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 811-02611
Van Kampen Exchange Fund
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)
Jerry W. Miller
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 12/31
Date of reporting period: 6/30/08
Item 1. Report to Shareholders.
The Fund's semi-annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Partner
In this report, you'll learn about how your investment in Van Kampen
Exchange Fund performed during the semiannual period. This report
includes the fund's financial statements and a list of fund investments
as of June 30, 2008.
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 UNITS 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 6/30/08
<Table>
<Caption>
since 12/16/76
- ----------------------------------------------
AVERAGE ANNUAL W/O SALES
TOTAL RETURNS CHARGES
Since Inception 12.18%
10-year 6.74
5-year 12.52
1-year 6.67
6-month -1.32
- ----------------------------------------------
</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 UNITS, 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
partner would pay on fund distributions or the redemption of fund units. Figures
shown above assume reinvestment of all dividends and capital gains. Periods of
less than one year are not annualized The Standard & Poor's 500(R) 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
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Managing General Partners and by a majority of the independent Managing
General Partners voting separately.
At meetings held on April 15, 2008 and May 8, 2008, the Board of Managing
General Partners, and the independent Managing General Partners voting
separately, considered and ultimately determined that the terms of the
investment advisory agreement are fair and reasonable and approved the
continuance of the investment advisory agreement as being in the best interests
of the Fund and its shareholders. In making its determination, the Board of
Managing General Partners considered materials that were specifically prepared
by the investment adviser at the request of the Board and Fund counsel, and by
an independent provider of investment company data contracted to assist the
Board, relating to the investment advisory agreement review process. The Board
also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Managing General Partners considered the
investment advisory agreement over a period of several months and the Managing
General Partners held sessions both with the investment adviser and separate
from the investment adviser in reviewing and considering the investment advisory
agreement.
In approving the investment advisory agreement, the Board of Managing General
Partners considered, among other things, the nature, extent and quality of the
services provided by the investment adviser, the performance, fees and expenses
of the Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Managing General
Partners considered the extent to which any economies of scale experienced by
the investment adviser are shared with the Fund's shareholders, and the
propriety of breakpoints in the Fund's investment advisory fee schedule. The
Board of Managing General Partners considered comparative advisory fees of the
Fund and other investment companies and/or other products at different asset
levels, and considered the trends in the industry. The Board of Managing General
Partners also reviewed the benefit to the investment adviser of receiving
research paid for by Fund assets and the propriety of such arrangements. The
Board of Managing General Partners evaluated other benefits the investment
adviser and its affiliates derive from their relationship with the Fund. The
Board of Managing General Partners reviewed information about the foregoing
factors and considered changes, if any, in such information since its previous
approval. The Board of Managing General Partners discussed the financial
strength of the investment adviser and its affiliated companies and the
capability of the personnel of the investment adviser, and specifically the
strength and
2
background of its portfolio management personnel. The Board of Managing General
Partners reviewed the statutory and regulatory requirements for approval and
disclosure of investment advisory agreements. The Board of Managing General
Partners, including the independent Managing General Partners, evaluated all of
the foregoing and does not believe any single factor or group of factors control
or dominate the review process, and, after considering all factors together, has
determined, in the exercise of its business judgment, that approval of the
investment advisory agreement is in the best interests of the Fund and its
shareholders. The following summary provides more detail on certain matters
considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Managing General Partners considers the roles and responsibilities of
