ABOUT THE PROXY CARD

Please vote on each issue using blue or black ink to mark an X in one of the
boxes provided on the proxy card.

APPROVAL OF NEW ADVISORY AGREEMENT--mark "For," "Against" or "Abstain"

ELECTION OF TRUSTEES (IF APPLICABLE)--mark "For," "Withhold" or "For All Except"

To withhold authority for any individual nominee, strike a line through the
nominee's name and mark the "For All Except" box.

RATIFICATION OF INDEPENDENT AUDITORS--mark "For," "Against" or "Abstain"

Sign, date and return the proxy card in the enclosed postage-paid envelope.
All registered owners of an account, as shown in the address, must sign the
card.  When signing as attorney, trustee, executor, administrator, custodian,
guardian or corporate officer, please indicate your full title.


                                                               SAMPLE

/X/ PLEASE MARK
    VOTES AS IN
    THIS EXAMPLE                              VAN KAMPEN AMERICAN CAPITAL XXXXX TRUST
                                                   JOINT MEETING OF SHAREHOLDERS

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

                                        FOR   AGAINST   ABSTAIN                                             FOR   AGAINST   ABSTAIN
1. The proposal to approve a new        / /     / /       / /     3. As to the proposal to ratify the       / /     / /       / / 
   investment advisory agreement.                                    selection of KPMG Peat Marwick LLP
                                                        FOR ALL      to act as the independent auditors
                                       FOR    WITHHOLD  EXCEPT       of the Fund for the fiscal year 
                                       / /      / /       / /        ending XXXX, 1997.
2. Authority to vote for the election
   as Class X Trustees the nominees
   named below:

XXXXXXXXX, XXXXXXXXXX, XXXXXXXXXX

   To withhold authority to vote for any individual nominee, 
   strike a line through the nominee's name and mark the
   "For All Except" box. Your shares will be voted for the 
   remaining nominee(s)
                                                                  VAN KAMPEN AMERICAN CAPITAL

Please be sure to sign and date this Proxy.  Date                 Mark box at right if comments or address change
                                                                  have been noted on the reverse side of this card.
Shareholder sign here          Co-owner sign here
                                                                  RECORD DATE SHARES:

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX


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April 21, 1997
 
Dear Van Kampen American Capital Fund Shareholder:
 
  The enclosed proxy statement relates to a joint meeting of the shareholders of
a number of Van Kampen American Capital closed-end investment companies and The
Explorer Institutional Trust open-end investment companies. We are pleased to
announce that Morgan Stanley Group Inc., the indirect corporate parent of the
investment adviser of your Fund, has entered into a merger agreement with Dean
Witter, Discover & Co. Under the terms of the merger agreement, your Fund's
investment adviser will become an indirect subsidiary of the merged company, to
be named Morgan Stanley, Dean Witter, Discover & Co. Your Fund's investment
adviser will continue to provide the Fund with investment advisory and
management services following the merger.
 
  The primary purpose of the shareholder meeting is to permit the shareholders
of each Fund to consider a new investment advisory agreement to take effect
following the merger. The new investment advisory agreement between your Fund
and its investment adviser will be substantially similar to the Fund's current
investment advisory agreement, except for certain provisions added at the
request of your trustees. The attached proxy statement seeks shareholder
approval on this and other items.
 
                 Your vote is important and your participation
           in the governance of your Fund(s) does make a difference.
 
  The proposals have been unanimously approved by the Board of Trustees of each
Fund, who recommend you vote "FOR" each of these proposals. YOUR IMMEDIATE
RESPONSE WILL HELP SAVE ON THE COSTS OF ADDITIONAL SOLICITATIONS. EACH FUND
VOTES SEPARATELY, SO PLEASE SIGN AND RETURN ALL OF 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,
 
                                          Dennis J. McDonnell
                                          President and Chairman of the
                                          Boards of Trustees
   5
 
  Dear Van Kampen American Capital Fund Shareholder:
 
  Each proxy card enclosed in this envelope represents your voting privilege in
a separate Van Kampen American Capital Fund. We have grouped your proxy cards
together for your convenience and to reduce postage expenses.
 
  The meeting date for your Van Kampen American Capital Fund is May 28, 1997.
Please sign all proxy cards and return them in the postage-paid envelope
included with this material.
 
  We appreciate the prompt return of your proxy cards.
   6
 
                       VAN KAMPEN AMERICAN CAPITAL FUNDS
 
                               ONE PARKVIEW PLAZA
                        OAKBROOK TERRACE, ILLINOIS 60181
                            TELEPHONE (800) 341-2929
 
                    NOTICE OF JOINT MEETING OF SHAREHOLDERS
 
                            TO BE HELD MAY 28, 1997
 
  Notice is hereby given to the holders of common shares of beneficial interest
("Common Shares") and preferred shares of beneficial interest (the "Preferred
Shares"), if any, of each of the Van Kampen American Capital Funds listed on
Annex A (the "Funds") to the attached Proxy Statement 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, Illinois
60181, on Wednesday, May 28, 1997, at 2:00 p.m., for the following purposes:
 
  
1.   For each Fund, to approve or disapprove a new investment
     advisory agreement;
2.   For each Closed-End Fund, to elect trustees in the following
     manner:
     2A. With respect to VIG, VKV, VCV, VMV, VJV, VNV, VOV, VPV,
         VKS, VOT, VKI and VOF, to elect three trustees by the
         holders of the Common Shares of each Fund, each trustee
         to serve for a 3 year term or until their successors
         shall have been duly elected and qualified;
     2B. With respect to VGM, VIM, VIC, VTF, VTJ, VTN, VTP, VMO,
         VKA, VAP, VKQ, VQC, VFM, VOQ, VNM, VPQ, VMT, VKC, VLT and
         VIT, to elect two trustees, one by the holders of the
         Common Shares of each Fund and one by the holders of the
         Preferred Shares of each Fund, the Common Shares and the
         Preferred Shares of each Fund voting as separate
         classes, each trustee to serve for a 3 year term or
         until their successors shall have been duly elected and
         qualified;
     2C. With respect to VKL, to elect two trustees, one by the
         holders of the Common Shares of each Fund and one by the
         holders of the Preferred Shares of each Fund, the Common
         Shares and the Preferred Shares of each Fund voting as
         separate classes, each trustee to serve for a 3 year
         term or until their successors shall have been duly
         elected and qualified;
3.   For each Fund, to ratify or reject the selection of KPMG
     Peat Marwick LLP as independent auditors for the fiscal year
     of each respective Fund ending in 1997; and
4.   To transact such other business as may properly come before
     the Meeting.


 
The Meeting will be an annual meeting for each Closed-End Fund and will be a
special meeting for each Explorer Fund. The Common Shares and the Preferred
Shares of the Closed-End Funds and the Common Shares of the Explorer Funds
sometimes are referred to herein collectively as the "Shares".
 
  Holders of record of the Shares of each Fund at the close of business on April
14, 1997 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
April 21, 1997
   7
 
  EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS 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 THE
VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING 1-800-341-2929 (1-800-421-5666 FOR
THE EXPLORER FUNDS) OR BY WRITING TO THE RESPECTIVE FUND AT ONE PARKVIEW PLAZA,
OAKBROOK TERRACE, ILLINOIS 60181.
 
  SHAREHOLDERS OF THE 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 FUND IN WHICH YOU WERE A
SHAREHOLDER AS OF THE RECORD DATE, DATE AND SIGN SUCH PROXY CARD(S), AND RETURN
IT (THEM) 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.
 
  THE BOARD OF TRUSTEES OF EACH FUND RECOMMENDS THAT YOU CAST YOUR VOTE:
 
  - FOR approval of each new investment advisory agreement;
 
  - IN FAVOR of each of the nominees for the Boards of Trustees of the Closed-
    End Funds listed in the Proxy Statement; and
 
  - FOR ratification of KPMG Peat Marwick LLP as independent auditors.
 
                            YOUR VOTE IS IMPORTANT.
                   PLEASE RETURN YOUR PROXY CARD(S) PROMPTLY
                       NO MATTER HOW MANY SHARES YOU OWN.
   8
 
                                PROXY STATEMENT
 
                       VAN KAMPEN AMERICAN CAPITAL FUNDS
 
                               ONE PARKVIEW PLAZA
                        OAKBROOK TERRACE, ILLINOIS 60181
                            TELEPHONE (800) 341-2929
 
                         JOINT MEETING OF SHAREHOLDERS
 
                                  MAY 28, 1997
 
  This Proxy Statement is furnished in connection with the solicitation by the
Boards of Trustees (the "Trustees" or "Board of Trustees") of each of the Van
Kampen American Capital Funds listed on Annex A to this Proxy Statement (the
"Funds") of proxies to be voted at a Joint Meeting of Shareholders of the Funds,
and all adjournments thereof (the "Meeting"), to be held at the offices of Van
Kampen American Capital, Inc., One Parkview Plaza, Oakbrook Terrace, Illinois
60181, on Wednesday, May 28, 1997, at 2:00 p.m. The Meeting will be an annual
meeting for each Closed-End Fund and a special meeting for each Explorer Fund.
The approximate mailing date of this Proxy Statement and accompanying form of
proxy is April 21, 1997.
 
  The primary purpose of the Meeting is to permit each Fund's shareholders to
consider a New Advisory Agreement (defined below) to take effect following the
consummation of the transactions contemplated by an Agreement and Plan of
Merger, dated as of February 4, 1997 (the "Merger Agreement"), between Dean
Witter, Discover & Co. ("Dean Witter Discover") and Morgan Stanley Group Inc.
("Morgan Stanley"), the indirect parent corporation of each Fund's investment
adviser. Pursuant to the Merger Agreement, the investment adviser will become an
indirect subsidiary of the merged company, which will be called Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD").
 
  Participating in the Meeting are holders of common shares of beneficial
interest (the "Common Shares") and preferred shares of beneficial interest (the
"Preferred Shares"), if any, of each of the Funds as set forth on Annex A to
this Proxy Statement. The Common Shares and the Preferred Shares of the
Closed-End Funds and the Common Shares of the Explorer Fund sometimes are
referred to herein collectively as the "Shares." The Meeting is scheduled as a
joint meeting of the shareholders of the Funds and the shareholders of the Funds
are expected to consider and vote on similar matters. The Boards of Trustees
have determined that the use of a joint Proxy Statement for the Meeting is in
the best interest of the shareholders of the Funds. In the event that a
shareholder of any Fund present at the Meeting objects to the holding of a joint
meeting and moves for an adjournment
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of the meeting of such Fund to a time immediately after the Meeting so that such
Fund's meeting may be held separately, the persons named as proxies will vote in
favor of the adjournment.
 
  Annex A lists the abbreviated name and stock symbol, if any, by which the
Funds sometimes are referred to in this Proxy Statement and groups the Funds
into "Closed-End Funds" and "Explorer Funds". Please refer to Annex A for any
questions you may have regarding whether your Fund is participating at the
Meeting, defined terms relating to the Funds and abbreviated Fund names. Other
Van Kampen American Capital investment companies not listed on Annex A will vote
at separate shareholder meetings on proposals substantially similar to Proposals
1, 2 and 3 in this Proxy Statement. They will hold separate shareholder meetings
because they are supervised by boards of trustees that are not identical to the
Boards of Trustees of the Funds or their shareholders will consider proposals
which do not affect the Funds. If you are a shareholder of Van Kampen American
Capital investment companies not listed on Annex A, you will receive one or more
additional proxy statements relating to such other shareholder meetings.
 
  The following table summarizes each proposal to be presented at the Meeting
and the Funds solicited with respect to such proposal:
 


                    PROPOSAL                         AFFECTED FUNDS
                    --------                         --------------
                                       
1.   Approval of New Advisory Agreement      All Funds
2.   Election of Trustees                    Closed-End Funds
3.   Ratification of Independent Auditors    All Funds

 
  EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS 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 THE
VAN KAMPEN AMERICAN CAPITAL FUNDS BY CALLING 1-800-341-2929 (1-800-421-5666 FOR
THE EXPLORER FUNDS) OR BY WRITING TO THE RESPECTIVE FUND AT ONE PARKVIEW PLAZA,
OAKBROOK TERRACE, ILLINOIS 60181.
 
VOTING
 
  The Boards of Trustees have fixed the close of business on April 14, 1997 as
the record date (the "Record Date") for the determination of holders of Shares
of each Fund entitled to vote at the Meeting. Shareholders of a Fund on the
Record Date will be entitled to one vote per Share with respect to each proposal
submitted to the shareholders of the Fund, with no Share having cumulative
voting rights.
 
                                        2
   10
 
  The voting requirement for passage of Proposal 1 is the "vote of a majority of
the outstanding voting securities", which is defined under the 1940 Act as the
lesser of (i) 67% or more of the voting securities of each respective Fund
entitled to vote thereon present in person or by proxy at the Meeting, if the
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 each respective Fund entitled to vote
thereon. With respect to Proposal 2, the affirmative vote of a plurality of the
Common Shares of a Closed-End Fund present in person or by proxy is required to
elect the nominee(s) for Trustee of the Closed-End Fund designated to be elected
by the holders of the Common Shares of such Closed-End Fund and an affirmative
vote of a plurality of the Preferred Shares of a Closed-End Fund present in
person or by proxy at the Meeting is required to elect the nominee(s) for
Trustee of the Closed-End Fund designated to be elected by the holders of the
Preferred Shares of such Closed-End Fund. With respect to Proposal 3, the
affirmative vote of a majority of the Shares of a Fund, present in person or by
proxy at the Meeting is necessary to ratify the selection of the independent
public accountants. Unless otherwise specified, the Common Shares and Preferred
Shares of the Closed-End Funds vote together as a single class.
 
  The Board of Trustees of each Fund recommends that you cast your vote:
 
  - FOR approval of each New Advisory Agreement.
 
  - IN FAVOR of each of the nominees for the Boards of Trustees of the Closed-
    End Funds listed in the Proxy Statement.
 
  - FOR ratification of KPMG Peat Marwick LLP as independent auditors.
 
  An unfavorable vote on a proposal by the shareholders of one Fund will not
affect the implementation of such a proposal by another Fund, if the proposal is
approved by the shareholders of the other Fund.
 
  All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon. Proxies received
prior to the Meeting on which no vote is indicated will be voted "for" each
proposal as to which it is entitled to vote. Shares not voted with respect to a
proposal due to an abstention or broker non-vote will be deemed votes not cast
with respect to such proposal, but such Shares will be deemed present for quorum
purposes. 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.
 
  Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the respective 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.
 
                                        3
   11
 
  The Funds know of no business other than that mentioned in Proposals 1, 2 and
3 of the Notice that 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 Funds are not received, the persons
named as proxies may propose one or more adjournments of the Meeting of the
concerned Fund 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.
 
- ------------------------------------------------------------------------------
PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENTS
- ------------------------------------------------------------------------------
 
THE ADVISERS
 
  Van Kampen American Capital Investment Advisory Corp. ("Advisory Corp.") acts
as investment adviser for each Closed-End Fund. Van Kampen American Capital
Management, Inc. ("Management Inc.") acts as investment adviser for each
Explorer Fund. Advisory Corp. and Management Inc. sometimes are referred to
herein collectively as the "Advisers" or individually as an "Adviser". One of
the Advisers has acted as investment adviser for each Fund since the Fund
commenced its investment operations. Prior to January 1995, Advisory Corp.
provided investment advisory services under the name Van Kampen Merritt
Investment Advisory Corp.
 
  Each Adviser currently is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("VKAC"). VKAC is a wholly-owned subsidiary of VK/AC Holding, Inc.
("VKAC Holding"). VKAC Holding is an indirect wholly-owned subsidiary of Morgan
Stanley. The addresses of VKAC Holding, VKAC and the Advisers are One Parkview
Plaza, Oakbrook Terrace, Illinois 60181 and 2800 Post Oak Blvd., Houston, Texas
77056.
 
INFORMATION CONCERNING MORGAN STANLEY
 
  Morgan Stanley and various of its directly or indirectly owned subsidiaries,
including Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co."), a
registered broker-dealer, Morgan Stanley Asset Management Inc., a registered
investment adviser, and Morgan Stanley & Co. International Limited, provide a
wide range of financial services on a global basis. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring real estate, project finance and other corporate finance advisory
activities; merchant
 
                                        4
   12
 
banking and other principal investment activities; stock brokerage and research
services; asset management; the trading of foreign exchange and commodities as
well as derivatives on a broad range of asset categories, rates and indices;
real estate advice, financing and investing; and global custody, securities
clearance services and securities lending.
 
INFORMATION CONCERNING DEAN WITTER, DISCOVER & CO.
 
