<PAGE>
Van Kampen American Capital
EMERGING
GROWTH FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1998
[PHOTO]
------- A Wealth of Knowledge "A Knowledge of Wealth" --------
VAN KAMPEN AMERICAN CAPITAL
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders........................................ 1
Performance Results........................................... 3
Glossary of Terms............................................. 4
Portfolio Management Review................................... 5
Portfolio Highlights.......................................... 8
Portfolio of Investments...................................... 9
Statement of Assets and Liabilities........................... 18
Statement of Operations....................................... 19
Statement of Changes in Net Assets............................ 20
Financial Highlights.......................................... 21
Notes to Financial Statements................................. 24
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
March 27, 1998
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL
APPEARS HERE]
Dear Shareholder,
We have begun what promises to be an exciting and challenging year for
investors. The Taxpayer Relief Act of 1997, signed into law by President Clinton
in August, creates many new opportunities for you and your family to take a more
active role in achieving your long-term financial goals.
Most Americans will benefit from the bill's $95 billion in tax cuts over five
years. The so-called Kiddie Credit gives parents $400 in immediate tax relief
for every child under age 17, and families will find it easier to save for their
children's college expenses through the new Education IRA. The bill also cuts
capital gains tax rates for the first time in more than a decade and loosens
restrictions on tax-deductible IRA contributions. Perhaps the most exciting
feature is the new Roth IRA, which allows investment earnings to grow tax free,
not just tax deferred.
This year more than ever, it could be important for you to talk with your
financial adviser about how to make the tax code work to your advantage. At Van
Kampen American Capital, we have prepared a variety of publications to help you
understand your choices under the new tax legislation. And with the help of your
adviser, we'll work with you to locate the many benefits hidden among the
changing tax landscape.
Economic Overview
The nation's economic report card continues to register nearly perfect grades.
Growth is strong, unemployment is low, the budget is headed for surplus, and the
dollar is rising around the world. With the economy running on all cylinders,
consumer confidence soared to a 30-year high in February.
Despite the strength in the economy, inflation remained under control. The
producer price index actually fell by 1.6 percent during the 12 months through
February. Inflation at the consumer level also was virtually nonexistent, with
the consumer price index rising by only 1.4 percent during the same period. A
strong dollar and significant productivity gains helped offset inflationary
pressures caused by rising wages.
The Federal Reserve Board left monetary policy unchanged during the six-month
reporting period. In addition to signs that the economy was slowing modestly
from its breakneck pace of early 1997, Fed policy-makers were concerned about
the impact that higher U.S. interest rates might have on the struggling
economies of Southeast Asia. Generally, higher U.S. interest rates cause the
dollar to rise relative to other currencies. With nearly all Asian currencies
already down significantly, a hike in U.S. rates would force monetary
authorities in Asia to choose between letting their currencies decline further
or matching the rate increase, thereby slowing their already-sluggish economies.
As the reporting period ended, there was little evidence that the Asian crisis
had negatively impacted the U.S. economy. The nation's total output of goods and
services (gross domestic product) grew at a rate of 3.9 percent in the fourth
quarter of 1997, and corporate profits remained
1 Continued on page two
<PAGE>
strong. A modest pickup in bond yields in mid-January indicated that global
investors were increasingly confident that the U.S. economy would escape
significant damage from the slowdown in Asia.
Market Overview
Bolstered by solid economic growth, low inflation, and early signs of an
economic recovery in Asia, U.S. stocks continued their advance during the
reporting period. For the six months through February, the Wilshire 5000 Index,
which measures the performance of all publicly traded U.S. companies, gained
15.28 percent, while the Dow Jones Industrial Average (DJIA) gained 12.11
percent. In addition, 1997 marked the first time in history that the DJIA
achieved 20 percent-plus gains in three consecutive years.
But while U.S. stocks kept rising, volatility also picked up. During the peak
of the economic turmoil in Asia between early August and late October, the DJIA
fell by 16 percent. When the anticipated negative impact of the Asian slowdown
on U.S. corporate profits failed to materialize, stocks rallied strongly to
close the reporting period near record-high territory.
Within the U.S. equity market, large stocks continued to outperform their
small-cap cousins. During the six months through February, the Russell 1000
Index of large-cap companies gained 16.37 percent, compared to 9.07 percent for
the Russell 2000 Index of small stocks. Shares of large technology companies
were especially strong, with the NASDAQ 100 Stock Index climbing 11.17 percent
in the six-month period.
Outlook
We expect that the economic readjustments that need to occur in Asia will take
years to fully take shape. In the meantime, it is likely that the growth rate of
U.S. corporate profits will decelerate, especially among larger companies. Given
the difficult year-over-year earnings comparisons that will begin to appear in
coming quarters, we caution investors not to expect a continuation of the large
gains that have become almost routine for U.S. stocks in recent years.
Still, the overall environment for equities remains positive. Inflation is
low, economic growth is strong, the bond market is healthy, and monetary policy
is stable. These characteristics usually support relatively high valuations in
the stock market. We remain confident that the domestic equity asset class will
continue to provide solid growth for investors with a long-term time horizon.
As we noted earlier, the Taxpayer Relief Act of 1997 provides attractive new
vehicles through which investors can save for a variety of goals, including
higher education and retirement. We encourage you to work with your financial
adviser to consider how the tax changes can work to your benefit.
Additional details about your Fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to serve you through our diverse menu of
quality investments.
Sincerely,
/s/Don G. Powell /s/Dennis J. McDonnell
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Asset Management, Inc. Asset Management, Inc.
2
<PAGE>
Performance Results for the Period Ended February 28, 1998
Van Kampen American Capital Emerging Growth Fund
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Total Returns
Six-month total return based on NAV/1/......... 11.83% 11.38% 11.40%
Six-month total return/2/...................... 5.40% 6.38% 10.40%
One-year total return/2/....................... 28.94% 30.78% 34.79%
Five-year average annual total return/2/....... 19.88% 20.21% N/A
Ten-year average annual total return/2/........ 19.11% N/A N/A
Life-of-Fund average annual total return/2/.... 17.55% 20.43% 18.88%
Commencement Date.............................. 10/02/70 04/20/92 07/06/93
</TABLE>
N/A=Not Applicable
/1/ Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or
contingent deferred sales charge for early withdrawal (5% for B shares and
1% for C shares).
/2/ Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or
contingent deferred sales charge for early withdrawal (B and C shares).
See the Prior Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. This performance was achieved during generally
rising stock prices. Fund shares, when redeemed, may be worth more or less than
their original cost.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE>
Glossary of Terms
Bottom-up investing:
A management style that emphasizes the analysis of individual stocks, rather
than economic and market cycles.
Capital gain:
The profit resulting from the sale of an asset, such as a stock or a bond.
Dow Jones Industrial Average:
The oldest and most widely recognized stock market average, the DJIA reflects
the performance of 30 actively traded stocks of well-established companies.
