VAN KAMPEN EQUITY TRUST II, N-30D, 2000-10-27

VAN KAMPEN EQUITY TRUST II
N-30D, 2000-10-27

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<PAGE> 1

<TABLE>
<S> <C>
Table of Contents

OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2

PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
GROWTH OF A $10,000 INVESTMENT 5

PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS 6
TOP FIVE SECTORS 6
Q&A WITH YOUR PORTFOLIO MANAGERS 7
GLOSSARY OF TERMS 10

BY THE NUMBERS
YOUR FUND'S INVESTMENTS 11
FINANCIAL STATEMENTS 14
NOTES TO FINANCIAL STATEMENTS 20
REPORT OF INDEPENDENT AUDITORS 26
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 27
FUND OFFICERS AND IMPORTANT ADDRESSES 28
</TABLE>

It is times
like these
when money-
management
experience
may make
a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2

OVERVIEW

LETTER TO SHAREHOLDERS
September 20, 2000

Dear Shareholder,

Whether you have held your fund for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your fund is being managed in this
environment.

It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the
value of investing for the long term.

As we move through the second half of 2000, count on us to
continue to draw on the wisdom of our 74 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is the theme of a
national advertising campaign that we recently kicked off. The message
emphasizes our depth of investment-management history, as well as our firm
belief that with the right investments, anyone can realize life's true wealth.

Sincerely,

[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments

1
<PAGE> 3

ECONOMIC SNAPSHOT

ECONOMIC GROWTH
ECONOMIC GROWTH REMAINED STRONG, UNDERPINNED BY LOW UNEMPLOYMENT AND RISING
PRODUCTIVITY, YET THERE WERE SIGNS THAT A HEALTHY SLOWDOWN HAD BEGUN. GROSS
DOMESTIC PRODUCT, THE PRIMARY MEASURE OF ECONOMIC GROWTH, INCREASED AT A 5.3
PERCENT ANNUALIZED RATE FOR THE SECOND QUARTER OF 2000. WHILE THIS FIGURE
REPRESENTS A MODEST INCREASE FROM THE PREVIOUS QUARTER, IT SUGGESTS THAT GROWTH
MIGHT BE SETTLING INTO A MORE MODERATE AND SUSTAINABLE PACE THAN ITS RAPID RATE
IN LATE 1999.

CONSUMER SPENDING AND EMPLOYMENT
TOWARD THE END OF THE REPORTING PERIOD, INFLATION FEARS BEGAN TO SUBSIDE DUE TO
A SLOWDOWN IN CONSUMER SPENDING AND A SLACKENING OF THE LABOR MARKET. RISING
INTEREST RATES FINALLY BEGAN TO TEMPER RETAIL SALES, WHICH IN AUGUST POSTED THE
WEAKEST MONTHLY GROWTH SINCE SPRING. ALTHOUGH THE TREND HAS BEEN DOWNWARD THIS
YEAR, CONSUMER SPENDING REMAINS SOUND.

THE JOBLESS RATE CONTINUED TO BE LOW BY HISTORICAL STANDARDS, BUT A RECENT
LEVELING-OFF OF PAYROLL FIGURES AND A SLIGHT RISE IN AUGUST UNEMPLOYMENT SUGGEST
THE LABOR MARKET IS EASING. WHILE EMPLOYER COSTS SUCH AS WAGES AND BENEFITS HAVE
BEEN ON THE RISE OVER THE PAST YEAR, THE LATEST SHIFT IN THE LABOR MARKET HAS
STARTED TO REVERSE THIS TREND--THE EMPLOYMENT COST INDEX SHOWED A MARKED
DECELERATION BETWEEN THE FIRST AND SECOND QUARTERS OF 2000.

INTEREST RATES AND INFLATION
THE FEDERAL RESERVE BOARD (THE FED) RAISED INTEREST RATES FOUR TIMES DURING THE
REPORTING PERIOD IN AN EFFORT TO WARD OFF INFLATION BY CURBING ECONOMIC GROWTH.
OVER THE SAME PERIOD, THE CONSUMER PRICE INDEX ROSE A MODERATE 3.2 PERCENT,
WHICH INDICATED THAT INFLATION GENERALLY REMAINED UNDER CONTROL.

GIVEN THE STRONG YET SUSTAINABLE PACE OF ECONOMIC GROWTH AND THE FAVORABLE
INFLATIONARY ENVIRONMENT, THE FED MAY HOLD INTEREST RATES STEADY IN THE SHORT
TERM, WHICH COULD HELP TO STABILIZE THE STOCK AND BOND MARKETS.

2
<PAGE> 4

U.S. GROSS DOMESTIC PRODUCT

SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998--June 30, 2000)
[BAR GRAPH]

<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Jun 98 2.1
Sep 98 3.8
Dec 98 5.9
Mar 99 3.5
Jun 99 2.5
Sep 99 5.7
Dec 99 8.3
Mar 00 4.8
Jun 00 5.3
</TABLE>

Source: Bureau of Economic Analysis

INTEREST RATES AND INFLATION

(August 31, 1998--August 31, 2000)

[LINE GRAPH]

<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Aug 98 5.50 1.60
5.25 1.50
5.00 1.50
Nov 98 4.75 1.50
4.75 1.60
4.75 1.70
Feb 99 4.75 1.60
4.75 1.70
4.75 2.30
May 99 4.75 2.10
5.00 2.00
5.00 2.10
Aug 99 5.25 2.30
5.25 2.60
5.25 2.60
Nov 99 5.50 2.60
5.50 2.70
5.50 2.70
Feb 00 5.75 3.20
6.00 3.70
6.00 3.00
May 00 6.50 3.10
6.50 3.70
6.50 3.60
Aug 00 6.50 3.20
</TABLE>

Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.

3
<PAGE> 5

PERFORMANCE SUMMARY

RETURN HIGHLIGHTS

(as of August 31, 2000)

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One-year total return based on
NAV(1) 139.93% 138.17% 138.17%
-------------------------------------------------------------------------
One-year total return(2) 126.13% 133.17% 137.17%
-------------------------------------------------------------------------
Life-of-Fund average annual total
return(2) 132.43% 140.13% 143.47%
-------------------------------------------------------------------------
Commencement date 07/26/99 07/26/99 07/26/99
-------------------------------------------------------------------------
</TABLE>

(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% on Class A Shares) or
contingent deferred sales charge ("CDSC"). On purchases of Class A Shares of
$1 million or more, a CDSC of 1% may be imposed on certain redemptions made
within one year of purchase. Returns for Class B Shares are calculated
without the effect of the maximum 5% CDSC, charged on certain redemptions
made within one year of purchase and declining thereafter to 0% after the
fifth year. Returns for Class C Shares are calculated without the effect of
the maximum 1% CDSC, charged on certain redemptions made within one year of
purchase. If the sales charges were included, total returns would be lower.

(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of maximum sales charge (5.75% for Class A
Shares) or contingent deferred sales charge ("CDSC"). On purchases of Class
A Shares of $1 million or more, a CDSC of 1% may be imposed on certain
redemptions made within one year of purchase. Returns for Class B Shares are
calculated with the effect of the maximum 5% CDSC, charged on certain
redemptions made within one year of purchase and declining thereafter to 0%
after the fifth year. Returns for Class C Shares are calculated with the
effect of the maximum 1% CDSC, charged on certain redemptions made within
one year of purchase.

An investment in the Fund is subject to Investment risks, and you could lose
money on your investment in the Fund. Please review the Risk/Return Summary
of the Prospectus for further details on investment risks. Fund shares, when
redeemed, may be worth more or less than their original cost. Past
performance is no guarantee of future results. Investment return and net
asset value will fluctuate with market conditions.

As a result of recent market activity, current performance may vary from the
figures shown.

Market forecasts provided in this report may not necessarily come to pass.

The Fund's performance during the period was largely attributable to
investments in the technology sector which performed favorably during the
period. There is no guarantee that this performance record or the
circumstances leading to it can be replicated in the future.

4
<PAGE> 6

GROWTH OF A $10,000 INVESTMENT

(July 26, 1999--August 31, 2000)

[INVESTMENT PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
PACIFIC STOCK EXCHANGE TECHNOLOGY
TECHNOLOGY FUND INDEX
--------------- ---------------------------------
<S> <C> <C>
7/99 9425.00 10000.00
10528.00 10797.00
9/99 10867.00 10810.00
12545.00 11446.00
14892.00 13095.00
12/99 19274.00 16743.00
19406.00 16380.00
26984.00 20116.00
3/00 24298.00 20015.00
20961.00 18741.00
18209.00 17132.00
6/00 21593.00 18971.00
20839.00 17696.00
8/00 25259.00 20158.00
</TABLE>

THE FUND'S PERFORMANCE DURING THE PERIOD WAS LARGELY ATTRIBUTABLE TO
INVESTMENTS IN THE TECHNOLOGY SECTOR, WHICH PERFORMED FAVORABLY FOR THE
PERIOD. THERE IS NO GUARANTEE THAT THIS PERFORMANCE RECORD OR THE
CIRCUMSTANCES LEADING TO IT CAN BE REPLICATED IN THE FUTURE.

This chart compares your fund's performance to that of the Pacific Stock
Exchange Technology Index over time.

This index is an unmanaged broad-based, statistical composite that does
not include any commissions or fees that would be paid by an investor
purchasing the securities it represents. Such costs would lower the
performance of this index. The historical performance of the index is
shown for illustrative purposes only; it is not meant to forecast, imply,
or guarantee the future performance of any investment vehicle. It is not
possible to invest directly in an index.

