AMERICAN CAPITAL LIFE INVESTMENT TRUST, 485APOS, 1995-12-22

AMERICAN CAPITAL LIFE INVESTMENT TRUST
485APOS, 1995-12-22

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1995

REGISTRATION NO. 33-628
811-4425
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 (X)
POST-EFFECTIVE AMENDMENT NO. 20 (X)

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 (X)
AMENDMENT NO. 22 (X)
</TABLE>

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2800 POST OAK BLVD., HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 993-0500

RONALD A. NYBERG, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN AMERICAN CAPITAL, INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
(NAME AND ADDRESS OF AGENT FOR SERVICE)

---------------------
Copy to:

GEORGE H. BARTLETT, ESQ.
O'MELVENY & MYERS
400 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071

---------------------
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.

---------------------
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)

/X/ 75 days after filing pursuant to paragraph (a)(ii)

/ / on (date), pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

The Exhibit Index required by Rule 483(a) under the Securities Act of 1933
is located at page of the manually signed copy of this Registration Statement.

DECLARATION PURSUANT TO RULE 24F-2

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST
OF THE COMMON STOCK FUND, THE DOMESTIC STRATEGIC INCOME FUND, THE GOVERNMENT
FUND, THE MULTIPLE STRATEGY FUND AND THE MONEY MARKET FUND $0.01 PAR VALUE,
UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT
COMPANY ACT OF 1940. A RULE 24F-2 NOTICE FOR ITS 1994 FISCAL YEAR ON BEHALF OF
EACH OF THE DOMESTIC STRATEGIC INCOME FUND, THE MONEY MARKET FUND AND THE
MULTIPLE STRATEGY FUND WERE FILED ON FEBRUARY 28, 1995. NO 24F-2 FILING WAS
NECESSARY FOR THE COMMON STOCK FUND AND GOVERNMENT FUND BECAUSE IT DID NOT SELL
ANY SECURITIES PURSUANT TO SUCH DECLARATION DURING SUCH FISCAL YEAR. A RULE
24F-2 NOTICE WILL NOT BE REQUIRED FOR EMERGING GROWTH FUND, THE GLOBAL EQUITY
FUND AND THE REAL ESTATE SECURITIES FUND UNTIL FEBRUARY OR MARCH OF 1996.

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<PAGE> 2

AMERICAN CAPITAL LIFE INVESTMENT TRUST

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
FORM N-1A PART A ITEM PROSPECTUS CAPTION
-------------------------------------------
<C> <S> <C>
1. Cover Page................................. Front Cover Page
2. Synopsis................................... Prospectus Summary
3. Condensed Financial Information............ Financial Highlights
4. General Description of Registrant.......... The Trust and Its Management Investment
Objective and Policies; Investment
Practices and Restrictions
5. Management of the Fund..................... The Trust and Its Management
6. Capital Stock and Other Securities......... The Trust and Its Management; Redemption of
Shares; Dividends, Distributions and
Taxes
7. Purchase of Securities Being Offered....... Purchase of Shares
8. Redemption or Repurchase................... Redemption of Shares
9. Pending Legal Proceedings.................. Inapplicable
</TABLE>

<TABLE>
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION CAPTION
-------------------------------------------
<C> <S> <C>
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ General Information
13. Investment Objectives and Policies......... Investment Restrictions
14. Management of the Registrant............... General Information; Investment Advisory
Agreement, Trustees and Executive
Officers
15. Control Persons and Principal Holders of
Securities............................... Trustees and Executive Officers
16. Investment Advisory and Other Services..... Investment Advisory Agreement; Distributor;
Other Information
17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities......... Inapplicable
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares;
Determination of Net Asset Value
20. Tax Status................................. Distributions and Taxes
21. Underwriters............................... Distributor
22. Calculation of Performance Data............ Fund Performance
23. Financial Statements....................... Financial Statements
PART C
</TABLE>

Information required to be included in Part C is set forth under the
appropriate item in Part C of this registration statement.
<PAGE> 3

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
2800 Post Oak Boulevard
Houston, Texas 77056
(800) 421-5666

, 1996

Van Kampen American Capital Life Investment Trust (the "Trust") is an
open-end diversified management investment company which offers shares in nine
separate Funds, each of which is in effect a separate fund. Shares are sold only
to separate accounts (the "Accounts") of various insurance companies to fund the
benefits of variable annuity or variable life insurance policies (the
"Contracts"). The Accounts invest in shares of the Funds in accordance with
allocation instructions received from Contractowners. Such allocation rights are
further described in the accompanying Prospectus for the Contracts. The
investment objectives of the Funds are as follows:

Asset Allocation Fund seeks a high total investment return consistent with
prudent risk through a fully managed investment policy utilizing equity
securities, primarily common stocks of large capitalization companies, as
well as investment grade intermediate and long-term debt securities and
money market securities.

Domestic Income Fund seeks current income as its primary objective. Capital
appreciation is a secondary objective. The Fund attempts to achieve these
objectives through investment primarily in a diversified portfolio of
fixed-income securities. The Fund may invest in investment grade securities
and lower rated and nonrated securities. LOWER RATED SECURITIES (COMMONLY
KNOWN AS "JUNK BONDS") ARE REGARDED BY THE RATING AGENCIES AS PREDOMINANTLY
SPECULATIVE WITH RESPECT TO THE ISSUER'S CONTINUING ABILITY TO MEET
PRINCIPAL AND INTEREST PAYMENTS.

Emerging Growth Fund seeks capital appreciation by investing in a portfolio
of securities consisting principally of common stocks of small and medium
sized companies considered by Van Kampen American Capital Asset Management,
Inc. (the "Adviser"), to be emerging growth companies.

Enterprise Fund seeks capital appreciation by investing in a portfolio of
securities consisting principally of common stocks.

Global Equity Fund seeks long-term growth of capital through investments in
an internationally diversified portfolio of equity securities of companies
of any nation including the United States.

Government Fund seeks to provide investors with a high current return
consistent with preservation of capital. The Fund invests primarily in debt
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. In order to hedge against changes in interest rates, the
Fund may also purchase or sell options and engage in transactions involving
interest rate futures contracts and options on such contracts.

Growth and Income Fund seeks long-term growth of capital and income. The
Fund invests principally in income-producing equity securities, including
common stocks and convertible securities. Investments are also made in
non-convertible preferred stocks and debt securities.

Money Market Fund seeks protection of capital and high current income by
investing in short-term money market instruments. INVESTMENTS IN THE MONEY
MARKET FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
ALTHOUGH THE MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE, THERE IS NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.

Real Estate Securities Fund seeks as its primary objective long-term growth
of capital by investing principally in securities of companies operating in
the real estate industry ("Real Estate Securities"). Current income is a
secondary consideration. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or net
profits from the ownership, construction, management or sale of residential,
commercial or industrial real estate. Under normal market conditions, at
least 65% of the Fund's total assets will be invested in Real Estate
Securities, primarily equity securities of real estate investment trusts.

There is no assurance that any Fund will achieve its investment objectives.

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

This Prospectus tells Contractowners briefly the information they should
know before allocating premiums or cash value to the Fund. Investors should read
and retain this Prospectus for future reference.

A Statement of Additional Information dated the same date as this Prospectus
has been filed with the Securities and Exchange Commission ("SEC") and contains
further information about the Trust. A copy of the Statement of Additional
Information may be obtained without charge by calling or writing the Fund at the
telephone number and address printed above. The Statement of Additional
Information is hereby incorporated by reference into this Prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR STATE REGULATORS NOR HAS THE COMMISSION OR STATE
REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 4

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

<TABLE>
<S> <C>
CUSTODIAN: State Street Bank and Trust
Company
225 Franklin Street
Boston, Massachusetts 02110
SHAREHOLDER ACCESS Investor Services, Inc.
SERVICE AGENT: P.O. Box 418256
Kansas City, Missouri
64141-9256
DISTRIBUTOR: Van Kampen American Capital
Distributors, Inc.
One Park View Plaza
Oak Brook Terrace, Illinois
60181
INVESTMENT Van Kampen American Capital
ADVISER: Asset Management, Inc.
2800 Post Oak Boulevard
Houston, Texas 77056
INVESTMENT John Govett & Co. Limited
SUBADVISER: 4 Battle Bridge Lane
[FOR "GLOBAL London SE1 2HR
EQUITY FUND"] England
INVESTMENT Hines Interests Realty
SUBADVISER: Advisors Limited Partnership
[FOR "REAL ESTATE 2800 Post Oak Boulevard
SECURITIES FUND"] Houston, Texas 77056
</TABLE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary......................
Financial Highlights....................
Introduction............................
Investment Objectives and Policies......
Asset Allocation Fund.................
Domestic Income Fund..................
Emerging Growth Fund..................
Enterprise Fund.......................
Global Equity Fund....................
Government Fund.......................
Growth and Income Fund................
Money Market Fund.....................
Real Estate Securities Fund...........
Investment Practices....................
The Trust and Its Management............
Purchase of Shares......................
Determination of Net Asset Value........
Redemption of Shares....................
Dividends, Distributions and Taxes......
Fund Performance........................
Description of Shares of the Trust......
Additional Information..................
Appendix................................
</TABLE>

No dealer, salesperson, or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Trust, the Adviser or the Distributor. This
Prospectus does not constitute an offer by the Trust or by the Distributor to
sell or a solicitation of an offer to buy any of the securities offered hereby
in any jurisdiction to any person to whom it is unlawful for the Trust to make
such an offer in such jurisdiction.

2
<PAGE> 5

PROSPECTUS SUMMARY

Shares Offered.......... Shares of Beneficial Interest in nine Funds: the Asset
Allocation Fund, the Domestic Income Fund, the Emerging
Growth Fund, the Enterprise Fund, the Global Equity
Fund, the Government Fund, the Growth and Income Fund,
the Money Market Fund, and the Real Estate Securities
Fund.

Type of Company......... Diversified, open-end management investment company.

Investment Objectives... The Asset Allocation Fund seeks high total investment
return; the Domestic Income Fund seeks current income
and capital appreciation; the Emerging Growth Fund
seeks capital appreciation; the Enterprise Fund seeks
capital appreciation; the Global Equity Fund seeks
long-term growth of capital; the Government Fund seeks
high current return consistent with preservation of
capital; the Growth and Income Fund seeks income and
long-term growth of capital; the Money Market Fund
seeks protection of capital and high current income;
and the Real Estate Securities Fund seeks long-term
growth of capital.

Investment Policies and
Risk Factors.......... The Asset Allocation Fund may, at various times, be
substantially invested in equity securities, bonds and
notes or money market securities, based upon the
Adviser's evaluation of economic and market trends and
anticipated relative return available from a particular
kind of security. Because prices of securities
fluctuate, the value of an investment in the Fund will
vary based upon the Fund's investment performance. Use
of options, futures contracts and options on futures
contracts may include additional risk. See "Investment
Practices -- Using Options, Futures Contracts and
Options on Futures Contracts."

The Domestic Income Fund invests in a diversified
portfolio of fixed-income securities. The Fund expects
that at all times at least 80% of its assets will be
invested in fixed-income securities rated at the time
of purchase B or higher by Moody's Investors Service
("Moody's") or Standard & Poor's Corporation ("S&P"),
nonrated debt securities and U.S. Government
securities. Securities rated BB or lower are regarded
by the rating agencies as predominantly speculative
with respect to the issuer's continuing ability to
meet principal and interest payments. Such securities
are commonly referred to as "junk bonds." Because
investment in lower rated securities involves greater
investment risk, achievement of the Fund's investment
objectives may be more dependent on the Adviser's
credit analysis than would be the case if the Fund
were investing in higher rated securities. Lower rated
securities may be more susceptible to real or
perceived adverse economic and competitive industry
conditions than investment grade securities and thus
be subject to higher risk. A projection of an economic
downturn, for example, could cause a decline in lower
rated securities prices because the advent of a
recession could lessen the ability of a highly
leveraged company to make principal and interest
payments on its debt securities. In addition, the
secondary trading market for lower rated securities
may be less liquid than the market for higher grade
securities. The market prices of debt securities also
generally fluctuate with changes in interest rates so
that the Fund's net asset value can be expected to
decrease as long-term interest rates rise and to
increase as long-term

3
<PAGE> 6

interest rates fall. The above risks may be increased by
investments in debt securities not producing immediate
cash income, such as zero-coupon and pay-in-kind
securities. See "Investment Objectives and Policies."

The Emerging Growth Fund invests at least 65% of the
Portfolio's total assets in common stocks of small and
medium sized companies (less than $2 billion of market
capitalization or annual sales), both domestic and
foreign, considered by the Adviser to be emerging growth
companies. The companies in which the Fund invests may
offer greater opportunities for growth of capital than
larger, more established companies, but investments in
such companies may involve special risks. See
"Investment Objectives and Policies" and "Investment
Practices -- Foreign Securities." The use of options,
futures contracts and related options may include
additional risks. See "Investment Practices -- Using
Options, Futures Contracts and Related Options."

The Enterprise Fund invests principally in common stocks
of companies which, in the judgment of the Adviser, have
above average potential for capital appreciation.
Because prices of common stocks and other securities
fluctuate, the value of an investment in the Fund will
vary based upon the Fund's investment performance. Use
of options, futures contracts and options on futures
contracts may include additional risk. See "Investment
Practices -- Using Options, Futures Contracts and
Options on Futures Contracts."

The Global Equity Fund invests in an internationally
diversified portfolio of equity securities of companies
of any nation including the United States. See
"Investment Objectives and Policies." Use of options,
futures contracts and related options may include
additional risks. See "Investment Practices -- Using
Options, Futures Contracts and Related Options."

The Government Fund invests primarily in debt securities
issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Fund may sell (write)
and purchase call and put options. The Fund also may
purchase and sell interest rate futures contracts and
options on such contracts since such transactions are
entered into for bona fide hedging purposes. The Fund
may purchase or sell U.S. Government securities on a
forward commitment basis. The market prices of debt
securities, including U.S. Government securities,
generally fluctuate with changes in interest rates so
that the Fund's net asset value can be expected to
decrease as long-term interest rates rise and to
increase as long-term interest rates fall. See
"Investment Objectives and Policies -- Government
Fund -- General."

The Growth and Income Fund invests principally in
income-producing equity securities including common
stock and convertible securities, although investments
are also made in non-convertible preferred stocks and
debt securities. Use of options, futures contracts and
related options may include additional risks. See
"Investment Practices -- Using Options, Futures
Contracts and Related Options."

The Money Market Portfolio invests in money market
instruments.

4
<PAGE> 7

The Real Estate Securities Fund invests in a portfolio
of securities of companies operating in the real
estate industry ("Real Estate Securities"). Real
Estate Securities include equity securities, including
common stocks and convertible securities, as well as
non-convertible preferred stocks and debt securities
of real estate industry companies. A "real estate
industry company" is a company that derives at least
50% of its assets (marked to market), gross income or
net profits from the ownership, construction,
management or sale of residential, commercial or
industrial real estate. Under normal market
conditions, at least 65% of the Fund's total assets
will be invested in Real Estate Securities, primarily
equity securities of real estate investment trusts.
The Fund's investment in debt securities will be
rated, at the time of investment, at least Baa by
Moody's or BBB by S&P, a comparable rating by any
other nationally recognized statistical rating
organization or if unrated, determined by the Adviser
to be of comparable quality. Under normal market
conditions, the Fund may invest up to 35% of its total
assets in equity and debt securities of companies
outside the real estate industry, U.S. Government
securities, cash and money market instruments.

Because of the Fund's policy of concentrating its
investments in Real Estate Securities, the Fund may be
more susceptible than an investment company without
such a policy to any single economic, political or
regulatory occurrence affecting the real estate
industry. In addition, the Fund will be affected by
general changes in interest rates which will result in
increases or decreases in the market value of the debt
securities (and, to a lesser degree, equity
securities) held by the Fund; the market value of such
securities tends to have an inverse relationship to
the movement of interest rates. For additional
information regarding the risk connected with
investment in Real Estate Securities, see "Risk
Factors."

The Fund may invest up to 25% of its total assets in
securities issued by foreign issuers, some or all of
which may also be Real Estate Securities. Investments
in foreign securities involve certain risks not
ordinarily associated with investments in securities
of domestic issuers, including fluctuations in foreign
exchange rates, future political and economic
developments, and the possible imposition of exchange
controls or other foreign governmental laws or
restrictions. See "Investment Practices -- Foreign
Securities."

The Fund may purchase or sell debt securities on a
forward commitment basis. See "Investment Practices --
Forward Commitments." The Fund may use portfolio
management techniques and strategies involving
options, futures contracts and options on futures. The
utilization of options, futures contracts and options
on futures contracts may involve greater than ordinary
risks and the likelihood of more volatile price
fluctuation. See "Investment Practices -- Using
Options, Futures Contracts and Options on Futures
Contracts."

Investment Adviser...... The Adviser has served as investment adviser to the
Trust since its inception. John Govett & Co. Limited
("John Govett") provides advisory services to the
Adviser with respect to the Global Equity Fund's
investments in foreign securities. Hines Interests
Realty Advisors Limited Partnership ("Hines Realty
Advisors") provides advisory services

5
<PAGE> 8

to the Adviser of the Real Estate Fund with respect to
the real estate industry. See "The Trust and Its
Management."

Dividends and
Distributions......... Dividends from net investment income are declared each
business day for the Money Market Fund and the
Government Fund. Such dividends are distributed
monthly. The Government Fund may distribute any net
short-term capital gains and any net long-term capital
gains at least annually. The Asset Allocation Fund,
Domestic Income Fund, Emerging Growth Fund, the
Enterprise Fund, the Global Equity Fund, the Growth
and Income Fund and the Real Estate Securities Fund
declare dividends and any capital gains distributions
annually.

Redemption.............. At the next determined net asset value.

Distributor............. Van Kampen American Capital Distributors, Inc. (the
"Distributor").

6
<PAGE> 9

FINANCIAL HIGHLIGHTS

The following information for each of the five most recent years has been
audited by Price Waterhouse LLP, independent accountants, whose report thereon
was unqualified. This information should be read in conjunction with the related
financial statements and notes thereto included in the Statement of Additional
Information.

ASSET ALLOCATION FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31
--------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1995 1994 1993 1992 1991 1990
-------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......................... $11.80 $11.92 $12.08 $10.43 $10.77
-------- -------- --------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................................ .52 .37 .44 .54 .58
Expenses..................................................... (.09) (.09) (.09) (.09) (.09)
Expense reimbursement........................................ .02 .01 .02 .02 .03
-------- -------- --------- -------- -------- --------
Net investment income........................................ .45 .29 .37 .47 .52
Net realized and unrealized gains or losses on securities.... (.89) .6025 .493 2.27 (.325)
-------- -------- --------- -------- -------- --------
Total from investment operations............................. (.44) .8925 .863 2.74 .195
-------- -------- --------- -------- -------- --------
LESS DISTRIBUTIONS FROM
Net investment income........................................ (.45) (.2925) (.3689) (.4825) (.535)
Net realized gain on securities.............................. (.90) (.63) (.6541) (.6075) --
Distributions in excess of net realized gains on
securities................................................. (.02) (.09) -- -- --
-------- -------- --------- -------- -------- --------
Total distributions.......................................... (1.37) (1.0125) (1.023) (1.09) (.535)
-------- -------- --------- -------- -------- --------
Net asset value, end of period............................... $ 9.99 $11.80 $11.92 $12.08 $10.43
========= ========= ========== ========= ========= =========
TOTAL RETURN(2).............................................. (3.66%) 7.71% 7.28% 27.05% 1.89%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)......................... $56.6 $64.9 $59.6 $52.2 $40.3
Ratios to average net assets (annualized)
Expenses................................................... .60% .60% .60% .60% .60%
Expenses, without expense reimbursement.................... .72% .74% .77% .80% .80%
Net investment income...................................... 3.70% 2.34% 3.05% 4.12% 4.70%
Net investment income, without expense reimbursement....... 3.58% 2.20% 2.88% 3.92% 4.50%
Portfolio turnover rate...................................... 163% 150% 126% 88% 46%

PER SHARE OPERATING PERFORMANCE 1989 1988 1987
-------- -------- --------
<S> <<C> <C> <C>
Net asset value, beginning of period......................... $9.67 $9.56 $10.00(1)
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................................ .65 .67 .20
Expenses..................................................... (.09) (.09) (.04)
Expense reimbursement........................................ .03 .03 .02
-------- -------- --------
Net investment income........................................ .59 .61 .18
Net realized and unrealized gains or losses on securities.... 1.13 .1125 (.445)
-------- -------- --------
Total from investment operations............................. 1.72 .7225 (.265)
-------- -------- --------
LESS DISTRIBUTIONS FROM
Net investment income........................................ (.595) (.6125) (.175)
Net realized gain on securities.............................. (.025) -- --
Distributions in excess of net realized gains on
securities................................................. -- -- --
-------- -------- --------
Total distributions.......................................... (.62) (.6125) (.175)
-------- -------- --------
Net asset value, end of period............................... $10.77 $9.67 $9.56
========= ========= =========
TOTAL RETURN(2).............................................. 17.82% 7.56% (5.23%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)......................... $40.5 $31.4 $22.7
Ratios to average net assets (annualized)
Expenses................................................... .60% .60% .60%
Expenses, without expense reimbursement.................... .86% .90% .95%
Net investment income...................................... 5.93% 6.36% 6.48%
Net investment income, without expense reimbursement....... 5.67% 6.06% 6.13%
Portfolio turnover rate...................................... 50% 48% 27%
</TABLE>

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

(1) As of June 30, 1987, commencement of operations.
(2) Total return for periods of less than one year are not annualized. Total
return does not consider the effect of sales loads.

7
<PAGE> 10

FINANCIAL HIGHLIGHTS (CONTINUED)

DOMESTIC INCOME FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31
--------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1995 1994 1993 1992 1991 1990
-------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $8.58 $8.00 $7.74 $6.98 $8.64
-------- --------- --------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income...................................... .91 .77 .74 .725 1.085
Expenses............................................... (.10) (.09) (.07) (.07) (.08)
Expense reimbursement.................................. .04 .04 .02 .03 .03
-------- --------- --------- --------- --------- --------
Net investment income.................................. .85 .72 .69 .685 1.035
Net realized and unrealized gains or losses on
securities........................................... (1.2275) .5825 .2725 .7525 (1.64)
-------- --------- --------- --------- --------- --------
Total from investment operations....................... (.3775) 1.3025 .9625 1.4375 (.605)
-------- --------- --------- --------- --------- --------
LESS DISTRIBUTIONS FROM
Net investment income.................................. (.8525) (.7225) (.7025) (.6775) (1.055)
Net realized gain on securities........................ -- -- -- -- --
-------- --------- --------- --------- --------- --------
Total distributions.................................... (.8525) (.7225) (.7025) (.6775) (1.055)
-------- --------- --------- --------- --------- --------
Net asset value, end of period......................... $7.35 $8.58 $8.00 $7.74 $6.98
========= ========= ========= ========= ========= ========
TOTAL RETURN(2)........................................ (4.33%) 16.32% 12.50% 21.23% (7.23%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)................... $21.3 $27.4 $21.1 $17.4 $6.3
Ratios to average net assets (annualized)
Expenses............................................. .60% .60% .60% .60% .60%
Expenses, without expense reimbursement.............. .95% .95% .95% .95% .95%
Net investment income................................ 8.35% 7.80% 8.89% 9.72% 11.99%
Net investment income, without expense
reimbursement...................................... 8.00% 7.40% 8.54% 9.37% 11.64%
Portfolio turnover rate................................ 94% 130% 117% 90% 123%

PER SHARE OPERATING PERFORMANCE 1989 1988 1987
--------- ---------- ----------
<S> <C<C> <C> <C>
Net asset value, beginning of period................... $10.96 $10.15 $10.00(1)
--------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Investment income...................................... 1.805 .65 .09
Expenses............................................... (.12) (.18) (.08)
Expense reimbursement.................................. .04 .15 .07
--------- ---------- ----------
Net investment income.................................. 1.725 .62 .08
Net realized and unrealized gains or losses on
securities........................................... (2.31) .8975 .1525
--------- ---------- ----------
Total from investment operations....................... (.585) 1.5175 .2325
--------- ---------- ----------
LESS DISTRIBUTIONS FROM
Net investment income.................................. (1.725) (.61) (.0825)
Net realized gain on securities........................ (.01) (.0975) --
--------- ---------- ----------
Total distributions.................................... (1.735) (.7075) (.0825)
--------- ---------- ----------
Net asset value, end of period......................... $8.64 $10.96 $10.15
========= ========== ==========
TOTAL RETURN(2)........................................ (5.44%) 14.95% 1.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)................... $8.1 $8.1 $1.2
Ratios to average net assets (annualized)
Expenses............................................. .60% .60% .60%
Expenses, without expense reimbursement.............. .95% .95% .95%
Net investment income................................ 12.92% 10.88% 5.58%
Net investment income, without expense
reimbursement...................................... 12.57% 10.53% 5.23%
Portfolio turnover rate................................ 56% 44% 42%
</TABLE>

- ---------------------
(1) As of November 4, 1987, commencement of operations.
(2) Total return for periods of less than one year are not annualized. Total
return does not consider the effect of sales loads.

8
<PAGE> 11

FINANCIAL HIGHLIGHTS (CONTINUED)

ENTERPRISE FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31
--------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.................................... $14.57 $14.21 $13.44 $10.09 $11.30 $8.70
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income........................................ .33 .30 .31 .335 .46 .46
Expenses................................................. (.09) (.11) (.10) (.10) (.101) (.10)
Expense reimbursement.................................... .01 .02 .02 .03 .036 .04
-------- -------- -------- -------- -------- -------- --------
Net investment income.................................... .25 .21 .23 .265 .395 .40
Net realized and unrealized gains or losses on
securities............................................. (.7625) 1.0325 .77 3.37 (1.17) 2.57
-------- -------- -------- -------- -------- -------- --------
Total from investment operations......................... (.5125) 1.2425 1.00 3.635 (.775) 2.97
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS FROM
Net investment income.................................... (.25) (.215) (.23) (.285) (.435) (.37)
Net realized gain on securities.......................... (1.4175) (.6675) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions...................................... (1.6675) (.8825) (.23) (.285) (.435) (.37)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period........................... $12.39 $14.57 $14.21 $13.44 $10.09 $11.30
========= ========= ========= ========= ========= ========= ========
TOTAL RETURN(3).......................................... (3.39%) 8.98% 7.48% 36.41% (6.84%) 34.23%

PER SHARE OPERATING PERFORMANCE 1988 1987(1) 1986
-------- -------- --------
<S> <<C> <C> <C>
Net asset value,
beginning of period.................................... $7.97 $9.33 $10.00(2)
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income........................................ .38 .25 .32
Expenses................................................. (.095) (.10) (.06)
Expense reimbursement.................................... .035 .03 .04
-------- -------- --------
Net investment income.................................... .32 .18 .30
Net realized and unrealized gains or losses on
securities............................................. .765 (1.1975) (.97)
-------- -------- --------
Total from investment operations......................... 1.085 (1.0175) (.67)
-------- -------- --------
LESS DISTRIBUTIONS FROM
Net investment income.................................... (.30) (.2575) --
Net realized gain on securities.......................... (.055 ) (.085) --
-------- -------- --------
Total distributions...................................... (.355) (.3425) --
-------- -------- --------
Net asset value, end of period........................... $8.70 $7.97 $9.33
========= ========= =========
TOTAL RETURN(3).......................................... 13.61% (11.12%) (6.70%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)..................... $67.5 $72.3 $65.6 $57.8 $27.2 $31.8
Ratios to average net assets (annualized)
Expenses............................................... .60% .60% .60% .60% .60% .60%
Expenses, without expense reimbursement................ .68% .72% .74% .90% .93% .93%
Net investment income.................................. 1.72% 1.41% 1.78% 2.33% 3.64% 3.74%
Net investment income, without expense reimbursement... 1.64% 1.29% 1.64% 2.03% 3.31% 3.41%
Portfolio turnover rate.................................. 153% 139% 116% 95% 122% 86%

<CAPTION>
RATIOS/SUPPLEMENTAL DATA
<S> <<C> <C> <C>
Net assets, end of period (millions)..................... $24.0 $31.0 $12.0
Ratios to average net assets (annualized)
Expenses............................................... .60% .60% .60%
Expenses, without expense reimbursement................ .95% .89% .95%
Net investment income.................................. 3.13% 1.65% 10.34%
Net investment income, without expense reimbursement... 2.78% 1.36% 9.99%
Portfolio turnover rate.................................. 63% 75% 268%
</TABLE>

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

(1) Based on average month-end shares outstanding.

(2) As of April 4, 1986, commencement of operations.

(3) Total return for periods of less than one year are not annualized. Total
return does not consider the effect of sales loads.

9
<PAGE> 12

FINANCIAL HIGHLIGHTS (CONTINUED)

GOVERNMENT FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31
-----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1995 1994 1993 1992 1991 1990 1989
------ ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period...................................... $9.26 $9.13 $9.29 $8.70 $8.80 $8.48
------ ------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Investment income.......................................... .61 .62 .72 .79 .835 .89
Expenses................................................... (.06) (.06) (.064) (.06) (.06) (.06)
Expense reimbursement...................................... .01 .01 .009 .01 .01 .01
------ ------- ------- ------- ------- ------ -------
Net investment income...................................... .56 .57 .665 .74 .785 .84
Net realized and unrealized gains or losses on
securities............................................... (.985) .135 (.1575) .60 (.105) .325
------ ------- ------- ------- ------- ------ -------
Total from investment operations........................... (.425) .705 .5075 1.34 .68 1.165
------ ------- ------- ------- ------- ------ -------
LESS DISTRIBUTIONS FROM
Net investment income...................................... (.555) (.575) (.6675) (.75) (.78) (.845)
Net realized gain on securities............................ -- -- -- -- -- --
------ ------- ------- ------- ------- ------ -------
Total distributions........................................ (.555) (.575) (.6675) (.75) (.78) (.845)
------ ------- ------- ------- ------- ------ -------
Net asset value, end of period............................. $8.28 $9.26 $9.13 $9.29 $8.70 $8.80
======= ======== ======== ======== ======== ====== ========
TOTAL RETURN(2)............................................ (4.63%) 7.86% 5.73% 16.23% 8.31% 14.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)....................... $65.5 $80.6 $74.8 $77.0 $73.2 $81.2
Ratios to average net assets (annualized)
Expenses................................................. .60% .60% .60% .60% .60% .60%
Expenses, without expense reimbursement.................. .70% .70% .70% .70% .69% .66%
Net investment income.................................... 6.71% 6.45% 7.29% 8.37% 9.19% 9.56%
Net investment income, without expense reimbursement..... 6.61% 6.35% 7.19% 8.27% 9.10% 9.50%
Portfolio turnover rate.................................... 192% 91% 36% 57% 164% 42%

PER SHARE OPERATING PERFORMANCE 1988 1987 1986(1)
------- -------- --------
<S> <C<C> <C> <C>
Net asset value,
beginning of period...................................... $8.68 $9.91 $10.00
------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income.......................................... .94 .81 .55
Expenses................................................... (.06) (.05) (.07)
Expense reimbursement...................................... -- -- .03
------- -------- --------
Net investment income...................................... .88 .76 .51
Net realized and unrealized gains or losses on
securities............................................... (.215) (.97) .0516
------- -------- --------
Total from investment operations........................... .665 (.21) .5616
------- -------- --------
LESS DISTRIBUTIONS FROM
Net investment income...................................... (.865) (.7525) (.5041)
Net realized gain on securities............................ -- (.2675) (.1475)
------- -------- --------
Total distributions........................................ (.865) (1.02) (.6516)
------- -------- --------
Net asset value, end of period............................. $8.48 $8.68 $9.91
======== ========= =========
TOTAL RETURN(2)............................................ 6.74% (2.12%) 4.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)....................... $90.6 $108.8 $67.7
Ratios to average net assets (annualized)
Expenses................................................. .60% .60% .60%
Expenses, without expense reimbursement.................. .64% .64% .95%
Net investment income.................................... 9.29% 8.37% 6.80%
Net investment income, without expense reimbursement..... 9.25% 8.33% 6.45%
Portfolio turnover rate.................................... 88% 65% 115%
</TABLE>

- ---------------------
(1) As of April 4, 1986, commencement of operations.
(2) Total return for periods of less than one year are not annualized. Total
return does not consider the effect of sales loads.

10
<PAGE> 13

FINANCIAL HIGHLIGHTS (CONTINUED)

MONEY MARKET FUND

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1995 1994 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Investment income......................................... .0425 .0322 .0391 .0607 .082 .0937
Expenses.................................................. (.0087) (.0095) (.009) (.0087) (.009) (.01)
Expense reimbursement..................................... .0027 .0035 .003 .0026 .003 .004
------- ------- ------- ------- ------- ------ -------
Net investment income..................................... .0365 .0262 .0331 .0546 .076 .0877
Net realized and unrealized gains or losses on
securities.............................................. -- -- -- -- -- --
------- ------- ------- ------- ------- ------ -------
Total from investment operations.......................... .0365 .0262 .0331 .0546 .076 .0877
------- ------- ------- ------- ------- ------ -------
DIVIDENDS FROM NET INVESTMENT INCOME...................... (.0365) (.0262) (.0331) (.0546) (.076) (.0877)
------- ------- ------- ------- ------- ------ -------
Net asset value, end of period............................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ====== =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)...................... $28.5 $30.0 $32.9 $38.0 $34.3 $29.0
Ratios to average net assets (annualized)
Expenses................................................ .60% .60% .60% .60% .60% .60%
Expenses, without expense reimbursement................. .87% .95% .89% .87% .89% .95%
Net investment income................................... 3.63% 2.63% 3.32% 5.44% 7.59% 8.76%
Net investment income, without expense reimbursement.... 3.37% 2.28% 3.03% 5.17% 7.30% 8.41%

PER SHARE OPERATING PERFORMANCE 1988 1987 1986(1)
------- -------- -------
<S> <<C> <C> <C>
Net asset value, beginning of period...................... $1.00 $1.00 $1.00
------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment income......................................... .0773 .0684 .0429
Expenses.................................................. (.0104) (.0141) (.0093)
Expense reimbursement..................................... .0045 .0081 .0052
------- -------- -------
Net investment income..................................... .0714 .0624 .0388
Net realized and unrealized gains or losses on
securities.............................................. -- (.00002) --
------- -------- -------
Total from investment operations.......................... .0714 .06238 .0388
------- -------- -------
DIVIDENDS FROM NET INVESTMENT INCOME...................... (.0714) (.06238) (.0388)
------- -------- -------
Net asset value, end of period............................ $1.00 $1.00 $1.00
======== ========= ========
TOTAL RETURN(2)........................................... 7.38% 6.41% 4.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)...................... $24.5 $18.6 $23.4
Ratios to average net assets (annualized)
Expenses................................................ .60% .60% .60%
Expenses, without expense reimbursement................. .95% .95% .95%
Net investment income................................... 7.22% 6.24% 5.70%
Net investment income, without expense reimbursement.... 6.87% 5.89% 5.35%
</TABLE>

11
<PAGE> 14

FINANCIAL HIGHLIGHTS (CONTINUED)

This information should be read in conjunction with the related financial
statements and notes thereto included in the Statement of Additional
Information.

EMERGING GROWTH FUND

<TABLE>
<CAPTION>
JULY 3,
1995(1)
THROUGH
DECEMBER 31,
PER SHARE OPERATING PERFORMANCE 1995(2)
------------
<S> <C>
Net asset value, beginning of period...............................................................................
------------
INCOME FROM INVESTMENT OPERATIONS
Investment income..................................................................................................
Expenses...........................................................................................................
Expense reimbursement..............................................................................................
------------
Net investment income (loss).......................................................................................
Net realized and unrealized gains on securities....................................................................
------------
Total from investment operations...................................................................................
------------
Net asset value, end of period.....................................................................................
===========
TOTAL RETURN(3)....................................................................................................
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)...............................................................................
Ratios to average net assets (annualized)
Expenses.........................................................................................................
Expenses, without expense reimbursement..........................................................................
Net investment loss..............................................................................................
Net investment loss, without expense reimbursement...............................................................
Portfolio turnover rate............................................................................................
</TABLE>

- ---------------------
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) Total return for a period of less than one year is not annualized. Total
return does not consider the effect of sales loads.

12
<PAGE> 15

FINANCIAL HIGHLIGHTS (CONTINUED)

This information should be read in conjunction with the related financial
statements and notes thereto included in the Statement of Additional
Information.

GLOBAL EQUITY FUND

<TABLE>
<CAPTION>
JULY 3
1995(1)
THROUGH
DECEMBER 31,
PER SHARE OPERATING PERFORMANCE 1995(2)
------------
<S> <C>
Net asset value, beginning of period...............................................................................
------------
INCOME FROM INVESTMENT OPERATIONS
Investment income..................................................................................................
Expenses...........................................................................................................
------------
Net investment loss................................................................................................
Net realized and unrealized gains on securities....................................................................
------------
Total from investment operations...................................................................................
------------
Net asset value, end of period.....................................................................................
===========
TOTAL RETURN(3)....................................................................................................
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)...............................................................................
Ratios to average net assets (annualized)
Expenses.........................................................................................................
Net investment loss..............................................................................................
Portfolio turnover rate............................................................................................
</TABLE>

13
<PAGE> 16

This information should be read in conjunction with the related financial
statements and notes thereto included in the Statement of Additional
Information.

REAL ESTATE SECURITIES FUND

<TABLE>
<CAPTION>
(UNAUDITED)
JULY 3,
1995(1)
THROUGH
DECEMBER 31,
PER SHARE OPERATING PERFORMANCE 1995(2)
------------
<S> <C>
Net asset value, beginning of period...............................................................................
------------
INCOME FROM INVESTMENT OPERATIONS
Investment income..................................................................................................
Expenses...........................................................................................................
Expense reimbursement..............................................................................................
------------
Net investment income..............................................................................................
Net realized and unrealized gains on securities....................................................................
------------
Total from investment operations...................................................................................
------------
Net asset value, end of period.....................................................................................
===========
TOTAL RETURN(3)....................................................................................................
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)...............................................................................
Ratios to average net assets (annualized)
Expenses.........................................................................................................
Expenses, without expense reimbursement..........................................................................
Net investment income............................................................................................
Net investment income, without expense reimbursement.............................................................
Portfolio turnover rate............................................................................................
</TABLE>

14
<PAGE> 17

INTRODUCTION

The Trust is a duly organized Delaware business trust with nine separate
Funds. Each Fund has separate assets and liabilities and a separate net asset
value per share. Shares of a Fund represent an interest only in that Fund. Since
market risks are inherent in all securities to varying degrees, assurance cannot
be given that the investment objectives of any of the Fund will be met.

INVESTMENT OBJECTIVES AND POLICIES

Each Fund of the Trust has a different investment objective which it
pursues through separate investment policies as described below. See "Investment
Practices" for further discussion of investment techniques and strategies. The
investment objective of each Fund, except the Real Estate Securities Fund, is a
fundamental policy and may not be changed without shareholder approval. With
respect to the Real Estate Securities Fund, the investment objective may be
changed by the Trustees. If there is a change in the objective of the Fund,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs. The differences in
objectives and policies among the Fund can be expected to affect the return of
each Fund and the degree of market and financial risk to which each Fund is
subject.

ASSET ALLOCATION FUND

The investment objective of the Asset Allocation Fund is to seek a high
total investment return consistent with prudent risk through a fully managed
investment policy utilizing equity, intermediate and long-term debt and money
market securities. Total investment return consists of current income, including
dividends, interest, and discount accruals, and capital appreciation. The
Adviser may vary the composition of the Fund from time to time based upon an
evaluation of economic and market trends and the anticipated relative total
return available from a particular type of security. Accordingly, the Asset
Allocation Fund may, at any given time, be substantially invested in equity
securities, bonds and notes or money market securities. Achieving this objective
depends on management's abilities to assess the effect of economic and market
trends on different sectors of the market. There can be no assurances that the
investment objective of the Fund will be achieved.

The Asset Allocation Fund may invest in those money market securities which
are eligible investments for the Fund's Money Market Fund. It may also invest in
intermediate and long-term debt securities, including convertible securities,
and in preferred and convertible preferred stock which are rated at the time of
purchase BBB or better by S&P or Baa or better by Moody's, or in nonrated
securities determined by the Adviser to be of comparable quality. To the extent
investments are made in fixed-income securities, the Fund will invest primarily
in such securities which are rated A or better by either rating agency. These
ratings are described in the Appendix hereto. The Fund is not limited as to the
maturities of the debt securities it may purchase. Debt securities with longer
maturities generally tend to produce higher yields and are subject to greater
market fluctuation as a result of changes in interest rates than debt securities
with shorter maturities.

The common stocks in which the Fund may invest will be primarily stocks of
large-capitalization quality companies. Generally, the characteristics of such
companies include a strong balance sheet, good financial resources, a
satisfactory rate of return on capital, a good industry position and superior
management skills. The Adviser believes that companies that conform most closely
to these characteristics often tend to exhibit generally consistent earnings
growth.

The Fund may engage in portfolio management strategies and techniques
involving options, futures, contracts and options on futures contracts. Options,
futures contracts, and options on futures contracts are described in "Investment
Practices -- Using Options, Futures Contracts, and Options on Futures
Contracts."

The Asset Allocation Fund may also invest in equity and debt securities of
foreign issuers, including non-U.S. dollar denominated debt securities,
Eurodollar securities and securities issued,

15
<PAGE> 18

assumed or guaranteed by foreign governments or political subdivisions or
instrumentalities thereof. The Asset Allocation Fund will limit its investment
in foreign securities to 25% of its total assets, taken at market value at the
time of each investment. See "Investment Practices -- Foreign Securities." For a
discussion of the Fund's practices regarding investment companies see
"Investment Practices -- Investment in Investment Companies."

Because of the fully managed approach of the Fund, portfolio turnover may
be greater resulting in increased brokerage charges to the Fund.

DOMESTIC INCOME FUND

The Fund's primary objective is to maximize current income. Capital
appreciation is a secondary objective which will be sought only when consistent
with its primary objective. The Fund attempts to achieve these investment
objectives by investing primarily in fixed-income securities, including both
convertible and non-convertible debt securities and preferred stocks. The Fund
may invest in investment grade securities and lower rated and nonrated
securities. There is no assurance that these objectives will be achieved and
yields may fluctuate over time. The Fund may also invest in debt securities of
foreign issuers, including non-U.S. dollar denominated debt securities,
Eurodollar securities and securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities thereof. The Fund
will limit its investment in foreign securities to 25% of its total assets,
taken at market value at the time of each investment. See "Investment
Practices -- Foreign Securities."

The Fund expects that at all times at least 80% of its assets will be
invested in fixed-income securities rated at the time of purchase B or higher by
Moody's or S&P, nonrated debt securities considered by the Adviser to be of
comparable quality, and U.S. Government securities. See the Appendix for a
description of corporate bond ratings. The Fund may also purchase or sell U.S.
Government securities on a forward commitment basis. See "Investment
Practices -- Forward Commitments."

The Fund may invest in debt securities rated below B by both Moody's and
S&P or nonrated debt securities considered by the Adviser to be of comparable
quality (commonly known as "junk bonds"), common stocks or other equity
securities and income bonds on which interest is not accrued by the Fund when
such investments are consistent with the Fund's investment objectives or are
acquired as part of a unit consisting of a combination of fixed-income or equity
securities. The Fund may also invest in prime commercial paper, certificates of
deposit, bankers' acceptances and other obligations of domestic banks having
total assets of at least $500 million, and repurchase agreements. See
"Investment Practices -- Repurchase Agreements." Equity securities as referred
to herein do not include preferred stocks. The Fund will not purchase any such
securities which will cause more than 20% of its total assets to be so invested
or which would cause more than ten percent of its total assets to be invested in
common stocks or other equity securities.

In general, the prices of debt securities vary inversely with interest
rates. If interest rates rise, debt security prices generally fall; if interest
rates fall, debt security prices generally rise. In addition, for a given change
in interest rates, longer-maturity debt securities fluctuate more in price
(gaining or losing more in value) than shorter-maturity debt securities, and
generally offer higher yields than shorter-maturity debt securities, all other
factors, including credit quality, being equal. This potential for a decline in
prices of debt securities due to rising interest rates is referred to herein as
"market risk." While the Fund has no policy limiting the maturities of the debt
securities in which it may invest, the Adviser seeks to moderate market risk by
generally maintaining a portfolio duration within a range of four to six years.

Duration is a measure of the expected life of a debt security that
incorporates a security's yield, coupon interest payments, final maturity and
call features into one measure. Traditionally a debt security's "term to
maturity" has been used as a proxy for the sensitivity of the security's price
to changes in interest rates (which is the "interest rate risk" or "price
volatility" of the security).

16
<PAGE> 19

However, "term to maturity" measures only the time until a debt security
provides its final payment taking no account of the pattern of the security's
payments of interest or principal prior to maturity. Duration is a measure of
the expected life of a debt security on a present value basis expressed in
years. It measures the length of the time interval between the present and the
time when the interest and principal payments are scheduled (or in the case of a
callable bond, expected to be received), weighing them by the present value of
the cash to be received at each future point in time. For any debt security with
interest payments occurring prior to the payment of principal, duration is
always less than maturity, and for zero coupon issues, duration and term to
maturity are equal. In general, the lower the coupon rate of interest or the
longer the maturity, or the lower the yield-to-maturity of a debt security, the
longer its duration; conversely, the higher the coupon rate of interest, the
shorter the maturity or the higher the yield-to-maturity of a debt security, the
shorter its duration.

Duration allows an investment manager to make certain assumptions regarding
how the value of a portfolio will generally respond to changes in interest
rates. For example, a portfolio consisting entirely of treasury notes yielding
7.7% with a remaining maturity of two years would have a duration of 1.9 years
and a 1% change in the interest rate earned on such securities would cause a
change of approximately 1.9% in the net asset value of the portfolio. A
portfolio consisting entirely of treasury notes yielding 7.8% with a remaining
maturity of ten years would have a duration of 7.0 years and a 1% change in the
interest rate earned on such securities would cause a change of between 6.5 and
8% in the net asset value of the portfolio. This example is intended for
demonstration purposes only, however, and is not intended to approximate how the
Fund's portfolio will respond to changes in interest rates. The Fund's
investment portfolio may include securities with differing maturities and
quality levels, and interest rates on those instruments may not all change by
the same amount at the same time as rates rise or fall generally in the
marketplace. Also, the treasury securities described in the example cannot be
retired prior to maturity, while some of the securities in the Fund's portfolio
can. These factors among others can cause the Fund's investment portfolio to
respond somewhat differently to changes in interest rates than shown in the
example.

There are some situations where even a duration calculation does not
properly reflect the interest rate exposure of a security. For example, floating
and variable rate securities often have final maturities of ten or more years;
however, their interest rate exposure corresponds to the frequency of the coupon
reset. Another example where the interest rate exposure is not properly captured
by duration is the case of mortgage pass-through securities. The stated final
maturity of such securities is generally 30 years, but current prepayment rates
are more critical in determining the securities' interest rate exposure. In
these and other similar situations, the Adviser will use more sophisticated
analytical techniques that incorporate the economic life of a security into the
determination of its interest rate exposure. At December 31, 1994, the duration
of the debt securities owned by the Fund, was approximately 5.5 years. The
duration is likely to vary from time to time as the Adviser pursues its strategy
of striving to maintain a balance between seeking to maximize income and
endeavoring to maintain the value of the Fund's capital. Thus the objective of
providing current return to shareholders is tempered by seeking to avoid undue
market risk. There is, of course, no assurance that the Adviser will be
successful in achieving such results for the Fund.

The higher yields sought by the Fund are generally obtainable from
securities rated in the lower categories by recognized rating services. These
securities generally are subordinated to the prior claims of banks and other
senior lenders. The lower rated debt securities in which the Portfolio may
invest are regarded as predominately speculative with respect to the issuers
continuing ability to meet principal and interest payments. The ratings of
Moody's and S&P represent their opinions of the quality of the debt securities
they undertake to rate, but not the market value risk of such securities. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, debt securities with the same maturity,
coupon and rating may have different yields while debt securities of the same
maturity and coupon with different ratings may have the same yield.

17
<PAGE> 20

During the fiscal year ended December 31, 1994, the average percentage of
the Fund's assets invested in debt securities within the various rating
categories (based on the higher of the S&P or Moody's ratings), and the nonrated
debt securities, determined on a dollar weighted average, were as follows:

<TABLE>
<S> <C>
AAA/Aaa................................................................... .13%
AA/Aa..................................................................... 2.35
A/A....................................................................... 10.93
BBB/Baa................................................................... 38.30
BB/Ba..................................................................... 14.64
B/B....................................................................... 18.92
*Nonrated................................................................. 12.98
Preferred Stocks/Common Stocks/Warrants................................... 1.51
Cash and Equivalents...................................................... .24
-------
Total Net Assets..................................................... 100.00%
</TABLE>

* The nonrated debt securities as a percentage of total net assets were
considered by the Adviser to be comparable to securities rated by Moody's as
follows: AAA- 11.59%, BBB- .38%, B- .99%, and D- .02%.

The securities in which the Fund may invest include the following:

-- Straight fixed-income debt securities. These include bonds and other
debt obligations which bear a fixed or variable rate of interest payable at
regular intervals and have a fixed or resettable maturity date. The particular
terms of such securities vary and may include features such as call provisions
and sinking funds.

-- Pay-in-kind debt securities. These pay interest in additional debt
securities rather than in cash.

-- Zero-coupon debt securities. These bear no interest obligation but are
issued at a discount from their value at maturity. When held to maturity,
their entire return equals the difference between their issue price and their
maturity value. Interest is however accrued by the Portfolio each day for
accounting and Federal income tax purposes.

-- Zero-fixed-coupon debt securities. These are zero-coupon debt securities
which convert on a specified date to interest-bearing debt securities.

Fixed-income securities rated below B by both Moody's and S&P include debt
obligations or other securities of companies that are financially troubled, in
default or are in bankruptcy or reorganization ("Deep Discount Securities").
Debt obligations of such companies are usually available at a deep discount from
the face value of the instrument. The Fund will invest in Deep Discount
Securities when the Adviser believes that existing factors are likely to restore
the company to a healthy financial condition. Such factors include a
restructuring of debt, management changes, existence of adequate assets, or
other unusual circumstances.

A debt instrument purchased at a deep discount may currently pay a very
high effective yield. In addition, if the financial condition of the issuer
improves, the underlying value of the security may increase, resulting in a
capital gain. If the company defaults on its obligations or remains in default,
or if the plan of reorganization is insufficient for debtholders, the Deep
Discount Securities may stop generating income and lose value or become
worthless. The Adviser will balance the benefits of Deep Discount Securities
with their risks. While a diversified portfolio may reduce the overall impact of
a Deep Discount Security that is in default or loses its value, the risk cannot
be eliminated.

Risk Factors of Investing in Lower Rated Debt Securities. Past experience
may not provide an accurate indication of future performance of the market for
lower rated debt securities, particularly

18
<PAGE> 21

during periods of economic recession. An economic downturn or increase in
interest rates is likely to have a greater negative effect on this market, the
value of lower rated debt securities in the Fund, the Fund's net asset value and
the ability of the bonds' issuers to repay principal and interest, meet
projected business goals and obtain additional financing than on higher rated
securities. These circumstances also may result in a higher incidence of
defaults than with respect to higher rated securities. An investment in this
Fund may be considered more speculative than investment in shares of a fund
which invests primarily in higher rated debt securities.

Prices of lower rated debt securities may be more sensitive to adverse
economic changes or corporate developments than higher rated investments. Debt
securities with longer maturities, which may have higher yields, may increase or
decrease in value more than debt securities with shorter maturities. Market
prices of lower rated debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may be
more volatile than securities which pay interest periodically and in cash. When
it deems it appropriate and in the best interests of Fund shareholders, the Fund
may incur additional expenses to seek recovery on a debt security on which the
issuer has defaulted and to pursue litigation to protect its interests of
security holders of its companies.

Because the market for lower rated securities may be thinner and less
active than for higher rated securities, there may be market price volatility
for these securities and limited liquidity in the resale market. Nonrated
securities are usually not as attractive to as many buyers as rated securities
are, a factor which may make nonrated securities less marketable. These factors
may have the effect of limiting the availability of the securities for purchase
by the Fund and may also limit the ability of the Fund to sell such securities
at their fair value either to meet redemption requests or in response to changes
in the economy or the financial markets. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of lower rated debt securities, especially in a thinly
traded market. To the extent the Portfolio owns or may acquire illiquid or
restricted lower rated securities, these securities may involve special
registration responsibilities, liabilities and costs, and liquidity and
valuation difficulties. Changes in values of debt securities which the Fund owns
will affect its net asset value per share. If market quotations are not readily
available for the Fund's lower rated or nonrated securities, these securities
will be valued by a method that the Fund's Trustees believes accurately reflects
fair value. Judgment plays a greater role in valuing lower rated debt securities
than with respect to securities for which more external sources of quotations
and last sale information are available.

Special tax considerations are associated with investing in lower rated
debt securities structured as zero coupon or pay-in-kind securities. The Fund
accrues income on these securities prior to the receipt of cash payments. The
Fund must distribute substantially all of its income to its shareholders to
qualify for pass-through treatment under the tax laws and may, therefore, have
to dispose a portion of its portfolio securities to satisfy distribution
requirements.

While credit ratings are only one factor the Adviser relies on in
evaluating lower rated debt securities, certain risks are associated with using
credit ratings. Credit rating agencies may fail to timely change the credit
ratings to reflect subsequent events; however, the Adviser continuously monitors
the issuers of lower rated debt securities in its portfolio in an attempt to
determine if the issuers will have sufficient cash flow and profits to meet
required principal and interest payments. Achievement of the Fund's investment
objective may be more dependent upon the Adviser's credit analysis than is the
case for higher quality debt securities. Credit ratings for individual
securities may change from time to time and the Fund may retain a portfolio
security whose rating has been changed.

Investors should consider carefully the additional risks associated with
investment in securities which carry lower ratings, which are not generally
meant for short-term investment.

19
<PAGE> 22

EMERGING GROWTH FUND

The Fund seeks to provide capital appreciation for its shareholders; any
ordinary income received from portfolio securities is entirely incidental.

As a fundamental investment policy, the Fund under normal conditions
invests at least 65% of its total assets in common stocks of small and medium
sized companies (less than $2 billion of market capitalization), both domestic
and foreign, in the early stages of their life cycle, that the Adviser believes
have the potential to become major enterprises. Investments in such companies
may offer greater opportunities for growth of capital than larger, more
established companies, but also may involve certain special risks. Emerging
growth companies often have limited product lines, markets, or financial
resources, and they may be dependent upon one or a few key people for
management. The securities of such companies may be subject to more abrupt or
erratic market movements than securities of larger, more established companies
or the market averages in general. While the Fund will invest primarily in
common stocks, to a limited extent it may invest in other securities such as
preferred stocks, convertible securities and warrants.

The Fund does not limit its investment to any single group or type of
security. The Fund may also invest in special situations involving new
management, special products and techniques, unusual developments, mergers or
liquidations. Investments in unseasoned companies and special situations often
involve much greater risks than are inherent in ordinary investments, because
securities of such companies may be more likely to experience unexpected
fluctuations in price.

The Fund's primary approach is to seek what the Adviser believes to be
unusually attractive growth investments on an individual company basis. The Fund
may invest in securities that have above average volatility of price movement.
Because prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The Fund attempts to reduce overall exposure to risk from declines in securities
prices by spreading its investments over many different companies in a variety
of industries. There is, however, no assurance that the Fund will be successful
in achieving its objective.

The Fund may invest up to 20% of its total assets in securities of foreign
issuers. See "Investment Practices -- Foreign Securities." Additionally, the
Fund may invest up to fifteen percent of the value of its assets in restricted
securities (i.e., securities which may not be sold without registration under
the Securities Act of 1933) and in other securities not having readily available
market quotations. The Fund may enter into repurchase agreements with domestic
banks and broker-dealers which involve certain risks. The Fund may invest in
either warrants or restricted securities so long as such investments aggregate
less than five percent of the Fund's total assets. The risks involved in
investing in restricted securities, warrants and repurchase agreements are
described in the Statement of Additional Information.

ENTERPRISE FUND

The Fund seeks capital appreciation through investments in securities
believed by the Adviser to have above average potential for capital
appreciation. Any income received on such securities is incidental to the
objective of capital appreciation.

The Fund invests principally in growth common stocks. Such securities
generally include those of companies with established records of growth in sales
or earnings, and companies with new products, new services, or new processes.
The Fund may also invest in companies in cyclical industries during periods when
their securities appear attractive to the Advisor for capital appreciation. In
addition to common stock, the Fund may invest in warrants and preferred stocks,
and in investment companies. See "Investment Practices -- Investment in
Investment Companies."

The Fund generally holds a portion of its assets in investment grade
short-term debt securities and investment grade corporate or government bonds in
order to provide liquidity. Such investments may be increased to up to 100% of
the Fund's assets when deemed appropriate by the Adviser for

20
<PAGE> 23

temporary defensive purposes. Short-term investments may include repurchase
agreements with banks or broker-dealers. See "Investment Practices -- Repurchase
Agreements."

The Fund's primary approach is to seek what the Adviser believes to be
attractive growth investments on an individual company basis. The Fund may
invest in securities that have above average volatility of price movement.
Because prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The Fund attempts to reduce overall exposure to risk from declines in securities
prices by spreading its investments over many different companies in a variety
of industries. There is, however, no assurance that the Fund will be successful
in achieving its objective. The Fund may also invest in debt securities of
foreign issuers, including non-U.S. dollar denominated debt securities,
Eurodollar securities and securities issued, assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities thereof. The Fund
will limit its investment in foreign securities to 10% of its total assets,
taken at market value at the time of each investment. See "Investment
Practices -- Foreign Securities." The Fund may engage in portfolio management
strategies and techniques involving options, futures contracts and options on
futures. Options, futures contracts and options on futures contracts are
described in "Investment Practices -- Using Options, Futures Contracts and
Options on Futures Contracts."

GLOBAL EQUITY FUND

The investment objective of the Fund is to provide long-term growth of
capital through investments in an internationally diversified portfolio of
equity securities of companies of any nation including the United States. The
Fund intends to be invested in equity securities of companies of at least three
countries including the United States. Under normal market conditions, at least
65% of the Fund's total assets are so invested. Equity securities include common
stocks, preferred stocks and warrants or options to acquire such securities. In
selecting portfolio securities, the Fund attempts to take advantage of the
differences between economic trends and the anticipated performance of
securities markets in various countries.

Normally, the Fund invests in securities of issuers traded on markets of at
least three of the world's six largest countries by market capitalization
(United States, Japan, United Kingdom, Germany, France and Canada), but
securities of issuers traded on quoted markets of other countries are also
considered for investment. The next six largest countries, in terms of market
capitalization, are Switzerland, Italy, Netherlands, Australia, Sweden and
Spain.

The Adviser, subject to the direction of the Trust's Trustees, provides the
Fund with an overall investment program consistent with the Fund's objective and
policies. The Adviser is solely responsible for advising the Fund with respect
to investments in the United States. The John Govett, subject to overall review
by the Adviser and the Trust's Trustees and other authorized officers, is
responsible for recommending an optimal geographic equity allocation and is
responsible for providing advice with respect to the Fund's investment in
countries other than the United States. Investments may be shifted among the
world's various capital markets and among different types of securities in
accordance with ongoing analysis provided by the Adviser and John Govett of
trends and developments affecting such markets and securities. The Adviser and
John Govett are sometimes referred to as the "Advisers."

While the investment policy of the Fund is to be broadly diversified as to
both countries and individual issuers, the Advisers select individual countries
and securities on the basis of several factors. Investments are allocated among
issuers in countries selected based on a comparison of values between the equity
markets in those countries. This comparison is based upon criteria such as
return on equity, book value, earnings, dividends, and interest rates in each
market. After evaluating these factors and others for each country and comparing
opportunities among countries, the Advisers select those countries which, in
their opinion, have the most attractive equity markets. This evaluation is
influential in deciding the amount of investment in each equity market.
Individual

21
<PAGE> 24

equity securities are selected within each market. The Advisers seek the most
attractive individual equity securities based on factors such as book value,
earnings per share and other financial data. The Advisers' approach to both
country and individual security selection is characterized as a quantitative
method utilizing specific financial criteria to identify both value and
opportunity in the equity markets. The Advisers also endeavor to identify
industry, political, and geographical trends which may affect equity values
within individual countries or among a group of countries. The Advisers use
these financial criteria and analysis of industry, political, and geographical
trends to evaluate and compare equity investment opportunities among various
countries and among securities within each country with the objective of
identifying and investing in those securities which can best meet the Fund's
investment objective. Of course, there is no assurance that the Advisers will be
successful in this endeavor or that the investment objective will be realized.

The Fund may purchase foreign securities in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other securities
representing underlying shares of foreign companies. ADRs are publicly traded on
exchanges or over-the-counter in the United States and are issued through
"sponsored" or "unsponsored" arrangements. In a sponsored ADR arrangement, the
foreign issuer assumes the obligations to pay some or all of the depositary's
transaction fees, whereas under an unsponsored arrangement, the foreign issuer
assumes no obligations and the depositary's transaction fees are paid by the ADR
holders. In addition, less information is available in the United States about
an unsponsored ADR than about a sponsored ADR. The Fund may invest in ADRs
through both sponsored and unsponsored arrangements. For further information on
ADRs and EDRs, investors should refer to the Statement of Additional
Information.

The Fund may invest cash temporarily in short-term debt instruments. Such
temporary investments will only be made with cash held to maintain liquidity or
pending investment. See "Temporary Short-Term Investments" herein.

Risk Factors. An investment in the Fund involves risks similar to those of
investing in foreign common stocks generally. Investment in common stocks of
foreign issuers may subject the Fund to risk of foreign political, economic and
legal conditions and developments. Such conditions or developments might include
favorable or unfavorable changes in currency exchange rates, exchange control
regulations (including currency blockage), expropriation of assets of companies,
imposition of withholding taxes on dividend or interest payments, and possible
difficulty in obtaining and enforcing judgments against a foreign issuer. Also,
foreign common stocks may not be as liquid and may be more volatile than
comparable domestic common stocks.

Furthermore, issuers of foreign common stocks are subject to different,
often less comprehensive, accounting, reporting and disclosure requirements than
domestic issuers. The Fund, in connection with its purchases and sales of
foreign securities, other than securities purchased or sold in United States
dollars, will incur transaction costs in converting currencies. Also, brokerage
costs incurred in purchasing and selling securities in foreign securities
markets generally are higher than such costs in comparable transactions in
domestic securities markets, and foreign custodial costs relating to the Fund
securities are higher than domestic custodial costs. See also "Investment
Practices" for a discussion of certain additional risks related to investment
practices that may be utilized by the Fund, including use of options, futures
contracts and related options.

Foreign Currency Transactions. The value of the Fund's securities that are
traded in foreign markets may be affected by changes in currency exchange rates
and exchange control regulations. In addition, the Fund will incur costs in
connection with conversions between various currencies. The Fund's foreign
currency exchange transactions generally will be conducted on a spot basis (that
is, cash basis) at the spot rate for purchasing or selling currency prevailing
in the foreign currency exchange market. The Fund purchases and sells foreign
currency on a spot basis in connection with the settlement of transactions in
securities traded in such foreign currency. The Fund does not purchase and sell
foreign currencies as an investment.

22
<PAGE> 25

The Fund also may enter into contracts with banks or other foreign currency
brokers or dealers to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts
to hedge against changes in foreign currency exchange rates. A foreign currency
forward contract is a negotiated agreement between the contracting parties to
exchange a specified amount of currency at a specified future time at a
specified rate. The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract.

The Fund may attempt to hedge against changes in the value of the United
States dollar in relation to a foreign currency by entering into a forward
contract for the purchase or sale of the amount of foreign currency invested or
to be invested, or by buying or selling a foreign currency futures contract for
such amount. Such hedging strategies may be employed before the Fund purchases a
foreign security traded in the hedged currency which the Fund anticipates
acquiring or between the date the foreign security is purchased or sold and the
date on which payment therefor is made or received. Hedging against a change in
the value of a foreign currency in the foregoing manner does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such hedging transactions reduce
or preclude the opportunity for gain if the value of the hedged currency should
move in the direction opposite to the hedged position. The Fund will not
speculate in foreign currency forward or futures contracts or through the
purchase and sale of foreign currencies.

Temporary Short-Term Investments. It is the Fund's policy to be fully
invested in common stocks and securities convertible into common stocks.
However, the Fund may hold a portion of its assets in cash to meet redemptions
and other day-to-day operating expenses. The Fund may invest cash held for such
purposes in obligations of the United States and of foreign governments,
including their political subdivisions, commercial paper, bankers' acceptances,
certificates of deposit, repurchase agreements collateralized by these
securities, and other short-term evidences of indebtedness. The Fund will only
purchase commercial paper if it is rated Prime-1 or Prime-2 by Moody's or A-1 or
A-2 by S&P. The Fund also may invest cash held for such purposes in short-term,
high grade foreign debt securities. High grade foreign debt securities are those
debt securities of foreign issuers which the Advisers determine to have
creditworthiness substantially equivalent to that of domestic issuers of debt
securities rated investment grade.

GOVERNMENT FUND

GENERAL

The investment objective of the Fund is to seek to provide investors with a
high current return consistent with preservation of capital. The Fund invests
primarily in debt securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. Under normal circumstances, at least 80% of the
total assets of the Fund are invested in such securities. The Fund may invest
its remaining assets (up to 20%) in other government related securities and in
repurchase agreements fully collateralized by U.S. Government securities. The
other government related securities include mortgage-related and mortgage-backed
securities and certificates issued by financial institutions or broker-dealers
representing "stripped" mortgage-related securities. See "Other Government
Related Securities" below. In order to hedge against changes in interest rates,
the Fund may purchase or sell options and engage in transactions involving
interest rate futures contracts and options on such contracts. See "Investment
Practices -- Using Options, Futures Contracts and Options on Futures Contracts"
and the Statement of Additional Information for discussion of options, futures
contracts and options on futures contracts. The Fund may also purchase or sell
U.S. Government securities on a forward commitment basis. See "Investment
Practices -- Forward Commitments." The Fund is not designed for investors
seeking capital appreciation. Shares of the Fund are not insured or guaranteed
by the U.S. Government, its agencies or instrumentalities or by any other person
or entity. There is no assurance that the Fund's objective will be achieved.

23
<PAGE> 26

Since the value of U.S. Government securities owned by the Fund will
fluctuate depending upon market factors and inversely with prevailing interest
rates, the net asset value of shares of the Fund will fluctuate. If interest
rates rise, debt security prices generally fall; if interest rates fall, debt
security prices generally rise. In addition, for a given change in interest
rates, longer-maturity debt securities fluctuate more in price (gaining or
losing more in value) than shorter-maturity debt securities, and generally offer
higher yields than shorter-maturity debt securities, all other factors,
including credit quality, being equal. This potential for a decline in prices of
debt securities due to rising interest rates is referred to herein as "market
risk." While the Fund has no policy limiting the maturities of the debt
securities in which it may invest, the Adviser seeks to moderate market risk by
generally maintaining a portfolio duration within a range of four to six years.
Duration is a measure of the expected life of a debt security that incorporates
a security's yield, coupon interest payments, final maturity and call features
into one measure.

Traditionally a debt security's "term to maturity" has been used as a proxy
for the sensitivity of the security's price to changes in interest rates (which
is the "interest rate risk" or "price volatility" of the security). However,
"term to maturity" measures only the time until a debt security provides its
final payment taking no account of the pattern of the security's payments of
interest or principal prior to maturity. Duration is a measure of the expected
life of a debt security on a present value basis expressed in years. It measures
the length of the time interval between the present and the time when the
interest and principal payments are scheduled (or in the case of a callable
bond, expected to be received), weighing them by the present value of the cash
to be received at each future point in time. For any debt security with interest
payments occurring prior to the payment of principal, duration is always less
than maturity, and for zero coupon issues, duration and term to maturity are
equal. In general, the lower the coupon rate of interest or the longer the
maturity, or the lower the yield-to-maturity of a debt security, the longer its
duration; conversely, the higher the coupon rate of interest, the shorter the
maturity or the higher the yield-to-maturity of a debt security, the shorter its
duration.

Duration allows an investment manager to make certain assumptions regarding
how the value of a portfolio will generally respond to changes in interest
rates. For example, a portfolio consisting entirely of treasury notes yielding
5.6% with a remaining maturity of two years would have a duration of 1.9 years
and a 1% change in the interest rate earned on such securities would cause a
change of approximately 1.9% in the net asset value of the portfolio. A
portfolio consisting entirely of treasury notes yielding 7.8% with a remaining
maturity of ten years would have a duration of 7.0 years and a 1% change in the
interest rate earned on such securities would cause a change of between 6.5% and
8% in the net asset value of the portfolio. This example is intended for
demonstration purposes only, however, and is not intended to approximate how the
Fund's portfolio will respond to changes in interest rates. The Fund's
investment portfolio may include securities with differing maturities and
quality levels, and interest rates on those instruments may not all change by
the same amount at the same time as rates rise or fall generally in the
marketplace. Also, the treasury securities described in the example cannot be
retired prior to maturity, while some of the securities in the Fund's portfolio
can. These factors among others can cause the Fund's investment portfolio to
respond somewhat differently to changes in interest rates than shown in the
example.

24
<PAGE> 27

owned by the Fund, as adjusted for investments in options, futures contracts and
related options, was approximately 5.2 years.

The Fund often purchases debt securities at a premium over the principal or
face value in order to obtain higher current income. The amount of any premium
declines during the term of the security to zero at maturity. Such decline
generally is reflected in the market price of the security and thus in the
Fund's net asset value. Any such decline is realized for accounting purposes as
a capital loss at maturity or upon resale. Prior to maturity or resale, such
decline in value could be offset, in whole or part, or increased by changes in
the value of the security due to changes in interest rate levels.

The principal reason for selling call or put options is to obtain, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. By selling options, the Fund reduces its potential
for capital appreciation on debt securities if interest rates decline. Thus if
market prices of debt securities increase, the Fund receives less total return
from its optioned positions than it would have received if the options had not
been sold. The purpose of selling options is intended to improve the Fund's
total return and not to support or "enhance" monthly distributions. During
periods when the Fund has capital loss carry forwards any capital gains
generated from such transactions will be retained in the Fund. See "Investment
Practices -- Using Options, Futures Contracts and Options on Futures Contracts"
and "Dividends, Distributions and Taxes" and the Statement of Additional
Information for discussion of options, futures contracts and options on futures
contracts.

The purchase and sale of options may result in a high portfolio turnover
rate. The Fund's turnover rate is shown in the table of "Financial Highlights."
See "Investment Practices -- Fund Turnover."

The Fund is subject to the diversification requirements of Section 817(h)
of the Internal Revenue Code (the "Code") which must be met at the end of each
quarter of the year (or within 30 days thereafter). Regulations issued by the
Secretary of the Treasury have the effect of requiring the Fund to invest no
more than 55% of its total assets in securities of any one issuer, no more than
70% in the securities of any two issuers, no more than 80% in the securities of
any three issuers, and no more than 90% in the securities of any four issuers.
For this purpose, the United States Treasury and each U.S. Government agency and
instrumentality is considered to be a separate issuer. Thus, the Fund intends to
invest in U.S. Treasury securities and in securities issued by at least four
U.S. Government agencies or instrumentalities in the amounts necessary to meet
these diversification requirements at the end of each quarter of the year (or
within thirty days thereafter).