Earnings estimate:
A company's forecast for their net income during a given period.
Emerging growth stocks:
Securities issued by companies with less than $2 billion in market
capitalization or annual sales. These companies often have limited product
lines, markets, or financial resources, and their stocks can experience more
erratic market movements than those of larger companies.
Market capitalization:
The size of a company, as measured by the value of its issued and outstanding
stock. Morningstar, Inc., an independent mutual fund rating service, defines
"small-cap" as less than $1 billion, "mid-cap" as between $1 billion and $5
billion, and "large-cap" as more than $5 billion.
Net asset value (NAV):
The value of a mutual fund share computed by deducting the fund's liabilities
from the total assets of the portfolio and dividing this amount by the number
of shares outstanding.
S&P 500-Stock Index:
An unmanaged index of the 500 largest, most actively traded stocks on the New
York Stock Exchange. It provides a guide to the overall health of the U.S.
stock market. The S&P 500 is a much broader index than the Dow Jones
Industrial Average, and reflects the stock market more accurately.
Valuation:
The estimated or determined current worth of a stock, based on its price
relative to its earnings.
4
<PAGE>
Portfolio Management Review
Van Kampen American Capital Emerging Growth Fund
We recently spoke to the management team of the Van Kampen American Capital
Emerging Growth Fund about the key events and economic forces that shaped the
markets during the reporting period. The team includes Gary Lewis, portfolio
manager, David Walker and Janet Willis, associate portfolio managers, and Alan
T. Sachtleben, chief investment officer for equity investments. The following
excerpts reflect their views on the Fund's performance during the six-month
period ended February 28, 1998.
Q What was the stock market environment for the Fund during the reporting
period?
A Moderate economic growth and low inflation provided a very favorable
environment for equity investments. However, at the beginning of the reporting
period, the stock market began to experience an increase in volatility. This
situation culminated in late October, when the stock market became very
sensitive to economic and currency turmoil in Southeast Asia. The Dow Jones
Industrial Average (DJIA) dropped a record number of points in a single day but
soon recovered completely, and by mid-February the DJIA was setting record highs
once again.
The stock market favored large companies during the last few months of 1997,
as uncertainty surrounding the situation in Asia prompted investors to seek out
familiar, easily traded stocks. However, concerns about Asia began to subside in
the new year, and small-capitalization stocks gained momentum in the early
months of 1998. Small-cap valuations, however, remained at historically low
levels relative to large-cap stocks.
Q What is your strategy in managing the Fund to meet its objective?
A Our fundamental investment strategy remains consistent: we look for stocks
with rising earnings expectations and rising valuations. We purchase stocks on
the basis of a company's potential to outperform earnings expectations and
produce a positive earnings result. Conversely, we sell stocks if earnings
estimates or valuations are declining. Our stock selection process is referred
to as "bottom up," which means we evaluate stocks one by one and pick the stocks
that best meet our criteria, rather than restricting the percentage of the
Fund's assets invested in a given industry sector. Finally, under normal
circumstances, we keep the portfolio fully invested in equity securities, rather
than holding a large percentage of assets in cash.
Q What major changes did you make to the portfolio during the past six
months?
A Our two most significant changes involved reallocating assets within the
technology sector and reducing the Fund's holdings in energy stocks. Technology
firms suffered in the fourth quarter of 1997, because many of them either sell
their products in Asia or manufacture products for companies that conduct
business in that region. Semiconductor stocks were some of the biggest losers,
because such a large portion of their revenues is dependent upon Asia. In
response, we eliminated many semiconductor names from the portfolio, including
Applied Materials, Teradyne, Cymer, Altera, and KLA-Tencor. All of these firms
represented between one-half
5
<PAGE>
and two percent of the Fund's assets six months ago, and we removed all of them
from the portfolio. There was some market sentiment that semiconductor stock
prices had reached their low point, and many of them bounced back with the rest
of the small-cap universe early this year. We disagree with that assessment--
earnings estimates are still declining for these stocks, so we haven't been
tempted to reinvest in them.
The assets that came out of semiconductors went into areas of technology that
were less affected by events in Asia, such as service and software companies.
The "year 2000" problem has fueled the demand for computer professionals, and
companies that provide training for technical personnel are thriving. Apollo
Group is a good example-although this stock is classified in the consumer
services sector, it is impacted by conditions in the technology area. Another
active niche was Internet-related companies, and we increased our positions in
Yahoo and America Online. This segment recently got a boost when President
Clinton recommended the passage of the Internet Tax Freedom Act, lending his
support to legislation that would place a halt on new Internet commerce taxes.
While the energy sector drove performance upward through much of 1997,
declining oil prices threatened the profitability of this group toward the end
of the period. The Fund's holdings were concentrated in oil service providers,
and as long as oil prices held steady between $18 and $22 a barrel, generally,
there wasn't a significant risk that spending in the service area would be cut
by oil service companies. However, oil prices did drop below $18 a barrel, and
the economics became less favorable for many oil and gas companies to continue
exploration projects. Earnings estimates for many service companies were
eventually cut, but we reduced positions in these stocks due to declining
valuations.
Q What specific holdings supported the Fund's performance?
A The Fund's largest holding at the end of the period was Dell Computer
Corp., a leader in customer-direct, build-to-order computer systems. Dell
contributed positively to the portfolio during the past six months, with its
stock price appreciating more than 60 percent during the six month reporting
period.
In the health-care sector, Guidant and Arterial Vascular Engineering (AVE)
were noteworthy holdings. These companies are among the world's leading
manufacturers of stents, which are devices used to open arteries and provide an
alternative to traditional angioplasty. Guidant and AVE have been successful
overseas, and their stents were recently approved for sale in the United States,
pushing up their stock prices.
Companies that promote "healthy living" have seen strong performance lately,
as our nation's population ages and people are more focused on taking better
care of themselves. Whole Foods (natural and organic food supermarkets), General
Nutrition Centers (vitamin and health supplement stores), and Rexall Sundown
(vitamin manufacturer) made favorable contributions to the Fund during the
reporting period.
We've had several stand-outs in the retail sector as well. Best Buy, a
consumer electronics chain, has been diligent about cutting costs in order to
improve their bottom-line profitability. Plus, the company enjoyed strong sales
during the holiday season, which gave a boost to top-line revenues. The result
was an earnings increase: its stock price jumped from $16 7/8 to $59 3/16 per
share in the last six months. Also, the continuation of low interest rates
sparked housing sales, and this
6
<PAGE>
trend lifted home-furnishing companies such as Linens `n Things and Pier 1
Imports. Of course, there is no guarantee that any of these stocks will perform
as well in the future, and not all stocks in the portfolio performed as
favorably. Please refer to the chart on page eight for additional Fund portfolio
highlights.
Q How did the Fund perform during the past six months?