The above chart reflects the performance of Class A shares of the fund. The
performance of Class A shares will differ from that of other share classes of
the fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The fund's performance
assumes reinvestment of all distributions, and includes payment of the maximum
sales charge (5.75% for Class A shares).

While past performance is no guarantee of future results, the above information
provides a broader vantage point from which to evaluate the discussion of the
fund's performance found in the following pages. As a result of recent market
activity, current performance may vary from the figures shown.

5
<PAGE> 7

PORTFOLIO AT A GLANCE

TOP TEN HOLDINGS

(as a percentage of long-term investments--August 31, 2000)

1. JUNIPER NETWORKS 6.0%
Produces hardware and software to
route traffic on the Internet.

2. CORNING 4.7%
Manufactures technology products
including telecommunications
components, advanced materials, and
information displays.

3. APPLIED MICRO CIRCUITS 4.6%
Develops high-speed integrated
circuits for data and
telecommunications.

4. SDL 4.4%
Sells bandwidth-enhancing products
for fiber-optic and satellite commu-
nication networks.

5. PMC SIERRA 3.6%
Develops semiconductor systems for
communications markets.

6. ARIBA 3.4%
Produces business-to-business
e-commerce software.

7. I2 TECHNOLOGIES 3.4%
Develops production management
software for manufacturers.

8. NORTEL NETWORKS 3.2%
Supplies network solutions to the
communications industry worldwide.

9. NEWPORT 3.0%
Manufactures components for the
aerospace, communications, and
semiconductor industries.

10. BROCADE COMMUNICATIONS
SYSTEMS 2.9%
Enables companies to manage growth of
their data storage requirements.
</TABLE>

TOP FIVE SECTORS*

(as a percentage of long-term investments)

* These sectors represent broad groupings of related industries.

[BAR GRAPH]

<TABLE>
<CAPTION>
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ---------------
<S> <C> <C>
Communications Technology - Equipment 25.8 16.8
Computers - Software 22.5 7.9
Electronics - Semiconductors 21.6 27.9
Communications - Networking 14.6 7.5
Computers - Hardware 9.2 8.2
</TABLE>

6
<PAGE> 8

Q&A WITH YOUR PORTFOLIO MANAGERS

WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN TECHNOLOGY FUND
ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND INFLUENCED
THE FUND'S RETURN DURING THE 12 MONTHS ENDED AUGUST 31, 2000. THE TEAM IS CO-LED
BY SENIOR PORTFOLIO MANAGERS GARY LEWIS AND DAVID WALKER, WHO HAVE MANAGED THE
FUND SINCE ITS INCEPTION. LEWIS HAS 21 YEARS OF EXPERIENCE IN THE INVESTMENT
INDUSTRY, AND WALKER HAS 10 YEARS OF EXPERIENCE. THEY ARE JOINED BY SENIOR
PORTFOLIO MANAGERS DUDLEY BRICKHOUSE AND JANET LUBY, AND PORTFOLIO MANAGER
MATTHEW HART. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S
PERFORMANCE.

[PHOTO] [PHOTO] [PHOTO] [PHOTO] [PHOTO]

Q HOW WOULD YOU CHARACTERIZE
THE RECENT ENVIRONMENT FOR TECHNOLOGY INVESTING, AND TO WHAT DO YOU
ATTRIBUTE THE FUND'S PERFORMANCE?

A The Van Kampen Technology
Fund was introduced on July 26, 1999, and in this annual report to shareholders,
the fund returned 139.93 percent for the 12-month period ended August 31, 2000.
(Class A shares at net asset value; if the maximum sales charge of 5.75 percent
were included, the return would be lower.) Past performance is no guarantee of
future results. As a result of recent market activity, current performance may
vary from the figures shown. Please refer to the chart and footnotes on page 4
for additional fund performance results. Last year, and the fourth quarter of
1999 in particular, was an excellent time to be building a technology portfolio.
The markets have become much more volatile in the last six months due to rising
interest rates. All of the major market indexes fell sharply in the spring. Most
dramatic was the decline of the technology-heavy NASDAQ index, which hit a peak
of 5048 on March 10, and then fell to close to 3000 in late May. The turbulence
challenged our investment discipline, but we believe that the fund's results for
the reporting period suggest that our response to these challenges was
appropriate and that we ultimately succeeded in providing the shareholders what
they expect from their investment managers.

We took advantage of the spring market sell-off to divest of some stocks and
concentrate our assets in the companies in which we had the strongest
convictions. We determine our convictions by focusing on rising earnings
expectations and rising

7
<PAGE> 9

valuations. Further, we look closely at the fundamentals of individual
companies.

The fund outperformed its benchmark, the Pacific Stock Exchange (PSE)
Technology Index, which returned 86.69 percent for the same period. The PSE
index is a price-weighted, unmanaged, broad-based index composed of 100 listed
and over-the-counter technology stocks from 15 different industries. This index
is a statistical composite that does not include commissions or fees that would
be paid by an investor purchasing the securities the index represents. Such
costs would lower the performance of the index. It is not possible to invest
directly in an index. Past performance is no guarantee of future results.

The June and July market turbulence, which caused the market to rotate
toward "old economy" stocks, provided another test of our discipline. In June,
the PSE benchmark rose 10.74 percent, and the 257 funds in Lipper's science and
technology category returned 17.36 percent, while the Technology Fund Class A
shares gained 18.58 percent. July was a down month in general for technology as
the fund's benchmark lost 6.72 percent, and the 275 funds in the science and
technology fund category tracked by Lipper Inc. lost 5.10 percent. By contrast,
the Technology Fund Class A shares lost 3.49 percent. In short, the stocks in
the fund's portfolio outperformed during both a down month and an up month in an
extremely volatile period. The reporting period ended with an excellent August,
after it became evident that the Federal Reserve Board would not raise interest
rates.

(Of course, the fund's performance during one month is not indicative of the
fund's long-term performance, nor can it guarantee that the fund will continue
to outperform its benchmark or its Lipper peer category in the future.
Furthermore, the fund did not outperform its benchmark or its Lipper category in
every month during the 12-month reporting period. Past performance is no
guarantee of future results.)

Q THE MEDIA CONTINUES TO EXPRESS
CONCERN ABOUT THE HIGH PRICE OF TECHNOLOGY STOCKS. IS THAT A CONCERN FOR YOU
AS WELL, PARTICULARLY SINCE THE FUND HAS GROWN AT A TIME WHEN THE MARKET HAS
BEEN PRICED SO HIGH?

A It's true that a lot of attention is
paid to price-to-earnings ratios (P/Es). The average P/E for this fund was 159.3
at the fiscal year-end compared to the benchmark's average P/E of 40.9.
Investing in stocks with P/Es that are higher than those of the market is a
function of our investment process. We insist that a company have rising
earnings expectations and rising valuations before we invest in it based on our
investment strategy.

Q WHICH STOCKS WERE THE
LARGEST CONTRIBUTORS TO THE FUND'S RETURN?

A During the reporting period, our
top performers included:

- Juniper Networks, which is a leading provider of next-generation Internet
protocol routers used to build out the core of a carrier's

8
<PAGE> 10

communication network and was the portfolio's largest holding at the end of
the period.

- SDL, which sells optical components for terrestrial and submarine
communication networks.

- Applied Micro Circuits, a leader in high-bandwidth silicon connectivity
solutions for optical networks.

- Corning, a manufacturer of optical fiber, cable, and photonic products for the
telecommunications industry.

Keep in mind that not all stocks in the portfolio performed favorably, and
there is no guarantee that any of these stocks will perform as well or will be
held by the portfolio in the future.

Q WHAT'S YOUR OUTLOOK FOR THE
NEXT SIX MONTHS?

A We expect another strong fourth
quarter. Technology should benefit from a more friendly Federal Reserve policy,
a low inflationary economic environment, and seasonal technology strength buoyed
by year-end budget spending.

9
<PAGE> 11

GLOSSARY OF TERMS

A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.

BENCHMARK: A predetermined set of securities used for performance comparison
purposes. Benchmarks may be based on published indexes or customized to suit an
investment strategy.

CLASS A SHARES: Mutual fund shares are generally divided into three groupings,
called Class A, Class B, and Class C shares, each with varying fees and sales
charges.

EARNINGS ESTIMATE: A forecast for a company's net income during a given period.
An earnings estimate can come from the company's management as well as from
independent analysts.

FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.

FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.

OLD ECONOMY: Refers to established companies among more traditional sectors such
as industrial and manufacturing services.

PRICE-TO-EARNINGS (P/E) RATIO: Shows the "multiple" of earnings at which a stock
is selling. The P/E ratio is calculated by dividing a stock's current price by
its current earnings per share. A high multiple means that investors are
optimistic about future growth and have bid up the stock's price.

VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.

VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.

