Exhibit 17(c)
Van Kampen
Life Investment Trust
Morgan Stanley
Real Estate
Securities Portfolio
The Morgan Stanley Real Estate Securities Portfolio is a mutual fund with the
primary investment objective to seek long-term growth of capital. Current income
is a secondary investment objective.
Shares of the Portfolio have not been approved or disapproved by the Securities
and Exchange Commission (SEC) or any state regulator, and neither the SEC nor
any state regulator has passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
This prospectus is dated April 28, 2000.
CLASS I SHARES
PROSPECTUS
(Any shares offered prior to April 28, 2000 have been designated Class I Shares)
Van Kampen
Funds
Table of Contents
Risk/Return Summary...................................................... 3
Van Kampen Life Investment Trust General Information..................... 5
Investment Objectives, Policies and Risks................................ 5
Investment Advisory Services............................................. 10
Purchase of Shares....................................................... 11
Redemption of Shares..................................................... 12
Dividends, Distributions and Taxes....................................... 13
Financial Highlights..................................................... 14
No dealer, salesperson, or any other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus, in connection with the offer contained in this prospectus and, if
given or made, such other information or representation must not be relied upon
as having been authorized by the Portfolio, the Portfolio's investment adviser
or the Portfolio's distributor. This prospectus does not constitute an offer by
the Portfolio or by the Portfolio's distributor to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful for the Portfolio to make such an offer in such
jurisdiction.
Risk/Return Summary
Investment Objectives
The Portfolio is a mutual fund with the primary investment objective to seek
long-term growth of capital. Current income is a secondary investment objective.
Investment Strategies
Under normal market conditions, the Portfolio's investment adviser seeks to
achieve the Portfolio's investment objectives by investing at least 65% of the
Portfolio's total assets in a portfolio of securities of companies operating in
the real estate industry, including equity securities of real estate investment
trusts ("REITs") and other securities of real estate operating companies. The
Portfolio's investment adviser diversifies its investments as to issuers,
property types and regions. The Portfolio's investment adviser emphasizes a
bottom-up stock selection (seeking individual companies with attractive
fundamental valuations relative to their underlying real estate value) with a
top-down asset allocation overlay (focusing on key regional criteria, including
demographic and macroeconomic considerations, for optimizing regional and
property market mix). Portfolio securities are typically sold when the
investment adviser's assessments of the growth or income potential of such
securities materially change. A company operating in the real estate industry is
one that derives at least 50% of its assets, gross income or net profits from
the ownership, construction, management or sale of residential, commercial or
industrial real estate. Besides equity securities of REITs, the Portfolio may
invest in equity securities, including common stocks and convertible securities,
or non-convertible preferred stocks and investment-grade quality securities of
companies operating in the real estate industry. The Portfolio may purchase or
sell up to 35% of its total assets in securities of companies outside the real
estate industry. The Portfolio may invest up to 25% of its total assets in
securities of foreign issuers, some or all of which may be in the real estate
industry. The Portfolio may purchase and sell certain derivative instruments,
such as options, futures and options on futures, for various portfolio
management purposes.
Investment Risks
An investment in the Portfolio is subject to investment risks, and you could
lose money on your investment in the Portfolio. There can be no assurance that
the Portfolio will achieve its investment objectives.
Market risk. Market risk is the possibility that the market values of securities
owned by the Portfolio will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Investments in equity
securities generally are affected by changes in the stock markets, which
fluctuate substantially over time, sometimes suddenly and sharply. The prices of
equity securities of companies in the real estate industry may be more volatile
and may not fluctuate in tandem with overall changes in the stock markets. The
value of debt securities tend to fall as interest rates rise, and such declines
may be greater among securities with longer maturities.
Risks of investing in real estate. Because of the Portfolio's policy of
concentrating its of investments in securities of companies operating in the
real estate industry and because a substantial portion of the Portfolio's
investments may be comprised of REITs, the Portfolio may be more susceptible to
risks associated with the ownership of real estate and with the real estate
industry in general. These risks can include fluctuations in the value of
underlying properties; defaults by borrowers or tenants; market saturation;
changes in general and local economic conditions; decreases in market rates for
rents; increases in competition, property taxes, capital expenditures, or
operating expenses; and other economic, political or regulatory occurrences
affecting the real estate industry. In addition, REITs depend upon specialized
management skills, may have limited financial resources, may have less trading
volume and may be subject to more abrupt or erratic price movements than the
overall securities markets. REITs must comply with certain federal income tax
law requirements to maintain their federal income tax status. Some REITs
(especially mortgage REITs) are affected by risks similar to those associated
with investments in debt securities including changes in interest rates and the
quality of credit extended.
Foreign risks. Because the Portfolio may own securities of foreign issuers, it
may be subject to risks not usually associated with owning securities of U.S.
issuers. These risks can include fluctuations in foreign currencies, foreign
currency exchange controls, political and economic instability, differences in
financial reporting, differences in securities regulation and trading, and
foreign taxation issues.
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Risks of using derivative instruments. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures and options on futures are
examples of derivatives. Derivative instruments involve risks different from
direct investment in underlying securities. These risks include imperfect
correlation between the value of the instruments and the underlying assets;
risks of default by the other party to certain transactions; risks that the
transactions may result in losses that partially or completely offset gains in
portfolio positions; risks that the transactions may not be liquid; and manager
risk.
Manager risk. As with any managed fund, the Portfolio's investment adviser may
not be successful in selecting the best-performing securities or investment
techniques, and the Portfolio's performance may lag behind that of similar
funds.