A The Fund achieved a six-month total return of 11.83 percent1 (Class A
shares at net asset value) as of February 28, 1998. By comparison, the Standard
& Poor's 500-Stock Index returned 17.61 percent, and the Russell 2000 Index,
which more closely resembles the Fund, returned 9.64 percent. The S&P 500-Stock
Index is a broad-based index that reflects the general performance of the stock
market, and the Russell 2000 Index reflects the general performance of the
smaller-cap stocks.
Keep in mind that these indices are statistical composites that do not include
any commissions or sales charges that would be paid by an investor purchasing
the securities or investments they represent. Please refer to the chart on page
three for additional Fund performance results.
Q What is your outlook for the Fund for the next six months?
A As we reported to you six months ago, small-cap stock valuations are at
historically low levels. The last time emerging growth valuations were this low
relative to the S&P 500-Stock Index was in April of 1997--and emerging growth
stocks appreciated by 33 percent during the six months that followed. While a
bounce-back of that size is unlikely at this time, we believe the climate is
right for a rebound in small-cap stocks. Longer term, we expect stock market
dominance to alternate between small companies and large companies. In such an
environment, stock selection becomes especially important, and we will continue
to focus on purchasing the best stocks available to us.
We continue to view emerging growth stocks as an attractive choice for many
investors. Because small-cap valuations are comparatively low, we think that
emerging growth stocks have the potential to see substantial earnings growth,
while richly priced large caps may find it more difficult to achieve growth of
the same magnitude. In fact, earnings of U.S. small-cap stocks have surpassed
large caps for the last three calendar quarters. Finally, domestic small-cap
stocks have often been less affected by global economic slowdowns than large
caps. If the situation in Asia were to precipitate such an event, we might
witness a beneficial widening in the relative earnings gap between large and
small stocks.
/s/ Alan T. Sachtleben /s/ Gary M. Lewis
Alan T. Sachtleben Gary M. Lewis
Chief Investment Officer Portfolio Manager
Equity Investments
7 Please see footnotes on page three
<PAGE>
Portfolio Highlights
Van Kampen American Capital Emerging Growth Fund
Top Ten Holdings as a Percentage of Long-Term Investments
<TABLE>
<CAPTION>
As of As of
February 28, 1998 August 31, 1997
<S> <C> <C>
Dell Computer Corp................ 6.1% .................. 5.2%
HBO & Co.......................... 3.0% .................. 1.7%
Compuware Corp.................... 2.2% .................. 2.2%
Chancellor Media Corp............. 1.8% .................. N/A
BMC Software, Inc................. 1.7% .................. 1.5%
Peoplesoft, Inc................... 1.6% .................. 1.6%
Guidant Corp...................... 1.6% .................. 1.1%
AirTouch Communications, Inc...... 1.6% .................. N/A
America Online, Inc............... 1.5% .................. 0.5%
EMC Corp.......................... 1.4% .................. N/A
</TABLE>
N/A = Not Applicable
Top Five Portfolio Sectors as a Percentage of Long-Term Investments
<TABLE>
<S> <C>
As of February 28, 1998
Technology......................... 30%
Consumer Distribution.............. 17%
Health Care........................ 12%
Consumer Services.................. 11%
Finance............................ 10%
As of August 31, 1997
Technology......................... 38%
Consumer Distribution.............. 11%
Health Care........................ 11%
Energy............................. 10%
Consumer Services.................. 8%
</TABLE>
8
<PAGE>
PORTFOLIO OF INVESTMENTS
February 28, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Description Shares Market Value
- -------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.6%
CONSUMER DISTRIBUTION 15.9%
AmeriCredit Corp. (a)............................ 125,000 $ 3,414,063
Barnes & Noble, Inc. (a)......................... 550,000 19,318,750
Bed Bath & Beyond, Inc. (a)...................... 450,000 19,434,375
Best Buy Co., Inc. (a)........................... 610,000 36,371,250
Brightpoint, Inc. (a)............................ 500,000 10,250,000
CompUSA, Inc. (a)................................ 1,000,000 35,000,000
Costco Cos., Inc. (a)............................ 700,000 34,212,500
CVS Corp......................................... 250,000 18,515,625
Dayton Hudson Corp............................... 250,000 19,328,125
Dollar General Corp.............................. 396,250 18,277,031
Dollar Tree Stores, Inc. (a)..................... 180,000 7,807,500
Family Dollar Stores, Inc........................ 650,000 23,156,250
Fred Meyer, Inc. (a)............................. 730,000 32,439,375
Gap, Inc......................................... 200,000 8,937,500
General Nutrition Cos., Inc. (a)................. 1,150,000 45,712,500
Ingram Micro, Inc., Class A (a).................. 125,000 4,828,125
Interface, Inc., Class A......................... 85,000 3,251,250
Interstate Bakeries Corp......................... 420,000 14,070,000
Kohl's Corp. (a)................................. 215,000 17,240,312
Lexmark International Group, Inc., Class A (a)... 150,000 6,412,500
Lowe's Cos., Inc................................. 350,000 20,453,125
McKesson Corp.................................... 140,000 7,297,500
Miller Herman, Inc............................... 475,200 29,106,000
Pacific Sunwear of California (a)................ 262,500 9,089,063
Pier 1 Imports, Inc.............................. 700,000 18,725,000
Proffitt's, Inc. (a)............................. 650,000 22,018,750
Ross Stores, Inc................................. 600,000 23,625,000
Safeway, Inc. (a)................................ 797,500 27,812,812
Stage Stores, Inc. (a)........................... 275,000 11,550,000
Steelcase, Inc. (a).............................. 69,300 2,499,131
TJX Cos., Inc.................................... 825,000 31,865,625
</TABLE>
9 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISTRIBUTION (CONTINUED)
Whole Foods Market, Inc. (a).................. 500,000 $ 30,593,750
Williams Sonoma, Inc. (a)..................... 275,000 14,162,500
------------
626,775,287
------------
CONSUMER DURABLES 1.2%
Ethan Allen Interiors, Inc.................... 210,000 11,707,500
Fleetwood Enterprises, Inc.................... 90,400 4,237,500
Gentex Corp. (a).............................. 250,000 8,062,500
Maytag Corp................................... 400,000 18,000,000
Oakwood Homes Corp............................ 125,000 4,953,125
------------
46,960,625
------------
CONSUMER NON-DURABLES 3.5%
Abercrombie & Fitch Co., Class A (a).......... 100,000 3,450,000
Action Performance Cos., Inc. (a)............. 175,000 6,453,125
Borders Group, Inc. (a)....................... 575,000 19,154,687
Canandaigua Brands, Inc., Class A (a)......... 300,000 16,725,000
Dean Foods Co................................. 150,000 8,250,000
Intimate Brands, Inc., Class A................ 210,000 5,696,250
Jones Apparel Group, Inc. (a)................. 206,400 11,352,000
Linens 'n Things, Inc. (a).................... 300,000 15,112,500
Nautica Enterprises, Inc. (a)................. 250,000 7,203,125
Smithfield Foods, Inc. (a).................... 322,000 10,183,250
Suiza Foods Corp. (a)......................... 191,250 12,395,391
Westpoint Stevens, Inc. (a)................... 200,000 10,675,000
Wolverine World Wide, Inc..................... 400,000 11,250,000
------------
137,900,328
------------
CONSUMER SERVICES 10.9%
AccuStaff, Inc. (a)........................... 200,000 5,650,000
Apollo Group, Inc., Class A (a)............... 300,000 12,712,500
Cablevision Systems Corp., Class A (a)........ 80,000 7,820,000
Capstar Hotel Co. (a)......................... 150,000 5,062,500
Caribiner International, Inc. (a)............. 200,000 6,725,000
