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
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 8/31
Date of reporting period: 2/29/04
Item 1. Report to Shareholders
The Fund's semi-annual report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Emerging Growth Fund performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the fund's financial statements and a list of fund investments
as of February 29, 2004.
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.
<Table>
<Caption>
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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</Table>
PERFORMANCE SUMMARY
<Table>
<Caption>
A SHARES B SHARES C SHARES D SHARES R SHARES
since 10/02/70 since 04/20/92 since 7/06/93 since 10/17/00 since 10/01/02
- ----------------------------------------------------------------------------------------------------------------------------------
AVERAGE
ANNUAL
TOTAL W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES
RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES
Since Inception 15.29% 15.09% 12.11% 12.11% 10.16% 10.16% -19.93% -19.93% 15.86% 15.86%
10-year 10.46 9.81 9.94 9.94 9.61 9.61 -- -- -- --
5-year 0.80 -0.39 0.03 -0.18 0.04 0.04 -- -- -- --
1-year 32.21 24.63 31.18 26.18 31.21 30.21 32.52 32.52 31.89 31.89
6-month 8.39 2.16 7.98 2.98 7.94 6.94 8.51 8.51 8.25 8.25
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</Table>
Past performance is no guarantee of future results and current performance may
be lower or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit vankampen.com or speak
with your financial advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost. The returns shown in this report do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Performance of share classes will vary due to differences in sales
charges and expenses.
As a result of recent market activity, current performance may vary from the
figures shown. 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. The
since inception returns for Class C shares reflect the conversion of Class C
shares into Class A shares ten years after purchase. See footnote 3 in the Notes
to Financial Statements for additional information. Certain non-recurring
payments were made to Class C shares, resulting in an increase to the one-year
return of 0.03 percent. 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
percent. Figures shown above assume reinvestment of all dividends and capital
gains.
The Russell 1000 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 Index. The index does not include any
expenses, fees or sales charges, which would lower performance. The index is
unmanaged and should not be considered an investment.
1
Fund Report
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 29, 2004
Van Kampen Emerging Growth Fund is managed by the adviser's Multi-Cap Growth
team.(1) Current members include Gary Lewis, Managing Director; Dudley
Brickhouse, Executive Director; Janet Luby, Executive Director; David Walker,
Executive Director; Matthew Hart, Vice President; and Scott Miller, Associate.
MARKET CONDITIONS
During the six-month reporting period, the stock market continued its upward
trend, despite some challenges toward the end of the period. In the earlier part
of the reporting period, the economy appeared to be solidly in a recovery phase,
boosting investor optimism and encouraging corporate managements to spend again.
Corporate profits recovered, and companies once again began to meet or exceed
earnings expectations. However, in January, the Federal Reserve Board adjusted
their views regarding interest rates, causing some choppiness in the markets as
investors began to anticipate a slowing economy and rising interest rates.
Against this backdrop, stocks in cyclical sectors such as basic materials,
technology, and consumer discretionary initially outperformed. These
economically sensitive stocks tend to benefit early in a recovery. Companies and
consumers gain confidence in their spending when they believe the economic
landscape is improving. However, in late December and into 2004, those sectors
that lagged for most of 2003--including telecommunications services and health
care--established a lead.
PERFORMANCE ANALYSIS
The fund returned 8.39 percent (Class A shares unadjusted for sales charge)
during the six-month period. The Russell 1000 Growth Index returned 12.17
percent for the same period.
After three years of finding few attractive opportunities, the improved economic
environment provided a favorable backdrop for our investment discipline.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDING FEBRUARY 29, 2004
<Table>
<Caption>
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RUSSELL 1000(R)
CLASS A CLASS B CLASS C CLASS D CLASS R GROWTH INDEX
8.39% 7.98% 7.94% 8.51% 8.25% 12.17%
- -----------------------------------------------------------------------------
</Table>
The performance for the five share classes varies because each has different
expenses. The fund's total return figures assume the reinvestment of all
distributions, but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. Past performance is no guarantee of future
results. See Performance Summary for standardized performance information and
index definitions.
(1)Team members may change at any time without notice.
2
Historically, our rising-earnings-estimates and rising-valuations discipline has
worked well during economic recoveries. Of course, it's important to remember
that past performance is no guarantee of future results. A stronger economy
created greater demand for products and services, and cost cutting helped profit
margins improve. This, in turn, helped earnings estimates and valuations rise,
as analysts and investors became more optimistic about a company's prospects.
Although the improving market conditions helped the fund's returns gain traction
earlier in the period, the fund experienced a setback in December. At the end of
2003, we saw a frenzied rotation out of semiconductor, retail, and many other
high-growth stocks as investors moved to capture strong gains made earlier in
the year. The fund's overweight positions in these groups, combined with an
underweight in the lower-growth sectors such as health care and industrials,
caused the fund to lag relative to its benchmark index.
