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Deficient management leads INDITEX on the verge of fail
BUCHAREST,
ROMANIA - Zara wants to cover losses from theft with employees’
money.
The management, theft and losses give headaches to the Spanish
group INDITEX, the owner of the ZARA chain. Only 10 months before, on
July 25th, 2011, the publication Ziarul Financiar
announced the fact that “INDITEX takes the manager from the
Douglas perfumeries” pointing at Paul Cuza, who previously had
the function of General Manager for Parfumerie Douglas SRL.
Currently, the Romanian INDITEX group performs salary and structural
changes without precedent, which the management team from Bucharest doesn’t want to explain.
The problem of the clothes theft is a known phenomenon, especially
when it comes to expensive brands such as ZARA or Massimo Dutti. The
phenomenon was publicly recognized even by the management of the
INDITEX Group Romania, two years before. Probably worried by this
fact, Mihai Cioltea, the development manager of the INDITEX Group
from Romania, also named by the press as “the Zara man”,
stated in 2010 for the economic website InCont the following: “They
steal a lot. Only for the stores in Bucharest we have 10 cases of
stealing per day, which we discover and, depending on the severity,
we call the police”.[...]
Read the rest of the article...
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Table of Contents
OVERVIEW
LETTER TO POLICYHOLDERS 1
ECONOMIC SNAPSHOT 2
ASSET ALLOCATION PORTFOLIO
RETURN HIGHLIGHTS 4
Q&A WITH YOUR PORTFOLIO MANAGERS 5
YOUR PORTFOLIO'S INVESTMENTS 7
FINANCIAL STATEMENTS 12
DOMESTIC INCOME PORTFOLIO
RETURN HIGHLIGHTS 16
Q&A WITH YOUR PORTFOLIO MANAGERS 17
YOUR PORTFOLIO'S INVESTMENTS 19
FINANCIAL STATEMENTS 22
GLOBAL EQUITY PORTFOLIO
RETURN HIGHLIGHTS 26
Q&A WITH YOUR PORTFOLIO MANAGERS 27
YOUR PORTFOLIO'S INVESTMENTS 29
FINANCIAL STATEMENTS 32
GOVERNMENT PORTFOLIO
RETURN HIGHLIGHTS 36
Q&A WITH YOUR PORTFOLIO MANAGERS 37
YOUR PORTFOLIO'S INVESTMENTS 39
FINANCIAL STATEMENTS 41
MONEY MARKET PORTFOLIO
Q&A WITH YOUR PORTFOLIO MANAGERS 45
YOUR PORTFOLIO'S INVESTMENTS 47
FINANCIAL STATEMENTS 49
NOTES TO FINANCIAL STATEMENTS 53
PORTFOLIO OFFICERS AND IMPORTANT ADDRESSES 61
|
It is times like these when money- management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
OVERVIEW
LETTER TO POLICYHOLDERS
July 20, 2000
Dear Policyholder,
Whether you have held your portfolio for years or just joined the Van Kampen
family of shareholders in the last few months, you are likely to have questions
and even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your portfolio is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we move through the second half of 2000, count on us to continue to draw on
the wisdom of our 74 years of experience. Along those lines, Van Kampen's
"Generations of Experience" is the theme of a national
advertising campaign that we recently kicked off. The message
emphasizes our depth of investment-management history, as well
as our firm belief that with the right investments, anyone can
realize life's true wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
BEGINNING IN THE SECOND QUARTER OF 2000, EVIDENCE OF SLOWER ECONOMIC GROWTH IN
THE UNITED STATES EMERGED. HOWEVER, ANALYSTS BELIEVE IT MAY HAVE BEEN PREMATURE
TO ASSUME THAT THE U.S. ECONOMY HAS SLOWED TO A SUSTAINABLE, NONINFLATIONARY
PACE, WITH THE GROSS DOMESTIC PRODUCT (GDP), A MEASURE OF ECONOMIC GROWTH, UP
5.2 PERCENT ANNUALIZED IN THE SECOND QUARTER OF 2000.
CONSUMER SPENDING AND EMPLOYMENT
CONSUMER SPENDING REMAINED THE MAIN ENGINE OF GROWTH BEHIND THE U.S. ECONOMY.
LIVING STANDARDS AND SPENDING HABITS WERE BOOSTED BY STRONG GAINS IN REAL
INCOME, AND INDIVIDUAL WEALTH INCREASED SUBSTANTIALLY, PRIMARILY DUE TO A
BUOYANT STOCK MARKET. NONETHELESS, DATA RELEASED IN THE SECOND QUARTER OF 2000
REFLECTED A MINOR DECREASE IN THE SPENDING OF INDIVIDUALS. IN JUNE, THE CONSUMER
PRICE INDEX (CPI), THE LEADING INFLATION INDICATOR, ROSE HIGHER THAN
EXPECTED--0.6 PERCENT MORE THAN THE PREVIOUS MONTH. THAT HEIGHTENED CONCERNS
ABOUT INFLATION AND THE PROSPECT OF ADDITIONAL FEDERAL RESERVE BOARD
INTEREST-RATE INCREASES.
THE U.S. LABOR MARKET WAS STILL ROBUST DURING THIS TIME, AND JOB INSECURITY
CONTINUED TO DECLINE. SOLID EMPLOYMENT GROWTH WAS ACCOMPANIED BY UNUSUALLY LARGE
GAINS IN PRODUCTIVITY, WHICH LIMITED THE RISE IN UNIT LABOR COSTS ACROSS THE
WHOLE ECONOMY. GIVEN THE HIGH EMPLOYMENT NUMBERS AND STRONG LEVELS OF
PRODUCTIVITY, ANALYSTS BELIEVE AN INCREASE IN INTEREST RATES TO WARD OFF
INFLATION AND FURTHER SLOW THE ECONOMY IS POSSIBLE.
INTEREST RATES AND INFLATION
DURING THE PAST FEW MONTHS, PERSISTENT STRENGTH IN CONSUMER SPENDING ACCOMPANIED
BY A VERY TIGHT LABOR MARKET, RESULTED IN SOME INFLATION. THE CPI REACHED A
LEVEL OF 2.7 PERCENT IN JANUARY 2000 AND 3.7 PERCENT IN JUNE 2000, CLEARLY
DEMONSTRATING SIGNS OF INFLATION.
SINCE JUNE 1999, THE FEDERAL RESERVE HAS INCREASED THE FEDERAL FUNDS RATE SIX
TIMES BY A TOTAL OF 175 BASIS POINTS TO LOWER ECONOMIC GROWTH AND DECREASE ANY
FUTURE FEARS OF INFLATION. THESE INCREASES IN INTEREST RATES HELPED SLOW THE
INTEREST-SENSITIVE AUTO AND HOUSING MARKETS.
MANY OBSERVERS BELIEVE INTEREST RATES COULD BE LIFTED FURTHER IN COMING MONTHS.
WHILE MARKETS HAVE EXPERIENCED MUCH SHORT-TERM VOLATILITY, THE MARKET'S OUTLOOK
COULD IMPROVE ONCE INTEREST-RATE HIKES CEASE.
2
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998--June 30, 2000)
[BAR GRAPH]
U.S. GROSS DOMESTIC PRODUCT
---------------------------
Jun 98 2.10
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.20
|
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(June 30, 1998--June 30, 2000)
[BAR GRAPH]
INTEREST RATES INFLATION
-------------- ---------
Jun 98 5.50 1.70
5.50 1.70
5.50 1.60
Sep 98 5.25 1.50
5.00 1.50
4.75 1.50
Dec 98 4.75 1.60
4.75 1.70
4.75 1.60
Mar 99 4.75 1.70
4.75 2.30
4.75 2.10
Jun 99 5.00 2.00
5.00 2.10
5.25 2.30
Sep 99 5.25 2.60
5.25 2.60
5.50 2.60
Dec 99 5.50 2.70
5.50 2.70
5.75 3.20
Mar 00 6.00 3.70
6.00 3.00
6.50 3.10
Jun 00 6.50 3.70
|
Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
3
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
ASSET ALLOCATION PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) 1.11%
---------------------------------------------------------------------------
One-year total return based on NAV(1) 4.37%
---------------------------------------------------------------------------
Five-year average annual total return based on NAV(1) 13.73%
---------------------------------------------------------------------------
Ten-year average annual total return based on NAV(1) 12.17%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 11.21%
---------------------------------------------------------------------------
Commencement date 06/30/87
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
4
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--ASSET ALLOCATION PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS
ENDED JUNE 30, 2000. THE TEAM IS LED BY JOHN CUNNIFF, SENIOR PORTFOLIO MANAGER,
WHO HAS MANAGED THE PORTFOLIO SINCE ITS INCEPTION AND HAS WORKED IN THE
INVESTMENT INDUSTRY SINCE 1992. HE IS JOINED BY PORTFOLIO MANAGERS KELLY GILBERT
AND RAJ WAGLE. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE PORTFOLIO'S
PERFORMANCE.
Q WHAT WERE THE STOCK AND BOND MARKET
ENVIRONMENTS FOR THE PORTFOLIO DURING THE REPORTING PERIOD, AND HOW DID THE
PORTFOLIO PERFORM IN THAT ENVIRONMENT?
A Overall, it was an extremely volatile period
for the stock market, which generally favored growth stocks over value, as has
been the case for the last six years. (There can be no assurance that growth
stocks will continue to be favorable over value stocks in the future.) The stock
market was strong in the first quarter, but was unable to sustain its
appreciation in the second quarter. Investors worried about a slowdown in the
economy, as the Federal Reserve Board raised interest rates several times, and
about the sustainability of high valuations, particularly in technology stocks.
The stock market's volatility didn't help the bond market, which also
struggled with the challenges of rising interest rates. Difficulties continued
for the investment-grade corporate bond market due to concerns that the market
had more sellers than buyers. This imbalance seemed to contribute to the
widening of yield spreads between Treasuries and other types of bonds (such as
corporate, high-yield, and mortgage-backed securities).
Because bonds outperformed stocks, the portfolio's conservative asset
allocation helped its performance. The portfolio returned 1.11 percent for the
six-month period ended June 30, 2000 (Class I shares). As a result of recent
market activity, current performance may vary from the figures shown. By
comparison, the Standard & Poor's 500 Index lost 0.43 percent, and the Lipper
Flexible Portfolio Fund Index, which more closely resembles the portfolio,
returned 1.05 percent. Of course, past performance is no guarantee of future
results. The S&P 500 Index is a broad-based, unmanaged index that reflects the
general performance of the stock market based on the average performance of 500
widely held common stocks from 83 industrial groups. The index, which tracks
industrial, transportation, financial, and utility stocks, to name a few,
provides a guide to the overall health of the U.S. stock market. The Lipper
Flexible Portfolio Fund Index reflects the average performance of the 30 largest
flexible portfolio funds. These indices are statistical composites that do not
include any commissions that would be paid by an investor purchasing the
securities they represent. Such costs would lower the performance of the
indices. It is not possible to invest directly in an index. Please refer to the
chart and footnotes on page 4 for additional performance results.
Q GIVEN THIS ENVIRONMENT, WHAT STRATEGIES
DID YOU USE TO MANAGE THE PORTFOLIO?
A The portfolio seeks to provide high total
return through investments in equity, debt, and money-market securities. To
achieve this goal, we decide how we want to allocate the portfolio's assets
based on economic and market trends.
During the first half of the year, we maintained the portfolio's exposure to
stocks and bonds and decreased its exposure to cash. As of June 30, 2000, the
asset allocation as a percentage of net assets was approximately 48 percent
stocks, 39 percent bonds, and 13 percent cash. By comparison, the allocation at
the beginning of the reporting period was 48 percent stocks, 36 percent bonds,
and 16 percent cash. We divided the portfolio's assets based on the results of
our asset allocation model, which, in response to volatility in the stock market
and rising interest rates during the reporting period, recommended a relatively
conservative asset allocation.
5
Q WHICH STOCKS SUPPORTED THE
PORTFOLIO'S PERFORMANCE?
A Technology stocks contributed positively to
performance. Intel's stock was boosted by an increase in semiconductor chip
demand in the first half of the year, thanks to growth in computer-related
product sales. Oracle, a dominant software company, benefited from strong growth
in Internet applications. Also, Hewlett Packard reported strong sales and
earnings during the first half of the year, which helped its stock price rise.
Keep in mind that not all stocks in the portfolio performed favorably, and
there is no guarantee that any of these stocks will perform well or will be held
by the portfolio in the future.
Q DID ANY STOCKS HURT THE PORTFOLIO?
A The stocks that hurt performance in the
first half of the year included Microsoft, Procter & Gamble, and America Online.
Microsoft's stock fell amid investor concerns over the government's lawsuit
against the company and the possibility that the company's business practices
would be restricted. Also, Procter & Gamble's stock suffered when it reported
slower sales than analysts predicted. AOL's stock declined in the first half of
the year, as investors feared that the company's growth rate would fall when it
merged with Time Warner, a more established media company with a slower growth
rate.
Q HOW DID YOU MANAGE THE BOND PORTION
OF THE PORTFOLIO?
A We continued to allocate the portfolio's
bond assets across a variety of sectors within the corporate bond market,
focusing on investment-grade securities (bonds rated BBB or higher) with a range
of maturities. Bonds with longer maturities tend to have more risk than bonds
with shorter maturities.
The duration of the bond portfolio, a measurement used to quantify the
sensitivity of a bond's price to changes in interest rates, was 7.04 years at
the end of the reporting period. Typically, portfolios with longer durations
perform better when interest rates are declining, and portfolios with shorter
durations perform better when rates are rising. This duration, which is
minimally longer than our benchmark, reflects our essentially neutral position
on interest rates.
Q WHAT DO YOU SEE AHEAD FOR
THE PORTFOLIO?
A It seems like the economy may finally be
slowing, but it is unknown to what extent. Going forward, we believe the
portfolio is well-positioned to handle an economic slowdown, or even a
recession. By keeping a significant percentage of the portfolio's allocation in
bonds and cash, we hope to balance the effects of flat or depressed stock-market
performance.
6
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Asset Allocation Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
MARKET
DESCRIPTION SHARES VALUE
COMMON STOCKS 47.5%
CONSUMER DISTRIBUTION 2.6%
Best Buy Co., Inc.
(a)................... 1,900 $ 120,175
Circuit City
Stores-Circuit City
Group................. 3,400 112,837
Federated Department
Stores, Inc. (a)...... 1,600 54,000
Home Depot, Inc. ....... 1,800 89,888
Kmart Corp. (a)......... 7,200 49,050
Lexmark International
Group, Inc., Class A
(a)................... 1,500 100,875
May Department Stores
Co. .................. 4,250 102,000
Sears Roebuck & Co. .... 1,500 48,938
Target Corp. ........... 700 40,600
TJX Cos., Inc. ......... 3,000 56,250
Tricon Global
Restaurants, Inc.
(a)................... 2,500 70,625
Wal-Mart Stores,
Inc. ................. 7,500 432,187
-----------
1,277,425
-----------
CONSUMER DURABLES 0.8%
Delphi Automotive
Systems Corp. ........ 2,488 36,232
Ford Motor Co. ......... 5,100 219,300
General Motors Corp. ... 1,250 72,578
Visteon Corp. .......... 668 8,097
Whirlpool Corp. ........ 1,300 60,612
-----------
396,819
-----------
CONSUMER NON-DURABLES 3.1%
Anheuser Busch Cos.,
Inc. ................. 2,300 171,781
Coca Cola Co. .......... 2,050 117,747
General Mills, Inc. .... 3,500 133,875
Jones Apparel Group,
Inc. (a).............. 1,800 42,300
Kimberly-Clark Corp. ... 3,500 200,812
Pepsi Bottling Group,
Inc. ................. 3,400 99,238
PepsiCo, Inc. .......... 5,500 244,406
Philip Morris Cos.,
Inc. ................. 8,800 233,750
Procter & Gamble Co. ... 3,100 177,475
Seagram Co. Ltd.--ADR
(Canada).............. 1,800 104,400
Tommy Hilfiger Corp.
(a)................... 1,600 12,000
Tyson Foods, Inc., Class
A..................... 1,200 10,500
-----------
1,548,284
-----------
|
MARKET
DESCRIPTION SHARES VALUE
CONSUMER SERVICES 1.3%
Brinker International,
Inc. (a).............. 3,800 $ 111,150
Darden Restaurants,
Inc. ................. 3,500 56,875
Harrah's Entertainment,
Inc. (a).............. 4,700 98,406
New York Times Co.,
Class A............... 1,500 59,250
Time Warner, Inc. ...... 2,900 220,400
Viacom, Inc., Class B
(a)................... 1,736 118,374
-----------
664,455
-----------
ENERGY 3.6%
Apache Corp. ........... 2,000 117,625
Ashland, Inc. .......... 1,700 59,606
Chevron Corp. .......... 1,300 110,256
Coastal Corp. .......... 4,000 243,500
El Paso Energy Corp. ... 1,800 91,687
Exxon Mobil Corp. ...... 8,572 672,902
McDermott International,
Inc. ................. 3,400 29,963
Phillips Petroleum
Co. .................. 1,650 83,634
Royal Dutch Petroleum
Co.-- ADR
(Netherlands)......... 2,400 147,750
Texaco, Inc. ........... 900 47,925
Ultramar Diamond
Shamrock Corp. ....... 2,200 54,588
USX--Marathon Group..... 5,600 140,350
-----------
1,799,786
-----------
FINANCE 6.0%
AMBAC Financial Group,
Inc. ................. 1,200 65,775
American Express Co. ... 1,650 86,006
American General
Corp. ................ 1,200 73,200
American International
Group, Inc. .......... 1,946 228,655
Bank of America
Corp. ................ 3,781 162,583
Bank One Corp. ......... 5,434 144,341
Charles Schwab Corp. ... 2,250 75,656
Chase Manhattan
Corp. ................ 3,750 172,734
CIGNA Corp. ............ 1,000 93,500
Citigroup, Inc. ........ 10,225 616,056
Fannie Mae.............. 4,500 234,844
Federal Home Loan
Mortgage Corp. ....... 1,800 72,900
|
See Notes to Financial Statements
7
YOUR PORTFOLIO'S INVESTMENTS
Asset Allocation Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
FINANCE (CONTINUED)
FleetBoston Financial
Corp. ................ 5,331 $ 181,254
Lehman Brothers
Holdings, Inc. ....... 2,000 189,125
Lincoln National
Corp. ................ 1,800 65,025
MBNA Corp. ............. 3,100 84,088
Mellon Financial
Corp. ................ 1,500 54,656
Merrill Lynch & Co.,
Inc. ................. 600 69,000
MGIC Investment
Corp. ................ 1,400 63,700
Providian Financial
Corp. ................ 1,900 171,000
Radian Group, Inc. ..... 1,200 62,100
-----------
2,966,198
-----------
HEALTHCARE 5.5%
Abbott Laboratories,
Inc. ................. 2,700 120,319
Aetna, Inc. ............ 1,200 77,025
Amgen, Inc. (a)......... 4,200 295,050
Baxter International,
Inc. ................. 600 42,188
Bristol-Myers Squibb
Co. .................. 5,800 337,850
Johnson & Johnson....... 2,900 295,437
Merck & Co., Inc. ...... 4,800 367,800
Pfizer, Inc. ........... 18,300 878,400
Schering-Plough
Corp. ................ 1,300 65,650
UnitedHealth Group,
Inc. ................. 1,700 145,775
Wellpoint Health
Networks, Inc., Class
A (a)................. 1,000 72,437
-----------
2,697,931
-----------
PRODUCER MANUFACTURING 2.9%
General Electric Co. ... 20,700 1,097,100
Johnson Controls,
Inc. ................. 1,600 82,100
Minnesota Mining &
Manufacturing Co. .... 1,100 90,750
Navistar International
Corp. (a)............. 2,300 71,444
Rockwell International
Corp. ................ 800 25,200
TRW, Inc. .............. 1,400 60,725
-----------
1,427,319
-----------
RAW MATERIALS/PROCESSING
INDUSTRIES 0.9%
Alcoa, Inc. (a)......... 2,200 63,800
Bowater, Inc. .......... 1,500 66,187
Corus Group PLC-- ADR
(United Kingdom)...... 2,300 33,063
Dow Chemical Co. ....... 4,200 126,787
|
MARKET
DESCRIPTION SHARES VALUE
RAW MATERIALS/PROCESSING
INDUSTRIES (CONTINUED)
Praxair, Inc. .......... 2,100 $ 78,619
Union Carbide Corp. .... 400 19,800
Westvaco Corp. ......... 1,800 44,663
-----------
432,919
-----------
TECHNOLOGY 16.2%
Adaptec, Inc. (a)....... 900 20,475
Agilent Technologies,
Inc. (a).............. 1,449 106,864
Alcatel SA-- ADR
(France).............. 1,100 73,150
America Online, Inc.
(a)................... 6,280 331,270
Apple Computer, Inc.
(a)................... 2,000 104,750
BMC Software, Inc.
(a)................... 300 10,945
Cisco Systems, Inc.
(a)................... 14,800 940,725
Dell Computer Corp.
(a)................... 2,900 143,006
Electronic Data Systems
Corp. ................ 2,900 119,625
Electronics for Imaging,
Inc. (a).............. 1,000 25,313
EMC Corp. (a)........... 2,800 215,425
Gateway 2000, Inc.
(a)................... 1,000 56,750
Hewlett Packard Co. .... 3,800 474,525
Honeywell International,
Inc. ................. 1,687 56,831
Intel Corp. ............ 6,100 815,494
International Business
Machines Corp. ....... 4,300 471,119
LSI Logic Corp. (a)..... 1,400 75,775
Lucent Technologies,
Inc. ................. 4,400 260,700
Microsoft Corp. (a)..... 11,700 936,000
Motorola, Inc. ......... 5,529 160,687
Network Appliance, Inc.
(a)................... 1,200 96,600
Nokia Corp. -- ADR
(Finland)............. 2,000 99,875
Nortel Networks
Corp--ADR (Canada).... 6,800 464,100
Oracle Corp. (a)........ 10,800 907,875
Pitney Bowes, Inc. ..... 1,100 44,000
Sanmina Corp. (a)....... 1,400 119,700
SCI Systems, Inc. (a)... 2,200 86,212
Seagate Technology, Inc.
(a)................... 3,000 165,000
Solectron Corp. (a)..... 2,800 117,250
Sun Microsystems, Inc.
(a)................... 1,000 90,937
Tellabs, Inc. (a)....... 1,300 88,969
|
See Notes to Financial Statements
8
YOUR PORTFOLIO'S INVESTMENTS
Asset Allocation Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
TECHNOLOGY (CONTINUED)
Texas Instruments,
Inc. ................. 1,000 $ 68,687
Time Warner Telecom,
Inc., Class A......... 1,800 115,875
Xerox Corp. ............ 5,300 109,975
-----------
7,974,484
-----------
TRANSPORTATION 0.2%
AMR Corp. (a)........... 400 10,575
Delta Air Lines,
Inc. ................. 900 45,506
Union Pacific Corp. .... 800 29,750
-----------
85,831
-----------
UTILITIES 4.4%
AT&T Corp. ............. 7,001 221,407
BellSouth Corp. ........ 2,900 123,612
DTE Energy Co. ......... 2,700 82,519
GPU, Inc. .............. 1,200 32,475
GTE Corp. .............. 7,000 435,750
Nextel Communications,
Inc. (a).............. 1,900 116,256
|
MARKET
DESCRIPTION SHARES VALUE
UTILITIES (CONTINUED)
NSTAR................... 1,403 $ 57,085
Qwest Communications
International, Inc.
(a)................... 4,000 198,750
SBC Communications,
Inc. ................. 8,538 369,268
Sprint Corp. ........... 3,300 168,300
TXU Corp. .............. 1,300 38,350
U.S. WEST Communications
Group. (a)............ 900 77,175
WorldCom, Inc. (a)...... 5,250 240,844
-----------
2,161,791
-----------
TOTAL COMMON
STOCKS 47.5%......... 23,433,242
-----------
|
See Notes to Financial Statements
9
YOUR PORTFOLIO'S INVESTMENTS
Asset Allocation Portfolio
June 30, 2000 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
CORPORATE OBLIGATIONS 17.3%
CONSUMER NON-DURABLES 0.5%
$ 250 Kroger Co., Ser B........................................... 7.250% 06/01/09 $ 236,382
-----------
ENERGY 1.4%
500 Enron Corp.................................................. 6.875 10/15/07 477,290
250 USX-Marathon Group.......................................... 6.650 02/01/06 237,792
-----------
715,082
-----------
FINANCE 4.3%
500 American Re Corp., Ser B.................................... 7.450 12/15/26 458,890
250 Avalonbay Communities, Inc. ................................ 7.500 08/01/09 237,975
250 Countrywide Funding Corp. .................................. 8.250 07/15/02 252,066
250 Finova Cap Corp. ........................................... 7.625 09/21/09 208,972
250 Ford Motor Credit Co. ...................................... 6.700 07/16/04 241,582
500 Lehman Brothers, Inc. ...................................... 7.125 07/15/02 494,910
250 Washington Mutual Cap I..................................... 8.375 06/01/27 223,102
-----------
2,117,497
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 1.0%
500 Georgia Pacific Corp. ...................................... 9.950 06/15/02 519,508
-----------
TECHNOLOGY 2.0%
500 Raytheon Co. ............................................... 6.750 08/15/07 465,127
500 Sun Microsystems, Inc. ..................................... 7.500 08/15/06 499,610
-----------
964,737
-----------
TRANSPORTATION 2.0%
500 CSX Corp. .................................................. 8.625 05/15/22 501,242
500 Southwest Air Lines Co. .................................... 7.375 03/01/27 468,894
-----------
970,136
-----------
UTILITIES 6.1%
300 360 Communications Co....................................... 7.125 03/01/03 298,477
500 Cox Communications, Inc. ................................... 6.875 06/15/05 483,742
250 Edison International........................................ 6.875 09/15/04 243,095
250 Niagara Mohawk Power Corp., Ser G........................... 7.750 10/01/08 244,081
250 Southern Energy, Inc., 144A--Private Placement (b).......... 7.900 07/15/09 228,944
250 Sprint Capital Corp......................................... 6.125 11/15/08 223,107
750 Texas Utilities Electric Co. ............................... 8.250 04/01/04 770,408
500 WorldCom, Inc. ............................................. 8.250 05/15/10 512,637
-----------
3,004,491
-----------
TOTAL CORPORATE OBLIGATIONS............................................................. 8,527,833
-----------
UNITED STATES GOVERNMENT OBLIGATIONS 21.5%
500 U.S. Treasury Bond.......................................... 6.125 08/15/29 505,325
2,000 U.S. Treasury Bond.......................................... 7.125 02/15/23 2,219,376
2,900 U.S. Treasury Bond.......................................... 7.250 05/15/16 3,192,668
500 U.S. Treasury Bond.......................................... 8.750 08/15/20 641,562
500 U.S. Treasury Note.......................................... 5.875 02/15/04 493,282
500 U.S. Treasury Note.......................................... 6.125 08/15/07 497,070
1,000 U.S. Treasury Note.......................................... 6.500 10/15/06 1,011,563
250 U.S. Treasury Note.......................................... 6.500 02/15/10 258,594
|
See Notes to Financial Statements
10
YOUR PORTFOLIO'S INVESTMENTS
Asset Allocation Portfolio
June 30, 2000 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
UNITED STATES GOVERNMENT OBLIGATIONS (CONTINUED)
$ 250 U.S. Treasury Note.......................................... 6.625% 05/15/07 $ 255,478
500 U.S. Treasury Note.......................................... 6.875 05/15/06 514,687
1,000 U.S. Treasury Note.......................................... 7.250 08/15/04 1,034,130
-----------
TOTAL UNITED STATES GOVERNMENT OBLIGATIONS 21.5%....................................... 10,623,735
-----------
TOTAL LONG-TERM INVESTMENTS 86.3%
(Cost $37,014,529).................................................................... 42,584,810
-----------
REPURCHASE AGREEMENTS 13.2%
DLJ Mortgage Acceptance Corp. ($2,170,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/00, to be sold on 07/03/00 at
$2,171,190)........................................................................... 2,170,000
State Street Bank & Trust Co. ($2,170,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/00, to be sold on 07/03/00 at
$2,171,166)........................................................................... 2,170,000
Warburg Dillon Read ($2,170,000 par collateralized by US Government obligations in a
pooled cash account, dated 06/30/00, to be sold on 07/03/00 at $2,171,186)............ 2,170,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $6,510,000)..................................................................... 6,510,000
-----------
TOTAL INVESTMENTS 99.5%
(Cost $43,524,529).................................................................... 49,094,810
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%............................................. 229,586
-----------
NET ASSETS 100.0%...................................................................... $49,324,396
===========
|
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally
transactions with qualified institutional buyers.
ADR--American Depositary Receipt.
See Notes to Financial Statements
11
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Asset Allocation Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments, including repurchase agreements of
$6,510,000 (Cost $43,524,529)............................. $49,094,810
Cash........................................................ 3,502
Receivables:
Interest.................................................. 347,410
Dividends................................................. 24,184
Other....................................................... 43,650
-----------
Total Assets............................................ 49,513,556
-----------
LIABILITIES:
Payables:
Portfolio Shares Purchased................................ 34,348
Shareholder Reports....................................... 14,581
Distributor and Affiliates................................ 2,213
Trustees' Deferred Compensation and Retirement Plans........ 136,656
Accrued Expenses............................................ 1,362
-----------
Total Liabilities....................................... 189,160
-----------
NET ASSETS.................................................. $49,324,396
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $43,560,339
Net Unrealized Appreciation................................. 5,570,281
Accumulated Undistributed Net Investment Income............. 832,924
Accumulated Net Realized Loss............................... (639,148)
-----------
NET ASSETS.................................................. $49,324,396
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $49,324,396 and 4,525,430 shares
of beneficial interest issued and outstanding)............ $ 10.90
===========
|
See Notes to Financial Statements
12
Statement of Operations
Asset Allocation Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 915,984
Dividends (Net of foreign withholding taxes of $477)........ 139,152
-----------
Total Income............................................ 1,055,136
-----------
EXPENSES:
Investment Advisory Fee..................................... 126,801
Trustees' Fees and Related Expenses......................... 27,777
Accounting.................................................. 16,063
Shareholder Reports......................................... 9,178
Audit....................................................... 8,423
Custody..................................................... 7,305
Legal....................................................... 1,766
Other....................................................... 9,172
-----------
Total Expenses.......................................... 206,485
Investment Advisory Fee Reduction....................... 54,757
-----------
Net Expenses............................................ 151,728
-----------
NET INVESTMENT INCOME....................................... $ 903,408
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (504,236)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 5,382,869
End of the Period:
Investments................................................. 5,570,281
-----------
Net Unrealized Appreciation During the Period............... 187,412
-----------
NET REALIZED AND UNREALIZED LOSS............................ $ (316,824)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 586,584
===========
|
See Notes to Financial Statements
13
Statement of Changes in Net Assets
Asset Allocation Portfolio
For the Six Months Ended June 30, 2000, and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 903,408 $ 1,923,837
Net Realized Gain/Loss...................................... (504,236) 3,958,873
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 187,412 (3,345,675)
------------ ------------
Change in Net Assets from Operations........................ 586,584 2,537,035
------------ ------------
Distributions from Net Investment Income.................... (1,929,516) (1,970,700)
Distributions from Net Realized Gain........................ (4,035,440) (5,938,317)
------------ ------------
Total Distributions......................................... (5,964,956) (7,909,017)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (5,378,372) (5,371,982)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 1,167,471 2,459,470
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 5,964,956 7,909,018
Cost of Shares Repurchased.................................. (5,869,187) (13,018,242)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 1,263,240 (2,649,754)
------------ ------------
TOTAL DECREASE IN NET ASSETS................................ (4,115,132) (8,021,736)
NET ASSETS:
Beginning of the Period..................................... 53,439,528 61,461,264
------------ ------------
End of the Period (Including accumulated undistributed net
investment income of $832,924 and $1,859,032,
respectively)............................................. $ 49,324,396 $ 53,439,528
============ ============
|
See Notes to Financial Statements
14
Financial Highlights
Asset Allocation Portfolio
(Unaudited)
THE FOLLOWING PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE PORTFOLIO
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS YEAR ENDED DECEMBER 31,
CLASS I SHARES ENDED ---------------------------------
JUNE 30, 2000 1999 1998 1997 1996
-------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................ $12.15 $13.38 $11.91 $11.35 $11.64
------ ------ ------ ------ ------
Net Investment Income................................. 0.22 0.46 0.43 0.51 0.48
Net Realized and Unrealized Gain/Loss................. (0.06) 0.12 1.41 1.90 1.08
------ ------ ------ ------ ------
Total from Investment Operations........................ 0.16 0.58 1.84 2.41 1.56
------ ------ ------ ------ ------
Less:
Distributions from Net Investment Income.............. 0.46 0.45 0.01 0.52 0.48
Distributions from Net Realized Gain.................. 0.95 1.36 0.36 1.33 1.37
------ ------ ------ ------ ------
Total Distributions..................................... 1.41 1.81 0.37 1.85 1.85
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD...................... $10.90 $12.15 $13.38 $11.91 $11.35
====== ====== ====== ====== ======
Total Return*........................................... 1.11%** 4.94% 15.67% 21.81% 13.87%
Net Assets at End of the Period (In millions)........... $ 49.3 $ 53.4 $ 61.5 $ 63.3 $ 63.9
Ratio of Expenses to Average Net Assets*................ .60% .60% .60% .60% .60%
Ratio of Net Investment Income to Average Net Assets*... 3.57% 3.41% 3.17% 3.86% 3.78%
Portfolio Turnover...................................... 7%** 78% 93% 58% 118%
* If certain expenses had not been assumed by Van Kampen, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets................. .82% .77% .72% .71% .81%
Ratio of Net Investment Income to Average
Net Assets............................................ 3.35% 3.24% 3.05% 3.75% 3.57%
** Non-Annualized
|
See Notes to Financial Statements
15
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
DOMESTIC INCOME PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) 0.44%
---------------------------------------------------------------------------
One-year total return based on NAV(1) 1.45%
---------------------------------------------------------------------------
Five-year average annual total return based on NAV(1) 6.05%
---------------------------------------------------------------------------
Ten-year average annual total return based on NAV(1) 8.04%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 7.05%
---------------------------------------------------------------------------
Commencement date 11/04/87
---------------------------------------------------------------------------
SEC Yield(2) 7.54%
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
(2) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ending June 30, 2000.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
16
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--DOMESTIC INCOME PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS
ENDED JUNE 30, 2000. THE TEAM IS LED BY KELLY GILBERT, SENIOR PORTFOLIO MANAGER,
WHO HAS MANAGED THE PORTFOLIO SINCE JUNE 1999 AND HAS WORKED IN THE INVESTMENT
INDUSTRY SINCE 1995. THE FOLLOWING DISCUSSION REFLECTS HER VIEWS ON THE
PORTFOLIO'S PERFORMANCE.