  Dean Witter Discover is a diversified financial services company offering a
broad range of nationally marketed credit and investment products with a primary
focus on individual customers. Dean Witter Discover has two principal lines of
business: credit services and securities. Its credit services business consists
primarily of the issuance, marketing and servicing of general purpose credit
cards and the provision of transaction processing services, private-label credit
card services and real estate secured loans. It is the largest single issuer of
general purpose credit cards in the United States, as measured by number of
accounts and cardmembers, and the third largest originator and servicer of
credit card receivables, as measured by managed loans. Dean Witter Discover's
securities business is conducted primarily through its wholly-owned
subsidiaries, Dean Witter Reynolds Inc. ("DWR") and Dean Witter InterCapital
Inc. ("InterCapital"). DWR is a full-service securities firm offering a wide
variety of securities products to serve the investment needs of individual
clients through over 9,100 account executives located in 371 branch offices. DWR
is among the largest NYSE members and is a member of other major securities,
futures and options exchanges. InterCapital is a registered investment adviser
that, along with its subsidiaries, services investment companies, individual
accounts and institutional portfolios. Investment companies serviced by
InterCapital include [   ] proprietary portfolios referred to herein as the
"InterCapital Funds".
 
THE MERGER
 
  Pursuant to the Merger Agreement, Morgan Stanley will be merged (the "Merger")
with and into Dean Witter Discover and the surviving corporation will be named
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"). Following the Merger,
each Adviser will be an indirect wholly-owned subsidiary of MSDWD.
 
  Under the terms of the Merger Agreement, each of Morgan Stanley's common
shares will be converted into the right to receive 1.65 shares of MSDWD common
stock and each issued and outstanding share of Dean Witter Discover common stock
will thereafter represent one share of MSDWD common stock. Following the Merger,
Morgan Stanley's former shareholders will own approximately 45% and Dean Witter
Discover's former shareholders will own approximately 55% of the outstanding
shares of common stock of MSDWD.
 
                                        5
   13
 
  The Merger is expected to be consummated in mid-1997 and is subject to certain
closing conditions, including certain regulatory approvals and the approval of
shareholders of both Morgan Stanley and Dean Witter Discover.
 
  Under the terms of the Merger Agreement, the Board of Directors of MSDWD
initially will consist of fourteen members, two of whom will be Morgan Stanley
insiders and two of whom will be Dean Witter Discover insiders. The remaining
ten directors will be independent directors, with Morgan Stanley and Dean Witter
Discover each nominating five of the ten. The Chairman and Chief Executive
Officer of MSDWD will be the current Chairman and Chief Executive Officer of
Dean Witter Discover, Phillip Purcell. The President and Chief Operating Officer
of MSDWD will be the current President of Morgan Stanley, John Mack.
 
  The Advisers do not anticipate any reduction in the quality of services now
provided to the Funds by the Advisers and do not expect that the Merger will
result in any material changes in the business of the Advisers or in the manner
in which the Advisers render services to the Funds. The Advisers also anticipate
that neither the Merger nor any ancillary transactions will have any adverse
effect on the Advisers' ability to fulfill their obligations under the New
Advisory Agreements (as defined below) or to operate their business in a manner
consistent with past business practices.
 
  In connection with Morgan Stanley's purchase of VKAC Holding on October 31,
1997, certain officers of the Advisers, including Dennis J. McDonnell, who is a
member of the Board of Trustees, and Don G. Powell, who was a member of the
Board of Trustees prior to August 1996, entered into employment agreements with
VKAC Holding which expire from between 1998 and 2000. Certain of such officers,
including Messrs. McDonnell and Powell also were granted options to purchase
shares of common stock of Morgan Stanley which vest from 1999 to 2001. Certain
officers of the Advisers also entered into retention agreements with VKAC
Holding, which will remain in place following the consummation of the Merger.
The employment agreements and retention agreements are intended to assure that
the services of the officers are available to the Advisers (and thus to the
Funds) until such agreements expire. Finally, certain officers of the Advisers,
including Messrs. McDonnell and Powell, received preferred stock of Morgan
Stanley that is convertible into common stock of Morgan Stanley from 1997 to
2000. As a result of the Merger, such preferred stock shall be convertible into
common stock of MSDWD at the effective time of the Merger.
 
THE ADVISORY AGREEMENTS
 
  In anticipation of the Merger, a majority of the Trustees of each Fund who are
not parties to the New Advisory Agreement or interested persons of any such
party (the "Disinterested Trustees") approved a new investment advisory
agreement (the "New Advisory Agreement") between each Fund and its respective
Adviser. The
 
                                        6
   14
 
holders of a majority of the outstanding voting securities (within the meaning
of the 1940 Act) of each Fund are being asked to approve its respective New
Advisory Agreement. See "The New Advisory Agreements" below.
 
  THE CURRENT ADVISORY AGREEMENTS. The Current Advisory Agreement for each
Closed-End Fund was last approved by a majority of the Trustees, including a
majority of the Disinterested Trustees, voting in person at a meeting called for
that purpose on July 18, 1996, relating to the acquisition of Advisory Corp.'s
corporate parent by Morgan Stanley. The Current Advisory Agreement was last
approved by shareholders of each Closed-End Fund at a meeting held on October
23, 1996 relating to the acquisition of Advisory Corp.'s corporate parent by
Morgan Stanley.
 
  The Current Advisory Agreement for each Explorer Fund was last approved by a
majority of the Trustees, including a majority of the Disinterested Trustees,
voting in person at a meeting called for that purpose on July 18, 1996, relating
to the acquisition of Management Inc.'s corporate parent by Morgan Stanley. The
Current Advisory Agreement was last approved by shareholders of each Explorer
Fund at a meeting held on October 23, 1996 relating to the acquisition of
Management Inc.'s corporate parent by Morgan Stanley.
 
  Each Current Advisory Agreement provides that the respective Adviser will
supply investment research and portfolio management, including the selection of
securities for each Fund to purchase, hold or sell and the selection of brokers
through whom that Fund's portfolio transactions are executed. The Adviser also
administers the business affairs of each Fund, furnishes offices, necessary
facilities and equipment, provides administrative services, and permits its
officers and employees to serve without compensation as Trustees and officers of
such Fund if duly elected to such positions.
 
  Each Current Advisory Agreement provides that the respective Adviser shall not
be liable for any error of judgment or of law, or for any loss suffered by the
particular Fund in connection with the matters to which the Current Advisory
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Adviser in the performance of its
obligations and duties, or by reason of its reckless disregard of obligations or
duties under each Current Advisory Agreement.
 
  Each Adviser's activities are subject to the review and supervision of the
Board of Trustees to which the Adviser renders periodic reports with respect to
each Fund's investment activities. The Current Advisory Agreement may be
terminated by either party, at any time, without penalty, upon 60 days written
notice, and automatically terminates in the event of its assignment.
 
  The net assets of each of the Funds as of March 31, 1997, as well as other
investment companies sponsored by VKAC and advised by the Advisers and the
 
                                        7
   15
 
rates of compensation paid thereto are set forth at Annex C hereto. Each
respective Fund recognized net advisory expenses, for its most recently
completed fiscal year, in the amounts set forth at Annex D hereto.
 
  Each Fund pays all other expenses incurred in its operation including, but not
limited to, direct charges relating to the purchase and sale of its portfolio
securities, interest charges, fees and expenses of legal counsel and independent
auditors, taxes and governmental fees, costs of share certificates and any other
expenses (including clerical expenses), expenses in connection with its dividend
reinvestment plan, membership fees in trade associations, expenses of
registering and qualifying its Shares for sale under federal and state
securities laws, expenses of printing and distribution, expenses of filing
reports and other documents filed with governmental agencies, expenses of annual
and special meetings of the trustees and shareholders, fees and disbursements of
the transfer agents, custodians and sub-custodians, expenses of disbursing
dividends and distributions, fees, expenses and out-of-pocket costs of the
trustees who are not affiliated with the Advisers, insurance premiums,
indemnification and other expenses not expressly provided for in each Current
Advisory Agreement and any extraordinary expenses of a nonrecurring nature. In
the case of each Explorer Fund, such expenses also include expenses related to
the issuance, sale and repurchase of its Shares. Each Fund also compensates the
Adviser, VKAC and, in the case of the Explorer Funds, the Distributor (defined
below) and ACCESS (defined below) for certain non-advisory services provided
pursuant to agreements discussed below. See "OTHER INFORMATION -- Non-Advisory
Agreements" below.
 
  THE NEW ADVISORY AGREEMENTS. The Board of Trustees approved a proposed New
Advisory Agreement between each Closed-End Fund and Advisory Corp. on March 26,
1997, the form of which is attached hereto as Annex B-1. The Board of Trustees
approved a proposed New Advisory Agreement between each Explorer Fund and
Management Inc. on March 26, 1997, the form of which is attached hereto as Annex
B-2.
 
  The form of the proposed New Advisory Agreement is substantially similar to
the Current Advisory Agreement between each Fund and its respective Adviser,
except as described in this paragraph. Each New Advisory Agreement designates
certain officers of the Adviser and the officers of the Fund as essential
personnel with respect to the operations of the Fund. Under the terms of the New
Advisory Agreement, the Adviser may not make any material or significant
personnel changes or replace any essential personnel or materially change the
responsibilities or duties of any essential personnel prior to the first
anniversary of the agreement without first informing with the Board of Trustees
in a timely manner. Each New Advisory Agreement also prohibits the Adviser from
changing its name without the prior consent of the Board of Trustees.
 
                                        8
   16
 
  The investment advisory fee as a percentage of net assets payable by each Fund
will be the same under its New Advisory Agreement as under its Current Advisory
Agreement. If the investment advisory fee under each New Advisory Agreement had
been in effect for each Fund's most recently completed fiscal year, contractual
advisory fees payable to the respective Adviser by each Fund would have been
identical to those payable under each Current Advisory Agreement.
 
  In connection with approving the New Advisory Agreements, the Boards of
Trustees held special telephone meeting on February 10, 1997 and special
in-person meetings on March 20, 1997 and March 26, 1997. At the meetings, the
Board of Trustees considered the possible effects of the Merger upon VKAC, the
Advisers, Van Kampen American Capital Distributors, Inc., the distributor of the
Explorer Funds' shares (the "Distributor"), and ACCESS Investors Services, Inc.,
the transfer agent for each of the Explorer Funds ("ACCESS"), and upon their
ability to provide investment advisory, distribution, transfer agency and other
services to each respective Fund. Representatives of Dean Witter Discover and
VKAC attended one or more of the in-person meetings and represented to the Board
of Trustees that (i) the VKAC family of funds will be maintained and operated as
a separate mutual fund complex and will not be consolidated with Dean Witter
Discover's InterCapital Funds and (ii) VKAC, the Advisers, the Distributor and
ACCESS will be maintained separate from their counterparts in the InterCapital
Fund complex and will be operated for the benefit of the Funds and other
investment companies sponsored by VKAC. The representatives of Dean Witter
Discover also described the financial and other resources available to VKAC and
its affiliates, after giving effect to the Merger, to secure for each Fund
quality investment research, investment advice, distribution, transfer agency
and other client services.
 
  In evaluating the New Advisory Agreements, the Board of Trustees took into
account that each Fund's Current Advisory Agreement and its New Advisory
Agreement, including the terms relating to the services to be provided
thereunder by the Adviser and the fees and expenses payable by each Fund, are
substantially similar, except for those provisions added to each New Advisory
Agreement at the request of the Trustees. The Board of Trustees considered the
skills and capabilities of the Advisers, the representations of Dean Witter
Discover and VKAC described above and the representations of Dean Witter
Discover and VKAC that no material change was planned in the current management
or facilities of the Advisers as a result of the Merger. The Board of Trustees
also considered the reputation, expertise and resources of Morgan Stanley and
Dean Witter Discover and their affiliates in domestic and international
financial markets. The Board of Trustees considered the continued employment of
members of senior management of the Advisers, the Distributor and ACCESS
pursuant to current and future employment and retention agreements to be
important to help assure the continuity of the personnel primarily responsible
for maintaining the quality of investment advisory
 
                                        9
   17
 
and other services for the Funds. The Board of Trustees also considered the
affect of certain stock options owned by senior management of the Advisers
vesting as a result of the Merger. The Trustees considered the possible benefits
the Advisers may receive as a result of the Merger, including the continued use,
to the extent permitted by law, of Morgan Stanley & Co., DWR and their
affiliates for brokerage services.
 
  The Board of Trustees considered the affects on the Funds of the Advisers
becoming affiliated persons of MSDWD. Following the Merger, the 1940 Act will
prohibit or impose certain conditions on the ability of the Funds to engage in
certain transactions with MSDWD and its affiliates. For example, absent
exemptive relief, the Funds will be prohibited from purchasing securities from
Morgan Stanley & Co. or DWR, both of which will be wholly-owned broker-dealer
subsidiaries of MSDWD, in transactions in which Morgan Stanley & Co. or DWR acts
as a principal, and the Funds will have to satisfy certain conditions in order
to engage in securities transactions in which Morgan Stanley & Co. or DWR act as
a broker or to purchase securities in an underwritten offering in which Morgan
Stanley & Co. or DWR is acting as an underwriter. In this connection, management
of the Advisers represented to the Board of Trustees that they do not believe
these prohibitions or conditions will have a material affect on the management
or performance of the Funds and, to the extent permitted by applicable law, VKAC
anticipates that the Funds will continue to use Morgan Stanley & Co., DWR and
their affiliates for brokerage services.
 
  The Board of Trustees was advised that Section 15(f) of the 1940 Act is
applicable to the Advisers as a result of Morgan Stanley's acquisition of the
Advisers' parent corporation on October 31, 1996. Section 15(f) of the 1940 Act
permits, in the context of a change in control of an investment adviser to a
registered investment company, the receipt by such investment adviser, or any of
its affiliated persons, of an amount of benefit in connection with such sale,
provided two conditions are satisfied. First, an "unfair burden" must not be
imposed on the investment company for which the investment adviser acts in such
capacity as a result of the sale of such interest, or any express or implied
terms, conditions or understandings applicable thereto. The term "unfair
burden," as defined in the 1940 Act, includes any arrangement during the
two-year period after the transaction whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from the investment company or its security holders (other than fees for bona
fide investment advisory and other services), or from any person in connection
with the purchase or sale of securities or other property to, from or on behalf
of the investment company (other than ordinary fees for bona fide principal
underwriting services). Management of Dean Witter Discover and VKAC are aware of
no circumstances arising from the Merger, preparatory transactions to the Merger
or any potential financing that might result in the imposition of an "unfair
burden" on the Funds.
 
                                       10
   18
 
  The second condition of Section 15(f) is that during the three-year period
immediately following a transaction to which Section 15(f) is applicable, at
least 75% of the subject investment company's board of directors must not be
"interested persons" (as defined in the 1940 Act) of the investment company's
investment adviser or predecessor adviser. The composition of the Board of
Trustees currently complies with such condition and, if each of the nominees set
forth in Proposal 2 below is elected to the Boards of Trustees, the composition
of the Boards of Trustees will continue comply with such condition.
 
  The Board of Trustees, including the Disinterested Trustees, concluded that if
the Merger occurs, entry by each respective Fund into a New Advisory Agreement
would be in the best interest of each Fund and the shareholders of each Fund.
The Board of Trustees of each Fund, including the Disinterested Trustees,
unanimously approved the New Advisory Agreement for each Fund and recommended
each such agreement for approval by the shareholders of the respective Fund at
the Meeting. The New Advisory Agreement would take effect upon the later to
occur of (i) the obtaining of shareholder approval or (ii) the closing of the
Merger. Each New Advisory Agreement will continue in effect until May 1999 and
thereafter for successive annual periods as long as such continuance is approved
in accordance with the 1940 Act.
 
  In the event that shareholders of a Fund do not approve the New Advisory
Agreement with respect to a Fund and the Merger is consummated, the Board of
Trustees of such Fund would seek to obtain for the Fund interim investment
advisory services at the lesser of cost or the current fee rate either from the
respective Adviser or from another advisory organization. Thereafter, the Board
of Trustees of such Fund would either negotiate a new investment advisory
agreement with an advisory organization selected by the Board of Trustees or
make appropriate arrangements, in either event subject to approval of the
shareholders of such Fund. In the event the Merger is not consummated, the
Advisers would continue to serve as investment adviser of the Funds pursuant to
the terms of the Current Advisory Agreement.
 