10
<PAGE> 12

BY THE NUMBERS

YOUR FUND'S INVESTMENTS

August 31, 2000
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCK 99.3%
COMMUNICATIONS TECHNOLOGY--EQUIPMENT 25.6%
ADC Telecommunications, Inc. (a)........................... 500,000 $ 20,468,750
Alcatel SA--ADR (France)................................... 350,000 29,006,250
Avanex Corp. (a)........................................... 100,000 15,146,875
Bookham Technology PLC (ADR--United Kingdom) (a)........... 300,000 18,525,000
CIENA Corp. (a)............................................ 200,000 44,337,500
Corning, Inc............................................... 400,000 131,175,000
Digital Lightwave, Inc. (a)................................ 125,000 10,968,750
Finisar Corp. (a).......................................... 200,000 9,275,000
New Focus, Inc. (a)........................................ 150,000 20,709,375
Newport Corp. ............................................. 525,000 83,475,000
Nortel Networks Corp. ..................................... 1,100,000 89,718,750
Scientific-Atlanta, Inc. .................................. 700,000 54,556,250
SDL, Inc. (a).............................................. 307,500 122,173,594
Sonus Networks, Inc. (a)................................... 75,000 12,478,125
Sycamore Networks, Inc. (a)................................ 375,000 51,562,500
--------------
713,576,719
--------------
COMPUTERS--HARDWARE 9.2%
Brocade Communications Systems, Inc. (a)................... 350,000 79,034,375
Emulex Corp. (a)........................................... 100,000 10,468,750
Juniper Networks, Inc. (a)................................. 775,000 165,656,250
--------------
255,159,375
--------------
COMPUTERS--NETWORKING 14.5%
Avici Systems, Inc. (a).................................... 150,000 22,471,875
Cisco Systems, Inc. (a).................................... 600,000 41,175,000
Corvis Corp. (a)........................................... 450,600 46,777,912
EMC Corp. (a).............................................. 800,000 78,400,000
Extreme Networks, Inc. (a)................................. 500,000 46,531,250
MMC Networks, Inc. (a)..................................... 250,000 30,453,125
Network Appliance, Inc. (a)................................ 300,000 35,100,000
ONI Systems Corp. (a)...................................... 175,000 16,679,688
Redback Networks, Inc. (a)................................. 150,000 22,406,250
Sun Microsystems, Inc. .................................... 400,000 50,775,000
Turnstone Systems, Inc. (a)................................ 207,000 12,187,125
--------------
402,957,225
--------------
</TABLE>

See Notes to Financial Statements

11
<PAGE> 13

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMPUTERS--SERVICES 0.7%
Mercury Interactive Corp. (a).............................. 175,000 $ 21,382,813
--------------

COMPUTERS--SOFTWARE 22.4%
Adobe Systems, Inc. ....................................... 250,000 32,500,000
Ariba, Inc. (a)............................................ 600,000 94,425,000
Art Technology Group, Inc. (a)............................. 425,000 43,323,437
BEA Systems, Inc. (a)...................................... 600,000 40,837,500
Check Point Software Technologies Ltd. (a)................. 500,000 72,906,250
I2 Technologies, Inc. (a).................................. 550,000 93,053,125
Interwoven, Inc. (a)....................................... 550,000 52,800,000
McDATA Corp. (a)........................................... 200,000 21,512,500
Micromuse, Inc. (a)........................................ 175,000 26,578,125
Oracle Corp. (a)........................................... 350,000 31,828,125
Rational Software Corp. (a)................................ 300,000 38,606,250
Siebel Systems, Inc. (a)................................... 300,000 59,343,750
VeriSign, Inc. (a)......................................... 75,000 14,915,625
--------------
622,629,687
--------------
CONSUMER SERVICES 0.9%
TMP Worldwide, Inc. (a).................................... 350,000 24,215,625
--------------

ELECTRONICS--MANUFACTURING 2.2%
Flextronics International Ltd. (Singapore) (a)............. 125,000 10,414,063
Jabil Circuit, Inc. (a).................................... 225,000 14,357,813
Power-One, Inc. (a)........................................ 225,000 35,648,437
--------------
60,420,313
--------------
ELECTRONICS--SEMICONDUCTORS 21.4%
Analog Devices, Inc. (a)................................... 250,000 25,125,000
Applied Micro Circuits Corp. (a)........................... 625,000 126,835,938
Broadcom Corp. (a)......................................... 300,000 75,000,000
GlobeSpan Semiconductor, Inc. (a).......................... 475,000 57,207,812
Intel Corp. ............................................... 750,000 56,156,250
Micron Technology, Inc. ................................... 700,000 57,225,000
PMC Sierra, Inc. (a)....................................... 425,000 100,300,000
QLogic Corp. (a)........................................... 75,000 8,512,500
TranSwitch Corp. (a)....................................... 250,000 15,046,875
Virata Corp. (a)........................................... 150,000 10,312,500
Vitesse Semiconductor Corp. (a)............................ 325,000 28,864,062
Xilinx, Inc. (a)........................................... 400,000 35,550,000
--------------
596,135,937
--------------
</TABLE>

See Notes to Financial Statements

12
<PAGE> 14

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HEALTHCARE 2.4%
Allergan, Inc. ............................................ 125,000 $ 9,140,625
MedImmune, Inc. (a)........................................ 340,000 28,602,500
MiniMed, Inc. (a).......................................... 200,000 14,359,375
Quest Diagnostics, Inc. (a)................................ 125,000 15,468,750
--------------
67,571,250
--------------

TOTAL LONG-TERM INVESTMENTS 99.3%
(Cost $1,800,593,586)............................................... 2,764,048,944
REPURCHASE AGREEMENT 0.5%
State Street Bank & Trust Co. ($13,465,000 par collateralized by
U.S. Government Obligations in a pooled cash account, dated
08/31/00, to be sold on 09/01/00 at $13,467,457)
(Cost $13,465,000).................................................. 13,465,000
--------------

TOTAL INVESTMENTS 99.8%
(Cost $1,814,058,586)............................................... 2,777,513,944
OTHER ASSETS IN EXCESS OF LIABILITIES 0.2%........................... 5,467,561
--------------
NET ASSETS 100.0%.................................................... $2,782,981,505
==============
</TABLE>

(a) Non-income producing security as this stock does not currently declare
dividends.

ADR--American Depositary Receipt

See Notes to Financial Statements

13
<PAGE> 15

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2000

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,814,058,586)..................... $2,777,513,944
Cash........................................................ 7,456,490
Receivables:
Investments Sold.......................................... 30,171,766
Fund Shares Sold.......................................... 11,085,577
Dividends................................................. 119,625
Interest.................................................. 2,457
--------------
Total Assets............................................ 2,826,349,859
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 35,732,973
Fund Shares Repurchased................................... 3,428,604
Distributor and Affiliates................................ 1,983,889
Investment Advisory Fee................................... 1,101,932
Accrued Expenses............................................ 1,094,050
Trustees' Deferred Compensation and Retirement Plans........ 26,906
--------------
Total Liabilities....................................... 43,368,354
--------------
NET ASSETS.................................................. $2,782,981,505
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,942,518,315
Net Unrealized Appreciation................................. 963,455,358
Accumulated Net Investment Loss............................. (26,236)
Accumulated Net Realized Loss............................... (122,965,932)
--------------
NET ASSETS.................................................. $2,782,981,505
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $928,793,267 and 34,646,131 shares of
beneficial interest issued and outstanding)............. $ 26.81
Maximum sales charge (5.75%* of offering price)......... 1.64
--------------
Maximum offering price to public........................ $ 28.45
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,442,188,143 and 54,233,016 shares of
beneficial interest issued and outstanding)............. $ 26.59
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $412,000,095 and 15,494,114 shares of
beneficial interest issued and outstanding)............. $ 26.59
==============
</TABLE>

* On sales of $50,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

14
<PAGE> 16

Statement of Operations
For the Year Ended August 31, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 4,711,398
Dividends................................................... 474,348
-------------
Total Income............................................ 5,185,746
-------------
EXPENSES:
Investment Advisory Fee..................................... 12,986,971
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,213,003, $8,199,161 and $2,260,357,
respectively)............................................. 11,672,521
Shareholder Services........................................ 4,044,981
Registration Fee............................................ 880,273
Shareholder Reports......................................... 407,818
Custody..................................................... 138,758
Legal....................................................... 37,850
Trustees' Fees and Related Expenses......................... 11,601
Other....................................................... 270,785
-------------
Total Expenses.......................................... 30,451,558
Less Credits Earned on Cash Balances.................... 25,089
-------------
Net Expenses............................................ 30,426,469
-------------
NET INVESTMENT LOSS......................................... $ (25,240,723)
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $(121,140,584)
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 25,307,608
End of the Period......................................... 963,455,358
-------------
Net Unrealized Appreciation During the Period............... 938,147,750
-------------
NET REALIZED AND UNREALIZED GAIN............................ $ 817,007,166
=============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 791,766,443
=============
</TABLE>

See Notes to Financial Statements

15
<PAGE> 17

Statement of Changes in Net Assets
For the Year Ended August 31, 2000 and the Period July 26, 1999 (Commencement of
Investment Operations) through August 31, 1999

<TABLE>
<CAPTION>
JULY 26, 1999
(COMMENCEMENT OF
YEAR ENDED INVESTMENT OPERATIONS)
AUGUST 31, 2000 TO AUGUST 31, 1999
------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss............................ $ (25,240,723) $ (325,266)
Net Realized Loss.............................. (121,140,584) (1,825,348)
Net Unrealized Appreciation During the
Period....................................... 938,147,750 25,307,608
-------------- ------------

NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................... 791,766,443 23,156,994
-------------- ------------

FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold...................... 2,224,548,079 220,058,816
Cost of Shares Repurchased..................... (475,324,655) (1,324,172)
-------------- ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................. 1,749,223,424 218,734,644
-------------- ------------
TOTAL INCREASE IN NET ASSETS................... 2,540,989,867 241,891,638
NET ASSETS:
Beginning of the Period........................ 241,991,638 100,000
-------------- ------------
End of the Period (Including accumulated net
investment loss of $26,236 and $1,367,
respectively)................................ $2,782,981,505 $241,991,638
============== ============
</TABLE>

See Notes to Financial Statements

16
<PAGE> 18

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
JULY 26, 1999
(COMMENCEMENT OF
YEAR ENDED INVESTMENT OPERATIONS)
AUGUST 31, 2000 TO AUGUST 31, 1999
CLASS A SHARES -----------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD..... $ 11.17 $10.00
------- ------
Net Investment Loss........................ (.16) (.01)
Net Realized and Unrealized Gain........... 15.80 1.18
------- ------
Total from Investment Operations............. 15.64 1.17
------- ------
NET ASSET VALUE, END OF THE PERIOD........... $ 26.81 $11.17
======= ======

Total Return (a)............................. 139.93% 11.70%*
Net Assets at End of the Period (In
millions).................................. $ 928.8 $ 49.7
Ratio of Expenses to Average Net Assets...... 1.47% 1.45%
Ratio of Net Investment Loss to Average Net
Assets..................................... (1.14%) (1.03%)
Portfolio Turnover........................... 167% 7%*
</TABLE>

* Non-Annualized

(a) 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 one year of purchase. If the
sale charges were included, total returns would be lower.