For example, four semiconductor stocks, Altera, Novellus, KLA-Tencor, and
Synopsys, were among the fund's significant detractors. Semiconductor companies
are cyclical businesses--they typically lead early in economic recoveries when
growing production orders means higher demand for chips. In anticipation of the
higher revenues generated by accelerating demand, investors tend to bid up the
valuations of many semiconductor stocks. Often times, though, once these
valuation levels peak, investors sell the stocks rapidly. Such was the case with
these four stocks.
In addition, Altera suffered from investor concerns about potential market-share
loss to its competitor Xilinx, and Synopsys made an unfavorable, costly
acquisition that the market punished. Although we did not uncover any
significant fundamental problems within Novellus and KLA-Tencor, the falling
valuations and
<Table>
TOP 10 HOLDINGS AS OF 2/29/04 TOP 10 INDUSTRIES AS OF 2/29/04
Genentech Inc 2.3% Communications Equipment 9.9%
International Game Technology 2.1 Semiconductors 8.1
eBay Inc 2.0 Health Care Equipment 6.6
Nextel Communications 1.9 Biotechnology 5.7
Analog Devices Inc 1.8 Investment Banking & Brokerage 3.9
Broadcom Corp 1.7 Pharmaceuticals 3.3
Cisco Systems Inc 1.6 Restaurants 2.8
Zimmer Holdings Inc 1.6 Casinos & Gaming 2.8
Yahoo! Inc 1.6 Oil & Gas Equipment & Services 2.6
Texas Instruments Inc 1.5 Systems Software 2.6
</Table>
Subject to change daily. 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. Van Kampen is a wholly
owned subsidiary of a global securities firm which is engaged in a wide range of
financial services including, for example, securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
3
absence of any good news on the horizon meant that the stocks no longer fit the
fund's investment criteria. We sold the four stocks from the portfolio.
Another stock that hurt results was Gilead Sciences, a biotechnology company
that had been a strong performer for the fund earlier in 2003. The stock fell
unexpectedly when the company announced that sales of its highly anticipated HIV
drug, Viread, were weaker than expected, causing an inventory build-up. We sold
the stock upon hearing the news.
Nonetheless, the portfolio enjoyed strong performance during the period from
many of its holdings, which represented a diverse group of industries. Casino-
gaming manufacturer International Game Technology (IGT) was the fund's
best-performing stock. IGT currently has a 70 percent market share in slot
machines, which helped the company generate significant revenue from a strong
replacement cycle. Casinos have been switching to the new, networked slot
machines, which helps them track winnings more accurately.
Wireless provider Nextel Communications was also a strong performer. Nextel's
shares advanced on expectations that the new wireless-phone-number portability
regulations would benefit this carrier, which has a reputation for superior
customer service. In addition, Nextel has been a standout among its competitors
with "Push to Talk," Nextel's walkie-talkie-like cell-phone technology.
Broadcom and Cisco Systems performed well as information-technology spending
rebounded, thereby increasing demand for the semiconductors and networking
services provided by these companies. Broadcom makes chips for goods such as
satellite-dish set-top boxes, wireless local area networks (LANs), and digital
subscriber line (DSL) modems. The company also supplies networking
semiconductors to Cisco. Cisco provides networking and communications products
to corporations, telecommunications companies, and public institutions.
Internet portal Yahoo was also a standout. Stronger-than-expected ad spending
and improved operating efficiency resulted in impressive earnings growth for the
company. Investors rewarded the stock for exceeding expectations.
We remain committed to pursuing long-term capital appreciation and maintaining
the fund's investment discipline throughout changing market conditions. We
continue to diligently seek stocks that we believe have above-average growth
potential, as evidenced by rising earnings expectations, rising valuations, or
preferably both.
4
ANNUAL HOUSEHOLDING NOTICE
To reduce fund expenses, the fund attempts to eliminate duplicate
mailings to the same address. The fund delivers a single copy of certain
shareholder documents to investors who share an address, even if the
accounts are registered under different names. The fund's prospectuses
and shareholder reports (including annual privacy notices) will be
delivered to you in this manner indefinitely unless you instruct us
otherwise. You can request multiple copies of these documents by either
calling (800) 341-2911 or writing to Van Kampen Investor Services at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor
Services has received your instructions, we will begin sending individual
copies for each account within 30 days.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust'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.