SHAREHOLDER APPROVAL
 
  To become effective, each New Advisory Agreement must be approved by the "vote
of a majority of the outstanding voting securities", which is defined under the
1940 Act as the lesser of the vote of (i) 67% or more of the Shares of the
respective Fund entitled to vote thereon present at the Meeting if the holders
of more than 50% of such outstanding Shares are present in person or represented
by proxy; or (ii) more than 50% of such outstanding Shares of the Fund entitled
to vote thereon. Each New Advisory Agreement was unanimously approved by the
Board of Trustees after consideration of all factors which they determined to be
relevant to their deliberations, including those discussed above. The Board of
Trustees also
 
                                       11
   19
 
unanimously determined to submit each New Advisory Agreement for consideration
by the shareholders of the respective Fund. THE BOARD OF TRUSTEES OF EACH FUND
RECOMMENDS A VOTE "FOR" APPROVAL OF THE NEW ADVISORY AGREEMENT.
- ------------------------------------------------------------------------------
PROPOSAL 2: ELECTION OF TRUSTEES
- ------------------------------------------------------------------------------
 
  With respect to each of the Closed-End Funds, trustees are to be elected by
the Shareholders in the following manner:
 
         a) With respect to VIG, VKV, VCV, VMV, VJV, VNV, VOV, VPV, VKS, VOT,
         VKI and VOF, Class I Trustees are to be elected at the Meeting by the
         Shareholders to serve until the later of each respective Closed-End
         Fund's Annual Meeting of Shareholders in 2000 or until their successors
         have been duly elected and qualified. Holders of Common Shares, voting
         as a separate class, will vote with respect to the three nominees set
         forth below as Class I Trustees designated to be elected by the holders
         of Common Shares. An affirmative vote of a plurality of the Common
         Shares of each Fund, voting as a separate class, present at the Meeting
         in person or by proxy is required to elect the respective nominees. It
         is the intention of the persons named in the enclosed proxy to vote the
         Shares represented by them for the election of the respective nominees
         listed below unless the proxy is marked otherwise.
 
         b) With respect to VGM, VIM, VIC, VTF, VTJ, VTN, VTP, VMO, VKA, VAP,
         VKQ, VQC, VFM, VOQ, VNM, VPQ, VMT, VKC, VLT and VIT, Class II Trustees
         are to be elected at the Meeting by the Shareholders to serve until the
         later of each respective Closed-End Fund's Annual Meeting of
         Shareholders in 2000 or until their successors have been duly elected
         and qualified. Holders of Common Shares, voting as a separate class,
         will vote with respect to the one nominee set forth below as a Class II
         Trustee designated to be elected by the holders of Common Shares.
         Holders of Preferred Shares, voting as a separate class, will vote with
         respect to the one nominee set forth below as a Class II Trustee
         designated to be elected by the holders of Preferred Shares. An
         affirmative vote of a plurality of the Common Shares of each Closed-End
         Fund and a plurality of the Preferred Shares of each Closed-End Fund,
         voting as a separate classes, present at the Meeting in person or by
         proxy is required to elect the respective nominees. It is the intention
         of the persons named in the enclosed proxy to vote the Shares
         represented by them for the election of the respective nominees listed
         below unless the proxy is marked otherwise.
 
         c) With respect to VKL, Class III Trustees are to be elected at the
         Meeting by the Shareholders to serve until the later of the Closed-End
 
                                       12
   20
 
         Fund's Annual Meeting of Shareholders in 2000 or until their successors
         have been duly elected and qualified. Holders of Common Shares, voting
         as a separate class, will vote with respect to the one nominee set
         forth below as a Class III Trustee designated to be elected by the
         holders of Common Shares. Holders of Preferred Shares, voting as a
         separate class, will vote with respect to the one nominee set forth
         below as a Class III Trustee designated to be elected by the holders of
         Preferred Shares. An affirmative vote of a plurality of the Common
         Shares of the Closed-End Fund and a plurality of the Preferred Shares
         of the Closed-End Fund, voting as separate classes, present at the
         Meeting in person or by proxy is required to elect the respective
         nominees. It is the intention of the persons named in the enclosed
         proxy to vote the Shares represented by them for the election of the
         respective nominees listed below unless the proxy is marked otherwise.
 
  Each of the Trustees has served as a member of the Board of Trustees since his
initial election or appointment to the Board of Trustees as set forth on Annex J
hereto.
 
The Declaration of Trust of each Closed-End Fund provides that the Board of
Trustees shall consist of not less than three nor more than eleven trustees
divided into three classes, the classes to be as nearly equal in number as
possible. The Trustees of only one class are elected at each annual meeting so
that the regular term of only one class of Trustees will expire annually and any
particular Trustee stands for election only once in each three-year period.
 
  With respect to each of the Closed-End Funds, pursuant to the 1940 Act, as
long as any Preferred Shares are outstanding, the holders of Preferred Shares
will, voting as a separate class, elect two of the Trustees of the Closed-End
Fund. One each of the Class II Trustees and the Class III Trustees has been
designated to be elected by the holders of the Preferred Shares. In the event a
vacancy occurs on any Board of Trustees by reason of death, resignation or a
reason other than removal by the appropriate class of shareholders, the
remaining Trustees, or remaining Trustee, elected by the class that elected the
vacant Trustee's position shall fill the vacancy for the entire unexpired term.
Mr. Dammeyer is currently the Class II Trustee designated to be elected by the
holders of the Preferred Shares and Mr. Myers is currently the Class III Trustee
designated to be elected by the holders of the Preferred Shares.
 
  With respect to each of the Closed-End Funds, each of the nominees has agreed
to serve as a Trustee if elected; however, should any nominees become unable or
unwilling to accept nomination or election, the proxies will be voted for one or
more substitute nominees designated by the present Board of Trustees of each
Closed-End Fund.
 
                                       13
   21
 
  The following sets forth the names, addresses, ages, principal occupations and
other information regarding the Trustee nominees and those Trustees whose terms
continue after the Meeting.
 


                                          PRINCIPAL OCCUPATIONS OR
     NAME, ADDRESS AND AGE               EMPLOYMENT IN PAST 5 YEARS
     ---------------------               --------------------------
                              
David C. Arch(1)...............  Trustee. Mr. Arch is Chairman and Chief
1800 Swift Drive                 Executive Officer of Blistex Inc., a
Oak Brook, IL 60521              consumer health care products
  Age: 51                        manufacturer. Mr. Arch is also a Trustee
                                 of the Van Kampen American Capital Prime
                                 Rate Income Trust.
Rod Dammeyer(2)................  Trustee. Mr. Dammeyer is President, Chief
Two North Riverside Plaza        Executive Officer and Director of Anixter
Chicago, IL 60606                International Inc. (formerly known as Itel
  Age: 56                        Corporation), a value-added provider of
                                 integrated networking and cabling
                                 solutions that support business informa-
                                 tion and network infrastructure
                                 requirements. He is Managing Director of
                                 EGI Corporate Investments, a division of
                                 Equity Investments, Inc., a company that
                                 makes private equity investments in other
                                 companies. Mr. Dammeyer is also a Trustee
                                 of the Van Kampen American Capital Prime
                                 Rate Income Trust.
Howard J Kerr(1)...............  Trustee. Mr. Kerr is President and Chief
736 North Western Ave.           Executive Officer of Pocklington
P.O. Box 317                     Corporation, Inc., an investment holding
Lake Forest, IL 60045            company. Mr. Kerr is also a Director of
  Age: 61                        Canbra Foods, Ltd., a Canadian oilseed
                                 crushing, refining, processing and
                                 packaging operation. Mr. Kerr is a Trustee
                                 of the Van Kampen American Capital Prime
                                 Rate Income Trust.

 
                                       14
   22
 


                                          PRINCIPAL OCCUPATIONS OR
     NAME, ADDRESS AND AGE               EMPLOYMENT IN PAST 5 YEARS
     ---------------------               --------------------------
                              
Dennis J. McDonnell*(1)........  Chairman, President, Chief Executive
One Parkview Plaza               Officer and Trustee. Mr. McDonnell is
Oakbrook Terrace, IL 60181       President, Chief Operating Officer and a
  Age: 54                        Director of Advisory Corp., Management
                                 Inc., Van Kampen American Capital Asset
                                 Management, Inc., Van Kampen American
                                 Capital Advisors Inc. and VCJ Inc. He is
                                 also an Executive Vice President and
                                 Director of VK/AC Holding, Inc., and Van
                                 Kampen American Capital. Director of MCM
                                 Asia Pacific Company, Limited and VSM,
                                 Inc., Director of McCarthy, Crisanti &
                                 Maffei, Inc. and McCarthy, Crisanti &
                                 Maffei Acquisition Corporation, President
                                 of Van Kampen Merritt Equity Advisors
                                 Corp., Director of Van Kampen Merritt
                                 Equity Holdings Corp. and McCarthy,
                                 Crisanti & Maffei, S.A. Mr. McDonnell is
                                 the President, Chief Executive Officer and
                                 a Trustee of other investment companies
                                 advised by the Advisers and its
                                 affiliates.
Theodore A. Myers(3)...........  Trustee. Mr. Myers is the Senior Financial
1940 East 6th Street             Advisor (and prior to 1997, an Executive
Cleveland, OH 44114              Vice President and Chief Financial
  Age: 66                        Officer) of Qualitech Steel Corporation, a
                                 producer of high quality engineered steels
                                 for automotive, transportation and capital
                                 goods industries. Prior to [         ,
                                 1997], a Director of McLouth Steel. A
                                 member of the Arthur Anderson Chief
                                 Financial Officer Advisory Committee.
                                 Prior to August, 1993, Mr. Myers was
                                 Senior Vice President, Chief Financial
                                 Officer and a Director of Food Brands
                                 America (formerly known as Doskocil Com-
                                 panies, Inc.), a food processing and
                                 distribution company. Mr. Myers is also a
                                 Trustee of the Van Kampen American Capital
                                 Prime Rate Income Trust and is a Director
                                 of COVA Series Trust.
Hugo F. Sonnenschein(3)........  Trustee. Mr. Sonnenschein is President of
5801 South Ellis Avenue          the University of Chicago. Mr.
Suite 502                        Sonnenschein is a member of the Board of
Chicago, IL 60637                Trustees of the University of Rochester
  Age: 56                        and a member of its investment committee.
                                 Prior to July, 1993, Mr. Sonnenschein was
                                 Provost of Princeton University and Dean
                                 of the School of Arts and Sciences at the
                                 University of Pennsylvania. Mr.
                                 Sonnenschein is a member of the National
                                 Academy of Sciences and a fellow of the
                                 American Academy of Arts and Sciences. Mr.
                                 Sonnenschein is also a trustee of the Van
                                 Kampen American Capital Prime Rate Income
                                 Trust.

 
                                       15
   23
 


                                          PRINCIPAL OCCUPATIONS OR
     NAME, ADDRESS AND AGE               EMPLOYMENT IN PAST 5 YEARS
     ---------------------               --------------------------
                              
                                 Trustee. Mr. Whalen is a partner in the
Wayne W. Whalen*(2)............  law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive            & Flom (Illinois). Mr. Whalen is also a
Chicago, IL 60606                Trustee of other investment companies
  Age: 57                        advised by the Advisers and their affili-
                                 ates.

 
- ---------------
 
* Such trustees are "interested persons" (within the meaning of Section 2(a)(19)
  of the 1940 Act). Mr. McDonnell is an interested person of the Adviser and
  each Closed-End Fund by reason of his position with the Adviser. Mr. Whalen is
  an interested person of each Closed-End Fund by reason of his firm acting as
  legal counsel for such Funds.
 
(1) Class I Trustee.
 
(2) Class II Trustee.
 
(3) Class III Trustee.
 
  During the fiscal year ended October 31, 1996, the Board of Trustees of VIG,
VKV, VCV, VMV, VJV, VNV, VOV, VPV, VKS, VOT, VKI, VOF, VGM, VIM, VIC, VTF, VTJ,
VTN, VTP, VMO, VKA, VAP and VKL each held six meetings. During the last fiscal
year, each of the Trustees of such Closed-End Funds attended at least 75% of the
meetings of the respective Board of Trustees during the period he has been a
Trustee, except Mr. Kerr who attended four of the meetings, and all committee
meetings thereof of which such Trustee was a member. During the fiscal year
ended October 31, 1996, the Board of Trustees of such Closed-End Funds had no
standing committees with the exception of an audit committee and retirement plan
committee, which held two meetings.
 
  During the fiscal year ended August 31, 1996, the Board of Trustees of VKQ,
VQC, VFM, VOQ, VNM and VPQ each held six meetings. During the last fiscal year,
each of the Trustees of such Closed-End Funds attended at least 75% of the
meetings of the respective Board of Trustees during the period he has been a
Trustee and all committee meetings thereof of which such Trustee was a member.
During the fiscal year ended August 31, 1996, the Board of Trustees of such
Closed-End Funds had no standing committees with the exception of an audit
committee and retirement plan committee, which held two meetings.
 
  During the fiscal year ended June 30, 1996, the Board of Trustees of VMT and
VKC each held five meetings. During the last fiscal year, each of the Trustees
of such Closed-End Funds attended at least 75% of the meetings of the respective
Board of Trustees during the period he has been a Trustee and all committee
meetings thereof of which such Trustee was a member. During the fiscal year
ended June 30, 1996, the Board of Trustees of such Closed-End Funds had no
standing committees with the exception of an audit committee and retirement plan
committee, which held two meetings.
 
                                       16
   24
 
  During the fiscal year ended December 31, 1996, the Board of Trustees of VLT
and VIT each held six meetings. During the last fiscal year, each of the
Trustees of such Closed-End Funds attended at least 75% of the meetings of the
respective Board of Trustees, except Mr. Kerr who attended four of the meetings,
and all committee meetings thereof of which such Trustee was a member. During
the fiscal year ended December 31, 1996, the Board of Trustees of such
Closed-End Funds had no standing committees with the exception of an audit
committee a retirement plan committee, which held two meetings.
 
  For the fiscal year of each Closed-End Fund ended in 1996, the audit committee
consisted of Messrs. Arch, Dammeyer, Kerr, Myers and Sonnenschein. The audit
committee makes recommendations to the Board concerning the selection of the
Fund's independent public accountants, reviews with such accountants the scope
and results of the Fund's annual audit and considers any comments that the
accountants may have regarding the Fund's financial statements or books of
account. For the fiscal year of each Fund ended in 1996, the audit committee of
each Closed-End Fund held two meetings. For the fiscal year of each Closed-End
Fund ended in 1996, the retirement plan committee consisted of Messrs. Arch,
Dammeyer and Sonnenschein. The retirement plan committee is responsible for
reviewing the terms of each Fund's retirement plan and reviews any
administrative matters with respect thereto. The retirement plan committee does
not meet on a regular basis, but does meet on an ad hoc basis as necessary to
administer the retirement plan.
 
  Each of the foregoing trustees holds the same position with each of the funds
in the Fund Complex (defined below). As of December 31, 1996, there were 36
funds in the Fund Complex. Each trustee who is not an affiliated person of the
Advisers, the Distributor or VKAC (each a "Non-Affiliated Trustee") is
compensated by an annual retainer and meeting fees for services to the funds in
the Fund Complex. Each fund in the Fund Complex provides a deferred compensation
plan to its Non-Affiliated Trustees that allows trustees to defer receipt of his
compensation and earn a return on such deferred amounts based upon the return of
the common shares of the funds in the Fund Complex as more fully described
below. Each fund in the Fund Complex also provides a retirement plan to its
Non-Affiliated Trustees that provides Non-Affiliated Trustees with compensation
after retirement, provided that certain eligibility requirements are met as more
fully described below.
 
  The compensation of each Non-Affiliated Trustee includes an annual retainer
paid by each Fund in the amount of $2,500 and meeting fees paid by each Fund in
the amount of $250 per meeting of the Board of Trustees, plus expenses.
 
  Each Non-Affiliated Trustee generally can elect to defer receipt of all or a
portion of the compensation earned by such Non-Affiliated Trustee until
retirement. Amounts deferred are retained by the respective Fund and earn a rate
of return determined by reference to the return on the Common Shares of such
Fund or other
 
                                       17
   25
 
funds in the Fund Complex as selected by the respective Non-Affiliated Trustee,
with the same economic effect as if such Non-Affiliated Trustee had invested in
one or more funds in the Fund Complex, including the Funds. To the extent
permitted by the 1940 Act, each Fund may invest in securities of those funds
selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the respective Fund.
 