In the event the Fund does not meet the diversification requirements of
Section 817(h) of the Code, the policies funded by shares of the Fund will not
be treated as life insurance for Federal income tax purposes and the owners of
the policies will be subject to taxation on their share of the dividends and
distributions paid by the Fund.

U.S. GOVERNMENT SECURITIES

Securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities include: (1) U.S. Treasury
obligations, which differ in their interest rates, maturities and times of
issuance: U.S. Treasury bills (maturity of one year or less), U.S. Treasury
notes (maturity of one to ten years), and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are backed by the full faith
and credit of the United States; and (2) obligations issued or guaranteed by
U.S. Government agencies or instrumentalities, including government guaranteed
mortgage-related securities, some of which are backed by the full faith and
credit of the U.S. Treasury, some of which are supported by the right of the
issuer to borrow from the U.S. Government and some of which are backed only by
the credit of the issuer itself.

Mortgage loans made by banks, savings and loan institutions, and other
lenders are often assembled into pools, which are issued or guaranteed by an
agency or instrumentality of the U.S.

25
<PAGE> 28

Government, though not necessarily by the U.S. Government itself. Interests in
such pools are what this Prospectus calls "mortgage-related securities."

Mortgage-related securities include, but are not limited to, obligations
issued or guaranteed by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). GNMA is a wholly owned corporate instrumentality
of the United States whose securities and guarantees are backed by the full
faith and credit of the United States. FNMA, a federally chartered and privately
owned corporation, and FHLMC, a federal corporation, are instrumentalities of
the United States. The securities and guarantees of FNMA and FHLMC are not
backed, directly or indirectly, by the full faith and credit of the United
States. Although the Secretary of the Treasury of the United States has
discretionary authority to lend FNMA up to $2.25 billion outstanding at any
time, neither the United States nor any agency thereof is obligated to finance
FNMA's or FHLMC's operations or to assist FNMA or FHLMC in any other manner.
Securities of FNMA and FHLMC include those issued in principal only or interest
only components.

Mortgage-related securities are characterized by monthly payments to the
holder, reflecting the monthly payments made by the borrowers who received the
underlying mortgage loans. The payments to the securityholders (such as the
Fund), like the payments on the underlying loans, represent both principal and
interest. Although the underlying mortgage loans are for specified periods of
time, such as 20 or 30 years, the borrowers can, and typically do, pay them off
sooner. Thus, the securityholders frequently receive prepayments of principal,
in addition to the principal which is part of the regular monthly payment. A
borrower is more likely to prepay a mortgage which bears a relatively high rate
of interest. This means that in times of declining interest rates, some of the
Fund's higher yielding securities might be converted to cash, and the Fund will
be forced to accept lower interest rates when that cash is used to purchase
additional securities. The increased likelihood of prepayment when interest
rates decline also limits market price appreciation of mortgage-related
securities. If the Fund buys mortgage-related securities at a premium, mortgage
foreclosures or mortgage prepayments may result in a loss to the Fund of up to
the amount of the premium paid since only timely payment of principal and
interest is guaranteed.

OTHER GOVERNMENT RELATED SECURITIES

The Fund may invest up to 20% of its assets in other government related
securities and in repurchase agreements fully collateralized by U.S. Government
securities. A principal type of government related security in which the Fund
may invest are mortgage-backed securities including collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduits ("REMICs").

CMOs are debt securities issued by U.S. Government agencies or by financial
institutions and other mortgage lenders and collateralized by a pool of
mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).

REMICs, which were authorized under the Tax Reform Act of 1986 (the "Tax
Reform Act"), are private entities formed for the purpose of holding a fixed
pool of mortgages secured by an interest in real property. REMICs are similar to
CMOs in that they issue multiple classes of securities.

CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. The Fund will invest in such
privately issued securities only if they are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. Government, its agencies
or

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<PAGE> 29

instrumentalities. The Fund intends to invest in privately issued CMOs and
REMICs only if they are rated at the time of purchase in the two highest grades
by a nationally-recognized rating agency.

STRIPPED SECURITIES

Stripped mortgage-related securities (hereinafter referred to as "Stripped
Mortgage Securities") are derivative multiclass mortgage securities. Stripped
Mortgage Securities may be issued by agencies or instrumentalities of the U.S.
Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.

Stripped Mortgage Securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of Stripped Mortgage Securities will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The
yield-to-maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
a rapid rate of principal payments may have a material adverse effect on the
securities' yield-to-maturity since interest payments cease as soon as the
related principal amount is repaid. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the Fund may fail to fully
recoup its initial investment in these securities even if the security is rated
AAA or Aaa. Holders of PO securities are not entitled to any periodic payments
of interest prior to maturity. Accordingly, such securities usually trade at a
deep discount from their face or par value and are subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities which make current distributions of
interest. Current federal tax law requires that a holder (such as the Fund) of
such securities accrue a portion of the discount at which the security was
purchased as income each year even though the holder receives no interest
payment in cash on the certificate during the year. Such securities may involve
greater risk than securities issued directly by the U.S. Government, its
agencies or instrumentalities.

Although the market for government-issued IO and PO securities backed by
fixed-rate mortgages is increasingly liquid, certain of such securities may not
be readily marketable and will be considered illiquid for purposes of the Fund's
limitation on investments in illiquid securities. The Trustees will establish
guidelines and standards for determining whether a particular government-issued
IO or PO backed by fixed-rate mortgages is liquid. Generally, such a security
may be deemed liquid if it can be disposed of promptly in the ordinary course of
business at a value reasonably close to that used in the calculation of the net
asset value per share. Stripped Mortgage Securities, other than
government-issued IO and PO securities backed by fixed-rate mortgages, are
presently considered by the staff of the SEC to be illiquid securities and thus
subject to the Fund's limitation on investment in illiquid securities.

GROWTH AND INCOME FUND

The Fund's investment objective is to seek long-term growth of capital and
income. Since investment in securities involves potential gain or loss, there is
no assurance that the Fund's objective will be achieved.

In view of the investment objective, the Fund generally invests principally
in income-producing equity securities including common stocks and convertible
securities; although investments are also made in non-convertible preferred
stocks and debt securities rated "investment grade," i.e., within the four
highest grades assigned by S&P or by Moody's. Ratings at the time of purchase
determine which securities may be acquired, and a subsequent reduction in rating
does not require the Fund to dispose of a security. Securities rated BBB by S&P
or Baa by Moody's are in the lowest of the four

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<PAGE> 30

investment grades and are considered by the rating agencies to be medium grade
obligations which possess speculative characteristics so that changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than in the case of higher
rated securities. The market prices of preferred stocks and debt securities
generally fluctuate with changes in interest rates so that the value of
investments in such securities can be expected to decrease as interest rates
rise and increase as interest rates fall. The Fund may also invest in warrants
and in securities of newly-formed companies and in investment companies. See
"Investment Practices -- Investment in Investment Companies." The Fund may enter
into repurchase agreements with domestic banks and broker-dealers which involves
certain risks or may lend portfolio securities on a fully collateralized basis.
See "Investment Practices -- Repurchase Agreements and Lending of Securities."
When deemed appropriate for temporary defensive purposes, the Fund may invest up
to 100% of its total assets in U.S. Government securities and investment grade
corporate debt securities.

The Fund may dispose of a security whenever, in the opinion of the Adviser,
factors indicate it is desirable to do so. Such factors include a change in
economic or market factors in general or with respect to a particular industry,
a change in the market trend of or other factors affecting an individual
security, changes in the relative market performance of or appreciation
possibilities offered by individual securities and other circumstances bearing
on the desirability of a given investment.

MONEY MARKET FUND

The Fund seeks protection of capital and high current income through
investments in money market instruments. The investment policies, the percentage
limitations, and the kinds of securities in which the Fund can invest may be
changed by the Trustees, unless expressly governed by those limitations stated
under "Investment Restrictions" in the Statement of Additional Information which
can be changed only by action of the shareholders of the Fund. It is not the
intention of the Trustees, however, to change these policies without prior
notice to shareholders.

The Fund seeks to maintain a constant net asset value of $1.00 per share by
investing in a diversified portfolio of money-market instruments maturing within
one year with a dollar-weighted average maturity of 90 days or less. It seeks
high current income from these short-term investments to the extent consistent
with protection of capital. Of course, there can be no guarantee that the Fund
will achieve its objective or be able at all times to maintain its net asset
value per share at $1.00. In addition, the daily dividend rate paid by the Fund
may be expected to fluctuate. The Fund uses the amortized cost method for
valuing portfolio securities purchased at a discount. See "Determination of Net
Asset Value." It may invest in instruments of the following types, all of which
will be U.S. dollar obligations:

OBLIGATIONS OF THE U.S. GOVERNMENT AND ITS AGENCIES

The Fund may invest in obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies and instrumentalities which are
supported by any of the following: (a) the full faith and credit of the U.S.
Government, (b) the right of the issuer to borrow an amount limited to a
specific line of credit from the U.S. Government, (c) discretionary authority of
the U.S. Government agency or instrumentality or (d) the credit of the
instrumentality. Such agencies or instrumentalities include, but are not limited
to, the Federal National Mortgage Association, the Government National Mortgage
Association, Federal Land Banks, and the Farmer's Home Administration.

BANK OBLIGATIONS

The Fund may invest in negotiable time deposits, certificates of deposit
and bankers' acceptances which are obligations of domestic banks having total
assets in excess of $1 billion as of the date of their most recently published
financial statements. The Fund is also authorized to invest up

28
<PAGE> 31

to five percent of its total assets in certificates of deposit issued by
domestic banks having total assets of less than $1 billion, provided that the
principal amount of the certificate of deposit acquired by the Fund is insured
in full by the Federal Deposit Insurance Corporation.

COMMERCIAL PAPER

The Fund may invest in short-term obligations of companies which at the
time of investment are (a) rated in one of the two highest categories by at
least two nationally recognized statistical organizations (or one rating
organization if the obligation was rated by only one such organization), or (b)
if not rated, are of comparable quality as determined in accordance with
procedures established by the Trustees. See the Statement of Additional
Information. Commercial paper consists of short-term (usually from 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. (See the Appendix in the Statement of Additional
Information for an explanation of these ratings). The Fund's current policy is
to limit investments in commercial paper to obligations rated in the highest
rating category.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements with banks and broker-dealers
which involve certain risks in the event of a default by the other party. See
"Investment Practices -- Repurchase Agreements."

REAL ESTATE SECURITIES FUND

General. The Fund's primary investment objective is to provide shareholders
with long-term growth of capital. Current income is a secondary consideration.
The Fund will seek to achieve its investment objectives by investing principally
in a diversified portfolio of Real Estate Securities which include equity
securities, including common stocks and convertible securities, as well as non-
convertible preferred stocks and debt securities of real estate industry
companies. A "real estate industry company" is a company that derives at least
50% of its assets (marked to market), gross income or net profits from the
ownership, construction, management or sale of residential, commercial or
industrial real estate. Real estate industry companies may include among others:
equity real estate investment trusts, which pool investors' funds for investment
primarily in commercial real estate properties, mortgage real estate investment
trusts, which invest pooled funds in real estate related loans; brokers or real
estate developers; and companies with substantial real estate holdings, such as
paper and lumber products and hotel and entertainment companies. Under normal
market conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate investment
trusts. The Fund's investment in debt securities will be rated, at the time of
investment, at least Baa by Moody's or BBB by S&P, a comparable rating by any
other nationally recognized statistical rating organization or if unrated,
determined by the Adviser to be of comparable quality. Ratings at the time of
purchase determine which securities may be acquired, and a subsequent reduction
in ratings does not require the Fund to dispose of a security. Securities rated
Baa by Moody's or BBB by S&P are considered to be medium grade obligations which
possess speculative characteristics so that changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher rated securities. The
rating of the ratings agencies represent their opinions of the quality of the
debt securities they undertake to rate, but not the market value risk of such
securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality. The Fund may invest more than 25% of its
total assets in the real estate industry.

Under normal market conditions, the Fund may invest up to 35% of its total
assets in equity and debt securities of companies outside the real estate
industry, U.S. Government securities, cash and money market instruments.

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<PAGE> 32

The Fund may invest up to 25% of its assets in securities issued by foreign
issuers. See "Investment Practices -- Foreign Securities." The Fund may engage
in portfolio management strategies and techniques involving options, futures
contracts and options on futures. Options, futures contracts and related options
are described in "Investment Practices -- Using Options, Futures Contracts and
Options on Futures Contracts" and the Statement of Additional Information.

For temporary defensive purposes, the Fund may invest up to 100% of its
total assets in short-term investments as described below. The Fund will assume
a temporary defensive posture only when economic and other factors affect the
real estate industry market to such an extent that the Adviser believes there to
be extraordinary risks in being primarily in Real Estate Securities.

There can be no assurance that the Fund will achieve its investment
objectives.

Short-Term Investments. The Fund may invest in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, commercial
paper, bankers' acceptances, certificates of deposit, repurchase agreements
collateralized by these securities, and other short-term evidences of
indebtedness. The Fund will only purchase commercial paper if it is rated
Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P. Such temporary investments
may be made either for liquidity purposes, to meet shareholder redemption
requirements or as a temporary defensive measure.

Risk Factors. Although the Fund does not invest directly in real estate, an
investment in the Fund will generally be subject to the risks associated with
real estate because of its policy of concentration in the securities of
companies in the real estate industry. These risks include, among others:
declines in the value of real estate; risks related to general and local
economic conditions; overbuilding and increased competition; increases in
property taxes and operating expenses; changes in zoning laws; casualty or
condemnation losses; variations in rental income; changes in neighborhood
values; the appeal of properties of tenants and changes in interest rates. The
value of securities of companies which service the real estate industry will
also be affected by such risks. If the Fund has rental income or income from the
disposition of real property acquired as a result of a default on securities the
Fund owns, the receipt of such income may adversely affect its ability to retain
its tax status as a regulated investment company.

In addition, equity real estate investment trusts may be affected by
changes in the value of the underlying property owned by the trusts, while
mortgage real estate investment trusts may be affected by the quality of credit
extended. Equity and mortgage real estate investment trusts are dependent upon
management skill, may not be diversified and are subject to the risks of
financing projects. Such real estate investment trusts are also subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation and the
possibility of failing to qualify for tax-free pass-through of income under the
Code and to maintain exemption from the Investment Company Act of 1940. Changes
in interest rates may also affect the value of the debt securities in the Fund's
portfolio. Like investment companies such as the Fund, real estate investment
trusts are not taxed on income distributed to shareholders provided they comply
with several requirements of the Code. The Fund will indirectly bear its
proportionate share of any expenses paid by the real estate investment trusts in
which it invests in addition to the expenses paid by the Fund.

Additional information about the Fund's investment practices and the risks
associated with such practices are contained in "Investment Objectives and
Policies" and "Investment Practices" herein and in the Statement of Additional
Information.

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<PAGE> 33

INVESTMENT PRACTICES AND RESTRICTIONS

Repurchase Agreements. Each Fund may enter into repurchase agreements with
broker-dealers or domestic banks (or a foreign branch or subsidiary thereof)
which are deemed creditworthy by the Adviser under guidelines approved by the
Trustees. A repurchase agreement is a short-term investment in which the
purchaser (i.e., the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the purchaser's holding period. In the event of a
bankruptcy or other default of the seller of a repurchase agreement, the Fund
could experience delays and expenses in liquidating the underlying securities
and loss including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto, (b)
possible lack of access to income on the underlying security during this period,
and (c) expenses of enforcing its rights. No Fund will invest in repurchase
agreements maturing in more than seven days if any such investment, together
with any other illiquid securities held by such Fund, exceeds in the case of the
Emerging Growth Fund, the Global Equity Fund, the Growth and Income Fund and the
Real Estate Securities Fund, 15% of the value of the Fund's net assets and, in
the case of the Asset Allocation Fund, the Domestic Income Fund, the Enterprise
Fund, the Government Fund and the Money Market Fund, ten percent of the value of
its net assets.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that substantially all of the funds advised or subadvised by
the Adviser would otherwise invest separately into a joint account. The cash in
the joint account is then invested and the funds that contributed to the joint
account share pro rata in the net revenue generated. The Adviser believes that
the joint account produces greater efficiencies and economies of scale that may
contribute to reduced transaction costs, higher returns, higher quality
investments and greater diversity of investments for the Funds than would be
available to the Funds investing separately. The manner in which the joint
account is managed is subject to conditions set forth in the SEC order obtained
authorizing this practice, which conditions are designed to ensure the fair
administration of the joint account and to protect the amounts in that account.

Loans of Portfolio Securities. Each Fund, except the Real Estate
Securities Fund, may lend portfolio securities to unaffiliated brokers, dealers
and financial institutions provided that (a) immediately after any such loan,
the value of the securities loaned does not exceed ten percent of the total
value of that Fund's assets, and (b) any securities loan is collateralized in
accordance with applicable regulatory requirements. See Statement of Additional
Information.

Foreign Securities. The Asset Allocation Fund, the Domestic Income Fund,
the Emerging Growth Fund, the Enterprise Fund, the Growth and Income Fund and
the Real Estate Securities Fund may invest up to 25%, 25%, 20%, 10%, 15% and
25%, respectively, of the value of such Funds' total assets in securities issued
by foreign issuers. With respect to the Real Estate Securities Fund, some of
such securities may also be Real Estate Securities. Investments in securities of
foreign entities and securities denominated in foreign currencies involve risks
not typically involved in domestic investment, including fluctuations in foreign
exchange rates, future foreign political and economic developments, and the
possible imposition of exchange controls or other foreign or United States
governmental laws or restrictions applicable to such investments. Since a Fund
may invest in securities denominated or quoted in currencies other than the
United States dollar, changes in foreign currency exchange rates may affect the
value of investments in the portfolio and the accrued income and unrealized
appreciation or depreciation of investments. Changes in foreign currency
exchange rates relative to the U.S. dollar will affect the U.S. dollar value of
a Fund's assets denominated in that currency and the Fund's yield on such
assets.

A Fund may also purchase foreign securities in the form of ADRs and EDRs or
other securities representing underlying shares of foreign companies. ADRs are
publicly traded on exchanges or over-the-counter in the United States and are
issued through "sponsored" or "unsponsored" arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay

31
<PAGE> 34

some or all of the depositary's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligation and the depositary's
transaction fees are paid by the ADR holders. In addition, less information is
available in the United States about an unsponsored ADR than about a sponsored
ADR and the financial information about a company may not be as reliable for an
unsponsored ADR as it is for a sponsored ADR. A Fund may invest in ADRs through
both sponsored and unsponsored arrangements. For further information on ADRs and
EDRs, investors should refer to the Statement of Additional Information.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investment in those countries.
There may be less publicly available information about a foreign security than
about a United States security, and foreign entities may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those of United States entities. In addition, certain foreign
investments made by a Fund may be subject to foreign withholding taxes, which
would reduce the Fund's total return on such investments and the amounts
available for distributions by the Fund to its shareholders. See "Dividends,
Distributions and Taxes." Foreign financial markets, while growing in volume,
have, for the most part, substantially less volume than United States markets,
and securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable domestic companies. The foreign markets
also have different clearance and settlement procedures and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of the Fund are not invested and no return is earned thereon. The inability of
the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. Costs associated with transactions in
foreign securities, including custodial costs and foreign brokerage commissions,
are generally higher than with transactions in United States securities. In
addition, the Fund will incur costs in connection with conversions between
various currencies. There is generally less government supervision and
regulation of exchanges, financial institutions and issuers in foreign countries
than there is in the United States.

Foreign Currency Transactions. The value of a Fund's portfolio securities
that are traded in foreign markets may be affected by changes in currency
exchange rates and exchange control regulations. In addition, the Fund will
incur costs in connection with conversions between various currencies. A Fund's
foreign currency exchange transactions generally will be conducted on a spot
basis (that is, cash basis) at the spot rate for purchasing or selling currency
prevailing in the foreign currency exchange market. A Fund purchases and sells
foreign currency on a spot basis in connection with the settlement of
transactions in securities traded in such foreign currency. A Fund does not
purchase and sell foreign currencies as an investment.

A Fund also may enter into contracts with banks or other foreign currency
brokers and dealers to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts
to hedge against changes in foreign currency exchange rates. A foreign currency
forward contract is a negotiated agreement between the contracting parties to
exchange a specified amount of currency at a specified future time at a
specified rate. The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract.

A Fund may attempt to hedge against changes in the value of the United
States dollar in relation to a foreign currency by entering into a forward
contract for the purchase or sale of the amount of foreign currency invested or
to be invested, or by buying or selling a foreign currency futures contract for
such amount. Such hedging strategies may be employed before the Fund purchases a
foreign security traded in the hedged currency which the Fund anticipates
acquiring or between the date the foreign security is purchased or sold and the
date on which payment therefore is made or

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<PAGE> 35

received. Hedging against a change in the value of a foreign currency in the
foregoing manner does not eliminate fluctuations in the price of portfolio
securities or prevent losses if the prices of such securities decline.
Furthermore, such hedging transactions reduce or preclude the opportunity for
gain if the value of the hedged currency should move in the direction opposite
to the hedged position. A Fund will not speculate in foreign currency forward or
futures contracts or through the purchase and sale of foreign currencies. With
respect to the Global Equity Fund, see "Investment Objectives and
Policies -- Global Equity Fund."

Restricted Securities. The Emerging Growth Fund, the Global Equity Fund,
the Growth and Income Fund and the Real Estate Securities Fund may invest up to
fifteen percent of their net assets in restricted securities and other illiquid
assets. The other Funds may each invest up to five percent of their net assets
in restricted securities and other illiquid assets. As used herein, restricted
securities are those that have been sold in the United States without
registration under the Securities Act of 1933 and are thus subject to
restrictions on resale. Excluded from the limitation, however, are any
restricted securities which are eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 and which have been determined to be liquid by the
Trustees or by the Adviser pursuant to Board-approved guidelines. The
determination of liquidity is based on the volume of reported trading in the
institutional secondary market for each security. Since it is not possible to
predict with assurance how the markets for restricted securities sold and
offered under Rule 144A will develop, the Trustees will carefully monitor the
Fund's investment in these securities focusing on such factors, among others, as
valuation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in the Fund to the
extent that qualified institutional buyers become for a time uninterested in
purchasing these restricted securities. These difficulties and delays could
result in the Fund's inability to realize a favorable price upon disposition of
restricted securities, and in some cases might make disposition of such
securities at the time desired by the Fund impossible. Since market quotations
are not readily available for restricted securities, such securities will be
valued by a method that the Fund's Trustees believe accurately reflects fair
value.

Short Sales Against the Box. The Global Equity Fund may from time to time
make short sales of securities it owns or has the right to acquire through
conversion or exchange of other securities it owns. A short sale is "against the
box" to the extent that the Fund contemporaneously owns or has the right to
obtain at no added cost securities identical to those sold short. In a short
sale, the Fund does not immediately deliver the securities sold and does not
receive the proceeds from the sale. The Fund is said to have a short position in
the securities sold until it delivers the securities sold, at which time it
receives the proceeds of the sale. The Fund may not make short sales or maintain
a short position if to do so would cause more than 25% of its total assets,
taken at market value, to be held as collateral for such sales.

To secure its obligation to deliver the securities sold short, the Fund
will deposit in escrow in a separate account with its Custodian an equal amount
of the securities sold short or securities convertible into or exchangeable for
such securities. The Fund may close out a short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund may want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short. However, the Fund
will not purchase and deliver new securities to satisfy its short order if such
purchase and sale would cause such Fund to derive more than 30% of its gross
income from the sale of securities held for less than three months.

Forward Commitments. The Domestic Income Fund and the Government Fund may
purchase or sell U.S. Government securities (or debt securities with respect to
the Real Estate Securities Fund) on a "when-issued" or "delayed delivery" basis
("Forward Commitments"). These transactions occur when securities are purchased
or sold by the Fund with payment and delivery taking place in the future,
frequently a month or more after such transaction. The price is fixed on the
date of the commitment, and the seller continues to accrue interest on the
securities covered by the

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<PAGE> 36

Forward Commitment until delivery and payment takes place. At the time of
settlement, the market value of the securities may be more or less than the
purchase or sale price.

Each Fund may either settle a Forward Commitment by taking delivery of the
securities or may resell or repurchase a Forward Commitment on or before the
settlement date in which event a Fund may reinvest the proceeds in another
Forward Commitment. A Fund's use of Forward Commitments may increase its overall
investment exposure and thus its potential for gain or loss. When engaging in
Forward Commitments, a Fund relies on the other party to complete the
transaction; should the other party fail to do so, a Fund might lose a purchase
or sale opportunity that could be more advantageous than alternative
opportunities at the time of the failure.

Each Fund maintains a segregated account (which is marked to market daily)
of cash, U.S. Government securities or the security covered by the Forward
Commitment with the Fund's custodian in an aggregate amount equal to the amount
of its commitment as long as the obligation to purchase or sell continues.

Portfolio Turnover. Each Fund may purchase or sell securities without
regard to the length of time the security has been held and thus may experience
a high rate of portfolio turnover. A 100% turnover rate would occur, for
example, if all the securities in a portfolio were replaced in a period of one
year. Securities with maturities of less than one year are excluded in the
computation of the portfolio turnover rate. The portfolio turnover rate is not a
limiting factor when the Adviser deems it desirable to purchase or sell
securities or to engage in transactions in options, futures contracts and
options on futures contracts on behalf of the Asset Allocation Fund, the
Emerging Growth Fund, the Enterprise Fund, the Global Equity Fund, the
Government Fund, the Growth and Income Fund, and the Real Estate Securities
Fund. The annual turnover rates of each Fund is shown under "Financial
Highlights." Higher portfolio turnover involves correspondingly greater
transaction costs, including any brokerage commissions, which are borne directly
by the Fund. In addition, higher portfolio turnover may increase the recognition
of short-term, rather than long-term, capital gains. See "Dividends,
Distributions and Taxes."

Using Options, Futures Contracts and Options on Futures Contracts. The
Asset Allocation Fund, the Emerging Growth Fund, the Enterprise Fund, the Global
Equity Fund, the Government Fund, the Growth and Income Fund, and the Real
Estate Securities Fund may purchase or sell options, futures contracts or
options on futures contracts. The Funds expect to utilize options, futures
contracts and options thereon in several different ways, depending upon the
status of the Portfolio's portfolio and the Adviser's expectations concerning
the securities markets. See the Statement of Additional Information for a
discussion of options, futures contracts and options on futures contracts.

Potential Risks of Options, Futures Contracts and Options on Futures
Contracts. The purchase and sale of options and futures contracts involve risks
different from those involved with direct investments in securities. While
utilization of options, futures contracts and similar instruments may be
advantageous to a Fund, if the Adviser and in the case of the Global Equity
Fund, John Govett is not successful in employing such instruments in managing
the Fund's investments, the Fund's performance will be worse than if the Fund
did not make such investments. In addition, the Fund would pay commissions and
other costs in connection with such investments, which may increase the Fund's
expenses and reduce its return. A Fund may write or purchase options in
privately negotiated transactions ("OTC Options") as well as listed options. OTC
Options can be closed out only by agreement with the other party to the
transaction. Any OTC Option purchased by a Fund is considered an illiquid
security. Any OTC Option written by a Fund is with a qualified dealer pursuant
to an agreement under which the Fund may repurchase the option at a formula
price. Such options are considered illiquid to the extent that the formula price
exceeds the intrinsic value of the option. A Fund may not purchase or sell
futures contracts or related options for which the aggregate initial margin and
premiums exceed five percent of the fair market value of the Fund's assets. In
order to prevent leverage in connection with the purchase of futures contracts
by a Fund, an amount of cash, cash equivalents or liquid high grade debt
securities equal to the market value of the obligation

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<PAGE> 37

under the futures contracts (less any related margin deposits) will be
maintained in a segregated account with the Custodian. Each Fund may not invest
more than ten percent of its net assets (or 15% for the Emerging Growth Fund,
the Global Equity Fund, the Growth and Income Fund and the Real Estate
Securities Fund) in illiquid securities and repurchase agreements which have a
maturity of longer than seven days. A more complete discussion of the potential
risks involved in transactions in options, futures contracts and options on
futures contracts is contained in the Statement of Additional Information.

Investment in Investment Companies. Certain Funds of the Trust may invest
in a separate investment company, Van Kampen American Capital Small
Capitalization Fund ("Small Cap Fund"), that invests in a broad selection of
small capitalization securities. The shares of the Small Cap Fund are available
only to investment companies advised by the Adviser. The Asset Allocation Fund,
the Enterprise Fund and the Growth and Income Fund may invest in the Small Cap
Fund. The Adviser believes that the use of the Small Cap Fund provides the Funds
with the most effective exposure to the performance of the small capitalization
sector of the stock market while at the same time minimizing costs. The Adviser
charges no advisory fee for managing the Small Cap Fund, nor is there any sales
load or other charges associated with distribution of its shares. Other expenses
incurred by the Small Cap Fund will be borne by it, and thus indirectly by the
Van Kampen American Capital funds that invest in it. With respect to such other
expenses, the Adviser anticipates that the efficiencies resulting from use of
the Small Cap Fund will result in cost savings for the Funds and other Van
Kampen American Capital funds. In large part these savings will be attributable
to the fact that administrative actions that would have to be performed multiple
times if each Van Kampen American Capital fund held its own portfolio of small
capitalization stocks will need to be performed only once. The Adviser expects
that the Small Cap Fund will experience trading costs that will be substantially
less than the trading costs that would be incurred if small capitalization
stocks were purchased separately for the Funds and other Van Kampen American
Capital funds.

The securities of small and medium sized companies that the Small Cap Fund
may invest in may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. In addition, small capitalization companies typically are subject to a
greater degree of change in earnings and business prospects than are larger,
more established companies. In light of these characteristics of small
capitalization companies and their securities, the Small Cap Fund may be subject
to greater investment risk than that assumed through investment in the equity
securities of larger capitalization companies.

The Asset Allocation Fund, the Enterprise Fund and the Growth and Income
Fund will each be deemed to own a pro rata portion of each investment of the
Small Cap Fund. For example, if a Fund's investment in the Small Cap Fund were
$10 million, and the Small Cap Fund had five percent of its assets invested in
the electronics industry, the Fund would be considered to have an investment of
$500,000 in the electronics industry.

Brokerage Practices. The Adviser and, in the case of the Global Equity
Fund, John Govett, are responsible for the placement of orders for the purchase
and sale of portfolio securities for the Fund and the negotiation of brokerage
commissions on such transactions. Brokerage firms are selected on the basis of
their professional capability for the type of transaction and the value and
quality of execution services rendered on a continuing basis. The Adviser and,
in the case of the Global Equity Fund, John Govett, are authorized to place
portfolio transactions with brokerage firms participating in the distribution of
shares of the Fund and other Van Kampen American Capital mutual funds if it
reasonably believes that the quality of the execution and the commission are
comparable to that available from other qualified brokerage firms. The Adviser
and, in the case of the Global Equity Fund, John Govett, are authorized to pay
higher commissions to brokerage firms that provide it with investment and
research information than to firms which do not provide such services if the
Adviser and, in the case of the Global Equity Fund, John Govett, determine that
such commissions are reasonable in relation to the overall services provided.
The information received may be used by the

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<PAGE> 38

Adviser and, in the case of the Global Equity Fund, John Govett, in managing the
assets of other advisory accounts as well as in the management of the assets of
the Fund.

THE TRUST AND ITS MANAGEMENT

The Trust, an open-end, diversified management investment company,
generally known as a mutual fund, was organized as a Massachusetts business
trust on June 3, 1985 and reorganized on September 16, 1995, under the laws of
the state of Delaware as a business entity commonly known as a "Delaware
business trust." A mutual fund provides, for those who have similar investment
goals, a practical and convenient way to invest in a diversified portfolio of
securities by combining their resources in an effort to achieve such goals.

The Trust's fourteen Trustees have the responsibility for overseeing the
affairs of the Fund. The Adviser, 2800 Post Oak Boulevard, Houston, Texas 77056,
determines the investment of the Trust's assets, provides administrative
services and manages the Trust's business and affairs. The Adviser, together
with its predecessors, has been in the investment advisory business since 1926.

THE ADVISER. The Adviser is a wholly owned subsidiary of Van Kampen
American Capital, Inc. ("Van Kampen American Capital"). Van Kampen American
Capital is a diversified asset management company with more than two million
retail investor accounts, extensive capabilities for managing institutional
portfolios, and nearly $50 billion under management or supervision. Van Kampen
American Capital's more than 40 open-end and 38 closed-end funds and more than
2,700 unit investment trusts are professionally distributed by leading financial
advisers nationwide.

Van Kampen American Capital Distributors, Inc. (the "Distributor"), the
distributor of the Trust and the sponsor of the funds mentioned above, is also a
wholly-owned subsidiary of Van Kampen American Capital. Van Kampen American
Capital is a wholly-owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc.
is controlled, through the ownership of a substantial majority of its common
stock, by The Clayton & Dubilier Private Equity Fund IV Limited Partnership
("C&D L.P."), a Connecticut limited partnership. C&D L.P. is managed by Clayton,
Dubilier & Rice, Inc., a New York based private investment firm. The General
Partner of C&D L.P. is Clayton & Dubilier Associates IV Limited Partnership
("C&D Associates L.P."). The general partners of C&D Associates L.P. are Joseph
L. Rice, III, B. Charles Ames, William A. Barbe, Alberto Cribiore, Donald J.
Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson, each of
whom is a principal of Clayton, Dubilier & Rice, Inc. In addition, certain
officers, directors and employees of Van Kampen American Capital own, in the
aggregate, not more than seven percent of the common stock of VK/AC Holding,
Inc. and have the right to acquire, upon the exercise of options, approximately
an additional 11% of the common stock of VK/AC Holding, Inc. Presently, and
after giving effect to the exercise of such options, no officer or trustee of
the Fund owns or would own five percent or more of the common stock of VK/AC
Holding, Inc.

As of , 1995, the Adviser owned beneficially and of record
approximately [43.30%] and [92.07%] of the outstanding shares of the Emerging
Growth Fund and Global Equity Fund, respectively, and therefore, may be deemed
to control those Funds.

THE SUBADVISERS. John Govett is a United Kingdom-based investment
management company whose investment management activities originated in the
1920s, and was incorporated in 1955 to provide a corporate structure for a
management group. Located at 4 Battle Bridge Lane, London SE1 2HR, England. John
Govett is a wholly-owned subsidiary of Govett & Company Limited, a corporation
listed on the London Stock Exchange. The Govett Group, which manages or
administers investment funds valued at approximately $8.6 billion, maintains
offices in London, Singapore, Jersey (Channel Islands), Sacramento, Raleigh, and
San Francisco. John Govett provides advisory services to the Adviser with
respect to the Global Equity Fund.

Hines Realty Advisors provides real estate advisory services to the Adviser
of the Real Estate Securities Fund. Hines Realty Advisors is a limited
partnership among Hines Holdings, Inc. (as

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<PAGE> 39

general partner), and Hines 1980 A, Ltd. and Gerald D. Hines (as limited
partners). Mr. William S. Wardrop, Jr. is President and Mr. Glenn L. Lowenstein
is Vice President of Hines Realty Advisors. Hines Realty Advisors has had
limited previous experience as an investment adviser to mutual funds (since mid
May 1994). Affiliates of Hines Realty Advisors have extensive domestic and
international experience in owning and managing real estate. Hines Realty
Advisors, an affiliate of the Hines real estate organization ("Hines"), provides
a comprehensive evaluation of the real estate market. Founded in 1957, Hines has
proven experience in a full range of real estate services: strategic asset
management, property management development, marketing and leasing,
acquisition/disposition and financing. Headquartered in Houston, Texas, Hines
has regional offices in New York, San Francisco, Atlanta and Chicago as well as
29 additional submarkets. The firm also has offices in Mexico City, Berlin and
Moscow. Hines owns and/or manages more than 61 million square feet of prime
office, retail and industrial space representing more than 451 projects. Major
projects include: Pennzoil Place in Houston, the Gallerias in Houston and
Dallas, 53rd At Third in New York, 101 California in San Francisco, One Ninety
One Peachtree in Atlanta, Three First National Plaza in Chicago and Huntington
Center in Columbus.

Hines associates in field offices nationwide generate regional economic
analysis based on demographic factors such as job growth and population
movement. Hines also provides a regional property-type analysis determining
whether the property -- outlet mall, strip shopping center or apartment complex,
among others -- makes sense in the area.

ADVISORY AGREEMENTS. The Trust and the Adviser are parties to an investment
advisory agreement (the "Advisory Agreement I"), pursuant to which the Trust
retains the Adviser to manage the investment of assets and to place orders for
the purchase and sale of portfolio securities for the Asset Allocation Fund, the
Domestic Income Fund, the Enterprise Fund, the Government Fund and the Money
Market Fund. The Trust and the Adviser are also parties to four additional
investment advisory agreements ("Advisory Agreements -- II, III, IV and V"),
pursuant to which the Adviser manages the investment of assets and places orders
for the purchase and sale of portfolio securities for the Emerging Growth Fund,
the Global Equity Fund, the Growth and Income Fund, and the Real Estate
Securities Fund, respectively (Advisory Agreements -- I, II, III, IV and V are
referred to herein collectively as the "Advisory Agreements").

Under the Advisory Agreements, the Trust bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating the daily net asset value of each Fund. The costs of such accounting
services include the salaries and overhead expenses of a Treasurer or other
principal financial officer and the personnel operating under his direction. The
services are provided at cost which is allocated among the investment companies
advised by the Adviser. The Trust also pays shareholder service agency fees,
custodian fees, legal and auditing fees, trustees' fees, the costs of
registration of its shares and reports and proxies to shareholders and all other
ordinary expenses not specifically assumed by the Adviser or the Distributor.

Under Advisory Agreement-I, the Trust pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the subject Funds at an
annual rate of 0.50% of the first $500 million of such Funds' aggregate average
net assets; 0.45% of the next $500 million of such Fund' aggregate average net
assets, and 0.40% of such Fund' aggregate average net assets in excess of $1
billion. Each Fund pays its pro rata share of the fee based upon its average
daily net assets. For the fiscal year ended December 31, 1994, advisory fees
plus the cost of accounting services payable by the Trust, before expense
reimbursements, equaled .59%, .70%, .58%, .50% and .67% for the Asset Allocation
Fund, the Domestic Income Fund, the Enterprise Fund, the Government Fund and the
Money Market Fund, respectively, of each Fund's average daily net assets. For
the same period, each Fund's net total operating expenses were 0.60%. Such
figure results from the Adviser's agreement that so long as it serves as Adviser
to such Fund it will limit the ordinary business expenses of such Fund to 0.60%
per year of the average net assets of such Fund by reducing the advisory fee
and/or bearing other expenses of a Fund in excess of such limitation. Expenses

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<PAGE> 40

subject to such limitation do not include (1) interest and taxes, (2) brokerage
commissions, (3) certain litigation and indemnification expenses as described in
the Advisory Agreement, and (4) any distribution expenses which may be incurred
by a Fund in the event a Distribution Plan is adopted. Any required reduction or
expense payment is computed and paid monthly, subject to readjustment during the
fiscal year.

Under Advisory Agreement-II, the Trust pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the Emerging Growth Fund
at an annual rate of 0.70%.

The Trust retains the Adviser to manage the investment of the Global Equity
Fund's assets and to place orders for the purchase and sale of its portfolio
securities. The Adviser has entered into a subadvisory agreement, (the "Global
Equity Subadvisory Agreement") with John Govett to assist it in performing its
investment advisory functions. John Govett will be primarily responsible for
recommending the allocation of investments among various international markets
and currencies; recommendation and selection of particular securities in the
international markets and placement of portfolio transactions in the foreign
equity markets. Under Advisory Agreement-III, the Trust pays to the Adviser as
compensation for the services rendered, facilities furnished, and expenses paid
by it a fee payable monthly, computed on average daily net assets of the Global
Equity Fund at the annual rate of 1.00%. This fee is higher than that charged by
most other mutual funds but the Trustees believe it is justified by the special
international nature of the Fund and is not necessarily higher than the fees
charged by certain mutual funds with investment objective and policies similar
to those of the Fund. Pursuant to the Global Equity Subadvisory Agreement, John
Govett receives on an annual basis 50% of the compensation received by the
Adviser.

Under Advisory Agreement-IV, the Trust pays the Adviser as compensation for
the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the Growth and Income
Fund at an annual rate of 0.60% of the first $500 million of the Fund's average
net assets; and 0.55% of the Fund's average net assets in excess of $500
million.

Under Advisory Agreement-V, the Trust pays the Adviser a monthly fee
computed on average daily net assets of the Real Estate Securities Fund at the
annual rate of 1.00% of the Fund's average daily net assets. This fee is higher
than that charged by most other mutual funds but the Trustees believe it is
justified by the special nature of the Fund and is not necessarily higher than
the fees charged by certain mutual funds with investment objectives and policies
similar to those of the Fund. The Adviser has entered into an investment
sub-advisory agreement (the "Hines Subadvisory Agreement") with Hines Realty
Advisors to assist it in performing its investment advisory functions. Hines
Realty Advisors is primarily responsible for the following areas: (i) providing
regional economic analysis of the areas in which properties owned by real estate
investment trusts are located; (ii) analyzing attractiveness of the
property-type within the geographic region; (iii) evaluating and assessing real
estate valuation and the condition of property; (iv) evaluating property
managers and sponsors of real estate investment trusts; and (v) continuously
reviewing and monitoring the real estate investments in the Fund's portfolio.
Pursuant to the Hines Subadvisory Agreement, Hines Realty Advisors receives on
an annual basis 50% of the compensation received by the Adviser.

The Adviser, John Govett, Hines Realty Advisor and/or the Distributor may,
from time to time, agree to waive their respective investment advisory fees or
any portion thereof or elect to reimburse any Fund for ordinary business
expenses in excess of an agreed upon amount.

With regard to the Money Market Fund, the Domestic Income Fund and
Government Fund, the Adviser may utilize at its own expense credit analysis,
research and trading support services provided by its affiliate, Van Kampen
American Capital Investment Advisory Corp.

PORTFOLIO MANAGEMENT. The Funds have different portfolio managers. Jeff New
is primarily responsible for the day-to-day management of the Enterprise Fund's
investment portfolio. Mr. New is Vice President of the Trust and has been
primarily responsible for managing the Fund's

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<PAGE> 41

investment portfolio since , 1996. He has been an associate portfolio
manager with the Adviser since April 1990. Prior to that he was a securities
analyst with Texas Commerce Investment Management Company. Walter W. Stabell,
III is primarily responsible for the day-to-day management of the Domestic
Income Fund's investment portfolio. Mr. Stabell is Vice President of the Fund
and Associate Portfolio Manager of the Adviser. From December, 1986 to August,
1989 Mr. Stabell was Senior Securities Analyst of the Adviser. Mr. Stabell has
been primarily responsible for managing the Portfolio's investment portfolio
since March, 1990. Mr. Baker is primarily responsible for the day-to-day
management of the Growth and Income Fund investment portfolio. Mr. Baker is Vice
President of the Trust and has been primarily responsible for managing the
Fund's investment portfolio since its inception. Mr. Baker has been a Portfolio
Manager of the Adviser since 1994 and an Associate Portfolio Manager of the
Adviser since November, 1991. Prior to that, he was Vice President -- Portfolio
Manager with Variable Annuity Life Insurance Co. Gary M. Lewis is primarily
responsible for the day-to-day management of the Emerging Growth Fund's
investment portfolio. Mr. Lewis is Vice President of the Trust and Vice
President of the Adviser. Mr. Lewis has been responsible for managing the Fund's
investment portfolio since its inception. Jeff New is primarily responsible for
the day-to-day management of the Global Equity Fund's investment portfolio with
respect to investments in the United States. Mr. New is Vice President of the
Trust. Mr. New has been primarily responsible for managing the Fund's investment
portfolio with respect to investments in the United States since its inception.
John Govett has employed Peter Kysel since September 1994 as Director and Fund
Manager. He is primarily responsible for allocating the Fund's investments
between United States and non-United States equity securities and day-to-day
management of the Fund's investments in counties other than the United States.
Mr. Kysel has provided such services since the Fund's inception. Mr. Kysel was
previously a managing director of the investment banking division of Komercni
Bank. John R. Reynoldson is primarily responsible for the day-to-day management
of the Government Fund's investment portfolio. Mr. Reynoldson is Vice President
of the Trust and has been Senior Vice President of the Adviser since July, 1991.
Mr. Reynoldson has been primarily responsible for managing the Portfolio's
investment portfolio since December, 1989. David R. Troth is primarily
responsible for the day-to-day management of the Money Market Fund's investment
portfolio. Mr. Troth is Vice President of the Trust and has been Senior Vice
President of the Adviser since March, 1978. Mr. Troth has been primarily
responsible for managing the Fund's investment portfolio since its inception.
Alan T. Sachtleben is responsible for allocating the Asset Allocation Fund's
assets between the equity and fixed-income categories in which the Fund invests.
B. Robert Baker manages the Asset Allocation Fund's equity investments and Tom
Copper manages the Fund's fixed income investments. Mr. Sachtleben is a Vice
President of the Trust. Messrs. Sachtleben and Copper have managed the Fund's
investment portfolio since August 7, 1995, and Mr. Baker has managed the Fund's
investment portfolio since May 2, 1994. Mr. Sachtleben is Executive Vice
President -- Chief Investment Officer of Equity of the Adviser. Mr. Copper is
Associate Portfolio Manager of the Adviser since January, 1992. Prior to that
time, he was a credit analyst with the Adviser.

Mary Jayne Maly is primarily responsible for the day-to-day management of
the Real Estate Securities Fund's investment portfolio. She has served in that
capacity since the inception of the Fund. Ms. Maly is Vice President of the
Trust and has been a portfolio manager with the Adviser since 1994. Prior to
that time, Ms. Maly was an associate portfolio manager with the Adviser and was
formerly a senior equity analyst at Texas Commerce Management Company.

PERSONAL INVESTING POLICIES. The Trust and the Adviser have adopted Codes
of Ethics designed to recognize the fiduciary relationship between the Trust and
the Adviser and its employees. The Codes permit directors/trustees, officers and
employees to buy and sell securities for their personal accounts subject to
certain restrictions. Persons with access to certain sensitive information are
subject to preclearance and other procedures designed to prevent conflicts of
interest.

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PURCHASE OF SHARES

The Trust is offering its shares only to Separate Accounts of various
insurance companies to fund the benefits of variable annuity or variable life
insurance contracts. The Trust does not foresee any disadvantage to holders of
Contracts arising out of the fact that the interests of the holders may differ
from the interests of holders of life insurance policies and that holders of one
insurance policy may differ from holders of other insurance policies.
Nevertheless, the Trust's Trustees intend to monitor events in order to identify
any material irreconcilable conflicts which may possibly arise and to determine
what action, if any, should be taken. The Contracts are described in the
separate prospectuses issued by the Participating Insurance Companies. The Trust
continuously offers shares in each of its Funds to the Accounts at prices equal
to the respective per share net asset value of the Fund. The Distributor, One
Park View Plaza, Oakbrook Terrace, Illinois 60181, acts as the distributor of
the shares. Net asset value is determined in the manner set forth below under
"Determination of Net Asset Value."

DETERMINATION OF NET ASSET VALUE

Net asset value per share is computed for each Fund as of the close of
trading (currently 4:00 p.m., New York time) each day the New York Stock
Exchange is open. See the accompanying Prospectus for the policies for
information regarding holidays observed by the insurance company. Net asset
value of each Fund is determined by adding the total market value of all
portfolio securities held by the Fund, cash and other assets, including accrued
interest. All liabilities, including accrued expenses, of the Fund are
subtracted. The resulting amount is divided by the total number of outstanding
shares of the Fund to arrive at the net asset value of each share. See
"Determination of Net Asset Value" in the Statement of Additional Information
for further information.

Securities listed or traded on a national securities exchange are valued at
the last sale price. Unlisted securities and listed securities for which the
last sales price is not available are valued at the most recent bid price. U.S.
Government and agency obligations are valued at the last reported bid price.
Listed options are valued at the last reported sale price in the exchange on
which such option is traded or, if no sales are reported, at the mean between
the last reported bid and asked prices. Options for which market quotations are
not readily available are valued at a fair value calculated under a method
approved by the Trustees. Short-term investments for all Funds other than the
Money Market Fund are valued as described in the Notes to Financial Statements
in the Statement of Additional Information.

The Money Market Fund's assets are valued on the basis of amortized cost,
which involves valuing a portfolio security at its cost, assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods in which value
as determined by amortized cost is higher or lower than the price the Portfolio
would receive if it sold the security. During such periods, the yield to
investors in the Portfolio may differ somewhat from that obtained in a similar
fund which uses available market quotations to value all of its portfolio
securities.

REDEMPTION OF SHARES

Payment for shares tendered for redemption by the insurance company is made
ordinarily in cash within seven days after tender in proper form, except under
unusual circumstances as determined by the SEC. The redemption price will be the
net asset value next determined after the receipt of a request in proper form.
The market value of the securities in each Fund is subject to daily fluctuations
and the net asset value of each Fund's shares will fluctuate accordingly.
Therefore, the redemption value may be more or less than the investor's cost.

DIVIDENDS, DISTRIBUTIONS AND TAXES

All dividends and capital gains distributions of each Fund are
automatically reinvested by the Account in additional shares of such Fund.

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Shares of the Money Market Fund and Government Fund become entitled to
income distributions declared on the day the shareholder service agent receives
payment of the purchase price in the form of federal funds. Such shares do not
receive income distributions declared on the date of redemption.

Dividends of the Money Market Fund. The Money Market Fund declares income
dividends each business day. The Fund's net income for dividend purposes is
calculated daily and consists of interest accrued or discount earned, plus or
minus any net realized gains or losses on portfolio securities, less any
amortization of premium and the expenses of the Fund.

Dividends and Distributions of the Asset Allocation Fund, the Domestic
Income Fund, the Emerging Growth Fund, Enterprise Fund, the Global Equity Fund,
the Growth and Income Fund and the Real Estate Securities Fund. Dividends from
stocks and interest earned from other investments are the main source of income
for these Funds. Substantially all of this income, less expenses, is distributed
on an annual basis. When a Fund sells portfolio securities, it may realize
capital gains or losses, depending on whether the prices of the securities sold
are higher or lower than the prices the Fund paid to purchase them. Net realized
capital gains represent the total profit from sales of securities minus total
losses from sales of securities including any losses carried forward from prior
years. Each of these Funds distributes any net realized capital gains to the
Account no less frequently than annually.

Dividends and Distributions of the Government Fund. The Government Fund
declares income dividends each business day. Such dividends are distributed
monthly. The daily dividend is a fixed amount determined at least monthly which
is expected not to exceed the net income of the Fund for the month divided by
the number of business days in the month. The Government Fund intends to
distribute monthly, or on such other basis as may be determined from time to
time by the Trustees, its net realized short-term capital gains, including such
gains realized from net premiums received from expired options, net gains from
closing purchase transactions and net short-term gains from securities sold upon
the exercise of options or otherwise, less any net realized long-term capital
loss. Net realized long-term capital gains, if any, are generally distributed at
least annually.

Tax Status of the Funds. Each Fund will or has elected to be taxed as a
"regulated investment company" under the Code. By maintaining its qualification
as a "regulated investment company," a Portfolio will not incur any liability
for federal income taxes to the extent its taxable ordinary income and any
capital gain net income is distributed in accordance with Subchapter M of the
Code. By qualifying as a regulated investment company, a Fund is not subject to
federal income taxes to the extent it distributes its taxable net investment
income and taxable net realized capital gains. If for any taxable year a Fund
does not qualify for the special tax treatment afforded regulated investment
companies, all of its taxable income, including any net realized capital gains,
would be subject to tax at regular corporate rates (without any deduction for
distributions to shareholders). Each Fund is subject to the diversification
requirements of Section 817(h) of the Code. See also "Government
Fund -- General" for information regarding Section 817(h) of the Code.

Dividends and interest received by certain funds may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Investors may be entitled to claim United States foreign tax credits with
respect to such taxes, subject to certain provisions and limitations contained
in the Code. If more than 50% in value of a Fund's total assets at the close of
its fiscal year consists of securities of foreign issuers, the Fund will be
eligible, and may file elections with the Internal Revenue Service pursuant to
which shareholders of the Fund will be required to include their respective pro
rata portions of such taxes in their United States income tax returns as gross
income, treat such respective pro rata portions as taxes paid by them, and
deduct such respective pro rata portions in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their United States
income taxes. The Fund will report annually to its shareholders the amount per
share of such withholding.

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Under Code Section 988, foreign currency gains or losses from certain
forward contracts not traded in the interbank market generally are typically
treated as ordinary income or loss. Such Code Section 988 gains or losses may
increase or decrease (or possibly eliminate) the amount of the Fund's investment
company taxable income available to be distributed to shareholders as ordinary
income, rather than increasing or decreasing the amount of the Fund's net
capital gain. If, under the rules governing the tax treatment of foreign
currency gains and losses, the Fund's income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital or, in
some circumstances, as capital gain. Generally, your tax basis in your Fund
shares will be reduced to the extent that an amount distributed to you is
treated as a return of capital.

Tax Treatment to Insurance Company as Shareholder. Dividends paid by each
Fund from its ordinary income and distributions of each Fund's net realized
short-term capital gains are includable in the insurance company's gross income.
The tax treatment of such dividends and distributions depends on the insurance
company's tax status. To the extent that income of a Fund represents dividends
on equity securities rather than interest income, its distributions are eligible
for the 70% dividends received deduction applicable in the case of a life
insurance company as provided in the Code. The Trust will send to the Account a
written notice required by the Code designating the amount and character of any
distributions made during such year.

Under the Code, any distribution designated as being made from a Fund's net
realized long-term capital gains are taxable to the insurance company as
long-term capital gains. Such distributions of long-term capital gains will be
designated as a capital gains distribution in a written notice to the Account
which accompanies the distribution payment. Long-term capital gains
distributions are not eligible for the dividends received deduction. Dividends
and capital gain distributions to the insurance company may also be subject to
state and local taxes.

As described in the accompanying Prospectus for the Contracts, the
insurance company reserves the right to assess the Account a charge for any
taxes paid by it.

Tax Treatment of Options and Futures Transactions. Gains or losses on
certain Fund's transactions in listed options on securities, futures and options
on futures generally are treated as 60% long-term and 40% short-term, ("60/40"),
and positions held by a Portfolio at the end of its fiscal year generally are
required to be marked to market, with the result that unrealized gains and
losses are treated as though they were realized. Gains and losses realized by a
Fund on transactions in over-the-counter options generally are short-term
capital gains or losses unless the option is exercised, in which case the gain
or loss is determined by the holding period of the underlying security. The Code
contains certain "straddle" rules which require deferral of losses incurred in
certain transactions involving hedged positions to the extent a Fund has
unrealized gains in offsetting positions and generally terminate the holding
period of the subject position. Additional information is set forth in the
Statement of Additional Information.

FUND PERFORMANCE

From time to time all the Funds, except the Money Market Fund, may
advertise their total return for prior periods. Any such advertisement would
include at least average annual total return quotations for one, five and
ten-year periods or for the life of the Fund. Other total return quotations,
aggregate or average, over other time periods may also be included. Total return
calculations do not take into account expenses at the "wrap" or contractholder
level. Investors should also review total return calculations that include those
expenses.

The total return of a Fund for a particular period represents the increase
(or decrease) in the value of a hypothetical investment in the Fund from the
beginning to the end of the period. Total return is calculated by subtracting
the value of the initial investment from the ending value and showing the
difference as a percentage of the initial investment; the calculation assumes
the initial investment is made at the maximum public offering price and that all
income dividends or capital

42
<PAGE> 45

gains distributions during the period are reinvested in Fund shares at net asset
value. Total return is based on historical earnings and asset value fluctuations
and is not intended to indicate future performance. No adjustments are made to
reflect any income taxes payable by shareholders on dividends and distributions
paid by the Fund.

Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.

In addition to total return information, the Government Fund and the
Domestic Income Fund may also advertise their current "yield." Yield figures are
based on historical earnings and are not intended to indicate future
performance. Yield is determined by analyzing the Fund's net income per share
for a thirty-day (or one-month) period (which period will be stated in the
advertisement), and dividing by the maximum offering price per share on the last
day of the period. A "bond equivalent" annualization method is used to reflect a
semiannual compounding. Yield calculations do not take into account expenses at
the "wrap" or contractholder level. Investors should also review yield
calculations that include those expenses.

From time to time, certain Funds may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. It differs from yield, which is a measure of the income
actually earned by the Fund's investments, and from total return, which is a
measure of the income actually earned by, plus the effect of any realized and
unrealized appreciation or depreciation of, such investments during a stated
period. Distribution rate is, therefore, not intended to be a complete measure
of the Fund's performance. Distribution rate may sometimes be greater than yield
since, for instance, it may not include the effect of amortization of bond
premiums, and may include non-recurring short-term capital gains and premiums
from futures transactions engaged in by the Fund. Distribution rates will be
computed separately for each class of the Fund's shares.

For purposes of calculating yield quotations, net income is determined by a
standard formula prescribed by the SEC to facilitate comparison with yields
quoted by other investment companies. Net income computed for this formula
differs from net income reported by a Fund in accordance with generally accepted
accounting principles and from net income computed for federal income tax
reporting purposes. Thus the yield computed for a period may be greater or
lesser than a Fund's then current dividend rate.

A Fund's yield is not fixed and will fluctuate in response to prevailing
interest rates and the market value of portfolio securities, and as a function
of the type of securities owned by a Fund, portfolio maturity and a Fund's
expenses.

Yield quotations should be considered relative to changes in the net asset
value of a Fund's shares, a Fund's investment policies, and the risks of
investing in shares of a Fund. The investment return and principal value of an
investment in a Fund will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.

The Adviser, for an indefinite period has agreed to absorb a certain amount
of the ordinary business expenses of the Asset Allocation Fund, Domestic Income
Fund, the Enterprise Fund, the Government Fund, and the Money Market Fund.
Absorption of a portion of the expenses will increase the yield or total return
of a Fund.

From time to time the Money Market Fund advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "yield" of the Fund refers to
the income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective

43
<PAGE> 46

yield" is calculated similarly but, when annualized, the income earned by an
investment in the Portfolio is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The current and effective yields for the seven-day
period ending December 31, 1994, and a description of the method by which the
yield was calculated is contained in the Statement of Additional Information.

Since yield fluctuates, yield data cannot necessarily be used to compare an
investment in the Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders should remember that yield is
generally a function of the kind and quality of the instrument held in a
portfolio, portfolio maturity, operating expenses and market conditions.

The Trust's Annual Report contains additional performance information. A
copy of the Annual Report may be obtained without charge by calling or writing
the Trust at the telephone number and address printed on the cover page of this
Prospectus.

DESCRIPTION OF SHARES OF THE TRUST

The Trust was originally organized as a Massachusetts business trust on
June 3, 1985 and reorganized on September 16, 1995, under the laws of the state
of Delaware as a business entity commonly known as "Delaware business trust." It
is authorized to issue an unlimited number of shares of beneficial interest of
$0.01 par value. Shares issued by the Trust are fully paid, non-assessable and
have no preemptive or conversion rights.

The Trust does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. More detailed information concerning the Trust if
set forth in the Statement of Additional Information.

The Trust's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Trust but the assets of the Trust only shall be liable.

ADDITIONAL INFORMATION

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

An investment in the Trust may not be appropriate for all investors.

The Trust is not intended to be a complete investment program, and
investors should consider their long-term investment goals and financial needs
when making an investment decision with respect to the Trust.

An investment in the Trust is intended to be a long-term investment, and
should not be used as a trading vehicle.

44
<PAGE> 47

APPENDIX

DESCRIPTION OF BOND RATINGS

MOODY'S INVESTORS SERVICE'S BOND RATINGS:

AAA -- Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.

AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.

A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

BAA -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great period of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

BA -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

CAA -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

CA -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

NONRATED -- Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.

3. There is lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

45
<PAGE> 48

Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

Note: Those bonds in the Aa, A, Baa and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa 1,
A 1, Baa 1, Ba 1 and B 1.

STANDARD & POOR'S BOND RATINGS:

AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA -- Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.

A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.

BB -- B -- CCC -- CC -- Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

CI -- The rating CI is reserved for income bonds on which no interest is
being paid.

D -- Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.

Plus (+) or Minus (-): The ratings from AA to B may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

NR -- Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.

PREFERRED STOCK RATINGS:

Both Moody's and S&P use the same designations for corporate bonds as they
do for preferred stock except in the case of Moody's preferred stock ratings the
initial letter rating is not capitalized. While the descriptions are tailored
for preferred stocks and relative quality distinctions are comparable to those
described above for corporate bonds.

46
<PAGE> 49

EXISTING SHAREHOLDERS--

FOR INFORMATION ON YOUR

EXISTING ACCOUNT PLEASE CALL

THE FUND'S TOLL-FREE

NUMBER--(800) 421-5666

PROSPECTIVE INVESTORS--CALL

YOUR BROKER OR (800) 421-5666

DEALERS--FOR DEALER

INFORMATION, SELLING

AGREEMENTS, WIRE ORDERS,

OR REDEMPTIONS CALL THE

DISTRIBUTOR'S TOLL-FREE

NUMBER--(800) 421-5666

FOR SHAREHOLDER AND

DEALER INQUIRIES THROUGH

TELECOMMUNICATIONS

DEVICE FOR THE DEAF (TDD)

DIAL (800) 772-8889

VAN KAMPEN AMERICAN CAPITAL

LIFE INVESTMENT TRUST

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

2800 Post Oak Blvd.

Houston, TX 77056

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

Investment Adviser

VAN KAMPEN AMERICAN CAPITAL

ASSET MANAGEMENT, INC.

2800 Post Oak Blvd.

Houston, TX 77056

Investment Subadvisers

For Global Equity Fund:

JOHN GOVETT & CO. LIMITED

4 Battle Bridge Lane

London SE1 2HR

England

For Real Estate Securities Fund:

HINES INTERESTS REALTY

ADVISORS LIMITED PARTNERSHIP

2800 Post Oak Blvd.

Houston, TX 77056

Distributor

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

One Parkview Plaza

Oakbrook Terrace, IL 60181

Transfer Agent

ACCESS INVESTOR SERVICES, INC.

P.O. Box 418256

Kansas City, MO 64141-9256

Custodian

STATE STREET BANK AND

TRUST COMPANY

225 Franklin Street, P.O. Box 1713

Boston, MA 02105-1713

Attn: Van Kampen American Capital Funds

Legal Counsel

O'MELVENY & MYERS

400 South Hope Street

Los Angeles, CA 90071

Independent Accountants

PRICE WATERHOUSE LLP

1201 Louisiana, Suite 2900

Houston, TX 77002

<PAGE> 50

LIFE INVESTMENT TRUST

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

P R O S P E C T U S

, 1996

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
- --------------------------------------------------------------------------------
<PAGE> 51

STATEMENT OF ADDITIONAL INFORMATION

, 1996

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
2800 POST OAK BLVD.
HOUSTON, TEXAS 77056
(800) 421-5666

Van Kampen American Capital Life Investment Trust (the "Trust") is a
diversified, open-end management investment company with nine Funds: Asset
Allocation Fund, Domestic Income Fund, Emerging Growth Fund, Enterprise Fund,
Global Equity Fund, Government Fund, Growth and Income Fund, Money Market Fund
and Real Estate Securities Fund. Each Fund is in effect a separate portfolio
issuing its own shares.

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

This Statement of Additional Information is not a Prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus and should be read in conjunction with the Prospectus. The Statement
of Additional Information and the related Prospectus are both dated
, 1996. A Prospectus may be obtained without charge by calling or writing Van
Kampen American Capital Distributors, Inc. (the "Distributor") at 2800 Post Oak
Blvd., Houston, Texas 77056 at (800) 421-5666.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION................................................................... 2
INVESTMENT OBJECTIVES AND POLICIES.................................................... 3
REPURCHASE AGREEMENTS................................................................. 9
FORWARD COMMITMENTS................................................................... 10
DEPOSITARY RECEIPTS................................................................... 10
OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS........................... 10
LOANS OF PORTFOLIO SECURITIES......................................................... 17
INVESTMENT RESTRICTIONS............................................................... 17
TRUSTEES AND EXECUTIVE OFFICERS....................................................... 29
INVESTMENT ADVISORY AGREEMENTS........................................................ 34
DISTRIBUTOR........................................................................... 35
TRANSFER AGENT........................................................................ 36
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................................. 36
DETERMINATION OF NET ASSET VALUE...................................................... 38
PURCHASE AND REDEMPTION OF SHARES..................................................... 40
DISTRIBUTIONS AND TAXES............................................................... 40
FUND PERFORMANCE...................................................................... 42
MONEY MARKET FUND YIELD INFORMATION................................................... 42
OTHER INFORMATION..................................................................... 43
FINANCIAL STATEMENTS.................................................................. 43
APPENDIX.............................................................................. 44
</TABLE>

<PAGE> 52

GENERAL INFORMATION

The Trust was organized under the laws of the Commonwealth of Massachusetts
on June 3, 1985 and reorganized under the laws of Delaware September 16, 1995.

Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van
Kampen American Capital Distributors, Inc. (the "Distributor"), and ACCESS
Investor Services, Inc. ("ACCESS") are wholly owned subsidiaries of Van Kampen
American Capital, Inc. ("VKAC"), which is a wholly owned subsidiary of VK/AC
Holding, Inc. VK/AC Holding, Inc. is controlled, through the ownership of a
substantial majority of its common stock, by The Clayton & Dubilier Private
Equity Fund IV Limited Partnership ("C&D L.P."), a Connecticut limited
partnership. C&D L.P. is managed by Clayton, Dubilier & Rice, Inc. a New York
based private investment firm. The General Partner of C&D L.P. is Clayton &
Dubilier Associates IV Limited Partnership ("C&D Associates L.P."). The general
partners of C&D Associates L.P. are Joseph L. Rice, III, B. Charles Ames,
William A. Barbe, Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr.,
Hubbard C. Howe and Andrall E. Pearson, each of whom is a principal of Clayton,
Dubilier & Rice, Inc. In addition, certain officers, directors and employees of
VKAC own, in the aggregate, not more than seven percent of the common stock of
VK/AC Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an additional 11% of the common stock of VK/AC Holding, Inc.

As of , 1995 no person was known by management to own
beneficially or of record as much as five percent of the outstanding shares of
any portfolio except as set forth below. The Fund offers its share only to
separate accounts of various insurance companies. Those separate accounts have
authority to vote shares from which they have not received instructions from the
contractholders, but only in the same proportion with respect to "yes" votes,
"no" votes or abstentions as is the case with respect to shares for which
instructions were received.

MONEY MARKET FUND

<TABLE>
<CAPTION>
AMOUNT OF RECORD OWNERSHIP
NAME AND ADDRESS OF OF THE PORTFOLIO
RECORD HOLDER AT , 1995 PERCENT
------------------- -------------------------- -------
<S> <C> <C>
American General Life Insurance Company 5,609,289.5 22.51%
Separate Account D
P.O. Box 1591
Houston, Texas 77251-1591
Nationwide VLI -- Separate Account of Nationwide 10,905,584.14 43.76%
Life Insurance Company
P.O. Box 182029
Columbus, Ohio 43218-2029
Nationwide Variable Account -- 3 8,058,276.25 32.33%
c/o IPO Investments Co 69
P.O. Box 182029
Columbus, Ohio 43218-2029
ENTERPRISE FUND
American General Life Insurance Company 1,038,723,777 20.65%
Separate Account -- D
P.O. Box 1591
Houston, Texas 77251-1591
Nationwide Variable Account -- 3 2,240,243.287 44.53%
c/o IPO Investments Co
Nationwide VLI -- separate account of Nationwide 1,749,258.059 34.77%
Life Insurance Company
P.O. Box 182029
Columbus, Ohio 43218-2029
</TABLE>

2
<PAGE> 53

<TABLE>
<CAPTION>
AMOUNT OF RECORD OWNERSHIP
NAME AND ADDRESS OF OF THE PORTFOLIO
RECORD HOLDER AT , 1995 PERCENT
------------------ -------------------------- -------
<S> <C> <C>
GOVERNMENT FUND
Nationwide VLI -- separate account of Nationwide 6,493,845.49 84.45%
Life Insurance Company
P.O. Box 182029
Columbus, Ohio 43218-2029
Nationwide Variable Account -- 3 1,057,163.01 13.75%
c/o IPO Investments Co 69
P.O. Box 182029
Columbus, Ohio 43218-2029
American General Life Insurance Co. -- 3 138,251.316 1.80%
P.O. Box 1591
Houston, Texas 77251-1591
ASSET ALLOCATION FUND
Nationwide VLI -- separate account of Nationwide 2,072,590.931 38.25%
Life Insurance Company
P.O. Box 182029
Columbus, Ohio 43218-2029
Nationwide Variable Account -- 3 3,086,100.478 56.96%
c/o IPO Investments Co 69
P.O. Box 182029
Columbus, Ohio 43218-2029
American General Life Insurance Co. 257,773.909 4.76%
P.O. Box 1591
Houston, Texas 77251-1591
DOMESTIC INCOME FUND
American General Life Insurance Company 846,907.533 25.84%
P.O. Box 1591
Houston, Texas 77251-1591
Nationwide VLI -- separate account of Nationwide 415,263.4 12.67%
Life Insurance Company
P.O. Box 182029
Columbus, Ohio 43218-2029
Nationwide Variable Account -- 3 2,061,205.206 62.88%
c/o IPO Investments Co 69
P.O. Box 182029
Columbus, Ohio 43218-2029
</TABLE>

INVESTMENT OBJECTIVES AND POLICIES

The following disclosures supplement disclosures set forth under an
identical caption in the Prospectus and do not, standing alone, present a
complete or accurate explanation of the matters disclosed. Readers must refer
also to this caption in the Prospectus for a complete presentation of the
matters disclosed below.

ASSET ALLOCATION FUND

The Fund seeks a high total investment return consistent with prudent risk
through a fully managed investment policy utilizing equity securities, primarily
common stocks of large capitalization companies, as well as investment grade
intermediate and long term debt securities and money market securities.

3
<PAGE> 54

DOMESTIC INCOME FUND

The primary objective of the Fund is to maximize current income through
investment primarily in a diversified portfolio of fixed-income securities.
Capital appreciation is a secondary objective which is sought only when
consistent with the primary objective. There is, of course, no assurance that
the Portfolio will be successful in achieving its investment objective.

Capital appreciation may result, for example, from an improvement in the
credit standing of an issuer whose securities are held in the Fund's portfolio
or from a general lowering of interest rates, or a combination of both.
Conversely, a reduction in the credit rating of an issuer whose securities are
held in the Fund's portfolio or a general increase in interest rates would be
expected to reduce the value of the Fund's investments.

