<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 3
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS 4
TOP FIVE INDUSTRIES 4
Q&A WITH YOUR PORTFOLIO MANAGERS 5
GLOSSARY OF TERMS 9
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 10
FINANCIAL STATEMENTS 16
NOTES TO FINANCIAL STATEMENTS 22
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 28
FUND OFFICERS AND IMPORTANT ADDRESSES 29
</TABLE>
One of the greatest shifts we've seen is the increasing importance of investing
for many Americans.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
April 3, 2000
Dear Shareholder,
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all
mutual fund shareholders earmarked retirement as their primary
financial goal in 1998.
Through all the changes in the investment environment over the
past century, the general principles that have made
generations of investors successful remain the same. Some that have stood the
test of time include:
- - Investing for the long-term
- - Basing investment decisions on sound research
- - Building a diversified portfolio
- - Acting on the value of professional investment advice
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[SIG]
Richard F. Powers, III
Chairman
Van Kampen
Asset Management Inc.
</TABLE>
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH REMAINED VIBRANT DURING THE REPORTING PERIOD DUE TO STRONG
CONSUMER AND GOVERNMENT SPENDING, AS WELL AS YEAR 2000-RELATED INVENTORY
BUILD-UP. GROSS DOMESTIC PRODUCT (GDP), THE PRIMARY MEASURE OF ECONOMIC GROWTH,
INCREASED AT AN ANNUALIZED RATE OF 6.9 PERCENT IN THE FOURTH QUARTER OF 1999,
ITS FASTEST GROWTH RATE SINCE 1996. WITH GDP MEASURING 4.1 PERCENT FOR 1999,
THIS WAS THE THIRD SUCCESSIVE YEAR IN WHICH GDP EXCEEDED 4 PERCENT.
STRONG GDP DATA, AMONG OTHER FACTORS, PROMPTED THE FEDERAL RESERVE BOARD TO TAKE
AN ACTIVE STANCE IN TEMPERING ECONOMIC GROWTH TO WARD OFF INFLATION. THE FED
INCREASED THE FEDERAL FUNDS RATE BY 0.25 PERCENT FOUR TIMES SINCE JUNE 1999, AND
AN ADDITIONAL INCREASE IS WIDELY ANTICIPATED IN LATE MARCH. [EDITOR'S NOTE: THE
FED RAISED THE FEDERAL FUNDS RATE BY 0.25 PERCENT ON MARCH 21.] DESPITE THE
SURGING ECONOMY, THE CONSUMER PRICE INDEX (CPI)--A MEASURE OF
INFLATION--REMAINED MODEST, RISING JUST 2.7 PERCENT DURING THE 12 MONTHS ENDED
FEBRUARY 29, 2000.
ALTHOUGH THE CPI POSTED FAVORABLE NUMBERS, INFLATIONARY PRESSURES CONTINUED TO
BUILD IN LABOR COSTS AND CONSUMER SPENDING RATES. THE JOB MARKET REMAINED TIGHT
AS UNEMPLOYMENT DROPPED TO A 30-YEAR LOW. AS A RESULT, THE EMPLOYMENT COST INDEX
HAS REFLECTED ESCALATING LABOR COSTS, AS EMPLOYERS HAVE INCREASED COMPENSATION
AND BENEFITS TO ATTRACT WORKERS.
RISING INTEREST RATES DID LITTLE TO CURB CONSUMER SPENDING. SHOPPERS SPENT
FREELY IN LATE 1999 AND INTO THE NEW YEAR, AND CONSUMER CONFIDENCE REMAINS VERY
HIGH DUE TO PLENTIFUL JOBS, ACCELERATING PERSONAL INCOME, AND LOW INFLATION.
INTEREST RATES AND INFLATION
(February 28, 1998 - February 29, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Feb 98 5.5 1.4
5.5 1.4
5.5 1.4
May 98 5.5 1.7
5.5 1.7
5.5 1.7
Aug 98 5.5 1.6
5.25 1.5
5.0 1.5
Nov 98 4.75 1.5
4.75 1.6
4.75 1.7
Feb 99 4.75 1.6
4.75 1.7
4.75 2.3
May 99 4.75 2.1
5.0 2.0
5.0 2.1
Aug 99 5.25 2.3
5.25 2.6
5.25 2.6
Nov 99 5.5 2.6
5.5 2.7
5.5 2.7
Feb 00 5.75 3.2
</TABLE>
Interest rates are represented by the closing midline federal funds 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.
2
<PAGE> 4
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of February 29, 2000)
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SIX-MONTH TOTAL RETURN BASED ON
NAV(1) 156.31% 155.38% 155.47%
- -------------------------------------------------------------------------
Six-month total return(2) 141.57% 150.38% 154.47%
- -------------------------------------------------------------------------
Life-of-Fund average annual total
return(2) 169.84% 180.00% 184.10%
- -------------------------------------------------------------------------
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 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% in 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 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.
