UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02424
Van Kampen Emerging Growth Fund
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 8/31
Date of reporting period: 8/31/03
Item 1. Report to Shareholders
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Emerging Growth Fund performed during the annual period. The portfolio
management team will provide an overview of the market conditions and
discuss some of the factors that affected investment performance during
the reporting period. In addition, this report includes the fund's
financial statements and a list of fund investments as of August 31,
2003.
This material must be preceded or accompanied by a prospectus for the
fund being offered.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the fund will achieve its investment
objective. The fund is subject to market risk, which is the possibility
that the market values of securities owned by the fund will decline and,
therefore, the value of the fund shares may be less than what you paid
for them. Accordingly, you can lose money investing in this fund. Please
see the prospectus for more complete information on investment risks.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
Performance Summary
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Russell 1000(R)
Growth Index from 8/31/1993 through 8/31/2003. Class A shares, adjusted for
sales charges.
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN EMERGING GROWTH
FUND RUSSELL 1000(R) GROWTH
-------------------------- ----------------------
8/93 9427 10000
9850 9926
12/93 9828 10308
9337 9853
8645 9751
9220 10502
12/94 9128 10578
9878 11586
11108 12724
12772 13879
12/95 13201 14511
14102 15290
15530 16263
16214 16848
12/96 15566 17866
14270 17962
16984 21359
20047 22964
12/97 18887 23313
21893 26846
23030 28064
20074 25515
12/98 25446 32337
29185 34393
30822 35716
32132 34408
12/99 51839 43060
65206 46128
57641 44882
61546 42469
12/00 45948 33404
35197 26422
35797 28647
28258 23086
12/01 30974 26582
29305 25894
25155 21059
21291 17890
12/02 20683 19170
20800 18965
23523 21678
8/03 24943 22771
</Table>
Source: Confluence Technologies Inc. and Bloomberg.
<Table>
<Caption>
A SHARES B SHARES C SHARES D SHARES R SHARES
since 10/2/70 since 4/20/92 since 7/6/93 since 10/17/00 since 10/1/02
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES W/O SALES
TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 15.26% 15.05% 11.87% 11.87% 9.81% 9.81% -25.10% -25.10% 13.69%
10-year 10.22 9.57 9.70 9.70 9.38 9.38 -- -- --
5-year 6.62 5.37 5.81 5.60 5.83 5.83 -- -- --
1-year 10.08 3.74 9.24 4.24 9.33 8.33 10.39 10.39 --
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and fund shares, when redeemed, may be worth
more or less than their original cost. The returns shown in this report do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Performance of share classes
will vary due to differences in sales charges and expenses.
As a result of recent market activity, current performance may vary from the
figures shown. For more up-to-date information, please visit vankampen.com or
speak with your financial advisor. Average annual total return with sales
charges includes payment of the maximum sales charge of 5.75 percent for Class A
shares, a contingent deferred sales charge of 5.00 percent for Class B shares
(in year one and declining to zero after year five), a contingent deferred sales
charge of 1.00 percent for Class C shares in year one, and combined Rule 12b-1
fees and service fees of up to 0.25 percent for Class A shares and 1.00 percent
for Class B and C shares. The since inception and 10-year returns for Class B
shares reflect the conversion of Class B shares into Class A shares six years
after purchase. See footnote 3 in the Notes to Financial Statements for
additional information. Certain non-recurring payments were made to Class C
1
shares, resulting in an increase to the one-year return of 0.03%. Class D and R
Shares are available for purchase exclusively by investors of tax-exempt
retirement plans. Class D shares include Profit Sharing, 401(k), money purchase
pension and defined benefit plans of Morgan Stanley DW Inc. (Morgan Stanley) or
any of its subsidiaries for the benefit of certain employees of Morgan Stanley
and its subsidiaries and are offered without any sales charges on purchases or
sales and does not include combined 12b-1 fees and service fees. Class R shares
include 401(k) plans, 457 plans, defined benefit plans, profit sharing and money
purchase pension plans, non-qualified deferred compensation plans, and
employer-sponsored 403(b) plans. Class R shares are offered without any sales
charges on purchases or sales. The combined Rule 12b-1 fees and service fees for
Class R shares are up to 0.50%. Figures shown above assume reinvestment of all
dividends and capital gains.
The Russell 1000(R) Growth Index is generally representative of the U.S. market
for large-capitalization stocks. It contains securities that growth managers
typically select from the Russell 1000(R) Index. Indexes are unmanaged and do
not include any sales charges or fees. Such costs would lower performance. It is
not possible to invest directly into an index.
2
Fund Report
FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2003
Van Kampen Emerging Growth Fund is managed by the adviser's Multi-Cap
Growth team. Current members include(1) Gary Lewis, Managing Director;
Dudley Brickhouse, Executive Director; Janet Luby, Executive Director;
David Walker, Executive Director; Matthew Hart, Vice President; and Scott
Miller, Associate. The following discussion reflects their views on the
fund's performance.
Q. BEFORE YOU DISCUSS HOW THE FUND PERFORMED, PLEASE DESCRIBE THE
OVERALL MARKET ENVIRONMENT.
A. Early in the period, mixed economic signals and the threat of war with
Iraq kept investors subdued about the market's prospects. In fact, in
October 2002, major stock indexes slumped to 12-month lows, and several
failed rallies were led by low-quality stocks with no growth prospects.
However, by late spring, stock markets began to turn upward. A
steepening yield curve provided an unfavorable backdrop for investors who
owned bonds, leading to a rotation into stocks. Because fixed-income
securities are interest-rate sensitive--generally speaking, as rates go
up, bond prices fall--stock investments became more attractive to
investors. Furthermore, many investors believed the Federal Reserve Board
would allow rates to creep up as the economy improved, maintaining the
appearance that stocks could be more favorable than bonds over the longer
term.
This backdrop, coupled with two consecutive quarters of stronger-
than-expected earnings reports, a swift conclusion to major combat in
Iraq, and an improving macroeconomic scenario, gave investors renewed
optimism for stocks. By August 2003, stock indexes were propelled to new
12-month highs.
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. Although the fund underperformed its benchmark index, the fund
performed better in this period than it had in some time.
-- Van Kampen Emerging Growth Fund returned 10.08 percent for the 12
months ended August 31, 2003. Performance figures are for Class A
shares, and assume the reinvestment of all distributions but do not
reflect the deduction of any applicable sales charges. If sales
charges were included, performance would be lower. Past performance
is no guarantee of future results.
(1)Team members may change at any time without notice.
3
-- The fund's benchmark index, the Russell 1000(R) Growth Index,
returned 14.08 percent for the same period.
See Performance Summary for additional information and index definitions.
Q. WHAT FACTORS HINDERED PERFORMANCE?
A. Many of the fund's holdings we discussed in the six-month report dated
February 28, 2002--Tenet Healthcare, Kohl's, Lockheed Martin, and
Northrop Grumman (all were sold during the period)--were also among the
largest detractors for the entire 12-month period. In addition to these
names, Kraft also fell short of our expectations.
-- TENET HEALTHCARE AND KOHL'S suffered from negative surprises. Shares
of Tenet, a hospital-chain operator, fell sharply when rumors of
fraudulent billing practices and a consequent government
investigation were announced. Discount department store Kohl's
reported lower-than-expected same-store sales. We sold both
positions because we viewed these negative changes as signs of
fundamental deterioration, but unfortunately, not before the stock
prices slipped.