  Each Fund has adopted a retirement plan. Under the retirement plan, a Non-
Affiliated Trustee who is receiving trustee's compensation from a Fund prior to
such Non-Affiliated Trustee's retirement, has at least ten years of service and
retires at or after attaining the age of 62, is eligible to receive a retirement
benefit equal to $2,500 per year for each of the ten years following such
trustee's retirement. Trustees retiring prior to the age of 62 or with fewer
than 10 years but more than 5 years of service may receive reduced retirement
benefits from a Fund.
 
  Additional information regarding compensation and benefits for trustees is set
forth below. As indicated in the notes accompanying the table, the amounts
relate to either the respective Closed-End Fund's most recently completed fiscal
year or the Fund Complex' most recently completed calendar year ended December
31, 1996.
 
                            1996 COMPENSATION TABLE
 


                                                     PENSION OR                                TOTAL
                                 AGGREGATE       RETIREMENT BENEFITS   ESTIMATED ANNUAL    COMPENSATION
                               COMPENSATION          ACCRUED PER         BENEFITS PER     BEFORE DEFERRAL
                              BEFORE DEFERRAL      CLOSED-END FUND     CLOSED-END FUND     FROM THE FUND
                             FROM EACH CLOSED-     AS PART OF FUND           UPON          COMPLEX PAID
          NAME(1)                END FUND             EXPENSES          RETIREMENT(4)     TO TRUSTEES(5)
          -------            -----------------   -------------------   ----------------   ---------------
                                                                              
David C. Arch                     (2)                     (3)             $2,500              $138,500
Rod Dammeyer                      (2)                     (3)             $2,500              $138,500
Howard J Kerr                     (2)                     (3)             $2,500              $138,500
Theodore A. Myers                 (2)                     (3)             $2,500              $138,500
Hugo F. Sonnenschein              (2)                     (3)             $2,500              $138,500
Wayne W. Whalen                   (2)                     (3)             $2,500              $138,500

 
                                ---------------
 
(1) Messrs. Powell and McDonnell, Trustees of each Closed-End Fund during all or
    a portion of its 1996 fiscal year, are affiliated persons of the Adviser and
    are not eligible for compensation or retirement benefits from the Closed-End
    Funds.
 
(2) The Aggregate Compensation before Deferral from each Closed-End Fund during
    its 1996 fiscal year is shown in Annex F. Certain trustees deferred all or a
    portion of their 1996 Aggregate Compensation from each Closed-End Fund as
    shown in Annex G. The cumulative deferred compensation (including interest)
    from each Closed-End Fund at the end of its last fiscal year is shown in
    Annex H. The deferred compensation plan is described above the 1996
    Compensation Table. Amounts deferred are retained by the respective
    Closed-End Fund and earn a rate of return determined by reference to the
    return on the Common Shares of such Fund or other funds in the Fund Complex
    as selected by the
 
                                       18
   26
 
    respective Non-Affiliated Trustee, with the same economic effect as if such
    Non-Affiliated Trustee had invested in one or more funds in the Fund
    Complex, including the Funds. To the extent permitted by the 1940 Act, each
    Fund may invest in securities of those funds selected by the Non-Affiliated
    Trustees in order to match the deferred compensation obligation.
 
(3) The retirement benefits accrued per Closed-End Fund as part of such Fund's
    expenses during its 1996 fiscal year are shown in Annex I. The retirement
    plan is described above the 1996 Compensation Table.
 
(4) This is the estimated annual benefits payable per Closed-End Fund in each
    year of the 10-year period commencing in the year of such Trustee's
    retirement from such Closed-End Fund assuming: the Trustee has 10 or more
    years of service on the Board of the respective Closed-End Fund and retires
    at or after attaining the age of 62. Trustees retiring prior to the age of
    62 or with fewer than 10 years of service for the respective Closed-End Fund
    may receive reduced retirement benefits from such Closed-End Fund.
 
(5) The amounts shown in this column represent the aggregate compensation paid
    by all 36 of the investment companies advised by the Advisers that have the
    same members on each funds' Board of Trustees as of December 31, 1996 (the
    "Fund Complex") before deferral by the Trustee under the deferred
    compensation plan. Certain Trustees deferred all or a portion of their
    Aggregate Compensation from the Fund Complex during the calendar year ended
    December 31, 1996. Amounts deferred are retained by the respective
    Closed-End Fund and earn a rate of return determined by reference to the
    return on the Common Shares of such Fund or other funds in the Fund Complex,
    as selected by the respective Non-Affiliated Trustee, with the same economic
    effect as if such Non-Affiliated Trustee had invested in one or more funds
    in the Fund Complex, including the Funds. To the extent permitted by the
    1940 Act, each Fund may invest in securities of those funds selected by the
    Non-Affiliated Trustees in order to match the deferred compensation
    obligation. The Advisers and their affiliates also serve as investment
    adviser for other investment companies; however, with the exception of
    Messrs. McDonnell and Whalen, the Trustees are not trustees of such
    investment companies. Combining the Fund Complex with the other investment
    companies advised by the Advisers and their affiliates, Mr. Whalen received
    Aggregate Compensation of $243,375 during the calendar year ended December
    31, 1996.
 
  Section 30(f) of the 1940 Act and Section 16(a) of the Securities Exchange Act
of 1934, as amended, require each of the Closed-End Funds' Trustees, officers,
investment adviser, affiliated persons of the investment adviser and persons who
own more than 10% of a registered class of the Closed-End Fund's equity
securities to file forms with the Securities and Exchange Commission (the "SEC")
and the New York Stock Exchange or American Stock Exchange, as applicable,
reporting their affiliation with the Closed-End Fund and reports of ownership
and changes in ownership of Closed-End Fund Shares. These persons and entities
are required by SEC regulation to furnish the Closed-End Fund with copies of all
such forms they file. Based on a review of these forms furnished to each
Closed-End Fund, each
 
                                       19
   27
 
Closed-End Fund believes that during its last fiscal year, its Trustees,
officers, investment adviser and affiliated persons of the investment adviser
complied with the applicable filing requirements. To the knowledge of management
of each Closed-End Fund, no shareholder of any of the Closed-End Funds owns more
than 5% of a registered class of any Closed-End Fund's equity securities.
 
SHAREHOLDER APPROVAL
 
  With respect to each of the Closed-End Funds, Common Shareholders and
Preferred Shareholders, each voting as a separate class, will vote on the
respective nominees for Trustees. The affirmative vote of a plurality of the
Common Shares present in person or by proxy is required to elect the nominee(s)
for Trustee designated to be elected by the Common Shares, and the affirmative
vote of a plurality of the Preferred Shares present in person or by proxy is
required to elect the nominee(s) designated to be elected by the Preferred
Shares. THE BOARDS OF TRUSTEES RECOMMEND A VOTE "IN FAVOR" EACH OF THE NOMINEES.
 
- ------------------------------------------------------------------------------
PROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
 
  The Board of Trustees of each Fund, including a majority of the Trustees who
are not "interested persons" of each Fund (as defined by the 1940 Act), has
selected the firm of KPMG Peat Marwick LLP, independent auditors, to examine the
financial statements for the fiscal year of each Fund ending in 1997. Each Fund
knows of no direct or indirect financial interest of such firm in such Fund.
Such appointment is subject to ratification or rejection by the shareholders of
each Fund, with the shareholders of each Fund voting as a single class. Unless a
contrary specification is made, the accompanying proxy will be voted in favor of
ratifying the selection of such accountants for each Fund.
 
  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 Fund, voting with respect to each Fund as a single
class, are entitled to vote on this proposal. The affirmative vote of a majority
of the Shares present in person or by proxy is required to ratify the selection
of the independent auditors. THE BOARDS OF TRUSTEES RECOMMEND A VOTE "FOR"
RATIFICATION OF THIS PROPOSAL.
 
                                       20
   28
 
- ------------------------------------------------------------------------------
OTHER INFORMATION
- ------------------------------------------------------------------------------
 
DIRECTORS AND OFFICERS OF THE ADVISERS
 
  The following table sets forth certain information concerning the principal
executive officers and directors of the Advisers not listed above.
 
                     DIRECTORS AND OFFICERS OF THE ADVISERS
 


   NAME AND ADDRESS                     PRINCIPAL OCCUPATION
   ----------------                     --------------------
                     
Don G. Powell.........  President, Chief Executive Officer and a Director of
  2800 Post Oak Blvd.   VKAC Holding and VKAC and Chairman, Chief Executive
  Houston, TX 77056     Officer and a Director of Van Kampen American Capital
                        Distributors, Inc. (the "Distributor"), the Advisers,
                        Van Kampen American Capital Asset Management, Inc.
                        and Van Kampen American Capital Advisors, Inc.
                        Chairman, President and a Director of Van Kampen
                        American Capital Exchange Corporation, American
                        Capital Contractual Services, Inc., Van Kampen
                        Merritt Equity Holdings Corp., and American Capital
                        Shareholders Corporation. Chairman and a Director of
                        ACCESS Investor Services, Inc. ("ACCESS"), Van Kampen
                        Merritt Equity Advisors Corp., and Van Kampen
                        American Capital Trust Company. Chairman, President
                        and a Director of Van Kampen American Capital
                        Services, Inc. President, Chief Executive Officer and
                        a Trustee/Director of certain open-end investment
                        companies and closed-end investment companies advised
                        by the Texas Adviser. Prior to July 1996, Chairman
                        and Director of VSM Inc. and VCJ Inc. Prior to July
                        1996, President, Chief Executive Officer and a
                        Trustee/Director of open-end investment companies and
                        closed-end investment companies advised by Van Kampen
                        American Capital Asset Management, Inc. ("Asset
                        Management").

 
                                       21
   29


   NAME AND ADDRESS                     PRINCIPAL OCCUPATION
   ----------------                     --------------------
                     
Ronald A. Nyberg......  Executive Vice President, General Counsel and
  One Parkview Plaza    Secretary of VKAC Holding and VKAC. Executive Vice
  Oakbrook Terrace, IL  President, General Counsel and a Director of the
  60181                 Distributor, the Advisers, Asset Management, Van
                        Kampen Merritt Equity Advisors Corp., and Van Kampen
                        Merritt Equity Holdings Corp. Executive Vice
                        President, General Counsel and Assistant Secretary of
                        Van Kampen American Capital Advisors, Inc., American
                        Capital Contractual Services, Inc., Van Kampen
                        American Capital Exchange Corporation, ACCESS, Van
                        Kampen American Capital Services, Inc. and American
                        Capital Shareholders Corporation. Executive Vice
                        President, General Counsel, Assistant Secretary and
                        Director of Van Kampen American Capital Trust
                        Company. General Counsel of McCarthy, Crisanti &
                        Maffei, Inc. Vice President and Secretary of open-end
                        investment companies and closed-end investment
                        companies advised by the Advisers and Asset
                        Management. Director of ICI Mutual Insurance Co., a
                        provider of insurance to members of the Investment
                        Company Institute. Prior to July 1996, Executive Vice
                        President and General Counsel of VSM Inc., and
                        Executive Vice President, General Counsel and
                        Director of VCJ Inc.
William R. Rybak......  Executive Vice President and Chief Financial Officer
  One Parkview Plaza    of VKAC Holding and VKAC since February 1993, and
  Oakbrook Terrace, IL  Treasurer of VKAC Holding through December 1993.
  60181                 Executive Vice President, Chief Financial Officer and
                        a Director of the Distributor, the Advisers and Asset
                        Management. Executive Vice President, Chief Financial
                        Officer, Treasurer and a Director of Van Kampen
                        Merritt Equity Advisors Corp. and Van Kampen Merritt
                        Equity Holdings Corp. Executive Vice President and
                        Chief Financial Officer of the Van Kampen American
                        Capital Advisors, Inc., Van Kampen American Capital
                        Exchange Corporation, Van Kampen American Capital
                        Trust Company, ACCESS, and American Capital
                        Contractual Services, Inc. Executive Vice President,
                        Chief Financial Officer and Treasurer of American
                        Capital Shareholders Corporation and Van Kampen
                        American Capital Services, Inc. Chief Financial
                        Officer and Treasurer of McCarthy, Crisanti & Maffei,
                        Inc. Chairman of the Board of Hinsdale Financial
                        Corp., a savings and loan holding company. Prior to
                        July 1996, Executive Vice President, Chief Financial
                        Officer and a Director of VCJ Inc., and Executive
                        Vice President and Chief Financial Officer of VSM
                        Inc.

 
                                       22
   30


   NAME AND ADDRESS                     PRINCIPAL OCCUPATION
   ----------------                     --------------------
                     
Peter W. Hegel........  Executive Vice President of the Advisers, Van Kampen
  One Parkview Plaza    American Capital Advisors, Inc. and Executive Vice
  Oakbrook Terrace, IL  President and Director of Van Kampen American Capital
  60181                 Asset Management, Inc. Director of McCarthy, Crisanti
                        & Maffei, Inc. Vice President of open-end investment
                        companies and closed-end investment companies advised
                        by the Advisers. Prior to July 1996, Director of VSM
                        Inc.
Alan T. Sachtleben....  Executive Vice President of the Advisers, and Asset
  2800 Post Oak Blvd.   Management. Executive Vice President and a Director
  Houston, TX 77056     of Van Kampen American Capital Asset Management, Inc.
                        and Van Kampen American Capital Advisors, Inc. Vice
                        President of open-end investment companies advised by
                        the Advisers.

 
  The following table sets forth the trustees and officers of the Funds who are
also officers of the Advisers.
 


                NAME                             POSITIONS WITH THE FUNDS
                ----                             ------------------------
                                    
Dennis J. McDonnell..................  Trustee and President
Peter W. Hegel.......................  Vice President
Curtis W. Morell.....................  Vice President and Chief Accounting Officer
Ronald A. Nyberg.....................  Vice President and Secretary
Alan T. Sachtleben...................  Vice President
Paul R. Wolkenberg...................  Vice President
Edward C. Wood III...................  Vice President and Chief Financial Officer
John L. Sullivan.....................  Treasurer
Tanya M. Loden.......................  Controller
Nicholas Dalmaso.....................  Assistant Secretary
Huey P. Falgout, Jr..................  Assistant Secretary
Scott E. Martin......................  Assistant Secretary
Weston B. Wetherell..................  Assistant Secretary
Steven M. Hill.......................  Assistant Treasurer
Robert Sullivan......................  Assistant Controller

 
  The officers of the Funds serve for one year or until their respective
successors are chosen and qualified. The Funds' officers receive no compensation
from the Funds, but are all officers of the Advisers, Van Kampen American
Capital Asset Management, Inc., the Distributor, VKAC or their affiliates and
receive compensation in such capacities.
 
NON-ADVISORY AGREEMENTS
 
  Each Fund has entered into one or more other agreements with the Advisers,
VKAC or their affiliates, as set forth below. These agreements do not need to be
voted on by the shareholders of the Funds at the Meeting. The Advisers currently
 
                                       23
   31
 
anticipate that the services provided to the Funds pursuant to these agreements
will continue to be provided after the proposed New Advisory Agreements are
approved.
 
  Distribution Agreement. The Explorer Funds have entered into a distribution
agreement with the Distributor pursuant to which the Distributor, as principal
underwriter, purchases shares for resale to the public, either directly or
through securities dealers. In connection with their consideration of the
Merger, the Boards of Trustees considered the affects of the Merger on the
Distributor and the ability of the Distributor to continue distributing the
shares of the Explorer Funds. The new distribution agreement between each Fund
and the Distributor is substantially similar to the current distribution
agreement, except that the new distribution agreement designates certain
officers of the Distributor and the officers of the Explorer Funds to be
essential personnel with respect to the operations of the Explorer Fund. The
Distributor may not make any material or significant personnel changes or
replace any essential personnel or materially change the responsibilities or
duties of any essential personnel prior to the first anniversary of the
agreement without first informing the Board of Trustees in a timely manner. In
addition, the Distributor may not distribute shares of any investment companies
other than the Explorer Funds without the prior approval of the Board of
Trustees. The Distributor may not change its name without the prior consent of
the Board of Trustees. The address of the Distributor is One Parkview Plaza,
Oakbrook Terrace, Illinois 60181. Under the Distribution Agreement, each
Explorer Fund paid the Distributor the amount set forth at Annex D hereto for
its most recently completed fiscal year.
 
  Following the Merger, the Advisers will be affiliated with Morgan Stanley &
Co. and DWR, both are registered broker-dealers. The [             ] Funds
                                                      ] paid Morgan Stanley &
Co. [      ], and DWR [    ], respectively, in brokerage commissions during
their most recently completed fiscal years. None of the other Funds paid
brokerage commissions to Morgan Stanley & Co. or DWR during their most recently
completed fiscal years.
 