Q WHAT WERE THE MARKET CONDITIONS IN
WHICH THE PORTFOLIO OPERATED, AND HOW DID THE PORTFOLIO PERFORM IN THAT
ENVIRONMENT?
A The Federal Reserve Board raised rates six
times between June 1999 and June 2000. These rate increases--mixed with
volatility and weakness in the equity market, the effects of the year 2000
computer scare, and concerns that the corporate bond market had more sellers
than buyers--all contributed to the widening of yield spreads between Treasuries
and other types of bonds (such as corporate, high-yield, and mortgage-backed
securities).
During the reporting period, the portfolio's return was supported by its
favorable sector allocations and continued concentration on credit quality.
However, this benefit was overshadowed by the negative performance of the
corporate bond market.
For the six months ended June 30, 2000, the portfolio achieved a total
return of 0.44 percent (Class I shares). Dividends paid and reinvested by the
portfolio during the period totaled $0.6619 per share. As a result of recent
market activity, current performance may vary from the figures shown. By
comparison, the Lehman Brothers BBB Corporate Bond Index produced a total return
of 2.20 percent for the same period. This broad-based, unmanaged index, which
reflects the general performance of corporate bonds, does not reflect any
commissions or fees that would be paid by an investor purchasing the securities
it represents. Such costs would lower the performance of the index. It is not
possible to invest directly in an index. Of course, past performance is no
guarantee of future results. Please refer to the chart and footnotes on page 16
for additional performance results.
Q HOW DID YOU POSITION THE PORTFOLIO IN
RESPONSE TO THESE CONDITIONS?
A We began the reporting period focused on
sectors with strong underlying fundamentals, which helped reduce the portfolio's
volatility and risk in today's uncertain environment. We looked to the
portfolio's benchmark, the Lehman Brothers BBB Corporate Bond Index, as a guide
for establishing weightings within the sectors held in the portfolio. This
enabled us to maintain diversification and credit quality in different sectors
and securities.
As a result, we repositioned the portfolio's exposure to the industrial
sector, which includes health-care, media and telecommunications, and consumer
cyclical securities. We maintained a slight overweighting in cable and media
securities, which continued to contribute positively to the portfolio's return.
This sector performed well due to the vigorous level of consumer demand.
We also reduced the portfolio's exposure in health care. We accomplished
this by selling our position in Tenet Healthcare, due to the concerns about the
welfare and higher default risk of health-care companies. In turn, we added
positions in Yankee bonds, which helped to enhance the portfolio's potential for
a higher yield.
Q WHAT WAS THE STRUCTURE OF THE PORTFOLIO
AT THE END OF THE REPORTING PERIOD?
A The portfolio's credit-quality allocation
continued to be weighted in medium-quality securities, which are defined as A
and BBB rated securities. At the end of the reporting period, approximately
36.11 percent of the long-term investments were allocated to
17
securities rated A and higher, and 55.93 percent of the long-term investments
were invested in BBB rated securities. The remaining 7.76 percent was allocated
to securities rated BB and lower. This allocation benefited the portfolio during
the six months, as A and BBB rated securities outperformed BB rated securities.
We also continued to focus on managing the portfolio's duration during the
period. Duration, which is expressed in years, is a measurement of a bond's
price sensitivity to changes in interest rates. For most of the period, the
portfolio's duration was held neutral to its benchmark, the Lehman Brothers BBB
Corporate Bond Index. At the end of the period, the portfolio's duration was
5.61 years, which is slightly shorter than the benchmark duration of 5.70 years.
Q WHAT IS THE OUTLOOK FOR THE
MONTHS AHEAD?
A We are optimistic about the outlook for
corporate bonds. As June saw spreads tighten for the first time this year, we
expect that demand for corporate bonds will improve in coming months. The
gradual waning of uncertainty about the Fed's direction, coupled with tightening
yield spreads, an increase in equity valuations, and the increase of buyers in
the corporate bond market, all seem to contribute to the positive tone in
investor sentiment.
Going forward, our focus will continue to be on higher credit-quality
issues, in-depth research, and assessment of corporate bonds. We will strive to
look for opportunities in the market that will add relative value and perform
well in a variety of market conditions. Through these fundamentals, we will
continue to support the portfolio's objective of current income and preservation
of capital.
18
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Domestic Income Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
CORPORATE DEBT 82.1%
CONSUMER DISTRIBUTION 8.0%
$250 Fred Meyer, Inc. ........................................... 7.375% 03/01/05 $ 244,047
500 Gruma SA De CV, 144A -- Private Placement (Mexico) (a)...... 7.625 10/15/07 417,500
500 Nabisco, Inc. .............................................. 7.550 06/15/15 438,126
250 Pepsi Bottling Group, Inc. ................................. 7.000 03/01/29 224,944
-----------
1,080,570
-----------
CONSUMER DURABLES 1.5%
250 DaimlerChrysler NA Holding.................................. 7.750 05/27/03 252,017
-----------
CONSUMER NON-DURABLES 3.3%
500 Bausch & Lomb, Inc. ........................................ 7.125 08/01/28 435,455
125 Westpoint Stevens, Inc. .................................... 7.875 06/15/05 104,375
-----------
539,830
-----------
CONSUMER SERVICES 14.4%
250 Cox Communications, Inc. ................................... 6.875 06/15/05 241,871
500 CSC Holdings, Inc. ......................................... 7.875 12/15/07 483,750
250 Liberty Media Group., 144A-Private Placement (a)............ 8.500 07/15/29 236,719
250 News America Holdings, Inc. ................................ 8.875 04/26/23 256,838
500 Park Place Entertainment Corp. ............................. 7.950 08/01/03 493,437
250 SocGen Real Estate Co. LLC Ser A, 144A -- Private Placement
(a)......................................................... 7.640 12/29/49 227,943
100 Time Warner Entertainment Co. .............................. 8.375 07/15/33 101,865
250 USA Waste Services, Inc. ................................... 7.000 10/01/04 232,077
100 Viacom, Inc. ............................................... 7.750 06/01/05 101,000
-----------
2,375,500
-----------
ENERGY 2.2%
250 PDV America, Inc. .......................................... 7.875 08/01/03 236,615
150 Petroleum Geo-Services ASA (Norway)......................... 7.125 03/30/28 124,492
-----------
361,107
-----------
FINANCE 12.3%
250 Abbey National PLC (United Kingdom)......................... 7.350 10/29/49 235,659
500 Avalonbay Communities, Inc. ................................ 7.500 08/01/09 475,949
250 Finova Capital Corp. ....................................... 7.625 09/21/09 208,972
125 Korea Development Bank (Korea).............................. 6.500 11/15/02 120,974
250 Lehman Brothers Holdings, Inc. ............................. 8.500 05/01/07 253,087
250 National Australia Bank (Australia)......................... 8.600 05/19/10 262,383
250 Nordbanken AB, 144A -- Private Placement (Sweden) (a)....... 7.250 11/12/09 244,051
250 Washington Mutual Capital I................................. 8.375 06/01/27 223,102
-----------
2,024,177
-----------
HEALTHCARE 2.0%
400 Manor Care, Inc. ........................................... 7.500 06/15/06 326,042
-----------
PRODUCER MANUFACTURING 4.2%
500 Idex Corp. ................................................. 6.875 02/15/08 456,449
250 USX Corp. .................................................. 6.650 02/01/06 237,791
-----------
694,240
-----------
|
See Notes to Financial Statements
19
YOUR PORTFOLIO'S INVESTMENTS
Domestic Income Portfolio
June 30, 2000 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
RAW MATERIALS/PROCESSING INDUSTRIES 6.1%
$500 Georgia-Pacific Corp. ...................................... 9.950% 06/15/02 $ 519,508
250 Tosco Corp. ................................................ 8.250 05/15/03 254,659
150 Vicap SA De CV (Mexico)..................................... 10.250 05/15/02 142,875
100 Vicap SA De CV (Mexico)..................................... 11.375 05/15/07 88,000
-----------
1,005,042
-----------
TECHNOLOGY 4.6%
250 Deutsche Telekom International (Netherlands)................ 8.000 06/15/10 252,535
250 Sun Microsystems, Inc. ..................................... 7.500 08/15/06 249,805
250 Vodafone Airtouch Plc, 144A-Private Placement (United
Kingdom) (a)................................................ 7.625 02/15/05 250,586
-----------
752,926
-----------
TRANSPORTATION 8.0%
100 Canadian National Railway Co. (Canada) ..................... 7.625 05/15/23 94,423
500 CSX Corp. .................................................. 8.625 05/15/22 501,242
500 Delta Air Lines, Inc. ...................................... 9.750 05/15/21 517,875
200 United Air Lines, Inc., Ser 91A2............................ 10.020 03/22/14 216,499
-----------
1,330,039
-----------
UTILITIES 15.5%
250 AT&T Canada, Inc. (Canada).................................. 7.650 09/15/06 247,854
250 Conoco, Inc. ............................................... 6.950 04/15/29 228,511
250 Edison International........................................ 6.875 09/15/04 243,095
250 Enron Corp. ................................................ 8.375 05/23/05 258,010
250 Israel Electric Corp. Ltd., 144A -- Private Placement
(Israel) (a)................................................ 8.250 10/15/09 249,198
250 Niagara Mohawk Power Corp., Ser G........................... 7.750 10/01/08 244,081
230 Phillips Petroleum Co. ..................................... 9.375 02/15/11 250,012
350 Public Service Co. of Colorado.............................. 8.750 03/01/22 352,908
250 Southern Energy, Inc., 144A -- Private Placement (a)........ 7.900 07/15/09 228,944
250 WorldCom, Inc. ............................................. 8.250 05/15/10 256,318
-----------
2,558,931
-----------
TOTAL CORPORATE DEBT 82.1%.............................................................. 13,544,468
-----------
|
See Notes to Financial Statements
20
YOUR PORTFOLIO'S INVESTMENTS
Domestic Income Portfolio
June 30, 2000 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
GOVERNMENT OBLIGATIONS 12.1%
$276 Federal National Mortgage Association Pool.................. 10.000% 04/01/21 $ 294,585
250 United Mexican States (Mexico).............................. 10.375 02/17/09 258,438
500 United States Treasury Note................................. 6.500 02/15/10 517,190
650 United States Treasury Note................................. 6.625 05/15/07 664,241
250 United States Treasury Note................................. 6.750 05/15/05 255,978
-----------
TOTAL GOVERNMENT OBLIGATIONS............................................................. 1,990,432
-----------
TOTAL LONG-TERM INVESTMENTS 94.2%
(Cost $16,029,667)..................................................................... 15,534,900
-----------
REPURCHASE AGREEMENTS 6.2%
Bank of America ($700,000 par collateralized by
U.S. Government obligations in a pooled cash account,
dated 06/30/00, to be sold on 07/03/00 at $700,400).................................... 700,000
Warburg Dillon Read ($325,000 par collateralized by
U.S. Government obligations in a pooled cash account,
dated 06/30/00, to be sold on 07/03/00 at $325,178).................................... 325,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $1,025,000)...................................................................... 1,025,000
-----------
TOTAL INVESTMENTS 100.4%
(Cost $17,054,667)..................................................................... 16,559,900
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4%)............................................ (67,692)
-----------
NET ASSETS 100.0%....................................................................... $16,492,208
===========
|
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may be resold
only in transactions exempt from registration which are normally
transactions with qualified institutional buyers.
See Notes to Financial Statements
21
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Domestic Income Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments (Cost $17,054,667)........................ $16,559,900
Cash........................................................ 4,082
Interest Receivable......................................... 278,717
Other....................................................... 40,940
-----------
Total Assets............................................ 16,883,639
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 249,143
Portfolio Shares Repurchased.............................. 2,094
Investment Advisory Fee................................... 1,793
Distributor and Affiliates................................ 1,507
Trustees' Deferred Compensation and Retirement Plans........ 131,095
Accrued Expenses............................................ 5,799
-----------
Total Liabilities....................................... 391,431
-----------
NET ASSETS.................................................. $16,492,208
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $18,174,554
Accumulated Undistributed Net Investment Income............. 539,498
Net Unrealized Depreciation................................. (494,767)
Accumulated Net Realized Loss............................... (1,727,077)
-----------
NET ASSETS.................................................. $16,492,208
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $16,492,208 and 2,223,037 shares
of beneficial interest issued and outstanding)............ $ 7.42
===========
|
See Notes to Financial Statements
22
Statement of Operations
Domestic Income Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 664,520
---------
EXPENSES:
Investment Advisory Fee..................................... 40,244
Trustees' Fees and Related Expenses......................... 27,646
Shareholder Services........................................ 12,513
Shareholder Reports......................................... 9,628
Accounting.................................................. 6,349
Audit....................................................... 4,184
Legal....................................................... 2,549
Custody..................................................... 1,201
Other....................................................... 825
---------
Total Expenses.......................................... 105,139
Expense Reduction ($40,244 Investment Advisory Fee and
$16,877 Other)......................................... 57,121
---------
Net Expenses............................................ 48,018
---------
NET INVESTMENT INCOME....................................... $ 616,502
=========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $(640,908)
---------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (591,739)
End of the Period:
Investments............................................. (494,767)
---------
Net Unrealized Appreciation During the Period............... 96,972
---------
NET REALIZED AND UNREALIZED LOSS............................ $(543,936)
=========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 72,566
=========
|
See Notes to Financial Statements
23
Statement of Changes in Net Assets
Domestic Income Portfolio
For the Six Months Ended June 30, 2000, and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 616,502 $ 1,312,387
Net Realized Loss........................................... (640,908) (328,221)
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 96,972 (1,285,909)
----------- -----------
Change in Net Assets from Operations........................ 72,566 (301,743)
Distributions from Net Investment Income.................... (1,321,534) (1,259,398)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (1,248,968) (1,561,141)
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 1,758,548 5,830,207
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 1,321,534 1,259,398
Cost of Shares Repurchased.................................. (1,668,548) (7,120,021)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 1,411,534 (30,416)
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... 162,566 (1,591,557)
NET ASSETS:
Beginning of the Period..................................... 16,329,642 17,921,199
----------- -----------
End of the Period (Including accumulated undistributed net
investment income of $539,498 and $1,244,530,
respectively)............................................. $16,492,208 $16,329,642
=========== ===========
|
See Notes to Financial Statements
24
Financial Highlights
Domestic Income Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED DECEMBER 31,
CLASS I SHARES SIX MONTHS ENDED ------------------------------------
JUNE 30, 2000 1999 1998 1997 1996
-------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD........ $ 8.04 $ 8.75 $ 8.25 $8.01 $ 8.21
------ ------ ------ ------ ------
Net Investment Income......................... 0.29 0.61 0.61 0.70 0.75
Net Realized and Unrealized Gain/Loss......... (0.25) (0.74) (0.09) 0.25 (0.21)
------ ------ ------ ------ ------
Total from Investment Operations................ 0.04 (0.13) 0.52 0.95 0.54
Less Distributions from Net Investment Income... 0.66 0.58 0.02 0.71 0.74
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD.............. $ 7.42 $ 8.04 $ 8.75 $8.25 $ 8.01
====== ====== ====== ====== ======
Total Return*................................... .44%** (1.55%) 6.34% 11.90% 6.68%
Net Assets at End of the Period (In millions)... $ 16.5 $ 16.3 $ 17.9 $ 17.2 $ 19.8
Ratio of Expenses to Average Net Assets* (a).... .60% .61% .60% .60% .60%
Ratio of Net Investment Income to Average Net
Assets*....................................... 7.68% 7.43% 7.29% 7.74% 7.97%
Portfolio Turnover.............................. 53%** 74% 46% 78% 77%
* If certain expenses had not been assumed by Van Kampen, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets (a)..... 1.31% 1.10% 1.09% 1.05% 1.29%
Ratio of Net Investment Income to Average Net
Assets........................................ 6.97% 6.94% 6.80% 7.29% 7.28%
|
(a) The Ratio of Expenses to Average Net Assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .01% for the year ended December 31,
1999.
** Non-Annualized
See Notes to Financial Statements
25
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
GLOBAL EQUITY PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) -5.03%
---------------------------------------------------------------------------
One-year total return based on NAV(1) 10.67%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 15.95%
---------------------------------------------------------------------------
Commencement date 07/03/95
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
26
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--GLOBAL EQUITY PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS
ENDED JUNE 30, 2000. THE TEAM IS LED BY BARTON BIGGS AND ANN D. THIVIERGE,
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, WHO HAVE MANAGED THE PORTFOLIO
SINCE 1997. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE PORTFOLIO'S
PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE MARKET
ENVIRONMENT IN WHICH THE PORTFOLIO OPERATED, AND HOW DID THE PORTFOLIO
PERFORM IN THIS ENVIRONMENT?
A Two major factors impacted the market
environment during the reporting period. The first factor was the explosion of
TMT (telecommunications, media, and technology) stocks, whose strong performance
dominated the global markets during the first quarter and increased market
volatility during the second quarter. In addition, international markets began
to mirror U.S. economic policy in hopes of creating an environment of robust
economic growth with low interest rates. As technology stocks--especially
dot-coms--around the world disappointed investors, and interest rates worldwide
continued to rise, the global markets fell on hard times.
The portfolio was not immune to this market downturn, returning -5.03
percent for the six months ended June 30, 2000 (Class I shares). As a result of
recent market activity, current performance may vary from the figures shown. By
comparison, the MSCI World Index with Net Dividends generated a total return of
-2.56 percent for the same period. Of course, past performance is no guarantee
of future results. This broad-based, unmanaged index is composed of securities
on stock exchanges of the United States, Europe, Canada, Australia, New Zealand,
and the Far East, and assumes dividends are reinvested. This index does not
reflect any commissions or sales charges that would be paid by an investor
purchasing the securities it represents. Such costs would lower the performance
of the index. It is not possible to invest directly in an index.
Q WHAT STRATEGIES DID YOU USE TO MANAGE
THE PORTFOLIO IN THIS ENVIRONMENT?
A Our philosophy is to look for undervalued
markets, and we believe the fundamental prospects of companies and their
industries are key indicators of investment return potential. These indicators
strongly favored the international markets during the reporting period.
Therefore, the portfolio maintained a position in Japan due to increased
consumer demand brought on by the TMT explosion. In addition, we believed that a
change in governmental leadership would be positive for the country, and that
Japan's economic growth and consumer demand for electronic goods would be
strong. However, in recent Japanese elections, the Liberal Democratic Party
(LDP) was reelected, creating considerable skepticism about the country's growth
potential. As a result, foreign investors decreased their holdings. Although we
have maintained the portfolio's position, we remain cautious about the future.
The portfolio also held stocks within the Singapore market, where impressive
governmental and business policies and valuations made the market attractive.
Finally, the portfolio maintained an even position in U.S. stock with its
benchmark. This position contributed to the portfolio's performance for the
period.
Q WHAT IS YOUR OUTLOOK MOVING FORWARD?
A We are expecting a general slowdown in the
European economy. Our Morgan Stanley Dean
27
Witter economists have decreased earnings forecasts and cut their 2001 economic
growth projections to reflect the impact of higher oil prices. Furthermore, we
believe that earnings expectations, which rose during the period, have peaked
and that equity analysts will begin to lower their earnings predictions for the
coming year. However, the potential of European money staying at home instead of
being invested in the U.S. markets could be a powerful driver to European equity
and Euro performance.
Next year's prognosis for U.S. earnings growth should be supported by
increased pricing power and a weaker dollar, although accelerating labor costs
and slowing top-line growth will challenge the country's growth prospects. In
the end, those who believe that the U.S. economy and inflation are going to
reaccelerate may be disappointed as signs point to a slowdown looming ahead.
The major risks to global equity markets are a steep decline in the U.S.
dollar, downward earnings revisions, and additional Federal Reserve Board
interest-rate hikes resulting in the slowdown of liquidity--all of which are
happening faster than expected. Lastly, in August or September we could see the
European Central Bank raise interest rates. Furthermore, we believe the Bank of
Japan could end its zero interest-rate policy in order to continue to strengthen
the economy.
28
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Global Equity Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
MARKET
DESCRIPTION SHARES VALUE
COMMON STOCKS 99.4%
AUSTRALIA 0.8%
Orica Ltd. .............. 4,909 $ 22,248
Rio Tinto Ltd. .......... 512 8,457
----------
30,705
----------
AUSTRIA 0.3%
OMV, AG.................. 117 10,165
----------
BELGIUM 0.9%
KBC Bancassurance Holding
NV..................... 830 36,530
----------
CANADA 2.2%
Enbridge, Inc. .......... 1,200 25,176
Nortel Networks Corp. ... 800 55,513
Placer Dome, Inc. ....... 700 6,574
----------
87,263
----------
DENMARK 0.4%
Novo Nordisk A/S, Ser B.. 100 17,017
----------
FINLAND 1.3%
Nokia (Ab) Oy (a)........ 1,000 51,029
----------
FRANCE 4.0%
Alcatel Alsthom (Cie Gen
El).................... 465 30,498
Axa-UAP.................. 183 28,827
Compagnie de Saint
Gobain................. 110 14,871
France Telecom........... 262 36,619
LVMH (Moet Hennessy Louis
Vuitton)............... 53 21,854
Total, Class B........... 184 28,212
----------
160,881
----------
GERMANY 6.0%
Allianz, AG.............. 102 36,644
BASF, AG................. 300 12,058
Bayer, AG................ 350 13,660
DaimlerChrysler, AG...... 351 18,306
Deutsche Bank, AG........ 650 53,492
Deutsche Telekom, AG..... 656 37,452
Linde, AG................ 200 8,038
Siemens, AG.............. 300 45,253
VEBA, AG................. 300 14,464
----------
239,367
----------
|
MARKET
DESCRIPTION SHARES VALUE
ITALY 2.4%
Assicurazioni Generali... 740 $ 25,362
Ente Nazionale
Idrocarburi, SpA....... 3,000 17,328
Fiat SpA................. 400 10,379
Telecom Italia........... 2,000 20,431
Telecom Italia SpA (a)... 1,502 20,649
----------
94,149
----------
JAPAN 15.3%
Acom Co., Ltd. .......... 100 8,407
Bank of Tokyo............ 2,600 31,390
Daiwa Securities......... 1,000 13,194
East Japan Railway....... 4 23,222
Hitachi.................. 1,000 14,420
Honda Motor Co. ......... 1,000 34,023
Japan Air Lines Co.
(a).................... 4,000 15,192
Japan Energy Corp. ...... 10,000 10,744
Japan Tobacco, Inc. ..... 2 17,549
Kao Corp. ............... 1,000 30,536
Kawasaki Steel Corp. .... 5,000 7,163
Komatsu.................. 2,000 14,062
Kyocera Corp. ........... 100 16,955
Matsushita Electric
Industries............. 1,000 25,918
Mitsubishi Electric
Corp. ................. 3,000 32,458
Mitsubishi Estate........ 2,000 23,524
NEC Corp. ............... 1,000 31,384
Nippon Steel Corp. ...... 6,000 12,610
Nippon Telegraph &
Telephone Corp. ....... 2 26,577
Nippon Yusen Kabushiki
Kaisha................. 4,000 19,226
Nissan Motor Co. ........ 2,000 11,781
NSK Ltd. ................ 1,000 8,765
Oji Paper Co. ........... 2,000 13,760
Sekisui House............ 2,000 18,491
Sharp Corp. ............. 1,000 17,671
Softbank Corp. .......... 100 13,571
Sony Corp. .............. 200 18,661
Teijin................... 2,000 9,745
Tobu Railway Co. ........ 8,000 22,845
Toshiba Corp............. 2,000 22,563
Toyota Motor Corp. ...... 1,000 45,521
----------
611,928
----------
|
See Notes to Financial Statements
29
YOUR PORTFOLIO'S INVESTMENTS
Global Equity Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
NETHERLANDS 3.1%
ABN Amro Holdings........ 1,313 $ 32,156
Akzo Nobel............... 340 14,445
Elsevier................. 1,064 12,890
Koninklijke Ahold NV..... 987 29,051
Royal Dutch Petroleum
Co. ................... 443 27,533
Wolters Kluwer........... 335 8,923
----------
124,998
----------
SINGAPORE 0.3%
Singapore
Telecommunications..... 8,000 11,720
----------
SPAIN 2.1%
Endesa, SA............... 1,540 29,831
Repsol-YPF, SA........... 1,082 21,538
Telefonica de Espana
(a).................... 1,598 34,326
----------
85,695
----------
SWEDEN 0.6%
Ericsson Telefon LM, Ser
B...................... 1,300 25,720
----------
SWITZERLAND 2.8%
Credit Suisse Group...... 150 29,838
Givaudan, AG............. 2 609
Nestle, SA............... 15 30,022
Novartis, AG............. 20 31,680
Roche Holdings
Genusscheine, AG....... 2 19,469
----------
111,618
----------
UNITED KINGDOM 7.7%
Allied Zurich (a)........ 1,391 16,448
Barclays................. 332 8,254
AstraZeneca Group Plc.... 468 21,846
Bass..................... 1,727 19,415
BP Amoco................. 3,708 35,571
British America
Tobacco................ 1,661 11,083
British
Telecommunications..... 830 10,725
Burmah Castrol PLC....... 622 15,680
Glaxo Wellcome........... 581 16,940
HSBC Holdings............ 2,736 31,276
Invensys PLC............. 2,546 9,554
Lloyds TSB Group......... 830 7,837
Marks & Spencer.......... 997 3,504
Rank Group............... 3,786 8,593
Smithkline Beecham....... 1,517 19,855
Smiths Industries........ 1,072 13,950
Vodafone AirTouch Plc
(a).................... 14,303 57,190
----------
307,721
----------
|
MARKET
DESCRIPTION SHARES VALUE
UNITED STATES 49.2%
Abbott Laboratories,
Inc. .................. 500 $ 22,281
Alcoa, Inc. ............. 200 5,800
America Online, Inc.
(a).................... 500 26,375
American Express Co. .... 500 26,063
American Home Products
Corp. ................. 400 23,500
American International
Group, Inc. ........... 275 32,312
AT&T Corp. .............. 500 15,813
AT&T Corp.--Liberty Media
Group., Class A........ 1,500 36,375
Bank of America Corp. ... 800 34,400
BellSouth Corp. ......... 600 25,575
Boeing Co. .............. 400 16,725
Bristol-Myers Squibb
Co. ................... 600 34,950
Chevron Corp. ........... 200 16,963
Cisco Systems, Inc.