5
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED)
<Table>
<Caption>
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------------------------------------
COMMON STOCKS 95.1%
AEROSPACE & DEFENSE 0.6%
General Dynamics Corp. ..................................... 500,000 $ 46,060,000
--------------
APPAREL & ACCESSORIES 1.1%
Coach, Inc. (a)............................................. 2,000,000 79,260,000
--------------
APPAREL RETAIL 1.1%
AnnTaylor Stores Corp. (a).................................. 367,940 16,851,652
Chico's FAS, Inc. (a)....................................... 750,000 32,062,500
Ross Stores, Inc. .......................................... 1,000,000 32,050,000
--------------
80,964,152
--------------
APPLICATION SOFTWARE 1.2%
Autodesk, Inc. ............................................. 750,000 21,487,500
SAP AG--ADR (Germany)....................................... 1,750,000 69,300,000
--------------
90,787,500
--------------
BIOTECHNOLOGY 5.4%
Amgen, Inc. (a)............................................. 1,000,000 63,530,000
Biogen Idec, Inc. (a)....................................... 1,750,000 97,037,500
Genentech, Inc. (a)......................................... 1,500,000 161,835,000
Invitrogen Corp. (a)........................................ 750,000 55,275,000
Protein Design Labs, Inc. (a)............................... 1,000,000 24,000,000
--------------
401,677,500
--------------
CASINOS & GAMING 2.7%
International Game Technology............................... 3,750,000 147,150,000
Mandalay Resort Group....................................... 1,000,000 51,400,000
--------------
198,550,000
--------------
COMMUNICATIONS EQUIPMENT 9.4%
Avaya, Inc. (a)............................................. 2,000,000 34,300,000
Cisco Systems, Inc. (a)..................................... 5,000,000 115,500,000
Corning, Inc. (a)........................................... 7,000,000 87,850,000
JDS Uniphase Corp. (a)...................................... 9,000,000 44,100,000
Juniper Networks, Inc. (a).................................. 3,000,000 77,610,000
Motorola, Inc. ............................................. 5,000,000 92,250,000
Nokia Oyj--ADR (Finland).................................... 4,000,000 87,080,000
Nortel Networks Corp. (Canada) (a).......................... 8,000,000 63,840,000
QUALCOMM, Inc. ............................................. 1,500,000 95,175,000
--------------
697,705,000
--------------
COMPUTER HARDWARE 1.0%
Research in Motion Ltd. (Canada) (a)........................ 750,000 74,205,000
--------------
COMPUTER STORAGE & PERIPHERALS 1.2%
EMC Corp. (a)............................................... 6,000,000 85,920,000
--------------
CONSUMER ELECTRONICS 0.4%
Harman International Industries, Inc. ...................... 400,000 31,196,000
--------------
</Table>
6 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------------------------------------
CONSUMER FINANCE 2.0%
American Express Co. ....................................... 1,500,000 $ 80,130,000
Capital One Financial Corp. ................................ 1,000,000 70,720,000
--------------
150,850,000
--------------
DEPARTMENT STORES 1.5%
May Department Stores Co. .................................. 1,500,000 52,830,000
Nordstrom, Inc. ............................................ 1,500,000 58,710,000
--------------
111,540,000
--------------
DIVERSIFIED CHEMICALS 1.0%
Dow Chemical Co. ........................................... 1,750,000 76,072,500
--------------
DIVERSIFIED COMMERCIAL SERVICES 1.9%
Apollo Group, Inc., Class A (a)............................. 1,025,000 78,053,750
Cendant Corp. .............................................. 1,750,000 39,725,000
H&R Block, Inc. ............................................ 400,000 21,620,000
--------------
139,398,750
--------------
DIVERSIFIED METALS & MINING 0.6%
Phelps Dodge Corp. (a)...................................... 500,000 43,130,000
--------------
DRUG RETAIL 0.5%
CVS Corp. .................................................. 1,000,000 37,500,000
--------------
ELECTRICAL COMPONENTS & EQUIPMENT 0.4%
Emerson Electric Co. ....................................... 500,000 31,240,000
--------------
ELECTRONIC EQUIPMENT MANUFACTURERS 0.9%
Agilent Technologies, Inc. (a).............................. 2,000,000 68,380,000
--------------
ELECTRONIC MANUFACTURING SERVICES 1.0%
Flextronics International Ltd. (Singapore) (a).............. 4,000,000 72,400,000
--------------
FOOD DISTRIBUTORS 0.5%
Sysco Corp. ................................................ 1,000,000 39,650,000
--------------
FOOD RETAIL 0.5%
Whole Foods Market, Inc. ................................... 500,000 38,675,000
--------------
FOOTWEAR 1.2%
Nike, Inc., Class B......................................... 1,250,000 91,562,500
--------------
GENERAL MERCHANDISE STORES 0.7%
Target Corp. ............................................... 1,250,000 54,950,000
--------------
HEALTH CARE EQUIPMENT 6.3%
Becton, Dickinson & Co. .................................... 750,000 36,487,500
Boston Scientific Corp. (a)................................. 1,750,000 71,487,500
Guidant Corp. .............................................. 750,000 51,105,000
St. Jude Medical, Inc. (a).................................. 1,250,000 90,812,500
</Table>
See Notes to Financial Statements 7
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT (CONTINUED)