Investor Profile
In light of the Portfolio's investment objectives and strategies, the Portfolio
may be appropriate for investors who:
. Seek to grow their capital over the long term
. Are willing to take on the increased risks of an investment concentrated in
securities of companies that operate within the same industry
. Can withstand volatility in the value of their shares of the Portfolio
. Wish to add to their investment holdings a portfolio that invests primarily
in companies operating in the real estate industry
An investment in the Portfolio is not a deposit of any bank or other insured
depository institution. An investment in the Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
An investment in the Portfolio may not be appropriate for all investors. The
Portfolio is not intended to be a complete investment program, and investors
should consider their long-term investment goals and financial needs when making
an investment decision about the Portfolio. An investment in the Portfolio is
intended to be a long-term investment and the Portfolio should not be used as a
trading vehicle.
Annual Performance
One way to measure the risks of investing in the Portfolio is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Portfolio's Class I Shares over the four calendar years prior to
the date of this prospectus. Sales charges or other expenses at the contract
level are not reflected in this chart. If sales charges or other expenses at the
contract level had been included, the returns shown below would have been lower.
Remember that the past performance of the Portfolio is not indicative of its
future performance.
[GRAPH APPEARS HERE]
1996 40.53%
1997 21.47%
1998 -11.62%
1999 -3.37%
The Portfolio's return for the three-month period ended March 31, 2000 was
2.14%.
During the four-year period shown in the bar chart, the highest quarterly return
was 19.89% (for the quarter ended December 31, 1996) and the lowest quarterly
return was -9.32% (for the quarter ended September 30, 1998).
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Comparative Performance
As a basis for evaluating the Portfolio's performance and risks, the table below
shows how the Portfolio's performance compares with two broad-based market
indices that the Portfolio's investment adviser believes are appropriate
benchmarks for the Portfolio: Standard & Poor's 500-Stock Index* and the NAREIT
Equity Index**. The Portfolio's performance figures do not include sales charges
or other expenses at the contract level that would be paid by investors. The
indices' performance figures do not include any commissions or sales charges
that would be paid by investor purchasing securities represented by the indices.
Average annual total returns are shown for the periods ended December 31, 1999
(the most recently completed calendar year prior to the date of this
prospectus). Remember that the past performance of the Portfolio is not
indicative of its future performance.
Average Annual
Total Returns
for the
Periods Ended Past Since
December 31, 1999 1 Year Inception
=======================================================
Morgan Stanley
Real Estate
Securities
Portfolio --
Class I Shares -3.37% 10.70%(1)
.......................................................
Standard & Poor's
500-Stock Index 21.04% 26.90%(2)
.......................................................
NAREIT Equity
Index -4.62% 6.80%(2)
.......................................................
Inception dates: (1) 7/3/95, (2) 6/30/95.
* The Standard and Poor's 500-Stock Index consists of 500 widely-held common
stocks of companies with market capitalization of $1 billion or more that are
a representative sample of approximately 100 industries, chosen mainly for
market size, liquidity and industry group representation (assumes dividends
are reinvested).
** NAREIT (National Association of Real Estate Investment Trusts) Equity Index
is an unmanaged market weighted index of tax-qualified REIT's listed on the
New York Stock Exchange, American Stock Exchange and the NASDAQ National
Market Systems (including dividends).
Van Kampen Life Investment Trust
General Information
Van Kampen Life Investment Trust (the "Trust") is an open-end management
investment company which offers shares in eleven separate portfolios, including
this Morgan Stanley Real Estate Securities Portfolio.
Each portfolio is in effect a separate mutual fund. Each portfolio of the Trust
has a different investment objective(s) which it pursues through its investment
policies. Each portfolio has its own income, expenses, assets, liabilities and
net asset value and each portfolio issues its own shares. Shares of each
portfolio represent an interest only in that portfolio.
Shares are sold only to separate accounts (the "Accounts") of various insurance
companies to fund the benefits of variable annuity or variable life insurance
policies (the "Contracts"). The Accounts may invest in shares of the portfolios
in accordance with allocation instructions received from contract owners
("Contract Owners"). Such allocation rights, as well as sales charges and other
expenses imposed on Contract Owners by the Contracts, are further described in
the accompanying Contract prospectus.
Investment Objectives, Policies and Risks
The primary investment objective of the Portfolio is to seek long-term growth of
capital. Current income is a secondary investment objective. The investment
objectives of the Portfolio may be changed by the Board of Trustees without
shareholder approval, but no change is anticipated. If there is a change in the
investment objectives of the Portfolio, the Portfolio will notify shareholders
and shareholders should consider whether the Portfolio remains an appropriate
investment in light of their then current financial position and needs. There
are risks inherent in all investments in securities; accordingly there can be no
assurance that the Portfolio will achieve its investment objectives.
The Portfolio's investment adviser seeks to achieve the investment objectives by
investing primarily in a portfolio of securities of companies operating in the
real estate industry. A company operating in the real estate industry is one
that derives at least 50% of its assets (marked-to-market), gross income or net
profits from the ownership, construction, management or sale of residential,
commercial or industrial real estate. Real estate industry companies include,
among others: equity real estate investment trusts, which pool investors' funds
for investment primarily in commercial real estate properties; mortgage real
estate investment trusts, which invest pooled funds in
5
real estate related loans; brokers or real estate developers; and companies with
substantial real estate holdings, such as paper and lumber products and hotel
and entertainment companies. Because of the Portfolio's policy of concentrating
its investments in real estate securities, the Portfolio may be more susceptible
to economic, political or regulatory occurrences affecting the real estate
industry than a portfolio without such a policy.
