UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-9279
Van Kampen Equity Trust II
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 8/31___
Date of reporting period: 2/28/07
Item 1. Report to Shareholders.
The Fund's semiannual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Technology Fund performed during the semiannual period. The portfolio
management team will provide an overview of the market conditions and
discuss some of the factors that affected investment performance during
the reporting period. In addition, this report includes the fund's
financial statements and a list of fund investments as of February 28,
2007.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE PROSPECTUSES CONTAIN
INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT OBJECTIVES, RISKS,
CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL PROSPECTUS, CONTACT YOUR
FINANCIAL ADVISOR OR DOWNLOAD ONE AT VANKAMPEN.COM. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND,
THEREFORE, THE VALUE OF THE FUND SHARES MAY BE LESS THAN WHAT YOU PAID
FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND.
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
PERFORMANCE SUMMARY as of 2/28/07
<Table>
<Caption>
A SHARES B SHARES C SHARES
since 7/26/99 since 7/26/99 since 7/26/99
- --------------------------------------------------------------------------------------------
W/MAX W/MAX W/MAX
5.75% 5.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE
Since Inception -8.39% -9.10% -9.11% -9.11% -9.09% -9.09%
5-year 2.38 1.17 1.56 1.27 1.60 1.60
1-year -3.20 -8.70 -4.16 -8.95 -3.96 -4.92
6-month 6.86 0.78 6.37 1.37 6.59 5.59
- --------------------------------------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
The returns shown in this report do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Performance of share classes will vary due to differences in sales charges and
expenses. Average annual total return with sales charges includes payment of the
maximum sales charge of 5.75 percent for Class A shares, a contingent deferred
sales charge of 5.00 percent for Class B shares (in year one and declining to
zero after year five), a contingent deferred sales charge of 1.00 percent for
Class C shares in year one and combined Rule 12b-1 fees and service fees of up
to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C
shares. Figures shown above assume reinvestment of all dividends and capital
gains.
The NYSE Arca Tech 100 Index is a price-weighted index comprised of common
stocks and ADRs of technology-related companies listed on U.S. exchanges. The
index does not include any expenses, fees or sales charges, which would lower
performance. The index is unmanaged and should not be considered an investment.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
MARKET CONDITIONS
For the six-month period ended February 28, 2007, the technology sector produced
solid returns despite significant volatility. The period began on a positive
note as the technology sector rallied following the Federal Open Market
Committee's (the "Fed") decision in August to leave the target federal funds
rate at 5.25 percent, which remained in effect throughout the period. This pause
in the Fed's monetary tightening policy, along with easing oil and gasoline
prices and a relatively quiet hurricane season, boosted consumer spending in
September. Strong retail technology sales during the back-to-school season
stoked investor enthusiasm for the sector and fuelled investors' anticipation of
robust spending during the holiday season. By November, however, investors'
eagerness dwindled as concerns rose about the potential impact of the new
Democratic majority in Congress. Adding to these worries were inconsistent
retail sales in the fourth quarter, which culminated in lackluster holiday sales
for several sectors, including technology. At the same time, investors were
confronted with less positive economic news as second quarter gross domestic
product (GDP) growth was revised even lower, and third quarter GDP fell short of
expectations. By year-end, technology stocks declined amid eroding investor
sentiment overall.
Technology stocks gained some ground in January due to better-than-expected
pre-earnings announcements and earnings reports. The positive news renewed
investors' interest in the sector and sparked another rally that continued into
February. However, the recovery ended abruptly at the end of the month. A
sell-off in the Chinese stock market on February 27 rippled across the global
markets, including the U.S., re-igniting investors' risk aversion and causing
technology stocks to retreat at the end of the reporting period.
2
PERFORMANCE ANALYSIS
The fund returned 6.86 percent for the six months ended February 28, 2007 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmark,
the NYSE Arca Tech 100 Index, returned 9.55 percent for the period.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
<Table>
<Caption>
- --------------------------------------------------------
NYSE ARCA
CLASS A CLASS B CLASS C TECH 100 INDEX
6.86% 6.37% 6.59% 9.55%
- --------------------------------------------------------
</Table>
The performance for the three share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and
index definition.
The fund's overall underperformance during the period against the NYSE Arca Tech
100 Index was due to stock selection, although sector allocation decisions did
help to partially mitigate negative returns. Among the sectors that contributed
the least to performance was application software. In this sector, the fund's
preference for larger, more established companies' diminished returns as these
firms' contractual service business models produced uncertain revenues.
Moreover, the fund's avoidance of smaller firms, which have been the focus of
much of the industry's recent merger and acquisition activity, had a detrimental
impact on performance. Within the systems software sector, stock selection and
an overweight allocation also hindered returns. Stock selection in the
communications equipment segment also negatively affected overall returns.
Despite these detractors to performance, there were several notable contributors
to the fund. The internet software and services sector bolstered returns as
internet information providers generated greater online advertising revenue over
the period. An underweight allocation within the electronic equipment
manufacturers also benefited overall performance. Finally, the fund's
underweight allocation in the pharmaceutical segment helped returns as this
industry experienced a significant amount of volatility both in the pre- and
post-election period.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
3
<Table>
<Caption>
TOP 10 HOLDINGS AS OF 2/28/07
QUALCOMM, Inc. 3.7%
KLA-Tencor Corp. 3.6
Google, Inc., Class A 3.4
Apple Computer, Inc. 3.3
Cisco Systems, Inc. 3.3
Lockheed Martin Corp. 3.1
Hewlett-Packard Co. 2.7
Genentech, Inc. 2.7
Microsoft Corp. 2.6
International Business Machines Corp. 2.4
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 2/28/07
Communications Equipment 14.9%
Semiconductors 11.1
Internet Software & Services 9.4
Computer Hardware 9.3
Systems Software 8.7
Biotechnology 8.6
Semiconductor Equipment 7.1
Aerospace & Defense 6.9
Application Software 6.7
Data Processing & Outsourced Services 3.9
Computer Storage & Peripherals 2.5
Health Care Supplies 2.3
Home Entertainment Software 1.7
Health Care Equipment 1.7
Life Sciences Tools & Services 1.6
IT Consulting & Other Services 1.5
Specialized Finance 1.2
Electronic Equipment Manufacturers 1.1
-----
Total Investments 100.2
Liabilities in Excess of Other Assets (0.2)
-----
Net Assets 100.0%
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. All percentages are as a percentage of
net assets. Van Kampen is a wholly owned subsidiary of a global securities firm
which is engaged in a wide range of financial services including, for example,
securities trading and brokerage activities, investment banking, research and
analysis, financing and financial advisory services.
4
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to fund shareholders, and
makes these reports available on its public Web site, www.vankampen.com.
In addition to the semiannual and annual reports that Van Kampen delivers
to shareholders and makes available through the Van Kampen public Web
site, each fund files a complete schedule of portfolio holdings with the
SEC for the fund's first and third fiscal quarters on Form N-Q. Van
Kampen does not deliver the reports for the first and third fiscal
quarters to shareholders, nor are the reports posted to the Van Kampen
public Web site. You may, however, obtain the Form N-Q filings (as well
as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. 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 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 847-2424.
5
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
6
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charges on redemptions of Class B and C Shares;
and redemption fees; and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees; and other Fund expenses. This example is
intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 9/1/06 - 2/28/07.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges or redemption fees.
Therefore, the second line of the table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
9/1/06 2/28/07 9/1/06-2/28/07
Class A
Actual...................................... $1,000.00 $1,068.61 $12.21
Hypothetical................................ 1,000.00 1,012.99 11.88
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,063.74 16.12
Hypothetical................................ 1,000.00 1,009.19 15.69
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,065.93 16.14
Hypothetical................................ 1,000.00 1,009.19 15.69
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.38%, 3.15%
and 3.15% for Class A, B and C Shares, respectively, multiplied by the
average account value over the period, multiplied by 181/365 (to reflect the
one-half year period) except for "Actual" information which reflects the
period from Commencement of Operations through February 28, 2007.
Assumes all dividends and distributions were reinvested.
7
VAN KAMPEN TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------------
COMMON STOCKS 100.2%
AEROSPACE & DEFENSE 6.9%
Aerovironment, Inc. (a)..................................... 41,400 $ 880,578
Goodrich Corp. ............................................. 70,000 3,433,500
Lockheed Martin Corp. ...................................... 70,000 6,809,600
Raytheon Co. ............................................... 70,000 3,748,500
------------
14,872,178
------------
APPLICATION SOFTWARE 6.7%
Adobe Systems, Inc. (a)..................................... 75,000 2,943,750
Autodesk, Inc. (a).......................................... 75,000 3,086,250
Citrix Systems, Inc. (a).................................... 65,000 2,093,000
SAP AG--ADR (Germany)....................................... 70,000 3,217,900
Synopsys, Inc. (a).......................................... 125,000 3,197,500
------------
14,538,400
------------
BIOTECHNOLOGY 8.6%
Amgen, Inc. (a)............................................. 70,000 4,498,200
Genentech, Inc. (a)......................................... 70,000 5,905,900
Genzyme Corp. (a)........................................... 75,000 4,635,000
Gilead Sciences, Inc. (a)................................... 50,000 3,578,000
------------
18,617,100
------------
COMMUNICATIONS EQUIPMENT 14.9%
Ciena Corp. (a)............................................. 75,000 2,360,250
Cisco Systems, Inc. (a)..................................... 275,000 7,133,500
Corning, Inc. (a)........................................... 115,000 2,372,450
Harris Corp. ............................................... 75,000 3,681,000
Juniper Networks, Inc. (a).................................. 175,000 3,309,250
OpNext, Inc. (a)............................................ 114,400 1,927,640
QUALCOMM, Inc. ............................................. 200,000 8,056,000
Research In Motion Ltd. (Canada) (a)........................ 15,000 2,109,150
Riverbed Technology, Inc. (a)............................... 39,600 1,260,468
------------
32,209,708
------------
COMPUTER HARDWARE 9.3%
Apple Computer, Inc. (a).................................... 85,000 7,191,850
Dell, Inc. (a).............................................. 85,000 1,942,250
Hewlett-Packard Co. ........................................ 150,000 5,907,000
International Business Machines Corp. ...................... 55,000 5,115,550
------------
20,156,650
------------
COMPUTER STORAGE & PERIPHERALS 2.5%
Network Appliance, Inc. (a)................................. 70,000 2,706,900
Seagate Technology (Cayman Islands)......................... 100,000 2,690,000
------------
5,396,900
------------
DATA PROCESSING & OUTSOURCED SERVICES 3.9%
Automatic Data Processing, Inc. ............................ 70,000 3,485,300
DST Systems, Inc. (a)....................................... 70,000 4,929,400
------------
8,414,700
------------
ELECTRONIC EQUIPMENT MANUFACTURERS 1.1%
Agilent Technologies, Inc. (a).............................. 75,000 2,379,000
------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT 1.7%
Medtronic, Inc. ............................................ 75,000 $ 3,777,000
------------
HEALTH CARE SUPPLIES 2.3%
Millipore Corp. (a)......................................... 70,000 5,006,400
------------
HOME ENTERTAINMENT SOFTWARE 1.7%
Electronic Arts, Inc. (a)................................... 75,000 3,781,500
------------
INTERNET SOFTWARE & SERVICES 9.4%
Akamai Technologies, Inc. (a)............................... 50,000 2,578,500
Digital River, Inc. (a)..................................... 35,000 1,938,650
eBay, Inc. (a).............................................. 100,000 3,206,000
Google, Inc., Class A (a)................................... 16,500 7,415,925
VeriSign, Inc. (a).......................................... 125,000 3,162,500
Yahoo!, Inc. (a)............................................ 65,000 2,005,900
------------
20,307,475
------------
IT CONSULTING & OTHER SERVICES 1.5%
Cognizant Technology Solutions Corp., Class A (a)........... 35,000 3,157,000
------------
LIFE SCIENCES TOOLS & SERVICES 1.6%
Thermo Fisher Scientific, Inc. (a).......................... 75,000 3,395,250
------------
SEMICONDUCTOR EQUIPMENT 7.1%
Applied Materials, Inc. .................................... 100,000 1,857,000
ASML Holding N.V. (Netherlands) (a)......................... 100,000 2,458,000
KLA-Tencor Corp. ........................................... 150,000 7,761,000
Lam Research Corp. (a)...................................... 75,000 3,349,500
------------
15,425,500
------------
SEMICONDUCTORS 11.1%
Altera Corp. (a)............................................ 85,000 1,794,350
Broadcom Corp., Class A (a)................................. 95,000 3,238,550
Intel Corp. ................................................ 85,000 1,687,250
Marvell Technology Group Ltd. (Bermuda) (a)................. 125,000 2,565,000
Mellanox Technologies Ltd. (a).............................. 17,700 379,134
Microchip Technology, Inc. ................................. 85,000 3,026,000
National Semiconductor Corp. ............................... 185,000 4,739,700
Texas Instruments, Inc. .................................... 155,000 4,798,800
Xilinx, Inc. ............................................... 75,000 1,921,500
------------
24,150,284
------------
SPECIALIZED FINANCE 1.2%
Chicago Mercantile Exchange Holdings, Inc. ................. 5,000 2,695,650
------------
SYSTEMS SOFTWARE 8.7%
BMC Software, Inc. (a)...................................... 75,000 2,314,500
McAfee, Inc. (a)............................................ 165,000 4,969,800
Microsoft Corp. (a)......................................... 200,000 5,634,000
</Table>
See Notes to Financial Statements 9
VAN KAMPEN TECHNOLOGY FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------------
SYSTEMS SOFTWARE (CONTINUED)
Oracle Corp. (a)............................................ 75,000 $ 1,232,250
Symantec Corp. (a).......................................... 275,000 4,702,500
------------
18,853,050
------------
TOTAL INVESTMENTS 100.2%
(Cost $179,657,105).................................................. 217,133,745
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%).......................... (370,930)
------------
NET ASSETS 100.0%..................................................... $216,762,815
============
</Table>
Percentages are calculated as a percentage of net assets.
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
10 See Notes to Financial Statements
VAN KAMPEN TECHNOLOGY FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 28, 2007 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $179,657,105)....................... $ 217,133,745
Receivables:
Investments Sold.......................................... 1,799,562
Fund Shares Sold.......................................... 143,255
Dividends................................................. 124,563
Other....................................................... 71,272
--------------
Total Assets............................................ 219,272,397
--------------
LIABILITIES:
Payables:
Custodian Bank............................................ 809,609
Distributor and Affiliates................................ 567,795
Fund Shares Repurchased................................... 464,691
Investment Advisory Fee................................... 155,014
Trustees' Deferred Compensation and Retirement Plans........ 130,135
Accrued Expenses............................................ 382,338
--------------
Total Liabilities....................................... 2,509,582
--------------
NET ASSETS.................................................. $ 216,762,815
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,719,076,128
Net Unrealized Appreciation................................. 37,476,640
Accumulated Net Investment Loss............................. (2,820,880)
Accumulated Net Realized Loss............................... (1,536,969,073)
--------------
NET ASSETS.................................................. $ 216,762,815
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $92,742,335 and 18,043,475 shares of
beneficial interest issued and outstanding)............. $ 5.14
Maximum sales charge (5.75%* of offering price)......... 0.31
--------------
Maximum offering price to public........................ $ 5.45
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $102,288,656 and 21,113,429 shares of
beneficial interest issued and outstanding)............. $ 4.84
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $21,731,824 and 4,485,293 shares of
beneficial interest issued and outstanding)............. $ 4.85
==============
</Table>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 11
VAN KAMPEN TECHNOLOGY FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended February 28, 2007 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $31)......... $ 516,282
Interest.................................................... 28,545
-----------
Total Income............................................ 544,827
-----------
EXPENSES:
Transfer Agent Fees......................................... 1,186,656
Investment Advisory Fee..................................... 1,037,472
Distribution (12b-1) and Service Fees
Class A................................................... 122,207
Class B................................................... 546,990
Class C................................................... 116,929
Reports to Shareholders..................................... 127,038
Professional Fees........................................... 42,363
Registration Fees........................................... 28,179
Accounting and Administrative Expenses...................... 26,293
Trustees' Fees and Related Expenses......................... 14,964
Custody..................................................... 8,646
Other....................................................... 11,227
-----------
Total Expenses.......................................... 3,268,964
Less Credits Earned on Cash Balances.................... 8,942
-----------
Net Expenses............................................ 3,260,022
-----------
NET INVESTMENT LOSS......................................... $(2,715,195)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $14,334,794
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 33,510,816
End of the Period......................................... 37,476,640
-----------
Net Unrealized Appreciation During the Period............... 3,965,824
-----------
NET REALIZED AND UNREALIZED GAIN............................ $18,300,618
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $15,585,423
===========
</Table>
12 See Notes to Financial Statements
VAN KAMPEN TECHNOLOGY FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss..................................... $ (2,715,195) $ (6,089,606)
Net Realized Gain....................................... 14,334,794 24,035,473
Net Unrealized Appreciation/Depreciation During the
Period................................................ 3,965,824 (21,901,770)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 15,585,423 (3,955,903)
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................... 8,395,770 24,438,947
Cost of Shares Repurchased.............................. (40,356,880) (77,038,236)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS...... (31,961,110) (52,599,289)
------------ ------------
TOTAL DECREASE IN NET ASSETS............................ (16,375,687) (56,555,192)
NET ASSETS:
Beginning of the Period................................. 233,138,502 289,693,694
------------ ------------
End of the Period (Including accumulated net investment
loss of $2,820,880 and $105,685, respectively)........ $216,762,815 $233,138,502
============ ============
</Table>
See Notes to Financial Statements 13
VAN KAMPEN TECHNOLOGY FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS A SHARES FEBRUARY 28, -----------------------------------------------
2007 2006 2005 2004 2003 2002
---------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD................... $ 4.81 $ 4.89 $ 3.88 $ 3.93 $ 2.90 $ 5.49
------ ------ ------ ------ ------ -------
Net Investment Loss (a)...... (0.05) (0.09) (0.08) (0.09) (0.08) (0.11)
Net Realized and Unrealized
Gain/Loss.................. 0.38 0.01 1.09 0.04 1.11 (2.48)
------ ------ ------ ------ ------ -------
Total from Investment
Operations................... 0.33 (0.08) 1.01 (0.05) 1.03 (2.59)
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD....................... $ 5.14 $ 4.81 $ 4.89 $ 3.88 $ 3.93 $ 2.90
====== ====== ====== ====== ====== =======
Total Return (b)............... 6.86%* -1.64% 26.03% -1.27% 35.52% -47.18%
Net Assets at End of the Period
(In millions)................ $ 92.7 $ 98.0 $113.1 $108.7 $125.3 $ 103.5
Ratio of Expenses to Average
Net Assets................... 2.38% 2.26% 2.42% 2.34% 2.88% 2.39%
Ratio of Net Investment Loss to
Average Net Assets........... (1.91%) (1.79%) (1.72%) (2.13%) (2.73%) (2.31%)
Portfolio Turnover............. 52%* 88% 93% 180% 152% 142%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. If
the sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
14 See Notes to Financial Statements
VAN KAMPEN TECHNOLOGY FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS B SHARES FEBRUARY 28, -----------------------------------------------
2007 2006 2005 2004 2003 2002
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $ 4.55 $ 4.66 $ 3.73 $ 3.81 $ 2.83 $ 5.41
------ ------ ------ ------ ------ -------
Net Investment Loss (a)..... (0.06) (0.12) (0.11) (0.12) (0.10) (0.14)
Net Realized and Unrealized
Gain/Loss................. 0.35 0.01 1.04 0.04 1.08 (2.44)
------ ------ ------ ------ ------ -------
Total from Investment
Operations.................. 0.29 (0.11) 0.93 (0.08) 0.98 (2.58)
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD...................... $ 4.84 $ 4.55 $ 4.66 $ 3.73 $ 3.81 $ 2.83
====== ====== ====== ====== ====== =======
Total Return (b).............. 6.37%* -2.36% 24.93% -2.10% 34.63% -47.69%
Net Assets at End of the
Period (In millions)........ $102.3 $111.2 $144.8 $146.7 $172.7 $ 133.8
Ratio of Expenses to Average
Net Assets.................. 3.15% 3.03% 3.19% 3.11% 3.65% 3.16%
Ratio of Net Investment Loss
to Average Net Assets....... (2.68%) (2.56%) (2.49%) (2.91%) (3.50%) (3.08%)
Portfolio Turnover............ 52%* 88% 93% 180% 152% 142%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of up to 1% and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
See Notes to Financial Statements 15
VAN KAMPEN TECHNOLOGY FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS C SHARES FEBRUARY 28, -----------------------------------------------
2007 2006 2005 2004 2003 2002
---------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD................. $ 4.55 $ 4.66 $ 3.73 $ 3.81 $ 2.83 $ 5.41
------ ------ ------ ------ ------ -------
Net Investment Loss (a).... (0.06) (0.12) (0.11) (0.12) (0.10) (0.14)
Net Realized and Unrealized
Gain/Loss................ 0.36 (.01) 1.04 0.04 1.08 (2.44)
------ ------ ------ ------ ------ -------
Total from Investment
Operations................. 0.30 (0.11) 0.93 (0.08) 0.98 (2.58)
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD..................... $ 4.85 $ 4.55 $ 4.66 $ 3.73 $ 3.81 $ 2.83
====== ====== ====== ====== ====== =======
Total Return (b)............. 6.59%* -2.36% 24.93% -2.10% 34.63% -47.69%
Net Assets at End of the
Period (In millions)....... $ 21.7 $ 24.0 $ 31.8 $ 34.7 $ 43.4 $ 34.7
Ratio of Expenses to Average
Net Assets................. 3.15% 3.03% 3.19% 3.11% 3.66% 3.16%
Ratio of Net Investment Loss
to Average Net Assets...... (2.68%) (2.56%) (2.49%) (2.91%) (3.51%) (3.08%)
Portfolio Turnover........... 52%* 88% 93% 180% 152% 142%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
16 See Notes to Financial Statements
VAN KAMPEN TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Technology Fund (the "Fund") is organized as a series of Van Kampen
Equity Trust II, a Delaware statutory trust, and is registered as a diversified,
open-end management investment company under the Investment Company Act of 1940
(the "1940 Act"), as amended. The Fund's investment objective is to seek capital
appreciation. The Fund commenced investment operations on July 26, 1999. The
Fund offers Class A Shares, Class B Shares, Class C Shares and Class I Shares.
Each class of shares differs by its initial sales load, contingent deferred
sales charges, the allocation of class-specific expenses and voting rights on
matters affecting a single class. As of February 28, 2007, there have been no
sales of Class I Shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with U.S. 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 last sale price as of the close of such securities exchange.
Equity securities traded on NASDAQ are valued at the NASDAQ Official Closing
Price. Listed securities and unlisted securities for which the last sale price
is not available are valued at the mean of the last reported bid and asked
prices. For those securities where quotations or prices are not readily
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 Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund 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 (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 Fund 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 Fund.
C. INCOME AND EXPENSES Dividend income is recorded net of applicable withholding
taxes on the ex-dividend date and interest income is recorded on an accrual
basis. Income and expenses of the Fund are allocated on a pro rata basis to each
class of shares, except for distribution and service fees and incremental
transfer agency costs which are unique to each class of shares.
17
VAN KAMPEN TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M 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. The
Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains and net unrealized appreciation, as applicable, as the income is earned or
capital gains are recorded.
The Fund intends to utilize provisions of federal income tax laws which
allow it 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. During the prior fiscal year, the Fund utilized capital losses carried
forward of $23,356,931. At August 31, 2006, the Fund had an accumulated capital
loss carryforward for tax purposes of $1,548,304,017, which will expire
according to the following schedule.
<Table>
<Caption>
AMOUNT EXPIRATION
$ 120,177,164............................................... August 31, 2009
1,245,430,493.............................................. August 31, 2010
182,696,360............................................... August 31, 2011
</Table>
At February 28, 2007, the cost and related gross unrealized appreciation and
depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $180,020,963
============
Gross tax unrealized appreciation........................... $ 39,721,727
Gross tax unrealized depreciation........................... (2,608,945)
------------
Net tax unrealized appreciation on investments.............. $ 37,112,782
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
annually from net investment income and from net realized gains, if any.
Distributions from net realized gains for book purposes may include short-term
capital gains, which are included as ordinary income for tax purposes.
There were no taxable distributions paid during the year ended August 31,
2006.
As of August 31, 2006, there were no distributable earnings on a tax basis.
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.
F. EXPENSE REDUCTIONS During the six months ended February 28, 2007, the Fund's
custody and accounting fees were reduced by $8,646 and $296, respectively, as a
result of credits earned on cash balances.
18
VAN KAMPEN TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .90%
Next $500 million........................................... .85%
Over $1 billion............................................. .80%
</Table>
For the six months ended February 28, 2007, the Fund recognized expenses of
approximately $4,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
Under separate Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the six months ended February 28,
2007, the Fund recognized expenses of approximately $34,600 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Professional Fees" on the Statement of Operations. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Accounting and Administrative Expenses" on the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
February 28, 2007, the Fund recognized expenses of approximately $961,900
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and trustees of
Van Kampen. The Fund does not compensate its officers or trustees who are also
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
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.
Amounts deferred are retained by the Fund, and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $62,059 are included in
"Other" assets on the Statement of Assets and Liabilities at February 28, 2007.
Appreciation/ depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
For the six months ended February 28, 2007, the Fund paid brokerage
commissions to Morgan Stanley DW Inc., an affiliate of the Adviser, totaling
$44,058.