See Notes to Financial Statements

17
<PAGE> 19

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
JULY 26, 1999
(COMMENCEMENT OF
YEAR ENDED INVESTMENT OPERATIONS)
AUGUST 31, 2000 TO AUGUST 31, 1999
CLASS B SHARES -----------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 11.16 $ 10.00
------- -------
Net Investment Loss........................... (.28) (.02)
Net Realized and Unrealized Gain.............. 15.71 1.18
------- -------
Total from Investment Operations................ 15.43 1.16
------- -------
NET ASSET VALUE, END OF THE PERIOD.............. $ 26.59 $ 11.16
======= =======

Total Return (a)................................ 138.17% 11.60%*
Net Assets at End of the Period (In millions)... $1,442.2 $ 164.3
Ratio of Expenses to Average Net Assets......... 2.23% 2.21%
Ratio of Net Investment Loss to Average Net
Assets........................................ (1.89%) (1.79%)
Portfolio Turnover.............................. 167% 7%*
</TABLE>

* Non-Annualized

(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 5%,
charged on certain redemptions made within one year of purchase and
declining thereafter to 0% after the fifth year. If the sales charges were
included, total returns would be lower.

See Notes to Financial Statements

18
<PAGE> 20

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
JULY 26, 1999
(COMMENCEMENT OF
YEAR ENDED INVESTMENT OPERATIONS)
AUGUST 31, 2000 TO AUGUST 31, 1999
CLASS C SHARES -----------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD........ $ 11.16 $10.00
------- ------
Net Investment Loss........................... (.27) (.02)
Net Realized and Unrealized Gain.............. 15.70 1.18
------- ------
Total from Investment Operations................ 15.43 1.16
------- ------
NET ASSET VALUE, END OF THE PERIOD.............. $ 26.59 $11.16
======= ======

Total Return (a)................................ 138.17% 11.60%*
Net Assets at End of the Period (In millions)... $ 412.0 $ 28.0
Ratio of Expenses to Average Net Assets......... 2.22% 2.21%
Ratio of Net Investment Loss to Average Net
Assets........................................ (1.88%) (1.79%)
Portfolio Turnover.............................. 167% 7%*
</TABLE>

* Non-Annualized

(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 1%,
charged on certain redemptions made within one year of purchase. If the
sales charge was included, total returns would be lower.

See Notes to Financial Statements

19
<PAGE> 21

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen Technology Fund (the "Fund") is organized as a series of Van Kampen
Equity Trust II (the "Trust"), a Delaware business trust, and is registered as a
diversified open-end investment management company under the Investment Company
Act of 1940, as amended. The Fund's investment objective is to seek capital
appreciation through investments in common stock of companies considered by the
Fund's management to rely extensively on technology, science or communications
in their product development or operations. The Fund commenced investment
operations on July 26, 1999 with three classes of common shares: Class A, Class
B, and Class C.

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 sale price as of the close of such securities exchange.
Unlisted securities and listed securities for which the last sales price is not
available are valued at the mean of the bid and asked prices, or, if not
available, their fair value as 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 Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The 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

20
<PAGE> 22

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.

C. INCOME AND EXPENSE Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. 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 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 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 intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of loss and offset such losses against any future realized capital gains.
At August 31, 2000, the Fund had an accumulated capital loss carryforward for
tax purposes of $10,164,534 which will expire between August 31, 2007 and August
31, 2008.

Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions and as a result of post October 31 losses which are not recognized
for tax purposes until the first day following the fiscal year.

At August 31, 2000, for federal income tax purposes, cost of long- and
short-term investments is $1,823,426,636, the aggregate gross unrealized
appreciation is $969,434,037 and the aggregate gross unrealized depreciation is
$15,346,729, resulting in net unrealized appreciation on long- and short-term
investments of $954,087,308.

E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
annually from net investment income. Net realized gains, if any, are distributed
annually. Distributions from net realized gains for book purposes may include
short-term capital gains which are included as ordinary income for tax purposes.

Due to inherent differences in the recognition of income and expenses under
generally accepted accounting principles and federal income tax purposes,
permanent differences between book and tax basis reporting for the current
fiscal year have been identified and appropriately reclassified. For the year
ended August 31, 2000, a permanent difference related to a net operating loss
totaling $25,215,854 has been reclassified from accumulated undistributed net
investment income to capital.

21
<PAGE> 23

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

F. EXPENSE REDUCTIONS During the year ended August 31, 2000, the Fund's custody
fee was reduced by $25,089 as a result of credits earned on overnight 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
<S> <C>
First $500 million.......................................... .90 of 1%
Next $500 million........................................... .85 of 1%
Over $1 billion or thereafter............................... .80 of 1%
</TABLE>

For the year ended August 31, 2000, the Fund recognized expenses of
approximately $37,900 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

For the year ended August 31, 2000, the Fund recognized expenses of
approximately $80,000 representing Van Kampen Funds Inc. or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.

Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended August 31,
2000, the Fund recognized expenses of approximately $2,852,100. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.

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
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 to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.

At August 31, 2000, Van Kampen owned 4,000 shares of Class A, 3,000 shares
of Class B, and 3,000 shares of Class C.

22
<PAGE> 24

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

3. CAPITAL TRANSACTIONS

At August 31, 2000, capital aggregated $686,518,418, $955,762,216 and
$300,237,681 for Classes A, B and C, respectively. For the year ended August 31,
2000, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................. 42,306,325 $ 925,557,334
Class B............................................. 45,612,013 954,197,222
Class C............................................. 16,045,889 344,793,523
----------- --------------
Total Sales........................................... 103,964,227 $2,224,548,079
=========== ==============
Repurchases:
Class A............................................. (12,109,800) $ (275,662,184)
Class B............................................. (6,093,733) (133,604,658)
Class C............................................. (3,060,811) (66,057,813)
----------- --------------
Total Repurchases..................................... (21,264,344) $ (475,324,655)
=========== ==============
</TABLE>

At August 31, 1999, capital aggregated $45,038,940, $148,236,808 and
$25,234,997 for Classes A, B and C, respectively. For the period ended August
31, 1999, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 4,494,651 $ 45,603,198
Class B............................................... 14,753,444 148,873,096
Class C............................................... 2,537,523 25,582,522
---------- ------------
Total Sales............................................. 21,785,618 $220,058,816
========== ============
Repurchases:
Class A............................................... (49,045) $ (537,859)
Class B............................................... (41,708) (446,360)
Class C............................................... (31,487) (339,953)
---------- ------------
Total Repurchases....................................... (122,240) $ (1,324,172)
========== ============
</TABLE>

Class B shares and any dividend reinvestment plan Class B shares received
thereon, automatically convert to Class A Shares eight years after the end of
the calendar month in which the shares were purchased. For the year ended August
31, 2000 and the period ended August 31, 1999, no Class B shares converted to
Class A shares. Class C shares do not possess a conversion feature.

23
<PAGE> 25

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC for Class B and C
shares will be imposed on most redemptions made within five years of the
purchase for Class B and within one year of the purchase for Class C as detailed
in the following schedule.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE OF DOLLAR
AMOUNT SUBJECT TO CHANGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First...................................................... 5.00% 1.00%
Second..................................................... 4.00% None
Third...................................................... 3.00% None
Fourth..................................................... 2.50% None
Fifth...................................................... 1.50% None
Sixth and Thereafter....................................... None None
</TABLE>

For the year ended August 31, 2000, Van Kampen, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$3,271,100 and CDSC on redeemed shares of approximately $2,292,800. Sales
charges do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $4,144,589,917 and $2,413,634,645,
respectively.

5. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.

Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended August 31, 2000, are payments retained by Van Kampen of
approximately $7,729,800.

24
<PAGE> 26

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

6. BORROWINGS

In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, entered into a $650 million committed line of credit facility
with a group of banks which expires on November 28, 2000, but is renewable with
the consent of the participating banks. Each fund is permitted to utilize the
facility in accordance with the restrictions of its prospectus. In the event the
demand for the credit facility meets or exceeds $650 million on a complex-wide
basis, each fund will be limited to its pro-rata percentage based on the net
assets of each participating fund. Interest on borrowings is charged under the
agreement at a rate of 0.50% above the federal funds rate per annum. An annual
commitment fee of 0.09% per annum is charged on the unused portion of the credit
facility, which each fund incurs based on its pro-rata percentage of quarterly
net assets. The Fund has not borrowed against the credit facility during the
period.

25
<PAGE> 27

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Trustees of Van Kampen Technology Fund

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Van Kampen Technology Fund (the "Fund"), as of
August 31, 2000, and the related statement of operations, changes in net assets
and financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The statement of changes in net assets of the Fund for the period
July 26, 1999 (Commencement of Operations) through August 31, 1999, and the
financial highlights for the period presented was audited by other auditors
whose report dated October 6, 1999, expressed an unqualified opinion on those
statements.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosure in
the financial statements. Our procedures included confirmation of securities
owned as of August 31, 2000, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the 2000 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund as of August 31, 2000, the results of its operations,
changes in net assets and financial highlights for the year then ended, in
conformity with accounting principles generally accepted in the United States.