The Fund expects that at all times at least 80% of its assets will be
invested in fixed-income securities rated at the time of purchase B or higher by
Moody's Investor Services, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"), nonrated securities considered by the Adviser to be of comparable
quality, and U.S. Government securities (as defined herein).

Lower rated and comparable nonrated securities tend to offer higher yields
than higher rated securities with the same maturities because the historical
conditions of the issuers of lower rated securities may not have been as strong
as that of other issuers. The Adviser, however, believes that such ratings are
not necessarily an accurate reflection of the current financial condition of the
issuers because they may be based upon considerations taken into account at the
time such ratings were assigned, rather than upon subsequent developments
affecting such issuers. Moreover, ratings categories tend to be broad, so that
there may be significant variations among the financial condition of issuers
within the same category. For these reasons, the Adviser may rely more on its
own analysis in determining which securities offer the best opportunities for
higher yields without unreasonable risks; therefore, the achievement of the
Fund's objectives will depend more on the Adviser's analytical and portfolio
management skills than would be the case if greater reliance were placed on
ratings assigned by the rating services. The Adviser's analysis will focus on a
number of factors affecting the financial condition of a company; including the
strength of its management; the financial soundness of the company and the
outlook of its industry; the security's responsiveness to changes in interest
rates and business conditions; the cash flow of the company; dividend or
interest coverage; and the fair market value of the company's assets. In making
portfolio decisions for the Fund, the Adviser will attempt to identify higher
yielding securities of companies whose financial condition has improved since
the issuance of such securities, or is anticipated to improve in the future.

The Fund may invest up to 20% of its total assets in debt securities rated
below B by Moody's and S&P or nonrated securities considered by the Adviser to
be of comparable quality, common stocks or other equity securities and in
non-income producing securities, prime commercial paper, certificates of
deposit, bankers' acceptances and other obligations of domestic banks having
total assets of at least $500 million, and repurchase agreements. The Fund will
not cause more than ten percent of its total assets to be invested in common
stocks or other equity securities. See "Investment Objectives and
Policies -- Domestic Income Fund," in the Prospectus.

Certain of the lower rated debt securities in which the Fund may invest may
be purchased at a discount. Such securities, when held to maturity or retired,
may include an element of capital gain. Capital losses may be realized when
securities purchased at a premium are held to maturity or are called or redeemed
at a price lower than the purchase price. Capital gains or losses are also
realized upon the sale of securities at prices that differ from their cost. The
market prices of fixed-income securities generally fall when interest rates
rise. Conversely, the market prices of fixed-income securities generally rise
when interest rates fall.

The Fund may invest in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities which are supported by any of the
following: (a) the full faith and credit of the U.S. Government, (b) the right
of the issuer to borrow an amount limited to a specific line of credit from the
U.S. Government, (c) discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. Such agencies or
instrumentalities include, but are not limited to, the Federal

4
<PAGE> 55

National Mortgage Association, the Government National Mortgage Association,
Federal Land Banks, and the Farmer's Home Administration. Such securities are
referred to as "U.S. Government securities".

Additional Risks of Investing in Lower Rated Debt Securities. Additional
risks of lower rated securities include limited liquidity and secondary market
support. As a result, the prices of debt securities may decline rapidly in the
event a significant number of holders decide to sell. Changes in expectations
regarding an individual issuer, an industry or lower rated debt securities
generally could reduce market liquidity for such securities and make their sale
by the Fund more difficult, at least in the absence of price concessions.
Reduced liquidity could also create difficulties in accurately valuing such
securities at certain times. The lower rated debt market has grown primarily
during a period of long economic expansion and it is uncertain how it would
perform during an economic downturn. An economic downturn or an increase in
interest rates could severely disrupt the market for lower rated debt and
adversely affect the value of outstanding securities and the ability of the
issuers to repay principal and interest. See "Investment Objectives and
Policies" in the Prospectus for a further discussion of risk factors associated
with investments in lower rated debt securities, which are not generally meant
for short-term investment.

EMERGING GROWTH FUND

The Fund seeks capital appreciation.

The following investment techniques, subject to the Investment Restrictions
below, may be employed by the Fund. These techniques inherently involve the
assumption of a higher degree of risk than normal and the possibility of more
volatile price fluctuations.

Restricted Securities. The Fund may invest up to fifteen percent of the
value of its net assets in restricted securities (i.e., securities which may not
be sold without registration under the Securities Act of 1933) and in other
securities that are not readily marketable, including repurchase agreements
maturing in more than seven days. Restricted securities are generally purchased
at a discount from the market price of unrestricted securities of the same
issuer. Investments in restricted securities are not readily marketable without
some time delay. Investments in securities which have no readily available
market value are valued at fair value as determined in good faith by the Fund's
Trustees. Ordinarily, the Fund would invest in restricted securities only when
it receives the issuer's commitment to register the securities without expense
to the Fund. However, registration and underwriting expenses (which may range
from seven percent to 15% of the gross proceeds of the securities sold) may be
paid by the Fund. A Fund position in restricted securities might adversely
affect the liquidity and marketability of such securities, and the Fund might
not be able to dispose of its holdings in such securities at reasonable price
levels.

Warrants. Warrants are in effect longer-term call options. They give the
holder the right to purchase a given number of shares of a particular company at
specified prices within certain periods of time. The purchaser of a warrant
expects that the market price of the security will exceed the purchase price of
the warrant plus the exercise price of the warrant, thus giving him a profit. Of
course, since the market price may never exceed the exercise price before the
expiration date of the warrant, the purchaser of the warrant risks the loss of
the entire purchase price of the warrant. Warrants generally trade in the open
market and may be sold rather than exercised. Warrants are sometimes sold in
unit form with other securities of an issuer. Units of warrants and common stock
may be employed in financing young, unseasoned companies. The purchase price of
a warrant varies with the exercise price of the warrant, the current market
value of the underlying security, the life of the warrant and various other
investment factors.

ENTERPRISE FUND

The Fund seeks capital appreciation by investing in a portfolio of
securities consisting principally of common stocks. Any income received on such
securities is incidental to the objective of capital appreciation. When, in the
opinion of the Adviser, the then prevailing market conditions dictate a
defensive position, the Fund may temporarily hold a significant percentage of
its assets in cash, U.S. Government securities, or investment grade debt
securities. The Fund may enter into repurchase agreements with banks and broker-
dealers. See "Repurchase Agreements."

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<PAGE> 56

In seeking to obtain capital appreciation, the Fund may trade to a
substantial degree in securities for the short term. To this extent, the Fund
would be engaged essentially in trading operations based on expectation of
short-term market movements. However, the Fund also seeks investments which are
expected to appreciate over a longer period of time. See "Portfolio Transactions
and Brokerage."

GLOBAL EQUITY FUND

The investment objective of the Fund is to provide long-term growth of
capital.

GOVERNMENT FUND

The Fund seeks to provide investors with a high current return consistent
with preservation of capital. The Fund invests primarily in U.S. Government
securities, related options, futures contracts and options on futures contracts.
The Fund may invest in other government related securities and in repurchase
agreements fully collateralized by U.S. Government securities. The other
government related securities include mortgage-related and mortgage-backed
securities and certificates issued by financial institutions or broker-dealers
representing "stripped" mortgage-related securities. Repurchase agreements will
be entered into with domestic banks or broker-dealers deemed creditworthy by the
Fund's Adviser solely for purposes of investing the Fund's cash reserves or when
the Fund is in a temporary defensive posture.

One type of mortgage-related securities in which the Fund invests are those
which are issued or guaranteed by an agency or instrumentality of the U.S.
Government, though not necessarily by the U.S. Government itself. One such type
of mortgage-related security is a Government National Mortgage Association
("GNMA") Certificate. GNMA Certificates are backed as to principal and interest
by the full faith and credit of the U.S. Government. Another type is a Federal
National Mortgage Association ("FNMA") Certificate. Principal and interest
payments of FNMA Certificates are guaranteed only by FNMA itself, not by the
full faith and credit of the U.S. Government. A third type of mortgage-related
security in which the Fund may invest is a Federal Home Loan Mortgage
Association ("FHLMC") Participation Certificate. This type of security is backed
by FHMLC as to payment of principal and interest but, like a FNMA security, it
is not backed by the full faith and credit of the U.S. Government.

The Fund seeks to obtain a high return from the following sources:

- interest paid on the Fund's portfolio securities;

- premiums earned upon the expiration of options written;

- net profits from closing transactions; and

- net gains from the sale of portfolio securities on the exercise of
options or otherwise.

The Fund is not designed for investors seeking long-term capital
appreciation. Moreover, varying economic and market conditions may affect the
value of and yields on debt securities and opportunities for gains from an
option writing program. Accordingly, there is no assurance that the Fund's
investment objective will be achieved.

GNMA Certificates

Government National Mortgage Association. The Government National Mortgage
Association is a wholly-owned corporate instrumentality of the United States
within the U.S. Department of Housing and Urban Development. GNMA's principal
programs involve its guarantees of privately issued securities backed by pools
of mortgages.

Nature of GNMA Certificates. GNMA Certificates are mortgage-backed
securities. The Certificates evidence part ownership of a pool of mortgage
loans. The Certificates which the Fund purchases are of the modified
pass-through type. Modified pass-through Certificates entitle the holder to
receive all interest and principal payments owed on the mortgage pool, net of
fees paid to the GNMA Certificate issuer and GNMA, regardless of whether or not
the mortgagor actually makes the payment.

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<PAGE> 57

GNMA Certificates are backed by mortgages and, unlike most bonds, their
principal amount is paid back by the borrower over the length of the loan rather
than in a lump sum at maturity. Principal payments received by the Fund will be
reinvested in additional GNMA Certificates or in other permissible investments.

GNMA Guarantee. The National Housing Act authorizes GNMA to guarantee the
timely payment of principal of and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or the Farmers
Home Administration or guaranteed by the Veterans Administration ("VA"). The
GNMA guarantee is backed by the full faith and credit of the United States. GNMA
is also empowered to borrow without limitation from the U.S. Treasury if
necessary to make any payments required under its guarantee.

Life of GNMA Certificates. The average life of a GNMA Certificate is likely
to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will result in the return of a portion of principal invested before
the maturity of the mortgages in the pool.

As prepayment rates of individual mortgage pools will vary widely, it is
not possible to predict accurately the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA are normally used as
an indicator of the expected average life of GNMA Certificates. These statistics
indicate that the average life of single-family dwelling mortgages with 25-30
year maturities (the type of mortgages backing the vast majority of GNMA
Certificates) is approximately twelve years. For this reason, it is customary
for pricing purposes to consider GNMA Certificates as 30-year mortgage-backed
securities which prepay fully in the twelfth year.

Yield Characteristics of GNMA Certificates. The coupon rate of interest of
GNMA Certificates is lower than the interest rate paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates, but only by the amount of the
fees paid to GNMA and the GNMA Certificate issuer. For the most common type of
mortgage pool, containing single-family dwelling mortgages, GNMA receives an
annual fee of 0.06 of one percent of the outstanding principal for providing its
guarantee, and the GNMA Certificate issuer is paid an annual servicing fee of
0.44 of one percent for assembling the mortgage pool and for passing through
monthly payments of interest and principal to Certificate holders.

The coupon rate by itself, however, does not indicate the yield which will
be earned on the Certificates for the following reasons:

1. Certificates are usually issued at a premium or discount, rather than at
par.

2. After issuance, Certificates usually trade in the secondary market at a
premium or discount.

3. Interest is paid monthly rather than semi-annually as is the case for
traditional bonds. Monthly compounding has the effect of raising the
effective yield earned on GNMA Certificates.

4. The actual yield of each GNMA Certificate is influenced by the
prepayment experience of the mortgage pool underlying the Certificate.
If mortgagors prepay their mortgages, the principal returned to
Certificate holders may be reinvested at higher or lower rates.

In quoting yields for GNMA Certificates, the customary practice is to
assume that the Certificates will have a twelve-year life. Compared on this
basis, GNMA Certificates have historically yielded roughly 1/4 of one percent
more than high grade corporate bonds and 1/2 of one percent more than U.S.
Government and U.S. Government agency bonds. As the life of individual pools may
vary widely, however, the actual yield earned on any issue of GNMA Certificates
may differ significantly from the yield estimated on the assumption of a
twelve-year life.

Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA Certificates
outstanding has grown rapidly. The size of the market and the active
participation in the secondary market by securities dealers and many types of
investors make GNMA Certificates highly liquid instruments. Quotes for GNMA
Certificates are readily available from securities

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<PAGE> 58

dealers and depend on, among other things, the level of market rates, the
Certificate's coupon rate and the prepayment experience of the pool of mortgages
backing each Certificate.

FNMA Securities

The Federal National Mortgage Association ("FNMA") was established in 1938
to create a secondary market in mortgages insured by the FHA. FNMA issues
guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble GNMA Certificates in that each FNMA Certificate represents
a pro rata share of all principal and interest payments made and owed on the
underlying pool. FNMA guarantees timely payment of interest and principal on
FNMA Certificates. The FNMA guarantee is not backed by the full faith and credit
of the United States.

FHLMC Securities

The Federal Home Loan Mortgage Corporation ("FHLMC") was created in 1970 to
promote development of a nationwide secondary market in conventional residential
mortgages. The FHLMC issues two types of mortgage pass-through securities
("FHLMC Certificates"): mortgage participation certificates ("PCs") and
guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in
that each PC represents a pro rata share of all interest and principal payments
made and owned on the underlying pool. The FHLMC guarantees timely monthly
payment of interest on PCs and the ultimate payment of principal. GMCs also
represent a pro rata interest in a pool of mortgages. However, these instruments
pay interest semiannually and return principal once a year in guaranteed minimum
payments. The expected average life of these securities is approximately ten
years. The FHLMC guarantee is not backed by the full faith and credit of the
United States.

Collateralized Mortgage Obligations

Collateralized mortgage obligations are debt obligations issued generally
by finance subsidiaries or trusts which are secured by mortgage-backed
certificates, including GNMA Certificates, FHLMC Certificates and FNMA
Certificates, together with certain portfolios and other collateral. Scheduled
distributions on the mortgage-backed certificates pledged to secure the
collateralized mortgage obligations, together with certain portfolios and other
collateral and reinvestment income thereon at an assumed reinvestment rate, will
be sufficient to make timely payments of interest on the obligations and to
retire the obligations not later than their stated maturity. Since the rate of
payment of principal of any collateralized mortgage obligation will depend on
the rate of payment (including prepayments) of the principal of the mortgage
loans underlying the mortgage-backed certificates; the actual maturity of the
obligation could occur significantly earlier than its stated maturity.
Collateralized mortgage obligations may be subject to redemption under certain
circumstances. The rate of interest borne by collateralized mortgage obligations
may be either fixed or floating. In addition, certain collateralized mortgage
obligations do not bear interest and are sold at a substantial discount (i.e., a
price less than the principal amount). Purchases of collateralized mortgage
obligations at a substantial discount involves a risk that the anticipated yield
on the purchase may not be realized if the underlying mortgage loans prepay at a
slower than anticipated rate, since the yield depends significantly on the rate
of prepayment of the underlying mortgages. Conversely, purchases of
collateralized mortgage obligations at a premium involve additional risk of loss
of principal in the event of unanticipated prepayments of the mortgage loans
underlying the mortgage-backed certificates since the premium may not have been
fully amortized at the time the obligation is repaid. The market value of
collateralized mortgage obligations purchased at a substantial premium of
discount is extremely volatile and the effects of prepayments on the underlying
mortgage loans may increase such volatility.

Although payment of the principal of and interest on the mortgage-backed
certificates pledged to secure collateralized mortgage obligations may be
guaranteed by GNMA, FHLMC or FNMA, the collateralized mortgage obligations
represent obligations solely of their issuers and are not insured or guaranteed
by GNMA, FHLMC, FNMA or any other governmental agency or instrumentality, or by
any other person or entity. The issuers of collateralized mortgage obligations
typically have no significant assets other than those pledged as collateral for
the obligations.

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GROWTH AND INCOME FUND

The Fund seeks long-term growth of capital and income by investing
principally in income-producing equity securities, including common stocks and
convertible securities.

MONEY MARKET FUND

The Fund seeks protection of capital and high current income by investing
in money market instruments.

The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Portfolio uses the amortized cost
method of valuing the Portfolio's securities pursuant to Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"), certain requirements of which
are summarized below.

In accordance with Rule 2a-7, the Portfolio is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 13 months or less and invest only in
U.S. dollar denominated securities determined in accordance with procedures
established by the Trustees to present minimal credit risks and which are rated
in one of the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations (or one rating
organization if the instrument was rated by only one such organization) or, if
unrated, are of comparable quality as determined in accordance with procedures
established by the Trustees. The nationally recognized statistical rating
organizations currently rating instruments of the type the Portfolio may
purchase are Moody's Investors Service, Inc., Standard & Poor's Corporation,
Fitch Investors Services, Inc., Duff and Phelps, Inc. and IBCA Limited and IBCA
Inc. See Appendix hereto. See the Prospectus for the Fund's maturity
requirements.

In addition, the Fund will not invest more than five percent of its total
assets in the securities (including the securities collateralizing a repurchase
agreement) of, or subject to puts issued by, a single issuer, except that (i)
the Fund may invest more than five percent of its total assets in a single
issuer for a period of up to three business days in certain limited
circumstances, (ii) the Fund may invest in obligations issued or guaranteed by
the U.S. Government without any such limitation, and (iii) the limitation with
respect to puts does not apply to unconditional puts if no more than ten percent
of the Fund's total assets is invested in securities issued or guaranteed by the
issuer of the unconditional put. Investments in rated securities not rated in
the highest category by at least two rating organizations (or one rating
organization if the instrument was rated by only one such organization), and
unrated securities not determined by the Trustees to be comparable to those
rated in the highest category, will be limited to five percent of the Fund's
total assets, with the investment in any one such issuer being limited to no
more than the greater of one percent of the Fund's total assets or $1,000,000.
As to each security, these percentages are measured at the time the Fund
purchases the security. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with broker-dealers or
domestic banks (or a foreign branch or subsidiary thereof). A repurchase
agreement is a short-term investment in which the purchaser (i.e., the Fund)
acquires ownership of a debt security and the seller agrees to repurchase the
obligation at a future time and set price, usually not more than seven days from
the date of purchase, thereby determining the yield during the purchaser's
holding period. Repurchase agreements are collateralized by the underlying debt
securities and may be considered to be loans under the 1940 Act. The Fund will
make payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of a custodian or bank acting as agent. The seller
under a repurchase agreement is required to maintain the value of the underlying
securities marked to market daily at not less than the repurchase price. The
underlying securities (normally securities of the U.S. Government, or its
agencies and instrumentalities), may have maturity dates exceeding one year. The
Fund does not bear the risk of a decline in value of the underlying security
unless the seller defaults under its repurchase obligation. See the Prospectus
for further information.

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FORWARD COMMITMENTS

The Government Fund, the Domestic Income Fund and the Real Estate
Securities Fund may engage in Forward Commitment purchases and sales. Relative
to a Forward Commitment purchase, the Fund maintains a segregated account (which
is marked to market daily) of cash, cash equivalents, liquid high grade debt
securities or U.S. Government securities (which may have maturities which are
longer than the term of the Forward Commitment) with the Fund's custodian in an
aggregate amount equal to the amount of its commitment as long as the obligation
to purchase continues. Since the market value of both the securities subject to
the Forward Commitment and the securities held in the segregated account may
fluctuate, the use of Forward Commitments may magnify the impact of interest
rate changes on the Fund's net asset value.

A Forward Commitment sale is covered if the Fund owns or has the right to
acquire the underlying securities subject to the Forward Commitment. A Forward
Commitment sale is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline in value of a security which the
Portfolio owns or has the right to acquire. Only the Government Fund and the
Real Estate Securities Fund may engage in forward commitment transactions for
cross-hedging purposes. In either circumstance, the Fund maintains in a
segregated account (which is marked to market daily) either the security covered
by the Forward Commitment or cash, cash equivalents, liquid high grade debt
securities or U.S. Government securities (which may have maturities which are
longer than the term of the Forward Commitment) with the Fund's custodian in an
aggregate amount equal to the amount of its commitment as long as the obligation
to sell continues. By entering into a Forward Commitment sale transaction, the
Fund foregoes or reduces the potential for both gain and loss in the security
which is being hedged by the Forward Commitment sale.

DEPOSITARY RECEIPTS

Certain Funds may invest in the securities of foreign issuers in the form
of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs")
or other securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally, ADRs in
registered form, are designed for use in United States securities markets and
EDRs, in bearer form, are designed for use in European securities markets.

OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

All of the Funds except the Domestic Income Fund and the Money Market Fund
may engage in transactions in options, futures contracts and options on futures
contracts. Set forth below is certain additional information regarding options,
futures contracts and options on futures contracts.

WRITING CALL AND PUT OPTIONS

Purpose. The principal reason for writing options is to obtain, through
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. The Fund's current return can be expected to
fluctuate because premiums earned from an option writing program and dividend or
interest income yields on portfolio securities vary as economic and market
conditions change. Writing options on portfolio securities also is likely to
result in a higher portfolio turnover.

Writing Options. The purchaser of a call option pays a premium to the
writer (i.e., the seller) for the right to buy the underlying security from the
writer at a specified price during a certain period. Each Fund writes call
options only on a covered basis and only the Government Fund writes call options
either on a covered basis or for cross-hedging purposes. A call option is
covered if at all times during the option period the Fund owns or has the right
to acquire securities of the type that it would be obligated to deliver if any
outstanding option were exercised. Thus, the Government Fund may write options
on mortgage-related or other U.S. Government securities or forward commitments
of such securities. An option is for cross-hedging purposes if it is not
covered, but is designed to provide a hedge against a security which the Fund
owns or has

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the right to acquire. In such circumstances, the Fund maintains in a segregated
account with the Fund's Custodian, cash or U.S. Government securities in an
amount not less than the market value of the underlying security, marked to
market daily, while the option is outstanding.

The purchaser of a put option pays a premium to the writer (i.e., the
seller) for the right to sell the underlying security to the writer at a
specified price during a certain period. A Fund would write put options only on
a secured basis, which means that, at all times during the option period, the
Fund would maintain in a segregated account with its Custodian cash, cash
equivalents or U.S. Government securities in an amount of not less than the
exercise price of the option, or would hold a put on the same underlying
security at an equal or greater exercise price.

Closing Purchase Transactions and Offsetting Transactions. In order to
terminate its position as a writer of a call or put option, a Fund could enter
into a "closing purchase transaction," which is the purchase of a call (put) on
the same underlying security and having the same exercise price and expiration
date as the call (put) previously written by the Fund. The Fund would realize a
gain (loss) if the premium plus commission paid in the closing purchase
transaction is less (greater) than the premium it received on the sale of the
option. A Fund would also realize a gain if an option it has written lapses
unexercised.

A Fund could write options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. A Fund
could close out its position as writer of an option only if a liquid secondary
market exists for options of that series, but there is no assurance that such a
market will exist, particularly in the case of over-the-counter options, since
they can be closed out only with the other party to the transaction.
Alternatively, a Fund could purchase an offsetting option, which would not close
out its position as a writer, but would provide an asset of equal value to its
obligation under the option written. If a Fund is not able to enter into a
closing purchase transaction or to purchase an offsetting option with respect to
an option it has written, it will be required to maintain the securities subject
to the call or the collateral underlying the put until a closing purchase
transaction can be entered into (or the option is exercised or expires), even
though it might not be advantageous to do so.

The exercise price of call options may be below ("in-the-money"), equal to
("at-the-money"), or above ("out-of-the-money") the current market value of the
underlying securities or futures contracts at the time the options are written.
The converse applies to put options.

Risks of Writing Options. By writing a call option, a Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by writing a put option a Fund might become obligated to
purchase the underlying security at an exercise price that exceeds the then
current market price.

PURCHASING CALL AND PUT OPTIONS

A Fund could purchase call options to protect (i.e., hedge) against
anticipated increases in the prices of securities it wishes to acquire. In
addition, the Asset Allocation Fund, Emerging Growth Fund, the Enterprise Fund,
the Global Equity Fund, the Growth and Income Fund and the Real Estate
Securities Fund may purchase call options for capital appreciation. Since the
premium paid for a call option is typically a small fraction of the price of the
underlying security, a given amount of funds will purchase call options covering
a much larger quantity of such security than could be purchased directly. By
purchasing call options, a Fund could benefit from any significant increase in
the price of the underlying security to a greater extent than had it invested
the same amount in the security directly. However, because of the very high
volatility of option premiums, a Fund would bear a significant risk of losing
the entire premium if the price of the underlying security did not rise
sufficiently, or if it did not do so before the option expired.

Conversely, put options could be purchased to protect (i.e., hedge) against
anticipated declines in the market value of either specific portfolio securities
or of a Fund's assets generally. In addition, the Asset Allocation Fund,
Emerging Growth Fund, the Enterprise Fund, Global Equity Fund, the Growth and
Income Fund and the Real Estate Securities Fund may purchase put options for
capital appreciation in anticipation of a price decline in the underlying
security and a corresponding increase in the value of the put option. The

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purchase of put options for capital appreciation involves the same significant
risk of loss as described above for call options.

In any case, the purchase of options for capital appreciation would
increase a Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.

The Government Fund will not purchase call or put options on securities if
as a result, more than ten percent of its net assets would be invested in
premiums on such options.

A Fund may purchase either listed or over-the-counter options.

RISK FACTORS APPLICABLE TO OPTIONS ON U.S. GOVERNMENT SECURITIES (GOVERNMENT
FUND ONLY)

Treasury Bonds and Notes. Because trading interest in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the exchanges will not continue indefinitely to introduce options with new
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each issue of bonds or notes will thus be phased out as new options are
listed on more recent issues, and options representing a full range of
expirations will not ordinarily be available for every issue on which options
are traded.

Treasury Bills. Because the deliverable Treasury bill changes from week to
week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its Custodian so that it will be
treated as being covered.

Mortgage-Related Securities. The following special considerations will be
applicable to options on mortgage-related securities. Currently such options are
only traded over-the-counter. Since the remaining principal balance of a
mortgage-related security declines each month as a result of mortgage payments,
the Fund as a writer of a mortgage-related call holding mortgage-related
securities as "cover" to satisfy its delivery obligation in the event of
exercise may find that the mortgage-related securities it holds no longer have a
sufficient remaining principal balance for this purpose. Should this occur, the
Fund will purchase additional mortgage-related securities from the same pool (if
obtainable) or replacement mortgage-related securities in the cash market in
order to maintain its cover. A mortgage-related security held by the Portfolio
to cover an option position in any but the nearest expiration month may cease to
represent cover for the option in the event of a decline in the coupon rate at
which new pools are originated under the FHA/VA loan ceiling in effect at any
given time. If this should occur, the Fund will no longer be covered, and the
Portfolio will either enter into a closing purchase transaction or replace such
mortgage-related security with a mortgage-related security which represents
cover. When the Fund closes its position or replaces such mortgage-related
security, it may realize an unanticipated loss and incur transaction costs.

OPTIONS ON STOCK INDEXES (ASSET ALLOCATION FUND, EMERGING GROWTH FUND,
ENTERPRISE FUND, GLOBAL EQUITY FUND, GROWTH AND INCOME FUND AND REAL ESTATE
SECURITIES FUND ONLY)

Options on stock indexes are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash upon exercise of the option. Receipt of this
cash amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received
will be the difference between the closing price of the index and the exercise
price of the option, multiplied by a specified dollar multiple. The writer of
the option is obligated, in return for the premium received, to make delivery of
this amount.

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Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indices are also based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. A stock index fluctuates with changes in the
market values of the stocks included in the index. Options are currently traded
on The Chicago Board Options Exchange, the American Stock Exchange and other
exchanges.

Gain or loss to a Fund on transactions in stock index options will depend
on price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities. As
with stock options, the Portfolio may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange, or it
may let the option expire unexercised.

FOREIGN CURRENCY OPTIONS (GLOBAL EQUITY FUND AND REAL ESTATE SECURITIES FUND)

The Fund may purchase put and call options on foreign currencies to reduce
the risk of currency exchange fluctuation. Premiums paid for such put and call
options will be limited to no more than five percent of the Fund's net assets at
any given time. Options on foreign currencies operate similarly to options on
securities, and are trade primarily in the over-the-counter market, although
options on foreign currencies are traded on United States and foreign exchanges.
Exchange-traded options are expected to be purchased by the Fund from time to
time and over-the-counter options may also be purchased, but only when the
Adviser believes that a liquid secondary market exists for such options,
although there can be no assurance that a liquid secondary market will exist for
a particular option at any specific time. Options on foreign currencies are
affected by all of those factors which influence foreign exchange rates and
investment generally. See "Investment Practices -- Using Options, Futures
Contracts and Related Options" in the Prospectus.

The value of a foreign currency option is dependent upon the value of the
underlying foreign currency relative to the U.S. dollar. As a result, the price
of the option position may vary with changes in the value of either or both
currencies and has no relationship to the investment merits of a foreign
security. Because foreign currency transactions occurring in the interbank
market (conducted directly between currency traders, usually large commercial
banks, and their customers) involve substantially larger amounts than those that
may be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (i.e., less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.

FUTURES CONTRACTS

Certain Funds may engage in transactions involving futures contracts and
related options in accordance with rules and interpretations of the Commodity
Futures Trading Commission ("CFTC") under which the Trust and its Funds are
exempt from registration as a "commodity pool."

Types of Contracts. An interest rate futures contract is an agreement
pursuant to which a party agrees to take or make delivery of a specified debt
security (such as U.S. Treasury bonds, U.S. Treasury notes, U.S. Treasury bills
and GNMA Certificates) at a specified future time and at a specified price.
Interest rate futures contracts also include cash settlement contracts based
upon a specified interest rate such as the London interbank offering rate for
dollar deposits, LIBOR.

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A stock index futures contract is an agreement pursuant to which a party
agrees to take or make delivery of cash equal to a specified dollar amount times
the difference between the stock index value at a specified time and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made.

The Fund also may invest in foreign stock index futures traded outside the
United States. Foreign stock index futures traded outside the United States
include the Nikkei Index of 225 Japanese stocks traded on the Singapore
International Monetary Exchange ("Nikkei Index"), Osaka Index of 50 Japanese
stocks traded on the Osaka Exchange, Financial Times Stock Exchange Index of the
100 largest stocks on the London Stock Exchange, the All Ordinaries Share Price
Index of 307 stocks on the Sydney, Melbourne Exchanges, Hang Seng Index of 33
stocks on the Hong Kong Stock Exchange, Barclays Share Price Index of 40 stocks
on the New Zealand Stock Exchange and Toronto Index of 35 stocks on the Toronto
Stock Exchange. Futures and futures options on the Nikkei Index are traded on
the Chicago Mercantile Exchange and United States commodity exchanges may
develop futures and futures options on other indices of foreign securities.
Futures and options on United States devised index of foreign stocks are also
being developed. Investments in securities of foreign entities and securities
denominated in foreign currencies involve risks not typically involved in
domestic investment, including fluctuations in foreign exchange rates, future
foreign political and economic developments, and the possible imposition of
exchange controls or other foreign or United States governmental laws or
restrictions applicable to such investments.

Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, a Fund is required to deposit with its Custodian in an
account in the broker's name an amount of cash, cash equivalents or liquid high
grade debt securities equal to a percentage (which will normally range between
two and ten percent) of the contract amount. This amount is known as initial
margin. The nature of initial margin in futures transactions is different from
that of margin in securities transactions in that futures contract margin does
not involve the borrowing of funds by the customer to finance the transaction.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract, which is returned to the Fund upon termination of the
futures contract and satisfaction of its contractual obligations. Subsequent
payments to and from the broker, called variation margin, are made on a daily
basis as the price of the underlying securities or index fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as marking to market.

For example, when a Fund purchases a futures contract and the price of the
underlying security or index rises, that position increases in value, and the
Fund receives from the broker a variation margin payment equal to that increase
in value. Conversely, where the Fund purchases a futures contract and the value
of the underlying security or index declines, the position is less valuable, and
the Portfolio is required to make a variation margin payment to the broker.

At any time prior to expiration of the futures contract, the Portfolio may
elect to terminate the position by taking an opposite position. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund, and the Fund realizes a loss or a gain.

Futures Strategies. When a Fund anticipates a significant market or market
sector advance, the purchase of a futures contract affords a hedge against not
participating in the advance at a time when the Fund is not fully invested
("anticipatory hedge"). Such purchase of a futures contract serves as a
temporary substitute for the purchase of individual securities, which may be
purchased in an orderly fashion once the market has stabilized. As individual
securities are purchased, an equivalent amount of futures contracts could be
terminated by offsetting sales. A Fund may sell futures contracts in
anticipation of or in a general market or market sector decline that may
adversely affect the market value of the Fund's securities ("defensive hedge").
To the extent that the Fund's portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures contracts
substantially reduces the risk to the Fund of a market decline and, by so doing,
provides an alternative to the liquidation of securities positions in the Fund
with attendant transaction costs. Relative to the Government Fund, ordinarily
commissions on futures transactions are lower than transaction costs incurred in
the purchase and sale of mortgage-related and U.S. Government securities.

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<PAGE> 65

In the event of the bankruptcy of a broker through which a Fund engages in
transactions in options, futures or related options, the Fund could experience
delays and/or losses in liquidating open positions purchased and/or incur a loss
of all or part of its margin deposits with the broker. Transactions are entered
into by a Fund only with brokers or financial institutions deemed creditworthy
by the Adviser.

Special Risks Associated with Futures Transactions. There are several risks
connected with the use of futures contracts as a hedging device. These include
the risk of imperfect correlation between movements in the price of the futures
contracts and of the underlying securities, the risk of market distortion, the
illiquidity risk and the risk of error in anticipating price movement.

There may be an imperfect correlation (or no correlation) between movements
in the price of the futures contracts and of the securities being hedged. The
risk of imperfect correlation increases as the composition of the securities
being hedged diverges from the securities upon which the futures contract is
based. If the price of the futures contract moves less than the price of the
securities being hedged, the hedge will not be fully effective. To compensate
for this imperfect correlation, a Fund could buy or sell futures contracts in a
greater dollar amount than the dollar amount of securities being hedged if the
historical volatility of the securities being hedged is greater than the
historical volatility of the securities underlying the futures contract.
Conversely, a Fund could buy or sell futures contracts in a lesser dollar amount
than the dollar amount of the securities being hedged if the historical
volatility of the securities being hedged is less than the historical volatility
of the securities underlying the futures contract. It is also possible that the
value of futures contracts held by a Fund could decline at the same time as
portfolio securities being hedged; if this occurred, the Fund would lose money
on the futures contract in addition to suffering a decline in value in the
portfolio securities being hedged.

There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities or index underlying the
futures contract due to certain market distortions. First, all participants in
the futures market are subject to margin depository and maintenance
requirements. Rather than meet additional margin depositary requirements,
investors may close futures contracts through offsetting transactions, which
could distort the normal relationship between the futures market and the
securities or index underlying the futures contract. Second, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions. Due to the possibility of price distortion in the futures markets
and because of the imperfect correlation between movements in futures contracts
and movements in the securities underlying them, a correct forecast of general
market trends by the Adviser may still not result in a successful hedging
transaction judged over a very short time frame.

There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although a Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract or at any
particular time. In the event of such illiquidity, it might not be possible to
close a futures position and, in the event of adverse price movement, a Fund
would continue to be required to make daily payments of variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the related futures contract. In such event, the Fund would
lose the benefit of the appreciation in value of the securities.

Successful use of futures is also subject to the Advisers' ability
correctly to predict the direction of movements in the market. For example, if
the Fund hedges against a decline in the market, and market prices instead
advance, the Portfolio will lose part or all of the benefit of the increase in
value of its securities holdings because it will have offsetting losses in
futures contracts. In such cases, if the Portfolio has insufficient cash, it may
have to sell portfolio securities at a time when it is disadvantageous to do so
in order to meet the daily variation margin.

CFTC regulations require, among other things, (i) that futures and related
options be used solely for bona fide hedging purposes (or meet certain other
conditions specified in CFTC regulations) and (ii) that a

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<PAGE> 66

Fund not enter into futures and related options for which the aggregate initial
margin and premiums exceed five percent of the fair market value of a Fund's
assets. In order to prevent leverage in connection with the purchase of futures
contracts by a Fund, an amount of cash, cash equivalents or liquid high grade
debt securities equal to the market value of the obligation under the futures
contracts (less any related margin deposits) will be maintained in a segregated
account with the Custodian.

OPTIONS ON FUTURES CONTRACTS

A Fund could also purchase and write options on futures contracts. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put), at a specified
exercise price at any time during the option period. As a writer of an option on
a futures contract, a Fund is subject to initial margin and maintenance
requirements similar to those applicable to futures contracts. In addition, net
option premiums received by a Fund are required to be included as initial margin
deposits. When an option on a futures contract is exercised, delivery of the
futures position is accompanied by cash representing the difference between the
current market price of the futures contract and the exercise price of the
option. A Fund could purchase put options on futures contracts in lieu of, and
for the same purposes as, the sale of a futures contract; at the same time, it
could write put options at a lower strike price (a "put bear spread") to offset
part of the cost of the strategy to the Fund. The purchase of call options on
futures contracts is intended to serve the same purpose as the actual purchase
of the futures contract.

Risks of Transactions in Options on Futures Contracts. In addition to the
risks described above which apply to all options transactions, there are several
special risks relating to options on futures. The Advisers will not purchase
options on futures on any exchange unless, in the Advisers' opinion, a liquid
secondary exchange market for such options exists. Compared to the use of
futures, the purchase of options on futures involves less potential risk to a
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However there may be circumstances, such as when there
is no movement in the level of the index, when the use of an option on a future
would result in a loss to the Fund when the use of a future would not.

ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS
ON FOREIGN CURRENCIES

Unlike transactions entered into by a Fund in futures contracts, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) by the Securities and Exchange Commission ("SEC"). To the contrary,
such instruments are traded through financial institutions acting as
market-makers, although foreign currency options are also traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading
environment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could, therefore, continue to an unlimited extent over
a period of time. Although the purchaser of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option seller and a trader of forward contracts could
lose amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting the Fund
to liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

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<PAGE> 67

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign special procedures on exercise and settlement, such as
technical changes in the mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions, on exercise.

In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.

LOANS OF PORTFOLIO SECURITIES

Each of the Funds, except the Real Estate Securities Fund, may lend an
amount up to ten percent of the value of its portfolio securities to
unaffiliated brokers, dealers and financial institutions provided that cash
equal to 100% of the market value of the securities loaned is deposited by the
borrower with the particular Fund and is maintained each business day. While
such securities are on loan, the borrower is required to pay the Fund any income
accruing thereon. Furthermore, the Fund may invest the cash collateral in
portfolio securities thereby increasing the return to the Fund as well as
increasing the market risk to the Fund.

Loans would be made for short-term purposes and subject to termination by
the Fund in the normal settlement time, currently five business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to the
Fund and its shareholders, but any gain can be realized only if the borrower
does not default. Each Fund may pay reasonable finders', administrative and
custodial fees in connection with a loan.

INVESTMENT RESTRICTIONS

Each Fund has adopted the following restrictions which may not be changed
without the approval of the holders of a majority of the outstanding shares of
such Portfolio. Such majority is defined by the 1940 Act as the lesser of (i)
67% or more of the voting securities present at a meeting, if the holders of
more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy; or (ii) more than 50% of the Fund's outstanding voting
securities. The percentage limitations need only be met at the time the
investment is made or after relevant action is taken. The Funds are subject to
the restrictions set forth below (Those restrictions that are only applicable to
certain Funds are noted as such).

THE FOLLOWING RESTRICTIONS ARE APPLICABLE TO THE ASSET ALLOCATION FUND, THE
DOMESTIC INCOME FUND, THE EMERGING GROWTH FUND, THE ENTERPRISE FUND, THE GLOBAL
EQUITY FUND, THE GOVERNMENT FUND, THE GROWTH AND INCOME FUND AND THE MONEY
MARKET FUND:

A Fund shall not:

1. Invest in securities of any company if any officer or trustee of the
Fund or of the Adviser owns more than one-half of one percent of the
outstanding securities of such company, and such officers and trustees
own more than five percent of the outstanding securities of such issuer;

2. Invest in companies for the purpose of acquiring control or management
thereof;

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<PAGE> 68

3. Underwrite securities of other companies, except insofar as a Fund
might be deemed to be an underwriter for purposes of the Securities Act
of 1933 in the resale of any securities owned by the Portfolio; or

4. Lend its portfolio securities in excess of ten percent of its total
assets, both taken at market value provided that any loans shall be in
accordance with the guidelines established for such loans by the Board
of Trustees of the Trust as described under "Loans of Portfolio
Securities," including the maintenance of collateral from the borrower
equal at all times to the current market value of the securities loaned.

THE FOLLOWING ADDITIONAL RESTRICTIONS ARE APPLICABLE TO THE ASSET ALLOCATION
FUND AND THE ENTERPRISE FUND:

A Fund shall not:

1. With respect to 75% of its assets, invest more than five percent of its
assets in the securities of any one issuer (except obligations of the
United States Government, its agencies or instrumentalities and
repurchase agreements secured thereby) or purchase more than ten percent
of the outstanding voting securities of any one issuer. Neither
limitation shall apply to the acquisition of shares of other open-end
investment companies to the extent permitted by rule or order of the
Securities and Exchange Commission exempting the Fund from the
limitation imposed by Section 12(d)(1) of the Investment Company Act of
1940;

2. Invest in securities of other investment companies except as part of a
merger, consolidation or other acquisition and except to acquire shares
of other open-end investment companies to the extent permitted by rule
or order of the Securities and Exchange Commission exempting the Fund
from the limitation imposed by Section 12(d)(1) of the Investment
Company Act of 1940;

3. Make any investment in real estate, commodities or commodities
contracts, except that the Fund may enter into transactions in options,
futures contracts or options on futures contracts and may purchase
securities secured by real estate or interests therein; or issued by
companies, including real estate investment trusts, which invest in real
estate or interests therein;

4. Invest in interests in oil, gas, or other mineral exploration or
development programs;

5. Purchase a restricted security or a security for which market quotations
are not readily available if as a result of such purchase more than five
percent of the Fund's assets would be invested in such securities.
Notwithstanding the foregoing, this limitation excludes shares of other
open-end investment companies owned by the Fund but includes the Fund's
pro rata portion of the securities and other assets owned by any such
investment company;

6. Lend money, except that a Fund may invest in repurchase agreements in
accordance with applicable requirements set forth in the Prospectus and
may acquire debt securities which the Fund's investment policies permit.
A Fund will not invest in repurchase agreements maturing in more than
seven days (unless subject to a demand feature) if any such investment,
together with any illiquid securities (including securities which are
subject to legal or contractual restrictions on resale) held by the
Fund, exceeds ten percent of the market or other fair value of its total
net assets; provided, however, that this limitation excludes shares of
other open-end investment companies owned by the Fund but includes the
Fund's pro rata portion of the securities and other assets owned by any
such investment company. See "Repurchase Agreements";

7. Invest more than 25% of the value of its total assets in securities of
issuers in any particular industry (except obligations of the United
States Government, its agencies or instrumentalities and repurchase
agreements secured thereby); provided, however, that this limitation
excludes shares of other open-end investment companies owned by the Fund
but includes the Fund's pro rata portion of the securities and other
assets owned by any such investment company;

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<PAGE> 69

8. Make short sales of securities, unless at the time of the sale the Fund
owns or has the right to acquire an equal amount of such securities.
Notwithstanding the foregoing, the Portfolio may engage in transactions
in options, futures contracts and options on futures contracts;

9. Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities. The deposit or payment by the Fund of initial
or maintenance margin in connection with transactions in options,
futures contracts or options on futures contracts is not considered the
purchase of a security on margin;

10. Invest more than five percent of its assets in companies having a
record, together with predecessors, of less than three years continuous
operation; provided, however, that this limitation excludes shares of
other open-end investment companies owned by the Fund but includes the
Fund's pro rata portion of the securities and other assets owned by any
such investment company; or

11. Borrow in excess of ten percent of the market or other fair value of
its total assets, or pledge its assets to an extent greater than five
percent of the market or other fair value of its total assets. Any such
borrowings shall be from banks and shall be undertaken only as a
temporary measure for extraordinary or emergency purposes. Deposits in
escrow in connection with the writing of covered call or secured put
options, or in connection with the purchase or sale of futures contracts
and related options are not deemed or to be a pledge or other
encumbrance.

In addition, the following restrictions apply to, and may not be changed
without the approval of the holders of a majority of the shares of, the Fund
indicated:

The Enterprise Fund may not invest more than five percent of its net
assets in warrants or rights valued at the lower of cost or market, nor
more than two percent of its net assets in warrants or rights (valued on
such basis) which are not listed on the New York or American Stock
Exchanges. Warrants or rights acquired in units or attached to other
securities are not subject to the foregoing limitation. Furthermore, the
Enterprise Fund may not invest in the securities of a foreign issuer if, at
the time of acquisition, more than ten percent of the value of the
Enterprise Fund's total assets would be invested in such securities.
Foreign investments may be subject to special risks, including future
political and economic developments, the possible imposition of additional
withholding taxes on dividend or interest income payable on the securities,
or the seizure or nationalization of companies, or establishment of
exchange controls or adoption of other restrictions which might adversely
affect the investment.

The Asset Allocation Fund may not invest in the securities of a
foreign issuer if, at the time of acquisition, more than 25% of the value
of the Asset Allocation Fund's total assets would be invested in such
securities.

THE FOLLOWING ADDITIONAL RESTRICTIONS ARE APPLICABLE TO THE DOMESTIC INCOME
FUND:

The Fund shall not:

2. Invest in securities of other investment companies except as part of a
merger, consolidation or other acquisition;

3. Make any investment in real estate, commodities or commodities
contracts, except that the Portfolio may purchase securities secured by
real estate or interests therein; or issued by companies, including real
estate investment trusts, which invest in real estate or interests
therein;

4. Invest in interests in oil, gas, or other mineral exploration or
development programs;

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<PAGE> 70

6. Lend money, except that the Fund may invest in repurchase agreements in
accordance with applicable requirements set forth in the Prospectus and
may acquire debt securities which the Fund's investment policies permit.
The Fund will not invest in repurchase agreements maturing in more than
seven days (unless subject to a demand feature) if any such investment,
together with any illiquid securities (including securities which are
subject to legal or contractual restrictions on resale) held by the
Fund, exceeds ten percent of the market or other fair value of its total
net assets. See "Repurchase Agreements";

8. Make short sales of securities, unless at the time of the sale the Fund
owns or has the right to acquire an equal amount of such securities;

9. Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities;

10. Invest more than five percent of its assets in companies having a
record, together with predecessors, of less than three years continuous
operation;

11. Write put or call options;

12. Borrow in excess of ten percent of the market or other fair value of
its total assets, or pledge its assets to an extent greater than five
percent of the market or other fair value of its total assets. Any such
borrowings shall be from banks and shall be undertaken only as a
temporary measure for extraordinary or emergency purposes. Deposits in
escrow in connection with the writing of covered call or secured put
options, or in connection with the purchase or sale of futures contracts
and related options are not deemed or to be a pledge or other
encumbrance; or

13. Invest in the securities of a foreign issuer if, at the time of
acquisition, more than 25% of the value of the Fund's total assets would
be invested in such securities.

THE FOLLOWING RESTRICTIONS ARE APPLICABLE TO THE EMERGING GROWTH FUND:

The Fund shall not:

1. Invest directly in real estate interests of any nature, although the
Fund may invest indirectly through media such as real estate investment
trusts;

2. Invest in commodities or commodity contracts, except that the Fund may
enter into transactions in futures contracts or related options;

3. Issue any of its securities for (a) services or (b) property other than
cash or securities (including securities of which the Fund is the
issuer), except as a dividend or distribution to its shareholders in
connection with a reorganization;

4. Issue senior securities and shall not borrow money except from banks as
a temporary measure for extraordinary or emergency purposes and in an
amount not exceeding five percent of the Portfolio's total assets.
Notwithstanding the foregoing, the Fund may enter into transactions in
options, futures contracts and related options and may make margin
deposits and payments in connection therewith;

5. Invest more than 25% of the value of its total assets in securities of
issuers in any particular industry (except obligations of the United
States Government, its agencies or instrumentalities and repurchase
agreements secured hereby); provided, however, that this limitation
excludes shares of

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other open-end investment companies owned by the Fund but includes the
Fund's pro rata portion of the securities and other assets owned by any
such investment company;

6. Invest in the securities of investment companies, except (a) that the
Fund may invest up to ten percent of its assets in the securities of
registered closed-end investment companies, provided that the Fund
acquires no more than five percent of the voting stock of any such
company which has a policy of concentrating investments in a particular
industry or group of industries or more than three percent of the voting
stock of such a company which does not have this policy; and (b) to
acquire shares of other open-end investment companies to the extent
permitted by rule or order of the Securities and Exchange Commission
exempting the Fund from the limitation imposed by Section 12(d)(1) of
the Investment Company Act of 1940;

7. Sell short or borrow for short sales. Short sales "against the box" are
not subject to this limitation;

8. With respect to 75% of its assets, invest more than five percent of its
assets in the securities of any one issuer (except obligations of the
United States Government, it agencies or instrumentalities and
repurchase agreements secured thereby) or purchase more than ten percent
of the outstanding voting securities of any one issuer. Neither
limitation shall apply to the acquisition of shares of other open-end
investment companies to the extent permitted by rule or order of the
Securities and Exchange Commission exempting the Fund from the
limitation imposed by Section 12(d)(1) of the Investment Company Act of
1940;

9. Invest in warrants in excess of five percent of its net assets
(including, but not to exceed two percent in warrants which are not
listed on the New York or American Stock Exchanges);

10. Purchase securities of issuers which have a record of less than three
years continuous operation if such purchase would cause more than five
percent of the Fund's total assets to be invested in securities of such
issuers; provided, however, that this limitation excludes shares of
other open-end investment companies owned by the Fund but includes the
Fund's pro rata portion of the securities and other assets owned by any
such investment company;

11. Invest more than fifteen percent of its net assets in illiquid
securities, including securities that are not readily marketable,
restricted securities and repurchase agreements that have a maturity of
more than seven days. Notwithstanding the foregoing, this limitation
excludes shares of other open-end investment companies owned by the Fund
but includes the Fund's pro rata portion of the securities and other
assets owned by any such investment company;

12. Invest in interests in oil, gas, or other mineral exploration or
developmental programs, except through the purchase of liquid securities
of companies which engage in such businesses; or

13. Pledge, mortgage or hypothecate its portfolio securities or other
assets to the extent that the percentage of pledged assets plus the
sales load exceeds ten percent of the offering price of the Fund's
shares.

THE FOLLOWING RESTRICTIONS ARE APPLICABLE TO THE GLOBAL EQUITY FUND:

The Fund shall not:

1. Invest more than 25% of the value of its total assets in securities of
issuers in any particular industry (except obligations of the United
States Government, its agencies or instrumentalities and repurchase
agreements secured thereby); provided, however, that this limitation
excludes shares of other open-end investment companies owned by the Fund
but includes the Fund's pro rata portion of the securities and other
assets owned by any such investment company;

2. With respect to 75% of its assets, invest more than five percent of its
assets in the securities of any one issuer (except obligations of the
United States Government, its agencies or instrumentalities and
repurchase agreements secured thereby) or purchase more than ten percent
of the outstanding voting securities of any one issuer. Neither
limitation shall apply to the acquisition of shares of other

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<PAGE> 72

open-end investment companies to the extent permitted by rule or order
of the Securities and Exchange Commission exempting the Fund from the
limitation imposed by Section 12(d)(1) of the Investment Company Act of
1940;

3. Borrow money except temporarily from banks to facilitate payment of
redemption requests and then only in amounts not exceeding 33 1/3% of
its net assets, or pledge more than ten percent of its net assets in
connection with permissible borrowings or purchase additional securities
when money borrowed exceeds five percent of its net assets. Margin
deposits or payments in connection with the writing of options or in
connection with the purchase or sale of forward contracts, futures,
foreign currency futures and related options are not deemed to be a
pledge or other encumbrance;

4. Lend money except through the purchase of (i) United States and foreign
government securities, commercial paper, bankers' acceptances,
certificates of deposit similar evidences of indebtedness, both foreign
and domestic, and (ii) repurchase agreements; or lend securities in an
amount exceeding 15% of the total assets of the Fund. The purchase of a
portion of an issue of securities described under (i) above distributed
publicly, whether or not the purchase is made on the original issuance,
is not considered the making of a loan;

5. Make short sales of securities, unless at the time of the sale it owns
or has the right to acquire an equal amount of such securities; provided
that this prohibition does not apply to the writing of options or the
sale of forward contracts, futures, foreign currency futures or related
options;

6. Purchase securities on margin but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities. The deposit or payment by the Fund of initial or maintenance
margin in connection with forward contracts, futures, foreign currency
futures or related options is not considered the purchase of a security
on margin;

7. Buy or sell real estate or interests in real estate including real
estate limited partnerships, provided that the foregoing prohibition
does not apply to a purchase and sale of publicly traded (i) securities
which are secured by real estate, (ii) securities representing interests
in real estate, and (iii) securities of companies principally engaged in
investing or dealing in real estate;

8. Invest in commodities or commodity contracts, except that the Fund may
enter into transactions in options, futures contracts or related options
including foreign currency futures contracts and related options and
forward contracts;

9. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making and
collateralizing any permitted borrowings, (ii) making any permitted
loans of its portfolio securities or (iii) entering into repurchase
agreements, utilizing options, futures contracts, options on futures
contracts, forward contracts, forward commitments and other investment
strategies and instruments that would be considered "senior securities"
but for the maintenance by the Fund of a segregated account with its
custodian or some other form of "cover;"

10. Invest in the securities of other open-end investment companies, or
invest in the securities of closed-end investment companies except (a)
through purchase in the open market in a transaction involving no
commission or profit to a sponsor or dealer (other than the customary
broker's commission) or as part of a merger, consolidation or other
acquisition; or (b) to acquire shares of other open-end investment
companies to the extent permitted by rule or order of the Securities and
Exchange Commission exempting the Fund from the limitation imposed by
Section 12(d)(1) of the Investment Company Act of 1940;

11. Invest more than five percent of its net assets in warrants or rights
valued at the lower of cost or market, nor more than two percent of its
net assets in warrants or rights (valued on such basis) which are not
listed on the New York or American Stock Exchanges. Warrants or rights
acquired in units or attached to other securities are not subject to the
foregoing limitation;

22
<PAGE> 73

12. Invest in interests in oil, gas, or other mineral exploration or
development programs or invest in oil, gas, or mineral leases, except
that the Fund may acquire securities of public companies which
themselves are engaged in such activities;

13. Invest more than five percent of its total assets in securities of
unseasoned issuers which have been in operation directly or through
predecessors for less than three years; provided, however, that this
limitation excludes shares of other open-end investment companies owned
by the Fund but includes the Fund's pro rata portion of the securities
and other assets owned by any such investment company; or

14. Purchase or otherwise acquire any security if, as a result, more than
fifteen percent of its net assets (taken at current value) would be
invested in securities that are illiquid by virtue of the absence of a
readily available market. This policy includes repurchase agreements
maturing in more than seven days and over-the-counter options held by
the Fund and that portion of assets used to cover such options. This
policy does not apply to restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 which the
Trustees or the Adviser under Board approved guidelines, may determine
are liquid nor does it apply to other securities, for which,
notwithstanding legal or contractual restrictions on resale, a liquid
market exists. Notwithstanding the foregoing, this limitation excludes
shares of other open-end investment companies owned by the Fund but
includes the Fund's pro rata portion of the securities and other assets
owned by any such investment company.

THE FOLLOWING ADDITIONAL RESTRICTIONS ARE APPLICABLE TO THE GOVERNMENT FUND:

The Fund shall not:

2. Invest in securities of other investment companies except as part of a
merger, consolidation or other acquisition;

3. Make any investment in real estate, commodities or commodities
contracts, except that the Fund may invest in interest rate futures and
related options and may purchase securities secured by real estate or
interests therein; or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein;

4. Invest in interests in oil, gas, or other mineral exploration or
development programs;

23
<PAGE> 74

8. Make short sales of securities, unless at the time of the sale the Fund
owns or has the right to acquire an equal amount of such securities.
Notwithstanding the foregoing, the Fund may make short sales by entering
into forward commitments for hedging or cross-hedging purposes and the
Portfolio may engage in transactions in options, future contracts and
related options;

9. Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities. The deposit or payment by the Fund of initial
or maintenance margin in connection with interest rate futures contracts
or related options transactions is not considered the purchase of a
security on margin;

10. Invest more than five percent of its assets in companies having a
record, together with predecessors, of less than three years continuous
operation;

11. Borrow in excess of ten percent of the market or other fair value of
its total assets, or pledge its assets to an extent greater than five
percent of the market or other fair value of its total assets. Any such
borrowings shall be from banks and shall be undertaken only as a
temporary measure for extraordinary or emergency purposes. Deposits in
escrow in connection with the writing of options, or in connection with
the purchase or sale of futures contracts and related options are not
deemed to be a pledge or other encumbrance; or

12. Write, purchase or sell puts, calls or combinations thereof, except
that the Fund may (a) write covered or fully collateralized call
options, write secured put options, and enter into closing or offsetting
purchase transactions with respect to such options, (b) purchase options
to the extent that the premiums paid for all such options owned at any
time do not exceed ten percent of its total assets, and enter into
closing or offsetting transactions with respect to such options, and (c)
engage in transactions in interest rate futures contracts and related
options provided that such transactions are entered into for bona fide
hedging purposes (or that the underlying commodity value of the Fund's
long positions do not exceed the sum of certain identified liquid
investments as specified in CFTC regulations), provided further that the
aggregate initial margin and premiums do not exceed five percent of the
fair market value of the Portfolio's total assets, and provided further
that the Fund may not purchase futures contracts or related options if
more than 30% of the Fund's total assets would be so invested.

THE FOLLOWING ADDITIONAL RESTRICTIONS ARE APPLICABLE TO THE GROWTH AND INCOME
FUND:

1. Borrow money, except from a bank and then only as a temporary measure
for extraordinary or emergency purposes but not for making additional
investments and not in excess of five percent of the total net assets of
the Fund taken at cost. In connection with any borrowing the Fund may
pledge up to 15% of its total assets taken at cost. Notwithstanding the
foregoing, the Fund may engage in transactions in options, futures
contracts and related options, segregate or deposit assets to cover or
secure options written, and make margin deposits or payments for futures
contracts and related options.

2. Purchase or sell interests in real estate, except readily marketable
securities, including securities of real estate investment trusts.

3. Purchase or sell commodities or commodities contracts, except that the
Fund may enter into transactions in futures contracts and related
options.

4. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making and
collateralizing any permitted borrowings, (ii) making any permitted
loans of its portfolio securities, or (iii) entering into repurchase
agreements, utilizing options, futures contracts, options on futures
contracts and other investment strategies and instruments that would be
considered "senior securities" but for the maintenance by the Fund of a
segregated account with its custodian or some other form of "cover."

24
<PAGE> 75

5. Invest more than 25% of its total net asset value in any one industry
provided, however, that this limitation excludes shares of other
open-end investment companies owned by the Fund but includes the Fund's
pro rata portion of the securities and other assets owned by any such
company.

6. Invest more than five percent of the market value of its total assets at
the time of purchase in the securities (except U.S. Government
securities) of any one issuer or purchase more than ten percent of the
outstanding voting securities of such issuer except to acquire shares of
other open-end investment companies to the extent permitted by rule or
order of the SEC exempting the Fund from the limitations imposed by
Section 12(d)(1) of the 1940 Act.

In addition to the foregoing fundamental policies which may not be changed
without shareholder approval, the Fund is subject to the following policies
which may be amended by the Trustees.

1. Purchase securities on margin, or sell securities short, but the Fund
may enter into transactions in options, futures contracts and related
options and may make margin deposits and payments in connection
therewith.

2. The Fund may not invest in interests in oil, gas, or other mineral
exploration or development programs, except that the Fund may acquire
securities of public companies which themselves are engaged in such
activities.

3. Purchase securities of a corporation in which a trustee of the Fund owns
a controlling interest.

4. Permit officers or trustees of the Fund to profit by selling securities
to or buying them from the Fund. However, companies with which the
officers and trustees of the Fund are connected may enter into
underwriting agreements with the Fund to sell its shares, sell
securities to, and purchase securities from the Fund when acting as
broker or dealer at the customary and usual rates and discounts, to the
extent permitted by the 1940 Act.

5. Investments in repurchase agreements and purchases by the Fund of a
portion of an issue of publicly distributed debt securities shall not be
considered the making of a loan.

6. Purchase a restricted security or a security for which market quotations
are not readily available if as a result of such purchase more than
fifteen percent of the value of the Fund's net assets would be invested
in such securities provided, however, that this limitation excludes
shares of other open-end investment companies owned by the Fund but
includes the Fund's pro rata portion of the securities and other assets
owned by any such company.

7. Invest more than five percent of the market value of its total assets in
companies having a record together with predecessors of less than three
years continuous operation and in securities not having readily
available market quotations; provided, however, that this limitation
excludes shares of other open-end investment companies owned by the Fund
but includes the Fund's pro rata portion of the securities and other
assets owned by any such company.

THE FOLLOWING ADDITIONAL RESTRICTIONS ARE APPLICABLE TO THE MONEY MARKET FUND:

The Fund shall not:

2. Invest in securities of other investment companies except as part of a
merger, consolidation or other acquisition;

3. Make any investment in real estate, commodities or commodities
contracts, except that the Fund may purchase securities secured by real
estate or interests therein; or issued by companies, including real
estate investment trusts, which invest in real estate or interests
therein;

25
<PAGE> 76

4. Invest in interests in oil, gas, or other mineral exploration or
development programs;

6. Lend money, except that the Fund may invest in repurchase agreements in
accordance with applicable requirements set forth in the Prospectus and
may acquire debt securities which the Portfolio's investment policies
permit. The Fund will not invest in repurchase agreements maturing in
more than seven days (unless subject to a demand feature) if any such
investment, together with any illiquid securities (including securities
which are subject to legal or contractual restrictions on resale) held
by the Fund, exceeds ten percent of the market or other fair value of
its total net assets. See "Repurchase Agreements";

8. Make short sales of securities, unless at the time of the sale the Fund
owns or has the right to acquire an equal amount of such securities;

9. Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities;

10. Invest more than five percent of its assets in companies having a
record, together with predecessors, of less than three years continuous
operation;

11. Write put or call options;

13. Purchase any security which matures more than one year from the date of
purchase.

THE FOLLOWING RESTRICTIONS ARE APPLICABLE TO THE REAL ESTATE SECURITIES FUND.

The Fund shall not:

1. Engage in the underwriting of securities of other issuers, except that
the Fund may sell an investment position even though it may be deemed to
be an underwriter under the federal securities laws.

2. With respect to 75% of its total assets, invest more than five percent
of its assets in the securities of any one issuer (except the U.S.
Government, its agencies and instrumentalities and repurchase agreements
secured thereby) or purchase more than ten percent of the outstanding
voting securities of any one issuer. Neither limitation shall apply to
the acquisition of shares of other open-end investment companies to the
extent permitted by rule or order of the SEC exempting the Fund from the
limitations imposed by Section 12(d)(1) of the 1940 Act.

3. Borrow money except temporarily from banks to facilitate payment of
redemption requests and then only in amounts not exceeding 33 1/3% of
its net assets, or pledge more than ten percent of its net assets in
connection with permissible borrowings or purchase additional securities
when money borrowed exceeds five percent of its net assets. Margin
deposits or payments in connection with the writing of options, or in
connection with the purchase or sale of forward contracts, futures,
foreign currency futures and related options, are not deemed to be a
pledge or other encumbrance.

26
<PAGE> 77

4. Lend money or securities except by the purchase of a portion of an issue
of bonds, debentures or other obligations of types commonly distributed
to institutional investors publicly or privately (in the latter case the
investment will be subject to the stated limits on investments in
"restricted securities"), and except by the purchase of securities
subject to repurchase agreements.

5. Buy or sell real estate including real estate limited partnerships,
provided that the foregoing prohibition does not apply to a purchase and
sale of (i) securities which are secured by real estate, (ii) securities
representing interests in real estate, and (iii) securities of companies
operating in the real estate industry, including real estate investment
trusts. The Fund may hold and sell real estate acquired as a result of
the ownership of its securities.

6. Invest in commodities or commodity contracts, except that the Fund may
enter into transactions in options, futures contracts or related options
including foreign currency futures contracts and related options and
forward contracts.

7. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making and
collateralizing any permitted borrowings, (ii) making any permitted
loans of its portfolio securities or (iii) entering into repurchase
agreements, utilizing options, futures contracts, options on futures
contracts, forward contracts, forward commitments and other investment
strategies and instruments that would be considered "senior securities"
but for the maintenance by the Fund of a segregated account with its
custodian or some other form of "cover."

8. Concentrate its investment in any one industry, except that the Fund
will invest more than 25% of its total assets in the real estate
industry. This limitation excludes shares of other open-end investment
companies owned by the Fund but includes the Fund's pro rata portion of
the securities and other assets owned by any such company.

9. Write, purchase or sell puts, calls or combinations thereof, except that
the Fund may (a) write covered or fully collateralized call options,
write secured put options, and enter into closing or offsetting purchase
transactions with respect to such options, (b) purchase and sell options
to the extent that the premiums paid for all such options owned at any
time do not exceed ten percent of its total assets and (c) engage in
transactions in futures contracts and related options transactions
provided that such transactions are entered into for bona fide hedging
purposes (or meet certain conditions as specified in CFTC regulations),
and provided further that the aggregate initial margin and premiums do
not exceed five percent of the fair market value of the Fund's total
assets.

10. The Fund may not make short sales of securities, unless at the time of
the sale it owns or has the right to acquire an equal amount of such
securities; provided that this prohibition does not apply to the writing
of options or the sale of forward contracts, futures, foreign currency
futures or related options.

In addition to the foregoing fundamental policies which may not be changed
without shareholder approval, the Fund is subject to the following policies
which may be amended by the Fund's Trustees and which apply at the time of
purchase of portfolio securities.

1. The Fund may not make investments for the purpose of exercising control
or management although the Fund retains the right to vote securities
held by it.

2. The Fund may not purchase securities on margin but the Fund may obtain
such short-term credits as may be necessary for the clearance of
purchases and sales of securities. The deposit or payment by the Fund of
initial or maintenance margin in connection with forward contracts,
futures, foreign currency futures or related options is not considered
the purchase of a security on margin.

27
<PAGE> 78

shares of other open-end investment companies to the extent permitted by
rule or order of the SEC exempting the Fund from the limitations imposed
by Section 12(d)(1) of the 1940 Act.

4. The Fund may not invest more than five percent of its net assets in
warrants or rights valued at the lower of cost or market, nor more than
two percent of its net assets in warrants or rights (valued on such
basis) which are not listed on the New York or American Stock Exchanges.
Warrants or rights acquired in units or attached to other securities are
not subject to the foregoing limitation.

5. The Fund may not invest in securities of any company if any officer or
trustee of the Fund or of the Adviser owns more than one-half of one
percent of the outstanding securities of such company, and such officers
and trustees who own more than one-half of one percent own in the
aggregate more than five percent of the outstanding securities of such
issuer.

6. The Fund may not invest in interests in oil, gas, or other mineral
exploration or development programs or invest in oil, gas, or mineral
leases, except that the Fund may acquire securities of public companies
which themselves are engaged in such activities.

7. The Fund may not invest more than five percent of its total assets in
securities of unseasoned issuers which have been in operation directly
or through predecessors for less than three years, provided, however,
that this limitation excludes shares of other open-end investment
companies owned by the Fund but includes the Fund's pro rata portion of
the securities and other assets owned by any such company.

8. The Fund may not purchase or otherwise acquire any security if, as a
result, more than fifteen percent of its net assets (taken at current
value) would be invested in securities that are illiquid by virtue of
the absence of a readily available market. This policy does not apply to
restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 which the Trustees or the Adviser under
approved guidelines, may determine are liquid nor does it apply to other
securities for which, notwithstanding legal or contractual restrictions
on resale, a liquid market exists.

28
<PAGE> 79

TRUSTEES AND EXECUTIVE OFFICERS

The Fund's Trustees and Executive Officers and their principal occupations
during the past five years are listed below.

TRUSTEES

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
Strafford Hall President of MDT Corporation, a company which develops,
Suite 200 manufactures, markets and services medical and
1009 Slater Road scientific equipment. A Trustee of each of the Van
Harrisville, NC 27560 Kampen American Capital Funds.
Age: 63
</TABLE>

<TABLE>
<S> <C>
Philip P. Gaughan.................. Prior to February, 1989, Managing Director and Manager
9615 Torresdale Avenue of Municipal Bond Department, W. H. Newbold's Sons & Co.
Philadelphia, PA 19114 A Trustee of each of the Van Kampen American Capital
Age: 66 Funds.

Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. A Trustee of each of the
Lyme, CT 06371 Van Kampen American Capital Funds.
Age: 75

Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a company
415 North Adams in insurance related businesses. Formerly Vice Chairman
Hinsdale, IL 60521 and Director of Continental Illinois National Bank and
Age: 75 Trust Company of Chicago and Continental Illinois
Corporation. A Trustee of each of the Van Kampen
American Capital Funds and Chairman of each Van Kampen
American Capital Fund advised by Van Kampen American
Capital Investment Advisory Corp.

Jack E. Nelson..................... President of Nelson Investment Planning Services, Inc.,
423 Country Club Drive a financial planning company and registered investment
Winter Park, FL 32789 adviser. President of Nelson Investment Brokerage
Age: 59 Services Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and Securities
Investors Protection Corp. A Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>

29
<PAGE> 80

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
Don G. Powell*..................... President, Chief Executive Officer and a Director of
2800 Post Oak Blvd. VK/AC Holding, Inc. and Van Kampen American Capital and
Houston, TX 77056 Chairman, Chief Executive Officer and a Director of the
Age: 55 Distributor, and the Adviser. Director and Executive
Vice President of ACCESS, Van Kampen American Capital
Services, Inc. and Van Kampen American Capital Trust
Company. Director, Trustee or Managing General Partner
of each of the Van Kampen American Capital Funds and
other open-end investment companies and closed-end
investment companies advised by the Adviser and its
affiliates.

David Rees......................... Contributing Columnist and, prior to 1995, Senior Editor
1601 Country Club Drive of Los Angeles Business Journal. A Director of Source
Glendale, CA 91208 Capital, Inc., an investment company unaffiliated with
Age: 71 Van Kampen American Capital; a Director and the Second
Vice President of International Institute of Los
Angeles. A Trustee of each of the Van Kampen American
Capital Funds.

Jerome L. Robinson................. President of Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director of Pacesetter Software, a
Age: 72 software programming company specializing in white
collar productivity. Director of Panasia Bank. A Trustee
of each of the Van Kampen American Capital Funds.

Lawrence J. Sheehan*............... Of Counsel to and formerly Partner (from 1969 to 1994)
1999 Avenue of the Stars of the law firm of O'Melveny & Myers, legal counsel to
Suite 700 the Fund. Director, FPA Capital Fund, Inc.; FPA New
Los Angeles, CA 90067 Income Fund, Inc.; FPA Perennial Fund, Inc.; Source
Age: 63 Capital, Inc.; and TCW Convertible Security Fund, Inc.,
investment companies unaffiliated with Van Kampen
American Capital. A Trustee of each of the Van Kampen
American Capital Funds.