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in securities of companies operating in the real estate industry,
including equity securities of REITs and other securities of real estate
operating companies. The Portfolio's investment adviser diversifies its
investments as to issuers, property types and regions. The investment adviser's
approach emphasizes a bottom-up stock selection with a top-down asset allocation
overlay. Besides equity securities of REITs, the Portfolio may also invest in
equity securities, including common stocks and convertible securities, or non-
convertible preferred stocks and investment-grade debt securities of real estate
industry companies. REITs pool investors' funds for investment primarily in
income producing real estate or real estate related loans or interests. REITs
can generally be classified as equity REITs, mortgage REITs or a combination of
both. Equity REITs, which invest the majority of their assets directly in real
property, derive their income from rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs,
which invest the majority of their assets in real estate mortgagees, derive
their income primarily from interest payments. REITs are not taxed on income
distributed to shareholders provided such REITs comply with several requirements
of the Internal Revenue Code of 1986, as amended (the "Code").
Common stocks are shares of a corporation or other entity that entitle the
holder to a pro rata share of the profits of the corporation, if any, without
preference over any other class of securities, including such entity's debt
securities, preferred stock and other senior equity securities. Common stock
usually carries with it the right to vote and frequently an exclusive right to
do so.
A convertible security is a bond, debenture, note, preferred stock, warrant or
other security that may be converted into or exchanged for a prescribed amount
of common stock or other equity security of the same or a different issuer or
into cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive interest paid or
accrued on debt securities or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities generally have characteristics similar to
both debt and equity securities. The value of convertible securities tends to
decline as interest rates rise and, because of the conversion feature, tends to
vary with fluctuations in the market value of the underlying equity security.
Convertible securities ordinarily provide a stream of income with generally
higher yields than those of common stock of the same or similar issuers.
Convertible securities generally rank senior to common stock in a corporation's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities generally do not participate directly in any
dividend increases or decreases of the underlying equity security although the
market prices of convertible securities may be affected by any such dividend
changes or other changes in the underlying equity security.
Preferred stock generally has a preference as to dividends and liquidation over
an issuer's common stock but ranks junior to debt securities in an issuer's
capital structure. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by an issuer's board of directors.
Preferred stock may be subject to optional or mandatory redemption provisions.
The ability of common stocks and preferred stocks to generate income is
dependent on the earnings and continuing declaration of dividends by the issuers
of such securities.
Debt securities of a corporation or other entity generally entitle the holder to
receive interest, at a fixed, variable or floating interest rate, during the
term of the security and repayment of principal at maturity or redemption. The
Portfolio invests in investment-grade debt securities (securities rated at the
time of investment BBB or higher by Standard & Poor's ("S&P") or rated Baa or
higher by Moody's Investors Service, Inc. ("Moody's") or comparably rated by
another nationally recognized statistical rating organization ("NRSRO") or
unrated securities considered by the Portfolio's investment adviser to be of
comparable quality). Credit quality at the time of purchase determines which
securities may be acquired, and a subsequent reduction in ratings does not
require the Portfolio to dispose of a security. Securities rated BBB by S&P or
Baa by Moody's are
6
considered to be medium-grade obligations which possess speculative
characteristics so that changes in economic conditions or other circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher-rated securities. The ratings assigned by
the ratings agencies represent their opinions of the quality of the debt
securities they undertake to rate, but not the market value risk of such
securities. It should be emphasized that ratings are general and are not
absolute standards of quality. A more complete description of security ratings
is contained in the Portfolio's Statement of Additional Information.
Under normal market conditions, the Portfolio may invest up to 35% of its total
assets in securities of companies outside the real estate industry.
Risk Factors of Investing in Real Estate Securities
The values and return on securities of companies in the real estate industry may
or may not fluctuate in tandem with the overall securities markets. Although the
Portfolio does not invest directly in real estate, an investment in the
Portfolio generally will be subject to the risks associated with investments in
real estate because of its policy of concentrating in the securities of
companies operating in the real estate industry. These risks include, among
others: declines in the value of real estate; defaults by borrowers or tenants;
risks related to general and local economic conditions; overbuilding and
increased competition; increases in property taxes, capital expenditures or
operating expenses; changes in zoning laws; casualty or condemnation losses;
variations in rental income; changes in neighborhood values; the appeal of
properties to tenants; changes in interest rates; and political or regulatory
occurrences affecting the real estate industry. The value of securities of
companies which service the real estate industry also will be affected by such
risks. If the Portfolio has rental income or income from the disposition of real
property acquired as a result of a default on securities the Portfolio may own,
the receipt of such income may adversely affect the Portfolio's ability to
retain its tax status as a regulated investment company.
Equity REITs may be affected by changes in the value of the underlying property
owned by the trusts, while mortgage REITs may be affected by changes in interest
rates and the quality of credit extended. Equity and mortgage REITs are
dependent upon management skill, may not be diversified (which may increase the
volatility of the REIT's value) and are subject to the risks of financing
projects. REITs are subject to heavy cash flow dependency, defaults by
borrowers, self-liquidation and the possibility of failing to qualify for tax-
free pass-through of income under the Code and to maintain exemption from the
Investment Company Act of 1940, as amended (the "1940 Act"). REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Code. Mortgage REITs, like debt securities, tend to decline
in value as interest rates rise. Mortgage REITs are often more susceptible than
traditional debt securities to further price declines in periods of rising
interest rates because of extension risks (i.e. rising interest rates could
cause property owners to prepay their mortgages more slowly than expected when
the security was purchased by the Portfolio which may further reduce the market
value of such security and lengthen the duration of the security). In addition,
mortgage REITs tend to benefit less than traditional debt securities when
interest rates decline because underlying mortgages often get prepaid faster
than expected in periods of declining interest rates. In addition, the Portfolio
indirectly will bear its proportionate share of any expenses paid by the REITs
in which it invests.