  Transfer Agency Agreement. The Explorer Funds have entered into a Transfer
Agency Agreement with ACCESS pursuant to which ACCESS provides transfer agency
and dividend disbursing services for such Funds. The address of ACCESS is 7501
Tiffany Springs Parkway, Kansas City, Missouri 64153. For its services, ACCESS
charges each Fund a fee that is determined in accordance with a cost allocation
model developed in conjunction with, and periodically reviewed by, Coopers &
Lybrand LLP. The model allocates among the Funds ACCESS's cost of providing the
Funds with transfer agency services, plus a profit margin approved by the Board
of Trustees. The allocation is based upon a number of factors including the
number of shareholder accounts per Fund, the number and type of shareholder
transactions experienced by each Fund and other factors. Under the Transfer
Agency Agreement, each Explorer Fund paid ACCESS the amount set forth on
 
                                       24
   32
 
Annex D hereto for its most recently completed fiscal year. In connection with
their consideration of the Merger, the Boards of Trustees considered the effects
of the Merger on ACCESS and the ability of ACCESS to continue to provide
transfer agency and dividend disbursing services to the Explorer Funds. The new
Transfer Agency Agreement between the Funds and ACCESS is substantially similar
to the current Transfer Agency Agreement, except that the new Transfer Agency
Agreement designates certain officers of the transfer agent and the officers of
the Fund to be essential personnel. ACCESS may not make any material or
significant personnel changes or replace any essential personnel or materially
change their duties and responsibilities prior to the first anniversary of the
agreement without first informing the Board of Trustees in a timely manner.
 
  Fund Accounting Agreement. Each Fund is party to the Fund Accounting
Agreement, and currently receives all accounting services through its respective
Adviser. Each Fund shares equally, together with the other mutual funds advised
and distributed by the Advisers, the Distributor and their affiliates, in 25% of
the cost of providing such services, with the remaining 75% of such cost being
paid by each Fund based proportionally upon their respective net assets. Under
the Fund Accounting Agreements, each Fund paid the Adviser the amount set forth
at Annex D hereto for its most recently completed fiscal year.
 
  Legal Services Agreement. Each Fund has entered into a Legal Services
Agreement pursuant to which VKAC provides legal services, including without
limitation maintenance of the Funds' minute books and records, preparation and
oversight of the Funds' regulatory reports, and other information provided to
shareholders, as well as responding to day-to-day legal issues. Payment by each
Fund for such services is made on a cost basis for the employment of personnel
as well as the overhead and equipment necessary to render such services. VKAC
also provides legal services for certain other Van Kampen American Capital
investment companies, some of which do not currently reimburse VKAC for the
provision of such services. VKAC allocates 50% of its costs equally to each Fund
or other investment company and the remaining 50% of such costs are allocated to
specific Funds or other investment companies based on specific time allocations,
or in the event services are attributable only to types of investment companies
(i.e. closed-end or open-end), the relative amount of time spent on each type of
investment companies and then further allocated among investment companies of
that type based upon their respective net asset values. Under the Legal Services
Agreement, each Fund paid VKAC the amount set forth at Annex D hereto for its
most recently completed fiscal year.
 
SHAREHOLDER INFORMATION
 
  As of [             ], 1997, the trustees and officers of the Funds as a group
owned less than 1% of the outstanding Shares of each Fund. As of [           ],
 
                                       25
   33
 
1997, certain trustees owned, directly or beneficially, the number of Common
Shares of each Fund as set forth in Annex E. [Trustees who do not own any Common
Shares of the Funds have been omitted from the table. Funds which are not owned
by any Trustee also have been omitted from the table]. As of [           ],
1997, no trustees owned any Preferred Shares of the Closed-End Funds. At such
date the "interested persons" of each Fund, as a group, owned an aggregate of
less than 5% of the outstanding shares of the Fund.
 
  The number of each Fund's outstanding Shares as of [             ], 1997 is
set forth at Annex C hereto. The persons who, to the knowledge of the Funds,
owned beneficially more than 5% of a class of a Fund's outstanding Shares as of
[             ], 1997 are set forth at Annex H hereto.
- ------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------
 
  MSDWD will pay for the expense of preparing, printing and mailing the enclosed
form of proxy, the accompanying Notice and this Proxy Statement. In order to
obtain the necessary quorum at the Meeting, additional solicitation may be made
by mail, telephone, telegraph, facsimile or personal interview by
representatives of the Funds, the Advisers or VKAC, or by dealers or their
representatives or by First Data Investor Services Group, a solicitation firm
located in Boston, Massachusetts that has been engaged to assist in proxy
solicitations at an estimated cost of approximately $[       ].
- ------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- ------------------------------------------------------------------------------
 
  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 the relevant Fund a reasonable time
before a solicitation is made. Timely submission of a proposal does not
necessarily mean that such proposal will be included. Any shareholder who wishes
to submit proposals for consideration at a meeting of such shareholder's Fund
should send such proposal to the respective Fund at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181.
 
- ------------------------------------------------------------------------------
GENERAL
- ------------------------------------------------------------------------------
 
  Management of each 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 Fund entitled to be present and vote at the
Meeting will be available at the offices of the respective Fund, One Parkview
Plaza,
 
                                       26
   34
 
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 Fund may necessitate
adjournment and may subject such 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
April 21, 1997
 
                                       27
   35
 
                                                                         ANNEX A
 
                       VAN KAMPEN AMERICAN CAPITAL FUNDS
 
  The following list sets forth the Van Kampen American Capital investment
companies (the "Funds") participating in the Joint Meeting of Shareholders to be
held at the offices of Van Kampen American Capital, Inc., One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 on Wednesday, May 28, 1997, at 2:00 p.m. The
name in the first column below is the legal name for each Fund and the name in
the second column is the abbreviated name as used in the Proxy Statement. Each
of the Closed-End Funds has issued common shares of beneficial interest, par
value $.01 per share, and each of the Explorer Funds has issued common shares of
beneficial interest, without par value (collectively, the common shares of the
Closed-End Funds and Explorer Fund are referred to herein as the "Common
Shares"). The Closed-End Funds also have issued preferred shares of beneficial
interest (the "Preferred Shares") each with a liquidation preference per share
as designated in the fourth column below.
 
                                CLOSED-END FUNDS
 


                                                                          PREFERRED SHARES
         LEGAL NAME              ABBREVIATED NAME     STOCK SYMBOL          OUTSTANDING
         ----------              ----------------     ------------        ----------------
                                                           
Van Kampen American Capital   Investment Grade            VIG       Remarketed Preferred Shares,
 Investment Grade Municipal    Municipal Trust                       liquidation preference
 Trust                                                               $100,000 per share
Van Kampen American Capital   California Municipal        VKC       Remarketed Preferred Shares,
 California Municipal Trust    Trust                                 liquidation preference
                                                                     $50,000 per share
Van Kampen American Capital   Select Sector               VKL       Remarketed Preferred Shares,
 Select Sector Municipal       Municipal Trust                       liquidation preference
 Trust                                                               $25,000 per share
Van Kampen American Capital   Municipal Trust             VKQ       Auction Preferred Shares,
 Municipal Trust                                                     liquidation preference
                                                                     $50,000 per share
Van Kampen American Capital   California Quality          VQC       Auction Preferred Shares,
 California Quality            Municipal Trust                       liquidation preference
 Municipal Trust                                                     $50,000 per share
Van Kampen American Capital   New York Quality            VNM       Auction Preferred Shares,
 New York Quality Municipal    Municipal Trust                       liquidation preference
 Trust                                                               $50,000 per share
Van Kampen American Capital   Pennsylvania Quality        VPQ       Auction Preferred Shares,
 Pennsylvania Quality          Municipal Trust                       liquidation preference
 Municipal Trust                                                     $50,000 per share
Van Kampen American Capital   Florida Quality             VFM       Auction Preferred Shares,
 Florida Quality Municipal     Municipal Trust                       liquidation preference
 Trust                                                               $50,000 per share
Van Kampen American Capital   Ohio Quality Municipal      VOQ       Auction Preferred Shares,
 Ohio Quality Municipal        Trust                                 liquidation preference
 Trust                                                               $50,000 per share
Van Kampen American Capital   Trust for Insured           VIM       Auction Preferred Shares,
 Trust for Insured             Municipals                            liquidation preference
 Municipals                                                          $50,000 per share
Van Kampen American Capital   Trust for Investment        VGM       Auction Preferred Shares,
 Trust for Investment Grade    Grade Municipals                      liquidation preference
 Municipals                                                          $50,000 per share

 
                                       A-1
   36


                                                                          PREFERRED SHARES
         LEGAL NAME              ABBREVIATED NAME     STOCK SYMBOL          OUTSTANDING
         ----------              ----------------     ------------        ----------------
                                                           
Van Kampen American Capital   Trust for Investment        VIC       Auction Preferred Shares,
 Trust for Investment Grade    Grade California                      liquidation preference
 California Municipals         Municipals                            $50,000 per share
Van Kampen American Capital   Trust for Investment        VTN       Auction Preferred Shares,
 Trust for Investment Grade    Grade New York                        liquidation preference
 New York Municipals           Municipals                            $50,000 per share
Van Kampen American Capital   Trust for Investment        VTP       Auction Preferred Shares,
 Trust for Investment Grade    Grade Pennsylvania                    liquidation preference
 Pennsylvania Municipals       Municipals                            $50,000 per share
Van Kampen American Capital   Trust for Investment        VTF       Auction Preferred Shares,
 Trust for Investment Grade    Grade Florida                         liquidation preference
 Florida Municipals            Municipals                            $50,000 per share
Van Kampen American Capital   Trust for Investment        VTJ       Auction Preferred Shares,
 Trust for Investment Grade    Grade New Jersey                      liquidation preference
 New Jersey Municipals         Municipals                            $50,000 per share
Van Kampen American Capital   Municipal Opportunity       VMO       Auction Preferred Shares,
 Municipal Opportunity Trust   Trust                                 liquidation preference
                                                                     $50,000 per share
Van Kampen American Capital   Advantage Municipal         VKA       Auction Preferred Shares,
 Advantage Municipal Income    Income Trust                          liquidation preference
 Trust                                                               $50,000 per share
Van Kampen American Capital   Advantage Pennsylvania      VAP       Auction Preferred Shares,
 Advantage Pennsylvania        Municipal Income                      liquidation preference
 Municipal Income Trust        Trust                                 $50,000 per share
Van Kampen American Capital   New Jersey Value            VJV       Auction Preferred Shares,
 New Jersey Value Municipal    Municipal Income                      liquidation preference
 Income Trust                  Trust                                 $50,000 per share
Van Kampen American Capital   Ohio Value Municipal        VOV       Auction Preferred Shares,
 Ohio Value Municipal Income   Income Trust                          liquidation preference
 Trust                                                               $50,000 per share
Van Kampen American Capital   Massachusetts Value         VMV       Auction Preferred Shares,
 Massachusetts Value           Municipal Income                      liquidation preference
 Municipal Income Trust        Trust                                 $50,000 per share
Van Kampen American Capital   Strategic Sector            VKS       Auction Preferred Shares,
 Strategic Sector Municipal    Municipal Trust                       liquidation preference
 Trust                                                               $50,000 per share
Van Kampen American Capital   New York Value              VNV       Auction Preferred Shares,
 New York Value Municipal      Municipal Income                      liquidation preference
 Income Trust                  Trust                                 $50,000 per share
Van Kampen American Capital   California Value            VCV       Auction Preferred Shares,
 California Value Municipal    Municipal Income                      liquidation preference
 Income Trust                  Trust                                 $50,000 per share
Van Kampen American Capital   Pennsylvania Value          VPV       Auction Preferred Shares,
 Pennsylvania Value            Municipal Income                      liquidation preference
 Municipal Income Trust        Trust                                 $50,000 per share
Van Kampen American Capital   Value Municipal Income      VKV       Auction Preferred Shares,
 Value Municipal Income        Trust                                 liquidation preference
 Trust                                                               $50,000 per share
Van Kampen American Capital   Florida Municipal           VOF       Auction Preferred Shares,
 Florida Municipal             Opportunity Trust                     liquidation preference
 Opportunity Trust                                                   $50,000 per share
Van Kampen American Capital   Municipal Opportunity       VOT       Auction Preferred Shares,
 Municipal Opportunity Trust   Trust II                              liquidation preference
 II                                                                  $50,000 per share

 
                                       A-2
   37


                                                                          PREFERRED SHARES
         LEGAL NAME              ABBREVIATED NAME     STOCK SYMBOL          OUTSTANDING
         ----------              ----------------     ------------        ----------------
                                                           
Van Kampen American Capital   Advantage Municipal         VKI       Auction Preferred Shares,
 Advantage Municipal Income    Income Trust II                       liquidation preference
 Trust II                                                            $50,000 per share
Van Kampen American Capital   Limited Term High           VLT       Auction Preferred Shares,
 Limited Term High Income      Income Trust                          liquidation preference
 Trust                                                               $50,000 per share
Van Kampen American Capital   Intermediate Term High      VIT       Auction Market Preferred
 Intermediate Term High        Income Trust                          Shares, liquidation
 Income Trust                                                        preference $100,000 per
                                                                     share
Van Kampen American Capital   Municipal Income Trust      VMT       Rate Adjusted Tax-Exempt
 Municipal Income Trust                                              Shares, liquidation
                                                                     preference $500,000 per
                                                                     share
 
                                         EXPLORER FUNDS
Explorer Institutional        Active Core Fund            Not       Not applicable
  Active Core Fund                                     applicable
Explorer Institutional        Limited Duration Fund       Not       Not applicable
 Limited Duration Fund                                 applicable

 
                                       A-3
   38
 
                                                                       ANNEX B-1
 
                                CLOSED-END FUNDS
                                    FORM OF
                         INVESTMENT ADVISORY AGREEMENT
 
  THIS INVESTMENT ADVISORY AGREEMENT, dated as of                 , 1997 (the
"Agreement"), by and between VAN KAMPEN AMERICAN CAPITAL          (the "Fund"),
a Massachusetts business trust (the "Trust"), and VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP. (the "Adviser"), a Delaware corporation.
 
  1. (a) RETENTION OF ADVISER BY FUND. Subject to the terms and conditions set
forth herein, the Fund hereby employs the Adviser to act as the investment
adviser for and to manage the investment and reinvestment of the assets of the
Fund in accordance with the Fund's investment objective and policies and
limitations, and to administer its affairs to the extent requested by, and
subject to the review and supervision of, the Board of Trustees of the Fund for
the period and upon the terms herein set forth. The investment of funds shall be
subject to all applicable restrictions of applicable law and of the Declaration
of Trust and By-Laws of the Trust, and resolutions of the Board of Trustees of
the Fund as may from time to time be in force and delivered or made available to
the Adviser.
 
  (b) ADVISER'S ACCEPTANCE OF EMPLOYMENT. The Adviser accepts such employment
and agrees during such period to render such services, to supply investment
research and portfolio management (including without limitation the selection of
securities for the Fund to purchase, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed, in accordance with
the policies adopted by the Fund and its Board of Trustees), to administer the
business affairs of the Fund, to furnish offices and necessary facilities and
equipment to the Fund, to provide administrative services for the Fund, to
render periodic reports to the Board of Trustees of the Fund, and to permit any
of its officers or employees to serve without compensation as trustees or
officers of the Fund if elected to such positions.
 
  (c) ESSENTIAL PERSONNEL. For a period of one year commencing on the effective
date of this Agreement, the Adviser and the Fund agree that the retention of (i)
the chief executive officer, president, chief financial officer and secretary of
the Adviser and (ii) each director, officer and employee of the Adviser or any
of its Affiliates (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) who serves as an officer of the Fund (each person referred to
in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his
or her current capacities, is in the best interest of the Fund and the Fund's
shareholders. In connection with the Adviser's acceptance of employment
hereunder, the Adviser hereby agrees and covenants for itself and on behalf of
its Affiliates that neither the
 
                                      B1-1
   39
 
Adviser nor any of its Affiliates shall make any material or significant
personnel changes or replace or seek to replace any Essential Person or cause to
be replaced any Essential Person, in each case without first informing the Board
of Trustees of the Fund in a timely manner. In addition, neither the Adviser nor
any Affiliate of the Adviser shall change or seek to change or cause to be
changed, in any material respect, the duties and responsibilities of any
Essential Person, in each case without first consulting with the Board of
Trustees of the Fund in a timely manner.
 
  (d) INDEPENDENT CONTRACTOR. The Adviser shall be deemed to be an independent
contractor under this Agreement and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund in any way
or otherwise be deemed as agent of the Fund.
 