(a).................... 1,200 76,275
Citigroup, Inc. ......... 750 45,187
Coca Cola Co. ........... 700 40,206
Dell Computer Corp. ..... 700 34,519
Delphi Automotive Systems
Corp................... 609 8,869
Dow Chemical Co. ........ 300 9,056
Du Pont (E. I.) de
Nemours & Co. ......... 300 13,125
Eastman Kodak Co. ....... 200 11,900
EMC Corp. ............... 500 38,469
Exxon Mobil Corp. ....... 764 59,974
Federal National Mortgage
Association............ 300 15,656
First Data Corp. ........ 500 24,813
FPL Group, Inc. ......... 400 19,800
General Electric Co. .... 2,200 116,600
General Motors Corp. .... 500 29,031
Gillette Co. ............ 400 13,975
HCA-The Healthcare
Corp. ................. 500 15,188
Hewlett Packard Co. ..... 200 24,975
Home Depot, Inc. ........ 650 32,459
Illinois Tool Works,
Inc. .................. 200 11,400
Intel Corp. ............. 700 93,581
International Business
Machines Corp. ........ 400 43,825
International Paper
Co. ................... 200 5,963
Johnson & Johnson........ 400 40,750
JP Morgan & Co., Inc. ... 200 22,025
Kimberly-Clark Corp. .... 200 11,475
Lilly Eli & Co. ......... 300 29,962
Lucent Technologies,
Inc. .................. 700 41,475
McDonald's Corp. ........ 700 23,056
Merck & Co., Inc. ....... 600 45,975
|
See Notes to Financial Statements
30
YOUR PORTFOLIO'S INVESTMENTS
Global Equity Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
UNITED STATES (CONTINUED)
Microsoft Corp. (a)...... 1,200 $ 96,000
Minnesota Mining &
Manufacturing Co. ..... 200 16,500
Motorola, Inc. .......... 700 20,344
Oracle Corp. (a)......... 800 67,250
Pfizer, Inc. ............ 1,000 48,000
Procter & Gamble Co. .... 300 17,175
QUALCOMM, Inc. (a)....... 300 18,000
Raytheon Co., Class A.... 100 1,944
Rockwell International
Corp. ................. 100 3,150
SBC Communications,
Inc. .................. 500 21,625
Sears Roebuck & Co. ..... 400 13,050
Texas Instruments,
Inc. .................. 500 34,344
Time Warner, Inc. ....... 700 53,200
Verizon Communications
(formerly Bell
Atlantic).............. 500 25,406
Wal-Mart Stores, Inc. ... 1,100 63,387
|
MARKET
DESCRIPTION SHARES VALUE
UNITED STATES (CONTINUED)
Walt Disney Co. ......... 500 $ 19,406
Wells Fargo Co. ......... 1,700 65,875
Weyerhaeuser Co. ........ 200 8,600
Worldcom, Inc. (a)....... 400 18,350
Xerox Corp. ............. 200 4,150
Yahoo!, Inc. ............ 300 37,162
----------
1,969,614
----------
TOTAL INVESTMENTS 99.4%
(Cost $3,056,054).............. 3,976,120
FOREIGN CURRENCY 0.7%
(Cost $30,170)................. 30,010
LIABILITIES IN EXCESS OF OTHER
ASSETS (0.1%)................. (4,476)
----------
NET ASSETS 100.0%............... $4,001,654
==========
|
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
31
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Global Equity Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments (Cost $3,056,054)......................... $3,976,120
Cash........................................................ 98,839
Foreign Currency (Cost $30,170)............................. 30,010
Dividends Receivable........................................ 5,743
Other....................................................... 173
----------
Total Assets............................................ 4,110,885
----------
LIABILITIES:
Payables:
Distributor and Affiliates................................ 9,371
Portfolio Shares Repurchased.............................. 222
Trustees' Deferred Compensation and Retirement Plans........ 62,102
Accrued Expenses............................................ 37,536
----------
Total Liabilities....................................... 109,231
----------
NET ASSETS.................................................. $4,001,654
==========
NET ASSETS CONSIST OF:
Capital (Par Value of $.01 per share with an unlimited
number of shares authorized).............................. $2,469,225
Net Unrealized Appreciation................................. 919,894
Accumulated Net Realized Gain............................... 646,874
Accumulated Distributions in Excess of Net Investment
Income.................................................... (34,339)
----------
NET ASSETS.................................................. $4,001,654
==========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $4,001,654 and 249,118 shares of
beneficial interest issued and outstanding)............... $ 16.06
==========
|
See Notes to Financial Statements
32
Statement of Operations
Global Equity Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $3,287)...... $ 33,158
Interest.................................................... 3,127
----------
Total Income............................................ 36,285
----------
EXPENSES:
Trustees' Fees and Related Expenses......................... 34,100
Investment Advisory Fee..................................... 23,016
Accounting.................................................. 15,743
Custody..................................................... 15,121
Shareholder Reports......................................... 8,554
Audit....................................................... 7,797
Shareholder Services........................................ 7,591
Amortization of Organizational Costs........................ 674
Legal....................................................... 271
Other....................................................... 1,303
----------
Total Expenses.......................................... 114,170
Expense Reduction ($23,016 Investment Advisory Fee and
$63,482 Other)......................................... 86,498
----------
Net Expenses............................................ 27,672
----------
NET INVESTMENT INCOME....................................... $ 8,613
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain/Loss:
Investments............................................... $ 648,057
Foreign Currency Transactions............................. 1,977
----------
Net Realized Gain........................................... 650,034
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,787,251
----------
End of the Period:
Investments............................................. 920,066
Foreign Currency Translation............................ (172)
----------
919,894
----------
Net Unrealized Depreciation During the Period............... (867,357)
----------
NET REALIZED AND UNREALIZED LOSS............................ $ (217,323)
==========
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (208,710)
==========
|
See Notes to Financial Statements
33
Statement of Changes in Net Assets
Global Equity Portfolio
For the Six Months Ended June 30, 2000, and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 8,613 $ 14,504
Net Realized Gain........................................... 650,034 33,854
Net Unrealized Appreciation/Depreciation During the
Period.................................................... (867,357) 906,978
----------- ----------
Change in Net Assets from Operations........................ (208,710) 955,336
----------- ----------
Distributions from Net Investment Income.................... (6,129) (9,541)
----------- ----------
Distributions from Net Realized Gain........................ (2,452) (33,854)
Distributions in Excess of Net Realized Gain................ -0- (10,981)
----------- ----------
Distributions from and in Excess of Net Realized Gain....... (2,452) (44,835)
----------- ----------
Total Distributions......................................... (8,581) (54,376)
----------- ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (217,291) 900,960
----------- ----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 1,048,424 829,783
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 5,870 33,418
Cost of Shares Repurchased.................................. (1,182,496) (767,893)
----------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... (128,202) 95,308
----------- ----------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... (345,493) 996,268
NET ASSETS:
Beginning of the Period..................................... 4,347,147 3,350,879
----------- ----------
End of the Period (Including accumulated distributions in
excess of net investment income of $34,339 and $36,823,
respectively)............................................. $ 4,001,654 $4,347,147
=========== ==========
|
See Notes to Financial Statements
34
Financial Highlights
Global Equity Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS YEAR ENDED DECEMBER 31,
CLASS I SHARES ENDED -----------------------------------------------
JUNE 30, 2000 1999 1998 1997 1996
---------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD... $ 16.94 $ 13.21 $ 11.00 $ 11.66 $ 10.30
------- ------- ------- ------- -----------------
Net Investment Income/Loss............... .03 .24 .09 .11 .03
Net Realized and Unrealized Gain/Loss.... (.88) 3.71 2.26 1.69 1.69
------- ------- ------- ------- -----------------
Total from Investment Operations........... (.85) 3.95 2.35 1.80 1.72
------- ------- ------- ------- -----------------
Less:
Distributions from and in Excess of Net
Investment Income...................... .02 .04 .14 .11 .19
Distributions from and in Excess of Net
Realized Gain.......................... .01 .18 -0- 2.35 .17
------- ------- ------- ------- -----------------
Total Distributions........................ .03 .22 .14 2.46 .36
------- ------- ------- ------- -----------------
NET ASSET VALUE, END OF THE PERIOD......... $ 16.06 $ 16.94 $ 13.21 $ 11.00 $ 11.66
======= ======= ======= ======= =================
Total Return*.............................. -5.03%** 30.06% 21.61% 15.85% 16.72%
Net Assets at End of the Period (In
millions)................................ $ 4.0 $ 4.3 $ 3.4 $ 3.0 $ 2.5
Ratio of Expenses to Average Net Assets*... 1.20% 1.20% 1.20% 1.20% 1.20%
Ratio of Net Investment Income to Average
Net Assets*.............................. .37% .42% 0.79% .76% .27%
Portfolio Turnover......................... 45%** 7% 3% 132% 94%
* If certain expenses had not been assumed by Van Kampen, Total Return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets.... 4.96% 4.84% 6.27% 6.78% 7.43%
Ratio of Net Investment Loss to Average Net
Assets................................... (3.39%) (3.22%) (4.28%) (4.82%) (5.96%)
|
** Non-Annualized
See Notes to Financial Statements
35
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
GOVERNMENT PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) 4.31%
---------------------------------------------------------------------------
One-year total return based on NAV(1) 4.31%
---------------------------------------------------------------------------
Five-year average annual total return based on NAV(1) 5.44%
---------------------------------------------------------------------------
Ten-year average annual total return based on NAV(1) 6.84%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 6.50%
---------------------------------------------------------------------------
Commencement date 04/07/86
---------------------------------------------------------------------------
SEC Yield(2) 6.01%
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying Portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
(2) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio
should theoretically generate for the 30-day period ending June 30, 2000.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
U.S. Government securities are backed by the full faith and credit of the
U.S. Government, its agencies or instrumentalities. The government backing
applies only to the timely payment of principal and interest when due on
specific securities in the portfolio, not to shares of the Portfolio.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
36
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--GOVERNMENT PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED
THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS ENDED
JUNE 30, 2000. THE TEAM IS LED BY JOHN R. REYNOLDSON, SENIOR PORTFOLIO MANAGER,
WHO HAS MANAGED THE PORTFOLIO SINCE JUNE 1988 AND HAS WORKED IN THE INVESTMENT
INDUSTRY SINCE 1977. HE IS JOINED BY PORTFOLIO MANAGERS TED V. MUNDY AND BARBARA
M. DOWNEY. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE PORTFOLIO'S
PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE MARKET
ENVIRONMENT IN WHICH THE PORTFOLIO OPERATED, AND HOW DID THE PORTFOLIO
PERFORM IN THAT ENVIRONMENT?
A By the first week of January, it had become
apparent that the year 2000 computer bug was not going to cause significant
financial disruptions. However, the U.S. economy continued to grow at a
breakneck pace, causing investors to fear additional rate increases by the
Federal Reserve Board. These fears were exacerbated by a sharp rally in
technology stocks during the first two months of 2000, which further emboldened
consumers to spend a portion of their investment profits. By the end of March,
the U.S. economy seemed perilously close to overheating.
Although the Fed had been raising interest rates gradually since June 1999,
some investors feared that the central bank had fallen behind in its effort to
thwart inflation. Indeed, policy makers did raise short-term interest rates by
an unusually large 50 basis points in June 2000, and, by the end of the period,
evidence was accumulating that the long-anticipated growth slowdown was finally
at hand.
For the six-month period ended June 30, 2000, the portfolio generated a
total return of 4.31 percent (Class I shares). By comparison, the Lehman
Brothers Government/Mortgage Index posted a total return of 4.38 percent for the
same period. This broad-based, unmanaged index, which reflects the general
performance of U.S. government and mortgage-backed securities, does not reflect
any commissions or fees that would be paid by an investor purchasing the
securities it represents. Such costs would lower the performance of the index.
An investment cannot be made directly in an index. Of course, past performance
is no guarantee of future results. As a result of recent market activity,
current performance may vary from the figures shown. Please refer to the chart
and footnotes on page 36 for additional portfolio performance results.
Q WHAT HAPPENED TO GOVERNMENT
SECURITIES DURING THIS TIME?
A A sharp rally on Wall Street and continued
strong consumer spending caused the yield on 10-year Treasury notes to rise by
40 basis points to 6.80 percent during the first three weeks in January. At that
point, however, the U.S. government announced that it would begin paying down
the national debt through periodic buybacks of Treasury securities. The buybacks
were to be concentrated on the long end of the yield curve. Because money
managers have historically been underweighted in Treasuries, the announcement
caused a "buyers' panic" in which institutional investors rushed to snap up the
existing supply. As a result, the yield on 10-year Treasury notes fell from 6.80
percent in late January to 5.75 percent by the second week of April, indicating
a significant rise in price.
Notably, short-term Treasury securities did not participate in the rally.
The extreme short end of the yield curve is often influenced more by Fed policy
than by market fundamentals. Given that the Fed seemed likely to raise short-
term interest rates, the yield on the two-year note increased from 6.39 percent
in January to 6.92 percent in May.
With a looming shortage of Treasury bonds pushing long-term yields lower,
and fears of Fed rate hikes pushing short-term yields higher, an "inverted" or
negative yield curve developed. In other words, yields on short-term securities
became higher than those of their longer-term counterparts.
37
These dynamics also affected the yield relationship between Treasury
securities and mortgage-backed bonds. Although yields in the mortgage market
remained fairly stable during the period, the yield differential or "spread"
versus Treasuries increased after the government buyback plan was announced.
Q WHAT WERE YOUR STRATEGIES FOR MANAGING
THE PORTFOLIO DURING THIS PERIOD?
A Before the reporting period began, the
portfolio had already increased its exposure to Treasury securities,
particularly on the long end of the yield curve. In addition, we moved in
January to limit our holdings in the mortgage market while modestly adding to
positions in agency paper, including Fannie Mae, Freddie Mac, and the Federal
Home Loan Bank. The portfolio maintained a neutral duration posture over the
reporting period.
As the reporting period ended, the portfolio had a slight overweight in
mortgage-backed securities to take advantage of what we believed were attractive
yields relative to Treasuries. Among our mortgage-backed holdings, we emphasized
issues with lower-than-average coupons, thus exposing the portfolio to less
prepayment risk if interest rates declined. Meanwhile, our agency holdings were
concentrated within the intermediate portion of the yield curve.
Q HOW DID THE PORTFOLIO'S STRATEGIES
CONTRIBUTE TO PERFORMANCE?
A Our approach to managing the portfolio
through volatile conditions in the government securities market contributed
positively to the portfolio's performance relative to its peers. First, the
portfolio benefited from its significant position in long-term Treasuries, as
bond yields fell sharply and prices rose between mid-January and early April.
Also, our decision to reduce the portfolio's exposure to mortgage-backed
securities helped to minimize the negative impact of rising credit spreads,
while helping the portfolio benefit from the Treasury sector's outperformance.
Q WHAT IS YOUR OUTLOOK FOR THE PORTFOLIO IN
THE MONTHS AHEAD?
A There is growing evidence that the U.S.
economy is decelerating from its torrid pace of late 1999 and early 2000. While
we expect the expansion to continue, we believe that economic growth will
moderate over the remainder of the year. Meanwhile, inflation should remain
relatively benign. These conditions should foster a less volatile environment in
the bond market, allowing prices to remain within a relatively narrow trading
range. We believe that mortgage-backed securities are attractive at current
levels, and we have positioned the portfolio accordingly.
38
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Government Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
UNITED STATES GOVERNMENT OBLIGATIONS 77.0%
$2,000 Federal Farm Credit Bank Medium Term Note
(a).......................................... 6.520% 09/24/07 $ 1,919,780
900 Federal Home Loan Banks...................... 5.125 09/15/03 856,143
124 Federal Home Loan Mortgage Corp. CMO Floater
(a).......................................... 7.140 09/15/23 123,874
943 Federal Home Loan Mortgage Corp. Gold 30 Year
Pools........................................ 7.000 05/01/24 to 07/01/24 915,691
2,134 Federal Home Loan Mortgage Corp. Gold 30 Year
Pools........................................ 7.500 05/01/24 to 10/01/2024 2,105,524
119 Federal Home Loan Mortgage Corp. Gold 30 Year
Pools........................................ 8.000 09/01/24 to 10/01/24 119,613
900 Federal Home Loan Mortgage Corp. Pools....... 5.000 01/15/04 843,471
2,919 Federal Home Loan Mortgage Corp. Pools....... 6.000 05/01/29 to 09/01/29 2,672,633
900 Federal Home Loan Mortgage Corp. Pools....... 6.250 07/15/04 875,556
2,405 Federal Home Loan Mortgage Corp. Pools....... 6.500 05/01/29 to 06/01/29 2,269,307
162 Federal National Mortgage Association
Pools........................................ 5.500 07/01/24 to 02/01/29 144,291
1,800 Federal National Mortgage Association
Pools........................................ 5.750 04/15/03 to 06/15/05 1,724,778
3,871 Federal National Mortgage Association
Pools........................................ 6.000 05/15/08 to 12/01/28 3,632,142
1,550 Federal National Mortgage Association
Pools........................................ 6.250 11/15/02 to 05/15/29 1,433,010
246 Federal National Mortgage Association
Pools........................................ 7.500 05/01/24 to 10/01/24 243,130
211 Federal National Mortgage Association
Pools........................................ 8.000 06/01/24 to 10/01/24 212,736
372 Federal National Mortgage Association
Pools........................................ 11.000 11/01/20 406,399
6,705 Federal National Mortgage Association Pools
15 Year Dwarf Pools.......................... 6.500 06/01/09 to 09/01/29 6,352,006
1,932 Federal National Mortgage Association Pools
15 Year Dwarf Pools.......................... 7.000 07/01/10 to 06/01/24 1,888,162
3,196 Government National Mortgage Association
Pools........................................ 6.500 05/15/23 to 03/15/29 3,033,723
7,081 Government National Mortgage Association
Pools........................................ 7.000 04/15/23 to 04/15/29 6,889,815
850 Government National Mortgage Association
Pools........................................ 7.500 12/15/21 to 06/15/24 846,693
200 Government National Mortgage Association
Pools........................................ 8.000 05/15/17 to 01/15/23 202,379
170 Government National Mortgage Association
Pools........................................ 8.500 04/15/17 to 07/15/17 175,127
407 Government National Mortgage Association
Pools........................................ 9.500 06/15/09 to 10/15/09 422,908
21 Government National Mortgage Association
Pools........................................ 11.000 09/15/10 to 08/15/20 23,418
-----------
TOTAL UNITED STATES GOVERNMENT OBLIGATIONS.................................... 40,332,309
-----------
|
See Notes to Financial Statements
39
YOUR PORTFOLIO'S INVESTMENTS
Government Portfolio
June 30, 2000 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
UNITED STATES TREASURY OBLIGATIONS 16.3%
$4,000 United States Treasury Bonds (a)............. 6.000% 02/15/26 $ 3,912,280
200 United States Treasury Bonds (a)............. 9.375 02/15/06 228,952
700 United States Treasury Bonds (a)............. 10.375 11/15/12 860,615
200 United States Treasury Bonds (a)............. 10.750 08/15/05 238,574
700 United States Treasury Bonds (a)............. 12.000 08/15/13 945,007
1,000 United States Treasury Notes (a)............. 5.500 02/15/08 957,950
1,200 United States Treasury Notes (a)............. 6.250 02/15/03 1,196,688
200 United States Treasury Notes (a)............. 7.000 07/15/06 207,390
-----------
TOTAL UNITED STATES TREASURY OBLIGATIONS...................................... 8,547,456
-----------
TOTAL LONG-TERM INVESTMENTS 93.3%
(Cost $49,736,741)....................................................................
48,879,765
-----------
REPURCHASE AGREEMENTS 6.3%
DLJ Mortgage Acceptance Corp. ($2,000,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 6/30/00, to be sold on 07/03/00 at
$2,001,097)........................................................................... 2,000,000
State Street Bank & Trust Co. ($1,270,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 6/30/00, to be sold on 07/03/00 at
$1,270,683)........................................................................... 1,270,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $3,270,000)..................................................................... 3,270,000
-----------
TOTAL INVESTMENTS 99.6%
(Cost $53,006,741).................................................................... 52,149,765
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4%............................................. 213,629
-----------
NET ASSETS 100.0%...................................................................... $52,363,394
===========
|
(a) Assets segregated as collateral for open futures transactions.
CMO-Collateralized Mortgage Obligations
See Notes to Financial Statements
40
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Government Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments (Cost $53,006,741)........................ $52,149,765
Receivables:
Interest.................................................. 496,766
Fund Shares Sold.......................................... 320
Other....................................................... 44,169
-----------
Total Assets............................................ 52,691,020
-----------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 132,213
Forward Commitments....................................... 23,541
Variation Margin on Futures............................... 9,312
Portfolio Shares Repurchased.............................. 5,100
Distributor and Affiliates................................ 2,324
Custodian Bank............................................ 399
Trustees' Deferred Compensation and Retirement Plans........ 137,300
Accrued Expenses............................................ 17,437
-----------
Total Liabilities....................................... 327,626
-----------
NET ASSETS.................................................. $52,363,394
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $61,208,524
Accumulated Undistributed Net Investment Income............. 1,536,201
Net Unrealized Depreciation................................. (648,172)
Accumulated Net Realized Loss............................... (9,733,159)
-----------
NET ASSETS.................................................. $52,363,394
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $52,363,394 and 6,067,931 shares
of beneficial interest issued and outstanding)............ $ 8.63
===========
|
See Notes to Financial Statements
41
Statement of Operations
Government Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 1,776,628
-----------
EXPENSES:
Investment Advisory Fee..................................... 130,146
Trustees' Fees and Related Expenses......................... 29,259
Accounting.................................................. 16,950
Shareholder Reports......................................... 8,034
Custody..................................................... 4,838
Legal....................................................... 4,568
Other....................................................... 16,728
-----------
Total Expenses.......................................... 210,523
Investment Advisory Fee Reduction....................... 53,532
-----------
Net Expenses............................................ 156,991
-----------
NET INVESTMENT INCOME....................................... $ 1,619,637
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (230,786)
Futures................................................... (21,098)
-----------
Net Realized Loss........................................... (251,884)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (1,507,647)
-----------
End of the Period:
Investments............................................. (856,976)
Futures................................................. 232,345
Forward Commitments..................................... (23,541)
-----------
(648,172)
-----------
Net Unrealized Appreciation During the Period............... 859,475
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 607,591
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 2,227,228
===========
|
See Notes to Financial Statements
42
Statement of Changes in Net Assets
Government Portfolio
For the Six Months Ended June 30, 2000, and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 1,619,637 $ 3,207,714
Net Realized Loss........................................... (251,884) (1,809,012)
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 859,475 (3,350,440)
----------- ------------
Change in Net Assets from Operations........................ 2,227,228 (1,951,738)
Distributions from Net Investment Income.................... (3,304,902) (2,745,022)
----------- ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (1,077,674) (4,696,760)
----------- ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 4,175,808 9,298,965
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 3,304,902 2,745,022
Cost of Shares Repurchased.................................. (7,368,940) (11,077,541)
----------- ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 111,770 966,446
----------- ------------
TOTAL DECREASE IN NET ASSETS................................ (965,904) (3,730,314)
NET ASSETS:
Beginning of the Period..................................... 53,329,298 57,059,612
----------- ------------
End of the Period (Including accumulated undistributed net
investment income of $1,536,201 and $3,221,466,
respectively)............................................. $52,363,394 $ 53,329,298
=========== ============
|
See Notes to Financial Statements
43
Financial Highlights
Government Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
CLASS I SHARES JUNE 30, ---------------------------------
2000 1999 1998 1997 1996
--------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................. $ 8.82 $ 9.59 $ 8.92 $ 8.67 $ 9.06
------- ------ ------ ------ ------
Net Investment Income.................................. .28 .53 .52 .56 .57
Net Realized and Unrealized Gain/Loss.................. .09 (.84) .24 .23 (.39)
------- ------ ------ ------ ------
Total from Investment Operations......................... .37 (.31) .76 .79 .18
Less Distributions from and in Excess of Net Investment
Income................................................. .56 .46 .09 .54 .57
------- ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD....................... $ 8.63 $ 8.82 $ 9.59 $ 8.92 $ 8.67
======= ====== ====== ====== ======
Total Return*............................................ 4.31%** -3.36% 8.59% 9.61% 2.12%
Net Assets at End of the Period (In millions)............ $ 52.4 $ 53.3 $ 57.1 $ 52.6 $ 57.3
Ratio of Expenses to Average Net Assets*................. .60% .60% .60% .60% .60%
Ratio of Net Investment Income to Average Net Assets*.... 6.22% 5.92% 5.74% 6.51% 6.56%
Portfolio Turnover....................................... 70%** 92% 107% 119% 143%
* If certain expenses had not been assumed by Van Kampen, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets.................. .81% .74% .73% .74% .80%
Ratio of Net Investment Income to Average Net Assets..... 6.43% 5.78% 5.61% 6.37% 6.36%
|
** Non-Annualized
See Notes to Financial Statements
44
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--MONEY MARKET PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS
ENDED JUNE 30, 2000. THE TEAM IS LED BY MICHAEL BIRD, PORTFOLIO MANAGER, WHO HAS
MANAGED THE PORTFOLIO SINCE AUGUST 1999 AND HAS WORKED IN THE INVESTMENT
INDUSTRY SINCE 1993. THE FOLLOWING DISCUSSION REFLECTS HIS VIEWS ON THE
PORTFOLIO'S PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE MARKET
ENVIRONMENT IN WHICH THE PORTFOLIO OPERATED, AND HOW DID THE PORTFOLIO
PERFORM IN THAT ENVIRONMENT?
A Concerns that a continuing strong economy
might ignite inflation spurred generally higher interest rates during the
reporting period. Rising employment costs, strong consumer spending, and spikes
in commodities prices contributed to the Federal Reserve Board's decision to
continue raising short-term interest rates by a total of one percentage point
during this time.
In this environment, the portfolio continued to provide shareholders with
relative stability, daily liquidity at $1.00 per share, and a competitive level
of current income. For the six-month period ended June 30, 2000, the portfolio
produced a total return of 2.74 percent (Class I shares). As a result of recent
market activity, current performance may vary from figures shown. As of June 30,
the portfolio generated a seven-day average yield of 5.90 percent and a 30-day
effective yield of 5.90 percent. The portfolio's price per share remained
unchanged at $1.00 throughout the reporting period. Of course, past performance
is no guarantee of future results.
Q HOW DID YOU MANAGE THE PORTFOLIO IN
LIGHT OF THESE CONDITIONS?
A We continued to pursue a portfolio
allocation with at least half of the portfolio's assets invested in commercial
paper, approximately one-third of the portfolio's assets invested in bank notes
and CDs (certificates of deposit), and the remainder allocated between agency
discount notes and repurchase agreements ("repos").
At the beginning of the year, our defensive investment strategies included a
heightened focus on extremely liquid investments and a short average maturity.
This position served the portfolio well in light of increased Fed activity and
rising interest rates. During this time, we renewed our focus on commercial
paper, which tended to provide the greatest yield advantage among the
portfolio's investments. Correspondingly, we decreased the portfolio's emphasis
on bank notes because these securities provided less value. At the end of the
reporting period, market conditions enabled us to shift more assets from repos
to commercial paper, creating a slight overweighting in that sector.
Within the commercial paper sector, we continued to select high-rated,
short-term corporate securities with ratings of at least A-1/P-1 from Moody's
and Standard & Poor's. These corporate securities provided income without
assuming excessive risk. We also continued to favor commercial paper with an
average maturity of 90 days or less. In the current interest-rate environment,
we believe there is little benefit in extending the portfolio's risk by
investing in longer-term paper, which provides only a minimally higher return
than shorter-term paper.
Q WHAT IS YOUR OUTLOOK FOR THE MARKET
OVER THE COMING MONTHS?
A With an eye on the Fed, we'll continue to
monitor key economic statistics for signs of an economic slowdown and clues
about the Fed's interest-rate bias. If inflationary pressures continue, even at
a moderate level, it's anticipated that the Fed will continue to increase rates
toward the end of the year.
If the Fed moves away from its tightening bias, we'll look for opportunities
to extend the
45
portfolio's maturity and explore higher-yielding securities. Because we don't
see evidence of a shift yet, we will continue to maintain our focus on the
allocation described earlier in this report and hold a short portfolio duration.
At the same time, we'll look to add value to the portfolio through careful
security selection as we continue to seek to achieve the portfolio's objectives.
An investment in the portfolio is not guaranteed or insured by the U.S.
government, and there is no assurance that the portfolio will be able to
maintain a stable net asset value of $1.00 per share.
The portfolio is offered through a variable annuity contract.
46
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Money Market Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) DESCRIPTION DATE PURCHASE COST
COMMERCIAL PAPER 58.3%
$1,000 Abbott Labs............................................... 07/06/00 6.750% $ 999,076
1,000 American Express Credit Corp.............................. 07/05/00 6.850 999,250
1,000 American General Finance Corp............................. 08/28/00 6.817 989,286
1,000 Associates Corp. of North America......................... 08/30/00 6.819 988,917
1,000 Bank of Nova Scotia....................................... 08/25/00 6.709 989,993
1,000 Chevron USA, Inc.......................................... 07/07/00 6.609 998,915
1,000 CIT Group Holdings, Inc................................... 07/20/00 6.624 996,564
1,000 Citicorp.................................................. 07/27/00 6.653 995,284
1,000 Coca-Cola Co.............................................. 07/10/00 6.582 998,380
1,000 DaimlerChrysler Corp...................................... 08/01/00 6.690 994,351
1,000 Ford Motor Credit Co...................................... 07/13/00 6.657 997,817
1,000 General Electric Corp..................................... 07/14/00 6.627 997,645
1,000 General Motors Acceptance Corp............................ 09/11/00 6.762 986,840
1,000 IBM Credit Corp........................................... 07/05/00 6.576 999,280
1,000 Merrill Lynch & Co. Inc................................... 07/24/00 6.711 995,790
1,000 Norwest Financial, Inc.................................... 08/18/00 6.690 991,280
1,000 Prudential Funding Corp................................... 07/12/00 6.635 998,005
500 Societe General North America Inc......................... 11/09/00 6.369 488,829
-----------
Total Commercial Paper......................................................... 17,405,502
-----------
CERTIFICATES OF DEPOSIT 18.4%
1,000 Bank of America........................................... 10/16/00 6.974 1,000,000
1,000 Branch Banking & Trust Company............................ 07/12/00 6.633 1,000,000
1,000 Canadian Imperial Bank.................................... 08/08/00 6.728 999,965
500 Commerzbank, AG........................................... 05/25/01 7.391 499,700
1,000 Harris Trust & Savings Bank............................... 08/21/00 6.673 999,997
1,000 UBS AG.................................................... 07/17/00 5.660 999,977
-----------
Total Certificates of Deposit.................................................. 5,499,639
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS 7.5%
750 Federal Home Loan Mortgage Discount Note.................. 08/31/00 6.608 741,809
702 Federal National Mortgage Association Discount Note....... 07/06/00 6.120 701,412
800 Federal National Mortgage Association Discount Note....... 07/07/00 5.308 799,303
-----------
Total U.S. Government Agency Obligations....................................... 2,242,524
-----------
|
See Notes to Financial Statements
47
YOUR PORTFOLIO'S INVESTMENTS
Money Market Portfolio
June 30, 2000 (Unaudited)
AMORTIZED
DESCRIPTION COST
REPURCHASE AGREEMENTS 16.0%
Bank of America Securities ($1,600,000 par collateralized by U.S. Government obligations in a
pooled cash account, dated 06/30/00, to be sold on 07/03/00 at $1,600,913)................. $ 1,600,000
DLJ Mortgage Acceptance Corp. ($1,600,000 par collateralized by U.S. Government obligations
in a pooled cash account, dated 06/30/00, to be sold on 07/03/00 at $1,600,877)............ 1,600,000
Warburg Dillon Reed ($1,586,000 par collateralized by U.S. Government obligations in a pooled
cash account, dated 06/30/00, to be sold on 07/03/00 at $1,586,867)........................ 1,586,000
-----------
Total Repurchase Agreements.................................................................. 4,786,000
-----------
TOTAL INVESTMENTS 100.2%.................................................................... 29,933,665
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%)................................................ (63,024)
-----------
NET ASSETS 100.0%........................................................................... $29,870,641
===========
|
See Notes to Financial Statements
48
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Money Market Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Investments, at amortized cost which approximates market,
including repurchase agreements of $4,786,000............. $29,933,665
Cash........................................................ 2,518
Receivables:
Interest.................................................. 83,978
Portfolio Shares Sold..................................... 58,782
Other....................................................... 48,068
-----------
Total Assets............................................ 30,127,011
-----------
LIABILITIES:
Payables:
Portfolio Shares Purchased................................ 124,620
Distributor and Affiliates................................ 2,865
Trustees' Deferred Compensation and Retirement Plans........ 127,627
Accrued Expenses............................................ 1,258
-----------
Total Liabilities....................................... 256,370
-----------
NET ASSETS.................................................. $29,870,641
===========
NET ASSETS CONSIST OF:
Capital..................................................... $29,870,666
Accumulated Distributions in Excess of Net Investment
Income.................................................... (25)
-----------
NET ASSETS (Equivalent to $1.00 per share for 29,870,666
shares outstanding)....................................... $29,870,641
===========
|
See Notes to Financial Statements
49
Statement of Operations
Money Market Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $905,535
--------
EXPENSES:
Investment Advisory Fee..................................... 74,773
Trustees' Fees and Related Expenses......................... 22,024
Shareholder Services........................................ 9,940
Accounting.................................................. 7,565
Shareholder Reports......................................... 6,537
Audit....................................................... 5,903
Custody..................................................... 5,040
Legal....................................................... 2,811
Other....................................................... 1,065
--------
Total Expenses.......................................... 135,658
Investment Advisory Fee Reduction....................... 45,643
--------
Net Expenses............................................ 90,015
--------
NET INVESTMENT INCOME....................................... $815,520
========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $815,520
========
|
See Notes to Financial Statements
50
Statement of Changes in Net Assets
Money Market Portfolio
For the Six Months Ended June 30, 2000, and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 815,520 $ 1,331,865
------------ ------------
Distributions from Net Investment Income.................... (815,520) (1,331,826)
Distributions in Excess of Net Investment Income............ (25) -0-
------------ ------------
Distributions from and in Excess of Net Investment Income... (815,545) (1,331,826)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (25) 39
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 20,068,370 36,672,632
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 815,545 1,341,788
Cost of Shares Repurchased.................................. (24,307,496) (31,429,889)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... (3,423,581) 6,584,531
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... (3,423,606) 6,584,570
NET ASSETS:
Beginning of the Period..................................... 33,294,247 26,709,677
------------ ------------
End of the Period (Including accumulated undistributed net
investment income of $(25) and $0, respectively).......... $ 29,870,641 $ 33,294,247
============ ============
|
See Notes to Financial Statements
51
Financial Highlights
Money Market Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
CLASS I SHARES JUNE 30, --------------------------------
2000 1999 1998 1997 1996
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................ $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Net Investment Income................................... 0.03 0.05 0.05 0.05 0.05
Less Distributions from Net Investment Income........... 0.03 0.05 0.05 0.05 0.05
----- ----- ----- ----- -----
NET ASSET VALUE, END OF THE PERIOD...................... $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return*........................................... 2.74%** 4.63% 5.02% 5.06% 4.89%
Net Assets at End of the Period (In millions)........... $29.9 $33.3 $26.7 $19.7 $19.6
Ratio of Expenses to Average Net Assets* (a)............ .60% .62% .60% .60% .60%
Ratio of Net Investment Income to Average Net Assets*... 5.44% 4.56% 4.88% 4.95% 4.78%
* If certain expenses had not been assumed by Van Kampen, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets (a)............. .90% .93% .99% .98% 1.29%
Ratio of Net Investment Income to Average Net Assets.... 5.13% 4.25% 4.49% 4.57% 4.10%
|
(a) The Ratio of Expenses to Average Net Assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the year ended December 31,
1999.