[/s/ ENRST & YOUNG]

Chicago, Illinois
October 13, 2000

26
<PAGE> 28

VAN KAMPEN FUNDS

THE VAN KAMPEN
FAMILY OF FUNDS

Growth

Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Value
Tax Managed Equity Growth
Technology

Growth and Income

Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value

Global/International

Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income*
Tax Managed Global Franchise
Worldwide High Income

Income

Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income

Capital Preservation

Reserve
Tax Free Money

Senior Loan

Prime Rate Income Trust
Senior Floating Rate

Tax Free

California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income

To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.

To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:

- visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]

- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.

[PHONE ICON]

- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us

[MAIL ICON]

* Closed to new investors

** Open to new investors for a limited time

27
<PAGE> 29

FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN TECHNOLOGY FUND

BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY

OFFICERS

RICHARD F. POWERS, III*
President

STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer

A. THOMAS SMITH III*
Vice President and Secretary

JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer

RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents

INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555

SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256

CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT AUDITORS(1)
ERNST & YOUNG LLP
233 South Wacker Drive

Chicago, Illinois 60606

(1) Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Board of Trustees has engaged Ernst & Young LLP
to be the Fund's independent auditors.

PricewaterhouseCoopers LLP ceased being the Fund's independent auditors
effective May 18, 2000. The cessation of the client-auditor relationship
between the Fund and PricewaterhouseCoopers was based solely on a possible
future business relationship by PricewaterhouseCoopers with an affiliate of
the Fund's Investment Adviser.

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

(SM) denotes a service mark of Van Kampen Funds Inc.

This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charges on
shares of the Fund, and other pertinent
data. After February 28, 2001, the report, if used with prospective investors,
must be accompanied by a quarterly performance update, if applicable.

28
<PAGE> 30

<TABLE>
<S> <C>
Table of Contents

OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2

PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
GROWTH OF A $10,000 INVESTMENT 5

PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS 6
TOP FIVE SECTORS 6
Q&A WITH YOUR PORTFOLIO MANAGERS 7
GLOSSARY OF TERMS 11

BY THE NUMBERS
YOUR FUND'S INVESTMENTS 12
FINANCIAL STATEMENTS 16
NOTES TO FINANCIAL STATEMENTS 22
REPORT OF INDEPENDENT AUDITORS 27

VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 28
FUND OFFICERS AND IMPORTANT ADDRESSES 29
</TABLE>

It is times like these when money- management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 31

OVERVIEW

LETTER TO SHAREHOLDERS
September 20, 2000

Dear Shareholder,

Sincerely,

/s/ Richard F. Powers, III
Richard F. Powers, III
President and CEO
Van Kampen Investments

1
<PAGE> 32

ECONOMIC SNAPSHOT

2
<PAGE> 33

U.S. GROSS DOMESTIC PRODUCT

SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998--June 30, 2000)
[BAR GRAPH]

<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Jun 98 2.10
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.30
</TABLE>

Source: Bureau of Economic Analysis

INTEREST RATES AND INFLATION

(August 31, 1998--August 31, 2000)

[LINE GRAPH]

3
<PAGE> 34

PERFORMANCE SUMMARY

RETURN HIGHLIGHTS

(as of August 31, 2000)

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Since inception total return based
on NAV(1) -3.20% -2.60% -2.80%
-------------------------------------------------------------------------
Since inception total return(2) -8.77% -7.47% -3.77%
-------------------------------------------------------------------------
Commencement date 03/28/00 03/28/00 03/28/00
-------------------------------------------------------------------------
</TABLE>

(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A Shares) or
contingent deferred sales charge ("CDSC"). On purchases of Class A Shares of
$1 million or more, a CDSC of 1% may be imposed on certain redemptions made
within one year of purchase. Returns for Class B Shares are calculated
without the effect of the maximum 5% CDSC, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
Returns for Class C Shares are calculated without the effect of the maximum
1% CDSC, charged on certain redemptions made within one year of purchase. If
the sales charges were included, total returns would be lower.

(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (5.75% for Class A
Shares) or contingent deferred sales charge ("CDSC"). On purchases of Class
A Shares of $1 million or more, a CDSC of 1% may be imposed on certain
redemptions made within one year of purchase. Returns for Class B Shares are
calculated with the effect of the maximum 5% CDSC, charged on certain
redemptions made within one year of purchase and declining to 0% after the
fifth year. Returns for Class C Shares are calculated with the effect of the
maximum 1% CDSC, charged on certain redemptions made within one year of
purchase.

See the Comparative Performance section of the current prospectus. Past
performance is no guarantee of future results. Investment return and net
asset value will fluctuate with market conditions. Fund shares, when
redeemed, may be worth more or less than their original cost.

Market forecasts provided in this report may not necessarily come to pass.

4
<PAGE> 35

GROWTH OF A $10,000 INVESTMENT

(March 28, 2000--August 31, 2000)

[INVESTMENT PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
STANDARD & POOR'S 500 INDEX
measures thee performance of
TAX MANAGED EQUITY GROWTH FUND 500 widely held common stocks.
------------------------------ ---------------------------
<S> <C> <C>
3/00 9425 10000
4/00 8643 9659
5/00 8303 9448
6/00 8699 9701
7/00 8567 9543
8/00 9123 10122
Fund's Total Return Since Inception -8.77%
</TABLE>

This chart compares your fund's performance to that of the Standard &
Poor's 500 Index over time.

5
<PAGE> 36

PORTFOLIO AT A GLANCE

TOP TEN HOLDINGS

(as a percentage of long-term investments--August 31, 2000)

1. TYCO INTERNATIONAL 5.9%
Manufactures electrical components,
communication systems, medical
supplies, and fire-detection systems.

2. CISCO SYSTEMS 5.2%
Provides solutions that connect
computing devices and computer
networks.

3. INTEL 5.1%
Designs, manufactures, and markets
microcomputer components.

4. GENERAL ELECTRIC 4.8%
Produces appliances, lighting
products, aircraft engines, and
plastics.

5. PFIZER 4.5%
Manufactures pharmaceuticals,
including Viagra and Lipitor, and
consumer products such as Certs,
Listerine, and Visine.

6. UNITED TECHNOLOGIES 3.2%
Manufactures building systems and
aerospace products, including
elevators, engines, and helicopters.

7. NORTEL NETWORKS 3.0%
Supplies network solutions to the
communications industry worldwide.

8. HOME DEPOT 2.6%
Sells building materials and
home-improvement products.

9. CITIGROUP 2.3%
Provides financial services to
consumer and corporate customers
around the world.

10. MICROSOFT 2.3%
Develops and supports a range of
software products.
</TABLE>

TOP FIVE SECTORS*

(as a percentage of long-term investments--August 31, 2000)

[BAR GRAPH]

<TABLE>
<CAPTION>
AUGUST 31, 2000
---------------
<S> <C>
Technology 42.4
Producer Manufacturing 16.0
Health Care 12.9
Finance 8.7
Consumer Services 6.2
</TABLE>

* These sectors represent broad groupings of related industries.

6
<PAGE> 37

Q&A WITH YOUR PORTFOLIO MANAGERS

WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN TAX MANAGED EQUITY
GROWTH FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND
INFLUENCED THE FUND'S RETURN DURING THE PERIOD FROM THE FUND'S INCEPTION ON
MARCH 28, 2000, THROUGH AUGUST 31, 2000. THE TEAM IS LED BY PHILIP W. FRIEDMAN
AND WILLIAM S. AUSLANDER, PORTFOLIO MANAGERS, MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC., BOTH OF WHOM HAVE MANAGED THE FUND SINCE ITS
INCEPTION. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S
PERFORMANCE.

Q HOW WOULD YOU CHARACTERIZE THE
MARKET CLIMATE DURING THE REPORTING PERIOD AND ITS IMPACT ON THE INITIAL
INVESTMENT OF THE FUND'S PORTFOLIO?

A During the period, the stock
market was both narrow, meaning that relatively few stocks contributed to most
of the market's performance, and extremely volatile. The fund's inception on
March 28, 2000, closely followed the dramatic fall of high-flying technology
stocks, which sent the markets reeling into the second quarter. April and May
saw turbulent markets. Nervous investors shunned high-profile growth stocks,
instead preferring "old economy" stocks (those of well-established companies
with relatively steady earnings track records) and value stocks (those of
companies with strong fundamentals that had fallen out of favor). Led by
advances in the technology and health-care sectors, growth stocks regained some
lost ground in June. However, market performance continued to be dominated by a
relatively small number of strong stocks, presenting relatively few
opportunities for growth through August.

The implosion of the technology markets in March worked to our advantage
during the period when we made initial investments for the fund's portfolio.
Historically, technology stocks have been among the fastest-growing stocks,
which have provided potent fuel for fund performance. We believed establishing a
stronghold in technology was important. We were able to acquire what we
considered to be some attractive technology names at reasonable valuations.
Sharp volatility in health care, another traditionally strong growth sector,
also enabled us to take advantage of price declines and purchase stocks at lower
prices, particularly among pharmaceutical manufacturers.

Q HOW DID THE FUND PERFORM?