See the Comparative Performance section of the current prospectus. An investment
should be made with an understanding of the risks that an investment in equity
securities entails. Specifically, there are significant competitive pressures
among technology-oriented companies and the products or operations of such
companies may become obsolete quickly. Therefore, stocks of companies that rely
on technology, science or communications, especially those of smaller or
unseasoned companies, tend to be more volatile than the overall stock market and
may or may not move in tandem with the overall stock market. In addition, the
Fund is subject to other risks. These risks include, but are not limited to:
market risk--the possibility that the market values of securities owned by the
Fund will decline; non-diversification risk--the Fund may invest a greater
portion of its assets in a more limited number of issuers than a "diversified"
fund; derivative investments risk--a derivative investment is one whose value
depends on (or is derived from) the value of an underlying asset, interest rate
or index and involves risks different from investment in the underlying
security; and manager risk--management may not be successful in selecting the
best performing securities and the Fund's performance may lag behind that of
similar funds. Investors should carefully consider their risk tolerance before
investing. Past performance does not guarantee 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.
3
<PAGE> 5
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS
(as a percentage of long-term investments--February 29, 2000)
<TABLE>
<S> <C> <C>
1. JDS UNIPHASE 2.6%
Makes products used in optical
networks for the telecommunications
and cable television industries.
2. SDL 2.6%
Sells bandwith-enhancing products for
fiber-optic and satellite commu-
nication networks.
3. ANALOG DEVICES 2.4%
Develops integrated circuits used in
analog and digital signal processing.
4. BROADCOM 2.4%
Makes semiconductors used in
high-speed data and video-
transmission products.
5. INFOSPACE.COM 2.2%
Provides private-label solutions for
content and commerce to Web sites and
Internet appliances.
6. CHECK POINT SOFTWARE
TECHNOLOGIES 2.1%
Provides Internet security by
blocking viruses and other unwanted
Web content.
7. NETWORK APPLIANCE 2.0%
Provides storage and data-access
solutions.
8. BROADVISION 1.9%
Develops software solutions that
personalize e-business.
9. BROCADE COMMUNICATIONS
SYSTEMS 1.8%
Enables companies to manage growth of
their data-storage requirements.
10. EMULEX 1.6%
Designs products that enhance access
to and storage of electronic data and
applications.
</TABLE>
TOP FIVE INDUSTRIES
(as a percentage of long-term investments)
[BAR GRAPH]
<TABLE>
<CAPTION>
FEBRUARY 29, 2000 AUGUST 31, 1999
----------------- ---------------
<S> <C> <C>
Electronics - Semiconductors 23.10 27.90
Computers - Software 17.90 7.90
Computers - Services 17.50 8.20
Communications Technology - Equipment 11.30 16.80
Health Care 6.10 9.00
</TABLE>
4
<PAGE> 6
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE ADVISER OF THE VAN KAMPEN
TECHNOLOGY FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
DURING THE PAST SIX MONTHS. THE REPRESENTATIVES INCLUDE GARY M. LEWIS, SENIOR
PORTFOLIO MANAGER, WHO HAS MANAGED THE FUND SINCE ITS INCEPTION IN 1999 AND
WORKED IN THE INVESTMENT INDUSTRY SINCE 1979. HE IS JOINED BY DUDLEY BRICKHOUSE,
MATTHEW HART (NEW TO THE FUND AS OF FEBRUARY 2000), JANET LUBY, AND DAVID
WALKER, PORTFOLIO MANAGERS, AND STEPHEN L. BOYD, CHIEF INVESTMENT OFFICER FOR
EQUITY INVESTMENTS. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S
PERFORMANCE DURING THE SIX MONTHS ENDED FEBRUARY 29, 2000.
Q HOW WAS THE FUND AFFECTED BY
MARKET CONDITIONS DURING THE REPORTING PERIOD?
A It was an extremely favorable
market environment for the Fund. Technology stocks continued their outstanding
performance of late. This was especially the case during the final quarter of
1999, when the NASDAQ stock index, which includes a number of technology
companies, rose an impressive 48 percent. In the first two months of the new
year, technology stocks continued their strong results while "blue chip" stocks
started falling out of favor with investors. As a result, the NASDAQ powered to
record highs in February while the Dow Jones Industrial Average dropped below
the 10,000 mark for the first time since April 1999.
Q HOW DID YOUR INVESTMENT
APPROACH (SEE NEXT PAGE) AFFECT THE FUND'S PERFORMANCE?
A We maintained a portfolio
diversified across a number of different technology industries. Our investments
in technology companies benefited the Fund greatly because of the excellent
performance among most technology firms during the reporting period. Successful
stock selection added further to the Fund's returns, as can be seen in the
Fund's outperformance of its benchmark index, the Pacific Stock Exchange (PSE)
Technology Index. Finally, also contributing to the Fund's performance during
the reporting period were investments in initial public offerings, which rose
rapidly following their launch into the stock market.
5
<PAGE> 7
THE MANAGERS' INVESTMENT APPROACH
WE INVEST THE FUND'S ASSETS IN COMPANIES THAT RELY EXTENSIVELY ON TECHNOLOGY,
SCIENCE, OR COMMUNICATIONS IN THEIR PRODUCT DEVELOPMENT OR OPERATIONS.
REGARDLESS OF MARKET CONDITIONS, WE FOLLOW A CONSISTENT INVESTMENT STRATEGY IN
MANAGING THE FUND: TO LOOK FOR STOCKS WITH RISING EARNINGS EXPECTATIONS AND
RISING VALUATIONS. WE INVEST THE FUND'S ASSETS IN THOSE COMPANIES WE BELIEVE
HAVE THE POTENTIAL TO OUTPERFORM EARNINGS EXPECTATIONS, AND WE SELL STOCKS IF
THE COMPANIES' EARNINGS ESTIMATES OR VALUATIONS ARE DECLINING. WE MANAGE THE
FUND USING A "BOTTOM UP" APPROACH, MEANING THAT WE EVALUATE EACH COMPANY
INDIVIDUALLY BEFORE DECIDING TO INVEST.