  (e) NON-EXCLUSIVE AGREEMENT. The services of the Adviser to the Fund under
this Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
 
  2. (a) FEE. For the services and facilities described in Section 1, the Fund
will accrue daily and pay to the Adviser at the end of each calendar month an
investment management fee computed based on a fee rate (expressed as a
percentage per annum) applied to the average daily net assets of the Fund as
follows:
 


                                                   FEE PERCENTAGE PER
                 AVERAGE DAILY                      ANNUM OF AVERAGE
                  NET ASSETS                        DAILY NET ASSETS
                 -------------                     ------------------
                                                

 
  (b) DETERMINATION OF NET ASSET VALUE. The net asset value of the Fund shall be
calculated as of the close of the New York Stock Exchange on the last day the
Exchange is open for trading in each calendar week or such other time or times
as the trustees may determine in accordance with the provisions of applicable
law and the Declaration of Trust and By-Laws of the Trust, and resolutions of
the Board of Trustees of the Fund as from time to time in force. For the purpose
of the foregoing computations, on each such day when net asset value is not
calculated, the net asset value of a share of beneficial interest of the Fund
shall be deemed to be the net asset value of such share as of the close of
business of the last day on which such calculation was made.
 
  (c) PRORATION. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Adviser's fee
 
                                      B1-2
   40
 
on the basis of the number of days that the Agreement is in effect during such
month and year, respectively.
 
  3. EXPENSES. In addition to the fee of the Adviser, the Fund shall assume and
pay any expenses for services rendered by a custodian for the safekeeping of the
Fund's securities or other property, for keeping its books of account, for any
other charges of the custodian and for calculating the net asset value of the
Fund as provided above. The Adviser shall not be required to pay, and the Fund
shall assume and pay, the charges and expenses of its operations, including
compensation of the trustees (other than those who are interested persons of the
Adviser), charges and expenses of independent accountants, of legal counsel and
of any transfer or dividend disbursing agent, costs of acquiring and disposing
of portfolio securities, cost of listing shares of the New York Stock Exchange
or other exchange, interest (if any) on obligations incurred by the Fund, costs
of share certificates, membership dues in the Investment Company Institute or
any similar organization, costs of reports and notices to shareholders, costs of
registering shares of the Fund under the federal securities laws, miscellaneous
expenses and all taxes and fees to federal, state or other governmental agencies
on account of the registration of securities issued by the Fund, filing of
corporate documents or otherwise. The Fund shall not pay or incur any obligation
for any management or administrative expenses for which the Fund intends to seek
reimbursement from the Adviser without first obtaining the written approval of
the Adviser. The Adviser shall arrange, if desired by the Fund, for officers or
employees of the Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by the law.
 
  4. INTERESTED PERSONS. Subject to applicable statutes and regulations, it is
understood that trustees, officers, shareholders and agents of the Fund are or
may be interested in the Adviser as directors, officers, shareholders, agents or
otherwise and that the directors, officers, shareholders and agents of the
Adviser may be interested in the Fund as trustees, officers, shareholders,
agents or otherwise.
 
  5. LIABILITY. The Adviser shall not be liable for any error of judgment or of
law, or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Adviser in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
 
  6. (a) TERM. This Agreement shall become effective on the date hereof and
shall remain in full force until [            ], 1999 unless sooner terminated
as hereinafter provided. This Agreement shall continue in force from year to
year thereafter, but only for so long as such continuance is specifically
approved as least annually, in the manner required by the 1940 Act.
 
                                      B1-3
   41
 
  (b) TERMINATION. This Agreement shall automatically terminate in the event of
its assignment. This Agreement may be terminated at any time without the payment
of any penalty by the Fund or by the Adviser on sixty (60) days written notice
to the other party. The Fund may effect termination by action of the Board of
Trustees or by vote of a majority of the outstanding shares of stock of the
Fund, accompanied by appropriate notice. This Agreement may be terminated at any
time without the payment of any penalty and without advance notice by the Board
of Trustees or by vote of a majority of the outstanding shares of the Fund in
the event that it shall have been established by a court of competent
jurisdiction that the Adviser or any officer or director of the Adviser has
taken any action which results in a breach of the covenants of the Adviser set
forth herein.
 
  (c) PAYMENT UPON TERMINATION. Termination of this Agreement shall not affect
the right of the Adviser to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.
 
  7. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
thereby affected.
 
  8. NOTICES. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
 
  9. DISCLAIMER. The Adviser acknowledges and agrees that, as provided by
Section 5.5 of the Declaration of Trust of the Trust, the shareholders,
trustees, officers, employees and other agents of the Trust and the Fund shall
not personally be bound by or liable hereunder, nor shall resort be had to their
private property for the satisfaction of any obligation or claim hereunder.
 
  10. GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Illinois and the 1940 Act without reference to the
choice-of-law principles thereof. To the extent that the applicable laws of the
State of Illinois conflict with the applicable provisions of the 1940 Act, the
latter shall control.
 
  11. NAME. In connection with its employment hereunder, the Adviser hereby
agrees and covenants not to change its name without the prior consent of the
Board of Trustees of the Fund.
 
                                      B1-4
   42
 
  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
 
                              VAN KAMPEN AMERICAN CAPITAL
                              [           ] TRUST
 
                              By:
                                 -----------------------------------------------
                              Name:
                                   ---------------------------------------------
                              Title:
                                    --------------------------------------------
 
                              VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY
                              CORP.
 
                              By:
                                 -----------------------------------------------
                              Name:
                                   ---------------------------------------------
                              Title:
                                    --------------------------------------------
 
                                      B1-5
   43
 
                                                                       ANNEX B-2
 
                                 EXPLORER FUNDS
                                    FORM OF
                             NEW ADVISORY AGREEMENT
 
  The following is the proposed form of New Advisory Agreement that will be in
effect between each Fund and the Adviser if approved by shareholders of the
Funds. The form of New Advisory Agreement has been marked to show changes from
the Form of Current Advisory Agreement.
 
                                    FORM OF
                         INVESTMENT ADVISORY AGREEMENT
 
                        THE EXPLORER INSTITUTIONAL TRUST
                                PROPOSED FORM OF
                         INVESTMENT ADVISORY AGREEMENT
 
  THIS INVESTMENT ADVISORY AGREEMENT, dated as of              , 1997 (the
"Agreement"), by and between THE EXPLORER INSTITUTIONAL TRUST, a Massachusetts
business trust (the "Trust"), on behalf of its subtrust,       FUND (the "Fund")
and VAN KAMPEN AMERICAN CAPITAL MANAGEMENT INC. (the "Adviser"), a Delaware
corporation.
 
  1. (a) RETENTION OF ADVISER BY FUND. Subject to the terms and conditions set
forth herein, the Fund hereby employs the Adviser to act as the investment
adviser for and to manage the investment and reinvestment of the assets of the
Fund in accordance with the Fund's investment objective and policies and
limitations, and to administer its affairs to the extent requested by, and
subject to the review and supervision of, the Board of Trustees of the Fund for
the period and upon the terms herein set forth. The investment of funds shall be
subject to all applicable restrictions of applicable law and of the Declaration
of Trust and By-Laws of the Trust, and resolutions of the Board of Trustees of
the Fund as may from time to time be in force and delivered or made available to
the Adviser.
 
  (b) ADVISER'S ACCEPTANCE OF EMPLOYMENT. The Adviser accepts such employment
and agrees during such period to render such services, to supply investment
research and portfolio management (including without limitation the selection of
securities for the Fund to purchase, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed, in accordance with
the policies adopted by the Fund and its Board of Trustees), to administer the
business affairs of the Fund, to furnish offices and necessary facilities and
equipment to the Fund, to provide administrative services for the Fund, to
render periodic reports to
 
                                      B2-1
   44
 
the Board of Trustees of the Fund, and to permit any of its officers or
employees to serve without compensation as trustees or officers of the Fund if
elected to such positions.
 
  (c) ESSENTIAL PERSONNEL. For a period of one year commencing on the effective
date of this Agreement, the Adviser and the Fund agree that the retention of (i)
the chief executive officer, president, chief financial officer and secretary of
the Adviser and (ii) each director, officer and employee of the Adviser or any
of its Affiliates (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) who serves as an officer of the Fund (each person referred to
in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his
or her current capacities, is in the best interest of the Fund and the Fund's
shareholders. In connection with the Adviser's acceptance of employment
hereunder, the Adviser hereby agrees and covenants for itself and on behalf of
its Affiliates that neither the Adviser nor any of its Affiliates shall make any
material or significant personnel changes or replace or seek to replace any
Essential Person or cause to be replaced any Essential Person, in each case
without first informing the Board of Trustees of the Fund in a timely manner. In
addition, neither the Adviser nor any Affiliate of the Adviser shall change or
seek to change or cause to be changed, in any material respect, the duties and
responsibilities of any Essential Person, in each case without first consulting
with the Board of Trustees of the Fund in a timely manner.
 
  (d) INDEPENDENT CONTRACTOR. The Adviser shall be deemed to be an independent
contractor under this Agreement and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund in any way
or otherwise be deemed as agent of the Fund.
 
  (e) NON-EXCLUSIVE AGREEMENT. The services of the Adviser to the Fund under
this Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
 
  2. (a) FEE. For the services and facilities described in Section 1, the Fund
will accrue daily and pay to the Adviser at the end of each calendar month an
investment management fee computed based on a fee rate (expressed as a
percentage per annum) applied to the average daily net assets of the Fund as
follows:
 


                                       FEE PERCENTAGE
                                        PER ANNUM OF
       AVERAGE DAILY                   AVERAGE DAILY
         NET ASSETS                      NET ASSETS
       -------------                   --------------
                             

 
                                      B2-2
   45
 
  (b) EXPENSE LIMITATION. The Adviser's compensation for any fiscal year of the
Fund shall be reduced by the amount, if any, by which the Fund's expense for
such fiscal year exceeds the most restrictive applicable expense limitation in
any jurisdiction in which the Fund's shares are qualified for offer and sale, as
such limitations set forth in the most recent notice thereof furnished by the
Adviser to the Fund. For purposes of this paragraph there shall be excluded from
computation of the Fund's expenses any amount borne directly or indirectly by
the Fund which is permitted to be excluded from the computation of such
limitation by such statute or regulatory authority. If for any month expenses of
the Fund properly included in such calculation exceed 1/12 of the amount
permitted annually by the most restrictive applicable expense limitation, the
payment to the Adviser for that month shall be reduced, and, if necessary, the
Adviser shall make a refund payment to the Fund, so that the total net expense
for the month will not exceed 1/12 of such amount. As of the end of the Fund's
fiscal year, however, the computations and payments shall be readjusted so that
the aggregate compensation payable to the Adviser for the year is equal to the
fee set forth in subsection (a) of this Section 2, diminished to the extent
necessary so that the expenses for the year do not exceed those permitted by the
applicable expense limitation.
 
  In addition to the expense limitation described above, during the term of this
Agreement, the Adviser may determine to waive or reimburse to the Fund all or a
portion of its fees, in order to insure that the total expenses of the Fund,
exclusive of extraordinary costs or expenses such as legal, accounting or other
costs of expenses not incurred in the course of the Fund's ongoing operations,
and expenditures which are capitalized in accordance with generally accepted
accounting principles, but including fees paid to the Adviser pursuant to
subsection 2(a) above, shall not exceed such expense limitation as may be set
forth in the Fund's prospectus from time to time. Interest, taxes, brokers'
commissions and other charges relating to the purchase and sale of securities
are not regarded as expenses for this purpose. The Fund agrees that any waiver
or reimbursement to the Fund by the Adviser pursuant to this paragraph shall be
deemed a contingent liability of the Fund which shall be subject to potential
reimbursement by the Fund to the Adviser, provided the Fund's assets reach a
sufficient size to permit such reimbursement to be made without causing the
annual expense ratio of the Fund to exceed the applicable expense limitation set
forth in the Fund's prospectus from time to time, or such lower amount as may be
imposed by any state expense limitation to which the Fund is subject, and
provided such reimbursement is made within four (4) years of recognition of the
contingent liability by the Fund.
 
  (c) DETERMINATION OF NET ASSET VALUE. The net asset value of the Fund shall be
calculated as of the close of the New York Stock Exchange on each day the
Exchange is open for trading or such other time or times as the trustees may
determine in accordance with the provisions of applicable law and the
Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of
Trustees of the
 
                                      B2-3
   46
 
Fund as from time to time in force. For the purpose of the foregoing
computations, on each such day when net asset value is not calculated, the net
asset value of a share of beneficial interest of the Fund shall be deemed to be
the net asset value of such share as of the close of business of the last day on
which such calculation was made.
 
  (d) PRORATION. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Adviser's fee on the basis of the number of days that the Agreement is in effect
during such month and year, respectively.
 
  3. EXPENSES. In addition to the fee of the Adviser, the Fund shall assume and
pay any expenses for services rendered by a custodian for the safekeeping of the
Fund's securities or other property, for keeping its books of account, for any
other charges of the custodian and for calculating the net asset value of the
Fund as provided above. The Adviser shall not be required to pay, and the Fund
shall assume and pay, the charges and expenses of its operations, including
compensation of the trustees (other than those who are interested persons of the
Adviser and other than those who are interested persons of the distributor of
the Fund but not of the Adviser, if the distributor has agreed to pay such
compensation), charges and expenses of independent accountants, of legal counsel
and of any transfer or dividend disbursing agent, costs of acquiring and
disposing of portfolio securities, interest (if any) on obligations incurred by
the Fund, costs of share certificates, membership dues in the Investment Company
Institute or any similar organization, costs of reports and notices to
shareholders, costs of registering shares of the Fund under the federal
securities laws, miscellaneous expenses and all taxes and fees to federal, state
or other governmental agencies on account of the registration of securities
issued by the Fund, filing of corporate documents or otherwise. The Fund shall
not pay or incur any obligation for any management or administrative expenses
for which the Fund intends to seek reimbursement from the Adviser without first
obtaining the written approval of the Adviser. The Adviser shall arrange, if
desired by the Fund, for officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of the Fund if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by the law.
 
  4. INTERESTED PERSONS. Subject to applicable statutes and regulations, it is
understood that trustees, officers, shareholders and agents of the Fund are or
may be interested in the Adviser as directors, officers, shareholders, agents or
otherwise and that the directors, officers, shareholders and agents of the
Adviser may be interested in the Fund as trustees, officers, shareholders,
agents or otherwise.
 
  5. LIABILITY. The Adviser shall not be liable for any error of judgment or of
law, or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or
 
                                      B2-4
   47
 
gross negligence on the part of the Adviser in the performance of its
obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
 
  6. (a) TERM. This Agreement shall become effective on the date hereof and
shall remain in full force until [             ], 1999 unless sooner terminated
as hereinafter provided. This Agreement shall continue in force from year to
year thereafter, but only for so long as such continuance is specifically
approved as least annually, in the manner required by the 1940 Act.
 
  (b) TERMINATION. This Agreement shall automatically terminate in the event of
its assignment. This Agreement may be terminated at any time without the payment
of any penalty by the Fund or by the Adviser on sixty (60) days written notice
to the other party. The Fund may effect termination by action of the Board of
Trustees or by vote of a majority of the outstanding shares of stock of the
Fund, accompanied by appropriate notice. This Agreement may be terminated at any
time without the payment of any penalty and without advance notice by the Board
of Trustee or by vote of a majority of the outstanding shares of the Fund in the
event that it shall have been established by a court of competent jurisdiction
that the Adviser or any officer or director of the Adviser has taken any action
which results in a breach of the covenants of the Adviser set forth herein.
 
  (c) PAYMENT UPON TERMINATION. Termination of this Agreement shall not affect
the right of the Adviser to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.
 
  7. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
thereby affected.
 
  8. NOTICES. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
 
  9. DISCLAIMER. The Adviser acknowledges and agrees that, as provided in the
Declaration of Trust of the Trust, the shareholders, trustees, officers,
employees and other agents of the Trust and the Fund shall not personally be
bound by or liable hereunder, nor shall resort be had to their private property
for the satisfaction of any obligation or claim hereunder.
 
  10. USE OF THE NAME "EXPLORER INSTITUTIONAL". Van Kampen American Capital Inc.
("Van Kampen") has consented to the use by the Trust of the identifying word or
name "Explorer Institutional" in the name of the Trust and its Series. Such
consent is conditioned upon the employment of Van Kampen, its successors or any
affiliate thereof, as investment advisor and distributor of the Trust and each
of its Series. As between the Trust and itself, Van Kampen controls the use of
the name
 
                                      B2-5
   48
 
of the Trust insofar as such name contains "Explorer Institutional." The name or
identifying word "Explorer Institutional" may be used from time to time in other
connections and for other purposes by Van Kampen or affiliated entities. Van
Kampen may require the Trust to cease using "Explorer Institutional" in the name
of the Trust if the Trust ceases to employ, for any reason, Van Kampen, an
affiliate, or any successor as investment advisor and distributor of the Trust
and each of its Series.
 