-- NORTHROP GRUMMAN AND LOCKHEED MARTIN entered the reporting period
with investors' lofty expectations that these aerospace-and-defense
contractors would be the beneficiaries of increased U.S. military
activity. However, Northrop reported earnings in mid-October 2002
that reflected weakness in its ship-building business and increased
pension costs. The stock was no longer attractive based on our
criteria, and we sold the holding over the
<Table>
TOP 10 HOLDINGS AS OF 8/31/03 TOP 10 INDUSTRIES AS OF 8/31/03
eBay 4.0% Semiconductors 10.1%
Intel 3.5 Internet Retail 8.1
Amazon.com 2.7 Biotechnology 8.0
Gilead Sciences 2.4 Systems Software 5.7
Best Buy 2.3 Communications Equipment 4.7
Boston Scientific 2.2 Health Care Equipment 4.6
Wal-Mart Stores 2.1 Pharmaceuticals 4.3
Cisco Systems 2.1 Semiconductor Equipment 3.5
Veritas Software 2.0 Construction & Farm Machinery 3.3
Electronic Arts 2.0 Oil & Gas Equipment & Services 3.0
</Table>
Subject to change daily. All percentages are as of a percentage of long-term
investments. All information is provided for informational purposes only and
should not be deemed as a recommendation to buy the securities mentioned or
securities in the industries shown above. Morgan Stanley is a full-service
securities firm engaged in securities trading and brokerage activities,
investment banking, research and analysis, financing and financial advisory
services.
4
next two days. We maintained a position in Lockheed but, following
major combat in Iraq, we did not see the earnings momentum we had
expected, and we still viewed escalating pension costs as an ongoing
challenge for the industry. Lockheed's stock price had fallen during
the period, which took a toll on the fund's performance when we sold
the position.
-- KRAFT missed its earnings guidance in January because of
higher-than-expected pension expenses, a weak business environment,
and sluggish sales in Latin America. We did not expect the negative
news but viewed it as significant. We sold the entire position
within the next two days. Although the stock later rallied, Kraft's
stock underperformed the market during the reporting period.
Q. WHAT HELPED PERFORMANCE DURING THE REPORTING PERIOD?
A. We attribute the fund's improved performance to several factors:
-- AN IMPROVED ECONOMIC ENVIRONMENT. The fund's style was able to gain
traction, which is exactly what we expected. Historically, the
fund's style of investing, which seeks stocks with rising earnings
expectations and/or rising valuations, has performed better in a
strengthening economy than in a weakening economy. This period was
no exception.
-- MORE SUSTAINABLE TRENDS. With this economic tailwind, we were able
to find more companies that met our rising-earnings-expectations,
rising-valuations investment criteria. Although we remained as
selective as ever about which stocks belonged in the fund's
portfolio, the improving economy meant that companies were more
easily maintaining their earnings growth. On the valuations side, we
did see more stocks with rising valuations as the market conditions
improved. In the first half of the period, stocks with weak outlooks
that were losing money tended to be favored by investors. However,
as market conditions recovered, we began to see the higher-quality
stocks we favor--those stocks with good earnings prospects--rewarded
with higher valuations.
-- STRONG CONSUMER SPENDING DROVE GAINS IN SELECTED FUND HOLDINGS.(2)
Fueled by tax refunds, consumers shopped at eBay, Amazon.com, and
Best Buy, signed on for enhanced user services from Yahoo!, bought
personal computers that housed Intel's processing chips, and
registered for post-secondary education with Apollo Group, which
owns online-education site University of Phoenix.
-- INTERNET RETAIL AND BIOTECHNOLOGY HOLDINGS.(2) In addition to
benefiting from consumer dollars, online auctioneer eBay and
Internet retailer Amazon.com were also rewarded by investors for
(2)There is no guarantee that these stocks will continue to perform well or be
held by the fund in the future.
5
taking market share in their respective spaces. The companies
survived the dot-com bubble and have finally generated the revenue
and margin growth we believed their business models were capable of
producing. Internet portal Yahoo! was another strong holding in this
group. Strong products and a favorable regulatory environment helped
biotechnology companies show remarkable results during the period.
Portfolio holdings Amgen and Gilead Sciences gained market share
with successful new drugs, which sent their stock prices upward.
Amgen develops drugs for cancer, anemia, and inflammatory disorders
such as arthritis, and Gilead specializes in therapeutics for
life-threatening diseases.
Q. PLEASE HIGHLIGHT SIGNIFICANT POSITIONS IN THE FUND'S PORTFOLIO.
A. Among the fund's largest industry positions at the close of the period
were semiconductors, systems software, Internet retail, and
biotechnology.
-- SEMICONDUCTORS. The performance of semiconductor companies has
historically been strongly tied to economic recoveries, and once
again investors anticipating this event bid semiconductor stocks
higher. However, we were more attracted to a spur in demand for the
chips, driven by increases in corporate spending.
-- SYSTEMS SOFTWARE. The fund's systems software names included Veritas
Software, Microsoft, and Symantec. We liked Veritas' prospects
because of growing storage demand--not only the need for increased
capacity, but also for more efficient storage--in today's digital
society. A new PC cycle bodes well for Microsoft and Symantec, whose
software products are installed on many new PCs. In addition,
virus-protection software designer Symantec benefited from the
recent, high-profile computer-virus outbreaks, and its products are
sold on an annual subscription basis, providing for a relatively
steady revenue stream to the company.
-- INTERNET RETAIL AND BIOTECHNOLOGY. As discussed earlier, we found
selected stocks very attractive--including eBay, Amazon.com, and
Yahoo! in Internet retail, and Gilead and Amgen in biotechnology--
lending to sizable industry weights in the fund's portfolio.
Q. NOW THAT YOU'VE PROVIDED AN OVERVIEW OF THE FUND, DO YOU HAVE ANY
CLOSING THOUGHTS FOR SHAREHOLDERS?
A. Our goal remains to seek out the companies that have what we believe to
be the best growth prospects. The fund's strategy has been in place for
decades, and despite difficult market conditions in the past, our
commitment to the fund's strategy has not been deterred.