Fernando Sisto..................... George M. Bond Chaired Professor and, prior to 1995,
Stevens Institute Dean of Graduate School and Chairman, Department of
of Technology Mechanical Engineering, Stevens Institute of Technology.
Castle Point Station Director of Dynalysis of Princeton, a firm engaged in
Hoboken, NJ 07030 engineering research. A Trustee of each of the Van
Age: 71 Kampen American Capital Funds and Chairman of the Van
Kampen American Capital Funds advised by the Adviser.

Wayne W. Whalen*................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom, legal counsel to certain of the Van Kampen
Chicago, IL 60606 American Capital Funds. A Trustee of each of the Van
Age: 55 Kampen American Capital Funds. He also is a Trustee of
the Van Kampen Merritt Series Trust and closed-end
investment companies advised by an affiliate of the
Adviser.
</TABLE>

30
<PAGE> 81

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently know as The Traver's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a
Age: 73 producer of paper products. Trustee, and former
President of Whitney Museum of American Art. Formerly,
Chairman of Institute for Educational Leadership, Inc.,
Board of Visitors, Graduate School of The City
University of New York, Academy of Political Science.
Trustee of Committee for Economic Development. Director
of Public Education Fund Network, Fund for New York City
Public Education. Trustee of Barnard College. Member of
Dean's Council, Harvard School of Public Health. Member
of Mental Health Task Force, Carter Center. A Trustee of
each of the Van Kampen American Capital Funds.
</TABLE>

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

* Such Trustees are "interested persons" (within the meaning of Section 2(a)19
of the 1940 Act). Mr. Powell is an interested person of the Adviser and the
Trust by reason of his position with the Adviser. Mr. Sheehan and Mr. Whalen
are interested persons of the Adviser and the Fund by reason of their firms
having acted as legal counsel to the Adviser or an affiliate thereof.

The Trust's officers other than Messrs. McDonnell and Nyberg are located
2800 Post Oak Blvd., Houston, TX 77056. Messrs. McDonnell and Nyberg are located
at One Parkview Plaza, Oakbrook Terrace, IL 60181.

OFFICERS

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------- --------------------- --------------------------------------------
<S> <C> <C>
B. Robert Baker.......... Vice President Associate Portfolio Manager of the Adviser.
Age: 41 Formerly, Vice President -- Portfolio
Manager, Variable Annuity Life Insurance
Company.

Nori L. Gabert........... Vice President and Vice President, Associate General Counsel
Age: 41 Secretary and Corporate Secretary of the Adviser.
</TABLE>

<TABLE>
<S> <C> <C>
Tanya M. Loden........... Vice President and Vice President and Controller of most of the
Age: 35 Controller investment companies advised by the Adviser,
formerly Tax Manager/Assistant Controller.

Dennis J. McDonnell...... Vice President President, Chief Operating Officer and a
Age: 53 Director of the Adviser, Director of VK/AC
Holding, Inc. and Van Kampen American
Capital.

Curtis W. Morell......... Vice President and Vice President and Treasurer of most of the
Age: 49 Treasurer investment companies advised by the Adviser.

Ronald A. Nyberg......... Vice President Executive Vice President, General Counsel
Age: 42 and Secretary of Van Kampen American
Capital, Executive Vice President and a
Director of the Distributor, Executive Vice
President of the Adviser. Director of ICI
Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute.

Robert Peck.............. Vice President Senior Vice President of the Adviser.
Age: 48
</TABLE>

31
<PAGE> 82

Alan T. Sachtleben....... Vice President Executive Vice President and Director of the
Age: 53 Adviser. Executive Vice President of VK/AC
Holding, Inc. and VKAC.

Walter W. Stabel III..... Vice President Associate Portfolio Manager of the Adviser.
Age: 36

J. David Wise............ Vice President and Vice President, Associate General Counsel
Age: 51 Assistant Secretary and Assistant Corporate Secretary of the
Adviser.

Paul R. Wolkenberg....... Vice President Senior Vice President of the Adviser.
Age: 50 President, Chief Operating Officer and
Director of Van Kampen American Capital
Services, Inc. Executive Vice President,
Chief Operating Officer and Director of Van
Kampen American Capital Trust Company.
Executive Vice President and Director of
ACCESS.
</TABLE>

The Trustees and officers of the Fund as a group do not own any outstanding
shares of the Fund because such shares are sold only to separate accounts (the
"Accounts") of various insurance companies to fund the benefits of variable
annuity or variable life insurance policies (the "Contracts"). Only Messrs.
Branagan, Hilsman, Powell, Rees, Sheehan, Sisto and Woodside served as Trustees
of the Trust during its last fiscal year. Effective September 7, 1995, Ms. Heagy
commenced service as a Trustee of the Trust. During the year ended December 31,
1994, the Trustees who were not affiliated with the Adviser received as a group
$9,123, $9,150, $9,674, $9,339, and $8,725 in Trustees' fees from the Asset
Allocation, Domestic Income, Enterprise, Government and Money Market Funds,
respectively, in addition to certain out-of-pocket expenses. Such trustees also
receive compensation for serving as directors of other investment companies
advised by the Adviser as identified in the notes to the foregoing table. For
legal services rendered during the fiscal year ended December 31, 1994, the
Trust paid legal fees of $3,598, $3,452, $3,546, $3,928 and $3,342 from the
Asset Allocation, Domestic Income, Enterprise, Government and Money Market
Funds, respectively, to the law firm of O'Melveny & Myers, of which Mr. Sheehan
is of counsel.

32
<PAGE> 83

Additional information regarding compensation paid by the Fund and the
related mutual funds for which the Trustees serve as director or trustee is set
forth below. The compensation shown for the Funds and the total compensation
shown for the Funds and other related mutual funds is for the year ended
December 31, 1994. Mr. Powell is not compensated for his service as Trustee,
because of his affiliation with the Adviser.

COMPENSATION TABLE

<TABLE>
<CAPTION>
I II
---------------------------------------------------- ----------------------
AGGREGATE COMPENSATION FROM REGISTRANT(6)
----------------------------------------------------------- TOTAL COMPENSATION FROM
MONEY ASSET DOMESTIC REGISTRANT AND FUND
ENTERPRISE GOVERNMENT MARKET ALLOCATION INCOME COMPLEX PAID TO
NAME OF DIRECTOR FUND FUND FUND FUND FUND DIRECTORS(1)(5)
- ------------------------------- ---------- ---------- ---------- --------- -------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
J. Miles Branagan.............. $1,355 $1,380 $1,270 $ 1,355 $1,260 $64,000
Dr. Roger Hilsman.............. $1,400 $1,430 $1,310 $ 1,400 $1,300 $66,000
David Rees(4).................. $1,355 $1,380 $1,270 $ 1,355 $1,260 $64,000
Lawrence J. Sheehan............ $1,420 $1,450 $1,330 $ 1,420 $1,320 $67,000
Dr. Fernando Sisto(2)(4)....... $1,745 $1,780 $1,635 $ 1,735 $1,615 $82,000
William S. Woodside(3)......... $1,160 $1,170 $1,090 $ 1,160 $1,080 $18,000
</TABLE>

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

(1) Represents 29 investment company portfolios in the fund complex.

(2) Amount reflects deferred compensation as follows: Enterprise Fund -- Sisto
$920; Government Fund -- Sisto, $925; Money Market Fund -- Sisto, $885;
Asset Allocation Fund -- Sisto, $915; Domestic Income Fund -- Sisto $850.

(3) Prior to October 6, 1994, Mr. Woodside's compensation was paid by the
Adviser. As a result, of the amounts reflected under heading I for that
Fund, Enterprise Fund paid $340, Government Fund paid $340, Money Market
Fund paid $320, Asset Allocation Fund paid $340, Domestic Income Fund paid
$320. Those Funds and the other funds in the fund complex paid Mr. Woodside
$36,000 in the aggregate.

(4) Mr. Rees and Sisto have deferred compensation in the past. The cumulative
deferred compensation accrued by the Fund as of December 31, 1994 is as
follows: Enterprise Fund -- Rees, $5,198; Sisto, $3,994; Government
Fund -- Rees, $5,761; Sisto, $4,028; Money Market Fund -- Rees, $5,252;
Sisto, $3,843; Asset Allocation Fund -- Rees, $4,103; Sisto, $3,250;
Domestic Income Fund -- Rees, $3,370; Sisto $3,634.

(5) Includes the following amounts for which the various funds were reimbursed
by the Adviser -- Branagan, $2,000; Caruso, $2,000; Hilsman, $1,000; Rees,
$2,000; Sheehan, $2,000; Sisto, $2,000; Woodside, $1,000 (Mr. Woodside was
paid $36,000 directly by the Adviser as discussed in Footnote 3 above).

(6) No compensation was paid to any Trustee with regard to the Emerging Growth
Fund, the Global Equity Fund, the Growth and Income Fund and the Real
Estate Securities Fund.

Beginning July 21, 1995, the Trust pays each trustee who is not affiliated
with the Adviser, the Distributor or VKAC an annual retainer of $3,360 and a
meeting fee of $100 per Board meeting plus expenses. No additional fees are paid
for committee meetings or to the chairman of the board. In order to alleviate an
additional expense that might be caused by the new compensation arrangement, the
trustees have approved a reduction in the compensation per trustee and have
agreed to an aggregate annual compensation cap with respect to the combined fund
complex of $84,000 per trustee until December 31, 1996, based upon the net
assets and the number of Van Kampen American Capital funds as of July 21, 1995
(except that Mr. Whalen, who is a trustee of 34 closed-end funds advised by an
affiliate of the Adviser, would receive an additional $119,000 for serving as a
trustee of such funds). In addition, the Adviser has agreed to reimburse the
Trust through December 31, 1996 for any increase in the aggregate trustees'
compensation paid by the Fund over their 1994 fiscal year aggregate
compensation.

INVESTMENT ADVISORY AGREEMENT

The Trust and the Adviser are parties to an investment advisory agreement
("Advisory Agreement - I") pursuant to which the Fund retains the Adviser to
manage the investment of assets and to place orders for the

33
<PAGE> 84

purchase and sale of portfolio securities for the Asset Allocation Fund, the
Domestic Income Fund, the Enterprise Fund, the Government Fund and the Money
Market Fund. The Fund and the Adviser are also parties to other investment
advisory agreements ("Advisory Agreement - II, III, IV and V") pursuant to which
the Adviser manages the investment of assets and places orders for the purchase
and sale of portfolio securities for the Emerging Growth Fund, the Global Equity
Fund, the Growth and Income Fund and the Real Estate Securities Fund,
respectively, (Advisory Agreement - I, Advisory Agreement - II, Advisory
Agreement - III, Advisory Agreement - IV and Advisory Agreement - V are referred
to herein collectively as the "Advisory Agreements"). Under the Advisory
Agreements, the Adviser is responsible for obtaining and evaluating economic,
statistical, and financial data and for formulating and implementing investment
programs in furtherance of each Fund's investment objectives. The Adviser also
furnishes at no cost to the Fund (except as noted herein) the services of
sufficient executive and clerical personnel for the Trust as are necessary to
prepare registration statements, prospectuses, shareholder reports, and notices
and proxy solicitation materials. In addition, the Adviser furnishes at no cost
to the Fund the services of a President of the Trust, one or more Vice
Presidents as needed, and a Secretary.

Under the Advisory Agreements, the Trust bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating the daily net asset value of each Fund. The costs of such accounting
services include the salaries and overhead expenses of a Treasurer or other
principal financial officer and the personnel operating under his direction. The
services are provided at cost which is allocated among the investment companies
advised by the Adviser. The Trust also pays shareholder service agency fees,
custodian fees, legal fees, the costs of reports to shareholders and all other
ordinary expenses not specifically assumed by the Adviser.

Under Advisory Agreements - II, III, IV and V, the Trust pays to the
Adviser as compensation for the services rendered, facilities furnished, and
expenses paid by it a fee payable monthly computed on average daily net assets
of 0.70% for the Emerging Growth Fund, 1.00% for the Global Equity Fund, 0.60%
of the first $500 million and 0.55 in excess of $500 million for the Growth and
Income Fund and 1.00% for the Real Estate Securities Fund, respectively.

The average daily net assets of a Fund is determined by taking the average
of all of the determinations of net assets of that Fund for each business day
during a given calendar month. The fee is payable for each calendar month as
soon as practicable after the end of that month. The fee payable to the Adviser
is reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the Adviser or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the Fund, less any direct expenses
incurred by such subsidiary of VK/AC Holding, Inc. in connection with obtaining
such payments. The Adviser agrees to use its best efforts to recapture tender
solicitation fees and exchange offer fees for the Fund's benefit, and to advise
the Trustees of the Fund of any other commissions, fees, brokerage or similar
payments which may be possible under applicable laws for the Adviser or any
other direct or indirect majority owned subsidiary of VK/AC Holding, Inc., to
receive in connection with the Fund's portfolio transactions or other
arrangements which may benefit the Fund.

Advisory Agreement - I also provides that, in the event the ordinary
business expenses of the Asset Allocation Fund, the Domestic Income Fund, the
Enterprise Fund, the Government Fund and the Money Market Fund for any fiscal
year exceed 0.95% of the average daily net assets, the compensation due the
Adviser will be reduced by the amount of such excess and that, if a reduction in
and refund of the advisory fee is insufficient, the Adviser will pay the Fund
monthly an amount sufficient to make up the deficiency, subject to readjustment
during the year. Ordinary business expenses do not include (1) interest and
taxes, (2) brokerage commissions, (3) any distribution expenses which may be
incurred in the event the Fund's Distribution Plan is implemented, and (4)
certain litigation and indemnification expenses as described in the

34
<PAGE> 85

Advisory Agreement. No such limit applies with respect to Advisory
Agreement - II, Advisory Agreement - III, Advisory Agreement - IV and Advisory
Agreement - V.

In addition to the contractual expense limitation, the Adviser elected to
reimburse the Asset Allocation Fund, the Domestic Income Fund, the Enterprise
Fund, the Government Fund, the Money Market Fund for all ordinary business
expenses in excess of .60% of the average daily net assets.

The following table shows expenses paid under the Advisory Agreement during
the periods ended December 31, 1992, December 31, 1993 and December 31, 1994.
The Emerging Growth Fund, the Global Equity Fund and the Real Estate Securities
Fund did not commence operations until May 1, 1995.

<TABLE>
<CAPTION>
DOMESTIC MONEY ASSET
PERIOD ENDING ENTERPRISE INCOME GOVERNMENT MARKET ALLOCATION
DECEMBER 31, 1992: FUND FUND FUND FUND FUND
- ---------------------------------------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Advisory fees $ 290,101 $ 93,803 $373,147 $ 181,232 $ 273,991
Accounting Services $ 44,713 $ 47,520 $ 52,072 $ 40,931 $ 48,242
Contractual expense reimbursement $ -0- $ 58,070 $ -0- $ -0- $ -0-
Voluntary expense reimbursement $ 79,392 $ 65,662 $ 75,744 $ 104,803 $ 94,458
</TABLE>

<TABLE>
<CAPTION>
PERIOD ENDING
DECEMBER 31, 1993:
- ----------------------------------------
<S> <C> <C> <C> <C> <C>
Advisory fees $ 345,093 $132,513 $393,050 $ 144,373 $ 319,607
Accounting Services $ 66,688 $ 63,008 $ 68,628 $ 59,477 $ 68,254
Contractual expense reimbursement $ -- $ 14,128 $ -- $ 445 $ --
Voluntary expense reimbursement $ 84,676 $ 93,319 $ 80,855 $ 101,061 $ 90,379
</TABLE>

<TABLE>
<CAPTION>
PERIOD ENDING
DECEMBER 31, 1994:
- ----------------------------------------
<S> <C> <C> <C> <C> <C>
Advisory fees $ 346,359 $130,474 $351,674 $ 152,665 $ 307,894
Accounting Services $ 52,665 $ 51,604 $ 58,043 $ 51,778 $ 55,826
Contractual expense reimbursement $ -- $ 302 $ -- $ -- $ --
Voluntary expense reimbursement $ 57,464 $ 91,332 $ 68,843 $ 80,915 $ 75,169
</TABLE>

The Advisory Agreements with respect to each subject Fund may be continued
from year to year if specifically approved at least annually (a)(i) by the
Trust's Trustees or (ii) by vote of a majority of the Fund's outstanding voting
securities and (b) by the affirmative vote of a majority of the Trustees who are
not parties to the agreement or interested persons of any such party by votes
cast in person at a meeting called for such purpose. The Advisory Agreement
provides that it shall terminate automatically if assigned and that it may be
terminated without penalty by either party on 60 days' written notice.

DISTRIBUTOR

Van Kampen American Capital Distributors, Inc., acts as the principal
underwriter of the shares of the Trust pursuant to written agreements (the
"Underwriting Agreement"). The Distributor is owned by the Adviser's parent
company. The Distributor's obligation is an agency or "best efforts" arrangement
under which the Distributor is not obligated to sell any stated number of
shares. The Underwriting Agreement is renewable from year to year if approved
(a) by the Trust's Trustees or by a vote of a majority of the Trust's
outstanding voting securities and (b) by the affirmative vote of a majority of
Trustees who are not parties to the Underwriting Agreement or interested persons
of any party, by votes cast in person at a meeting called for that purpose. The
Underwriting Agreement provides that it will terminate if assigned, and that it
may be terminated without penalty by either party on 60 days' written notice.

The Distributor bears the cost of printing (but not typesetting)
prospectuses used in connection with this offering and the cost and expense of
supplemental sales literature, promotion and advertising and any costs of
qualification of shares for sales under state blue sky laws. The Trust pays all
expenses attributable to the registrations of its shares under federal law,
including registration and filing fees, the cost of preparation of the

35
<PAGE> 86

prospectuses, related legal and auditing expenses, and the cost of printing
prospectuses for current shareholders.

TRANSFER AGENT

For the fiscal years ended December 31, 1992, 1993, and 1994, ACCESS
Investor Services, Inc. ("ACCESS"), shareholder service agent and dividend
disbursing agent for the Trust, received fees aggregating $17,160, $18,000 and
$18,000, respectively, from each Fund, for these services. These services are
provided at cost plus a profit.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Advisers are responsible for decisions to buy and sell securities for
the Trust and for the placement of its portfolio business and the negotiation of
the commissions, if any, paid on such transactions. It is the policy of the
Advisers to seek the best security price available with respect to each
transaction. In over-the-counter transactions, orders are placed directly with a
principal market maker unless it is believed that a better price and execution
can be obtained by using a broker. Except to the extent that the Trust may pay
higher brokerage commissions for brokerage and research services, as described
below, on a portion of its transactions executed on securities exchanges, the
Adviser seeks the best security price at the most favorable commission rate. In
selecting dealers and in negotiating commissions, the Advisers consider the
firm's reliability, the quality of its execution services on a continuing basis
and its financial condition. When more than one firm is believed to meet these
criteria, preference may be given to firms which also provide research services
to the Trust or the Adviser.

Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an account
to pay a broker or dealer who supplies brokerage and research services, a
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for effecting the
transaction. Brokerage and research services include (a) furnishing advice as to
the value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities, (b) furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts, and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody).

Pursuant to provisions of the Advisory Agreements, the Trust's Trustees
have authorized the Advisers to cause the Fund to incur brokerage commissions in
an amount higher than the lowest available rate in return for research services
provided to the Advisers. The Advisers are of the opinion that the continued
receipt of supplemental investment research services from dealers is essential
to its provision of high quality portfolio management services to the Trust. The
Advisers undertake that such higher commissions will not be paid by the Fund
unless (a) the Advisers determine in good faith that the amount is reasonable in
relation to the services in terms of the particular transaction or in terms of
the Advisers' overall responsibilities with respect to the accounts as to which
it exercises investment discretion, (b) such payment is made in compliance with
the provisions of Section 28(e) and other applicable state and federal laws, and
(c) in the opinion of the Advisers, the total commissions paid by the Fund are
reasonable in relation to the expected benefits to the Trust over the long term.
The investment advisory fee paid by the Trust under the Advisory Agreements is
not reduced as a result of the Advisers' receipt of research services.

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking best execution and such other
policies as the Trustees may determine, the Advisers may consider sales of
shares of the Trust and of the other Van Kampen American Capital mutual funds as
a factor in the selection of dealers to execute portfolio transactions for the
Trust.

Prior to December 20, 1994, the Fund placed brokerage transactions with
brokers who were considered affiliated persons of the Adviser's former parent,
The Travelers Inc. Such affiliated persons including Jefferies & Company, Inc.
("Jefferies"), Smith Barney Inc. ("Smith Barney") and Robinson Humphrey, Inc.
("Robinson Humphrey"). Effective September 30, 1992, Jefferies ceased to be an
affiliate of the Adviser.

36
<PAGE> 87

Effective December 20, 1994, Smith Barney and Robinson Humphrey ceased to be
affiliates of the Adviser. The negotiated commission paid to an affiliated
broker on any transaction would be comparable to that payable to a
non-affiliated broker in a similar transaction.

The Trust paid the following commissions to affiliated brokers during the
periods shown:

Commissions Paid:

<TABLE>
<CAPTION>
SMITH BARNEY ROBINSON
JEFFERIES SHEARSON HUMPHREY
--------- ------------ --------
<S> <C> <C> <C>
Fiscal 1992
Money Market Fund -- --
Enterprise Fund $ 1,008 $ 21,675 --
Government Fund -- $ 1,128 --
Asset Allocation Fund $ 525 $ 9,903 --
Domestic Income Fund -- -- --
Fiscal 1993
Money Market Fund -- -- --
Enterprise Fund -- $ 32,295 --
Government Fund -- $ 2,739
Asset Allocation Fund -- $ 18,185 $ 455
Domestic Income Fund -- -- --
Fiscal 1994
Money Market Fund -- --
Enterprise Fund $ 36,136 $1,330
Government Fund $ 2,578 --
Asset Allocation Fund $ 27,550 $ 42
Domestic Income Fund -- --
Fiscal 1994 Percentages:
Commissions with affiliates to total commissions
Money Market Fund -- --
Enterprise Fund 10.62% .39%
Government Fund 16.95% --
Asset Allocation Fund 12.99% .02%
Domestic Income Fund -- --
Value of transactions with affiliates to total
transactions
Money Market Fund -- --
Enterprise Fund 14.42% .13%
Government Fund 18.62% --
Asset Allocation Fund 9.53% .03%
Domestic Income Fund -- --
</TABLE>

The Adviser places portfolio transactions for other advisory accounts
including other investment companies. Research services furnished by firms
through which the Trust effects its securities transactions may be used by the
Adviser in servicing all of its accounts; not all of such services may be used
by the Adviser in connection with the Trust. In the opinion of the Adviser, the
benefits from research services to each of the accounts, including the Trust,
managed by the Adviser cannot be measured separately. Because the volume and
nature of the trading activities of the accounts are not uniform, the amount of
commissions in excess of the lowest available rate paid by each account for
brokerage and research services will vary. However, in the opinion of the
Adviser, such costs to the Trust will not be disproportionate to the benefits
received by the Trust on a continuing basis.

The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Trust and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Trust. In
making such allocations among the Trust and other advisory accounts, the main
factors considered by the Adviser are the respective

37
<PAGE> 88

investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and opinions of the persons responsible
for recommending the investment.

The following table summarizes for each portfolio the total brokerage
commissions paid, the amount of commissions paid to brokers selected primarily
on the basis of research services provided to the Adviser and the value of these
specific transactions. The Adviser's brokerage practices are monitored on a
quarterly basis by the Brokerage Review Committee composed of Fund Trustees who
are not interested persons (as defined in the 1940 Act) of the Adviser. The
Emerging Growth Fund, the Global Equity Fund, the Growth and Income Fund and the
Real Estate Securities Fund commenced operations after the end of 1994.

<TABLE>
<CAPTION>
ASSET DOMESTIC MONEY
ENTERPRISE GOVERNMENT ALLOCATION INCOME MARKET
FUND FUND FUND FUND FUND
----------- ---------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
1992
Total brokerage commissions $ 208,445 $ 27,704 $ 160,398 $ 951 --
Commissions for research services $ 102,780 -- $ 69,903 $ 595 --
Value of research transactions $58,028,320 -- $40,053,381 $325,081 --
1993
Total brokerage commissions $ 283,795 $ 12,198 $ 259,924 -- --
Commissions for research services $ 146,345 0 $ 155,243 -- --
Value of research transactions $84,070,654 0 $83,666,168 -- --
1994
Total brokerage commissions $ 340,219 $ 15,213 $ 212,116 $ 395
Commissions for research services $ 144,248 -- $ 90,649
Value of research transactions $84,974,336 -- $72,221,352
</TABLE>

PORTFOLIO TURNOVER

The portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of each Fund's investment portfolio securities during such fiscal
year. Securities which mature in one year or less at the time of acquisition are
not included in this computation. The turnover rate may vary greatly from year
to year as well as within a year. The Fund's investment portfolio turnover rate
for prior years is shown under "Financial Highlights" in the Prospectus. The
turnover rate for the Government Fund will fluctuate over time depending upon
the Adviser's investment strategy and the higher volatility of the market for
government securities. In 1994, as a result of declining interest rates and
because of the previously described factors, the portfolio turnover rate rose to
a higher level than 1993.

DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of each Fund is computed by dividing the
value of all securities held by the Fund plus other assets, less liabilities, by
the number of shares outstanding. This computation is made for each Fund as of
the close of business each day the Exchange (the "Exchange") is open (currently
4:00 p.m., New York time). The Exchange is currently closed on weekends and on
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

MONEY MARKET FUND NET ASSET VALUATION

The valuation of the Fund's portfolio securities is based upon their
amortized cost, which does not take into account unrealized capital gains or
losses. Amortized cost valuation involves initially valuing an instrument at its
cost and thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price that the Fund would receive if
it sold the instrument.

38
<PAGE> 89

The Fund's use of the amortized cost method of valuing its portfolio
securities is permitted by a rule adopted by the SEC. Under this rule, the Fund
must maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 13 months or less and
invest only in securities determined by the Adviser to be of eligible quality
with minimal credit risks.

The Fund has established procedures reasonably designed, taking into
account current market conditions and the Fund's investment objective, to
stabilize the net asset value per share for purposes of sales and redemptions at
$1.00. These procedures include review by the Trustees, at such intervals as the
Fund or the Trustees deem appropriate, to determine the extent, if any, to which
the new asset value per share calculated by using available market quotations
deviates from $1.00 per share based on amortized cost. In the event such
deviation should exceed four tenths of one percent, the Trustees are required to
promptly consider what action, if any, should be initiated. If the Trustees
believe that the extent of any deviation from a $1.00 amortized cost price per
share may result in material dilution or other unfair results to new or existing
shareholders, it will take such steps as it considers appropriate to eliminate
or reduce these consequences to the extent reasonably practicable. Such steps
may include selling portfolio securities prior to maturity; shortening the
average maturity of the portfolio; withholding or reducing dividends; or
utilizing a net asset value per share determined by using available market
quotations.

DOMESTIC INCOME FUND NET ASSET VALUATION

The net asset value of this Fund is computed by (i) valuing securities
listed or traded on a national securities exchange at the last reported sale
price, or if there has been no sale that day at the last reported bid price,
using prices as of the close of trading on the New York Stock Exchange, (ii)
valuing unlisted securities for which over-the-counter market quotations are
readily available at the most recent bid price as supplied by the National
Association of Securities Dealers Automated Quotations ("NASDAQ") or by
broker-dealers, and (iii) valuing any securities for which market quotations are
not readily available, and any other assets at fair value as determined in good
faith by the Fund's Trustees.

ASSET ALLOCATION, DOMESTIC INCOME, EMERGING GROWTH, ENTERPRISE, GLOBAL EQUITY,
GROWTH AND INCOME AND REAL ESTATE SECURITIES FUNDS NET ASSET VALUATION

The net asset value of these Funds is computed by (i) valuing securities
listed or traded on a national securities exchange at the last reported sale
price, or if there has been no sale that day at the last reported bid price,
using prices as of the close of trading on the New York Stock Exchange, (ii)
valuing unlisted securities for which over-the-counter market quotations are
readily available at the most recent bid price as supplied by NASDAQ or by
broker-dealers, and (iii) valuing any securities for which market quotations are
readily available, and any other assets at fair value as determined in good
faith by the Trust's Trustees. Options, futures contracts and options thereon,
which are traded on exchanges, are valued at their last sale or settlement price
as of the close of such exchanges or if no sales are reported, at the mean
between the last reported bid and asked prices. Securities with a remaining
maturity of 60 days or less are valued on an amortized cost basis, which
approximates market value. Securities for which market quotations are not
readily available, and any other assets are valued at fair value as determined
in good faith by the Trust's Trustees.

With respect to certain Funds, trading in securities on European and Far
Eastern securities exchanges and over-the-counter markets is normally completed
well before the close of business on each business day in New York (i.e., a day
on which the Exchange is open). In addition, European or Far Eastern securities
trading generally or in a particular country or countries may not take place on
all business days in New York. Furthermore, trading takes place on all business
days in Japanese markets, on certain Saturdays, and in various foreign markets
on days which are not business days in New York, and on which the Fund's net
asset value is not calculated, and on which the Fund does not effect sales,
redemptions and repurchases of its shares. There may be significant variations
in the net asset value of Fund shares on days when net asset value is not
calculated and on which shareholders cannot redeem on account of changes in
prices of stocks traded in foreign stock markets.

39
<PAGE> 90

GOVERNMENT FUND NET ASSET VALUATION

U.S. Government securities are traded in the over-the-counter market and
are valued at the last available bid price. Such valuations are based on
quotations of one or more dealers that make markets in the securities as
obtained from such dealers or from a pricing service. Options, interest rate
futures contracts and options thereon, which are traded on exchanges, are valued
at their last sale or settlement price as of the close of such exchanges or if
no sales are reported, at the mean between the last reported bid and asked
prices. Securities with a remaining maturity of 60 days or less are valued on an
amortized cost basis, which approximates market value. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Trust's Trustees. Such
valuations and procedures will be reviewed periodically by the Trustees.

PURCHASE AND REDEMPTION OF SHARES

The purchase of shares of the Funds is currently limited to the Accounts as
explained on the cover page and in the Prospectus. Such shares are sold and
redeemed at their respective net asset values as described in the Prospectus.

Redemptions are not made on days during which the New York Stock Exchange
is closed, including those holidays listed under "Determination of Net Asset
Value." The right of redemption may be suspended and the payment therefor may be
postponed for more than seven days during any period when (a) the New York Stock
Exchange is closed for other than customary weekends or holidays; (b) trading on
the New York Stock Exchange is restricted; (c) an emergency exists as a result
of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund to fairly determine
the value of its net assets; or (d) the Securities and Exchange Commission, by
order, so permits.

DISTRIBUTIONS AND TAXES

Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code (the "Code"). By so qualifying, a Fund
will not be subject to Federal income taxes on amounts paid by it as dividends
and distributions to the Account. Each Fund expects to be treated as a separate
entity for purposes of determining Federal tax treatment. Accordingly, in order
to qualify as a "regulated investment company" at the end of each quarter of its
taxable year, at least 50% of the aggregate value of each Fund's net assets must
consist of cash, cash items, government securities and other securities, limited
with respect to each issuer at the time of purchase to not more than five
percent of that Fund's total assets. Similar but slightly different investment
requirements apply to each Fund because it provides benefits under variable life
insurance policies. Additional requirements applicable to the Government Fund
are described in the Prospectus under "Government Fund-General." The Trust will
endeavor to ensure that each Portfolio's assets are so invested so that all such
requirements are satisfied, but there can be no assurance that it will be
successful in doing so.

Each Fund is subject to a four percent excise tax to the extent it fails to
distribute to its shareholders during any calendar year at least (1) 98% of its
ordinary income for the twelve months ended December 31, plus (2) 98% of its
capital gains net income for the twelve months ended October 31 of such year.
Each Fund intends to distribute sufficient amounts to avoid liability for the
excise tax.

Dividends and distributions declared to shareholders of record after
September 30 of any year and paid before February 1 of the following year, are
considered taxable income to shareholders on the record date even though paid in
the next year.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and these regulations
are subject to change by legislative or administrative action.

Dividends and capital gains distributions may also be subject to state and
local taxes. Shareholders are urged to consult their attorneys or tax advisors
regarding specific questions as to federal, state or local taxes.

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<PAGE> 91

With respect to certain Funds, the Fund may qualify for and may make the
election permitted under Section 853 of the Code so that shareholders will be
able to claim a credit or deduction on their income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid by the Fund to foreign countries (which taxes
relate primarily to investment income). The shareholders of the Fund may claim a
foreign tax credit by reason of the Fund's election under Section 853 of the
Code subject to the certain limitations imposed by Section 904 of the Code. Also
under Section 63 of the Code, no deduction for foreign taxes may be claimed by
shareholders who do not itemize deductions on their federal income tax returns,
although any such shareholder may claim a credit for foreign taxes and in any
event will be treated as having taxable income in respect of the shareholder's
pro rata share of foreign taxes paid by the Fund. It should also be noted that a
tax-exempt shareholder, like other shareholders, will be required to treat as
part of the amounts distributed to it a pro rata portion of the income taxes
paid by the Fund to foreign countries. However, that income will generally be
exempt from United States taxation by virtue of such shareholder's tax-exempt
status and such a shareholder will not be entitled to either a tax credit or a
deduction with respect to such income.

BACK-UP WITHHOLDING

The Trust is required to withhold and remit to the United States Treasury
31% of (i) reportable taxable dividends and distributions and (ii) the proceeds
of any redemptions of Fund shares with respect to any shareholder who is not
exempt from withholding and who fails to furnish the Trust with a correct
taxpayer identification number, who fails to report fully dividend or interest
income, or who fails to certify to the Trust that he has provided a correct
taxpayer identification number and that he is not subject to withholding. (An
individual's taxpayer identification number is his social security number.) The
31% "Back-up withholding tax" is not an additional tax and may be credited
against a taxpayer's regular federal income tax liability.

TAX TREATMENT OF OPTION AND FUTURES TRANSACTIONS

The Code includes special rules applicable to the listed options, futures
contracts, and options on futures contracts which certain Funds may write,
purchase or sell. Such options and contracts are classified as Section 1256
contracts under the Code. The character of gain or loss resulting from the sale,
disposition, closing out, expiration or other termination of Section 1256
contracts is generally treated as long-term capital gain or loss to the extent
of 60 percent thereof and short-term capital gain or loss to the extent of 40
percent thereof ("60/40 gain or loss"). Such contracts, when held by a Fund at
the end of a fiscal year, generally are required to be treated as sold at market
value on the last day of such fiscal year for Federal income tax purposes
("marked-to-market"). Over-the-counter options are not classified as Section
1256 contracts and are not subject to the mark-to-market rule or to 60/40 gain
or loss treatment. Any gains or losses recognized by a Fund from transactions in
over-the-counter options generally constitute short-term capital gains or
losses. If over-the-counter call options written, or over-the-counter put
options purchased, by a Fund are exercised, the gain or loss realized on the
sale of the underlying securities may be either short-term or long-term,
depending on the holding period of the securities. In determining the amount of
gain or loss, the sales proceeds are reduced by the premium paid for
over-the-counter puts or increased by the premium received for over-the-counter
calls.

Certain of the Funds' transactions in options, futures contracts, and
options on futures contracts, particularly hedging transactions, may constitute
"straddles" which are defined in the Internal Revenue Code as offsetting
positions with respect to personal property. A straddle in which at least one
(but not all) of the positions are Section 1256 contracts is a "mixed straddle"
under the Code if certain identification requirements are met.

The Code generally provides with respect to straddles (i) "loss deferral"
rules which may postpone recognition for tax purposes of losses from certain
closing purchase transactions or other dispositions of a position in the
straddle to the extent of unrealized gains in the offsetting position, (ii)
"wash sale" rules which may postpone recognition for tax purposes of losses
where a position is sold and a new offsetting position is acquired within a
prescribed period and (iii) "short sale" rules which may terminate the holding
period of

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<PAGE> 92

securities owned by the Fund when offsetting positions are established and which
may convert certain losses from short-term to long-term.

The Code provides that certain elections may be made for mixed straddles
that can alter the character of the capital gain or loss recognized upon
disposition of positions which form part of a straddle. Certain other elections
are also provided in the Code. No determination has been reached to make any of
these elections.

FUND PERFORMANCE

The Adviser has agreed so long as it serves as adviser to the Fund to limit
the ordinary business expenses of the Asset Allocation Fund, the Domestic Income
Fund, the Enterprise Fund, the Government Fund, the Money Market Fund to 0.60%
per year of the average net assets of each such Fund by reducing the advisory
fee and/or bearing other expenses of a Fund in excess of such limitation.

The Government Fund's average annual total returns (computed in the manner
described in the Prospectus) for the one-year, five-year and the nine-year,
three month period ended June 30, 1995 and the life of the Fund were 11.00%,
8.25% and 7.08%, respectively.

The Domestic Income Fund's average annual total returns (computed in the
manner described in the Prospectus) for the one-year, five-year and the seven
year six and one-half month period ended June 30, 1995, were 14.15%, 10.06% and
7.70%, respectively. These results are based on historical earnings and asset
value fluctuations and are not intended to indicate future performance. Such
information should be considered in light of the Fund's investment objectives
and policies as well as the risks incurred in the Fund's investment practices.

The Enterprise Fund's average annual total returns (computed in the manner
described in the Prospectus) for the one-year, five-year and nine-year three
month period ended June 30, 1995 and for the life of the Fund were 21.57%,
11.08% and 8.86%, respectively.

The Asset Allocation Fund's average annual total returns (computed in the
manner described in the Prospectus) for the one-year, five-year and the eight
year period ended June 30, 1995 were 19.53%, 10.63% and 9.66%, respectively.
Future results will be affected by changes in the general level of prices of
securities available for purchase. These periods have been ones of fluctuating
common stock prices.

The Government Fund's and the Domestic Income Fund's annualized current
yields for the 30-day period ended June 30, 1995 were 6.40% and 7.52%,
respectively. The Funds' yields are not fixed and will fluctuate in response to
prevailing interest rates and the market value of portfolio securities, and as a
function of the type of securities owned by the Fund, portfolio maturity and the
Fund's expenses.

The Growth and Income Fund did not commence operations until May 1, 1995.

MONEY MARKET FUND YIELD INFORMATION

The Money Market Fund's annualized current yield for the seven-day period
ending June 30, 1995 was 5.18%. Its compound effective yield for the same period
was 5.31%.

The yield of the Fund is its net income expressed in annualized terms. The
Securities and Exchange Commission requires by rule that a yield quotation set
forth in an advertisement for a "money market" fund be computed by a
standardized method based on a historical seven calendar day period. The
standardized yield is computed by determining the net change (exclusive of
realized gains and losses and unrealized appreciation and depreciation) in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, dividing the net change in account value by the
value of the account at the beginning of the base period to obtain the base
period return, and multiplying the base period return by 365/7. The
determination of net change in account value reflects the value of additional
shares purchased with dividends from the original share, dividends declared on
both the original share and such additional shares, and all fees that are
charged to all shareholder accounts, in proportion to the length of the base
period and the Fund's average account size. The Fund may also calculate its
effective yield by compounding the unannualized base

42
<PAGE> 93

period return (calculated as described above) by adding 1 to the base period
return, raising the sum to a power equal to 365 divided by 7, and subtracting
one.

The yield quoted at any time represents the amount being earned on a
current basis for the indicated period and is a function of the types of
instruments in the Fund, their quality and length of maturity, and the Fund's
operating expenses. The length of maturity for the Fund is the average dollar
weighted maturity of the Fund. This means that the Fund has an average maturity
of a stated number of days for all of its issues. The calculation is weighted by
the relative value of the investment.

The yield fluctuates daily as the income earned on the investments of the
Fund fluctuates. Accordingly, there is no assurance that the yield quoted on any
given occasion will remain in effect for any period of time. It should also be
emphasized that the Fund is an open-end investment company and that there is no
guarantee that the net asset value will remain constant. A shareholder's
investment in the Fund is not insured. Investors comparing results of the Fund
with investment results and yields from other sources such as banks or savings
and loan associations should understand this distinction. The yield quotation
may be of limited use for comparative purposes because it does not reflect
charges imposed at the Account level which, if included, would decrease the
yield.

Other portfolios of the money market type as well as banks and savings and
loan associations may calculate their yield on a different basis, and the yield
quoted by the Fund could vary upwards or downwards if another method of
calculation or base period were used.

OTHER INFORMATION

CUSTODY OF ASSETS -- All securities owned by the Fund and all cash, including
proceeds from the sale of shares of the Fund and of securities in the Fund's
investment portfolio, are held by State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, as Custodian. With respect to
investments in foreign securities, the custodian enters into agreements with
foreign sub-custodians which are approved by the Trustees pursuant to Rule 17f-5
under the 1940 Act. The Custodian and sub-custodians generally domestically, and
frequently abroad, do not actually hold certificates for the securities in their
custody, but instead have book records with domestic and foreign securities
depositories, which in turn have book records with the transfer agents of the
issuers of the securities.

SHAREHOLDER REPORTS -- Semiannual statements are furnished to shareholders, and
annually such statements are audited by the independent accountants whose
selection is ratified annually by shareholders.

INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 1201 Louisiana, Houston, Texas
77002, the independent accountants for the Fund, perform an annual audit of the
Fund's financial statements.

FINANCIAL STATEMENTS

The attached financial statements in the form of the Annual and Semi-Annual
Report to Shareholders including the related report of Independent Auditors on
such financial statements are hereby included in the Statement of Additional
Information.

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<PAGE> 94

APPENDIX

Description of the highest commercial paper, bond and other short- and
long-term rating categories assigned by Standard & Poor's Corporation ("S&P"),
Moody's Investors Services, Inc ("Moody's"), Fitch Investors Service, Inc.
("Fitch"), Duff and Phelps, Inc. ("Duff") and IBCA Limited and IBCA Inc.
("IBCA");

COMMERCIAL PAPER AND SHORT-TERM RATINGS

The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.

The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations and ordinarily will established industries,
high rates of return of portfolios employed, conservative well established
industries, high rates of return of portfolios employed, conservative
capitalization structures with moderate reliance on debt and ample asset
protection, broad margins in earnings coverage of fixed financial charges and
high internal cash generation, and well established access to a range of
financial markets and assured sources of alternate liquidity. Issues rated
Prime-2 (P-2) have a strong capacity for repayment of short-term promissory
obligations. This ordinarily will be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.

The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.

The rating Duff-1 is the highest commercial paper rating assigned by Duff,
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors small.

The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. The designation A2 by
IBCA indicates that the obligation is supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic, or financial conditions.

BOND AND LONG-TERM RATINGS

Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay principal and interest. Bonds
rated AA by S&P are judged by S&P to have a very strong capacity to pay
principal and interest and, in the majority of instances, differ only in small
degrees from issues rated AAA.

Bonds which are rated Aaa by Moody's are judged to be of the best quality.
Bonds are rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger. Moody's applies numerical modifiers 1, 2
and 3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in

44
<PAGE> 95

the higher end of this rating category, the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates a ranking in the lower end of the rating
category.

Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.

Bonds rated Duff-1 are judged by Duff to be of the highest credit quality
with negligible risk factors; only slightly more than U.S. Treasury debt. Bonds
rated Duff-2, 3 and 4 are judged by Duff to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.

Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA have a
very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very significantly.

IBCA also assigns a rating to certain international and U.S. banks. An IBCA
bank rating represents IBCA's current assessment of the strength of the bank and
whether such bank would receive support should it experience difficulties. In
its assessment of a bank, IBCA uses a dual rating system comprised of Legal
Rating and Individual Ratings. In addition, IBCA assigns banks Long- and
Short-Term Ratings as used in the corporate ratings discussed above. Legal
Ratings, which range in gradation from 1 through 5, address the question of
whether the bank would receive support by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be a prime
factor in its assessment of credit risk. Individual Ratings, which range in
gradations from A through E, represent IBCA's assessment of a bank's economic
merits and address the question of how the bank would be viewed if it were
entirely independent and could not rely on support from state authorities or its
owners.

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<PAGE> 96

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
(formerly, American Capital Life Investment Trust)
2800 Post Oak Boulevard
Houston, Texas 77056
(800) 421-5666

, 1996

Van Kampen American Capital Life Investment Trust (the "Trust") is an
open-end diversified management investment company which offers shares in nine
separate Funds, one of which is described in this Prospectus. Shares are sold
only to separate accounts (the "Accounts") of various insurance companies to
fund the benefits of variable annuity or variable life insurance policies (the
"Contracts"). The Accounts invest in shares of the Funds in accordance with
allocation instructions received from Contractowners. Such allocation rights are
further described in the accompanying Prospectus for the Contracts. The
investment objectives of one of the Funds is as follows:

Real Estate Securities Fund (the "Fund") seeks as its primary objective
long-term growth of capital by investing principally in securities of
companies operating in the real estate industry ("Real Estate Securities").
Current income is a secondary consideration. A "real estate industry
company" is a company that derives at least 50% of its assets (marked to
market), gross income or net profits from the ownership, construction,
management or sale of residential, commercial or industrial real estate.
Under normal market conditions, at least 65% of the Fund's total assets
will be invested in Real Estate Securities, primarily equity securities of
real estate investment trusts. There can be no assurance that the Fund will
achieve its investment objectives.

THE SHARES OF THIS FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.

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

A Statement of Additional Information dated the same date as this
Prospectus has been filed with the Securities and Exchange Commission ("SEC")
and contains further information about the Fund. A copy of the Statement of
Additional Information may be obtained without charge by calling or writing the
Fund at the telephone number and address printed above. The Statement of
Additional Information is hereby incorporated by reference into this Prospectus.

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

<TABLE>
<S> <C>
CUSTODIAN: State Street Bank and Trust
Company
225 Franklin Street
Boston, Massachusetts 02110
SHAREHOLDER ACCESS Investor Services, Inc.
SERVICE AGENT: P.O. Box 418256
Kansas City, Missouri
64141-9256
DISTRIBUTOR: Van Kampen American Capital
Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois
60181
INVESTMENT Van Kampen American Capital
ADVISER: Asset Management, Inc.
2800 Post Oak Boulevard
Houston, Texas 77056
INVESTMENT Hines Interests Realty
SUBADVISER: Advisors Limited Partnership
[FOR "REAL ESTATE 2800 Post Oak Boulevard
PORTFOLIO"] Houston, Texas 77056
</TABLE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary...................... 3
Financial Highlights.................... 5
Investment Objectives and Policies...... 6
Risk Factors............................ 8
Investment Practices.................... 9
The Trust and Its Management............ 12
Purchase of Shares...................... 13

<CAPTION>
Page
<S> <C>
Determination of Net Asset Value........ 14
Redemption of Shares.................... 14
Dividends, Distributions and Taxes...... 14
Fund Performance........................ 16
Description of Shares of the Trust...... 16
Additional Information.................. 17
Appendix................................ 18
</TABLE>

2
<PAGE> 98

PROSPECTUS SUMMARY

Shares Offered.......... Shares of beneficial interest.

Type of Company......... Diversified, open-end management investment company.

Investment Objectives... The Fund's primary investment objective is to seek
long-term growth of capital. Current income is a
secondary consideration. There is, however, no
assurance that the Fund will be successful in
achieving its objectives.

Investment Policy and
Risks................. The Fund will seek to achieve its investment objectives
by investing in a portfolio of securities of companies
operating in the real estate industry ("Real Estate
Securities"). Real Estate Securities include equity
securities, including common stocks and convertible
securities, as well as non-convertible preferred
stocks and debt securities of real estate industry
companies. A "real estate industry company" is a
company that derives at least 50% of its assets
(marked to market), gross income or net profits from
the ownership, construction, management or sale of
residential, commercial or industrial real estate.
Under normal market conditions, at least 65% of the
Fund's total assets will be invested in Real Estate
Securities, primarily equity securities of real estate
investment trusts. The Fund's investment in debt
securities will be rated, at the time of investment,
at least Baa by Moody's Investors Service ("Moody's")
or BBB by Standard & Poor's Corporation ("S&P"), a
comparable rating by any other nationally recognized
statistical rating organization or if unrated,
determined by Van Kampen American Capital Asset
Management, Inc. (the "Adviser") to be of comparable
quality. Under normal market conditions, the Fund may
invest up to 35% of its total assets in equity and
debt securities of companies outside the real estate
industry, U.S. Government securities, cash and money
market instruments. There can be no assurance that the
Fund will achieve its investment objectives.

3
<PAGE> 99

The Fund may purchase or sell debt securities on a
forward commitment basis. See "Investment Practices
and Restrictions -- Forward Commitments." The Fund may
use portfolio management techniques and strategies
involving options, futures contracts and options on
futures. The utilization of options, futures contracts
and options on futures contracts may involve greater
than ordinary risks and the likelihood of more
volatile price fluctuation. See "Investment Practices
-- Using Options, Futures Contracts and Options on
Futures Contracts."

Investment Advisers..... The Adviser has served as investment adviser to the
Fund since its inception. Hines Interests Realty
Advisors Limited Partnership (hereinafter referred to
either as the "Subadviser" or "Hines Realty Advisors")
provides advisory services to the Adviser of the
Portfolio with respect to the real estate industry.
See "The Trust and Its Management."

Dividends and
Distributions......... Dividends and any capital gains are distributed at
least annually. All dividends and distributions are
automatically reinvested by the Account in shares of
the Fund at net asset value per share. See "Dividends,
Distributions and Taxes."

Redemption.............. At the next determined net asset value.

Distributor............. Van Kampen American Capital Distributors, Inc. (the
"Distributor").

4
<PAGE> 100

FINANCIAL HIGHLIGHTS

This information should be read in conjunction with the related financial
statements and notes thereto included in the Statement of Additional
Information.

REAL ESTATE SECURITIES FUND

5
<PAGE> 101

INVESTMENT OBJECTIVES AND POLICIES

General. The Fund's primary investment objective is to provide
shareholders with long-term growth of capital. Current income is a secondary
consideration. The Fund will seek to achieve its investment objectives by
investing principally in a diversified portfolio of Real Estate Securities which
include equity securities, including common stocks and convertible securities,
as well as non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that derives
at least 50% of its assets (marked to market), gross income or net profits from
the ownership, construction, management or sale of residential, commercial or
industrial real estate. Real estate industry companies may include among others:
equity real estate investment trusts, which pool investors' funds for investment
primarily in commercial real estate properties, mortgage real estate investment
trusts, which invest pooled funds in real estate related loans; brokers or real
estate developers; and companies with substantial real estate holdings, such as
paper and lumber products and hotel and entertainment companies. Under normal
market conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate investment
trusts. The Fund's investment in debt securities will be rated, at the time of
investment, at least Baa by Moody's or BBB by S&P, a comparable rating by any
other nationally recognized statistical rating organization or if unrated,
determined by the Adviser to be of comparable quality. Ratings at the time of
purchase determine which securities may be acquired, and a subsequent reduction
in ratings does not require the Fund to dispose of a security. Securities rated
Baa by Moody's or BBB by S&P are considered to be medium grade obligations which
possess speculative characteristics so that changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher rated securities. The
rating of the ratings agencies represent their opinions of the quality of the
debt securities they undertake to rate, but not the market value risk of such
securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality. The Fund may invest more than 25% of its
total assets in the real estate industry.

The Fund may invest up to 25% of its assets in securities issued by foreign
issuers. See "Investment Objectives and Policies -- Foreign Securities." The
Fund may engage in portfolio management strategies and techniques involving
options, futures contracts and options on futures. Options, futures contracts
and related options are described in "Investment Practices -- Using Options,
Futures Contracts and Options on Futures Contracts" and the Statement of
Additional Information.

There can be no assurance that the Fund will achieve its investment
objectives.

The investment objectives and policies, the percentage limitations, and the
kinds of securities in which the Fund may invest are generally not fundamental
policies and may be changed by the Trustees, unless expressly governed by
certain limitations as described under "Investment Practices and
Restrictions -- Investment Restrictions" which can be changed only by action of
the shareholders. If there is a change in the objectives of the Fund,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs.

6
<PAGE> 102

Foreign Securities. The Fund may invest up to 25% of its assets in
securities issued by foreign issuers of developed countries of similar quality
as the securities described above as determined by the Adviser. Some of such
securities may also be Real Estate Securities. Investments in securities of
foreign entities and securities denominated in foreign currencies involve risks
not typically involved in domestic investment, including fluctuations in foreign
exchange rates, future foreign political and economic developments, and the
possible imposition of exchange controls or other foreign or United States
governmental laws or restrictions applicable to such investments. Since the Fund
may invest in securities denominated or quoted in currencies other than the
United States dollar, changes in foreign currency exchange rates may affect the
value of investments in the portfolio and the accrued income and unrealized
appreciation or depreciation of investments. Changes in foreign currency
exchange rates relative to the U.S. dollar will affect the U.S. dollar value of
the Fund's assets denominated in that currency and the Fund's yield on such
assets.

The Fund may also purchase foreign securities in the form of American
Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other
securities representing underlying shares of foreign companies. ADRs are
publicly traded on exchanges or over-the-counter in the United States and are
issued through "sponsored" or "unsponsored" arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligation and the depositary's transaction fees are
paid by the ADR holders. In addition, less information is available in the
United States about an unsponsored ADR than about a sponsored ADR and the
financial information about a company may not be as reliable for an unsponsored
ADR as it is for a sponsored ADR. The Fund may invest in ADRs through both
sponsored and unsponsored arrangements. For further information on ADRs and
EDRs, investors should refer to the Statement of Additional Information.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investment in those countries.
There may be less publicly available information about a foreign security than
about a United States security, and foreign entities may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those of United States entities. In addition, certain foreign
investments made by the Fund may be subject to foreign withholding taxes, which
would reduce the Fund's total return on such investments and the amounts
available for distributions by the Fund to its shareholders. See "Dividends,
Distributions and Taxes." Foreign financial markets, while growing in volume,
have, for the most part, substantially less volume than United States markets,
and securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable domestic companies. The foreign markets
also have different clearance and settlement procedures and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of the Fund are not invested and no return is earned thereon. The inability of
the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. Costs associated with transactions in
foreign securities, including

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custodial costs and foreign brokerage commissions, are generally higher than
with transactions in United States securities. In addition, the Fund will incur
costs in connection with conversions between various currencies. There is
generally less government supervision and regulation of exchanges, financial
institutions and issuers in foreign countries than there is in the United
States.

Foreign Currency Transactions. The value of the Fund's portfolio
securities that are traded in foreign markets may be affected by changes in
currency exchange rates and exchange control regulations. In addition, the Fund
will incur costs in connection with conversions between various currencies. The
Fund's foreign currency exchange transactions generally will be conducted on a
spot basis (that is, cash basis) at the spot rate for purchasing or selling
currency prevailing in the foreign currency exchange market. The Fund purchases
and sells foreign currency on a spot basis in connection with the settlement of
transactions in securities traded in such foreign currency. The Fund does not
purchase and sell foreign currencies as an investment.

The Fund also may enter into contracts with banks or other foreign currency
brokers and dealers to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts
to hedge against changes in foreign currency exchange rates. A foreign currency
forward contract is a negotiated agreement between the contracting parties to
exchange a specified amount of currency at a specified future time at a
specified rate. The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract.

The Fund may attempt to hedge against changes in the value of the United
States dollar in relation to a foreign currency by entering into a forward
contract for the purchase or sale of the amount of foreign currency invested or
to be invested, or by buying or selling a foreign currency futures contract for
such amount. Such hedging strategies may be employed before the Fund purchases a
foreign security traded in the hedged currency which the Fund anticipates
acquiring or between the date the foreign security is purchased or sold and the
date on which payment therefore is made or received. Hedging against a change in
the value of a foreign currency in the foregoing manner does not eliminate
fluctuations in the price of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such hedging transactions reduce
or preclude the opportunity for gain if the value of the hedged currency should
move in the direction opposite to the hedged position. The Fund will not
speculate in foreign currency forward or futures contracts or through the
purchase and sale of foreign currencies.

RISK FACTORS

Although the Fund does not invest directly in real estate, an investment in
the Fund will generally be subject to the risks associated with real estate
because of its policy of concentration in the securities of companies in the
real estate industry. These risks include, among others: declines in the value
of real estate; risks related to general and local economic conditions;
overbuilding and increased competition; increases in property taxes and
operating expenses; changes in zoning laws; casualty or condemnation losses;
variations in rental income; changes in neighborhood values; the appeal of
properties of tenants and changes in interest rates. The value of securities of
companies which service the real estate industry will also be affected by such
risks. If the Fund has rental income or income from the disposition of real
property acquired as a result of a default on securities the Fund owns, the
receipt of such income may adversely affect its ability to retain its tax status
as a regulated investment company.

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through of income under the Internal Revenue Code (the "Code") and to maintain
exemption from the Investment Company Act of 1940. Changes in interest rates may
also affect the value of the debt securities in the Fund's portfolio. Like
investment companies such as the Fund, real estate investment trusts are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Code. The Fund will indirectly bear its proportionate share
of any expenses paid by the real estate investment trusts in which it invests in
addition to the expenses paid by the Fund.

INVESTMENT PRACTICES

Repurchase Agreements. The Fund may enter into repurchase agreements with
domestic or foreign banks or broker-dealers in order to earn a return on
temporarily available cash. A repurchase agreement is a short-term investment in
which the purchaser, (i.e., the Fund) acquires ownership of a debt security and
the seller agrees to repurchase the obligation at a future time and set price,
thereby determining the yield during the holding period. The Fund will not
invest more than 15% of its net assets in repurchase agreements that do not
mature within seven days and in any other illiquid securities. In the event of
the bankruptcy of the seller of a repurchase agreement, the Fund could
experience delays in liquidating the underlying securities, and the Fund could
incur a loss including: (a) possible decline in the value of the underlying
security during the period while the Fund seeks to enforce its rights thereto,
(b) possible lack of access to income on the underlying security during this
period, and (c) expenses of enforcing its rights. See the Statement of
Additional Information.

For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that substantially all of the funds advised or subadvised by
the Adviser would otherwise invest separately into a joint account. The cash in
the joint account is then invested and the funds that contributed to the joint
account share pro rata in the net revenue generated. The Adviser believes that
the joint account produces greater efficiencies and economies of scale that may
contribute to reduced transaction costs, higher returns, higher quality
investments and greater diversity of investments for the Fund than would be
available to the Fund investing separately. The manner in which the joint
account is managed is subject to conditions set forth in the SEC order
authorizing this practice, which conditions are designed to ensure the fair
administration of the joint account and to protect the amounts in that account.

Portfolio Transactions and Brokerage Practices. The Adviser is responsible
for the placement of orders for the purchase and sale of portfolio securities
for the Fund and the negotiation of brokerage commissions on such transactions.
Brokerage firms are selected on the basis of their professional capability for
the type of transaction and the value and quality of execution services rendered
on a continuing basis. The debt securities in the Fund's portfolio generally are
traded in the over-the-counter market through dealers. A dealer is a securities
firm or bank which makes a market for securities by opening a position at one
price and closing the position at a slightly more favorable price. The
difference between the prices is known as a spread. Foreign currency and forward
currency exchange contracts are traded in a similar fashion in a dealer market
maintained primarily by large commercial banks. The Fund will pay brokerage
commissions in connection with transactions in exchange-traded options, futures
contracts and related options. Spreads or commissions for transactions executed
in foreign markets often are higher than in the United States. The Adviser is
authorized to place portfolio transactions with brokerage firms participating in
the

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<PAGE> 105

distribution of shares of the Fund and other Van Kampen American Capital mutual
funds if it reasonably believes that the quality of the execution and the
commission are comparable to that available from other qualified brokerage
firms. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. The Information
received may be used by the Adviser in managing the assets of other advisory
accounts as well as in the management of the assets of the Fund.

Portfolio Turnover. The Fund may purchase and sell securities without
regard to the length of time the security is to be, or has been held. The annual
portfolio turnover rate may exceed 100%, which is higher than that of many other
investment companies. A 100% turnover rate would occur, for example, if all the
securities held by the Fund were replaced in a period of one year. High
portfolio turnover involves correspondingly greater brokerage commissions and
other transaction costs, which are borne directly by the Fund, and may result in
realization of short-term capital gains if securities are held for one year or
less which may be subject to applicable income taxes. See "Dividends,
Distributions and Taxes."

Restricted Securities. The Fund may invest up to 15% of its net assets in
restricted securities and other illiquid assets (see herein for information
regarding state restrictions). As used herein, restricted securities are those
that have been sold in the United States without registration under the
Securities Act of 1933 ("1933 Act") and are thus subject to restrictions on
resale. Excluded from the limitation, however, are any restricted securities
which are eligible for resale pursuant to Rule 144A under the 1933 Act and which
have been determined to be liquid by the Trustees or by the Adviser pursuant to
guidelines approved by the Trustees. The determination of liquidity is based on
the volume of reported trading in the institutional secondary market for each
security. Since it is not possible to predict with assurance how the markets for
restricted securities sold and offered under Rule 144A will develop, the
Trustees will carefully monitor the Fund's investment in these securities
focusing on such factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
These difficulties and delays could result in the Fund's inability to realize a
favorable price upon disposition of restricted securities, and in some cases
might make disposition of such securities at the time desired by the Fund
impossible. Since market quotations are not readily available for restricted
securities, such securities will be valued by a method that the Fund's Trustees
believes accurately reflects fair value.

Using Options, Futures Contracts and Options on Futures Contracts. The
Fund expects to utilize opinions, futures contracts and options on futures
contracts in several different ways, depending upon the status of the Fund's
portfolio and the Adviser's expectations concerning the securities markets. See
the Statement of Additional information for a discussion of options, futures
contracts and options on futures contracts.

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<PAGE> 106

the formula price exceeds the intrinsic value of the option. The Fund may not
purchase or sell futures contracts or related options for which the aggregate
initial margin and premiums exceed five percent of the fair market value of the
Fund's assets. In order to prevent leverage in connection with the purchase of
futures contracts or call options thereon by the Fund, an amount of cash, cash
equivalents or liquid high-grade debt securities equal to the market value of
the obligation under the futures contract or option (less any related margin
deposits) will be maintained in a segregated account with the Custodian. The
Fund may not invest more than 15% of its net assets in illiquid securities and
repurchase agreements which have a maturity of longer than seven days. A more
complete discussion of the potential risks involved in transactions involving
options or futures contracts and options on futures contracts is contained in
the Statement of Additional Information.

Forward Commitments. The Fund may purchase or sell debt securities on a
"when-issued" or "delayed delivery" basis ("Forward Commitments"). These
transactions occur when securities are purchased or sold by the Fund with
payment and delivery taking place in the future, frequently a month or more
after such transaction. This price is fixed on the date of the commitment, and
the seller continues to accrue interest on the securities covered by the Forward
Commitment until delivery and payment take place. At the time of settlement, the
market value of the securities may be more or less than the purchase or sale
price.

The Fund may either settle a Forward Commitment by taking delivery of the
securities or may either resell or repurchase a Forward Commitment on or before
the settlement date in which event the Fund may reinvest the proceeds in another
Forward Commitment. The Fund's use of Forward Commitments may increase its
overall investment exposure and thus its potential for gain or loss. When
engaging in Forward Commitments, the Fund relies on the other party to complete
the transaction. Should the other party fail to do so, the Fund might lose a
purchase or sale opportunity that could be more advantageous than alternative
opportunities at the time of the failure.

The Fund maintains a segregated account (which is marked to market daily)
of cash, U.S. Government securities or the security covered by the Forward
Commitment with the Fund's custodian in an aggregate amount equal to the amount
of its commitment as long as the obligation to purchase or sell continues.

Investment Restrictions. The Fund has adopted a number of investment
restrictions that may not be changed without the approval of the holders of a
majority of the Fund's shares. See the Statement of Additional Information. The
percentage limitations need only be met at the time the investment is made or
other relevant action taken. These restrictions provide, among other things,
that the Fund may not:

1. Borrow money except temporarily from banks to facilitate payment of
redemption requests and then only in amounts not exceeding 33 1/3% of its
net assets, or pledge more than ten percent of its net assets in connection
with permissible borrowings or purchase additional securities when money
borrowed exceeds five percent of its net assets. Margin deposits or
payments in connection with the writing of options, or in connection with
the purchase or sale of forward contracts, futures, foreign currency
futures and related options, are not deemed to be a pledge or other
encumbrance.

2. With respect to 75% of its total assets, invest more than five
percent of its assets in the securities of any one issuer (except the U.S.
Government, its agencies and instrumentalities and repurchase agreements
secured thereby) or purchase more than ten percent of the outstanding
voting securities of any one issuer. Neither limitation shall apply to the
acquisition of shares of other open-end investment companies to the extent
permitted by rule or order of the SEC exempting the Fund from the
limitations imposed by Section 12(d)(1) of the 1940 Act.

3. Lend money or securities except by the purchase of a portion of an
issue of bonds, debentures or other obligations of types commonly
distributed to institutional investors publicly or privately (in the latter
case the investment will be subject to the stated limits on investments

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<PAGE> 107

in "restricted securities"), and except by the purchase of securities
subject to repurchase agreements.

4. Concentrate its investment in any one industry, except that the
Fund will invest more than 25% of its total assets in the real estate
industry. This limitation excludes shares of other open-end investment
companies owned by the Fund but includes the Fund's pro rata portion of the
securities and other assets owned by such company.

The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and restrictions as the Fund.

THE TRUST AND ITS MANAGEMENT

The Trust, an open-end, diversified management investment company, was
originally organized as a Massachusetts business trust on June 3, 1985 and
reorganized on September 16, 1995 under the laws of the state of Delaware as a
business entity commonly known as a "Delaware business trust." A mutual fund
provides, for those who have similar investment goals, a practical and
convenient way to invest in a more diversified portfolio of securities by
combining their resources in an effort to achieve such goals.

The Trust's fourteen Trustees have the responsibility for overseeing the
affairs of the Fund. The Adviser and the Subadviser are responsible for the
provision of advisory services in relation to the Fund's assets. The Adviser
also provides administrative services and manages the Fund's business and
affairs. The Adviser, together with its predecessors, has been in the investment
advisory business since 1926 and has served as investment adviser to the Fund
since its inception.

THE SUBADVISER. Hines Realty Advisors provides real estate advisory
services to the Adviser of the Fund. Hines Realty Advisors is a limited
partnership among Hines Holdings, Inc. (as general partner), and Hines 1980 A,
Ltd. and Gerald D. Hines (as limited partners). Mr. William S. Wardrop, Jr. is
President and Mr. Glenn L. Lowenstein is Vice President of the Subadviser. Hines
Realty Advisors has had limited previous experience as an investment adviser to
mutual funds (since mid

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May 1994). Affiliates of the Subadviser have extensive domestic and
international experience in owning and managing real estate. Hines Realty
Advisors, an affiliate of the Hines real estate organization ("Hines"), provides
a comprehensive evaluation of the real estate market. Founded in 1957, Hines has
proven experience in a full range of real estate services: strategic asset
management, property management development, marketing and leasing,
acquisition/disposition and financing. Headquartered in Houston, Texas, Hines
has regional offices in New York, San Francisco, Atlanta and Chicago as well as
29 additional submarkets. The firm also has offices in Mexico City, Berlin and
Moscow. Hines Interests owns and/or manages more than 61 million square feet of
prime office, retail and industrial space representing more than 451 projects.
Major projects include: Pennzoil Place in Houston, the Gallerias in Houston and
Dallas, 53rd At Third in New York, 101 California in San Francisco, One Ninety
One Peachtree in Atlanta, Three First National Plaza in Chicago and Huntington
Center in Columbus.

Associates in field offices nationwide generate regional economic analysis
based on demographic factors such as job growth and population movement. Hines
also provides a regional property-type analysis determining whether the
property -- outlet mall, strip shopping center or apartment complex, among
others -- makes sense in the area.

ADVISORY AGREEMENT. The Trust retains the Adviser to manage the investment
of its assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement (the "Advisory Agreement"),
the Trust pays the Adviser a monthly fee computed on average daily net assets of
the Fund at the annual rate of 1.00% of the Fund's average daily net assets.
This fee is higher than that charged by most other mutual funds but the Trustees
believe it is justified by the special nature of the Fund and is not necessarily
higher than the fees charged by certain mutual funds with investment objectives
and policies similar to those of the Fund. Under the Advisory Agreement, the
Trust also reimburses the Adviser for the cost of the Fund's accounting
services, which include maintaining its financial books and records and
calculating its daily net asset value. Operating expenses paid by the Fund
include shareholder service agency fees, custodial fees, legal and accounting
fees, the costs of reports and proxies to shareholders, trustees' fees, and all
other business expenses not specifically assumed by the Adviser. The Adviser has
entered into an investment subadvisory agreement (the "Subadvisory Agreement")
with the Subadviser to assist it in performing its investment advisory
functions. The Subadviser is primarily responsible for the following areas: (i)
providing regional economic analysis of the areas in which properties owned by
real estate investment trusts are located; (ii) analyzing attractiveness of the
property-type within the geographic region; (iii) evaluating and assessing real
estate valuation and the condition of property; (iv) evaluating property
managers and sponsors of real estate investment trusts; and (v) continuously
reviewing and monitoring the real estate investments in the Fund's portfolio.
Pursuant to the Subadvisory Agreement, the Subadviser receives on an annual
basis 50% of the compensation received by the Adviser. The Adviser and the
Subadviser may, from time to time, agree to waive their respective investment
advisory fees or any portion thereof or elect to reimburse the Fund for ordinary
business expenses in excess of an agreed upon amount.

PORTFOLIO MANAGEMENT. Mary Jayne Maly is primarily responsible for the
day-to-day management of the Fund's investment portfolio. She has served in that
capacity since the inception of the Fund. Ms. Maly is Vice President of the
Trust and has been a portfolio manager with the Adviser since 1994. Prior to
that time, Ms. Maly was an associate portfolio manager with the Adviser and was
formerly a senior equity analyst at Texas Commerce Management Company.

PURCHASE OF SHARES

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monitor events in order to identify any material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken. The
Contracts are described in the separate prospectuses issued by the Participating
Insurance Companies. The Trust continuously offers shares in the Fund to the
Accounts at prices equal to the respective per share net asset value of the
Fund. Van Kampen American Capital Distributors, Inc., One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, acts as the distributor of the shares. Net
asset value is determined in the manner set forth below under "Determination of
Net Asset Value."

DETERMINATION OF NET ASSET VALUE

Net asset value per share is computed for the Fund as of the close of
trading (currently 4:00 p.m., New York time) each day the New York Stock
Exchange is open. See the accompanying Prospectus for the policies for
information regarding holidays observed by the insurance company.