Cendant Corp. (a)............................. 300,000 11,250,000
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Chancellor Media Corp. (a)....................... 1,525,000 $ 68,243,750
CKE Restaurants, Inc............................. 261,800 11,110,138
Clear Channel Communications, Inc. (a)........... 400,000 36,250,000
Consolidated Graphics, Inc. (a).................. 260,000 13,828,750
Cracker Barrel Old Country Store, Inc............ 300,000 12,131,250
Foodmaker, Inc. (a).............................. 325,000 5,910,938
Gartner Group, Inc., Class A..................... 235,000 9,370,625
Heftel Broadcasting Corp., Class A (a)........... 150,000 7,106,250
Interpublic Group of Cos., Inc................... 390,000 21,255,000
Jacor Communications, Inc., Class A (a).......... 345,000 19,966,875
Mail Well Holdings, Inc. (a)..................... 100,000 3,987,500
McGraw Hill, Inc................................. 150,000 11,343,750
Meredith Corp.................................... 575,000 24,689,062
New York Times Co., Class A...................... 210,000 13,741,875
Omnicom Group, Inc............................... 600,000 27,450,000
Outdoor Systems, Inc. (a)........................ 375,000 11,179,687
Promus Hotel Corp. (a)........................... 458,125 22,104,531
Robert Half International, Inc. (a).............. 397,500 17,986,875
Signature Resorts, Inc. (a)...................... 412,500 8,559,375
Snyder Communications, Inc. (a).................. 85,000 3,490,313
Tele-Communications, Inc., Class A (a)........... 352,500 9,671,719
Times Mirror Co., Class A........................ 60,000 3,693,750
Univision Communications, Inc., Class A (a)...... 248,400 9,532,350
Valassis Communications, Inc. (a)................ 150,000 5,718,750
------------
427,543,113
------------
ENERGY 4.5%
Coflexip SA - ADR (France)....................... 200,000 10,012,500
Cooper Cameron Corp. (a)......................... 425,000 22,790,625
ENSCO International, Inc......................... 900,000 26,212,500
EVI, Inc. (a).................................... 600,000 29,437,500
Marine Drilling Cos., Inc. (a)................... 897,900 16,106,081
National Oilwell, Inc. (a)....................... 270,000 7,560,000
</TABLE>
11 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
R & B Falcon Corp. (a)........................... 500,000 $ 13,250,000
Rowan Cos., Inc. (a)............................. 700,000 19,731,250
Varco International, Inc. (a).................... 1,250,000 31,093,750
------------
176,194,206
------------
FINANCE 9.6%
Ahmanson H.F. & Co............................... 100,000 6,243,750
AmSouth Bancorp.................................. 150,000 8,428,125
Associates First Capital Corp., Class A.......... 150,000 12,000,000
Astoria Financial Corp........................... 175,000 9,778,125
Bank United Corp., Class A....................... 85,000 4,005,625
Capital One Financial Corp....................... 275,000 18,476,562
CMAC Investment Corp............................. 375,000 25,125,000
Comdisco, Inc.................................... 300,000 12,506,250
Concentra Managed Care, Inc. (a)................. 225,000 7,720,313
Conseco, Inc..................................... 750,000 35,203,125
Cullen Frost Bankers, Inc........................ 150,000 8,540,625
Dime Bancorp, Inc................................ 327,000 9,973,500
Everest Reinsurance Holdings, Inc................ 150,000 5,531,250
Federal Home Loan Mortgage Corp.................. 225,000 10,631,250
Fifth Third Bancorp.............................. 85,000 6,715,000
Finova Group, Inc................................ 600,000 33,000,000
Golden State Bancorp, Inc. (a)................... 200,000 7,125,000
GreenPoint Financial Corp........................ 175,000 12,993,750
Lehman Brothers Holdings, Inc.................... 125,000 7,882,813
Marshall & Ilsley Corp........................... 125,000 7,328,125
Mercury General Corp............................. 40,000 2,270,000
MGIC Investment Corp............................. 175,000 12,895,312
National Commerce Bancorp........................ 94,000 3,536,750
North Fork Bancorp, Inc.......................... 300,000 10,256,250
Northern Trust Corp.............................. 110,000 8,366,875
Peoples Heritage Financial Group, Inc............ 160,000 7,450,000
Protective Life Corp............................. 125,000 8,640,625
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Providian Financial Corp......................... 350,000 $ 19,862,500
Silicon Valley Bancshares (a).................... 60,000 3,420,000
SouthTrust Corp.................................. 187,500 7,664,063
Star Banc Corp................................... 213,150 12,549,206
State Street Corp................................ 200,000 12,362,500
SunAmerica, Inc.................................. 187,500 8,496,094
Transatlantic Holdings, Inc...................... 45,000 3,403,125
Zions Bancorp.................................... 175,000 7,525,000
------------
377,906,488
------------
HEALTHCARE 11.4%
Arterial Vascular Engineering, Inc. (a).......... 200,000 16,375,000
Biomet Inc....................................... 250,000 7,453,125
Curative Health Services, Inc. (a)............... 150,000 5,531,250
ESC Medical Systems Ltd. (a)..................... 400,000 13,650,000
Guidant Corp..................................... 825,000 60,173,437
HBO & Co......................................... 2,100,000 113,662,500
Health Care & Retirement Corp. (a)............... 200,000 8,775,000
Health Management Assn., Inc., Class A (a)....... 831,250 23,119,141
Medicis Pharmaceutical Corp., Class A (a)........ 301,250 12,934,922
MiniMed, Inc. (a)................................ 175,000 7,350,000
NBTY, Inc. (a)................................... 300,000 13,968,750
Omnicare, Inc.................................... 730,000 27,010,000
Parexel International Corp. (a).................. 250,000 9,437,500
Quintiles Transnational Corp. (a)................ 500,000 24,437,500
Rexall Sundown, Inc. (a)......................... 700,000 25,900,000
Steris Corp. (a)................................. 185,000 10,949,687
Sunrise Assisted Living, Inc. (a)................ 240,000 10,140,000
Sybron International Corp. (a)................... 350,000 9,559,375
Theragenics Corp. (a)............................ 100,000 5,937,500
Total Renal Care Holdings, Inc. (a).............. 658,708 21,202,164
Universal Health Services, Inc., Class B (a)..... 200,000 10,450,000
Watson Pharmaceuticals, Inc. (a)................. 300,000 10,762,500
------------
448,779,351
------------
</TABLE>
13 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ---------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 3.0%
Allied Waste Industries, Inc. (a)................. 750,000 $ 16,125,000
Danaher Corp...................................... 200,000 14,387,500
Federal Mogul Corp................................ 200,000 9,812,500
Kuhlman Corp...................................... 170,000 7,501,250
Mueller Industries, Inc. (a)...................... 100,000 5,512,500
Newpark Resources, Inc. (a)....................... 600,000 11,550,000
Sipex Corp. (a)................................... 225,000 7,748,438
Southdown, Inc.................................... 85,000 5,440,000
Tyco International Ltd............................ 800,000 40,600,000
------------
118,677,188
------------
RAW MATERIALS/PROCESSING INDUSTRIES 0.9%
Safeskin Corp. (a)................................ 525,000 32,221,875
Solutia, Inc...................................... 150,000 4,096,875
------------
36,318,750
------------
TECHNOLOGY 29.0%
Advanced Fibre Communications, Inc. (a)........... 500,000 14,968,750
America Online, Inc. (a).......................... 460,000 55,717,500
Apex PC Solutions, Inc. (a)....................... 175,000 4,812,500
Applied Graphics Technologies, Inc. (a)........... 150,000 8,868,750
Aspect Development, Inc. (a)...................... 125,000 5,968,750
Bea Systems, Inc. (a)............................. 200,000 5,375,000