For the six months ended February 28, 2007, Van Kampen, as Distributor for
the Fund, received net commissions on sales of the Fund's Class A Shares of
approximately $20,300 and
19
VAN KAMPEN TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
contingent deferred sales charge (CDSC) on redeemed shares of approximately
$69,100. Sales charges do not represent expenses to the Fund.
3. CAPITAL TRANSACTIONS
For the six months ended February 28, 2007 and the year ended August 31, 2006,
transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
-------------------------- ---------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A.......................... 1,101,238 $ 5,648,668 3,324,841 $ 16,835,782
Class B.......................... 496,018 2,395,381 1,297,719 6,241,526
Class C.......................... 72,985 351,721 282,088 1,361,639
---------- ------------ ----------- ------------
Total Sales........................ 1,670,241 $ 8,395,770 4,904,648 $ 24,438,947
========== ============ =========== ============
Repurchases:
Class A.......................... (3,452,922) $(17,671,129) (6,080,559) $(30,518,899)
Class B.......................... (3,834,555) (18,524,915) (7,938,518) (37,822,805)
Class C.......................... (861,520) (4,160,836) (1,829,337) (8,696,532)
---------- ------------ ----------- ------------
Total Repurchases.................. (8,148,997) $(40,356,880) (15,848,414) $(77,038,236)
========== ============ =========== ============
</Table>
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within 30 days of purchase. The redemption
fee is paid directly to the Fund. For the six months ended February 28, 2007,
the Fund received redemption fees of approximately $900, which are reported as
part of "Cost of Shares Repurchased" on the Statement of Changes in Net Assets.
The per share impact from redemption fees paid to the Fund was less than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $119,673,909 and $153,339,537,
respectively.
6. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees of up to .25% of Class A average daily net assets and up
to 1.00% each of Class B and Class C average daily net assets. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $27,525,000 and
$226,100 for Class B and
20
VAN KAMPEN TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
Class C Shares, respectively. These amounts may be recovered from future
payments under the distribution plan or CDSC. To the extent the unreimbursed
receivable has been fully recovered, the distribution fee is reduced.
7. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action which additionally names as defendants certain individual
trustees of certain Van Kampen funds. The named investment companies, including
the Fund, are listed as nominal defendants. The complaint alleges that
defendants caused the Van Kampen funds to pay economic incentives to a
proprietary sales force to promote the sale of Van Kampen funds. The complaint
also alleges that the Van Kampen funds paid excessive commissions to Morgan
Stanley and its affiliates in connection with the sales of the funds. The
complaint seeks, among other things, the removal of the current trustees of the
funds, rescission of the management contracts for the funds, disgorgement of
profits by Morgan Stanley and its affiliates and monetary damages. This
derivative action was coordinated with a direct action alleging related
violations of defendants' statutory disclosure obligations and fiduciary duties
with respect to the payments described above. In addition, this derivative
action was stayed by agreement of the parties pending rulings on the motion to
dismiss the direct action and the motion to dismiss another derivative action
brought by the same plaintiff that brought this derivative action, alleging
market timing and late trading in the Van Kampen funds. In April 2006, the court
granted defendants' motion to dismiss the direct action. In June 2006, the court
granted defendants' motion to dismiss the market timing action. Accordingly, the
stay on this action was lifted. Plaintiff and defendants have agreed that this
action should be dismissed in light of the rulings dismissing the two cases
discussed above. The Court has approved a notice to shareholders regarding the
dismissal.
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
9. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006 and is to be
applied to all open tax years as of the effective date. Recent SEC guidance
allows implementing FIN 48 in the fund NAV calculations as late as the fund's
last NAV calculation in the first required financial statement period. As a
result, the Fund will incorporate FIN 48 in its semi annual report on February
28, 2008. The impact to the Fund's financial statements, if any, is currently
being assessed.
21
VAN KAMPEN TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
22
VAN KAMPEN TECHNOLOGY FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
23
Van Kampen Technology Fund
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
(continued on next page)
Van Kampen Technology Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen Technology Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2007 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
77, 177, 277
TECHSAR 4/07
(VAN KAMPEN INVESTMENTS LOGO) RN07-01048P-Y02/07
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
International Advantage Fund performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of February 28, 2007.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE OR CLASS I SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL
PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT
VANKAMPEN.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND
THAT THE VALUE OF THE FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU
PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND.
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 2/28/07
<Table>
<Caption>
A SHARES B SHARES C SHARES I SHARES
since 9/26/01 since 9/26/01 since 9/26/01 since 8/12/05
- ----------------------------------------------------------------------------------------------------
W/MAX W/MAX W/MAX
5.75% 5.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES
Since Inception 13.44% 12.21% 12.63% 12.63% 12.84% 12.84% 21.23%
5-year 13.32 11.98 12.52 12.33 12.74 12.74 --
1-year 18.77 11.97 17.88 12.88 17.84 16.84 19.01
6-month 15.75 9.06 15.31 10.31 15.29 14.29 15.81
- ----------------------------------------------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
The returns shown in this report do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Performance of share classes will vary due to differences in sales charges and
expenses. Average annual total return with sales charges includes payment of the
maximum sales charge of 5.75 percent for Class A shares, a contingent deferred
sales charge of 5.00 percent for Class B shares (in year one and declining to
zero after year five), a contingent deferred sales charge of 1.00 percent for
Class C shares in year one, and combined Rule 12b-1 fees and service fees of up
to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C
shares. Class I shares are offered without any sales charges on purchases or
sales and do not include combined Rule 12b-1 fees and service fees. Class I
shares are available for purchase exclusively by investors through (i)
tax-exempt retirement plans with assets of at least one million dollars
(including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit
sharing and money purchase plans, defined benefit plans and non-qualified
deferred compensation plans), (ii) fee-based investment programs with assets of
at least one million dollars and (iii) institutional clients with assets of at
least one million dollars. Figures shown above assume reinvestment of all
distributions. The fund's adviser has waived or reimbursed fees and expenses
from time to time; absent such waivers/ reimbursements, the fund's returns would
have been lower.
The MSCI All Country World Free Index ex-USA is representative of world stock
markets, excluding the United States. The index does not include any expenses,
fees or sales charges, which would lower performance. The index is unmanaged and
should not be considered an investment. It is not possible to invest directly in
an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
MARKET CONDITIONS
Despite a sharp downturn at the end of February 2007, international stock
markets were buoyed by a supportive market environment during the six-month
period. A weaker U.S. dollar relative to most major currencies (except for the
yen) further bolstered returns. Early in the period, markets continued to
recover from a market correction in May and June of 2006. Fears of a U.S.-led
global economic slowdown began to subside as the U.S. Federal Open Market
Committee (the "Fed") discontinued its two-year cycle of interest rate increases
in August. Investors promptly regained their confidence in stock investing and
the markets performed strongly in the fourth quarter and in the beginning of the
new year. However, in the final days of the reporting period, a sell-off in
China's equity market disrupted markets around the world. Additionally, trouble
in the U.S. subprime mortgage market reignited concerns about the possibility of
recession in the U.S. economy.
PERFORMANCE ANALYSIS
The fund returned 15.75 percent for the six months ended February 28, 2007
(Class A shares, unadjusted for sales charges). In comparison, the fund's
benchmark, the MSCI All Country (AC) World Free Index ex-USA, returned 12.28
percent for the period.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
<Table>
<Caption>
- ----------------------------------------------------------------
MSCI AC
WORLD FREE
CLASS A CLASS B CLASS C CLASS I INDEX EX-USA
15.75% 15.31% 15.29% 15.81% 12.28%
- ----------------------------------------------------------------
</Table>
The performance for the four share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and
index definition.
Although the fund's country and sector allocations may provide a useful basis
for performance discussions, these allocations are not based on top-down
positioning decisions. Given our bottom-up approach to stock selection, the
fund's weightings in particular countries or sectors are indicative of where we
found the most attractive investment opportunities (or, conversely, a lack of
opportunities) on an individual stock basis.
On a country allocation basis, significant contributors to the fund's
outperformance over the MSCI AC World Free Index ex-USA were overweights in
Singapore and Spain, which were among the top performing countries during
2
the period. An underweight in Japan--a market with a scarcity of reasonably
priced stocks meeting our investment criteria--also drove outperformance for the
fund. Our security selection within individual countries was most additive in
the United Kingdom, Australia and Hong Kong. In contrast, stock selection in
Germany, Spain and Japan had a detrimental effect on performance relative to the
MSCI AC World Free Index ex-USA.
At the sector level, during the period, an underweight in the energy sector
enhanced performance, while an overweight in the health care sector detracted.
We have tended to avoid investment in energy stocks because we believe their
earnings growth is highly dependent on rising commodity prices. Conversely, our
investment process has led us to a number of attractively valued health care
companies that we believe can generate strong earnings growth regardless of the
broader economic environment. Stock selection in the health care and industrials
sectors produced outsized gains relative to the MSCI AC World Free Index ex-USA.
However, our stock selection in the financial sector modestly hurt returns.
Other notable themes in the fund's performance during the six-month period
included the positive influence of small and medium-size companies. The fund is
permitted to invest in companies of any size, and during the reporting period
the fund's exposure to small and mid-size stocks benefited returns. On the
whole, the fund's emerging markets holdings also boosted results, as the
emerging markets outperformed the developed markets during the period under
review. However, as it has for the past several years, the broad market
environment continued to favor value stocks over growth stocks, which
contributed some downward pressure to the fund's growth-oriented portfolio.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
3
<Table>
<Caption>
TOP 10 HOLDINGS AS OF 2/28/07
Li & Fung, Ltd. 3.1%
UniCredito Italiano S.p.A. 3.1
Esprit Holdings, Ltd. 3.0
Cosco Corp., Ltd. 2.9
Standard Chartered PLC 2.9
DAITO Trust Construction Co., Ltd. 2.7
Man Group PLC 2.7
Computershare, Ltd. 2.6
Industria de Diseno Textil, SA 2.5
NII Holdings, Inc., Class B 2.5
<Caption>
SUMMARY OF INVESTMENTS BY COUNTRY CLASSIFICATION AS OF 2/28/07
United Kingdom 15.6%
Spain 9.9
Germany 9.6
Bermuda 9.4
Singapore 7.1
Australia 4.5
Japan 4.1
Mexico 3.7
Switzerland 3.6
Greece 3.5
Italy 3.1
South Africa 2.8
United States 2.5
Canada 2.3
Ireland 2.1
Israel 2.1
France 1.5
China 1.4
Netherlands 1.3
India 1.0
Republic of China (Taiwan) 1.0
British Virgin Islands 0.8
Cayman Islands 0.7
-----
Total Long-Term Investments 93.6
Repurchase Agreements 2.5
Foreign Currency 2.9
Other Assets in Excess of Liabilities 1.0
-----
Net Assets 100.0%
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. All percentages are as a percentage of
total net assets. Van Kampen is a wholly owned subsidiary of a global securities
firm which is engaged in a wide range of financial services including, for
example, securities trading and brokerage activities, investment banking,
research and analysis, financing and financial advisory services.
4
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to fund shareholders, and
makes these reports available on its public Web site, www.vankampen.com.
In addition to the semiannual and annual reports that Van Kampen delivers
to shareholders and makes available through the Van Kampen public Web
site, each fund files a complete schedule of portfolio holdings with the
SEC for the fund's first and third fiscal quarters on Form N-Q. Van
Kampen does not deliver the reports for the first and third fiscal
quarters to shareholders, nor are the reports posted to the Van Kampen
public Web site. You may, however, obtain the Form N-Q filings (as well
as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. 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 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 847-2424.
5
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
6
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charges on redemptions of Class B and Class C
Shares; and redemption fees; and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees; and other Fund expenses. This example is
intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 9/1/06 - 2/28/07.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges or redemption fees.
Therefore, the second line of the table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
cost would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
9/1/06 2/28/07 9/1/06-2/28/07
Class A
Actual...................................... $1,000.00 $1,157.47 $ 8.51
Hypothetical................................ 1,000.00 1,016.91 7.95
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,153.07 12.55
Hypothetical................................ 1,000.00 1,013.14 11.73
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,152.95 12.49
Hypothetical................................ 1,000.00 1,013.19 11.68
(5% annual return before expenses)
Class I
Actual...................................... 1,000.00 1,158.14 7.17
Hypothetical................................ 1,000.00 1,018.15 6.71
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.59%, 2.35%,
2.34% and 1.34% for Class A, B, C, and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
Assumes all dividends and distributions were reinvested.
7
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------------------------------------
COMMON STOCKS 93.6%
AUSTRALIA 4.5%
A.B.C. Learning Centres, Ltd. .............................. 614,623 $ 3,337,617
Computershare, Ltd. ........................................ 571,800 4,557,872
------------
7,895,489
------------
BERMUDA 9.4%
Axis Capital Holdings, Ltd. ................................ 77,144 2,608,239
Esprit Holdings, Ltd. ...................................... 496,000 5,183,932
Li & Fung, Ltd. ............................................ 1,694,000 5,407,131
Willis Group Holdings, Ltd. ................................ 80,700 3,203,790
------------
16,403,092
------------
BRITISH VIRGIN ISLANDS 0.8%
Nam Tai Electronics, Inc. .................................. 109,000 1,445,340
------------
CANADA 2.3%
SunOpta, Inc. (a)........................................... 365,400 3,909,780
------------
CAYMAN ISLANDS 0.7%
Global Bio-chem Technology Group Co., Ltd. ................. 4,454,000 1,228,509
------------
CHINA 1.4%
China Shenhua Energy Co. (a)................................ 983,000 2,485,947
------------
FRANCE 1.5%
Ipsen, SA................................................... 57,600 2,626,785
------------
GERMANY 9.6%
adidas-Salomon, AG.......................................... 80,564 3,956,615
Fresenius, AG,.............................................. 54,300 3,913,894
Grenkeleasing, AG........................................... 34,139 1,387,142
Hypo Real Estate Holding, AG................................ 47,869 3,031,968
United Internet, AG......................................... 118,200 2,157,981
Wirecard, AG (a)............................................ 212,000 2,224,635
------------
16,672,235
------------
GREECE 3.5%
Cosmote Mobile Telecommunications, SA....................... 92,810 2,700,151
EFG Eurobank Ergasias....................................... 89,220 3,315,344
------------
6,015,495
------------
INDIA 1.0%
ACC, Ltd. .................................................. 83,700 1,705,097
------------
IRELAND 2.1%
ICON PLC--ADR (a)........................................... 87,200 3,623,160
------------
ISRAEL 2.1%
Teva Pharmaceutical Industries, Ltd.--ADR................... 101,368 3,604,646
------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------------------------------------
ITALY 3.1%
UniCredito Italiano S.p.A. ................................. 576,039 $ 5,324,615
------------
JAPAN 4.1%
DAITO Trust Construction Co., Ltd........................... 95,900 4,650,334
OSG Corp. .................................................. 151,000 2,426,088
------------
7,076,422
------------
MEXICO 3.7%
Fomento Economico Mexicano, SA de CV, Class B--ADR.......... 25,400 2,801,620
Grupo Aeroportuario del Sureste, SA de CV, Class B--ADR..... 80,600 3,592,342
------------
6,393,962
------------
NETHERLANDS 1.3%
QIAQEN N.V. (a)............................................. 139,800 2,291,322
------------
REPUBLIC OF CHINA (TAIWAN) 1.0%
Taiwan Semiconductor Manufacturing Co., Ltd.--ADR........... 150,363 1,669,029
------------
SINGAPORE 7.1%
Cosco Corp., Ltd. .......................................... 2,878,000 5,102,191
Flextronics International, Ltd. (a)......................... 311,183 3,401,230
Singapore Airlines, Ltd. ................................... 363,000 3,754,615
------------
12,258,036
------------
SOUTH AFRICA 2.8%
Aspen Pharmacare Holdings, Ltd. ............................ 585,300 2,851,118
Pretoria Portland Cement Co., Ltd. ......................... 35,200 2,051,024
------------
4,902,142
------------
SPAIN 9.9%
Banco Bilbao Vizcaya Argentaria, SA......................... 98,502 2,392,436
Banco Santander Central Hispano, SA......................... 142,300 2,629,761
Gestevision Telecinco, SA................................... 123,941 3,437,268
Industria de Diseno Textil, SA.............................. 76,259 4,420,278
Telefonica, SA.............................................. 196,464 4,224,629
------------
17,104,372
------------
SWITZERLAND 3.6%
Kudelski, SA................................................ 71,500 2,647,000
UBS, AG..................................................... 62,046 3,662,708
------------
6,309,708
------------
UNITED KINGDOM 15.6%
Hirco PLC (a)............................................... 144,711 1,120,094
KKR Private Equity Investor LP (a).......................... 96,900 2,323,557
Man Group PLC............................................... 430,002 4,626,823
RAB Capital PLC............................................. 1,792,000 3,315,112
Regus Group PLC (a)......................................... 1,069,000 2,513,754
SABMiller PLC............................................... 184,000 4,066,205
Shire PLC................................................... 197,428 4,172,426
Standard Chartered PLC...................................... 179,408 5,017,621
------------
27,155,592
------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------------------------------------
UNITED STATES 2.5%
NII Holdings, Inc., Class B (a)............................. 61,100 $ 4,328,324
------------
TOTAL LONG-TERM INVESTMENTS 93.6%
(Cost $134,232,117)................................................... 162,429,099
------------
REPURCHASE AGREEMENTS 2.5%
Citigroup Global Markets, Inc. ($955,165 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
5.27%, dated 02/28/07, to be sold on 03/01/07 at $955,305)............ 955,165
State Street Bank & Trust Co. ($3,391,835 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of 5.12%,
dated 02/28/07, to be sold on 03/01/07 at $3,392,318)................... 3,391,835
------------
TOTAL REPURCHASE AGREEMENTS 2.5%
(Cost $4,347,000)..................................................... 4,347,000
------------
TOTAL INVESTMENTS 96.1%
(Cost $138,579,117)................................................... 166,776,099
FOREIGN CURRENCY 2.9%
(Cost $5,062,309)..................................................... 5,117,879
OTHER ASSETS IN EXCESS OF LIABILITIES 1.0%............................. 1,665,475
------------
NET ASSETS 100.0%...................................................... $173,559,453
============
</Table>
Percentages are calculated as a percentage of net assets.
Securities with total market value equal to $125,950,277 have been valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Fund's Trustees.
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
10 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------
Diversified Banks........................................... $ 18,679,776 10.8%
Pharmaceuticals............................................. 13,254,976 7.6
Asset Management & Custody Banks............................ 10,265,492 5.9
Apparel Retail.............................................. 9,604,211 5.5
Wireless Telecommunication Services......................... 7,028,475 4.1
Distributors................................................ 5,407,131 3.1
Marine...................................................... 5,102,191 2.9
Electronic Manufacturing Services........................... 4,846,570 2.8
Homebuilding................................................ 4,650,334 2.7
Data Processing & Outsourced Services....................... 4,557,872 2.6
Integrated Telecommunication Services....................... 4,224,629 2.4
Brewers..................................................... 4,066,205 2.3
Apparel, Accessories & Luxury Goods......................... 3,956,615 2.3
Health Care Equipment....................................... 3,913,894 2.3
Packaged Foods & Meats...................................... 3,909,780 2.3
Construction Materials...................................... 3,756,121 2.2
Airlines.................................................... 3,754,615 2.2
Diversified Capital Markets................................. 3,662,707 2.1
Life Sciences Tools & Services.............................. 3,623,160 2.1
Airport Services............................................ 3,592,342 2.1
Broadcasting & Cable TV..................................... 3,437,268 2.0
Education Services.......................................... 3,337,617 1.9
Insurance Brokers........................................... 3,203,790 1.8
Thrifts & Mortgage Finance.................................. 3,031,968 1.8
Soft Drinks................................................. 2,801,620 1.6
Electronic Equipment Manufacturers.......................... 2,647,000 1.5
Property & Casualty Insurance............................... 2,608,239 1.5
Office Services & Supplies.................................. 2,513,754 1.5
Coal & Consumable Fuels..................................... 2,485,947 1.4
Industrial Machinery........................................ 2,426,088 1.4
Biotechnology............................................... 2,291,322 1.3
Diversified Commercial & Professional Services.............. 2,224,635 1.3
Internet Software & Services................................ 2,157,981 1.2
Semiconductors.............................................. 1,669,029 1.0
Specialized Finance......................................... 1,387,142 0.8
Agricultural Products....................................... 1,228,509 0.7
Real Estate Management & Development........................ 1,120,094 0.6
------------ -----
$162,429,099 93.6%
============ =====
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 28, 2007 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $138,579,117)....................... $166,776,099
Foreign Currency (Cost $5,062,309).......................... 5,117,879
Cash........................................................ 941
Receivables:
Fund Shares Sold.......................................... 1,417,677
Investments Sold.......................................... 804,593
Dividends................................................. 77,241
Interest.................................................. 622
Other....................................................... 79,004
------------
Total Assets............................................ 174,274,056
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 208,211
Investment Advisory Fee................................... 121,123
Distributor and Affiliates................................ 84,193
Trustees' Deferred Compensation and Retirement Plans........ 136,051
Accrued Expenses............................................ 165,025
------------
Total Liabilities....................................... 714,603
------------
NET ASSETS.................................................. $173,559,453
============
NET ASSETS CONSIST OF:
Capital (Par value of $0.01 per share with an unlimited
number of shares authorized).............................. $145,765,491
Net Unrealized Appreciation................................. 28,231,667
Accumulated Net Realized Loss............................... (63,812)
Accumulated Undistributed Net Investment Income............. (373,893)
------------
NET ASSETS.................................................. $173,559,453
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $123,408,929 and 8,323,028 shares of
beneficial interest issued and outstanding)............. $ 14.83
Maximum sales charge (5.75%* of offering price)......... 0.90
------------
Maximum offering price to public........................ $ 15.73
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $24,600,513 and 1,697,760 shares of
beneficial interest issued and outstanding)............. $ 14.49
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $10,357,453 and 706,915 shares of
beneficial interest issued and outstanding)............. $ 14.65
============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $15,192,558 and 1,024,105 shares of
beneficial interest issued and outstanding)............. $ 14.83
============
</Table>
* On sales of $50,000 or more, the sales charge will be reduced.
12 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended February 28, 2007 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $38,124)..... $ 965,257
Interest.................................................... 101,197
-----------
Total Income.............................................. 1,066,454
-----------
EXPENSES:
Investment Advisory Fee..................................... 691,298
Distribution (12b-1) and Service Fees
Class A................................................... 135,275
Class B................................................... 118,617
Class C................................................... 48,089
Transfer Agent Fees......................................... 145,995
Custody..................................................... 42,284
Professional Fees........................................... 37,631
Reports to Shareholders..................................... 32,375
Accounting and Administrative Expenses...................... 30,383
Registration Fees........................................... 23,362
Trustees' Fees and Related Expenses......................... 15,270
Other....................................................... 9,565
-----------
Total Expenses.......................................... 1,330,144
Less Credits Earned on Cash Balances.................... 1,600
-----------
Net Expenses............................................ 1,328,544
-----------
NET INVESTMENT LOSS......................................... $ (262,090)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 345,965
Foreign Currency Transactions............................. (50,533)
-----------
Net Realized Gain........................................... 295,432
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 6,606,263
-----------
End of the Period:
Investments............................................. 28,196,982
Foreign Currency Translation............................ 34,685
-----------
28,231,667
-----------
Net Unrealized Appreciation During the Period............... 21,625,404
-----------
NET REALIZED AND UNREALIZED GAIN............................ $21,920,836
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $21,658,746
===========
</Table>
See Notes to Financial Statements 13
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income/Loss.............................. $ (262,090) $ 315,700
Net Realized Gain....................................... 295,432 25,685,186
Net Unrealized Appreciation/Depreciation During the
Period................................................ 21,625,404 (5,907,039)
------------ ------------
Change in Net Assets from Operations.................... 21,658,746 20,093,847
------------ ------------
Distributions from Net Investment Income:
Class A Shares........................................ (439,659) 603,288
Class B Shares........................................ -0- 41,518
Class C Shares........................................ -0- 19,712
Class I Shares........................................ (72,919) 86,942
------------ ------------
(512,578) 751,460
------------ ------------
Distributions from Net Realized Gain:
Class A Shares........................................ (12,619,704) 961,822
Class B Shares........................................ (2,848,381) 308,122
Class C Shares........................................ (1,182,908) 97,835
Class I Shares........................................ (1,399,962) 113,443
------------ ------------
(18,050,955) 1,481,222
------------ ------------
Total Distributions..................................... (18,563,533) (2,232,682)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 3,095,213 17,861,165
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................... 39,474,502 61,492,469
Net Asset Value of Shares Issued Through Dividend
Reinvestment.......................................... 17,896,023 2,148,504
Cost of Shares Repurchased.............................. (26,583,788) (54,521,153)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS...... 30,786,737 9,119,820
------------ ------------
TOTAL INCREASE IN NET ASSETS............................ 33,881,950 26,980,985
NET ASSETS:
Beginning of the Period................................. 139,677,503 112,696,518
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $(373,893) and $400,775,
respectively)......................................... $173,559,453 $139,677,503
============ ============
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS SEPT. 26, 2001
ENDED YEAR ENDED AUGUST 31, (COMMENCEMENT
CLASS A SHARES FEB. 28, --------------------------------- OF OPERATIONS) TO
2007 2006 2005 2004 2003 AUGUST 31, 2002
------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD................... $14.52 $12.56 $10.86 $ 9.83 $ 9.43 $ 10.00
------ ------ ------ ------ ------ -------
Net Investment
Income/Loss (a).............. (.01) .06 .13 .04 .09 .03
Net Realized and
Unrealized Gain/Loss......... 2.26 2.16 2.14 .99 .88 (.28)
------ ------ ------ ------ ------ -------
Total from
Investment Operations........ 2.25 2.22 2.27 1.03 .97 (.25)
------ ------ ------ ------ ------ -------
Less:
Distributions from Net
Investment Income.......... .07 .10 -0- -0- .57 .31
Distributions from Net
Realized Gain.............. 1.87 .16 .57 -0- -0- .01
------ ------ ------ ------ ------ -------
Total Distributions............ 1.94 .26 .57 -0- .57 .32
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD....................... $14.83 $14.52 $12.56 $10.86 $ 9.83 $ 9.43
====== ====== ====== ====== ====== =======
Total Return* (b).............. 15.75%** 17.91% 21.36% 10.48% 11.20% -2.60%**
Net Assets at End of the
Period (In millions)......... $123.4 $ 97.7 $ 70.3 $ 13.9 $ 5.6 $ 1.6
Ratio of Expenses to Average
Net Assets* (c).............. 1.59% 1.65% 1.70% 1.72% 1.75% 1.78%
Ratio of Net Investment
Income/Loss to Average Net
Assets*...................... (.20%) .44% 1.08% .38% .98% .33%
Portfolio Turnover............. 11%** 124% 69% 68% 43% 62%**
* If certain expenses had not been voluntarily 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 (c)............... N/A 1.68% 1.97% 2.86% 4.85% 15.81%
Ratio of Net Investment
Income/Loss to Average Net
Assets....................... N/A .41% .81% (.76%) (2.11%) (13.70%)
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. If
the sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .03% for the period ended August 31,
2002.