  11. NAME. In connection with its employment hereunder, the Adviser hereby
agrees and covenants not to change its name without the prior consent of the
Board of Trustees of the Fund.
 
  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
 
THE EXPLORER
INSTITUTIONAL TRUST,
on behalf of its sub-trust
[           ] FUND
 
By:
   -----------------------------
    Name:
    Title:


VAN KAMPEN
AMERICAN CAPITAL
MANAGEMENT INC.
 
By:
   -----------------------------
    Name:
    Title:
 
                                      B2-6
   49
 
                                                                         ANNEX C
 
  The table below sets forth, for each investment company advised by Advisory
Corp. and Management, Inc., such fund's net assets and the rate at which it
compensates Advisory Corp. and Management, Inc. for investment advisory
services. Funds for which Advisory Corp. has waived or reduced its compensation
are marked by an "*". There can be no assurance that Advisory Corp. will
continue such waiver or reduction.


                                                                     NUMBER OF         NUMBER OF
                                                                   COMMON SHARES    PREFERRED SHARES
                                                                    OUTSTANDING       OUTSTANDING       NET ASSETS
                                                                       AS OF             AS OF            AS OF           ANNUAL
                                                                     MARCH 31,         MARCH 31,        MARCH 31,      ADVISORY FEE
                                FUNDS                                   1997              1997             1997          SCHEDULE
                                -----                              -------------    ----------------    ----------     ------------
                                                                                                         
I. ADVISORY AGREEMENTS BETWEEN ADVISORY CORP. AND
   THE CLOSED-END FUNDS
A.   Investment Grade Municipal Trust............................                           250        $ 74,737,632        .600%
     Trust for Insured Municipals................................                         1,800        $246,247,231        
     Municipal Income Trust......................................                           330        $441,595,824
     California Municipal Trust..................................                           400        $ 52,733,080

B.   Trust for Investment Grade Municipals.......................                         5,300        $                   .650%
     Trust for Investment Grade California Municipals............                           900        $
     Trust for Investment Grade New York Municipals..............                         1,200        $
     Trust for Investment Grade Pennsylvania Municipals..........                         1,400        $
     Trust for Investment Grade Florida Municipals...............                           800        $
     Trust for Investment Grade New Jersey Municipals............                           800        $
     Municipal Opportunity Trust.................................                         3,000        $
     Advantage Municipal Income Trust............................                         3,800        $
     Advantage Pennsylvania Municipal Income Trust...............                           800        $
     New Jersey Value Municipal Income Trust.....................                           500        $
     Ohio Value Municipal Income Trust...........................                           300        $
     Massachusetts Value Municipal Income Trust..................                           500        $
     New York Value Municipal Income Trust.......................                           800        $
     Strategic Sector Municipal Trust............................                         1,900        $
 

 
                                      C-1
   50


                                                                     NUMBER OF         NUMBER OF
                                                                   COMMON SHARES    PREFERRED SHARES
                                                                    OUTSTANDING       OUTSTANDING        NET ASSETS
                                                                       AS OF             AS OF             AS OF
                                                                     MARCH 31,         MARCH 31,         MARCH 31,
                                FUNDS                                   1997              1997              1997
                                -----                              -------------    ----------------     ----------
                                                                                           
     California Value Municipal Income Trust.....................                             1,200    $
     Pennsylvania Value Municipal Income Trust...................                               900    $
     Value Municipal Income Trust................................                             4,500    $
     Florida Municipal Opportunity Trust.........................                               320    $
     Municipal Opportunity Trust II..............................                             2,300    $
     Advantage Municipal Income Trust II.........................                             1,600    $
C.   Municipal Trust.............................................                             6,000    $
     California Quality Municipal Trust..........................                             1,500    $
     New York Quality Municipal Trust............................                               900    $
     Pennsylvania Quality Municipal Trust........................                             1,300    $
     Florida Quality Municipal Trust.............................                             1,000    $
     Ohio Quality Municipal Trust................................                               700    $
     Select Sector Municipal Trust...............................                             1,360    $
D.   VIT or Intermediate Term High Income Trust..................                               588    $
     VLT or Limited Term High Income Trust.......................                               900    $
E.   Prime Rate Income Trust.....................................                         N/A          $
II. ADVISORY AGREEMENTS BETWEEN ADVISORY CORP. AND OTHER INVESTMENT COMPANIES
 

                                                                                       NUMBER OF
                                                                                         SHARES
                                                                                      OUTSTANDING        NET ASSETS
                                                                                         AS OF             AS OF
                                                                                       MARCH 31,         MARCH 31,
                                FUNDS                                                     1997              1997
     ------------------------------------------------------------                    --------------    --------------
                                                                                           
A.   Van Kampen American Capital California Insured Tax Free Fund[*].............                      $
 

  
 
C.   .700%
 
D.   .750%
 
E.   First $4.0 Billion .950%
     Next $3.5 Billion  .900%
     Next $2.5 Billion  .875%
     Over $10.0 Billion .850%
     
II.
 
             ANNUAL
          ADVISORY FEE
            SCHEDULE
     -----------------------
A.   First $100 Million .500%
     Next $150 Million .450%
     Next $250 Million .425%
     Over $500 Million .400%

 
                                      C-2
   51
 


                                                                     NUMBER OF
                                                                       SHARES
                                                                    OUTSTANDING       NET ASSETS
                                                                       AS OF            AS OF                ANNUAL
                                                                     MARCH 31,        MARCH 31,           ADVISORY FEE
                                FUNDS                                   1997             1997               SCHEDULE
                                -----                               -----------       ----------          ------------
                                                                                         
B.   Van Kampen American Capital Insured Tax Free Income Fund....                   $                First $500 Million .525%
                                                                                    $                Next $500 Million .500%
                                                                                    $                Next $500 Million .475%
                                                                                    $                Over $1.5 Billion .450%
C.   Van Kampen American Capital Tax Free High Income Fund.......                   $                First $500 Million .500%
     Van Kampen American Capital Municipal Income Fund*..........                   $                Over $500 Million .450%
     Van Kampen American Capital Intermediate Term Municipal
      Income Fund*...............................................
     Van Kampen American Capital Florida Insured Tax Free Income
      Fund*......................................................
D.   Van Kampen American Capital New Jersey Tax Free Income
      Fund*......................................................                   $                First $500 Million .600%
     Van Kampen American Capital New York Tax Free Income
      Fund*......................................................                   $                Over $500 Million .500%
     Van Kampen American Capital Pennsylvania Tax Free Income
      Fund.......................................................
E.   Van Kampen American Capital High Yield Fund*................                   $                First $500 Million .750%
                                                                                                     Over $500 Million .650%

F.   Van Kampen American Capital Short-Term Global Income Fund...                   $                       .550%

G.   Van Kampen American Capital Strategic Income Fund...........                   $                First $500 Million .750%
                                                                                                     
     Van Kampen American Capital Growth Fund.....................       6,483,066   $                Next $500 Million .700%
     Van Kampen American Capital Value Fund......................         104,821   $                Over $1 Billion .650%
     Van Kampen American Capital Aggressive Growth Fund..........      18,325,585   $
H.   Van Kampen American Capital Utility Fund....................                   $                First $500 Million .650%
                                                                                                     
                                                                                                     Next $500 Million .600%
                                                                                                     Over $1 Billion .550%

 
                                      C-3
   52


                                                                     NUMBER OF
                                                                       SHARES
                                                                    OUTSTANDING       NET ASSETS
                                                                       AS OF            AS OF                ANNUAL
                                                                     MARCH 31,        MARCH 31,           ADVISORY FEE
                                FUNDS                                   1997             1997               SCHEDULE
                                -----                               -----------       ----------          ------------
                                                                                         
I.   Van Kampen American Capital Balanced Fund*..................                   $                First $500 Million .700%
                                                                                                     
                                                                                                     Over $500 Million  .650%
J.   U.S. Government Fund........................................                   $                First $500 Million .550%
                                                                                                     
                                                                                                     Next $500 Million  .525%
                                                                                                     Next $2 Billion    .500%
                                                                                                     Next $2 Billion    .475%
                                                                                                     Next $2 Billion    .450%
                                                                                                     Next $2 Billion    .425%
                                                                                                     Next $2 Billion    .400%
K.   Tax Free Money Fund*........................................                   $                First $500 Million .500%
                                                                                                     
                                                                                                     Next $500 Million  .475%
                                                                                                     Next $500 Million  .425%
                                                                                                     Over $1.5 Billion  .375%
L.   Great American Companies Fund...............................         101,964   $                First $500 Million .700%
                                                                                                     
     Prospector Fund.............................................         104,019   $                Next $500 Million  .650%
M.   Foreign Securities Fund.....................................          96,305   $                N/A
III. ADVISORY AGREEMENTS BETWEEN VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC. AND THE EXPLORER FUNDS
 

                                                                     NUMBER OF
                                                                       SHARES
                                                                    OUTSTANDING       NET ASSETS
                                                                       AS OF            AS OF                ANNUAL
                                                                     MARCH 31,        MARCH 31,           ADVISORY FEE
                                FUNDS                                   1997             1997               SCHEDULE
     ------------------------------------------------------------  --------------   --------------   -----------------------
                                                                                         
A.   Active Core Fund............................................         568,118   $                First $1 Billion .300%
     Limited Duration Fund.......................................         819,333   $                Over $1 Billion  .250%

 
                                      C-4
   53
 
                                                                         ANNEX D
 
  The following table sets forth amounts paid by each Fund during its most
recently completed fiscal year pursuant to its investment advisory,
administration, fund accounting, transfer agency, legal services and
distribution agreements.
 


                                                                                               TRANSFER       FUND        LEGAL
                                                  ADVISORY     ADMINISTRATION   DISTRIBUTION    AGENCY     ACCOUNTING    SERVICES
                     FUND                         EXPENSES        EXPENSES        EXPENSES     EXPENSES     EXPENSES     EXPENSES
                     ----                         --------     --------------   ------------   --------    ----------    --------
                                                                                                       
Investment Grade Municipal Trust...............  $              $               $              $            $            $
California Municipal Trust.....................
Select Sector Municipal Trust..................
Municipal Trust................................
California Quality Municipal Trust.............
New York Quality Municipal Trust...............
Pennsylvania Quality Municipal Trust...........
Florida Quality Municipal Trust................
Ohio Quality Municipal Trust...................
Trust for Insured Municipals...................
Trust for Investment Grade Municipals..........
Trust for Investment Grade California
  Municipals...................................
Trust for Investment Grade New York
  Municipals...................................
Trust for Investment Grade Pennsylvania
  Municipals...................................
Trust for Investment Grade Florida
  Municipals...................................
Trust for Investment Grade New Jersey
  Municipals...................................
Municipal Opportunity Trust....................
Advantage Municipal Income Trust...............
Advantage Pennsylvania Municipal Income
  Trust........................................
New Jersey Value Municipal Income Trust........
Ohio Value Municipal Income Trust..............

 
                                      D-1
   54
 


                                                                                    FUND      TRANSFER     LEGAL
                                                  ADVISORY     ADMINISTRATION    ACCOUNTING    AGENCY     SERVICES   DISTRIBUTION
                     FUND                         EXPENSES        EXPENSES        EXPENSES    EXPENSES    EXPENSES     EXPENSES
                     ----                         --------     --------------    ----------   --------    --------   ------------
                                                                                                   
Massachusetts Value Municipal Income Trust.....  $              $                 $           $           $          $
Strategic Sector Municipal Trust...............
New York Value Municipal Income Trust..........
California Value Municipal Income Trust........
Pennsylvania Value Municipal Income Trust......
Value Municipal Income Trust...................
Florida Municipal Opportunity Trust............
Municipal Opportunity Trust II.................
Advantage Municipal Income Trust II............
Limited Term High Income Trust.................
Intermediate Term High Income Trust............
Municipal Income Trust.........................
Active Core Fund...............................
Limited Duration Fund..........................

 
                                      D-2
   55
 
                                                                         ANNEX E
                              5% HOLDERS FOR PROXY
   
                      RECORD DATE OF [                  ]
    
 
   


    FUND NAME AND           NAME AND ADDRESS OF           AMOUNT OF         PERCENT OF
   CLASS OF SHARES            BENEFICIAL OWNER       BENEFICIAL OWNERSHIP     CLASS
   ---------------          -------------------      --------------------   ----------
                                                                   
ACTIVE CORE FUND
 
                                         E-1

    
 
   


    FUND NAME AND           NAME AND ADDRESS OF           AMOUNT OF         PERCENT OF
   CLASS OF SHARES            BENEFICIAL OWNER       BENEFICIAL OWNERSHIP     CLASS
   ---------------          -------------------      --------------------   ----------
                                                                   
 
                                         E-2

    
   56
 
                                                                         ANNEX F
 
     1996 AGGREGATE COMPENSATION BEFORE DEFERRAL FROM EACH CLOSED-END FUND
 


                    NAME OF FUND                       FISCAL YEAR-END   ARCH    DAMMEYER   KERR    MYERS   SONNENSCHEIN   WHALEN
                    ------------                       ---------------   ----    --------   ----    -----   ------------   ------
                                                                                                      
Municipal Income Trust...............................       06/30        3,757    3,757     3,757   3,757      3,757       3,750
California Municipal Trust...........................       06/30        3,757    3,757     3,757   3,757      3,757       3,750
Municipal Trust......................................       08/31        4,007    4,007     4,007   4,007      4,007       4,000
California Quality Municipal Trust...................       08/31        4,007    4,007     4,007   4,007      4,007       4,000
New York Quality Municipal Trust.....................       08/31        4,007    4,007     4,007   4,007      4,007       4,000
Florida Quality Municipal Trust......................       08/31        4,007    4,007     4,007   4,007      4,007       4,000
Ohio Quality Municipal Trust.........................       08/31        4,007    4,007     4,007   4,007      4,007       4,000
Pennsylvania Quality Municipal Trust.................       08/31        4,007    4,007     4,007   4,007      4,007       4,000
Advantage Municipal Income Trust.....................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Advantage Municipal Income Trust II..................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Advantage Pennsylvania Municipal Income Trust........       10/31        3,757    3,757     3,757   3,757      3,757       3,750
California Value Municipal Income Trust..............       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Florida Municipal Opportunity Trust..................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Investment Grade Municipal Trust.....................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Massachusetts Value Municipal Income Trust...........       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Municipal Opportunity Trust..........................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Municipal Opportunity Trust II.......................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
New Jersey Value Municipal Income Trust..............       10/31        3,757    3,757     3,757   3,757      3,757       3,750
New York Value Municipal Income Trust................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Ohio Value Municipal Income Trust....................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Pennsylvania Value Municipal Income Trust............       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Select Sector Municipal Trust........................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Strategic Sector Municipal Trust.....................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Trust for Insured Municipals.........................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Trust for Investment Grade California Municipals.....       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Trust for Investment Grade Florida Municipals........       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Trust for Investment Grade Municipals................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Trust for Investment Grade New Jersey Municipals.....       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Trust for Investment Grade New York Municipals.......       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Trust for Investment Grade Pennsylvania Municipals...       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Value Municipal Income Trust.........................       10/31        3,757    3,757     3,757   3,757      3,757       3,750
Intermediate Term High Income Trust..................       12/31        4,000    4,000     4,000   4,000      4,000       4,000
Limited Term High Income Trust.......................       12/31        4,000    4,000     4,000   4,000      4,000       4,000

   57
 
                                                                         ANNEX G
 
         1996 AGGREGATE COMPENSATION DEFERRED FOR EACH CLOSED-END FUND
 


                     NAME OF FUND                       FISCAL YEAR-END   ARCH   DAMMEYER   KERR    MYERS   SONNENSCHEIN   WHALEN
                     ------------                       ---------------   ----   --------   ----    -----   ------------   ------
                                                                                                      