Stryker Corp. .............................................. 500,000 $ 44,365,000
Varian Medical Systems, Inc. (a)............................ 700,000 58,618,000
Zimmer Holdings, Inc. (a)................................... 1,500,000 113,460,000
--------------
466,335,500
--------------
HEALTH CARE SERVICES 1.7%
Caremark Rx, Inc. (a)....................................... 2,500,000 80,650,000
Quest Diagnostics, Inc. .................................... 500,000 41,435,000
--------------
122,085,000
--------------
HOME IMPROVEMENT RETAIL 1.0%
Home Depot, Inc. ........................................... 2,000,000 72,620,000
--------------
HOTELS 2.2%
Carnival Corp. ............................................. 1,750,000 77,647,500
Royal Caribbean Cruises Ltd. ............................... 750,000 33,187,500
Starwood Hotels & Resorts Worldwide, Inc. .................. 1,250,000 48,762,500
--------------
159,597,500
--------------
HOUSEHOLD PRODUCTS 1.7%
Kimberly-Clark Corp. ....................................... 750,000 48,510,000
Procter & Gamble Co. ....................................... 750,000 76,882,500
--------------
125,392,500
--------------
HYPERMARKETS & SUPER CENTERS 1.0%
Wal-Mart Stores, Inc. ...................................... 1,250,000 74,450,000
--------------
INDUSTRIAL CONGLOMERATES 0.6%
Tyco International Ltd. (Bermuda)........................... 1,500,000 42,855,000
--------------
INDUSTRIAL MACHINERY 1.6%
Danaher Corp. .............................................. 650,000 58,259,500
Eaton Corp. ................................................ 1,000,000 58,540,000
--------------
116,799,500
--------------
INTEGRATED OIL & GAS 1.7%
ChevronTexaco Corp. ........................................ 900,000 79,515,000
Occidental Petroleum Corp. ................................. 1,000,000 44,400,000
--------------
123,915,000
--------------
INTERNET RETAIL 1.9%
eBay, Inc. (a).............................................. 2,000,000 137,720,000
--------------
INTERNET SOFTWARE & SERVICES 2.0%
SINA Corp. (Cayman Islands) (a)............................. 750,000 33,135,750
Yahoo!, Inc. (a)............................................ 2,500,000 111,000,000
--------------
144,135,750
--------------
INVESTMENT BANKING & BROKERAGE 3.7%
Ameritrade Holding Corp. (a)................................ 2,500,000 40,700,000
E*TRADE Financial Corp. (a)................................. 1,750,000 25,042,500
Goldman Sachs Group, Inc. .................................. 700,000 74,109,000
</Table>
8 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE (CONTINUED)
Lehman Brothers Holdings, Inc. ............................. 1,000,000 $ 86,710,000
Merrill Lynch & Co., Inc. .................................. 750,000 45,907,500
--------------
272,469,000
--------------
IT CONSULTING & OTHER SERVICES 0.6%
Cognizant Technology Solutions Corp., Class A (a)........... 1,000,000 47,440,000
--------------
LIFE & HEALTH INSURANCE 0.5%
AFLAC, Inc. ................................................ 1,000,000 40,610,000
--------------
MANAGED HEALTH CARE 2.4%
Aetna, Inc. ................................................ 1,000,000 80,790,000
UnitedHealth Group, Inc. ................................... 1,500,000 93,000,000
--------------
173,790,000
--------------
MOVIES & ENTERTAINMENT 1.2%
News Corp., LTD.--ADR (Australia)........................... 1,000,000 37,450,000
Walt Disney Co. ............................................ 2,000,000 53,060,000
--------------
90,510,000
--------------
MULTI-LINE INSURANCE 1.0%
American International Group, Inc. ......................... 1,000,000 74,000,000
--------------
OIL & GAS DRILLING 0.4%
Transocean, Inc. (Cayman Islands) (a)....................... 1,000,000 29,480,000
--------------
OIL & GAS EQUIPMENT & SERVICES 2.5%
Schlumberger Ltd. .......................................... 1,500,000 96,735,000
Smith International, Inc. (a)............................... 1,750,000 88,672,500
--------------
185,407,500
--------------
OIL & GAS EXPLORATION & PRODUCTION 1.0%
Apache Corp. ............................................... 1,000,000 41,170,000
XTO Energy, Inc. ........................................... 1,000,000 29,840,000
--------------
71,010,000
--------------
PHARMACEUTICALS 3.1%
Forest Laboratories, Inc. (a)............................... 1,000,000 75,480,000
Pfizer, Inc. ............................................... 2,500,000 91,625,000
Teva Pharmaceutical Industries, Ltd.--ADR (Israel).......... 1,000,000 65,000,000
--------------
232,105,000
--------------
PROPERTY & CASUALTY 0.5%
ACE Ltd. (Cayman Islands)................................... 750,000 33,720,000
--------------
PUBLISHING 0.8%
McGraw-Hill Cos., Inc. ..................................... 750,000 58,627,500
--------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------------------------------------
RESTAURANTS 2.7%
McDonald's Corp. ........................................... 3,000,000 $ 84,900,000
Starbucks Corp. (a)......................................... 2,000,000 74,820,000
Wendy's International, Inc. ................................ 1,000,000 40,670,000
--------------
200,390,000
--------------
SEMICONDUCTOR EQUIPMENT 1.4%
Applied Materials, Inc. (a)................................. 3,000,000 63,720,000
Lam Research Corp. (a)...................................... 1,500,000 38,355,000
--------------
102,075,000