Risks of Investing in Securities of Foreign Issuers
The Portfolio may invest up to 25% of total assets in securities of foreign
issuers. Securities of foreign issuers may be denominated in U.S. dollars or in
currencies other than U.S. dollars. Investments in foreign securities present
certain risks not ordinarily associated with investments in securities of U.S.
issuers. These risks include fluctuations in foreign currency exchange rates,
political, economic or legal developments (including war or other instability,
expropriation of assets, nationalization and confiscatory taxation), imposition
of foreign exchange limitations (including currency blockage), withholding taxes
on dividend or interest payments or capital transactions or other restrictions,
higher transaction costs (including higher brokerage, custodial and settlement
costs and currency translation costs) and possible difficulty in enforcing
contractual obligations or taking judicial action. Also, foreign securities may
not be as liquid and may be more volatile than comparable domestic securities.
In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive, auditing, accounting, financial
7
reporting and disclosure requirements than domestic issuers. There is generally
less government regulation of stock exchanges, brokers and listed companies
abroad than in the U.S., and, with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of exchanges, brokers and
dealers than there is in the U.S., the Portfolio may experience settlement
difficulties or delays not usually encountered in the U.S.
Delays in making trades in foreign securities relating to volume constraints,
limitations or restrictions, clearance or settlement procedures, or otherwise
could impact yields and result in temporary periods when assets of the Portfolio
are not fully invested or attractive investment opportunities are foregone.
The Portfolio may invest in securities of issuers in developing or emerging
market countries. Investments in securities of developing or emerging markets
are subject to greater risks than investments in securities of developed
countries since emerging markets tend to have economic structures that are less
diverse and mature and political systems that are less stable than developed
countries.
In addition to the increased risks of investing in foreign securities, there are
often increased transactions costs associated with investing in foreign
securities including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodian costs.
The Portfolio may purchase foreign securities in the form of American Depository
Receipts, European Depositary Receipts or other securities representing
underlying shares of foreign companies. The risks of foreign investments should
be considered carefully by an investor in a Portfolio that invests in foreign
securities.
Using Options, Futures Contracts and Options on Futures Contracts
The Portfolio may, but is not required to use, various investment strategic
transactions, such as options, futures contracts and options on futures
contracts, in several different ways, depending upon the status of the
Portfolio's securities and the investment adviser's expectations concerning the
securities or currency markets. Although the Portfolio's investment adviser
seeks to use the practices to further the Portfolio's investment objectives, no
assurance can be given that the use of these practices will achieve this result.
In times of stable or rising securities' prices, the Portfolio generally seeks
to be fully invested. Even when the Portfolio is fully invested, however,
prudent management requires that at least a small portion of assets be available
as cash to honor redemption requests and for other short-term needs. The
Portfolio may also have cash on hand that has not yet been invested. The portion
of the Portfolio's assets that is invested in cash or cash equivalents does not
fluctuate with overall market prices, so that, in times of rising market prices,
the Portfolio may underperform the market in proportion to the amount of cash or
cash equivalents in the Portfolio. By purchasing stock index futures contracts,
however, the Portfolio can compensate for the cash portion of its assets and may
obtain performance equivalent to investing all of its assets in securities.
If the Portfolio's investment adviser forecasts a market decline, the Portfolio
may seek to reduce its exposure to the securities markets by increasing its cash
position. By selling stock index futures contracts instead of Portfolio
securities, a similar result can be achieved to the extent that the performance
of the futures contracts correlates to the performance of the Portfolio's
investments. Sales of futures contracts frequently may be accomplished more
rapidly and at less cost than the actual sale of securities. Once the desired
hedged position has been effected, the Portfolio could then liquidate securities
in a more deliberate manner, reducing its futures position simultaneously to
maintain the desired balance, or it could maintain the hedged position.
As an alternative to futures contracts, the Portfolio can engage in options (or
stock index options or stock index futures options) to manage the Portfolio's
risk in advancing or declining markets. For example, the value of a put option
generally increases as the underlying security declines below a specified level,
value is protected against a market decline to the degree the performance of the
put correlates with the performance of the Portfolio's investment portfolio. If
the market remains stable or advances, the Portfolio can refrain from exercising
the put and the Portfolio will participate in the advance, having incurred only
the premium cost for the put.
The Portfolio is authorized to purchase and sell listed and over-the-counter
options ("OTC Options").
8
OTC Options are subject to certain additional risks including default by the
other party to the transaction and the liquidity of the transactions.
In addition to futures and options on securities, the Portfolio may engage in
foreign currency futures and options. The Portfolio may use currency options to
protect it against declines in the U.S. dollar value of foreign currency
denominated securities and against increases in the U.S. dollar cost of such
securities to be acquired. As in the case of other kinds of options, however,
the selling of an option on a foreign currency constitutes only a partial hedge,
up to the amount of the premium received, and the Portfolio could be required to
cover its position by purchasing or selling foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to a Portfolio's position, the Portfolio may forfeit the entire amount of the
premium plus related transaction costs. Options on foreign currencies in which
the Portfolio invests are traded on U.S. and foreign exchanges or over-the-
counter.