Net asset value per share is determined by dividing the value of the Fund's
securities, cash and other assets (including accrued interest) attributable to
such class less all liabilities (including accrued expenses) attributable to
such class, by the total number of shares of the class outstanding. Such
computation is made by using prices as of the close of trading on the Exchange
and (i) valuing securities listed or traded on a national securities exchange at
the last reported sale price, (ii) valuing over-the-counter securities for which
the last sale price is available from the National Association of Securities
Dealers Automated Quotations ("NASDAQ") at that price, (iii) unlisted securities
and listed securities for which the last sale price is not available are valued
at the last reported bid price, (iv) options and futures contracts are valued at
the last sale price or if no sales are reported, at the mean between the bid and
asked prices, and (v) valuing any securities for which market quotations are not
readily available, and any other assets at fair value as determined in good
faith by the Trustees of the Trust. Short-term investments with a maturity of 60
days or less when purchased are valued at amortized cost, which approximates
market value. Short-term investments with a maturity of more than 60 days when
purchased are valued based on market quotations until the remaining days to
maturity becomes less than 61 days. From such time, until maturity, the
investments are valued at amortized cost using the value of the investment on
the 61st day.

REDEMPTION OF SHARES

Payment for shares tendered for redemption by the insurance company is made
ordinarily in cash within seven days after tender in proper form, except under
unusual circumstances as determined by the SEC. The redemption price will be the
net asset value next determined after the receipt of a request in proper form.
The market value of the securities in the Fund is subject to daily fluctuations
and the net asset value of the Fund's shares will fluctuate accordingly.
Therefore, the redemption value may be more or less than the investor's cost.

DIVIDENDS, DISTRIBUTIONS AND TAXES

All dividends and capital gains distributions of the Fund are automatically
reinvested by the Account in additional shares of the Fund.

Dividends and Distributions. Dividends from stocks and interest earned
from other investments are the main source of income for the Fund. Substantially
all of this income, less expenses, is distributed on an annual basis. When the
Fund sells portfolio securities, it may realize capital gains or losses,
depending on whether the prices of the securities sold are higher or lower than
the prices the Fund paid to purchase them. Net realized capital gains represent
the total profit from sales of securities minus total losses from sales of
securities including any losses carried forward from prior years. The Fund
distributes any net realized capital gains to the Account no less frequently
than annually.

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<PAGE> 110

The Fund intends to qualify as a "regulated investment company" under the
Code. By maintaining its qualification as a "regulated investment company," the
Fund will not incur any liability for federal income taxes to the extent its
taxable ordinary income and any capital gain net income is distributed in
accordance with Subchapter M of the Code. By qualifying as a regulated
investment company, the Fund is not subject to Federal income taxes to the
extent it distributes its taxable net investment income and taxable net realized
capital gains. If for any taxable year the Fund does not qualify for the special
tax treatment afforded regulated investment companies, all of its taxable
income, including any net realized capital gains, would be subject to tax at
regular corporate rates (without any deduction for distributions to
shareholders). The Fund is subject to the diversification requirements of
Section 817(h) of the Code.

Dividends and distributions paid by the Fund have the effect of reducing
net asset value per share on the record date by the amount of the payment.
Therefore, a dividend or distribution paid shortly after the purchase of shares
by an investor would represent, in substance, a return of capital to the
shareholder (to the extent it is paid on the shares so purchased) even though
subject to income taxes as discussed above.

Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Investors
may be entitled to claim United States foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in the Code. If
more than 50% in value of the Fund's total assets at the close of its fiscal
year consists of securities of foreign issuers, the Fund will be eligible, and
may file elections with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their respective pro rata
portions of such taxes in their United States income tax returns as gross
income, treat such respective pro rata portions as taxes paid by them, and
deduct such respective pro rata portions in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their United States
income taxes. The Fund will report annually to its shareholders the amount per
share of such withholding.

Under Code Section 988, foreign currency gains or losses from certain
forward contracts not traded in the interbank market are typically treated as
ordinary income or loss. Such income or loss may increase or decrease (or
possibly eliminate) the Fund's income available for distribution. If, under the
rules governing the tax treatment of foreign currency gains and losses, the
Fund's income available for distribution is decreased or eliminated, all or a
portion of the dividends declared by the Fund may be treated for federal income
tax purposes as a return of capital or, in some circumstances, as capital gain.
Generally, your tax basis in your Fund shares will be reduced to the extent that
an amount distributed to you is treated as a return of capital.

Tax Treatment to Insurance Company as Shareholder. Dividends paid by the
Fund from its ordinary income and distributions of the Fund's net realized
short-term capital gains are includable in the insurance company's gross income.
The tax treatment of such dividends and distributions depends on the insurance
company's tax status. To the extent that income of the Fund represents dividends
on equity securities rather than interest income, its distributions are eligible
for the 70% dividends received deduction applicable in the case of a life
insurance company as provided in the Code. However, a dividend received from a
real estate investment trust does not qualify for the dividend received
deduction. The Trust will send to the Account a written notice required by the
Code designating the amount and character of any distributions made during such
year.

Under the Code, any distribution designated as being made from the Fund's
net realized long-term capital gains are taxable to the insurance company as
long-term capital gains. Such distributions of long-term capital gains will be
designated as a capital gains distribution in a written notice to the Account
which accompanies the distribution payment. Long-term capital gains
distributions are not eligible for the dividends received deduction. Dividends
and capital gain distributions to the insurance company may also be subject to
state and local taxes.

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As described in the accompanying Prospectus for the Contracts, the
insurance company reserves the right to assess the Account a charge for any
taxes paid by it.

Tax Treatment of Options and Futures Transactions. Gains or losses on
transactions in listed options on securities, futures and options on futures
generally are treated as 60% long-term and 40% short-term, ("60/40"), and
positions held by the Fund at the end of its fiscal year generally are required
to be marked to market, with the result that unrealized gains and losses are
treated as though they were realized. Gains and losses realized by the Fund on
transactions in over-the-counter options generally are short-term capital gains
or losses unless the option is exercised, in which case the gain or loss is
determined by the holding period of the underlying security. The Code contains
certain "straddle" rules which require deferral of losses incurred in certain
transactions involving hedged positions to the extent the Fund has unrealized
gains in offsetting positions and generally terminate the holding period of the
subject position. Additional information is set forth in the Statement of
Additional Information.

FUND PERFORMANCE

From time to time the Fund may advertise its total return for prior
periods. Any such advertisement would include at least average annual total
return quotations for one, five and ten-year periods or for the life of the
Fund. Other total return quotations, aggregate or average, over other time
periods may also be included.

The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the end of the period. Total return is calculated by
subtracting the value of the initial investment from the ending value and
showing the difference as a percentage of the initial investment; the
calculation assumes the initial investment is made at the maximum public
offering price and that all income dividends or capital gains distributions
during the period are reinvested in Fund shares at net asset value. Total return
is based on historical earnings and asset value fluctuations and is not intended
to indicate future performance. No adjustments are made to reflect any income
taxes payable by shareholders on dividends and distributions paid by the Fund.

To increase the Fund's yield the Adviser may, from time to time, absorb a
certain amount of the future ordinary business expenses. The Adviser may stop
absorbing these expenses at any time without prior notice.

The Trust's Annual Report contains additional performance information. A
copy of the Annual Report may be obtained without charge by calling or writing
the Trust of the telephone number and address printed on the cover page of this
Prospectus.

DESCRIPTION OF SHARES OF THE TRUST

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ADDITIONAL INFORMATION

An investment in the Trust may not be appropriate for all investors.

An investment in the Trust is intended to be a long-term investment, and
should not be used as a trading vehicle.

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APPENDIX

DESCRIPTION OF BOND RATINGS

MOODY'S INVESTORS SERVICE

AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

BAA -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact, have speculative characteristics as well.

BA -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

CAA -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

CA -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

NONRATED -- Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

18
<PAGE> 114

Note: Those bonds in the Aa, A, Baa and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa 1,
A 1, Baa 1, Ba 1 and B 1.

STANDARD & POOR'S CORPORATION

AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.

A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB -- B -- CCC -- CC -- C -- Debt rated BB, B, CCC, CC and C is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

CI -- The rating CI is reserved for income bonds on which no interest is
being paid.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

PREFERRED STOCK RATINGS:

Both Moody's and Standard & Poor's use the same designations for corporate
bonds as they do for preferred stock, except in the case of Moody's preferred
stock ratings, the initial letter rating is not capitalized. While the
descriptions are tailored for preferred stocks, the relative quality
distinctions are comparable to those described above for corporate bonds.

19
<PAGE> 115

EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666

PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666

DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666

FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 772-8889
VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
REAL ESTATE SECURITIES FUND

- ------------------
2800 Post Oak Blvd.
Houston, TX 77056

- ------------------
Investment Adviser

VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
2800 Post Oak Blvd.
Houston, TX 77056
Investment Subadviser

HINES INTERESTS REALTY
ADVISORS LIMITED PARTNERSHIP
2800 Post Oak Blvd.
Houston, TX 77056
Distributor

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent

ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Custodian

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

O'MELVENY & MYERS
400 South Hope Street
Los Angeles, CA 90071
Independent Accountants

PRICE WATERHOUSE LLP
1201 Louisiana, Suite 2900
Houston, TX 77002
<PAGE> 116

LIFE INVESTMENT TRUST

REAL ESTATE SECURITIES FUND

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

P R O S P E C T U S

, 1996

------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
- --------------------------------------------------------------------------------
<PAGE> 117

STATEMENT OF ADDITIONAL INFORMATION

, 1996

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

2800 POST OAK BLVD.
HOUSTON, TEXAS 77056
(800) 421-5666

Van Kampen American Capital Life Investment Trust (the "Trust") is a
diversified, open-end management investment company with nine separate Funds,
one of which is discussed herein: Real Estate Securities Fund (the "Fund").

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

This Statement of Additional Information is not a Prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus and should be read in conjunction with the Prospectus. The Statement
of Additional Information and the related Prospectus are both dated
, 1996. A Prospectus may be obtained without charge by calling or
writing Van Kampen American Capital Distributors, Inc. (the "Distributor") at
One Parkview Plaza, Oakbrook Terrace, Illinois 60181 at (800) 225-2222.

TABLE OF CONTENTS

GENERAL INFORMATION

The Trust was originally organized under the laws of the Commonwealth of
Massachusetts on June 3, 1985 and reorganized under the laws of Delaware on
September 16, 1995.

Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van
Kampen American Capital Distributors, Inc. (the "Distributor") and Van Kampen
American Capital Shareholder Services, Inc. ("ACCESS") are wholly owned
subsidiaries of Van Kampen American Capital, Inc. ("VKAC"), which is a wholly
owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is controlled,
through the ownership of a substantial majority of its common stock, by The
Clayton & Dubilier Private Equity Fund IV Limited Partnership ("C&D L.P."), a
Connecticut limited partnership. C&D L.P. is managed by Clayton, Dubilier &
Rice, Inc. a New York based private investment firm. The General Partner of C&D
L.P. is Clayton & Dubilier Associates IV Limited Partnership ("C&D Associates
L.P."). The general partners of C&D Associates L.P. are, Joseph L. Rice, III, B.
Charles Ames, William A. Barbe, Alberto Cribiore, Donald J. Gogel, Leon J.
Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson, each of whom is a
principal of Clayton, Dubilier & Rice, Inc. In addition, certain officers,
directors and employees of VKAC own, in the aggregate, not more than seven
percent of the common stock of VK/AC Holding, Inc. and have the right to
acquire, upon the exercise of options, approximately an additional 11% of the
common stock of VK/AC Holding, Inc. Advantage Capital Corporation, a retail
broker-dealer affiliate of the Distributor, is a wholly owned subsidiary of
VK/AC Holding, Inc.

As of , 1996 no person was known by management to own
beneficially or of record as much as five percent of the outstanding shares of
any portfolio except as set forth below. The Fund offers to share only to
separate accounts of various insurance companies. Those separate accounts have
authority to vote shares from which they have not received instructions from the
contractholders, but only in the same proportion with respect to "yes" votes,
"no" votes or abstentions as is the case with respect to shares for which
instructions were received.

REAL ESTATE SECURITIES FUND

<TABLE>
<CAPTION>
AMOUNT OF
RECORD
OWNERSHIP
OF THE FUND
AT
NAME AND ADDRESS OF RECORD HOLDER , 1996 PERCENT
- ---------------------------------------------------------------- ------------- ----------
<S> <C> <C>
Van Kampen American Capital Asset Management, Inc............... [50,010.00] [15.81]%
2800 Post Oak Blvd.
Houston, Texas 77056
National Variable Account--II................................... [252,755.60] [79.91]%
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, Ohio 43218-2029
</TABLE>

INVESTMENT OBJECTIVES AND POLICIES

As its primary objective, the Fund seeks long-term growth of capital by
investing principally in securities of companies operating in the real estate
industry. Current income is a secondary consideration. The following disclosures
supplement disclosures set forth in the Prospectus. Readers must refer also to
the Prospectus for a complete presentation.

DEPOSITARY RECEIPTS

The Fund may invest in the securities of foreign issuers in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) or
other securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a

2
<PAGE> 119

similar ownership arrangement. Generally, ADRs in registered form, are designed
for use in United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.

OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

The Fund may engage in transactions in options, futures contracts and
options on futures contracts. Set forth below is certain additional information
regarding options, futures contracts and options on futures contracts. See
Prospectus for further information.

SELLING CALL AND PUT OPTIONS

Purpose. The principal reason for selling options is to obtain, through
receipt of premiums, a greater current return or total return than would be
realized on the underlying securities alone.

Selling Options. The purchaser of a call option pays a premium to the
seller (i.e., the writer) for the right to buy the underlying security from the
writer at a specified price during a certain period. The Fund sells call options
either on a covered basis or for cross hedging purposes. A call option is
covered if, at all times during the option period, the Fund would own or have
the right to acquire securities of the type that it would be obligated to
deliver if any outstanding option were exercised. An option is for cross-hedging
purposes if it is not covered but is designed to provide a hedge against a
security which the Fund owns or has the right to acquire. In such circumstances,
the Fund collateralizes the option by maintaining in a segregated account with
the Fund's Custodian, cash, cash equivalents or high quality, liquid debt
securities in an amount not less than the market value of the underlying
security, marked to market daily, while the option is outstanding.

The purchaser of a put option pays a premium to the seller (i.e., the
writer) for the right to sell the underlying security to the writer at a
specified price during a certain period. The Fund sells put options only on a
secured basis, which means that, at all times during the option period, the Fund
would maintain in a segregated account with its Custodian cash, cash equivalents
or high quality, liquid debt securities in an amount of not less than the
exercise price of the option, or would hold a put on the same underlying
security at an equal or greater exercise price.

Closing Purchase Transactions and Offsetting Transactions. In order to
terminate its position as a seller of a call or put option, the Fund could enter
into a "closing purchase transaction," which is the purchase of a call (put) on
the same underlying security and having the same exercise price and expiration
date as the call (put) previously written by the Fund. The Fund would realize a
gain (loss) if the premium plus commission paid in the closing purchase
transaction is less (greater) than the premium it received on the sale of the
option. The Fund would also realize a gain if an option it has written lapses
unexercised.

The Fund could sell options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. The
Fund could close out its position as seller of an option only if a liquid
secondary market exists for options of that series, but there is no assurance
that such a market will exist, particularly in the case of over-the-counter
options, since they can be closed out only with the other party to the
transaction. Alternatively, the Fund could purchase an offsetting option, which
would not close out its position as a seller, but would provide an asset of
equal value to its obligation under the option written. If the Fund is not able
to enter into a closing purchase transaction or to purchase an offsetting option
with respect to an option it has written, it will be required to maintain the
securities subject to the call or the collateral underlying the put until a
closing purchase transaction can be entered into (or the option is exercised or
expires), even though it might not be advantageous to do so.

Risks of Selling Options. By selling a call option, the Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by selling a put option the Fund might become obligated
to purchase the underlying security at an exercise price that exceeds the then
current market price.

3
<PAGE> 120

PURCHASING CALL AND PUT OPTIONS

The Fund could purchase call options to protect (i.e., hedge) against
anticipated increases in the prices of securities it wishes to acquire. In
addition, the Fund may purchase call options for capital appreciation. Since the
premium paid for a call option is typically a small fraction of the price of the
underlying security, a given amount of funds will purchase call options covering
a much larger quantity of such security than could be purchased directly. By
purchasing call options, the Fund could benefit from any significant increase in
the price of the underlying security to a greater extent than had it invested
the same amount in the security directly. However, because of the very high
volatility of option premiums, the Fund would bear a significant risk of losing
the entire premium if the price of the underlying security did not rise
sufficiently, or if it did not do so before the option expired.

Conversely, put options could be purchased to protect (i.e., hedge) against
anticipated declines in the market value of either specific portfolio securities
or of the Fund's assets generally. In addition, the Fund may purchase put
options for capital appreciation in anticipation of a price decline in the
underlying security and a corresponding increase in the value of the put option.
The purchase of put options for capital appreciation involves the same
significant risk of loss as described above for call options.

In any case, the purchase of options for capital appreciation would
increase the Fund's volatility by increasing the impact of changes in the market
price of the underlying securities on the Fund's net asset value.

OPTIONS ON STOCK INDEXES

Options on stock indexes are similar to options on stock, but the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock index gives the holder the
right to receive an amount of cash upon exercise of the option. Receipt of this
cash amount will depend upon the closing level of the stock index upon which the
option is based being greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash received
will be the difference between the closing price of the index and the exercise
price of the option, multiplied by a specified dollar multiple. The seller of
the option is obligated, in return for the premium received, to make delivery of
this amount.

Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower index such as the Standard & Poor's 100. Indexes are also based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. A stock index fluctuates with changes in the
market values of the stocks included in the index. Options are currently traded
on The Chicago Board Options Exchange, the American Stock Exchange and other
exchanges. The Fund may sell or purchase options which are listed on an exchange
as well as options which are traded over-the-counter.

Gain or loss to the Fund on transactions in stock index options will depend
on price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements of individual securities. As
with stock options, the Fund may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange, or it
may let the option expire unexercised.

RISK FACTORS APPLICABLE TO OPTIONS ON U.S. GOVERNMENT SECURITIES

Treasury Bonds and Notes. Because trading interest in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the Exchanges will not continue indefinitely to introduce options with new
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each issue of bonds or notes will thus be phased out as new options are
listed on more recent issues, and options representing a full range of
expirations will not ordinarily be available for every issue on which options
are traded.

4
<PAGE> 121

Treasury Bills. Because the deliverable Treasury bill changes from week to
week, sellers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its Custodian so that it will be
treated as being covered.

Mortgage-Related Securities. The following special considerations will be
applicable to options on mortgage-related securities. Currently such options are
only traded over-the-counter. Since the remaining principal balance of a
mortgage-related security declines each month as a result of mortgage payments,
the Fund as a seller of a mortgage-related call holding mortgage-related
securities as "cover" to satisfy its delivery obligation in the event of
exercise may find that the mortgage-related securities it holds no longer have a
sufficient remaining principal balance for this purpose. Should this occur, the
Fund will purchase additional mortgage-related securities from the same pool (if
obtainable) or replacement mortgage-related securities in the cash market in
order to maintain its cover. A mortgage-related security held by the Portfolio
to cover an option position in any but the nearest expiration month may cease to
represent cover for the option in the event of a decline in the coupon rate at
which new pools are originated under the FHA/VA loan ceiling in effect at any
given time. If this should occur, the Fund will no longer be covered, and the
Fund will either enter into a closing purchase transaction or replace such
mortgage-related security with a mortgage-related security which represents
cover. When the Fund closes its position or replaces such mortgage-related
security, it may realize an unanticipated loss and incur transaction costs.

FOREIGN CURRENCY OPTIONS

The Fund may purchase put and call options on foreign currencies to reduce
the risk of currency exchange fluctuation. Premiums paid for such put and call
options will be limited to no more than five percent of the Fund's net assets at
any given time. Options on foreign currencies operate similarly to options on
securities, and are traded primarily in the over-the-counter market, although
options on foreign currencies are traded on United States and foreign exchanges.
Exchange-traded options are expected to be purchased by the Fund from time to
time and over-the-counter options may also be purchased, but only when the
Adviser believes that a liquid secondary market exists for such options,
although there can be no assurance that a liquid secondary market will exist for
a particular option at any specific time. Options on foreign currencies are
affected by all of those factors which influence foreign exchange rates and
investment generally. See "Investment Practices -- Using Options, Futures
Contracts and Options on Futures Contracts" in the Prospectus.

5
<PAGE> 122

FUTURES CONTRACTS

The Fund may engage in transactions involving futures contracts and related
options in accordance with rules and interpretations of the Commodity Futures
Trading Commission ("CFTC") under which the Fund is exempt from registration as
a "commodity pool."

The Fund may also invest in foreign stock index futures traded outside the
United States. Such foreign stock index futures include the Nikkei Index of 225
Japanese stocks traded on the Singapore International Monetary Exchange ("Nikkei
Index"), Osaka Index of 50 Japanese stocks traded on the Osaka Exchange,
Financial Times Stock Exchange Index of the 100 largest stocks on the London
Stock Exchange, the All Ordinaries Share Price Index of 307 stocks on the
Sydney, Melbourne Exchanges, Hang Seng Index of 33 stocks on the Hong Kong Stock
Exchange, Barclays Share Price Index of 40 stocks on the New Zealand Stock
Exchange and Toronto Index of 35 stocks on the Toronto Stock Exchange. Futures
and futures options on the Nikkei Index are traded on the Chicago Mercantile
Exchange and United States commodity exchanges may develop futures and futures
options on other indices of foreign securities. Futures and options on United
States devised index of foreign stocks are also being developed. Investments in
securities of foreign entities and securities denominated in foreign currencies
involve risks not typically involved in domestic investment, including
fluctuations in foreign exchange rates, future foreign political and economic
developments, and the possible imposition of exchange controls or other foreign
or United States governmental laws or restrictions applicable to such
investments.

Initial and Variation Margin. In contrast to the purchase or sale of a
security, no price is paid or received upon the purchase or sale of a futures
contract. Initially, the Fund is required to deposit with its Custodian in an
account in the broker's name an amount of cash, cash equivalents or liquid high
grade debt securities equal to a percentage (which will normally range between
two and ten percent) of the contract amount. This amount is known as initial
margin. The nature of initial margin in futures transactions is different from
that of margin in securities transactions in that futures contract margin does
not involve the borrowing of funds by the customer to finance the transaction.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract, which is returned to the Fund upon termination of the
futures contract and satisfaction of its contractual obligations. Subsequent
payments to and from the broker, called variation margin, are made on a daily
basis as the price of the underlying securities or index fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as marking to market.

For example, when the Fund purchases a futures contract and the price of
the underlying security or index rises, that position increases in value, and
the Fund receives from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund purchases a futures contract and
the value of the underlying security or index declines, the position is less
valuable, and the Fund is required to make a variation margin payment to the
broker.

At any time prior to expiration of the futures contract, the Fund may elect
to terminate the position by taking an opposite position. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or a gain.

Futures Strategies. When the Fund anticipates a significant market or
market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is not fully
invested ("anticipatory hedge"). Such purchase of a futures contract serves as a
temporary

6
<PAGE> 123

substitute for the purchase of individual securities, which may be purchased in
an orderly fashion once the market has stabilized. As individual securities are
purchased, an equivalent amount of futures contracts could be terminated by
offsetting sales. The Fund may sell futures contracts in anticipation of or in a
general market or market sector decline that may adversely affect the market
value of the Fund's securities ("defensive hedge"). To the extent that the
Fund's portfolio of securities changes in value in correlation with the
underlying security or index, the sale of futures contracts substantially
reduces the risk to the Fund of a market decline and, by so doing, provides an
alternative to the liquidation of securities positions in the Fund with
attendant transaction costs. Ordinarily commissions on futures transactions are
lower than transaction costs incurred in the purchase and sale of securities.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or related options, the Fund could
experience delays and/or losses in liquidating open positions purchased and/or
incur a loss of all or part of its margin deposits with the broker. Transactions
are entered into by the Fund only with brokers or financial institutions deemed
creditworthy by the Adviser.

Special Risks Associated with Futures Transactions. There are several risks
connected with the use of futures contracts as a hedging device. These include
the risk of imperfect correlation between movements in the price of the futures
contracts and of the underlying securities, currency or index the risk of market
distortion, the illiquidity risk and the risk of error in anticipating price
movement.

There may be an imperfect correlation (or no correlation) between movements
in the price of the futures contracts and of the securities being hedged. The
risk of imperfect correlation increases as the composition of the securities
being hedged diverges from the securities, currency or index upon which the
futures contract is based. If the price of the futures contract moves less than
the price of the securities being hedged, the hedge will not be fully effective.
To compensate for this imperfect correlation, the Fund could buy or sell futures
contracts in a greater dollar amount than the dollar amount of securities being
hedged if the historical volatility of the securities being hedged is greater
than the historical volatility of the securities, currency or index underlying
the futures contract. Conversely, the Fund could buy or sell futures contracts
in a lesser dollar amount than the dollar amount of the securities being hedged
if the historical volatility of the securities being hedged is less than the
historical volatility of the securities, currency or index underlying the
futures contract. It is also possible that the value of futures contracts held
by the Fund could decline at the same time as portfolio securities being hedged;
if this occurred, the Fund would lose money on the futures contract in addition
to suffering a decline in value in the portfolio securities being hedged.

There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities, currency or index
underlying the futures contract due to certain market distortions. First, all
participants in the futures market are subject to margin depository and
maintenance requirements. Rather than meet additional margin depositary
requirements, investors may close futures contracts through offsetting
transactions, which could distort the normal relationship between the futures
market and the securities or index underlying the futures contract. Second, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures markets may cause
temporary price distortions. Due to the possibility of price distortion in the
futures markets and because of the imperfect correlation between movements in
futures contracts and movements in the securities underlying them, a correct
forecast of general market trends by the Adviser may still not result in a
successful hedging transaction judged over a very short time frame.

There is also the risk that futures markets may not be sufficiently liquid.
Futures contracts may be closed out only on an exchange or board of trade that
provides a market for such futures contracts. Although the Fund intends to
purchase or sell futures only on exchanges and boards of trade where there
appears to be an active secondary market, there can be no assurance that an
active secondary market will exist for any particular contract or at any
particular time. In the event of such illiquidity, it might not be possible to
close a futures position and, in the event of adverse price movement, the Fund
would continue to be required to make daily payments of variation margin. Since
the securities being hedged would not be sold until the related futures contract
is sold, an increase, if any, in the price of the securities may to some extent
offset losses on the

7
<PAGE> 124

related futures contract. In such event, the Fund would lose the benefit of the
appreciation in value of the securities.

Successful use of futures is also subject to the Adviser's ability
correctly to predict the direction of movements in the market. For example, if
the Fund hedges against a decline in the market, and market prices instead
advance, the Fund will lose part or all of the benefit of the increase in value
of its securities holdings because it will have offsetting losses in futures
contracts. In such cases, if the Fund has insufficient cash, it may have to sell
portfolio securities at a time when it is disadvantageous to do so in order to
meet the daily variation margin.

CFTC regulations require, among other things, (i) that futures and related
options be used solely for bona fide hedging purposes (or meet certain
conditions as specified in CFTC regulations) and (ii) that the Fund not enter
into futures and related options for which the aggregate initial margin and
premiums exceed five percent of the fair market value of the Fund's assets. In
order to prevent leverage in connection with the purchase of futures contracts
by the Fund, an amount of cash, cash equivalents or liquid high grade debt
securities equal to the market value of the obligation under the futures
contracts (less any related margin deposits) will be maintained in a segregated
account with the Custodian.

Additional Risks to Options and Futures Transactions. Each of the United
States exchanges has established limitations governing the maximum number of
call or put options on the same underlying security or futures contract (whether
or not covered) which may be sold by a single investor, whether acting alone or
in concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts or
through one or more brokers). Option positions of all investment companies
advised by the Adviser are combined for purposes of these limits. An exchange
may order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which the Fund may write.

Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, the Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract. However, there is no guarantee that the
price of the securities being hedged will, in fact, correlate with the price
movements in a futures contract and thus provide an offset to losses on the
futures contract. Option on futures contracts to be sold or purchased by the
Fund will be traded on United States or foreign exchange or over-the-counter.

OPTIONS ON FUTURES CONTRACTS

The Fund could also purchase and sell options on futures contracts. Options
on futures contracts to be sold or purchased by the Fund will be traded on
United States or foreign exchanges or over-the-counter. An option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract (a long position if the option is a call
and a short position if the option is a put), at a specified exercise price at
any time during the option period. As a writer of an option on a futures
contract, the Fund is subject to initial margin and maintenance requirements
similar to those applicable to futures contracts. In addition, net option
premiums received by the Fund are required to be included as initial margin
deposits. When an option on a futures contract is exercised, delivery of the
futures position is accompanied by cash representing the difference between the
current market price of the futures contract and the exercise price of the
option. The Fund could purchase put options on futures contracts in lieu of, and
for the same purposes as, the sale of a futures contract; at the same time, it
could sell put options at a lower strike price (a "put bear spread") to offset
part of the cost of the strategy to the Fund. The purchase of call options on
futures contracts is intended to serve the same purpose as the actual purchase
of the futures contract.

8
<PAGE> 125

Risks of Transactions in Options on Futures Contracts. In addition to the
risks described above which apply to all options transactions, there are several
special risks relating to options on futures. The Adviser will not purchase
options on futures on any exchange unless, in the Adviser's opinion, a liquid
secondary exchange market for such options exists. Compared to the use of
futures, the purchase of options on futures involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However there may be circumstances, such as when there
is no movement in the level of the index or in the price of the underlying
security, when the use of an option on a future would result in a loss to the
Fund when the use of a future would not.

ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS
ON FOREIGN CURRENCIES

Unlike transactions entered into by the Fund in futures contracts, options
on foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) by the Securities and Exchange Commission ("SEC"). To the contrary,
such instruments are traded through financial institutions acting as
market-makers, although foreign currency options are also traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading
environment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could, therefore, continue to an unlimited extent over
a period of time. Although the purchaser of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option seller and a trader of forward contracts could
lose amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.

9
<PAGE> 126

FORWARD COMMITMENTS

Relative to a Forward Commitment purchase, the Fund maintains a segregated
account (which is marked to market daily) of cash, cash equivalents, liquid high
grade debt securities or U.S. Government securities (which may have maturities
which are longer than the term of the Forward Commitment) with the Fund's
custodian in an aggregate amount equal to the amount of its commitment as long
as the obligation to purchase continues. Since the market value of both the
securities or currency subject to the Forward Commitment and the securities or
currency held in the segregated account may fluctuate, the use of Forward
Commitments may magnify the impact of interest rate changes on the Fund's net
asset value.

A Forward Commitment sale is covered if the Fund owns or has the right to
acquire the underlying securities or currency subject to the Forward Commitment.
A Forward Commitment sale is for cross-hedging purposes if it is not covered,
but is designed to provide a hedge against a decline in value of a security or
currency which the Fund owns or has the right to acquire. In either
circumstance, the Fund maintains in a segregated account (which is marked to
market daily) either the security or currency covered by the Forward Commitment
or cash, cash equivalents, liquid high grade debt securities or U.S. Government
securities (which may have maturities which are longer than the term of the
Forward Commitment) with the Fund's custodian in an aggregate amount equal to
the amount of its commitment as long as the obligation to sell continues. By
entering into a Forward Commitment sale transaction, the Fund forgoes or reduces
the potential for both gain and loss in the security which is being hedged by
the Forward Commitment sale. See the Prospectus for further information.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements with domestic or foreign
banks or broker-dealers deemed to be creditworthy by the Adviser under
guidelines approved by the Trustees. A repurchase agreement is a short-term
investment in which the purchaser (i.e., the Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, usually not more than seven days from the date of purchase, thereby
determining the yield during the purchaser's holding period. Repurchase
agreements are fully collateralized by the underlying debt securities and are
considered to be loans under the Investment Company Act of 1940, as amended
("1940 Act"). The Fund pays for such securities only upon physical delivery or
evidence of book entry transfer to the account of a custodian or bank acting as
agent. The seller under a repurchase agreement will be required to maintain the
value of the underlying securities marked to market daily at not less than the
repurchase price. The underlying securities (normally securities of the U.S.
Government, or its agencies and instrumentalities), may have maturity dates
exceeding one year. The Fund does not bear the risk of a decline in value of the
underlying securities unless the seller defaults under its repurchase
obligation. See "Investment Practices -- Repurchase Agreements" in the
Prospectus for further information.

INVESTMENT RESTRICTIONS

The Fund has adopted the following restrictions which may not be changed
without the approval of the holders of a majority of the outstanding shares of
the Fund. Such majority is defined by the 1940 Act as the lesser of (i) 67% or
more of the voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy; or (ii) more than 50% of the Fund's outstanding voting securities. The
percentage limitations need only be met at the time the investment is made or
after relevant action is taken. In addition to the fundamental investment
restrictions set forth in the Prospectus, the Fund is subject to the
restrictions set forth below.

10
<PAGE> 127

The Fund shall not:

1. Engage in the underwriting of securities of other issuers, except that
the Fund may sell an investment position even though it may be deemed to
be an underwriter under the federal securities laws.

3. Borrow money except temporarily from banks to facilitate payment of
redemption requests and then only in amounts not exceeding 33 1/3% of
its net assets, or pledge more than ten percent of its net assets in
connection with permissible borrowings or purchase additional securities
when money borrowed exceeds five percent of its net assets. Margin
deposits or payments in connection with the writing of options, or in
connection with the purchase or sale of forward contracts, futures,
foreign currency futures and related options, are not deemed to be a
pledge or other encumbrance.

10. The Fund may not make short sales of securities, unless at the time of
the sale it owns or has the right to acquire an equal amount of such
securities; provided that this prohibition does not apply to the
writing of options or the sale of forward contracts, futures, foreign
currency futures or related options.

11
<PAGE> 128

In addition to the foregoing fundamental policies which may not be changed
without shareholder approval, the Fund is subject to the following policies
which may be amended by the Trust's Trustees and which apply at the time of
purchase of portfolio securities.

1. The Fund may not make investments for the purpose of exercising control
or management although the Fund retains the right to vote securities
held by it.

3. The Fund may not invest in the securities of other open-end investment
companies, or invest in the securities of closed-end investment
companies except through purchase in the open market in a transaction
involving no commission or profit to a sponsor or dealer (other than the
customary broker's commission) or as part of a merger, consolidation or
other acquisition except to acquire shares of other open-end investment
companies to the extent permitted by rule or order of the SEC exempting
the Fund from the limitations imposed by Section 12(d)(1) of the 1940
Act.

5. The Fund may not invest in securities of any company if any officer or
Trustee of the Trust or of the Adviser owns more than one-half of one
percent of the outstanding securities of such company, and such officers
and Trustees who own more than one-half of one percent own in the
aggregate more than five percent of the outstanding securities of such
issuer.

7. The Fund may not invest more than five percent of its total assets in
securities of unseasoned issuers which have been in operation directly
or through predecessors for less than three years, provided, however,
that this limitation excludes shares of other open-end investment
companies owned by the Fund but includes the Trust's pro rata portion of
the securities and other assets owned by any such company.

12
<PAGE> 129

TRUSTEES AND EXECUTIVE OFFICERS

The Trust's Trustees and Executive Officers and their principal occupations
during the past five years are listed below.

TRUSTEES

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
Strafford Hall President of MDT Corporation, a company which develops,
Suite 200 manufactures, markets and services medical and
1009 Slater Road scientific equipment. A Trustee of each of the Van
Harrisville, NC 27560 Kampen American Capital Funds.
Age: 63

Philip P. Gaughan.................. Prior to February, 1989, Managing Director and Manager
9615 Torresdale Avenue of Municipal Bond Department, W. H. Newbold's Sons & Co.
Philadelphia, PA 19114 A Trustee of each of the Van Kampen American Capital
Age: 67 Funds.

Linda Hutton Heagy................. Managing Partner, Paul Ray Berndston, an executive
10 South Riverside Plaza recruiting and management consulting firm. Formerly,
Suite 720 Executive Vice President of ABN AMRO, N.A., a Dutch bank
Chicago, IL 60606 holding company. Prior to 1992, Executive Vice President
Age: 46 of LaSalle National Bank. A Trustee of each of the Van
Kampen American Capital Funds.
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. A Trustee of each of the
Lyme, CT 06371 Van Kampen American Capital Funds.
Age: 75

R. Craig Kennedy................... President and Director, German Marshall Fund of the
1341 E. 50th Street United States. Formerly, advisor to the Dennis Trading
Chicago, IL 60615 Group Inc. Prior to 1992, President and Chief Executive
Age: 43 Officer, Director and member of the Investment Committee
of the Joyce Foundation, a private foundation. A Trustee
of each of the Van Kampen American Capital Funds.
Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a company
415 North Adams in insurance related businesses. Formerly Vice Chairman
Hinsdale, IL 60521 and Director of Continental Illinois National Bank and
Age: 75 Trust Company of Chicago and Continental Illinois
Corporation. A Trustee of each of the Van Kampen
American Capital Funds and Chairman of each Van Kampen
American Capital Fund advised by Van Kampen American
Capital Investment Advisory Corp.
Jack E. Nelson..................... President of Nelson Investment Planning Services, Inc.,
423 Country Club Drive a financial planning company and registered investment
Winter Park, FL 32789 adviser. President of Nelson Investment Brokerage
Age: 59 Services Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and Securities
Investors Protection Corp. A Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>

13
<PAGE> 130

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
Don G. Powell*..................... President, Chief Executive Officer and a Director of
2800 Post Oak Blvd. VK/AC Holding, Inc. and Van Kampen American Capital and
Houston, TX 77056 Chairman, Chief Executive Officer and a Director of the
Age: 55 Distributor, and the Adviser. Director and Executive
Vice President of ACCESS, Van Kampen American Capital
Services, Inc. and Van Kampen American Capital Trust
Company. Director, Trustee or Managing General Partner
of each of the Van Kampen American Capital Funds and
other open-end investment companies and closed-end
investment companies advised by the Adviser and its
affiliates.

14
<PAGE> 131

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- --------------------------------------------------------
<S> <C>
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently know as The Traver's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a
Age: 73 producer of paper products. Trustee, and former
President of Whitney Museum of American Art. Formerly,
Chairman of Institute for Educational Leadership, Inc.,
Board of Visitors, Graduate School of The City
University of New York, Academy of Political Science.
Trustee of Committee for Economic Development. Director
of Public Education Fund Network, Fund for New York City
Public Education. Trustee of Barnard College. Member of
Dean's Council, Harvard School of Public Health. Member
of Mental Health Task Force, Carter Center. A Trustee of
each of the Van Kampen American Capital Funds.
</TABLE>

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

OFFICERS

Nori L. Gabert........... Vice President and Vice President, Associate General Counsel
Age: 42 Secretary and Corporate Secretary of the Adviser.

Gary M. Lewis............ Vice President Vice President of the Adviser.
Age: 42

Tanya M. Loden........... Vice President and Vice President and Controller of most of the
Age: 35 Controller investment companies advised by the Adviser,
formerly Tax Manager/Assistant Controller.

Dennis J. McDonnell...... Vice President President, Chief Operating Officer and a
Age: 53 Director of the Adviser, Director of VK/AC
Holding, Inc. and Van Kampen American
Capital.

Curtis W. Morell......... Vice President and Vice President and Treasurer of most of the
Age: 49 Treasurer investment companies advised by the Adviser.

Jeff New................. Vice President Portfolio Manager of the Adviser.
Age: 38
</TABLE>

15
<PAGE> 132

<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
- ------------------------- --------------------- --------------------------------------------
<S> <C> <C>
Ronald A. Nyberg......... Vice President Executive Vice President, General Counsel
Age: 42 and Secretary of Van Kampen American
Capital, Executive Vice President and a
Director of the Distributor, Executive Vice
President of the Adviser. Director of ICI
Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute.

Robert Peck.............. Vice President Senior Vice President of the Adviser.
Age: 48

John R. Reynoldson....... Vice President Senior Vice President of the Adviser.
Age: 42

Alan T. Sachtleben....... Vice President Executive Vice President and Director of the
Age: 53 Adviser. Executive Vice President of VK/AC
Holding, Inc. and VKAC.

Walter W. Stabell III.... Vice President Associate Portfolio Manager of the Adviser.
Age: 36

David Troth.............. Vice President Senior Vice President of the Adviser.
Age: 61
J. David Wise............ Vice President and Vice President, Associate General Counsel
Age: 51 Assistant Secretary and Assistant Corporate Secretary of the
Adviser.

The Trustees and officers of the Trust as a group do not own any
outstanding shares of the Trust because such shares are sold only to separate
accounts (the "Accounts") of various insurance companies to fund the benefits of
variable annuity or variable life insurance policies (the "Contracts"). Only
Messrs. Branagan, Hilsman, Powell, Rees, Sheehan, Sisto and Woodside served as
Trustees of the Trust during its last fiscal year. Effective September 7, 1995,
Ms. Heagy commenced service as a Trustee of the Fund and Dr. Caruso ceased
serving as a Trustee of the Trust.

The Fund has not paid any compensation to the Trustees as of the date
hereof. Additional information regarding compensation paid by the Trust and the
related mutual funds for which the Trustees serve as director or trustee is set
forth below. The compensation shown is for the year ended December 31, 1994. Mr.
Powell is not compensated for his service as a Trustee, because of his
affiliation with the Adviser.

16
<PAGE> 133

COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM REGISTRANT
AND FUND
COMPLEX PAID TO
NAME OF PERSON TRUSTEES(1)(3)
-------------------------------------------------------------------- ---------------
<S> <C>
J. Miles Branagan................................................... $64,000
Dr. Roger Hilsman................................................... $66,000
David Rees.......................................................... $64,000
Lawrence J. Sheehan................................................. $67,000
Dr. Fernando Sisto.................................................. $82,000
William S. Woodside(2).............................................. $18,000
</TABLE>

- ---------------
(1) Represents 29 investment company portfolios in the fund complex.

(2) Prior to October 6, 1994, Mr. Woodside's compensation was paid by the
Adviser. As a result, of the amount reflected in the second column, $34,000
was paid by the Registrant and the fund complex in the aggregate.

(3) Includes the following amounts for which the various funds were reimbursed
by the Adviser -- Branagan, $2,000; Hilsman, $1,000; Rees, $2,000; Sheehan,
$2,000; Sisto, $2,000; Woodside, $1,000 (Mr. Woodside was paid $36,000
directly by the Adviser as discussed in Footnote 2 above).

INVESTMENT ADVISORY AGREEMENTS

The Trust the Adviser are parties to an investment advisory agreement (the
"Advisory Agreement") with respect to the Fund. Under the Advisory Agreement,
the Trust retains the Adviser to manage the investment of the Fund's assets and
to place orders for the purchase and sale of the Fund's securities. The Adviser
is responsible for obtaining and evaluating economic, statistical, and financial
data and for formulating and implementing investment programs in furtherance of
the Fund's investment objectives. The Adviser also furnishes at no cost to the
Trust (except as noted herein) the services of sufficient executive and clerical
personnel for the Trust as are necessary to prepare registration statements,
prospectuses, shareholder reports, and notices and proxy solicitation materials.
In addition, the Adviser furnishes at no cost to the Trust the services of a
President of the Trust, one or more Vice Presidents as needed, and a Secretary.
Under the Advisory Agreement, the Trust pays to the Adviser as compensation for
the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the Fund at an annual
rate of 1.00% of the average daily net assets of the Portfolio.

The Adviser has entered into an investment sub-advisory agreement dated
December 20, 1994 (the "Subadvisory Agreement"), with the Subadviser to assist
it in performing its investment advisory functions. The Subadviser will be
primarily responsible for the following areas: (i) providing regional economic
analysis of the areas in which properties owned by real estate investment trusts
are located; (ii) analyzing attractiveness of the property-type within the
geographic region; (iii) evaluating and assessing real estate

17
<PAGE> 134

valuation and condition of property; (iv) evaluating property managers and
sponsors of real estate investment trusts; and (v) continuously reviewing and
monitoring the investments in the Fund's portfolio. For its services, the
Subadviser receives from the Adviser a fee at the annual rate of 50% of the
compensation received by the Adviser. The Adviser and Subadviser are hereinafter
sometimes referred to as the "Advisers".

Under the Advisory Agreement, the Trust bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating the daily net asset value of the Fund. The costs of such accounting
services include the salaries and overhead expenses of a Treasurer or other
principal financial officer and the personnel operating under his direction.
Charges are allocated among the investment companies advised or subadvised by
the Adviser. A portion of these amounts were paid to the Adviser or its parent
in reimbursement of personnel, office space, facilities and equipment costs
attributable to the provision of accounting services to the Trust. The services
provided by the Adviser are at cost. The Trust also pays shareholder service
agency fees, custodian fees, legal and auditing fees, the costs of reports to
shareholders and all other ordinary expenses not specifically assumed by the
Adviser. The Advisory Agreement also provides that the Adviser shall not be
liable to the company for any actions or omissions if it acted without willful
misfeasance, bad faith, negligence or reckless disregard of its obligations.

The average net asset value of the Fund for purposes of computing the
advisory fee is determined by taking the average of all of the determinations of
net asset value for each business day during a given calendar month. Such fee is
payable for each calendar month as soon as practicable after the end of that
month. The fee payable to the Adviser is reduced by any commissions, tender
solicitation and other fees, brokerage or similar payments received by the
Adviser or any direct or indirect majority owned subsidiary of VKAC, in
connection with the purchase and sale of portfolio investments of the Fund, less
any direct expenses incurred by such subsidiary of VKAC in connection with
obtaining such payments. The Adviser agrees to use its best efforts to recapture
tender solicitation fees and exchange offer fees for the Fund's benefit, and to
advise the Trustees of the Fund of any other commissions, fees, brokerage or
similar payments which may be possible under applicable laws for the Adviser or
any direct or indirect majority owned subsidiary of VKAC to receive in
connection with the Trust's portfolio transactions or other arrangements which
may benefit the Fund.

The Advisory Agreement with respect to the Fund may be continued from year
to year if specifically approved at least annually (a)(i) by the Trust's
Trustees or (ii) by vote of a majority of the Fund's outstanding voting
securities and (b) by the affirmative vote of a majority of the Trustees who are
not parties to the agreement or interested persons of any such party by votes
cast in person at a meeting called for such purpose. The Advisory Agreement
provides that it shall terminate automatically if assigned and that it may be
terminated without penalty by either party on 60 days' written notice.

DISTRIBUTOR

Van Kampen American Capital Distributors, Inc., acts as the principal
underwriter of the shares of the Portfolio pursuant to a written agreement (the
"Underwriting Agreement"). The Distributor's obligation is an agency or "best
efforts" arrangement under which the Distributor is not obligated to sell any
stated number of shares. The Underwriting Agreement is renewable from year to
year if approved (a) by the Trust's Trustees or by a vote of a majority of the
Fund's outstanding voting securities and (b) by the affirmative vote of a
majority of Trustees who are not parties to the Underwriting Agreement or
interested persons of any party, by votes cast in person at a meeting called for
that purpose. The Underwriting Agreement provides that it will terminate if
assigned, and that it may be terminated without penalty by either party on 60
days' written notice.

The Distributor bears the cost of printing (but not typesetting)
prospectuses used in connection with this offering and the cost and expense of
supplemental sales literature, promotion and advertising and any costs of
qualification of shares for sales under state blue sky laws. The Trust pays all
expenses attributable to the registrations of the Fund's shares under federal
law, including registration and filing fees, the cost of preparation of the
prospectuses, related legal and auditing expenses, and the cost of printing
prospectuses for current shareholders.

18
<PAGE> 135

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Adviser is responsible for decisions to buy and sell securities for the
Trust and for the placement of its portfolio business and the negotiation of the
commissions, if any, paid on such transactions. It is the policy of the Adviser
to seek the best security price available with respect to each transaction. In
over-the-counter transactions, orders are placed directly with a principal
market maker unless it is believed that a better price and execution can be
obtained by using a broker. Except to the extent that the Trust may pay higher
brokerage commissions for brokerage and research services (as described below)
on a portion of its transactions executed on securities exchanges, the Adviser
seeks the best security price at the most favorable commission rate. In
selecting dealers and in negotiating commissions, the Adviser considers the
firm's reliability, the quality of its execution services on a continuing basis
and its financial condition. When more than one firm is believed to meet these
criteria, preference may be given to firms which also provide research services
to the Trust or the Adviser.

Pursuant to provisions of the Advisory Agreement, the Trust's Trustees have
authorized the Adviser to cause the Fund to incur brokerage commissions in an
amount higher than the lowest available rate in return for research services
provided to the Adviser. The Adviser is of the opinion that the continued
receipt of supplemental investment research services from dealers is essential
to its provision of high quality portfolio management services to the Fund. The
Adviser undertakes that such higher commissions will not be paid by the Trust
unless (a) the Adviser determines in good faith that the amount is reasonable in
relation to the services in terms of the particular transaction or in terms of
the Adviser's overall responsibilities with respect to the accounts as to which
it exercises investment discretion, (b) such payment is made in compliance with
the provisions of Section 28(e) and other applicable state and federal laws, and
(c) in the opinion of the Adviser, the total commissions paid by the Fund are
reasonable in relation to the expected benefits to the Trust over the long term.
The investment advisory fee paid by the Trust under the Advisory Agreement is
not reduced as a result of the Adviser's receipt of research services.

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking best execution and such other
policies as the Trustees may determine, the Adviser may consider sales of shares
of the Trust and of the other Van Kampen American Capital mutual funds as a
factor in the selection of dealers to execute portfolio transactions for the
Fund.

The Adviser places portfolio transactions for other advisory accounts
including other investment companies. Research services furnished by firms
through which the Fund effects its securities transactions may be used by the
Adviser in servicing all of its accounts; not all of such services may be used
by the Adviser in connection with the Trust. In the opinion of the Adviser, the
benefits from research services to each of the accounts (including the Trust)
managed by the Adviser cannot be measured separately. Because the volume and
nature of the trading activities of the accounts are not uniform, the amount of
commissions in excess of the lowest available rate paid by each account for
brokerage and research services will vary. However, in the opinion of the
Adviser, such costs to the Trust will not be disproportionate to the benefits
received by the Trust on a continuing basis.

19
<PAGE> 136

DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of the Fund is computed by dividing the
value of all securities held by the Fund plus other assets, less liabilities, by
the number of shares outstanding. This computation is made for the Fund as of
the close of business each day the New York Stock Exchange is open (currently
4:00 p.m., New York time). The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the Exchange is open). In
addition, European or Far Eastern securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place on all business days in Japanese markets
on certain Saturdays and in various foreign markets on days which are not
business days in New York and on which the Fund's net asset value is not
calculated and on which the Fund does not effect sales, redemptions and
repurchases of its shares. There may be significant variations in the net asset
value of Fund shares on days when net asset value is not calculated and on which
shareholders cannot redeem on account of changes in prices of stocks traded in
foreign stock markets.

PURCHASE AND REDEMPTION OF SHARES

The purchase of shares of the Fund is currently limited to the Accounts as
explained on the cover page and in the Prospectus. Such shares are sold and
redeemed at their respective net asset values as described in the Prospectus.

DISTRIBUTIONS AND TAXES

The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code (the "Code"). By so qualifying, the
Fund will not be subject to Federal income taxes on amounts paid by it as
dividends and distributions to the Account. The Fund expects to be treated as a
separate entity for purposes of determining Federal tax treatment. Accordingly,
in order to qualify as a "regulated investment company" at the end of each
quarter of its taxable year, at least 50% of the aggregate value of the Fund's
net assets must consist of cash, cash items, government securities and other
securities, limited with respect to each issuer at the time of purchase to not
more than five percent of the Fund's total assets. Similar but slightly
different investment requirements apply to the Fund because it provides benefits
under variable life insurance policies. The Trust will endeavor to ensure that
the Fund's assets are so invested so that all such requirements are satisfied,
but there can be no assurance that it will be successful in doing so.

The Fund is subject to a four percent excise tax to the extent it fails to
distribute to its shareholders during any calendar year at least (1) 98% of its
ordinary income for the twelve months ended December 31, plus (2) 98% of its
capital gains net income for the twelve months ended October 31 of such year.
The Fund intends to distribute sufficient amounts to avoid liability for the
excise tax.

20
<PAGE> 137

The Fund may qualify and may make an election permitted under Section 853
of the Code so that shareholders will be able to claim a credit or deduction on
their income tax returns for, and will be required to treat as part of the
amounts distributed to them, their pro rata portion of qualified taxes paid by
the Fund to foreign countries (which taxes relate primarily to investment
income). The shareholders of the Fund may claim a foreign tax credit by reason
of the Fund's election under Section 853 of the Code subject to the certain
limitations imposed by Section 904 of the Code. Also under Section 63 of the
Code, no deduction for foreign taxes may be claimed by shareholders who do not
itemize deductions on their Federal income tax returns, although any such
shareholder may claim a credit for foreign taxes and in any event will be
treated as having taxable income in respect to the shareholder's pro rata share
of foreign taxes paid by the Fund. It should also be noted that a tax-exempt
shareholder, like other shareholders, will be required to treat as part of the
amounts distributed to it a pro rata portion of the income taxes paid by the
Fund to foreign countries. However, that income will generally be exempt from
United States taxation by virtue of such shareholder's tax-exempt status and
such a shareholder will not be entitled to either a tax credit or a deduction
with respect to such income.

BACK-UP WITHHOLDING

The Trust is required to withhold and remit to the United States Treasury
31% of (i) reportable taxable dividends and distributions and (ii) the proceeds
of any redemptions of Fund shares with respect to any shareholder who is not
exempt from withholding and who fails to furnish the Fund with a correct
taxpayer identification number, who fails to report fully dividend or interest
income, or who fails to certify to the Fund that he has provided a correct
taxpayer identification number and the he is not subject to withholding. (An
individual's taxpayer identification number is his social security number.) The
31% "Back-up withholding tax" is not an additional tax and may be credited
against a taxpayer's regular federal income tax liability.

TAX TREATMENT OF OPTION AND FUTURES TRANSACTIONS

The Code includes special rules applicable to the listed options, futures
contracts, and options on futures contracts which the Fund, may write, purchase
or sell. Such options and contracts are classified as Section 1256 contracts
under the Code. The character of gain or loss resulting from the sale,
disposition, closing out, expiration or other termination of Section 1256
contracts is generally treated as long-term capital gain or loss to the extent
of 60 percent thereof and short-term capital gain or loss to the extent of 40
percent thereof ("60/40 gain or loss"). Such contracts, when held by a Fund at
the end of a fiscal year, generally are required to be treated as sold at market
value on the last day of such fiscal year for Federal income tax purposes
("marked-to-market"). Over-the-counter options are not classified as Section
1256 contracts and are not subject to the mark-to-market rule or to 60/40 gain
or loss treatment. Any gains or losses recognized by the Fund from transactions
in over-the-counter options generally constitute short-term capital gains or
losses. If over-the-counter call options written, or over-the-counter put
options purchased, by the Fund are exercised, the gain or loss realized on the
sale of the underlying securities may be either short-term or long-term,
depending on the holding period of the securities. In determining the amount of
gain or loss, the sales proceeds are reduced by the premium paid for
over-the-counter puts or increased by the premium received for over-the-counter
calls.

21
<PAGE> 138

Certain of the Fund's transactions in options, futures contracts, and
options on futures contracts, particularly hedging transactions, may constitute
"straddles" which are defined in the Code as offsetting
positions with respect to personal property. A straddle in which at least one
(but not all) of the positions are Section 1256 contracts is a "mixed straddle"
under the Code if certain identification requirements are met.

OTHER INFORMATION

INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 1201 Louisiana, Houston, Texas
77002, the independent accountants for the Trust, perform an annual audit of the
Trust's financial statements.

22
<PAGE> 139

PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements

<TABLE>
<CAPTION>
INCLUDED IN PART B FOR
ASSET ALLOCATION FUND
COMMON STOCK FUND
DOMESTIC INCOME FUND
GOVERNMENT FUND
MONEY MARKET FUND
---------------------------
<S> <C>
Investment Portfolio
December 31, 1995 X
Statement of Assets and Liabilities
December 31, 1995 X
Statement of Operations
Year ended December 31, 1995 X
Statement of Changes in Net Assets
Year ended December 31, 1995 X
Year ended December 31, 1994 X
Notes to Financial Statements X
Financial Highlights X
Report of Independent Accountants X
</TABLE>

<TABLE>
<CAPTION>
INCLUDED IN PART B FOR
EMERGING GROWTH FUND
GLOBAL EQUITY FUND
REAL ESTATE SECURITIES FUND
---------------------------
<S> <C>
Investment Portfolio
December 31, 1995 X
Statement of Assets and Liabilities
December 31, 1995 X
Statement of Operations
Period ended December 31, 1995 X
Statement of Changes in Net Assets
Period ended December 31, 1995 X
Notes to Financial Highlights X
Financial Highlights X
</TABLE>

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and, therefore, have been omitted.

(b) Exhibits

<TABLE>
<C> <S>
1 -- First Amended and Restated Agreement and Declaration of Trust.
1.2 -- Certificate of Amendment.
1.3 -- Certificate of Designation of Enterprise Fund (formerly Common Stock
Fund).
1.4 -- Certificate of Designation of Domestic Income Fund (formerly Domestic
Strategic Income Fund).
1.5 -- Certificate of Designation of Emerging Growth Fund.
1.6 -- Certificate of Designation of Global Equity Fund.
1.7 -- Certificate of Designation of Government Fund.
</TABLE>

C-1
<PAGE> 140

<TABLE>
<S> <C>
1.8 -- Certificate of Designation of Money Market Fund.
1.9 -- Certificate of Designation of Asset Allocation Fund (formerly
Multiple Strategy Fund).
1.10 -- Certificate of Designation of Real Estate Securities Fund.
1.11 -- Form of Certificate of Designation of Growth and Income Fund.
1.12 -- Form of Amended and Restated Certificate of Designation of Asset
Allocation Fund.
1.13 -- Form of Amended and Restated Certificate of Designation of Domestic
Income Fund.
1.14 -- Form of Amended and Restated Certificate of Designation of Enterprise
Fund.
2 -- Amended and Restated Bylaws.
4 -- Not Applicable.
5.1 -- Investment Advisory Agreement for Asset Allocation Fund, Domestic
Income Fund, Enterprise Fund, Government Fund and Money Market Fund.
5.2 -- Investment Advisory Agreement for Emerging Growth Fund.
5.3 -- Investment Advisory Agreement for Global Equity Fund.
5.4 -- Investment Sub-Advisory Agreement for Global Equity Fund.
5.5 -- Investment Advisory Agreement for Real Estate Securities Fund.
5.6 -- Investment Sub-Advisory Agreement for Real Estate Securities Fund.
5.7 -- Form of Investment Advisory Agreement for Growth and Income Fund.
6.1 -- Underwriting Agreement.
6.2 -- Form of Addendum to Underwriting Agreement for Growth and Income
Fund.
8.1 -- Custodian Agreement between Registrant and State Street Bank and
Trust Company -- Note 1.
8.2 -- Transfer Agency and Servicing Agreement.
9 -- Data Access Services Agreement dated December 2, 1993 -- Note 4.
10 -- Inapplicable for this filing.
13 -- Investment Letter dated October 7, 1987 -- Note 2.
15.2 -- Copy of Servicing Agreement -- Note 3.
16 -- Computation Measure for Performance Information.
17.1 -- List of certain investment companies in response to Item 29(a).
17.2 -- List of officers and directors of Van Kampen American Capital
Distributors, Inc. in response to Item 29(b).
19.1 -- Powers of Attorney for Messrs. Branagan, Hilsman, Powell, Rees,
Sheehan, Sisto and Woodside -- Note 5.
19.2 -- Powers of Attorney for Messrs. Gaughan, Kennedy, Miller, Nelson,
Robinson and Whalen -- Note 5.
27 -- Financial Data Schedules.
</TABLE>

C-2
<PAGE> 141

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

<TABLE>
<S> <C>
Note 1 -- Custodian Contract dated December 2, 1993 incorporated herein by reference
(Exhibit 8 to Form N-1A of Van Kampen American Capital Global Managed Assets Fund,
Registration No. 33-74024 Post-Effective Amendment No. 2, filed May 6, 1994.
Note 2 -- Included in Pre-Effective Amendment No. 3 to Registrant's Registration Statement
on Form N-1A (File No. 33-628) filed on or about April 11, 1986.
Note 3 -- Included in Post-Effective Amendment No. 3 to Registrant's Registration Statement
on Form N-1A (File No. 33-628) filed on or about May 4, 1987.
Note 4 -- Data Access Services Agreement dated December 2, 1993 incorporated herein by
reference (Exhibit 9.2 to Form N-1A of Van Kampen American Capital Utilities
Income Fund, Registration No. 33-68452, Post-Effective Amendment No. 1 filed on
May 19, 1994).
Note 5 -- Included in Registrant's Registration Statement on Form N-1A (File No. 33-628)
filed on or about September 16, 1995.
</TABLE>

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

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

AS OF NOVEMBER 30, 1995

<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS
----------------------------------------------------- ----------------
<S> <C>
Money Market Fund 4
Enterprise Fund 5
Domestic Income Fund 4
Asset Allocation Fund 3
Government Fund 3
Emerging Growth Fund 3
Global Equity Fund 3
Real Estate Securities Fund 10
Growth and Income Fund 0
</TABLE>

ITEM 27. INDEMNIFICATION.

Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust.

Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which the officer or trustee may be or may have been involved by reason of
being or having been an officer or trustee, except that such indemnity shall not
protect any such person against a liability to the Registrant or any shareholder
thereof to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, the decision by the
Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.

C-3
<PAGE> 142

The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officer or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.

Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by the trustee, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

See "Investment Advisory Services" in the Prospectus and "Trustees and
Executive Officers" in the Statement of Additional Information for information
regarding the business of the Adviser. For information as to the business,
profession, vocation and employment of a substantial nature of directors and
officers of the Adviser, reference is made to the Adviser's current Form ADV
(File No. 801-1669) filed under the Investment Advisers Act of 1940, as amended,
incorporated herein by reference.

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) The sole principal underwriter is Van Kampen American Capital
Distributors, Inc., which acts as principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit 17.1 incorporated by
reference herein.

(b) Van Kampen American Capital Distributors, Inc. is an affiliated person
of an affiliated person of Registrant and is the only principal underwriter for
Registrant. The name, principal business address and positions and offices with
Van Kampen American Capital Distributors, Inc. of each of the directors and
officers thereof are set forth in Exhibit 17.2. Except as disclosed under the
heading, "Trustees and Executive Officers" in Part B of this Registration
Statement, none of such persons has any position or office with Registrant.

C-4
<PAGE> 143

ITEM 30. LOCATION OF BOOKS AND RECORDS.

Unless otherwise stated below, the books or other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder are in the physical possession of:

Fund Treasurer
Mutual Fund Accounting
2800 Post Oak Blvd.
Houston, Texas 77056

<TABLE>
<CAPTION>
RULE LOCATION OF REQUIRED RECORDS
- ------ ---------------------------------------------------------
<S> <C> <C>
31a-1 (b)(2)(i)(i)(iii), Van Kampen American Capital Asset Management, Inc.
(3)(7)(8)(9)(10)(12) 2800 Post Oak Blvd.
Houston, Texas 77056
(b)(2)(iv) ACCESS Investor Services, Inc.
7501 Tiffany Springs Parkway
Kansas City, Missouri 64153
</TABLE>

<TABLE>
<CAPTION>
RULE LOCATION OF REQUIRED RECORDS
- ------ ---------------------------------------------------------
<S> <C>
(b)(5)(6)(11) John Govett & Co. Limited
Shackleton House
4 Battle Bridge Lane
London SE1 2HR
England
</TABLE>

ITEM 31. MANAGEMENT SERVICES.

There are no management related services contracts not discussed in Part A.

ITEM 32. UNDERTAKINGS.

Registrant hereby undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.

Registrant hereby undertakes to file a post effective amendment on behalf
of Growth and Income Fund, which need not be certified, within four to six
months from the effective date of Registrant's 1933 Act Registration Statement.

Registrant hereby undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.

C-5
<PAGE> 144

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Houston, and State of Texas, on the 21st day of
December, 1995.

VAN KAMPEN AMERICAN CAPITAL LIFE

INVESTMENT TRUST

By /s/ DON G. POWELL

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

(Don G. Powell, President)

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on December 21, 1995:

Principal Executive Officer:

<TABLE>
<C> <S>
/s/ *DON G. POWELL President and Trustee
- ------------------------------
(Don G. Powell)
Principal Financial Officer and Accounting
Officer:

/s/ CURTIS W. MORELL Vice President and Treasurer
- ------------------------------
(Curtis W. Morell)

Trustees:

/s/ *J. MILES BRANAGAN Trustee
- ------------------------------
(J. Miles Branagan)

/s/ *PHILIP P. GAUGHAN Trustee
- ------------------------------
(Philip P. Gaughan)
Trustee
- ------------------------------
(Linda Hutton Heagy)

/s/ *ROGER HILSMAN Trustee
- ------------------------------
(Roger Hilsman)

/s/ *R. CRAIG KENNEDY Trustee
- ------------------------------
(R. Craig Kennedy)

/s/ *DONALD C. MILLER Trustee
- ------------------------------
(Donald C. Miller)

/s/ *JACK E. NELSON Trustee
- ------------------------------
(Jack E. Nelson)

/s/ *DAVID REES Trustee
- ------------------------------
(David Rees)

/s/ *JEROME L. ROBINSON Trustee
- ------------------------------
(Jerome L. Robinson)

/s/ *LAWRENCE J. SHEEHAN Trustee
- ------------------------------
(Lawrence J. Sheehan)

/s/ *FERNANDO SISTO Trustee
- ------------------------------
(Fernando Sisto)

/s/ *WAYNE W. WHALEN Trustee
- ------------------------------
(Wayne W. Whalen)

/s/ *WILLIAM S. WOODSIDE Trustee
- ------------------------------
(William S. Woodside)
</TABLE>

/s/ NORI L. GABERT
Nori L. Gabert
Attorney-in-Fact

* Signed pursuant to a Power-of-Attorney.
<PAGE> 145

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

INDEX TO EXHIBITS TO FORM N-1A
REGISTRATION STATEMENT

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----- ------------------------------------------------------------------------------------
<S> <C><C>
1.1 -- First Amended and Restated Agreement and Declaration of Trust.
1.2 -- Certificate of Amendment.
1.3 -- Certificate of Designation of Enterprise Fund (formerly Common Stock Fund).
1.4 -- Certificate of Designation of Domestic Income Fund (formerly Domestic Strategic
Income Fund).
1.5 -- Certificate of Designation of Emerging Growth Fund.
1.6 -- Certificate of Designation of Global Equity Fund.
1.7 -- Certificate of Designation of Government Fund.
1.8 -- Certificate of Designation of Money Market Fund.
1.9 -- Certificate of Designation of Asset Allocation Fund (formerly Multiple Strategy
Fund).
1.10 -- Certificate of Designation of Real Estate Securities Fund.
1.11 -- Form of Certificate of Designation of Growth and Income Fund.
1.12 -- Form of Amended and Restated Certificate of Designation of Asset Allocation Fund.
1.13 -- Form of Amended and Restated Certificate of Designation of Domestic Income Fund.
1.14 -- Form of Amended and Restated Certificate of Designation of Enterprise Fund.
2 -- Amended and Restated Bylaws.
5.1 -- Investment Advisory Agreement for Asset Allocation Fund, Domestic Income Fund,
Enterprise Fund, Government Fund and Money Market Fund.
5.2 -- Investment Advisory Agreement for Emerging Growth Fund.
5.3 -- Investment Advisory Agreement for Global Equity Fund.
5.4 -- Investment Sub-Advisory Agreement for Global Equity Fund.
5.5 -- Investment Advisory Agreement for Real Estate Securities Fund.
5.6 -- Investment Sub-Advisory Agreement for Real Estate Securities Fund.
5.7 -- Form of Investment Advisory Agreement for Growth and Income Fund.
6.1 -- Underwriting Agreement.
6.2 -- Form of Addendum to Underwriting Agreement for Growth and Income Fund.
8.2 -- Transfer Agency and Servicing Agreement.
16 -- Computation Measure for Performance Information.
17.1 -- List of certain investment companies in response to Item 29(a).
17.2 -- List of officers and directors of Van Kampen American Capital Distributors, Inc. in
response to Item 29(b).
27 -- Financial Data Schedules.
</TABLE>

<PAGE> 1
EXHIBIT 1.1

FIRST AMENDED AND RESTATED

AGREEMENT AND DECLARATION OF TRUST

VAN KAMPEN

AMERICAN CAPITAL

LIFE INVESTMENT TRUST

Dated: June 21, 1995

<PAGE> 2

FIRST AMENDED AND RESTATED

AGREEMENT AND DECLARATION OF TRUST

Index

RECITALS ........................................................... 1

ARTICLE I THE TRUST ................................................. 2

SECTION 1.1 Name ...................................................... 2

SECTION 1.2. Location .................................................. 2

SECTION 1.3. Nature of Trust ........................................... 2

SECTION 1.4. Definitions ............................................... 2

SECTION 1.5. Real Property to be Converted into Personal Property ...... 5

ARTICLE 2 PURPOSE OF THE TRUST ...................................... 5

ARTICLE 3 POWERS OF THE TRUSTEES .................................... 6

SECTION 3.1. Powers in General ......................................... 6
(a) Investments ....................................................... 7
(b) Disposition of Assets ............................................. 7
(c) Ownership Powers .................................................. 7
(d) Form of Holding ................................................... 7
(e) Reorganization, etc. .............................................. 7
(f) Voting Trusts, etc. ............................................... 7
(g) Contracts, etc. ................................................... 8
(h) Guarantees, etc. .................................................. 8
(i) Partnerships, etc. ................................................ 8
(j) Insurance ......................................................... 8
(k) Pensions, etc. .................................................... 8
(I) Power of Collection and Litigation ................................ 8
(m) Issuance and Repurchase of Shares ................................. 9
(n) Offices ........................................................... 9
(o) Expenses .......................................................... 9
(p) Agents, etc. ...................................................... 9
(q) Accounts .......................................................... 9
(r) Valuation ......................................................... 9
(s) Indemnification ................................................... 9
(t) General ........................................................... 9

SECTION 3.2. Borrowings; Financings; Issuance of Securities ............ 10

i
<PAGE> 3
SECTION 3.3. Deposits ................................................... 10

SECTION 3.4. Allocations ................................................ 10

SECTION 3.5. Further Powers; Limitations ................................ 10

ARTICLE 4 TRUSTEES AND OFFICERS ...................................... 11

SECTION 4.1. Number, Designation, Election, Term, etc. .................. 11
(a) Initial Trustee .................................................... 11
(b) Number ............................................................. 11
(c) Election and Term .................................................. 11
(d) Resignation and Retirement ......................................... 12
(e) Removal ............................................................ 12
(f) Vacancies .......................................................... 12
(g) Acceptance of Trusts ............................................... 12
(h) Effect of Death, Resignation, etc. ................................. 12
(i) Conveyance ......................................................... 12
(j) No Accounting ...................................................... 13

SECTION 4.2. Trustees' Meetings; Participation by Telephone, etc. ....... 13

SECTION 4.3. Committees; Delegation ..................................... 13

SECTION 4.4. Officers ................................................... 13

SECTION 4.5. Compensation of Trustees and Officers ...................... 13

SECTION 4.6. Ownership of Shares and Securities of the Trust ............ 14

SECTION 4.7. Right of Trustees and Officers to Own Property or to Engage
in Business; Authority of Trustees to Permit Others to Do
Likewise ................................................... 14

SECTION 4.8. Reliance on Experts ........................................ 14

SECTION 4.9. Surety Bonds ............................................... 15

SECTION 4.10. Apparent Authority of Trustees and Officers ................ 15

SECTION 4.11. Other Relationships Not Prohibited ......................... 15

SECTION 4.12. Payment of Trust Expenses .................................. 15

SECTION 4.13. 0wnership of the Trust Property ............................ 16

ii
<PAGE> 4
SECTION 4.14. By-Laws .................................................... 16

ARTICLE 5 DELEGATION OF MANAGERIAL RESPONSIBILITIES .................. 16

SECTION 5.1. Appointment; Action by Less than All Trustees .............. 16

SECTION 5.2. Certain Contracts .......................................... 16
(a) Advisory ........................................................... 17
(b) Administration ..................................................... 17
(c) Underwriting ....................................................... 17
(d) Custodian .......................................................... 17
(e) Transfer and Dividend Disbursing Agent ............................. 18
(f) Shareholder Servicing .............................................. 18
(g) Accounting ......................................................... 18

Section 5.3. Distribution Arrangements .................................. 18

Section 5.4. Service Arrangements ....................................... 18

ARTICLE 6 SERIES AND SHARES .......................................... 18

SECTION 6.1. Description of Series and Shares ........................... 18
(a) General ............................................................ 18
(b) Establishment, etc. of Series; Authorization of Shares ............. 19
(c) Character of Separate Series and Shares Thereof .................... 19
(d) Consideration for Shares ........................................... 19
(e) Assets Belonging to Series ......................................... 20
(f) Liabilities of Series .............................................. 20
(g) Dividends .......................................................... 20
(h) Liquidation ........................................................ 21
(i) Voting ............................................................. 21
(j) Redemption by Shareholder .......................................... 21
(k) Redemption at the Option of the Trust .............................. 22
(I) Net Asset Value .................................................... 22
(m) Transfer ........................................................... 22
(n) Equality ........................................................... 23
(o) Rights of Fractional Shares ........................................ 23
(p) Conversion Rights .................................................. 23

SECTION 6.2. Ownership of Shares .......................................... 24

SECTION 6.3. Investments in the Trust ..................................... 24

SECTION 6.4. No Pre-emptive Rights ........................................ 24

iii
<PAGE> 5
SECTION 6.5. Status of Shares ........................................... 24

ARTICLE 7 SHAREHOLDERS' VOTING POWERS AND MEETINGS ................... 24

SECTION 7.1. Voting Powers .............................................. 24

SECTION 7.2. Number of Votes and Manner of Voting; Proxies .............. 25

SECTION 7.3. Meetings ................................................... 25

SECTION 7.4. Record Dates ............................................... 26

SECTION 7.5. Quorum and Required Vote ................................... 26

SECTION 7.6. Action by Written Consent .................................. 26

SECTION 7.7. Inspection of Records ...................................... 27

SECTION 7.8. Additional Provisions ...................................... 27

ARTICLE 8 LIMITATION OF LIABILITY; INDEMNIFICATION ................... 27

SECTION 8.1. Trustees, Shareholders, etc. Not Personally Liable; Notice.. 27

SECTION 8.2. Trustees' Good Faith Action; Expert Advice; No Bond
or Surety ................................................. 27

SECTION 8.3. Indemnification of Shareholders ............................ 28

SECTION 8.4. Indemnification of Trustees, Officers, etc. ................ 28

SECTION 8.5. Compromise Payment ......................................... 29

SECTION 8.6. Indemnification Not Exclusive, etc. ........................ 29

SECTION 8.7. Liability of Third Persons Dealing with Trustees ........... 29

ARTICLE 9 DURATION; REORGANIZATION; INCORPORATION; AMENDMENTS ........ 30

SECTION 9.1. Duration of Trust .......................................... 30

SECTION 9.2. Termination of Trust ....................................... 30

SECTION 9.3. Reorganization ............................................. 30

SECTION 9.4. Incorporation ............................................. 31

iv
<PAGE> 6
SECTION 9.5. Amendments; etc. ............................................. 31

SECTION 9.6. Filing of Copies of Declaration and Amendments ............... 31

ARTICLE 10 MISCELLANEOUS ................................................ 32

SECTION 10.1. Notices ...................................................... 32

SECTION 10.2. Governing Law ................................................ 32

SECTION 10.3. Counterparts ................................................ 32

SECTION 10.4. Reliance by Third Parties .................................... 32

SECTION 10.5. References; Headings ......................................... 32

SECTION 10.6. Provisions in Conflict With Law or Regulation ................ 32

SECTION 10.7. Use of the Name "Van Kampen American Capital" ................ 33

Signature ................................................................. 34

Acknowledgments ........................................................... 35

v
<PAGE> 7

AGREEMENT AND DECLARATION OF TRUST

VAN KAMPEN AMERICAN CAPITAL

LIFE INVESTMENT TRUST

As amended and restated as of June 21, 1995

This CONSENT TO AMENDMENT AND RESTATMENT, made as of this 21st day of
June, 1995, by the Trustees whose signatures are set forth below:

W I T N E S S E T H T H A T:

WHEREAS, the AGREEMENT AND DECLARATION OF TRUST of Van Kampen American
Capital Life Investment Trust, a trust organized as a business trust under
Delaware law (the "Trust"), was signed and delivered on May 10, 1995, by Van
Kampen American Capital, Inc. as Settlor (the "Settlor"), and Ronald A. Nyberg
as trustee (the "Initial Trustee"), in the city of Oakbrook Terrace, Illinois;
and

WHEREAS, a Certificate of Trust relating to the Trust was thereafter
filed in the offices of the Secretary of State of the State of Delaware; and

WHEREAS, Article IX, Sections 9.5 and 9.6 of the Declaration provide
certain procedures for the amendment and restatement thereof; and

WHEREAS, the Trustees have determined that it is desirable and in the
best interests of the Trust and the Shareholders that the Declaration be
amended and restated as herein provided.