--------------
SEMICONDUCTORS 7.7%
Analog Devices, Inc. ....................................... 2,500,000 124,750,000
Broadcom Corp., Class A (a)................................. 3,000,000 121,740,000
Intel Corp. ................................................ 2,500,000 73,075,000
PMC-Sierra, Inc. (a)........................................ 2,000,000 39,800,000
Texas Instruments, Inc. .................................... 3,500,000 107,275,000
Xilinx, Inc. (a)............................................ 2,500,000 105,100,000
--------------
571,740,000
--------------
SOFT DRINKS 1.0%
Coca-Cola Co. .............................................. 1,500,000 74,940,000
--------------
SPECIALTY STORES 0.7%
Staples, Inc. .............................................. 2,000,000 52,440,000
--------------
SYSTEMS SOFTWARE 2.5%
Check Point Software Technologies Ltd. (Israel) (a)......... 1,500,000 34,530,000
Microsoft Corp. ............................................ 1,650,000 43,725,000
Symantec Corp. (a).......................................... 2,500,000 102,850,000
--------------
181,105,000
--------------
TECHNOLOGY DISTRIBUTORS 0.2%
CDW Corp. .................................................. 250,000 17,295,000
--------------
THRIFTS & MORTGAGE FINANCE 0.9%
Countrywide Financial Corp. ................................ 500,000 45,815,000
Golden West Financial Corp. ................................ 150,000 17,117,190
--------------
62,932,190
--------------
WIRELESS TELECOMMUNICATION SERVICES 1.8%
Nextel Communications, Inc., Class A (a).................... 5,000,000 132,450,000
--------------
TOTAL LONG-TERM INVESTMENTS 95.1%
(Cost $5,714,138,166).................................................. 7,032,115,842
</Table>
10 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
<Table>
<Caption>
DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 5.0%
Banc of America Securities LLC ($367,405,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 02/27/04, to be
sold on 03/01/04 at $367,435,923)
(Cost $367,405,000).................................................... $ 367,405,000
--------------
TOTAL INVESTMENTS 100.1%
(Cost $6,081,543,166).................................................. 7,399,520,842
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%)............................ (9,698,628)
--------------
NET ASSETS 100.0%....................................................... $7,389,822,214
==============
</Table>
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
See Notes to Financial Statements 11
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 29, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $6,081,543,166)..................... $ 7,399,520,842
Receivables:
Investments Sold.......................................... 392,492,126
Fund Shares Sold.......................................... 9,408,365
Dividends................................................. 3,816,100
Interest.................................................. 30,923
Other....................................................... 1,069,380
---------------
Total Assets............................................ 7,806,337,736
---------------
LIABILITIES:
Payables:
Investments Purchased..................................... 387,812,997
Fund Shares Repurchased................................... 15,237,409
Distributor and Affiliates................................ 7,092,106
Investment Advisory Fee................................... 2,576,935
Custodian Bank............................................ 838,719
Accrued Expenses............................................ 2,378,265
Trustees' Deferred Compensation and Retirement Plans........ 579,091
---------------
Total Liabilities....................................... 416,515,522
---------------
NET ASSETS.................................................. $ 7,389,822,214
===============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $12,860,032,982
Net Unrealized Appreciation................................. 1,317,977,676
Accumulated Net Investment Loss............................. (32,588,771)
Accumulated Net Realized Loss............................... (6,755,599,673)
---------------
NET ASSETS.................................................. $ 7,389,822,214
===============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $4,354,474,581 and 117,893,791 shares of
beneficial interest issued and outstanding)............. $ 36.94
Maximum sales charge (5.75%* of offering price)......... 2.25
---------------
Maximum offering price to public........................ $ 39.19
===============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $2,417,832,342 and 75,727,089 shares of
beneficial interest issued and outstanding)............. $ 31.93
===============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $551,363,422 and 16,835,563 shares of
beneficial interest issued and outstanding)............. $ 32.75
===============
Class D Shares:
Net asset value and offering price per share (Based on
net assets of $37,397,756 and 1,004,042 shares of
beneficial interest issued and outstanding)............. $ 37.25
===============
Class R Shares:
Net asset value and offering price per share (Based on
net assets of $28,754,113 and 780,406 shares of
beneficial interest issued and outstanding)............. $ 36.85
===============
</Table>
* On sales of $50,000 or more, the sales charge will be reduced.