** Non-Annualized
See Notes to Financial Statements
52
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Life Investment Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company comprised of eleven Portfolios: Asset Allocation Portfolio
("Asset Allocation"), Comstock Portfolio(1) ("Comstock"), Domestic Income
Portfolio ("Domestic Income"), Emerging Growth Portfolio(1) ("Emerging Growth"),
Enterprise Portfolio(1) ("Enterprise"), Global Equity Portfolio ("Global
Equity"), Government Portfolio ("Government"), Growth and Income Portfolio(1)
("Growth and Income"), Money Market Portfolio ("Money Market"), Morgan Stanley
Real Estate Securities Portfolio(1) ("Real Estate") and Strategic Stock
Portfolio(1) ("Strategic Stock") (collectively the "Portfolios"). Each Portfolio
is accounted for as a separate entity.
On April 26, 2000, each of the Portfolios commenced offering of Class II
Shares. (As no Class II Shares were sold from any of the portfolios as of June
30, 2000, all financial information presented applies to Class I Shares only.)
The goals of the Portfolios are as follows: Asset Allocation seeks a high
total investment return consistent with prudent investment risk; Domestic Income
seeks current income as its primary objective and capital appreciation as a
secondary objective; Global Equity seeks long-term growth of capital through an
internationally diversified portfolio of equity securities of companies of any
nation, including the United States; Government seeks high current return
consistent with preservation of capital; and Money Market seeks protection of
capital and high current income by investing in money market instruments.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Investments in securities listed on a securities exchange
are valued at their sales price as of the close of such securities exchange.
Fixed income investments are valued by independent pricing services or dealers
using the mean of the bid and asked prices. Unlisted securities and listed
securities for which the last sales price is not available are valued at the
mean of the bid and asked prices. For those securities where prices or
quotations are not available, valuations are determined in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market value. For Money Market, all investments are
valued at amortized cost, which approximates market value.
Domestic Income's investments include lower rated and unrated debt
securities which may be more susceptible to a decline in value due to adverse
economic conditions than other investment grade holdings. These securities are
often subordinated to the prior claims of other senior lenders and uncertainties
exist as to an issuer's ability to meet principal and interest payments. Debt
securities rated below investment grade and comparable unrated securities
represented approximately 8% of Domestic Income's net assets at June 30, 2000.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Portfolios may invest in repurchase agreements which are short-term
investments in which the Portfolios acquire ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Portfolios may invest independently in repurchase
(1) These Portfolios are included under a separate cover.
53
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
agreements, or transfer uninvested cash balances into a pooled cash account
along with other investment companies advised by Van Kampen Asset Management
Inc. (the "Adviser") or its affiliates, the daily aggregate of which is invested
in repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Portfolios will make payment for such securities
only upon physical delivery or evidence of book entry transfer to the account of
the custodian bank. The seller is required to maintain the value of the
underlying security at not less than the repurchase proceeds due the Portfolios.
C. INCOME AND EXPENSES Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Bond premium is not amortized
and original issue discount is accreted over the expected life of each
applicable security.
D. ORGANIZATIONAL COSTS Global Equity has reimbursed Van Kampen Funds Inc. or
its affiliates (collectively "Van Kampen") for costs incurred in connection with
the Portfolio's organization in the amount of $6,828. These costs are being
amortized on a straight line basis over the 60 month period ending July 2, 2000.
The Adviser has agreed that in the event any of the initial shares of the
Portfolio originally purchased by Van Kampen are redeemed during the
amortization period, the Portfolio will be reimbursed for any unamortized
organizational costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
E. FEDERAL INCOME TAXES It is each Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
Each Portfolio intends to utilize provisions of the federal income tax laws
which allow each Portfolio to carry a realized capital loss forward for eight
years following the year of the loss and offset such losses against any future
realized capital gains. The following table presents the capital loss
carryforward at December 31, 1999 along with its expiration dates. The table
also presents the identified cost of investments at June 30, 2000 for federal
income tax purposes with the associated gross unrealized appreciation, gross
unrealized depreciation and net unrealized appreciation/depreciation on
investments.
ASSET DOMESTIC GLOBAL
ALLOCATION INCOME EQUITY
Realized capital loss carryforward......................... -- $ 987,353 --
Expiration dates of capital loss carryforward.............. -- 2002-2007 --
Amount expiring on 12/31/00................................ -- -- --
Identified cost............................................ $43,618,979 $17,054,667 $3,056,612
Gross unrealized appreciation.............................. 7,371,143 148,719 1,110,304
Gross unrealized depreciation.............................. 1,895,312 643,486 190,797
Net unrealized appreciation/depreciation................... 5,475,831 (494,767) 919,507
|
54
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
MONEY
GOVERNMENT MARKET
Realized capital loss carryforward.......................... $ 8,939,169 $ 1,765
Expiration dates of capital loss carryforward............... 2000-2007 2003-2007
Amount expiring on 12/31/00................................. $ 117,213 --
Identified cost............................................. $53,006,741 $29,933,665
Gross unrealized appreciation............................... 209,348 --
Gross unrealized depreciation............................... 1,066,324 --
Net unrealized appreciation/depreciation.................... (856,976) --
|
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following fiscal year and
the deferral of losses relating to wash sale transactions.
F. DISTRIBUTION OF INCOME AND GAINS Money Market declares dividends from net
investment income and net realized gain/loss on each business day. Asset
Allocation, Domestic Income, Global Equity and Government declare dividends from
net investment income and net realized gains, if any, annually. Distributions
from net realized gains for book purposes may include short-term capital gains
and gains on option and futures transactions. All short-term capital gains and a
portion of option and futures gains are included in ordinary income for tax
purposes.
Due to inherent differences in the recognition of certain expenses under
generally accepted accounting principles and federal income tax purposes, the
amount of distributed net investment income may differ for a particular period.
These differences are temporary in nature, but may result in book basis
distribution in excess of net investment income for certain periods.
G. FOREIGN CURRENCY TRANSLATION The market values of foreign securities, forward
currency exchange contracts and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars based on quoted exchange rates
as of noon Eastern Standard Time. The cost of securities is determined using
historical exchange rates. Income and expenses are translated at prevailing
exchange rates when accrued or incurred. Gains and losses on the sale of
securities are not segregated for financial reporting purposes between amounts
arising from changes in exchange rates and amounts arising from changes in the
market prices of securities. Realized gain and loss on foreign currency includes
the net realized amount from the sale of currency and the amount realized
between trade date and settlement date on security transactions.
55
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly based upon the average daily net assets as follows:
Asset Allocation, Domestic Income, Enterprise, Government
and Money Market (based upon their combined net assets)
First $500 million...................................... .50%
Next $500 million....................................... .45%
Over $1 billion......................................... .40%
(The resulting fee is prorated to each of these
Portfolios based upon their respective average daily net
assets.)
Global Equity
First $500 million...................................... 1.00%
Next $500 million....................................... .95%
Over $1 billion......................................... .90%
|
In relation to Global Equity, the Adviser has entered into a subadvisory
agreement, dated April 1, 1997 with Morgan Stanley Dean Witter Investment
Management Inc. (the "Subadviser") to provide advisory services to the Portfolio
and the Adviser with respect to the Portfolio's investments. For these services,
the Adviser pays 50% of its advisory fees to the Subadviser.
Under the terms of the advisory agreement, if the total ordinary business
expenses, exclusive of taxes, distribution fees and interest, exceed .95% of the
average daily net assets of Asset Allocation, Domestic Income, Government or
Money Market, the Adviser will reimburse the Portfolio for the amount of the
excess. Additionally, the Adviser has voluntarily agreed to reimburse the
Portfolios for all expenses as a percent of average daily net assets in excess
of the following:
Asset Allocation, Domestic Income, Government and Money
Market...................................................... .60%
Global Equity............................................... 1.20%
|
Other transactions with affiliates during the six months ended June 30, 2000
were approximately as follows:
ASSET DOMESTIC GLOBAL
ALLOCATION INCOME EQUITY
Accounting.................................................. $ 2,900 $ 2,500 $ 1,300
Shareholder servicing agent's fees.......................... 7,500 10,500 7,300
Legal (Skadden Arps)........................................ 1,800 2,500 300
|
MONEY
GOVERNMENT MARKET
Accounting.................................................. $ 7,700 $ 5,000
Shareholder servicing agent's fees.......................... 7,500 9,000
Legal (Skadden Arps)........................................ 4,600 2,800
|
Accounting services are provided by Van Kampen at cost. Van Kampen Investor
Services Inc., an affiliate of the Adviser, serves as the shareholder servicing
agent for the Portfolios. Transfer agency fees are determined through
negotiations with the Portfolios' Board of Trustees and are based on competitive
benchmarks. Legal services are provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Portfolios, of which a trustee of the Portfolios is
an affiliated person.
56
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
Certain officers and trustees of the Portfolios are also officers and
directors of Van Kampen. The Portfolios do not compensate their officers or
trustees who are officers of Van Kampen.
The Portfolios provide deferred compensation and retirement plans for their
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Portfolios. The
maximum annual benefit per trustee under the plan is $2,500 per portfolio.
At June 30, 2000, Van Kampen owned 95,241 shares of Global Equity.
3. CAPITAL TRANSACTIONS
For the six months ended June 30, 2000, share transactions were as follows:
ASSET DOMESTIC GLOBAL
ALLOCATION INCOME EQUITY
Beginning Shares........................................... 4,399,081 2,030,866 256,613
Sales...................................................... 99,887 232,094 64,526
Dividend Reinvestment...................................... 543,256 176,440 356
Repurchases................................................ (516,794) (216,363) (72,377)
----------- ----------- ----------
Ending Shares.............................................. 4,525,430 2,223,037 249,118
=========== =========== ==========
Capital at 06/30/00........................................ $43,560,339 $18,174,554 $2,469,225
=========== =========== ==========
|
MONEY
GOVERNMENT MARKET
Beginning Shares............................................ 6,047,586 33,294,247
Sales....................................................... 493,661 20,068,370
Dividend Reinvestment....................................... 390,189 815,545
Repurchases................................................. (863,505) (24,307,496)
----------- -----------
Ending Shares............................................... 6,067,931 29,870,666
=========== ===========
Capital at 06/30/00......................................... $61,208,524 $29,870,666
=========== ===========
|
At June 30, 2000, with the exception of Van Kampen's ownership of shares of
certain portfolios, five insurance companies or their separate accounts were
record owners of all but a de minimus number of the shares of each Portfolio.
For the year ended December 31, 1999, share transactions were as follows:
ASSET DOMESTIC GLOBAL
ALLOCATION INCOME EQUITY
Beginning Shares........................................... 4,591,957 2,048,609 253,694
Sales...................................................... 200,932 700,539 53,999
Dividend Reinvestment...................................... 680,053 155,098 2,147
Repurchases................................................ (1,073,861) (873,380) (53,227)
----------- ----------- ----------
Ending Shares.............................................. 4,399,081 2,030,866 256,613
=========== =========== ==========
Capital at 12/31/99........................................ $42,297,099 $16,763,020 $2,597,427
=========== =========== ==========
|
57
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
MONEY
GOVERNMENT MARKET
Beginning Shares............................................ 5,947,274 26,709,716
Sales....................................................... 1,022,161 36,672,632
Dividend Reinvestment....................................... 305,002 1,341,788
Repurchases................................................. (1,226,851) (31,429,889)
----------- ------------
Ending Shares............................................... 6,047,586 33,294,247
=========== ============
Capital at 12/31/99......................................... $61,096,754 $ 33,294,247
=========== ============
|
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of long-term
investments, including principal paydowns and excluding forward commitment
transactions and short-term investments, were:
ASSET DOMESTIC GLOBAL
ALLOCATION INCOME EQUITY GOVERNMENT
Purchases...................................... $2,786,308 $8,541,726 $1,964,436 $38,749,275
Sales.......................................... 3,693,159 8,111,325 2,112,681 32,196,931
|
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Portfolios have a variety of reasons to use derivative instruments, such
as to attempt to protect the Portfolios against possible changes in the market
value of its portfolio, manage the Portfolio's effective yield, foreign currency
exposure, maturity and duration or to generate potential gain. All of the
Portfolios' holdings, including derivative instruments, are marked to market
each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when taking delivery of a security underlying a
futures or forward contract. In these instances, the recognition of gain or loss
is postponed until the disposal of the security underlying the futures or
forward contract.
Summarized below are the specific types of derivative financial instruments
used by the Portfolios.
A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
fixed income Portfolios generally invest in futures on U.S. Treasury Bonds and
Notes. The equity Portfolios generally invest in S&P 500 Index Futures. Upon
entering into futures contracts, the Portfolios maintain, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended June 30, 2000,
were as follows:
NUMBER OF
GOVERNMENT CONTRACTS
Outstanding at December 31, 1999............................ 81
Futures Opened.............................................. 362
Futures Closed.............................................. (368)
----
Outstanding at June 30, 2000................................ 75
====
|
58
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
The futures contracts outstanding at June 30, 2000, and the descriptions and
unrealized appreciation/depreciation are as follows:
UNREALIZED
NUMBER OF APPRECIATION/
CONTRACTS DEPRECIATION
GOVERNMENT
LONG CONTRACTS
30-year U.S. Treasury Bonds--September 2000
(Current notional value of $94,750 per contract)........ 61 236,824
5-year U.S. Treasury Notes--September 2000
(Current notional value of $97,219 per contract)........ 8 8,413
SHORT CONTRACTS
10-year U.S. Treasury Notes--September 2000
(Current notional value of $96,109 per contract)........ 6 (12,892)
-- --------
75 232,345
== ========
|
B. FORWARD COMMITMENTS Domestic Income, Global Equity, and Government may trade
certain securities under the terms of forward commitments, whereby the
settlement for payment and delivery occurs at a specified future date. Forward
commitments are privately negotiated transactions between the Portfolio and
dealers. Upon executing a forward commitment and during the period of
obligation, the Portfolio maintains collateral of cash or securities in a
segregated account with its custodian in an amount sufficient to relieve the
obligation. If the intent of the Portfolio is to accept delivery of a security
traded under a forward bond purchase commitment, the commitment is recorded as a
long-term purchase. For forward bond purchase commitments for which security
settlement is not intended by the Portfolio, changes in the value of the
commitment are recognized by marking the commitment to market on a daily basis
with changes in value reflected as a component of unrealized
appreciation/depreciation. A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Upon the settlement of the contract, a realized gain or loss is recognized
and is included as a component of realized gain/loss on forwards. Purchasing
securities on a forward commitment involves a risk that the market value at the
time of delivery may be lower than the agreed upon purchase price resulting in
an unrealized loss. Selling securities on a forward commitment involves
different risks and can result in losses more significant than those arising
from the purchase of such securities. During the term of the commitment, the
Portfolio may sell the forward commitment and enter into a new forward
commitment, the effect of which is to extend the settlement date. In addition,
the Portfolio may occasionally close such forward commitments prior to delivery.
Risks may arise as a result of the potential liability of the counterparties to
meet the terms of their contracts.
The forward bond commitments outstanding as of June 30, 2000 for which
settlement is not intended, and the description and unrealized
appreciation/depreciation are as follows:
PAR UNREALIZED
AMOUNT CURRENT APPRECIATION/
(000) DESCRIPTION VALUE DEPRECIATION
GOVERNMENT
SHORT CONTRACTS
$3,000 FNMA 30 Yr July Forward, 6.500%, TBA........................ $2,827,500 $(11,250)
900 FNMA 30 Yr July Forward, 7.000%, TBA........................ 868,500 (4,781)
4,000 GNMA 30 Yr July Forward, 7.000%, TBA........................ 3,888,760 (7,510)
--------
$(23,541)
========
|
There were no forward currency contracts outstanding at June 30, 2000.
59
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
6. BORROWINGS
In accordance with its investment policies, the Portfolios may borrow from banks
for temporary purposes and are subject to certain other customary restrictions.
Effective November 30, 1999, the Portfolios, in conjunction with certain other
funds of Van Kampen, entered in to a $650,000,000 committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each fund is permitted to
utilize the facility in accordance with the restrictions of its prospectus. In
the event the demand for the facility meets or exceeds $650 million on a
complex-wide basis, each fund will be limited to its pro-rata percentage based
on the net assets of each participating fund. Interest on borrowings is charged
under the agreement at a rate of 0.50% above the federal funds rate per annum.
An annual commitment fee of 0.09% per annum is charged on the unused portion of
the credit facility, which each fund incurs based on its pro-rata percentage of
quarterly net assets. The Portfolios did not borrow against the credit facility
during the period.
60
PORTFOLIO OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN LIFE INVESTMENT TRUST
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISOR
(GLOBAL EQUITY PORTFOLIO)
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1585 Broadway
New York, NY 10036
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS(1)
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
(1) Independent auditors for the Portfolios perform an annual audit of the
Portfolios' financial statements. The Board of Trustees has engaged Ernst &
Young LLP to be the Portfolios' independent auditors.
PricewaterhouseCoopers LLP ceased being the Portfolios' independent
auditors effective May 18, 2000. The cessation of the client-auditor
relationship between the Portfolios and PricewaterhouseCoopers was based
solely on a possible future business relationship by PricewaterhouseCoopers
with an affiliate of the Portfolios' investment adviser.
* "Interested persons" of the Portfolios, as defined in the Investment Company
Act of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Portfolios. It is not authorized for distribution to prospective investors
unless it has been preceded or is accompanied by an effective prospectus of the
Portfolios which contains additional information on how to purchase shares, the
sales charges on shares of the Portfolios, and other pertinent data. After
December 31, 2000, the report, if used with prospective investors, must be
accompanied by a quarterly performance update.
61
Table of Contents
OVERVIEW
LETTER TO POLICYHOLDERS 1
ECONOMIC SNAPSHOT 2
COMSTOCK PORTFOLIO
RETURN HIGHLIGHTS 4
Q&A WITH YOUR PORTFOLIO MANAGERS 5
YOUR PORTFOLIO'S INVESTMENTS 7
FINANCIAL STATEMENTS 9
EMERGING GROWTH PORTFOLIO
RETURN HIGHLIGHTS 13
Q&A WITH YOUR PORTFOLIO MANAGERS 14
YOUR PORTFOLIO'S INVESTMENTS 16
FINANCIAL STATEMENTS 19
ENTERPRISE PORTFOLIO
RETURN HIGHLIGHTS 23
Q&A WITH YOUR PORTFOLIO MANAGERS 24
YOUR PORTFOLIO'S INVESTMENTS 26
FINANCIAL STATEMENTS 29
GROWTH AND
INCOME PORTFOLIO
RETURN HIGHLIGHTS 33
Q&A WITH YOUR PORTFOLIO MANAGERS 34
YOUR PORTFOLIO'S INVESTMENTS 36
FINANCIAL STATEMENTS 38
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
RETURN HIGHLIGHTS 42
Q&A WITH YOUR PORTFOLIO MANAGERS 43
YOUR PORTFOLIO'S INVESTMENTS 45
FINANCIAL STATEMENTS 47
STRATEGIC STOCK PORTFOLIO
RETURN HIGHLIGHTS 51
Q&A WITH YOUR PORTFOLIO MANAGERS 52
YOUR PORTFOLIO'S INVESTMENTS 54
FINANCIAL STATEMENTS 56
NOTES TO FINANCIAL STATEMENTS 60
THE VAN KAMPEN FAMILY OF FUNDS 67
PORTFOLIO OFFICERS AND IMPORTANT ADDRESSES 68
|
It is times like these when money- management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
OVERVIEW
LETTER TO POLICYHOLDERS
July 20, 2000
Dear Policyholder,
Whether you have held your portfolio for years or just joined the Van Kampen
family of shareholders in the last few months, you are likely to have questions
and even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your portfolio is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we move through the second half of 2000, count on us to continue to draw on
the wisdom of our 74 years of experience. Along those lines, Van Kampen's
"Generations of Experience" is the theme of a national
advertising campaign that we recently kicked off. The message
emphasizes our depth of investment-management history, as well
as our firm belief that with the right investments, anyone can
realize life's true wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
BEGINNING IN THE SECOND QUARTER OF 2000, EVIDENCE OF SLOWER ECONOMIC GROWTH IN
THE UNITED STATES EMERGED. HOWEVER, ANALYSTS BELIEVE IT MAY HAVE BEEN PREMATURE
TO ASSUME THAT THE U.S. ECONOMY HAS SLOWED TO A SUSTAINABLE, NONINFLATIONARY
PACE, WITH THE GROSS DOMESTIC PRODUCT (GDP), A MEASURE OF ECONOMIC GROWTH, UP
5.2 PERCENT ANNUALIZED IN THE SECOND QUARTER OF 2000.
CONSUMER SPENDING AND EMPLOYMENT
CONSUMER SPENDING REMAINED THE MAIN ENGINE OF GROWTH BEHIND THE U.S. ECONOMY.
LIVING STANDARDS AND SPENDING HABITS WERE BOOSTED BY STRONG GAINS IN REAL
INCOME, AND INDIVIDUAL WEALTH INCREASED SUBSTANTIALLY, PRIMARILY DUE TO A
BUOYANT STOCK MARKET. NONETHELESS, DATA RELEASED IN THE SECOND QUARTER OF 2000
REFLECTED A MINOR DECREASE IN THE SPENDING OF INDIVIDUALS. IN JUNE, THE CONSUMER
PRICE INDEX (CPI), THE LEADING INFLATION INDICATOR, ROSE HIGHER THAN
EXPECTED--0.6 PERCENT MORE THAN THE PREVIOUS MONTH. THAT HEIGHTENED CONCERNS
ABOUT INFLATION, AND THE PROSPECT OF ADDITIONAL FEDERAL RESERVE BOARD
INTEREST-RATE INCREASES.
THE U.S. LABOR MARKET WAS STILL ROBUST DURING THIS TIME, AND JOB INSECURITY
CONTINUED TO DECLINE. SOLID EMPLOYMENT GROWTH WAS ACCOMPANIED BY UNUSUALLY LARGE
GAINS IN PRODUCTIVITY, WHICH LIMITED THE RISE IN UNIT LABOR COSTS ACROSS THE
WHOLE ECONOMY. GIVEN THE HIGH EMPLOYMENT NUMBERS AND STRONG LEVELS OF
PRODUCTIVITY, ANALYSTS BELIEVE AN INCREASE IN INTEREST RATES TO WARD OFF
INFLATION AND FURTHER SLOW THE ECONOMY IS POSSIBLE.
INTEREST RATES AND INFLATION
DURING THE PAST FEW MONTHS, PERSISTENT STRENGTH IN CONSUMER SPENDING ACCOMPANIED
BY A VERY TIGHT LABOR MARKET, RESULTED IN SOME INFLATION. THE CPI REACHED A
LEVEL OF 2.7 PERCENT IN JANUARY 2000 AND 3.7 PERCENT IN JUNE 2000, CLEARLY
DEMONSTRATING SIGNS OF INFLATION.
SINCE JUNE 1999, THE FEDERAL RESERVE HAS INCREASED THE FEDERAL FUNDS RATE SIX
TIMES BY A TOTAL OF 175 BASIS POINTS TO LOWER ECONOMIC GROWTH AND DECREASE ANY
FUTURE FEARS OF INFLATION. THESE INCREASES IN INTEREST RATES HELPED SLOW THE
INTEREST-SENSITIVE AUTO AND HOUSING MARKETS.
MANY OBSERVERS BELIEVE INTEREST RATES COULD BE LIFTED FURTHER IN COMING MONTHS.
WHILE MARKETS HAVE EXPERIENCED MUCH SHORT-TERM VOLATILITY, THE MARKET'S OUTLOOK
COULD IMPROVE ONCE INTEREST-RATE HIKES CEASE.
2
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998--June 30, 2000)
[BAR GRAPH]
U.S. GROSS DOMESTIC PRODUCT
---------------------------
Jun 98 2.10
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.20
|
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(June 30, 1998--June 30, 2000)
[BAR GRAPH]
INTEREST RATES INFLATION
-------------- ---------
Jun 98 5.50 1.70
5.50 1.70
5.50 1.60
Sep 98 5.25 1.50
5.00 1.50
4.75 1.50
Dec 98 4.75 1.60
4.75 1.70
4.75 1.60
Mar 99 4.75 1.70
4.75 2.30
4.75 2.10
Jun 99 5.00 2.00
5.00 2.10
5.25 2.30
Sep 99 5.25 2.60
5.25 2.60
5.50 2.60
Dec 99 5.50 2.70
5.50 2.70
5.75 3.20
Mar 00 6.00 3.70
6.00 3.00
6.50 3.10
Jun 00 6.50 3.70
|
Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
3
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
COMSTOCK PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) 1.87%
---------------------------------------------------------------------------
One-year total return based on NAV(1) -4.44%
---------------------------------------------------------------------------
Life-of-Portfolio cumulative total return based on NAV(1) -3.24%
---------------------------------------------------------------------------
Commencement date 04/30/99
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
4
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--COMSTOCK PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED
THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS ENDED
JUNE 30, 2000. THE TEAM IS LED BY B. ROBERT BAKER, JR., SENIOR PORTFOLIO
MANAGER, WHO HAS MANAGED THE PORTFOLIO SINCE ITS INCEPTION IN 1999 AND HAS
WORKED IN THE INVESTMENT INDUSTRY SINCE 1979. HE IS JOINED BY PORTFOLIO MANAGERS
KEVIN HOLT AND JASON LEDER. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE
PORTFOLIO'S PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE MARKET
ENVIRONMENT IN WHICH THE PORTFOLIO OPERATED, AND HOW DID THE PORTFOLIO
PERFORM IN THAT ENVIRONMENT?
A Overall, it was an extremely volatile period
for the markets, which generally continued to favor growth stocks over value.
(There can be no assurance that growth stocks will continue to be favored over
value stocks in the future.)
The Standard & Poor's 500 Index started the reporting period strong, though
it encountered some turbulence when the strength of the economy caused investors
to worry about further interest-rate increases by the Federal Reserve Board. In
late February and mid-March, the S&P 500 rocketed upward, along with the
technology-heavy NASDAQ index and the rest of the market. Both the S&P 500 and
the NASDAQ fell sharply beginning in late March, however, due to concerns about
technology stocks' high valuations and the effects of continued interest-rate
increases on U.S. corporate earnings.
When technology stocks began to falter, some investors looked to traditional
value sectors for relatively strong performance potential with less volatility
than growth sectors. However, this short-lived rally was not enough for value
stocks to outperform growth stocks.
The portfolio, whose value-style strategy was out of favor with investors,
achieved a total return of 1.87 percent for the six-month period ended June 30,
2000 (Class I shares). As a result of recent market activity, current
performance may vary from the figures drawn. By comparison, the S&P 500 Index
lost 0.43 percent, and the Standard & Poor's Barra Value Index lost 4.07 percent
for the same period. Of course, past performance is no guarantee of future
results. The S&P 500 Index is an unmanaged, broad-based index that measures the
performance of 500 stocks from 83 industrial groups and reflects the general
performance of the stock market. The S&P Barra Value Index is an unmanaged,
broad-based index that reflects the general performance of value stocks.
Generally, the companies in the value index exhibit characteristics such as low
price-to-earnings ratios, high dividend yields, and low historical and predicted
earnings growth. These indexes are statistical composites that do not include
any commissions or sales charges that would be paid by an investor purchasing
the securities they represent. Such costs would lower the performance of the
indexes. It is not possible to invest directly in an index. Please refer to the
chart and footnotes on page 4 for additional portfolio performance results.
Q WHAT WAS YOUR STRATEGY FOR MANAGING
THE PORTFOLIO IN THIS ENVIRONMENT?
A Our job is to evaluate companies, and this
remains true regardless of market conditions. As value investors, we look for
solid companies that may be temporarily undervalued in the marketplace, meaning
they may have sound business fundamentals, but their stock prices are lower than
what we believe they should be.
We then do our homework to determine whether, in our opinion, the company's
stock has the potential to reach a price we think is more in line with the
company's true worth.
5
Q WHAT STOCKS PERFORMED WELL DURING THE
REPORTING PERIOD?
A During the reporting period, we found
bargains in the electric utilities sector. Reliant Energy and Illinova, which
was acquired by Dynegy in February and was sold from the portfolio in March,
helped the portfolio's overall performance, as did the portfolio's overweighting
in utilities relative to its benchmark, the S&P Barra Value Index. Over the
six-month period, we didn't significantly change the portfolio's weighting in
utilities.
Health-care stocks, particularly health maintenance organizations (HMOs) and
hospital stocks, also contributed positively to the portfolio's performance.
UnitedHealth Group, an HMO, and Tenet Healthcare, a leading U.S. hospital chain,
posted solid gains during the reporting period. Two pharmaceutical stocks,
American Home Products and Aventis, also performed well.
We began to increase our exposure to cyclical stocks because their prices
fell as the Fed increased interest rates several times throughout the reporting
period. Investors' fears of an economic slowdown caused these stocks' prices to
drop, and we believed this period of falling prices presented a buying
opportunity, enabling us to position the portfolio to capitalize on their
potential return to favor.
Philip Morris was our largest holding and the top contributor to the
portfolio's performance. During the first six months of 2000, the company's
business fundamentals improved and investors seemed to realize that perhaps the
out-of-favor company would not collapse under the weight of its litigation
issues after all--and the stock price lifted as a result.
Despite the correction in the technology sector, a few of the portfolio's
technology stocks were strong performers. Checkpoint Systems, which develops
secure computer networking environments for businesses, had a large run-up in
price in the beginning of 2000, and we sold it to lock in its price
appreciation. Some other notable technology names included SunGard Data Systems,
a provider of systems and support for the financial industry; Cognex, a
manufacturer of hardware and software with vision capabilities; and American
Power Conversion, a manufacturer of power-surge protection devices.
Keep in mind that not all stocks in the portfolio performed favorably, and
there is no guarantee that any of these stocks will perform well or will be held
by the portfolio in the future.
Q WHICH STOCKS WERE DISAPPOINTMENTS?
A Cyclical stocks, as a group, were the biggest
drag on performance. Although we believe that the depressed prices presented
buying opportunities, it didn't change the fact that those prices led to poor
short-term performance. Paper stocks such as International Paper, Weyerhaeuser,
and Boise Cascade were all down year to date. The portfolio's holdings in
Caterpillar and its small exposure to the steel industry in USX-U.S. Steel Group
also hurt its return. These companies' stocks have tended to fall when investors
perceive a slowdown in the economy, a condition that occurred as the Fed
increased interest rates during the reporting period. As interest rates rose,
the costs of mortgages and automobile loans also increased, which slowed the
demand for houses and cars. Consequently, manufacturers' earnings slowed, and
their stock prices fell.
Q WHAT IS YOUR OUTLOOK FOR THE PORTFOLIO IN
THE COMING MONTHS?