During the six months ended February 29, 2000, the Fund returned 156.31
percent(1) (Class A shares at net asset value; if the sales charge of 5.75
percent were included, the return would have been lower). By comparison, the PSE
Technology Index, a price-weighted, broad-based index composed of 100 listed and
over-the-counter technology stocks from 15 different industries, returned 86.46
percent. This index is a statistical composite that doesn't include any
commissions or fees that would be paid by an investor purchasing the securities
it represents. Such costs would lower the performance of the index. Also, keep
in mind that you can't invest directly in an index.
Please refer to the chart and footnotes on page 3 for additional Fund
performance results. Past performance does not guarantee future results.
Q WHAT WERE SOME OF THE
INVESTMENTS THAT MOST HELPED THE FUND'S PERFORMANCE?
A Increasingly, companies have been
reengineering their business practices to take advantage of the Internet's cost
efficiencies, leading to many investment opportunities in technology. We
continued to invest the Fund's assets in businesses that are creating the
infrastructure supporting the Internet. At the end of the reporting period, the
Fund's largest holding and strongest contributor to performance was JDS
Uniphase, which produces networking equipment to transmit data over the
Internet. A similar stock that benefited performance was SDL, which develops
semiconductor lasers and other fiber-optic products.
(1) The Fund's performance during the six-month reporting period can largely be
attributed to investments in the technology sector, which performed favorably
during that time. This performance was achieved during a rising market, and
there is no guarantee that this performance record or the circumstances leading
to it can ever be repeated. As the Fund expects to have a substantial portion of
its assets invested in stocks of emerging growth companies, the Fund will be
subject to more volatility and erratic movements than will the market in
general.
6
<PAGE> 8
Other technology companies that helped Fund performance included the
following:
- - Broadvision and BEA Systems, software developers whose products enhance
Internet-based commerce;
- - Veritas Software and Network Appliance, makers of products that help enhance
access to stored electronic data;
- - VeriSign, which helps enable secure data transmission over the Internet; and
- - Broadcom, a semiconductor manufacturer that facilitates electronic data
transmission to homes and businesses.
Of course, not all of the stocks in the Fund performed as favorably, nor is
there any guarantee that any of the stocks mentioned will continue to perform as
well in the future. For additional Fund portfolio highlights, please refer to
page 4.
Q DID ANY STOCKS HURT THE
FUND'S PERFORMANCE?
A The Fund's performance was
strong during the reporting period, and more of our investments were winners
than losers. Nevertheless, some of the stocks we selected for the Fund performed
more poorly than we had hoped. The stock whose performance contributed most
negatively to total return was Hi/fn, which makes semiconductors enabling data
compression and encryption. The company's stock performance suffered in the
fourth quarter of 1999 because of decreased spending from two of Hi/fn's largest
customers.
Other companies whose poor performance hurt the Fund during the reporting
period included
- - Doubleclick, whose stock declined when investors became concerned that the
government would investigate how one of Doubleclick's corporate acquisitions
would affect consumer privacy;
- - Unisys, which experienced revenue shortfalls stemming from a loss of
government contracts and year 2000 concerns; and
- - Intuit, which saw its stock fall in response to lower-than- anticipated
earnings and fears of increased competition.
All of these stocks were eliminated from the Fund during the reporting
period.
Q WHAT IS YOUR OUTLOOK FOR
THE FUND?
A We remain optimistic and believe
that the Internet is a dynamic force that continues to drive dramatic change in
how companies conduct business. We believe that this change will create many
unique and exciting investment opportunities. Against this positive outlook for
company fundamentals, we remain mindful of stock valuations. The higher
valuations get, the greater the negative impact on the Fund if investors were to
lose their enthusiasm for growth stocks, causing valuations to fall.
7
<PAGE> 9
Our outlook also depends in part on whether the Federal Reserve continues to
increase interest rates to help limit inflationary pressures. Inflation
continues to be moderate, but it is uncertain how long this trend will continue,
particularly if rising oil prices contribute to a general rise in the cost of
living. A sharp rise in wages could also spur the Fed to continue raising
interest rates. Although recent rate increases have had only a moderate effect
on stock prices, additional rate hikes could have a more substantial impact.
8
<PAGE> 10
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
BLUE-CHIP STOCKS: Stocks of large, well-known companies that have a long record
of growth. Examples of blue-chip stocks include General Motors, International
Business Machines (IBM), Coca-Cola, and General Electric.
BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load"). In most
cases, there is no redemption fee (contingent deferred sales charge).
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
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.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing this
amount by the number of shares outstanding. The NAV does not include any initial
or contingent deferred sales charge.
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.
9
<PAGE> 11
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR FUND AT THE END OF THE
REPORTING PERIOD.