BMC Software, Inc. (a)............................ 825,000 63,112,500
Cambridge Technology Partners, Inc. (a)........... 625,000 28,437,500
CBT Group PLC - ADR (Ireland) (a)................. 450,000 41,175,000
CHS Electronics, Inc. (a)......................... 250,000 5,156,250
Ciber, Inc. (a)................................... 265,000 17,688,750
Cisco Systems, Inc. (a)........................... 300,000 19,762,500
Citrix Systems, Inc. (a).......................... 450,000 18,928,125
Computer Horizons Corp. (a)....................... 300,000 15,656,250
Computer Learning Centers, Inc. (a)............... 300,000 11,043,750
Compuware Corp. (a)...............................1,950,000 82,143,750
Dell Computer Corp. (a)...........................1,650,000 230,793,750
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------
<S> <C> <C>
Technology (Continued)
DII Group, Inc. (a).......................... 125,000 $ 3,312,500
Documentum, Inc.............................. 85,900 3,983,612
EMC Corp. (a)................................ 1,350,000 51,637,500
Engineering Animation, Inc. (a).............. 42,000 2,572,500
Envoy Corp. (a).............................. 200,000 8,125,000
Gemstar Group Ltd. (a)....................... 125,000 3,843,750
Hyperion Software Corp. (a).................. 425,000 17,478,125
Information Management Resources, Inc. (a)... 272,900 13,065,088
Keane, Inc. (a).............................. 550,000 25,575,000
Legato Systems, Inc. (a)..................... 335,000 16,415,000
Lernout & Hauspie Speech Products N.V. (a)... 85,000 6,481,250
Lucent Technologies, Inc..................... 100,000 10,837,500
Lycos, Inc. (a).............................. 150,000 6,187,500
Manugistics Group, Inc. (a).................. 184,000 7,337,000
Mastech Corp. (a)............................ 210,000 11,051,250
Mercury Interactive Corp. (a)................ 150,000 5,587,500
Micrel, Inc. (a)............................. 150,000 5,503,125
Network Appliance, Inc. (a).................. 125,000 3,687,500
Orbital Sciences Corp. (a)................... 150,000 5,718,750
Paychex, Inc................................. 250,000 12,906,250
Peoplesoft, Inc. (a)......................... 1,350,000 60,328,125
Renaissance Worldwide, Inc. (a).............. 85,000 5,046,875
Saville Systems PLC - ADR (Ireland) (a)...... 350,000 16,406,250
Siebel Systems, Inc. (a)..................... 500,000 30,750,000
Smart Modular Technologies, Inc. (a)......... 250,000 7,000,000
Sterling Software, Inc. (a).................. 188,000 9,905,250
SunGard Data Systems, Inc. (a)............... 650,000 22,221,875
Tekelec, Inc................................. 200,000 8,175,000
Uniphase Corp. (a)........................... 534,000 21,393,375
Veritas DGC, Inc. (a)........................ 85,000 3,511,563
Veritas Software Co. (a)..................... 375,000 21,328,125
Visio Corp. (a).............................. 400,000 14,400,000
</TABLE>
15 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Vitesse Semiconductor Corp. (a).................... 500,000 $ 25,390,625
Yahoo!, Inc. (a)................................... 605,000 44,278,437
--------------
1,141,050,575
--------------
TRANSPORTATION 3.6%
Airborne Freight Corp.............................. 550,000 19,903,125
Alaska Air Group, Inc. (a)......................... 275,000 15,142,188
America West Holding Corp., Class B (a)............ 250,000 6,203,125
Comair Holdings, Inc............................... 325,000 8,653,125
Continental Airlines, Inc., Class B (a)............ 405,000 20,351,250
Halter Marine Group, Inc. (a)...................... 335,000 6,574,375
Royal Caribbean Cruises Ltd........................ 85,000 4,653,750
Southwest Airlines Co.............................. 875,000 25,101,562
U.S. Airways Group, Inc. (a)....................... 550,000 34,821,875
--------------
141,404,375
--------------
UTILITIES 2.1%
AES Corp. (a)...................................... 470,000 20,680,000
AirTouch Communications, Inc. (a).................. 1,300,000 58,418,750
Billing Information Concepts....................... 170,000 4,930,000
--------------
84,028,750
--------------
TOTAL COMMON STOCKS............................................. 3,763,539,036
SUBSCRIPTION WARRANT 0.0%
BJ Services Co. (40,000 common stock warrants expiring 04/12/00) 1,670,000
--------------
TOTAL LONG-TERM INVESTMENTS 95.6%
(Cost $2,448,466,656)....................................... 3,765,209,036
--------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Portfolio of Investments (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- -------------------------------------------------------------------------------------------------------
<S> <C>
SHORT-TERM INVESTMENTS 5.7%
Commercial Paper 1.3%
General Electric Capital Corp. ($50,000,000 par, yielding 5.683%, 03/02/98 maturity)... $ 49,976,330
--------------
REPURCHASE AGREEMENTS 2.3%
BA Securities ($24,000,000 par, collateralized by U.S. Government obligations
in a pooled cash account, dated 02/27/98, to be sold on 03/02/98 at $24,011,320)....... 24,000,000
SBC Warburg ($67,130,000 par, collateralized by U.S. Government obligations
in a pooled cash account, dated 02/27/98, to be sold on 03/02/98 at $67,161,327)....... 67,130,000
--------------
91,130,000
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 2.1%
Federal Home Loan Mortgage Corp. ($20,000,000 par, yielding 5.391%,
06/12/98 maturity)..................................................................... 19,686,600
Federal National Mortgage Assn. ($20,000,000 par, yielding 5.425%,
05/01/98 maturity)..................................................................... 19,811,600
Federal National Mortgage Assn. ($20,000,000 par, yielding 5.428%,
05/05/98 maturity)..................................................................... 19,799,000
Federal National Mortgage Assn. ($25,000,000 par, yielding 5.670%,
06/04/98 maturity)..................................................................... 24,638,250
--------------
83,935,450
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $225,053,130).................................................................. 225,041,780
TOTAL INVESTMENTS 101.3%
(Cost $2,673,519,786)................................................................ 3,990,250,816
LIABILITIES IN EXCESS OF OTHER ASSETS (1.3%)........................................... (51,172,706)
--------------
NET ASSETS 100.0%..................................................................... $3,939,078,110
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
17 See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total Investments (Cost $2,673,519,786)................................... $3,990,250,816
Cash...................................................................... 689
Receivables:
Investments Sold........................................................ 46,418,445
Fund Shares Sold........................................................ 7,377,056
Dividends............................................................... 897,239
Other..................................................................... 114,897
--------------
Total Assets............................................................ 4,045,059,142
--------------
Liabilities:
Payables:
Investments Purchased................................................... 57,584,078
Fund Shares Repurchased................................................. 43,064,946
Distributor and Affiliates.............................................. 2,724,660
Investment Advisory Fee................................................. 1,312,657
Income Distributions.................................................... 64,686
Accrued Expenses.......................................................... 1,012,482
Trustees' Deferred Compensation and Retirement Plans...................... 217,523
--------------
Total Liabilities....................................................... 105,981,032
--------------