A At the end of the period,
technology accounted for the largest sector allocation in the portfolio. Robust
returns in health-care, capital-goods, and

7
<PAGE> 38

consumer-staples stocks were not enough to offset the overall weakness of the
technology sector, despite prudent stock-picking. From its inception through
August 31, 2000, the fund was down 3.20 percent (Class A shares at net asset
value; if the maximum sales charge of 5.75 percent were included, the return
would have been lower). As a result of recent market activity, current
performance may vary from the figures shown. By comparison, the Standard &
Poor's 500 Index returned 1.17 percent. Of course, past performance is no
guarantee of future results. The S&P 500 Index is an unmanaged, broad-based
index that measures the performance of 500 stocks and reflects the general
performance of the stock market. It is a statistical composite that does not
include any commissions or sales charges that would be paid by an investor
purchasing the securities it represents. Such costs would lower the performance
of the index. It is not possible to invest directly in an index. Please refer to
the chart and footnotes on page 4 for additional fund performance results.

The performance differential between the fund and its benchmark was due
primarily to the fund's smaller positions in financial, utilities, and energy
stocks, all of which posted strong gains during the period.

Q HOW DO YOU SEEK TO CREATE TAX-
EFFICIENCY IN A FUND LIKE THIS?

A Let's be clear. In a fund that seeks
long-term capital appreciation, there is no way to eliminate taxes entirely. If
you're seeking to make money, you will run the risk of paying some taxes. Our
goal is to minimize the impact of taxes to the extent possible, in order to
maximize returns over time. There are four main strategies we use to do that.

First, our investment strategy is largely to maintain a long-term investment
focus by buying and holding stocks. While portfolio turnover is not necessarily
a bad thing, limiting it, as we try to do, may help minimize capital
gains--especially short-term gains, which are taxed much more heavily than
long-term gains. Second, we seek to minimize taxable dividends by investing
principally in stocks that pay relatively low dividends, or none at all. Third,
when it is prudent we will sell securities to realize losses, again with the
purpose of offsetting capital gains. And finally, if possible, we will sell
securities with a higher cost basis first. That means we try to sell the shares
that we bought when the share price was high, i.e. the shares cost more than
shares bought when the price was low, which helps to minimize the gain made when
the shares are sold. (Keep in mind that managing a fund for after-tax returns
may negatively affect the fund's performance. Since the fund balances investment
and tax considerations when deciding whether to buy or sell securities, its
pre-tax return may be lower than that of a similar fund that is not tax managed.
The fund utilizes an active management style and may realize capital gains.
There can be no assurance that after-tax returns from the fund will be higher
than those earned from an investment in a growth fund that is not tax managed.)

Here is an example of how the strategies can work together. When the stock
price of Bristol-Myers Squibb

8
<PAGE> 39

dipped, we sold the stock and used the proceeds to purchase a number of
health-care stocks, specifically pharmaceutical companies. The swap enabled us
to realize a loss that could help to offset the tax consequences of potential
gains, as well as participate in an industry sector that we believed held great
earnings potential. Based on our analysis, however, we concluded that investor
emotion, rather than fundamental weakness, had driven Bristol-Myers' price down.
The stock was still attractive to us, and by repurchasing it at a low price, we
were able to reduce its overall cost basis. The Internal Revenue Service
mandates, however, that to legally record a loss, a stock cannot be repurchased
for 30 days. When that 30-day period was up, we seized the opportunity to buy
Bristol-Myers back.

Q WHAT ARE THE OTHER IMPORTANT
ELEMENTS OF YOUR INVESTMENT DISCIPLINE?

A The cornerstone of our investment
discipline is "bottom-up" analysis. That means we carefully analyze individual
stocks to identify those with the greatest fundamental strengths. These are
stocks that we believe have the potential to generate surprisingly strong
earnings growth. Generally, we focus on three types of stocks: classic growth
stocks, household names, or companies with long track records of consistent
earnings growth; nontraditional or lesser-known names with the potential for
positive surprises; and growth stocks whose prices have been driven down by what
we believe are unfounded investor fears.

On the basis of this research, we may choose to invest a significant portion
of the fund's total assets in a few select holdings. We call this "opportunistic
concentration," because we believe that by making substantial investments in
stocks that represent our best ideas, while keeping the majority of the
portfolio well diversified, we may increase the fund's potential to deliver
superior long-term performance. Extensive research, we believe, is what gives us
an "information edge" over the competition.

Q CAN YOU GIVE US AN EXAMPLE OF
HOW YOUR ANALYTICAL PROCESS GAVE YOU THE INFORMATION EDGE?

A The best example relates to the
fund's largest holding, Tyco International, a stock in which we have established
an opportunistic concentration. We had held the stock in another fund that we
manage for some time when it was suggested that the company may have engaged in
questionable accounting practices. Our prior research and ongoing communication
with the company's management made us skeptical of the accusations. Previously,
we had hired an independent auditor to review Tyco's books. Yet the power of
rumor to wreak havoc on Wall Street is titanic. The stock plunged and trading
was halted.

At that time, we met again with Tyco's management. We carefully analyzed its
cash flow and other balance-sheet data. The result? We held on to the stock
while others panicked, driving the stock down again when the company announced
weeks later that it was the target of an

9
<PAGE> 40

investigation by the Securities and Exchange Commission (SEC).

Our own analysis convinced us that the charges would be proven baseless. So,
when the opportunity arose to buy the stock for this fund at what we considered
to be a discount to its fair value, we did so. The SEC later cleared Tyco of all
charges. The stock rebounded decisively and continued to climb throughout the
period, roundly beating the market.

Keep in mind that not all stocks in the portfolio performed favorably, and
there is no guarantee that any of these stocks will perform well or will be held
by the fund in the future. For additional portfolio highlights, please refer to
page 6.

Q WERE THERE STOCKS THAT DID
NOT PERFORM AS WELL AS YOU HAD EXPECTED?

A Unfortunately, there usually are. In
this case, prompted by a second-quarter downturn in retail sales, consumer
cyclicals were the weakest performers for the period. Notably, Home Depot, which
was one of the fund's largest holdings, was among the hardest hit. We viewed
this price decline as an overreaction to short-term issues and an opportunity to
buy more shares of the stock at a reduced price.

Q GIVEN THE CHALLENGES OF THE
RECENT MARKET, WHAT IS YOUR GENERAL OUTLOOK FOR GROWTH STOCKS IN THE NEAR
TERM?

A We are strongly optimistic about
the short-term prospects for stocks of growth-oriented companies. Interest rates
have come down significantly, and inflation appears to be in check. We believe
the environment is very favorable for growth stocks.

Q LOOKING AHEAD, DO YOU FORESEE
ANY MAJOR CHANGES TO THE PORTFOLIO?

A No. Again, let us reiterate our
steadfast belief that fund performance has not been lost, only deferred. We saw
few earnings surprises or real disappointments during the period. That is what
portfolio managers worry about. What we saw, instead, was unwarranted collateral
damage to some of the fund's holdings based on price declines suffered by stocks
that the fund did not own. It is essentially guilt by association.

Our investment philosophy has not changed. We are confident in the fund's
general composition and in the fundamental strength of its holdings. We are not
market timers and intend to keep the fund fully invested. Overall, we remain
committed to our long-term investment discipline because we believe that over
time it may provide tax-efficient growth-style investing and the attractive
returns the fund's shareholders seek.

10
<PAGE> 41

GLOSSARY OF TERMS

A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.

BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.

COST BASIS: The price of a security or investment at its initial purchase.

EARNINGS ESTIMATE: A forecast for a company's net income during a given period.
An earnings estimate can come from the company's management as well as from
independent analysts.

FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.

GROWTH INVESTING: An investment strategy that seeks to identify stocks that
offer greater-than-average earnings growth. Growth stocks typically trade at
higher prices relative to their earnings than value stocks, due to their higher
expected earnings growth.

INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic indicator
that measures the change in the cost of purchased goods and services.

OLD ECONOMY: Refers to established companies among more traditional sectors such
as industrial and manufacturing services.

VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.

VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.

11
<PAGE> 42

BY THE NUMBERS

YOUR FUND'S INVESTMENTS

August 31, 2000
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON AND PREFERRED STOCKS 90.7%
CONSUMER DISTRIBUTION 5.3%
Dollar Tree Stores, Inc. (a)................................ 700 $ 28,394
Home Depot, Inc. ........................................... 6,250 300,391
Limited, Inc. .............................................. 3,900 78,439
Safeway, Inc. (a)........................................... 1,700 83,831
Tiffany & Co. .............................................. 1,750 72,844
Wal-Mart Stores, Inc. ...................................... 2,200 104,362
-----------
668,261
-----------
CONSUMER NON-DURABLES 3.0%
Anheuser-Busch Cos., Inc. .................................. 1,500 118,219
Keebler Foods Co. .......................................... 750 34,359
PepsiCo, Inc. .............................................. 2,550 108,694
Procter & Gamble Co. ....................................... 950 58,722
Quaker Oats Co. ............................................ 950 64,540
-----------
384,534
-----------
CONSUMER SERVICES 5.6%
AT&T Corp. -- Liberty Media Corp., Class A (a).............. 7,800 166,725
Brinker International, Inc. (a)............................. 600 19,050
Clear Channel Communications, Inc. (a)...................... 2,250 162,844
Comcast Corp., Class A...................................... 3,400 126,650
Gemstar-TV Guide International, Inc. (a).................... 494 44,583
News Corp., Ltd. -- Preferred -- ADR (Australia)............ 850 37,613
Omnicom Group, Inc. ........................................ 700 58,406
Time Warner, Inc. .......................................... 100 8,593
Viacom, Inc., Class B (a)................................... 1,329 89,458
-----------
713,922
-----------
FINANCE 7.9%
American Express Co. ....................................... 1,950 115,294
American International Group, Inc. ......................... 1,500 133,688
Bank of New York Co., Inc. ................................. 3,850 201,884
Chase Manhattan Corp. ...................................... 1,050 58,669
Citigroup, Inc. ............................................ 4,533 264,633
FleetBoston Financial Corp. ................................ 2,300 98,181
Freddie Mac................................................. 2,550 107,419
Pinnacle Holdings, Inc. (a)................................. 600 24,150
-----------
1,003,918
-----------
</TABLE>