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCK 92.5%
COMMUNICATIONS 5.2%
Adelphia Business Solutions, Inc. (a)....................... 100,000 $ 5,137,500
Airgate PCS, Inc. (a)....................................... 16,200 1,587,600
Alamosa PCS Holdings, Inc. (a).............................. 28,900 1,047,625
Amdocs Ltd. (a)............................................. 275,000 20,401,562
Deltathree.com, Inc. (a).................................... 15,000 628,125
Illuminet Holdings, Inc. (a)................................ 4,900 362,600
IMPSAT Fiber Networks, Inc. (a)............................. 3,800 139,413
ITXC Corp. (a).............................................. 13,200 1,082,400
Jazztel PLC (ADR - United Kingdom) (a)...................... 5,100 600,525
McLeodUSA, Inc. (a)......................................... 175,000 15,400,000
Metromedia Fiber Network, Inc. (a).......................... 250,000 17,972,656
MRV Communications, Inc. (a)................................ 50,000 7,840,625
Nextel Communications, Inc. (a)............................. 65,000 8,888,750
NEXTLINK Communications, Inc. (a)........................... 75,000 8,264,062
Powerwave Technologies, Inc. (a)............................ 65,000 10,391,875
VoiceStream Wireless Corp. (a).............................. 85,000 11,310,312
--------------
111,055,630
--------------
COMMUNICATIONS TECHNOLOGY--EQUIPMENT 10.4%
Advanced Fibre Communications, Inc. (a)..................... 225,000 15,328,125
Aether Systems, Inc. (a).................................... 9,000 2,325,375
Airnet Communications Corp. (a)............................. 16,000 936,000
C-COR.net Corp. (a)......................................... 100,000 4,471,875
CIENA Corp. (a)............................................. 55,000 8,789,687
Comverse Technology, Inc. (a)............................... 75,000 14,765,625
Corning, Inc................................................ 95,000 17,860,000
Ditech Communications Corp. (a)............................. 70,000 7,647,500
Efficient Networks, Inc. (a)................................ 75,000 12,093,750
eOn Communications Corp. (a)................................ 7,700 174,213
Ericsson (L M) Telephone Co., Class B (ADR - Sweden)........ 65,000 6,240,000
Gemstar International Group Ltd. (a)........................ 150,000 11,381,250
GigaMedia Ltd. (Taiwan) (a)................................. 4,200 294,263
Harmonic, Inc. (a).......................................... 150,000 20,540,625
Motorola, Inc............................................... 88,000 15,004,000
Next Level Communications, Inc. (a)......................... 7,100 954,950
Nokia Oyg Corp. (ADR - Finland)............................. 65,000 12,890,312
Nortel Networks Corp........................................ 130,000 14,495,000
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMUNICATIONS TECHNOLOGY--EQUIPMENT (CONTINUED)
Phone.com, Inc. (a)......................................... 40,000 $ 5,585,000
Polycom, Inc. (a)........................................... 60,000 6,978,750
Proxim, Inc. (a)............................................ 50,000 7,175,000
QUALCOMM, Inc. (a).......................................... 200,000 28,487,500
Scientific-Atlanta, Inc..................................... 80,000 8,215,000
Telaxis Communications Corp. (a)............................ 7,700 601,081
--------------
223,234,881
--------------
COMPUTERS--HARDWARE 5.0%
Brocade Communications Systems, Inc. (a).................... 125,000 36,140,625
Copper Mountain Networks, Inc. (a).......................... 150,000 13,040,625
Emulex Corp. (a)............................................ 200,000 32,000,000
Juniper Networks, Inc. (a).................................. 80,000 21,945,000
Symbol Technologies, Inc.................................... 50,000 4,756,250
--------------
107,882,500
--------------
COMPUTERS--NETWORKING 5.0%
Advanced Digital Information Corp. (a)...................... 110,000 9,968,750
Cisco Systems, Inc. (a)..................................... 80,000 10,575,000
EMC Corp. (a)............................................... 45,000 5,355,000
Foundry Networks, Inc. (a).................................. 40,000 5,587,500
Network Appliance, Inc. (a)................................. 205,000 38,693,750
Radisys Corp. (a)........................................... 60,000 2,940,000
Redback Networks, Inc. (a).................................. 30,000 8,955,000
SanDisk Corp. (a)........................................... 100,000 8,900,000
Sun Microsystems, Inc. (a).................................. 150,000 14,287,500
Turnstone Systems, Inc. (a)................................. 5,800 1,113,963
--------------
106,376,463
--------------
COMPUTERS--SERVICES 16.2%
724 Solutions, Inc. (a)..................................... 19,200 3,614,400
Be Free, Inc. (a)........................................... 26,200 2,367,825
BroadVision, Inc. (a)....................................... 150,000 37,884,375
Business Objects S.A. (ADR - France) (a).................... 170,000 19,528,750
Cacheflow, Inc. (a)......................................... 3,500 426,125
Centra Software, Inc. (a)................................... 3,900 143,813
CMGI Inc. (a)............................................... 40,000 5,182,500
CNET Networks, Inc. (a)..................................... 60,000 4,012,500
Eloquent, Inc. (a).......................................... 10,100 339,613
eMerge Interactive, Inc. (a)................................ 8,200 435,625
Exodus Communications, Inc. (a)............................. 150,000 21,356,250
FirePond, Inc. (a).......................................... 14,800 1,442,075
Go2Net, Inc. (a)............................................ 50,000 4,350,000
GRIC Communications, Inc. (a)............................... 17,200 1,206,150
HomeStore.com, Inc. (a)..................................... 12,300 840,244
Inforte Corp. (a)........................................... 8,100 651,544
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMPUTERS--SERVICES (CONTINUED)