6
ANNUAL HOUSEHOLDING NOTICE
To reduce expenses, the fund attempts to eliminate duplicate mailings to
the same address. The fund delivers a single copy of certain shareholder
documents to investors who share an address, even if the accounts are
registered under different names. The fund's prospectus and shareholder
reports (including annual privacy notices) will be delivered to you in
this manner indefinitely unless you instruct us otherwise. You can
request multiple copies of these documents by either calling (800)
341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza,
P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has
received your instructions, we will begin sending individual copies for
each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the fund's policies and procedures with respect to the
voting of proxies relating to the Fund's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
7
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
August 31, 2003
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<Table>
<Caption>
MARKET
DESCRIPTION SHARES VALUE
COMMON STOCKS 96.0%
ADVERTISING 0.3%
Univision Communications, Inc., Class A (a)................. 500,000 $ 18,745,000
--------------
AIR FREIGHT & COURIERS 0.5%
FedEx Corp. ................................................ 500,000 33,550,000
--------------
AIRLINES 0.3%
JetBlue Airways Corp. (a)................................... 350,000 18,767,000
--------------
ALUMINUM 0.5%
Alcoa, Inc. ................................................ 1,250,000 35,700,000
--------------
APPAREL & ACCESSORIES 0.8%
Coach, Inc. (a)............................................. 1,000,000 58,040,000
--------------
APPAREL RETAIL 1.5%
Gap, Inc. .................................................. 5,000,000 104,450,000
--------------
APPLICATION SOFTWARE 2.1%
Mercury Interactive Corp. (a)............................... 1,000,000 43,890,000
SAP AG--ADR (Germany)....................................... 1,250,000 37,425,000
Synopsys, Inc. (a).......................................... 1,000,000 68,210,000
--------------
149,525,000
--------------
ASSET MANAGEMENT & CUSTODY BANKS 0.4%
Mellon Financial Corp. ..................................... 1,000,000 31,350,000
--------------
AUTO PARTS & EQUIPMENT 0.3%
Advanced Auto Parts, Inc. (a)............................... 250,000 18,662,500
--------------
BIOTECHNOLOGY 7.6%
Amgen, Inc. (a)............................................. 2,000,000 131,800,000
Celgene Corp. (a)........................................... 500,000 19,245,000
Genentech, Inc. (a)......................................... 1,500,000 119,100,000
Genzyme Corp. (a)........................................... 1,250,000 58,937,500
Gilead Sciences, Inc. (a)................................... 2,500,000 166,750,000
Invitrogen Corp. (a)........................................ 300,000 17,301,000
Medimmune, Inc. (a)......................................... 1,000,000 34,870,000
--------------
548,003,500
--------------
</Table>
8 See Notes to Financial Statements
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
MARKET
DESCRIPTION SHARES VALUE
BROADCASTING & CABLE TV 1.5%
EchoStar Communications Corp., Class A (a).................. 3,000,000 $ 110,700,000
--------------
CASINOS & GAMING 1.4%
International Game Technology............................... 4,000,000 103,360,000
--------------
COMMUNICATIONS EQUIPMENT 4.5%
Cisco Systems, Inc. (a)..................................... 7,500,000 143,625,000
Corning, Inc. (a)........................................... 7,500,000 61,875,000
Foundry Networks, Inc. (a).................................. 1,250,000 24,312,500
Juniper Networks, Inc. (a).................................. 4,000,000 68,880,000
QLogic Corp. (a)............................................ 500,000 24,510,000
--------------
323,202,500
--------------
COMPUTER & ELECTRONICS RETAIL 2.2%
Best Buy Co., Inc. (a)...................................... 3,000,000 156,030,000
--------------
COMPUTER HARDWARE 1.8%
Dell Computer Corp. (a)..................................... 4,000,000 130,520,000
--------------
COMPUTER STORAGE & PERIPHERALS 2.7%
EMC Corp. (a)............................................... 7,000,000 89,250,000
Network Appliance, Inc. (a)................................. 2,000,000 44,820,000
SanDisk Corp. (a)........................................... 1,000,000 60,460,000
--------------
194,530,000
--------------
CONSTRUCTION & FARM MACHINERY 3.2%
Caterpillar, Inc. .......................................... 1,000,000 71,830,000
Deere & Co. ................................................ 1,250,000 70,637,500
Paccar, Inc. ............................................... 1,000,000 85,200,000
--------------
227,667,500
--------------
CONSUMER ELECTRONICS 0.3%
Harman International Industries, Inc. ...................... 200,000 19,930,000
--------------
CONSUMER FINANCE 1.9%
American Express Co. ....................................... 2,500,000 112,625,000
SLM Corp. .................................................. 600,000 24,108,000
--------------
136,733,000
--------------
DEPARTMENT STORES 1.1%
Federated Department Stores, Inc. .......................... 1,750,000 76,475,000
--------------
DIVERSIFIED BANKS 1.1%
Bank of America Corp. ...................................... 500,000 39,625,000
Wachovia Corp. ............................................. 1,000,000 42,150,000
--------------
81,775,000
--------------
DIVERSIFIED CAPITAL MARKETS 0.5%
JP Morgan Chase & Co. ...................................... 1,000,000 34,220,000
--------------
</Table>
See Notes to Financial Statements 9
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
MARKET
DESCRIPTION SHARES VALUE
DIVERSIFIED COMMERCIAL SERVICES 2.1%
Apollo Group, Inc., Class A (a)............................. 1,525,000 $ 97,706,750
Career Education Corp. (a).................................. 500,000 22,565,000
Cendant Corp. (a)........................................... 1,750,000 31,465,000
--------------
151,736,750
--------------
DRUG RETAIL 0.5%
CVS Corp. .................................................. 1,000,000 32,600,000
--------------
HEALTH CARE EQUIPMENT 4.4%
Boston Scientific Corp. (a)................................. 2,500,000 150,250,000
Guidant Corp. .............................................. 1,250,000 62,750,000
St. Jude Medical, Inc. (a).................................. 500,000 26,035,000
Stryker Corp. .............................................. 500,000 37,900,000
Zimmer Holdings, Inc. (a)................................... 750,000 38,805,000
--------------
315,740,000
--------------
HOME ENTERTAINMENT SOFTWARE 1.9%
Electronic Arts, Inc. (a)................................... 1,500,000 134,625,000
--------------
HOME IMPROVEMENT RETAIL 2.3%
Home Depot, Inc. ........................................... 2,250,000 72,360,000
Lowe's Co., Inc. ........................................... 1,750,000 96,005,000
--------------
168,365,000
--------------
HYPERMARKETS & SUPER CENTERS 2.1%
Wal-Mart Stores, Inc. ...................................... 2,500,000 147,925,000
--------------
INDUSTRIAL CONGLOMERATES 0.8%
3M Co. ..................................................... 400,000 56,988,000
--------------
INTERNET RETAIL 7.7%
Amazon.com, Inc. (a)........................................ 4,000,000 185,760,000
eBay, Inc. (a).............................................. 5,000,000 276,900,000
InterActiveCorp (a)......................................... 2,500,000 92,525,000
--------------
555,185,000
--------------
INTERNET SOFTWARE & SERVICES 1.4%
Yahoo!, Inc. (a)............................................ 3,000,000 100,200,000
--------------
INVESTMENT BANKING & BROKERAGE 2.0%
Ameritrade Holding Corp. (a)................................ 1,000,000 10,870,000
Goldman Sachs Group, Inc. .................................. 750,000 66,367,500
Merrill Lynch & Co., Inc. .................................. 1,250,000 67,225,000
--------------
144,462,500
--------------
MANAGED HEALTH CARE 1.6%
Aetna, Inc. ................................................ 750,000 42,750,000
UnitedHealth Group, Inc. ................................... 1,500,000 74,145,000
--------------
116,895,000
--------------
</Table>
10 See Notes to Financial Statements
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
MARKET
DESCRIPTION SHARES VALUE
MOVIES & ENTERTAINMENT 1.0%
News Corp., LTD.--ADR (Australia)........................... 750,000 $ 25,762,500
Viacom, Inc., Class B (a)................................... 1,100,000 49,500,000
--------------
75,262,500
--------------
OIL & GAS EQUIPMENT & SERVICES 2.9%
BJ Services Co. (a)......................................... 1,500,000 56,055,000
Schlumberger Ltd. .......................................... 1,500,000 74,265,000
Smith International, Inc. (a)............................... 2,000,000 78,180,000
--------------
208,500,000
--------------
PERSONAL PRODUCTS 0.5%
Avon Products, Inc. ........................................ 600,000 38,460,000
--------------
PHARMACEUTICALS 4.1%
Biovail Corp. (Canada) (a).................................. 1,150,000 47,759,500
Eli Lilly & Co. ............................................ 750,000 49,897,500
Pfizer, Inc. ............................................... 1,250,000 37,400,000
Teva Pharmaceutical Industries, Ltd.--ADR (Israel).......... 2,000,000 117,424,000
Wyeth....................................................... 1,000,000 42,850,000
--------------
295,331,000
--------------