N/A=Not Applicable
See Notes to Financial Statements 15
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS SEPT. 26, 2001
ENDED YEAR ENDED AUGUST 31, (COMMENCEMENT
CLASS B SHARES FEB. 28, ------------------------------------- OF OPERATIONS) TO
2007 2006 2005 2004 2003 AUGUST 31, 2002
----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF THE PERIOD............. $ 14.22 $12.32 $10.73 $ 9.77 $ 9.38 $ 10.00
------- ------ ------ ------ ------ -------
Net Investment Income/Loss
(a)....................... (.07) (.05) .05 (.03) -0-(d) (.04)
Net Realized and
Unrealized Gain/Loss.... 2.21 2.13 2.11 .99 .89 (.27)
------- ------ ------ ------ ------ -------
Total from
Investment Operations..... 2.14 2.08 2.16 .96 .89 (.31)
------- ------ ------ ------ ------ -------
Less:
Distributions from Net
Investment Income....... -0- .02 -0- -0- .50 .30
Distributions from Net
Realized Gain........... 1.87 .16 .57 -0- -0- .01
------- ------ ------ ------ ------ -------
Total Distributions......... 1.87 .18 .57 -0- .50 .31
------- ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD.................... $ 14.49 $14.22 $12.32 $10.73 $ 9.77 $ 9.38
======= ====== ====== ====== ====== =======
Total Return* (b)........... 15.31%** 17.05% 20.57% 9.83% 10.40% -3.37%**
Net Assets at End of the
Period (In millions)...... $ 24.6 $ 22.8 $ 25.3 $ 2.6 $ 1.2 $ .9
Ratio of Expenses to Average
Net Assets* (c)........... 2.35% 2.40% 2.41% 2.35% 2.50% 2.53%
Ratio of Net Investment
Income/Loss to Average Net
Assets*................... (.95%) (.37%) .42% (.28%) (.02%) (.45%)
Portfolio Turnover.......... 11%** 124% 69% 68% 43% 62%**
* If certain expenses had not been voluntarily 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 (c)............ N/A 2.43% 2.66% 3.30% 5.60% 16.56%
Ratio of Net Investment
Income/Loss to Average Net
Assets.................... N/A (.40%) .17% (1.23%) (3.12%) (14.48%)
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
If the sales charges were included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of up to 1% and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .03% for the period ended August 31,
2002.
(d) Amount is less than $0.01 per share.
N/A=Not Applicable
16 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS SEPT. 26, 2001
ENDED YEAR ENDED AUGUST 31, (COMMENCEMENT
CLASS C SHARES FEB. 28, --------------------------------------- OF OPERATIONS) TO
2007 2006 2005 2004 2003 AUGUST 31, 2002
---------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF THE PERIOD............. $ 14.36 $12.45 $10.84 $ 9.77 $ 9.38 $ 10.00
------- ------ ------ ------ ------ -------
Net Investment Income/Loss
(a)..................... (.07) (.05) .04 .07 -0-(d) (.04)
Net Realized and
Unrealized Gain/Loss.... 2.23 2.15 2.14 1.00 .89 (.27)
------- ------ ------ ------ ------ -------
Total from Investment
Operations................ 2.16 2.10 2.18 1.07 .89 (.31)
------- ------ ------ ------ ------ -------
Less:
Distributions from Net
Investment Income....... -0- .03 -0- -0- .05 .30
Distributions from Net
Realized Gain........... 1.87 .16 .57 -0- -0- .01
------- ------ ------ ------ ------ -------
Total Distributions......... 1.87 .19 .57 -0- .50 .31
------- ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD.................... $ 14.65 $14.36 $12.45 $10.84 $ 9.77 $ 9.38
======= ====== ====== ====== ====== =======
Total Return* (b)........... 15.29%** 17.05% 20.54%(e) 10.95%(e)(f) 10.40%(e) -3.37%**
Net Assets at End of the
Period (In millions)...... $ 10.4 $ 8.9 $ 7.6 $ 1.7 $ .8 $ .6
Ratio of Expenses to Average
Net Assets* (c)........... 2.34% 2.40% 2.40%(e) 1.77%(e) 2.50%(e) 2.53%
Ratio of Net Investment
Income/Loss to Average Net
Assets*................... (.94%) (.34%) .34%(e) .59%(e)(f) .00%(e) (.44%)
Portfolio Turnover.......... 11%** 124% 69% 68% 43% 62%**
* If certain expenses had not been voluntarily 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
(c).................... N/A 2.43% 2.67%(e) 2.92%(e) 5.60%(e) 16.56%
Ratio of Net Investment
Income to Average Net
Assets................. N/A (.37%) .07%(e) (.56%)(e)(f) (3.09%)(e) (14.47%)
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption on Fund
shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .03% for the period ended August 31,
2002.
(d) Amount is less than $0.01 per share.
(e) The Total Return, Ratio of Expenses to Average Net Assets and Ratio of Net
Investment Income/Loss to Average Net Assets reflect actual 12b-1 fees of
less than 1% (See footnote 7).
(f) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income/Loss to
Average Net Assets of 0.31%.
N/A=Not Applicable
See Notes to Financial Statements 17
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR AUGUST 12, 2005
FEBRUARY ENDED (COMMENCEMENT OF
CLASS I SHARES 28, AUGUST 31, OPERATIONS) TO
2007 2006 AUGUST 31, 2005
--------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD......... $14.54 $12.56 $ 12.77
------ ------ -------
Net Investment Income (a)...................... -0-(c) .08 .01
Net Realized and Unrealized Gain/Loss.......... 2.26 2.19 (.22)
------ ------ -------
Total from Investment Operations................. 2.26 2.27 (.21)
------ ------ -------
Less:
Distributions from Net Investment Income....... .10 .13 -0-
Distributions from Net Realized Gain........... 1.87 .16 -0-
------ ------ -------
Total Distributions.............................. 1.97 .29 -0-
------ ------ -------
NET ASSET VALUE, END OF THE PERIOD............... $14.83 $14.54 $ 12.56
====== ====== =======
Total Return* (b)................................ 15.81%** 18.27% -1.64%**
Net Assets at End of the Period (In millions).... $ 15.2 $ 10.3 $ 9.4
Ratio of Expenses to Average Net Assets*......... 1.34% 1.40% 1.40%
Ratio of Net Investment Income to Average Net
Assets*........................................ .03% .61% 1.00%
Portfolio Turnover............................... 11%** 124% 69%
* If certain expenses had not been voluntarily 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 1.43% 1.52%
Ratio of Net Investment Income to Average
Net Assets.................................. N/A .58% .88%
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption on Fund shares.
(c) Amount is less than $0.01 per share.
N/A=Not Applicable
18 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen International Advantage Fund (the "Fund") is organized as a series of
the Van Kampen Equity Trust II, a Delaware statutory trust, and is registered as
a diversified, open-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment
objective is to seek long-term capital appreciation. The Fund commenced
investment operations on September 26, 2001. The Fund offers Class A Shares,
Class B Shares, Class C Shares and Class I Shares. Each class of shares differs
by its initial sales load, contingent deferred sales charges, the allocation of
class-specific expenses and voting rights on matters affecting a single class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with U.S. 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 last sale price as of the close of such securities exchange.
Equity securities traded on NASDAQ are valued at the NASDAQ Official Closing
Price. Unlisted securities and listed securities for which the last sale price
is not available are valued at the mean of the last reported bid and asked
prices. For those securities where quotations or prices are not readily
available, valuations are determined in accordance with procedures established
in good faith by the Board of Trustees. Most foreign markets close before the
New York Stock Exchange (NYSE). Occasionally, developments that could affect the
closing prices of securities and other assets may occur between the times at
which valuations of such securities are determined (that is, close of the
foreign market on which the securities trade) and the close of business on the
NYSE. If these developments are expected to materially affect the value of the
securities, the valuations may be adjusted to reflect the estimated fair value
as of the close of the NYSE, as determined in good faith under procedures
established 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. Forward foreign currency contracts are valued using quoted foreign
exchange rates.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund 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 (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 Fund 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 Fund.
19
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
C. INCOME AND EXPENSES Dividend income is recorded net of applicable withholding
taxes on the ex-dividend date and interest income is recorded on an accrual
basis. Income and expenses of the Fund are allocated on a pro rata basis to each
class of shares, except for distributions and service fees and incremental
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M 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. The
Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains and net unrealized appreciation, as applicable, as the income is earned or
capital gains are recorded.
At February 28, 2007, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $138,579,521
============
Gross tax unrealized appreciation........................... $ 32,961,613
Gross tax unrealized depreciation........................... (4,765,035)
------------
Net tax unrealized appreciation on investments.............. $ 28,196,578
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends at
least annually from net investment income and from net realized gains, if any.
Distributions from net realized gains for book purposes may include short-term
capital gains, which are included in ordinary income for tax purposes
The tax character of distributions paid during the year ended August 31,
2006 was as follows:
<Table>
Distribution paid from:
Ordinary income........................................... $ 751,460
Long-term capital gain.................................... 1,481,222
----------
$2,232,682
==========
</Table>
As of August 31, 2006, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $1,368,538
Undistributed long-term capital gain........................ 16,835,775
</Table>
Net realized gains or losses may differ for financial reporting and tax
purposes as a result of the deferral of losses relating to wash sale
transactions.
F. FOREIGN CURRENCY TRANSLATION The market values of foreign securities, forward
foreign currency contracts and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the mean of the quoted bid
and ask prices of such currencies
20
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. The cost of securities is determined using historical exchange rates.
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 transactions includes the net realized amount from
the sale of foreign currency and the amount realized between trade date and
settlement date on securities transactions. Income and expenses are translated
at rates prevailing when accrued.
G. EXPENSE REDUCTIONS During the six months ended February 28, 2007, the Fund's
custody fee was reduced by $1,600 as a result of credits earned on cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .90%
Next $500 million........................................... .85%
Over $1 billion............................................. .80%
</Table>
For the six months ended February 28, 2007, the Fund recognized expenses of
approximately $12,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide services as legal counsel to the Fund.
Under separate Legal Services, Accounting Services, and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the six months ended February 28,
2007, the Fund recognized expenses of approximately $22,000 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Professional Fees" on the Statement of Operations. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Accounting and Administrative Expenses" on the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
February 28, 2007, the Fund recognized expenses of approximately $122,900
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are also
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
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.
Amounts deferred are retained by the Fund, and
21
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
to the extent permitted by the 1940 Act, as amended, may be invested in the
common shares of those funds selected by the trustees. Investments in such funds
of approximately $74,400 are included in "Other" assets on the Statement of
Assets and Liabilities at February 28, 2007. Appreciation/depreciation and
distributions received from these investments are recorded with an offsetting
increase/decrease in the deferred compensation obligation and do not affect the
net asset value of the Fund. Benefits under the retirement plan are payable upon
retirement for a ten-year period and are based upon each trustee's years of
service to the Fund. The maximum annual benefit per trustee under the plan is
$2,500.
For the six months ended February 28, 2007, the Fund paid brokerage
commissions to Morgan Stanley DW Inc., an affiliate of the Adviser, totaling
$683.
For the six months ended February 28, 2007, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A Shares of
approximately $29,400 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $11,800. Sales charges do not represent expenses of the
Fund.
3. CAPITAL TRANSACTIONS
For the six months ended February 28, 2007 and the year ended August 31, 2006,
transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A........................... 1,999,991 $ 30,020,303 3,606,898 $ 49,976,616
Class B........................... 215,555 3,173,889 486,947 6,706,964
Class C........................... 93,447 1,416,101 184,504 2,559,330
Class I........................... 322,676 4,864,209 158,429 2,249,559
---------- ------------ ---------- ------------
Total Sales......................... 2,631,669 $ 39,474,502 4,436,778 $ 61,492,469
========== ============ ========== ============
Dividend Reinvestment:
Class A........................... 870,608 $ 12,667,346 113,732 $ 1,516,273
Class B........................... 187,144 2,664,928 24,867 326,241
Class C........................... 75,755 1,090,868 7,970 105,604
Class I........................... 101,229 1,472,881 15,033 200,386
---------- ------------ ---------- ------------
Total Dividend Reinvestment......... 1,234,736 $ 17,896,023 161,602 $ 2,148,504
========== ============ ========== ============
Repurchases:
Class A........................... (1,274,155) $(19,200,345) (2,596,444) $(35,979,865)
Class B........................... (310,129) (4,560,245) (963,754) (13,039,564)
Class C........................... (80,981) (1,194,773) (186,781) (2,576,197)
Class I........................... (108,776) (1,628,425) (211,666) (2,925,527)
---------- ------------ ---------- ------------
Total Repurchases................... (1,774,041) $(26,583,788) (3,958,645) $(54,521,153)
========== ============ ========== ============
</Table>
22
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within 30 days of purchase. The redemption
fee is paid directly to the Fund. For the six months ended February 28, 2007,
the Fund received redemption fees of approximately $900, which are reported as
part of "Cost of Shares Repurchased" in the Statements of Changes in Net Assets.
The per share impact from redemption fees paid to the Fund was less than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $20,461,785 and $15,767,560,
respectively.
6. 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 Fund may use derivative instruments for a variety of reasons, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to manage the Fund's foreign currency exposure or generate
potential gain. All of the Fund's portfolio 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 forward commitment. In this instance, the recognition of gain or loss is
postponed until the disposal of the security underlying the forward commitment.
Purchasing securities or foreign currency on a forward commitment basis
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 or foreign currency on a forward commitment basis involves different
risks and can result in losses more significant than those arising from the
purchase of such securities. Risks may arise as a result of the potential
inability of the counterparties to meet the terms of their contracts.
A forward foreign 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 forward foreign currency
contracts. As of February 28, 2007, there were no forward foreign currency
commitments outstanding.
7. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees of up to .25% of Class A average daily net assets and up
to 1.00% each of Class B and Class C average daily net assets. These fees are
accrued daily and paid to the Distributor monthly.
23
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $201,900 and $12,400
for Class B and Class C Shares, respectively. These amounts may be recovered
from future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, the distribution fee is
reduced.
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
9. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action which additionally names as defendants certain individual
trustees of certain Van Kampen funds. The named investment companies, including
the Fund, are listed as nominal defendants. The complaint alleges that
defendants caused the Van Kampen funds to pay economic incentives to a
proprietary sales force to promote the sale of Van Kampen funds. The complaint
also alleges that the Van Kampen funds paid excessive commissions to Morgan
Stanley and its affiliates in connection with the sales of the funds. The
complaint seeks, among other things, the removal of the current trustees of the
funds, rescission of the management contracts for the funds, disgorgement of
profits by Morgan Stanley and its affiliates and monetary damages. This
derivative action was coordinated with a direct action alleging related
violations of defendants' statutory disclosure obligations and fiduciary duties
with respect to the payments described above. In addition, this derivative
action was stayed by agreement of the parties pending rulings on the motion to
dismiss the direct action and the motion to dismiss another derivative action
brought by the same plaintiff that brought this derivative action, alleging
market timing and late trading in the Van Kampen funds. In April 2006, the court
granted defendants' motion to dismiss the direct action. In June 2006, the court
granted defendants' motion to dismiss the market timing action. Accordingly, the
stay on this action was lifted. Plaintiff and defendants have agreed that this
action should be dismissed in light of the rulings dismissing the two cases
discussed above. The Court has approved a notice to shareholders regarding the
dismissal.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for the fiscal years beginning after December 15, 2006 and is to be
applied to all open tax years as of the effective date. Recent SEC guidance
allows implementing FIN 48 in the fund NAV calculations as late as the fund's
last NAV calculation in the first required financial statement period. As a
result, the Fund will incorporate FIN 48 in its semi annual report on February
29, 2008. The impact to the Fund's financial statements, if any, is currently
being assessed.
24
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
25
VAN KAMPEN INTERNATIONAL ADVANTAGE FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
26
Van Kampen International Advantage Fund
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
(continued on next page)
Van Kampen International Advantage Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen International Advantage Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2007 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
185, 285, 385, 687
IASAR 4/07
(VAN KAMPEN INVESTMENTS LOGO) IU07-00165P-Y02/07
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
American Franchise Fund performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of February 28, 2007.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE OR CLASS I SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL
PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT
VANKAMPEN.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS
INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE
POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL
DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT
YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS
FUND.
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 2/28/07
<Table>
<Caption>
A SHARES B SHARES C SHARES I SHARES
since 6/23/05 since 6/23/05 since 6/23/05 since 6/23/05
- ---------------------------------------------------------------------------------------------------
W/MAX W/MAX W/MAX
5.75% 5.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES
Since Inception 12.29% 8.42% 11.39% 9.17% 11.38% 11.38% 12.48%
1-year 12.07 5.61 11.20 6.20 11.17 10.17 12.26
6-month 5.98 -0.15 5.59 0.59 5.57 4.57 5.98
- ---------------------------------------------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
The returns shown in this report do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Performance of share classes will vary due to differences in sales charges and
expenses. Average annual total return with sales charges includes payment of the
maximum sales charge of 5.75 percent for Class A shares, a contingent deferred
sales charge of 5.00 percent for Class B shares (in year one and declining to
zero after year five), a contingent deferred sales charge of 1.00 percent for
Class C shares in year one and combined Rule 12b-1 fees and service fees of up
to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C
shares. Class I shares are available for purchase exclusively by investors
through (i) tax-exempt retirement plans with assets of at least $1 million
(including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit
sharing and money purchase plans, defined benefit plans and non-qualified
deferred compensation plans), (ii) fee-based investment programs with assets of
at least $1 million and (iii) institutional clients with assets of at least $1
million. Class I shares are offered without any sales charges on purchases or
sales and do not include combined Rule 12b-1 fees and service fees. Figures
shown above assume reinvestment of all dividends and capital gains. The fund's
adviser has waived or reimbursed fees and expenses from time to time; absent
such waivers/reimbursements, the fund's returns would have been lower.
The S&P 500 Index is generally representative of the U.S. stock market. The
index does not include any expenses, fees or sales charges, which would lower
performance. The index is unmanaged and should not be considered an investment.
It is not possible to invest directly in an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
MARKET CONDITIONS
For the six months ended February 28, 2007, the top performing sectors in the
S&P 500(R) Index were materials, telecommunication services and consumer
discretionary. All sectors had positive returns during the period, with the
health care, consumer staples and energy sectors gaining the least.
In all market environments, we pursue a strategy that is driven by finding
companies which we consider to be of exceptional quality at compelling value. We
manage a concentrated portfolio, as only a relatively small number of companies
meet our stringent quality and valuation criteria. Because of this
concentration, and the fact that we do not use benchmarks as a portfolio
construction tool, our strategy has a low correlation to the benchmark S&P 500
Index. As a result, the fund's short-term performance does not tend to follow
that of the markets.
PERFORMANCE ANALYSIS
The fund returned 5.98 percent for the six months ended February 28, 2007 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmark,
the S&P 500(R) Index, returned 8.93 percent for the period.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
<Table>
<Caption>
- ------------------------------------------------------------
S&P
500(R)
CLASS A CLASS B CLASS C CLASS I INDEX
5.98% 5.59% 5.57% 5.98% 8.93%
- ------------------------------------------------------------
</Table>
The performance for the four share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and
index information.
The fund's top five performing stocks for the period under review were cosmetics
giant Estee Lauder, radio and advertising company Clear Channel Communications,
information technology services provider Accenture, agricultural chemicals
manufacturer Scotts Miracle-Gro and publisher McGraw-Hill. Because the fund
invests in a small number of holdings, it can be difficult to generalize
performance along sector lines. For example, the information technology (IT)
sector was among the fund's top performing groups during the time period, but it
was due to the fund's only IT holding in Accenture.
In contrast, the fund's weakest individual stock performances came from wines
and spirits producer Brown Forman, pharmaceuticals company Pfizer, radio
broadcaster Westwood One, tobacco company Reynolds American and packaged food
manufacturer Kellogg. On a sector basis, health care was the only area
2
within the fund's portfolio with a negative return, due entirely to the downturn
in Pfizer's shares in the six-month period.
We continue to seek investment opportunities in companies with strong business
franchises protected by a dominant intangible asset. Additionally, we demand
sound management, substantial free cash flow and growth potential. We invest in
these high quality companies only when we can identify compelling value as
measured by a current free cash flow yield in excess of the risk-free bond
yield. We seek to deliver attractive returns while minimizing business and
valuation risk. Our goal is for the fund to outperform broadly-based benchmarks
over the long term with less than average volatility.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
3
<Table>
<Caption>
TOP 10 HOLDINGS AS OF 2/28/07
Altria Group, Inc. 8.1%
Pfizer, Inc. 6.8
Kellogg Co. 6.5
Kimberly-Clark Corp. 6.2
Reynolds American, Inc. 5.5
Cadbury Schweppes PLC 4.7
Accenture, Ltd., Class A 4.5
Harley-Davidson, Inc. 4.4
Thomson Corp. 3.9
Fortune Brands, Inc. 3.6
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 2/28/07
Packaged Foods & Meats 13.2%
Tobacco 13.0
Household Products 12.0
Pharmaceuticals 9.4
Publishing 8.8
Broadcasting & Cable TV 6.0
IT Consulting & Other Services 4.3
Motorcycle Manufacturers 4.2
Housewares & Specialties 3.4
Personal Products 3.3
Specialized Consumer Services 3.2
Education Services 2.5
Health Care Technology 2.5
Restaurants 2.5
Distillers & Vintners 2.4
Soft Drinks 2.4
Fertilizers & Agricultural Chemicals 2.4
-----
Total Long-Term Investments 95.5
Total Repurchase Agreements 6.3
-----
Total Investments 101.8
Foreign Currency 0.0*
Liabilities in Excess of Other Assets (1.8)
-----
Net Assets 100.0%
</Table>
* Amount is less than 0.1%
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. Holdings are as a percentage of total
long-term investments. Summary of Investments by Industry Classification are as
a percentage of total net assets. Van Kampen is a wholly owned subsidiary of a
global securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
4
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to fund shareholders, and
makes these reports available on its public Web site, www.vankampen.com.
In addition to the semiannual and annual reports that Van Kampen delivers
to shareholders and makes available through the Van Kampen public Web
site, each fund files a complete schedule of portfolio holdings with the
SEC for the fund's first and third fiscal quarters on Form N-Q. Van
Kampen does not deliver the reports for the first and third fiscal
quarters to shareholders, nor are the reports posted to the Van Kampen
public Web site. You may, however, obtain the Form N-Q filings (as well
as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. 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 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 847-2424.
5
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
6
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charges on redemptions of Class B and Class C
Shares; and redemption fees; and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees; and other Fund expenses. This example is
intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 9/1/06 - 2/28/07.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges or redemption fees.
Therefore, the second line of the table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
cost would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
9/1/06 2/28/07 9/1/06-2/28/07
Class A
Actual...................................... $1,000.00 $1,059.78 $ 6.13
Hypothetical................................ 1,000.00 1,018.89 6.01
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,055.89 9.94
Hypothetical................................ 1,000.00 1,015.09 9.74
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,055.67 9.94
Hypothetical................................ 1,000.00 1,015.09 9.74
(5% annual return before expenses)
Class I
Actual...................................... 1,000.00 1,059.84 4.85
Hypothetical................................ 1,000.00 1,020.09 4.76
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.20%, 1.95%,
1.95% and 0.95% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
Assumes all dividends and distributions were reinvested.