InfoSpace.com, Inc. (a)..................................... 200,000 $ 43,400,000
Inktomi Corp. (a)........................................... 125,000 17,140,625
Intertrust Technologies Corp. (a)........................... 23,000 1,953,562
Kana Communications, Inc. (a)............................... 70,000 9,975,000
Keynote Systems, Inc. (a)................................... 15,400 2,521,750
Lante Corp. (a)............................................. 13,900 1,108,525
Macromedia, Inc. (a)........................................ 90,000 7,779,375
MedicaLogic, Inc. (a)....................................... 18,100 671,963
Mercury Interactive Corp. (a)............................... 175,000 16,865,625
Metasolv Software, Inc. (a)................................. 5,800 511,125
Neoforma.com, Inc. (a)...................................... 11,600 690,200
NetRatings, Inc. (a)........................................ 16,200 580,163
Network Solutions, Inc. (a)................................. 75,500 24,344,031
Niku Corp. (a).............................................. 16,700 1,152,300
Onvia.com, Inc. (a)......................................... 31,400 659,400
Organic, Inc. (a)........................................... 6,900 235,463
Portal Software, Inc. (a)................................... 200,000 15,025,000
RealNetworks, Inc. (a)...................................... 100,000 7,031,250
S1 Corp. (a)................................................ 50,000 5,031,250
Scient Corp. (a)............................................ 60,000 4,245,000
Sciquest.com, Inc. (a)...................................... 14,600 1,093,175
VeriSign, Inc. (a).......................................... 125,000 31,625,000
VERITAS Software Corp. (a).................................. 145,000 28,691,875
Viant Corp. (a)............................................. 40,000 1,517,500
Vicinity Corp. (a).......................................... 10,200 413,100
Wireless Facilities, Inc. (a)............................... 6,600 818,400
Yahoo!, Inc. (a)............................................ 110,000 17,565,625
--------------
346,428,071
--------------
COMPUTERS--SOFTWARE 16.6%
Apropos Technology, Inc. (a)................................ 8,400 402,150
Ariba, Inc. (a)............................................. 90,000 23,805,000
Art Technology Group, Inc. (a).............................. 75,000 10,837,500
Bea Systems, Inc. (a)....................................... 250,000 31,640,625
Caminus Corp. (a)........................................... 20,700 489,038
Check Point Software Technologies Ltd. (a).................. 200,000 40,787,500
Citrix Systems, Inc. (a).................................... 230,000 24,250,625
Clarus Corp. (a)............................................ 75,000 8,746,875
Delano Technology Corp. (a)................................. 4,100 196,031
DigitalThink, Inc. (a)...................................... 21,000 855,750
Extensity, Inc. (a)......................................... 9,400 681,500
I2 Technologies, Inc. (a)................................... 150,000 24,525,000
Informatica Corp. (a)....................................... 30,000 5,145,000
Interwoven, Inc. (a)........................................ 40,000 5,980,000
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMPUTERS--SOFTWARE (CONTINUED)
ISS Group, Inc. (a)......................................... 100,000 $ 10,500,000
MatrixOne, Inc. (a)......................................... 19,200 480,000
Mediaplex, Inc. (a)......................................... 23,900 1,995,650
Micromuse, Inc. (a)......................................... 200,000 28,362,500
MicroStrategy, Inc. (a)..................................... 100,000 13,906,250
Net.Genesis Corp. (a)....................................... 10,500 189,000
NetIQ Corp. (a)............................................. 75,000 5,034,375
OpenTv Corp. (a)............................................ 40,000 7,400,000
Oracle Corp. (a)............................................ 75,000 5,568,750
Peregrine Systems, Inc. (a)................................. 250,000 13,656,250
PC-Tel, Inc. (a)............................................ 11,100 754,800
Proxicom, Inc. (a).......................................... 157,000 6,574,375
Quest Software, Inc. (a).................................... 35,000 4,081,875
Siebel Systems, Inc. (a).................................... 200,000 27,737,500
Tibco Software, Inc. (a).................................... 195,000 25,545,000
Vignette Corp............................................... 100,000 23,050,000
WebMethods, Inc. (a)........................................ 4,200 1,293,862
Witness Systems, Inc. (a)................................... 8,100 297,675
--------------
354,770,456
--------------
CONSUMER SERVICES 0.4%
TMP Worldwide, Inc. (a)..................................... 70,000 9,515,625
--------------
ELECTRONICS--MANUFACTURING 1.6%
AVX Corp.................................................... 125,000 7,937,500
CTS Corp.................................................... 50,000 3,225,000
Jabil Circuit, Inc. (a)..................................... 30,000 2,083,125
KEMET Corp. (a)............................................. 138,000 8,478,375
Microchip Technology, Inc. (a).............................. 60,000 3,746,250
St Assembly Test Services Ltd (ADR - Singapore)............. 18,900 907,200
Zomax, Inc. (a)............................................. 150,000 7,340,625
--------------
33,718,075
--------------
ELECTRONICS--SEMICONDUCTORS 21.3%
Amkor Technology, Inc. (a).................................. 35,000 1,817,812
ANADIGICS, Inc. (a)......................................... 50,000 6,750,000
Analog Devices, Inc. (a).................................... 300,000 47,100,000
Applied Micro Circuits Corp. (a)............................ 100,000 27,506,250
ARM Holdings PLC (ADR - United Kingdom) (a)................. 35,000 8,176,875
Broadcom Corp. (a).......................................... 225,000 44,409,375
Chartered Semiconductor Manufacturing Ltd.