PROPERTY & CASUALTY 0.7%
Chubb Corp. ................................................ 750,000 50,955,000
--------------
RESTAURANTS 1.3%
McDonald's Corp. ........................................... 4,000,000 89,680,000
--------------
SEMICONDUCTOR EQUIPMENT 3.4%
Applied Materials, Inc. (a)................................. 5,000,000 108,000,000
KLA-Tencor Corp. (a)........................................ 2,250,000 133,560,000
--------------
241,560,000
--------------
SEMICONDUCTORS 9.7%
Altera Corp. (a)............................................ 3,500,000 78,540,000
Analog Devices, Inc. (a).................................... 2,500,000 102,500,000
Broadcom Corp., Class A (a)................................. 3,000,000 81,960,000
Intel Corp. ................................................ 8,500,000 243,270,000
International Rectifier Corp. (a)........................... 500,000 20,795,000
Intersil Corp., Class A (a)................................. 1,500,000 43,695,000
Linear Technology Corp. .................................... 1,750,000 72,135,000
Marvell Technology Group Ltd. (Bermuda) (a)................. 1,250,000 52,712,500
--------------
695,607,500
--------------
SPECIALTY STORES 1.4%
Bed Bath & Beyond, Inc. (a)................................. 1,250,000 53,787,500
Staples, Inc. (a)........................................... 2,000,000 49,260,000
--------------
103,047,500
--------------
</Table>
See Notes to Financial Statements 11
YOUR FUND'S INVESTMENTS
August 31, 2003
<Table>
<Caption>
MARKET
DESCRIPTION SHARES VALUE
SYSTEMS SOFTWARE 5.5%
Computer Associates International, Inc. .................... 2,500,000 $ 64,075,000
Microsoft Corp. ............................................ 3,000,000 79,560,000
Oracle Corp. (a)............................................ 3,000,000 38,340,000
Symantec Corp. (a).......................................... 1,250,000 71,787,500
VERITAS Software Corp. (a).................................. 4,000,000 137,920,000
--------------
391,682,500
--------------
THRIFTS & MORTGAGE FINANCE 0.5%
Countrywide Financial Corp. ................................ 500,000 33,925,000
--------------
WIRELESS TELECOMMUNICATION SERVICES 1.7%
Nextel Communications, Inc., Class A (a).................... 6,500,000 125,320,000
--------------
TOTAL LONG-TERM INVESTMENTS 96.0%
(Cost $5,365,673,670)................................................ 6,885,989,250
--------------
REPURCHASE AGREEMENTS 4.3%
BankAmerica ($160,805,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 08/29/03, to be sold on
09/02/03 at $160,822,689)............................................ 160,805,000
State Street Bank & Trust Co. ($48,307,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 08/29/03, to
be sold on 09/02/03 at $48,311,831).................................. 48,307,000
UBS Securities LLC ($103,439,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 08/29/03, to be sold on
09/02/03 at $103,450,263)............................................ 103,439,000
--------------
TOTAL REPURCHASE AGREEMENTS
(Cost $312,551,000).................................................. 312,551,000
--------------
TOTAL INVESTMENTS 100.3%
(Cost $5,678,224,670)................................................ 7,198,540,250
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3%).......................... (24,977,857)
--------------
NET ASSETS 100.0%..................................................... $7,173,562,393
==============
</Table>
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
12 See Notes to Financial Statements
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2003
<Table>
ASSETS:
Total Investments (Cost $5,678,224,670)..................... $ 7,198,540,250
Receivables:
Investments Sold.......................................... 127,517,974
Fund Shares Sold.......................................... 6,851,925
Dividends................................................. 2,884,150
Interest.................................................. 25,337
Other....................................................... 1,024,432
---------------
Total Assets............................................ 7,336,844,068
---------------
LIABILITIES:
Payables:
Investments Purchased..................................... 137,859,595
Fund Shares Repurchased................................... 9,824,251
Distributor and Affiliates................................ 9,047,582
Investment Advisory Fee................................... 2,592,211
Custodian Bank............................................ 819,335
Accrued Expenses............................................ 2,613,733
Trustees' Deferred Compensation and Retirement Plans........ 524,968
---------------
Total Liabilities....................................... 163,281,675
---------------
NET ASSETS.................................................. $ 7,173,562,393
===============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $13,222,525,517
Net Unrealized Appreciation................................. 1,520,315,580
Accumulated Net Investment Loss............................. (592,789)
Accumulated Net Realized Loss............................... (7,568,685,915)
---------------
NET ASSETS.................................................. $ 7,173,562,393
===============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $4,222,805,339 and 123,904,361 shares of
beneficial interest issued and outstanding)............. $ 34.08
Maximum sales charge (5.75%* of offering price)......... 2.08
---------------
Maximum offering price to public........................ $ 36.16
===============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $2,346,262,759 and 79,335,784 shares of
beneficial interest issued and outstanding)............. $ 29.57
===============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $570,092,636 and 18,792,845 shares of
beneficial interest issued and outstanding)............. $ 30.34
===============
Class D Shares:
Net asset value and offering price per share (Based on
net assets of $33,936,554 and 988,606 shares of
beneficial interest issued and outstanding)............. $ 34.33
===============
Class R Shares:
Net asset value and offering price per share (Based on
net assets of $465,105 and 13,663 shares of beneficial
interest issued and outstanding)........................ $ 34.04
===============
</Table>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements 13
Statement of Operations
For the Year Ended August 31, 2003
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $127,923).... $ 31,740,805
Interest.................................................... 5,084,960
--------------
Total Income............................................ 36,825,765
--------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B, C, D and R of $9,716,380, $21,890,132, $5,515,960,
$0 and $337, respectively)................................ 37,122,809
Investment Advisory Fee..................................... 29,638,485
Shareholder Services........................................ 28,061,917
Custody..................................................... 500,243
Legal....................................................... 338,292
Trustees' Fees and Related Expenses......................... 95,495
Other....................................................... 2,673,379
--------------
Total Expenses.......................................... 98,430,620
Less Credits Earned on Cash Balances.................... 63,774
--------------
Net Expenses............................................ 98,366,846
--------------
NET INVESTMENT LOSS......................................... $ (61,541,081)
==============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (907,033,099)
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (44,490,730)
End of the Period......................................... 1,520,315,580
--------------
Net Unrealized Appreciation During the Period............... 1,564,806,310
--------------
NET REALIZED AND UNREALIZED GAIN............................ $ 657,773,211
==============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 596,232,130
==============
</Table>
14 See Notes to Financial Statements
Statements of Changes in Net Assets
<Table>
<Caption>
YEAR ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002
---------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss.................................... $ (61,541,081) $ (74,208,094)
Net Realized Loss...................................... (907,033,099) (3,062,734,160)
Net Unrealized Appreciation During the Period.......... 1,564,806,310 4,917,164
--------------- ---------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... 596,232,130 (3,132,025,090)
--------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 1,058,461,118 2,234,137,357
Cost of Shares Repurchased............................. (1,845,414,527) (2,974,005,607)
--------------- ---------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... (786,953,409) (739,868,250)
--------------- ---------------
TOTAL DECREASE IN NET ASSETS........................... (190,721,279) (3,871,893,340)
NET ASSETS:
Beginning of the Period................................ 7,364,283,672 11,236,177,012
--------------- ---------------
End of the Period (Including accumulated net investment
loss of $592,789 and $479,608, respectively)......... $ 7,173,562,393 $ 7,364,283,672
=============== ===============
</Table>
See Notes to Financial Statements 15
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS A SHARES --------------------------------------------------------
