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: 8/31/04
Item 1. Report to Shareholders.
The Fund's 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 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,
2004.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
FUND BEING OFFERED. THE PROSPECTUS CONTAINS INFORMATION ABOUT THE FUND,
INCLUDING THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS
INVESTMENT OBJECTIVE. FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE
POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL
DECLINE AND THAT THE VALUE OF FUND SHARES MAY THEREFORE BE LESS THAN WHAT
YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS
FUND.
<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 as of 8/31/04
PERFORMANCE OF A $10,000 INVESTMENT
This chart compares your fund's performance to that of the Russell 1000 Growth
Index from 8/31/1994 through 8/31/2004. Class A shares, adjusted for sales
charges.
(LINE GRAPH)
<Table>
<Caption>
VAN KAMPEN EMERGING GROWTH
FUND RUSSELL 1000 GROWTH INDEX
-------------------------- -------------------------
8/94 9424 10000
9374 9865
12/94 9280 9937
10043 10883
11294 11952
12985 13037
12/95 13422 13630
14338 14362
15790 15276
16486 15827
12/96 15826 16782
14508 16872
17268 20063
20383 21571
12/97 19203 21899
22259 25217
23416 26362
20410 23967
12/98 25872 30375
29674 32306
31338 33549
32670 32320
12/99 52706 40447
66298 43329
58606 42160
62575 39892
12/00 46717 31377
35786 24819
36396 26909
28731 21686
12/01 31492 24969
29795 24323
25576 19781
21647 16805
12/02 21029 18007
21148 17814
23917 20363
24482 21160
12/03 26886 23363
27198 23547
27526 24003
8/04 25405 22534
</Table>
<Table>
<Caption>
A SHARES B SHARES C SHARES D SHARES R SHARES
since 10/02/70 since 4/20/92 since 7/06/93 since 10/17/00 since 10/01/02
- -------------------------------------------------------------------------------------------------------------------------
W/MAX W/MAX W/MAX
AVERAGE 5.75% 5.00% 1.00%
ANNUAL W/O SALES SALES W/O SALES SALES W/O SALES SALES W/O SALES W/O SALES
TOTAL RETURNS CHARGES CHARGE CHARGES CHARGE CHARGES CHARGE CHARGES CHARGES
Since Inception 14.78% 14.58% 10.88% 10.88% 8.91% 8.91% -19.21% 6.90%
10-year 10.43 9.77 9.91 9.91 9.59 9.59 -- --
5-year -4.64 -5.77 -5.37 -5.57 -5.35 -5.35 -- --
1-year 0.18 -5.59 -0.57 -5.55 -0.59 -1.59 0.41 -0.06
- -------------------------------------------------------------------------------------------------------------------------
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND FUND 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. 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. 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. Source for index
performance: Lipper Inc.
1
Fund Report
FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2004
Van Kampen Emerging Growth Fund is managed by the Adviser's Multi-Cap Growth
team.(1) Current members include Gary Lewis, Managing Director of the Adviser;
Dudley Brickhouse, Janet Luby, and David Walker, Executive Directors of the
Adviser; Matthew Hart, Vice President of the Adviser; and Scott Miller, Senior
Associate of the Adviser.
MARKET CONDITIONS
The fund's fiscal year saw a considerable sentiment shift in the stock market.
For most of 2003, evidence of a stronger economy, tax refunds in consumers'
wallets, relatively benign energy prices, and an accommodative Federal Reserve
(the Fed) policy buoyed investors' optimism that a recovery was well on its way.
This enabled growth stocks--the fund's mainstay--to outperform the broad market,
reversing a three-year trend.
However, in January, the Fed began to hint it would raise interest rates.
Uncertainty ruled the market as investors feared the Fed would have to raise
rates aggressively to keep inflation in check. (The Fed did increase its federal
funds rate a quarter point on June 30, 2004, as a "preventative" measure.)
Although some positive trends in the overall economy, such as improving
employment and stronger capital spending, pointed to a more bullish outlook,
these positive data points were often overshadowed by other variables.
Geopolitical tensions and terrorism, the effect of sustained high energy prices
on the consumer, and the potential for an administration change in Washington
continued to overhang the stock market for the remainder of the reporting
period.
Many "big picture" uncertainties, coupled with disappointing earnings reports in
the July 2004 corporate reporting period, contributed to a challenging
environment for growth investors. Technology companies set the stage for a
volatile and rotational market: many companies across the board either failed to
meet analysts' expectations for that quarter or did not give earnings guidance
for upcoming reporting periods that met or exceeded expectations, driving
valuations and stock prices lower.
(1)Team members may change at any time without notice.
2
PERFORMANCE ANALYSIS
The fund returned 0.18 percent (Class A shares unadjusted for sales charge)
during the 12-month period. The Russell 1000 Growth Index returned 5.36 percent
for the same period.
We attribute the fund's underperformance relative to its benchmark to the
following factors: a) the fund's overweighted position in consumer-discretionary
stocks and underweighted position in health-care (primarily large
pharmaceutical) companies; and b) the highly rotational and variable nature of
the market environment, in which we saw significant stock-price movement
unrelated to the underlying business fundamentals of the companies owned by the
fund.
In addition, individual portfolio holdings disappointed. Gilead Sciences fell
short of its earnings expectations in October, driven by an unexpected inventory
correction. We sold the stock from the fund at the time. (Subsequently, in the
summer, we bought it back in the fund's portfolio, in anticipation of the
upcoming launch of the company's newest AIDS drug. We also regained confidence
in the inventory controls the company implemented.) The fund was also hindered
by Guidant Corp. The company's development in the high growth and innovative
drug-eluting stent market hit a manufacturing snag, which looked to delay the
company's entrance into this market and caused downward earnings revision; we
eliminated the position on this news. A position in Flextronics hurt the fund as
demand for its electronics-manufacturing services slowed against a backdrop of
softening demand from its electronics and wireless equipment customers.
Secondary-education provider Career Education suffered under the negative
headlines generated by regulatory scrutiny around allegations that the company
falsified documents and reported inflated enrollment of students in its
facilities; this drove our decision to eliminate the stock.
On the positive side, the fund benefited the most from an overweighted position
in energy, as well as individual stock holdings in the consumer sector. Energy
stocks as a group benefited from the favorable conditions created by tight
supply and high demand, as well as the lofty commodity price of oil.
The fund's best performers continued to be Yahoo! and eBay, both classified in
the consumer sector. Both dot-com survivors have executed their business plans
well and have expanded their user bases and product lines. Both have become
entrenched not only in the United States but also abroad. Moreover, both
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDING AUGUST 31, 2004
<Table>
<Caption>
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RUSSELL 1000(R)
CLASS A CLASS B CLASS C CLASS D CLASS R GROWTH INDEX
0.18% -0.57% -0.59% 0.41% -0.06% 5.36%
- -----------------------------------------------------------------------------
</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.
3
companies' business models have generated impressive financial results over the
years, and the companies' high-growth prospects, attractive competitive
positioning, and ability to execute continue to qualify the stocks for
investment.
Elsewhere in the consumer sector, International Game Technology also boosted the
fund's return over the period. A leading slot-machine manufacturer, the company
has benefited from the gaming industry's conversion cycle of replacing older
slots with the cashless, paper-ticket slots. In addition, more states and
jurisdictions have legalized gaming each year, which has also provided an
attractive backdrop for the stock. Toward the end of the period, the company's
growth expectations were revised downward due to an expected slowdown in the
replacement cycle which caused us to decide to eliminate the position.