the investment adviser as a whole and for those specific portfolio management,
support and trading functions servicing the Fund. The Managing General Partners
discuss with the investment adviser the resources available and used in managing
the Fund and changes made in the Fund's portfolio management team over time. The
Fund discloses information about its portfolio management team members and their
experience in its prospectus. The Managing General Partners also discuss certain
other services which are provided on a cost-reimbursement basis by the
investment adviser or its affiliates to the Van Kampen funds including certain
accounting, administrative and legal services. The Board has determined that the
nature, extent and quality of the services provided by the investment adviser
support its decision to approve the investment advisory agreement.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Managing General Partners reviews the performance, fees and expenses of the Fund
compared to its peers and to appropriate benchmarks. In addition, the Board
spends more focused time on the performance of the Fund and other funds in the
Van Kampen complex, paying specific attention to underperforming funds. The
Managing General Partners discuss with the investment adviser the performance
goals and the actual results achieved in managing the Fund. When considering a
fund's performance, the Managing General Partners and the investment adviser
place emphasis on trends and longer-term returns (focusing on one-year,
three-year and five-year performance with special attention to three-year
performance) and, when a fund's weighted performance is under the fund's
benchmark, they discuss the causes and where necessary seek to make specific
changes to investment strategy or investment personnel. The Fund discloses more
information about its performance elsewhere in this report. The Managing General
Partners discuss with the investment adviser the level of advisory fees for this
Fund relative to comparable funds and other products advised by the adviser and
others in the marketplace. The Managing General Partners review not only the
advisory fees but other fees and expenses (whether paid to the adviser, its
affiliates or others) and the Fund's overall expense ratio. The Board has
determined that the performance,
3
fees and expenses of the Fund support its decision to approve the investment
advisory agreement.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the Managing General Partners review the investment adviser's
expenses in providing services to the Fund and other funds advised by the
investment adviser and the profitability of the investment adviser. These
profitability reports are put together by the investment adviser with the
oversight of the Board. The Managing General Partners discuss with the
investment adviser its revenues and expenses, including among other things,
revenues for advisory services, portfolio management-related expenses, revenue
sharing arrangement costs and allocated expenses both on an aggregate basis and
per fund. The Board has determined that the analysis of the investment adviser's
expenses and profitability support its decision to approve the investment
advisory agreement.
Economies of Scale. On a regular basis, the Board of Managing General Partners
considers the size of the Fund and how that relates to the Fund's expense ratio
and particularly the Fund's advisory fee rate. In conjunction with its review of
the investment adviser's profitability, the Managing General Partners discuss
with the investment adviser how more (or less) assets can affect the efficiency
or effectiveness of managing the Fund's portfolio and whether the advisory fee
level is appropriate relative to current asset levels and/or whether the
advisory fee structure reflects economies of scale as asset levels change. The
Board has determined that its review of the actual and potential economies of
scale of the Fund support its decision to approve the investment advisory
agreement.
Other Benefits of the Relationship. On a regular basis, the Board of Managing
General Partners considers other benefits to the investment adviser and its
affiliates derived from its relationship with the Fund and other funds advised
by the investment adviser. These benefits include, among other things, fees for
transfer agency services provided to the funds, in certain cases research
received by the adviser generated from commission dollars spent on funds'
portfolio trading, and in certain cases distribution or service related fees
related to funds' sales. The Managing General Partners review with the
investment adviser each of these arrangements and the reasonableness of its
costs relative to the services performed. The Board has determined that the
other benefits received by the investment adviser or its affiliates support its
decision to approve the investment advisory agreement.