Net Assets................................................................ $3,939,078,110
==============
Net Assets Consist of:
Capital................................................................... $2,619,324,209
Net Unrealized Appreciation............................................... 1,316,731,030
Accumulated Net Realized Gain............................................. 17,693,004
Accumulated Net Investment Loss........................................... (14,670,133)
--------------
Net Assets................................................................ $3,939,078,110
==============
Maximum Offering Price Per Share:
Class A Shares:
Net asset value and redemption price per share (Based on net assets
of $2,304,016,017 and 55,776,816 shares of beneficial interest issued
and outstanding).......................................................... $ 41.31
Maximum sales charge (5.75%* of offering price)...................... 2.52
--------------
Maximum offering price to public..................................... $ 43.83
--------------
Class B Shares:
Net asset value and offering price per share (Based on net assets
of $1,464,166,476 and 37,685,085 shares of beneficial interest issued
and outstanding).......................................................... $ 38.85
--------------
Class C Shares:
Net asset value and offering price per share (Based on net assets
of $170,895,617 and 4,328,251 shares of beneficial interest issued
and outstanding).......................................................... $ 39.48
--------------
*On sales of $50,000 or more, the sales charge will be reduced.
</TABLE>
18 See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
For the Six Months Ended February 28, 1998 (Unaudited)
================================================================================
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................................ $ 5,687,530
Dividends........................................................................... 3,318,514
--------------
Total Income...................................................................... 9,006,044
--------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of
$2,252,284, $6,495,593 and $753,167, respectively).................................. 9,501,044
Investment Advisory Fee............................................................. 8,008,650
Shareholder Services................................................................ 5,037,903
Legal............................................................................... 51,004
Custody............................................................................. 42,035
Trustees' Fees and Expenses......................................................... 39,890
Other............................................................................... 870,978
--------------
Total Expenses.................................................................... 23,551,504
--------------
NET INVESTMENT LOSS................................................................. $ (14,545,460)
==============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments....................................................................... $ 162,298,160
Futures........................................................................... 3,459,261
--------------
Net Realized Gain................................................................... 165,757,421
--------------
Unrealized Appreciation/Depreciation:
Beginning of the Period........................................................... 1,049,651,975
End of the Period:
Investments..................................................................... 1,316,731,030
--------------
Net Unrealized Appreciation During the Period....................................... 267,079,055
--------------
NET REALIZED AND UNREALIZED GAIN.................................................... $ 432,836,476
==============
NET INCREASE IN NET ASSETS FROM OPERATIONS.......................................... $ 418,291,016
==============
</TABLE>
19 See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended February 28, 1998 and
the Year Ended August 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
February 28, 1998 August 31, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss......................................................... $ (14,545,460) $ (17,019,810)
Net Realized Gain........................................................... 165,757,421 211,200,349
Net Unrealized Appreciation During the Period............................... 267,079,055 427,587,305
--------------- ---------------
Change in Net Assets from Operations........................................ 418,291,016 621,767,844
Distributions from Net Realized Gain:
Class A Shares............................................................ (187,560,886) (68,724,698)
Class B Shares............................................................ (124,322,361) (40,777,606)
Class C Shares............................................................ (14,246,795) (4,475,920)
--------------- ---------------
Total Distributions......................................................... (326,130,042) (113,978,224)
--------------- ---------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......................... 92,160,974 507,789,620
--------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................................... 1,926,280,528 3,571,842,624
Net Asset Value of Shares Issued Through
Dividend Reinvestment..................................................... 306,065,324 106,183,551
Cost of Shares Repurchased.................................................. (1,716,453,149) (3,132,953,942)
--------------- ---------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......................... 515,892,703 545,072,233
--------------- ---------------
TOTAL INCREASE IN NET ASSETS................................................ 608,053,677 1,052,861,853
NET ASSETS:
Beginning of the Period..................................................... 3,331,024,433 2,278,162,580
--------------- ---------------
End of the Period
(Including accumulated net investment loss
of $14,670,133 and $124,673, respectively)................................ $ 3,939,078,110 $ 3,331,024,433
=============== ===============
</TABLE>
20 See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended August 31,
--------------------------------------------
Class A Shares February 28, 1998(a) 1997 1996(a) 1995(a) 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period....................... $ 40.844 $ 34.347 $ 31.59 $ 24.37 $26.46
-------- -------- -------- -------- ------
Net Investment Income/Loss.................. (.101) (.127) (.096) .05 (.11)
Net Realized and Unrealized
Gain/Loss................................... 4.318 8.177 6.043 7.79 (.32)
-------- -------- -------- -------- ------
Total from Investment Operations.............. 4.217 8.050 5.947 7.84 (.43)
Less Distributions from
Net Realized Gain............................. 3.753 1.553 3.190 .62 1.66
-------- -------- -------- -------- ------
Net Asset Value, End of the Period............ $ 41.308 $ 40.844 $ 34.347 $ 31.59 $24.37
======== ======== ======== ======== ======
Total Return (b).............................. 11.83%* 24.44% 20.54% 33.11% (1.67%)
Net Assets at End of the Period
(In millions)................................. $2,304.0 $1,970.7 $1,438.5 $1,029.2 $677.1
Ratio of Expenses to
Average Net Assets (c)........................ 1.01% 1.05% 1.10% 1.14% 1.18%
Ratio of Net Investment Income/Loss
to Average Net Assets (c)..................... (.50%) (.30%) (.29%) .19% (.30%)
Portfolio Turnover............................ 51%* 92% 91% 101% 64%
Average Commission Paid Per
Equity Share Traded (d)....................... $ .0609 $ .0609 $ .0587 -- --
</TABLE>
*Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(c) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC
reimbursement of certain expenses was less than 0.01%.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal periods prior to 1996.