(ADR - Singapore) (a)..................................... 100,000 8,825,000
Conexant Systems, Inc. (a).................................. 185,000 18,176,250
Cree Research, Inc. (a)..................................... 50,000 9,393,750
Cypress Semiconductor Corp. (a)............................. 150,000 6,843,750
GlobeSpan Semiconductor, Inc. (a)........................... 120,000 9,060,000
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
ELECTRONICS -- SEMICONDUCTORS (CONTINUED)
Integrated Device Technology, Inc. (a)...................... 125,000 $ 4,609,375
Intel Corp.................................................. 125,000 14,125,000
Intersil Holding Corp. (a).................................. 35,700 2,119,687
JDS Uniphase Corp. (a)...................................... 197,840 52,155,570
LSI Logic Corp. (a)......................................... 340,000 21,781,250
Micrel, Inc. (a)............................................ 175,000 20,168,750
National Semiconductor Corp. (a)............................ 125,000 9,390,625
PMC Sierra, Inc. (a)........................................ 40,000 7,722,500
QLogic Corp. (a)............................................ 100,000 15,600,000
Quantum Effect Devices, Inc. (a)............................ 1,900 183,113
RF Micro Devices, Inc. (a).................................. 75,000 10,373,437
SDL, Inc. (a)............................................... 125,000 51,250,000
Semtech Corp. (a)........................................... 70,000 4,375,000
Silicon Image, Inc. (a)..................................... 8,500 833,000
Texas Instruments, Inc...................................... 60,000 9,990,000
TranSwitch Corp. (a)........................................ 75,000 8,812,500
TriQuint Semiconductor, Inc. (a)............................ 150,000 17,812,500
Virata Corp. (a)............................................ 11,700 1,725,750
Vitesse Semiconductor Corp. (a)............................. 30,000 3,114,375
Xilinx, Inc. (a)............................................ 90,000 7,177,500
Zoran Corp. (a)............................................. 100,000 5,100,000
--------------
456,478,994
--------------
EQUIPMENT -- SEMICONDUCTORS 4.9%
Applied Materials, Inc. (a)................................. 125,000 22,867,187
ASM Lithography Holding N.V. (Netherlands) (a).............. 100,000 12,812,500
Credence Systems Corp. (a).................................. 100,000 13,325,000
Helix Technology Corp....................................... 70,000 4,978,750
KLA - Tencor Corp. (a)...................................... 200,000 15,587,500
Lam Research Corp. (a)...................................... 100,000 15,612,500
Novellus Systems, Inc. (a).................................. 200,000 11,862,500
Teradyne, Inc. (a).......................................... 85,000 7,395,000
Therma-Wave, Inc. (a)....................................... 19,400 780,850
--------------
105,221,787
--------------
HEALTHCARE 5.7%
Abgenix, Inc. (a)........................................... 10,000 3,221,250
Affymetrix, Inc. (a)........................................ 55,000 15,929,375
Antigenics, Inc. (a)........................................ 9,700 436,500
Biogen, Inc. (a)............................................ 30,000 3,238,125
Caliper Technologies Corp. (a).............................. 22,300 3,965,219
Diversa Corp. (a)........................................... 10,500 1,401,750
Human Genome Sciences, Inc. (a)............................. 15,000 3,273,750
Immunex Corp. (a)........................................... 100,000 19,743,750
Maxygen, Inc. (a)........................................... 40,000 5,865,000
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HEALTHCARE (CONTINUED)
MedImmune, Inc. (a)......................................... 40,000 $ 7,940,000
Millennium Pharmaceuticals, Inc. (a)........................ 50,000 13,006,250
PE Corp - PE Biosystems Group............................... 180,000 18,990,000
Protein Design Labs, Inc. (a)............................... 40,000 10,007,500
QLT Phototherapeutics, Inc. (a)............................. 90,000 6,423,750
Sequenom, Inc. (a).......................................... 23,790 2,973,750
Symyx Technologies, Inc. (a)................................ 12,600 693,000
Vical, Inc. (a)............................................. 76,000 4,488,750
--------------
121,597,719
--------------
PHOTOGRAPHY/IMAGING 0.2%
Zebra Technologies Corp. (a)................................ 50,000 3,328,125
--------------
TOTAL LONG-TERM INVESTMENTS 92.5%
(Cost $1,037,872,381)............................................ 1,979,608,326
--------------
SHORT-TERM INVESTMENTS 7.2%
REPURCHASE AGREEMENT 4.9%
Warburg Dillon Reed ($103,820,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 02/29/00, to
be sold on 03/01/00 at $103,836,611)................................. 103,820,000
U.S. GOVERNMENT AGENCY OBLIGATIONS 2.3%
Federal Home Loan Bank Consolidated Discount Notes ($50,000,000 par,
yielding 5.72%, 03/01/00 maturity)................................... 50,000,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $153,820,000).............................................. 153,820,000
--------------
TOTAL INVESTMENTS 99.7%
(Cost $1,191,692,381)............................................ 2,133,428,326
OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%.......................... 5,435,927
--------------
NET ASSETS 100.0%................................................... $2,138,864,253
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 29, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,191,692,381)..................... $2,133,428,326
Cash........................................................ 11,787
Receivables:
Fund Shares Sold.......................................... 65,705,069
Investments Sold.......................................... 15,075,077
Interest.................................................. 16,611
Dividends................................................. 14,970
Other....................................................... 450
--------------
Total Assets............................................ 2,214,252,290
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 65,310,593
Fund Shares Repurchased................................... 7,450,389
Investment Advisory Fee................................... 1,232,908
Distributor and Affiliates................................ 1,037,651
Accrued Expenses............................................ 355,188
Trustees' Deferred Compensation and Retirement Plans........ 1,308
--------------
Total Liabilities....................................... 75,388,037
--------------
NET ASSETS.................................................. $2,138,864,253
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,206,633,517
Net Unrealized Appreciation................................. 941,735,945
Accumulated Net Realized Loss............................... (3,240,417)
Accumulated Net Investment Loss............................. (6,264,792)
--------------
NET ASSETS.................................................. $2,138,864,253
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $672,784,207 and 23,502,267 shares of
beneficial interest issued and outstanding)............. $ 28.63
Maximum sales charge (5.75%* of offering price)......... 1.75
--------------