In certain cases, the options and futures markets provide investment or risk
management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed with greater ease and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities or currencies. However, such
transactions involve risks different from the direct investment in underlying
securities such as imperfect correlation between the value of the instruments
and the underlying assets, risks of default by the other party to certain
transactions, risks that the transactions may incur losses that partially or
completely offset gains in portfolio positions, risks that the transactions may
not be liquid and manager risk. In addition, such transactions may involve
commissions and other costs, which may increase the Portfolio's expenses and
reduce its return. A more complete discussion of options, futures contracts and
related options and their risks is contained in the Statement of Additional
Information.
Other Investment Practices and Risk Factors
The Portfolio may engage in repurchase agreements with broker-dealers, banks and
other financial institutions to earn a return on temporarily available cash.
Such transactions are subject to the risk of default by the other party.
The Portfolio may invest up to 15% of its net assets in illiquid securities and
certain restricted securities. Such securities may be difficult or impossible to
sell at the time and the price that the Portfolio would like. Thus, the
Portfolio may have to sell such securities at a lower price, sell other
securities instead to obtain cash or forego other investment opportunities.
The Portfolio may purchase and sell debt securities on a "when-issued" or
"delayed delivery" basis ("Forward Commitments"). These transactions occur
when securities are purchased or sold by the Portfolio with payment and delivery
taking place in the future, frequently a month or more after such transaction.
The price is fixed on the date of the commitment, and the seller continues to
accrue interest on the securities covered by the Forward Commitment until
delivery and payment take place. At the time of settlement, the market value of
the securities may be more or less than the purchase or sale price. The
Portfolio may either settle a Forward Commitment by taking delivery of the
securities or may either resell or repurchase a Forward Commitment on or before
the settlement date in which event the Portfolio may reinvest the proceeds in
another Forward Commitment. These transactions are subject to market risk as the
value or yield of a security at delivery may be more or less than the purchase
price or the yield generally available on securities when delivery occurs. When
engaging in Forward Commitments, the Portfolio relies on the other party to
complete the transaction. Should the other party fail to do so, the Portfolio
might lose a purchase or sale opportunity that could be more advantageous than
alternative opportunities at the time of the failure. The Portfolio maintains a
segregated account (which is marked to market daily) of cash or liquid portfolio
securities with the Portfolio's custodian in an aggregate amount equal to the
amount of its commitment as long as the obligation to purchase or sell
continues.
The Portfolio may sell securities without regard to the length of time they have
been held in order to take advantage of new investment opportunities or when the
Portfolio's investment adviser believes the securities' potential relative to
the Portfolio's investment objectives has lessened or otherwise. The Portfolio's
turnover rate is shown under the heading "Financial Highlights." The portfolio
turnover rate
9
for the Portfolio may vary from year to year. A high portfolio turnover rate
(100% or more) increases a fund's transaction costs, including brokerage
commissions or dealer costs, and may result in the realization of more short-
term capital gains than if a fund had lower portfolio turnover. Increases in a
fund's transaction costs would adversely impact the fund's performance. The
turnover rate will not be a limiting factor, however, if the Portfolio's
investment adviser considers portfolio changes appropriate.
Further information about these types of investments and other investment
practices that may be used by the Portfolio is contained in the Statement of
Additional Information which can be obtained by investors free of charge as
described on the back cover of this prospectus.
Temporary defensive strategy. When market conditions dictate a more
"defensive" investment strategy, the Portfolio may invest on a temporary basis
a portion or all of its assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, prime commercial paper,
certificates of deposit, bankers' acceptances and other obligations of domestic
banks having total assets of at least $500 million, and repurchase agreements.
Under normal market conditions, the potential for capital growth on these
securities will tend to be lower than the potential for capital growth on other
securities that may be owned by the Portfolio. In taking such a defensive
position, the Portfolio would not be pursuing and may not achieve its investment
objectives.
Investment Advisory
Services
Investment Adviser
Van Kampen Asset Management Inc. is the investment adviser for the Portfolio
(the "Adviser"). The Adviser is a wholly owned subsidiary of Van Kampen
Investments Inc. ("Van Kampen Investments"). Van Kampen Investments is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $90 billion under management or supervision as of December 31, 1999. Van
Kampen Investments' more than 50 open-end and 39 closed-end funds and more than
2,700 unit investment trusts are professionally distributed by leading
authorized dealers nationwide. Van Kampen Funds Inc., the distributor of the
Portfolio (the "Distributor") and the sponsor of the funds mentioned above, is
also a wholly owned subsidiary of Van Kampen Investments. Van Kampen Investments
is an indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555.
Advisory agreement. The Portfolio retains the Adviser to manage the investment
of its assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Trust, on behalf of the Portfolio, the Portfolio pays the Adviser a monthly fee
computed based upon an annual rate applied to average daily net assets of the
Portfolio as follows:
% Per
Average Daily Net Assets Annum
=============================================================================
First $500 million 1.00%
- ----------------------------------------------------------------------------
Next $500 million 0.95%
- ----------------------------------------------------------------------------
Over $1 billion 0.90%
- ----------------------------------------------------------------------------
The Portfolio's average daily net assets are determined by taking the average of
all the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.
After voluntary fee waivers, the effective advisory fee rate was 0.97% of the
Portfolio's average daily net assets for the fiscal year ended December 31,
1999.
Under the advisory agreement, the Adviser furnishes offices, necessary
facilities and equipment and provides administrative services to the Portfolio.