4
VAN KAMPEN EXCHANGE FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------------------------------------
COMMON STOCKS 97.0%
AEROSPACE & DEFENSE 0.8%
Honeywell International, Inc. .............................. 12,528 $ 629,908
-----------
COAL & CONSUMABLE FUELS 1.5%
Massey Energy Corp. ........................................ 12,831 1,202,906
-----------
COMMODITY CHEMICALS 0.0%
Tronox, Inc., Class B....................................... 2,197 6,635
-----------
COMPUTER HARDWARE 2.2%
IBM Corp. .................................................. 15,016 1,779,846
-----------
CONSTRUCTION & ENGINEERING 2.9%
Fluor Corp. ................................................ 12,831 2,387,593
-----------
DIVERSIFIED BANKS 1.1%
HSBC Holdings PLC--ADR (United Kingdom)..................... 11,434 876,988
-----------
FOREST PRODUCTS 0.3%
Louisiana-Pacific Corp. .................................... 25,970 220,485
-----------
HEALTH CARE DISTRIBUTORS 0.1%
Cardinal Health, Inc. ...................................... 1,867 96,300
-----------
HEALTH CARE EQUIPMENT 0.9%
Baxter International, Inc. ................................. 10,000 639,400
Edwards Lifesciences Corp. (a).............................. 1,000 62,040
-----------
701,440
-----------
HEALTH CARE SERVICES 0.7%
Medco Health Solutions, Inc. (a)............................ 12,150 573,480
-----------
INDUSTRIAL GASES 9.2%
Air Products & Chemicals, Inc. ............................. 75,539 7,467,786
-----------
INDUSTRIAL MACHINERY 2.2%
SPX Corp. .................................................. 13,648 1,797,851
-----------
INTEGRATED OIL & GAS 21.8%
BP PLC--ADR (United Kingdom)................................ 33,876 2,356,753
Exxon Mobil Corp. .......................................... 82,523 7,272,752
Hess Corp. ................................................. 63,600 8,025,684
-----------
17,655,189
-----------
MULTI-LINE INSURANCE 1.4%
American International Group, Inc. ......................... 41,688 1,103,065
-----------
</Table>
See Notes to Financial Statements 5
VAN KAMPEN EXCHANGE FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------------------------------------
OFFICE SERVICES & SUPPLIES 1.2%
IKON Office Solutions, Inc. ................................ 86,993 $ 981,281
-----------
OIL & GAS DRILLING 0.4%
Transocean, Inc. (Cayman Islands) (a)....................... 2,177 331,753
-----------
OIL & GAS EQUIPMENT & SERVICES 11.0%
Baker Hughes, Inc. ......................................... 25,634 2,238,873
Halliburton Co. ............................................ 60,640 3,218,165
Schlumberger Ltd. (Netherlands Antilles).................... 32,160 3,454,949
-----------
8,911,987
-----------
OIL & GAS EXPLORATION & PRODUCTION 4.5%
Apache Corp. ............................................... 26,346 3,662,094
-----------
PACKAGED FOODS & MEATS 4.2%
McCormick & Co., Inc. ...................................... 96,518 3,441,832
-----------
PHARMACEUTICALS 18.8%
Johnson & Johnson........................................... 78,636 5,059,440
Merck & Co., Inc. .......................................... 50,376 1,898,672
Pfizer, Inc. ............................................... 176,611 3,085,394
Schering-Plough Corp. ...................................... 125,158 2,464,361
Wyeth....................................................... 56,000 2,685,760
-----------
15,193,627
-----------
RESTAURANTS 0.1%
Luby's Cafeterias, Inc. (a)................................. 13,367 81,539
-----------
SEMICONDUCTORS 5.8%
Intel Corp. ................................................ 216,837 4,657,659
-----------
SPECIALIZED REIT'S 1.4%
Plum Creek Timber Co., Inc. ................................ 25,602 1,093,461
-----------
SPECIALTY CHEMICALS 4.5%
International Flavors & Fragrances, Inc. ................... 49,712 1,941,751
Lubrizol Corp. ............................................. 37,620 1,742,934
-----------
3,684,685
-----------
TOTAL LONG-TERM INVESTMENTS 97.0%
(Cost $5,830,532)...................................................... 78,539,390
-----------
</Table>
6 See Notes to Financial Statements
VAN KAMPEN EXCHANGE FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2008 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION VALUE
- ---------------------------------------------------------------------------------------
5yREPURCHASE AGREEMENTS 3.0%
Banc of America Securities ($743,563 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
2.50%, dated 06/30/08, to be sold on 07/01/08 at $743,615)............. $ 743,563
Citigroup Global Markets, Inc. ($743,563 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
2.50%, dated 06/30/08, to be sold on 07/01/08 at $743,615)............. 743,563
JPMorgan Chase & Co. ($223,069 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 2.60%, dated
06/30/08, to be sold on 07/01/08 at $223,085).......................... 223,069
State Street Bank & Trust Co. ($734,805 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
1.85%, dated 06/30/08, to be sold on 07/01/08 at $734,842)............. 734,805
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $2,445,000)...................................................... 2,445,000
-----------
TOTAL INVESTMENTS 100.0%
(Cost $8,275,532)...................................................... 80,984,390
OTHER ASSETS IN EXCESS OF LIABILITIES 0.0%.............................. 12,588
-----------
NET ASSETS 100.0%....................................................... $80,996,978
===========
</Table>
Percentages are calculated as a percentage of net assets.