NOW, THEREFORE, the undersigned, being at least a Majority of the
Trustees, do hereby consent, pursuant to Section 9.5 of the Declaration, to the
first amendment and restatement of the Agreement and Declaration of Trust, and
hereby declare, for the benefit of all Persons who shall hereafter become
holders of Shares of the Trust (or of any Series thereof), that the Trustees
will hold the sum delivered to the Initial Trustee upon his execution of the
Declaration, and all other and further cash, securities and other property of
every type and description which they may in any way acquire in their capacity
as such Trustees, together with the income therefrom and the proceeds thereof,
IN TRUST NEVERTHELESS, to manage and dispose of the same for the benefit of the
holders from time to time of the Shares being issued and to be issued hereunder
and in the manner and subject to the provisions hereof, to wit:

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<PAGE> 8
ARTICLE I

THE TRUST

SECTION 1.1 Name. The name of the Trust shall be

"VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST"

and so far as may be practicable, the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued under that name,
which name (and the word "Trust" wherever used in this Agreement and
Declaration of Trust, except where the context otherwise requires) shall refer
to the Trustees in their capacity as Trustees, and not individually or
personally, and shall not refer to the officers, agents or employees of the
Trust or of such Trustees, or to the holders of the Shares of the Trust or any
Series. If the Trustees determine that the use of such name is not practicable,
legal or convenient at any time or in any jurisdiction, or if the Trust is
required to discontinue the use of such name pursuant to Section 10.7 hereof,
then subject to that Section, the Trustees may use such other designation, or
they may adopt such other name for the Trust as they deem proper, and the Trust
may hold property and conduct its activities under such designation or name.

SECTION 1.2. Location. The Trust shall maintain a registered office in
the State of Delaware and may have such other offices or places of business as
the Trustees may from time to time determine to be necessary or expedient.

SECTION 1.3. Nature of Trust. The Trust shall be a trust with
transferable shares under the laws of The State of Delaware, of the type
defined in Title 12, Chapter 38, Section 3801 of the Delaware Code as a
business trust. The Trust is not intended to be, shall not be deemed to be, and
shall not be treated as, a general partnership, limited partnership, joint
venture, corporation or joint stock company. The Shareholders shall be
beneficiaries and their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them hereunder.

SECTION 1.4. Definitions. As used in this Agreement and Declaration of
Trust, the following terms shall have the meanings set forth below unless the
context thereof otherwise requires:

"Accounting Agent" shall have the meaning designated in Section 5.2(g)
hereof.

"Administrator" shall have the meaning designated in Section 5.2(b)
hereof.

"Affiliated Person" shall have the meaning assigned to it in the 1940
Act.

"By-Laws" shall mean the By-Laws of the Trust, as amended from time to
time.

"Certificate of Designation" shall have the meaning designated in
Section 6.1 hereof.

"Certificate of Termination" shall have the meaning designated in
Section 6.1 hereof.

"Class" or "Classes" shall mean, with respect to the Trust (of any
Series thereof), any unissued Shares of the Trust (or such Series) in respect
of which the Trustees shall from time to time fix and determine any special
provisions relating to sales charges, any rights of redemption and the price,
terms and manner of redemption, special and relative rights as to dividends and
other distributions and on

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<PAGE> 9
liquidation, sinking or purchase fund provisions, conversion rights,
and conditions under which the Shareholders of such Class shall have separate
voting rights or no voting rights.

"Commission" shall have the same meaning as in the 1940 Act.

"Contracting Party" shall have the meaning designated in the preamble
to Section 5.2 hereof.

"Conversion Date" shall mean with respect to Shares of any Class that
are convertible automatically into Shares of any other Class of the Trust (or
Series thereof) the date fixed by the Trustees for such conversion.

"Covered Person" shall have the meaning designated in Section 8.4
hereof.

"Custodian" shall have the meaning designated in Section 5.2(d) hereof.

"Declaration" and "Declaration of Trust" shall mean this Agreement and
Declaration of Trust and all amendments or modifications thereof as from time
to time in effect. This Agreement and Declaration of Trust is the "governing
instrument" of the Trust within the meaning of the laws of the State of
Delaware with respect to Delaware Business Trusts. References in this
Agreement and Declaration of Trust to "hereof", "herein" and "hereunder" shall
be deemed to refer to the Declaration of Trust generally, and shall not be
limited to the particular text, Article or Section in which such words appear.

"Disabling Conduct" shall have the meaning designated in Section 8.4
hereof.

"Distributor" shall have the meaning designated in Section 5.2(c)
hereof.

"Dividend Disbursing Agent" shall have the meaning designated in
Section 5.2(e) hereof.

"General Items" shall have the meaning defined in Section 6.2(a)
hereof.

"Initial Trustee" shall have the meaning defined in the preamble
hereto.

"Investment Advisor" shall have the meaning defined in Section 5.2(a)
hereof.

"Majority of the Trustees" shall mean a majority of the Trustees in
office at the time in question. At any time at which there shall be only one
(1) Trustee in office, such term shall mean such Trustee.

"Majority Shareholder Vote," as used with respect to (a) the election
of any Trustee at a meeting of Shareholders, shall mean the vote for the
election of such Trustee of a plurality of all outstanding Shares of the Trust,
without regard to Series, represented in person or by proxy and entitled to
vote thereon, provided that a quorum (as determined in accordance with the
By-Laws) is present, (b) any other action required or permitted to be taken by
Shareholders, shall mean the vote for such action of the holders of that
majority of all outstanding Shares (or, where a separate vote of Shares of any
particular Series is to be taken, the affirmative vote of that majority of the
outstanding Shares of that Series) of the Trust which consists of: (i) a
majority of all Shares (or of Shares of the particular Series) represented in
person or by proxy and entitled to vote on such action at the meeting of
Shareholders at which such action is to be taken, provided that a quorum (as
determined in accordance with the By-Laws) is present; or (ii) if such action
is to be taken by written consent of Shareholders, a majority of all Shares (or
of Shares of the particular Series) issued and outstanding and entitled to vote
on such action; provided that (iii) as used

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<PAGE> 10
with respect to any action requiring the affirmative vote of "a
majority of the outstanding voting securities," as the quoted phrase is defined
in the 1940 Act, of the Trust or of any Series, "Majority Shareholder Vote"
means the vote for such action at a meeting of Shareholders of the smallest
majority of all outstanding Shares of the Trust (or of Shares of the particular
Series) entitled to vote on such action which satisfies such 1940 Act voting
requirement.

"1940 Act" shall mean the provisions of the Investment Company Act of
1940 and the rules and regulations thereunder, both as amended from time to
time, and any order or orders thereunder which may from time to time be
applicable to the Trust.

"Person" shall mean and include individuals, as well as corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, banks, trust companies, land trusts, business trusts or
other organizations established under the laws of any jurisdiction, whether or
not considered to be legal entities, and governments and agencies and political
subdivisions thereof.

"Principal Underwriter" shall have the meaning designated in Section
5.2(c) hereof.

"Prospectus," as used with respect to the Trust (or the Shares of a
particular Series), shall mean the prospectus relating to the Trust (or such
Series) which constitutes part of the currently effective Registration
Statement of the Trust under the Securities Act of 1933, as such prospectus may
be amended or supplemented from time to time.

"Securities" shall have the same meaning ascribed to that term in the
Securities Act of 1993.

"Series" shall mean one or more of the series of Shares authorized by
the Trustees to represent the beneficial interest in one or more separate
components of the assets of the Trust which are now or hereafter established
and designated under or in accordance with the provisions of Article 6 hereof.

"Settlor" shall have the meaning defined in the preamble hereto.

"Shareholder" shall mean as of any particular time any Person shown of
record at such time on the books of the Trust as a holder of outstanding Shares
of any Series, and shall include a pledgee into whose name any such Shares are
transferred in pledge.

"Shareholder Servicing Agent" shall have the meaning designated in
Section 5.2(f) hereof.

"Shares" shall mean the transferable units into which the beneficial
interest in the Trust and each Series of the Trust (as the context may require)
shall be divided from time to time, and includes fractions of Shares as well as
whole Shares. All references herein to "Shares" which are not accompanied by a
reference to any particular Series or Class shall be deemed to apply to
outstanding Shares without regard to Series or Class.

"Single Class Voting," as used with respect to any matter to be acted
upon at a meeting or by written consent of Shareholders, shall mean a style of
voting in which each holder of one or more Shares shall be entitled to one vote
on the matter in question for each Share standing in his name on the records of
the Trust, irrespective of Series or Class of a Series, and all outstanding
Shares of all Series vote as a single class.

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<PAGE> 11
"Statement of Additional Information," as used with respect to the
Trust (or any Series), shall mean the statement of additional information
relating to the Trust (or such Series) which constitutes part of the currently
effective Registration Statement of the Trust under the Securities Act of 1933,
as such statement of additional information may be amended or supplemented from
time to time.

"Transfer Agent" shall have the meaning defined in Section 5.2(e)
hereof.

"Trust" shall mean the trust named in Section 1.1 hereof.

"Trust Property" shall mean, as of any particular time, any and all
property which shall have been transferred, conveyed or paid to the Trust or
the Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
such time is owned or held by, or for the account of, the Trust or the
Trustees, without regard to the Series to which such property is allocated.

"Trustees" shall mean, collectively, the Initial Trustee, so long as he
shall continue in office, and all other individuals who at the time in question
have been duly elected or appointed as Trustees of the Trust in accordance with
the provisions hereof and who have qualified and are then in office. At any
time at which there shall be only one (I) Trustee in office, such term shall
mean such single Trustee.

SECTION 1.5. Real Property to be Converted into Personal Property.
Notwithstanding any other provision hereof, any real property at any time
forming part of the Trust Property shall be held in trust for sale and
conversion into personal property at such time or times and in such manner and
upon such terms as the Trustees shall approve, but the Trustees shall have
power until the termination of this Trust to postpone such conversion as long
as they in their uncontrolled discretion shall think fit, and for the purpose
of determining the nature of the interest of the Shareholders therein, all such
real property shall at all times be considered as personal property.

ARTICLE 2

PURPOSE OF THE TRUST

The purpose of the Trust shall be to (a) manage, conduct, operate and
carry on the business of an investment company; (b) subscribe for, invest in,
reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign,
transfer, exchange, distribute or otherwise deal in or dispose of any and all
sorts of property, tangible or intangible, including but not limited to
Securities of any type whatsoever, whether equity or nonequity, of any issuer,
evidences of indebtedness of any person and any other rights, interest,
instruments or property of any sort to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investment
of every kind and description, including without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more Persons to exercise any of said rights, powers and privileges in respect
of any of said investments. The Trustees shall not be limited by any law
limiting the investments which may be made by fiduciaries.

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<PAGE> 12
ARTICLE 3

POWERS OF THE TRUSTEES

SECTION 3.1. Powers in General. The Trustees shall have, without other
or further authorization, full, entire, exclusive and absolute power, control
and authority over, and management of, the business of the Trust and over the
Trust Property, to the same extent as if the Trustees were the sole owners of
the business and property of the Trust in their own right, and with such powers
of delegation as may be permitted by this Declaration, subject only to such
limitations as may be expressly imposed by this Declaration of Trust or by
applicable law. The enumeration of any specific power or authority herein shall
not be construed as limiting the aforesaid power or authority or any specific
power or authority. Without limiting the foregoing; they may select, and from
time to time change, the fiscal year of the Trust; they may adopt and use a
seal for the Trust, provided that unless otherwise required by the Trustees, it
shall not be necessary to place the seal upon, and its absence shall not impair
the validity of, any document, instrument or other paper executed and delivered
by or on behalf of the Trust; they may from time to time in accordance with the
provisions of Section 6.1 hereof establish one or more Series to which they may
allocate such of the Trust Property, subject to such liabilities, as they shall
deem appropriate, each such Series to be operated by the Trustees as a separate
and distinct investment medium and with separately defined investment
objectives and policies and distinct investment purposes, all as established by
the Trustees, or from time to time changed by them; they may as they consider
appropriate elect and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee; they may appoint from their own number, and
terminate, any one or more committees consisting of one or more Trustees,
including without implied limitation an Executive Committee, which may, when
the Trustees are not in session and subject to the 1940 Act, exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
in accordance with Section 5.2 they may employ one or more Investment Advisers,
Administrators and Custodians and may authorize any such service provider to
employ one or more other or service providers and to deposit all or any part of
such assets in a system or systems for the central handling of Securities,
retain Transfer, Dividend Disbursing, Accounting or Shareholder Servicing
Agents or any of the foregoing, provide for the distribution of Shares by the
Trust through one or more Distributors, Principal Underwriters or otherwise,
set record dates or times for the determination of Shareholders entitled to
participate in, benefit from or act with respect to various matters; and in
general they may delegate to any officer of the Trust, to any Committee of the
Trustees and to any employee, Investment Adviser, Administrator, Distributor,
Custodian, Transfer Agent, Dividend Disbursing Agent, or any other agent or
consultant of the Trust, such authority, powers, functions and duties as they
consider desirable or appropriate for the conduct of the business and affairs
of the Trust, including without implied limitation the power and authority to
act in the name of the Trust and of the Trustees, to sign documents and to act
as attorney-in-fact for the Trustees. Without limiting the foregoing and to the
extent not inconsistent with the 1940 Act or other applicable law, the Trustees
shall have power and authority:

(a) Investments. To subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute
or otherwise deal in or dispose of any and all sorts of property, tangible or
intangible, including but not limited to Securities of any type whatsoever,
whether equity or nonequity, of any issuer, evidences of indebtedness of any
person and any other rights, interest, instruments or property of any sort, to
exercise any and all rights, powers and privileges of ownership or

<PAGE> 13
interest in respect of any and all such investments of every kind and
description, including without limitation the right to consent and otherwise
act with respect thereto, with power to designate one or more Persons to
exercise any of said rights, powers and privileges in respect of any of said
investments, in every case without being limited by any law limiting the
investments which may be made by fiduciaries;

(b) Disposition of Assets. Upon such terms and conditions as they deem
best, to lend, sell, exchange, mortgage, pledge, hypothecate, grant security
interests in, encumber, negotiate, convey, transfer or otherwise dispose of,
and to trade in, any and all of the Trust Property, free and clear of all
trusts, for cash or on terms, with or without advertisement, and on such terms
as to payment, security or otherwise, all as they shall deem necessary or
expedient;

(c) Ownership Powers. To vote or give assent, or exercise any and all
other rights, powers and privileges of ownership with respect to, and to
perform any and all duties and obligations as owners of, any Securities or
other property forming part of the Trust Property, the same as any individual
might do; to exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of Securities, and to receive powers of
attorney from, and to execute and deliver proxies or powers of attorney to,
such Person or Persons as the Trustees shall deem proper, receiving from or
granting to such Person or Persons such power and discretion with relation to
Securities or other property of the Trust, all as the Trustees shall deem
proper;

(d) Form of Holding. To hold any Security or other property in a form
not indicating any trust, whether in bearer, unregistered or other negotiable
form, or in the name of the Trustees or of the Trust, or of the Series to which
such Securities or property belong, or in the name of a Custodian, subcustodian
or other nominee or nominees, or otherwise, upon such terms, in such manner or
with such powers, as the Trustees may determine, and with or without indicating
any trust or the interest of the Trustees therein;

(e) Reorganizations etc. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or issuer, any
Security of which is or was held in the Trust or any Series; to consent to any
contract, lease, mortgage, purchase or sale of property by such corporation or
issuer, and to pay calls or subscriptions with respect to any Security forming
part of the Trust Property;

(f) Voting Trusts, etc. To join with other holders of any Securities in
acting through a committee, depository, voting trustee or otherwise, and in
that connection to deposit any Security with, or transfer any Security to, any
such committee, depository or trustee, and to delegate to them such power and
authority with relation to any Security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depository or trustee as the Trustees shall deem proper;

(g) Contracts. etc. To enter into, make and perform all such
obligations, contracts, agreements and undertakings of every kind and
description, with any Person or Persons, as the Trustees shall in their
discretion deem expedient in the conduct of the business of the Trust, for such
terms as they shall see fit, whether or not extending beyond the term of office
of the Trustees, or beyond the possible expiration of the Trust; to amend,
extend, release or cancel any such obligations, contracts, agreements or
understandings; and to execute, acknowledge, deliver and record all written
instruments which they may deem necessary or expedient in the exercise of their
powers;

(h) Guarantees. etc. To endorse or guarantee the payment of any notes
or other obligations of any Person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof;

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<PAGE> 14
and to mortgage and pledge the Trust Property or any part thereof to secure any
of or all such obligations;

(i) Partnerships, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or association;

(j) Insurance. To purchase and pay for entirely out of Trust Property
such insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, Investment Advisers, managers,
Administrators, Distributors, Principal Underwriters, or other independent
contractors, or any thereof (or any Person connected therewith), of the Trust,
individually, against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such Person
in any such capacity, whether or not the Trust would have the power to
indemnify such Person against such liability;

(k) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit sharing, share bonus, share purchase, savings, thrift, deferred
compensation and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity contracts as
a means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust;

(I) Power of Collection and Litigation. To collect, sue for and receive
all sums of money coming due to the Trust, to employ counsel, and to commence,
engage in, prosecute, intervene in, join, defend, compound, compromise, adjust
or abandon, in the name of the Trust, any and all actions, suits, proceedings,
disputes, claims, controversies, demands or other litigation or legal
proceedings relating to the Trust, the business of the Trust, the Trust
Property, or the Trustees, officers, employees, agents and other independent
contractors of the Trust, in their capacity as such, at law or in equity, or
before any other bodies or tribunals, and to compromise, arbitrate or otherwise
adjust any dispute to which the Trust may be a party, whether or not any suit
is commenced or any claim shall have been made or asserted. Except to the
extent required for a Delaware Business Trust, the Shareholders shall have no
power to vote as to whether or not a court action, legal proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders.

(m) Issuance and Repurchase of Shares. To authorize, issue, sell,
repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares of any Series, and, subject to Article 6
hereof, to apply to any such repurchase, redemption, retirement, cancellation
or acquisition of Shares of any Series, any of the assets belonging to the
Series to which such Shares relate, whether constituting capital or surplus or
otherwise, to the full extent now or hereafter permitted by applicable law;
provided that any Shares belonging to the Trust shall not be voted, directly or
indirectly;

(n) Offices. To have one or more offices, and to carry on all or any of
the operations and business of the Trust, in any of the States, Districts or
Territories of the United States, and in any and all foreign countries, subject
to the laws of such State, District, Territory or country;

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<PAGE> 15
(o) Expenses. To incur and pay any and all such expenses and charges as
they may deem advisable (including without limitation appropriate fees to
themselves as Trustees), and to pay all such sums of money for which they may
be held liable by way of damages, penalty, fine or otherwise;

(p) Agents, etc. To retain and employ any and all such servants,
agents, employees, attorneys, brokers, Investment Advisers, accountants,
architects, engineers, builders, escrow agents, depositories, consultants,
ancillary trustees, custodians, agents for collection, insurers, banks and
officers, as they think best for the business of the Trust or any Series, to
supervise and direct the acts of any of the same, and to fix and pay their
compensation and define their duties;

(q) Accounts. To determine, and from time to time change, the method or
form in which the accounts of the Trust or any Series shall be kept;

(r) Valuation. Subject to the requirements of the 1940 Act, to
determine from time to time the value of all or any part of the Trust Property
and of any services, Securities, property or other consideration to be
furnished to or acquired by the Trust, and from time to time to revalue all or
any part of the Trust Property in accordance with such appraisals or other
information as is, in the Trustees' sole judgment, necessary and satisfactory;

(s) Indemnification. In addition to the mandatory indemnification
provided for in Article 8 hereof and to the extent permitted by law, to
indemnify or enter into agreements with respect to indemnification with any
Person with whom this Trust has dealings, including, without limitation, any
independent contractor, to such extent as the Trustees shall determine; and

(t) General. Subject to the fundamental policies in effect from time to
time with respect to the Trust, to do all such other acts and things and to
conduct, operate, carry on and engage in such other lawful businesses or
business activities as they shall in their sole and absolute discretion
consider to be incidental to the business of the Trust or any Series as an
investment company, and to exercise all powers which they shall in their
discretion consider necessary, useful or appropriate to carry on the business
of the Trust or any Series, to promote any of the purposes for which the Trust
is formed, whether or not such things are specifically mentioned herein, in
order to protect or promote the interests of the Trust or any Series, or
otherwise to carry out the provisions of this Declaration.

SECTION 3.2. Borrowings; Financings: Issuance of Securities. The
Trustees have power, subject to the fundamental policies in effect from time to
time with respect to the Trust, to borrow or in any other manner raise such sum
or sums of money, and to incur such other indebtedness for goods or services,
or for or in connection with the purchase or other acquisition of property, as
they shall deem advisable for the purposes of the Trust, in any manner and on
any terms, and to evidence the same by negotiable or nonnegotiable Securities
which may mature at any time or times, even beyond the possible date of
termination of the Trust; to issue Securities of any type for such cash,
property, services or other considerations, and at such time or times and upon
such terms, as they may deem advisable; and to reacquire any such Securities.
Any such Securities of the Trust may, at the discretion of the Trustees, be
made convertible into Shares of any Series, or may evidence the right to
purchase, subscribe for or otherwise acquire Shares of any Series, at such
times and on such terms as the Trustees may prescribe.

SECTION 3.3. Deposits. Subject to the requirements of the 1940 Act, the
Trustees shall have power to deposit any moneys or Securities included in the
Trust Property with any one or more banks, trust companies or other banking
institutions, whether or not such deposits will draw interest. Such deposits

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<PAGE> 16
are to be subject to withdrawal in such manner as the Trustees may
determine, and the Trustees shall have no responsibility for any loss which may
occur by reason of the failure of the bank, trust company or other banking
institution with which any such moneys or Securities have been deposited,
except as provided in Section 8.2 hereof.

SECTION 3.4. Allocations. The Trustees shall have power to determine
whether moneys or other assets received by the Trust shall be charged or
credited to income or capital, or allocated between income and capital,
including the power to amortize or fail to amortize any part or all of any
premium or discount, to treat any part or all of the profit resulting from the
maturity or sale of any asset, whether purchased at a premium or at a discount,
as income or capital, or to apportion the same between income and capital, to
apportion the sale price of any asset between income and capital, and to
determine in what manner any expenses or disbursements are to be borne as
between income and capital, whether or not in the absence of the power and
authority conferred by this Section 3.4 such assets would be regarded as income
or as capital or such expense or disbursement would be charged to income or to
capital; to treat any dividend or other distribution on any investment as
income or capital, or to apportion the same between income and capital; to
provide or fail to provide reserves, including reserves for depreciation,
amortization or obsolescence in respect of any Trust Property in such amounts
and by such methods as they shall determine; to allocate less than all of the
consideration paid for Shares of any Series to surplus with respect to the
Series to which such Shares relate and to allocate the balance thereof to
paid-in capital of that Series, and to reallocate such amounts from time to
time; all as the Trustees may reasonably deem proper.

SECTION 3.5. Further Powers: Limitations. The Trustees shall have power
to do all such other matters and things, and to execute all such instruments,
as they deem necessary, proper or desirable in order to carry out, promote or
advance the interests of the Trust, although such matters or things are not
herein specifically mentioned. Any determination as to what is in the interests
of the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration of Trust, the presumption shall
be in favor of a grant of power to the Trustees. The Trustees shall not be
required to obtain any court order to deal with the Trust Property. The
Trustees may limit their right to exercise any of their powers through express
restrictive provisions in the instruments evidencing or providing the terms for
any Securities of the Trust or in other contractual instruments adopted on
behalf of the Trust.

ARTICLE 4

TRUSTEES AND OFFICERS

SECTION 4.1. Number. Designation, Election. Term, etc.

(a) Initial Trustee. Upon his execution of this Agreement and
Declaration of Trust dated May 10, 1995 or a counterpart hereof or some other
writing in which he accepted such Trusteeship and agreed to the provisions
hereof, the individual whose signature is affixed thereto as Initial Trustee
became the Initial Trustee thereof.

(b) Number. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase (to not more than fourteen (14)) or
decrease the number of Trustees to a number other than the number theretofore
determined by a written instrument signed by a Majority

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(or a supermajority if required by the By-Laws) of the Trustees). No
decrease in the number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a Trustee pursuant
to subsection (e) of this Section 4.1.

(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders immediately
prior to the initial issuance of shares of the Trust in a public offering and
the term of office of any Trustees in office before such election shall
terminate at the time of such election. Subject to Section 16(a) of the 1940
Act and to the preceding sentence of this subsection (c) and to any
requirements specified in the By-Laws, the Trustees shall have the power to set
and alter the terms of office of the Trustees, and at any time to lengthen or
shorten their own terms or make their terms of unlimited duration, to elect
their own successors and, pursuant to subsection (f) of this Section 4.1, to
appoint Trustees to fill vacancies; provided that Trustees shall be elected by
a Majority Shareholder Vote at any such time or times as the Trustees shall
determine that such action is required under Section 16(a) of the 1940 Act or,
if not so required, that such action is advisable; and further provided that,
after the initial election of Trustees by the Shareholders, the term of office
of any incumbent Trustee shall continue until the termination of this Trust or
his earlier death, resignation, retirement, bankruptcy, adjudicated
incompetency or other incapacity or removal, or if not so terminated, until the
election of such Trustee's successor in office has become effective in
accordance with this subsection (c).

(d) Resignation and Retirement. Any Trustee may resign his trust or
retire as a Trustee, by a written instrument signed by him and delivered to the
other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later date as is
specified in such instrument.

(e) Removal. Any Trustee may be removed: (i) with cause at any time by
written instrument, signed by at least two thirds (2/3) of the number of
Trustees prior to such removal, specifying the date upon which such removal
shall become effective; or (ii) by vote of Shareholders holding a majority of
the Shares of the Trust then outstanding, cast in person or by proxy at any
meeting called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than a majority of the Shares of the Trust then
outstanding. Notwithstanding any other provisions set forth in this Declaration
of Trust, this Section 4.1(e) may not be amended (either directly or indirectly
through a reorganization) without the approval of (i) 80% of the Trustees then
in office or (ii) by vote of Shareholders holding a majority of the Shares of
the Trust then outstanding.

(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including an increase in the number of Trustees, may (but need not
unless required by the 1940 Act) be filled by a Majority (or a supermajority if
required by the By-Laws) of the Trustees, subject to the provisions of Section
16(a) of the 1940 Act, through the appointment in writing of such other
individual as such remaining Trustees in their discretion shall determine;
provided that if there shall be no Trustees in office, such vacancy or
vacancies shall be filled by Majority Shareholders Vote. Any such appointment
or election shall be effective upon such individual's written acceptance of his
appointment as a Trustee and his agreement to be bound by the provisions of
this Declaration of Trust, except that any such appointment in anticipation of
a vacancy to occur by reason of retirement, resignation or increase in the
number of Trustees to be effective at a later date shall become effective only
at or after the effective date of said retirement, resignation or increase in
the number of Trustees.

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(g) Acceptance of Trusts. Whenever any conditions to the appointment or
election of any individual as a Trustee hereunder who was not, immediately
prior to such appointment or election, acting as a Trustee shall have been
satisfied, such individual shall become a Trustee and the Trust estate shall
vest in the new Trustee, together with the continuing Trustees, without any
further act or conveyance. Such new Trustee shall accept such appointment or
election in writing and agree in such writing to be bound by the provisions
hereof, but the execution of such writing shall not be requisite to the
effectiveness of the appointment or election of a new Trustee.

(h) Effect of Death. Resignation, etc. No vacancy, whether resulting
from the death, resignation, retirement, bankruptcy, adjudicated incompetency,
incapacity, or removal of any Trustee, an increase in the number of Trustees or
otherwise, shall operate to annul or terminate the Trust hereunder or to revoke
or terminate any existing agency or contract created or entered into pursuant
to the terms of this Declaration of Trust. Until such vacancy is filled as
provided in this Section 4.1, the Trustees in office (if any), regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration. Upon
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require in
order to effect the purpose of this Paragraph.

(i) Convevance. In the event of the resignation or removal of a
Trustee or his otherwise ceasing to be a Trustee, such former Trustee or his
legal representative shall, upon request of the continuing Trustees, execute
and deliver such documents as may be required for the purpose of consummating
or evidencing the conveyance to the Trust or the remaining Trustees of any
Trust Property held in such former Trustee's name, but the execution and
delivery of such documents shall not be requisite to the vesting of title to
the Trust Property in the remaining Trustees, as provided in subsection (g) of
this Section 4.1 and in Section 4.13 hereof.

(j) No Accounting. Except to the extent required by the 1940 Act or
under circumstances which would justify his removal for cause, no Person
ceasing to be a Trustee (nor the estate of any such Person) shall be required
to make an accounting to the Shareholders or remaining Trustees upon such
cessation.

SECTION 4.2. Trustees' Meetings: Participation by Telephone. etc.
Annual and special meetings may be held from time to time, in each case, upon
the call of such officers as may be thereunto authorized by the By-Laws or vote
of the Trustees, or by any three (3) Trustees, or pursuant to a vote of the
Trustees adopted at a duly constituted meeting of the Trustees, and upon such
notice as shall be provided in the By-Laws. Any such meeting may be held within
or without the state of Delaware. The Trustees may act with or without a
meeting, and a written consent to any matter, signed by all of the Trustees,
shall be equivalent to action duly taken at a meeting of the Trustees, duly
called and held. Except as otherwise provided by the 1940 Act or other
applicable law, or by this Declaration of Trust or the By-Laws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present at
a meeting of Trustees (a quorum, consisting of at least a Majority of the
Trustees, being present), within or without Delaware. If authorized by the
By-Laws, all or any one or more Trustees may participate in a meeting of the
Trustees or any Committee thereof by means of conference telephone or similar
means of communication by means of which all Persons participating in the
meeting can hear each other, and participation in a meeting pursuant to such
means of communication shall constitute presence in person at such meeting. The
minutes of any meeting thus held shall be prepared in the same manner as a
meeting at which all participants were present in person.

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SECTION 4.3. Committees; Delegation. The Trustees shall have power,
consistent with their ultimate responsibility to supervise the affairs of the
Trust, to delegate from time to time to one or more other Committees, or to any
single Trustee, the doing of such things and the execution of such deeds or
other instruments, either in the name of the Trust or the names of the Trustees
or as their attorney or attorneys in fact, or otherwise as the Trustees may
from time to time deem expedient, and any agreement, deed, mortgage, lease or
other instrument or writing executed by the Trustee or Trustees or other Person
to whom such delegation was made shall be valid and binding upon the Trustees
and upon the Trust.

SECTION 4.4. Officers. The Trustees shall annually elect such officers
or agents, who shall have such powers, duties and responsibilities as the
Trustees may deem to be advisable, and as they shall specify by resolution or
in the By-Laws. Except as may be provided in the By-Laws, any officer elected
by the Trustees may be removed at any time with or without cause. Any two (2)
or more offices may be held by the same individual.

SECTION 4.5. Compensation of Trustees and Officers. The Trustees shall
fix the compensation of all officers and Trustees. Without limiting the
generality of any of the provisions hereof, the Trustees shall be entitled to
receive reasonable compensation for their general services as such, and to fix
the amount of such compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including legal, accounting,
or other professional services, as they in good faith may deem reasonable. No
Trustee or officer resigning (except where a right to receive compensation for
a definite future period shall be expressly provided in a written agreement
with the Trust, duly approved by the Trustees) and no Trustee or officer
removed shall have any right to any compensation as such Trustee or officer for
any period following his resignation or removal, or any right to damages on
account of his removal, whether his compensation be by the month, or the year
or otherwise.

SECTION 4.6. Ownership of Shares and Securities of the Trust. Any
Trustee, and any officer, employee or agent of the Trust, and any organization
in which any such Person is interested, may acquire, own, hold and dispose of
Shares of any Series and other Securities of the Trust for his or its
individual account, and may exercise all rights of a holder of such Shares or
Securities to the same extent and in the same manner as if such Person were not
such a Trustee, officer, employee or agent of the Trust; subject, in the case
of Trustees and officers, to the same limitations as directors or officers (as
the case may be) of a Delaware business corporation; and the Trust may issue
and sell or cause to be issued and sold and may purchase any such Shares or
other Securities from any such Person or any such organization, subject only to
the general limitations, restrictions or other provisions applicable to the
sale or purchase of Shares of such Series or other Securities of the Trust
generally.

SECTION 4.7. Right of Trustees and Officers to Own Property or to
Engage in Business; Authority of Trustees to Permit Others to Do Likewise. The
Trustees, in their capacity as Trustees, and (unless otherwise specifically
directed by vote of the Trustees) the officers of the Trust in their capacity
as such, shall not be required to devote their entire time to the business and
affairs of the Trust. Except as otherwise specifically provided by vote of the
Trustees, or by agreement in any particular case, any Trustee or officer of the
Trust may acquire, own, hold and dispose of, for his own individual account,
any property, and acquire, own, hold, carry on and dispose of, for his own
individual account, any business entity or business activity, whether similar
or dissimilar to any property or business entity or business activity invested
in or carried on by the Trust, and without first offering the same as an
investment opportunity to the Trust, and may exercise all rights in respect
thereof as if he were not a Trustee or officer of the Trust. The Trustees shall
also have power, generally or in specific cases, to permit

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employees or agents of the Trust to have the same rights (or lesser
rights) to acquire, hold, own and dispose of property and businesses, to carry
on businesses, and to accept investment opportunities without offering them to
the Trust, as the Trustees have by virtue of this Section 4.7.

SECTION 4.8. Reliance on Experts. The Trustees and officers may consult
with counsel, engineers, brokers, appraisers, auctioneers, accountants,
investment bankers, securities analysts or other Persons (any of which may be a
firm in which one or more of the Trustees or officers is or are members or
otherwise interested) whose profession gives authority to a statement made by
them on the subject in question, and who are reasonably deemed by the Trustees
or officers in question to be competent, and the advice or opinion of such
Persons shall be full and complete personal protection to all of the Trustees
and officers in respect of any action taken or suffered by them in good faith
and in reliance on or in accordance with such advice or opinion. In discharging
their duties, Trustees and officers, when acting in good faith, may rely upon
financial statements of the Trust represented to them to be correct by any
officer of the Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant fairly to present
the financial position of the Trust. The Trustees and officers may rely, and
shall be personally protected in acting, upon any instrument or other document
believed by them to be genuine.

SECTION 4.9. Surety Bonds. No Trustee, officer, employee or agent of
the Trust shall, as such, be obligated to give any bond or surety or other
security for the performance of any of his duties, unless required by
applicable law or regulation, or unless the Trustees shall otherwise determine
in any particular case.

SECTION 4.10. Apparent Authority of Trustees and Officers. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by such
officer, or to make inquiry concerning or be liable for the application of
money or property paid, loaned or delivered to or on the order of the Trustees
or of such officer.

SECTION 4.11. Other Relationships Not Prohibited. The fact that:

(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party (as defined in Section 5.2 hereof), or of or
for any parent or affiliate of any Contracting Party, or that the
Contracting Party or any parent or affiliate thereof is a Shareholder
or has an interest in the Trust or any Series, or that

(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or have other business or interests,

shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust
and/or the Trustees or disqualify any Shareholder, Trustee or officer of the
Trust from voting upon or executing the same or create any liability or
accountability to the Trust or to the holders of Shares of any Series; provided
that, in the case of any relationship or interest referred to in the preceding
clause (i) on the part of any Trustee or officer of the Trust, either (x) the
material facts as to such relationship or interest have been disclosed to or
are known by the Trustees not having any such relationship or interest and the
contract involved is approved in good faith by a majority

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of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of all
of the Trustees), (y) the material facts as to such relationship or interest
and as to the contract have been disclosed to or are known by the Shareholders
entitled to vote thereon and the contract involved is specifically approved in
good faith by vote of the Shareholders, or (z) the specific contract involved
is fair to the Trust as of the time it is authorized, approved or ratified by
the Trustees or by the Shareholders.

SECTION 4.12. Payment of Trust Expenses. The Trustees are authorized to
pay or to cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, and according to any
allocation to a particular Series and Class made by them pursuant to Section
6.1(f) hereof, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the business and affairs of the Trust or in
connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, Investment Adviser, Administrator, Distributor,
Principal Underwriter, auditor, counsel, Custodian, Transfer Agent, Dividend
Disbursing Agent, Accounting Agent, Shareholder Servicing Agent, and such other
agents, consultants, and independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur.

SECTION 4.13. Ownership of the Trust Property. Legal title to all the
Trust Property shall be vested in the Trustees as joint tenants, except that
the Trustees shall have power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees, or in the name of the
Trust, or of any particular Series, or in the name of any other Person as
nominee, on such terms as the Trustees may determine; provided that the
interest of the Trust and of the respective Series therein is appropriately
protected. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may hereafter become a Trustee.
Upon the termination of the term of office of a Trustee as provided in Section
4.1(c), (d) or (e) hereof, such Trustee shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to Section 4.1(i) hereof.

SECTION 4.14. By-Laws. The Trustees may adopt and from time to time
amend or repeal By-Laws for the conduct of the business of the Trust.

ARTICLE 5

DELEGATION OF MANAGERIAL RESPONSIBILITIES

SECTION 5.1. Appointment; Action by Less than All Trustees. The
Trustees shall be responsible for the general operating policy of the Trust and
for the general supervision of the business of the Trust conducted by officers,
agents, employees or advisers of the Trust or by independent contractors, but
the Trustees shall not be required personally to conduct all the business of
the Trust and, consistent with their ultimate responsibility as stated herein,
the Trustees may appoint, employ or contract with one or more officers,
employees and agents to conduct, manage and/or supervise the operations of the
Trust, and may grant or delegate such authority to such officers, employees
and/or agents as the Trustees may, in their sole discretion, deem to be
necessary or desirable, without regard to whether such authority is normally
granted or delegated by trustees. With respect to those matters of the
operation and business of

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the Trust which they shall elect to conduct themselves, except as
otherwise provided by this Declaration or the By-Laws, if any, the Trustees may
authorize any single Trustee or defined group of Trustees, or any committee
consisting of a number of Trustees less than the whole number of Trustees then
in office without specification of the particular Trustees required to be
included therein, to act for and to bind the Trust, to the same extent as the
whole number of Trustees could do, either with respect to one or more
particular matters or classes of matters, or generally.

SECTION 5.2. Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time in their discretion and
without limiting the generality of their powers and authority otherwise set
forth herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships or other
types of organizations, or individuals ("Contracting Party"), to provide for
the performance and assumption of some or all of the following services, duties
and responsibilities to, for or on behalf of the Trust and/or any Series,
and/or the Trustees, and to provide for the performance and assumption of such
other services, duties and responsibilities in addition to those set forth
below, as the Trustees may deem appropriate:

(a) Advisory. An investment advisory or management agreement whereby
the agent shall undertake to furnish the Trust (or any Series thereof) such
management, investment advisory or supervisory, statistical and research
facilities and services, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable, all upon such terms and
conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
or any applicable provisions of the By-Laws (any such agent being herein
referred to as an "Investment Adviser"). To the extent required by the 1940
Act, any such advisory or management agreement and any amendment thereto shall
be subject to approval by a Majority Shareholder Vote at a meeting of the
Shareholders of the Trust (or applicable Series). Notwithstanding any
provisions of this Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
securities of the Trust on behalf of the Trustees or may authorize any officer
or employee of the Trust or any Trustee to effect such purchases, sales, loans
or exchanges pursuant to recommendations of the Investment Adviser (and all
without further action by the Trustees). Any such purchases, sales, loans and
exchanges shall be deemed to have been authorized by all of the Trustees. The
Trustees may, in their sole discretion, call a meeting of Shareholders in order
to submit to a vote of Shareholders of the Trust (or applicable Series) at such
meeting the approval of continuance of any such investment advisory or
management agreement.

(b) Administration. An agreement whereby the agent, subject to the
general supervision of the Trustees and in conformity with any policies of the
Trustees with respect to the operations of the Trust and each Series thereof,
will supervise all or any part of the operations of the Trust (or any Series
thereof), and will provide all or any part of the administrative and clerical
personnel, office space and office equipment and services appropriate for the
efficient administration and operations of the Trust (or any Series thereof)
(any such agent being herein referred to as an "Administrator").

(c) Underwriting. An agreement providing for the sale of Shares of the
Trust (or any Series thereof) to net the Trust not less than the net asset
value per Share (as described in Section 6.1(l) hereof) and pursuant to which
the Trust may appoint the other party to such agreement as its principal
underwriter or sales agent for the distribution of such Shares. The agreement
shall contain such terms and

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conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
and any applicable provisions of the By-Laws (any such agent being herein
referred to as a "Distributor" or a "Principal Underwriter," as the case may
be).

(d) Custodian. The appointment of an agent meeting the requirements for
a custodian for the assets of Investment Companies contained in the 1940 Act
as custodian of the Securities and cash of the Trust (or any Series thereof)
and of the accounting records in connection therewith (any such agent being
herein referred to as a "Custodian").

(e) Transfer and Dividend Disbursing Agent. An agreement with an agent
to maintain records of the ownership of outstanding Shares, the issuance and
redemption and the transfer thereof (any such agent being herein referred to
as a "Transfer Agent"), and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest any such dividends
(any such agent being herein referred to as a "Dividend Disbursing Agent").

(f) Shareholder Servicing. An agreement with an agent to provide
service with respect to the relationship of the Trust and its Shareholders,
records with respect to Shareholders and their Shares, and similar matters
(any such agent being herein referred to as a "Shareholder Servicing Agent").

(g) Accounting. An agreement with an agent to handle all or any part of
the accounting responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise (any such agent being herein referred
to as an "Accounting Agent").

In addition, the Trustees may from time to time cause the Trust (or any
Series thereof) to enter into agreements with respect to such other services
and upon such other terms and conditions as they may deem necessary,
appropriate or desirable. The same Person may be the Contracting Party for
some or all of the services, duties and responsibilities to, for and of the
Trust and/or the Trustees, and the contracts with respect thereto may contain
such terms interpretive of or in addition to the delineation of the services,
duties and responsibilities provided for, including provisions that are not
inconsistent with the 1940 Act relating to the standard of duty of and the
rights to indemnification of the Contracting Party and others, as the Trustees
may determine. Nothing herein shall preclude, prevent or limit the Trust or a
Contracting Party from entering into subcontractual arrangements relative to
any of the matters referred to in subsections (a) through (g) of this Section
5.2.

Section 5.3. Distribution Arrangements. Subject to compliance with the
1940 Act, the Trustees may adopt and amend or repeal from time to time and
implement one or more plans of distribution pursuant to Rule 12b-1 of the 1940
Act which plan(s) will provide for the payment of specified marketing,
distribution and shareholder relations expenses of the Trust and any or all
Series and their agents and the agents of such agents.

Section 5.4. Service Arrangements. Subject to compliance with the
1940 Act, the Trustees may adopt and amend or repeal from time to time and
implement one or more service plans which plans will provide for the payment of
ongoing services to holders of the shares of such Trust (or any Series thereof)
and in connection with the maintenance of such shareholders' accounts.

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ARTICLE 6

SERIES AND SHARES

SECTION 6.1. Description of Series and Shares.

(a) General. The beneficial interest in the Trust shall be divided into
Shares (either full or fractional) with $.01 par value per Share, of which an
unlimited number may be issued. The Trustees shall have the authority from time
to time to establish and designate one or more separate, distinct and
independent Series of Shares (each of which Series shall represent interests
only in the asset attributed by the Trustees to such Series), and to authorize
separate Classes of Shares of the Trust (or any such Series), as they deem
necessary or desirable. All Shares shall be of one class, provided that the
Trustees shall have the power to classify or reclassify any unissued Shares of
any Series into any number of additional Classes of such Series.

(b) Establishment. etc. of Series and Classes; Authorization of Shares.
The establishment and designation of any Series and the authorization of the
Shares thereof shall be effective upon the execution by a Majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a Majority of
the Trustees) of an instrument setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Series or Class
and the manner in which the same may be amended (a "Certificate of
Designation"), and may provide that the number of Shares of such Series or
Class which may be issued is unlimited, or may limit the number issuable. At
any time that there are no Shares outstanding of any particular Series or Class
previously established and designated, the Trustees may by an instrument
executed by a Majority of the Trustees (or by an officer of the Trust pursuant
to the vote of a Majority of the Trustees) terminate such Series or Class and
the establishment and designation thereof and the authorization of its Shares
(a "Certificate of Termination"). Each Certificate of Designation, Certificate
of Termination and any instrument amending a Certificate of Designation shall
have the status of an amendment to this Declaration of Trust.

(c) Character of Separate Series and Shares Thereof. Each Series
established hereunder shall represent beneficial interests in a separate
component of the assets of the Trust. Holders of Shares of a Series shall be
considered Shareholders of such Series, but such Shareholders shall also be
considered Shareholders of the Trust for purposes of receiving reports and
notices and, except as otherwise provided herein or in the Certificate of
Designation of a particular Series, or as required by the 1940 Act or other
applicable law, the right to vote, all without distinction by Series. The
Trustees shall have exclusive power without the requirement of Shareholder
approval to establish and designate such separate and distinct Series, and to
fix and determine the relative rights and preferences as between the shares of
the respective Series, and as between the Classes of the Trust (or any Series
thereof), as to rights of redemption and the price, terms and manner of
redemption, special and relative rights as to dividends and other distributions
and on liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the Shareholders of the several Series or the several
Classes of any Series of Shares shall have separate voting rights or no voting
rights. Except as otherwise provided as to a particular Series herein, or in
the Certificate of Designation therefor, the Trustees shall have all the rights
and powers, and be subject to all the duties and obligations, with respect to
each such Series and the assets and affairs thereof as they have under this
Declaration with respect to the Trust and the Trust Property in general.
Separate and distinct records shall be maintained for each Series of Shares and
the assets and liabilities attributable thereto.

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(d) Consideration for Shares. The Trustees may issue Shares of the
Trust (or any Series thereof) for such consideration (which may include
property subject to, or acquired in connection with the assumption of,
liabilities) and on such terms as they may determine (or for no consideration
if pursuant to a Share dividend or split-up), all without action or approval of
the Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and nonassessable (but may be subject to mandatory
contribution back to the Trust (or applicable Series) as provided in Section
6.1(l) hereof. The Trustees may classify or reclassify any unissued Shares, or
any Shares of the Trust (or any Series thereof) previously issued and
reacquired by the Trust, into Shares of the Trust or one or more other Series
that may be established and designated from time to time.

(e) Assets Belonging to Series. Any portion of the Trust Property
allocated to a particular Series, and all consideration received by the Trust
for the issue or sale of Shares of such Series, together with all assets in
which such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series and shall irrevocably belong to
that Series for all purposes, and shall be so recorded upon the books of
account of the Trust, and the Shareholders of such Series shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of any
Series of which they are not Shareholders. Such consideration, assets,
interest, dividends, income, earnings, profits, gains and proceeds, together
with any General Items allocated to that Series as provided in the following
sentence, are herein referred to collectively as assets "belonging to" that
Series. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series (collectively, "General Items"), the
Trustees shall allocate such General Items to and among any one or more of the
Series established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable; and any
General Items so allocated to a particular Series shall belong to and be part
of the assets belonging to that Series. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for all
purposes.

(f) Liabilities of Series. The assets belonging to each particular
Series shall be charged with the liabilities in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which
are not readily identifiable as pertaining to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of the
Series established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
indebtedness, expenses, costs, charges and reserves allocated and so charged to
a particular Series are herein referred to as "liabilities of" that Series.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series
for all purposes. Any creditor of any Series may look only to the assets
belonging to that Series to satisfy such creditor's debt.

(g) Dividends. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine, which may
be daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, to the
Shareholders of that Series, from such of the income, accrued or realized, and
capital gains,

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<PAGE> 26
realized or unrealized, and out of the assets belonging to that Series,
as the Trustees may determine, after providing for actual and accrued
liabilities of that Series. All dividends and distributions on Shares of a
particular Series shall be distributed pro rata to the Shareholders of that
Series in proportion to the number of such Shares held by such holders at the
date and time of record established for the payment of such dividends or
distributions, except that the dividends and distributions of investment income
and capital gains with respect to each Class of Shares of a particular Series
shall be in such amount as may be declared from time to time by the Trustees,
and such dividends and distributions may vary as between such Classes to
reflect differing allocations of the expenses of the Series between the
Shareholders of such several Classes and any resultant differences between the
net asset value of such several Classes to such extent and for such purposes as
the Trustees may deem appropriate and further except that, in connection with
any dividend or distribution program or procedure, the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by the time
or times established by the Trustees under such program or procedure, or that
dividends or distributions shall be payable on Shares which have been tendered
by the holder thereof for redemption or repurchase, but the redemption or
repurchase proceeds of which have not yet been paid to such Shareholder. Such
dividends and distributions may be made in cash, property or Shares of any
Class of that Series or a combination thereof as determined by the Trustees, or
pursuant to any program that the Trustees may have in effect at the time for
the election by each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or distribution paid in
Shares will be paid at the net asset value thereof as determined in accordance
with subsection (l) of this Section 6.1.

(h) Liquidation. In the event of the liquidation or dissolution of the
Trust (or any particular Series), the Shareholders of the Trust (or that
Series) shall be entitled to receive, when and as declared by the Trustees, the
excess of the assets belonging to the Trust (or that Series) over the
liabilities of such Series. The assets so distributable to the Shareholders of
the Trust (or that Series) shall be distributed among such Shareholders in
proportion to the number of Shares of the Trust (or that Series) held by them
and recorded on the books of the Trust. The liquidation of the Trust (or any
particular Series) may be authorized by vote of a Majority of the Trustees,
subject to the affirmative vote of "a majority of the outstanding voting
securities" of that Series, as the quoted phrase is defined in the 1940 Act,
determined in accordance with clause (iii) of the definition of "Majority
Shareholder Vote" in Section 1.4 hereof.

(i) Voting. The Shareholders shall have the voting rights set forth in
or determined under Article 7 hereof.

(j) Redemption by Shareholder. Each holder of Shares of the Trust (or a
particular Series thereof) shall have the right at such times as may be
permitted by the Trust, but no less frequently than required by the 1940 Act,
to require the Trust (or such Series) to redeem all or any part of his Shares of
the Trust (or such Series) at a redemption price equal to the net asset value
per Share of the Trust (or Series) next determined in accordance with
subsection (l) of this Section 6.1 after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption and that the
proceeds of the redemption of Shares (including a fractional Share) of any
Class of the Trust (or any Series thereof) shall be reduced by the amount of
any applicable contingent deferred sales charge or other sales charge, if any,
payable on such redemption to the distributor of Shares of such Class pursuant
to the terms of

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<PAGE> 27
the initial issuance of the Shares of such Class (to the extent
consistent with the 1940 Act or regulations or exemptions thereunder) and the
Trust shall promptly pay to such distributor the amount of such deferred sales
charge. Payment of the redemption price shall be in cash; provided, however,
that if the Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or undesirable, the
Trust may make payment wholly or partly in Securities or other assets belonging
to such Series at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust may
postpone payment of the redemption price and may suspend the right of the
holders of Shares of the Trust (or any Series thereof) to require the Trust to
redeem Shares of the Trust (or such Series) during any period or at any time
when and to the extent permissible under the 1940 Act.

(k) Redemption at the Option of the Trust. The Trustees shall have the
power to redeem Shares of the Trust (or any Series thereof) at a redemption
price determined in accordance with Section 6.1(j), if at any time (i) the
total investment in such account does not have a value of at least such minimum
amount as may be specified in the Prospectus for the Trust (or such Series)
from time to time (ii) the number of Shares held in such account is equal to or
in excess of a specified percentage of Shares of the Trust or any Series as set
forth from time to time in the applicable Prospectus. In the event the Trustees
determine to exercise their power to redeem Shares provided in this Section
6.1(k), the Shareholder shall be notified that the value of his account is less
than the applicable minimum amount and shall be allowed 30 days to make an
appropriate investment before redemption is processed.

(l) Net Asset Value. The net asset value per Share of the Trust (or any
Series or Class) at any time shall be the quotient obtained by dividing the
value of the net assets of the Trust (or such Series or Class) at such time
(being the current value of the assets belonging to the Trust (or such Series
or Class), less its then existing liabilities) by the total number of Shares of
the Trust (or such Series) then outstanding, all determined in accordance with
the methods and procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time in accordance with the
requirements of the 1940 Act. The net asset value of the several Classes of the
Trust (or a particular Series) shall be separately computed, and may vary from
one another. The Trustees shall establish procedures for the allocation of
investment income or capital gains and expenses and liabilities of a particular
Series between the several Classes of the Trust (or such Series). The Trustees
may determine to maintain the net asset value per Share of the Trust or any
Series or Class at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Trust or such Series or
Class as dividends payable in additional Shares of the Trust or such Series or
Class at the designated constant dollar amount and for the handling of any
losses attributable to the Trust or such Series or Class. Such procedures may
provide that in the event of any loss each Shareholder shall be deemed to have
contributed to the shares of beneficial interest account of the Trust or such
Series or Class his pro rata portion of the total number of Shares required to
be canceled in order to permit the net asset value per Share of the Trust or
such Series or Class to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Trust shall be
deemed to have expressly agreed, by his investment in the Trust (or any Series
thereof) with respect to which the Trustees shall have adopted any such
procedure, to make the contribution referred to in the preceding sentence in
the event of any such loss.

(m) Transfer. All Shares of the Trust and each Series shall be
transferable, but transfers of Shares of the Trust or a particular Series will
be recorded on the Share transfer records of the Trust

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<PAGE> 28
applicable to the Trust or such Series only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of the
Trust or such Series and at such other times as may be permitted by the
Trustees.

(n) Equality. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities of that Series), and each Share of any particular Series shall
be equal to each other Share thereof; but the provisions of this sentence shall
not restrict any distinctions between the several Classes of a Series
permissible under this Section 6.1 or under Section 7. 1 hereof nor any
distinctions permissible under subsection (g) of this Section 6.1 that may
exist with respect to dividends and distributions on Shares of the same Series.
The Trustees may from time to time divide or combine the Shares of any class of
particular Series into a greater or lesser number of Shares of that class of a
Series without thereby changing the proportionate beneficial interest in the
assets belonging to that Series or in any way affecting the rights of the
holders of Shares of any other Series.

(o) Rights of Fractional Shares. Any fractional Share of the Trust (or
any Series thereof) shall carry proportionately all the rights and obligations
of a whole Share of the Trust (or such Series), including rights and
obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust or of the Series to which
they pertain.

(p) Conversion Rights. (i) Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that holders
of Shares of any Series shall have the right to convert said Shares into Shares
of one or more other Series, that holders of any Class of the Trust or a Series
of Shares shall have the right to convert said Shares of such Class into Shares
of one or more other Classes of the Trust or such Series, and that Shares of
any Class of the Trust or a Series shall be automatically converted into Shares
of another Class of the Trust or such Series, in each case in accordance with
such requirements and procedures as the Trustees may establish.

(ii) The number of Shares of into which a convertible Share shall
convert shall equal the number (including for this purpose fractions of a
Share) obtained by dividing the net asset value per Share for purposes of sales
and redemptions of the converting Share on the Conversion Date by the net asset
value per Share for purposes of sales and redemptions of the Class of Shares
into which it is converting on the Conversion Date.

(iii) On the Conversion Date, the Share converting into another
share will cease to accrue dividends and will no longer be deemed
outstanding and the rights of the holders thereof (except the right to receive
the number of target Shares into which the converting Shares have been
converted and declared but unpaid dividends to the Conversion Date) will cease.
Certificates representing Shares resulting from the conversion need not be
issued until certificates representing Shares converted, if issued, have been
received by the Trust or its agent duly endorsed for transfer.

(vi) The Trust will appropriately reflect the conversion of Shares
of one Class of the Trust (or a Series thereof) into Shares of another
Class of the Trust (or such Series) on the first periodic statements of account
sent to Shareholders of record affected which provide account information with
respect to a reporting period which includes the date such conversion occurred.

SECTION 6.2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a Transfer Agent or similar agent for
the Trust, which books shall be maintained

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<PAGE> 29
separately for the Shares of each Series that has been authorized.
Certificates evidencing the ownership of Shares need not be issued except as
the Trustees may otherwise determine from time to time, and the Trustees shall
have power to call outstanding Share certificates and to replace them with book
entries. The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the use of facsimile signatures, the transfer
of Shares and similar matters. The record books of the Trust as kept by the
Trust or any Transfer Agent or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders and as to the number of Shares of the
Trust and, if designated, each Series thereof held from time to time by each
such Shareholder.

The holders of Shares of the Trust and, if designated, each Series
thereof shall upon demand disclose to the Trustees in writing such information
with respect to their direct and indirect ownership of Shares of the Trust or,
if designated, such Series as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code, or to comply with the requirements of
any other authority.

SECTION 6.3. Investments in the Trust. The Trustees may accept
investments in any Series of the Trust from such Persons and on such terms and
for such consideration, not inconsistent with the provisions of the 1940 Act,
as they from time to time authorize. The Trustees may authorize any
Distributor, Principal Underwriter, Custodian, Transfer Agent or other Person
to accept orders for the purchase of Shares that conform to such authorized
terms and to reject any purchase orders for Shares, whether or not conforming
to such authorized terms.

SECTION 6.4. No Preemptive Rights. No Shareholder, by virtue of holding
Shares of the Trust or, if designated, any Series thereof, shall have any
preemptive or other right to subscribe to any additional Shares of the Trust or
such Series, or to any shares of any other Series, or any other Securities
issued by the Trust.

SECTION 6.5. Status of Shares. Every Shareholder, by virtue of having
become a Shareholder, shall be held to have expressly assented and agreed to
the terms hereof and to have become a party hereto. Shares shall be deemed to
be personal property, giving only the rights provided herein. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust Property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust or any Series, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.

ARTICLE 7

SHAREHOLDERS' VOTING POWERS AND MEETINGS

SECTION 7.1. Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Sections 4.1(c)
and (e) hereof, (ii) with respect to the approval or termination in accordance
with the 1940 Act of any contract with a Contracting Party as provided in
Section 5.2 hereof as to which Shareholder approval is required by the 1940
Act, (iii) with respect to any termination or reorganization of the Trust or
any Series to the extent and as provided in Sections 9.2, 9.3 and 9.4 hereof,
(iv) with respect to any amendment of this Declaration of Trust to the extent
and as provided in Section 9.5 hereof, (v) to the same extent as the
stockholders of a Delaware business

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<PAGE> 30
corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or any Series, or the Shareholders of any of them
(provided. however, that a Shareholder of a particular Series shall not in any
event be entitled to maintain a derivative or class action on behalf of any
other Series or the Shareholders thereof), and (vi) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act,
this Declaration of Trust, the By-Laws or any registration of the Trust with
the Commission (or any successor agency) or any State, or as the Trustees may
consider necessary or desirable. If and to the extent that the Trustees shall
determine that such action is required by law or by this Declaration, they
shall cause each matter required or permitted to be voted upon at a meeting or
by written consent of Shareholders to be submitted to a separate vote of the
outstanding Shares of each Series entitled to vote thereon; provided, that (i)
when expressly required by the 1940 Act or by other law, actions of
Shareholders shall be taken by Single Class Voting of all outstanding Shares
whose holders are entitled to vote thereon; and (ii) when the Trustees
determine that any matter to be submitted to a vote of Shareholders affects
only the rights or interests of Shareholders of one or more but not all Series
or of one or more but not all Classes of the Trust or a single Series
(including without limitation any distribution plan pursuant to Rule 12b-1 of
the 1940 Act applicable to such Class), then only the Shareholders of the
Series or Classes so affected shall be entitled to vote thereon. Any matter
required to be submitted to shareholders and affecting one or more Series shall
require separate approval by the required vote of Shareholders of the Trust or
each affected Series; provided, however, that to the extent required by the
1940 Act, there shall be no separate Series votes on the election or removal of
Trustees, the selection of auditors for the Trust and its Series or approval of
any agreement or contract entered into by the Trust or any Series. Shareholders
of a particular Series shall not be entitled to vote on any matter that affects
only one or more other Series.

SECTION 7.2. Number of Votes and Manner of Voting: Proxies. On each
matter submitted to a vote of the Shareholders, each holder of Shares of the
Trust or, if applicable, any Series shall be entitled to a number of votes
equal to the number of Shares of the Trust or such Series standing in his name
on the books of the Trust. There shall be no cumulative voting in the election
or removal of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two (2) or more Persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.

SECTION 7.3. Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided, or upon
any other matter deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to be given by
the Trustees by mailing such notice at least seven (7) days before such
meeting, postage prepaid, stating the time, place and purpose of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records
of the Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than ten
percent (10%) of the Shares then outstanding. If the Trustees shall fail to
call or give notice of any meeting of Shareholders for a period of thirty (30)
days after written application by Shareholders holding at least ten percent
(10%) of the Shares then outstanding requesting that a

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meeting be called for any other purpose requiring action by the
Shareholders as provided herein or in the By-Laws, then Shareholders holding at
least ten percent (10%) of the Shares then outstanding may call and give notice
of such meeting, and thereupon the meeting shall be held in the manner provided
for herein in case of call thereof by the Trustees. Any meetings may be held
within or without The State of Delaware. Shareholders may only act with
respect to matters set forth in the notice to Shareholders.

SECTION 7.4. Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding thirty (30) days (except at
or in connection with the termination of the Trust), as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date
and time not more than ninety (90) days prior to the date of any meeting of
Shareholders or other action as the date and time of record for the
determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes of
such other action, and any Shareholder who was a Shareholder at the date and
time so fixed shall be entitled to vote at such meeting or any adjournment
thereof or to be treated as a Shareholder of record for purposes of such other
action, even though he has since that date and time disposed of his Shares, and
no Shareholder becoming such after that date and time shall be so entitled to
vote at such meeting or any adjournment thereof or to be treated as a
Shareholder of record for purposes of such other action.

SECTION 7.5. Quorum and Required Vote. A majority of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a reasonable
time after the date set for the original meeting without the necessity of
further notice. A Majority Shareholder Vote at a meeting of which a quorum is
present shall decide any question, except when a different vote is required or
permitted by any provision of the 1940 Act or other applicable law or by this
Declaration of Trust or the By-Laws, or when the Trustees shall in their
discretion require a larger vote or the vote of a majority or larger fraction
of the Shares of one or more particular Series.

SECTION 7.6. Action By Written Consent. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger proportion thereof or of the Shares of any particular
Series as shall be required by the 1940 Act or by any express provision of this
Declaration of Trust or the By-Laws or as shall be permitted by the Trustees)
consent to the action in writing and if the writings in which such consent is
given are filed with the records of the meetings of Shareholders, to the same
extent and for the same period as proxies given in connection with a
Shareholders' meeting. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.

SECTION 7.7. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Delaware business corporation under the Delaware business
corporation law.

SECTION 7.8. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.

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ARTICLE 8

LIMITATION OF LIABILITY: INDEMNIFICATION

SECTION 8.1. Trustees. Shareholders. etc. Not Personally Liable;
Notice. The Trustees, officers, employees and agents of the Trust, in incurring
any debts, liabilities or obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or shall be deemed to be
acting as Trustees, officers, employees or agents of the Trust and not in their
own capacities. No Shareholder shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any other Person or Persons in
connection with the assets or the affairs of the Trust or of any Series, and
subject to Section 8.4 hereof, no Trustee, officer, employee or agent of the
Trust shall be subject to any personal liability whatsoever in tort, contract,
or otherwise, to any other Person or Persons in connection with the assets or
affairs of the Trust or of any Series, save only that arising from his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or the discharge of his functions.
The Trust (or if the matter relates only to a particular Series, that Series)
shall be solely liable for any and all debts, claims, demands, judgments,
decrees, liabilities or obligations of any and every kind, against or with
respect to the Trust or such Series in tort, contract or otherwise in
connection with the assets or the affairs of the Trust or such Series, and all
Persons dealing with the Trust or any Series shall be deemed to have agreed
that resort shall be had solely to the Trust Property of the Trust or the
Series Assets of such Series, as the case may be, for the payment or
performance thereof.

The Trustees shall use their best efforts to ensure that every note,
bond, contract, instrument, certificate or undertaking made or issued by the
Trustees or by any officers or officer shall give notice that a Certificate of
Trust in respect of the Trust is on file with the Secretary of the state of
Delaware and shall recite to the effect that the same was executed or made by
or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer, and not individually, and that the obligations of such instrument are
not binding upon any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, or the particular Series in
question, as the case may be, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the Series Assets of any Series to the
obligations of any other Series.

SECTION 8.2. Trustees' Good Faith Action; Expert Advice: No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to Section 8.4 hereof, a
Trustee shall be liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (i) the Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing
of any officer, agent, employee, consultant, Investment Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or Transfer Agent, Dividend
Disbursing Agent, Shareholder Servicing Agent or Accounting Agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written
reports made to the Trustees by any officer appointed by them, any independent
public accountant, and (with respect to the subject matter of the contract
involved) any officer, partner or

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responsible employee of a Contracting Party appointed by the Trustees
pursuant to Section 5.2 hereof. The Trustees as such shall not be required to
give any bond or surety or any other security for the performance of their
duties.

SECTION 8.3. Indemnification of Shareholders. If any Shareholder (or
former Shareholder) of the Trust shall be charged or held to be personally
liable for any obligation or liability of the Trust solely by reason of being
or having been a Shareholder and not because of such Shareholder's acts or
omissions or for some other reason, the Trust (upon proper and timely request
by the Shareholder) may assume the defense against such charge and satisfy any
judgment thereon or may reimburse the Shareholders for expenses, and the
Shareholder or former Shareholder (or the heirs, executors, administrators or
other legal representatives thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall be entitled (but solely
out of the assets of the Series of which such Shareholder or former Shareholder
is or was the holder of Shares) to be held harmless from and indemnified
against all loss and expense arising from such liability.