The Portfolio pays all charges and expenses of its day-to-day operations,
including service fees, distribution fees, custodian fees, legal and independent
accountant fees, the costs of reports and proxies to shareholders, compensation
of trustees (other than those who are affiliated persons of the Adviser,
Distributor or Van Kampen Investments) and all other ordinary business expenses
not specifically assumed by the Adviser.
The Adviser may utilize at its own expense credit analysis, research and trading
support services provided by its affiliate, Van Kampen Investment Advisory Corp.
("Advisory Corp.").
10
Investment Subadviser
Morgan Stanley Dean Witter Investment Management Inc. is the subadviser (the
"Subadviser") for the Portfolio. The Subadviser is a wholly owned subsidiary
of Morgan Stanley Dean Witter & Co., and is an affiliate of the Adviser. The
Subadviser conducts a worldwide portfolio management business and provides a
broad range of portfolio management services to customers in the United States
and abroad. At December 31, 1999, the Subadviser, together with its affiliated
institutional asset management companies, managed assets of approximately $184.8
billion, including assets under fiduciary advice. The Subadviser's principal
office is located at 1221 Avenue of the Americas, New York, New York 10020. On
December 1, 1998, Morgan Stanley Asset Management Inc. changed its name to
Morgan Stanley Dean Witter Investment Management Inc. but continues to do
business in certain instances using the name Morgan Stanley Asset Management.
Subadvisory agreement. The Adviser has entered into a subadvisory agreement with
the Subadviser to assist the Adviser in performing its investment advisory
functions. The Adviser pays the Subadviser on a monthly basis a portion of the
net advisory fees the Adviser receives from the Fund.
General
From time to time, the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce the Fund's expenses by reducing the fees payable
to them or by reducing other expenses of the Fund in accordance with such
limitations as the Adviser, the Subadviser or Distributor may establish.
Personal investment policies. The Portfolio, the Adviser, the Subadviser and the
Distributor have adopted Codes of Ethics designed to recognize the fiduciary
relationships among the Portfolio, the Adviser, the Subadviser, the Distributor
and their respective employees. The Codes permit directors, trustees, officers
and employees to buy and sell securities for their personal accounts subject to
certain restrictions. Persons with access to certain sensitive information are
subject to preclearance and other procedures designed to prevent conflicts of
interest.
Portfolio management. The Portfolio is managed by Theodore R. Bigman and Douglas
A. Funke. Theodore R. Bigman joined the Subadviser in 1995 and currently is a
Managing Director of the Subadviser and Morgan Stanley & Co. Incorporated. He
has primary responsibility for managing the Subadviser's global real estate
securities business. Prior to joining the Subadviser, he was a Director at CS
First Boston, where he worked for eight years in the Real Estate Group. While at
CS First Boston, Mr. Bigman established and managed that firm's REIT effort,
including primary responsibility for $2.5 billion of initial public offerings by
REITs. Mr. Bigman graduated from Brandeis University in 1983 with a B.A. in
Economics and received his M.B.A. from Harvard University in 1987. Mr. Bigman
has shared primary responsibility for managing the Portfolio's assets since
March 1995.
Douglas A. Funke joined Morgan Stanley & Co. Incorporated in 1993 as a Financial
Analyst. Currently, he is Vice President of the Subadviser and Morgan Stanley &
Co. Incorporated and is responsible for providing research and analytical
support for the group's real estate securities investment business. Prior to
joining the Subadviser, he was a member of Morgan Stanley's Interest Rate and
Foreign Exchange Risk Management Group, where he assisted in the execution of
more than $3 billion of structured financings and firm-related risk management
projects. Mr. Funke graduated from the University of Chicago in 1993 with a B.A.
in Economics and Political Science. He is a member of the National Association
of Real Estate Investment Trusts and the New York Society of Securities
Analysts. Mr. Funke has shared primary responsibility for managing the
Portfolio's assets since January 1999.
Purchase of Shares
The Portfolio offers two classes of shares -- designated as Class I Shares and
Class II Shares. Prior to April 28, 2000, the Portfolio issued one class of
shares and that class of shares has been designated as Class I Shares. The Class
I Shares of the Portfolio are offered by this prospectus (Class II Shares of the
Portfolio are offered through a separate prospectus). Each class of shares
represents an interest in the same portfolio of investments of the Portfolio and
has the same rights, except for the differing distribution fees, services fees
and related expenses associated with each class of shares and the exclusive
voting rights by each class with respect to any Rule 12b-1 distribution plan or
service plan for such class of shares. Investors can contact their financial
adviser for
11
more information regarding the insurance company's Accounts and class of the
Portfolio's shares available through such Accounts.
The Portfolio offers shares only to Accounts of various insurance companies to
fund the benefits of variable annuity or variable life insurance contracts. The
Portfolio does not foresee any disadvantage to holders of Contracts arising out
of the fact that the interests of the holders may differ from the interests of
holders of life insurance policies and that holders of one insurance policy may
differ from holders of other insurance policies. Nevertheless, the Portfolio's
Board of Trustees intends to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken. The Contracts are described in the separate
prospectuses issued by participating insurance companies and accompanying this
Portfolio prospectus.
The Portfolio continuously offers shares to the Accounts at prices equal to the
respective per share net asset value of the Portfolio. The Distributor, located
at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555, acts as the
distributor of the shares. The Portfolio and the Distributor reserves the right
to refuse any order for the purchase of shares. Net asset value is determined in
the manner set forth below under "Determination of Net Asset Value."