A Because our focus is on individual
companies, we are more concerned about each company's business model,
competitors, revenue, earnings, and other fundamentals than we are about
macroeconomic trends. Therefore, we will continue to seek undervalued stocks on
a company-first basis.
6
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Comstock Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
MARKET
DESCRIPTION SHARES VALUE
COMMON STOCKS 79.7%
CONSUMER DISTRIBUTION 7.1%
Albertson's, Inc. ......... 3,835 $ 127,514
Federated Department
Stores, Inc. (a)......... 1,395 47,081
Kroger Co. (a)............. 2,745 60,562
Lowe's Cos., Inc. ......... 310 12,729
May Department Stores
Co. ..................... 315 7,560
Target Corp. .............. 250 14,500
----------
269,946
----------
CONSUMER DURABLES 0.6%
Ford Motor Co. ............ 250 10,750
Ingersoll-Rand Co. ........ 300 12,309
Visteon Corp. ............. 33 397
----------
23,456
----------
CONSUMER NON-DURABLES 10.0%
ConAgra, Inc. ............. 1,735 33,074
Nabisco Holdings Corp.,
Class A.................. 300 15,750
Nike, Inc., Class B........ 320 12,740
Philip Morris Cos.,
Inc. .................... 5,940 157,781
Procter & Gamble Co. ...... 285 16,316
Sara Lee Corp. ............ 5,110 98,687
Weyerhaeuser Co. .......... 1,100 47,300
----------
381,648
----------
CONSUMER SERVICES 0.7%
Computer Associates
International, Inc. ..... 500 25,594
----------
ENERGY 11.1%
American Electric Power
Co., Inc. ............... 372 11,021
BP Amoco PLC--ADR (United
Kingdom)................. 880 49,775
Chevron Corp. ............. 790 67,002
Conoco, Inc., Class A...... 3,700 81,400
Conoco, Inc., Class B...... 820 20,141
Diamond Offshore Drilling,
Inc. .................... 540 18,967
Halliburton Co. ........... 890 41,997
ScottishPower PLC--ADR
(United Kingdom)......... 664 22,202
Texaco, Inc. .............. 1,700 90,525
Unocal Corp. .............. 290 9,606
USX--Marathon Group........ 360 9,023
----------
421,659
----------
|
MARKET
DESCRIPTION SHARES VALUE
FINANCE 14.3%
Allstate Corp. ............ 4,100 $ 91,225
AMBAC Financial Group,
Inc. .................... 1,420 77,834
Bank of America Corp. ..... 550 23,650
Bear Stearns Cos., Inc. ... 590 24,559
CIGNA Corp. ............... 90 8,415
Chase Manhattan Corp. ..... 255 11,746
Chubb Corp. ............... 550 33,825
Everest Reinsurance Group,
Ltd. .................... 160 5,260
Fannie Mae................. 100 5,219
Federal Home Loan Mortgage
Corp. ................... 440 17,820
FleetBoston Financial
Corp. ................... 618 21,012
LandAmerica Financial
Group, Inc. ............. 220 5,046
Liberty Financial Cos.,
Inc. .................... 70 1,536
Nationwide Financial
Services, Inc., Class
A ....................... 100 3,287
Providian Financial
Corp. ................... 1,080 97,200
Torchmark, Inc. ........... 510 12,591
U.S. Bancorp............... 2,350 45,237
Washington Mutual, Inc. ... 1,180 34,072
Wells Fargo Co. ........... 610 23,637
----------
534,171
----------
HEALTHCARE 5.9%
American Home Products
Corp. ................... 390 22,912
Baxter International,
Inc. .................... 705 49,570
HCA-The Healthcare
Corp. ................... 1,650 50,119
Tenet Healthcare Corp.
(a)...................... 3,335 90,045
UnitedHealth Group,
Inc. .................... 110 9,433
----------
222,079
----------
PRODUCER MANUFACTURING 2.8%
Aventis SA--ADR (France)... 575 41,724
Caterpillar, Inc. ......... 400 13,550
Rohm & Haas Co. ........... 300 10,535
Waste Management, Inc. .... 2,130 40,470
----------
106,279
----------
RAW MATERIALS/PROCESSING
INDUSTRIES 5.6%
Barrick Gold Corp. ........ 530 9,639
Boise Cascade Corp. ....... 490 12,679
Freeport-McMoRan Copper &
Gold, Inc., Class B
(a)...................... 1,055 9,759
Homestake Mining Co. ...... 1,060 7,288
International Paper Co. ... 3,679 109,680
Kimberly-Clark Corp. ...... 610 34,999
|
See Notes to Financial Statements
7
YOUR PORTFOLIO'S INVESTMENTS
Comstock Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
RAW MATERIALS/PROCESSING
INDUSTRIES (CONTINUED)
Placer Dome, Inc. ......... 770 $ 7,363
USX-U.S. Steel Group....... 1,190 22,089
----------
213,496
----------
TECHNOLOGY 4.1%
American Power Conversion
Corp. (a)................ 490 19,998
BMC Software, Inc. (a)..... 400 14,594
Cognex Corp. (a)........... 400 20,700
Electronics for Imaging,
Inc. (a)................. 700 17,719
Hewlett-Packard Co. ....... 100 12,487
Microsoft Corp. (a)........ 200 16,000
SunGard Data Systems, Inc.
(a)...................... 1,760 54,560
----------
156,058
----------
UTILITIES 17.5%
Constellation
Energy Group............. 730 23,771
CP&L Energy, Inc. ......... 380 12,136
DTE Energy Co. ............ 670 20,477
Duke Energy Corp. ......... 850 47,919
Edison International....... 760 15,580
Entergy Corp. ............. 280 7,613
FirstEnergy Corp. ......... 340 7,948
GPU, Inc. ................. 360 9,742
IDACORP, Inc. ............. 650 20,962
New Century Energies,
Inc. .................... 870 26,100
NSTAR...................... 566 23,029
OGE Energy Corp. .......... 920 17,020
PG&E Corp.................. 710 17,484
Pinnacle West Capital
Corp. ................... 250 8,469
Public Service Co. of New
Mexico................... 520 8,027
Public Service Enterprise
Group.................... 400 13,850
Reliant Energy, Inc. ...... 2,800 82,775
SBC Communications,
Inc. .................... 1,100 47,575
Southern Co. .............. 2,700 62,944
TXU Corp. ................. 2,190 64,605
Unicom Corp. .............. 880 34,045
Verizon Communications
(Formerly Bell Atlantic
Corp.)................... 1,880 95,527
----------
667,643
----------
TOTAL LONG-TERM INVESTMENTS 79.7%
(Cost $3,121,643).................. 3,030,984
----------
|
MARKET
DESCRIPTION VALUE
SHORT-TERM INVESTMENTS 31.1%
REPURCHASE AGREEMENTS 20.8%
Bank of America Securities
($198,000 par collateralized by
U.S. Government obligations in a
pooled cash account, dated
06/30/00, to be sold on 07/03/00
at $198,113)..................... $ 198,000
DLJ Mortgage Acceptance Corp.
($197,000 par collateralized by
U.S. Government obligations in a
pooled cash account, dated
06/30/00, to be sold on 07/03/00 at
$197,108).......................... 197,000
State Street Bank & Trust Co.
($197,000 par collateralized by
U.S. Government obligations in a
pooled cash account, dated
06/30/00, to be sold on 07/03/00
at $197,106)..................... 197,000
Warburg Dillon Read ($198,000 par
collateralized by U.S. Government
obligations in a pooled cash
account, dated 06/30/00, to be
sold on 07/03/00 at $198,108).... 198,000
----------
TOTAL REPURCHASE AGREEMENTS........ 790,000
----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS 10.3%
United States Treasury Bills
($200,000 par, yielding 5.62%,
09/28/00 maturity)............... 197,221
United States Treasury Bills
($200,000 par, yielding 5.78%,
09/14/00 maturity)............... 197,592
----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS...................... 394,813
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,184,813)................ 1,184,813
----------
TOTAL INVESTMENTS 110.8%
(Cost $4,306,456)................ 4,215,797
LIABILITIES IN EXCESS OF OTHER
ASSETS (10.8%).................. (411,298)
----------
NET ASSETS 100.0%................. $3,804,499
==========
|
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
See Notes to Financial Statements
8
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Comstock Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments (Cost $4,306,456)......................... $4,215,797
Cash........................................................ 2,427
Receivables:
Investments Sold.......................................... 46,292
Dividends................................................. 5,919
Portfolio Shares Sold..................................... 530
Interest.................................................. 145
Other....................................................... 29
----------
Total Assets............................................ 4,271,139
----------
LIABILITIES:
Payables:
Investments Purchased..................................... 420,880
Distributor and Affiliates................................ 10,776
Portfolio Shares Repurchased.............................. 429
Trustees' Deferred Compensation and Retirement Plans........ 18,633
Accrued Expenses............................................ 15,922
----------
Total Liabilities....................................... 466,640
----------
NET ASSETS.................................................. $3,804,499
==========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $3,870,199
Accumulated Undistributed Net Investment Income............. 21,706
Accumulated Net Realized Gain............................... 3,253
Net Unrealized Depreciation................................. (90,659)
----------
NET ASSETS.................................................. $3,804,499
==========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $3,804,499 and 406,092 shares of
beneficial interest issued and outstanding)............... $ 9.37
==========
|
See Notes to Financial Statements
9
Statement of Operations
Comstock Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Dividends................................................... $ 28,549
Interest.................................................... 9,461
--------
Total Income............................................ 38,010
--------
EXPENSES:
Trustees' Fees and Related Expenses......................... 15,808
Investment Advisory Fee..................................... 6,369
Shareholder Services........................................ 5,672
Accounting.................................................. 5,458
Audit....................................................... 5,255
Reports to Shareholders..................................... 4,817
Custody..................................................... 2,741
Legal....................................................... 310
Other....................................................... 6,984
--------
Total Expenses.......................................... 53,414
Expense Reduction ($6,369 Investment Advisory Fee and
$36,983 Other)......................................... 43,352
Less Credits Earned on Cash Balances.................... 112
--------
Net Expenses............................................ 9,950
--------
NET INVESTMENT INCOME....................................... $ 28,060
========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 16,881
--------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (77,038)
End of the Period......................................... (90,659)
--------
Net Unrealized Depreciation During the Period............... (13,621)
--------
NET REALIZED AND UNREALIZED GAIN............................ $ 3,260
========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 31,320
========
|
See Notes to Financial Statements
10
Statement of Changes in Net Assets
Comstock Portfolio
For the Six Months Ended June 30, 2000 and the Period April 30, 1999
(Commencement of Investment Operations) to December 31, 1999 (Unaudited)
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 28,060 $ 15,351
Net Realized Gain........................................... 16,881 8,752
Net Unrealized Depreciation During the Period............... (13,621) (77,038)
---------- ----------
Change in Net Assets from Operations........................ 31,320 (52,935)
---------- ----------
Distributions from Net Investment Income.................... (644) (15,351)
Distributions in Excess of Net Investment Income............ -0- (5,710)
---------- ----------
Distributions from and in Excess of Net Investment Income... (644) (21,061)
Distributions from Net Realized Gain........................ (22,380) -0-
---------- ----------
Total Distributions......................................... (23,024) (21,061)
---------- ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... 8,296 (73,996)
---------- ----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 2,272,590 662,801
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 12,283 7,651
Cost of Shares Repurchased.................................. (83,309) (1,817)
---------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 2,201,564 668,635
---------- ----------
TOTAL INCREASE IN NET ASSETS................................ 2,209,860 594,639
NET ASSETS:
Beginning of the Period..................................... 1,594,639 1,000,000
---------- ----------
End of Period (Including accumulated undistributed net
investment income of $21,706 and ($5,710),
respectively)............................................. $3,804,499 $1,594,639
========== ==========
|
See Notes to Financial Statements
11
Financial Highlights
Comstock Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
APRIL 30, 1999
(COMMENCEMENT
SIX MONTHS OF INVESTMENT
CLASS I SHARES ENDED OPERATIONS)
JUNE 30, 2000 TO DECEMBER 31, 1999
-------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 9.31 $10.00
------ ------
Net Investment Income..................................... .09 .10
Net Realized and Unrealized Gain.......................... .07 (.66)
------ ------
Total from Investment Operations............................ .16 (.56)
------ ------
Less:
Distributions from and in Excess of Net Investment
Income.................................................. -0- .13
Distributions from Net Realized Gain...................... .10 -0-
------ ------
Total Distributions......................................... .10 .13
------ ------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 9.37 $ 9.31
====== ======
Total Return*............................................... 1.87%** -5.53%**
Net Assets at End of the Period (In millions)............... $ 3.8 $ 1.6
Ratio of Expenses to Average Net Assets* (a)................ .96% .95%
Ratio of Net Investment Income to Average Net Assets*....... 2.68% 1.99%
Portfolio Turnover.......................................... 23%** 42%**
* If certain expenses had not been assumed by Van Kampen,
Total Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets (a)................. 5.10% 10.36%
Ratio of Net Investment Loss to Average Net Assets.......... (1.46%) (7.42%)
|
** Non-Annualized
(a) The Ratios of Expenses to Average Net Assets do not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratios would decrease by .01% for the six months ended June
30, 2000.
See Notes to Financial Statements
12
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
EMERGING GROWTH PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) 11.68%
---------------------------------------------------------------------------
One-year total return based on NAV(1) 87.13%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 38.92%
---------------------------------------------------------------------------
Commencement date 07/03/95
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
13
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--EMERGING GROWTH PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS
ENDED JUNE 30, 2000. THE TEAM IS LED BY GARY LEWIS, SENIOR PORTFOLIO MANAGER,
WHO HAS MANAGED THE PORTFOLIO SINCE INCEPTION AND HAS WORKED IN THE INVESTMENT
INDUSTRY SINCE 1986. HE IS JOINED BY SENIOR PORTFOLIO MANAGERS JANET LUBY, DAVID
WALKER, DUDLEY BRICKHOUSE, AND PORTFOLIO MANAGER MATTHEW HART. THE FOLLOWING
DISCUSSION REFLECTS THEIR VIEWS ON THE PORTFOLIO'S PERFORMANCE.
Q WHAT MARKET FACTORS AFFECTED THE
PORTFOLIO DURING THE REPORTING PERIOD?
A After a strong start to the year, all of the
major market indexes fell sharply. Beginning the year near 11,300, the Dow Jones
Industrial Average peaked on January 14 at 11,750. Significant fluctuations
followed as the index fell to 9,731 in early March, rebounded to 11,200 in
April, and closed at 10,350 on June 30, 2000. The technology-heavy NASDAQ index
burst into the year by continuing the strong performance it posted in 1999,
returning 22 percent before reaching its peak of 5,048 on March 10. Since that
time, it fell close to 3,000 in late May before rallying to close the first half
of the year at 3,900.
Several factors contributed to the market's disappointing performance. In an
attempt to keep inflation at bay, the Federal Reserve Board (the Fed) raised
interest rates six times in a one-year period. These rising rates began to
curtail consumer spending, as evidenced by slowing housing demand. Retail stocks
performed poorly as a result. Internet companies also tumbled due to concerns
about the viability of their business models, questions regarding the
availability of further funding, and the high valuations of their stocks.
Although investors understandably were skeptical about some low-quality stocks,
many higher-quality stocks were caught in the market's downdraft and
underperformed as well.
Against this backdrop, the portfolio returned 11.68 percent for the
six-month period ended June 30, 2000 (Class I shares). As a result of recent
market activity, current performance may vary from the figures shown. By
comparison, the Standard & Poor's Mid Cap 400 Index returned 9.06 percent. Of
course, past performance is no guarantee of future results. The S&P Mid Cap 400
Index is an unmanaged capitalization weighted measure of 400 stocks in the
midrange sector of the market. This index is a statistical composite that does
not include any commissions or sales charges that would be paid by an investor
purchasing the securities it represents. If these costs had been included,
performance would have been less favorable. It is not possible to invest
directly in an index. Please refer to the chart and footnotes on page 13 for
additional portfolio performance results.
Q WHAT STRATEGIES DID YOU USE TO
MANAGE THE PORTFOLIO IN LIGHT OF THIS ENVIRONMENT?
A In all kinds of market conditions, we look
for stocks with rising earnings expectations and rising valuations, and our
strategy during the past six months was no different. We invested in those
companies we believed had the potential to earn even more than Wall Street
analysts predicted they would. Conversely, we sold stocks whose earnings
expectations or valuations were declining. We consistently manage the portfolio
from the "bottom up," meaning that we evaluate each company individually before
deciding to invest.
The portfolio's investment approach leads us to the areas of the market
where we believe we can find the best stocks at any given time. In the past six
months, this meant companies positioned to profit from advanced technologies
such as semiconductors and communications infrastructure. It also meant we
reduced the amount of stocks sensitive to a slowdown in consumer spending,
especially retail stocks.
14
Q WHAT INVESTMENTS CONTRIBUTED MOST TO
THE PORTFOLIO'S RETURN?
A In the area of Internet infrastructure, the
portfolio benefited the most from our investment in JDS Uniphase, a manufacturer
of advanced fiber-optic devices used in higher-speed telecommunications
networks.
The rapid build-out of the Internet created other successful investment
opportunities. Corning manufactures advanced fiber-optic cabling that allows for
higher-speed Internet access than in the past. SDL, like JDS Uniphase, also
manufactures fiber-optic related products that help increase Internet bandwidth.
Advanced semiconductor companies such as LSI Logic, Xilinx, and PMC-Sierra also
helped to boost portfolio returns. Increased Internet usage has generated huge
amounts of data that must be stored, and EMC and Network Appliance have
capitalized on that need and positively contributed to the portfolio's return.
Keep in mind that not all stocks in the portfolio performed favorably, and there
is no guarantee that any of these stocks will perform as well or will be held by
the portfolio in the future.
Q WHICH STOCKS HURT PERFORMANCE?
A The biggest drag on performance in the
last six months was Qualcomm, the company that licenses CDMA (code division
multiple access) technology, which has been the standard for cellular phones.
Qualcomm's stock fell in response to concerns that worldwide handset sales
failed to live up to expectations.
Several retailing stocks, such as Home Depot and Circuit City, also had a
negative impact on portfolio returns as their stock prices fell over concerns
that rising interest rates would cool consumer demand.
Echostar Communications, a direct broadcast satellite company, also hurt
performance. Its stock dropped in response to investor concerns about slowing
subscriber growth and increased competition. Finally, Emulex, a company that
designs and develops fiberchannel host adapters and hubs, saw its stock fall due
to increased competition and slowing product sales.
We sold all of these stocks during the reporting period.
Q WHAT DO YOU SEE AHEAD FOR
THE PORTFOLIO?
A Although the market's sell-off has made for
a challenging investment environment, valuations have fallen to what we believe
to be more realistic and healthy levels. The overall earnings outlook remains
strong, and we expect the Fed to raise rates only one more time this year. All
these factors point to the potential for strong market performance in the coming
months. However, 2000 is also an election year, which typically results in
increased uncertainty among investors as various political issues are discussed
and debated. Political posturing by presidential candidates will affect the
market, and we will be diligent in looking for opportunities to profit from
these changes. Regardless of short-term uncertainties, we will adhere to our
investment discipline: bottom-up stock picking that focuses on rising earnings
expectations and rising valuations.
15
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Emerging Growth Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
MARKET
DESCRIPTION SHARES VALUE
COMMON STOCKS* 91.1%
CONSUMER DISTRIBUTION 2.9%
Bed Bath & Beyond, Inc.
(a).................... 30,000 $ 1,087,500
Best Buy Co., Inc. (a)... 42,000 2,656,500
Cardinal Health, Inc..... 34,000 2,516,000
Celestica, Inc. (a)...... 15,000 744,375
Kohl's Corp. (a)......... 91,000 5,061,875
Limited, Inc. ........... 84,000 1,816,500
Tiffany & Co. ........... 14,000 945,000
------------
14,827,750
------------
CONSUMER DURABLES 0.2%
Harley-Davidson, Inc. ... 26,500 1,020,250
------------
CONSUMER SERVICES 2.8%
Hispanic Broadcasting
Corp. (a).............. 8,000 265,000
Omnicom Group, Inc. ..... 27,000 2,404,687
TMP Worldwide,
Inc. (a)............... 25,000 1,845,313
Univision Communications,
Inc., Class A (a)...... 36,000 3,726,000
Viacom, Inc., Class
B (a).................. 56,000 3,818,500
Walt Disney Co. ......... 60,000 2,328,750
------------
14,388,250
------------
ENERGY 4.4%
Anadarko Petroleum
Corp................... 44,000 2,169,750
Apache Corp. ............ 58,000 3,411,125
Baker Hughes, Inc. ...... 60,000 1,920,000
BJ Services Co. (a)...... 43,000 2,687,500
Coastal Corp. ........... 19,500 1,187,063
Devon Energy Corp. ...... 21,500 1,208,031
Enron Corp. ............. 50,000 3,225,000
Nabors Industries, Inc.
(a).................... 70,000 2,909,375
Noble Drilling Corp.
(a).................... 65,000 2,677,187
Phillips Petroleum
Co. ................... 20,000 1,013,750
------------
22,408,781
------------
FINANCE 1.6%
Lehman Brothers Holdings,
Inc. .................. 16,500 1,560,282
Marsh & McLennan Cos.,
Inc. .................. 11,500 1,201,031
Merrill Lynch & Co.,
Inc. .................. 20,000 2,300,000
State Street Corp. ...... 30,000 3,181,875
------------
8,243,188
------------
HEALTHCARE 5.6%
Allergan, Inc............ 40,000 2,980,000
Eli Lilly & Co. ......... 30,000 2,996,250
|
MARKET
DESCRIPTION SHARES VALUE
HEALTHCARE (CONTINUED)
Forest Laboratories, Inc.
(a) ................... 33,000 $ 3,333,000
Immunex Corp. (a)........ 25,000 1,235,938
Ivax Corp. (a)........... 36,000 1,494,000
Medimmune, Inc. (a)...... 93,000 6,882,000
Pfizer, Inc. ............ 93,000 4,464,000
Pharmacia Corp. ......... 35,000 1,809,062
Teva Pharmaceutical
Industries Ltd.--ADR
(Israel)............... 33,000 1,829,437
UnitedHealth Group,
Inc.................... 20,500 1,757,875
------------
28,781,562
------------
PRODUCER MANUFACTURING 6.6%
ASM Lithography Holding
NV--ADR (Netherlands)
(a).................... 47,000 2,073,875
Corning, Inc. ........... 80,250 21,657,469
E-Tek Dynamics,
Inc. (a)............... 6,750 1,780,734
General Electric Co. .... 37,000 1,961,000
Metromedia Fiber Network,
Inc., Class A (a)...... 94,000 3,730,625
Tyco International
Ltd. .................. 50,000 2,368,750
------------
33,572,453
------------
TECHNOLOGY 62.1%
Adobe Systems, Inc. ..... 27,000 3,510,000
Advanced Fibre
Communications, Inc.
(a).................... 21,000 951,563
Advanced Micro Devices,
Inc. (a)............... 38,000 2,935,500
Alcatel SA-- ADR
(France)............... 56,000 3,724,000
Altera Corp. (a)......... 84,000 8,562,750
Amdocs Ltd. (a).......... 31,000 2,379,250
Analog Devices,
Inc. (a)............... 125,000 9,500,000
Applied Materials, Inc.
(a).................... 82,000 7,431,250
Applied Micro Circuits
Corp. (a).............. 31,000 3,061,250
BEA Systems, Inc. (a).... 53,000 2,620,187
Broadcom Corp., Class A
(a).................... 28,000 6,130,250
BroadVision, Inc. (a).... 56,000 2,845,500
Brocade Communications
Systems, Inc. (a)...... 37,000 6,788,922
Check Point Software
Technologies Ltd.
(a).................... 42,500 8,999,375
CIENA Corp. (a).......... 20,500 3,417,094
|
See Notes to Financial Statements
16
YOUR PORTFOLIO'S INVESTMENTS
Emerging Growth Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
TECHNOLOGY (CONTINUED)
Cisco Systems, Inc.
(a).................... 140,000 $ 8,898,750
Comverse Technology, Inc.
(a).................... 85,000 7,905,000
Cree Research, Inc.
(a).................... 8,000 1,068,000
EMC Corp. (a)............ 155,000 11,925,312
Exodus Communications,
Inc. (a)............... 54,000 2,487,375
Flextronics International
Ltd. (a)............... 50,000 3,434,375
i2 Technologies, Inc.
(a).................... 27,000 2,815,172
Inktomi Corp. (a)........ 17,000 2,010,250
Intel Corp. ............. 34,500 4,612,219
Jabil Circuit, Inc.
(a).................... 28,000 1,389,500
JDS Uniphase Corp. (a)... 185,000 22,176,875
Juniper Networks, Inc.
(a).................... 57,000 8,297,062
KLA-Tencor Corp. (a)..... 20,500 1,200,531
Lam Research Corp. (a)... 39,000 1,462,500
Linear Technology
Corp................... 77,000 4,923,187
LSI Logic Corp. (a)...... 170,000 9,201,250
Macromedia, Inc. (a)..... 12,500 1,208,594
McLeodUSA, Inc., Class A
(a).................... 59,000 1,220,563
Mercury Interactive Corp.
(a).................... 50,000 4,837,500
Micron Technology,
Inc. (a)............... 50,000 4,403,125
National Semiconductor
Corp. (a).............. 21,000 1,191,750
Network Appliance, Inc.
(a).................... 141,000 11,350,500
Nokia Corp.--ADR
(Finland).............. 168,000 8,389,500
Nortel Networks Corp. ... 199,000 13,581,750
Novellus Systems, Inc.
(a).................... 29,000 1,640,313
Oracle Corp. (a)......... 92,000 7,733,750
Paychex, Inc. ........... 72,000 3,024,000
PMC-Sierra, Inc. (a)..... 26,250 4,664,297
Rational Software Corp.
(a).................... 38,000 3,531,625
RF Micro Devices, Inc.
(a).................... 29,000 2,541,125
Sanmina Corp. (a)........ 78,000 6,669,000
Scientific-Atlanta,
Inc. .................. 76,000 5,662,000
SDL, Inc. (a)............ 44,000 12,548,250
Siebel Systems, Inc.
(a).................... 85,000 13,902,812
STMicroelectronics NV--
ADR (Netherlands)...... 66,000 4,236,375
Sun Microsystems, Inc.
(a).................... 56,000 5,092,500
|
MARKET
DESCRIPTION SHARES VALUE
TECHNOLOGY (CONTINUED)
Symbol Technologies,
Inc. .................. 35,000 $ 1,890,000
Teradyne, Inc. (a)....... 50,000 3,675,000
Texas Instruments,
Inc. .................. 58,000 3,983,875
TIBCO Software, Inc.
(a).................... 23,000 2,466,391
VERITAS Software Corp.
(a).................... 114,000 12,883,781
Xilinx, Inc. (a)......... 102,000 8,421,375
------------
317,414,000
------------
TRANSPORTATION 0.3%
Kansas City Southern
Industries, Inc. ...... 20,000 1,773,750
------------
UTILITIES 4.6%
ADC Telecommunications,
Inc. (a)............... 149,000 12,497,375
AES Corp. ............... 28,000 1,277,500
AT&T Corp., Class
A (a).................. 84,000 2,037,000
Calpine Corp. (a)........ 60,000 3,945,000
China Mobile (Hong Kong)
Ltd.--ADR (China)
(a).................... 7,000 1,244,688
Nextel Communications,
Inc. (a)............... 40,000 2,447,500
------------
23,449,063
------------
TOTAL LONG-TERM INVESTMENTS 91.1%
(Cost $339,907,889)............. 465,879,047
------------
REPURCHASE AGREEMENTS 10.3%
DLJ Mortgage Acceptance Corp.
($20,000,000 par collateralized
by U.S. Government obligations
in a, pooled cash account, dated
6/30/00, to be sold on 07/03/00
at $20,010,967)................. 20,000,000
State Street Bank & Trust Co.
($12,865,000 par collateralized
by U.S. Government obligations
in a pooled cash account, dated
6/30/00, to be sold on 07/03/00
at $12,871,915)................. 12,865,000
Warburg Dillon Read ($20,000,000
par collateralized by U.S.
Government obligations in a
pooled cash account, dated
06/30/00, to be sold on 07/03/00
at $20,010,933)................. 20,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $52,865,000).............. 52,865,000
------------
|
See Notes to Financial Statements
17
YOUR PORTFOLIO'S INVESTMENTS
Emerging Growth Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION VALUE
TOTAL INVESTMENTS 101.4%
(Cost $392,772,889)............... $518,744,047
LIABILITIES IN EXCESS OF OTHER
ASSETS (1.4%).................. (7,428,224)
------------
NET ASSETS 100.0%................ $511,315,823
============
|
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
* The common stocks are classified by sectors which represents broad groupings
of related industries.
See Notes to Financial Statements
18
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Emerging Growth Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments, including repurchase agreements of
$52,865,000
(Cost $392,772,889)....................................... $518,744,047
Cash........................................................ 7,440
Receivables:
Investments Sold.......................................... 10,017,303
Portfolio Shares Sold..................................... 1,413,618
Dividends................................................. 20,241
Interest.................................................. 9,605
Other....................................................... 1,876
------------
Total Assets............................................ 530,214,130
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 18,459,512
Investment Advisory Fee................................... 279,106
Portfolio Shares Repurchased.............................. 75,314
Distributor and Affiliates................................ 2,361
Trustees' Deferred Compensation and Retirement Plans........ 66,248
Accrued Expenses............................................ 15,766
------------
Total Liabilities....................................... 18,898,307
------------
NET ASSETS.................................................. $511,315,823
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $389,646,852
Net Unrealized Appreciation................................. 125,971,158
Accumulated Net Investment Loss............................. (231,579)
Accumulated Net Realized Loss............................... (4,070,608)
------------
NET ASSETS.................................................. $511,315,823
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $511,315,823 and 9,926,860 shares
of beneficial interest issued and outstanding)............ $ 51.51
============
|
See Notes to Financial Statements
19
Statement of Operations
Emerging Growth Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 1,219,722
Dividends (net of foreign withholding taxes of $4,971)...... 123,298
------------
Total Income............................................ 1,343,020
------------
EXPENSES:
Investment Advisory Fee..................................... 1,398,464
Trustees' Fees and Related Expenses......................... 25,357
Custody..................................................... 29,694
Legal....................................................... 4,023
Amortization of Organizational Costs........................ 681
Other....................................................... 69,266
------------
Total Expenses.......................................... 1,527,485
------------
NET INVESTMENT LOSS......................................... $ (184,465)
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (3,904,133)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 99,357,373
End of the Period......................................... 125,971,158
------------
Net Unrealized Appreciation During the Period............... 26,613,785
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 22,709,652
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 22,525,187
============
|
See Notes to Financial Statements
20
Statement of Changes in Net Assets
Emerging Growth Portfolio
For the Six Months Ended June 30, 2000 and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss......................................... $ (184,465) $ (146,795)
Net Realized Gain/Loss...................................... (3,904,133) 2,654,240
Net Unrealized Appreciation During the Period............... 26,613,785 89,250,361
------------ ------------
Change in Net Assets from Operations........................ 22,525,187 91,757,806
Distributions from Net Realized Gain........................ (1,128,627) -0-
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... 21,396,560 91,757,806
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 284,046,119 168,226,421
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 1,128,627 -0-
Cost of Shares Repurchased.................................. (58,748,015) (29,911,735)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 226,426,731 138,314,686
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 247,823,291 230,072,492
NET ASSETS:
Beginning of the Period..................................... 263,492,532 33,420,040
------------ ------------
End of the Period (Including accumulated net investment loss
of $231,579 and $47,114, respectively).................... $511,315,823 $263,492,532
============ ============
|
See Notes to Financial Statements
21
Financial Highlights
Emerging Growth Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
CLASS I SHARES JUNE 30, ----------------------------------
2000 1999 1998 1997 1996
---------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................ $46.22 $ 22.62 $16.45 $13.66 $11.72
------ ------- ------ ------ ------
Net Investment Loss................................... (.02) (.01) (.01) (.01) (.02)
Net Realized and Unrealized Gain...................... 5.46 23.61 6.19 2.80 1.96
------ ------- ------ ------ ------
Total from Investment Operations........................ 5.44 23.60 6.18 2.79 1.94
------ ------- ------ ------ ------
Less:
Distributions in Excess of Net Investment Income...... -0- -0- .01 -0- -0-
Distributions from Net Realized Gain.................. .15 -0- -0- -0- -0-
------ ------- ------ ------ ------
Total Distributions................................... .15 -0- .01 -0- -0-
------ ------- ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD...................... $51.51 $ 46.22 $22.62 $16.45 $13.66
====== ======= ====== ====== ======
Total Return*........................................... 11.68%** 104.38% 37.56% 20.42% 16.55%
Net Assets at End of the Period (In millions)........... $511.3 $ 263.5 $ 33.4 $ 10.5 $ 5.2
Ratio of Expenses to Average Net Assets*................ .77% .85% .85% .85% .85%
Ratio of Net Investment Loss to Average Net Assets*..... (.09%) (.17%) (.23%) (.11%) (.17%)
Portfolio Turnover...................................... 53%** 96% 91% 116% 102%
* If certain expenses had not been assumed by Van Kampen, Total
Return would have been lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets................. N/A .88% 1.23% 2.14% 3.28%
Ratio of Net Investment Loss to Average Net Assets...... N/A (.20%) (.61%) (1.40%) (2.60%)
|
** Non-Annualized
N/A=Not Applicable
See Notes to Financial Statements
22
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
ENTERPRISE PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) 6.37%
---------------------------------------------------------------------------
One-year total return based on NAV(1) 25.50%
---------------------------------------------------------------------------
Five-year average annual total return based on NAV(1) 25.45%
---------------------------------------------------------------------------
Ten-year average annual total return based on NAV(1) 18.05%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 14.42%
---------------------------------------------------------------------------
Commencement date 04/07/86
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
23
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--ENTERPRISE PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED
THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS ENDED
JUNE 30, 2000. THE TEAM IS LED BY JEFF D. NEW, SENIOR PORTFOLIO MANAGER, WHO HAS
MANAGED THE PORTFOLIO SINCE 1994 AND HAS WORKED IN THE INVESTMENT INDUSTRY SINCE
1987. HE IS JOINED BY SENIOR PORTFOLIO MANAGERS MICHAEL DAVIS AND MARY JAYNE
MALY. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE PORTFOLIO'S
PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE MARKET
ENVIRONMENT IN WHICH THE PORTFOLIO OPERATED, AND HOW DID THE PORTFOLIO
PERFORM IN THAT ENVIRONMENT?