Maximum offering price to public........................ $ 30.38
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,145,221,903 and 40,180,692 shares of
beneficial interest issued and outstanding)............. $ 28.50
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $320,858,143 and 11,254,389 shares of
beneficial interest issued and outstanding)............. $ 28.51
==============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
16
<PAGE> 18
Statement of Operations
For the Six Months Ended February 29, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 1,666,325
Dividends................................................... 69,612
------------
Total Income............................................ 1,735,937
------------
EXPENSES:
Investment Advisory Fee..................................... 3,625,218
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $285,253, $2,331,488 and $566,898,
respectively)............................................. 3,183,639
Shareholder Services........................................ 740,853
Custody..................................................... 114,496
Legal....................................................... 9,104
Trustees' Fees and Related Expenses......................... 8,372
Other....................................................... 320,242
------------
Total Expenses.......................................... 8,001,924
Less Credits Earned on Cash Balances.................... 2,562
------------
Net Expenses............................................ 7,999,362
------------
NET INVESTMENT LOSS......................................... $ (6,263,425)
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (1,415,069)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 25,307,608
End of the Period......................................... 941,735,945
------------
Net Unrealized Appreciation During the Period............... 916,428,337
------------
NET REALIZED AND UNREALIZED GAIN............................ $915,013,268
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $908,749,843
============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
Statement of Changes in Net Assets
For the Six Months Ended February 29, 2000 and the Period July 26, 1999
(Commencement of Investment Operations) through August 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
JULY 26, 1999
(COMMENCEMENT OF
SIX MONTHS ENDED INVESTMENT OPERATIONS)
FEBRUARY 29, 2000 TO AUGUST 31, 1999
-------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss....................... $ (6,263,425) $ (325,266)
Net Realized Loss......................... (1,415,069) (1,825,348)
Net Unrealized Appreciation During the
Period.................................. 916,428,337 25,307,608
-------------- ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.............................. 908,749,843 23,156,994
-------------- ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................. 1,115,323,026 220,058,816
Cost of Shares Repurchased................ (127,200,254) (1,324,172)
-------------- ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................ 988,122,772 218,734,644
-------------- ------------
TOTAL INCREASE IN NET ASSETS.............. 1,896,872,615 241,891,638
NET ASSETS:
Beginning of the Period................... 241,991,638 100,000
-------------- ------------
End of the Period (Including accumulated
net investment loss of $6,264,792 and
$1,367, respectively)................... $2,138,864,253 $241,991,638
============== ============
</TABLE>
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. (UNAUDITED)
<TABLE>
<CAPTION>
JULY 26, 1999
(COMMENCEMENT OF
SIX MONTHS ENDED INVESTMENT OPERATIONS)
FEBRUARY 29, 2000 TO AUGUST 31, 1999
CLASS A SHARES -------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD... $11.173 $10.000
------- -------
Net Investment Loss...................... (0.054) (0.009)
Net Realized and Unrealized Gain......... 17.507 1.182
------- -------
Total from Investment Operations........... 17.453 1.173
------- -------
NET ASSET VALUE, END OF THE PERIOD......... $28.626 $11.173
======= =======
Total Return (a)........................... 156.31%* 11.70%*
Net Assets at End of the Period (In
millions)................................ $ 672.8 $ 49.7
Ratio of Expenses to Average Net Assets.... 1.62% 1.45%
Ratio of Net Investment Loss to Average Net
Assets................................... (1.14%) (1.03%)
Portfolio Turnover......................... 29%* 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
19
<PAGE> 21
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED. (UNAUDITED)
<TABLE>
<CAPTION>
JULY 26, 1999
(COMMENCEMENT OF
SIX MONTHS ENDED INVESTMENT OPERATIONS)
FEBRUARY 29, 2000 TO AUGUST 31, 1999
CLASS B SHARES -------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......... $11.163 $10.000
------- -------
Net Investment Loss......................... (0.101) (.017)
Net Realized and Unrealized Gain............ 17.440 1.180
------- -------
Total from Investment Operations.............. 17.339 1.163
------- -------
NET ASSET VALUE, END OF THE PERIOD............ $28.502 $11.163
======= =======
Total Return (a).............................. 155.38%* 11.60%*
Net Assets at End of the Period (In
millions)................................... $1,145.2 $ 164.3
Ratio of Expenses to Average Net Assets....... 2.41% 2.21%
Ratio of Net Investment Loss to Average Net
Assets...................................... (1.94%) (1.79%)
Portfolio Turnover............................ 29%* 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
20
<PAGE> 22
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIOD INDICATED. (UNAUDITED)
<TABLE>
<CAPTION>
JULY 26, 1999
(COMMENCEMENT OF
SIX MONTHS ENDED INVESTMENT OPERATIONS)
FEBRUARY 29, 2000 TO AUGUST 31, 1999
CLASS C SHARES -------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD... $11.163 $10.000
------- -------
Net Investment Loss...................... (0.088) (.016)
Net Realized and Unrealized Gain......... 17.435 1.179
------- -------
Total from Investment Operations........... 17.347 1.163
------- -------
NET ASSET VALUE, END OF THE PERIOD......... $28.510 $11.163
======= =======
Total Return (a)........................... 155.47%* 11.60%*
Net Assets at End of the Period (In
millions)................................ $ 320.9 $ 28.0
Ratio of Expenses to Average Net Assets.... 2.45% 2.21%
Ratio of Net Investment Loss to Average Net
Assets................................... (1.97%) (1.79%)
Portfolio Turnover......................... 29%* 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
21
<PAGE> 23
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Investments in securities listed on a securities exchange
are valued at their 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 is
considered to approximate 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 purchase and sell securities on a "when-issued" or "delayed
delivery" basis, with settlement to occur at a later date. The value of the
security so purchased is subject to market fluctuations during this period. The
Fund will maintain, in a segregated account with its custodian, assets having an
aggregate value at least equal to the amount of the when-issued or delayed
delivery purchase commitments until payment is made. At February 29, 2000, there
were no when-issued or delayed delivery purchase commitments.