Other stocks that boosted the fund's return included Symantec, a security
software developer, and communications-equipment designer Qualcomm. Symantec
continued to be one of the best in its space, with strong demand for its
products driven by the ever-expanding threat of cyber-terrorism. The company
continues to execute well and exceed earnings expectations. Qualcomm makes code
division multiple access (CDMA) chips for wireless phones, for which Qualcomm
receives a royalty for every phone sold. The company is also involved in
producing chips for the next-generation wireless networks, which we believe is
likely to continue to drive the growth rate of the company.
At the close of the period, we remain cautiously optimistic. We are buoyed by a
still generally positive outlook for corporate profits and economic expansion,
and believe the upcoming election results and a better sense of the Fed's
trajectory for raising interest rates may help ease uncertainty in the
marketplace. However, high energy prices continue to concern us, particularly as
they affect the behavior and spending patterns of the consumer. We saw some
evidence of this in the August same-store sales results, as consumers worked to
absorb the "tax" of high gas prices coupled with increasing health-care expenses
and a lack of tax relief as seen in 2003. In addition, corporate spending also
seemed to pause toward the end of the period, as detailed in technology
companies' mid-quarter reviews. Companies, like consumers, also must absorb high
energy costs and have been reluctant to spend given the above-mentioned
uncertainties. Nonetheless, we are encouraged by the high level of cash on
corporate balance sheets, as we believe the companies will deploy this cash by
spending more as confidence grows and by initiating and expanding programs to
enhance shareholder value, such as increasing dividends and buying back shares.
We believe as uncertainties dissipate and investors gain confidence, the market
can stabilize and be less rotational and short-term oriented. Despite the
challenging backdrop to our style, we remain true to our investment discipline.
We seek companies that show accelerating growth or more growth than the overall
economy, and have rising earnings expectations or rising valuations.
There is no guarantee the securities mentioned will continue to perform well or
be held by the fund in the future.
4
<Table>
<Caption>
TOP 10 HOLDINGS AS OF 8/31/04
Microsoft Corp 2.7%
Exxon Mobil Corp 2.6
Johnson & Johnson 2.4
Procter & Gamble Co 2.3
Pfizer, Inc 1.9
Tyco International, Ltd 1.8
Dell, Inc 1.7
Boeing Co 1.7
QUALCOMM, Inc 1.5
Bank of America Corp 1.5
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 8/31/04
Pharmaceuticals 8.8%
Aerospace & Defense 5.1
Systems Software 5.0
Communications Equipment 4.2
Integrated Oil & Gas 3.9
Computer Hardware 3.9
Health Care Equipment 3.8
Biotechnology 3.6
Industrial Conglomerates 3.4
Household Products 3.1
Managed Health Care 2.9
Industrial Machinery 2.8
Diversified Banks 2.2
Semiconductors 2.2
Oil & Gas Equipment & Services 2.0
Consumer Finance 2.0
Personal Products 1.9
Department Stores 1.8
Hotels 1.6
Application Software 1.5
Thrifts & Mortgage Finance 1.4
Movies & Entertainment 1.4
Specialty Stores 1.4
Packaged Foods 1.2
Internet Retail 1.2
Internet Software & Services 1.2
Computer Storage & Peripherals 1.1
Home Improvement Retail 1.0
Restaurants 1.0
Integrated Telecommunication Services 1.0
Footwear 0.9
Air Freight & Couriers 0.9
Multi-line Insurance 0.8
Home Entertainment Software 0.8
Oil & Gas Exploration & Production 0.7
Diversified Chemicals 0.7
Health Care Services 0.7
Hypermarkets & Super Centers 0.7
Casinos & Gaming 0.7
Consumer Electronics 0.6
</Table>
<Table>
(continued on next page)
</Table>
5
<Table>
<Caption>
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 8/31/04
(continued from previous page)
Diversified Commercial Services 0.6%
Fertilizers & Agricultural Chemicals 0.6
Household Appliances 0.6
Office Electronics 0.6
Apparel & Accessories 0.5
Advertising 0.5
Soft Drinks 0.5
Building Products 0.5
Data Processing & Outsourcing Services 0.5
Trading Companies & Distributors 0.5
Steel 0.5
Property & Casualty 0.5
Investment Banking & Brokerage 0.5
Homebuilding 0.5
Electrical Components & Equipment 0.5
Health Care Supplies 0.5
Railroads 0.5
Electronic Manufacturing Services 0.4
Broadcasting & Cable TV 0.4
Motorcycle Manufacturers 0.3
-----
Total Long-Term Investments 95.1%
Short-Term Investments 5.2
Liabilities in Excess of Other Assets -0.3
-----
Total Net Assets 100.0%
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the industries shown above. All percentages are as a percentage of
net assets. 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.
6
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen fund provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
fund's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to fund shareholders, and makes these reports available on its
public web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public web site, each fund files a
complete schedule of portfolio holdings with the SEC for the fund's first
and third fiscal quarters on Form N-Q. Van Kampen does not deliver the
reports for the first and third fiscal quarters to shareholders, nor are
the reports posted to the Van Kampen public web site. You may, however,
obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's web site, http://www.sec.gov. You may
also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-202-942-8090. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
In addition to filing a complete schedule of portfolio holdings with the
SEC each fiscal quarter, each Van Kampen fund makes portfolio holdings
information available by periodically providing the information on its
public web site, www.vankampen.com. Each Van Kampen fund provides a
complete schedule of portfolio holdings on the public web site on a
calendar-quarter basis approximately 30 days after the close of the
calendar quarter. Furthermore, each Van Kampen open-end fund provides
partial lists of its portfolio holdings (such as top 10 or top 15 fund
holdings) to the public web site each month with a delay of approximately
15 days.
You may obtain copies of a fund's fiscal quarter filings, or its monthly
or calendar-quarter web site postings, by contacting Van Kampen Client
Relations at 1-800-847-2424.
7
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 1-800-341-2911 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 AND PROXY VOTING RECORD
The fund's policies and procedures with respect to the voting of proxies
relating to the fund's portfolio securities and information on how the
fund voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by calling 1-800-847-2424 or by visiting our web site at
www.vankampen.com. This information is also available on the Securities
and Exchange Commission's web site at http://www.sec.gov.
8
Expense Example
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and service (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing cost (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 3/1/04 - 8/31/04.
ACTUAL EXPENSE
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the second line of the table is useful in
comparing ongoing costs, and will not help you determine the relative total
costs of owning different funds that have transactional costs, such as sales
charges (loads), and redemption fees, or exchange fees.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
---------------------------------------------------
3/1/04 8/31/04 3/1/04-8/31/04
Class A
Actual................................... $1,000.00 $ 924.20 $5.13
Hypothetical............................. 1,000.00 1,019.84 5.38
(5% annual return before expenses)
Class B
Actual................................... 1,000.00 920.76 8.84
Hypothetical............................. 1,000.00 1,015.94 9.27
(5% annual return before expenses)
Class C
Actual................................... 1,000.00 920.92 8.79
Hypothetical............................. 1,000.00 1,015.94 9.22
(5% annual return before expenses)
Class D
Actual................................... 1,000.00 925.37 3.92
Hypothetical............................. 1,000.00 1021.04 4.11
(5% annual return before expenses)
Class R
Actual................................... 1,000.00 925.37 6.39
Hypothetical............................. 1,000.00 1018.54 6.70
(5% annual return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.06%, 1.83%,
1.82%, 0.81% and 1.32% for Class A, B, C, D and R Shares, respectively,
multiplied by the average account value over the period, multiplied by
184/366 (to reflect the one-half year period).
Assumes all dividends and distributions were reinvested.