SECTION 8.4. Indemnification of Trustees. Officers, etc. Subject to the
limitations, if applicable, hereinafter set forth in this Section 8.4, the
Trust shall indemnify (from the assets of one or more Series to which the
conduct in question relates) each of its Trustees, officers, employees and
agents (including Persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise (hereinafter, together with
such Person's heirs, executors, administrators or personal representative,
referred to as a "Covered Person")) against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable accountants' and counsel
fees, incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such Covered Person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a Trustee or officer,
director or trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not opposed to
the best interests of the Trust; (ii) had acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office (iii) for a criminal proceeding, had
reasonable cause to believe that his conduct was unlawful (the conduct
described in (i), (ii) and (iii) being referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits by a court or
other body before whom the proceeding was brought that the Covered Person to be
indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of a
court action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum
of Trustees who are neither "interested persons" of the Trust as defined in
Section 2(a)(19) of the 1940 Act nor parties to the proceeding (the
"Disinterested Trustees"), or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so incurred by any
such Covered Person (but excluding amounts paid in satisfaction of judgments,
in compromise or as fines or penalties), may be paid from time to time by one
or more Series to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided that the Covered
Person shall have undertaken to repay the amounts so paid to such Series if it
is ultimately determined that indemnification of such expenses is not
authorized under this Article 8 and (i) the Covered Person shall

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have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the Disinterested Trustees, or an independent legal
counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial type inquiry), that there
is reason to believe that the Covered Person ultimately will be found entitled
to indemnification.

SECTION 8.5. Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 8.4
hereof, pursuant to a consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
Disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent
legal counsel pursuant to clause (ii) shall not prevent the recovery from any
Covered Person of any amount paid to such Covered Person in accordance with
either of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Trust or to have been liable to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Covered Person's office.

SECTION 8.6. Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article 8 shall not be exclusive of or affect
any other rights to which any such Covered Person or shareholder may be
entitled. As used in this Article 8, a "disinterested" Person is one against
whom none of the actions, suits or other proceedings in question, and no other
action, suit or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this Article 8 shall affect
any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other Persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such Person.

SECTION 8.7. Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry concerning
the validity of any transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred to the Trust or
upon its order.

ARTICLE 9

DURATION: REORGANIZATION: INCORPORATION; AMENDMENTS

SECTION 9.1. Duration of Trust. Unless terminated as provided herein,
the Trust shall have perpetual existence.

SECTION 9.2. Termination of Trust. The Trust may be terminated at any
time by a Majority of the Trustees, subject to the favorable vote of the
holders of not less than a majority of the Shares outstanding and entitled to
vote of each Series of the Trust, or by an instrument or instruments in writing
without a meeting, consented to by the holders of not less than a majority of
such Shares, or by such greater or different vote of Shareholders of any Series
as may be established by the Certificate of Designation by which such Series
was authorized. Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or anticipated
as may be

28
<PAGE> 35
determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, Securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with
the provisions of Section 6.1(h) hereof. After termination of the Trust or any
Series and distribution to the Shareholders as herein provided, a majority of
the Trustees shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination. Upon
termination of the Trust, the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease. Upon termination of any Series, the
Trustees shall thereupon be discharged from all further liabilities and duties
with respect to such Series, and the rights and interests of all Shareholders
of such Series shall thereupon cease.

SECTION 9.3. Reorganization. The Trustees may sell, convey and transfer
all or substantially all of the assets of the Trust, or the assets belonging to
any one or more Series, to another trust, partnership, association, corporation
or other entity organized under the laws of any state of the United States, or
may transfer such assets to another Series of the Trust, in exchange for cash,
Shares or other Securities (including, in the case of a transfer to another
Series of the Trust, Shares of such other Series), or to the extent permitted
by law then in effect may merge or consolidate the Trust or any Series with any
other Trust or any corporation, partnership, or association organized under the
laws of any state of the United States, all upon such terms and conditions and
for such consideration when and as authorized by vote or written consent of a
Majority of the Trustees and approved by the affirmative vote of the holders of
not less than a majority of the Shares outstanding and entitled to vote of each
Series whose assets are affected by such transaction, or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than a majority of such Shares, and/or by such other vote of any Series as
may be established by the Certificate of Designation with respect to such
Series. Following such transfer, the Trustees shall distribute the cash, Shares
or other Securities or other consideration received in such transaction (giving
due effect to the assets belonging to and indebtedness of, and any other
differences among, the various Series of which the assets have so been
transferred) among the Shareholders of the Series of which the assets have been
so transferred; and if all of the assets of the Trust have been so transferred,
the Trust shall be terminated. Nothing in this Section 9.3 shall be construed
as requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or
other organizations, and to sell, convey or transfer less than substantially
all of the Trust Property or the assets belonging to any Series to such
organizations or entities.

SECTION 9.4. Incorporation. Upon approval by Majority Shareholder
Vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization, in
exchange for the shares or securities thereof, or otherwise, and to lend money
to, subscribe for the shares of securities of, and enter into any contracts
with any such corporation, trust, partnership, association or organization in
which the Trust holds or is about to acquire shares or any other interests. The
Trustees may also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporation, trusts,

29
<PAGE> 36
partnerships, associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organizations or entities.

SECTION 9.5. Amendments; etc. All rights granted to the Shareholders
under this Declaration of Trust are granted subject to the reservation of the
right to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any Shareholder
or Trustee or the prohibition of assessment upon the Shareholders (otherwise
than as permitted under Section 6.1(l)) without the express consent of each
Shareholder or Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does not
adversely affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such amendment is not
in contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of all Shareholders may
be adopted at any time by an instrument in writing signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to a vote of a Majority of the
Trustees) when authorized to do so by the vote in accordance with Section 7.I
hereof of Shareholders holding a majority of all the Shares outstanding and
entitled to vote, without regard to Series, or if said amendment adversely
affects the rights of the Shareholders of less than all of the Series, by the
vote of the holders of a majority of all the Shares entitled to vote of each
Series so affected. Notwithstanding any other provisions set forth in this
Declaration of Trust, a provision in this Declaration of Trust requiring
shareholder approval of any action may be amended only with like shareholder
approval.

SECTION 9.6. Filing of Copies of Declaration and Amendments. The
original or a copy of this Declaration and of each amendment hereto (including
each Certificate of Designation and Certificate of Termination) shall be kept
at the office of the Trust where it may be inspected by any Shareholder. A
restated Declaration, integrating into a single instrument all of the
provisions of this Declaration which are then in effect and operative, may be
executed from time to time by a Majority of the Trustees and shall, upon
execution, be conclusive evidence of all amendments contained therein and may
thereafter be referred to in lieu of the original Declaration and the various
amendments thereto. A Certificate of Trust shall be filed in the office of the
Secretary of State of the State of Delaware.

ARTICLE 10

MISCELLANEOUS

SECTION 10.1. Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the applicable register of the
Trust.

SECTION 10.2. Governing Law. This Declaration of Trust is, with
reference to the laws thereof, and the rights of all parties and the
construction and effect of every provision hereof shall be, subject to and
construed according to the laws of said The State of Delaware.

SECTION 10.3. Counterparts. This Declaration of Trust and any amendment
thereto may be simultaneously executed in several counterparts, each of which
so executed shall be deemed to be an

30
<PAGE> 37
original, and such counterparts, together, shall constitute but one and
the same instrument, which shall be sufficiently evidenced by any such original
counterpart.

SECTION 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust is a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Shareholders, (b) the
due authorization of the execution of any instrument or writing, (c) the form
of any vote passed at a meeting of Trustees or Shareholders, (d) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration of Trust, (e)
the form of any By-Law adopted, or the identity of any officers elected, by the
Trustees, (f) the existence or nonexistence of any fact or facts which in any
manner relate to the affairs of the Trust, or (g) the name of the Trust or the
establishment of a Series shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees, or any of them, and
the successors of such Person.

SECTION 10.5. References; Headings. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part of this Declaration or control
or affect the meaning, construction or effect hereof.

SECTION 10.6. Provisions in Conflict With Law or Regulation. (a)
The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986 or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration; provided, however, that such determination shall not affect
any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.

(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.

SECTION 10.7. Use of the Name "Van Kampen American Capital". Van Kampen
American Capital, Inc. ("Van Kampen American Capital") has consented to the use
by the Trust and by each Series and each Series thereof to the identifying
words "Van Kampen" or "Van Kampen Merritt" or any combination thereof in the
name of the Trust and of each Series and Series thereof. Such consent is
conditioned upon the Trust's employment of Van Kampen American Capital, its
successors or a subsidiary or affiliate thereof as investment adviser to the
Trust and to each Series and each Series thereof. As between Van Kampen
American Capital and the Trust, Van Kampen American Capital shall control the
use of such name insofar as such name contains the identifying words "Van
Kampen" or "Van Kampen Merritt". Van Kampen American Capital may from time to
time use the identifying words "American Capital," "Van Kampen" or "Van Kampen
Merritt" in other connections and for other purposes, including without
limitation in the names of other investment companies, corporations or
businesses that it may manage, advise, sponsor or own or in which it may have a
financial interest. Van Kampen American Capital may require the Trust or any
Series or Series thereof to cease using the identifying words "Van Kampen" or
"Van Kampen Merritt" in the name of the Trust or any Series or any Series
thereof if the Trust or any Series or Series thereof ceases to employ Van
Kampen American Capital, its successors or a subsidiary or affiliate thereof as
investment adviser.

31
<PAGE> 38

IN WITNESS WHEREOF, the undersigned, being at least a majority of the
Trustees of the Trust, have set their hands and seal, for themselves and their
assigns, unto this First Amended and Restated Agreement and Declaration of
Trust of Van Kampen American Capital Life Investment Trust, as of the day and
year first above written.

/s/ J. MILES BRANAGAN /s/ RICHARD E. CARUSO
___________________________________ ___________________________________
J. Miles Branagan Richard E. Caruso

/s/ ROGER HILSMAN /s/ DON G. POWELL
___________________________________ ___________________________________
Roger Hilsman Don G. Powell

/s/ DAVID REES /s/ LAWRENCE J. SHEEHAN
___________________________________ ___________________________________
David Rees Lawrence J. Sheehan

/s/ FERNANDO SISTO /s/ WILLIAM S. WOODSIDE
___________________________________ ___________________________________
Fernando Sisto William S. Woodside

32
<PAGE> 39

A C K N O W L E D G M E N T

STATE OF TEXAS )
) ss
COUNTY OF HARRIS )

June 21, 1995
______________________
(Date)

Then personally appeared the above named individuals and each one
acknowledged the foregoing instrument to be his free act and deed.

Before me,

/s/ PAMELA J. McLEMORE
_______________________________
(Notary Public)

My commission expires: 9-3-97

<PAGE> 1
EXHIBIT 1.2

CERTIFICATE OF AMENDMENT DATED SEPTEMBER 7, 1995
TO
FIRST AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST DATED JUNE 21, 1995

WHEREAS, the Trustees of Van Kampen American Capital Life Investment
Trust, a Delaware business trust (the "Trust") have approved the amendment of
the Trust's First Amended and Restated Agreement and Declaration of Trust dated
June 21, 1995 ("Declaration of Trust") in accordance with Section 9.5 thereof;

WHEREAS, the Trustees have authorized the proper officers of the
Trust, including the officer whose name appears below, to effect such
amendment;

NOW, THEREFORE, the Declaration of Trust is amended as follows:

1. The first sentence of Section 4.1(b) is amended and restated in its
entirety to read as follows:

(b) Number. The Trustees serving as such, whether named above
or hereafter becoming Trustees, may increase (to not more than
fifteen (15)) or decrease the number of Trustees to a number
other than the number theretofore determined by a written
instrument signed by a Majority (or a supermajority if
required by the By-Laws) of the Trustees (or by an officer of
the Trust pursuant to the vote of a Majority (or a
supermajority if required by the By-Laws) of the Trustees).

2. Section 4.1(e) is amended and restated in its entirety to read as
follows:

(e) Removal. Any Trustee may be removed: (i) with cause at
any time by written instrument, signed by at least two-thirds
(2/3) of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become
effective; or (ii) without cause at any time by written
instrument, signed by at least two-thirds (2/3) of the number
of Trustees prior to such removal, specifying the date upon
which such removal shall become effective; or (iii) by vote of
shareholders holding a majority of the Shares of the Trust
then outstanding, cast in person or by proxy at any meeting
called for the purpose; or (iv) by a written declaration
signed by Shareholders holding not less than a majority of the
Shares of the Trust then outstanding. Notwithstanding any
other provisions set forth in this Declaration of Trust, this
Section 4.1(e)

<PAGE> 2
may not be amended (either directly or indirectly through a
reorganization) without the approval of (i) two-thirds (2/3) of the
Trustees then in office or (ii) by vote of Shareholders holding a
majority of the Shares of the Trust then outstanding.

EXECUTED, to be effective as of September 7, 1995

/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.3

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of
Common Stock Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Common Stock Fund
(the "Fund") with the following rights, preferences and characteristics:

1. Shares. The beneficial interest in the Fund shall be divided into Shares,
all of one class, having a nominal or par value of $0.01 per Share, of which an
unlimited number may be issued, which Shares shall represent interests only in
the Fund. The Trustees shall have the authority from time to time to authorize
separate Series of Shares for the Trust as they deem necessary or desirable.

2. Other Rights Governed by Declaration. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust set forth in the Declaration shall apply to Shares of the
Fund unless otherwise specified in this Certificate of Designation, in which
case this Certificate of Designation shall govern.

3. Amendments, etc. Subject to the provisions and limitations of Section 9.5
of the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
and officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Fund outstanding and entitled to
vote or, if such amendment affects the Shares of one or more but not all of the
Classes of the Fund, the holders of a majority of all the Shares of the
affected Classes outstanding and entitled to vote.

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June 21, 1995

/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.4

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of
Domestic Strategic Income Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Domestic Strategic
Income Fund (the "Fund") with the following rights, preferences and
characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June 21, 1995

/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.5

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of
Emerging Growth Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Emerging Growth
Fund (the "Fund") with the following rights, preferences and characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June 21, 1995

/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.6

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of
Global Equity Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Global Equity Fund
(the "Fund") with the following rights, preferences and characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June 21, 1995

/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.7

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of
Government Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Government Fund
(the "Fund") with the following rights, preferences and characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June 21, 1995

/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.8

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of
Money Market Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Money Market Fund
(the "Fund") with the following rights, preferences and characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June 21, 1995

/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.9

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of
Multiple Strategy Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Multiple Strategy
Fund (the "Fund") with the following rights, preferences and characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June 21, 1995

/s/ NORI L. GABERT
_________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.10

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of
Real Estate Securities Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Real Estate
Securities Fund (the "Fund") with the following rights, preferences and
characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June 21, 1995

/s/ NORI L. GABERT
__________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.11

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Certificate of Designation
of

Growth and Income Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby establish and designate as a Series of the Trust the Growth and Income
Fund (the "Fund") with the following rights, preferences and
characteristics:

3. Amendments, etc. Subject to the provisions and limitations of Section 9.5
of the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
an officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Fund outstanding and entitled to
vote or, if such amendment affects the Shares of one or more but not all of the
Classes of the Fund, the holders of a majority of all the Shares of the
affected Classes outstanding and entitled to vote.

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

June _____, 1995

__________________________
Nori L. Gabert,
Secretary

<PAGE> 1
EXHIBIT 1.12

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Amended and Restated Certificate of Designation
of
Asset Allocation Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby amend and restate in its entirety the Certificate of Designation of the
Multiple Strategy Fund Series of the Trust dated June 21, 1995, by
redesignating such Series as the Asset Allocation Fund (the "Fund") with the
following rights, preferences and characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

1
<PAGE> 2
___________________, 1995

_________________________

Secretary

<PAGE> 1
EXHIBIT 1.13

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Amended and Restated Certificate of Designation
of
Domestic Income Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby amend and restate in its entirety the Certificate of Designation of the
Domestic Strategic Income Fund Series of the Trust dated June 21, 1995, by
redesignating such Series as the Domestic Income Fund (the "Fund") with the
following rights, preferences and characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

1
<PAGE> 2

______________, 1995

_________________________

Secretary

<PAGE> 1
EXHIBIT 1.14

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Amended and Restated Certificate of Designation
of
Enterprise Fund

The undersigned, being the Secretary of Van Kampen American Capital Life
Investment Trust, a Delaware business trust (the "Trust"), pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1 of the
Trust's First Amended and Restated Agreement and Declaration of Trust
("Declaration"), and by the affirmative vote of a Majority of the Trustees does
hereby amend and restate in its entirety the Certificate of Designation of the
Common Stock Fund Series of the Trust dated June 21, 1995, by redesignating
such Series as the Enterprise Fund (the "Fund") with the following rights,
preferences and characteristics:

4. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meaning as ascribed to those terms in the
Declaration.

1
<PAGE> 2

_____________________, 1995

_________________________

Secretary

<PAGE> 1
EXHIBIT 2

VAN KAMPEN AMERICAN CAPITAL

LIFE INVESTMENT TRUST

AMENDED AND RESTATED BYLAWS
(AS AMENDED SEPTEMBER 7, 1995)

<PAGE> 2

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

Amended and Restated Bylaws
(As Amended September 7, 1995)

Index

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ARTICLE 1 SHAREHOLDERS AND SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . 1

Section 1.1. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Section 1.2. Presiding Officer; Secretary . . . . . . . . . . . . . . . . . . . . . . 1

Section 1.3. Authority of Chairman of Meeting to Interpret Declaration and Bylaws . . 1

Section 1.4. Voting; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Section 1.5. Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Section 1.6 Records at Shareholder Meetings . . . . . . . . . . . . . . . . . . . . 2

Section 1.7. Shareholders Action in Writing . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE 2 TRUSTEES AND TRUSTEES' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Section 2.1. Number of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Section 2.2. Regular Meetings of Trustees . . . . . . . . . . . . . . . . . . . . . . 2

Section 2.3. Special Meetings of Trustees . . . . . . . . . . . . . . . . . . . . . . 3

Section 2.4. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Section 2.5. Quorum; Presiding Trustee . . . . . . . . . . . . . . . . . . . . . . . 3

Section 2.6. Participation by Telephone . . . . . . . . . . . . . . . . . . . . . . . 3

Section 2.7. Location of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Section 2.8. Actions by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Section 2.9. Rulings of Presiding Trustee . . . . . . . . . . . . . . . . . . . . . . 4

Section 2.10. Trustees' Action in Writing . . . . . . . . . . . . . . . . . . . . . . 4

Section 2.11. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Section 2.12. Tenure of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>

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ARTICLE 3 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Section 3.1. Officers of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . 4

Section 3.2. Time and Terms of Election . . . . . . . . . . . . . . . . . . . . . . . 5

Section 3.3. Resignation and Removal . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 3.4. Fidelity Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 3.5. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 3.6. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 3.7. Treasurer and Assistant Treasurers . . . . . . . . . . . . . . . . . . . 5

Section 3.8. Controller and Assistant Controllers . . . . . . . . . . . . . . . . . . 6

Section 3.9. Secretary and Assistant Secretaries . . . . . . . . . . . . . . . . . . 6

Section 3.10. Substitutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Section 3.11. Execution of Deeds, etc. . . . . . . . . . . . . . . . . . . . . . . . . 6

Section 3.12. Power to Vote Securities . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE 4 COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Section 4.1. Power of Trustees to Designate Committees . . . . . . . . . . . . . . . 7

Section 4.2. Rules for Conduct of Committee Affairs . . . . . . . . . . . . . . . . 7

Section 4.3. Trustees May Alter, Abolish, etc., Committees . . . . . . . . . . . . . 7

Section 4.4. Minutes; Review by Trustees . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE 5 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE 6 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 6.1. Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 6.2. Uncertificated Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 6.3. Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 6.4. Lost, Stolen, etc., Certificates . . . . . . . . . . . . . . . . . . . 8
</TABLE>

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ARTICLE 7 STOCK TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Section 7.1. Transfer Agents, Registrars, etc. . . . . . . . . . . . . . . . . . . . 9

Section 7.2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Section 7.3. Registered Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE 8 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Section 8.1. Bylaws Subject to Amendment . . . . . . . . . . . . . . . . . . . . . 9

Section 8.2. Notice of Proposal to Amend Bylaws Required . . . . . . . . . . . . . . 9
</TABLE>

<PAGE> 5

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

AMENDED AND RESTATED BYLAWS
(AS AMENDED SEPTEMBER 7, 1995)

These are the Bylaws of Van Kampen American Capital U.S. Government
Trust for Income, a trust with transferable shares established under the laws
of The State of Delaware (the "Trust"), pursuant to an Agreement and
Declaration of Trust of the Trust (the "Declaration") made the 10th day of May,
1995, as amended, and a Certificate of Trust filed in the office of the
Secretary of State pursuant to Section 3810 of The Delaware Business Trust Act,
Title 12, Chapter 38 of the Delaware Code. These Bylaws have been adopted by
the Trustees pursuant to the authority granted by Section 4.14 of the
Declaration.

All words and terms capitalized in these Bylaws, unless otherwise
defined herein, shall have the same meanings as they have in the Declaration.

ARTICLE 1

SHAREHOLDERS AND SHAREHOLDERS' MEETINGS

SECTION 1.1. Meetings. A meeting of the Shareholders of the Trust
shall be held whenever called by the Chairman, the President or a majority of
the Trustees and whenever election of a Trustee or Trustees by Shareholders is
required by the provisions of the 1940 Act. Meetings of Shareholders shall
also be called by the Trustees when requested in writing by Shareholders
holding at least ten percent (10%) of the Shares then outstanding for the
purpose of voting upon removal of any Trustee, or if the Trustees shall fail to
call or give notice of any such meeting of Shareholders for a period of thirty
(30) days after such application, then Shareholders holding at least ten
percent (10%) of the Shares then outstanding may call and give notice of such
meeting. Notice of Shareholders' meetings shall be given as provided in the
Declaration.

SECTION 1.2. Presiding Officer; Secretary. The President shall
preside at each Shareholders' meeting as chairman of the meeting, or in the
absence of the President, the Trustees present at the meeting shall elect one
of their number as chairman of the meeting. Unless otherwise provided for by
the Trustees, the Secretary of the Trust shall be the secretary of all meetings
of Shareholders and shall record the minutes thereof.

SECTION 1.3. Authority of Chairman of Meeting to Interpret
Declaration and Bylaws. At any Shareholders' meeting the chairman of the
meeting shall be empowered to determine the construction or interpretation
of the Declaration or these Bylaws, or any part thereof or hereof, and their
ruling shall be final.

SECTION 1.4. Voting; Quorum. At each meeting of Shareholders, except
as otherwise provided by the Declaration, every holder of record of Shares
entitled to vote shall be entitled to a number of votes equal to the number of
Shares standing in his name on the Share register of the Trust on the record
date of the meeting. Shareholders may vote by proxy and the form of any such
proxy may be prescribed from time to time by the Trustees. A quorum shall
exist if the holders of a majority of the outstanding Shares of the Trust
entitled to vote are present in person or by proxy, but any lesser

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number shall be sufficient for adjournments. At all meetings of the
Shareholders, votes shall be taken by ballot for all matters which may be
binding upon the Trustees pursuant to Section 7.1 of the Declaration. On other
matters, votes of Shareholders need not be taken by ballot unless otherwise
provided for by the Declaration or by vote of the Trustees, or as required by
the 1940 Act, but the chairman of the meeting may in his discretion authorize
any matter to be voted upon by ballot.

SECTION 1.5. Inspectors. At any meeting of Shareholders, the chairman
of the meeting may appoint one or more Inspectors of Election or Balloting to
supervise the voting at such meeting or any adjournment thereof. If Inspectors
are not so appointed, the chairman of the meeting may, and on the request of
any Shareholder present or represented and entitled to vote shall, appoint one
or more Inspectors for such purpose. Each Inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of Inspector of Election or Balloting, as the case may be, at such
meeting with strict impartiality and according to the best of his ability. If
appointed, Inspectors shall take charge of the polls and, when the vote is
completed, shall make a certificate of the result of the vote taken and
of such other facts as may be required by law.

SECTION 1.6. Records at Shareholder Meetings. At each meeting of the
Shareholders there shall be open for inspection the minutes of the last
previous Meeting of Shareholders of the Trust and a list of the Shareholders of
the Trust, certified to be true and correct by the Secretary or other proper
agent of the Trust, as of the record date of the meeting or the date of closing
of transfer books, as the case may be. Such list of Shareholders shall contain
the name of each Shareholder. Shareholders shall have such other rights and
procedures of inspection of the books and records of the Trust as are granted
to shareholders of a Delaware corporation.

SECTION 1.7. Shareholders' Action in Writing. Nothing in this Article
1 shall limit the power of the Shareholders to take any action by means of
written instruments without a meeting, as permitted by Section 7.6 of the
Declaration.

ARTICLE 2

TRUSTEES AND TRUSTEES' MEETINGS

SECTION 2.1. Number of Trustees. The number of Trustees shall be
fifteen (15), provided that such number shall be reduced upon the death,
resignation or retirement of any Trustee until the number of Trustees is eight
(8), unless the Trustees shall find by a majority vote that such reduction is
not in the best interest of the Fund's shareholders, in which case the number
of Trustees shall not be reduced and a vacancy shall be created upon such
death, resignation or retirement of such Trustees.

SECTION 2.2. Regular Meetings of Trustees. Regular meetings of the
Trustees may be held without call or notice at such places and at such times as
the Trustees may from time to time determine; provided, that notice of such
determination, and of the time and place of the first regular meeting
thereafter, shall be given to each absent Trustee in accordance with Section
2.4 hereof.

SECTION 2.3. Special Meetings of Trustees. Special meetings of the
Trustees may be held at any time and at any place when called by the President
or the Treasurer or by three (3) or more

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Trustees, or if there shall be less than three (3) Trustees, by any Trustee;
provided, that notice of the time and place thereof is given to each Trustee
in accordance with Section 2.4 hereof by the Secretary or an Assistant
Secretary or by the officer or the Trustees calling the meeting.

SECTION 2.4. Notice of Meetings. Notice of any regular or special
meeting of the Trustees shall be sufficient if given in writing to each
Trustee, and if sent by mail at least five (5) days, by a nationally recognized
overnight delivery service at least two (2) days or by facsimile at least
twenty-four (24) hours, before the meeting, addressed to his usual or last
known business or residence address, or if delivered to him in person at least
twenty-four (24) hours before the meeting. Notice of a special meeting need
not be given to any Trustee who was present at an earlier meeting, not more
than thirty-one (31) days prior to the subsequent meeting, at which the
subsequent meeting was called. Unless statute, these bylaws or a resolution of
the Trustees might otherwise dictate, notice need not state the business to be
transacted at or the purpose of any meeting of the Board of Trustees. Notice
of a meeting may be waived by any Trustee by written waiver of notice, executed
by him or her before or after the meeting, and such waiver shall be filed with
the records of the meeting. Attendance by a Trustee at a meeting shall
constitute a waiver of notice, except where a Trustee attends a meeting for the
purpose of protesting prior thereto or at its commencement the lack of notice.
No notice need be given of action proposed to be taken by unanimous written
consent.

SECTION 2.5. Quorum: Presiding Trustee. At any meeting of the
Trustees, a Majority of the Trustees shall constitute a quorum. Any meeting may
be adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice. Unless the Trustees shall otherwise elect,
generally or in a particular case, the Chairman shall be the presiding Trustee
at each meeting of the Trustees or in the absence of the Chairman, the
President shall preside over the meeting. In the absence of both the Chairman
and the President, the Trustees present at the meeting shall elect one of their
number as presiding Trustee of the meeting.

SECTION 2.6. Participation by Telephone. One or more of the Trustees
may participate in a meeting thereof or of any Committee of the Trustees by
means of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.

SECTION 2.7. Location of Meetings. Trustees' meetings may be held at
any place, within or without the State of Delaware.

SECTION 2.8. Actions by Trustees. Unless statute, the charter or
By-laws requires a greater proportion, action of a majority of the Trustees
present at a meeting at which a quorum is present is action of the Board of
Trustees. The results of all voting shall be recorded by the Secretary in the
minute book.

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SECTION 2.9. Rulings of Presiding Trustee. All other rules of conduct
adopted and used at any Trustees' meeting shall be determined by the presiding
Trustee of such meeting, whose ruling on all procedural matters shall be
final.

SECTION 2.10. Trustees' Action in Writing. Nothing in this Article 2
shall limit the power of the Trustees to take action by means of a written
instrument without a meeting, as provided in Section 4.2 of the Declaration.

SECTION 2.11. Resignations. Any Trustee may resign at any time by
written instrument signed by him and delivered to the Chairman, the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.

SECTION 2.12. Tenure of Trustees. Notwithstanding any other
provision herein to the contrary, through June 30, 1996, the term of office of
each Trustee shall end at the time such Trustee reaches the age of seventy-six
and one-half years (76 1/2) or seventy-four and one-half years (74 1/2) for
each person who had not been elected before January 1, 1986 as a trustee or
director of any open end investment company managed by Van Kampen American
Capital Asset Management, Inc. (formerly American Capital Asset Management,
Inc. and, prior thereto, American General Capital Management, Inc.) and on and
after July 1, 1996, the term of office of each Trustee shall end at the time
such Trustee reaches the age of seventy-six and one-half years (76 1/2) or
seventy-two and one-half years (72 1/2) for each person who had not been
elected before January 1, 1986 as a trustee or director of any open end
investment company managed by Van Kampen American Capital Asset Management,
Inc.; provided that the term of office of each Trustee shall end on December
31st of the year in which such Trustee reaches the age of seventy-five years
(75) for each person first elected on or after July 1, 1995 and prior to
December 1, 1995 as a Trustee who was over the age of seventy-two and one half
(72 1/2) and under the age of seventy-five (75) at the time of such election;
and further provided that the term of office of each Trustee first elected on
or after July 1, 1995 and prior to December 1, 1995 who is seventy-five years
(75) of age at the time of such election shall expire as of the date such
Trustees reaches the age of seventy-six years (76).

SECTION 2.13. Chairman of the Board. The Trustees shall from time to
time elect one of the Trustees to serve as Chairman of the Board of Trustees,
provided that the chairman shall be a Trustee who is not an "interested person"
of the Trust or the Trust's investment adviser, within the meaning of the 1940
Act.

ARTICLE 3

OFFICERS

SECTION 3.1. Officers of the Trust. The officers of the Trust shall
consist of a President, a Treasurer and a Secretary, and may include a
Controller and one or more Vice Presidents, Assistant Treasurers and Assistant
Secretaries, and such other officers as the Trustees may designate. Any person
may hold more than one office.

SECTION 3.2. Time and Terms of Election. The President, the Treasurer
and the Secretary shall be elected by the Trustees at their first meeting and
thereafter at the annual meeting of the Trustees, as provided in Section 4.2 of
the Declaration. Such officers shall hold office until the next

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annual meeting of the Trustees and until their successors shall have been duly
elected and qualified, and may be removed at any meeting by the affirmative
vote of a Majority of the Trustees. All other officers of the Trust may be
elected or appointed at any meeting of the Trustees. Such officers shall hold
office for any term, or indefinitely, as determined by the Trustees, and shall
be subject to removal, with or without cause, at any time by the Trustees.

SECTION 3.3. Resignation and Removal. Any officer may resign at any
time by giving written notice to the Trustees. Such resignation shall take
effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make
it effective. If the office of any officer or agent becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office or
otherwise, the Trustees may choose a successor, who shall hold office for the
unexpired term in respect of which such vacancy occurred. Except to the extent
expressly provided in a written agreement with the Trust, no officer resigning
or removed shall have any right to any compensation for any period following
such resignation or removal, or any right to damage on account of such removal.

SECTION 3.4. Fidelity Bond. The Trustees may, in their discretion,
direct any officer appointed by them to furnish at the expense of the Trust a
fidelity bond approved by the Trustees, in such amount as the Trustees may
prescribe.

SECTION 3.5. President. The President shall be the chief executive
officer of the Trust and, subject to the supervision of the Trustees, shall
have general charge and supervision of the business, property and affairs of
the Trust and such other powers and duties as the Trustees may prescribe.

SECTION 3.6. Vice Presidents. In the absence or disability of the
President, the Vice President or, if there shall be more than one, the Vice
Presidents in the order of their seniority or as otherwise designated by the
Trustees, shall exercise all of the powers and duties of the President. The
Vice Presidents shall have the power to execute bonds, notes, mortgages and
other contracts, agreements and instruments in the name of the Trust, and shall
do and perform such other duties as the Trustees or the President shall direct.

SECTION 3.7. Treasurer and Assistant Treasurers. The Treasurer shall
be the chief financial officer of the Trust, and shall have the custody of the
Trust's funds and Securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit
all moneys, and other valuable effects in the name and to the credit of the
Trust, in such depositories as may be designated by the Trustees, taking
proper vouchers for such disbursements, shall have such other duties and
powers as may be prescribed from time to time by the Trustees, and shall
render to the Trustees, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the Trust. If no
Controller is elected, the Treasurer shall also have the duties and powers
of the Controller, as provided in these Bylaws. Any Assistant Treasurer shall
have such duties and powers as shall be prescribed from time to time by the
Trustees or the Treasurer, and shall be responsible to and shall report to the
Treasurer. In the absence or disability of the Treasurer, the Controller shall
have the powers and duties of the Treasurer. If no Controller is elected, the
Assistant Treasurer or, if there shall be more than one, the Assistant
Treasurers in the order of their seniority or as otherwise designated by the
Trustees or the Chairman, shall have the powers and duties of the Treasurer.

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SECTION 3.8. Controller and Assistant Controllers. If a Controller
is elected, the Controller shall be the chief accounting officer of the Trust
and shall be in charge of its books of account and accounting records and of
its accounting procedures, and shall have such duties and powers as are
commonly incident to the office of a controller, and such other duties and
powers as may be prescribed from time to time by the Trustees. The Controller
shall be responsible to and shall report to the Trustees, but in the
ordinary conduct of the Trust's business, shall be under the supervision of
the Treasurer. Any Assistant Controller shall have such duties and powers as
shall be prescribed from time to time by the Trustees or the Controller, and
shall be responsible to and shall report to the Controller. In the absence or
disability of the Controller, the Assistant Controller or, if there shall be
more than one, the Assistant Controllers in the order of their seniority or as
otherwise designated by the Trustees, shall have the powers and duties of the
Controller.

SECTION 3.9. Secretary and Assistant Secretaries. The
Secretary shall, if and to the extent requested by the Trustees, attend all
meetings of the Trustees, any Committee of the Trustees and/or the Shareholders
and record all votes and the minutes of proceedings in a book to be kept for
that purpose, shall give or cause to be given notice of all meetings of the
Trustees, any Committee of the Trustees, and of the Shareholders and shall
perform such other duties as may be prescribed by the Trustees. The Secretary,
or in his absence any Assistant Secretary, shall affix the Trust's seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary. The Secretary shall be
the custodian of the Share records and all other books, records and papers of
the Trust (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed. In the absence or disability of the Secretary, the
Assistant Secretary or, if there shall be more than one, the Assistant
Secretaries in the order of their seniority or as otherwise designated by the
Trustees, shall have the powers and duties of the Secretary.

SECTION 3.10. Substitutions. In case of the absence or disability
of any officer of the Trust, or for any other reason that the Trustees may deem
sufficient, the Trustees may delegate, for the time being, the powers or
duties, or any of them, of such officer to any other officer, or to any
Trustee.

SECTION 3.11. Execution of Deeds, etc. Except as the Trustees may
generally or in particular cases otherwise authorize or direct, all deeds,
leases, transfers, contracts, proposals, bonds, notes, checks, drafts and other
obligations made, accepted or endorsed by the Trust shall be signed or endorsed
on behalf of the Trust by its properly authorized officers or agents as
provided in the Declaration.

SECTION 3.12. Power to Vote Securities. Unless otherwise ordered by
the Trustees, the Treasurer shall have full power and authority on behalf of
the Trust to give proxies for, and/or to attend and to act and to vote at, any
meeting of stockholders of any corporation in which the Trust may hold stock,
and at any such meeting the Treasurer or his proxy shall possess and may
exercise any and all rights and powers incident to the ownership of such stock
which, as the owner thereof, the Trust might have possessed and exercised if
present. The Trustees, by resolution from time to time, or, in the absence
thereof, the Treasurer, may confer like powers upon any other person or persons
as attorneys and proxies of the Trust.

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ARTICLE 4

COMMITTEES

SECTION 4.1. Power of Trustees to Designate Committees. The Trustees,
by vote of a Majority of the Trustees, may elect from their number an Executive
Committee and any other Committees and may delegate thereto some or all of
their powers except those which by law, by the Declaration or by these
Bylaws may not be delegated; provided, that an Executive Committee shall not
be empowered to elect the President, the Treasurer or the Secretary, to amend
the Bylaws, to exercise the powers of the Trustees under this Section 4.1 or
under Section 4.3 hereof, or to perform any act for which the action of a
Majority of the Trustees is required by law, by the Declaration or by these
Bylaws. The members of any such Committee shall serve at the pleasure of the
Trustees.

SECTION 4.2. Rules for Conduct of Committee Affairs. Except as
otherwise provided by the Trustees, each Committee elected or appointed
pursuant to this Article 4 may adopt such standing rules and regulations for
the conduct of its affairs as it may deem desirable, subject to review and
approval of such rules and regulations by the Trustees at the next succeeding
meeting of the Trustees, but in the absence of any such action or any contrary
provisions by the Trustees, the business of each Committee shall be conducted,
so far as practicable, in the same manner as provided herein and in the
Declaration for the Trustees.

SECTION 4.3. Trustees May Alter, Abolish, etc., Committees Trustees
may at any time alter or abolish any Committee, change membership of any
Committee, or revoke, rescind, waive or modify action of any Committee or the
authority of any Committee with respect to any matter or class of matters;
provided, that no such action shall impair the rights of any third parties.

SECTION 4.4. Minutes: Review by Trustees. Any Committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees.

ARTICLE 5

SEAL

The seal of the Trust, if any, may be affixed to any instrument, and
the seal and its attestation may be lithographed, engraved or otherwise printed
on any document with the same force and effect as if had been imprinted and
affixed manually in the same manner and with the same force and effect as if
done by a Delaware corporation. Unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence shall not
impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.

ARTICLE 6

SECTION 6.1. Issuance of Shares. The Trustees may issue an unlimited
number of Classes of Shares of any or all Series either in certificated or
uncertificated form, they may issue certificates to the

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holders of a Class of Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series in
certificated form, they may at any time discontinue the issuance of Share
certificates for such Series and may, by written notice to such Shareholders of
such Series require the surrender of their Share certificates to the Trust for
cancellation, which surrender and cancellation shall not affect the ownership
of Shares for such Series.

SECTION 6.2. Uncertificated Shares. For any Class of Shares for which
the Trustees issue Shares without certificates, the Trust or the Transfer Agent
may either issue receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such Shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of such Shares as if they
had received certificates therefor and shall be held to have expressly assented
and agreed to the terms hereof and of the Declaration.

SECTION 6.3. Share Certificates. For any Class of Shares for which
the Trustees shall issue Share certificates, each Shareholder of such Class
shall be entitled to a certificate stating the number of Shares owned by him in
such form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Trust. Such signatures may be facsimiles if the certificate
is countersigned by a Transfer Agent, or by a Registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued by the
Trust with the same effect as if he were such officer at the time of its issue.

SECTION 6.4. Lost, Stolen, etc., Certificates. If any
certificate for certificated Shares shall be lost, stolen, destroyed or
mutilated, the Trustees may authorize the issuance of a new certificate of the
same tenor and for the same number of Shares in lieu thereof. The Trustees
shall require the surrender of any mutilated certificate in respect of which a
new certificate is issued, and may, in their discretion, before the issuance of
a new certificate, require the owner of a lost, stolen or destroyed
certificate, or the owner's legal representative, to make an affidavit or
affirmation setting forth such facts as to the loss, theft or destruction as
they deem necessary, and to give the Trust a bond in such reasonable sum as the
Trustees direct, in order to indemnify the Trust.

ARTICLE 7

TRANSFER OF SHARES

SECTION 7.1. Transfer Agents, Registrars, etc. As approved in Section
5.2(e) of the Declaration, the Trustees shall have the authority to employ and
compensate such transfer agents and registrars with respect to the Shares of
the Trust as the Trustees shall deem necessary or desirable. In addition, the
Trustees shall have the power to employ and compensate such dividend dispersing
agents, warrant agents and agents for reinvestment of dividends as they shall
deem necessary or desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustees.

SECTION 7.2 Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section
6.1(m) of the Declaration. The Trust, or its transfer agents, shall be
authorized to

8
<PAGE> 13
refuse any transfer unless and until presentation of such evidence as may be
reasonably required to show that the requested transfer is proper.

SECTION 7.3 Registered Shareholders. The Trust may deem and treat
the holder of record of any Shares the absolute owner thereof for all purposes
and shall not be required to take any notice of any right or claim of right of
any other person.

ARTICLE 8

AMENDMENTS

SECTION 8.1. Bylaws Subject to Amendment. These Bylaws may be
altered, amended or repealed, in whole or in part, at any time by vote of the
holders of a majority of the Shares issued, outstanding and entitled to vote.
The Trustees, by vote of a Majority of the Trustees (unless a greater vote is
required by Section 2.8 hereof), may alter, amend or repeal these Bylaws, in
whole or in part, including Bylaws adopted by the Shareholders, except with
respect to any provision hereof which by law, the Declaration or these Bylaws
requires action by the Shareholders. Bylaws adopted by the Trustees may be
altered, amended or repealed by the Shareholders.

SECTION 8.2. Notice of Proposal to Amend Bylaws Required. No proposal
to amend or repeal these Bylaws or to adopt new Bylaws shall be acted upon at a
meeting unless either (i) such proposal is stated in the notice or in the
waiver of notice, as the case may be, of the meeting of the Trustees or
Shareholders at which such action is taken, or (ii) all of the Trustees or
Shareholders, as the case may be, are present at such meeting and all agree to
consider such proposal without protesting the lack of notice.

<PAGE> 1
EXHIBIT 5.1

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this 16th day of September, 1995, by and between VAN KAMPEN
AMERICAN CAPITAL LIFE INVESTMENT TRUST, a Delaware business trust, hereinafter
referred to as the "Trust," and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC., a Delaware corporation, hereinafter referred to as the "ADVISER".

The Trust and the ADVISER agree as follows:

1. Appointment

a. The Trust hereby appoints the ADVISER to act as investment adviser to the
Trust's Common Stock Fund, Domestic Strategic Income Fund, Government Fund,
Money Market Fund and Multiple Strategy Fund ("Initial Funds"), for the period
and on the terms set forth in this Agreement. The ADVISER accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.

b. In the event that the Trust establishes one or more portfolios other than
the Initial Funds with respect to which it desires to retain the ADVISER to act
as investment adviser hereunder, it shall notify the ADVISER in writing. If the
ADVISER is willing to render such services it shall notify the Trust in writing
whereupon such portfolio shall become a Fund hereunder and the compensation
payable by such new portfolio to the ADVISER will be as agreed in writing at
the time.

2. Services Rendered and Expenses Paid by ADVISER

The ADVISER, subject to the control, direction and supervision of the Trust's
Trustees and in conformity with applicable laws, the Trust's Declaration of
Trust, Bylaws, registration statement, prospectus and the stated investment
objectives, policies and restrictions of each Fund, shall:

a. manage the investment and reinvestment of the Trust's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in each of the Trust's Funds, and formulation and implementation of
investment programs;

b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the account of each Fund of the Trust with brokers or
dealers selected by the ADVISER;

c. conduct and manage the day-to-day operations of the Trust including, by way
of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing of
legal services except for services provided by outside counsel to the Trust
selected by the Trustees, and the supervision of the Trust's Treasurer and the
personnel working under his direction; and

<PAGE> 2
d. furnish to the Trust office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each Trust trustee and Trust officer who is an
affiliated person of the ADVISER, except the compensation of the Trust's
Treasurer and related expenses as provided below.

In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the Trust and each Fund the most favorable
price and execution available and shall maintain records adequate to
demonstrate compliance with this requirement. Subject to prior authorization by
the Trust's Trustees of appropriate policies and procedures, the ADVISER may,
to the extent authorized by law, cause the Trust to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. In the event of such authorization and to the extent authorized by
law the ADVISER shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
such action.

Except as otherwise agreed, or as otherwise provided herein, the Trust shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
Trust shall include (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase and sale of portfolio investments;
(iii) compensation of its trustees and officers other than those who are
affiliated persons of the ADVISER; (iv) compensation of its Treasurer,
compensation of personnel working under the Treasurer's direction, and expenses
of office space, facilities, and equipment used by the Treasurer and such
personnel in the performance of their normal duties for the Trust which consist
of maintenance of the accounts, books and other documents which constitute the
record forming the basis for the Trust's financial statements, preparation of
such financial statements and other Trust documents and reports of a financial
nature required by federal and state laws, and participation in the production
of the Trust's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to and of
independent accountants of the Trust selected by the Trustees; (vi) custodian,
registrar and shareholder service agent fees and expenses; (vii) expenses
related to the repurchase or redemption of its shares including expenses
related to a program of periodic repurchases or redemptions; (viii) expenses
related to the issuance of its shares against payment therefor by or on behalf
of the subscribers thereto; (ix) fees and related expenses of registering and
qualifying the Trust and its shares for distribution under state and federal
securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the Trust; (xi) all other expenses incidental to holding meetings of the
Trust's shareholders including proxy solicitations therefor; (xii) expenses for

2
<PAGE> 3
servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for the Trust's membership in
trade associations approved by the Trustees; and (xv) such nonrecurring
expenses as may arise, including those associated with actions, suits, or
proceedings to which the Trust is a party and the legal obligation which the
Trust may have to indemnify its officers and trustees with respect thereto. To
the extent that any of the foregoing expenses are allocated between the Trust
and any other party, such allocations shall be pursuant to methods approved by
the Trustees.

3. Role of ADVISER

The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the Trust are not impaired.

Except as otherwise required by the Investment Company Act of 1940 any of the
shareholders, trustees, officers and employees of the Trust may be a
shareholder, director, officer or employee of, or be otherwise interested in,
the ADVISER, and in any person controlled by or under common control with the
ADVISER, and the ADVISER, and any person controlled by or under common control
with the ADVISER, may have an interest in the Trust.

Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties hereunder on the
part of the ADVISER, the ADVISER shall not be subject to liability to the
Trust, or to any shareholder of the Trust, for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.

4. Compensation Payable to ADVISER

The Trust shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, with respect to the
Funds set forth below, a monthly fee computed at the following annual rates:

3
<PAGE> 4
.50% on the first $500 million of the Fund's average daily net assets; .45% on
the next $500 million of the Fund's average daily net assets; and .40% of any
excess over $1 billion.

For purposes of this calculation, assets of such Funds shall be combined in
calculating the investment advisory fee. Each Fund shall bear its pro rata
share of such fee based upon its average daily net assets.

Average daily net assets shall be determined by taking the average of the net
assets for each business day (for each calendar day in the case of the Money
Market Fund) during a given calendar month, calculated in the manner provided
in the Trust's Declaration of Trust. Such fee shall be payable for each
calendar month as soon as practicable after the end of that month.

The fees payable to the ADVISER by the Trust pursuant to this Section 4 shall
be reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding Inc., in connection with the
purchase and sale of portfolio investments of the Trust, less any direct
expenses incurred by such person, in connection with obtaining such
commissions, fees, brokerage or similar payments. The ADVISER shall use its
best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with each of the Trust's portfolio
transactions and shall advise the Trustees of any other commissions, fees,
brokerage or similar payments which may be possible for the ADVISER or any
other direct or indirect majority owned subsidiary of VK/AC Holding, Inc. to
receive in connection with the Trust's portfolio transactions or other
arrangements which may benefit the Trust.

In the event that the ordinary business expenses of the Trust for any fiscal
year should exceed .95% of average daily net assets, the compensation due the
ADVISER for such fiscal year shall be reduced by the amount of such excess. The
ADVISER's compensation shall be so reduced by a reduction or a refund thereof,
at the time such compensation is payable after the end of each calendar month
during such fiscal year of the Trust, and if such amount should exceed such
monthly compensation, the ADVISER shall pay the Trust an amount sufficient to
make up the deficiency, subject to readjustment during the Trust's fiscal year.
For purposes of this paragraph, all ordinary business expenses of the Trust
include the investment advisory fee and other operating expenses paid by the
Trust except (i) for interest and taxes; (ii) brokerage commissions; (iii) as a
result of litigation in connection with a suit involving a claim for recovery
by the Trust; (iv) as a result of litigation involving a defense against a
liability asserted against the Trust, provided that, if the ADVISER made the
decision or took the actions which resulted in such claim, it acted in good
faith without negligence or misconduct; and (v) any indemnification paid by the
Trust to its officers and trustees and the ADVISER in accordance with
applicable state and federal laws as a result of such litigation.

4
<PAGE> 5
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.

5. Books and Records

In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the Trust are the
property of the Trust and further agrees to surrender promptly to the Trust any
of such records upon the Trust's request. The ADVISER further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the Act.

6. Duration and Termination

This Agreement will become effective with respect to the initial Funds on the
date hereof, and with respect to any additional Funds, on the date of receipt
by the Trust of notice from the ADVISER in accordance with Section 1(b) hereof
that the ADVISER is willing to serve as investment adviser with respect to such
Fund, provided that this Agreement (as supplemented by the terms specified in
any notice and agreement pursuant to Section 1(b) hereof) shall have been
approved by the shareholders of each Fund subject to this Agreement, in
accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect for an initial period
of two years. Thereafter, if not terminated, this Agreement shall continue in
effect as to a particular Fund for successive periods of twelve months each,
provided such continuance is specifically approved at least annually, (a) by
the vote of a majority of those members of the Trust's Trustees who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Trust's
Trustees or by vote of a majority of the outstanding voting securities of such
Trust. Not withstanding the foregoing, this Agreement may be terminated as to
any Trust at any time, without the payment of any penalty, by the Trust (by
vote of the Trust's Trustees or by vote of a majority of the outstanding voting
securities of such Fund), or by the ADVISER, on sixty days' written notice.
This Agreement will immediately terminate in the event of its assignment.

7. Miscellaneous Provisions

For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of 1940 (the "1940 Act") and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted to either the ADVISER or
the Trust by the Securities and Exchange Commission, or such interpretive
positions as may be taken by the Commission or its staff, under said Act, and
the term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934 and the Rules and Regulations thereunder.

5
<PAGE> 6
The execution of this Agreement has been authorized by the Trust's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Trust or
the Trustees of the Trust as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the Trust individually but are binding only upon
the assets and property of the Trust. The Trust is composed of multiple Funds.
All obligations of the Trust under this Agreement shall apply only on a Fund by
Fund basis and the assets of one Fund shall not be liable for the obligations
of any other Fund. A Certificate of Trust in respect of the Trust is on file
with the Secretary of the State of Delaware.

The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

By /s/ Nori L. Gabert
______________________________________

Name: Nori L. Gabert
__________________________________

Its: Vice President
___________________________________

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

By /s Huey P. Falgout, Jr.
______________________________________

Name: Huey P. Falgout, Jr.
__________________________________

Its: Vice President
___________________________________

<PAGE> 1
EXHIBIT 5.2

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this 16th day of September, 1995, by and between VAN KAMPEN
AMERICAN CAPITAL LIFE INVESTMENT TRUST, a Delaware business trust, hereinafter
referred to as the "TRUST," and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC., a Delaware corporation, hereinafter referred to as the "ADVISER".

The FUND and the ADVISER agree as follows:

1. Appointment

a. The TRUST hereby appoints the ADVISER to act as investment adviser to the
FUND'S Emerging Growth Fund ("the Fund"), for the period and on the
terms set forth in this Agreement. The ADVISER accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.

b. In the event that the TRUST establishes one or more portfolios with respect
to which it desires to retain the ADVISER to act as investment adviser
hereunder, it shall notify the ADVISER in writing. If the ADVISER is willing to
render such services it shall notify the TRUST in writing whereupon such
portfolio shall become a Fund hereunder and the compensation payable by
such new Fund to the ADVISER will be as agreed in writing at the time.

2. Services Rendered and Expenses Paid by ADVISER

The ADVISER, subject to the control, direction and supervision of the TRUST's
Trustees and in conformity with applicable laws, the TRUST's Agreement and
Declaration of Trust ("Declaration of Trust"), Bylaws, registration statement,
prospectus and the stated investment objectives, policies and restrictions of
the Fund, shall:

a. manage the investment and reinvestment of the TRUST's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the TRUST's Portfolio, and formulation and implementation of
investment programs;

b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the account of the Fund of the TRUST with brokers
or dealers selected by the ADVISER;

c. conduct and manage the day-to-day operations of the TRUST including, by way
of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing of
legal services except for services provided by outside counsel to the TRUST
selected by the Trustees, and the supervision of the TRUST's Treasurer and the

<PAGE> 2
personnel working under his direction; and

d. furnish to the TRUST office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each TRUST trustee and TRUST officer who is an
affiliated person of the ADVISER, except the compensation of the TRUST's
Treasurer and related expenses as provided below.

In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the TRUST and the Fund the most
favorable price and execution available and shall maintain records adequate to
demonstrate compliance with this requirement. Subject to prior authorization by
the TRUST's Trustees of appropriate policies and procedures, the ADVISER may, to
the extent authorized by law, cause the TRUST to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. In the event of such authorization and to the extent authorized by
law the ADVISER shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
such action.

2
<PAGE> 3
federal securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the TRUST; (xi) all other expenses incidental to holding meetings of the TRUST's
shareholders including proxy solicitations therefor; (xii) expenses for
servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for the TRUST's membership in
trade associations approved by the Trustees; and (xv) such nonrecurring
expenses as may arise, including those associated with actions, suits, or
proceedings to which the TRUST is a party and the legal obligation which the
TRUST may have to indemnify its officers and trustees with respect thereto. To
the extent that any of the foregoing expenses are allocated between the TRUST
and any other party, such allocations shall be pursuant to methods approved by
the Trustees.

3. Role of ADVISER

Except as otherwise required by the Investment Company Act of 1940 any of the
shareholders, trustees, officers and employees of the TRUST may be a
shareholder, director, officer or employee of, or be otherwise interested in,
the ADVISER, and in any person controlled by or under common control with the
ADVISER, and the ADVISER, and any person controlled by or under common control
with the ADVISER, may have an interest in the TRUST.

Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties hereunder on the
part of the ADVISER, the ADVISER shall not be subject to liability to the TRUST,
or to any shareholder of the TRUST, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.

4. Compensation Payable to ADVISER

The TRUST shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, with respect to the
Fund, a monthly fee computed at the following annual rate: 0.70% of
average daily net assets.

Average daily net assets shall be determined by taking the average of the net
assets for each business day during a given calendar month, calculated in the
manner provided in the TRUST's Declaration of Trust. Such fee shall be payable
for each calendar month as soon as practicable after the end of that month.

3
<PAGE> 4
The fees payable to the ADVISER by the TRUST pursuant to this Section 4 shall be
reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the TRUST, less any direct
expenses incurred by such person, in connection with obtaining such
commissions, fees, brokerage or similar payments. The ADVISER shall use its
best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with each of the TRUST's portfolio
transactions and shall advise the Trustees of any other commissions, fees,
brokerage or similar payments which may be possible for the ADVISER or any
other direct or indirect majority owned subsidiary of VK/AC Holding, Inc. to
receive in connection with the TRUST's portfolio transactions or other
arrangements which may benefit the TRUST.

If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.

5. Books and Records

In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the TRUST are the
property of the TRUST and further agrees to surrender promptly to the TRUST any
of such records upon the TRUST's request. The ADVISER further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the Act.

6. Duration and Termination

This Agreement will become effective with respect to the Fund on the date
hereof, and with respect to any additional Funds, on the date of receipt by the
TRUST of notice from the ADVISER in accordance with Section 1(b) hereof that
the ADVISER is willing to serve as investment adviser with respect to such
Fund, provided that this Agreement (as supplemented by the terms specified in
any notice and agreement pursuant to Section 1(b) hereof) shall have been
approved by the shareholders of each Fund subject to this Agreement, in
accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect for an initial period
of two years. Thereafter, if not terminated, this Agreement shall continue in
effect as to a particular Fund for successive periods of twelve months each,
provided such continuance is specifically approved at least annually, (a) by
the vote of a majority of those members of the TRUST's Trustees who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the TRUST's
Trustees or by vote of a majority of the outstanding voting securities of such
Fund. Not withstanding

4
<PAGE> 5
the foregoing, this Agreement may be terminated as to any Fund at any time,
without the payment of any penalty, by the TRUST (by vote of the TRUST's
Trustees or by vote of a majority of the outstanding voting securities of such
Fund), or by the ADVISER, on sixty days' written notice. This Agreement will
immediately terminate in the event of its assignment.

7. Miscellaneous Provisions

For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of 1940 (the "1940 Act") and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted to either the ADVISER or
the TRUST by the Securities and Exchange Commission, or such interpretive
positions as may be taken by the Commission or its staff, under said Act, and
the term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934 and the Rules and Regulations thereunder.

The execution of this Agreement has been authorized by the Trust's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Trust or
the Trustees of the Trust as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the Trust individually but are binding only upon
the assets and property of the Trust. The TRUST is composed of multiple
Portfolios. All obligations of the TRUST under this Agreement shall apply only
on a Fund by Fund basis and the assets of one Fund shall not be liable for the
obligations of any other Fund. A Certificate of Trust in respect of the Trust
is on file with the Secretary of the State of Delaware.

The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

By /s/ Nori L. Gabert
______________________________________

Name: Nori L. Gabert
__________________________________

Its: Vice President
___________________________________

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

By /s Huey P. Falgout, Jr.
______________________________________

Name: Huey P. Falgout, Jr.
__________________________________

Its: Vice President
___________________________________

<PAGE> 1
EXHIBIT 5.3

INVESTMENT ADVISORY AGREEMENT

The TRUST and the ADVISER agree as follows:

1. Appointment

a. The TRUST hereby appoints the ADVISER to act as investment adviser to the
TRUST'S Global Equity Fund ("the Fund"), for the period and on the terms set
forth in this Agreement. The ADVISER accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.

b. In the event that the TRUST establishes one or more portfolios with respect
to which it desires to retain the ADVISER to act as investment adviser
hereunder, it shall notify the ADVISER in writing. If the ADVISER is willing to
render such services it shall notify the TRUST in writing whereupon such
portfolio shall become a Fund hereunder and the compensation payable by such
new portfolio to the ADVISER will be as agreed in writing at the time.

2. Services Rendered and Expenses Paid by ADVISER

a. manage the investment and reinvestment of the TRUST's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the TRUST'S Fund, and formulation and implementation of
investment programs;

b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the account of the Fund of the TRUST with brokers or
dealers selected by the ADVISER;

<PAGE> 2
TRUST's Trustees of appropriate policies and procedures, the ADVISER may, to
the extent authorized by law, cause the TRUST to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. In the event of such authorization and to the extent authorized by
law the ADVISER shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
such action.

Except as otherwise agreed, or as otherwise provided herein, the TRUST shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
TRUST shall include (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase and sale of portfolio investments;
(iii) compensation of its trustees and officers other than those who are
affiliated persons of the ADVISER; (iv) compensation of its Treasurer,
compensation of personnel working under the Treasurer's direction, and expenses
of office space, facilities, and equipment used by the Treasurer and such
personnel in the performance of their normal duties for the TRUST which consist
of maintenance of the accounts, books and other documents which constitute the
record forming the basis for the TRUST's financial statements, preparation of
such financial statements and other TRUST documents and reports of a financial
nature required by federal and state laws, and participation in the production
of the TRUST's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to and of
independent accountants of the TRUST selected by the Trustees; (vi) custodian,
registrar and shareholder service agent fees and expenses; (vii) expenses
related to the repurchase or redemption of its shares including expenses
related to a program of periodic repurchases or redemptions; (viii) expenses
related to the issuance of its shares against payment therefor by or on behalf
of the subscribers thereto; (ix) fees and related expenses of registering and
qualifying the TRUST and its shares for distribution under state and federal
securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the TRUST; (xi) all other expenses incidental to holding meetings of the
TRUST's shareholders including proxy solicitations therefor; (xii) expenses for
servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for the TRUST's membership in
trade associations approved by the Trustees; and (xv) such nonrecurring
expenses as may arise, including those associated with actions, suits, or
proceedings to which the TRUST is a party and the legal obligation which the
TRUST may have to indemnify its officers and trustees with respect thereto. To
the extent that any of the foregoing expenses are allocated between the TRUST
and any other party, such allocations shall be pursuant to methods approved by
the Trustees.

3. Role of ADVISER

2
<PAGE> 3
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.

4. Compensation Payable to ADVISER

The fees payable to the ADVISER by the TRUST pursuant to this Section 4 shall
be reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the TRUST, less any direct
expenses incurred by such person, in connection with obtaining such
commissions, fees, brokerage or similar payments. The ADVISER shall use its
best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with each of the TRUST's portfolio
transactions and shall advise the Trustees of any other commissions, fees,
brokerage or similar payments which may be possible for the ADVISER or any
other direct or indirect majority owned subsidiary of VK/AC Holding, Inc. to
receive in connection with the TRUST's portfolio transactions or other
arrangements which may benefit the TRUST.

If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.

5. Books and Records

In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the TRUST are the
property of the TRUST and further agrees to surrender promptly to the TRUST any
of such records upon the TRUST's request. The ADVISER further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the Act.

6. Duration and Termination

3
<PAGE> 4
penalty, by the TRUST (by vote of the TRUST's Trustees or by vote of a majority
of the outstanding voting securities of such Fund), or by the ADVISER, on sixty
days' written notice. This Agreement will immediately terminate in the event of
its assignment.

7. Miscellaneous Provisions

For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of 1940 (the "1940 Act") and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted to either the ADVISER or
the TRUST by the Securities and Exchange Commission, or such interpretive
positions as may be taken by the Commission or its staff, under said Act, and
the term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934 and the Rules and Regulations thereunder.

The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

By /s/ NORI L. GABERT
___________________________________

Name: Nori L. Gabert
___________________________________

Its: Vice President
___________________________________

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

By /s/ HUEY P. FALGOUT, JR.
___________________________________

Name: Huey P. Falgout, Jr.
___________________________________

Its: Vice President
___________________________________

<PAGE> 1
EXHIBIT 5.4

INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
and
JOHN GOVETT & CO. LIMITED

THIS AGREEMENT is made as of this 16th day of September, 1995 by and between
JOHN GOVETT & CO. LIMITED ("JOHN GOVETT") of Shackleton House, 4 Battle Bridge
Lane, London SE1 2HR, England, and VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC. ("VKAC") of 2800 Post Oak Boulevard, Houston, Texas 77056.

WHEREAS, VKAC has heretofore sponsored and acts as Investment Adviser to Van
Kampen American Capital Life Investment Trust (the "Trust") with respect to the
Global Equity Fund (the "Fund"); and

WHEREAS, JOHN GOVETT has available a staff of experienced investment personnel
and facilities for providing investment sub-advisory services applicable to
that portion of the investment portfolio invested in non-U.S. securities; and

WHEREAS, VKAC represents that it is a non-private investor with regard to the
Investment Management Regulatory Organization Limited ("IMRO") rules.

WHEREAS, JOHN GOVETT is a member of IMRO, a self-regulating organization
recognized under the Financial Services Act 1986 of the United Kingdom and is
willing to provide VKAC with investment advisory services on the terms and
conditions hereinafter set forth; and

WHEREAS, VKAC and JOHN GOVETT (jointly referred to as "the Advisers") desire to
enter into an agreement for JOHN GOVETT to provide sub-advisory services to the
Fund and to VKAC with respect to the Fund's non-U.S. investments.

NOW THEREFORE it is mutually agreed:

1. Investment Sub-Advisory Services

1.1 Investment Advice

a) Subject to the overall policies, control, direction and review of the
Fund's Trustees, JOHN GOVETT shall keep under review the non-U.S. investments
of the Fund and continuously furnish to the Fund and to VKAC (1) investment
advice primarily for investments in securities for which the principal trading
market(s) are in non-U.S. countries; (2) economic, statistical and research
information and advice, including advice on the allocation of investments among
countries, relating only to such portion of the Fund's assets as the Advisers
shall from time to time designate ("Non-U.S. Securities"), generally with
respect to securities issued outside

<PAGE> 2
the United States and Canada; (3) recommendations as to the voting of proxies
solicited by or with respect to Non-U.S. Securities; and (4) an investment
program with respect to Non-U.S. Securities and recommendations as to what
securities shall be purchased, sold or exchanged, and what portion, if any, of
the Non-U.S. Securities shall be held in money market instruments.

b) The Advisers are responsible for the allocation of the Fund's assets among
the various securities markets of the world. The Advisers will determine at
least quarterly the percentage of the assets that shall be allocated to each of
the Advisers (the "Asset Allocation"). The Asset Allocation will specify the
percentage and nature of the assets of the Fund allocated to each of the
Advisers for management on the effective date of the determination and will
apply to cash inflows or outflows and income and expense accruals thereafter
until such time as the Asset Allocation is redetermined. Each of the Advisers
will be responsible for the allocation of assets among the securities markets
within the area for which it is responsible. If the Advisers cannot agree on an
Asset Allocation, the Trustees shall make the final determination since the
Trustees retains in all events the control and management of the business and
affairs of the Fund.

c) Unless otherwise instructed by VKAC or the Trustees, and subject to the
provisions of this Agreement and to any guidelines or limitations specified
from time to time by VKAC or by the Trustees, JOHN GOVETT shall determine the
Non-U.S. Securities to be purchased and sold by the Fund and shall place
orders for the purchase, sale or exchange of Non-U.S. Securities for the
Fund's accounts with brokers or dealers and to that end JOHN GOVETT is
authorized by the Trustees to give instructions to the Custodian and any
Sub-Custodian of the Fund as to deliveries of such Non-U.S. Securities,
transfers of currencies and payments of cash for the account of the Fund.

d) In performing these services, JOHN GOVETT shall adhere to the Fund's
investment objectives, restrictions and limitations as contained in its
Prospectus, Statement of Additional Information, or Agreement and Declaration
of Trust and shall comply with all statutory and regulatory restrictions,
limitations and requirements applicable to the activity of the Fund.

e) Unless otherwise instructed by VKAC or the Trustees, and subject to the
provisions of this Agreement and to any guidelines or limitations specified
from time to time by VKAC or by the Trustees, JOHN GOVETT shall have executed
and performed on behalf of and at the expense of the Fund:

i) Purchases, sales, exchanges, conversions, and placement or orders for
execution, and

2
<PAGE> 3
ii) Reporting of all transactions to VKAC and to other entities as directed by
VKAC or by the Trustees.

f) JOHN GOVETT shall provide the Trustees at least quarterly, in advance of
the regular meetings of the Trustees, a report of its activities hereunder on
behalf of the Fund and its proposed strategy for the next quarter, all in such
form and detail as requested by the Trustees. JOHN GOVETT shall also make an
investment officer available to attend such meetings of the Trustees as the
Trustees may reasonably request.

1.2 Restriction of JOHN GOVETT's Powers

(a) JOHN GOVETT shall not commit the Fund to any extent beyond the amount of
the cash and securities placed by the Fund under the control of the JOHN
GOVETT.

(b) In carrying out its duties hereunder JOHN GOVETT shall comply with all
reasonable instruction of the Fund or VKAC in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Trustees or by any other person authorized by a resolution of the
Trustees provided a certified copy of such resolution has been supplied to JOHN
GOVETT.

(c) All securities, cash, and other assets of the Fund shall be placed and
maintained in the care of a member bank of the Federal Reserve System of the
United States approved by the Trustees as custodian and one or more "Eligible
Foreign Custodians" (as defined in Rule 17f-5 under the Investment Company Act
of 1940 (the "1940 Act")) approved by the Trustees as sub-custodians.

(d) Persons authorized by resolution of the Trustees shall have the right to
inspect and copy contracts, notes, vouchers, and copies of entries in books or
electronic recording media relating to the Fund's transactions at the
registered office of JOHN GOVETT at any time during normal business hours. Such
records, in relation to each transaction effected by JOHN GOVETT on behalf of
the Fund shall be maintained by JOHN GOVETT for a period of seven years from
the date of such transaction.

1.3 Purchase and Sale of Securities

In performing the services described above, JOHN GOVETT shall use its best
efforts to obtain for the Fund the most favorable price and execution
available. Subject to prior authorization of appropriate policies and
procedures by the Trustees, JOHN GOVETT may, to the extent authorized by law,
cause the Fund to pay a broker or dealer who provides brokerage and research
services an amount of commission for effecting the Fund's investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, in

3
<PAGE> 4
recognition of the brokerage and research services provided by the broker or
dealer. To the extent authorized by law, JOHN GOVETT shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of such action.

1.4 Custodian

JOHN GOVETT shall not act as Custodian for the securities or any other assets
of the Fund. All such assets shall be held by the Custodian or Sub-Custodian
appointed by the Trustees.

2. Duties of VKAC

2.1 Provision of Information

VKAC shall advise JOHN GOVETT from time to time with respect to the Fund of its
investment objectives and of any changes or modifications thereto, as well as
any specific investment restrictions or limitations by sending to JOHN GOVETT a
copy of each registration statement relating to the Fund as filed with the
Securities and Exchange Commission. As requested by JOHN GOVETT, VKAC shall
furnish such information to JOHN GOVETT as to holdings, purchases, and sales of
the securities under its management as will reasonably enable JOHN GOVETT to
furnish its investment advice under this Agreement.

2.2 Compensation to JOHN GOVETT

The fee for the services provided under this Agreement will be determined as
follows:

(a) An amount for each month (or such other valuation period as may be
mutually agreed upon) equivalent, on an annual basis, to 50% of the
compensation actually received by VKAC pursuant to the investment advisory fee
schedule set forth in the Investment Advisory Agreement between the Fund and
VKAC taking into account any waiver or return to the Fund of any or all of such
advisory fee by VKAC (with any such return of fees to be treated as if not
actually received). The value of the assets of the Fund shall be computed as of
the close of business on the last day of each valuation period for the Fund,
using the average of all the daily determinations of the net value of the
assets of the Fund.

(b) The foregoing fee shall be paid in cash by VKAC to JOHN GOVETT within five
(5) business days after the last day of the valuation period.

3. Miscellaneous

3.1 Activities of JOHN GOVETT

4
<PAGE> 5
The services of JOHN GOVETT as Sub-Adviser to VKAC under this Agreement are not
to be deemed exclusive, JOHN GOVETT and its affiliates being free to render
services to others. It is understood that shareholders, directors, officers and
employees of JOHN GOVETT may become interested in the Fund or VKAC as a
shareholder, trustee, officer, partner or otherwise.