7
VAN KAMPEN AMERICAN FRANCHISE FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------------------------------------
COMMON STOCKS 95.5%
BROADCASTING & CABLE TV 6.0%
Clear Channel Communications, Inc. ......................... 404,713 $ 14,642,516
Westwood One, Inc. ......................................... 1,914,103 13,073,324
------------
27,715,840
------------
DISTILLERS & VINTNERS 2.4%
Brown-Forman Corp., Class B................................. 171,436 11,229,058
------------
EDUCATION SERVICES 2.5%
Career Education Corp. (a).................................. 384,391 11,370,286
------------
FERTILIZERS & AGRICULTURAL CHEMICALS 2.4%
Scotts Miracle-Gro Co., Class A............................. 245,263 10,818,551
------------
HEALTH CARE TECHNOLOGY 2.5%
IMS Health, Inc. ........................................... 393,654 11,368,727
------------
HOUSEHOLD PRODUCTS 12.0%
Colgate-Palmolive Co. ...................................... 201,568 13,577,621
Kimberly-Clark Corp. ....................................... 397,993 27,107,303
Procter & Gamble Co. ....................................... 221,609 14,069,955
------------
54,754,879
------------
HOUSEWARES & SPECIALTIES 3.4%
Fortune Brands, Inc. ....................................... 192,938 15,512,215
------------
IT CONSULTING & OTHER SERVICES 4.3%
Accenture, Ltd., Class A (Bermuda).......................... 546,643 19,515,155
------------
MOTORCYCLE MANUFACTURERS 4.2%
Harley-Davidson, Inc. ...................................... 289,765 19,095,513
------------
PACKAGED FOODS & MEATS 13.2%
Cadbury Schweppes PLC (United Kingdom) (GBP)................ 1,936,727 20,700,599
Kellogg Co. ................................................ 569,790 28,443,917
Nestle, SA (Switzerland) (CHF).............................. 29,739 11,071,800
------------
60,216,316
------------
PERSONAL PRODUCTS 3.3%
Estee Lauder Co., Inc., Class A............................. 312,530 14,963,936
------------
PHARMACEUTICALS 9.4%
Johnson & Johnson........................................... 215,282 13,573,530
Pfizer, Inc. ............................................... 1,182,439 29,513,678
------------
43,087,208
------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN AMERICAN FRANCHISE FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------------------------------------
PUBLISHING 8.8%
McGraw-Hill Co., Inc. ...................................... 160,103 $ 10,344,255
New York Times Co., Class A................................. 519,658 12,851,142
Thomson Corp. (Canada)...................................... 425,366 17,172,026
------------
40,367,423
------------
RESTAURANTS 2.5%
Domino's Pizza, Inc. ....................................... 366,936 11,323,645
------------
SOFT DRINKS 2.4%
PepsiCo, Inc. .............................................. 176,364 11,137,387
------------
SPECIALIZED CONSUMER SERVICES 3.2%
Weight Watchers International, Inc. ........................ 314,224 14,847,084
------------
TOBACCO 13.0%
Altria Group, Inc. ......................................... 419,267 35,335,823
Reynolds American, Inc. .................................... 394,481 24,083,065
------------
59,418,888
------------
TOTAL LONG-TERM INVESTMENTS 95.5%
(Cost $412,841,740)................................................... 436,742,111
------------
REPURCHASE AGREEMENTS 6.3%
Citigroup Global Markets, Inc. ($6,273,721 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
5.27%, dated 02/28/07, to be sold on 03/01/07 at $6,274,640).......... 6,273,721
State Street Bank & Trust Co. ($22,278,279 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
5.12%, dated 02/28/07, to be sold on 03/01/07 at $22,281,447)......... 22,278,279
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $28,552,000).................................................... 28,552,000
------------
TOTAL INVESTMENTS 101.8%
(Cost $441,393,740)................................................... 465,294,111
FOREIGN CURRENCY 0.0%
(Cost $84,409)........................................................ 84,165
LIABILITIES IN EXCESS OF OTHER ASSETS (1.8%)........................... (8,066,668)
------------
NET ASSETS 100.0%...................................................... $457,311,608
============
</Table>
See Notes to Financial Statements 9
VAN KAMPEN AMERICAN FRANCHISE FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
Percentages are calculated as a percentage of net assets.
Securities with total market value equal to $31,772,399 have been valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Fund's Trustees.
(a) Non-income producing security as this stock currently does not declare
dividends.
CHF -- Swiss Franc
GBP -- Pound Sterling
10 See Notes to Financial Statements
VAN KAMPEN AMERICAN FRANCHISE FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 28, 2007 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $441,393,740)....................... $465,294,111
Foreign Currency (Cost $84,409)............................. 84,165
Cash........................................................ 510
Receivables:
Investments Sold.......................................... 17,187,617
Fund Shares Sold.......................................... 4,754,566
Dividends................................................. 2,778,597
Interest.................................................. 4,087
Other....................................................... 10,971
------------
Total Assets............................................ 490,114,624
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 30,844,510
Fund Shares Repurchased................................... 1,289,107
Investment Advisory Fee................................... 243,385
Distributor and Affiliates................................ 229,854
Trustees' Deferred Compensation and Retirement Plans........ 28,264
Accrued Expenses............................................ 167,896
------------
Total Liabilities....................................... 32,803,016
------------
NET ASSETS.................................................. $457,311,608
============
NET ASSETS CONSIST OF:
Capital (Par value of $0.01 per share with an unlimited
number of shares authorized).............................. $425,004,632
Net Unrealized Appreciation................................. 23,902,488
Accumulated Net Realized Gain............................... 6,164,197
Accumulated Undistributed Net Investment Income............. 2,240,291
------------
NET ASSETS.................................................. $457,311,608
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $326,652,265 and 27,254,343 shares of
beneficial interest issued and outstanding)........... $ 11.99
Maximum sales charge (5.75%* of offering price)......... 0.73
------------
Maximum offering price to public........................ $ 12.72
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $32,908,404 and 2,772,415 shares of
beneficial interest issued and outstanding)........... $ 11.87
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $43,454,595 and 3,663,542 shares of
beneficial interest issued and outstanding)........... $ 11.86
============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $54,296,344 and 4,519,703 shares of
beneficial interest issued and outstanding)........... $ 12.01
============
</Table>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 11
VAN KAMPEN AMERICAN FRANCHISE FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended February 28, 2007 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $31,584)..... $ 5,500,416
Interest.................................................... 717,018
-----------
Total Income.............................................. 6,217,434
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,207,982
Distribution (12b-1) and Service Fees
Class A................................................... 311,843
Class B................................................... 131,981
Class C................................................... 179,149
Transfer Agent Fees......................................... 232,306
Registration Fees........................................... 55,344
Professional Fees........................................... 44,917
Accounting and Administrative Expenses...................... 33,745
Reports to Shareholders..................................... 24,702
Custody..................................................... 19,053
Trustees' Fees and Related Expenses......................... 13,675
Other....................................................... 8,411
-----------
Total Expenses.......................................... 2,263,108
Less Credits Earned on Cash Balances.................... 28,126
-----------
Net Expenses............................................ 2,234,982
-----------
NET INVESTMENT INCOME....................................... $ 3,982,452
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 6,471,049
Foreign Currency Transactions............................. (15,192)
-----------
Net Realized Gain........................................... 6,455,857
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 18,085,583
-----------
End of the Period:
Investments............................................. 23,900,371
Foreign Currency Translation............................ 2,117
-----------
23,902,488
-----------
Net Unrealized Appreciation During the Period............... 5,816,905
-----------
NET REALIZED AND UNREALIZED GAIN............................ $12,272,762
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $16,255,214
===========
</Table>
12 See Notes to Financial Statements
VAN KAMPEN AMERICAN FRANCHISE FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
-----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................... $ 3,982,452 $ 1,731,417
Net Realized Gain/Loss................................... 6,455,857 (272,548)
Net Unrealized Appreciation During the Period............ 5,816,905 17,752,520
------------ ------------
Change in Net Assets from Operations..................... 16,255,214 19,211,389
------------ ------------
Distributions from Net Investment Income:
Class A Shares......................................... (2,266,457) (526,982)
Class B Shares......................................... (144,837) (51,724)
Class C Shares......................................... (223,110) (67,526)
Class I Shares......................................... (485,829) (575)
------------ ------------
(3,120,233) (646,807)
------------ ------------
Distributions from Net Realized Gain:
Class A Shares......................................... (8,958) -0-
Class B Shares......................................... (950) -0-
Class C Shares......................................... (1,305) -0-
Class I Shares......................................... (1,711) -0-
------------ ------------
(12,924) -0-
------------ ------------
Total Distributions...................................... (3,133,157) (646,807)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 13,122,057 18,564,582
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 248,131,161 179,512,045
Net Asset Value of Shares Issued Through
Dividend Reinvestment.................................. 3,014,572 625,435
Cost of Shares Repurchased............................... (26,043,308) (27,944,316)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... 225,102,425 152,193,164
------------ ------------
TOTAL INCREASE IN NET ASSETS............................. 238,224,482 170,757,746
NET ASSETS:
Beginning of the Period.................................. 219,087,126 48,329,380
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $2,240,291 and $1,378,072,
respectively).......................................... $457,311,608 $219,087,126
============ ============
</Table>
See Notes to Financial Statements 13
VAN KAMPEN AMERICAN FRANCHISE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS JUNE 23, 2005
ENDED YEAR ENDED (COMMENCEMENT OF
CLASS A SHARES FEBRUARY AUGUST 31, OPERATIONS) TO
28, 2007 2006 AUGUST 31, 2005
--------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD......... $11.41 $10.17 $10.00
------ ------ ------
Net Investment Income (a)...................... .14 .15 .02
Net Realized and Unrealized Gain............... .54 1.15 .15
------ ------ ------
Total from Investment Operations................. .68 1.30 .17
------ ------ ------
Less:
Distributions from Net Investment Income....... .10 .06 -0-
Distributions from Net Realized Gain........... -0-(d) -0- -0-
------ ------ ------
Total Distributions.............................. .10 .06 -0-
------ ------ ------
NET ASSET VALUE, END OF THE PERIOD............... $11.99 $11.41 $10.17
====== ====== ======
Total Return* (b)................................ 5.98%** 12.80% 1.70%**
Net Assets at End of the Period (In millions).... $326.7 $173.7 $ 40.2
Ratio of Expenses to Average Net Assets* (c)..... 1.20% 1.36% 1.38%
Ratio of Net Investment Income to Average Net
Assets*........................................ 2.41% 1.39% 1.03%
Portfolio Turnover............................... 12%** 17% 0%**
* If certain expenses had not been voluntarily 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 (c)... N/A 1.46% 3.97%
Ratio of Net Investment Income/Loss to Average
Net Assets.................................. N/A 1.29% (1.56%)
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. If
the sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02%, .01% and .03% for the periods
ended February 28, 2007, August 31, 2006 and August 31, 2005, respectively.
(d) Amount is less than $0.01 per share.
N/A=Not Applicable
14 See Notes to Financial Statements
VAN KAMPEN AMERICAN FRANCHISE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS JUNE 23, 2005
ENDED YEAR ENDED (COMMENCEMENT OF
CLASS B SHARES FEBRUARY 28, AUGUST 31, OPERATIONS) TO
2007 2006 AUGUST 31, 2005
---------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD....... $11.30 $10.15 $10.00
------ ------ ------
Net Investment Income (a).................... .09 .07 -0-(d)
Net Realized and Unrealized Gain............. .54 1.13 .15
------ ------ ------
Total from Investment Operations............... .63 1.20 .15
------ ------ ------
Less:
Distributions from Net Investment Income..... .06 .05 -0-
Distributions from Net Realized Gain......... -0-(d) -0- -0-
------ ------ ------
Total Distributions............................ .06 .05 -0-
------ ------ ------
NET ASSET VALUE, END OF THE PERIOD............. $11.87 $11.30 $10.15
====== ====== ======
Total Return* (b).............................. 5.59%** 11.90% 1.50%**
Net Assets at End of the Period (In
millions).................................... $ 32.9 $ 19.5 $ 4.1
Ratio of Expenses to Average Net Assets* (c)... 1.95% 2.11% 2.13%
Ratio of Net Investment Income to Average Net
Assets*...................................... 1.61% .65% .27%
Portfolio Turnover............................. 12%** 17% 0%**
* If certain expenses had not been voluntarily 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
(c)....................................... N/A 2.21% 5.69%
Ratio of Net Investment Income/Loss to
Average Net Assets........................ N/A .55% (3.28%)
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of up to 1% and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02%, .01% and .03% for the periods
ended February 28, 2007, August 31, 2006 and August 31, 2005, respectively.
(d) Amount is less than $0.01 per share.
N/A=Not Applicable
See Notes to Financial Statements 15
VAN KAMPEN AMERICAN FRANCHISE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS JUNE 23, 2005
ENDED YEAR ENDED (COMMENCEMENT OF
CLASS C SHARES FEBRUARY 28, AUGUST 31, OPERATIONS) TO
2007 2006 AUGUST 31, 2005
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD....... $11.30 $10.15 $10.00
------ ------ ------
Net Investment Income (a).................... .09 .07 -0-(d)
Net Realized and Unrealized Gain............. .54 1.13 .15
------ ------ ------
Total from Investment Operations............... .63 1.20 .15
------ ------ ------
Less:
Distributions from Net Investment Income..... .07 .05 -0-
Distributions from Net Realized Gain......... -0-(d) -0- -0-
------ ------ ------
Total Distributions............................ .07 .05 -0-
------ ------ ------
NET ASSET VALUE, END OF THE PERIOD............. $11.86 $11.30 $10.15
====== ====== ======
Total Return* (b).............................. 5.57%** 11.91% 1.50%**
Net Assets at End of the Period (In
millions).................................... $ 43.5 $ 24.8 $ 4.0
Ratio of Expenses to Average Net Assets* (c)... 1.95% 2.11% 2.13%
Ratio of Net Investment Income to Average Net
Assets*...................................... 1.59% .64% .25%
Portfolio Turnover............................. 12%** 17% 0%**
* If certain expenses had not been voluntarily 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
(c)....................................... N/A 2.21% 5.69%
Ratio of Net Investment Income/Loss to
Average Net Assets........................ N/A .54% (3.31%)
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02%, .01% and .03% for the periods
ended February 28, 2007, August 31, 2006 and August 31, 2005, respectively.
(d) Amount is less than $0.01 per share.
N/A=Not Applicable
16 See Notes to Financial Statements
VAN KAMPEN AMERICAN FRANCHISE FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS JUNE 23, 2005
ENDED YEAR ENDED (COMMENCEMENT OF
CLASS I SHARES FEBRUARY 28, AUGUST 31, OPERATIONS) TO
2007 2006 AUGUST 31, 2005
------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD....... $11.44 $10.17 $10.00
------ ------ ------
Net Investment Income (a).................... .17 .18 .01
Net Realized and Unrealized Gain............. .51 1.15 .16
------ ------ ------
Total from Investment Operations............... .68 1.33 .17
------ ------ ------
Less:
Distributions from Net Investment Income..... .11 .06 -0-
Distributions from Net Realized Gain......... -0-(d) -0- -0-
------ ------ ------
Total Distributions............................ .11 .06 -0-
------ ------ ------
NET ASSET VALUE, END OF THE PERIOD............. $12.01 $11.44 $10.17
====== ====== ======
Total Return* (b).............................. 5.98%** 13.22% 1.60%**
Net Assets at End of the Period (In
millions).................................... $ 54.3 $ 1.0 $ 0.1
Ratio of Expenses to Average Net Assets* (c)... .95% 1.11% 1.13%
Ratio of Net Investment Income to Average Net
Assets*...................................... 2.86% 1.79% 0.76%
Portfolio Turnover............................. 12%** 17% 0%**
* If certain expenses had not been voluntarily 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
(c)....................................... N/A 1.21% 6.94%
Ratio of Net Investment Income/Loss to
Average Net Assets........................ N/A 1.69% (5.05%)
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02%, .01% and .03% for the periods
ended February 28, 2007, August 31, 2006 and August 31, 2005, respectively.
(d) Amount is less than $0.01 per share.
N/A=Not Applicable
See Notes to Financial Statements 17
VAN KAMPEN AMERICAN FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Franchise Fund (the "Fund") is organized as a series of the
Van Kampen Equity Trust II, a Delaware statutory trust, and is registered as a
non-diversified, open-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment
objective is to seek long-term capital appreciation. The Fund invests primarily
in equity securities of U.S. issuers that, in the judgment of the Fund's
portfolio management team have, among other things, resilient business
franchises and growth potential. The Fund commenced investment operations on
June 23, 2005. The Fund offers Class A Shares, Class B Shares, Class C Shares
and Class I Shares. Each class of shares differs by its initial sales load,
contingent deferred sales charges, the allocation of class-specific expenses and
voting rights on matters affecting a single class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with U.S. 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 last sale price as of the close of such securities exchange.
Equity securities traded on NASDAQ are valued at the NASDAQ Official Closing
Price. Listed and unlisted securities for which the last sale price is not
available are valued at the mean of the last reported bid and asked prices. For
those securities where quotations or prices are not readily available,
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Most foreign markets close before the New York
Stock Exchange (NYSE). Occasionally, developments that could affect the closing
prices of securities and other assets may occur between the times at which
valuations of such securities are determined (that is, close of the foreign
market on which the securities trade) and the close of business on the NYSE. If
these developments are expected to materially affect the value of the
securities, the valuations may be adjusted to reflect the estimated fair value
as of the close of the NYSE, as determined in good faith under procedures
established 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 Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund 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 (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 Fund will make payment for such security only upon physical delivery or
evidence of book entry transfer to
18
VAN KAMPEN AMERICAN FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
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
Fund.
C. INCOME AND EXPENSES Dividend income is recorded net of applicable withholding
taxes on the ex-dividend date and interest income is recorded on an accrual
basis. Income and expenses of the Fund are allocated on a pro rata basis to each
class of shares, except for distributions and service fees and incremental
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M 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. The
Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains and net unrealized appreciation, as applicable, as the income is earned or
capital gains are recorded.
At February 28, 2007, the cost and related gross unrealized appreciation and
depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $441,722,042
============
Gross tax unrealized appreciation........................... $ 28,018,114
Gross tax unrealized depreciation........................... (4,446,045)
------------
Net tax unrealized appreciation on investments.............. $ 23,572,069
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends at
least annually from net investment income and from net realized gains, if any.
Distributions from net realized gains for book purposes may include short-term
capital gains, which are included as ordinary income for tax purposes.
The tax character of distributions paid during the year ended August 31,
2006 was as follows:
<Table>
Distributions paid from:
Ordinary income........................................... $646,807
Long-term capital gain.................................... -0-
--------
$646,807
========
</Table>
As of August 31, 2006, the component of distributable earnings on a tax
basis was as follows:
<Table>
Undistributed ordinary income............................... $1,410,096
</Table>
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.
19
VAN KAMPEN AMERICAN FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
F. EXPENSE REDUCTIONS During the six months ended February 28, 2007, the Fund's
custody and accounting fees were reduced by $19,053 and $9,073, respectively, as
a result of credits earned on cash balances.
G. FOREIGN CURRENCY TRANSLATION The market values of foreign securities, forward
foreign currency contracts and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the mean of the quoted bid
and ask prices of such currencies against the U.S. dollar. Purchases and sales
of portfolio securities are translated at the rate of exchange prevailing when
such securities were acquired or sold. The cost of securities is determined
using historical exchange rates. 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 transactions includes
the net realized amount from the sale of foreign currency and the amount
realized between trade date and settlement date on securities transactions.
Income and expenses are translated at rates prevailing when accrued.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET % PER ANNUM
First $500 million.......................................... .70%
Next $500 million........................................... .65%
Over $1 billion............................................. .60%
</Table>
The Adviser has entered into a subadvisory agreement with Morgan Stanley
Investment Management Ltd. (the "Subadviser", a wholly owned subsidiary of
Morgan Stanley) to provide advisory services to the Fund and the Adviser with
respect to the Fund's investments. The Adviser paid 47% of its investment
advisory fee to the Subadviser. The Adviser has agreed to waive all expenses in
excess of 1.35% of Class A average net assets, 2.10% of Class B average net
assets, 2.10% of Class C average net assets and 1.10% of Class I average net
assets. This waiver is voluntary and can be discontinued at any time. For the
six months ended February 28, 2007, the Adviser did not waive any of its
advisory fees.
For the six months ended February 28, 2007, the Fund recognized expenses of
approximately $2,200 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
Under separate Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the six months ended February 28,
2007, the Fund recognized expenses of approximately $43,800 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting and legal services to the Fund, as well as the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Professional Fees" on the Statement of Operations. Services provided
pursuant to the
20
VAN KAMPEN AMERICAN FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
Accounting Services and CCO Employment agreement are reported as part of
"Accounting and Administrative Expenses" on the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
February 28, 2007, the Fund recognized expenses of approximately $210,000
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are also
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
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.
Amounts deferred are retained by the Fund, and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $9,707 are included in
"Other" assets on the Statement of Assets and Liabilities at February 28, 2007.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
For the six months ended February 28, 2007, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A Shares of
approximately $355,200 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $34,400. Sales charges do not represent expenses of the
Fund.
At February 28, 2007, Morgan Stanley Investment Management Inc., an
affiliate of the Adviser, owned 8,340 shares of Class I.
21
VAN KAMPEN AMERICAN FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
For the six months ended February 28, 2007 and the year ended August 31, 2006,
transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A.......................... 13,585,106 $161,726,350 13,487,499 $142,256,902
Class B.......................... 1,215,421 14,319,155 1,487,679 15,626,965
Class C.......................... 1,671,051 19,569,784 1,980,370 20,805,611
Class I.......................... 4,437,576 52,515,872 76,158 822,567
---------- ------------ ---------- ------------
Total Sales........................ 20,909,154 $248,131,161 17,031,706 $179,512,045
========== ============ ========== ============
Dividend Reinvestment:
Class A.......................... 183,424 $ 2,188,242 48,996 $ 511,827
Class B.......................... 11,766 139,188 4,928 50,148
Class C.......................... 17,168 202,925 6,095 62,885
Class I.......................... 40,520 484,217 55 575
---------- ------------ ---------- ------------
Total Dividend Reinvestment........ 252,878 $ 3,014,572 60,074 $ 625,435
========== ============ ========== ============
Repurchases:
Class A.......................... (1,742,330) $(20,710,529) (2,260,413) $(24,244,465)
Class B.......................... (183,235) (2,166,548) (163,515) (1,743,622)
Class C.......................... (221,591) (2,629,262) (182,754) (1,956,229)
Class I.......................... (44,606) (536,969) -0- -0-
---------- ------------ ---------- ------------
Total Repurchases.................. (2,191,762) $(26,043,308) (2,606,682) $(27,944,316)
========== ============ ========== ============
</Table>
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within seven days of purchase. The
redemption fee is paid directly to the Fund. For the six months ended February
28, 2007, the Fund received redemption fees of approximately $6,200 which are
reported as part of "Cost of Shares Repurchased" on the Statements of Changes in
Net Assets. The per share impact from redemption fees paid to the Fund was less
than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $265,667,373 and $40,526,965,
respectively.
6. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the
22
VAN KAMPEN AMERICAN FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
Plans, the Fund will incur annual fees of up to .25% of Class A average daily
net assets and up to 1.00% each of Class B and Class C average daily net assets.
These fees are accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $625,500 and $121,900
for Class B and Class C Shares, respectively. These amounts may be recovered
from future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, the distribution fee is
reduced.
7. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action which additionally names as defendants certain individual
trustees of certain Van Kampen funds. The named investment companies are listed
as nominal defendants. The complaint alleges that defendants caused the Van
Kampen funds to pay economic incentives to a proprietary sales force to promote
the sale of Van Kampen funds. The complaint also alleges that the Van Kampen
funds paid excessive commissions to Morgan Stanley and its affiliates in
connection with the sales of the funds. The complaint seeks, among other things,
the removal of the current trustees of the funds, rescission of the management
contracts for the funds, disgorgement of profits by Morgan Stanley and its
affiliates and monetary damages. This derivative action was coordinated with a
direct action alleging related violations of defendants' statutory disclosure
obligations and fiduciary duties with respect to the payments described above.
In addition, this derivative action was stayed by agreement of the parties
pending rulings on the motion to dismiss the direct action and the motion to
dismiss another derivative action brought by the same plaintiff that brought
this derivative action, alleging market timing and late trading in the Van
Kampen funds. In April 2006, the court granted defendants' motion to dismiss the
direct action. In June 2006, the court granted defendants' motion to dismiss the
market timing action. Accordingly, the stay on this action was lifted. Plaintiff
and defendants have agreed that this action should be dismissed in light of the
rulings dismissing the two cases discussed above. The Court has approved a
notice to shareholders regarding the dismissal.
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
9. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for the fiscal
years beginning after December 15, 2006 and is to be applied to all open tax
years as of the effective date. Recent SEC guidance allows implementing FIN 48
in the fund NAV calculations as late as the fund's last NAV calculation in the
first required financial statement period. As a result, the Fund will
incorporate FIN 48
23
VAN KAMPEN AMERICAN FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
in its semi annual report on February 29, 2008. The impact to the Fund's
financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
24
VAN KAMPEN AMERICAN FRANCHISE FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
INVESTMENT SUBADVISER
MORGAN STANLEY INVESTMENT
MANAGEMENT LIMITED
25 Cabot Square
Canary Wharf
London, United Kingdom E14 4QA
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
25
Van Kampen American Franchise Fund
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
(continued on next page)
Van Kampen American Franchise Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen American Franchise Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2007 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
146, 246, 346, 646
AMFRSAR 4/07
(VAN KAMPEN INVESTMENTS LOGO) IU07-00169P-Y02/07
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
International Growth Fund performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of February 28, 2007.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE OR CLASS I SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN A PROSPECTUS, CONTACT
YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT VANKAMPEN.COM. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND
THAT THE VALUE OF THE FUND SHARES MAY THEREFORE BE LESS THAN WHAT YOU
PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND.
PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION ON INVESTMENT
RISKS.