9
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
COMMON STOCKS 95.1%
ADVERTISING 0.5%
Lamar Advertising Co., Class A (a).......................... 750,000 $ 32,767,500
--------------
AEROSPACE & DEFENSE 5.1%
Boeing Co. ................................................. 2,000,000 104,440,000
General Dynamics Corp. ..................................... 500,000 48,820,000
L-3 Communications Holdings, Inc. .......................... 500,000 31,320,000
Lockheed Martin Corp. ...................................... 1,250,000 67,225,000
United Technologies Corp. .................................. 650,000 61,041,500
--------------
312,846,500
--------------
AIR FREIGHT & COURIERS 0.9%
FedEx Corp. ................................................ 650,000 53,293,500
--------------
APPAREL & ACCESSORIES 0.5%
Coach, Inc. (a)............................................. 800,000 33,720,000
--------------
APPLICATION SOFTWARE 1.5%
Autodesk, Inc. ............................................. 1,500,000 66,615,000
SAP AG--ADR (Germany)....................................... 700,000 25,522,000
--------------
92,137,000
--------------
BIOTECHNOLOGY 3.6%
Amgen, Inc. (a)............................................. 1,100,000 65,219,000
Biogen, Inc. (a)............................................ 1,000,000 59,330,000
Celgene Corp. (a)........................................... 500,000 28,375,000
Gilead Sciences, Inc. (a)................................... 1,000,000 69,130,000
--------------
222,054,000
--------------
BROADCASTING & CABLE TV 0.4%
XM Satellite Radio Holdings, Inc., Class A (a).............. 1,000,000 27,470,000
--------------
BUILDING PRODUCTS 0.5%
Masco Corp. ................................................ 1,000,000 32,130,000
--------------
CASINOS & GAMING 0.7%
Mandalay Resort Group....................................... 600,000 40,704,000
--------------
COMMUNICATIONS EQUIPMENT 4.2%
Avaya, Inc. (a)............................................. 1,000,000 12,120,000
Cisco Systems, Inc. (a)..................................... 2,500,000 46,900,000
Corning, Inc. (a)........................................... 4,000,000 40,480,000
Motorola, Inc. ............................................. 4,000,000 64,600,000
QUALCOMM, Inc. ............................................. 2,500,000 95,125,000
--------------
259,225,000
--------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
COMPUTER HARDWARE 3.9%
Apple Computer, Inc. (a).................................... 2,000,000 $ 68,980,000
Dell, Inc. (a).............................................. 3,000,000 104,520,000
Research in Motion, Ltd. (Canada) (a)....................... 1,100,000 66,242,000
--------------
239,742,000
--------------
COMPUTER STORAGE & PERIPHERALS 1.1%
Lexmark International, Inc., Class A (a).................... 750,000 66,337,500
--------------
CONSUMER ELECTRONICS 0.6%
Harman International Industries, Inc. ...................... 400,000 38,676,000
--------------
CONSUMER FINANCE 2.0%
American Express Co. ....................................... 1,250,000 62,525,000
Capital One Financial Corp. ................................ 500,000 33,880,000
MBNA Corp. ................................................. 1,000,000 24,140,000
--------------
120,545,000
--------------
DATA PROCESSING & OUTSOURCING SERVICES 0.5%
Automatic Data Processing, Inc. ............................ 800,000 31,816,000
--------------
DEPARTMENT STORES 1.8%
J.C. Penney Co., Inc. ...................................... 2,000,000 76,640,000
Nordstrom, Inc. ............................................ 1,000,000 37,130,000
--------------
113,770,000
--------------
DIVERSIFIED BANKS 2.2%
Bank of America Corp. ...................................... 2,000,000 89,960,000
Wachovia Corp. ............................................. 1,000,000 46,910,000
--------------
136,870,000
--------------
DIVERSIFIED CHEMICALS 0.7%
Dow Chemical Co. ........................................... 1,000,000 42,810,000
--------------
DIVERSIFIED COMMERCIAL SERVICES 0.6%
Cendant Corp. .............................................. 1,750,000 37,852,500
--------------
ELECTRICAL COMPONENTS & EQUIPMENT 0.5%
Rockwell Automation, Inc. .................................. 750,000 29,250,000
--------------
ELECTRONIC MANUFACTURING SERVICES 0.4%
Flextronics International, Ltd. (Singapore) (a)............. 2,250,000 27,922,500
--------------
FERTILIZERS & AGRICULTURAL CHEMICALS 0.6%
Monsanto Co. ............................................... 1,000,000 36,600,000
--------------
FOOTWEAR 0.9%
Nike, Inc., Class B......................................... 750,000 56,482,500
--------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT 3.8%
Becton, Dickinson & Co. .................................... 750,000 $ 36,090,000
Biomet, Inc. ............................................... 1,250,000 57,062,500
Boston Scientific Corp. (a)................................. 750,000 26,797,500
C.R. Bard, Inc. ............................................ 600,000 33,660,000
St. Jude Medical, Inc. (a).................................. 500,000 33,625,000
Zimmer Holdings, Inc. (a)................................... 650,000 46,345,000
--------------
233,580,000
--------------
HEALTH CARE SERVICES 0.7%
Quest Diagnostics, Inc. .................................... 500,000 42,800,000
--------------
HEALTH CARE SUPPLIES 0.5%
Fisher Scientific International, Inc. (a)................... 500,000 28,485,000
--------------
HOME ENTERTAINMENT SOFTWARE 0.8%
Electronic Arts, Inc. (a)................................... 1,000,000 49,780,000
--------------
HOME IMPROVEMENT RETAIL 1.0%
Home Depot, Inc. ........................................... 1,750,000 63,980,000
--------------
HOMEBUILDING 0.5%
Pulte Homes, Inc. .......................................... 500,000 29,475,000
--------------
HOTELS 1.6%
Carnival Corp. ............................................. 750,000 34,342,500
Starwood Hotels & Resorts Worldwide, Inc. .................. 1,500,000 66,300,000
--------------
100,642,500
--------------
HOUSEHOLD APPLIANCES 0.6%
Black & Decker Corp. ....................................... 500,000 34,465,000
--------------
HOUSEHOLD PRODUCTS 3.1%
Kimberly-Clark Corp. ....................................... 750,000 50,025,000
Procter & Gamble Co. ....................................... 2,500,000 139,925,000
--------------
189,950,000
--------------
HYPERMARKETS & SUPER CENTERS 0.7%
Costco Wholesale Corp. ..................................... 1,000,000 41,170,000
--------------
INDUSTRIAL CONGLOMERATES 3.4%
General Electric Co. ....................................... 2,000,000 65,580,000
Textron, Inc. .............................................. 500,000 31,745,000
Tyco International, Ltd. (Bermuda).......................... 3,500,000 109,620,000
--------------
206,945,000
--------------
INDUSTRIAL MACHINERY 2.8%
Danaher Corp. .............................................. 1,300,000 66,846,000
Eaton Corp. ................................................ 750,000 45,262,500
Illinois Tool Works, Inc. .................................. 650,000 59,338,500
--------------
171,447,000
--------------
</Table>
12 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
INTEGRATED OIL & GAS 3.9%
Amerada Hess Corp. ......................................... 500,000 $ 40,250,000
Exxon Mobil Corp. .......................................... 3,500,000 161,350,000
Occidental Petroleum Corp. ................................. 750,000 38,737,500
--------------
240,337,500
--------------
INTEGRATED TELECOMMUNICATION SERVICES 1.0%
Verizon Communications, Inc. ............................... 1,500,000 58,875,000
--------------
INTERNET RETAIL 1.2%
eBay, Inc. (a).............................................. 850,000 73,559,000
--------------
INTERNET SOFTWARE & SERVICES 1.2%
Yahoo!, Inc. (a)............................................ 2,500,000 71,275,000
--------------
INVESTMENT BANKING & BROKERAGE 0.5%
Bear Stearns Co., Inc. ..................................... 350,000 30,772,000
--------------
MANAGED HEALTH CARE 2.9%
Aetna, Inc. ................................................ 500,000 46,325,000
Anthem, Inc. (a)............................................ 500,000 40,620,000
Coventry Health Care, Inc. (a).............................. 500,000 25,390,000