Determination of Net Asset Value
Net asset value per share is computed for the Portfolio as of the close of
trading (currently 4:00 p.m., New York time) each day the New York Stock
Exchange is open. See the accompanying prospectus for the policies observed by
the insurance company. Net asset value of the Portfolio is determined by adding
the total market value of all portfolio securities held by the Portfolio, cash
and other assets, including accrued interest. All liabilities, including accrued
expenses, of the Portfolio are subtracted. The resulting amount is divided by
the total number of outstanding shares of the Portfolio to arrive at the net
asset value of each share. See "Determination of Net Asset Value" in the
Statement of Additional Information for further information.
Securities listed or traded on a national securities exchange are valued at the
last sale price. Unlisted securities and listed securities for which the last
sales price is not available are valued at the mean between the last reported
bid and asked prices. U.S. government and agency obligations are valued at the
mean between the last reported bid and asked prices. Listed options are valued
at the last reported sale price on the exchange on which such option is traded
or, if no sales are reported, at the mean between the last reported bid and
asked prices. Private placement securities are valued at the last reported bid
price. Securities for which market quotations are not readily available and
other assets are valued at a fair value in good faith by the Adviser in
accordance with procedures established by the Portfolio's Board of Trustees.
Short-term investments for the Portfolio are valued as described in the notes to
financial statements in the Statement of Additional Information.
Trading in securities on many foreign securities exchanges (including European
and Far Eastern securities exchange) and over-the-counter markets is normally
completed before the close of business on each business day in New York (i.e., a
day on which the Exchange is open). In addition, securities trading in a
particular country or countries may not take place on all business days for the
Exchange or may take place on days which are not business days for the Exchange.
Changes in valuations on certain securities may occur at times or on days on
which the Portfolio's net asset value is not calculated and on which the
Portfolio does not effect sales, redemptions and exchanges of its shares. The
Portfolio calculates net asset value per share, and therefore effects sales,
redemptions and exchanges of its shares, as of the close of trading on the
Exchange each day the Exchange is open for trading. Such calculation does not
take place contemporaneously with the determination of the prices of certain
foreign portfolio securities used in such calculation. If events materially
affecting the value of such securities occur between the time when their price
is determined and the time when the Portfolio's net asset value is calculated,
such securities may be valued at fair value as determined in good faith by the
Adviser based in accordance with procedures established by the Portfolio's Board
of Trustees.
Redemption of Shares
Payment for shares tendered for redemption by the insurance company is made
ordinarily in cash within seven days after tender in proper form, except under
unusual circumstances as determined by the SEC.
12
The redemption price will be the net asset value per share next determined after
the receipt of a request in proper form. The market values of the securities in
the Portfolio are subject to daily fluctuations and the net asset value per
share of the Portfolio's shares will fluctuate accordingly. Therefore, the
redemption value may be more or less than the investor's cost.
Dividends,
Distributions
and Taxes
All dividends and capital gains distributions of the Portfolio are automatically
reinvested by the Account in additional shares of the Portfolio.
Dividends from stocks and interest earned from other investments are the main
sources of income for the Portfolio. Substantially all of this income, less
expenses, is distributed to Accounts at least annually. When the Portfolio sells
portfolio securities, it may realize capital gains or losses, depending on
whether the prices of the securities sold are higher or lower than the prices
the Portfolio paid to purchase them. The Portfolio distributes any net capital
gains to Accounts at least annually.
Tax status of the portfolio. The Portfolio has elected and qualified, and
intends to continue to qualify, to be taxed as a "regulated investment
company" under the Code. By maintaining its qualification as a regulated
investment company, the Portfolio is not subject to federal income taxes to the
extent it distributes its investment company taxable income and net capital
gains. If for any taxable year the Portfolio does not qualify for the special
tax treatment afforded regulated investment companies, all of its taxable
income, including any net capital gain, would be subject to tax at regular
corporate rates (without any deduction for distributions to shareholders).
Tax treatment to insurance company as shareholder. The investments of the
Accounts in the Portfolios are subject to the diversification requirements of
Section 817(h) of the Code, which must be met at the end of each calendar
quarter of the year (or within 30 days thereafter). Regulations issued by the
Secretary of the Treasury have the effect of requiring the Accounts to invest no
more than 55% of their total assets in securities of any one issuer, no more
than 70% in the securities of any two issuers, no more than 80% in the
securities of any three issuers, and no more than 90% in the securities of any
four issuers. For this purpose, the U.S. Treasury and each U.S. Government
agency and instrumentality is considered to be a separate issuer. In the event
the investments of the Accounts in the Portfolio are not properly diversified
under Code Section 817(h), then the policies funded by shares of the Portfolio
will not be treated as life insurance for federal income tax purposes and the
owners of the policies will be subject to taxation on their respective shares of
the dividends and distributions paid by the Portfolio.
Dividends paid by the Portfolio from its income and distributions of the
Portfolio's investment company taxable income (consisting generally of taxable
income net short-term capital gain) are includable in the insurance company's
gross income. The tax treatment of such dividends and distributions depends on
the insurance company's tax status. Some portion of the dividends from the
Portfolio may be eligible for the dividends received deduction for corporations
if the Portfolio receives qualifying dividends during the taxable year and if
certain other requirements of the Code are satisfied. The Portfolio will send to
the Accounts a written notice (contained in the annual report) required by the
Code designating the amount and character of any distributions made during such
year.
Under the Code, any dividends designated as being made from the Portfolio's net
capital gains are taxable to the insurance company as long-term capital gains.
Such capital gain dividends will be designated as such in a written notice to
the Accounts (contained in the annual report). Capital gain dividends are not
eligible for the dividends received deduction for corporations. Dividends and
capital gain dividends to the insurance company may also be subject to state and
local taxes.