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
22
<PAGE> 24
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
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 maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.
C. INCOME AND EXPENSE Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Discounts are accreted over the
life of each applicable security. Premiums on debt securities are not amortized.
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, 1999, the Fund had an accumulated capital loss carryforward for
tax purposes of $1,825,348 which will expire on August 31, 2007.
At February 29, 2000, for federal income tax purposes, cost of long- and
short-term investments is $1,191,741,667, the aggregate gross unrealized
appreciation is $946,744,589 and the aggregate gross unrealized depreciation is
$5,057,930, resulting in net unrealized appreciation on long- and short-term
investments of $941,686,659.
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.
F. EXPENSE REDUCTIONS During the six months ended February 29, 2000, the Fund's
custody fee was reduced by $2,562 as a result of credits earned on overnight
cash balances.
23
<PAGE> 25
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
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 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 six months ended February 29, 2000, the Fund recognized expenses of
approximately $8,300 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 six months ended February 29, 2000, the Fund recognized expenses of
approximately $16,500 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 six months ended February
29, 2000, the Fund recognized expenses of approximately $534,700. 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 February 29, 2000, Van Kampen owned 4,000 shares of Class A, 3,000 shares
of Class B, and 3,000 shares of Class C.
24
<PAGE> 26
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
3. CAPITAL TRANSACTIONS
At February 29, 2000, capital aggregated $405,136,890, $612,576,174 and
$188,920,453 for Classes A, B and C, respectively. For the six months ended
February 29, 2000, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A.............................................. 22,656,140 $ 432,055,984
Class B.............................................. 27,377,383 501,414,064
Class C.............................................. 9,669,893 181,852,978
---------- --------------
Total Sales............................................ 59,703,416 $1,115,323,026
========== ==============
Repurchases:
Class A.............................................. (3,603,479) $ (71,958,034)
Class B.............................................. (1,911,427) (37,074,698)
Class C.............................................. (924,540) (18,167,522)
---------- --------------
Total Repurchases...................................... (6,439,446) $ (127,200,254)
========== ==============
</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 and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). 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 six months ended February 29, 2000 and
the
25
<PAGE> 27
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
period ended August 31, 1999, no Class B shares converted to Class A shares.
Class C shares do not possess a conversion feature. 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
--------------------------
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 six months ended February 29, 2000, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A shares of
approximately $1,652,800 and CDSC on redeemed shares of approximately $721,200.
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 $1,084,572,145 and $236,061,343,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or to generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising a call
option contract or taking delivery of a security underlying a futures contract.
In these instances, the recognition of gain or loss is postponed until the
disposal of the security underlying the option or futures contract.
The Fund may invest in futures contracts, a type of derivative. A futures
contract is an agreement involving the delivery of a particular asset on a
specified
26
<PAGE> 28
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
future date at an agreed upon price. Upon entering into futures contracts, the
Fund maintains, in a segregated account with its custodian, securities with a
value equal to its obligation under the futures contracts. During the period the
futures contract is open, payments are received from or made to the broker based
upon changes in the value of the contract (the variation margin). There were no
transactions in futures contracts for the six months ended February 29, 2000.
6. 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 six months ended February 29, 2000, are payments retained by Van Kampen
of approximately $1,669,300.
7. 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, has 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.
27
<PAGE> 29
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
Small Cap Value
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
Global Fixed Income*
Global Franchise
Global Government Securities*
Global Managed Assets*
International Magnum
Latin American
Strategic Income
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- - call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- - e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
28
<PAGE> 30
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
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*(1)
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
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, 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 ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Drive
Chicago, Illinois 60601
(1) Appointed Executive Vice President and Chief Investment Officer effective
April 3, 2000.
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
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 charge, and
other pertinent data. After August 31,
2000, the report, if used with prospective investors, must be accompanied by a
quarterly performance update, if applicable.
29