(a) Non-income producing security.
ADR--American Depositary Receipt
REIT--Real Estate Investment Trust
See Notes to Financial Statements 7
VAN KAMPEN EXCHANGE FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2008 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $8,275,532)......................... $80,984,390
Cash........................................................ 122
Receivables:
Dividends................................................. 90,556
Interest.................................................. 157
-----------
Total Assets............................................ 81,075,225
-----------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 20,105
Other Affiliates.......................................... 6,909
Managing General Partners' Retirement Plan.................. 7,031
Accrued Expenses............................................ 44,202
-----------
Total Liabilities....................................... 78,247
-----------
NET ASSETS.................................................. $80,996,978
===========
NET ASSETS ARE COMPRISED OF:
161,094 units of limited partnership interest............... $79,234,397
3,389 units of non-managing general partnership interest.... 1,666,880
195 units of managing general partnership interest.......... 95,701
-----------
NET ASSETS.................................................. $80,996,978
===========
NET ASSET VALUE PER UNIT ($80,996,978 divided by 164,678
units of partnership interest outstanding)................ $ 491.85
===========
</Table>
8 See Notes to Financial Statements
VAN KAMPEN EXCHANGE FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended June 30, 2008 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends................................................... $ 734,385
Interest.................................................... 33,849
-----------
Total Income............................................ 768,234
-----------
EXPENSES:
Investment Advisory Fee..................................... 116,975
Professional Fees........................................... 23,564
Reports to Partners......................................... 10,442
Accounting and Administrative Expenses...................... 9,800
Transfer Agent Fees......................................... 7,735
Custody..................................................... 5,656
Managing General Partners' Fees and Related Expenses........ 3,423
Other....................................................... 8,543
-----------
Total Expenses.......................................... 186,138
Less Credits Earned on Cash Balances.................... 826
-----------
Net Expenses............................................ 185,312
-----------
NET INVESTMENT INCOME....................................... $ 582,922
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss on Investments............................ $ (103,867)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 74,357,690
End of the Period......................................... 72,708,858
-----------
Net Unrealized Depreciation During the Period............... (1,648,832)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(1,752,699)
===========
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(1,169,777)
===========
</Table>
See Notes to Financial Statements 9
VAN KAMPEN EXCHANGE FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31, 2007
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 582,922 $ 1,250,394
Net Realized Gain/Loss................................ (103,867) 2,349,703
Net Unrealized Appreciation/Depreciation During the
Period.............................................. (1,648,832) 11,486,671
----------- -----------
Change in Net Assets from Operations.................. (1,169,777) 15,086,768
----------- -----------
Distributions from Net Investment Income.............. (412,923) (220,420)
Distributions from Net Realized Gain.................. (402,778) (467,849)
----------- -----------
Total Distributions................................... (815,701) (688,269)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... (1,985,478) 14,398,499
----------- -----------
FROM PARTNERSHIP UNIT TRANSACTIONS:
Proceeds from Units Issued Through Dividend
Reinvestment........................................ 137,976 163,903
Cost of Units Repurchased............................. (632,914) (4,344,021)
----------- -----------
NET CHANGE IN NET ASSETS FROM PARTNERSHIP UNIT
TRANSACTIONS........................................ (494,938) (4,180,118)
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS................. (2,480,416) 10,218,381
NET ASSETS:
Beginning of the Period............................... 83,477,394 73,259,013
----------- -----------
End of the Period..................................... $80,996,978 $83,477,394
=========== ===========
CHANGE IN PARTNERSHIP UNITS OUTSTANDING:
Units Issued through Dividend Reinvestment............ 301 379
Units Repurchased..................................... (1,336) (8,997)
----------- -----------
Decrease in Partnership Units Outstanding............. (1,035) (8,618)
=========== ===========
</Table>
10 See Notes to Financial Statements
VAN KAMPEN EXCHANGE 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 DECEMBER 31,
JUNE 30, -----------------------------------------------
2008 2007 2006 2005 2004 2003
------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD........................... $503.75 $420.23 $368.67 $345.65 $329.53 $261.82
------- ------- ------- ------- ------- -------
Net Investment Income (a)............ 3.53 7.27 5.81 4.64 3.43 2.99
Net Realized and Unrealized
Gain/Loss.......................... (10.50) 80.21 49.57 19.71 14.06 66.00
------- ------- ------- ------- ------- -------
Total from Investment Operations....... (6.97) 87.48 55.38 24.35 17.49 68.99
------- ------- ------- ------- ------- -------
Less:
Distributions from Net Investment
Income............................. 2.50 1.28 1.28 1.28 1.28 1.28
Distributions from Net Realized
Gain............................... 2.43 2.68 2.54 0.05 0.09 -0-
------- ------- ------- ------- ------- -------
Total Distributions.................... 4.93 3.96 3.82 1.33 1.37 1.28
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF THE PERIOD..... $491.85 $503.75 $420.23 $368.67 $345.65 $329.53
======= ======= ======= ======= ======= =======
Total Return (b)....................... -1.32%* 20.97% 15.12% 7.07% 5.33% 26.44%
Net Assets at End of the Period
(In millions)........................ $ 81.0 $ 83.5 $ 73.3 $ 66.0 $ 63.6 $ 66.4
Ratio of Expenses to Average Net
Assets............................... 0.48% 0.46% 0.57% 0.54% 0.72% 0.78%
Ratio of Net Investment Income to
Average Net Assets................... 1.49% 1.58% 1.49% 1.30% 1.04% 1.05%
Portfolio Turnover..................... 0%* 0% 0% 0% 0% 0%
</Table>
(a) Based on average units outstanding.
(b) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all units at the end of the period, all at NAV. These
returns do not reflect the deduction of taxes that a partner would pay on
Fund distributions or the redemption of Fund units.
* Non-Annualized
See Notes to Financial Statements 11
VAN KAMPEN EXCHANGE FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Exchange Fund (the "Fund"), a California limited partnership, is a
partnership registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as a diversified, open-end investment management company. The Fund
seeks long-term growth of capital. The production of current income is a
secondary objective. The Fund commenced investment operations on December 16,
1976.
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 accounting principles
generally accepted in the United States of America 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 between the last reported bid and ask 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 Managing General Partners. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
The Fund adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective
January 1, 2008. In accordance with FAS 157, fair value is defined as the price
that the Fund would receive to sell an investment or pay to transfer a liability
in an orderly transaction with an independent buyer in the principal market, or
in the absence of a principal market the most advantageous market for the
investment or liability. FAS 157 establishes a three-tier hierarchy to
distinguish between (1) inputs that reflect the assumptions market participants
would use in pricing an asset or liability developed based on market data
obtained from sources independent of the reporting entity (observable inputs)
and (2) inputs that reflect the reporting entity's own assumptions about the
assumptions market participants would use in pricing an asset or liability
developed based on the best information available in the circumstances
(unobservable inputs) and to establish classification of fair value measurements
for disclosure purposes. Various inputs are used in determining the value of the
Fund's investments. The inputs are summarized in the three broad levels listed
below.
- Level 1--quoted prices in active markets for identical investments
- Level 2--other significant observable inputs (including quoted prices for
similar investments, interest rates, prepayment speeds, credit risk, etc.)