UnitedHealth Group, Inc. ................................... 1,000,000 66,130,000
--------------
178,465,000
--------------
MOTORCYCLE MANUFACTURERS 0.3%
Harley-Davidson, Inc. ...................................... 350,000 21,357,000
--------------
MOVIES & ENTERTAINMENT 1.4%
News Corp., Ltd.--ADR (Australia)........................... 1,000,000 31,250,000
Time Warner, Inc. (a)....................................... 3,500,000 57,225,000
--------------
88,475,000
--------------
MULTI-LINE INSURANCE 0.8%
American International Group, Inc. ......................... 700,000 49,868,000
--------------
OFFICE ELECTRONICS 0.6%
Zebra Technologies Corp., Class A (a)....................... 600,000 34,290,000
--------------
OIL & GAS EQUIPMENT & SERVICES 2.0%
Baker Hughes, Inc. ......................................... 750,000 29,497,500
BJ Services Co. ............................................ 750,000 36,037,500
Smith International, Inc. (a)............................... 1,000,000 56,980,000
--------------
122,515,000
--------------
OIL & GAS EXPLORATION & PRODUCTION 0.7%
Burlington Resources, Inc. ................................. 1,250,000 45,287,500
--------------
</Table>
See Notes to Financial Statements 13
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
PACKAGED FOODS 1.2%
Hershey Foods Corp. ........................................ 700,000 $ 33,796,000
Kellogg Co. ................................................ 1,000,000 41,980,000
--------------
75,776,000
--------------
PERSONAL PRODUCTS 1.9%
Avon Products, Inc. ........................................ 1,500,000 66,270,000
Gillette Co. ............................................... 1,250,000 53,125,000
--------------
119,395,000
--------------
PHARMACEUTICALS 8.8%
Elan Corp.--ADR (Ireland) (a)............................... 1,000,000 22,630,000
Eli Lilly & Co. ............................................ 500,000 31,725,000
Eon Labs, Inc. (a).......................................... 750,000 18,870,000
Johnson & Johnson........................................... 2,500,000 145,250,000
Novartis AG--ADR (Switzerland).............................. 1,400,000 65,030,000
Pfizer, Inc. ............................................... 3,500,000 114,345,000
Roche Holdings, Ltd.--ADR (Switzerland)..................... 650,000 62,921,430
Sepracor, Inc. (a).......................................... 1,000,000 49,610,000
Teva Pharmaceutical Industries, Ltd.--ADR (Israel).......... 1,100,000 29,975,000
--------------
540,356,430
--------------
PROPERTY & CASUALTY 0.5%
Safeco Corp. ............................................... 650,000 31,310,500
--------------
RAILROADS 0.5%
Norfolk Southern Corp. ..................................... 1,000,000 28,400,000
--------------
RESTAURANTS 1.0%
Starbucks Corp. (a)......................................... 1,400,000 60,536,000
--------------
SEMICONDUCTORS 2.2%
Broadcom Corp., Class A (a)................................. 2,000,000 54,280,000
Intel Corp. ................................................ 1,000,000 21,290,000
Marvell Technology Group Ltd. (Bermuda) (a)................. 1,500,000 34,680,000
Microchip Technology, Inc. ................................. 900,000 23,751,000
--------------
134,001,000
--------------
SOFT DRINKS 0.5%
PepsiCo, Inc. .............................................. 650,000 32,500,000
--------------
SPECIALTY STORES 1.4%
PETsMART, Inc. ............................................. 1,000,000 28,060,000
Staples, Inc. .............................................. 2,000,000 57,360,000
--------------
85,420,000
--------------
STEEL 0.5%
Nucor Corp. ................................................ 400,000 31,316,000
--------------
</Table>
14 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 2004 continued
<Table>
<Caption>
NUMBER OF
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------------------------------------
SYSTEMS SOFTWARE 5.0%
Adobe Systems, Inc. ........................................ 1,250,000 $ 57,337,500
Microsoft Corp. ............................................ 6,000,000 163,800,000
Symantec Corp. (a).......................................... 1,750,000 83,930,000
--------------
305,067,500
--------------
THRIFTS & MORTGAGE FINANCE 1.4%
Countrywide Financial Corp. ................................ 1,050,000 37,327,500
MGIC Investment Corp. ...................................... 750,000 51,202,500
--------------
88,530,000
--------------
TRADING COMPANIES & DISTRIBUTORS 0.5%
Fastenal Co. ............................................... 500,000 31,390,000
--------------
TOTAL LONG-TERM INVESTMENTS 95.1%
(Cost $5,425,821,992)............................................... 5,856,815,430
REPURCHASE AGREEMENT 5.2%
Bank of America Securities LLC ($320,016,000 par collateralized by U.S.
Government obligations in a pooled cash account, interest rate of
1.53%, dated 08/31/04, to be sold on 09/01/04 at $320,029,601)
(Cost $320,016,000) .................................................. 320,016,000
--------------
TOTAL INVESTMENTS 100.3%
(Cost $5,745,837,992)................................................. 6,176,831,430
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3%)............................ (20,594,750)
--------------
NET ASSETS 100.0%....................................................... $6,156,236,680
==============
</Table>
Percentages are calculated as a percentage of net assets.
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
See Notes to Financial Statements 15
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
August 31, 2004
<Table>
ASSETS:
Total Investments (Cost $5,745,837,992)..................... $ 6,176,831,430
Receivables:
Investments Sold.......................................... 43,843,120
Dividends................................................. 6,061,615
Fund Shares Sold.......................................... 3,407,503
Interest.................................................. 13,601
Other....................................................... 594,338
---------------
Total Assets............................................ 6,230,751,607
---------------
LIABILITIES:
Payables:
Investments Purchased..................................... 51,712,298
Fund Shares Repurchased................................... 11,028,453
Distributor and Affiliates................................ 7,080,037
Investment Advisory Fee................................... 2,294,910
Custodian Bank............................................ 276,473
Accrued Expenses............................................ 1,565,649
Trustees' Deferred Compensation and Retirement Plans........ 557,107
---------------
Total Liabilities....................................... 74,514,927
---------------
NET ASSETS.................................................. $ 6,156,236,680
===============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $12,111,400,596
Net Unrealized Appreciation................................. 430,993,438
Accumulated Net Investment Loss............................. (576,259)
Accumulated Net Realized Loss............................... (6,385,581,095)
---------------
NET ASSETS.................................................. $ 6,156,236,680
===============
NET ASSET VALUE PER COMMON SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $3,663,882,296 and 107,309,385 shares of
beneficial interest issued and outstanding)............. $ 34.14
Maximum sales charge (5.75%* of offering price)......... 2.08
---------------
Maximum offering price to public........................ $ 36.22
===============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $2,010,437,443 and 68,379,630 shares of
beneficial interest issued and outstanding)............. $ 29.40
===============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $430,163,702 and 14,263,532 shares of
beneficial interest issued and outstanding)............. $ 30.16
===============
Class D Shares:
Net asset value and offering price per share (Based on
net assets of $31,763,787 and 921,383 shares of
beneficial interest issued and outstanding)............. $ 34.47
===============
Class R Shares:
Net asset value and offering price per share (Based on
net assets of $19,989,452 and 587,645 shares of
beneficial interest issued and outstanding)............. $ 34.02
===============
</Table>
* On sales of $50,000 or more, the sales charge will be reduced.