12 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended February 29, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $32,893)..... $ 17,618,984
Interest.................................................... 1,800,272
--------------
Total Income............................................ 19,419,256
--------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B, C, D and R of $5,161,519, $11,935,898, $2,827,011,
$0 and $32,555, respectively)............................. 19,956,983
Investment Advisory Fee..................................... 16,057,402
Shareholder Services........................................ 13,693,702
Custody..................................................... 231,038
Legal....................................................... 136,738
Trustees' Fees and Related Expenses......................... 42,551
Other....................................................... 1,304,618
--------------
Total Expenses.......................................... 51,423,032
Less Credits Earned on Cash Balances.................... 7,794
--------------
Net Expenses............................................ 51,415,238
--------------
NET INVESTMENT LOSS......................................... $ (31,995,982)
==============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 813,086,242
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,520,315,580
End of the Period......................................... 1,317,977,676
--------------
Net Unrealized Depreciation During the Period............... (202,337,904)
--------------
NET REALIZED AND UNREALIZED GAIN............................ $ 610,748,338
==============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 578,752,356
==============
</Table>
See Notes to Financial Statements 13
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss.................................... $ (31,995,982) $ (61,541,081)
Net Realized Gain/Loss................................. 813,086,242 (907,033,099)
Net Unrealized Appreciation/Depreciation During the
Period............................................... (202,337,904) 1,564,806,310
-------------- ---------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... 578,752,356 596,232,130
-------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............................. 531,599,939 1,058,461,118
Cost of Shares Repurchased............................. (894,092,474) (1,845,414,527)
-------------- ---------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... (362,492,535) (786,953,409)
-------------- ---------------
TOTAL INCREASE/DECREASE IN NET ASSETS.................. 216,259,821 (190,721,279)
NET ASSETS:
Beginning of the Period................................ 7,173,562,393 7,364,283,672
-------------- ---------------
End of the Period (Including accumulated net investment
loss of $32,588,771 and $592,789, respectively)...... $7,389,822,214 $ 7,173,562,393
============== ===============
</Table>
14 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS A SHARES FEBRUARY 29, -----------------------------------------------------
2004 (a) 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 (a)
--------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF THE PERIOD........... $ 34.08 $ 30.96 $ 43.18 $ 109.19 $ 60.00 $ 36.13
-------- -------- -------- -------- --------- --------
Net Investment
Income/Loss........... (.10) (.18) (.17) .03 (.32) (.23)
Net Realized and
Unrealized Gain/Loss.. 2.96 3.30 (12.05) (51.18) 58.81 26.41
-------- -------- -------- -------- --------- --------
Total from Investment
Operations.............. 2.86 3.12 (12.22) (51.15) 58.49 26.18
Less Distributions from
Net Realized Gain....... -0- -0- -0- 14.86 9.30 2.31
-------- -------- -------- -------- --------- --------
NET ASSET VALUE, END OF
THE PERIOD.............. $ 36.94 $ 34.08 $ 30.96 $ 43.18 $ 109.19 $ 60.00
======== ======== ======== ======== ========= ========
Total Return (b).......... 8.39%* 10.08% -28.30% -51.22% 104.41% 75.10%
Net Assets at End of the
Period (In millions).... $4,354.5 $4,222.8 $4,310.2 $6,251.4 $11,527.6 $4,156.4
Ratio of Expenses to
Average Net Assets...... 1.10% 1.15% 1.06% .93% .87% .97%
Ratio of Net Investment
Income/Loss to Average
Net Assets.............. (.57%) (.61%) (.44%) .04% (.35%) (.45%)
Portfolio Turnover........ 90%* 180% 230% 148% 110% 124%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge (CDSC). On purchases of $1 million or more, a CDSC of 1% may be
imposed on certain redemptions made within 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.
See Notes to Financial Statements 15
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS B SHARES FEBRUARY 29, ----------------------------------------------------
2004 (a) 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 (a)
-------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF THE PERIOD............ $ 29.57 $ 27.07 $ 38.04 $ 99.32 $ 55.56 $ 33.84
-------- -------- -------- -------- -------- --------
Net Investment Loss...... (.21) (.36) (.41) (.41) (.93) (.57)
Net Realized and
Unrealized Gain/Loss... 2.57 2.86 (10.56) (46.01) 53.99 24.60
-------- -------- -------- -------- -------- --------
Total from Investment
Operations............... 2.36 2.50 (10.97) (46.42) 53.06 24.03
Less Distributions from Net
Realized Gain............ -0- -0- -0- 14.86 9.30 2.31
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE
PERIOD................... $ 31.93 $ 29.57 $ 27.07 $ 38.04 $ 99.32 $ 55.56
======== ======== ======== ======== ======== ========
Total Return (b)........... 7.98%* 9.24% -28.84% -51.60% 102.85% 73.78%
Net Assets at End of the
Period (In millions)..... $2,417.8 $2,346.3 $2,395.2 $3,904.7 $7,648.0 $2,850.2
Ratio of Expenses to
Average Net Assets....... 1.86% 1.91% 1.82% 1.71% 1.63% 1.74%
Ratio of Net Investment
Loss to Average Net
Assets................... (1.33%) (1.37%) (1.20%) (.74%) (1.12%) (1.22%)
Portfolio Turnover......... 90%* 180% 230% 148% 110% 124%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining to 0% after the fifth year.