- Level 3--significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
12
VAN KAMPEN EXCHANGE FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 (UNAUDITED) continued
The following is a summary of the inputs used as of June 30, 2008 in valuing
the Fund's investments carried at value:
<Table>
<Caption>
INVESTMENTS IN
VALUATION INPUTS SECURITIES
Level 1--Quoted Prices...................................... $78,539,390
Level 2--Other Significant Observable Inputs................ 2,445,000
Level 3--Significant Unobservable Inputs.................... -0-
-----------
TOTAL..................................................... $80,984,390
===========
</Table>
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. INVESTMENT INCOME Dividend income is recorded net of applicable withholding
taxes on the ex-dividend date and interest income is recorded on an accrual
basis.
D. FEDERAL INCOME TAXES The Fund has met the qualification to be classified as a
partnership for federal income tax purposes and intends to maintain this
qualification in the future. A partnership is not subject to federal income tax.
The Fund adopted the provisions of the Financial Accounting Standards Board
("FASB") Interpretation No. 48 ("FIN 48") Accounting for Uncertainty in Income
Taxes on June 30, 2007. FIN 48 sets forth a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return. The implementation of FIN 48 did not result in any
unrecognized tax benefits in the accompanying financial statements. If
applicable, the Fund recognizes interest accrued related to unrecognized tax
benefits in "Interest Expense" and penalties in "Other" expenses on the
Statement of Operations. The Fund files tax returns with the U.S. Internal
Revenue Service, California, and various states. Generally, each of the tax
years in the four year period ended December 31, 2007, remains subject to
examination by taxing authorities.
At June 30, 2008, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $ 4,998,770
===========
Gross tax unrealized appreciation........................... $76,042,841
Gross tax unrealized depreciation........................... (57,221)
-----------
Net tax unrealized appreciation on investments.............. $75,985,620
===========
</Table>
13
VAN KAMPEN EXCHANGE FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 (UNAUDITED) continued
E. DISTRIBUTION OF INCOME AND GAINS Quarterly distributions to partners are
recorded on the record date. Net investment income is allocated daily to each
partner, relative to the total number of units held. Capital gains or losses
will be allocated equally among units outstanding on the day recognized.
F. CREDITS EARNED ON CASH BALANCES During the six months ended June 30, 2008,
the Fund's custody fee was reduced by $826 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 facilities and investment advice to the Fund for an annual fee payable
monthly of .30% based on the average daily net assets of the Fund.
For the six months ended June 30, 2008, the Fund recognized expenses of
approximately $10,600 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a Managing General Partner 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 Accounting Services and Chief Compliance Officer (CCO)
Employment agreements, the Adviser provides accounting and the CCO provides
compliance services to the Fund. The costs of these services are allocated to
each fund. For the six months ended June 30, 2008, the Fund recognized expenses
of approximately $5,800 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 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 six months ended
June 30, 2008, the Fund recognized expenses of approximately $7,500 representing
transfer agency fees paid to VKIS. Transfer agency fees are determined through
negotiations with the Fund's Managing General Partners.
The Managing General Partners of the Fund instituted a Retirement Plan
effective April 1, 1996. The Plan is not funded, and obligations under the Plan
will be paid solely out of the Fund's general accounts. The Fund will not
reserve or set aside funds for the payment of its obligations under the Plan by
any form of trust or escrow. Under the Plan, for the Managing General Partners
retiring with the effectiveness of the Plan, the annual retirement benefit
payable per year for a ten year period is equal to 75% of the total compensation
received from the Fund during the 1995 calendar year.
At June 30, 2008, Van Kampen Funds Inc. and Van Kampen Exchange Corp. (both
affiliates of the Adviser), as nonmanaging general partners of the Fund, owned
223 and 3,166 units of partnership interest, respectively.