16 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL STATEMENTS continued
Statement of Operations
For the Year Ended August 31, 2004
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $309,883).... $ 40,437,853
Interest.................................................... 3,269,586
---------------
Total Income............................................ 43,707,439
---------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B, C, D and R of $10,121,917, $23,169,425, $5,296,752,
$0 and $96,834, respectively)............................. 38,684,928
Investment Advisory Fee..................................... 31,092,281
Shareholder Services........................................ 24,925,097
Custody..................................................... 487,639
Legal....................................................... 230,957
Trustees' Fees and Related Expenses......................... 62,711
Other....................................................... 2,572,548
---------------
Total Expenses.......................................... 98,056,161
Less Credits Earned on Cash Balances.................... 34,439
---------------
Net Expenses............................................ 98,021,722
---------------
NET INVESTMENT LOSS......................................... $ (54,314,283)
===============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,183,108,779
---------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,520,315,580
End of the Period......................................... 430,993,438
---------------
Net Unrealized Depreciation During the Period............... (1,089,322,142)
---------------
NET REALIZED AND UNREALIZED GAIN............................ $ 93,786,637
===============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 39,472,354
===============
</Table>
See Notes to Financial Statements 17
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
---------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss...................................... $ (54,314,283) $ (61,541,081)
Net Realized Gain/Loss................................... 1,183,108,779 (907,033,099)
Net Unrealized Appreciation/Depreciation During the
Period................................................. (1,089,322,142) 1,564,806,310
--------------- ---------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...... 39,472,354 596,232,130
--------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................ 910,766,850 1,058,461,118
Cost of Shares Repurchased............................... (1,967,564,917) (1,845,414,527)
--------------- ---------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS....... (1,056,798,067) (786,953,409)
--------------- ---------------
TOTAL DECREASE IN NET ASSETS............................. (1,017,325,713) (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 $576,259 and $592,789, respectively)........... $ 6,156,236,680 $ 7,173,562,393
=============== ===============
</Table>
18 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
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 -----------------------------------------------------------------
2004 2003 2002 2001 2000
-----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................... $ 34.08 $ 30.96 $ 43.18 $ 109.19 $ 60.00
-------- -------- -------- -------- ---------
Net Investment Income/Loss.... (.16)(a) (.18)(a) (.17)(a) .03(a) (.32)(a)
Net Realized and Unrealized
Gain/Loss................... .22 3.30 (12.05) (51.18) 58.81
-------- -------- -------- -------- ---------
Total from Investment
Operations.................... .06 3.12 (12.22) (51.15) 58.49
Less Distributions from Net
Realized Gain................. -0- -0- -0- 14.86 9.30
-------- -------- -------- -------- ---------
NET ASSET VALUE, END OF THE
PERIOD........................ $ 34.14 $ 34.08 $ 30.96 $ 43.18 $ 109.19
======== ======== ======== ======== =========
Total Return (b)................ 0.18% 10.08% -28.30% -51.22% 104.41%
Net Assets at End of the Period
(In millions)................. $3,663.9 $4,222.8 $4,310.2 $6,251.4 $11,527.6
Ratio of Expenses to Average Net
Assets........................ 1.08% 1.15% 1.06% .93% .87%
Ratio of Net Investment
Income/Loss to Average Net
Assets........................ (.46%) (.61%) (.44%) .04% (.35%)
Portfolio Turnover.............. 177% 180% 230% 148% 110%
</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.
See Notes to Financial Statements 19
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS continued
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 ----------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD......................... $ 29.57 $ 27.07 $ 38.04 $ 99.32 $ 55.56
-------- -------- -------- -------- --------
Net Investment Loss............ (.38)(a) (.36)(a) (.41)(a) (.41)(a) (.93)(a)
Net Realized and Unrealized
Gain/Loss.................... .21 2.86 (10.56) (46.01) 53.99
-------- -------- -------- -------- --------
Total from Investment
Operations..................... (.17) 2.50 (10.97) (46.42) 53.06
Less Distributions from Net
Realized Gain.................. -0- -0- -0- 14.86 9.30
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE
PERIOD......................... $ 29.40 $ 29.57 $ 27.07 $ 38.04 $ 99.32
======== ======== ======== ======== ========
Total Return (b)................. -0.57% 9.24% -28.84% -51.60% 102.85%
Net Assets at End of the Period
(In millions).................. $2,010.4 $2,346.3 $2,395.2 $3,904.7 $7,648.0
Ratio of Expenses to Average Net
Assets......................... 1.85% 1.91% 1.82% 1.71% 1.63%
Ratio of Net Investment Loss to
Average Net Assets............. (1.23%) (1.37%) (1.20%) (.74%) (1.12%)
Portfolio Turnover............... 177% 180% 230% 148% 110%
</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.
20 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS continued
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 ----------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $30.34 $27.75 $ 39.00 $101.30 $ 56.52
------ ------ ------- ------- --------
Net Investment Loss............... (.39)(a) (.36)(a) (.42)(a) (.41)(a) (.95)(a)
Net Realized and Unrealized
Gain/Loss....................... .21 2.95 (10.83) (47.03) 55.03
------ ------ ------- ------- --------
Total from Investment Operations.... (.18) 2.59 (11.25) (47.44) 54.08
Less Distributions from Net Realized
Gain.............................. -0- -0- -0- 14.86 9.30
------ ------ ------- ------- --------
NET ASSET VALUE, END OF THE
PERIOD............................ $30.16 $30.34 $ 27.75 $ 39.00 $ 101.30
====== ====== ======= ======= ========
Total Return (b).................... -0.59% 9.33%(c) -28.85% -51.60% 102.91%
Net Assets at End of the Period (In
millions)......................... $430.2 $570.1 $ 629.0 $1,038.5 $1,944.0
Ratio of Expenses to Average Net
Assets............................ 1.85% 1.91% 1.82% 1.70% 1.64%
Ratio of Net Investment Loss to
Average Net Assets................ (1.23%) (1.34%)(c) (1.20%) (.73%) (1.11%)
Portfolio Turnover.................. 177% 180% 230% 148% 110%
</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%
See Notes to Financial Statements 21
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
OCTOBER 17, 2000
(COMMENCEMENT
YEAR ENDED AUGUST 31, OF INVESTMENT
CLASS D SHARES ------------------------------- OPERATIONS) TO
2004 2003 2002 AUGUST 31, 2001
-----------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD.................................. $34.33 $31.10 $ 43.27 $ 97.10
------ ------ ------- -------
Net Investment Income/Loss.............. (.08)(a) (.11)(a) (.07)(a) .17(a)
Net Realized and Unrealized Gain/Loss... .22 3.34 (12.10) (39.14)
------ ------ ------- -------
Total from Investment Operations.......... .14 3.23 (12.17) (38.97)
Less Distributions from Net Realized
Gain.................................... -0- -0- -0- 14.86
------ ------ ------- -------
NET ASSET VALUE, END OF THE PERIOD........ $34.47 $34.33 $ 31.10 $ 43.27
====== ====== ======= =======
Total Return (b).......................... 0.41% 10.39% -28.13% -45.03%*
Net Assets at End of the Period (In
millions)............................... $ 31.8 $ 33.9 $ 29.8 $ 41.6
Ratio of Expenses to Average Net Assets... .84% .90% .81% .72%
Ratio of Net Investment Income/Loss to
Average Net Assets...................... (.21%) (.36%) (.19%) .33%
Portfolio Turnover........................ 177% 180% 230% 148%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period.