Municipal Income Trust................................       06/30         0      3,757     3,757     0        3,757       3,750
California Municipal Trust............................       06/30         0      3,757     3,757     0        3,757       3,750
Municipal Trust.......................................       08/31         0      3,757     3,757     0        3,757       3,750
California Quality Municipal Trust....................       08/31         0      3,757     3,757     0        3,757       3,750
New York Quality Municipal Trust......................       08/31         0      3,757     3,757     0        3,757       3,750
Florida Quality Municipal Trust.......................       08/31         0      3,757     3,757     0        3,757       3,750
Ohio Quality Municipal Trust..........................       08/31         0      3,757     3,757     0        3,757       3,750
Pennsylvania Quality Municipal Trust..................       08/31         0      3,757     3,757     0        3,757       3,750
Advantage Municipal Income Trust......................       10/31         0      3,507     3,507     0        3,507       3,500
Advantage Municipal Income Trust II...................       10/31         0      3,507     3,507     0        3,507       3,500
Advantage Pennsylvania Municipal Income Trust.........       10/31         0      3,507     3,507     0        3,507       3,500
California Value Municipal Income Trust...............       10/31         0      3,507     3,507     0        3,507       3,500
Florida Municipal Opportunity Trust...................       10/31         0      3,507     3,507     0        3,507       3,500
Investment Grade Municipal Trust......................       10/31         0      3,507     3,507     0        3,507       3,500
Massachusetts Value Municipal Income Trust............       10/31         0      3,507     3,507     0        3,507       3,500
Municipal Opportunity Trust...........................       10/31         0      3,507     3,507     0        3,507       3,500
Municipal Opportunity Trust II........................       10/31         0      3,507     3,507     0        3,507       3,500
New Jersey Value Municipal Income Trust...............       10/31         0      3,507     3,507     0        3,507       3,500
New York Value Municipal Income Trust.................       10/31         0      3,507     3,507     0        3,507       3,500
Ohio Value Municipal Income Trust.....................       10/31         0      3,507     3,507     0        3,507       3,500
Pennsylvania Value Municipal Income Trust.............       10/31         0      3,507     3,507     0        3,507       3,500
Select Sector Municipal Trust.........................       10/31         0      3,507     3,507     0        3,507       3,500
Strategic Sector Municipal Trust......................       10/31         0      3,507     3,507     0        3,507       3,500
Trust for Insured Municipals..........................       10/31         0      3,507     3,507     0        3,507       3,500
Trust for Investment Grade California Municipals......       10/31         0      3,507     3,507     0        3,507       3,500
Trust for Investment Grade Florida Municipals.........       10/31         0      3,507     3,507     0        3,507       3,500
Trust for Investment Grade Municipals.................       10/31         0      3,507     3,507     0        3,507       3,500
Trust for Investment Grade New Jersey Municipals......       10/31         0      3,507     3,507     0        3,507       3,500
Trust for Investment Grade New York Municipals........       10/31         0      3,507     3,507     0        3,507       3,500
Trust for Investment Grade Pennsylvania Municipals....       10/31         0      3,507     3,507     0        3,507       3,500
Value Municipal Income Trust..........................       10/31         0      3,507     3,507     0        3,507       3,500
Intermediate Term High Income Trust...................       12/31         0      3,750     3,750     0        3,750       3,750
Limited Term High Income Trust........................       12/31         0      3,750     3,750     0        3,750       3,750

   58
 
                                                                         ANNEX H
 
   CUMULATIVE COMPENSATION DEFERRED (PLUS INTEREST) FROM EACH CLOSED-END FUND
 


                    NAME OF FUND                       FISCAL YEAR-END   ARCH   DAMMEYER    KERR    MYERS   SONNENSCHEIN   WHALEN
                    ------------                       ---------------   ----   --------    ----    -----   ------------   ------
                                                                                                      
Municipal Income Trust...............................       06/30         0       8,052     8,039     0         8,869      5,811
California Municipal Trust...........................       06/30         0       8,052     8,039     0         8,869      5,811
Municipal Trust......................................       08/31         0       9,308     9,005     0        10,159      6,870
California Quality Municipal Trust...................       08/31         0       9,308     9,005     0        10,159      6,870
New York Quality Municipal Trust.....................       08/31         0       9,308     9,005     0        10,159      6,870
Florida Quality Municipal Trust......................       08/31         0       9,308     9,005     0        10,159      6,870
Ohio Quality Municipal Trust.........................       08/31         0       9,308     9,005     0        10,159      6,870
Pennsylvania Quality Municipal Trust.................       08/31         0       9,308     9,005     0        10,159      6,870
Advantage Municipal Income Trust.....................       10/31         0       9,329     9,110     0        10,479      6,994
Advantage Municipal Income Trust II..................       10/31         0       9,329     9,110     0        10,479      6,994
Advantage Pennsylvania Municipal Income Trust........       10/31         0       9,329     9,110     0        10,479      6,994
California Value Municipal Income Trust..............       10/31         0       9,329     9,110     0        10,479      6,994
Florida Municipal Opportunity Trust..................       10/31         0       9,329     9,110     0        10,479      6,994
Investment Grade Municipal Trust.....................       10/31         0       9,329     9,110     0        10,479      6,994
Massachusetts Value Municipal Income Trust...........       10/31         0       9,329     9,110     0        10,479      6,994
Municipal Opportunity Trust..........................       10/31         0       9,329     9,110     0        10,479      6,994
Municipal Opportunity Trust II.......................       10/31         0       9,329     9,110     0        10,479      6,994
New Jersey Value Municipal Income Trust..............       10/31         0       9,329     9,110     0        10,479      6,994
New York Value Municipal Income Trust................       10/31         0       9,329     9,110     0        10,479      6,994
Ohio Value Municipal Income Trust....................       10/31         0       9,329     9,110     0        10,479      6,994
Pennsylvania Value Municipal Income Trust............       10/31         0       9,329     9,110     0        10,479      6,994
Select Sector Municipal Trust........................       10/31         0       9,329     9,110     0        10,479      6,994
Strategic Sector Municipal Trust.....................       10/31         0       9,329     9,110     0        10,479      6,994
Trust for Insured Municipals.........................       10/31         0       9,329     9,110     0        10,479      6,994
Trust for Investment Grade California Municipals.....       10/31         0       9,329     9,110     0        10,479      6,994
Trust for Investment Grade Florida Municipals........       10/31         0       9,329     9,110     0        10,479      6,994
Trust for Investment Grade Municipals................       10/31         0       9,329     9,110     0        10,479      6,994
Trust for Investment Grade New Jersey Municipals.....       10/31         0       9,329     9,110     0        10,479      6,994
Trust for Investment Grade New York Municipals.......       10/31         0       9,329     9,110     0        10,479      6,994
Trust for Investment Grade Pennsylvania Municipals...       10/31         0       9,329     9,110     0        10,479      6,994
Value Municipal Income Trust.........................       10/31         0       9,329     9,110     0        10,479      6,994
Intermediate Term High Income Trust..................       12/31         0      10,188    10,341     0        12,082      8,276
Limited Term High Income Trust.......................       12/31         0      10,188    10,341     0        12,082      8,276

   59
 
                                                                         ANNEX I
 
              1996 RETIREMENT BENEFITS ACCRUED PER CLOSED-END FUND
 


                     NAME OF FUND                       FISCAL YEAR-END   ARCH   DAMMEYER   KERR   MYERS    SONNENSCHEIN   WHALEN
                     ------------                       ---------------   ----   --------   ----   -----    ------------   ------
                                                                                                      
Municipal Income Trust................................       06/30        $269     $466     $775   $1,645       $367        $519
California Municipal Trust............................       06/30        $268     $465     $775   $1,644       $367        $520
Municipal Trust.......................................       08/31        $228     $404     $748   $1,592       $361        $458
California Quality Municipal Trust....................       08/31        $228     $404     $748   $1,592       $361        $458
New York Quality Municipal Trust......................       08/31        $228     $404     $748   $1,592       $361        $458
Florida Quality Municipal Trust.......................       08/31        $228     $404     $748   $1,592       $361        $458
Ohio Quality Municipal Trust..........................       08/31        $228     $404     $748   $1,592       $361        $458
Pennsylvania Quality Municipal Trust..................       08/31        $228     $404     $748   $1,592       $361        $458
Advantage Municipal Income Trust......................       10/31        $213     $383     $733   $1,578       $358        $434
Advantage Municipal Income Trust II...................       10/31        $198     $360     $701   $1,411       $353        $409
Advantage Pennsylvania Municipal Income Trust.........       10/31        $213     $383     $733   $1,578       $358        $434
California Value Municipal Income Trust...............       10/31        $198     $359     $698   $1,403       $351        $407
Florida Municipal Opportunity Trust...................       10/31        $198     $360     $701   $1,411       $353        $409
Investment Grade Municipal Trust......................       10/31        $248     $436     $756   $1,586       $362        $488
Massachusetts Value Municipal Income Trust............       10/31        $198     $359     $698   $1,403       $351        $407
Municipal Opportunity Trust...........................       10/31        $213     $382     $731   $1,574       $357        $432
Municipal Opportunity Trust II........................       10/31        $198     $360     $701   $1,411       $353        $409
New Jersey Value Municipal Income Trust...............       10/31        $198     $359     $698   $1,403       $351        $407
New York Value Municipal Income Trust.................       10/31        $198     $359     $698   $1,403       $351        $407
Ohio Value Municipal Income Trust.....................       10/31        $198     $359     $698   $1,403       $351        $407
Pennsylvania Value Municipal Income Trust.............       10/31        $198     $359     $698   $1,403       $351        $407
Select Sector Municipal Trust.........................       10/31        $198     $360     $701   $1,411       $353        $409
Strategic Sector Municipal Trust......................       10/31        $200     $363     $706   $1,419       $354        $412
Trust for Insured Municipals..........................       10/31        $214     $384     $734   $1,583       $359        $434
Trust for Investment Grade California Municipals......       10/31        $213     $382     $732   $1,575       $357        $431
Trust for Investment Grade Florida Municipals.........       10/31        $213     $382     $732   $1,575       $357        $431
Trust for Investment Grade Municipals.................       10/31        $214     $384     $734   $1,583       $359        $434
Trust for Investment Grade New Jersey Municipals......       10/31        $213     $382     $732   $1,575       $357        $431
Trust for Investment Grade New York Municipals........       10/31        $213     $382     $732   $1,575       $357        $431
Trust for Investment Grade Pennsylvania Municipals....       10/31        $213     $382     $732   $1,575       $357        $431
Value Municipal Income Trust..........................       10/31        $198     $359     $698   $1,403       $351        $407
Intermediate Term High Income Trust...................       12/31        $247     $433     $752   $1,574       $362        $484
Limited Term High Income Trust........................       12/31        $244     $429     $749   $1,561       $361        $480

   60
 
                                                                         ANNEX J
 


                                             ARCH      DAMMEYER      KERR      MCDONNELL      MYERS      SONNENSCHEIN      WHALEN
                                             ----      --------      ----      ---------      -----      ------------      ------
                                                                                                      
California Municipal Trust (VKC).......      1988        1998        1992        1998         1998           1994           1988
Intermediate Term High Income Trust
 (VIT).................................      1988        1988        1992        1988         1988           1994           1988
Municipal Income Trust (VMT)...........      1988        1988        1992        1988         1988           1994           1988
Investment Grade Municipal Trust
 (VIG).................................      1989        1989        1992        1989         1989           1994           1989
Limited Term High Income Trust (VLT)...      1989        1989        1992        1989         1989           1994           1989
California Quality Municipal Trust
 (VQC).................................      1991        1991        1992        1991         1991           1994           1991
Florida Quality Municipal Trust
 (VFM).................................      1991        1991        1992        1991         1991           1994           1991
Municipal Trust (VKQ)..................      1991        1991        1992        1991         1991           1994           1991
New York Quality Municipal Trust
 (VNM).................................      1991        1991        1992        1991         1991           1994           1991
Ohio Quality Municipal Trust (VOQ).....      1991        1991        1992        1991         1991           1994           1991
Pennsylvania Quality Municipal Trust
 (VPQ).................................      1991        1991        1992        1991         1991           1994           1991
Trust for Insured Municipals (VIM).....      1991        1991        1992        1991         1991           1994           1991
Trust for Investment Grade Municipals
 (VGM).................................      1991        1991        1992        1991         1991           1994           1991
Advantage Municipal Income Trust
 (VKA).................................      1992        1992        1992        1992         1992           1994           1992
Advantage Pennsylvania Municipal Income
 Trust (VAP)...........................      1992        1992        1992        1992         1992           1994           1992
Municipal Opportunity Trust (VMO)......      1992        1992        1992        1992         1992           1994           1992
Strategic Sector Municipal Trust
 (VKS).................................      1992        1992        1992        1992         1992           1994           1992
Trust for Investment Grade California
 Municipals (VIC)......................      1992        1992        1992        1992         1992           1994           1992
Trust for Investment Grade Florida
 Municipals (VTF)......................      1992        1992        1992        1992         1992           1994           1992
Trust for Investment Grade New Jersey
 Municipals (VTJ)......................      1992        1992        1992        1992         1992           1994           1992
Trust for Investment Grade New York
 Municipals (VTN)......................      1992        1992        1992        1992         1992           1994           1992
Trust for Investment Grade Pennsylvania
 Municipals (VTP)......................      1992        1992        1992        1992         1992           1994           1992
Advantage Municipal Income Trust II
 (VKI).................................      1993        1993        1993        1993         1993           1994           1993
California Value Municipal Income Trust
 (VCV).................................      1993        1993        1993        1993         1993           1994           1993
Florida Municipal Opportunity Trust
 (VOF).................................      1993        1993        1993        1993         1993           1994           1993
Massachusetts Value Municipal Income
 Trust (VMV)...........................      1993        1993        1993        1993         1993           1994           1993
Municipal Opportunity Trust II (VOT)...      1993        1993        1993        1993         1993           1994           1993
New Jersey Value Municipal Income Trust
 (VJV).................................      1993        1993        1993        1993         1993           1994           1993
New York Value Municipal Income Trust
 (VNV).................................      1993        1993        1993        1993         1993           1994           1993
Ohio Value Municipal Income Trust
 (VOV).................................      1993        1993        1993        1993         1993           1994           1993
Pennsylvania Value Municipal Income
 Trust (VPV)...........................      1993        1993        1993        1993         1993           1994           1993
Select Sector Municipal Trust (VKL)....      1993        1993        1993        1993         1993           1994           1993
Value Municipal Income Trust (VKV).....      1993        1993        1993        1993         1993           1994           1993

   61
 
           [X] PLEASE MARK
            VOTES AS IN
            THIS EXAMPLE             FORM OF PROXY
                     VAN KAMPEN AMERICAN CAPITAL XXXXXXXXXX TRUST
 
                             JOINT MEETING OF SHAREHOLDERS
 
                  PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
 
           The undersigned holder of XXXXXX shares of VAN KAMPEN AMERICAN
           CAPITAL XXXXXXXXXX TRUST, a Massachusetts business trust (the
           "Fund"), hereby appoints Dennis J. McDonnell, 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 Joint Meeting of Shareholders to be held at
           the offices of Van Kampen American Capital, Inc., One Parkview
           Plaza, Oakbrook Terrace, Illinois 60181, on Wednesday, May 28,
           1997 at 2:00 p.m., and any and all adjournments thereof (the
           "Meeting"), and thereat to vote all XXXXXX shares which the
           undersigned would be entitled to vote, with all powers the
           undersigned would possess if personally present, in accordance
           with the following instructions.
 
           Account No.           No. of Shares           Proxy No.
 
                                                                        
                 1.   The proposal to approve a new investment advisory agreement;  FOR    AGAINST   ABSTAIN
                                                                                    [ ]      [ ]       [ ]
                 2.   Authority to vote for the election as Class X Trustees, the                    FOR ALL
                      nominees named below:                                         FOR   WITHHOLD    EXCEPT
                                                                                    [ ]      [ ]       [ ]
                      XXXXXXX, XXXXXXX, XXXXXXX
                      TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL TRUSTEE,
                      STRIKE A LINE THROUGH THE NOMINEE'S NAME AND MARK THE "FOR
                      ALL EXCEPT" BOX. YOUR SHARES WILL BE VOTED FOR THE REMAINING
                      TRUSTEES.
                 3.   The proposal to ratify KPMG Peat Marwick LLP as independent   FOR    AGAINST   ABSTAIN
                      auditors for the Fund's fiscal year ending         , 1997     [ ]      [ ]       [ ]
                 4.   To transact such other business as may properly come before
                      the Meeting.

                 
 
           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 HEREIN 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 MAY 28, 1997.
 
                                                Date  , 1997
 
                                                ----------------------------
                                                   Shareholder signature
 
                                                ----------------------------
                                                   Co-owner signature (if
                                                        applicable)
 
                                                Please sign this Proxy
                                                exactly as your name or
                                                names appear on the books of
                                                the Fund. When signing as
                                                attorney, trustee, executor,
                                                administrator, custodian,
                                                guardian or corporate
                                                officer, please give full
                                                title. If shares are held
                                                jointly, each holder should
                                                sign.