21 See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended August 31,
-----------------------------------------
Class B Shares February 28, 1998(a) 1997 1996(a) 1995(a) 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period.............................. $ 38.789 $ 32.938 $ 30.65 $23.86 $26.14
-------- -------- ------- ------ ------
Net Investment Loss.................................. (.245) (.270) (.349) (.16) (.27)
Net Realized and Unrealized
Gain/Loss.......................................... 4.062 7.674 5.827 7.57 (.35)
-------- -------- ------- ------ ------
Total from Investment Operations....................... 3.817 7.404 5.478 7.41 (.62)
Less Distributions from Net Realized Gain.............. 3.753 1.553 3.190 .62 1.66
-------- -------- ------- ------ ------
Net Asset Value, End of the Period..................... $ 38.853 $ 38.789 $32.938 $30.65 $23.86
======== ======== ======= ====== ======
Total Return (b)....................................... 11.38%* 23.51% 19.61% 32.01% (2.46%)
Net Assets at End of the Period
(In millions)........................................ $1,464.2 $1,220.4 $ 757.3 $450.5 $252.9
Ratio of Expenses to
Average Net Assets (c).............................. 1.80% 1.85% 1.90% 1.97% 2.01%
Ratio of Net Investment Loss to
Average Net Assets (c).............................. (1.28%) (1.10%) (1.10%) (.64%) (1.07%)
Portfolio Turnover..................................... 51%* 92% 91% 101% 64%
Average Commission Paid Per
Equity Share Traded (d)............................. $ .0609 $ .0609 $ .0587 -- --
</TABLE>
*Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(c) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC
reimbursement of certain expenses was less than 0.01%.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal periods prior to 1996.
22 See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended August 31,
-----------------------------------------
Class C Shares February 28, 1998(a) 1997 1996(a) 1995(a) 1994(a)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period.............................. $ 39.351 $33.384 $ 31.02 $24.14 $26.42
-------- ------- ------- ------ ------
Net Investment Loss.................................. (.248) (.273) (.354) (.16) (.25)
Net Realized and Unrealized
Gain/Loss............................................ 4.134 7.793 5.908 7.66 (.37)
-------- ------- ------- ------ ------
Total from Investment Operations....................... 3.886 7.520 5.554 7.50 (.62)
Less Distributions from Net Realized Gain.............. 3.753 1.553 3.190 .62 1.66
-------- ------- ------- ------ ------
Net Asset Value, End of the Period..................... $ 39.484 $39.351 $33.384 $31.02 $24.14
======== ======= ======= ====== ======
Total Return (b)....................................... 11.40%* 23.56% 19.60% 32.01% (2.46%)
Net Assets at End of the Period
(In millions)........................................ $ 170.9 $ 139.9 $ 82.4 $ 41.8 $ 24.5
Ratio of Expenses to
Average Net Assets (c)............................... 1.79% 1.85% 1.89% 1.96% 2.02%
Ratio of Net Investment Loss to
Average Net Assets (c)............................... (1.27%) (1.10%) (1.10%) (.63%) (1.04%)
Portfolio Turnover..................................... 51%* 92% 91% 101% 64%
Average Commission Paid Per
Equity Share Traded (d).............................. $ .0609 $.0609 $ .0587 -- --
</TABLE>
*Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(c) For the years ended August 31, 1997 and 1996, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to VKAC
reimbursement of certain expenses was less than 0.01%.
(d) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal periods prior to 1996.
23 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Van Kampen American Capital Emerging Growth Fund (the "Fund") is organized as a
Delaware business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund seeks capital appreciation by principally investing in common stock of
small- and medium-sized companies that are considered to be emerging growth
companies. The Fund commenced investment operations on October 2, 1970. The
distribution of the Fund's Class B and Class C shares commenced on April 20,
1992 and July 6, 1993, 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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuation-Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Unlisted securities and listed securities for which the last sales
price is not available are valued at the mean of the bid and asked prices or, if
not available, their fair value as determined using 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.
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 American Capital Asset Management, Inc. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.
C. Income and Expenses-Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discounts on
debt securities purchased are
24
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
amortized over the expected life of each applicable security. Premiums on debt
securities are not amortized. Expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. Federal Income Taxes-It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
Net realized gain differs for financial reporting and tax purposes as a
result of the deferral for tax purposes of losses resulting from wash sales.
At February 28, 1998 for federal income tax purposes, cost of long- and
short-term investments is $2,673,774,189; the aggregate gross unrealized
appreciation is $1,342,862,587 and the aggregate gross unrealized depreciation
is $26,385,960, resulting in net unrealized appreciation of $1,316,476,627.
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 and gains on option and futures transactions. All short-term
capital gains and a portion of option and futures gains are included in ordinary
income for tax purposes.
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:
Average Net Assets % Per Annum
- -------------------------------------------------
First $350 million................... .575 of 1%
Next $350 million.................... .525 of 1%
Next $350 million.................... .475 of 1%
Over $1.05 billion................... .425 of 1%
For the six months ended February 28, 1998, the Fund recognized expenses of
approximately $50,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended February 28, 1998, the Fund recognized expenses of
approximately $195,800 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting
services to the Fund. These services are provided by VKAC at cost.
25
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
February 28, 1998, the Fund recognized expenses of approximately $3,717,300,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Fund. The maximum annual
benefit per trustee under the plan is equal to $2,500.
At February 28, 1998, VKAC owned 151,728 Class A shares of the Fund.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest,
Classes A, B and C, each with a par value of $.01 per share. There are an
unlimited number of shares of each class authorized.