As described in the accompanying prospectus for the Contracts, the insurance
company reserves the right to assess the Account a charge for any taxes paid by
the insurance company.
13
Financial Highlights
The financial highlights table is intended to help you understand the financial
performance of the Portfolio's Class I Shares for the past five years. Prior to
April 28, 2000, the Portfolio issued one class of shares and that class of
shares has been designated as Class I Shares. Certain information reflects
financial results for a single Class I Share of the Portfolio. The total returns
in the table represent the rate that an investor would have earned (or lost) on
an investment in the Portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose reports, along with the Portfolio's financial
statements, are included in the Statement of Additional Information and may be
obtained by shareholders without charge by calling the telephone number on the
back cover of this prospectus. This information should be read in conjunction
with the financial statements and notes thereto included in the Statement of
Additional Information.
July 3, 1995
(Commencement
of Investment
Year Ended December 31, Operations) to
------------------------------------------
1999 1998 1997 1996 December 31, 1995
=============================================================================================================================
Net Asset Value, Beginning of the Period................. $13.759 $15.846 $ 14.784 $ 10.74 $ 10.00
------- ------- -------- ------- --------
Net Investment Income............................... .676 .781 .464 .217 .20
Net Realized and Unrealized Gain/Loss............... (1.150) (2.597) 2.617 4.117 .6325
------- ------- -------- ------- --------
Total from Investment Operations......................... (.474) (1.816) 3.081 4.334 .8325
------- ------- -------- ------- --------
Less:
Distributions from Net Investment Income............ .913 .025 .470 .199 .0925
Distributions from Net Realized Gain................ -0- .246 1.549 .091 -0-
------- ------- -------- ------- --------
Total Distributions...................................... .913 .271 2.019 .290 .0925
------- ------- -------- ------- --------
Net Asset Value, End of the Period....................... $12.372 $13.759 $ 15.846 $14.784 $ 10.74
======= ======= ======== ======= ========
Total Return*............................................ (3.37%) (11.62%) 21.47% 40.53% 8.35%**
Net Assets at End of the Period (In millions)............ $ 149.6 $ 208.8 $ 299.4 $ 167.5 $ 8.6
Ratio of Expenses to Average Net Assets* ................ 1.10% 1.08% 1.07% 1.10% 2.50%
Ratio of Net Investment Income to Average
Net Assets*......................................... 3.74% 4.72% 3.42% 5.06% 3.75%
Portfolio Turnover....................................... 23% 110% 177% 84% 85%**
*If certain expenses had not been assumed by the
Adviser, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets.................. 1.13% N/A N/A 1.27% 2.90%
Ratio of Net Investment Income to Average Net Assets..... 3.71% N/A N/A 4.89% 3.36%
** Non-Annualized
N/A = Not Applicable
14
Board of Trustees and Officers
Board of Trustees
J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*, Chairman
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson
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 H. Zimmerman, III*
Vice President
Michael H. Santo*
Vice President
Peter W. Hegel*
Vice President
John L. Sullivan*
Vice President, Chief Financial Officer & Treasurer
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
For More Information
Existing Shareholders or Prospective Investors
Call your broker or (800) 341-2929
7:00 a.m. to 7:00 p.m. Central time
Monday through Friday
Dealers
For dealer information, selling agreements, wire orders,
or redemptions, call the Distributor at (800) 421-5666
Telecommunications Device for the Deaf
For shareholder and dealer inquiries through
Telecommunications Device for the Deaf (TDD), call
(800) 421-2833
Web Site www.vankampen.com
Van Kampen Life Investment Trust--
Morgan Stanley Real Estate
Securities Portfolio
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
Van Kampen Asset Management Inc.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Subadviser
Morgan Stanley Dean Witter
Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Distributor
Van Kampen Funds Inc.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
Van Kampen Investor Services Inc.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Life Investment Trust--
Morgan Stanley Real Estate Securities Portfolio
Custodian
State Street Bank and Trust Company
225 West Franklin Street, PO Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Life Investment Trust--
Morgan Stanley Real Estate Securities Portfolio
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
Pricewaterhousecoopers LLP
200 East Randolph Street
Chicago, IL 60601
Van Kampen
Life Investment Trust
Morgan Stanley
Real Estate
Securities Portfolio
CLASS I SHARES
PROSPECTUS
April 28, 2000
A Statement of Additional Information, which contains more details about the
Trust and the Portfolio, is incorporated by reference in its entirety into this
prospectus.
You will find additional information about the Portfolio in its annual and
semiannual reports to shareholders. The annual report explains the market
conditions and investment strategies affecting the Portfolio's performance
during its last fiscal year.
You can ask questions or obtain a free copy of the Portfolio's reports or the
Statement of Additional Information by calling (800) 341-2911 from 7:00 a.m. to
7:00 p.m., Central time, Monday through Friday. Telecommunications Device for
the Deaf users may call (800) 421-2833.
Information about the Trust and the Portfolio, including the reports and
Statement of Additional Information, has been filed with the Securities and
Exchange Commission (SEC). It can be reviewed and copied at the SEC's Public
Reference Room in Washington, DC or on the EDGAR database on the SEC's internet
site (http://www.sec.gov). Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-202-942-8090. You can
also request copies of these materials, upon payment of a duplicating fee, by
electronic request at the SEC's e-mail address (publicinfo@sec.gov), or by
writing the Public Reference Section of the SEC, Washington, DC 20549-6009, and
paying a duplication fee.
Van Kampen
Funds
The Fund's Investment Company Act File No. is 811-4424.