See Notes to Financial Statements

12
<PAGE> 43

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HEALTHCARE 11.7%
Abbott Laboratories......................................... 1,200 $ 52,500
American Home Products Corp. ............................... 2,450 132,759
Amgen, Inc. (a)............................................. 700 53,069
Bristol-Myers Squibb Co. ................................... 1,800 95,400
Bruker Daltonics, Inc. (a).................................. 300 15,075
Eli Lilly & Co. ............................................ 600 43,800
HCA -- The Healthcare Co. .................................. 1,150 39,675
Johnson & Johnson........................................... 1,200 110,325
MedImmune, Inc. (a)......................................... 500 42,063
Merck & Co., Inc. .......................................... 1,650 115,294
PE Corp. -- PE Biosystems Group............................. 500 49,187
Pfizer, Inc. ............................................... 11,925 515,756
Pharmacia Corp. ............................................ 2,707 158,529
Schering-Plough Corp. ...................................... 1,050 42,131
Tularik, Inc. (a)........................................... 650 21,694
-----------
1,487,257
-----------
PRODUCER MANUFACTURING 14.5%
ASM Lithography Holding NV (Netherlands) (a)................ 750 28,594
Corning, Inc. .............................................. 400 131,175
General Electric Co. ....................................... 9,350 548,728
Textron, Inc. .............................................. 1,600 89,700
Tyco International, Ltd. (Bermuda).......................... 11,850 675,450
United Technologies Corp. .................................. 5,900 368,381
-----------
1,842,028
-----------
TECHNOLOGY 38.5%
America Online, Inc. (a).................................... 4,200 246,225
American Tower Corp., Class A............................... 2,850 103,491
Analog Devices, Inc. (a).................................... 200 20,100
Applied Materials, Inc. (a)................................. 2,550 220,097
Broadcom Corp., Class A (a)................................. 250 62,500
CIENA Corp. (a)............................................. 400 88,675
Cisco Systems, Inc. (a)..................................... 8,650 593,606
EMC Corp. (a)............................................... 1,700 166,600
Exfo Electro-Optical Engineering, Inc. (a).................. 200 11,350
General Dynamics Corp. ..................................... 2,750 173,078
General Motors Corp., Class H (a)........................... 4,250 140,781
Hewlett-Packard Co. ........................................ 750 90,562
Infineon Technologies AG -- ADR (Germany) (a)............... 600 39,562
Inktomi Corp. (a)........................................... 200 26,075
Intel Corp. ................................................ 7,800 584,025
International Business Machines Corp. ...................... 1,000 132,000
Intersil Holding Corp., Class A (a)......................... 950 51,300
</TABLE>

See Notes to Financial Statements

13
<PAGE> 44

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
TECHNOLOGY (CONTINUED)
JDS Uniphase Corp. (a)...................................... 950 $ 118,260
Juniper Networks, Inc. (a).................................. 400 85,500
Lucent Technologies, Inc. .................................. 2,550 106,622
Maxim Integrated Products, Inc. (a)......................... 2,100 184,144
McDATA Corp. (a)............................................ 200 21,512
Microsoft Corp. (a)......................................... 3,750 261,797
Motorola, Inc. ............................................. 3,150 113,597
Nortel Networks Corp. ...................................... 4,300 350,719
Oracle Corp. (a)............................................ 2,350 213,703
PMC Sierra, Inc. (a)........................................ 200 47,200
RealNetworks, Inc. (a)...................................... 350 17,041
Seagate Technology, Inc. (a)................................ 850 50,469
Spectrasite Holdings, Inc. (a).............................. 1,400 32,812
StorageNetworks, Inc. (a)................................... 300 30,450
Sun Microsystems, Inc. (a).................................. 1,650 209,447
Texas Instruments, Inc. .................................... 2,850 190,772
TyCom, Ltd. (Bermuda) (a)................................... 650 27,056
VeriSign, Inc. (a).......................................... 100 19,888
Yahoo!, Inc. (a)............................................ 400 48,600
-----------
4,879,616
-----------
UTILITIES 4.2%
AT&T Corp. ................................................. 1,950 61,425
AT&T Wireless Group (a)..................................... 850 22,259
Crown Castle International Corp. (a)........................ 2,400 83,250
Global Crossing, Ltd. (Bermuda) (a)......................... 1,023 30,754
Nextel Communications, Inc., Class A (a).................... 750 41,578
SBA Communications Corp. (a)................................ 300 13,388
</TABLE>

See Notes to Financial Statements

14
<PAGE> 45

YOUR FUND'S INVESTMENTS

August 31, 2000

<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UTILITIES (CONTINUED)
Verizon Communications...................................... 4,400 $ 191,950
Worldcom, Inc. (a).......................................... 2,250 82,125
-----------
526,729
-----------

TOTAL LONG-TERM INVESTMENTS 90.7%
(Cost $10,715,144)................................................ 11,506,265
-----------

REPURCHASE AGREEMENT 6.7%
State Street Bank & Trust Co., (collateralized by U.S. Government
obligations in a pooled cash account, dated 08/31/00, to be sold
on 09/01/00 at $850,124)
(Cost $850,000)................................................... 850,000
-----------

TOTAL INVESTMENTS 97.4%
(Cost $11,565,144)................................................ 12,356,265
OTHER ASSETS IN EXCESS OF LIABILITIES 2.6%......................... 332,770
-----------

NET ASSETS 100.0%.................................................. $12,689,035
===========
</TABLE>

(a) Non-income producing security as this stock currently does not declare
dividends.

See Notes to Financial Statements

15
<PAGE> 46

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2000

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $11,565,144)........................ $12,356,265
Cash........................................................ 7,867
Receivables:
Fund Shares Sold.......................................... 652,743
Investments Sold.......................................... 74,007
Dividends................................................. 6,007
Interest.................................................. 124
-----------
Total Assets............................................ 13,097,013
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 347,129
Distributor and Affiliates................................ 10,500
Accrued Expenses............................................ 42,022
Trustees' Deferred Compensation and Retirement Plans........ 8,327
-----------
Total Liabilities....................................... 407,978
-----------
NET ASSETS.................................................. $12,689,035
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $12,199,036
Net Unrealized Appreciation................................. 791,121
Accumulated Net Investment Loss............................. (8,327)
Accumulated Net Realized Loss............................... (292,795)
-----------
NET ASSETS.................................................. $12,689,035
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $5,049,565 and 521,271 shares of
beneficial interest issued and outstanding)............. $ 9.69
Maximum sales charge (5.75%* of offering price)......... .59
-----------
Maximum offering price to public........................ $ 10.28
===========
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $4,491,584 and 460,961 shares of
beneficial interest issued and outstanding)............. $ 9.74
===========
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $3,147,886 and 323,559 shares of
beneficial interest issued and outstanding)............. $ 9.73
===========
</TABLE>

* On sales of $50,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

16
<PAGE> 47

Statement of Operations
For the Period March 28, 2000 (Commencement of Investment Operations) to August
31, 2000

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 18,253
Interest.................................................... 9,923
---------
Total Income............................................ 28,176
---------
EXPENSES:
Shareholders Report......................................... 27,631
Audit....................................................... 25,006
Investment Advisory Fee..................................... 22,950
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $2,819, $10,136 and $7,179, respectively)... 20,134
Custody..................................................... 13,960
Registration Fee............................................ 11,243
Trustees' Fees and Related Expenses......................... 9,950
Accounting.................................................. 8,260
Shareholder Services........................................ 7,255
Legal....................................................... 1,088
Other....................................................... 3,666
---------
Total Expenses.......................................... 151,143
Expense Reduction ($22,950 Investment Advisory Fee and
$70,698 Other)........................................ 93,648
---------
Net Expenses............................................ 57,495
---------
NET INVESTMENT LOSS......................................... $ (29,319)
=========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $(292,795)
---------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... -0-
End of the Period......................................... 791,121
---------
Net Unrealized Appreciation During the Period............... 791,121
---------
NET REALIZED AND UNREALIZED GAIN............................ $ 498,326
=========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 469,007
=========
</TABLE>

See Notes to Financial Statements

17
<PAGE> 48

Statement of Changes in Net Assets
For the Period March 28, 2000 (Commencement of Investment Operations)
to August 31, 2000

<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 2000
---------------
<S> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss......................................... $ (29,319)
Net Realized Loss........................................... (292,795)
Net Unrealized Appreciation During the Period............... 791,121
-----------

NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... 469,007
-----------

FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 10,577,092
Cost of Shares Repurchased.................................. (357,064)
-----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 10,220,028
-----------
TOTAL INCREASE IN NET ASSETS................................ 10,689,035
NET ASSETS:
Beginning of the Period..................................... 2,000,000
-----------
End of the Period (Including accumulated net investment loss
of $8,327)................................................ $12,689,035
===========
</TABLE>

See Notes to Financial Statements

18
<PAGE> 49

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
MARCH 28, 2000
(COMMENCEMENT OF
CLASS A SHARES INVESTMENT OPERATIONS) TO
AUGUST 31, 2000
-------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $10.00
------
Net Investment Loss....................................... (0.01)
Net Realized and Unrealized Loss.......................... (0.30)
------
Total from Investment Operations............................ (0.31)
------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 9.69
======

Total Return (a)............................................ -3.20%**
Net Assets at End of the Period (In millions)............... $ 5.0
Ratio of Expenses to Average Net Assets*.................... 1.55%
Ratio of Net Investment Loss to Average Net Assets*......... -0.57%
Portfolio Turnover.......................................... 23%**
* If certain expenses had not been waived by Van Kampen,
Total Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets................. 4.80%
Ratio of Net Investment Loss to Average Net Assets...... -3.82%
</TABLE>

** Non-Annualized

(a) 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 one year of purchase. If the
sales charges were included, total returns would be lower.