PURSUANT TO AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN VAN KAMPEN
INTERNATIONAL GROWTH FUND AND 1838 INTERNATIONAL EQUITY FUND, ON DECEMBER
16, 2005, VAN KAMPEN INTERNATIONAL GROWTH FUND ACQUIRED SUBSTANTIALLY ALL
OF THE ASSETS AND SUBSTANTIALLY ALL OF THE LIABILITIES OF THE 1838
INTERNATIONAL EQUITY FUND IN EXCHANGE FOR CLASS I SHARES OF VAN KAMPEN
INTERNATIONAL GROWTH FUND. AS A RESULT OF THE REORGANIZATION, CLASS I
SHARES OF VAN KAMPEN INTERNATIONAL GROWTH FUND ARE THE ACCOUNTING
SUCCESSOR OF THE 1838 INTERNATIONAL EQUITY FUND.
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 2/28/07
<Table>
<Caption>
A SHARES B SHARES C SHARES I SHARES
since 12/19/05 since 12/19/05 since 12/19/05 since 8/3/95
- -----------------------------------------------------------------------------------------------------
W/MAX W/MAX W/MAX
5.75% 5.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 22.46% 16.56% 21.58% 18.34% 21.61% 21.61% 9.45%
10-year -- -- -- -- -- -- 9.92
5-year -- -- -- -- -- -- 16.39
1-year 18.32 11.53 17.44 12.44 17.55 16.55 18.61
6-month 11.77 5.32 11.35 6.35 11.39 10.39 11.92
- -----------------------------------------------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
The returns shown in this report do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Performance of share classes will vary due to differences in sales charges and
expenses. Average annual total return with sales charges includes payment of the
maximum sales charge of 5.75 percent for Class A shares, a contingent deferred
sales charge of 5.00 percent for Class B shares (in year one and declining to
zero after year five), a contingent deferred sales charge of 1.00 percent for
Class C shares in year one, and combined Rule 12b-1 fees and service fees of up
to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C
shares. Class I shares are offered without any sales charges on purchases or
sales and do not include combined Rule 12b-1 fees and service fees. Class I
shares are available for purchase exclusively by investors through (i)
tax-exempt retirement plans with assets of at least one million dollars
(including 401(k) plans, 457 plans, employer sponsored 403(b) plans, profit
sharing and money purchase plans, defined benefit plans and non-qualified
deferred compensation plans), (ii) fee-based investment programs with assets of
at least one million dollars and (iii) institutional clients with assets of at
least one million dollars. Class I shares may also be held in shareholder
accounts opened in connection with the reorganization of the 1838 International
Equity Fund into the Fund ("Reorganization Shareholders"). Reorganization
Shareholders may purchase additional Class I shares of the Fund, either directly
or through the reinvestment of dividends. Figures shown above assume
reinvestment of all distributions. The fund's adviser has waived or reimbursed
fees and expenses from time to time; absent such waivers/reimbursements, the
fund's returns would have been lower.
The MSCI EAFE Index is a free float-adjusted market capitalization index that is
designed to measure developed market equity performance, excluding the US &
Canada. The index does not include any expenses, fees or sales charges, which
would lower performance. The index is unmanaged and should not be considered an
investment.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
MARKET CONDITIONS
The international equity markets performed strongly for the six-month period
ended February 28, 2007. After the sharp market sell-off in the second quarter
of 2006--which was driven primarily by rising inflation, increased valuations
and fears of slowing global economic growth--international equity markets
demonstrated convincing resilience, and made a strong recovery over this
reporting period. Moreover, a backdrop of robust corporate earnings growth and a
wave of global mergers and acquisition activity further supported international
stocks' gains during the period.
The U.S. Federal Open Market Committee's (the "Fed") decision to pause its
monetary tightening policy in August, following two consecutive years of
continuous increases of the federal funds target rate, also bolstered the
international markets. These ongoing rates increases contributed to the relative
weakening of the U.S. dollar, and investors in foreign companies benefited as
the U.S. dollar declined against the Euro and the British pound. Although market
conditions, particularly in China, turned more volatile at the end of February,
Asia ex-Japan, Europe, Japan, and key emerging markets all finished the period
with strong gains.
PERFORMANCE ANALYSIS
The fund returned 11.77 percent for the six months ended February 28, 2007
(Class A shares, unadjusted for sales charges). In comparison, the fund's
benchmark, the MSCI EAFE Index, returned 12.17 percent for the period.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
<Table>
<Caption>
- -------------------------------------------------------------
MSCI EAFE
CLASS A CLASS B CLASS C CLASS I INDEX
11.77% 11.35% 11.39% 11.92% 12.17%
- -------------------------------------------------------------
</Table>
The performance for the four share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and
index definition.
Relative to the MSCI EAFE Index during the period, the fund's performance in
Japan was strong, primarily due to gains in real estate development and the
financial sectors. Investment in export-oriented companies also positively added
to relative performance as a result of the weakened yen. Within the European
region, the fund's holdings performed well, with significantly strong
performance from Irish banking companies offsetting lackluster returns in the
2
fund's continental Europe bank holdings. In the emerging markets, strong stock
selection in the Indian banking segment, the Indian telecommunications sector
and in Chinese retail industries further added to relative returns.
Toward the end of the period, however, the materials sector materially
diminished the fund's returns. This negative effect was caused by the fund's
holding of a Japanese synthetic fiber manufacturer whose earnings were depressed
by ongoing high fuel costs and raw materials prices.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
3
<Table>
<Caption>
TOP TEN HOLDINGS AS OF 2/28/07
Sumitomo Realty & Development Co., Ltd. 2.4%
Anglo Irish Bank Corp. PLC 2.2
Continental, AG 2.1
Total, SA 2.1
Erste Bank Der Oester Spark, AG 2.0
ING Groep, NV CVA 1.9
Fortum Oyj 1.9
Keppel Corp., Ltd. 1.9
E.ON, AG 1.8
Telenor, ASA 1.8
<Caption>
TOP FIVE INDUSTRIES AS OF 2/28/07
Diversified Banks 15.2%
Industrial Machinery 3.8
Electric Utilities 3.6
Pharmaceuticals 3.0
Integrated Telecommunication Services 2.6
<Caption>
SUMMARY OF INVESTMENTS BY COUNTRY CLASSIFICATION AS OF 2/28/07
Japan 16.8%
France 10.0
United Kingdom 9.0
Germany 8.7
Switzerland 6.3
Ireland 4.6
Finland 4.3
Austria 4.2
Netherlands 4.0
Norway 2.9
Singapore 2.9
India 2.7
Mexico 2.7
Greece 2.6
Hong Kong 2.2
Sweden 2.2
Australia 1.6
Spain 1.4
Canada 1.4
Bermuda 1.4
Cayman Islands 1.3
</Table>
<Table>
(continued on next page)
</Table>
4
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY COUNTRY CLASSIFICATION AS OF 2/28/07
(continued from previous page)
Republic of Korea (South Korea) 0.9
Israel 0.9
Turkey 0.8
-----
Total Long-Term Investments 95.8
Total Repurchase Agreements 2.3
-----
Total Investments 98.1
Foreign Currency 0.1
Other Assets in Excess of Liabilities 1.8
-----
Net Assets 100.0%
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. The top ten holdings are as a
percentage of long-term investments. The top five industries and the summary of
investments by country classification are as a percentage of net assets. Van
Kampen is a wholly owned subsidiary of a global securities firm which is engaged
in a wide range of financial services including, for example, securities trading
and brokerage activities, investment banking, research and analysis, financing
and financial advisory services.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to fund shareholders, and
makes these reports available on its public Web site, www.vankampen.com.
In addition to the semiannual and annual reports that Van Kampen delivers
to shareholders and makes available through the Van Kampen public Web
site, each fund files a complete schedule of portfolio holdings with the
SEC for the fund's first and third fiscal quarters on Form N-Q. Van
Kampen does not deliver the reports for the first and third fiscal
quarters to shareholders, nor are the reports posted to the Van Kampen
public Web site. You may, however, obtain the Form N-Q filings (as well
as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. 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 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 847-2424.
6
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
7
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments of Class A Shares
and contingent deferred sales charges on redemptions of Class B and Class C
Shares; and redemption fees; and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees; and other Fund expenses. This example is
intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 9/1/06 - 2/28/07.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges or redemption fees.
Therefore, the second line of the table is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
9/1/06 2/28/07 9/1/06-2/28/07
Class A
Actual...................................... $1,000.00 $1,117.69 $ 7.30
Hypothetical................................ 1,000.00 1,017.89 6.95
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,113.46 11.21
Hypothetical................................ 1,000.00 1,014.19 10.69
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,113.85 11.22
Hypothetical................................ 1,000.00 1,014.19 10.69
(5% annual return before expenses)
Class I
Actual...................................... 1,000.00 1,119.21 5.99
Hypothetical................................ 1,000.00 1,019.19 5.71
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.39%, 2.14%,
2.14% and 1.14% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
Assumes all dividends and distributions were reinvested.
8
VAN KAMPEN INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ----------------------------------------------------------------------------------------
COMMON STOCKS 94.5%
AUSTRALIA 1.6%
BHP Billiton, Ltd. ......................................... 410,079 $ 8,799,920
AUSTRIA 4.2%
Andritz, AG................................................. 35,778 7,532,439
Erste Bank Der Oester Spark, AG............................. 141,879 10,515,419
Telekom Austria, AG......................................... 204,202 5,089,184
------------
23,137,042
------------
BERMUDA 1.4%
Esprit Holdings, Ltd. ...................................... 725,494 7,582,484
------------
CANADA 1.4%
EnCana Corp. ............................................... 158,721 7,714,850
------------
CAYMAN ISLANDS 1.3%
Parkson Retail Group, Ltd. ................................. 1,175,400 7,151,987
------------
FINLAND 4.3%
Fortum Oyj.................................................. 363,904 10,019,330
Kone Oyj, Class B........................................... 138,158 7,878,653
Neste Oil Oyj............................................... 171,096 5,466,860
------------
23,364,843
------------
FRANCE 10.0%
AXA, SA..................................................... 217,405 9,206,966
BNP Paribas, SA............................................. 72,893 7,585,491
Essilor International, SA................................... 77,056 8,776,860
LVMH Moet-Hennessy Louis Vuitton, SA........................ 53,393 5,898,272
Schneider Electric, SA...................................... 56,933 6,888,825
Total, SA................................................... 164,678 11,067,805
Vallourec, SA............................................... 23,310 5,750,602
------------
55,174,821
------------
GERMANY 7.4%
Celesio, AG................................................. 120,352 6,809,964
Continental, AG............................................. 89,852 11,208,788
Deutsche Bank, AG........................................... 55,209 7,240,780
E.ON, AG.................................................... 73,603 9,646,878
SAP, AG..................................................... 121,907 5,624,023
------------
40,530,433
------------
GREECE 2.6%
Coca-Cola Hellenic Bottling Co., SA......................... 162,295 6,307,132
National Bank of Greece, SA................................. 155,973 8,079,354
------------
14,386,486
------------
HONG KONG 2.2%
China Resources Power Holdings Co., Ltd. ................... 5,080,000 7,181,113
CNOOC, Ltd. ................................................ 6,413,000 5,176,337
------------
12,357,450
------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ----------------------------------------------------------------------------------------
INDIA 2.7%
Bharti Airtel, Ltd. (a)..................................... 404,700 $ 6,629,420
ICICI Bank, Ltd.--ADR....................................... 210,163 8,055,548
------------
14,684,968
------------
IRELAND 4.6%
Allied Irish Banks PLC...................................... 242,818 7,126,410
Anglo Irish Bank Corp. PLC.................................. 538,847 11,443,205
CRH PLC..................................................... 159,521 6,642,833
------------
25,212,448
------------
ISRAEL 0.9%
Teva Pharmaceutical Industries, Ltd.--ADR................... 137,507 4,889,749
------------
JAPAN 16.8%
Canon, Inc. ................................................ 143,400 7,754,961
Casio Computer Co., Ltd. ................................... 292,300 6,450,886
Credit Saison Co., Ltd. .................................... 151,100 4,981,832
Daiwa Securities Group, Inc. ............................... 527,000 6,646,257
Hoya Corp. ................................................. 149,600 5,163,905
Kobe Steel, Ltd. ........................................... 1,647,000 6,596,753
Kubota Corp. ............................................... 673,000 6,646,531
ORIX Corp. ................................................. 20,140 5,593,824
Sharp Corp. ................................................ 352,000 6,502,123
Shin-Etsu Chemical Co., Ltd. ............................... 88,400 5,525,405
Sumitomo Realty & Development Co., Ltd. .................... 321,000 12,748,927
Terumo Corp. ............................................... 145,100 5,540,041
Toray Industries, Inc. ..................................... 807,000 5,809,539
Toyota Motor Corp. ......................................... 101,300 6,625,653
------------
92,586,637
------------
MEXICO 2.7%
America Movil, SA de CV, Ser L--ADR......................... 148,144 6,488,707
Wal-Mart de Mexico, SA de CV, Ser V--ADR.................... 211,047 8,130,290
------------
14,618,997
------------
NETHERLANDS 4.0%
ING Groep, NV CVA........................................... 239,472 10,232,516
Reed Elsevier, NV........................................... 297,716 5,248,920
Royal Numico, NV............................................ 120,844 6,226,341
------------
21,707,777
------------
NORWAY 2.9%
Telenor, ASA................................................ 503,776 9,309,990
TGS Nopec Geophysical Company, ASA (a)...................... 320,957 6,601,252
------------
15,911,242
------------
REPUBLIC OF KOREA (SOUTH KOREA) 0.9%
Samsung Electronics Co., Ltd.--GDR (b)...................... 16,505 4,955,560
------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ----------------------------------------------------------------------------------------
SINGAPORE 2.9%
DBS Group Holdings, Ltd. ................................... 426,255 $ 6,005,448
Keppel Corp., Ltd. ......................................... 831,900 9,860,331
------------
15,865,779
------------
SPAIN 1.4%
Banco Popular Espanol, SA................................... 401,645 7,881,416
------------
SWEDEN 2.2%
Ericsson, AB, Class B....................................... 1,499,422 5,367,477
Getinge, AB, Class B........................................ 331,017 6,839,276
------------
12,206,753
------------
SWITZERLAND 6.3%
ABB, Ltd. .................................................. 517,936 8,641,704
Nestle, SA.................................................. 21,274 7,920,289
Novartis, AG................................................ 99,799 5,543,978
Roche Holding, AG........................................... 34,580 6,156,994
SGS, SA..................................................... 5,803 6,544,154
------------
34,807,119
------------
TURKEY 0.8%
Akbank, TAS................................................. 134,572 887,828
Akbank, TAS--ADR............................................ 252,170 3,315,909
------------
4,203,737
------------
UNITED KINGDOM 9.0%
Barclays PLC................................................ 564,294 8,175,916
Capita Group PLC............................................ 518,861 6,589,381
Prudential PLC.............................................. 489,193 6,479,618
Reckitt Benckiser PLC....................................... 150,154 7,546,459
Royal Bank of Scotland Group PLC............................ 196,278 7,722,571
SABMiller PLC............................................... 271,390 5,997,432
Tesco PLC................................................... 850,740 7,204,491
------------
49,715,868
------------
TOTAL COMMON STOCKS 94.5%............................................... 519,448,366
------------
PREFERRED STOCKS 1.3%
GERMANY 1.3%
Porsche, AG................................................. 5,273 6,901,153
------------
TOTAL LONG-TERM INVESTMENTS 95.8%
(Cost $466,523,278)...................................................... 526,349,519
------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION VALUE
- --------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 2.3%
Citigroup Global Markets, Inc. ($2,798,697 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
5.27%, dated 02/28/07, to be sold on 03/01/07 at $2,799,106)......... $ 2,798,697
State Street Bank & Trust Co. ($9,938,303 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
5.12%, dated 02/28/07, to be sold on 03/01/07 at $9,939,717)......... 9,938,303
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $12,737,000)................................................... 12,737,000
------------
TOTAL INVESTMENTS 98.1%
(Cost $479,260,278).................................................. 539,086,519
FOREIGN CURRENCY 0.1%
(Cost $428,285)...................................................... 429,098
OTHER ASSETS IN EXCESS OF LIABILITIES 1.8%............................ 9,972,066
------------
NET ASSETS 100.0%..................................................... $549,487,683
============
</Table>
Percentages are calculated as a percentage of net assets.
Securities with total market value equal to $487,754,466 have been valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Fund's Trustees.
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) 144A-Private Placement security which is exempt from registration under Rule
144A of the Securities Act of 1933, as amended. This security may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
ADR--American Depositary Receipt
CVA--Certification Van Aandelen
GDR--Global Depositary Receipt
12 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
Diversified Banks........................................... $ 83,478,607 15.2%
Industrial Machinery........................................ 21,161,694 3.8
Electric Utilities.......................................... 19,666,208 3.6
Pharmaceuticals............................................. 16,590,721 3.0
Integrated Telecommunication Services....................... 14,399,173 2.6
Packaged Foods & Meats...................................... 14,146,630 2.6
Automobile Manufacturers.................................... 13,526,806 2.5
Wireless Telecommunication Services......................... 13,118,127 2.4
Consumer Electronics........................................ 12,953,009 2.4
Oil & Gas Exploration & Production.......................... 12,891,187 2.3
Real Estate Management & Development........................ 12,748,927 2.3
Health Care Equipment....................................... 12,379,317 2.2
Tires & Rubber.............................................. 11,208,788 2.0
Integrated Oil & Gas........................................ 11,067,805 2.0
Consumer Finance............................................ 10,575,656 1.9
Other Diversified Financial Services........................ 10,232,516 1.9
Industrial Conglomerates.................................... 9,860,330 1.8
Multi-Line Insurance........................................ 9,206,966 1.7
Diversified Metals & Mining................................. 8,799,920 1.6
Health Care Supplies........................................ 8,776,860 1.6
Heavy Electrical Equipment.................................. 8,641,704 1.6
Hypermarkets & Super Centers................................ 8,130,290 1.5
Office Electronics.......................................... 7,754,961 1.4
Apparel Retail.............................................. 7,582,484 1.4
Household Products.......................................... 7,546,459 1.4
Diversified Capital Markets................................. 7,240,780 1.3
Food Retail................................................. 7,204,491 1.3
Independent Power Producers & Energy Traders................ 7,181,113 1.3
Department Stores........................................... 7,151,987 1.3
Electrical Components & Equipment........................... 6,888,825 1.3
Health Care Distributors.................................... 6,809,964 1.2
Construction & Farm Machinery & Heavy Trucks................ 6,646,531 1.2
Investment Banking & Brokerage.............................. 6,646,257 1.2
Construction Materials...................................... 6,642,833 1.2
Oil & Gas Equipment & Services.............................. 6,601,252 1.2
Steel....................................................... 6,596,753 1.2
Human Resource & Employment Services........................ 6,589,381 1.2
Diversified Commercial & Professional Services.............. 6,544,154 1.2
Life & Health Insurance..................................... 6,479,618 1.2
Soft Drinks................................................. 6,307,132 1.1
Brewers..................................................... 5,997,432 1.1
Apparel, Accessories & Luxury Goods......................... 5,898,272 1.1
Commodity Chemicals......................................... 5,809,539 1.1
Application Software........................................ 5,624,023 1.0
Specialty Chemicals......................................... 5,525,405 1.0
Oil & Gas Refining & Marketing.............................. 5,466,860 1.0
Communications Equipment.................................... 5,367,478 1.0
</Table>
See Notes to Financial Statements 13
VAN KAMPEN INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------
Publishing.................................................. 5,248,920 1.0
Electronic Equipment Manufacturers.......................... 5,163,905 0.9
Semiconductor Equipment..................................... 4,955,560 0.9
Consumer Finance............................................ 3,315,909 0.6
------------ ----
$526,349,519 95.8%
============ ====
</Table>
14 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL GROWTH FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 28, 2007 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $479,260,278)....................... $539,086,519
Foreign Currency (Cost $428,285)............................ 429,098
Cash........................................................ 432
Receivables:
Fund Shares Sold.......................................... 19,051,325
Dividends................................................. 414,628
Interest.................................................. 1,823
Other....................................................... 9,452
------------
Total Assets............................................ 558,993,277
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 7,996,981
Fund Shares Repurchased................................... 619,310
Investment Advisory Fee................................... 303,587
Distributor and Affiliates................................ 227,942
Accrued Expenses............................................ 335,455
Trustees' Deferred Compensation and Retirement Plans........ 22,319
------------
Total Liabilities....................................... 9,505,594
------------
NET ASSETS.................................................. $549,487,683
============
NET ASSETS CONSIST OF:
Capital (Par value of $0.01 per share with an unlimited
number of shares authorized).............................. $494,639,665
Net Unrealized Appreciation................................. 59,702,107
Accumulated Undistributed Net Investment Income............. (1,363,395)
Accumulated Net Realized Loss............................... (3,490,694)
------------
NET ASSETS.................................................. $549,487,683
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $400,943,902 and 19,164,193 shares of
beneficial interest issued and outstanding)............. $ 20.92
Maximum sales charge (5.75%* of offering price)......... 1.28
------------
Maximum offering price to public........................ $ 22.20
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $36,170,559 and 1,741,686 shares of
beneficial interest issued and outstanding)............. $ 20.77
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $19,720,009 and 949,065 shares of
beneficial interest issued and outstanding)............. $ 20.78
============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $92,653,213 and 4,419,532 shares of
beneficial interest issued and outstanding)............. $ 20.96
============
</Table>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 15
VAN KAMPEN INTERNATIONAL GROWTH FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended February 28, 2007 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $96,206)..... $ 1,314,511
Interest.................................................... 185,047
-----------
Total Income............................................ 1,499,558
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,490,173
Distribution (12b-1) and Service Fees
Class A................................................... 360,578
Class B................................................... 134,371
Class C................................................... 68,132
Transfer Agent Fees......................................... 292,996
Custody..................................................... 194,216
Registration and Filing Fees................................ 74,010
Accounting and Administrative Expenses...................... 55,625
Professional Fees........................................... 38,722
Reports to Shareholders..................................... 18,855
Trustees' Fees and Related Expenses......................... 15,577
Other....................................................... 75,637
-----------
Total Expenses.......................................... 2,818,892
Less Credits Earned on Cash Balances.................... 19,405
-----------
Net Expenses............................................ 2,799,487
-----------
NET INVESTMENT LOSS......................................... $(1,299,929)
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 434,822
Foreign Currency Transactions............................. (100,580)
-----------
Net Realized Gain........................................... 334,242
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 17,834,931
-----------
End of the Period:
Investments............................................. 59,826,241
Foreign Currency Translation............................ (124,134)
-----------
59,702,107
-----------
Net Unrealized Appreciation During the Period............... 41,867,176
-----------
NET REALIZED AND UNREALIZED GAIN............................ $42,201,418
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $40,901,489
===========
</Table>
16 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL GROWTH FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income/Loss.............................. $ (1,299,929) $ 1,158,916
Net Realized Gain....................................... 334,242 73,411
Net Unrealized Appreciation During the Period........... 41,867,176 12,568,487
------------ ------------
Change in Net Assets from Operations.................... 40,901,489 13,800,814
------------ ------------
Distributions from Net Investment Income:
Class A Shares........................................ (864,122) -0-
Class B Shares........................................ (40,779) -0-
Class C Shares........................................ (18,422) -0-
Class I Shares........................................ (250,770) (57,268)
------------ ------------
Total Distributions..................................... (1,174,093) (57,268)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... 39,727,396 13,743,546
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................... 241,673,078 264,521,996
Net Asset Value of Shares Issued Through Dividend
Reinvestment.......................................... 963,632 -0-
Cost of Shares Repurchased.............................. (17,429,386) (11,995,759)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS...... 225,207,324 252,526,237
------------ ------------
TOTAL INCREASE IN NET ASSETS............................ 264,934,720 266,269,783
NET ASSETS:
Beginning of the Period................................. 284,552,963 18,283,180
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $(1,363,395) and $1,110,627,
respectively)......................................... $549,487,683 $284,552,963
============ ============
</Table>
See Notes to Financial Statements 17
VAN KAMPEN INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS DECEMBER 19, 2005
ENDED (COMMENCEMENT OF
CLASS A SHARES FEBRUARY 28, OPERATIONS) TO
2007 AUGUST 31, 2006
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................... $18.77 $16.47
------ ------
Net Investment Income/Loss (a)........................... (.06) .15
Net Realized and Unrealized Gain......................... 2.27 2.15
------ ------
Total from Investment Operations........................... 2.21 2.30
Less Distributions from Net Investment Income.............. .06 -0-
------ ------
NET ASSET VALUE, END OF THE PERIOD......................... $20.92 $18.77
====== ======
Total Return* (b).......................................... 11.77%** 13.96%**
Net Assets at End of the Period (In millions).............. $400.9 $209.4
Ratio of Expenses to Average Net Assets* (c)............... 1.39% 1.52%
Ratio of Net Investment Income/Loss to Average Net
Assets*.................................................. (.62%) 1.22%
Portfolio Turnover......................................... 8%** 14%**
* If certain expenses had not been voluntarily 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 (c)............. N/A 1.80%
Ratio of Net Investment Income to Average Net Assets.... N/A .94%
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. If
the sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the period ended August 31,
2006.