3. PARTNERSHIP UNIT TRANSACTIONS
Partners of the Fund may redeem units any time. The net asset value of units
redeemed, other than redemptions under a systematic withdrawal plan, may be paid
in cash or securities, at the option of the Fund, and will ordinarily be paid in
whole or in part in
14
VAN KAMPEN EXCHANGE FUND
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008 (UNAUDITED) continued
securities. The Fund's valuation will determine the quantity of securities
tendered. The Fund will select securities for tender in redemptions based on tax
or investment considerations.
4. INVESTMENT TRANSACTIONS
During the period, the Fund did not purchase or sell any investments.
5. NET ASSETS
At June 30, 2008, net assets include the following:
<Table>
Net paid in capital on units of beneficial interest......... $ 8,288,120
Net unrealized appreciation on investments.................. 72,708,858
-----------
Total net assets............................................ $80,996,978
===========
</Table>
6. 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.
7. ACCOUNTING PRONOUNCEMENT
On March 19, 2008, Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 161, Disclosures about Derivative Instruments
and Hedging Activities (FAS 161). FAS 161 requires qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative
agreements. The application of FAS 161 is required for fiscal years and interim
periods beginning after November 15, 2008. At this time, management is
evaluating the implications of FAS 161 and its impact on the financial
statements has not yet been determined.
15
VAN KAMPEN EXCHANGE FUND (A CALIFORNIA LIMITED PARTNERSHIP)
MANAGING GENERAL PARTNERS, OFFICERS AND IMPORTANT ADDRESSES
MANAGING GENERAL PARTNERS
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
JERRY W. MILLER
President and Principal Executive Officer
DENNIS SHEA
Vice President
KEVIN KLINGERT
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
STUART N. SCHULDT
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
522 Fifth Avenue
New York, New York 10036
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES, INC.
P.O. Box 219286
Kansas City, Missouri 64121-9286
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
NON-MANAGING GENERAL PARTNERS
VAN KAMPEN EXCHANGE CORP.
One Parkview Plaza - Suite 100
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
VAN KAMPEN FUNDS INC.
522 Fifth Avenue
New York, New York 10036
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60606-4301
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940.
16
VAN KAMPEN EXCHANGE FUND
RESULTS OF PARTNER VOTES
The Annual Meeting of the Partners of the Fund was held on June 18, 2008, where
partners voted on the election of Managing General Partners. With regard to the
election of the following Managing General Partners of the Fund:
<Table>
<Caption>
# OF UNITS
----------------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------------------------
David C. Arch............................................... 121,043 2,686
Jerry D. Choate............................................. 121,043 2,686
Rod Dammeyer................................................ 121,043 2,686
Linda Hutton Heagy.......................................... 121,043 2,686
R. Craig Kennedy............................................ 121,043 2,686
Howard J Kerr............................................... 121,043 2,686
Jack E. Nelson.............................................. 121,043 2,686
Hugo F. Sonnenschein........................................ 121,043 2,686
Wayne W. Whalen............................................. 121,043 2,686
Suzanne H. Woolsey.......................................... 121,043 2,686
</Table>
17
Van Kampen Exchange 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 Exchange 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 Exchange 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.
522 Fifth Avenue
New York, New York 10036
www.vankampen.com
Copyright (C)2008 Van Kampen Funds Inc.
All rights reserved. Member FINRA/SIPC.
EXCHSAN 8/08
(VAN KAMPEN INVESTMENTS LOGO) IU08-04060P-Y06/08
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.
(a) Please refer to Item #1.
(b) Not applicable.
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 Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund 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 Exchange Fund
By: /s/ Jerry W. Miller
-------------------------------
Name: Jerry W. Miller
Title: Principal Executive Officer
Date: August 15, 2008
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/ Jerry W. Miller
-------------------------------
Name: Jerry W. Miller
Title: Principal Executive Officer
Date: August 15, 2008
By: /s/ Stuart N. Schuldt
-------------------------------
Name: Stuart N. Schuldt
Title: Principal Financial Officer
Date: August 15, 2008