2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 (a)
--------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD........................... $ 30.96 $ 43.18 $ 109.19 $ 60.00 $ 36.13
-------- -------- -------- --------- --------
Net Investment Income/Loss....... (.18) (.17) .03 (.32) (.23)
Net Realized and Unrealized
Gain/Loss...................... 3.30 (12.05) (51.18) 58.81 26.41
-------- -------- -------- --------- --------
Total from Investment Operations... 3.12 (12.22) (51.15) 58.49 26.18
Less Distributions from Net
Realized Gain.................... -0- -0- 14.86 9.30 2.31
-------- -------- -------- --------- --------
NET ASSET VALUE, END OF THE
PERIOD........................... $ 34.08 $ 30.96 $ 43.18 $ 109.19 $ 60.00
======== ======== ======== ========= ========
Total Return (b)................... 10.08% -28.30% -51.22% 104.41% 75.10%
Net Assets at End of the Period (In
millions)........................ $4,222.8 $4,310.2 $6,251.4 $11,527.6 $4,156.4
Ratio of Expenses to Average Net
Assets........................... 1.15% 1.06% .93% .87% .97%
Ratio of Net Investment Income/Loss
to Average Net Assets............ (.61%) (.44%) .04% (.35%) (.45%)
Portfolio Turnover................. 180% 230% 148% 110% 124%
</Table>
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .25% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
16 See Notes to Financial Statements
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS B SHARES -------------------------------------------------------
2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 (a)
-------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $ 27.07 $ 38.04 $ 99.32 $ 55.56 $ 33.84
-------- -------- -------- -------- --------
Net Investment Loss............... (.36) (.41) (.41) (.93) (.57)
Net Realized and Unrealized
Gain/Loss....................... 2.86 (10.56) (46.01) 53.99 24.60
-------- -------- -------- -------- --------
Total from Investment Operations.... 2.50 (10.97) (46.42) 53.06 24.03
Less Distributions from Net Realized
Gain.............................. -0- -0- 14.86 9.30 2.31
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE
PERIOD............................ $ 29.57 $ 27.07 $ 38.04 $ 99.32 $ 55.56
======== ======== ======== ======== ========
Total Return (b).................... 9.24% -28.84% -51.60% 102.85% 73.78%
Net Assets at End of the Period (In
millions)......................... $2,346.3 $2,395.2 $3,904.7 $7,648.0 $2,850.2
Ratio of Expenses to Average Net
Assets............................ 1.91% 1.82% 1.71% 1.63% 1.74%
Ratio of Net Investment Loss to
Average Net Assets................ (1.37%) (1.20%) (.74%) (1.12%) (1.22%)
Portfolio Turnover.................. 180% 230% 148% 110% 124%
</Table>
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of 1% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
See Notes to Financial Statements 17
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
YEAR ENDED AUGUST 31,
CLASS C SHARES -------------------------------------------------------
2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 (a)
-------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.............................. $27.75 $ 39.00 $ 101.30 $ 56.52 $34.39
------ ------- -------- -------- ------
Net Investment Loss................. (.36) (.42) (.41) (.95) (.58)
Net Realized and Unrealized
Gain/Loss......................... 2.95 (10.83) (47.03) 55.03 25.02
------ ------- -------- -------- ------
Total from Investment Operations...... 2.59 (11.25) (47.44) 54.08 24.44
Less Distributions from Net Realized
Gain................................ -0- -0- 14.86 9.30 2.31
------ ------- -------- -------- ------
NET ASSET VALUE, END OF THE PERIOD.... $30.34 $ 27.75 $ 39.00 $ 101.30 $56.52
====== ======= ======== ======== ======
Total Return (b)...................... 9.33%(c) -28.85% -51.60% 102.91% 73.79%
Net Assets at End of the Period (In
millions)........................... $570.1 $ 629.0 $1,038.5 $1,944.0 $454.5
Ratio of Expenses to Average Net
Assets.............................. 1.91% 1.82% 1.70% 1.64% 1.74%
Ratio of Net Investment Loss to
Average Net Assets.................. (1.34%)(c) (1.20%) (.73%) (1.11%) (1.21%)
Portfolio Turnover.................... 180% 230% 148% 110% 124%
</Table>
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) Certain non-recurring payments were made to Class C Shares, resulting in an
increase to the Total Return and Ratio of Net Investment Income to Average
Net Assets of .03%.
18 See Notes to Financial Statements
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
OCTOBER 17, 2000
YEAR ENDED (COMMENCEMENT
AUGUST 31, OF INVESTMENT
CLASS D SHARES -------------------- OPERATIONS) TO
2003 (a) 2002 (a) AUGUST 31, 2001 (a)
------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD........... $31.10 $ 43.27 $ 97.10
------ ------- -------
Net Investment Income/Loss....................... (.11) (.07) .17
Net Realized and Unrealized Gain/Loss............ 3.34 (12.10) (39.14)
------ ------- -------
Total from Investment Operations................... 3.23 (12.17) (38.97)
Less Distributions from Net Realized Gain.......... -0- -0- 14.86
------ ------- -------
NET ASSET VALUE, END OF THE PERIOD................. $34.33 $ 31.10 $ 43.27
====== ======= =======
Total Return (b)................................... 10.39% -28.13% -45.03%*
Net Assets at End of the Period (In millions)...... $ 33.9 $ 29.8 $ 41.6
Ratio of Expenses to Average Net Assets............ .90% .81% .72%
Ratio of Net Investment Income/Loss to Average Net
Assets........................................... (.36%) (.19%) .33%
Portfolio Turnover................................. 180% 230% 148%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period.
See Notes to Financial Statements 19
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
OCTOBER 1, 2002
(COMMENCEMENT
OF OPERATIONS) TO
AUGUST 31, 2003 (a)
CLASS R SHARES -------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $29.94
------
Net Investment Loss....................................... (.24)
Net Realized and Unrealized Gain.......................... 4.34
------
Total from Investment Operations............................ 4.10
------
NET ASSET VALUE, END OF THE PERIOD.......................... $34.04
======
Total Return (b)............................................ 13.69%*
Net Assets at End of the Period (In millions)............... $ .5
Ratio of Expenses to Average Net Assets..................... 1.41%
Ratio of Net Investment Loss to Average Net Assets.......... (.85%)
Portfolio Turnover.......................................... 180%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. The return
includes combined Rule 12b-1 fees and service fees of .50% and does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
20 See Notes to Financial Statements
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Emerging Growth Fund (the "Fund") is organized as a Delaware business
trust, and is registered as a diversified open-end management investment company
under the Investment Company Act of 1940 (the "1940 Act"), as amended. The
Fund's investment objective is capital appreciation. The Fund commenced
investment operations on October 2, 1970. The distribution of the Fund's Class
B, Class C, Class D, and Class R Shares commenced on April 20, 1992, July 6,
1993, October 17, 2000 and October 1, 2002, respectively.
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.
Equity securities traded on NASDAQ are valued at the NASDAQ Official Closing
Price. Listed and unlisted securities for which the last sale price is not
available are valued at the mean of the bid and asked prices. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the Board
of Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management 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 EXPENSES Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
21
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
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, 2003, the Fund had an accumulated capital loss carryforward for
tax purposes of $7,139,466,841, which will expire between August 31, 2010 and
August 31, 2011.
At August 31, 2003, the cost and related gross unrealized appreciation and
depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $5,747,020,222
==============
Gross tax unrealized appreciation........................... $1,472,053,042
Gross tax unrealized depreciation........................... (20,533,014)
--------------
Net tax unrealized appreciation on investments.............. $1,451,520,028
==============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
annually from net investment income and from net realized gains, if any.
Distributions from net realized gains for book purposes may include short-term
capital gains, which are included in ordinary income for tax purposes.
Due to inherent differences in the recognition of income, expenses and
realized gain/losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between book and tax basis reporting have been identified and appropriately
reclassified on the Statement of Assets and Liabilities. Permanent book and tax
differences relating to a net operating loss in the amount of $61,407,042 was
reclassified from accumulated net investment loss to capital. Additionally, a
permanent book and tax difference relating to the Fund's investment in other
regulated investment companies totaling $20,858 was reclassified from
accumulated net realized loss to accumulated net investment loss.