22 See Notes to Financial Statements
VAN KAMPEN EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS continued
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
CLASS R SHARES OCTOBER 1, 2002
(COMMENCEMENT
YEAR ENDED OF INVESTMENT
AUGUST 31, OPERATIONS) TO
2004 AUGUST 31, 2003
-----------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $34.04 $29.94
------ ------
Net Investment Loss....................................... (.24)(a) (.24)(a)
Net Realized and Unrealized Gain.......................... .22 4.34
------ ------
Total from Investment Operations............................ (.02) 4.10
------ ------
NET ASSET VALUE, END OF THE PERIOD.......................... $34.02 $34.04
====== ======
Total Return (b)............................................ -0.06% 13.69%*
Net Assets at the End of the Period (in millions)........... $ 20.0 $ .5
Ratio of Expenses to Average Net Assets..................... 1.33% 1.41%
Ratio of Net Investment Loss to Average Net Assets.......... (.65%) (.85%)
Portfolio Turnover.......................................... 177% 180%
</Table>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period. These returns
include combined Rule 12b-1 fees of 0.50% 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 23
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004
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 U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION Investments in securities listed on a securities exchange
are valued at their 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
24
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
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, 2004, the Fund had an accumulated capital loss carryforward for
tax purposes of $6,380,899,491, which will expire between August 31, 2010 and
August 31, 2011.
At August 31, 2004, the cost and related gross unrealized appreciation and
depreciation were as follows:
<Table>
Cost of investments for tax purposes........................ $5,750,519,595
==============
Gross tax unrealized appreciation........................... $ 564,395,669
Gross tax unrealized depreciation........................... (138,083,834)
--------------
Net tax unrealized appreciation on investments.............. $ 426,311,835
==============
</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 gains/losses under U.S. generally accepted accounting principles 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 $54,326,854 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 $3,959 was reclassified to accumulated net realized loss from
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.
F. EXPENSE REDUCTIONS During the year ended August 31, 2004, the Fund's custody
fee was reduced by $34,439 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>
25
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
For the year ended August 31, 2004, the Fund recognized expenses of
approximately $231,000 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 year ended August 31, 2004, the Fund recognized expenses of
approximately $293,100 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,
2004, the Fund recognized expenses of approximately $21,433,400. 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 $400,844 are included in
"Other" assets on the Statement of Assets and Liabilities at August 31, 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 year ended August 31, 2004, the Fund paid brokerage commissions to
Morgan Stanley DW Inc., (Morgan Stanley) an affiliate of the Adviser, totaling
$1,788,860.
26
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
3. CAPITAL TRANSACTIONS
At August 31, 2004, capital aggregated $6,405,170,497, $4,231,806,699,
$1,367,382,062, $86,024,944 and $21,016,394 for Classes A, B, C, D, and R,
respectively. For the year ended August 31, 2004, transactions were as follows:
<Table>
<Caption>
SHARES VALUE
Sales:
Class A.................................................. 18,786,524 $ 669,892,192
Class B.................................................. 5,296,493 163,446,114
Class C.................................................. 1,154,509 36,550,987
Class D.................................................. 208,563 7,508,169
Class R.................................................. 924,246 33,369,388
----------- ---------------
Total Sales................................................ 26,370,335 $ 910,766,850
=========== ===============
Repurchases:
Class A.................................................. (35,381,500) $(1,264,994,832)
Class B.................................................. (16,252,647) (499,964,345)
Class C.................................................. (5,683,822) (180,075,861)
Class D.................................................. (275,786) (9,917,441)
Class R.................................................. (350,264) (12,612,438)
----------- ---------------
Total Repurchases.......................................... (57,944,019) $(1,967,564,917)
=========== ===============
</Table>
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
27
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
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, 2004 and 2003, 821,843 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 years
ended August 31, 2004 and 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 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, 2004, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A Shares of approximately
$1,204,700 and CDSC on redeemed shares of approximately $4,548,500. 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 $11,938,390,195 and $13,060,856,751,
respectively.
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 .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
28
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
daily net assets are accrued daily. The annual fees for Class A Shares are paid
quarterly and annual fees for Class C Shares are paid monthly. For Class B
Shares, .75% of the annual fees are paid monthly, while .25% of the annual fees
are paid quarterly. The amount of distribution expenses incurred by Van Kampen
and not yet reimbursed ("unreimbursed receivable") was approximately $43,914,000
and $1,490,000 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, 2004 are payments
retained by Van Kampen of approximately $17,983,500 and payments made to Morgan
Stanley, an affiliate of the Adviser, of approximately $1,301,400.
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 similar class action complaints which were recently
consolidated. This consolidated action also names as defendants certain
individual Trustees and Directors of the named investment companies advised by
affiliates of the Adviser; the complaint does not, however, name the individual
Trustees of any Van Kampen funds. The consolidated amended complaint generally
alleges that defendants 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 recommend the funds advised by the Adviser or its
affiliates to investors 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 efforts to
recommend these funds to investors. The complaint seeks, among other things,
unspecified compensatory damages, rescissionary damages, fees and costs.
The Adviser, certain affiliates of the Adviser and certain investment
companies advised by the Adviser or its affiliates are also named as defendants
in a derivative suit which additionally names as defendants certain individual
Trustees of the Van Kampen funds; the funds, including the Fund, are also named
as nominal defendants. The complaint in the derivative action alleges that
defendants gave a proprietary sales force economic incentives to promote the
sale of proprietary mutual funds and that they improperly failed to disclose
these economic incentives. The complaint also alleges that the Van Kampen funds
paid excessive commissions to Morgan Stanley DW Inc. in connection with the
sales of the funds. The complaint seeks, among other things, the removal of the
current Trustees of the Van Kampen funds, rescission of the management contracts
for the Van Kampen funds, disgorgement of profits by Morgan Stanley and monetary
damages. This complaint has been coordinated with the consolidated complaint
described in the preceding paragraph.
The defendants have moved to dismiss these actions and otherwise intend to
vigorously 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.
29
VAN KAMPEN EMERGING GROWTH FUND
NOTES TO FINANCIAL STATEMENTS -- AUGUST 31, 2004 continued
7. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications. The
Fund's maximum exposure under these arrangements is unknown. However, the Fund
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
30
VAN KAMPEN EMERGING GROWTH FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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
periods indicated therein. 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.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (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, 2004, 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, 2004, 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 periods indicated therein in conformity with U.S. generally accepted
accounting principles.
-s- Ernst & Young LLP
Chicago, Illinois
October 7, 2004
31
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, New York 10020
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1221 Avenue of the Americas
New York, New York 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 REGISTERED
PUBLIC ACCOUNTING FIRM
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.
32
VAN KAMPEN EMERGING GROWTH FUND
TRUSTEES AND OFFICERS INFORMATION
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 Asset Management (the "Adviser"),
Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen
Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). The
term "Fund Complex" includes each of the investment companies advised by the
Adviser or its 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 85 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. Director of
the Heartland Alliance, a
nonprofit organization
serving human needs based
in Chicago. Director of
St. Vincent de Paul
Center, a Chicago based
day care facility serving
the children of low
income families. Board
member of the Illinois
Manufacturer's
Association.
J. Miles Branagan (71) Trustee Trustee Private investor. 83 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>
33
<Table>
<Caption>
VAN KAMPEN EMERGING GROWTH FUND
TRUSTEE AND OFfiCER INFORMATION continued
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 (66) Trustee Trustee Prior to January 1999, 83 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 (63) Trustee Trustee President of CAC, L.L.C., 85 Trustee/Director/Managing
CAC, L.L.C. since 2003 a private company General Partner of funds
4350 LaJolla Village Drive offering capital in the Fund Complex.
Suite 980 investment and management Director of Stericycle,
San Diego, CA 92122-6223 advisory services. Prior Inc., GATX Corporation,
to February 2001, Vice and Trustee of The
Chairman and Director of Scripps Research
Anixter International, Institute and the
Inc., a global University of Chicago
distributor of wire, Hospitals and Health
cable and communications Systems. Prior to January
connectivity products, 2004, Director of
and IMC Global Inc., an TeleTech Holdings Inc.
international company and Arris Group, Inc.
that mines, manufacturers Prior to May 2002,
and sells essential crop Director of Peregrine
nutrients and feed Systems Inc. Prior to
ingredients to farmers. July 2000, Director of
Prior to July 2000, Allied Riser
Managing Partner of Communications Corp.,
Equity Group Corporate Matria Healthcare Inc.,
Investment (EGI), a Transmedia Networks,
company that makes Inc., CNA Surety, Corp.
private investments in and Grupo Azcarero Mexico
other companies. (GAM).