N/A=Not Applicable
18 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS DECEMBER 19, 2005
ENDED (COMMENCEMENT OF
CLASS B SHARES FEBRUARY 28, OPERATIONS) TO
2007 AUGUST 31, 2006
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................... $18.68 $16.47
------ ------
Net Investment Income/Loss (a)........................... (.14) .05
Net Realized and Unrealized Gain......................... 2.26 2.16
------ ------
Total from Investment Operations........................... 2.12 2.21
Less Distributions from Net Investment Income.............. .03 -0-
------ ------
NET ASSET VALUE, END OF THE PERIOD......................... $20.77 $18.68
====== ======
Total Return* (b).......................................... 11.35%** 13.42%**
Net Assets at End of the Period (In millions).............. $ 36.2 $ 18.5
Ratio of Expenses to Average Net Assets* (c)............... 2.14% 2.27%
Ratio of Net Investment Income/Loss to Average Net
Assets*.................................................. (1.37%) .43%
Portfolio Turnover......................................... 8%** 14%**
* If certain expenses had not been voluntarily 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 (c)............. N/A 2.53%
Ratio of Net Investment Income to Average Net Assets.... N/A .17%
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of up to 1% and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the period ended August 31,
2006.
N/A=Not Applicable
See Notes to Financial Statements 19
VAN KAMPEN INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS DECEMBER 19, 2005
ENDED (COMMENCEMENT OF
CLASS C SHARES FEBRUARY 28, OPERATIONS) TO
2007 AUGUST 31, 2006
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................... $18.68 $16.47
------ ------
Net Investment Income/Loss (a)........................... (.14) .05
Net Realized and Unrealized Gain......................... 2.27 2.16
------ ------
Total from Investment Operations........................... 2.13 2.21
Less Distributions from Net Investment Income.............. 0.03 -0-
------ ------
NET ASSET VALUE, END OF THE PERIOD......................... $20.78 $18.68
====== ======
Total Return* (b).......................................... 11.39%** 13.42%**
Net Assets at End of the Period (In millions).............. $ 19.7 $ 9.8
Ratio of Expenses to Average Net Assets* (c)............... 2.14% 2.27%
Ratio of Net Investment Income/Loss to Average Net
Assets*.................................................. (1.37%) .42%
Portfolio Turnover......................................... 8%** 14%**
* If certain expenses had not been voluntarily 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 (c)............. N/A 2.51%
Ratio of Net Investment Income to Average Net Assets.... N/A .19%
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the period ended August 31,
2006.
N/A=Not Applicable
20 See Notes to Financial Statements
VAN KAMPEN INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS NOVEMBER 1,
ENDED 2005 TO YEAR ENDED OCTOBER 31,
CLASS I SHARES FEBRUARY 28, AUGUST 31, ----------------------------------
2007 2006 2005 2004 2003 2002
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD......................... $18.80 $15.36 $12.57 $10.50 $ 8.50 $ 9.89
------ ------ ------ ------ ------ -------
Net Investment Income/Loss..... (.04)(a) .16(a) .13 .10 .05 .01
Net Realized and Unrealized
Gain/Loss.................... 2.27 3.33 2.66 1.97 1.95 (1.40)
------ ------ ------ ------ ------ -------
Total from
Investment Operations.......... 2.23 3.49 2.79 2.07 2.00 (1.39)
Less Distributions from Net
Investment Income.............. .07 .05 -0- -0- -0- -0-
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF THE
PERIOD......................... $20.96 $18.80 $15.36 $12.57 $10.50 $ 8.50
====== ====== ====== ====== ====== =======
Total Return* (b)................ 11.92%** 22.68%** 22.20% 19.71% 23.53% -14.05%
Net Assets at End of the Period
(In millions).................. $ 92.7 $ 46.8 $ 18.3 $ 30.0 $ 50.1 $ 56.5
Ratio of Expenses to Average Net
Assets* (c).................... 1.14% 1.27% 1.25% 1.25% 1.23% 1.10%
Ratio of Net Investment
Income/Loss to Average Net
Assets*........................ (.37%) 1.14% .64% .63% .55% .80%
Portfolio Turnover............... 8%** 14%** 17% 37% 46% 32%
* If certain expenses had not been voluntarily 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 (c).............. N/A 1.89% 2.37% 1.48% N/A N/A
Ratio of Net Investment
Income/Loss to Average Net
Assets...................... N/A .52% (.48%) .40% N/A N/A
</Table>
** Non-annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the period ended August 31,
2006.
N/A=Not Applicable
See Notes to Financial Statements 21
VAN KAMPEN INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen International Growth Fund (the "Fund"), formerly known as the 1838
International Equity Fund, is organized as a series of the Van Kampen Equity
Trust II, a Delaware statutory trust, and is registered as a diversified,
open-end management investment company under the Investment Company Act of 1940
(the "1940 Act"), as amended. The Fund's investment objective is to seek capital
appreciation, with a secondary objective of income, by investing primarily in a
diversified portfolio of equity securities of foreign issuers. The Fund
commenced investment operations on August 3, 1995. Pursuant to an agreement and
plan of reorganization between the Fund and 1838 International Equity Fund, at
the close of business on December 16, 2005, the Fund acquired substantially all
of the net assets of the 1838 International Equity Fund in exchange for Class I
Shares of the Fund through a tax-free exchange under Section 368 of the Internal
Revenue Code. As a result of the reorganization, Class I Shares of the Fund are
the accounting successor of the 1838 International Equity Fund and the fiscal
year end changed from October 31 to August 31. The Fund offers Class A Shares,
Class B Shares, Class C Shares, Class I Shares, and Class R Shares. Each class
of shares differs by its initial sales load, contingent deferred sales charges,
the allocation of class-specific expenses and voting rights on matters affecting
a single class. There were no sales of Class R Shares for the period ended
February 28, 2007.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with U.S. 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 last sale price as of the close of such securities exchange.
Equity securities traded on NASDAQ are valued at the NASDAQ Official Closing
Price. Listed and unlisted securities for which the last sale price is not
available are valued at the mean of the last reported bid and asked prices. For
those securities where quotations or prices are not readily available,
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Most foreign markets close before the New York
Stock Exchange (NYSE). Occasionally, developments that could affect the closing
prices of securities and other assets may occur between the times at which
valuations of such securities are determined (that is, close of the foreign
market on which the securities trade) and the close of business on the NYSE. If
these developments are expected to materially affect the value of the
securities, the valuations may be adjusted to reflect the estimated fair value
as of the close of the NYSE, as determined in good faith under procedures
established 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. Forward foreign currency contracts are valued using quoted foreign
exchange rates.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
22
VAN KAMPEN INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund 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 (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 Fund will make payment for such security 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 Fund.
C. INCOME AND EXPENSES Dividend income is recorded net of applicable withholding
taxes on the ex-dividend date and interest income is recorded on an accrual
basis. Income and expenses of the Fund are allocated on a pro rata basis to each
class of shares, except for distribution and service fees and incremental
transfer agency costs which are unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M 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. The
Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains and net unrealized appreciation, as applicable, as the income is earned or
capital gains are recorded.
The Fund intends to utilize provisions of the federal income tax law which
allow it 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. During the prior fiscal year, the Fund utilized capital losses carried
forward of $137,452. At August 31, 2006, the Fund had an accumulated capital
loss carryforward for tax purposes of $3,726,175 which will expire on August 31,
2010.
At February 28, 2007, the cost and related gross unrealized appreciation and
depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $479,359,039
============
Gross tax unrealized appreciation........................... $ 64,666,520
Gross tax unrealized depreciation........................... (4,939,040)
------------
Net tax unrealized appreciation on investments.............. $ 59,727,480
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends at
least annually from net investment income and from net realized gains, if any.
Distributions from net realized gains for book purposes may include short-term
capital gains, which are included as ordinary income for tax purposes.
Distributions from the Fund are recorded on the ex-distribution date.
23
VAN KAMPEN INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
The tax character of distributions paid during the period ended August 31,
2006 was as follows:
<Table>
Distributions paid from:
Ordinary income............................................. $57,268
Long-term capital gain...................................... -0-
-------
$57,268
=======
</Table>
As of August 31, 2006, the component of distributable earnings on a tax
basis was as follows:
<Table>
Undistributed ordinary income............................... $1,174,415
</Table>
Net realized gains and losses may differ for financial reporting and tax
purposes primarily as a result of the deferral of losses relating to wash sale
transactions.
F. FOREIGN CURRENCY TRANSLATION The market values of foreign securities, forward
foreign currency contracts and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the mean of the quoted bid
and ask prices of such currencies against the U.S. dollar. Purchases and sales
of portfolio securities are translated at the rate of exchange prevailing when
such securities were acquired or sold. The cost of securities is determined
using historical exchange rates. 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 transactions include
the net realized amount from the sale of foreign currency and the amount
realized between trade date and settlement date on securities transactions.
Income and expenses are translated at rates prevailing when accrued.
G. EXPENSE REDUCTIONS During the six months ended February 28, 2007, the Fund's
custody fee was reduced by $19,405 as a result of credits earned on cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $1 billion............................................ .75%
Over $1 billion............................................. .70
</Table>
For the six months ended February 28, 2007, the Fund recognized expenses of
approximately $9,000 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Fund is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Fund.
Under separate Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each
24
VAN KAMPEN INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
fund. For the six months ended February 28, 2007, the Fund recognized expenses
of approximately $30,100 representing Van Kampen Investments Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing accounting and legal
services to the Fund, as well as the salary, benefits and related costs of the
CCO and related support staff paid by Van Kampen. Services provided pursuant to
the Legal Services agreement are reported as part of "Professional Fees" on the
Statement of Operations. Services provided pursuant to the Accounting Services
and CCO employment agreement are reported as part of "Accounting and
Administrative Expenses" on the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
February 28, 2007, the Fund recognized expenses of approximately $272,000
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are also
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
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.
Amounts deferred are retained by the Fund, and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $7,722 are included in
"Other" assets on the Statement of Assets and Liabilities at February 28, 2007.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
For the six months ended February 28, 2007, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A Shares of
approximately $563,800 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $16,300. Sales charges do not represent expenses of the
Fund.
25
VAN KAMPEN INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
For the six months ended February 28, 2007 and the period ended August 31, 2006,
transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A.......................... 8,662,475 $175,918,600 11,579,500 $208,721,999
Class B.......................... 842,693 16,900,622 1,041,192 18,886,189
Class C.......................... 455,545 9,266,961 540,431 9,851,304
Class I.......................... 1,969,777 39,586,895 1,482,489 27,062,504
---------- ------------ ---------- ------------
Total Sales........................ 11,930,490 $241,673,078 14,643,612 $264,521,996
========== ============ ========== ============
Dividend Reinvestment:
Class A.......................... 40,696 $ 844,847 -0- $ -0-
Class B.......................... 1,892 39,050 -0- -0-
Class C.......................... 730 15,065 -0- -0-
Class I.......................... 3,109 64,670 -0- -0-
---------- ------------ ---------- ------------
Total Dividend Reinvestment........ 46,427 $ 963,632 -0- $ -0-
========== ============ ========== ============
Repurchases:
Class A.......................... (696,667) $(14,023,846) (421,811) $ (7,521,189)
Class B.......................... (95,500) (1,935,265) (48,591) (876,249)
Class C.......................... (29,888) (609,498) (17,753) (319,506)
Class I.......................... (43,853) (860,777) (182,436) (3,278,815)
---------- ------------ ---------- ------------
Total Repurchases.................. (865,908) $(17,429,386) (670,591) $(11,995,759)
========== ============ ========== ============
</Table>
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on proceeds of Fund shares that are
redeemed (either by sale or exchange) within 30 days of purchase. The redemption
fee is paid directly to the Fund. For the six months ended February 28, 2007,
the Fund received redemption fees of approximately $8,700, which are reported as
part of "Cost of Shares Repurchased" on the Statement of Changes in Net Assets.
The per share impact from redemption fees paid to the Fund was less than $0.01.
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $233,650,507 and $31,604,622,
respectively.
6. DISTRIBUTION AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the
26
VAN KAMPEN INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
Plans, the Fund will incur annual fees of up to .25% of Class A average daily
net assets and up to 1.00% each of Class B and Class C average daily net assets.
These fees are accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $491,600 and $57,900
for Class B and Class C Shares, respectively. These amounts may be recovered
from future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, the distribution fee is
reduced.
7. 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 Fund may use derivative instruments for a variety of reasons, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to manage the foreign currency exposure, maturity, or to generate
potential gain. All of the Fund's portfolio 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 forward commitment. In this instance, the recognition of gain or loss is
postponed until the disposal of the security underlying the forward commitment.
Purchasing securities or foreign currency 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 or
foreign currency on a forward commitment involves different risks and can result
in losses more significant than those arising from the purchase of such
securities. Risks may arise as a result of the potential inability of the
counterparties to meet the terms of their contracts.
A forward foreign currency contract is a commitment to purchase or sell a
foreign currency at a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original value of the contract and the
closing value of such contract is included as a component on realized gain/loss
on foreign currency transactions. As of February 28, 2007, there were no forward
foreign currency contracts outstanding.
8. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action which additionally names as defendants certain individual
trustees of certain Van Kampen funds. The named investment companies are listed
as nominal defendants. The complaint alleges that defendants caused the Van
Kampen funds to pay economic incentives to a proprietary sales force to promote
the sale of Van Kampen funds. The complaint also alleges that the Van Kampen
funds paid excessive commissions to Morgan Stanley and its affiliates in
connection with the sales of the funds. The complaint seeks, among other things,
the removal of the current trustees of the funds, rescission of the management
contracts for the funds, disgorgement of profits by Morgan Stanley and its
affiliates and monetary damages. This derivative action was coordinated with a
direct action alleging related violations of defendants' statutory disclosure
obligations and fiduciary duties with respect to the payments described above.
In addition, this derivative action was stayed by agreement of the parties
pending rulings on the motion to dismiss the direct action and the motion to
27
VAN KAMPEN INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
dismiss another derivative action brought by the same plaintiff that brought
this derivative action, alleging market timing and late trading in the Van
Kampen funds. In April 2006, the court granted defendants' motion to dismiss the
direct action. In June 2006, the court granted defendants' motion to dismiss the
market timing action. Accordingly, the stay on this action was lifted. Plaintiff
and defendants have agreed that this action should be dismissed in light of the
rulings dismissing the two cases discussed above. The Court has approved a
notice to shareholders regarding the dismissal.
9. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for the fiscal years beginning after December 15, 2006 and is to be
applied to all open tax years as of the effective date. Recent SEC guidance
allows implementing FIN 48 in the fund NAV calculations as late as the fund's
last NAV calculation in the first required financial statement period. As a
result, the Fund will incorporate FIN 48 in its semi annual report on February
29, 2008. The impact to the Fund's financial statements, if any, is currently
being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
28
VAN KAMPEN INTERNATIONAL GROWTH FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ERNST & YOUNG
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
29
Van Kampen International Growth Fund
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
(continued on next page)
Van Kampen International Growth Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen International Growth Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2007 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
34, 134, 234, 634, 334
IGFSAR 4/07
(VAN KAMPEN INVESTMENTS LOGO) IU07-00167P-Y02/07
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Equity Premium Income Fund performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of February 28, 2007.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CLASS A, B, AND C
SHARE OR CLASS I SHARE PROSPECTUS FOR THE FUND BEING OFFERED. THE
PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND, INCLUDING THE INVESTMENT
OBJECTIVES, RISKS, CHARGES AND EXPENSES. TO OBTAIN AN ADDITIONAL
PROSPECTUS, CONTACT YOUR FINANCIAL ADVISOR OR DOWNLOAD ONE AT
VANKAMPEN.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS
INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE
POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL
DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT
YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS
FUND.
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 2/28/07
<Table>
<Caption>
A SHARES B SHARES C SHARES I SHARES
since 6/26/06 since 6/26/06 since 6/26/06 since 6/26/06
- -----------------------------------------------------------------------------------------------------
W/MAX W/MAX W/MAX
5.75% 5.00% 1.00%
AVERAGE ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES
Since Inception 11.33% 4.93% 10.67% 5.67% 10.79% 9.79% 11.32%
6-month 7.31% 1.12% 6.87% 1.87% 6.97% 5.97% 7.27%
- -----------------------------------------------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
The returns shown in this report do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Performance of share classes will vary due to differences in sales charges and
expenses. Average annual total return with sales charges includes payment of the
maximum sales charge of 5.75 percent for Class A shares, a contingent deferred
sales charge of 5.00 percent for Class B shares (in year one and declining to
zero after year five), a contingent deferred sales charge of 1.00 percent for
Class C shares in year one, and combined Rule 12b-1 fees and service fees of up
to 0.25 percent for Class A shares and up to 1.00 percent for Class B and C
shares. Class I shares are offered without any sales charges on purchases or
sales and without any distribution (Rule 12b-1) fee and service fee. Class I
shares are available for purchase exclusively by investors through (i)
tax-exempt retirement plans with assets of at least one million dollars
(including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit
sharing and money purchase plans, defined benefit plans and non-qualified
deferred compensation plans), (ii) fee-based investment programs with assets of
at least one million dollars and (iii) institutional clients with assets of at
least one million dollars. Figures shown above assume reinvestment of all
distributions. The fund's adviser has waived or reimbursed fees and expenses
from time to time; absent such waivers/ reimbursements, the fund's returns would
have been lower.
The S&P 500 Stock Index is generally representative of the U.S. stock market.
The index does not include any expenses, fees or sales charges, which would
lower performance. The CBOE S&P 500 BuyWrite Index (BXM) is a benchmark index
designed to track the performance of a hypothetical buy-write strategy on the
S&P 500 Index. BXM is a passive total return index based on (1) buying an S&P
500 stock index portfolio, and (2) "writing" (or selling) the near-term S&P 500
Index (SPX(SM)) "covered" call option, generally on the third Friday of each
month. The SPX call written will have about one month remaining to expiration,
with an exercise price just above the prevailing index level (i.e., slightly out
of the money). The SPX call is held until expiration and cash settled, at which
time a new one-month, near-the-money call is written. Indexes are unmanaged and
should not be considered investments. It is not possible to invest directly in
an index.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
MARKET CONDITIONS
Early in the reporting period, market conditions were recovering from a downturn
that occurred in May and June of 2006, when concerns about the slowing economy,
higher inflation, rising interest rates and soaring oil prices pushed market
volatility to levels not seen in several years. By August, however, conditions
stabilized and stocks returned to positive territory. The Federal Open Market
Committee (the "Fed") left the target federal funds rate unchanged for the
remainder of 2006, which helped alleviate investors' worries that the Fed's two
years of monetary tightening would cool the economy too much. Disappointing
third quarter gross domestic product (GDP) data did not halt stocks' advance in
the fourth quarter. Additionally, consumer spending and confidence, on the
whole, did not flag any significant trouble, although consumer debt levels
garnered greater attention toward the end of the year. Warmer weather helped
energy prices ease in the final months of 2006, and gasoline prices also
declined. The jobs market softened but was still in line with expectations, and
inflation data reported at year-end did not cause much of a stir. In early 2007,
the market slowed its advance, although economic data in the form of payroll,
jobs growth and consumer sentiment were received positively. Oil prices
continued to retreat in January, and fourth quarter GDP exceeded expectations.
At the end of the month, the Fed left the rate unchanged and in its official
comments suggested a more upbeat view of the economy. While February began on a
generally positive note, stock prices moved sharply lower in the final days of
the month. China's equity market dropped significantly, spurring stock
volatility in markets across the world. Furthermore, difficulties in the
subprime mortgage market and comments made by former Fed Chairman Alan Greenspan
reignited recessionary fears in the U.S.
2
PERFORMANCE ANALYSIS
The fund returned 7.31 percent for the six months ended February 28, 2007 (Class
A shares, unadjusted for sales charges). In comparison, the fund's benchmark, a
blend of 75 percent CBOE BXM Index and 25 percent S&P 500(R) Index, returned
6.51 percent for the period.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2007
<Table>
<Caption>
- ------------------------------------------------------------------
75% CBOE
BXM INDEX/25%
S&P 500(R)
CLASS A CLASS B CLASS C CLASS I INDEX
7.31% 6.87% 6.97% 7.27% 6.51%
- ------------------------------------------------------------------
</Table>
THE PERFORMANCE FOR THE FOUR SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT
EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL
DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES.
SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION AND
INDEX DEFINITIONS.
The fund's investments in the consumer discretionary and industrials sectors
were the primary contributors to outperformance relative to the S&P 500 Index
during the period. Within the consumer discretionary sector, a number of
retailers drove strong gains for the fund due to better-than-expected holiday
sales. In the industrials sector, the fund's transportation stocks bolstered
performance as declining energy prices, and therefore lower fuel costs, had a
positive impact on selected airline and railroad companies' profit margins. The
options strategy generated short term capital gain from option premiums during
the period but also prevented the fund from realizing all of the stock market's
gains each month. As the market rallied, investors exercised their options and
the call-writing strategy underperformed, which is typical in periods of rapidly
rising stock prices.
Although all sectors represented in the fund's portfolio had positive returns on
an absolute basis during the six-month period, certain sectors detracted from
performance on a relative basis. The fund lacked exposure to the rallying
utilities sector, which advanced strongly on a high-profile takeover
announcement within the sector. In the health care sector, below-market
performance was mainly localized to company-specific weakness. A product recall
hurt the earnings outlook for one of the fund's holdings and another holding was
outbid by a competitor on a major service contract.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the fund in
the future.
3
<Table>
<Caption>
TOP 10 HOLDINGS AS OF 2/28/07
Exxon Mobil Corp. 2.3%
Bank of America Corp. 2.0
AT&T, Inc. 2.0
Cisco Systems, Inc. 1.7
Altria Group, Inc. 1.7
Hewlett-Packard Co. 1.6
International Business Machines Corp. 1.5
Goldman Sachs Group, Inc. 1.5
Johnson & Johnson 1.5
J.P. Morgan Chase & Co. 1.4
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 2/28/07
Integrated Oil & Gas 5.6%
Pharmaceuticals 5.0
Investment Banking & Brokerage 4.9
Other Diversified Financial Services 4.5
Communications Equipment 4.4
Aerospace & Defense 3.5
Computer Hardware 3.5
Managed Health Care 3.5
Internet Retail 2.9
Property & Casualty Insurance 2.8
Tobacco 2.7
Industrial Conglomerates 2.4
Department Stores 2.3
Broadcasting & Cable TV 2.2
Health Care Distributors 1.9
Life Sciences Tools & Services 1.9
Restaurants 1.8
Multi-Line Insurance 1.8
Systems Software 1.7
Apparel Retail 1.7
Drug Retail 1.4
Specialized Finance 1.4
Railroads 1.4
Thrifts & Mortgage Finance 1.3
Semiconductors 1.3
Movies & Entertainment 1.3
Construction & Farm Machinery & Heavy Trucks 1.3
Residential REIT's 1.2
Household Products 1.2
Oil & Gas Refining & Marketing 1.1
Exchange Traded Fund 1.1
Electric Utilities 1.0
Health Care Services 1.0
Health Care Equipment 0.9
Household Appliances 0.9
Consumer Finance 0.8
Air Freight & Logistics 0.8
Oil & Gas Equipment & Services 0.7
Steel 0.7
Oil & Gas Storage & Transportation 0.7
</Table>
<Table>
(continued on next page)
</Table>
4
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 2/28/07
(continued from previous page)
Fertilizers & Agricultural Chemicals 0.7%
Packaged Foods & Meats 0.7
Agricultural Products 0.7
Apparel, Accessories & Luxury Goods 0.7
Commodity Chemicals 0.6
Application Software 0.6
Internet Software & Services 0.6
Computer Storage & Peripherals 0.5
Airlines 0.5
Computer & Electronics Retail 0.5
Electronic Equipment Manufacturers 0.5
Soft Drinks 0.5
Auto Parts & Equipment 0.5
Data Processing & Outsourced Services 0.5
Mortgage REIT's 0.4
IT Consulting & Other Services 0.4
Aluminum 0.4
Oil & Gas Drilling 0.4
Personal Products 0.4
Distillers & Vintners 0.4
Diversified Banks 0.3
Diversified Chemicals 0.3
Semiconductor Equipment 0.3
Publishing 0.2
Industrial Machinery 0.2
Asset Management & Custody Banks 0.0*
Office 0.0*
------
Total Long-Term Investments 94.3
Total Repurchase Agreements 4.3
------
Total Investments 98.6
Other Assets in Excess of Liabilities 1.7
Written Options (0.3)
------
Net Assets 100.0%
</Table>
* Amount is less than 0.1%
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. All percentages are as a percentage of
net assets. Van Kampen is a wholly owned subsidiary of a global securities firm
which is engaged in a wide range of financial services including, for example,
securities trading and brokerage activities, investment banking, research and
analysis, financing and financial advisory services.
5
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to fund shareholders, and
makes these reports available on its public Web site, www.vankampen.com.
In addition to the semiannual and annual reports that Van Kampen delivers
to shareholders and makes available through the Van Kampen public Web
site, each fund files a complete schedule of portfolio holdings with the
SEC for the fund's first and third fiscal quarters on Form N-Q. Van
Kampen does not deliver the reports for the first and third fiscal
quarters to shareholders, nor are the reports posted to the Van Kampen
public Web site. You may, however, obtain the Form N-Q filings (as well
as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web site,
http://www.sec.gov. You may also review and copy them at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at (800)
SEC-0330. 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 20549-0102.
You may obtain copies of a fund's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
6
HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling 1-800-341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the fund's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free 1-800-847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the fund voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
7
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and redemption fees
of Class A Shares and contingent deferred sales charges on redemptions of Class
B and Class C Shares; and redemption fees; and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars)
of investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 9/1/06 - 2/28/07.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges or redemption fees.