3.2 Services to Other Clients

VKAC acknowledges that JOHN GOVETT may have investment responsibilities, or
render investment advice to, or perform other investment advisory services for,
other individuals or entities, ("Clients"). Subject to the provisions of this
paragraph, VKAC agrees that JOHN GOVETT may give advice or exercise investment
responsibility and take such other action with respect to such Clients which
may differ from advice given or the timing or nature of action taken with
respect to the Fund, provided that JOHN GOVETT acts in good faith, and
provided, further, that it is JOHN GOVETT policy to allocate, within its
reasonable discretion, investment opportunities to the Fund over a period of
time on a fair and equitable basis relative to the Clients, taking into account
the investment objectives and policies of the Fund and any specific investment
restrictions applicable thereto. VKAC acknowledges that one or more of the
Clients may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Fund may have an
interest from time to time, whether in transactions which may involve the Fund
or otherwise. JOHN GOVETT shall have no obligation to acquire for the Fund a
position in any investment which any Client may acquire, and VKAC shall have no
first refusal, coinvestment or other rights in respect of any such investment,
either for the Fund or otherwise.

3.3 Best Efforts

It is understood and agreed that in furnishing the investment advice and other
services as herein provided, JOHN GOVETT shall use its best professional
judgment to recommend actions which will provide favorable results for the
Fund. JOHN GOVETT shall not be liable to the Fund or to any shareholder of the
Fund to any greater degree than VKAC.

3.4 Indemnity for Taxes

a) Notwithstanding any other provision of this Agreement, VKAC shall indemnify
and save JOHN GOVETT and each of its affiliates, officers, directors and
employees (each an "Indemnified Party") harmless from, against, for and in
respect of all taxes imposed by the United Kingdom on VKAC or the Fund, in
relation to the matters contemplated by this Agreement in the event that any
such tax is assessed or charged on an Indemnified Party as a branch or agent of
VKAC or the Fund.

5
<PAGE> 6
b) VKAC will not be liable under this indemnification provision with respect
to any liabilities incurred by reason of an Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Fund.

c) VKAC will not be liable under this indemnification provision with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified VKAC in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated agent). In
case any such action is brought against the Indemnified Parties, VKAC will be
entitled to participate, at its own expense, in the defense thereof. VKAC also
will be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from VKAC to such party of VKAC's
election to assume the defense thereof, the Indemnified Party will bear the
fees and expenses of any additional counsel retained by it, and VKAC will not
be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof.

3.5 Duration of Agreement

a) This Agreement, unless terminated pursuant to paragraph b or c below, shall
have an initial term of two years, and thereafter shall continue in effect from
year to year, provided its continued applicability is specifically approved at
least annually by the Trustees or by a vote of the holders of a majority of the
outstanding shares of the Fund. In addition, such continuation shall be
approved by vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. As used in this paragraph,
the term "interested person" shall have the same meaning as set forth in the
1940 Act.

b) This Agreement may be terminated by sixty (60) days' written notice by
either VKAC or JOHN GOVETT to the other party. The Agreement may also be
terminated at any time, without the payment of any penalty, by the Fund (by
vote of the Trustees or, by the vote of a majority of the outstanding voting
securities of such Fund), on sixty (60) days' written notice to both VKAC and
JOHN GOVETT. This Agreement shall automatically terminate in the event of the
termination of the investment advisory agreement between VKAC and the Fund.

c) This Agreement shall terminate in the event of its assignment. The term
"assignment" for this purpose shall have the same meaning

6
<PAGE> 7
set forth in Section 2(a)(4) of the 1940 Act.

d) Termination shall be without prejudice to the completion of any
transactions which JOHN GOVETT shall have committed to on behalf of the Fund
prior to the time of termination. JOHN GOVETT shall not effect and the Fund
shall not be entitled to instruct JOHN GOVETT to effect any further
transactions on behalf of the Fund subsequent to the time termination takes
effect.

e) This Agreement shall terminate forthwith by notice in writing on the
happening of any of the following events:

i) if VKAC or JOHN GOVETT shall go into liquidation (except a voluntary
liquidation for the purpose of and followed by a bona fide reconstruction or
amalgamation upon terms previously approved in writing by the party not in
liquidation) or if a receiver or receiver and manager of any of the assets of
any of them is appointed; or

ii) if either of the parties hereto shall commit any breach of the provisions
hereof and shall not have remedied such breach within 30 days after the service
of notice by the party not in breach on the other requiring the same to be
remedied.

f) On the termination of this Agreement and completion of all matters referred
to in the foregoing paragraph (d) JOHN GOVETT shall deliver or cause to be
delivered to the Fund copies of all documents, records and books of the Fund
required to be maintained pursuant to Rules 31a-1 or 31a-2 of the 1940 Act
which are in JOHN GOVETT's possession, power or control and which are valid and
in force at the date of termination.

3.6 Notices

Any notice, request, instruction, or other document to be given under this
Agreement by any party hereto to the other parties shall be in writing and
delivered personally or sent by mail or telecopy (with a hard copy to follow),

If to JOHN GOVETT, to:

Shackleton House
4 Battle Bridge Lane
London SE1 2HR
England
attn: The Hon. Kevin Pakenham

7
<PAGE> 8
with a copy to:

650 California Street
28th Floor
San Francisco, CA 94108
telecopy: (415) 249-0554
attn: Michael J. Mayer

and a copy to:

650 California Street
28th Floor
San Francisco, CA 94108
telecopy: (415) 249-0553
attn: Robert A. Cornman, Esq.

and a copy to:

Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
telecopy: (415) 772-6268
attn: Mitchell E. Nichter, Esq.

If to VKAC, to:

2800 Post Oak Blvd.
Houston, TX 77056
telecopy: (713) 993-4300
attn: Don Powell

with a copy to:

2800 Post Oak Blvd.
Houston, TX 77056
telecopy: (713) 993-4317
attn: Nori L. Gabert, Esq.

or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be presumed to have
been duly given to the party to which it is addressed, on the date three (3)
days after mailing, and in the case of delivery by telecopy, on the date the
hard copy is received.

8
<PAGE> 9
3.7 IMRO Rules

As a member of IMRO and in light of IMRO Rules, the Sub-Adviser places on
record that it regards this Agreement as not necessitating any ancillary
agreement with the Fund or VKAC on the grounds that, within meanings of the
IMRO Rules (a) the Fund is an open-ended investment company and a business
investor, (b) VKAC is a professional investor and (c) the subject matter of
this Agreement is a scheme management activity.

3.8 Choice of Law

This Agreement shall be construed according to, and the rights and liabilities
of the parties hereto shall be governed by, the laws of the United States and
the State of California.

3.9 Miscellaneous Provisions

IN WITNESS WHEREOF, the Agreement has been executed as of the date first above
given.

JOHN GOVETT & CO. LIMITED

By: /s/ KEVIN J. T. PAKENHAM
_____________________________________

Name: Kevin J. T. Pakenham
___________________________________

Its: Chief Executive
___________________________________

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

/s/ NORI L. GABERT
By: ____________________________________

Name: Nori L. Gabert
___________________________________

Its: Vice President
___________________________________

<PAGE> 1
EXHIBIT 5.5

INVESTMENT ADVISORY AGREEMENT

The TRUST and the ADVISER agree as follows:

1. Appointment

a. The TRUST hereby appoints the ADVISER to act as investment adviser to the
TRUST'S Real Estate Securities Fund ("the Fund"), for the period and on the
terms set forth in this Agreement. The ADVISER accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.

b. In the event that the TRUST establishes one or more portfolios with respect
to which it desires to retain the ADVISER to act as investment adviser
hereunder, it shall notify the ADVISER in writing. If the ADVISER is willing to
render such services it shall notify the TRUST in writing whereupon such
portfolio shall become a Fund hereunder and the compensation payable by such
new portfolio to the ADVISER will be as agreed in writing at the time.

2. Services Rendered and Expenses Paid by ADVISER

a. manage the investment and reinvestment of the TRUST's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the TRUST'S Fund, and formulation and implementation of
investment programs;

b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the account of the Fund of the TRUST with brokers or
dealers selected by the ADVISER;

<PAGE> 2
d. furnish to the TRUST office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each TRUST trustee and TRUST officer who is an
affiliated person of the ADVISER, except the compensation of the TRUST's
Treasurer and related expenses as provided below.

In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the TRUST and the Fund the most favorable
price and execution available and shall maintain records adequate to
demonstrate compliance with this requirement. Subject to prior authorization by
the TRUST's Trustees of appropriate policies and procedures, the ADVISER may,
to the extent authorized by law, cause the TRUST to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. In the event of such authorization and to the extent authorized by
law the ADVISER shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
such action.

2
<PAGE> 3
proxy solicitation materials of the TRUST; (xi) all other expenses incidental
to holding meetings of the TRUST's shareholders including proxy solicitations
therefor; (xii) expenses for servicing shareholder accounts; (xiii) insurance
premiums for fidelity coverage and errors and omissions insurance; (xiv) dues
for the TRUST's membership in trade associations approved by the Trustees; and
(xv) such nonrecurring expenses as may arise, including those associated with
actions, suits, or proceedings to which the TRUST is a party and the legal
obligation which the TRUST may have to indemnify its officers and trustees with
respect thereto. To the extent that any of the foregoing expenses are allocated
between the TRUST and any other party, such allocations shall be pursuant to
methods approved by the Trustees.

3. Role of ADVISER

Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties hereunder on the
part of the ADVISER, the ADVISER shall not be subject to liability to the
TRUST, or to any shareholder of the TRUST, for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.

4. Compensation Payable to ADVISER

The fees payable to the ADVISER by the TRUST pursuant to this Section 4 shall
be reduced by any commissions, tender solicitation

3
<PAGE> 4
and other fees, brokerage or similar payments received by the ADVISER, or any
other direct or indirect majority owned subsidiary of VK/AC Holding, Inc., in
connection with the purchase and sale of portfolio investments of the TRUST,
less any direct expenses incurred by such person, in connection with obtaining
such commissions, fees, brokerage or similar payments. The ADVISER shall use
its best efforts to recapture all available tender offer solicitation fees and
exchange offer fees in connection with each of the TRUST's portfolio
transactions and shall advise the Trustees of any other commissions, fees,
brokerage or similar payments which may be possible for the ADVISER or any
other direct or indirect majority owned subsidiary of VK/AC Holding, Inc. to
receive in connection with the TRUST's portfolio transactions or other
arrangements which may benefit the TRUST.

If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.

5. Books and Records

In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the TRUST are the
property of the TRUST and further agrees to surrender promptly to the TRUST any
of such records upon the TRUST's request. The ADVISER further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the Act.

6. Duration and Termination

4
<PAGE> 5
of a majority of the outstanding voting securities of such Fund), or by the
ADVISER, on sixty days' written notice. This Agreement will immediately
terminate in the event of its assignment.

7. Miscellaneous Provisions

For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of 1940 (the "1940 Act") and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted to either the ADVISER or
the TRUST by the Securities and Exchange Commission, or such interpretive
positions as may be taken by the Commission or its staff, under said Act, and
the term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934 and the Rules and Regulations thereunder.

The execution of this Agreement has been authorized by the Trust's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Trust or
the Trustees of the Trust as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the Trust individually but are binding only upon
the assets and property of the Trust. The TRUST is composed of multiple Funds.
All obligations of the TRUST under this Agreement shall apply only on a Fund by
Fund basis and the assets of one Fund shall not be liable for the obligations
of any other Fund. A Certificate of Trust in respect of the fund is on file
with the Secretary of the State of Delaware.

It is understood and agreed that the ADVISER may engage a subadviser to assist
it in the performance of its duties hereunder.

5
<PAGE> 6
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

By /s/ Nori L. Gabert
___________________________________

Name: Nori L. Gabert
__________________________________

Its: Vice President
___________________________________

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

By /s/ Huey P. Falgout, Jr.
______________________________________

Name: Huey P. Falgout, Jr.
__________________________________

Its: Vice President
___________________________________

<PAGE> 1
EXHIBIT 5.6

INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
AND
HINES INTERESTS REALTY ADVISORS LIMITED PARTNERSHIP

This Agreement is entered into this 16th day of September, 1995, between VAN
KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC., ("VKAC") and HINES INTERESTS
REALTY ADVISORS LIMITED PARTNERSHIP ("Hines"), to provide certain investment
advisory services to Van Kampen American Capital Life Investment Trust (the
"Trust").

WHEREAS, VKAC has entered into an Investment Advisory Agreement (the "Advisory
Agreement"), dated this date, with the Trust, under which VKAC has agreed,
among other things, to act as investment adviser to the Real Estate Securities
Fund of the Trust (the "Fund"); and

WHEREAS, the Advisory Agreement provides that VKAC may engage a subadviser to
furnish requested investment information and advice with respect to real estate
matters to assist VKAC in carrying out its responsibilities under the Advisory
Agreement; and

WHEREAS, it is the purpose of this Sub-Advisory Agreement (the "Agreement") to
express the agreements and understandings of the parties with respect to the
services to be provided by Hines to VKAC with respect to the Fund and the terms
and conditions under which such services will be rendered.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is agreed as follows:

1. Services of Hines.

Hines shall act as sub-adviser to VKAC to assist VKAC in the performance of its
investment advisory responsibilities to the Fund. In this capacity, Hines
shall have the following responsibilities:

(a) to provide regional economic analysis of the areas in which properties
owned by real estate investment trusts are located;

(b) to provide analysis and information concerning the relative attractiveness
of the various property types within the several geographic regions;

(d) to evaluate property managers and sponsors of real estate investment
trusts;

<PAGE> 2
(e) to review and monitor the real estate investments in the Fund; and

(f) to furnish such other information and reports as may reasonably be
requested by VKAC from time to time.

2. Obligations of VKAC.

VKAC shall have the following obligations under this Agreement:

(a) to keep Hines fully informed as to the composition of the Fund's
investment securities;

(b) to keep Hines fully advised of the Fund's investment objectives, and any
modifications and changes thereto, as well as any specific investment
restrictions or limitations by sending Hines copies of each registration
statement;

(c) to furnish Hines with a copy of any financial statement or report prepared
for the Trust by independent public accountants, and with copies of any
financial statements or reports made by the Trust to shareholders or to any
governmental body or securities exchange and to inform Hines of the results of
any audits or examinations by regulatory authorities pertaining to the Trust;

(d) to furnish Hines with any further materials or information which Hines may
reasonably request to enable it to perform its functions under this Agreement;
and

(e) to compensate Hines for its services under this Agreement by the payment
of fees equal to (i) 50% of the fees received by VKAC for services rendered
under the Advisory Agreement by VKAC to the Fund during the term of this
Agreement, less (ii) 50% of the amount paid by VKAC on behalf of the Fund
pursuant to any expense limitation or the amount of any other reimbursement
made by VKAC to the Fund. In the event that this Agreement shall be effective
for only part of a period to which any such fee received by VKAC is
attributable, then an appropriate pro-ration of the fee that would have been
payable to Hines under this Agreement shall be made. The fees payable to Hines
from VKAC shall be payable upon receipt by VKAC of advisory fees from the Fund.

3. Best Efforts.

It is understood and agreed that in furnishing the investment advice and other
services as provided in this Agreement, Hines shall use its best professional
judgment to recommend actions which will provide favorable results for the
Fund. Hines shall not be liable to the Trust or to any shareholder of the
Trust to any greater degree than VKAC. Hines shall be free to render similar
services to others and otherwise to engage in the real estate

2
<PAGE> 3
business and related activities so long as the services rendered to the Fund
are not impaired.

4. Compliance With Laws.

Hines represents that it is, and will continue to be throughout the term of
this Agreement, an investment adviser registered under all applicable federal
and state laws. In all matters relating to the performance of this Agreement,
Hines will act in conformity with the Trust's Agreement and Declaration of
Trust, Bylaws, and current registration statement and with the instructions and
direction of VKAC and the Trust's Trustees, and will conform to and comply with
the Investment Company Act of 1940, as amended (the "1940 Act"), and all other
applicable federal or state laws and regulations.

5. Termination.

This Agreement shall terminate automatically upon the termination of the
Advisory Agreement. This Agreement may be terminated at any time, without
penalty, by VKAC or by the Trust by giving 30 days' written notice of such
termination to Hines at its principal place of business, provided that such
termination is approved by the Trustees of the Trust or by vote of a majority
of the outstanding voting securities (as that phrase is defined in Section
2(a)(42) of the 1940 Act) of the Fund. This Agreement may be terminated at any
time by Hines by giving 30 days' written notice of such termination to the
Trust and VKAC at their respective principal places of business.

6. Assignment.

This Agreement shall terminate automatically in the event of its assignment (as
that term is defined in Section 2(a)(4) of the 1940 Act).

7. Term.

This Agreement shall continue in effect, unless sooner terminated in accordance
with its terms, for an initial term of two years and shall continue in effect
from year to year thereafter provided continuance is specifically approved at
least annually by the vote of a majority of the Trustees of the Trust who are
not parties hereto or interested persons (as the term is defined in Section
2(a)(19) of the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on the approval of the terms of such renewal, and by
either the Trustees of the Trust or the affirmative vote of a majority of the
outstanding voting securities of the Fund (as that phrase is defined in Section
2(a)(42) of the 1940 Act).

3
<PAGE> 4
8. Amendments.

This Agreement may be amended only with the approval by the affirmative vote of
a majority of the outstanding voting securities of the Fund (as that phrase is
defined in Section 2(a)(42) of the 1940 Act) and the approval by the vote of a
majority of the Trustees of the Trust who are not parties hereto or interested
persons (as that term is defined in Section 2(a)(19) of the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting on the
approval of such amendment, unless otherwise permitted in accordance with the
1940 Act.

9. Applicable Laws.

This Agreement shall be construed according to, and the rights and liabilities
of the parties hereto shall be governed by, the laws of the United States and
the State of Texas.

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above
written.

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

Name: /s/ Nori L. Gabert
_____________________________________

Its: Vice President
_____________________________________

By: Nori L. Gabert
______________________________________

HINES INTERESTS REALTY ADVISORS LIMITED PARTNERSHIP

Name: /s/ William S. Wardrop
_____________________________________

Its: President
_____________________________________

By: William S. Wardrop
_____________________________________

<PAGE> 1
EXHIBIT 5.7

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this ____ day of ________, 1996, by and between VAN KAMPEN
AMERICAN CAPITAL LIFE INVESTMENT TRUST, a Delaware business trust, hereinafter
referred to as the "TRUST," and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC., a Delaware corporation, hereinafter referred to as the "ADVISER".

The TRUST and the ADVISER agree as follows:

1. Appointment

a. The TRUST hereby appoints the ADVISER to act as investment adviser to the
TRUST'S Growth and Income Fund ("the Fund"), for the period and on the terms
set forth in this Agreement. The ADVISER accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.

b. In the event that the TRUST establishes one or more portfolios with respect
to which it desires to retain the ADVISER to act as investment adviser
hereunder, it shall notify the ADVISER in writing. If the ADVISER is willing to
render such services it shall notify the TRUST in writing whereupon such
portfolio shall become a Fund hereunder and the compensation payable by such
new portfolio to the ADVISER will be as agreed in writing at the time.

2. Services Rendered and Expenses Paid by ADVISER

a. manage the investment and reinvestment of the TRUST's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the TRUST'S Fund, and formulation and implementation of
investment programs;

b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the account of the Fund of the TRUST with brokers or
dealers selected by the ADVISER;

In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the TRUST and the Fund the most favorable
price and execution available and shall maintain records adequate to
demonstrate compliance with this requirement. Subject to prior authorization by
the TRUST's Trustees of appropriate policies and procedures, the ADVISER may,
to the extent authorized by law, cause the TRUST to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. In the event of such authorization and to the extent authorized by
law the ADVISER shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
such action.

2
<PAGE> 3
between the TRUST and any other party, such allocations shall be pursuant to
methods approved by the Trustees.

3. Role of ADVISER

Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties hereunder on the
part of the ADVISER, the ADVISER shall not be subject to liability to the
TRUST, or to any shareholder of the TRUST, for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.

4. Compensation Payable to ADVISER

3
<PAGE> 4
owned subsidiary of VK/AC Holding, Inc. to receive in connection with the
TRUST's portfolio transactions or other arrangements which may benefit the
TRUST.

If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.

5. Books and Records

In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the TRUST are the
property of the TRUST and further agrees to surrender promptly to the TRUST any
of such records upon the TRUST's request. The ADVISER further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the Act.

6. Duration and Termination

7. Miscellaneous Provisions

For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the Investment
Company Act of 1940 (the "1940 Act") and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted to either the ADVISER or
the TRUST by the Securities and Exchange Commission, or such interpretive
positions as may be taken by the Commission or its staff, under said Act, and
the term "brokerage and research

4
<PAGE> 5
services" shall have the meaning given in the Securities Exchange Act of 1934
and the Rules and Regulations thereunder.

The execution of this Agreement has been authorized by the Trust's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Trust or
the Trustees of the Trust as Trustees and not individually and that the
obligations of this Agreement are not binding upon any of the Trustees, officers
or shareholders of the Trust individually but are binding only upon the assets
and property of the Trust. The TRUST is composed of multiple Funds. All
obligations of the TRUST under this Agreement shall apply only on a Fund by Fund
basis and the assets of one Fund shall not be liable for the obligations of any
other Fund. A Certificate of Trust in respect of the fund is on file with the
Secretary of the State of Delaware.

It is understood and agreed that the ADVISER may engage a subadviser to assist
it in the performance of its duties hereunder.

The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

By ______________________________________

Name: __________________________________

Its: ___________________________________

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.

By ______________________________________

Name: __________________________________

Its: ___________________________________

<PAGE> 1
EXHIBIT 6.1

UNDERWRITING AGREEMENT
between
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
and
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

THIS AGREEMENT made this 16th day of September, 1995, by and between VAN KAMPEN
AMERICAN CAPITAL LIFE INVESTMENT TRUST, a Delaware business trust, hereinafter
referred to as the "Fund", and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
a Delaware corporation, hereinafter referred to as the "Underwriter".

W I T N E S S E T H :

In consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt whereof is hereby acknowledged, the parties
hereto agree as follows:

FIRST: The Trust hereby appoints the Underwriter as its exclusive agent for
the sale of shares of the Trust to separate accounts established by life
insurance companies to fund variable life insurance or variable annuities.
This agreement shall apply to shares of the Common Stock Fund, Domestic
Strategic Income Fund, Emerging Growth Fund, Global Equity Fund, Government
Fund, Money Market Fund, and Multiple Strategy Fund and Real Estate Securities
Fund and to such additional portfolios of the Trust as may be mutually agreed
upon in writing by the Trust and the Underwriter.

SECOND: The Trust shall not sell any of its shares except through the
Underwriter and under the terms and conditions set forth in paragraph FOURTH
below.

THIRD: The Underwriter hereby accepts appointment as exclusive agent for the
sale of the shares of the Trust and agrees that it will use its best efforts to
sell such shares; provided, however, that:

(A) the Underwriter may, and when requested by the Trust shall, suspend its
efforts to effectuate such sales at any time when, in the opinion of the
Underwriter or of the Trust, no sales should be made because of market or other
economic considerations or abnormal circumstances of any kind; and

(B) the Trust may withdraw the offering of its shares (i) at any time with the
consent of the Underwriter, or (ii) without such consent when so required by
the provisions of any statute or of any order, rule or regulation of any
governmental body having jurisdiction. It is mutually understood and agreed
that the Underwriter does not undertake to sell any specific amount of shares
of the Trust.

<PAGE> 2

FOURTH: The offering price of shares of the Trust (the "offering price") shall
be the net asset value per share which shall be determined in the manner
provided in the then current prospectus of the Trust.

The Underwriter shall act as agent of the Trust in connection with the sale and
repurchase of shares of the Trust. Except with respect to such sales and
repurchases, the Underwriter shall act as principal in all matters relating to
the promotion of the sale of shares of the Trust and shall enter into all of
its own engagements, agreements and contracts as principal on its own account.

FIFTH: The Underwriter shall bear

(A) the expense of printing from the final proof and distributing registration
statement and prospectuses relating to public offerings made by the Underwriter
pursuant to this Agreement and annual and semi-annual shareowner reports used
as sales literature (not, however, including typesetting costs), as well as all
printing and distribution costs of any other sales literature used by the
Underwriter or furnished by the Underwriter to dealers in connection with such
public offerings except as otherwise agreed by the Trustees;

(B) expenses of advertising in connection with such public offerings except as
otherwise agreed by the Trustees; and

SIXTH: The Underwriter will accept orders for shares of the Trust only to the
extent of purchase orders actually received and not in excess of such orders,
and it will not avail itself of any opportunity of making a profit by
expediting or withholding orders.

SEVENTH:

(A) The Trust and the Underwriter shall each comply with all applicable
provisions of the Investment Company Act of 1940 (the "Act"), the Securities
Act of 1933 (the "Securities Act") and of all other federal and state laws,
rules and regulations governing the issuance and sale of shares of the Trust.

(B) The Trust agrees to indemnify the Underwriter against any and all claims,
demands, liabilities and expenses which the Underwriter may incur under the
Securities Act, or common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in any registration
statement or prospectus of the Trust, or any omission to state a material fact
therein, the omission of which makes any statement contained therein
misleading, unless such statement or omission was made in reliance upon, and in

<PAGE> 3
conformity with, information furnished to the Trust in connection therewith by
or on behalf of the Underwriter.

(C) The Underwriter agrees to indemnify the Trust against any and all claims,
demands, liabilities and expenses which the Trust may incur arising out of or
based upon any act or deed of the Underwriter or its sales representatives
which has not been authorized by the Trust in its prospectus or in this
Agreement. The Underwriter agrees to indemnify the Trust against any and all
claims, demands, liabilities and expenses which the Trust may incur under the
Securities Act, or common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in any registration
statement or prospectus of the Trust, or any omission to state a material fact
therein if such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Trust in connection therewith by
or on behalf of the Underwriter.

(D) The Underwriter agrees to indemnify the Trust against any and all claims,
demands, liabilities and expenses which the Trust may incur under the
Securities Act, or common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in any prospectus of the
Trust prepared for use under Rule 482 of the Securities Act, or any omission to
state a material fact therein.

EIGHTH: Nothing herein contained shall require the Trust to take any action
contrary to any provision of its Declaration of Trust or to any applicable
statute or regulation.

NINTH: This Agreement shall become effective on the date hereof, shall have an
initial term of two years from the date hereof, and shall continue in force and
effect from year to year thereafter, provided, that such continuance is
specifically approved at least annually (a)(i) by the Trustees of the Trust, or
(ii) by vote of a majority of the Trust's outstanding voting securities (as
defined in Section 2(a)(42) of the Act), and (b) by vote of a majority of the
Trust's Trustees who are not parties to this Agreement or interested persons
(as defined in Section 2(a)(19) of the Act) of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval.

TENTH:

(A) This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Trust, or by the Underwriter, on sixty
(60) days' written notice to the other party.

(B) This Agreement shall automatically terminate in the event of its
assignment (as defined in Section 2(a)(4) of the Act).

<PAGE> 4
ELEVENTH: Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed, postage paid, to the other party at such address as such
other party may designate for the receipt of such notices. Until further
notice to the other party, it is agreed that the address of the Trust shall be
2800 Post Oak Boulevard, Houston, Texas 77056 and the address of the
Underwriter shall be One Parkview Plaza, Oakbrook Terrace, Illinois 60181.

TWELFTH: This Agreement is executed on behalf of the Trust or the Trustees of
the Trust as Trustees and not individually and that the obligations of this
Agreement are not binding upon any of the Trustees, officers or shareholders of
the Trust individually but are binding only upon the assets and property of the
Trust. A Certificate of Trust in respect of the Trust is on file with the
Secretary of the State of Delaware.

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

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

By: /s/ DON G. POWELL

__________________________________________

Name: Don G. Powell
________________________________________

Its: Chief Executive Officer
________________________________________

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

By: /s/ NORI L. GABERT

__________________________________________

Name: Nori L. Gabert
________________________________________

Its: Vice President
________________________________________

<PAGE> 1

EXHIBIT 6.2

VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST

ADDENDUM TO UNDERWRITING AGREEMENT

GROWTH AND INCOME FUND

The Underwriting Agreement ("Agreement") dated _____________, 199_
by and between Van Kampen American Capital Life Investment Trust, a Delaware
business trust ("Fund") and Van Kampen American Capital Distributors, Inc.
("Underwriter") provides that, in the event the Fund establishes an additional
portfolio with respect to which it wishes to appoint Underwriter to act as
underwriter, the Fund shall notify the Underwriter in writing. The Fund has
created a new portfolio called Growth and Income Fund and wishes to appoint the
Underwriter to act as the Underwriter for the Growth and Income Fund on the
following terms.

1. All terms of the Agreement shall apply to Growth and Income
Fund as if it had been one of the initial portfolios named
therein.

All obligations of the Fund under the Agreement and this Addendum
shall apply only on a Fund by Fund basis, and the assets of one Portfolio shall
not be liable for the obligations of any other Fund.

<TABLE>
<S> <C>
Dated: ___________________________ Van Kampen American Capital Life Investment Trust

By: ___________________________
Nori L. Gabert
Vice President and Secretary

Van Kampen American Capital Distributors, Inc. accepts Growth
and Income Fund on the terms and conditions set forth above.

Dated: ___________________________ Van Kampen American Capital Distributors, Inc.

By: ___________________________
Ronald A. Nyberg
Executive Vice President
</TABLE>

<PAGE> 1
EXHIBIT 8.2

TRANSFER AGENCY AND SERVICE AGREEMENT

AGREEMENT made as of the 31st day of July, 1995 by and between each
of the VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS set forth on Schedule "A"
hereto, which are organized under the laws of the state and as the entities set
forth in Schedule "A" hereto, having their principal office and place of
business at Houston, Texas (collectively, the "Funds"), and ACCESS INVESTOR
SERVICES, INC., a Delaware corporation, having its principal office at Houston,
Texas, and its principal place of business at Kansas City, Missouri ("ACCESS").

R E C I T A L:

WHEREAS, each of the Funds desires to appoint ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent and ACCESS
desires to accept such appointments;

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

ARTICLE 1. TERMS OF APPOINTMENT; DUTIES OF ACCESS.

1.01 Subject to the terms and conditions set forth in this
Agreement, each of the Funds hereby employs and appoints ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent.

1.02 ACCESS hereby accepts such employment and appointments and
agrees that on and after the effective date of this Agreement it will act as
the transfer agent, dividend disbursing agent and shareholder service agent for
each of the Funds on the terms and conditions set forth herein.

1.03 ACCESS agrees that its duties and obligations hereunder will
be performed in a competent, efficient and workmanlike manner with due
diligence in accordance with reasonable industry practice, and that the
necessary facilities, equipment and personnel for such performance will be
provided.

1.04 In order to assure compliance with section 1.03 and to
implement a cooperative effort to improve the quality of transfer agency and
shareholder services received by each of the Funds and its shareholders,

1
<PAGE> 2
ACCESS agrees to provide and maintain quantitative performance objectives,
including maximum target turn-around times and maximum target error rates, for
the various services provided hereunder. ACCESS also agrees to provide a
reporting system designed to provide the Board of Trustees or Board of
Directors of each of the Funds (the "Board") on a quarterly basis with
quantitative data comparing actual performance for the period with the
performance objectives. The foregoing procedures are designed to provide a
basis for continuing monitoring by the Board of the quality of services
rendered hereunder.

ARTICLE 2. FEES AND EXPENSES.

2.01 For the services to be performed by ACCESS pursuant to this
Agreement, each of the Funds agrees to pay ACCESS the fees provided in the fee
schedules agreed upon from time to time by each of the Funds and ACCESS.

2.02 In addition to the amounts paid under section 2.01 above, each
of the Funds agrees to reimburse ACCESS promptly for such Fund's reasonable
out-of-pocket expenses or advances paid on its behalf by ACCESS in connection
with its performance under this Agreement for postage, freight, envelopes,
checks, drafts, continuous forms, reports and statements, telephone, telegraph,
costs of outside mailing firms, necessary outside record storage costs, media
for storage of records (e.g., microfilm, microfiche and computer tapes) and
printing costs incurred due to special requirements of such Fund. In addition,
any other special out-of-pocket expenses paid by ACCESS at the specific request
of any of the Funds will be promptly reimbursed by the requesting Fund.
Postage for mailings of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to ACCESS by the concerned Fund
three business days prior to the mailing date of such materials.

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ACCESS.

ACCESS represents and warrants to each of the Funds that:

3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.

3.02 It is duly qualified to carry on its business in the states of
Texas and Missouri.

3.03 It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement.

2
<PAGE> 3
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.

3.05 It has and will continue to have during the term of this
Agreement access to the necessary facilities, equipment and personnel to
perform its duties and obligations hereunder.

3.06 It will maintain a system regarding "as of" transactions as
follows:

(a) Each "as of" transaction effected at a price other
than that in effect on the day of processing for which an estimate has
not been given to any of the affected Funds and which is necessitated
by ACCESS' error, or delay for which ACCESS is responsible or which
could have been avoided through the exercise of reasonable care, will
be identified, and the net effect of such transactions determined, on
a daily basis for each such Fund.

(b) The cumulative net effect of the transactions
included in paragraph (a) above will be determined each day throughout
each month. If, on any day during the month, the cumulative net
effect upon any Fund is negative and exceeds an amount equivalent to
1/2 of 1 cent per share of such Fund, ACCESS shall promptly make a
payment to such Fund (in cash or through use of a credit as described
in paragraph (c) below) in such amount as necessary to reduce the
negative cumulative net effect to less than 1/2 of 1 cent per share of
such Fund. If on the last business day of the month the cumulative
net effect (adjusted by the amount of any payments pursuant to the
preceding sentence) upon any Fund is negative, such Fund shall be
entitled to a reduction in the monthly transfer agency fee next
payable by an equivalent amount, except as provided in paragraph (c)
below. If on the last business day of the month the cumulative net
effect (similarly adjusted) upon any Fund is positive, ACCESS shall be
entitled to recover certain past payments and reductions in fees, and
to a credit against all future payments and fee reductions made under
this paragraph to such Fund, as described in paragraph (c) below.

(c) At the end of each month, any positive cumulative net
effect upon any Fund shall be deemed to be a credit to ACCESS which
shall first be applied to recover any payments and fee reductions made
by ACCESS to such Fund under paragraph (b) above during the calendar
year by increasing the amount of the monthly transfer agency fee next
payable in an amount equal to prior payments and fee

3
<PAGE> 4
reductions made during such year, but not exceeding the sum of that
month's credit and credits arising in prior months during such year to
the extent such prior credits have not previously been utilized as
contemplated by this paragraph (c). Any portion of a credit to ACCESS
not so used shall remain as a credit to be used as payment against the
amount of any future negative cumulative net effects that would
otherwise require a payment or fee reduction to such Fund pursuant to
paragraph (b) above.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE FUNDS.

Each of the Funds hereby represents and warrants on behalf of
itself only and not any other Funds that are a party to this Agreement that:

4.01 It is duly organized and existing and in good standing under
the laws of the commonwealth or state set forth in Schedule "A" hereto.

4.02 It is empowered under applicable laws and regulations and by
its Declaration of Trust or Articles of Incorporation and by-laws to enter into
and perform this Agreement.

4.03 All requisite proceedings have been taken by its Board to
authorize it to enter into and perform this Agreement.

4.04 It is an open-end, diversified, management investment company
registered under the Investment Company Act of 1940, as amended.

4.05 A registration statement under the Securities Act of 1933, as
amended, is currently effective and will remain effective, and appropriate
state securities laws filings have been made and will continue to be made, with
respect to all of its shares being offered for sale.

ARTICLE 5. INDEMNIFICATION.

5.01 ACCESS shall not be responsible for and each of the Funds
shall indemnify and hold ACCESS harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liabilities arising out of or attributable to:

4
<PAGE> 5
(a) All actions of ACCESS required to be taken by ACCESS
for the benefit of such Fund pursuant to this Agreement, provided
ACCESS has acted in good faith with due diligence and without
negligence or willful misconduct.

(b) The reasonable reliance by ACCESS on, or reasonable
use by ACCESS of, information, records and documents which have been
prepared or maintained by or on behalf of such Fund or have been
furnished to ACCESS by or on behalf of such Fund.

(d) The offer or sale of such Fund's shares in violation
of any requirement under the federal securities laws or regulations or
the securities laws or regulations of any state or in violation of any
stop order or other determination or ruling by any federal agency or
any state with respect to the offer or sale of such shares in such
state unless such violation results from any failure by ACCESS to
comply with written instructions of such Fund that no offers or sales
of such Fund's shares be made in general or to the residents of a
particular state.

(e) Such Fund's refusal or failure to comply with the
terms of this Agreement, or such Fund's lack of good faith, negligence
or willful misconduct or the breach of any representation or warranty
of such Fund hereunder.

5.02 ACCESS shall indemnify and hold each of the Funds harmless
from and against any and all losses, damages, costs, charges, reasonable
counsel fees, payments, expenses and liability arising out of or attributable
to ACCESS' refusal or failure to comply with the terms of this Agreement, or
ACCESS' lack of good faith, negligence or willful misconduct, or the breach of
any representation or warranty of ACCESS hereunder.

5.03 At any time ACCESS may apply to any authorized officer of any
of the Funds for instructions, and may consult with any of the Funds' legal
counsel, at the expense of such concerned Fund, with respect to any matter
arising in connection with the services to be performed by ACCESS under this
Agreement, and ACCESS shall not be liable and shall be indemnified by such
concerned Fund for any action taken or omitted by it in good faith in
reasonable reliance upon such instructions or upon the opinion of such counsel.
ACCESS shall be protected and

5
<PAGE> 6
indemnified in acting upon any paper or document reasonably believed by ACCESS
to be genuine and to have been signed by the proper person or persons and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the concerned Fund. ACCESS shall also
be protected and indemnified in recognizing stock certificates which ACCESS
reasonably believes to bear the proper manual or facsimile signatures of the
officers of the concerned Fund, and the proper countersignature of any former
transfer agent or registrar, or of a co-transfer agent or co-registrar.

5.04 In the event any party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.

5.05 In no event and under no circumstances shall any party to this
Agreement be liable to another party for consequential damages under any
provision of this Agreement or for any act or failure to act hereunder.

5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which one party may be
required to indemnify another, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the other party
advised with respect to all developments concerning such claim. The party who
may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in
any case in which the other party may be required to indemnify it except with
the other party's prior written consent.

ARTICLE 6. COVENANTS OF EACH OF THE FUNDS AND ACCESS.

6.01 Each of the Funds shall promptly furnish to ACCESS the
following:

(a) Certified copies of the resolution of its Board
authorizing the appointment of ACCESS and the execution and delivery
of this Agreement.

(b) Certified copies of its Declaration of Trust or
Articles of Incorporation and by-laws and all amendments thereto.

6
<PAGE> 7
6.02 ACCESS hereby agrees to maintain facilities and procedures
reasonably acceptable to each of the Funds for safekeeping of share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.

6.03 ACCESS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable; provided,
however, that all accounts, books and other records of each of the Funds
(hereinafter referred to as "Fund Records") prepared or maintained by ACCESS
hereunder shall be maintained and kept current in compliance with Section 31 of
the Investment Company Act of 1940 and the Rules thereunder (such Section and
Rules being hereinafter referred to as the "1940 Act Requirements"). To the
extent required by the 1940 Act Requirements, ACCESS agrees that all Fund
Records prepared or maintained by ACCESS hereunder are the property of the
concerned Fund and shall be preserved and made available in accordance with the
1940 Act Requirements, and shall be surrendered promptly to the concerned Fund
on its request. ACCESS agrees at such reasonable times as may be requested by
the Board and at least quarterly to provide (i) written confirmation to the
Board that all Fund Records are maintained and kept current in accordance with
the 1940 Act Requirements, and (ii) such other reports regarding its
performance hereunder as may be reasonably requested by the Board.

6.04 ACCESS and each of the Funds agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.

6.05 In case of any requests or demands for the inspection of any
of the Fund Records, ACCESS will endeavor to notify each of the concerned Funds
and to secure instructions from an authorized officer of each of the concerned
Funds as to such inspection. ACCESS reserves the right, however, to exhibit
such Fund Records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit such Fund Records to such person.

ARTICLE 7. TERM AND TERMINATION OF AGREEMENT.

7.01 This Agreement shall remain in effect from the date hereof
through December 31, 1996; provided, however, that this Agreement may be
terminated by any party with respect to that party for good and reasonable

7
<PAGE> 8
cause at any time by giving written notice to the other party at least 120 days
prior to the date on which such termination is to be effective. Any unpaid
fees or reimbursable expenses payable to ACCESS shall be due on any such
termination date. ACCESS agrees to use its best efforts to cooperate with each
of the Funds and the successor transfer agent or agents in accomplishing an
orderly transition.

7.02 Subject to the prior approval of the Board, this Agreement
shall be renewed and extended for periods of not more than one year each,
unless and until this Agreement is terminated in accordance with section 7.01
above.

ARTICLE 8. MISCELLANEOUS.

8.01 Except as provided in section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by any party
without the written consent of ACCESS or the concerned Fund, as the case may
be; provided, however, that no consent shall be required for any merger of any
of the Funds with, or any sale of all or substantially all the assets of any of
the Funds to, another investment company.

8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.

8.03 ACCESS may, without further consent on the part of any of the
Funds, subcontract with DST, Inc., a Missouri corporation, or any other
qualified servicer, for the performance of data processing activities;
provided, however, that ACCESS shall be as fully responsible to each of the
Funds for the acts and omissions of DST, Inc., or other qualified servicer as
it is for its own acts and omissions.

8.04 ACCESS may, without further consent on the part of any of the
Funds, provide services to its affiliated companies. Such services may be
provided at cost.

8.05 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes any
prior agreement with respect thereto, whether oral or written, and this
Agreement may not be modified except by written instrument executed by the
affected parties.

8.06 The execution of this Agreement has been authorized by the
Funds' Trustees. This Plan is executed on behalf of the Funds or the Trustees
of the Funds as Trustees and not individually and that the obligations of this
Agreement are not binding upon any of

8
<PAGE> 9
the Trustees, officers or shareholders of the Funds individually but are
binding only upon the assets and property of the Funds. A Certificate of Trust
in respect of each of the Funds is on file with the Secretary of the State of
Delaware.

8.07 For each of those Funds that have one or more portfolios as
set forth in Schedule "A" hereto, all obligations of those Funds under this
Agreement shall apply only on a portfolio-by-portfolio basis and the assets of
one portfolio shall not be liable for the obligations of any other.

8.08 In the event of a change in the business or regulatory
environment affecting all or any portion of this Agreement, the parties hereto
agree to renegotiate such affected portions in good faith.

9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf and through their duly
authorized officers, as of the date first above written.

EACH OF THE VAN KAMPEN AMERICAN
CAPITAL OPEN END FUNDS LISTED ON
SCHEDULE "A" HERETO

BY: /s/ Nori L. Gabert
____________________________________
Vice President

ATTEST:

/s/ Huey Falgout
____________________________
Assistant Secretary

ACCESS INVESTOR SERVICES, INC.

BY: /s/ Nori L. Gabert
____________________________________
Vice President

ATTEST:

/s/ Huey Falgout
____________________________
Assistant Secretary

10
<PAGE> 11
SCHEDULE "A"

VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS

NOTE: All of the entities listed below are organized as Delaware business
trusts

FUND NAME
(INCLUDING PORTFOLIOS)
===============================================================================

Van Kampen American Capital Comstock Fund

Van Kampen American Capital Corporate Bond Fund

Van Kampen American Capital Emerging Growth Fund

Van Kampen American Capital Enterprise Fund

Van Kampen American Capital Equity Income Fund

Van Kampen American Capital Limited Maturity Government Fund

Van Kampen American Capital Global Managed Assets Fund

Van Kampen American Capital Government Securities Fund

Van Kampen American Capital Government Target Fund

Van Kampen American Capital Growth and Income Fund

Van Kampen American Capital Harbor Fund

Van Kampen American Capital High Income Corporate Bond Fund

Van Kampen American Capital Life Investment Trust
Common Stock Fund
Domestic Strategic Income Fund
Emerging Growth Fund
Global Equity Fund
Government Fund
Money Market Fund
Multiple Strategy Fund
Real Estate Securities Fund

Van Kampen American Capital Municipal Bond Fund

Van Kampen American Capital Pace Fund

Van Kampen American Capital Real Estate Securities Fund

Van Kampen American Capital Reserve Fund

Van Kampen American Capital Small Capitalization Fund

Van Kampen American Capital Tax-Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Insured Municipal Fund

Van Kampen American Capital Texas Tax Free Income Fund

Van Kampen American Capital U.S. Government Trust for Income

Van Kampen American Capital Utilities Income Fund

Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund

<PAGE> 1

EXHIBIT 16

COMPUTATION MEASURE FOR PERFORMANCE INFORMATION

CALCULATION OF TOTAL RETURN

Each Fund calculates its average annual total return quotations for
the 1, 5 and 10 year (or since inception if less than 10 years) periods ended
June 30, 1995, the date of the most recent balance sheet included in the
registration statement, by finding the average annual compounded rates of
return over the 1, 5 and 10 year (or since inception if less than 10 years)
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:

P(1+T)n = ERV

<TABLE>
<S> <C> <C> <C>
Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 and 10 year periods, at the end of the 1, 5 and 10 year
periods, or fractional portion thereof
</TABLE>

These calculations incorporate the following assumptions:

1. The maximum sales load, or other charges deducted from payments, is
deducted from the initial $1,000 payment.

2. All dividends and distributions by the Fund are reinvested at the
price stated in the prospectus on the reinvestment dates during the period,
i.e., any sales load charged upon reinvestment of dividends would be
reflected.

3. All recurring fees, if any, charged to all shareholder accounts are
included.

4. The ending redeemable value assumes a complete redemption at the
end of 1, 5 and 10 year (or since inception if less than 10 years) periods
and the deduction of all nonrecurring charges, if any, deducted at the end
of each period.
<PAGE> 2

CALCULATION OF YIELD

Each Fund calculates their yield quotations based on a 30-day
period ended on June 30, 1995, the date of the most recent balance sheet
included in the registration statement, by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period, according to the following formula:
<TABLE>
<S> <C> <C>
a-b
YIELD (y) = 2[ ----- + 1)6 - 1]
cd
</TABLE>

Where: a = dividends and interest earned during the period

b = expenses accrued for the period (net of reimbursements)

c = the average daily number of shares outstanding during the period that
were entitled to receive dividends

d = the maximum offering price per share on the last day of the period

DOMESTIC
GOVERNMENT STRATEGIC
FUND FUND
- ---------------- --------------
<S> <C>
a = $ 180,525 a = $ 391,100
b = $ 13,368 b = $ 33,646
c = 3,248,426 c = 7,704,543
d = $8.34 d = $8.81
y = 7.52% y = 6.40%
</TABLE>

<PAGE> 3
CALCULATION OF YIELD

The Money Market Portfolio calculates its annualized current yield quotations
based on the seven days ended June 30, 1995, the date of the most recent
balance sheet included in the registration statement, computed by determining
the net change, exclusive of capital charges, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
multiplying the base period by (365/7).

Annualized Current Yield = 5.41%

The Money Market Portfolio calculates its effective yield based on the seven
days ended June 30, 1995, the date of the most recent balance sheet included in
the registration statement, computed by determining the net change exclusive of
capital charges, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, according to the following
formula:

Effective Yield = [(Base Period Return +1) 365/7]-1

Effective Yield = 5.56%

<PAGE> 1

EXHIBIT 17.1

INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
DECEMBER 5, 1995

Van Kampen American Capital U.S. Government Trust
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Tax Free Trust
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Limited Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Trust
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Emerging Markets Income Fund
Van Kampen American Capital Equity Trust
Van Kampen American Capital Utility Fund
Van Kampen American Capital Balanced Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Tax Free Money Fund
Van Kampen American Capital Prime Rate Income Trust
Van Kampen Merritt Series Trust
Van Kampen American Capital Quality Income Portfolio
Van Kampen American Capital High Yield Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Stock Index Portfolio
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Common Stock Fund
Van Kampen American Capital Domestic Strategic Income Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Government Fund
Van Kampen American Capital Money Market Fund
Van Kampen American Capital Multiple Strategy Fund
Van Kampen American Capital Real Estate Securities Fund
<PAGE> 2

Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Tax-Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Texas Tax Free Income Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
<PAGE> 3

<TABLE>
<S> <C>
Emerging Markets Municipal Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 361
Insured Municipals Income Trust (Discount) . . . . . . . . . . . . . . . . . . . . . . . . . Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term) . . . . . . . . . . . . . . . . . . Series 1 through 1009
Insured Municipals Income Trust (Intermediate Term) . . . . . . . . . . . . . . . . . . . . . Series 5 through 85
Insured Municipals Income Trust (Limited Term) . . . . . . . . . . . . . . . . . . . . . . . Series 9 through 82
Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . . . . . . Series 1 through 3
Insured Municipals Income Trust (Intermediate Laddered Maturity) . . . . . . . . . . . . . . Series 1 and 2
Insured Tax Free Bond Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 6
Insured Tax Free Bond Trust (Limited Term) . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 92
Investors' Quality Tax-Exempt Trust-Intermediate . . . . . . . . . . . . . . . . . . . . . . Series 1
Investors' Corporate Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 12
Investors' Governmental Securities Income Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 7
Van Kampen Merritt International Bond Income Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Alabama Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 9
Arizona Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 16
Arizona Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 15
Arkansas Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 2
Arkansas Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1
California Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 147
California Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . Series 1
California Insured Municipals Income Trust (1st Intermediate Series) . . . . . . . . . . . . Series 1 through 3
California Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 21
California Insured Municipals Income Trust (Intermediate Laddered) . . . . . . . . . . . . . Series 1 through 22
Colorado Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 77
Colorado Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 18
Connecticut Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 28
Connecticut Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1
Delaware Investor's Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 and 2
Florida Insured Municipal Income Trust - Intermediate . . . . . . . . . . . . . . . . . . . . Series 1 and 2
Florida Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 99
Florida Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 and 2
Florida Insured Municipals Income Trust (Intermediate Laddered) . . . . . . . . . . . . . . . Series 1 through 13
Georgia Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 77
Georgia Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 16
Hawaii Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Investors' Quality Municipals Trust (AMT) . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 9
Kansas Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 11
Kentucky Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 56
Louisiana Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 13
Maine Investor's Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Maryland Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 74
Massachusetts Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 31
Massachusetts Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . Series 1
Michigan Financial Institutions Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Michigan Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 133
Michigan Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . Series 1
Michigan Insured Municipals Income Trust (1st Intermediate Series) . . . . . . . . . . . . . Series 1 through 3
Michigan Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 30
Minnesota Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 57
Minnesota Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 21
Missouri Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 93
Missouri Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . Series 1
Missouri Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 15
Missouri Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Nebraska Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 9

</TABLE>

<PAGE> 4

<TABLE>
<S> <C>
New Mexico Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 18
New Jersey Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 107
New Jersey Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 22
New Jersey Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 and 4
New York Insured Municipals Income Trust - Intermediate . . . . . . . . . . . . . . . . . . . Series 1 through 6
New York Insured Municipals Income Trust (Limited Term) . . . . . . . . . . . . . . . . . . . Series 1
New York Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 129
New York Insured Tax-Free Bond Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
New York Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 15
New York Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1
North Carolina Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 84
Ohio Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 99
Ohio Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . . . . . Series 1 and 2
Ohio Insured Municipals Income Trust (Intermediate Term) . . . . . . . . . . . . . . . . . . Series 1
Ohio Insured Municipals Income Trust
(Intermediate Laddered Maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 3 through 6
Ohio Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 16
Oklahoma Insured Municipal Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 17
Oregon Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 53
Pennsylvania Insured Municipals Income Trust - Intermediate . . . . . . . . . . . . . . . . . Series 1 through 6
Pennsylvania Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 211
Pennsylvania Insured Municipals Income Trust (Premium Bond Series) . . . . . . . . . . . . . Series 1
Pennsylvania Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . Series 1 through 14
South Carolina Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . Series 1 through 81
Tennessee Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1-3 and 5-33
Texas Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 40
Texas Insured Municipal Income Trust (Intermediate Ladder) . . . . . . . . . . . . . . . . . Series 1
Virginia Investors' Quality Tax-Exempt Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 67
Van Kampen Merritt Utility Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 6
Van Kampen Merritt Insured Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 45
Van Kampen Merritt Insured Income Trust (Intermediate Term) . . . . . . . . . . . . . . . . . Series 1 through 44
Van Kampen Merritt Select Equity Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
Van Kampen Merritt Select Equity and Treasury Trust . . . . . . . . . . . . . . . . . . . . . Series 1
Washington Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . . Series 1
West Virginia Insured Municipals Income Trust . . . . . . . . . . . . . . . . . . . . . . . . Series 1 through 5
</TABLE>

<PAGE> 1

EXHIBIT 17.2

OFFICERS

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ---- ------ --------
<S> <C> <C>
Don G. Powell Chairman & Chief Executive Officer Houston, TX

William R. Molinari President & Chief Operating Oakbrook Terrace, IL
Officer

Ronald A. Nyberg Executive Vice President & General Oakbrook Terrace, IL
Counsel
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX

Robert A. Broman Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL
Douglas B. Gehrman Sr. Vice President Houston, TX
Richard D. Humphrey Sr. Vice President Houston, TX
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Debra A. Nichols Sr. Vice President Houston, TX
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL

Timothy K. Brown 1st Vice President Laguna Niguel, CA
James S. Fosdick 1st Vice President Oakbrook Terrace, IL
Edward F. Lynch 1st Vice President Oakbrook Terrace, IL
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
Mark T. McGannon 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
Michael L. Stallard 1st Vice President Oakbrook Terrace, IL
David M. Swanson 1st Vice President Oakbrook Terrace, IL

Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Patricia A. Bettlach Vice President St. Louis, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
Linda Mae Brown Vice President Oakbrook Terrace, IL
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Thomas M. Byron Vice President Oakbrook Terrace, IL
Glenn M. Cackovic Vice President Laguna Niguel, CA
Joseph N. Caggiano Vice President New York, NY
Richard J. Charlino Vice President Oakbrook Terrace, IL
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Suzanne Cummings Vice President Houston, TX
David B. Dibo Vice President Oakbrook Terrace, IL

</TABLE>

<PAGE> 2

<TABLE>
<S> <C> <C>
Howard A. Doss Vice President Tampa, FL
Jonathan Eckhard Vice President Boulder, CO
Charles Edward Fisher Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Charles Friday Vice President Gibsonia, PA
Nori L. Gabert Vice President, Assoc. General Houston, TX
Counsel & Asst. Secretary
Erich P. Gerth Vice President Dallas, TX
Daniel Hamilton Vice President Houston, TX
John A. Hanhauser Vice President Philadelphia, PA
Eric J. Hargens Vice President Orlando, FL
J. Christopher Jackson Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
Lowell Jackson Vice President Norcross, GA
Dana R. Klein Vice President Oakbrook Terrace, IL
Ann Marie Klingenhagen Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
S. William Lehew III Vice President Charlotte, NC
Robert C. Lodge Vice President Philadelphia, PA
Walter Lynn Vice President Flower Mound, TX
Michele L. Manley Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Carl Mayfield Vice President Lakewood, CO
Ruth L. McKeel Vice President Oakbrook Terrace, IL
John Mills Vice President Kenner, LA
Robert Muller, Jr. Vice President Houston, TX
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Oakbrook Terrace, IL
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
James B. Ross Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, Va
Stephanie Scarlata Vice President Lynbrook, NY
Lisa A. Schomer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Kimberly M. Spangler Vice President Atlanta, GA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
William C. Strafford Vice President Granger, IN
James C. Taylor Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Sandra A. Waterworth Vice President and Assistant Oakbrook Terrace, IL
Secretary
Steven T. West Vice President Wayne, PA
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
James R. Yount Vice President Seattle, WA
Richard P. Zgonina Vice President Oakbrook Terrace, IL

James J. Boyne Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Eric J. Bridges Asst. Vice President Oakbrook Terrace, IL
Richard B. Callaghan Asst. Vice President Oakbrook Terrace, IL

</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
Stephen M. Cutka Asst. Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Asst. Vice President & Asst. Oakbrook Terrace, IL
Secretary
Gerald A. Davis Asst. Vice President Oakbrook Terrace, IL
Jerome M. Dybzinski Asst. Vice President Oakbrook Terrace, IL
Melissa B. Epstein Asst. Vice President Houston, TX
Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX
Rocco Fiordelisi III Asst. Vice President St. Louis, MO
Robert D. Gorski Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Joseph Hays Asst. Vice President Philadelphia, PA
Susan J. Hill Asst. Vice President Oakbrook Terrace, IL
Hunter Knapp Asst. Vice President Laguna, CA
Natalie N. Hurdle Asst. Vice President New York, NY
Laurie L. Jones Asst. Vice President Houston, TX
Brian T. Levinson Asst. Vice President Houston, TX
Peggy E. Moro Asst. Vice President Oakbrook Terrace, IL
David R. Niemi Asst. Vice President Oakbrook Terrace, IL
Daniel J. O'Keefe Asst. Vice President Oakbrook Terrace, IL
Allison Okun Asst. Vice President Oakbrook Terrace, IL
David B. Partain Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Michael Quinn Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Andrew J. Scherer Asst. Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Asst. Vice President Philadelphia, PA
Traci T. Sorensen Asst. Vice President Oakbrook Terrace, IL
Gary Steele Asst. Vice President Philadelphia, PA
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Kathleen M. Wennerstrum Asst. Vice President Oakbrook Terrace, IL
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL
Melinda K. Yeager Asst. Vice President Houston, TX

David C. Goodwin Asst. Secretary Oakbrook Terrace, IL
Gina M. Scumaci Asst. Secretary Oakbrook Terrace, IL

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

</TABLE>

<PAGE> 4

DIRECTORS

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.

<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ---- ------ --------
<S> <C> <C>
Don G. Powell Chairman & CEO 2800 Post Oak Blvd.
Houston, TX 77056

William R. Molinari President & COO One Parkview Plaza
Oakbrook Terrace, IL 60181

Ronald A. Nyberg Executive Vice President One Parkview Plaza
& General Counsel Oakbrook Terrace, IL 60181

William R. Rybak Executive Vice President One Parkview Plaza
& CFO Oakbrook Terrace, IL 60181

</TABLE>

<ARTICLE> 6
<CIK> 0000778536
<NAME> AC LIFE INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> COMMON STOCK PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 61,318,699
<INVESTMENTS-AT-VALUE> 69,109,911
<RECEIVABLES> 3,278,805
<ASSETS-OTHER> 1,856
<OTHER-ITEMS-ASSETS> 847
<TOTAL-ASSETS> 72,391,419
<PAYABLE-FOR-SECURITIES> 849,564
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 270,336
<TOTAL-LIABILITIES> 1,119,900
<SENIOR-EQUITY> 48,393
<PAID-IN-CAPITAL-COMMON> 59,415,422
<SHARES-COMMON-STOCK> 4,839,261
<SHARES-COMMON-PRIOR> 5,444,930
<ACCUMULATED-NII-CURRENT> 752,832
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,263,660
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,791,212
<NET-ASSETS> 71,271,519
<DIVIDEND-INCOME> 848,513
<INTEREST-INCOME> 134,028
<OTHER-INCOME> 0
<EXPENSES-NET> 207,491
<NET-INVESTMENT-INCOME> 775,050
<REALIZED-GAINS-CURRENT> 3,552,959
<APPREC-INCREASE-CURRENT> 8,354,404
<NET-CHANGE-FROM-OPS> 12,682,413
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37,385
<DISTRIBUTIONS-OF-GAINS> 760,158
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 255,130
<NUMBER-OF-SHARES-REDEEMED> 919,572
<SHARES-REINVESTED> 58,773
<NET-CHANGE-IN-ASSETS> 3,799,597
<ACCUMULATED-NII-PRIOR> 15,167
<ACCUMULATED-GAINS-PRIOR> 470,859
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 172,909
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 240,359
<AVERAGE-NET-ASSETS> 69,163,538
<PER-SHARE-NAV-BEGIN> 12.39
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> 2.34
<PER-SHARE-DIVIDEND> .008
<PER-SHARE-DISTRIBUTIONS> .152
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.73
<EXPENSE-RATIO> .60<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>EXPENSE RATIO IS ANNUALIZED
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0000778536
<NAME> AC LIFE INVESTMENT TRUST
<SERIES>
<NUMBER> 2
<NAME> DOMESTIC STRATEGIC PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 27,717,166
<INVESTMENTS-AT-VALUE> 28,568,762
<RECEIVABLES> 1,046,153
<ASSETS-OTHER> 1,132
<OTHER-ITEMS-ASSETS> 2,049
<TOTAL-ASSETS> 29,618,096
<PAYABLE-FOR-SECURITIES> 2,519,583
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,030
<TOTAL-LIABILITIES> 2,567,613
<SENIOR-EQUITY> 32,420
<PAID-IN-CAPITAL-COMMON> 27,167,842
<SHARES-COMMON-STOCK> 3,241,975
<SHARES-COMMON-PRIOR> 2,894,700
<ACCUMULATED-NII-CURRENT> 1,070,870
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,072,245)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 851,596
<NET-ASSETS> 27,050,483
<DIVIDEND-INCOME> 3,265
<INTEREST-INCOME> 1,157,866
<OTHER-INCOME> 0
<EXPENSES-NET> 77,108
<NET-INVESTMENT-INCOME> 1,084,023
<REALIZED-GAINS-CURRENT> 186,262
<APPREC-INCREASE-CURRENT> 2,014,847
<NET-CHANGE-FROM-OPS> 3,285,134
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24,775
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 767,791
<NUMBER-OF-SHARES-REDEEMED> 423,688
<SHARES-REINVESTED> 3,172
<NET-CHANGE-IN-ASSETS> 5,776,514
<ACCUMULATED-NII-PRIOR> 11,622
<ACCUMULATED-GAINS-PRIOR> (2,258,509)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 64,257
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 128,156
<AVERAGE-NET-ASSETS> 25,702,682
<PER-SHARE-NAV-BEGIN> 7.35
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> .668
<PER-SHARE-DIVIDEND> .008
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.34
<EXPENSE-RATIO> .60<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>EXPENSE RATIO IS ANNUALIZED
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0000778536
<NAME> AC LIFE INVESTMENT TRUST
<SERIES>
<NUMBER> 3
<NAME> GOVERNMENT PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 73,291,354
<INVESTMENTS-AT-VALUE> 74,741,030
<RECEIVABLES> 7,104,718
<ASSETS-OTHER> 1,571
<OTHER-ITEMS-ASSETS> 2,002
<TOTAL-ASSETS> 81,849,321
<PAYABLE-FOR-SECURITIES> 13,529,294
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 110,919
<TOTAL-LIABILITIES> 13,640,213
<SENIOR-EQUITY> 77,386
<PAID-IN-CAPITAL-COMMON> 81,072,017
<SHARES-COMMON-STOCK> 7,738,562
<SHARES-COMMON-PRIOR> 7,914,930
<ACCUMULATED-NII-CURRENT> 17,814
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,473,605)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,515,496
<NET-ASSETS> 68,209,108
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,540,909
<OTHER-INCOME> 0
<EXPENSES-NET> 199,224
<NET-INVESTMENT-INCOME> 2,341,685
<REALIZED-GAINS-CURRENT> 313,438
<APPREC-INCREASE-CURRENT> 3,823,904
<NET-CHANGE-FROM-OPS> 6,479,027
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,319,734
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 204,427
<NUMBER-OF-SHARES-REDEEMED> 649,813
<SHARES-REINVESTED> 269,018
<NET-CHANGE-IN-ASSETS> 2,695,847
<ACCUMULATED-NII-PRIOR> (4,137)
<ACCUMULATED-GAINS-PRIOR> (14,787,043)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 166,020
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 243,445
<AVERAGE-NET-ASSETS> 66,407,858
<PER-SHARE-NAV-BEGIN> 8.28
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> .528
<PER-SHARE-DIVIDEND> .298
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.81
<EXPENSE-RATIO> .60<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>EXPENSE RATIO IS ANNUALIZED
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0000778536
<NAME> AC LIFE INVESTMENT TRUST
<SERIES>
<NUMBER> 4
<NAME> MONEY MARKET PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 24,445,279
<INVESTMENTS-AT-VALUE> 24,445,279
<RECEIVABLES> 28,166
<ASSETS-OTHER> 1,120
<OTHER-ITEMS-ASSETS> 2,663
<TOTAL-ASSETS> 24,477,228
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,991
<TOTAL-LIABILITIES> 41,991
<SENIOR-EQUITY> 244,354
<PAID-IN-CAPITAL-COMMON> 24,191,049
<SHARES-COMMON-STOCK> 24,435,403
<SHARES-COMMON-PRIOR> 28,547,478
<ACCUMULATED-NII-CURRENT> (166)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 24,435,237
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 746,404
<OTHER-INCOME> 0
<EXPENSES-NET> 74,740
<NET-INVESTMENT-INCOME> 671,664
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 671,664
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 672,027
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,596,311
<NUMBER-OF-SHARES-REDEEMED> 11,380,413
<SHARES-REINVESTED> 672,027
<NET-CHANGE-IN-ASSETS> (4,112,438)
<ACCUMULATED-NII-PRIOR> 197
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62,283
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 150,239
<AVERAGE-NET-ASSETS> 24,913,389
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .027
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .027
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .60<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>EXPENSE RATIO IS ANNUALIZED
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0000778536
<NAME> AC LIFE INVESTMENT TRUST
<SERIES>
<NUMBER> 5
<NAME> MULTIPLE STRATEGY PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 57,948,506
<INVESTMENTS-AT-VALUE> 62,622,724
<RECEIVABLES> 2,524,967
<ASSETS-OTHER> 567
<OTHER-ITEMS-ASSETS> 1,702
<TOTAL-ASSETS> 65,149,960
<PAYABLE-FOR-SECURITIES> 3,949,523
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 150,322
<TOTAL-LIABILITIES> 4,099,845
<SENIOR-EQUITY> 52,062
<PAID-IN-CAPITAL-COMMON> 53,658,822
<SHARES-COMMON-STOCK> 5,206,212
<SHARES-COMMON-PRIOR> 5,668,898
<ACCUMULATED-NII-CURRENT> 1,236,378
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,428,635
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,674,218
<NET-ASSETS> 61,050,115
<DIVIDEND-INCOME> 397,890
<INTEREST-INCOME> 1,041,211
<OTHER-INCOME> 0
<EXPENSES-NET> 176,524
<NET-INVESTMENT-INCOME> 1,262,577
<REALIZED-GAINS-CURRENT> 1,638,514
<APPREC-INCREASE-CURRENT> 6,561,607
<NET-CHANGE-FROM-OPS> 9,462,698
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40,666
<DISTRIBUTIONS-OF-GAINS> 27,111
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 100,399
<NUMBER-OF-SHARES-REDEEMED> 569,332
<SHARES-REINVESTED> 6,247
<NET-CHANGE-IN-ASSETS> 4,414,182
<ACCUMULATED-NII-PRIOR> 14,467
<ACCUMULATED-GAINS-PRIOR> (182,768)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 106,886
<GROSS-ADVISORY-FEES> 147,104
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224,439
<AVERAGE-NET-ASSETS> 58,841,523
<PER-SHARE-NAV-BEGIN> 9.99
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 1.513
<PER-SHARE-DIVIDEND> .008
<PER-SHARE-DISTRIBUTIONS> .005
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.73
<EXPENSE-RATIO> .60<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>EXPENSE RATIO IS ANNUALIZED
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0000778536
<NAME> AC LIFE INVESTMENT TRUST
<SERIES>
<NUMBER> 6
<NAME> EMERGING GROWTH PORTFOLIO

<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-03-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 765,834
<INVESTMENTS-AT-VALUE> 812,919
<RECEIVABLES> 9,838
<ASSETS-OTHER> 610
<OTHER-ITEMS-ASSETS> 836
<TOTAL-ASSETS> 824,203
<PAYABLE-FOR-SECURITIES> 131,110
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,722
<TOTAL-LIABILITIES> 132,832
<SENIOR-EQUITY> 637
<PAID-IN-CAPITAL-COMMON> 643,824
<SHARES-COMMON-STOCK> 63,687
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (175)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47,085
<NET-ASSETS> 691,371
<DIVIDEND-INCOME> 115
<INTEREST-INCOME> 822
<OTHER-INCOME> 0
<EXPENSES-NET> 1,112
<NET-INVESTMENT-INCOME> (175)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 47,085
<NET-CHANGE-FROM-OPS> 46,910
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63,687
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 691,271
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 312
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,034
<AVERAGE-NET-ASSETS> 533,671
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> .86
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.86
<EXPENSE-RATIO> 2.50<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>EXPENSE RATIO IS ANNUALIZED
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0000778536
<NAME> AC LIFE INVESTMENT TRUST
<SERIES>
<NUMBER> 7
<NAME> GLOBAL EQUITY PORTFOLIO

<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-03-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 2,033,502
<INVESTMENTS-AT-VALUE> 2,069,817
<RECEIVABLES> 27,503
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 3,883
<TOTAL-ASSETS> 2,125,314
<PAYABLE-FOR-SECURITIES> 58,689
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,868
<TOTAL-LIABILITIES> 2,057,757
<SENIOR-EQUITY> 2,016
<PAID-IN-CAPITAL-COMMON> 2,014,272
<SHARES-COMMON-STOCK> 201,597
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (2,319)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,596
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 36,192
<NET-ASSETS> 2,057,757
<DIVIDEND-INCOME> 561
<INTEREST-INCOME> 4,438
<OTHER-INCOME> 0
<EXPENSES-NET> 7,318
<NET-INVESTMENT-INCOME> (2,319)
<REALIZED-GAINS-CURRENT> 7,596
<APPREC-INCREASE-CURRENT> 36,192
<NET-CHANGE-FROM-OPS> 41,469
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 201,597
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,057,657
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,610
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,318
<AVERAGE-NET-ASSETS> 1,932,050
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> .22
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.21
<EXPENSE-RATIO> 4.55<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>expense ratio is annualized
</FN>

</TABLE>

<ARTICLE> 6
<CIK> 0000778536
<NAME> AC LIFE INVESTMENT TRUST
<SERIES>
<NUMBER> 8
<NAME> REAL ESTATE PORTFOLIO

<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-03-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 1,673,652
<INVESTMENTS-AT-VALUE> 1,690,650
<RECEIVABLES> 21,703
<ASSETS-OTHER> 402
<OTHER-ITEMS-ASSETS> 2,909
<TOTAL-ASSETS> 1,715,664
<PAYABLE-FOR-SECURITIES> 407,505
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,258
<TOTAL-LIABILITIES> 434,763
<SENIOR-EQUITY> 1,256
<PAID-IN-CAPITAL-COMMON> 1,262,821
<SHARES-COMMON-STOCK> 125,628
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,728
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,902)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,998
<NET-ASSETS> 1,280,901
<DIVIDEND-INCOME> 1,995
<INTEREST-INCOME> 1,277
<OTHER-INCOME> 0
<EXPENSES-NET> 1,544
<NET-INVESTMENT-INCOME> 1,728
<REALIZED-GAINS-CURRENT> (1,902)
<APPREC-INCREASE-CURRENT> 16,998
<NET-CHANGE-FROM-OPS> 16,824
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 135,598
<NUMBER-OF-SHARES-REDEEMED> 9,970
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,280,801
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,562
<AVERAGE-NET-ASSETS> 741,202
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .18
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.20
<EXPENSE-RATIO> 2.50<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Expense ratio is annualized
</FN>

</TABLE>