</Table>
34
<Table>
<Caption>
VAN KAMPEN EMERGING GROWTH FUND
TRUSTEE AND OFfiCER INFORMATION continued
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 (56) Trustee Trustee Managing Partner of 83 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 (52) Trustee Trustee Director and President of 83 Trustee/Director/Managing
1744 R Street, NW since 1995 the German Marshall Fund General Partner of funds
Washington, DC 20009 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 (68) Trustee Trustee Prior to 1998, President 85 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>
35
<Table>
<Caption>
VAN KAMPEN EMERGING GROWTH FUND
TRUSTEE AND OFfiCER INFORMATION continued
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 (68) Trustee Trustee President of Nelson 83 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 (63) Trustee Trustee President Emeritus and 85 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, Ph.D. Trustee Trustee Previously Chief 83 Trustee/Director/Managing
(62) since 1999 Communications Officer of General Partner of funds
815 Cumberstone Road the National Academy of in the Fund Complex.
Harwood, MD 20776 Sciences/National Director of Fluor Corp.,
Research Council, an an engineering,
independent, federally procurement and
chartered policy construction
institution, from 2001 to organization, since
November 2003 and Chief January 2004 and Director
Operating Officer from of Neurogen Corporation,
1993 to 2001. Director of a pharmaceutical company,
the Institute for Defense since January 1998.
Analyses, a federally
funded research and
development center,
Director of the German
Marshall Fund of the
United States, Director
of the Rocky Mountain
Institute 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>
36
VAN KAMPEN EMERGING GROWTH FUND
TRUSTEE AND OFFICER INFORMATION continued
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* (51) Trustee, Trustee President and Chief 83 Trustee/Director/Managing
1221 Avenue of the Americas President since Executive Officer of General Partner of funds
New York, NY 10020 and Chief 1999; funds in the Fund in the Fund Complex.
Executive President Complex. Chairman,
Officer and Chief President, Chief
Executive Executive Officer and
Officer Director of the Adviser
since 2002 and Van Kampen 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>
37
<Table>
<Caption>
VAN KAMPEN EMERGING GROWTH FUND
TRUSTEE AND OFfiCER INFORMATION continued
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
Richard F. Powers, III* (58) Trustee Trustee Advisory Director of 85 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* (65) Trustee Trustee Partner in the law firm 85 Trustee/Director/Managing
333 West Wacker Drive since 1995 of Skadden, Arps, Slate, General Partner of funds
Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex.
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 Adviser by reason of
their current or former positions with Morgan Stanley or its affiliates.
38
VAN KAMPEN EMERGING GROWTH FUND
TRUSTEE AND OFFICER INFORMATION continued
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
Stefanie V. Chang (37) Vice President Officer Executive Director of Morgan Stanley Investment Management.
1221 Avenue of the Americas and Secretary since 2003 Vice President of funds in the Fund Complex.
New York, NY 10020
Amy Doberman (42) Vice President Officer Managing Director and General Counsel, U.S. Investment
1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment
New York, NY 10020 Management, Inc., Morgan Stanley Investment Advisers Inc.
and the Adviser. Vice President of the Morgan Stanley
Institutional and Retail Funds since July 2004 and Vice
President of funds in the Fund Complex as of August 2004.
Previously, Managing Director and General Counsel of
Americas, UBS Global Asset Management from July 2000 to July
2004 and General Counsel of Aeitus Investment Management,
Inc from January 1997 to July 2000.
James M. Dykas (38) Chief Financial Officer Officer Executive Director of Van Kampen Asset Management and Morgan
1 Parkview Plaza and Treasurer since 1999 Stanley Investment Management. Chief Financial Officer and
Oakbrook Terrace, IL 60181 Treasurer of funds in the Fund Complex. Prior to August
2004, Assistant Treasurer of funds in the Fund Complex.
Joseph J. McAlinden (61) 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 Adviser and Van Kampen
Advisors Inc. since December 2002.
</Table>
39
<Table>
<Caption>
VAN KAMPEN EMERGING GROWTH FUND
TRUSTEE AND OFFICER INFORMATION continued
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
Ronald E. Robison (65) Executive Vice Officer Principal Executive Officer--office of the Funds (since
1221 Avenue of the Americas President and since 2003 November 2003). Chief Executive Officer and Chairman of
New York, NY 10020 Principal Executive Investor Services. Executive Vice President and Principal
Officer Executive Officer of funds in the Fund Complex. Managing
Director of Morgan Stanley. Chief Administrative Officer,
Managing Director and Director of Morgan Stanley Investment
Advisors Inc., Morgan Stanley Services Company Inc. and
Managing Director and Director of Morgan Stanley
Distributors Inc. Chief Executive Officer and Director of
Morgan Stanley Trust. Executive Vice President and Principal
Executive Officer of the Institutional and Retail Morgan
Stanley Funds; Director of Morgan Stanley SICAV; previously
Chief Global Operations Officer and Managing Director of
Morgan Stanley Investment Management Inc.
John L. Sullivan (49) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since
1 Parkview Plaza Officer since 1996 August 2004. Director and Managing Director of Van Kampen
Oakbrook Terrace, IL 60181 Investments, the Adviser, Van Kampen Advisors Inc. and
certain other subsidiaries of Van Kampen Investments. Prior
August 2004, Vice President, Chief Financial Officer and
Treasurer of funds in the Fund Complex and head of Fund
Accounting for Morgan Stanley Investment Management. Prior
to December 2002, Executive Director of Van Kampen
Investments, the Adviser and Van Kampen Advisors Inc.
</Table>
40
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
The Statement of Additional Information includes additional information about
Fund trustees and is available, without charge, upon request by calling
1-800-847-2424.
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)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 16, 116, 216,
516, 316
EMG ANR
10/04 RN04-02225P-Y08/04
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) Due to personnel changes at the Adviser, the list of Covered Officers
set forth in Exhibit B and the General Counsel designee to whom questions about
the application of the Code should be referred in Exhibit C have been amended.
(d) The Fund has not 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 11A.
(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.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2004
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES............................. $66,000 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES........... $0 $159,500(2)
TAX FEES..................... $1,500(3) $42,141(4)
ALL OTHER FEES............... $0 $222,168(5)
TOTAL NON-AUDIT FEES................... $1,500 $423,809
TOTAL.................................. $67,500 $423,809
2003
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES............................. $60,630 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES........... $0 $88,000(2)
TAX FEES..................... $1,370(3) $70,314(4)
ALL OTHER FEES............... $0 $331,980(6)
TOTAL NON-AUDIT FEES................... $1,370 $490,294
TOTAL.................................. $62,000 $490,294
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors)
and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the
Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically
attestation services provided in connection with a SAS 70
Report.
(3) Tax Fees represent tax advice and compliance services provided
in connection with the review of the Registrant's tax.
(4) Tax Fees represent tax advice services provided to Covered
Entities, including research and identification of PFIC
entities.
(5) All Other Fees represent attestation services provided in
connection with performance presentation standards.
(6) All Other Fees represent attestation services provided in
connection with performance presentation standards, general
industry education seminars provided, and a regulatory review
project performed.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
JOINT AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
VAN KAMPEN FUNDS
AS ADOPTED JULY 23, 2003(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.(2)
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider
whether such services are consistent with the SEC's rules on auditor
independence. The Audit Committee will also consider whether the Independent
Auditors are best positioned to provide the most effective and efficient
services, for reasons such as its familiarity with the Fund's business, people,
culture, accounting systems, risk profile and other factors, and whether the
service might enhance the Fund's ability to manage or control risk or improve
audit quality. All such factors will be considered as a whole, and no one factor
should necessarily be determinative.