Therefore, the second line of the table is useful in comparing ongoing costs,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your cost would
have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------------------------------------------
9/1/06 2/28/07 9/1/06-2/28/07
Class A
Actual...................................... $1,000.00 $1,073.12 $6.48
Hypothetical................................ 1,000.00 1,018.59 6.31
(5% annual return before expenses)
Class B
Actual...................................... 1,000.00 1,068.67 10.31
Hypothetical................................ 1,000.00 1,014.79 10.04
(5% annual return before expenses)
Class C
Actual...................................... 1,000.00 1,069.71 10.31
Hypothetical................................ 1,000.00 1,014.79 10.04
(5% annual return before expenses)
Class I
Actual...................................... 1,000.00 1,072.70 5.19
Hypothetical................................ 1,000.00 1,019.89 5.06
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.26%, 2.01%,
2.01% and 1.01% for Class A, B, C and I Shares, respectively, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period). These expense ratios reflect an expense waiver.
Assumes all dividends and distributions were reinvested.
8
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
COMMON STOCKS 94.3%
AEROSPACE & DEFENSE 3.5%
Boeing Co. ................................................. 12,139 $ 1,059,370
General Dynamics Corp. ..................................... 13,190 1,008,507
Honeywell International, Inc. .............................. 17,670 820,595
Lockheed Martin Corp. ...................................... 13,275 1,291,392
Northrop Grumman Corp. ..................................... 16,243 1,167,060
Raytheon Co. ............................................... 12,209 653,792
United Technologies Corp. .................................. 26,575 1,744,117
--------------
7,744,833
--------------
AGRICULTURAL PRODUCTS 0.7%
Archer-Daniels-Midland Co. ................................. 43,789 1,505,466
--------------
AIR FREIGHT & LOGISTICS 0.8%
FedEx Corp. ................................................ 9,441 1,077,973
United Parcel Service, Inc., Class B........................ 9,821 689,336
--------------
1,767,309
--------------
AIRLINES 0.5%
AMR Corp. (a)............................................... 16,408 559,349
Continental Airlines, Inc., Class B (a)..................... 14,640 579,744
--------------
1,139,093
--------------
ALUMINUM 0.4%
Alcan, Inc. (Canada)........................................ 11,835 615,183
Alcoa, Inc. ................................................ 10,283 343,555
--------------
958,738
--------------
APPAREL, ACCESSORIES & LUXURY GOODS 0.7%
Coach, Inc. (a)............................................. 17,786 839,499
Polo Ralph Lauren Corp., Class A............................ 7,562 657,743
--------------
1,497,242
--------------
APPAREL RETAIL 1.7%
Abercrombie & Fitch Co., Class A............................ 10,393 812,421
American Eagle Outfitters, Inc. ............................ 35,565 1,104,293
Chico's FAS, Inc. (a)....................................... 22,706 509,295
The Men's Wearhouse, Inc. .................................. 27,681 1,225,715
--------------
3,651,724
--------------
APPLICATION SOFTWARE 0.6%
Citrix Systems, Inc. (a).................................... 21,636 696,679
Synopsys, Inc. (a).......................................... 24,379 623,615
--------------
1,320,294
--------------
ASSET MANAGEMENT & CUSTODY BANKS 0.0%
Janus Capital Group, Inc. .................................. 713 15,151
Legg Mason, Inc. ........................................... 112 11,507
--------------
26,658
--------------
AUTO PARTS & EQUIPMENT 0.5%
Johnson Controls, Inc. ..................................... 11,557 1,084,047
--------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
BIOTECHNOLOGY 1.3%
Amgen, Inc. (a)............................................. 15,214 $ 977,652
Genentech, Inc. (a)......................................... 7,548 636,825
Gilead Sciences, Inc. (a)................................... 12,665 906,307
OSI Pharmaceuticals, Inc. (a)............................... 9,678 334,859
--------------
2,855,643
--------------
BROADCASTING & CABLE TV 0.9%
Comcast Corp., Class A (a).................................. 75,581 1,943,930
--------------
BUILDING PRODUCTS 0.3%
USG Corp. (a)............................................... 11,280 611,263
--------------
CASINOS & GAMING 0.3%
Harrah's Entertainment, Inc. ............................... 8,375 707,604
--------------
COMMODITY CHEMICALS 0.0%
Tronox, Inc., Class B....................................... 340 5,046
--------------
COMMUNICATIONS EQUIPMENT 4.4%
ADC Telecommunications, Inc. (a)............................ 38,465 631,595
Cisco Systems, Inc. (a)..................................... 145,630 3,777,642
Comverse Technology, Inc. (a)............................... 26,033 572,205
Corning, Inc. (a)........................................... 94,296 1,945,327
Motorola, Inc. ............................................. 61,577 1,140,406
QUALCOMM, Inc. ............................................. 15,162 610,725
Tellabs, Inc. (a)........................................... 101,976 1,068,709
--------------
9,746,609
--------------
COMPUTER & ELECTRONICS RETAIL 0.5%
Best Buy Co., Inc. ......................................... 24,338 1,130,987
--------------
COMPUTER HARDWARE 3.5%
Apple Computer, Inc. (a).................................... 7,848 664,019
Hewlett-Packard Co. ........................................ 91,814 3,615,635
International Business Machines Corp. ...................... 36,175 3,364,637
--------------
7,644,291
--------------
COMPUTER STORAGE & PERIPHERALS 0.5%
Lexmark International, Inc., Class A (a).................... 10,927 661,739
SanDisk Corp. (a)........................................... 13,987 509,407
--------------
1,171,146
--------------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS 1.3%
Caterpillar, Inc. .......................................... 10,430 671,901
Deere & Co. ................................................ 14,182 1,537,612
Joy Global, Inc. ........................................... 13,555 601,029
Oshkosh Truck Corp. ........................................ 149 7,994
--------------
2,818,536
--------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
CONSUMER FINANCE 0.8%
American Express Co. ....................................... 14,220 $ 808,691
AmeriCredit Corp. (a)....................................... 18,006 439,707
Capital One Financial Corp. ................................ 6,804 524,452
--------------
1,772,850
--------------
DATA PROCESSING & OUTSOURCED SERVICES 0.5%
CheckFree Corp. (a)......................................... 4,787 181,523
Computer Sciences Corp. (a)................................. 1,023 54,147
Convergys Corp. (a)......................................... 29,277 753,005
--------------
988,675
--------------
DEPARTMENT STORES 2.3%
Federated Department Stores, Inc. .......................... 47,471 2,120,055
J.C. Penney Co., Inc. ...................................... 27,343 2,217,791
Nordstrom, Inc. ............................................ 13,674 725,952
--------------
5,063,798
--------------
DISTILLERS & VINTNERS 0.4%
MGP Ingredients, Inc. ...................................... 40,357 800,683
--------------
DIVERSIFIED BANKS 0.3%
Wachovia Corp. ............................................. 299 16,556
Wells Fargo & Co. .......................................... 20,642 716,277
--------------
732,833
--------------
DIVERSIFIED CHEMICALS 0.3%
FMC Corp. .................................................. 8,681 638,661
--------------
DIVERSIFIED METALS & MINING 1.2%
Phelps Dodge Corp. ......................................... 10,057 1,256,220
Rio Tinto PLC--ADR (United Kingdom)......................... 2,694 583,682
Southern Copper Corp. ...................................... 10,932 769,613
--------------
2,609,515
--------------
DRUG RETAIL 0.3%
CVS Corp. .................................................. 18,089 568,175
--------------
ELECTRIC UTILITIES 1.0%
Duke Energy Corp. .......................................... 30,584 602,199
Exelon Corp. ............................................... 12,046 794,193
Pepco Holdings, Inc. ....................................... 29,864 794,979
--------------
2,191,371
--------------
ELECTRONIC EQUIPMENT MANUFACTURERS 0.5%
Tektronix, Inc. ............................................ 20,996 600,695
Vishay Intertechnology, Inc. (a)............................ 34,171 486,937
--------------
1,087,632
--------------
ELECTRONIC MANUFACTURING SERVICES 0.4%
Jabil Circuit, Inc. ........................................ 33,209 887,344
--------------
FERTILIZERS & AGRICULTURAL CHEMICALS 0.3%
Monsanto Co. ............................................... 12,164 640,921
--------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
FOOD RETAIL 1.1%
Safeway, Inc. .............................................. 34,147 $ 1,180,462
SUPERVALU, Inc. ............................................ 19,220 710,371
Whole Foods Market, Inc. ................................... 10,270 490,598
--------------
2,381,431
--------------
FOOTWEAR 0.5%
NIKE, Inc., Class B......................................... 9,897 1,033,940
--------------
HEALTH CARE DISTRIBUTORS 0.4%
Cardinal Health, Inc. ...................................... 12,259 859,233
--------------
HEALTH CARE EQUIPMENT 0.9%
Advanced Medical Optics, Inc. (a)........................... 28,521 1,099,199
Kinetic Concepts, Inc. (a).................................. 19,028 935,226
--------------
2,034,425
--------------
HEALTH CARE SERVICES 1.0%
Express Scripts, Inc. (a)................................... 8,071 608,634
Quest Diagnostics, Inc. .................................... 30,372 1,549,579
--------------
2,158,213
--------------
HOME FURNISHINGS 0.4%
Tempur-Pedic International, Inc. ........................... 39,202 975,738
--------------
HOTELS, RESORTS & CRUISE LINES 0.4%
Marriott International, Inc., Class A....................... 20,121 963,997
--------------
HOUSEHOLD APPLIANCES 0.0%
Whirlpool Corp. ............................................ 66 5,822
--------------
HOUSEHOLD PRODUCTS 1.2%
Energizer Holdings, Inc. (a)................................ 7,687 660,467
Procter & Gamble Co. ....................................... 29,710 1,886,288
--------------
2,546,755
--------------
HUMAN RESOURCE & EMPLOYMENT SERVICES 0.4%
Manpower, Inc. ............................................. 11,540 857,422
--------------
HYPERMARKETS & SUPER CENTERS 0.3%
Wal-Mart Stores, Inc. ...................................... 15,339 740,874
--------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 0.3%
AES Corp. (a)............................................... 32,757 698,379
--------------
INDUSTRIAL CONGLOMERATES 1.3%
General Electric Co. ....................................... 82,455 2,879,329
--------------
</Table>
12 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
INDUSTRIAL MACHINERY 0.2%
Danaher Corp. .............................................. 3,953 $ 283,193
Timken Co. ................................................. 6,429 183,741
--------------
466,934
--------------
INTEGRATED OIL & GAS 5.6%
Chevron Corp. .............................................. 29,363 2,014,595
ConocoPhillips.............................................. 45,881 3,001,535
Exxon Mobil Corp. (c) ...................................... 69,433 4,976,958
Hess Corp. ................................................. 15,238 808,376
Marathon Oil Corp. ......................................... 15,764 1,430,425
Royal Dutch Shell PLC--ADR (United Kingdom)................. 645 41,932
--------------
12,273,821
--------------
INTEGRATED TELECOMMUNICATION SERVICES 2.6%
AT&T, Inc. ................................................. 118,233 4,350,974
Verizon Communications, Inc. ............................... 36,248 1,356,763
--------------
5,707,737
--------------
INTERNET RETAIL 0.3%
Expedia, Inc. (a)........................................... 35,336 751,243
--------------
INTERNET SOFTWARE & SERVICES 0.6%
eBay, Inc. (a).............................................. 38,036 1,219,434
VeriSign, Inc. (a).......................................... 100 2,530
Yahoo!, Inc. (a)............................................ 1,445 44,593
--------------
1,266,557
--------------
INVESTMENT BANKING & BROKERAGE 4.9%
Bear Stearns Cos., Inc. .................................... 12,321 1,875,749
E*TRADE Financial Corp. (a)................................. 31,641 730,591
Goldman Sachs Group, Inc. .................................. 16,535 3,333,456
Lehman Brothers Holdings, Inc. ............................. 31,876 2,336,511
Merrill Lynch & Co., Inc. .................................. 28,577 2,391,323
--------------
10,667,630
--------------
IT CONSULTING & OTHER SERVICES 0.4%
Accenture Ltd., Class A (Bermuda)........................... 27,182 970,397
--------------
LIFE & HEALTH INSURANCE 1.1%
Metlife, Inc. .............................................. 23,308 1,471,900
Prudential Financial, Inc. ................................. 10,894 990,701
--------------
2,462,601
--------------
LIFE SCIENCES TOOLS & SERVICES 0.8%
Thermo Fisher Scientific, Inc. (a).......................... 37,417 1,693,868
--------------
MANAGED HEALTH CARE 3.5%
Aetna, Inc. ................................................ 5,947 263,274
Coventry Health Care, Inc. (a).............................. 478 26,013
Health Net, Inc. (a)........................................ 21,388 1,143,616
</Table>
See Notes to Financial Statements 13
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
MANAGED HEALTH CARE (CONTINUED)
Humana, Inc. (a)............................................ 23,179 $ 1,387,031
UnitedHealth Group, Inc. ................................... 56,346 2,941,261
WellPoint, Inc. (a)......................................... 23,697 1,881,305
--------------
7,642,500
--------------
MORTGAGE REIT'S 0.4%
Capitalsource, Inc. ........................................ 37,540 968,157
New Century Financial Corp. ................................ 397 6,074
--------------
974,231
--------------
MOVIES & ENTERTAINMENT 1.3%
News Corp., Class A......................................... 48,360 1,089,551
Time Warner, Inc. .......................................... 45,888 933,821
Walt Disney Co. ............................................ 24,878 852,320
--------------
2,875,692
--------------
MULTI-LINE INSURANCE 1.8%
American Financial Group, Inc. ............................. 26,082 912,870
American International Group, Inc. ......................... 25,483 1,709,909
Loews Corp. ................................................ 29,474 1,280,351
--------------
3,903,130
--------------
OFFICE 0.0%
HRPT Properties Trust....................................... 867 11,202
--------------
OIL & GAS DRILLING 0.4%
Nabors Industries Ltd. (Bermuda) (a)........................ 5,109 153,066
Rowan Cos., Inc. ........................................... 4,420 135,384
Transocean, Inc. (Cayman Islands) (a)....................... 8,669 664,739
--------------
953,189
--------------
OIL & GAS EQUIPMENT & SERVICES 0.7%
Halliburton Co. ............................................ 13,883 428,707
National Oilwell Varco, Inc. (a)............................ 100 6,964
Superior Energy Services, Inc. (a).......................... 26,068 798,984
Weatherford International Ltd. (Bermuda) (a)................ 8,654 347,458
--------------
1,582,113
--------------
OIL & GAS EXPLORATION & PRODUCTION 0.3%
Anadarko Petroleum Corp. ................................... 11,361 457,053
Chesapeake Energy Corp. .................................... 7,720 235,383
Devon Energy Corp. ......................................... 116 7,622
--------------
700,058
--------------
OIL & GAS REFINING & MARKETING 0.8%
Valero Energy Corp. ........................................ 29,356 1,692,373
--------------
OIL & GAS STORAGE & TRANSPORTATION 0.7%
Overseas Shipholding Group, Inc. ........................... 19,057 1,154,473
Spectra Energy Corp. ....................................... 14,931 384,175
--------------
1,538,648
--------------
</Table>
14 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES 4.5%
Bank of America Corp. ...................................... 85,796 $ 4,364,442
Citigroup, Inc. ............................................ 48,089 2,423,686
J.P. Morgan Chase & Co. .................................... 61,024 3,014,586
--------------
9,802,714
--------------
PACKAGED FOODS & MEATS 0.7%
General Mills, Inc. ........................................ 27,033 1,523,580
Hormel Foods Corp. ......................................... 70 2,555
--------------
1,526,135
--------------
PERSONAL PRODUCTS 0.4%
Estee Lauder Co., Inc., Class A............................. 17,662 845,657
--------------
PHARMACEUTICALS 5.0%
Johnson & Johnson........................................... 51,154 3,225,260
Merck & Co., Inc. .......................................... 56,454 2,493,009
Mylan Laboratories, Inc. ................................... 453 9,590
Pfizer, Inc. ............................................... 54,348 1,356,526
Schering-Plough Corp. ...................................... 53,777 1,262,684
Teva Pharmaceutical Industries Ltd.--ADR (Israel)........... 25,197 896,005
Wyeth....................................................... 33,550 1,641,266
--------------
10,884,340
--------------
PROPERTY & CASUALTY INSURANCE 2.8%
Allstate Corp. ............................................. 18,083 1,086,065
Chubb Corp. ................................................ 23,280 1,188,444
CNA Financial Corp.--GDR (a)................................ 15,604 640,700
Commerce Group, Inc. ....................................... 23,625 677,329
Philadelphia Consolidated Holding Corp. (a)................. 19,028 873,575
Travelers Cos., Inc. ....................................... 32,822 1,666,045
--------------
6,132,158
--------------
PUBLISHING 0.2%
Meredith Corp. ............................................. 9,191 537,398
--------------
RAILROADS 1.4%
Burlington Northern Santa Fe Corp. ......................... 20,357 1,612,071
CSX Corp. .................................................. 36,003 1,356,233
--------------
2,968,304
--------------
REGIONAL BANKS 0.8%
BB & T Corp. ............................................... 4,016 170,600
National City Corp. ........................................ 42,338 1,602,493
SunTrust Banks, Inc. ....................................... 100 8,431
--------------
1,781,524
--------------
RESIDENTIAL REIT'S 0.4%
Archstone-Smith Trust....................................... 14,153 798,371
--------------
RESTAURANTS 1.8%
Cheesecake Factory, Inc. (a)................................ 1,186 32,366
Darden Restaurants, Inc. ................................... 2,155 88,269
</Table>
See Notes to Financial Statements 15
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
RESTAURANTS (CONTINUED)
McDonald's Corp. ........................................... 51,182 $ 2,237,677
Panera Bread Co., Class A (a)............................... 10,562 646,711
Starbucks Corp. (a)......................................... 14,927 461,244
Yum! Brands, Inc. .......................................... 10,259 594,407
--------------
4,060,674
--------------
SEMICONDUCTOR EQUIPMENT 0.3%
Applied Materials, Inc. .................................... 33,675 625,345
Novellus Systems, Inc. (a).................................. 152 4,894
--------------
630,239
--------------
SEMICONDUCTORS 1.3%
Broadcom Corp., Class A (a)................................. 2,704 92,179
Intel Corp. ................................................ 51,667 1,025,590
Micron Technology, Inc. (a)................................. 43,454 515,365
Texas Instruments, Inc. .................................... 34,623 1,071,928
Xilinx, Inc. ............................................... 7,431 190,382
--------------
2,895,444
--------------
SOFT DRINKS 0.5%
Hansen Natural Corp. (a).................................... 18,057 631,995
Pepsi Bottling Group, Inc. ................................. 14,598 452,538
--------------
1,084,533
--------------
SPECIALIZED FINANCE 1.4%
Chicago Mercantile Exchange Holdings, Inc. ................. 3,332 1,796,381
CIT Group, Inc. ............................................ 13,045 736,651
Nasdaq Stock Market, Inc. (a)............................... 18,950 567,174
--------------
3,100,206
--------------
SPECIALTY STORES 0.3%
Barnes & Noble, Inc. ....................................... 360 14,738
Office Depot, Inc. (a)...................................... 5,083 169,569
Staples, Inc. .............................................. 20,353 529,585
--------------
713,892
--------------
STEEL 0.4%
United States Steel Corp. .................................. 9,728 862,095
--------------
SYSTEMS SOFTWARE 1.7%
Microsoft Corp. ............................................ 87,798 2,473,269
Oracle Corp. (a)............................................ 82,174 1,350,119
--------------
3,823,388
--------------
THRIFTS & MORTGAGE FINANCE 1.3%
Fannie Mae.................................................. 22,945 1,301,670
IndyMac Bancorp, Inc. ...................................... 6,976 239,486
MGIC Investment Corp. ...................................... 1,005 60,652
Radian Group, Inc. ......................................... 11,524 662,054
Washington Mutual, Inc. .................................... 15,001 646,243
--------------
2,910,105
--------------
TOBACCO 2.7%
Altria Group, Inc. ......................................... 43,101 3,632,552
</Table>
16 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
TOBACCO (CONTINUED)
Loews Corp.--Carolina Group................................. 24,124 $ 1,737,652
Reynolds American, Inc. .................................... 9,247 564,529
--------------
5,934,733
--------------
TRADING COMPANIES & DISTRIBUTORS 0.1%
WESCO International, Inc. (a)............................... 3,268 218,074
--------------
EXCHANGE TRADED FUND 1.0%
Semiconductor HOLDRs Trust.................................. 3,268 2,162,040
--------------
TOTAL LONG-TERM INVESTMENTS (B) 94.3%
(Cost $206,529,933)................................................... 207,254,423
--------------
REPURCHASE AGREEMENTS 4.3%
Citigroup Global Markets, Inc. ($2,050,517 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
5.27%, dated 02/28/07, to be sold on 03/01/07 at $2,050,817).......... 2,050,517
State Street Bank & Trust Co. ($7,281,483 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
5.12%, dated 02/28/07, to be sold on 03/01/07 at $7,282,518).......... 7,281,483
--------------
TOTAL REPURCHASE AGREEMENTS
(Cost $9,332,000)..................................................... 9,332,000
--------------
TOTAL INVESTMENTS 98.6%
(Cost $215,861,933)................................................... 216,586,423
OTHER ASSETS IN EXCESS OF LIABILITIES 1.7%............................. 3,700,349
WRITTEN OPTIONS (0.3%)................................................ (600,986)
--------------
NET ASSETS 100.0%...................................................... $ 219,685,786
==============
</Table>
Percentages are calculated as a percentage of net assets.
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) The Fund may designate up to 100% of its common stock investments to cover
outstanding call options.
(c) All or a portion of this security has been physically segregated in
connection with open futures contracts.
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
See Notes to Financial Statements 17
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
FUTURES CONTRACTS OUTSTANDING AS OF FEBRUARY 28, 2007:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
LONG CONTRACTS:
S&P Mini 500 Index Futures, March 2007 (Current
Notional Value of $70,445 per contract)................... 100 $ (26,525)
------ ---------
</Table>
WRITTEN OPTIONS OUTSTANDING AS OF FEBRUARY 28, 2007:
<Table>
<Caption>
NUMBER
EXERCISE EXPIRATION OF
NAME OF ISSUER PRICE DATE CONTRACTS PREMIUM VALUE
- ------------------------------------------------------------------------------------------------
Call--Basket--Accenture Ltd.,
Altria Group, Inc., Archer-
Daniels-Midland Co., Estee
Lauder Co., Inc., General
Mills, Inc., Intel Corp.,
Procter & Gamble Co.,
Safeway, Inc. and Tellabs,
Inc. (OTC) $ 100.700 03/27/07 130,850 $ (100,755) $ (51,965)
Call--Basket--Advanced Medical
Optics, Inc., Comcast Corp.,
Deere & Co., Federated
Department Stores, Inc.,
General Electric Co., J.C.
Penny Co., Inc., McDonald's
Corp., Schering-Plough Corp.
and United Technologies
Corp. (OTC) 101.100 03/27/07 159,492 (129,189) (49,443)
Call--Basket--American Eagle
Outfitters, Inc., Amgen,
Inc., Best Buy Co., Inc.,
Cardinal Health, Inc.,
Honeywell International,
Inc., Manpower, Inc.,
Southern Copper Corp.,
Tempur-Pedic International,
Inc. and Teva Pharmaceutical
Industries Ltd. (OTC) 101.300 03/27/07 78,270 (72,009) (31,833)
Call--Basket--American
Financial Group, Inc., Chubb
Corp., Coach, Inc., Hess
Corp., Marriott
International, Inc.,
Metlife, Inc., Prudential
Finance, Inc., Superior
Energy Services, Inc. and
Walt Disney Co. (OTC) 101.000 03/27/07 82,841 (80,356) (34,845)
</Table>
18 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER
EXERCISE EXPIRATION OF
NAME OF ISSUER PRICE DATE CONTRACTS PREMIUM VALUE
- ------------------------------------------------------------------------------------------------
Call--Basket--American
International Group., Inc.,
Burlington Northern Santa Fe
Corp., CSX Corp., Hewlett-
Packard Co., Loews Corp.,
Loews Corp.--Carolina Group,
The Men's Wearhouse, Inc.
and News Corp. (OTC) $ 101.000 03/27/07 133,519 $ (134,854) $ (79,641)
Call--Basket--Archstone-Smith
Trust, Caterpillar, Inc.,
CIT Group, Inc., Citigroup,
Inc., Convergys Corp.,
E*TRADE Financial Corp.,
Jabil Circuit, Inc.,
National City Corp. and
United Parcel Service, Inc.
(OTC) 101.300 03/27/07 90,178 (69,437) (26,553)
Call--Basket--AT & T, Inc.,
Boeing Co., Genentech, Inc.,
General Dynamics Corp.,
Gilead Sciences, Inc.,
Raytheon Co. and Texas
Instruments, Inc. (OTC) 101.400 03/27/07 60,686 (49,763) (18,491)
Call--Basket--AT & T, Inc.,
ConocoPhillips, Exxon Mobil
Corp., J.P. Morgan Chase &
Co., Lehman Brothers
Holdings, Inc. and Verizon
Communications, Inc. (OTC) 101.300 03/27/07 158,634 (134,839) (41,990)
Call--Basket--Bear Stearns
Cos., Inc., Chevron Corp.,
Cisco Systems, Inc., Goldman
Sachs Group, Inc., Marathon
Oil Corp., Merrill Lynch &
Co., Inc., Microsoft Corp.
and Valero Energy Corp.