See Notes to Financial Statements

19
<PAGE> 50

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
MARCH 28, 2000
(COMMENCEMENT OF
CLASS B SHARES INVESTMENT OPERATIONS) TO
AUGUST 31, 2000
-------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $10.00
------
Net Investment Loss....................................... (0.03)
Net Realized and Unrealized Loss.......................... (0.23)
------
Total from Investment Operations............................ (0.26)
------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 9.74
======

Total Return (a)............................................ -2.60%**
Net Assets at End of the Period (In millions)............... $ 4.5
Ratio of Expenses to Average Net Assets*.................... 2.30%
Ratio of Net Investment Loss to Average Net Assets*......... -1.32%
Portfolio Turnover.......................................... 23**
* If certain expenses had not been waived by Van Kampen,
Total Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets................. 5.55%
Ratio of Net Investment Loss to Average Net Assets...... -4.57%
</TABLE>

** Non-Annualized

(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge 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.

See Notes to Financial Statements

20
<PAGE> 51

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED.

<TABLE>
<CAPTION>
MARCH 28, 2000
(COMMENCEMENT OF
CLASS C SHARES INVESTMENT OPERATIONS) TO
AUGUST 31, 2000
-------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 10.00
-------
Net Investment Loss....................................... (0.03)
Net Realized and Unrealized Loss.......................... (0.24)
-------
Total from Investment Operations............................ (0.27)
-------
NET ASSET VALUE, END OF THE PERIOD.......................... $ 9.73
=======

Total Return (a)............................................ -2.80%**
Net Assets at End of the Period (In millions)............... $ 3.1
Ratio of Expenses to Average Net Assets*.................... 2.30%
Ratio of Net Investment Loss to Average Net Assets*......... -1.32%
Portfolio Turnover.......................................... 23%**
* If certain expenses had not been waived by Van Kampen,
Total Return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net Assets................. 5.54%
Ratio of Net Investment Loss to Average Net Assets...... -4.56%
</TABLE>

** Non-Annualized

See Notes to Financial Statements

21
<PAGE> 52

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen Tax Managed Equity Growth Fund (the "Fund") is organized as a series
of Van Kampen Equity Trust II (the "Trust"), a Delaware business trust, and is
registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek to provide long-term capital appreciation on an after tax basis, by
investing primarily in a portfolio of growth-oriented equity securities while
attempting to minimize the impact of federal income taxes on shareholder
returns. The Fund commenced investment operations on March 28, 2000, with three
classes of common shares, Class A, Class B and Class C shares.

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 Investment Advisory Corp. (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

22
<PAGE> 53

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

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 on the ex-dividend date and
interest income is recorded on an accrual basis. Discounts are accreted over the
expected life of each applicable security. 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 transfer agency costs which are unique to each class of
shares.

At August 31, 2000, for federal income tax purposes the cost of long- and
short-term investments is $11,655,191, the aggregate gross unrealized
appreciation is $1,018,586 and the aggregate gross unrealized depreciation is
$317,512, resulting in net unrealized appreciation on long- and short-term
investments of $701,074.

The Fund intends to utilize provisions of the 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 these losses against any future realized capital
gains. At August 31, 2000, the Fund had an accumulated capital loss carryforward
for tax purposes of $202,748 which will expire on August 31, 2008. Net realized
gains or losses may differ for financial and tax reporting purposes primarily as
a result of the deferral of losses for tax purposes resulting from wash sales.

E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
annually from net investment income. Net realized gains, if any, are distributed
annually.

Due to inherent differences in the recognition of income, expenses and
realized gains/losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between financial and tax basis reporting have been identified and appropriately
reclassified. A permanent difference relating to a net operating loss totaling
$4,897 and a permanent difference relating to nondeductible expenses totaling
$16,095 have been reclassified from accumulated net investment loss to capital.

23
<PAGE> 54

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

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
<S> <C>
First $500 million.......................................... .80 of 1%
Next $500 million........................................... .75 of 1%
Over $1 billion............................................. .70 of 1%
</TABLE>

The Adviser has entered into a subadvisory agreement with Morgan Stanley
Dean Witter Investment Management Inc. (the "Subadviser"), to provide advisory
services to the Fund and the Adviser with respect to the Fund's investments. The
Adviser pays 50% of its investment advisory fee to the Subadviser.

For the period ended August 31, 2000, the Adviser voluntarily waived $22,950
of its investment advisory fees and assumed $70,698 of the Fund's other
expenses. This waiver is voluntary and can be discontinued at the Adviser's
discretion.

For the period ended August 31, 2000, the Fund recognized expenses of
approximately $1,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.

Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent of the Fund. For the period ended August 31,
2000, the Fund recognized expenses of approximately $6,800. Transfer agency fees
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive market benchmarks.

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
officers of Van Kampen.

At August 31, 2000, Van Kampen owned 80,000 shares of Class A, 60,000 shares
of Class B, and 60,000 shares of Class C.

24
<PAGE> 55

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

3. CAPITAL TRANSACTIONS

At August 31, 2000, capital aggregated $4,846,956, $4,313,110 and $3,038,970 for
Classes A, B and C, respectively. For the period ended August 31, 2000,
transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A.................................................. 444,767 $ 4,087,399
Class B.................................................. 402,198 3,731,548
Class C.................................................. 296,965 2,758,145
--------- -----------
Total Sales................................................ 1,143,930 $10,577,092
========= ===========
Repurchases:
Class A.................................................. (3,496) $ (32,090)
Class B.................................................. (1,237) (11,007)
Class C.................................................. (33,406) (313,967)
--------- -----------
Total Repurchases.......................................... (38,139) $ (357,064)
========= ===========
</TABLE>

Class B Shares, including Class B Shares received from reinvestment of
dividends through the dividend reinvestment plan, automatically convert to Class
A Shares eight years after the end of the calendar month in which the shares
were purchased. Class B and C Shares are offered without a front end sales
charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC
will be imposed on most redemptions made within five years of the purchase for
Class B Shares and one year of the purchase for Class C Shares as detailed in
the following schedule.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF DOLLAR
AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR SINCE PURCHASE CLASS B CLASS C
<S> <C> <C>
First...................................................... 5.00% 1.00%
Second..................................................... 4.00% None
Third...................................................... 3.00% None
Fourth..................................................... 2.50% None
Fifth...................................................... 1.50% None
Sixth and Thereafter....................................... None None
</TABLE>

25
<PAGE> 56

NOTES TO
FINANCIAL STATEMENTS

August 31, 2000

For the period ended August 31, 2000, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A Shares of
approximately $11,900 and CDSC on redeemed shares of approximately $20. Sales
charges do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $12,480,108 and $1,472,169, respectively.

5. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
the Fund's shares, ongoing shareholder services and maintenance of shareholder
accounts.

Annual fees under the Plans of up to .25% for Class A net assets and 1.00%
each for Class B and Class C net assets are accrued daily. Included in these
fees for the period ended August 31, 2000, are payments retained by Van Kampen
of approximately $13,500.

26
<PAGE> 57

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Trustees of Van Kampen Tax Managed Equity
Growth

We have audited the accompanying statement of assets and liabilities including
the portfolio of investments of the Van Kampen Tax Managed Equity Growth Fund
(the "Fund") as of August 31, 2000, and the related statements of operation,
changes in net assets and the financial highlights from March 28, 2000
(commencement of investment operations) through August 31, 2000. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of August 31, 2000, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund at August 31, 2000, the results of its operations, the changes in its net
assets, and the financial highlights for the period then ended, in conformity
with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

October 10, 2000

27
<PAGE> 58

VAN KAMPEN FUNDS

THE VAN KAMPEN
FAMILY OF FUNDS

Growth

Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Value
Tax Managed Equity Growth
Technology

Growth and Income

Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value

Global/International

Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income*
Tax Managed Global Franchise
Worldwide High Income

Income

Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income

Capital Preservation

Reserve
Tax Free Money

Senior Loan

Prime Rate Income Trust
Senior Floating Rate

Tax Free

To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:

- visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]

- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.

[PHONE ICON]

- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us

[MAIL ICON]

* Closed to new investors

** Open to new investors for a limited time

28
<PAGE> 59

FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN TAX MANAGED EQUITY
GROWTH FUND

OFFICERS

RICHARD F. POWERS, III*
President

STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer

A. THOMAS SMITH III*
Vice President and Secretary

JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer

RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents

INVESTMENT ADVISER
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555

INVESTMENT SUBADVISOR
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, NY 10020

DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555

TRANSFER AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256

CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT AUDITORS(1)
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606

(1) Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Board of Trustees has engaged Ernst & Young LLP to be
the Fund's independent auditors. PricewaterhouseCoopers LLP ceased being the
Fund's independent auditors effective May 18, 2000. The cessation of the
client-auditor relationship between the Fund and PricewaterhouseCoopers was
based solely on a possible future business relationship by
PricewaterhouseCoopers with an affiliate of the Fund's investment adviser.

* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.

(SM) denotes a service mark of Van Kampen Funds Inc.

This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares,
the sales charges on shares of the Fund, and other pertinent data. After January
31, 2001, the report, if used with prospective investors, must be accompanied by
a quarterly performance update.