A While the economy continued to be strong,
the word that most aptly describes the market environment during the period is
volatile.
Investors spent much of the last six months trying to determine how far the
Federal Reserve Board (the Fed) would go with its interest-rate hikes and what
effect those rate hikes would have on various market sectors and stocks. That
uncertainty showed up in the markets in the form of some fairly dramatic market
swings, especially in the technology sector. From the start of the year through
early March, technology stocks did very well. On March 10, the technology-heavy
NASDAQ index reached its all-time peak, but then started to decline and finally
plummeted in early to mid-April, taking the Standard and Poor's 500 Index down
with it. Stocks staged a brief rally toward the end of April, but fell again
until mid-May, when they started to go back up again.
The portfolio weathered this volatility well, returning 6.37 percent for the
six-month period ended June 30, 2000 (Class I shares). As a result of recent
market activity, current performance may vary from the figures shown. By
comparison, the Standard & Poor's 500 Index lost 0.42 percent, and the Russell
1000 Growth Index, which more closely resembles the composition of the
portfolio, returned 4.23 percent for the same period. Of course, past
performance is no guarantee of future results.
The S&P 500 Index is an unmanaged, broad-based index that measures the
performance of 500 stocks from 83 industrial groups and reflects the general
performance of the stock market, and the Russell 1000 Growth Index is an
unmanaged index that reflects the general performance of growth stocks. These
indexes are statistical composites that do not include any commissions or sales
charges that would be paid by an investor purchasing the securities they
represent. If these costs had been included, performance would have been less
favorable. It is not possible to invest directly in an index. Please refer to
the chart and footnotes on page 23 for additional portfolio performance results.
Q WHAT STRATEGIES DID YOU USE TO MANAGE
THE PORTFOLIO THROUGH THIS VOLATILE PERIOD?
A We maintained our investment discipline of
looking for companies with positive future fundamentals, whether in volatile or
stable markets. We invest in companies that possess at least one of the
following characteristics: consistent earnings growth, accelerating earnings
growth, better-than-expected fundamentals, or an underlying change in a company,
industry, or regulatory environment. Because we evaluate stocks on a company-by-
company basis, our focus is on the merits of any given company rather than
market movements or interest-rate changes. Regardless of what happens in the
market on a daily basis, we always remain true to this discipline.
Q WHAT SPECIFIC STOCKS CONTRIBUTED TO THE
PORTFOLIO'S RETURN?
A Despite the sector's volatility, many of the
stocks that helped portfolio performance were in the technology sector. Intel, a
microprocessor manufacturer, was the portfolio's largest holding and also the
largest contributor to portfolio performance. Intel performed very well due to
good unit growth, improved pricing, and several new products. Micron Technology,
a
24
semiconductor company, was one of the portfolio's better performers during the
period. We added to the portfolio's position in late 1999 and again in May 2000.
Cisco and Oracle have also been positive stocks for the portfolio, as each has
emerged as the dominant company in its market (Internet infrastructure and
corporate databases, respectively).
The portfolio benefited from owning drug stocks, particularly in the
large-cap sector. In addition to being largely overlooked by investors, there
was uncertainty regarding a possible Medicare prescription-drug benefit and its
effect on drug prices. This uncertainty resulted in the group's stock prices
being relatively low, despite consistent, moderate growth rates. The portfolio
owned both Pfizer and Warner-Lambert, two companies that merged during the
reporting period. We increased the portfolio's position in the surviving
company, Pfizer, during the period because we felt that the success of its
existing drugs and the expected economies of scale coming out of the merger made
the company an even more attractive holding. American Home Products, another
drug company with a number of promising drugs in its pipeline, also contributed
to performance.
Another sector that boosted portfolio performance was energy. In the past
six months, we added a number of offshore drillers and companies whose
businesses are tied to oil and gas wells to the portfolio. Oil and gas prices
rose during the period, which heightened drilling activity. BJ Services, Smith
International, and Schlumberger all did well as a result.
Of course, not all of the stocks in the portfolio performed as favorably,
nor is there any guarantee that any of the stocks mentioned above will continue
to perform as well or will be held by the portfolio in the future.
Q WHAT STOCKS HURT PORTFOLIO PERFORMANCE
DURING THE PERIOD?
A Not all technology stocks could be counted
on for positive performance, with Microsoft's decline detracting from
performance more than any other stock in the portfolio. We started reducing the
portfolio's position in Microsoft in late 1999 and continued to sell it this
spring due to our belief that Microsoft would become a smaller player than it
has been in the past as technology shifts away from desktop computers to
cellular phones and other Internet-access devices. Qualcomm, a major player in
cellular-phone components, also turned in disappointing performance, as did the
stock of America Online, whose value weakened amid uncertainty created by their
upcoming merger with Time Warner.
Many retail stocks hurt the portfolio's overall performance as well. The
stocks of Wal-Mart and Home Depot declined on the expectations that higher
interest rates would slow consumer spending.
Another sector that did poorly was communication services, which includes
wireless telecommunications and independent telecommunications companies. We
sold Voicestream Wireless, a telecommunications stock, from the portfolio in
April, after the company reported lower earnings than what Wall Street analysts
had predicted.
Q WHAT DO YOU SEE AHEAD FOR THE MARKET
AND THE PORTFOLIO?
A We envision more of the same for the
economy. We think that the overall outlook for corporate profits is good and
that the Fed has been successful in slowing the economy. Therefore, we expect to
see sustainable growth rather than a boom/bust cycle. This is positive for
stocks because it sets the stage for favorable earnings growth without the risk
of inflation. With that said, we believe our best long-term course of action for
the portfolio is to stick to our investment discipline and continue to look for
companies with positive fundamentals, regardless of market movements.
25
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Enterprise Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
MARKET
DESCRIPTION SHARES VALUE
COMMON STOCKS* 95.0%
CONSUMER DISTRIBUTION 4.3%
Best Buy Co.,
Inc. (a).............. 9,000 $ 569,250
Home Depot, Inc. ....... 34,000 1,697,875
Kohl's Corp. (a)........ 30,000 1,668,750
Kroger Co. (a) ......... 20,000 441,250
Limited, Inc. .......... 32,000 692,000
Safeway, Inc. (a)....... 38,000 1,714,750
Target Corp. ........... 10,500 609,000
Wal-Mart Stores,
Inc. ................. 28,000 1,613,500
------------
9,006,375
------------
CONSUMER DURABLES 0.8%
Harley-Davidson,
Inc. ................. 43,000 1,655,500
------------
CONSUMER NON-DURABLES 3.9%
Anheuser-Busch Cos.,
Inc. ................. 8,600 642,313
Avon Products, Inc. .... 12,000 534,000
Colgate-Palmolive
Co. .................. 11,000 658,625
Nike, Inc., Class B..... 21,000 836,062
Pepsi Bottling Group,
Inc. ................. 55,600 1,622,825
PepsiCo, Inc. .......... 48,000 2,133,000
Quaker Oats Co. ........ 9,700 728,713
Starbucks Corp. (a)..... 26,000 992,875
------------
8,148,413
------------
CONSUMER SERVICES 5.3%
Hispanic Broadcasting
Corp. (a)............. 20,000 662,500
Metro-Goldwyn-Mayer,
Inc. (a).............. 36,080 942,590
MGM Grand, Inc. ........ 16,000 514,000
Omnicom Group, Inc. .... 13,100 1,166,719
Outback Steakhouse, Inc.
(a)................... 24,000 702,000
Park Place Entertainment
Corp. (a)............. 34,000 414,375
Starwood Hotels &
Resorts Worldwide,
Inc., Class B......... 55,000 1,790,937
Time Warner, Inc. ...... 21,300 1,618,800
Univision
Communications, Inc.,
Class A (a)........... 15,600 1,614,600
Viacom, Inc., Class B
(a)................... 17,251 1,176,303
Walt Disney Co. ........ 13,000 504,562
------------
11,107,386
------------
|
MARKET
DESCRIPTION SHARES VALUE
ENERGY 4.7%
Anadarko Petroleum
Corp. ................ 15,000 $ 739,688
Baker Hughes, Inc. ..... 28,000 896,000
BJ Services Co. (a)..... 23,000 1,437,500
Enron Corp. ............ 6,000 387,000
ENSCO International,
Inc. ................. 46,000 1,647,375
Nabors Industries, Inc.
(a)................... 19,000 789,688
Noble Drilling Corp.
(a)................... 50,000 2,059,375
Schlumberger Ltd. ...... 5,000 373,125
Smith International,
Inc. (a).............. 19,000 1,383,437
------------
9,713,188
------------
FINANCE 7.7%
Allstate Corp. ......... 18,000 400,500
American Express Co. ... 24,000 1,251,000
American General
Corp. ................ 7,000 427,000
American International
Group, Inc. .......... 14,250 1,674,375
Associates First Capital
Corp., Class A........ 14,000 312,375
Bank of America
Corp. ................ 15,000 645,000
Bank of New York,
Inc. ................. 8,000 372,000
Capital One Financial
Corp. ................ 13,000 580,125
Charles Schwab Corp. ... 25,500 857,437
Chase Manhattan Corp. .. 15,000 690,937
Citigroup, Inc. ........ 27,075 1,631,269
Fannie Mae.............. 11,000 574,062
Federal Home Loan
Mortgage Corp. ....... 13,000 526,500
Fifth Third Bancorp..... 6,000 379,500
Firstar Corp. .......... 19,000 400,188
FleetBoston Financial
Corp. ................ 33,000 1,122,000
Franklin Resources,
Inc. ................. 12,000 364,500
Marsh & McLennan Cos.,
Inc. ................. 3,000 313,313
MBNA Corp. ............. 20,000 542,500
Merrill Lynch &
Co., Inc. ............ 7,000 805,000
Northern Trust Corp. ... 6,000 390,375
Providian Financial
Corp. ................ 4,000 360,000
|
See Notes to Financial Statements
26
YOUR PORTFOLIO'S INVESTMENTS
Enterprise Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
FINANCE (CONTINUED)
T. Rowe Price
Associates, Inc. ..... 10,000 $ 425,000
USA Education, Inc.
(formerly SLM Holding
Corp.) ............... 8,000 299,500
Wells Fargo Co. ........ 18,000 697,500
------------
16,041,956
------------
HEALTHCARE 12.7%
American Home Products
Corp. ................ 33,500 1,968,125
Amgen, Inc. (a)......... 26,600 1,868,650
Bristol-Myers Squibb
Co. .................. 18,900 1,100,925
Eli Lilly & Co. ........ 35,000 3,495,625
Immunex Corp. (a)....... 19,000 939,313
Johnson & Johnson....... 22,000 2,241,250
MedImmune, Inc. (a)..... 18,000 1,332,000
Merck & Co., Inc. ...... 28,000 2,145,500
PE Corp.-PE Biosystems
Group................. 10,000 658,750
Pfizer, Inc. ........... 133,100 6,388,800
Pharmacia Corp. ........ 19,000 982,062
Schering-Plough
Corp. ................ 28,500 1,439,250
UnitedHealth Group,
Inc. ................. 14,000 1,200,500
Wellpoint Health
Networks, Inc. (a).... 7,500 543,281
------------
26,304,031
------------
PRODUCER MANUFACTURING 6.5%
Corning, Inc. .......... 11,800 3,184,525
General Electric Co. ... 162,500 8,612,500
Johnson Controls,
Inc. ................. 10,000 513,125
Tyco International
Ltd. ................. 24,000 1,137,000
------------
13,447,150
------------
TECHNOLOGY 46.2%
ADC Telecommunications,
Inc. (a).............. 40,000 3,355,000
Adobe Systems, Inc. .... 9,000 1,170,000
Advanced Micro Devices,
Inc. (a).............. 9,000 695,250
Agilent Technologies,
Inc. (a).............. 3,051 225,011
Alcatel SA--ADR
(France).............. 8,000 532,000
Altera Corp. (a)........ 22,500 2,293,594
America Online, Inc.
(a)................... 51,600 2,721,900
Analog Devices, Inc.
(a)................... 22,000 1,672,000
Apple Computer, Inc.
(a)................... 10,000 523,750
Applied Materials, Inc.
(a)................... 26,800 2,428,750
Atmel Corp. (a)......... 15,000 553,125
|
MARKET
DESCRIPTION SHARES VALUE
TECHNOLOGY (CONTINUED)
BEA Systems, Inc. (a)... 6,000 $ 296,625
Broadcom Corp., Class A
(a)................... 4,000 875,750
CIENA Corp. (a)......... 4,000 666,750
Cisco Systems, Inc.
(a)(b)................ 155,500 9,883,969
Comverse Technology,
Inc. (a).............. 28,200 2,622,600
Dell Computer Corp.
(a)................... 50,000 2,465,625
EMC Corp. (a)........... 71,600 5,508,725
First Data Corp. ....... 11,700 580,613
Hewlett-Packard Co. .... 8,000 999,000
Inktomi Corp. (a)....... 4,000 473,000
Intel Corp. ............ 80,800 10,801,950
JDS Uniphase Corp.
(a)................... 29,600 3,548,300
KLA-Tencor Corp. (a).... 7,000 409,938
Linear Technology
Corp. ................ 22,400 1,432,200
LSI Logic Corp. (a)..... 32,000 1,732,000
Lucent Technologies,
Inc. ................. 17,975 1,065,019
McLeodUSA, Inc., Class A
(a)................... 36,000 744,750
Micron Technology,
Inc. ................. 37,000 3,258,312
Microsoft Corp. (a)..... 34,500 2,760,000
National Semiconductor
Corp. (a)............. 8,000 454,000
NEXTLINK Communications,
Inc., Class A (a)..... 18,000 682,875
Nokia Corp.--ADR
(Finland)............. 62,200 3,106,112
Nortel Networks
Corp. ................ 44,200 3,016,650
Oracle Corp. (a)........ 71,800 6,035,687
QUALCOMM, Inc. (a)...... 2,700 162,000
Sanmina Corp. (a)....... 23,000 1,966,500
Scientific-Atlanta,
Inc. ................. 8,000 596,000
STMicroelectronics NV--
ADR (Netherlands)..... 29,900 1,919,206
Sun Microsystems, Inc.
(a)................... 30,000 2,728,125
Teradyne, Inc. (a)...... 15,000 1,102,500
Texas Instruments,
Inc. ................. 38,600 2,651,337
VERITAS Software Corp.
(a)................... 10,750 1,214,918
Waters Corp. (a)........ 10,300 1,285,569
Xilinx, Inc. (a)........ 30,800 2,542,925
Yahoo!, Inc. (a)........ 3,000 371,625
------------
96,131,535
------------
TRANSPORTATION 0.2%
Kansas City Southern
Industries, Inc. ..... 5,000 443,438
------------
|
See Notes to Financial Statements
27
YOUR PORTFOLIO'S INVESTMENTS
Enterprise Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
UTILITIES 2.7%
Nextel Communications,
Inc., Class A (a)..... 16,000 $ 979,000
SBC Communications,
Inc. ................. 23,000 994,750
Sprint Corp. ........... 18,000 918,000
Verizon Communications
(formerly Bell
Atlantic Corp.)....... 16,000 813,000
WorldCom, Inc. (a)...... 41,000 1,880,875
------------
5,585,625
------------
TOTAL LONG-TERM INVESTMENTS 95.0%
(Cost $135,775,660)............ 197,584,597
------------
SHORT-TERM INVESTMENTS 5.8%
REPURCHASE AGREEMENT 4.9%
Bank of America ($10,100,000 par
collateralized by U.S.
Government obligation in a
pooled cash account, dated
06/30/00, to be sold on
07/03/00 at $10,105,765)....... 10,100,000
|
MARKET
DESCRIPTION SHARES VALUE
U.S. GOVERNMENT AGENCY
OBLIGATION 0.9%
Federal Home Loan Bank Discount
Note ($2,000,000 par, yielding
6.40%, 09/06/00 maturity)
(b)............................ $ 1,976,178
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $12,076,178)............. 12,076,178
------------
TOTAL INVESTMENTS 100.8%
(Cost $147,851,838)............ 209,660,775
LIABILITIES IN EXCESS OF OTHER
ASSETS (0.8%)................. (1,608,215)
------------
NET ASSETS 100.0%............... $208,052,560
============
|
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated for open futures transactions.
ADR--American Depositary Receipt
* The common stocks are classified by sectors which represent broad groupings of
related industries.
See Notes to Financial Statements
28
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Enterprise Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments (Cost $147,851,838)....................... $209,660,775
Cash........................................................ 5,294
Receivables:
Investments sold.......................................... 2,081,997
Portfolio Shares sold..................................... 165,006
Dividends................................................. 47,548
Variation Margin on Futures............................... 37,125
Interest.................................................. 1,936
Other....................................................... 46,713
------------
Total Assets............................................ 212,046,394
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 3,564,184
Portfolio Shares Repurchased.............................. 153,991
Investment Advisory Fee................................... 122,181
Distributor and Affiliates................................ 5,645
Trustees' Deferred Compensation and Retirement Plans........ 143,000
Accrued Expenses............................................ 4,833
------------
Total Liabilities....................................... 3,993,834
------------
NET ASSETS.................................................. $208,052,560
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $137,616,847
Net Unrealized Appreciation................................. 61,696,692
Accumulated Net Realized Gain............................... 8,688,640
Accumulated Undistributed Net Investment Income............. 50,381
------------
NET ASSETS.................................................. $208,052,560
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $208,052,560 and 8,235,595 shares
of beneficial interest issued and outstanding)............ $ 25.26
============
|
See Notes to Financial Statements
29
Statement of Operations
Enterprise Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $4,065)...... $ 338,229
Interest.................................................... 339,597
-----------
Total Income............................................ 677,826
-----------
EXPENSES:
Investment Advisory Fee..................................... 474,238
Trustees' Fees and Related Expenses......................... 29,403
Custody..................................................... 5,880
Legal....................................................... 8,206
Other....................................................... 38,626
-----------
Total Expenses.......................................... 556,353
Less Credits Earned on Cash Balances.................... 510
-----------
Net Expenses............................................ 555,843
-----------
NET INVESTMENT INCOME....................................... $ 121,983
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 9,390,535
Futures................................................... (137,141)
-----------
Net Realized Gain........................................... 9,253,394
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 59,541,665
-----------
End of the Period:
Investments............................................. 61,808,937
Futures................................................. (112,245)
-----------
61,696,692
-----------
Net Unrealized Appreciation During the Period............... 2,155,027
-----------
NET REALIZED AND UNREALIZED GAIN............................ $11,408,421
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $11,530,404
===========
|
See Notes to Financial Statements
30
Statement of Changes in Net Assets
Enterprise Portfolio
For the Six Months Ended June 30, 2000 and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 121,983 $ 310,546
Net Realized Gain........................................... 9,253,394 18,174,698
Net Unrealized Appreciation During the Period............... 2,155,027 15,825,721
------------ ------------
Change in Net Assets from Operations........................ 11,530,404 34,310,965
------------ ------------
Distributions from Net Investment Income.................... (313,037) (393,720)
Distributions from Net Realized Gain........................ (18,646,102) (9,274,929)
------------ ------------
Total Distributions......................................... (18,959,139) (9,668,649)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (7,428,735) 24,642,316
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 36,113,346 43,053,299
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 18,976,504 9,668,649
Cost of Shares Repurchased.................................. (13,745,281) (26,796,761)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 41,344,569 25,925,187
------------ ------------
TOTAL INCREASE IN NET ASSETS................................ 33,915,834 50,567,503
NET ASSETS:
Beginning of the Period..................................... 174,136,726 123,569,223
------------ ------------
End of the Period (Including accumulated undistributed net
investment income of $50,381 and $241,435,
respectively)............................................. $208,052,560 $174,136,726
============ ============
|
See Notes to Financial Statements
31
Financial Highlights
Enterprise Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS YEAR ENDED DECEMBER 31,
CLASS I SHARES ENDED ---------------------------------
JUNE 30, 2000 1999 1998 1997 1996
----------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $26.11 $22.39 $18.11 $16.26 $14.69
------ ------ ------ ------ ------
Net Investment Income...................... .01 .05 .07 .09 .11
Net Realized and Unrealized Gain........... 1.82 5.39 4.44 4.74 3.42
------ ------ ------ ------ ------
Total from Investment Operations............. 1.83 5.44 4.51 4.83 3.53
------ ------ ------ ------ ------
Less:
Distributions from Net
Investment Income........................ .04 .07 .02 .10 .11
Distributions from Net Realized Gain....... 2.64 1.65 .21 2.88 1.85
------ ------ ------ ------ ------
Total Distributions.......................... 2.68 1.72 .23 2.98 1.96
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD........... $25.26 $26.11 $22.39 $18.11 $16.26
====== ====== ====== ====== ======
Total Return*................................ 6.37%** 25.85% 25.00% 30.66% 24.80%
Net Assets at End of the Period
(In millions).............................. $208.1 $174.1 $123.6 $98.7 $84.8
Ratio of Expenses to Average Net Assets*..... .55% .60% .60% .60% .60%
Ratio of Net Investment Income to Average Net
Assets*.................................... .13% .22% .35% .47% .68%
Portfolio Turnover........................... 42%** 116% 82% 82% 152%
* If certain expenses had not been assumed by Van Kampen,
Total Return would have been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets...... N/A .62% .64% .66% .75%
Ratio of Net Investment Income to Average Net
Assets..................................... N/A .20% .31% .41% .53%
|
** Non-Annualized
N/A = Not Applicable
See Notes to Financial Statements
32
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
GROWTH AND INCOME PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) 5.12%
---------------------------------------------------------------------------
One-year total return based on NAV(1) 7.78%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 17.34%
---------------------------------------------------------------------------
Commencement date 12/23/96
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
33
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--GROWTH AND INCOME PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS
ENDED JUNE 30, 2000. THE TEAM IS LED BY JAMES A. GILLIGAN, SENIOR PORTFOLIO
MANAGER, WHO HAS MANAGED THE PORTFOLIO SINCE ITS INCEPTION IN DECEMBER 1996 AND
HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1985. HE IS JOINED BY PORTFOLIO
MANAGERS SCOTT A. CARROLL AND JAMES O. ROEDER. THE FOLLOWING DISCUSSION REFLECTS
THEIR VIEWS ON THE PORTFOLIO'S PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE MARKET
ENVIRONMENT IN WHICH THE PORTFOLIO OPERATED, AND HOW DID THE PORTFOLIO
PERFORM IN THAT ENVIRONMENT?
A Overall, it was an extremely volatile period
for the markets, and investors continued to favor growth stocks over value
stocks, as they have for the last six years. (There can be no assurance that
growth stocks will continue to be favored over value stocks in the future.)
The Standard & Poor's 500 Index struggled in the first month of the year as
investors took profits off the table, digesting the gains achieved in the fourth
quarter of 1999. However, the technology-heavy NASDAQ index started a strong
move upward in early February. With the S&P 500 following later that month, both
indexes reached all-time highs in March.
In April, both the S&P 500 and the NASDAQ fell sharply due to concerns about
technology stocks' high valuations and the effects of continued interest-rate
increases on U.S. corporate earnings. As the reporting period ended in June,
both indexes had recovered from their lows but were still significantly below
their highs.
In the early part of the year, technology stocks continued to dominate all
other sectors. When technology started to weaken in April and May, there was
renewed enthusiasm for more stable areas such as consumer non-durables
(including food and soft drink companies) and health-care stocks. Energy stocks,
for the most part, also performed well in the wake of accelerating energy
prices.
Although it was a difficult market in which to find attractively valued
stocks, the portfolio profited from some well-positioned holdings that boosted
its return during the reporting period. As a result, for the six-month period
ended June 30, 2000, the portfolio achieved a total return of 5.12 percent
(Class I shares). As a result of recent market activity, current performance may
vary from the figures shown. By comparison, the Standard & Poor's 500 Index lost
0.42 percent, and the Russell 1000 Index, which more closely resembles the
composition of the portfolio, returned 0.78 percent for the same period. Of
course, past performance is no guarantee of future results. The S&P 500 Index is
an unmanaged, broad-based index that reflects the general performance of the
stock market, and the Russell 1000 Index is an unmanaged index that reflects the
general performance of the 1,000 largest U.S. companies on total market
capitalization. These indexes are statistical composites that do not include any
commissions or sales charges that would be paid by an investor purchasing the
securities they represent. Such costs would lower the performance of the index.
It is not possible to invest directly in an index. Please refer to the chart and
footnotes on page 33 for additional portfolio performance results.
Q WHAT WAS YOUR STRATEGY FOR MANAGING
THE PORTFOLIO IN THIS ENVIRONMENT?
A As always, we continued to look for
attractively valued companies that we believe have catalysts to drive their
stock prices higher. Late in the period, we favored natural gas and energy
service stocks due to rising energy prices. As a result, we added a number of
oil service stocks to the portfolio to capture the upside potential of the
increased spending that we predict from oil companies in coming years. The
addition of Schlumberger, Transocean, and Halliburton all contributed to the
portfolio's performance.
34
At the same time, we monitored the portfolio for stocks that no longer met
our value criteria. During the reporting period, we decreased the portfolio's
position in technology stocks due to our concerns about their generally high
valuations relative to the rest of the market. Holdings in Texas Instruments,
Dell, Motorola, Nortel, and Alcatel were all reduced or eliminated.
Other top contributors to the portfolio's performance during the reporting
period were Dynegy, Coastal, and El Paso Energy. Of course, not all of the
stocks in the portfolio performed as favorably, nor is there any guarantee that
any of the stocks mentioned above will continue to perform as well or will be
held by the portfolio in the future.
Q YOU MENTIONED STRENGTH IN THE HEALTH-
CARE AND CONSUMER NON-DURABLE SECTORS. HOW DID THOSE SECTORS FACTOR INTO THE
PORTFOLIO'S PERFORMANCE?
A The portfolio was well-positioned in health
care. Three of the portfolio's better pharmaceutical performers were
Schering-Plough, Pharmacia, and American Home Products. We added Schering to the
portfolio after its share price weakened amid concerns about the slowing growth
of its largest product. The portfolio also profited from its position in United
Healthcare, as the shares of most HMOs benefited from improved revenue growth.
We sold the portfolio's United Healthcare holdings at the end of the period to
take advantage of this growth.
In the consumer non-durables area, the portfolio's position in beverage and
bottling companies boosted performance. The portfolio's holding in Pepsi
Bottling appreciated as the company reported strong earnings and offered the
potential for higher growth rates.
Q WHERE ELSE DID YOU SEARCH FOR VALUE?
A We added to our position in the financial
sector late in the reporting period. We believe that the Federal Reserve Board's
rate hikes are near an end and that investors will again become attracted to
financial stocks. One of the largest additions to the portfolio during the
reporting period was Paine Webber. We think it is an extremely attractive
franchise that could be of takeover interest to other firms in the consolidating
brokerage industry. The portfolio's positions in John Hancock and MetLife, both
former mutual insurance companies that have converted to public ownership, also
did well.
Q WHAT WERE SOME OF THE DISAPPOINTMENTS
IN THE PORTFOLIO?
A The single biggest disappointment was
Electronic Data Systems (EDS), the largest independent computer management and
services company in the United States. At the end of the reporting period, EDS
announced that its earnings would not meet Wall Street analysts' expectations,
and its stock price fell on the heels of this announcement. The portfolio
continued to hold EDS because we see a trend toward increased data outsourcing
on the part of corporate America, and we believe EDS is well-positioned to
capitalize on that trend.
We were also disappointed by the performance of Motorola, whose stock
performed poorly when the company was unable to realize expected profitability
in its cellular phone business. We sold a portion of the portfolio's position in
Motorola at the end of the first quarter and the remainder by the end of June.
Q WHAT IS YOUR OUTLOOK FOR THE PORTFOLIO
AND THE MARKET?
A We are more confident in our outlook since
the market's April correction. Valuations have fallen to what we believe are
more reasonable levels, particularly in the technology sector, and it does not
appear that the economy will slow enough to dramatically influence earnings. As
we previously noted, we expect the financial sector to benefit from lower rates
going forward, and we have positioned the portfolio according to that
expectation. In addition, we expect to increase the portfolio's exposure to
technology because valuations have become more reasonable and earnings growth is
still strong relative to the rest of the market.