Net realized gains and losses may differ for financial reporting purposes
primarily as a result of the deferral of losses relating to wash sale
transactions and post October losses which are not realized for tax purposes
until the first day of the following fiscal year.
F. EXPENSE REDUCTIONS During the year ended August 31, 2003, the Fund's custody
fee was reduced by $63,774 as a result of credits earned on cash balances.
22
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $350 million.......................................... .575%
Next $350 million........................................... .525%
Next $350 million........................................... .475%
Over $1.05 billion.......................................... .425%
</Table>
For the year ended August 31, 2003, the Fund recognized expenses of
approximately $338,300 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.
Under an Accounting Services agreement, the Adviser provides accounting
services to the Fund. The Adviser allocates the cost of such services to each
fund. For the year ended August 31, 2003, the Fund recognized expenses of
approximately $370,100 representing Van Kampen Investments Inc.'s or its
affiliates' (collectively "Van Kampen") cost of providing accounting services to
the Fund, which are reported as part of "Other" expenses in the Statement of
Operations.
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,
2003, the Fund recognized expenses of approximately $23,239,000. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation.
Amounts deferred are retained by the Fund and to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of $386,111 are included in
"Other" assets on the Statement of Assets and Liabilities at August 31, 2003.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
For the year ended August 31, 2003, the Fund paid brokerage commissions to
Morgan Stanley DW Inc., (Morgan Stanley) an affiliate of Van Kampen, totaling
$573,267.
At August 31, 2003, Van Kampen owned 33 shares of Class R.
23
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
3. CAPITAL TRANSACTIONS
At August 31, 2003, capital aggregated $7,032,595,024, $4,586,075,058,
$1,514,704,846, $88,714,658 and $435,931 for Classes A, B, C, D, and R,
respectively. For the year ended August 31, 2003, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A.................................................. 25,608,189 $ 774,042,461
Class B.................................................. 8,204,476 216,522,629
Class C.................................................. 1,972,739 53,563,237
Class D.................................................. 451,964 13,823,860
Class R.................................................. 15,715 508,931
----------- ---------------
Total Sales................................................ 36,253,083 $ 1,058,461,118
=========== ===============
Repurchases:
Class A.................................................. (40,942,557) $(1,225,272,921)
Class B.................................................. (17,357,272) (450,924,839)
Class C.................................................. (5,845,694) (156,203,721)
Class D.................................................. (422,920) (12,944,028)
Class R.................................................. (2,052) (69,018)
----------- ---------------
Total Repurchases.......................................... (64,570,495) $(1,845,414,527)
=========== ===============
</Table>
At August 31, 2002, capital aggregated $7,519,973,491, $4,840,561,718,
$1,622,225,430 and $88,125,329 for Classes A, B, C, and D, respectively. For the
year ended August 31, 2002, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A.................................................. 40,681,272 $ 1,574,726,544
Class B.................................................. 14,483,524 494,638,638
Class C.................................................. 4,287,292 151,190,754
Class D.................................................. 344,185 13,581,421
----------- ---------------
Total Sales................................................ 59,796,273 $ 2,234,137,357
=========== ===============
Repurchases:
Class A.................................................. (46,231,542) $(1,736,987,366)
Class B.................................................. (28,641,546) (945,570,350)
Class C.................................................. (8,249,546) (278,234,931)
Class D.................................................. (345,611) (13,212,960)
----------- ---------------
Total Repurchases.......................................... (83,468,245) $(2,974,005,607)
=========== ===============
</Table>
24
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received on such shares, automatically convert
to Class A Shares eight years after the end of the calendar month in which the
Shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received on such shares, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the years ended August 31, 2003 and 2002, 195,817
and 4,015,842 Class B Shares converted to Class A Shares, respectively, and are
shown in the above table as sales of Class A Shares and repurchases of Class B
Shares. Class C Shares purchased before January 1, 1997, and any dividend
reinvestment plan C Shares received on such shares, automatically convert to
Class A Shares ten years after the end of the calendar month in which such
shares were purchased. Class C Shares purchased on or after January 1, 1997 do
not possess a conversion feature. For the years ended August 31, 2003 and 2002,
no Class C Shares converted to Class A Shares. Class D and Class R Shares do not
possess a conversion feature. 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 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 CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS 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, 2003, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A Shares of approximately
$1,079,800 and CDSC on redeemed shares of approximately $5,477,700. Sales
charges do not represent expenses to the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $11,438,705,190 and $12,103,787,746,
respectively.
25
NOTES TO
FINANCIAL STATEMENTS
August 31, 2003
5. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares, Class C Shares and Class R
Shares, the Fund and its shareholders have adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively
the "Plans"). The Plans govern payments for: the distribution of the Fund's
Class A Shares, Class B Shares, Class C Shares and Class R Shares; the provision
of ongoing shareholder services with respect to such classes of shares; and
maintenance of shareholder accounts with respect to such classes of shares.
Annual fees under the Plan of up to 0.25% of Class A average daily net
assets, 1.00% each for Class B and Class C average daily net assets and .50% of
Class R Shares average daily net assets are accrued daily. The amount of
distribution expenses incurred by Van Kampen and not yet reimbursed
("unreimbursed receivable") was approximately $59,688,300 and $1,579,300 for
Class B and Class C Shares, respectively. These amounts may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed receivable has been fully recovered, any excess 12b-1 fees will be
refunded to the Fund on a quarterly basis.
Included in the fees for the year ended August 31, 2003 are payments
retained by Van Kampen of approximately $16,693,700 and payments made to Morgan
Stanley, an affiliate of the Adviser, of approximately $1,166,800.
26
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of Van Kampen Emerging Growth Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Emerging Growth Fund (the "Fund"), including the portfolio of
investments, as of August 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
four years in the period 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 and financial highlights
based on our audits. The financial highlights of the Fund for the year ended
August 31, 1999 were audited by other auditors whose report dated October 6,
1999 expressed an unqualified opinion on those financial highlights.
We conducted our audits 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 and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2003, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. 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
audits provide 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
Van Kampen Emerging Growth Fund at August 31, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the four years in the period then ended in conformity with accounting principles
generally accepted in the United States.
-s- Ernst & Young LLP
Chicago, Illinois
October 1, 2003
27
BOARD OF DIRECTORS AND IMPORTANT ADDRESSES
VAN KAMPEN EMERGING GROWTH FUND
BOARD OF DIRECTORS
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
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 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
28
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and executive officers of the Fund
and their principal occupations during the last five years, other directorships
held by trustees and their affiliations, if any, with Van Kampen Investments
Inc. ("Van Kampen Investments"), Van Kampen Investment Advisory Corp. ("Advisory
Corp."), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds
Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp.
and Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and
Asset Management sometimes are referred to herein collectively as the
"Advisers." The term "Fund Complex" includes each of the investment companies
advised by the Advisers or their affiliates as of the date of this Statement of
Additional Information. Trustees serve until reaching their retirement age or
until their successors are duly elected and qualified. Officers are annually
elected by the trustees.
INDEPENDENT TRUSTEES
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
David C. Arch (58) Trustee Trustee Chairman and Chief 90 Trustee/Director/Managing
Blistex Inc. since 2003 Executive Officer of General Partner of funds
1800 Swift Drive Blistex Inc., a consumer in the Fund Complex.
Oak Brook, IL 60523 health care products
manufacturer. Former
Director of the World
Presidents
Organization-Chicago
Chapter. Director of the
Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago.