If the sales charge was included, total returns would be lower. These
returns include combined Rule 12b-1 fees and service fees of 1% and do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
16 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS C SHARES FEBRUARY 29, ---------------------------------------------------------
2004 (a) 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 (a)
-------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF THE PERIOD............. $ 30.34 $ 27.75 $ 39.00 $ 101.30 $ 56.52 $ 34.39
-------- -------- -------- -------- -------- --------
Net Investment Loss....... (.21) (.36) (.42) (.41) (.95) (.58)
Net Realized and
Unrealized Gain/Loss.... 2.62 2.95 (10.83) (47.03) 55.03 25.02
-------- -------- -------- -------- -------- --------
Total from Investment
Operations................ 2.41 2.59 (11.25) (47.44) 54.08 24.44
Less Distributions from Net
Realized Gain............. -0- -0- -0- 14.86 9.30 2.31
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE
PERIOD.................... $ 32.75 $ 30.34 $ 27.75 $ 39.00 $ 101.30 $ 56.52
======== ======== ======== ======== ======== ========
Total Return (b)............ 7.94%* 9.33%(c) -28.85% -51.60% 102.91% 73.79%
Net Assets at End of the
Period (In millions)...... $ 551.4 $ 570.1 $ 629.0 $1,038.5 $1,944.0 $ 454.5
Ratio of Expenses to Average
Net Assets................ 1.86% 1.91% 1.82% 1.70% 1.64% 1.74%
Ratio of Net Investment Loss
to Average Net Assets..... (1.33%) (1.34%)(c) (1.20%) (.73%) (1.11%) (1.21%)
Portfolio Turnover.......... 90%* 180% 230% 148% 110% 124%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower. These returns include combined Rule 12b-1 fees and
service fees of 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%.
See Notes to Financial Statements 17
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
OCTOBER 17, 2000
SIX MONTHS YEAR ENDED (COMMENCEMENT OF
ENDED AUGUST 31, INVESTMENT
CLASS D SHARES FEBRUARY 29, -------------------- OPERATIONS) TO
2004 (a) 2003 (a) 2002 (a) AUGUST 31, 2001 (a)
-----------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................... $34.33 $ 31.10 $ 43.27 $ 97.10
------ -------- -------- -------
Net Investment Income/Loss........... (.06) (.11) (.07) .17
Net Realized and Unrealized
Gain/Loss.......................... 2.98 3.34 (12.10) (39.14)
------ -------- -------- -------
Total from Investment Operations....... 2.92 3.23 (12.17) (38.97)
Less Distributions from Net Realized
Gain................................. -0- -0- -0- 14.86
------ -------- -------- -------
NET ASSET VALUE, END OF THE PERIOD..... $37.25 $ 34.33 $ 31.10 $ 43.27
====== ======== ======== =======
Total Return (b)....................... 8.51%* 10.39% -28.13% -45.03%*
Net Assets at End of the Period (In
millions)............................ $ 37.4 $ 33.9 $ 29.8 $ 41.6
Ratio of Expenses to Average Net
Assets............................... .86% .90% .81% .72%
Ratio of Net Investment Income/Loss to
Average Net Assets................... (.33%) (.36%) (.19%) .33%
Portfolio Turnover..................... 90%* 180% 230% 148%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period.
18 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS (UNAUDITED) continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
OCTOBER 1, 2002
(COMMENCEMENT OF
CLASS R SHARES SIX MONTHS ENDED OPERATIONS) TO
FEBRUARY 29, 2004 (a) AUGUST 31, 2003 (a)
--------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD............ $34.04 $ 29.94
------ --------
Net Investment Loss............................... (.31) (.24)
Net Realized and Unrealized Gain.................. 3.12 4.34
------ --------
Total from Investment Operations.................... 2.81 4.10
------ --------
NET ASSET VALUE, END OF THE PERIOD.................. $36.85 $ 34.04
====== ========
Total Return (b).................................... 8.25%* 13.69%*
Net Assets at End of the Period (In millions)....... $ 28.8 $ .5
Ratio of Expenses to Average Net Assets............. 1.36% 1.41%
Ratio of Net Investment Loss to Average Net
Assets............................................ (.72%) (.85%)
Portfolio Turnover.................................. 90%* 180%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. The returns
include combined Rule 12b-1 fees and service fees of .50% 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 19
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Emerging Growth Fund (the "Fund") is organized as a Delaware
statutory trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act"), as
amended. The Fund's investment objective is 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 sales 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 (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.
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.
20
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
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 February 29, 2004, the cost and related gross unrealized appreciation and
depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $6,123,181,252
--------------
Gross tax unrealized appreciation........................... $1,311,357,411
Gross tax unrealized depreciation........................... (35,017,821)
--------------
Net tax unrealized appreciation on investments.............. $1,276,339,590
==============
</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.
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.