The Audit Committee is also mindful of the relationship between fees
for audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
- ----------
(1) This Joint Audit Committee Audit and Non-Audit Services Pre-Approval
Policy and Procedures (the "Policy"), adopted as of the date above, supercedes
and replaces all prior versions that may have been adopted from time to time.
(2) Terms used in this Policy and not otherwise defined herein shall have
the meanings as defined in the Joint Audit Committee Charter.
The appendices to this Policy describe the Audit, Audit-related, Tax
and All Other services that have the general pre-approval of the Audit
Committee. The term of any general pre-approval is 12 months from the date of
pre-approval, unless the Audit Committee considers and provides a different
period and states otherwise. The Audit Committee will annually review and
pre-approve the services that may be provided by the Independent Auditors
without obtaining specific pre-approval from the Audit Committee. The Audit
Committee will add to or subtract from the list of general pre-approved services
from time to time, based on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes
that implementation of the Policy will not adversely affect the Independent
Auditors' independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the
Audit Committee, the Audit Committee may grant general pre-approval to other
Audit services, which are those services that only the Independent Auditors
reasonably can provide. Other Audit services may include statutory audits and
services associated with SEC registration statements (on Forms N-1A, N-2, N-3,
N-4, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the following Audit services. All
other Audit services not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
o Statutory audits or financial audits for the Fund
o Services associated with SEC registration statements (including new
funds), periodic reports and other documents filed with the SEC or
other documents issued in connection with securities offerings (e.g.,
comfort letters for closed-end fund offerings, consents), and
assistance in responding to SEC comment letters
o Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or standard
setting
bodies (Note: Under SEC rules, some consultations may be "audit
related" services rather than "audit" services)
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements or, to the extent they are Covered Services, the Covered
Entities' financial statements, or that are traditionally performed by the
Independent Auditors. Because the Audit Committee believes that the provision of
Audit-related services does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence, the Audit Committee may
grant general pre-approval to Audit-related services. Audit-related services
include, among others, accounting consultations related to accounting, financial
reporting or disclosure matters not classified as "Audit services"; assistance
with understanding and implementing new accounting and financial reporting
guidance from rulemaking authorities; agreed-upon or expanded audit procedures
related to accounting and/or billing records required to respond to or comply
with financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the following Audit-related
services. All other Audit-related services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
o Attest procedures not required by statute or regulation (including
agreed upon procedures related to the Closed-End Fund asset coverage
tests required by the rating agencies and/or lenders)
o Due diligence services pertaining to potential fund mergers
o Issuance of SAS-70 reports on internal controls of Morgan Stanley Trust
Co. and MSIM Trade Operations
o Consultations by the Fund's management as to the accounting or
disclosure treatment of transactions or events and/or the actual or
potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or
standard-setting bodies (Note: Under SEC rules, some consultations may
be "audit" services rather than "audit-related" services)
o Information systems reviews not performed in connection with the audit
(e.g., application data center and technical reviews)
o General assistance with implementation of the requirements of SEC rules
or listing standards promulgated pursuant to the Sarbanes-Oxley Act
o Audit of record keeping services performed by Morgan Stanley Trust Fund
related to the New Jersey State Retirement Plan
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide
Tax services to the Fund and, to the extent they are Covered Services, the
Covered Entities, such as tax compliance, tax planning and tax advice without
impairing the auditor's independence, and the SEC has stated that the
Independent Auditors may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those Tax services that have
historically been provided by the Independent Auditors, that the Audit Committee
has reviewed and believes would not impair the independence of the Independent
Auditors, and that are consistent with the SEC's rules on auditor independence.
The Audit Committee will not permit the retention of the Independent Auditors in
connection with a transaction initially recommended by the Independent Auditors,
the sole business purpose of which may be tax avoidance and the tax treatment of
which may not be supported in the Internal Revenue Code and related regulations.
The Audit
Committee will consult with Director of Tax or outside counsel to determine that
the tax planning and reporting positions are consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has
pre-approved the following Tax Services. All Tax services involving large and
complex transactions not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies):
o U.S. federal, state and local tax planning and advice
o U.S. federal, state and local tax compliance
o International tax planning and advice
o International tax compliance
o Review of federal, state, local and international income, franchise,
and other tax returns
o Identification of Passive Foreign Investment Companies
o Review of closed-end funds pro rata allocation of taxable income and
capital gains to common and preferred shares.
o Domestic and foreign tax planning, compliance, and advice
o Assistance with tax audits and appeals before the IRS and similar
state, local and foreign agencies
o Tax advice and assistance regarding statutory, regulatory or
administrative developments (e.g., excise tax reviews, evaluation of
Fund's tax compliance function)
o Review the calculations of taxable income from corporate actions
including reorganizations related to bankruptcy filings and provide
guidance related to the foregoing
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the following All Other services.
Permissible All Other services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
o Risk management advisory services, e.g., assessment and testing of
security infrastructure controls
The following is a list of the SEC's prohibited non-audit services. The
SEC's rules and relevant guidance should be consulted to determine the precise
definitions of these services and the applicability of exceptions to certain of
the prohibitions:
o Bookkeeping or other services related to the accounting records or
financial statements of the audit client
o Financial information systems design and implementation
o Appraisal or valuation services, fairness opinions or
contribution-in-kind reports
o Actuarial services
o Internal audit outsourcing services
o Management functions
o Human resources
o Broker-dealer, investment adviser or investment banking services
o Legal services
o Expert services unrelated to the audit
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be
provided by the Independent Auditors will be established annually by the Audit
Committee. Any proposed services exceeding these levels or amounts will require
specific pre-approval by the Audit Committee. The Audit Committee is mindful of
the overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the
Independent Auditors that do not require specific approval by the Audit
Committee will be submitted to the Fund's Chief Financial Officer and must
include a detailed description of the services to be rendered. The Fund's Chief
Financial Officer will determine whether such services are included within the
list of services that have received the general pre-approval of the Audit
Committee. The Audit Committee will be informed on a timely basis of any such
services rendered by the Independent Auditors. Requests or applications to
provide services that require specific approval by the Audit Committee will be
submitted to the Audit Committee by both the Independent Auditors and the Fund's
Chief Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SEC's rules on
auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer
to monitor the performance of all services provided by the Independent Auditors
and to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. Both the Fund's Chief Financial Officer
and management will immediately report to the chairman of the Audit Committee
any breach of this Policy that comes to the attention of the Fund's Chief
Financial Officer or any member of management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an
annual basis to meet its responsibility to oversee the work of the Independent
Auditors and to assure the auditor's independence from the Fund, such as
reviewing a formal written statement from the Independent Auditors delineating
all relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not
only to the Fund but also to the Covered Entities if the engagements relate
directly to the operations and financial reporting of the Fund. This list of
Covered Entities would include:
o Van Kampen Investments, Inc.
o Van Kampen Investment Advisory Corporation
o Van Kampen Asset Management Inc.
o Van Kampen Advisors Inc.
o Van Kampen Funds Inc.
o Van Kampen Trust Company
o Van Kampen Investor Services Inc.
o Van Kampen Management Inc.
o Morgan Stanley Investment Management Inc.
o Morgan Stanley Investments LP
o Morgan Stanley Trust Company
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. 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 11. Exhibits.
(a) The Code of Ethics for Principal Executive and Senior Financial
Officers is attached hereto.
(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: October 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: October 20, 2004
By: /s/ James M. Dykas
----------------------
Name: James M. Dykas
Title: Principal Financial Officer
Date: October 20, 2004