J. Miles Branagan (71) Trustee Trustee Private investor. 88 Trustee/Director/Managing
1632 Morning Mountain Road since 1991 Co-founder, and prior to General Partner of funds
Raleigh, NC 27614 August 1996, Chairman, in the Fund Complex.
Chief Executive Officer
and President, MDT
Corporation (now known as
Getinge/Castle, Inc., a
subsidiary of Getinge
Industrier AB), a company
which develops,
manufactures, markets and
services medical and
scientific equipment.
</Table>
29
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jerry D. Choate (65) Trustee Trustee Prior to January 1999, 88 Trustee/Director/Managing
33971 Selva Road since 1999 Chairman and Chief General Partner of funds
Suite 130 Executive Officer of the in the Fund Complex.
Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a
("Allstate") and Allstate biotechnological company,
Insurance Company. Prior and Director of Valero
to January 1995, Energy Corporation, an
President and Chief independent refining
Executive Officer of company.
Allstate. Prior to August
1994, various management
positions at Allstate.
Rod Dammeyer (62) Trustee Trustee President of CAC, llc., a 90 Trustee/Director/Managing
CAC, llc. since 2003 private company offering General Partner of funds
4350 LaJolla Village Drive capital investment and in the Fund Complex.
Suite 980 management advisory Director of TeleTech
San Diego, CA 92122-6223 services. Prior to July Holdings Inc.,
2000, Managing Partner of Stericycle, Inc.,
Equity Group Corporate TheraSense, Inc., GATX
Investment (EGI), a Corporation, Arris Group,
company that makes Inc. and Trustee of the
private investments in University of Chicago
other companies. Hospitals and Health
Systems. Prior to May
2002, Director of
Peregrine Systems Inc.
Prior to February 2001,
Vice Chairman and
Director of Anixter
International, Inc. and
IMC Global Inc. Prior to
July 2000, Director of
Allied Riser
Communications Corp.,
Matria Healthcare Inc.,
Transmedia Networks,
Inc., CNA Surety, Corp.
and Grupo Azcarero Mexico
(GAM). Prior to April
1999, Director of Metal
Management, Inc.
</Table>
30
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Linda Hutton Heagy (55) Trustee Trustee Managing Partner of 88 Trustee/Director/Managing
Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds
233 South Wacker Drive executive search firm. in the Fund Complex.
Suite 7000 Trustee on the University
Chicago, IL 60606 of Chicago Hospitals
Board, Vice Chair of the
Board of the YMCA of
Metropolitan Chicago and
a member of the Women's
Board of the University
of Chicago. Prior to
1997, Partner of Ray &
Berndtson, Inc., an
executive recruiting
firm. Prior to 1996,
Trustee of The
International House
Board, a fellowship and
housing organization for
international graduate
students. Prior to 1995,
Executive Vice President
of ABN AMRO, N.A., a bank
holding company. Prior to
1992, Executive Vice
President of La Salle
National Bank.
R. Craig Kennedy (51) Trustee Trustee Director and President of 88 Trustee/Director/Managing
11 DuPont Circle, N.W. since 1995 the German Marshall Fund General Partner of funds
Washington, D.C. 20016 of the United States, an in the Fund Complex.
independent U.S.
foundation created to
deepen understanding,
promote collaboration and
stimulate exchanges of
practical experience
between Americans and
Europeans. Formerly,
advisor to the Dennis
Trading Group Inc., a
managed futures and
option company that
invests money for
individuals and
institutions. Prior to
1992, President and Chief
Executive Officer,
Director and member of
the Investment Committee
of the Joyce Foundation,
a private foundation.
Howard J Kerr (67) Trustee Trustee Prior to 1998, President 90 Trustee/Director/Managing
736 North Western Avenue since 2003 and Chief Executive General Partner of funds
P.O. Box 317 Officer of Pocklington in the Fund Complex.
Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake
investment holding Forest Bank & Trust.
company. Director of the
Marrow Foundation
</Table>
31
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Jack E. Nelson (67) Trustee Trustee President of Nelson 88 Trustee/Director/Managing
423 Country Club Drive since 1995 Investment Planning General Partner of funds
Winter Park, FL 32789 Services, Inc., a in the Fund Complex.
financial planning
company and registered
investment adviser in the
State of Florida.
President of Nelson Ivest
Brokerage Services Inc.,
a member of the NASD,
Securities Investors
Protection Corp. and the
Municipal Securities
Rulemaking Board.
President of Nelson Sales
and Services Corporation,
a marketing and services
company to support
affiliated companies.
Hugo F. Sonnenschein (62) Trustee Trustee President Emeritus and 90 Trustee/Director/Managing
1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds
Chicago, IL 60637 University of Chicago and in the Fund Complex.
the Adam Smith Director of Winston
Distinguished Service Laboratories, Inc.
Professor in the
Department of Economics
at the University of
Chicago. Prior to July
2000, President of the
University of Chicago.
Trustee of the University
of Rochester and a member
of its investment
committee. Member of the
National Academy of
Sciences, the American
Philosophical Society and
a fellow of the American
Academy of Arts and
Sciences.
Suzanne H. Woolsey (61) Trustee Trustee Chief Communications 88 Trustee/Director/Managing
2101 Constitution Ave., N.W. since 1999 Officer of the National General Partner of funds
Room 285 Academy of in the Fund Complex.
Washington, D.C. 20418 Sciences/National Director of Neurogen
Research Council, an Corporation, a
independent, federally pharmaceutical company,
chartered policy since January 1998.
institution, since 2001
and previously Chief
Operating Officer from
1993 to 2001. Director of
the Institute for Defense
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, and
Trustee of Colorado
College. Prior to 1993,
Executive Director of the
Commission on Behavioral
and Social Sciences and
Education at the National
Academy of
Sciences/National
Research Council. From
1980 through 1989,
Partner of Coopers &
Lybrand.
</Table>
32
INTERESTED TRUSTEES*
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Mitchell M. Merin* (50) Trustee, Trustee President and Chief 88 Trustee/Director/Managing
1221 Avenue of the Americas President since 1999 Executive Officer of General Partner of funds
New York, NY 10020 and Chief funds in the Fund in the Fund Complex.
Executive Complex. Chairman,
Officer President, Chief
Executive Officer and
Director of the Advisers
and VK Advisors Inc.
since December 2002.
Chairman, President and
Chief Executive Officer
of Van Kampen Investments
since December 2002.
Director of Van Kampen
Investments since
December 1999. Chairman
and Director of Van
Kampen Funds Inc. since
December 2002. President,
Director and Chief
Operating Officer of
Morgan Stanley Investment
Management since December
1998. President and
Director since April 1997
and Chief Executive
Officer since June 1998
of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc.
Chairman, Chief Executive
Officer and Director of
Morgan Stanley
Distributors Inc. since
June 1998. Chairman since
June 1998, and Director
since January 1998 of
Morgan Stanley Trust.
Director of various
Morgan Stanley
subsidiaries. President
of the Morgan Stanley
Funds since May 1999.
Previously Chief
Executive Officer of Van
Kampen Funds Inc. from
December 2002 to July
2003, Chief Strategic
Officer of Morgan Stanley
Investment Advisors Inc.
and Morgan Stanley
Services Company Inc. and
Executive Vice President
of Morgan Stanley
Distributors Inc. from
April 1997 to June 1998.
Chief Executive Officer
from September 2002 to
April 2003 and Vice
President from May 1997
to April 1999 of the
Morgan Stanley Funds.