35
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Growth and Income Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
MARKET
DESCRIPTION SHARES VALUE
COMMON STOCKS 90.9%
CONSUMER DISTRIBUTION 2.2%
Federated Department
Stores, Inc. (a)......... 17,720 $ 598,050
Lexmark International
Group, Inc., Class A
(a)...................... 12,100 813,725
-----------
1,411,775
-----------
CONSUMER NON-DURABLES 6.9%
Anheuser-Busch Cos.,
Inc. .................... 10,800 806,625
Colgate-Palmolive Co. ..... 18,020 1,078,947
Pepsi Bottling Group,
Inc. .................... 32,000 934,000
PepsiCo, Inc. ............. 21,100 937,631
Ralston-Ralston Purina
Group.................... 19,000 378,813
Whitman Corp. ............. 16,600 205,425
-----------
4,341,441
-----------
CONSUMER SERVICES 1.2%
H & R Block, Inc. ......... 17,400 563,325
USA Networks, Inc. (a)..... 9,200 198,950
-----------
762,275
-----------
ENERGY 13.3%
Burlington Resources,
Inc. .................... 22,200 849,150
Coastal Corp. ............. 5,770 351,249
Dynegy, Inc., Class A...... 14,620 998,729
El Paso Energy Corp. ...... 24,790 1,262,741
Exxon Mobil Corp. ......... 17,445 1,369,432
Halliburton Co. ........... 17,500 825,781
Schlumberger Ltd. ......... 8,900 664,162
Texaco, Inc. .............. 23,600 1,256,700
Transocean Sedco Forex,
Inc. .................... 13,971 746,575
-----------
8,324,519
-----------
FINANCE 21.0%
Allstate Corp. ............ 14,600 324,850
American Express Co. ...... 11,400 594,225
American General Corp. .... 8,550 521,550
Aon Corp. ................. 12,300 382,069
AXA Financial, Inc. ....... 19,800 673,200
Bank of America Corp. ..... 22,900 984,700
Bank of Tokyo-Mitsubishi,
Ltd.--ADR (Japan)........ 41,310 500,884
Chase Manhattan Corp. ..... 6,550 301,709
Chubb Corp. ............... 8,300 510,450
Citigroup, Inc. ........... 14,300 861,575
Equifax, Inc. ............. 14,600 383,250
Federal National Mortgage
Association.............. 10,800 563,625
FleetBoston Financial
Corp..................... 22,640 769,760
Franklin Resources,
Inc. .................... 19,900 604,463
|
MARKET
DESCRIPTION SHARES VALUE
FINANCE (CONTINUED)
Jefferson-Pilot Corp. ..... 6,700 $ 378,131
John Hancock Financial
Services (a)............. 26,000 615,875
Lincoln National Corp. .... 14,000 505,750
Marsh & McLennan Cos.,
Inc. .................... 9,900 1,033,931
MetLife, Inc. (a).......... 28,700 604,494
Paine Webber Group,
Inc. .................... 19,300 878,150
PNC Financial Services
Group.................... 15,300 717,187
Washington Mutual, Inc. ... 16,316 471,125
-----------
13,180,953
-----------
HEALTHCARE 8.5%
American Home Products
Corp. ................... 14,600 857,750
Aventis SA, Warrants--ADR
(France)................. 2,079 19,751
Baxter International,
Inc. .................... 10,500 738,281
Beckman Coulter, Inc. ..... 9,200 537,050
HCA-The Healthcare Corp.... 28,900 877,837
Pharmacia Corp. ........... 27,552 1,424,094
Schering-Plough Corp. ..... 17,400 878,700
-----------
5,333,463
-----------
PRODUCER MANUFACTURING 6.8%
Honeywell International,
Inc...................... 12,720 428,505
Ingersoll-Rand Co. ........ 19,100 768,775
Koninklijke Philips
Electronics NV--ADR
(Netherlands)............ 21,560 1,024,100
Minnesota Mining &
Manufacturing Co. ....... 18,400 1,518,000
Raytheon Co., Class B...... 29,200 562,100
-----------
4,301,480
-----------
RAW MATERIALS/PROCESSING
INDUSTRIES 2.8%
Imperial Chemical
Industries PLC--ADR
(United Kingdom)......... 9,740 300,114
International Paper Co. ... 3,000 89,438
Pall Corp. ................ 25,300 468,050
Rohm & Haas Co. ........... 13,700 472,650
Sherwin-Williams Co. ...... 21,400 453,412
-----------
1,783,664
-----------
TECHNOLOGY 17.5%
3Com Corp. (a)............. 6,300 363,038
Adobe Systems, Inc. ....... 4,000 520,000
Alcatel SA--ADR (France)... 6,500 432,250
Altera Corp. (a)........... 4,500 458,719
America Online, Inc. (a)... 8,000 422,000
|
See Notes to Financial Statements
36
YOUR PORTFOLIO'S INVESTMENTS
Growth and Income Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
TECHNOLOGY (CONTINUED)
BMC Software, Inc. (a)..... 14,900 $ 543,617
Boeing Co. ................ 19,300 806,981
Cadence Design Systems,
Inc. (a)................. 21,900 446,213
Cisco Systems, Inc. (a).... 4,700 298,744
Compaq Computer Corp. ..... 23,400 598,162
Dell Computer Corp. (a).... 6,500 320,531
Electronic Data Systems
Corp. ................... 18,500 763,125
Electronics for Imaging,
Inc. (a)................. 18,200 460,688
EMC Corp. (a).............. 4,400 338,525
Hewlett-Packard Co. ....... 5,300 661,837
Intel Corp. ............... 2,300 307,481
Lucent Technologies,
Inc. .................... 7,000 414,750
Nippon Telegraph &
Telephone-- ADR (Japan).. 12,000 820,500
Nortel Networks Corp. ..... 12,300 839,475
Oracle Corp. (a)........... 3,900 327,844
SunGard Data Systems, Inc.
(a)...................... 19,600 607,600
Texas Instruments, Inc. ... 3,600 247,275
-----------
10,999,355
-----------
UTILITIES 10.7%
DQE, Inc. ................. 11,100 438,450
GTE Corp. ................. 17,710 1,102,447
Niagara Mohawk Holdings,
Inc. (a)................. 63,710 887,958
Northeast Utilities (a).... 40,500 880,875
NSTAR...................... 18,110 736,851
PECO Energy Co. ........... 13,210 532,528
Reliant Energy, Inc. ...... 18,400 543,950
SBC Communications, Inc.... 20,400 882,300
Sprint Corp. .............. 13,490 687,990
Verizon Communications
(formerly Bell Atlantic
Corp.) (a)............... 500 25,686
-----------
6,719,035
-----------
TOTAL COMMON STOCKS 90.9%.......... 57,157,960
-----------
|
MARKET
DESCRIPTION VALUE
CORPORATE BOND 0.2%
Hewlett-Packard Co., LYON, 144A--
Private Placement ($125,000 par,
yielding 3.125%, 10/14/17
maturity) (c)..................... $ 118,125
-----------
TOTAL LONG-TERM INVESTMENTS 91.1%
(Cost $51,917,991)................ 57,276,085
-----------
SHORT-TERM INVESTMENTS 8.4%
REPURCHASE AGREEMENTS 6.8%
DLJ Mortgage Acceptance Corp.
($1,765,000 par collateralized by
U.S. Government obligations in a
pooled cash account, dated
06/30/00, to be sold on 07/03/00
at $1,765,968).................... 1,765,000
Warburg Dillon Read ($2,500,000 par
collateralized by U.S. Government
obligations in a pooled cash
account, dated 06/30/00, to be
sold on 07/03/00 at $2,501,367)... 2,500,000
-----------
TOTAL REPURCHASE AGREEMENTS......... 4,265,000
-----------
U.S. GOVERNMENT AGENCY OBLIGATION 1.6%
Federal National Mortgage Discount
Note ($1,000,000 par, yielding
6.48%, 09/21/00 maturity) (b)..... 985,240
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $5,250,240)................. 5,250,240
-----------
TOTAL INVESTMENTS 99.5%
(Cost $57,168,231)................ 62,526,325
FOREIGN CURRENCY 0.0%
(Cost $472)....................... 484
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.5%................. 312,964
-----------
NET ASSETS 100.0%.................. $62,839,773
===========
|
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated for open futures transactions.
(c) 144A Securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally
transactions with qualified institutional buyers.
ADR--American Depositary Receipt
LYON--Liquid Yield Option Note
See Notes to Financial Statements
37
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Growth and Income Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments (Cost $57,168,231)........................ $62,526,325
Cash........................................................ 6,273
Foreign Currency (Cost $472)................................ 484
Receivables:
Investments Sold.......................................... 622,957
Portfolio Shares Sold..................................... 122,283
Dividends................................................. 47,497
Variation Margin on Futures............................... 15,150
Interest.................................................. 778
Other....................................................... 3,557
-----------
Total Assets............................................ 63,345,304
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 438,258
Investment Advisory Fee................................... 12,546
Portfolio Shares Repurchased.............................. 3,369
Distributor and Affiliates................................ 2,502
Trustees' Deferred Compensation and Retirement Plans........ 39,004
Accrued Expenses............................................ 9,852
-----------
Total Liabilities....................................... 505,531
-----------
NET ASSETS.................................................. $62,839,773
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $54,139,115
Net Unrealized Appreciation................................. 5,313,490
Accumulated Net Realized Gain............................... 3,019,599
Accumulated Undistributed Net Investment Income............. 367,569
-----------
NET ASSETS.................................................. $62,839,773
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $62,839,773 and 3,942,755 shares
of beneficial interest issued and outstanding)............ $ 15.94
===========
|
See Notes to Financial Statements
38
Statement of Operations
Growth and Income Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $4,467)...... $ 377,762
Interest.................................................... 190,877
----------
Total Income............................................ 568,639
----------
EXPENSES:
Investment Advisory Fee..................................... 172,001
Trustees' Fees and Related Expenses......................... 17,567
Custody..................................................... 7,764
Legal....................................................... 1,238
Other....................................................... 33,887
----------
Total Expenses.......................................... 232,457
Investment Advisory Fee Reduction....................... 18,532
Less Credits Earned on Cash Balances.................... 145
----------
Net Expenses............................................ 213,780
----------
NET INVESTMENT INCOME....................................... $ 354,859
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $3,474,841
Futures................................................... 105,408
Foreign Currency Transaction.............................. (35)
----------
Net Realized Gain........................................... 3,580,214
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 6,490,114
----------
End of the Period:
Investments............................................. 5,358,094
Futures................................................. (44,616)
Foreign Currency Translation............................ 12
----------
5,313,490
----------
Net Unrealized Depreciation During the Period............... (1,176,624)
----------
NET REALIZED AND UNREALIZED GAIN............................ $2,403,590
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $2,758,449
==========
|
See Notes to Financial Statements
39
Statement of Changes in Net Assets
Growth and Income Portfolio
For the Six Months Ended June 30, 2000 and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 354,859 $ 540,154
Net Realized Gain........................................... 3,580,214 2,869,665
Net Unrealized Appreciation/Depreciation During the
Period.................................................... (1,176,624) 2,184,495
----------- -----------
Change in Net Assets from Operations........................ 2,758,449 5,594,314
----------- -----------
Distributions from Net Investment Income.................... (46,919) (745,667)
Distributions from Net Realized Gain........................ (620,653) (2,344,365)
----------- -----------
Total Distributions......................................... (667,572) (3,090,032)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... 2,090,877 2,504,282
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 12,421,973 21,242,526
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 667,572 3,090,032
Cost of Shares Repurchased.................................. (4,802,542) (6,605,514)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 8,287,003 17,727,044
----------- -----------
TOTAL INCREASE IN NET ASSETS................................ 10,377,880 20,231,326
NET ASSETS:
Beginning of the Period..................................... 52,461,893 32,230,567
----------- -----------
End of the Period (Including accumulated undistributed net
investment income of $367,569 and $59,629,
respectively)............................................. $62,839,773 $52,461,893
=========== ===========
|
See Notes to Financial Statements
40
Financial Highlights
Growth and Income Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
DECEMBER 23, 1996
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31 INVESTMENT
CLASS I SHARES SIX MONTHS ENDED ------------------------- OPERATIONS)
JUNE 30, 2000 1999(A) 1998 1997 TO DECEMBER 31, 1996
-------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.......................... $ 15.34 $14.48 $12.12 $ 9.97 $ 10.00
------- ------ ------ ------ -------
Net Investment Income........... .09 .19 .12 .07 .01
Net Realized and Unrealized
Gain/Loss..................... .69 1.66 2.26 2.31 (.04)
------- ------ ------ ------ -------
Total from Investment
Operations...................... .78 1.85 2.38 2.38 (.03)
------- ------ ------ ------ -------
Less:
Distributions from Net
Investment Income............. .01 .27 .02 .07 -0-
Distributions from and in Excess
of Net Realized Gain.......... .17 .72 -0- .16 -0-
------- ------ ------ ------ -------
Total Distributions............... .18 .99 .02 .23 -0-
------- ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD.......................... $ 15.94 $15.34 $14.48 $12.12 $ 9.97
======= ====== ====== ====== =======
Total Return*..................... 5.12%** 12.99% 19.61% 23.90% -.30%**
Net Assets at End of the Period
(In millions)................... $ 62.8 $ 52.5 $ 32.2 $ 11.7 $ 0.5
Ratio of Expenses to Average Net
Assets*......................... .75% .75% .75% .75% .75%
Ratio of Net Investment Income to
Average Net Assets*............. 1.25% 1.25% 1.27% 1.19% 4.47%
Portfolio Turnover................ 46%** 96% 70% 96% 0%**
* If certain expenses had not been assumed by Van Kampen,
Total Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net
Assets.......................... .82% .92% 1.09% 1.63% 45.97%
Ratio of Net Investment
Income/Loss to Average Net
Assets.......................... 1.18% 1.08% .93% .31% -40.74%
|
** Non-Annualized
(a) Based on average month-end shares outstanding.
See Notes to Financial Statements
41
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) 14.28%
---------------------------------------------------------------------------
One-year total return based on NAV(1) 1.77%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 12.55%
---------------------------------------------------------------------------
Commencement date 07/03/95
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less that their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Investing in REITs involves unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of
any credit extended. REITs are dependent upon management skills, are not
diversified and are subject to the risks of financing projects. REITs are
subject to heavy cash flow dependency, default by borrowers, self-
liquidation and the possibilities of failing to qualify for tax-exempt
status under the Internal Revenue Code of 1986, as amended. REITs,
especially mortgage REITs, are also subject to some interest rate risk
(e.g., as interest rates rise, the value of REITs may decline).
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
42
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO ABOUT THE KEY EVENTS AND
ECONOMIC FORCES THAT SHAPED THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN
DURING THE SIX MONTHS ENDED JUNE 30, 2000. THE TEAM IS LED BY THEODORE R. BIGMAN
AND DOUGLAS A. FUNKE, WHO HAVE MANAGED THE PORTFOLIO SINCE 1995 AND 1999 AND
HAVE WORKED IN THE INVESTMENT INDUSTRY SINCE 1983 AND 1993, RESPECTIVELY. THE
FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE PORTFOLIO'S PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE MARKET
ENVIRONMENT IN WHICH THE PORTFOLIO OPERATED, AND HOW DID THE PORTFOLIO
PERFORM IN THAT ENVIRONMENT?
A During the reporting period, the REIT (real
estate investment trust) market not only outperformed the Standard & Poor's 500
Index, but also experienced far less volatility. In fact, major stock market
indicators such as the S&P 500 Index, the Dow Jones Industrial Average, and the
technology-heavy NASDAQ all posted negative returns, while the NAREIT (National
Association of Real Estate Investment Trusts) Equity REIT Index was up for the
first half of 2000.
In our view, REITs performed as they should have. Although real estate stock
prices are influenced by the broader stock market's movements, we believe their
performance depends primarily on the real estate market, which has helped them
achieve attractive performance with less volatility than the overall market.
As a result of the robust economy, many real estate markets experienced
increases in occupancy rates and strong rental growth, particularly in areas
with significant exposure to technology-oriented businesses and central business
locations. Furthermore, investors who were uncomfortable with the stock market's
sharp movements in the first half of the year began turning to less volatile
alternatives, such as REITs, for diversification. The growth in real estate
markets and attention from investors helped the fund achieve a total return of
14.28 percent for the six-month period ended June 30, 2000 (Class I shares). As
a result of recent market activity, current performance may vary from the
figures shown. By comparison, the NAREIT Equity REIT Index returned 13.18
percent, and the S&P 500 Index declined 0.43 percent for the same period. Of
course, past performance is no guarantee of future results. The NAREIT Equity
REIT Index is an unmanaged index that reflects the general performance of a
broad range of equity REITs of all property types. The S&P 500 Index is a
broad-based, unmanaged index that measures the performance of 500 stocks from 83
industrial groups and reflects the general performance of the stock market.
These indexes are statistical composites that do not include any commissions or
sales charges that would be paid by an investor purchasing the securities they
represented. Such costs would lower the performance of the indexes. It is not
possible to invest directly in an index. Please refer to the chart and footnotes
on page 42 for additional portfolio performance results.
Q IN THIS ENVIRONMENT, WHAT WAS YOUR
STRATEGY FOR MANAGING THE PORTFOLIO?
A We continued to shape the portfolio with
companies that have solid business fundamentals and are available at attractive
prices. Overall, the portfolio's sector weightings did not change much from
quarter to quarter. We added to companies focused on offices in central business
districts, as recent increases in rent helped this sector's overall performance.
Despite its weak performance, we liked the manufactured home sector because of
its predictable growth, limited degree of new supply, and the modest levels of
capital expenditure it requires. We were cautious about the retail sector
because rising interest rates and a subsequent decline in consumer confidence
led us to believe that consumers' shopping appetites might be slowing.
43
Q WHAT SECTORS OF THE REAL ESTATE MARKET
PERFORMED WELL, AND WHAT SECTORS WERE DISAPPOINTMENTS?
A Lodging stocks have been the best
performers, as the solid economy has provided strong demand for hotels and
resorts. As a result, we added to the portfolio's weighting in these stocks
during the reporting period. Another good performer was the office and
industrial sector, which benefited from a burst in demand and a rise in rents in
the markets where technology plays a major role in the local economies. The
apartment sector, which is the portfolio's second largest sector allocation,
performed modestly well on a year-to-date basis.
On the other hand, neither the manufactured home sector nor the retail
sector performed well, although performance in the regional mall sub-sector
improved when investors realized that Internet commerce did not pose a serious
and immediate competitive threat to traditional "bricks and mortar" stores.
Finally, the self-storage sector was the worst performer. Because this is a
small sector, negative events at individual companies had a pronounced effect on
the sector's overall performance.
Keep in mind that not all sectors in the portfolio performed favorably, and
there is no guarantee that any of these sectors will perform well or will
continue to be held by the portfolio in the future.
Q WHAT IS YOUR OUTLOOK FOR THE REAL
ESTATE MARKET?
A The outlook for the REIT market continues
to be favorable. We will focus on two key factors: the health of the physical
property markets and the pricing for the securities. The private real estate
markets have remained attractive, based on the robust U.S. economy and a
reasonable level of new supply. We are encouraged that the flow of development
either peaked in 1999 or is in the process of peaking in 2000 for the vast
majority of property types. Clearly, the strength of the economy has provided
demand for development. However, given the declining levels of construction, we
believe the U.S. real estate market is prepared for the eventual slowdown in the
economy. Given the current volatility in the equity markets, we believe that
REITs may be well poised to continue to receive a high level of attention from
traditional equity investors.
44
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Morgan Stanley Real Estate
Securities Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
MARKET
DESCRIPTION SHARES VALUE
COMMON AND PREFERRED STOCKS 95.1%
APARTMENTS 19.6%
Amli Residential
Properties Trust...... 73,100 $ 1,722,419
Archstone Communities
Trust................. 137,246 2,890,744
AvalonBay Communities,
Inc. ................. 210,900 8,805,075
BRE Properties, Inc.,
Class A............... 8,000 231,000
Equity Residential
Properties Trust...... 150,054 6,902,484
Essex Property Trust,
Inc. ................. 226,800 9,525,600
Pennsylvania REIT....... 111,300 1,906,012
Smith (Charles E.)
Residential Realty,
Inc. ................. 116,300 4,419,400
Summit Properties,
Inc. ................. 11,000 231,000
------------
36,633,734
------------
DEVELOPMENT 5.4%
Atlantic Gulf
Communities Corp.
(a)................... 414,824 35,260
Atlantic Gulf
Communities
Corp.--Preferred Ser B
(a)................... 55,647 299,102
Atlantic Gulf
Communities
Corp.--Preferred Ser
B, 144A--Private
Placement (a) (b)..... 79,420 466,592
Atlantic Gulf
Communities Corp.
Warrants, 37,098
shares Class A, B and
C, expiring 06/23/04
(a)................... 111,294 6,678
Atlantic Gulf
Communities Corp.
Warrants, 74,352
shares Class A, B and
C, expiring 06/23/04,
144A--Private
Placement (a) (b)..... 223,056 13,383
Brookfield Properties
Corp. ................ 546,342 7,273,178
Brookfield Properties
Corp. Canada.......... 150,875 2,003,177
------------
10,097,370
------------
HEALTHCARE FACILITIES 0.0%
Meditrust Cos. ......... 2,700 10,125
------------
|
MARKET
DESCRIPTION SHARES VALUE
HOTEL & LODGING 6.4%
Candlewood Hotel Co.,
Inc. (a).............. 80,000 $ 190,000
Hilton Hotels Corp. .... 52,400 492,943
Interstate Hotels
Management, Inc.
(a)................... 13,575 39,877
Starwood Hotels &
Resorts, Class B...... 317,511 10,338,952
Wyndham International,
Inc., Class A (a)..... 380,163 950,407
------------
12,012,179
------------
MANUFACTURED HOME COMMUNITIES4.7%
Chateau Communities,
Inc. ................. 284,938 8,049,498
Manufactured Home
Communities, Inc. .... 25,800 617,588
------------
8,667,086
------------
OFFICE/INDUSTRIAL 35.1%
Arden Realty, Inc. ..... 379,600 8,920,600
Beacon Capital Partners,
Co Space.............. 60,925 91,156
Beacon Capital Partners,
Cypress Communication,
Inc. ................. 48,385 204,287
Beacon Capital Partners,
Inc. ................. 271,300 3,239,973
Beacon Capital Partners,
Wyndham International,
Inc. ................. 12,658 1,152,097
Boston Properties,
Inc. ................. 210,700 8,138,288
Brandywine Realty
Trust................. 68,600 1,311,975
Cabot Industrial
Trust................. 11,500 226,406
CarrAmerica Realty
Corp. ................ 281,200 7,451,800
Equity Office Properties
Trust................. 331,546 9,138,237
Great Lakes REIT,
Inc. ................. 333,675 5,672,475
Pacific Gulf Properties,
Inc. ................. 212,600 5,328,288
Prentiss Properties
Trust................. 23,800 571,200
Prime Group Realty
Trust................. 323,600 4,914,675
ProLogis Trust.......... 177,700 3,787,231
Trizec Hahn Corp. ...... 134,900 2,411,338
Wellsford Real
Properties, Inc.
(a)................... 194,771 2,945,911
------------
65,505,937
------------
|
See Notes to Financial Statements
45
YOUR PORTFOLIO'S INVESTMENTS
Morgan Stanley Real Estate Securities Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION SHARES VALUE
SELF-STORAGE 6.8%
PS Business Parks,
Inc. ................. 157,820 $ 3,787,680
Public Storage, Inc. ... 379,138 8,886,047
------------
12,673,727
------------
SHOPPING CENTERS 6.6%
Acadia Realty Trust..... 28,300 160,956
Burnham Pacific
Properties, Inc. ..... 650,882 4,474,814
Federal Realty
Investment Trust...... 205,100 4,102,000
JDN Realty Corp. ....... 96,300 981,056
Pan Pacific Retail
Properties, Inc. ..... 83,800 1,686,475
Ramco-Gershenson
Properties Trust...... 2,000 30,875
Vornado Realty Trust.... 25,900 900,025
------------
12,336,201
------------
SHOPPING MALLS 10.5%
Rouse Co. .............. 170,700 4,224,825
Simon Property Group,
Inc. ................. 350,300 7,772,281
Taubman Centers,
Inc. ................. 698,242 7,680,662
------------
19,677,768
------------
TOTAL COMMON AND PREFERRED
STOCKS 95.1%
(Cost $176,449,435)............ 177,614,127
------------
SHORT-TERM INVESTMENTS 7.1%
U.S. GOVERNMENT AGENCY OBLIGATION 0.6%
Federal Home Loan Bank Discount
Note ($1,200,000 par, yielding
4.38%, 07/03/00 maturity)...... 1,199,562
------------
|
MARKET
DESCRIPTION VALUE
REPURCHASE AGREEMENTS 6.5%
DLJ Mortgage Acceptance Corp.,
($6,060,000 par collateralized
by U.S. Government obligations
in a pooled cash account, dated
06/30/00, to be sold on
07/03/00 at $6,063,323)........ $ 6,060,000
Warburg Dillon Reed ($6,000,000
par collateralized by U.S.
Government obligations in a
pooled cash account, dated
06/30/00, to be sold on
07/03/00 at $6,003,280)........ 6,000,000
------------
TOTAL REPURCHASE AGREEMENTS...... 12,060,000
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $13,259,562)............. 13,259,562
------------
TOTAL INVESTMENTS 102.2%
(Cost $189,708,997)............ 190,873,689
LIABILITIES IN EXCESS OF OTHER
ASSETS (2.2%)................. (4,048,050)
------------
NET ASSETS 100.0%................ $186,825,639
============
|
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) 144A Securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally
transactions with qualified institutional buyers.
REIT--Real Estate Investment Trust
See Notes to Financial Statements
46
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Morgan Stanley Real Estate Securities Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments (Cost $189,708,997)....................... $190,873,689
Receivables:
Dividends................................................. 1,705,252
Portfolio Shares Sold..................................... 607,712
Investments Sold.......................................... 379,155
Interest.................................................. 43,421
Other....................................................... 5,460
------------
Total Assets............................................ 193,614,689
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 4,925,389
Portfolio Shares Repurchased.............................. 1,103,397
Custodian Bank............................................ 466,601
Investment Advisory Fee................................... 187,204
Distributor and Affiliates................................ 4,364
Trustees' Deferred Compensation and Retirement Plans........ 70,999
Accrued Expenses............................................ 31,096
------------
Total Liabilities....................................... 6,789,050
------------
NET ASSETS.................................................. $186,825,639
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $192,688,836
Accumulated Undistributed Net Investment Income............. 4,057,615
Net Unrealized Appreciation................................. 1,228,256
Accumulated Net Realized Loss............................... (11,149,068)
------------
NET ASSETS.................................................. $186,825,639
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $186,825,639 and 13,902,042 shares
of beneficial interest issued and outstanding)............ $ 13.44
============
|
See Notes to Financial Statements
47
Statement of Operations
Morgan Stanley Real Estate Securities Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $29,887)..... $ 4,906,830
Interest (Net of foreign withholding taxes of $9,268)....... 176,243
------------
Total Income............................................ 5,083,073
------------
EXPENSES:
Investment Advisory Fee..................................... 784,785
Trustees' Fees and Related Expenses......................... 23,300
Custody..................................................... 10,018
Shareholder Services........................................ 8,291
Legal....................................................... 3,381
Amortization of Organizational Costs........................ 681
Other....................................................... 27,006
------------
Total Expenses.......................................... 857,462
Less Credits Earned on Cash Balances.................... 64
------------
Net Expenses............................................ 857,398
------------
NET INVESTMENT INCOME....................................... $ 4,225,675
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (2,140,918)
Foreign Currency.......................................... 372
------------
Net Realized Loss........................................... (2,140,546)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (17,565,429)
------------
End of the Period:
Investments............................................. 1,164,692
Foreign Currency Translation............................ 63,564
------------
1,228,256
------------
Net Unrealized Appreciation During the Period............... 18,793,685
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 16,653,139
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 20,878,814
============
|
See Notes to Financial Statements
48
Statement of Changes in Net Assets
Morgan Stanley Real Estate Securities Portfolio
For the Six Months Ended June 30, 2000 and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 4,225,675 $ 6,579,592
Net Realized Loss........................................... (2,140,546) (2,236,925)
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 18,793,685 (10,040,283)
------------ -------------
Change in Net Assets from Operations........................ 20,878,814 (5,697,616)
------------ -------------
Distributions from Net Investment Income.................... (6,714,636) (11,849,805)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... 14,164,178 (17,547,421)
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 79,736,160 72,449,932
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 6,714,636 11,849,796
Cost of Shares Repurchased.................................. (63,368,604) (126,003,752)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 23,082,192 (41,704,024)
------------ -------------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... 37,246,370 (59,251,445)
NET ASSETS:
Beginning of the Period..................................... 149,579,269 208,830,714
------------ -------------
End of the Period (Including accumulated undistributed net
investment income of $4,057,615 and $6,546,576,
respectively)............................................. $186,825,639 $ 149,579,269
============ =============
|
See Notes to Financial Statements
49
Financial Highlights
Morgan Stanley Real Estate
Securities Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
CLASS I SHARES JUNE 30, ----------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD............ $12.37 $13.76 $ 15.85 $14.78 $10.74
------ ------ ------- ------ ------
Net Investment Income............................. .35 .68 .78 .46 .22
Net Realized and Unrealized Gain/Loss............. 1.32 (1.16) (2.60) 2.63 4.11
------ ------ ------- ------ ------
Total from Investment Operations.................... 1.67 (.48) (1.82) 3.09 4.33
------ ------ ------- ------ ------
Less:
Distributions from Net Investment Income.......... .60 .91 .03 .47 .20
Distributions from Net Realized Gain.............. -0- -0- .24 1.55 .09
------ ------ ------- ------ ------
Total Distributions................................. .60 .91 .27 2.02 .29
------ ------ ------- ------ ------
NET ASSET VALUE, END OF THE PERIOD.................. $13.44 $12.37 $ 13.76 $15.85 $14.78
====== ====== ======= ====== ======
Total Return*....................................... 14.28%** -3.37% -11.62% 21.47% 40.53%
Net Assets at End of the Period (In millions)....... $186.8 $149.6 $ 208.8 $299.4 $167.5
Ratio of Expenses to Average Net Assets*............ 1.09% 1.10% 1.08% 1.07% 1.10%
Ratio of Net Investment Income to Average Net
Assets*........................................... 5.39% 3.74% 4.72% 3.42% 5.06%
Portfolio Turnover.................................. 25%** 23% 110% 177% 84%
* If certain expenses had not been assumed by Van Kampen, Total Return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets............. N/A 1.13% N/A N/A 1.27%
Ratio of Net Investment Income to Average
Net Assets........................................ N/A 3.71% N/A N/A 4.89%
|
** Non-Annualized
N/A = Not Applicable
See Notes to Financial Statements
50
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
STRATEGIC STOCK PORTFOLIO
CLASS I SHARES
(as of June 30, 2000)
---------------------------------------------------------------------------
Six-month total return based on NAV(1) -8.99%
---------------------------------------------------------------------------
One-year total return based on NAV(1) -18.75%
---------------------------------------------------------------------------
Life-of-Portfolio average annual total return based on
NAV(1) 3.01%
---------------------------------------------------------------------------
Commencement date 11/03/97
---------------------------------------------------------------------------
|
(1) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
Total returns do not include any charges, expenses, or fees imposed by an
insurance company at the underlying portfolio or separate account levels. If
the returns included the effect of these additional charges, the returns
would have been lower.
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. Please review the
Risk/Return Summary of the Prospectus for further details on investment
risks. Portfolio shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future results.
Investment return and net asset value will fluctuate with market conditions.
Market forecasts provided in this report may not necessarily come to pass.
The Portfolio being offered is through a variable annuity contract.
51
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LIFE INVESTMENT
TRUST--STRATEGIC STOCK PORTFOLIO ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT
SHAPED THE MARKETS AND INFLUENCED THE PORTFOLIO'S RETURN DURING THE SIX MONTHS
ENDED JUNE 30, 2000. THE TEAM IS LED BY JOHN CUNNIFF, SENIOR PORTFOLIO MANAGER,
WHO HAS MANAGED THE PORTFOLIO SINCE ITS INCEPTION AND HAS WORKED IN THE
INVESTMENT INDUSTRY SINCE 1992. HE IS JOINED BY PORTFOLIO MANAGER RAJ WAGLE. THE
FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE PORTFOLIO'S PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE
MARKET ENVIRONMENT IN WHICH THE PORTFOLIO OPERATED, AND HOW DID THE
PORTFOLIO PERFORM?
A Overall, it was an extremely volatile period
for the markets, which generally continued to favor growth stocks over value.
(There can be no assurance that growth stocks will continue to be favored over
value stocks in the future.)
The Standard & Poor's 500 Index started the reporting period strong, though
it encountered some turbulence when the strength of the economy caused investors
to worry about further interest-rate increases by the Federal Reserve Board.
Beginning in late March, the S&P 500 Index and the technology-heavy NASDAQ index
fell sharply due to concerns about technology stocks' high valuations and the
effects of continued interest-rate increases on U.S. corporate earnings.