F. EXPENSE REDUCTIONS During the six months ended February 29, 2004, the Fund's
custody fee was reduced by $7,794 as a result of credits earned on cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
First $350 million.......................................... .575%
Next $350 million........................................... .525%
Next $350 million........................................... .475%
Over $1.05 billion.......................................... .425%
</Table>
For the six months ended February 29, 2004, the Fund recognized expenses of
approximately $136,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, 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 six months ended February 29, 2004, the Fund recognized expenses
of approximately $167,500 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 six months ended February
29, 2004, the Fund recognized expenses of approximately $11,365,800. Transfer
agency fees are determined through negotiations with the Fund's Board of
Trustees.
21
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
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 $413,577 are included in
"Other" assets on the Statement of Assets and Liabilities at February 29, 2004.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund. Benefits under the
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
For the six months ended February 29, 2004, the Fund paid brokerage
commissions to Morgan Stanley DW Inc., (Morgan Stanley) an affiliate of Van
Kampen, totaling $547,218.
At February 29, 2004, Van Kampen owned 33 shares of Class R.
3. CAPITAL TRANSACTIONS
At February 29, 2004, capital aggregated $6,816,151,355, $4,474,103,879,
$1,452,334,264, $89,300,928 and $28,142,556 for Classes A, B, C, D, and R,
respectively. For the six months ended February 29, 2004, transactions were as
follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A................................................... 10,688,016 $ 381,135,912
Class B................................................... 3,050,933 94,148,651
Class C................................................... 686,754 21,740,817
Class D................................................... 163,225 5,882,405
Class R................................................... 793,901 28,692,154
----------- -------------
Total Sales................................................. 15,382,829 $ 531,599,939
=========== =============
Repurchases:
Class A................................................... (16,698,586) $(597,579,581)
Class B................................................... (6,659,628) (206,119,830)
Class C................................................... (2,644,036) (84,111,399)
Class D................................................... (147,789) (5,296,135)
Class R................................................... (27,158) (985,529)
----------- -------------
Total Repurchases........................................... (26,177,197) $(894,092,474)
=========== =============
</Table>
22
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
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>
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 six months ended February 29, 2004 and the
year ended August 31, 2003, 95,793 and 195,817 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 six months
ended February 29, 2004 and the year ended August 31, 2003, 39,682 and 0 Class C
Shares converted to Class A Shares, respectively, and are shown in the above
table as sales of Class A Shares and repurchases of Class C 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
23
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
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 six months ended February 29, 2004, Van Kampen, as Distributor for
the Fund, received net commissions on sales of the Fund's Class A Shares of
approximately $667,400 and CDSC on redeemed shares of approximately $2,177,600.
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 $6,241,696,079 and $6,706,317,825,
respectively.
5. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C 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 and Class C 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 .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 $52,479,300 and $1,552,800 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 these fees for the six months ended February 29, 2004 are
payments retained by Van Kampen of approximately $9,284,200 and payments made to
Morgan Stanley, an affiliate of the Adviser, of approximately $662,000.
6. LEGAL MATTERS
The Adviser, certain affiliates of the Adviser and certain investment companies
advised by the Adviser or its affiliates, including the Fund, are named as
defendants in a number of recently
24
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- FEBRUARY 29, 2004 (UNAUDITED) continued
filed, similar class action complaints. One of the actions also names the
individual Trustees of the Van Kampen funds as defendants. These complaints
generally allege that defendants, including the Fund, violated their statutory
disclosure obligations and fiduciary duties by failing properly to disclose (i)
that the Adviser and certain affiliates of the Adviser allegedly offered
economic incentives to brokers and others to steer investors to the funds
advised by the Adviser or its affiliates rather than funds managed by other
companies, and (ii) that the funds advised by the Adviser or its affiliates,
including the Fund, allegedly paid excessive commissions to brokers in return
for their alleged efforts to steer investors to these funds. The complaints
seek, among other things, unspecified compensatory damages, rescissionary
damages, fees and costs. The defendants intend to move to dismiss these actions
and otherwise vigorously to defend them. While the Fund believes that it has
meritorious defenses, the ultimate outcome of these matters is not presently
determinable at this early stage of the litigation, and no provision has been
made in the Fund's financial statements for the effect, if any, of these
matters.
25
VAN KAMPEN EMERGING GROWTH FUND
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
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
1221 Avenue of the Americas
New York, NY 10020
DISTRIBUTOR
VAN KAMPEN FUNDS, INC.
1221 Avenue of the Americas
New York, NY 10020
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 947
Jersey City, New Jersey 07303-0947
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER, & FLOM LLP
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.
26
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 Asset Management, Van
Kampen Advisors 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.
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)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 16, 116, 216,
516, 316
EMG SAR 4/04 14074C04-AP-4/04
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
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.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) Code of Ethics -- Not applicable for semi-annual reports.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Emerging Growth Fund
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: April 20, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: April 20, 2004
By: /s/ John L. Sullivan
Name: John L. Sullivan
Title: Principal Financial Officer
Date: April 20, 2004