</Table>
33
<Table>
<Caption>
NUMBER OF
TERM OF FUNDS IN
OFFICE AND FUND
POSITION(S) LENGTH OF COMPLEX
NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
Richard F. Powers, III* (57) Trustee Trustee Advisory Director of 90 Trustee/Director/Managing
1 Parkview Plaza since 1999 Morgan Stanley. Prior to General Partner of funds
P.O. Box 5555 December 2002, Chairman, in the Fund Complex.
Oakbrook Terrace, IL 60181 Director, President,
Chief Executive Officer
and Managing Director of
Van Kampen Investments
and its investment
advisory, distribution
and other subsidiaries.
Prior to December 2002,
President and Chief
Executive Officer of
funds in the Fund
Complex. Prior to May
1998, Executive Vice
President and Director of
Marketing at Morgan
Stanley and Director of
Dean Witter, Discover &
Co. and Dean Witter
Realty. Prior to 1996,
Director of Dean Witter
Reynolds Inc.
Wayne W. Whalen* (64) Trustee Trustee Partner in the law firm 90 Trustee/Director/Managing
333 West Wacker Drive since 1995 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom in the Fund Complex.
(Illinois), legal counsel
to funds in the Fund
Complex.
</Table>
* Such trustee is an "interested person" (within the meaning of Section
2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain
funds in the Fund Complex by reason of his firm currently acting as legal
counsel to such funds in the Fund Complex. Messrs. Merin and Powers are
interested persons of funds in the Fund Complex and the Advisers by reason
of their current or former positions with Morgan Stanley or its affiliates.
34
OFFICERS
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
Stephen L. Boyd (62) Vice President Officer Managing Director of Global Research Investment Management.
2800 Post Oak Blvd. since 1998 Vice President of funds in the Fund Complex. Prior to
45th Floor December 2002, Chief Investment Officer of Van Kampen
Houston, TX 77056 Investments and President and Chief Operations Officer of
the Advisers and Van Kampen Advisors Inc. Prior to May 2002,
Executive Vice President and Chief Investment Officer of
funds in the Fund Complex. Prior to May 2001, Managing
Director and Chief Investment Officer of Van Kampen
Investments, and Managing Director and President of the
Advisers and Van Kampen Advisors Inc. Prior to December
2000, Executive Vice President and Chief Investment Officer
of Van Kampen Investments, and President and Chief Operating
Officer of the Advisers. Prior to April 2000, Executive Vice
President and Chief Investment Officer for Equity
Investments of the Advisers. Prior to October 1998, Vice
President and Senior Portfolio Manager with AIM Capital
Management, Inc. Prior to February 1998, Senior Vice
President and Portfolio Manager of Van Kampen American
Capital Asset Management, Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American Capital
Management, Inc.
Stefanie V. Chang (36) Vice President Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas since 2003 Vice President of funds in the Fund Complex.
New York, NY 10020
Joseph J. McAlinden (60) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas President and Chief since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment
New York, NY 10020 Investment Officer Management Inc. and Morgan Stanley Investments LP and
Director of Morgan Stanley Trust for over 5 years. Executive
Vice President and Chief Investment Officer of funds in the
Fund Complex. Managing Director and Chief Investment Officer
of Van Kampen Investments, the Advisers and Van Kampen
Advisors Inc. since December 2002.
</Table>
35
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
John R. Reynoldson (50) Vice President Officer Executive Director and Portfolio Specialist of the Advisers
1 Parkview Plaza since 2000 and Van Kampen Advisors Inc. Vice President of funds in the
P.O. Box 5555 Fund Complex. Prior to July 2001, Principal and Co-head of
Oakbrook Terrace, IL 60181 the Fixed Income Department of the Advisers and Van Kampen
Advisors Inc. Prior to December 2000, Senior Vice President
of the Advisers and Van Kampen Advisors Inc. Prior to May
2000, Senior Vice President of the investment grade taxable
group for the Advisers. Prior to June 1999, Senior Vice
President of the government securities bond group for Asset
Management.
Ronald E. Robison (64) Executive Vice Officer Chief Executive Officer and Chairman of Investor Services.
1221 Avenue of the Americas President and since 2003 Executive Vice President and Principal Executive Officer of
New York, NY 10020 Principal Executive funds in the Fund Complex. Chief Global Operations Officer
Officer and Managing Director of Morgan Stanley Investment
Management Inc. Managing Director of Morgan Stanley.
Managing Director and Director of Morgan Stanley Investment
Advisors Inc. and Morgan Stanley Services Company Inc. Chief
Executive Officer and Director of Morgan Stanley Trust. Vice
President of the Morgan Stanley Funds.
A. Thomas Smith III (46) Vice President and Officer Managing Director of Morgan Stanley, Managing Director and
1221 Avenue of the Americas Secretary since 1999 Director of Van Kampen Investments, Director of the
New York, NY 10020 Advisers, Van Kampen Advisors Inc., the Distributor,
Investor Services and certain other subsidiaries of Van
Kampen Investments. Managing Director and General
Counsel-Mutual Funds of Morgan Stanley Investment Advisors,
Inc. Vice President and Secretary of funds in the Fund
Complex. Prior to July 2001, Managing Director, General
Counsel, Secretary and Director of Van Kampen Investments,
the Advisers, the Distributor, Investor Services, and
certain other subsidiaries of Van Kampen Investments. Prior
to December 2000, Executive Vice President, General Counsel,
Secretary and Director of Van Kampen Investments, the
Advisers, Van Kampen Advisors Inc., the Distributor,
Investor Services and certain other subsidiaries of Van
Kampen Investments. Prior to January 1999, Vice President
and Associate General Counsel to New York Life Insurance
Company ("New York Life"), and prior to March 1997,
Associate General Counsel of New York Life. Prior to
December 1993, Assistant General Counsel of The Dreyfus
Corporation. Prior to August 1991, Senior Associate, Willkie
Farr & Gallagher. Prior to January 1989, Staff Attorney at
the Securities and Exchange Commission, Division of
Investment Management, Office of Chief Counsel.
</Table>
36
<Table>
<Caption>
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS
John L. Sullivan (48) Vice President, Chief Officer Director and Managing Director of Van Kampen Investments,
1 Parkview Plaza Financial Officer and since 1996 the Advisers, Van Kampen Advisors Inc. and certain other
P.O. Box 5555 Treasurer subsidiaries of Van Kampen Investments. Vice President,
Oakbrook Terrace, IL 60181 Chief Financial Officer and Treasurer of funds in the Fund
Complex. Head of Fund Accounting for Morgan Stanley
Investment Management. Prior to December 2002, Executive
Director of Van Kampen Investments, the Advisers and Van
Kampen Advisors Inc.
</Table>
37
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp.,
Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen
Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc.,
Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many
Van Kampen mutual funds and Van Kampen unit investment trusts.
The Statement of Additional Information includes additional information about
Fund trustees and is available, without charge, upon request by calling (800)
847-2424.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2003 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 16, 116, 216,
516, 316
EMG ANR 10/03 12029J03-AP-10/03
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to
its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1 hereto
(d) The Fund has granted a waiver or an implicit waiver from a provision of its
Code of Ethics.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit 10A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has three "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: J. Miles Branagan, Jerry Choate and R. Craig Kennedy.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
Applicable only for reports covering fiscal years ending on or after December
15, 2003.
Item 5. Audit Committee of Listed Registrants.
Applicable only for reports covering periods ending on or after the earlier of
(i) the first annual shareholder meeting after January 15, 2004 or (ii) October
31, 2004.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
Item 8. [Reserved.]
Item 9. Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's second fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b) A separate certification for each Principal Executive Officer and Principal
Financial Officer of the registrant are attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Emerging Growth Fund
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By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 20, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: October 20, 2003
By: /s/ John L. Sullivan
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Name: John L. Sullivan
Title: Principal Financial Officer
Date: October 20, 2003