(OTC) 101.800 03/27/07 160,535 (133,244) (32,107)
Call--Basket--Capitalsource,
Inc., Corning, Inc., eBay,
Inc., Fannie Mae,
International Business
Machines Corp., Oracle
Corp., Overseas Shipholding
Group, Inc. and United
States Steel Corp. (OTC) 101.000 03/27/07 122,308 (96,623) (32,828)
</Table>
See Notes to Financial Statements 19
VAN KAMPEN EQUITY PREMIUM INCOME FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
<Table>
<Caption>
NUMBER
EXERCISE EXPIRATION OF
NAME OF ISSUER PRICE DATE CONTRACTS PREMIUM VALUE
- ------------------------------------------------------------------------------------------------
Call--Basket--Cisco Systems,
Inc., Exxon Mobil Corp.,
Health Net, Inc., Kinetic
Concepts, Inc., Lockheed
Martin Corp. and Phelps
Dodge Corp.
(OTC) $ 101.000 03/27/07 70,528 $ (52,896) $ (52,896)
Call--Basket--CVS Corp.,
Expedia, Inc., Exxon Mobil
Corp., Halliburton Co.,
Harrah's Entertainment,
Inc., MGP Ingredients, Inc.,
Polo Ralph Lauren Corp.,
Transocean, Inc. and Wal-
Mart Stores, Inc. (OTC) 102.500 03/27/07 56,643 (45,881) (31,431)
Call--Basket--Humana, Inc.,
Johnson & Johnson, Merck &
Co., Inc., Pfizer, Inc.,
Quest Diagnostics, Inc.,
Thermo Fisher Scientific,
Inc., UnitedHealth Group,
Inc., WellPoint, Inc. and
Wyeth (OTC) 100.600 03/27/07 180,129 (145,904) (89,650)
Call--Semiconductor HOLDR's
Trust (OTC) 36.380 03/27/07 62,850 (27,082) (13,073)
Call--S & P 500 Index March 1,455.000 03/17/07 89 (137,683) (14,240)
----------- ---------
$(1,410,515) $(600,986)
=========== =========
</Table>
OTC--Over the Counter
20 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 28, 2007 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $215,861,933)....................... $216,586,423
Cash........................................................ 118
Receivables:
Investments Sold........................................... 11,910,420
Fund Shares Sold........................................... 8,926,865
Options Written............................................ 1,177,188
Dividends.................................................. 333,530
Interest................................................... 1,336
Unamortized Offering Costs.................................. 57,869
Other....................................................... 2,541
------------
Total Assets............................................. 238,996,290
------------
LIABILITIES:
Payables:
Investments Purchased...................................... 17,684,016
Options written, at value (premiums received of
$1,410,515).............................................. 600,986
Income and Capital Gains Distributions..................... 361,787
Fund Shares Repurchased.................................... 285,575
Distributor and Affiliates................................. 107,585
Investment Advisory Fee.................................... 98,175
Variation Margin on Futures................................ 26,525
Trustees' Deferred Compensation and Retirement Plans........ 10,994
Accrued Expenses............................................ 134,861
------------
Total Liabilities........................................ 19,310,504
------------
NET ASSETS.................................................. $219,685,786
============
NET ASSETS CONSIST OF:
Capital (Par value of $0.001 per share with an unlimited
number of shares authorized)............................... $217,800,753
Net Unrealized Appreciation................................. 1,507,494
Accumulated Undistributed Net Investment Income............. 110,492
Accumulated Net Realized Gain............................... 267,047
------------
NET ASSETS.................................................. $219,685,786
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $127,655,773 and 11,947,156 shares of
beneficial interest issued and outstanding).............. $ 10.69
Maximum sales charge (5.75%* of offering price).......... 0.65
------------
Maximum offering price to public......................... $ 11.34
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $15,550,664 and 1,459,705 shares of
beneficial interest issued and outstanding).............. $ 10.65
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $75,327,452 and 7,070,025 shares of
beneficial interest issued and outstanding).............. $ 10.65
============
Class I Shares:
Net asset value and offering price per share (Based on
net assets of $1,151,897 and 107,831 shares of beneficial
interest issued and outstanding)......................... $ 10.68
============
</Table>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 21
VAN KAMPEN EQUITY PREMIUM INCOME FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended February 28, 2007 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $1,125)...... $ 981,997
Interest.................................................... 116,552
----------
Total Income.............................................. 1,098,549
----------
EXPENSES:
Investment Advisory Fee..................................... 441,082
Distribution (12b-1) and Service Fees
Class A................................................... 93,787
Class B................................................... 50,108
Class C................................................... 194,056
Custody..................................................... 98,403
Offering Costs.............................................. 89,028
Registration Fees........................................... 72,044
Transfer Agent Fees......................................... 43,994
Professional Fees........................................... 34,091
Accounting and Administrative Expenses...................... 32,068
Reports to Shareholders..................................... 26,950
Trustees' Fees and Related Expenses......................... 14,318
Other....................................................... 4,878
----------
Total Expenses............................................ 1,194,807
Investment Advisory Fee Reduction......................... 220,827
Less Credits Earned on Cash Balances...................... 12,214
----------
Net Expenses.............................................. 961,766
----------
NET INVESTMENT INCOME....................................... $ 136,783
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $6,961,495
Futures................................................... 79,641
Options................................................... (2,333,888)
----------
Net Realized Gain........................................... 4,707,248
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 623,206
----------
End of the Period:
Investments............................................. 724,490
Options................................................. 809,529
Futures................................................. (26,525)
----------
1,507,494
----------
NET UNREALIZED APPRECIATION DURING THE PERIOD............... 884,288
----------
NET REALIZED AND UNREALIZED GAIN............................ $5,591,536
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $5,728,319
==========
</Table>
22 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE PERIOD
JUNE 26, 2006
FOR THE SIX (COMMENCEMENT
MONTHS ENDED OF OPERATIONS) TO
FEBRUARY 28, 2007 AUGUST 31, 2006
--------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 136,783 $ 42,914
Net Realized Gain...................................... 4,707,248 284,990
Net Unrealized Appreciation During the Period.......... 884,288 623,206
------------ -----------
Change in Net Assets from Operations................... 5,728,319 951,110
------------ -----------
Distributions from Net Investment Income:
Class A Shares....................................... (137,822) (32,368)
Class B Shares....................................... (814) (2,050)
Class C Shares....................................... (4,447) (6,351)
Class I Shares....................................... (3,652) (3,825)
------------ -----------
(146,735) (44,594)
------------ -----------
Distributions from Net Realized Gain:
Class A Shares....................................... (2,637,724) (151,222)
Class B Shares....................................... (344,336) (32,242)
Class C Shares....................................... (1,413,902) (66,358)
Class I Shares....................................... (61,059) (18,348)
------------ -----------
(4,457,021) (268,170)
------------ -----------
Total Distributions.................................... (4,603,756) (312,764)
------------ -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... 1,124,563 638,346
------------ -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 182,597,098 51,772,204
Net Asset Value of Shares Issued Through Dividend
Reinvestment......................................... 3,195,720 256,547
Cost of Shares Repurchased............................. (19,641,740) (256,952)
------------ -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... 166,151,078 51,771,799
------------ -----------
TOTAL INCREASE IN NET ASSETS........................... 167,275,641 52,410,145
NET ASSETS:
Beginning of the Period................................ 52,410,145 -0-
------------ -----------
End of the Period (Including accumulated undistributed
net investment income of $110,492 and $120,444,
respectively)........................................ $219,685,786 $52,410,145
============ ===========
</Table>
See Notes to Financial Statements 23
VAN KAMPEN EQUITY PREMIUM INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS JUNE 26, 2006
CLASS A SHARES ENDED (COMMENCEMENT
FEBRUARY 28, OF OPERATIONS) TO
2007 AUGUST 31, 2006
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $10.29 $10.00
------ ------
Net Investment Income (a)................................. 0.03 0.01
Net Realized and Unrealized Gain.......................... 0.72 0.36
------ ------
Total from Investment Operations............................ 0.75 10.37
------ ------
Less:
Distributions from Net Investment Income.................. 0.02 0.01
Distributions from Net Realized Gain...................... 0.33 0.07
------ ------
Total Distributions......................................... 0.35 0.08
------ ------
NET ASSET VALUE, END OF THE PERIOD.......................... $10.69 $10.29
====== ======
Total Return*(b)............................................ 7.31%** 3.75%**
Net Assets at End of the Period (In millions)............... $127.7 $ 31.2
Ratio of Expenses to Average Net Assets* (c)................ 1.26% 1.24%
Ratio of Net Investment Income to Average Net Assets*....... 0.50% 1.32%
Portfolio Turnover.......................................... 51%** 26%**
* If certain expenses had not been voluntarily 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 (c).............. 1.61% 4.35%
Ratio of Net Investment Income/Loss to Average Net
Assets................................................. 0.14% (1.79%)
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within eighteen months of purchase. If
the sales charge were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the period ended February
28, 2007.
24 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS JUNE 26, 2006
CLASS B SHARES ENDED (COMMENCEMENT
FEBRUARY 28, OF OPERATIONS) TO
2007 AUGUST 31, 2006
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 10.28 $10.00
------- ------
Net Investment Income/Loss (a)............................ (0.01) 0.01
Net Realized and Unrealized Gain.......................... 0.72 0.34
------- ------
Total from Investment Operations............................ 0.71 10.35
------- ------
Less:
Distributions from Net Investment Income.................. 0.01 0.00(b)
Distributions from Net Realized Gain...................... 0.33 0.07
------- ------
Total Distributions......................................... 0.34 0.07
------- ------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 10.65 $10.28
======= ======
Total Return*(c)............................................ 6.87%** 3.56%**
Net Assets at End of the Period (In millions)............... $ 15.6 $ 5.5
Ratio of Expenses to Average Net Assets* (d)................ 2.01% 1.99%
Ratio of Net Investment Income/Loss to Average Net
Assets*................................................... (0.25%) 0.37%
Portfolio Turnover.......................................... 51%** 26%**
* If certain expenses had not been voluntarily 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 (d).............. 2.36% 5.10%
Ratio of Net Investment Loss to Average Net Assets....... (0.60%) (2.74%)
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Amount is less than $0.01 per share.
(c) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of up to 1% and do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(d) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the period ended February
28, 2007.
See Notes to Financial Statements 25
VAN KAMPEN EQUITY PREMIUM INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS JUNE 26, 2006
CLASS C SHARES ENDED (COMMENCEMENT
FEBRUARY 28, OF OPERATIONS) TO
2007 AUGUST 31, 2006
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 10.28 $10.00
------- ------
Net Investment Income/Loss (a)............................ (0.01) 0.01
Net Realized and Unrealized Gain.......................... 0.71 0.35
------- ------
Total from Investment Operations............................ 0.70 10.36
------- ------
Less:
Distributions from Net Investment Income.................. 0.00(b) 0.01
Distributions from Net Realized Gain...................... 0.33 0.07
------- ------
Total Distributions......................................... 0.33 0.08
------- ------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 10.65 $10.28
======= ======
Total Return*(c)............................................ 6.97%** 3.57%**
Net Assets at End of the Period (In millions)............... $ 75.3 $ 13.0
Ratio of Expenses to Average Net Assets* (d)................ 2.01% 1.99%
Ratio of Net Investment Income/Loss to Average Net
Assets*................................................... (0.23%) 0.46%
Portfolio Turnover.......................................... 51%** 26%**
* If certain expenses had not been voluntarily 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 (d).............. 2.36% 5.10%
Ratio of Net Investment Loss to Average Net Assets....... (0.57%) (2.65%)
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Amount is less than $0.01 per share.
(c) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of up to 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(d) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the period ended February
28, 2007.
26 See Notes to Financial Statements
VAN KAMPEN EQUITY PREMIUM INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS JUNE 26, 2006
CLASS I SHARES ENDED (COMMENCEMENT
FEBRUARY 28, OF OPERATIONS) TO
2007 AUGUST 31, 2006
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $10.29 $10.00
------ ------
Net Investment Income (a)................................. 0.04 0.02
Net Realized and Unrealized Gain.......................... 0.70 0.35
------ ------
Total from Investment Operations............................ 0.74 10.37
------ ------
Less:
Distributions from Net Investment Income.................. 0.02 0.01
Distributions from Net Realized Gain...................... 0.33 0.07
------ ------
Total Distributions......................................... 0.35 0.08
------ ------
NET ASSET VALUE, END OF THE PERIOD.......................... $10.68 $10.29
====== ======
Total Return* (b)........................................... 7.27%** 3.77%**
Net Assets at End of the Period (In millions)............... $ 1.2 $ 2.7
Ratio of Expenses to Average Net Assets* (c)................ 1.01% 0.99%
Ratio of Net Investment Income to Average Net Assets*....... 0.68% 1.33%
Portfolio Turnover.......................................... 51%** 26%**
* If certain expenses had not been voluntarily 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 (c).............. 1.36% 4.10%
Ratio of Net Investment Income/Loss to Average Net
Assets................................................. 0.32% (1.78%)
</Table>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns do
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
(c) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the period ended February
28, 2007.
See Notes to Financial Statements 27
VAN KAMPEN EQUITY PREMIUM INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Van Kampen Equity Premium Income Fund (the "Fund") is organized as a series
of the Van Kampen Equity Trust II (the "Trust"), a Delaware statutory trust, and
is registered as a diversified, open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's
investment objective is to seek current income and long-term capital
appreciation. The Fund invests primarily in a portfolio of equity securities of
U.S. issuers and utilizes an option writing strategy to enhance current
distributions. The Fund commenced operations on June 26, 2006. The Fund offers
Class A Shares, Class B Shares, Class C Shares and Class I Shares. Each class of
shares differs by its initial sales load, contingent deferred sales charges, the
allocation of class-specific expenses and voting rights on matters affecting a
single class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with U.S. 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 last sale price as of the close of such securities exchange.
Equity securities traded on NASDAQ are valued at the NASDAQ Official Closing
Price. Unlisted securities and listed securities for which the last sale price
is not available are valued at the mean of the last reported bid and asked
price. For those securities where quotations or prices are not readily
available, valuations are determined in accordance with procedures established
in good faith by the Board of Trustees. Options are valued at the last sale
price. Future contracts are valued at the settlement price established each day
on the exchange on which they are traded. 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 Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund 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 (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 Fund 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 Fund.
C. INCOME AND EXPENSES Dividend income is recorded net of applicable withholding
taxes on the ex-dividend date and interest income is recorded on an accrual
basis. Income and expenses of the Fund are allocated on a pro rata basis to each
class of shares except for
28
VAN KAMPEN EQUITY PREMIUM INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
distribution and service fees and incremental transfer agency costs which are
unique to each class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of Subchapter M 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. The
Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income earned or gains realized or repatriated.
Taxes are accrued and applied to net investment income, net realized capital
gains and net unrealized appreciation, as applicable, as the income is earned or
capital gains are recorded.
At February 28, 2007, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $215,862,063
============
Gross tax unrealized appreciation........................... $ 5,211,828
Gross tax unrealized depreciation........................... (4,487,468)
------------
Net tax unrealized appreciation on investments.............. $ 724,360
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays monthly dividends
from investment company taxable income, which generally includes qualified
dividend income, ordinary income and short-term capital gains, including a
portion of premiums received from written options. Realized short-term gains are
considered ordinary income for tax purposes. Net realized long-term capital
gains, if any, are distributed at least annually.
The tax character of distributions paid during the fiscal period ended
August 31, 2006 was as follows:
<Table>
Distribution paid from:
Ordinary income............................................. $269,552
</Table>
As of August 31, 2006, the component of distributable earnings on a tax
basis was as follows:
<Table>
Undistributed ordinary income............................... $315,554
</Table>
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.
F. OFFERING COSTS Offering costs are amortized, on a straight-line basis, over a
twelve-month period.
G. EXPENSE REDUCTIONS During the six months ended February 28, 2007, the Fund's
custody fee was reduced by $12,214 as a result of credits earned on cash
balances.
29
VAN KAMPEN EQUITY PREMIUM INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $500 million.......................................... .70%
Next $500 million........................................... .65%
Over $1 billion............................................. .60%
</Table>
For the six months ended February 28, 2007, the Adviser waived approximately
$220,800 of its advisory fees. The Adviser has agreed to waive all expenses in
excess of 1.24% of Class A average net assets, 1.99% of Class B average net
assets, 1.99% of Class C average net assets and .99% of Class I average net
assets. This waiver is voluntary and can be discontinued at any time after
August 31, 2007.
For the six months ended February 28, 2007, the Fund recognized expenses of
approximately $600 representing legal services provided by Skadden, Arps, Slate,
Meagher & Flom LLP, of which a trustee of the Fund is a partner of such firm and
he and his law firm provide legal services as legal counsel to the Fund.
Under separate Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Fund. The costs of
these services are allocated to each fund. For the six months ended February 28,
2007, the Fund recognized expenses of approximately $26,200 representing Van
Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of
providing accounting services to the Fund, as well as the salary, benefits and
related costs of the CCO and related support staff paid by Van Kampen. Services
provided pursuant to Legal Services agreement are reported as part of
"Professional Fees" on the Statement of Operations. Services provided pursuant
to the Accounting Services and CCO Employment agreement are reported as part of
"Accounting and Administrative Expenses" on the Statement of Operations.
Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
February 28, 2007, the Fund recognized expenses of approximately $40,600
representing transfer agency fees paid to VKIS. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and trustees of
Van Kampen. The Fund does not compensate its officers or trustees who are also
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
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.
Amounts deferred are retained by the Fund and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $2,457 are included in
"Other" assets on the Statement of Assets and Liabilities at February 28, 2007.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The
30
VAN KAMPEN EQUITY PREMIUM INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
maximum annual benefit per trustee under the plan is $2,500.
For the six months ended February 28, 2007, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A Shares of
approximately $305,200 and contingent deferred sales charge (CDSC) on redeemed
shares of approximately $13,900. Sales charges do not represent expenses of the
Fund.
At February 28, 2007, Morgan Stanley Investment Management, Inc., an
affiliate of the Adviser, owned 9,300 shares of Class B and 9,300 shares of
Class I.
3. CAPITAL TRANSACTIONS
For the six months ended February 28, 2007 and the period ended August 31, 2006,
transactions were as follows:
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
-------------------------- ------------------------
SHARES VALUE SHARES VALUE
Sales:
Class A............................ 9,668,325 $103,805,389 3,030,893 $30,879,134
Class B............................ 1,185,930 12,727,937 532,719 5,376,096
Class C............................ 6,064,539 65,126,368 1,271,517 12,911,974
Class I............................ 87,428 937,404 260,186 2,605,000
---------- ------------ --------- -----------
Total Sales.......................... 17,006,222 $182,597,098 5,095,315 $51,772,204
========== ============ ========= ===========
Dividend Reinvestment:
Class A............................ 195,406 $ 2,092,504 14,904 $ 152,976
Class B............................ 21,213 226,336 2,736 28,016
Class C............................ 78,623 840,649 5,256 53,842
Class I............................ 3,424 36,231 2,120 21,713
---------- ------------ --------- -----------
Total Dividend Reinvestment.......... 298,666 $ 3,195,720 25,016 $ 256,547
========== ============ ========= ===========
Repurchases:
Class A............................ (947,392) $(10,262,940) (14,980) $ (153,558)
Class B............................ (282,880) (3,052,783) (13) (130)
Class C............................ (339,809) (3,669,124) (10,101) (103,264)
Class I............................ (245,327) (2,656,893) -0- -0-
---------- ------------ --------- -----------
Total Repurchases.................... (1,815,408) $(19,641,740) (25,094) $ (256,952)
========== ============ ========= ===========
</Table>
4. REDEMPTION FEE
The Fund assesses a 2% redemption fee on the proceeds of Fund shares that are
redeemed (either by sale or exchange) within seven days of purchase. The
redemption fee is paid directly to the Fund. For the six months ended February
28, 2007, the Fund received redemption fees of $10 which are reported as part of
"Cost of Shares Repurchased" on the Statement of Changes in Net Assets. The per
share impact from redemption fees paid to the Fund was less than $0.01.
31
VAN KAMPEN EQUITY PREMIUM INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
5. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $215,821,560 and $63,311,920,
respectively.
6. 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 Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio, including to earn income, to facilitate portfolio management and to
mitigate risks. All of the Fund's portfolio 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 exercising an option contract or taking
delivery of a security underlying a futures contract. In these instances, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract. Summarized below are the specific
types of derivative financial instruments used by the Fund.
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
Fund generally invests in exchange traded futures contracts on stock indices and
typically closes the contract prior to the delivery date. Upon entering into
futures contracts, the Fund maintains an amount of cash or liquid securities
with a value equal to a percentage of the contract amount with either a futures
commission merchant pursuant to rules and regulations promulgated under the 1940
Act, as amended, or with its custodian in an account in the broker's name. This
amount is known as initial margin. 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 February 28,
2007, were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at August 31, 2006.............................. 42
Futures Opened.............................................. 2,426
Futures Closed.............................................. (2,368)
------
Outstanding at February 28, 2007............................ 100
======
</Table>
B. OPTION CONTRACTS The Fund may write call and put options on stock indices,
futures, securities, or currencies it owns or in which it may invest. Writing
put options tends to increase the Fund's exposure to the underlying instrument.
Writing call options tends to decrease the Fund's exposure to the underlying
instrument. When the Fund writes a call or put option, an amount equal to the
premium received is recorded as a liability and subsequently marked to market to
reflect the current value of the option written. These liabilities are reflected
as written options outstanding on the Statement of Assets and Liabilities.
Premiums received from writing options which expire are treated as realized
gains.
32
VAN KAMPEN EQUITY PREMIUM INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
Premiums received from writing options which are exercised or closed are added
to the proceeds or offset against amounts paid on the underlying stock indices,
futures, securities or currency transactions to determine the realized gain or
loss. The Fund as a writer of an option has no control over whether the
underlying future, security or currency may be sold (call) or purchased (put)
and as a result bears the market risk of an unfavorable change in the price of
the future, security or currency underlying the written option. There is the
risk the Fund may not be able to enter into a closing transaction because of an
illiquid market.
Transactions in written call options were as follows:
<Table>
<Caption>
NUMBER OF CONTRACTS PREMIUM RECEIVED
Options outstanding at August 31, 2006.............. 297 $ 332,639
Options written..................................... 6,752,811 5,893,380
Options terminated in closing purchase
transactions...................................... (322) (354,384)
Options exercised................................... (1,628,984) (2,917,486)
Options expired..................................... (3,576,250) (1,543,634)
---------- -----------
Options outstanding at February 28, 2007............ 1,547,552 $ 1,410,515
========== ===========
</Table>
7. DISTRIBUTIONS AND SERVICE PLANS
Shares of the Fund are distributed by Van Kampen Funds Inc. (the "Distributor"),
an affiliate of the Adviser. The Fund has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively,
the "Plans") for Class A Shares, Class B Shares and Class C Shares to compensate
the Distributor for the sale, distribution, shareholder servicing and
maintenance of shareholder accounts for these shares. Under the Plans, the Fund
will incur annual fees of up to .25% of Class A average daily net assets and up
to 1.00% each of Class B and Class C average daily net assets. These fees are
accrued daily and paid to the Distributor monthly.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed receivable") was approximately $412,400 and $415,600
for Class B and Class C Shares, respectively. These amounts may be recovered
from future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, the distribution fee is
reduced.
8. LEGAL MATTERS
The Adviser and certain affiliates of the Adviser are named as defendants in a
derivative action which additionally names as defendants certain individual
trustees of certain Van Kampen funds. The named investment companies are listed
as nominal defendants. The complaint alleges that defendants caused the Van
Kampen funds to pay economic incentives to a proprietary sales force to promote
the sale of Van Kampen funds. The complaint also alleges that the Van Kampen
funds paid excessive commissions to Morgan Stanley and its affiliates in
connection with the sales of the funds. The complaint seeks, among other things,
the removal of the current trustees of the funds, rescission of the management
contracts for the funds, disgorgement of profits by Morgan Stanley and its
affiliates and monetary damages. This derivative action was coordinated with a
direct action alleging related violations of defendants' statutory disclosure
obligations and fiduciary duties with respect to the payments described above.
In addition, this derivative action was stayed by agreement of the parties
pending rulings on the motion to dismiss the direct action and the motion to
33
VAN KAMPEN EQUITY PREMIUM INCOME FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 28, 2007 (UNAUDITED) continued
dismiss another derivative action brought by the same plaintiff that brought
this derivative action, alleging market timing and late trading in the Van
Kampen funds. In April 2006, the court granted defendants' motion to dismiss the
direct action. In June 2006, the court granted defendants' motion to dismiss the
market timing action. Accordingly, the stay on this action was lifted. Plaintiff
and defendants have agreed that this action should be dismissed in light of the
rulings dismissing the two cases discussed above. The Court has approved a
notice to shareholders regarding the dismissal.
9. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
10. ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes--an interpretation
of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes
by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for the fiscal
years beginning after December 15, 2006 and is to be applied to all open tax
years as of the effective date. Recent SEC guidance allows implementing FIN 48
in the fund NAV calculations as late as the funds last NAV calculation in the
first required financial statement period. As a result, the Fund will
incorporate FIN 48 in its semi annual report on February 29, 2008. The impact to
the Fund's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
34
VAN KAMPEN EQUITY PREMIUM INCOME FUND
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRETT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
35
Van Kampen Equity Premium Income Fund
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
(continued on next page)
Van Kampen Equity Premium Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen Equity Premium Income Fund
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2007 Van Kampen Funds Inc.
All rights reserved. Member NASD/SIPC.
110, 210, 310, 610
EPISAR 4/07
(VAN KAMPEN INVESTMENTS LOGO) IU07-00240P-Y02/07
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures
(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form
N-CSRS was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(1) Code of Ethics - Not applicable for semi-annual reports.
(2)(a) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(2)(b) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Equity Trust II
By: /s/ Ronald E. Robison
--------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: April 19, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
--------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: April 19, 2007
By: /s/ James W. Garrett
--------------------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: April 19, 2007