When technology stocks began to falter, some investors looked to traditional
value sectors for relatively strong performance potential with less volatility
than growth sectors. However, this short-lived rally was not enough to help
value stocks outperform growth stocks on a long-term basis.
The portfolio, whose dividend-oriented value strategy was out of favor with
investors, fell 8.99 percent for the six-month period ended June 30, 2000 (Class
I shares.) As a result of recent market activity, current performance may vary
from the figures shown. By comparison, the S&P 500 Index fell 0.43 percent, the
Dow Jones Industrial Average fell 8.44 percent, and the Morgan Stanley Capital
International USA Index fell 1.96 percent for the same period. Of course, past
performance is no guarantee of future results. The S&P 500 Index is a
broad-based, unmanaged index that measures the performance of 500 stocks from 83
industrial groups and reflects the general performance of the stock market. The
Dow consists of 30 actively traded stocks of well-established, blue-chip
companies, and the MSCI-USA Index achieves a 60 percent representation of U.S.
market capitalization, as well as 60 percent of the capitalization of each
industry group. These indexes are statistical composites that do not include any
commissions that would be paid by an investor purchasing the securities they
represent. Such costs would lower the performance of the indexes. It is not
possible to invest directly in an index. Please refer to the chart and footnotes
on page 51 for additional fund performance results.
Q IN LIGHT OF THESE CONDITIONS,
WHICH STOCKS MOST HELPED THE PORTFOLIO'S PERFORMANCE?
A Stocks that contributed positively to
performance included Avon Products, Abbott Labs, and Philip Morris. Avon
Products, under new CEO Andrea Jung, carried out an impressive turnaround of its
business by taking advantage of both the Internet and traditional stores to fuel
growth. This helped the company's earnings, and its stock price was rewarded by
investors. Abbott Labs benefited from the good performance of pharmaceutical
stocks and from its strong sales and earnings growth in the first half of 2000.
Finally, Philip Morris appreciated as investors gained confidence that the
company would withstand its legal issues.
Keep in mind that not all stocks in the portfolio performed favorably, and
there is no guarantee that any of these stocks will perform well or will be held
by the portfolio in the future.
52
Q WHICH STOCKS HINDERED PERFORMANCE?
A Cyclical stocks, as a group, hindered the
portfolio's performance. In particular, Du Pont, International Paper, and
Caterpillar were poor performers in the first half of 2000. Cyclical stocks tend
to falter when consumers perceive a slowdown in the economy, a condition that
occurred as the Fed increased interest rates during the reporting period. Rises
in home mortgages and automobile loan rates slowed the demand for houses and
cars. Consequently, manufacturers' earnings slowed, and their stock prices fell.
Q WHAT IS YOUR STOCK-SELECTION STRATEGY?
A As always, we use a disciplined strategy to
select undervalued stocks of high-quality companies. First, we analyze the Dow,
which is composed of 30 blue-chip stocks. Each month, we invest half of the
portfolio's new assets equally among the 10 Dow stocks with the highest dividend
yields. Investors often refer to this as a "Dogs of the Dow" strategy.
Next, we review the nearly 370 large-company stocks that comprise the
MSCI-USA Index. We exclude from this group the 30 Dow stocks and all utility and
financial stocks. The remaining securities are screened for quality factors such
as sales growth, earnings growth, dividend performance, and trading volume. Of
the securities that pass our screen, we select the 10 stocks with the highest
dividend yields. The other half of the portfolio's new assets is invested
equally among these 10 stocks each month.
By limiting our investments to these two indexes, we select from a pool of
what we believe are high-quality U.S. companies. Also, because stocks with high
dividend yields tend to be undervalued, our strategy pinpoints companies that
could potentially rebound in price.
Q HOW DOES THIS STRATEGY WORK OVER TIME?
A The portfolio effectively has 12 "baskets" of
stocks, one basket for each month. We sell each basket after 12 months and
purchase a new basket of 20 stocks to replace it. Of course, there won't
necessarily be 20 entirely new stocks in each month's basket, since a new basket
could contain one or more stocks that were also included in previous months.
It's also important to understand that shareholders of the portfolio don't own
just one basket of stocks. Each shareholder owns a portion of the whole
portfolio, which contains multiple baskets.
Through this stock-selection process, the portfolio is rotated every month
to purchase stocks that may be undervalued in the marketplace, and to sell
stocks that have had a full 12 months to potentially rebound to their fair
values. It has been our experience that solid, well-established companies do not
often languish at reduced valuations. Their true worth is usually recognized
over time. Our strategy gives each stock at least a 12-month window to achieve
its appreciation potential.
Q WHAT DO YOU SEE AHEAD FOR
THE PORTFOLIO?
A Regardless of market conditions, we will
continue to follow our disciplined stock-selection strategy. Because of dramatic
market gains in recent years, stock valuations are at unprecedented high levels.
However, the market moves in cycles, and we believe this period of overvalued
stocks will eventually pass, causing investors to return to high dividend yield
stocks and restoring our investment discipline to favor.
53
BY THE NUMBERS
YOUR PORTFOLIO'S INVESTMENTS
Strategic Stock Portfolio
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR PORTFOLIO'S INVESTMENTS AT THE END OF THE
REPORTING PERIOD.
MARKET
SECURITY DESCRIPTION SHARES VALUE
COMMON STOCKS 97.5%
CONSUMER DISTRIBUTION 6.2%
Limited, Inc. ............ 4,300 $ 92,988
May Department
Stores Co. ............. 44,475 1,067,400
Sears Roebuck & Co. ...... 11,780 384,322
Too, Inc. (a)............. 2,911 74,049
TRW, Inc. ................ 1,400 60,725
-----------
1,679,484
-----------
CONSUMER DURABLES 15.0%
Delphi Automotive Systems
Corp. .................. 9,568 139,334
Eastman Kodak Co. ........ 21,620 1,286,390
Ford Motor Co. ........... 3,450 148,350
General Motors Corp. ..... 19,100 1,108,994
Genuine Parts Co. ........ 150 3,000
Goodyear Tire &
Rubber Co. ............. 8,350 167,000
Masco Corp. .............. 21,080 380,757
Maytag Corp. ............. 19,040 702,100
Newell Rubbermaid,
Inc. ................... 3,750 96,563
Visteon Corp. ............ 452 5,477
-----------
4,037,965
-----------
CONSUMER NON-DURABLES 17.7%
Anheuser-Busch Cos.,
Inc. ................... 1,310 97,841
Avon Products, Inc. ...... 23,660 1,052,870
General Mills, Inc. ...... 30,210 1,155,532
H. J. Heinz Co. .......... 2,420 105,875
Philip Morris Cos.,
Inc. ................... 53,540 1,422,156
Procter & Gamble Co. ..... 2,430 139,118
Sara Lee Corp. ........... 40,490 781,963
-----------
4,755,355
-----------
CONSUMER SERVICES 3.5%
Carnival Corp. ........... 2,730 53,235
McGraw-Hill Cos., Inc. ... 16,500 891,000
-----------
944,235
-----------
ENERGY 6.2%
Chevron Corp. ............ 5,960 505,482
Exxon Mobil Corp. ........ 14,770 1,159,445
-----------
1,664,927
-----------
FINANCE 5.2%
J.P. Morgan & Co.,
Inc. ................... 12,570 1,384,271
-----------
|
MARKET
SECURITY DESCRIPTION SHARES VALUE
HEALTHCARE 5.9%
Abbott Laboratories,
Inc. ................... 27,550 $ 1,227,697
Eli Lilly & Co. .......... 3,490 348,564
-----------
1,576,261
-----------
PRODUCER MANUFACTURING 17.2%
Caterpillar, Inc. ........ 30,330 1,027,429
Dana Corp. ............... 24,470 518,458
Emerson Electric Co. ..... 17,870 1,078,901
Ingersoll-Rand Co. ....... 3,340 134,435
Minnesota Mining &
Manufacturing Co. ...... 18,470 1,523,775
Textron, Inc. ............ 4,380 237,889
Xerox Corp. .............. 4,310 89,432
-----------
4,610,319
-----------
RAW MATERIALS/PROCESSING
INDUSTRIES 10.8%
Air Products & Chemicals,
Inc. ................... 110 3,389
E. I. Du Pont de Nemours &
Co. .................... 22,030 963,813
International Paper
Co. .................... 20,280 604,598
Sherwin-Williams Co. ..... 62,220 1,318,286
-----------
2,890,086
-----------
TECHNOLOGY 0.2%
General Dynamics Corp. ... 1,290 67,402
-----------
TRANSPORTATION 2.9%
Burlington Northern Santa
Fe Corp. ............... 34,130 782,857
-----------
UTILITIES 6.7%
AT&T Corp. ............... 2,760 87,285
BellSouth Corp. .......... 4,750 202,469
SBC Communications,
Inc. ................... 30,260 1,308,745
Verizon Communications
(formerly Bell Atlantic
Corp.).................. 3,940 200,201
-----------
1,798,700
-----------
TOTAL LONG-TERM INVESTMENTS 97.5%
(Cost $29,018,058).............. 26,191,862
|
See Notes to Financial Statements
54
YOUR PORTFOLIO'S INVESTMENTS
Strategic Stock Portfolio
June 30, 2000 (Unaudited)
MARKET
DESCRIPTION VALUE
REPURCHASE AGREEMENT 2.4%
Warburg Dillon Read ($655,000 par
collateralized by U.S.
Government obligations in a
pooled cash account, dated
06/30/00, to be sold on 07/03/00
at $655,358)
(Cost $655,000)................. $ 655,000
-----------
TOTAL INVESTMENTS 99.9%
(Cost $29,673,058).............. 26,846,862
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.1%............... 26,481
-----------
NET ASSETS 100.0%................ $26,873,343
===========
|
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
55
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
Strategic Stock Portfolio
June 30, 2000 (Unaudited)
ASSETS:
Total Investments (Cost $29,673,058)........................ $26,846,862
Cash........................................................ 3,069
Receivables:
Dividends................................................. 65,799
Interest.................................................. 183
Unamortized Organizational Costs............................ 18,760
Other....................................................... 947
-----------
Total Assets............................................ 26,935,620
-----------
LIABILITIES:
Payables:
Portfolio Shares Purchased................................ 20,211
Investment Advisory Fee................................... 4,046
Distributor and Affiliates................................ 2,180
Trustees' Deferred Compensation and Retirement Plans........ 32,676
Accrued Expenses............................................ 3,164
-----------
Total Liabilities....................................... 62,277
-----------
NET ASSETS.................................................. $26,873,343
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $30,507,471
Accumulated Undistributed Net Investment Income............. 300,420
Accumulated Net Realized Loss............................... (1,108,352)
Net Unrealized Depreciation................................. (2,826,196)
-----------
NET ASSETS.................................................. $26,873,343
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Based on net assets of $26,873,343 and 2,671,946 shares
of beneficial interest issued and outstanding)............ $ 10.06
===========
|
See Notes to Financial Statements
56
Statement of Operations
Strategic Stock Portfolio
For the Six Months Ended June 30, 2000 (Unaudited)
INVESTMENT INCOME:
Dividends................................................... $ 394,431
Interest.................................................... 14,406
-----------
Total Income............................................ 408,837
-----------
EXPENSES:
Investment Advisory Fee..................................... 68,877
Trustees' Fees and Related Expenses......................... 18,044
Shareholder Services........................................ 10,292
Accounting.................................................. 9,904
Audit....................................................... 8,259
Custody..................................................... 5,846
Amortization of Organizational Costs........................ 3,989
Legal....................................................... 1,309
Other....................................................... 5,509
-----------
Total Expenses.......................................... 132,029
Investment Advisory Fee Reduction....................... 42,455
-----------
Net Expenses............................................ 89,574
-----------
NET INVESTMENT INCOME....................................... $ 319,263
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (766,793)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (611,807)
End of the Period......................................... (2,826,196)
-----------
Net Unrealized Depreciation During the Period............... (2,214,389)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(2,981,182)
===========
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(2,661,919)
===========
|
See Notes to Financial Statements
57
Statement of Changes in Net Assets
Strategic Stock Portfolio
For the Six Months Ended June 30, 2000 and the Year Ended December 31, 1999
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 319,263 $ 497,535
Net Realized Gain/Loss...................................... (766,793) 757,354
Net Unrealized Depreciation During the Period............... (2,214,389) (1,830,412)
----------- -----------
Change in Net Assets from Operations........................ (2,661,919) (575,523)
----------- -----------
Distributions from Net Investment Income.................... (508,843) (236,337)
Distributions from Net Realized Gain........................ (1,064,836) (61,873)
----------- -----------
Total Distributions......................................... (1,573,679) (298,210)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (4,235,598) (873,733)
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 5,198,871 14,861,659
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 1,561,518 295,270
Cost of Shares Purchased.................................... (5,543,916) (5,799,584)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 1,216,473 9,357,345
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... (3,019,125) 8,483,612
NET ASSETS:
Beginning of the Period..................................... 29,892,468 21,408,856
----------- -----------
End of Period (Including accumulated undistributed net
investment income of $300,420 and $490,000,
respectively)............................................. $26,873,343 $29,892,468
=========== ===========
|
See Notes to Financial Statements
58
Financial Highlights
Strategic Stock Portfolio
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE
PORTFOLIO OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
NOVEMBER 3, 1997
(COMMENCEMENT
CLASS I SHARES OF INVESTMENT
SIX MONTHS ENDED YEAR ENDED YEAR ENDED OPERATIONS) TO
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF THE PERIOD............ $11.73 $11.93 $10.25 $10.00
------ ------ ------ ------
Net Investment Income.... .12 .18 .11 .03
Net Realized and
Unrealized Gain/Loss... (1.18) (.23) 1.58 .22
------ ------ ------ ------
Total from Investment
Operations............... (1.06) (.05) 1.69 .25
------ ------ ------ ------
Less:
Distributions from Net
Investment Income...... .20 .12 .01 -0-
Distributions from Net
Realized Gain.......... .41 .03 -0- -0-
------ ------ ------ ------
Total Distributions........ .61 .15 .01 -0-
------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD................... $10.06 $11.73 $11.93 $10.25
====== ====== ====== ======
Total Return*.............. -8.99%** -.47% 16.51% 2.45%**
Net Assets at End of the
Period (In millions)..... $ 26.9 $ 29.9 $ 21.4 $ 2.5
Ratio of Expenses to
Average Net Assets*...... .65% .65% .65% .61%
Ratio of Net Investment
Income to Average Net
Assets*.................. 2.32% 1.81% 2.01% 2.67%
Portfolio Turnover......... 24%** 43% 10% 0%**
* If certain expenses had not been assumed by Van Kampen, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to
Average Net Assets....... .96% .91% 1.25% 2.59%
Ratio of Net Investment
Income to Average Net
Assets................... 2.02% 1.55% 1.41% .68%
|
** Non-Annualized
See Notes to Financial Statements
59
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Life Investment Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company comprised of eleven Portfolios: Asset Allocation Portfolio(1)
("Asset Allocation"), Comstock Portfolio ("Comstock"), Domestic Income
Portfolio(1) ("Domestic Income"), Emerging Growth Portfolio ("Emerging Growth"),
Enterprise Portfolio ("Enterprise"), Global Equity Portfolio(1) ("Global
Equity"), Government Portfolio(1) ("Government"), Growth and Income Portfolio
("Growth and Income"), Money Market Portfolio(1) ("Money Market"), Morgan
Stanley Real Estate Securities Portfolio ("Real Estate") and Strategic Stock
Portfolio ("Strategic Stock") (collectively the "Portfolios"). Each Portfolio is
accounted for as a separate entity. On April 28, 2000, each of the Portfolios
commenced offering of Class II Shares. (As no Class II Shares were sold from any
of the portfolios as of June 30, 2000, all financial information presented
applies to Class I Shares only.)
The goals of the Portfolios are as follows: Comstock seeks capital growth
and income through investments in equity securities including common and
preferred stocks and securities convertible into common and preferred stocks;
Emerging Growth seeks capital appreciation by investing principally in common
stocks of emerging growth companies; Enterprise seeks capital appreciation by
investing principally in common stocks of growth companies; Growth and Income
seeks long-term growth of capital and income by investing primarily in
income-producing equity securities including common stocks and convertible
securities; Real Estate seeks long-term growth of capital by investing
principally in securities of companies operating in the real estate industry;
and Strategic Stock seeks an above average total return consistent with the
preservation of invested capital, by investing primarily in a portfolio of high
dividend yielding equity securities included in the Dow Jones Industrial Average
or the Morgan Stanley Capital International USA Index.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Investments in securities listed on a securities exchange
are valued at their sales price as of the close of such securities exchange.
Fixed income investments are valued by independent pricing services or dealers
using the mean of the bid and asked prices. Unlisted securities and listed
securities for which the last sales price is not available are valued at the
mean of the bid and asked prices. For those securities where prices or
quotations are not available, valuations are determined in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Portfolios may invest in repurchase agreements which are short-term
investments in which the Portfolios acquire ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Portfolios may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Portfolios will make payment for such securities only upon physical delivery
or evidence of book entry transfer to the
(1) These Portfolios are included under a separate cover.
60
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
account of the custodian bank. The seller is required to maintain the value of
the underlying security at not less than the repurchase proceeds due the
Portfolios.
C. INCOME AND EXPENSES Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Bond premium is not amortized
and original issue discount is accreted over the expected life of each
applicable security.
D. ORGANIZATIONAL COSTS Emerging Growth, Real Estate and Strategic Stock have
reimbursed Van Kampen Funds Inc. or its affiliates (collectively "Van Kampen")
for costs incurred in connection with each Portfolio's organization in the
amount of $6,828, $6,828 and $40,000, respectively per Portfolio. These costs
are being amortized on a straight line basis over the 60 month period ending
July 2, 2000, July 2, 2000 and November 4, 2002, respectively. The Adviser has
agreed that in the event any of the initial shares of the Portfolios originally
purchased by Van Kampen are redeemed during the amortization period, the
Portfolios will be reimbursed for any unamortized organizational costs in the
same proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
E. FEDERAL INCOME TAXES It is each Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
Each Portfolio intends to utilize provisions of the federal income tax laws
which allow each Portfolio to carry a realized capital loss forward for eight
years following the year of the loss and offset such losses against any future
realized capital gains. The following table presents the capital loss
carryforward at December 31, 1999 along with its expiration dates. The table
also presents the identified cost of investments at June 30, 2000 for federal
income tax purposes with the associated gross unrealized appreciation, gross
unrealized depreciation and net unrealized appreciation/depreciation on
investments.
EMERGING
COMSTOCK GROWTH ENTERPRISE
Realized capital loss carryforward..................... -- -- --
Expiration dates of capital loss carryforward.......... -- -- --
Amount expiring on 12/31/99............................ -- -- --
Identified cost........................................ $4,320,062 $392,845,204 $147,989,244
Gross unrealized appreciation.......................... 113,243 129,640,019 65,781,332
Gross unrealized depreciation.......................... 217,508 3,741,176 4,109,801
Net unrealized appreciation/depreciation............... (104,265) 125,898,843 61,671,531
|
GROWTH
AND REAL STRATEGIC
INCOME ESTATE STOCK
Realized capital loss carryforward..................... -- $ 6,669,534 --
Expiration dates of capital loss carryforward.......... -- 2006-2007 --
Amount expiring on 12/31/99............................ -- -- --
Identified cost........................................ $57,384,101 $190,596,450 $29,978,339
Gross unrealized appreciation.......................... 8,100,944 14,790,199 1,071,901
Gross unrealized depreciation.......................... 2,958,720 14,512,960 4,203,378
Net unrealized appreciation/depreciation............... 5,142,224 277,239 (3,131,477)
|
Net realized gains or losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses relating to wash sale
transactions.
61
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
F. DISTRIBUTION OF INCOME AND GAINS Comstock, Emerging Growth, Enterprise,
Growth and Income, Real Estate and Strategic Stock declare dividends from net
investment income and net realized gains, if any, annually. Distributions from
net realized gains for book purposes may include short-term capital gains and
gains on option and futures transactions. All short-term capital gains and a
portion of option and futures gains are included in ordinary income for tax
purposes.
G. EXPENSE REDUCTIONS During the six months ended June 30, 2000, custody fees
were reduced by the following amounts as a result of credits earned on overnight
cash balances:
GROWTH
EMERGING AND REAL STRATEGIC
COMSTOCK GROWTH ENTERPRISE INCOME ESTATE STOCK
Credits earned on overnight cash
balances................................ $112 $0 $510 $145 $64 $0
|
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly based upon the average daily net assets as follows:
Asset Allocation, Domestic Income, Enterprise, Government
and Money Market (based upon their combined net assets)
First $500 million...................................... .50%
Next $500 million....................................... .45%
Over $1 billion......................................... .40%
(The resulting fee is prorated to each of these
Portfolios based upon their respective average daily net
assets.)
Emerging Growth
First $500 million...................................... .70%
Next $500 million....................................... .65%
Over $1 billion......................................... .60%
Comstock, Growth and Income
First $500 million...................................... .60%
Over $500 million....................................... .55%
Real Estate
First $500 million...................................... 1.00%
Next $500 million....................................... .95%
Over $1 billion......................................... .90%
Strategic Stock
First $500 million...................................... .50%
Over $500 million....................................... .45%
|
In relation to Real Estate, the Adviser has entered into a subadvisory
agreement, dated October 1, 1998, with Morgan Stanley Dean Witter Investment
Management Inc. (the "Subadviser") to provide advisory services to the Portfolio
and the Adviser with respect to the Portfolio's investments. For these services,
the Adviser pays 50% of its advisory fees to the Subadviser.
Under the terms of the advisory agreement, if the total ordinary business
expenses, exclusive of taxes, distribution fees and interest, exceed .95% of the
average daily net assets of Enterprise, the Adviser will reimburse the Portfolio
for the amount of the excess. Additionally, the Adviser has
62
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
voluntarily agreed to reimburse the Portfolios for all expenses as a percent of
average daily net assets in excess of the following:
Comstock.................................................... .95%
Emerging Growth............................................. .85%
Enterprise.................................................. .60%
Growth and Income........................................... .75%
Real Estate................................................. 1.10%
Strategic Stock............................................. .65%
|
Other transactions with affiliates during the six months ended June 30, 2000
were approximately as follows:
EMERGING
COMSTOCK GROWTH ENTERPRISE
Accounting.................................................. $ -0- $13,800 $5,300
Shareholder servicing agent's fees.......................... 5,200 7,500 7,500
Legal (Skadden Arps)........................................ 300 4,000 8,200
|
GROWTH
AND REAL STRATEGIC
INCOME ESTATE STOCK
Accounting.................................................. $2,600 $5,700 $5,200
Shareholder servicing agent's fees.......................... 7,500 7,500 9,500
Legal (Skadden Arps)........................................ 1,200 3,400 1,300
|
Accounting services are provided by Van Kampen at cost. Van Kampen Investor
Services Inc., an affiliate of the Adviser, serves as the shareholder servicing
agent for the Portfolios. Transfer agency fees are determined through
negotiations with the Portfolios' Board of Trustees and are based on competitive
benchmarks. Legal services are provided by Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Portfolios, of which a trustee of the Portfolios is
an affiliated person.
Certain officers and trustees of the Portfolios are also officers and
directors of Van Kampen. The Portfolios do not compensate their officers or
trustees who are officers of Van Kampen.
The Portfolios provide deferred compensation and retirement plans for their
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Trust. The maximum
annual benefit per trustee under the plan is $2,500 per portfolio.
At June 30, 2000, Van Kampen owned 100,000 shares of Comstock, 10 shares of
Real Estate, and 20,000 shares of Strategic Stock.
63
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
3. CAPITAL TRANSACTIONS
For the six months ended June 30, 2000, share transactions were as follows:
EMERGING
COMSTOCK GROWTH ENTERPRISE
Beginning Shares........................................ 171,239 5,700,230 6,669,872
Sales................................................... 242,094 5,376,475 1,408,110
Dividend Reinvestment................................... 1,391 17,866 700,757
Repurchases............................................. (8,632) (1,167,711) (543,144)
---------- ------------ ------------
Ending Shares........................................... 406,092 9,926,860 8,235,595
========== ============ ============
Capital at 06/30/2000................................... $3,870,199 $389,646,852 $137,616,847
========== ============ ============
|
GROWTH AND REAL STRATEGIC
INCOME ESTATE STOCK
Beginning Shares........................................ 3,419,972 12,090,590 2,548,299
Sales................................................... 786,163 6,223,422 492,339
Dividend Reinvestment................................... 41,932 563,036 157,570
Repurchases............................................. (305,312) (4,975,006) (526,262)
----------- ------------ -----------
Ending Shares........................................... 3,942,755 13,902,042 2,671,946
=========== ============ ===========
Capital at 06/30/00..................................... $54,139,115 $192,688,836 $30,507,471
=========== ============ ===========
|
At June 30, 2000, with the exception of Van Kampen's ownership of shares of
certain portfolio's, five insurance companies or their separate accounts were
record owners of all but a de minimus number of the shares of each Portfolio.
For the year ended December 31, 1999, share transactions were as follows:
EMERGING
COMSTOCK GROWTH ENTERPRISE
Beginning Shares............................................ 100,000(1) 1,477,759 5,518,824
Sales....................................................... 70,595 5,233,873 1,916,479
Dividend Reinvestment....................................... 838 -0- 445,355
Repurchases................................................. (194) (1,011,402) (1,210,786)
---------- ------------ -----------
Ending Shares............................................... 171,239 5,700,230 6,669,872
========== ============ ===========
Capital at 12/31/99......................................... $1,668,635 $163,220,121 $96,272,278
========== ============ ===========
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GROWTH AND REAL STRATEGIC
INCOME ESTATE STOCK
Beginning Shares.......................................... 2,225,645 15,178,156 1,794,237
Sales..................................................... 1,413,376 5,498,923 1,206,873
Dividend Reinvestment..................................... 209,139 972,091 24,667
Repurchases............................................... (428,188) (9,558,580) (477,478)
----------- ------------ -----------
Ending Shares............................................. 3,419,972 12,090,590 2,548,299
=========== ============ ===========
Capital at 12/31/99....................................... $45,852,112 $169,606,644 $29,290,998
=========== ============ ===========
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(1) Portfolio commenced investment operations on April 30, 1999.
At December 31, 1999, with the exception of Van Kampen's ownership of shares
of certain portfolios, five insurance companies or their separate accounts were
record owners of all but a de minimus number of the shares of each Portfolio.
64
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding forward commitment transactions and short-term investments, were:
GROWTH
EMERGING AND REAL STRATEGIC
COMSTOCK GROWTH ENTERPRISE INCOME ESTATE STOCK
Purchases............ $2,065,430 $398,663,504 $108,168,546 $32,093,097 $58,004,999 $6,430,495
Sales................ 374,443 194,370,452 75,690,999 23,539,856 38,254,271 6,462,436
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5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Portfolios have a variety of reasons to use derivative instruments, such
as to attempt to protect the Portfolios against possible changes in the market
value of its portfolio, manage the Portfolio's effective yield, foreign currency
exposure, maturity and duration or to generate potential gain. All of the
Portfolios' holdings, including derivative instruments, are marked to market
each day with the change in value reflected in unrealized appreciation/
depreciation. Upon disposition, a realized gain or loss is recognized
accordingly, except when taking delivery of a security underlying a futures or
forward contract. In these instances, the recognition of gain or loss is
postponed until the disposal of the security underlying the futures or forward
contract.
Summarized below are the specific types of derivative financial instruments
used by the Portfolios.
A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
fixed income Portfolios generally invest in futures on U.S. Treasury Bonds and
Notes. The equity Portfolios generally invest in S&P 500 Index Futures. Upon
entering into futures contracts, the Portfolios maintain, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended June 30, 2000,
were as follows:
NUMBER OF CONTRACTS
---------------------------------------
ENTERPRISE GROWTH AND INCOME
Outstanding at December 31, 1999............................ 46 6
Futures Opened.............................................. 45 22
Futures Closed.............................................. (76) (22)
--- ---
Outstanding at June 30, 2000................................ 15 6
=== ===
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65
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
The futures contracts outstanding at June 30, 2000, and the descriptions and
unrealized appreciation/depreciation are as follows:
UNREALIZED
NUMBER OF APPRECIATION/
CONTRACTS DEPRECIATION
ENTERPRISE
LONG CONTRACTS
S&P 500 Index Futures--Sep 00
(Current notional value of $367,025 per contract)....... 15 $(112,245)
== =========
GROWTH AND INCOME
LONG CONTRACTS
S&P 500 Index Futures--Sep 00
(Current notional value of $367,025 per contract)....... 6 $ (44,616)
== =========
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B. FORWARD COMMITMENTS Real Estate may trade certain securities under the terms
of forward commitments, whereby the settlement for payment and delivery occurs
at a specified future date. Forward commitments are privately negotiated
transactions between the Portfolio and dealers. Upon executing a forward
commitment and during the period of obligation, the Portfolio maintains
collateral of cash or securities in a segregated account with its custodian in
an amount sufficient to relieve the obligation. If the intent of the Portfolio
is to accept delivery of a security traded under a forward bond purchase
commitment, the commitment is recorded as a long-term purchase. For forward bond
purchase commitments for which security settlement is not intended by the
Portfolio, changes in the value of the commitment are recognized by marking the
commitment to market on a daily basis with changes in value reflected as a
component of unrealized appreciation/depreciation. Upon the settlement of the
contract, a realized gain or loss is recognized and is included as a component
of realized gain/loss on forwards. Purchasing securities on a forward commitment
involves a risk that the market value at the time of delivery may be lower than
the agreed upon purchase price resulting in an unrealized loss. Selling
securities on a forward commitment involves different risks and can result in
losses more significant than those arising from the purchase of such securities.
During the term of the commitment, the Portfolio may sell the forward commitment
and enter into a new forward commitment, the effect of which is to extend the
settlement date. In addition, the Portfolio may occasionally close such forward
commitments prior to delivery. Risks may arise as a result of the potential
liability of the counterparties to meet the terms of their contracts. There were
no forward bond commitments outstanding as of June 30, 2000.
6. BORROWINGS
In accordance with its investment policies, the Portfolios may borrow from banks
for temporary purposes and are subject to certain other customary restrictions.
Effective November 30, 1999, the Portfolios, in conjunction with certain other
funds of Van Kampen, entered in to a $650,000,000 committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each fund is permitted to
utilize the facility in accordance with the restrictions of its prospectus. In
the event the demand for the facility meets or exceeds $650 million on a
complex-wide basis, each fund will be limited to its pro-rata percentage based
on the net assets of each participating fund. Interest on borrowings is charged
under the agreement at a rate of 0.50% above the federal funds rate per annum.
An annual commitment fee of 0.09% per annum is charged on the unused portion of
the credit facility, which each fund incurs based on its pro-rata percentage of
quarterly net assets. The Portfolios did not borrow against the credit facility
during the period.
66
VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income
Tax Managed Global Franchise
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return*
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
|
* Closed to new investors
** Open to new investors for a limited time
67
PORTFOLIO OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN LIFE INVESTMENT TRUST
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President
and Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
INVESTMENT SUBADVISOR
(MORGAN STANLEY REAL ESTATE
SECURITIES PORTFOLIO)
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1585 Broadway
New York, NY 10036
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN
INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS(1)
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
(1) Independent auditors for the Portfolios perform an annual audit of the
Portfolios' financial statements. The Board of Trustees has engaged Ernst &
Young LLP to be the Portfolios' independent auditors.
PricewaterhouseCoopers LLP ceased being the Portfolios' independent
auditors effective May 18, 2000. The cessation of the client-auditor
relationship between the Portfolios and PricewaterhouseCoopers was based
solely on a possible future business relationship by PricewaterhouseCoopers
with an affiliate of the Portfolios' investment adviser.
* "Interested persons" of the Portfolios, as defined in the Investment
Company Act of 1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Portfolios. It is not authorized for distribution to prospective investors
unless it has been preceded or is accompanied by an effective prospectus of the
Portfolios, which contains additional information on how to purchase shares of
the Portfolios, the sales charges, and other pertinent data.
68
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