At February 28, 1998, capital aggregated $1,365,467,231, $1,119,819,162 and
$134,037,816 for Classes A, B, and C, respectively. For the six months ended
February 28, 1998, transactions were as follows:
26
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
Sales:
<S> <C> <C>
Class A..................... 41,871,250 $ 1,688,760,587
Class B..................... 5,145,637 196,911,741
Class C..................... 1,055,520 40,608,200
----------- ---------------
Total Sales................... 48,072,407 $ 1,926,280,528
=========== ===============
Dividend Reinvestment:
Class A..................... 4,998,669 $ 177,702,686
Class B..................... 3,474,757 116,334,867
Class C..................... 353,446 12,027,771
----------- ---------------
Total Dividend Reinvestment... 8,826,872 $ 306,065,324
=========== ===============
Repurchases:
Class A..................... (39,341,530) $(1,600,691,359)
Class B..................... (2,397,597) (91,302,956)
Class C..................... (636,885) (24,458,834)
----------- ---------------
Total Repurchases............. (42,376,012) $(1,716,453,149)
=========== ===============
</TABLE>
At August 31, 1997, capital aggregated $1,099,695,317, $897,875,510 and
$105,860,679 for Classes A, B, and C, respectively. For the year ended August
31, 1997, transactions, were as follows:
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
Sales:
<S> <C> <C>
Class A.................... 85,481,062 $ 3,061,226,475
Class B.................... 12,632,143 435,521,886
Class C.................... 2,148,596 75,094,263
------------ ---------------
Total Sales.................. 100,261,801 $ 3,571,842,624
============ ===============
Dividend Reinvestment:
Class A.................... 1,934,861 $ 64,450,222
Class B.................... 1,192,031 37,918,500
Class C.................... 118,216 3,814,829
------------ ---------------
Total Dividend Reinvestment.. 3,245,108 $ 106,183,551
============ ===============
Repurchases:
Class A.................... (81,049,033) $(2,912,887,498)
Class B.................... (5,352,502) (178,981,485)
Class C.................... (1,178,202) (41,084,959)
------------ ---------------
Total Repurchases............ (87,579,737) $(3,132,953,942)
============ ===============
</TABLE>
27
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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
--------------------
Year of Redemption Class B Class C
- ---------------------------------------------
<S> <C> <C>
First....................... 5.00% 1.00%
Second...................... 4.00% None
Third....................... 3.00% None
Fourth...................... 2.50% None
Fifth....................... 1.50% None
Sixth and Thereafter........ None None
</TABLE>
For the six months ended February 28, 1998, VKAC, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $660,800 and CDSC on the redeemed shares of approximately
$1,086,400. 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 $1,914,526,382 and $1,718,339,409,
respectively.
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain.
All of the Fund's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when taking delivery of a security underlying a
futures contract. In these instances, the recognition of gain or loss is
postponed until the disposal of the security underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in exchange traded stock index futures. These contracts are
generally used to provide the return of an index without purchasing all of the
securities
28
<PAGE>
Notes to Financial Statements (Continued)
February 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
underlying the index or to manage the Fund's overall exposure to the equity
markets. Upon entering into futures contracts, the Fund maintains, in a
segregated account with its custodian, securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended February 28,
1998, were as follows:
<TABLE>
<CAPTION>
Contracts
- -----------------------------------------------
<S> <C>
Outstanding at August 31, 1997....... 144
Futures Opened....................... 0
Futures Closed....................... (144)
----
Outstanding at February 28, 1998..... 0
----
</TABLE>
6. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended February 28, 1998, are payments retained by VKAC of
approximately $5,339,900.
29
<PAGE>
Funds Distributed by Van Kampen American Capital
EQUITY FUNDS
Domestic
MS Aggressive Equity
VKAC Aggressive Growth
MS American Value
VKAC Comstock
VKAC Emerging Growth
VKAC Enterprise
VKAC Equity Income
VKAC Growth
VKAC Growth and Income
VKAC Harbor
VKAC Pace
VKAC Real Estate Securities
MS U.S. Real Estate
VKAC Utility
MS Value
International /Global
MS Asian Growth
MS Emerging Markets
MS Global Equity
VKAC Global Equity
MS Global Equity Allocation
VKAC Global Managed Assets
MS International Magnum
MS Latin American
FIXED-INCOME FUNDS
Income
VKAC Corporate Bond
MS Global Fixed Income
VKAC Global Government Securities
VKAC Government Securities
VKAC High Income Corporate Bond
MS High Yield
VKAC High Yield
VKAC Limited Maturity Government
VKAC Short-Term Global Income
VKAC Strategic Income
VKAC U.S. Government
VKAC U.S. Government Trust for Income
MS Worldwide High Income
Tax Exempt Income
VKAC California Insured Tax Free
VKAC Florida Insured Tax Free Income
VKAC High Yield Municipal
VKAC Insured Tax Free Income
VKAC Intermediate Term
Municipal Income
VKAC Municipal Income
VKAC New York Tax Free Income
VKAC Pennsylvania Tax Free Income
VKAC Tax Free High Income
CAPITAL PRESERVATION
VKAC Prime Rate Income Trust
VKAC Reserve
VKAC Senior Floating Rate
VKAC Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen American Capital or Morgan Stanley fund prospectus
or to receive additional fund information, choose from one of the following:
. visit our web site at www.vkac.com -- to view prospectuses, select Investors'
Place, then Download a Prospectus
. call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time
(Telecommunications Device for the Deaf users, call 1-800-421-2833)
. e-mail us by visiting www.vkac.com and selecting Investors' Place
30
<PAGE>
Van Kampen American Capital Emerging Growth Fund
Board of Trustees
J. Miles Branagan
Richard M. DeMartini*
Linda Hutton Heagy
R. Craig Kennedy
Jack E. Nelson
Phillip B. Rooney
Fernando Sisto
Wayne W. Whalen* Chairman
Officers
Dennis J. McDonnell*
President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya M. Loden*
Controller
Peter W. Hegel*
Alan T. Sachtleben*
Paul R. Wolkenberg*
Vice Presidents
Investment Adviser
Van Kampen American Capital
Asset Management Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
Van Kampen American Capital
Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Shareholder Servicing Agent
ACCESS Investor
Services, Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
Custodian
State Street Bank
and Trust Company
225 Franklin Street,
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Independent Accountants
Price Waterhouse LLP
200 East Randolph Drive
Chicago, Illinois 60601
* "Interested" persons of the Fund, as defined in the Investment Company Act
of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1998 All rights reserved.
/SM/ denotes a service mark of Van Kampen American Capital Distributors, Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares and other pertinent
data. After June 30, 1998, the report must, if used with prospective investors,
be accompanied by a quarterly performance update.
31
<PAGE>
Van Kampen American Capital Emerging Growth Fund
This Page Intentionally Left Blank
32
<PAGE>
------------------
Bulk Rate
U.S. Postage
PAID
VAN KAMPEN
AMERICAN CAPITAL
------------------
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> EMG GROWTH A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 2,673,519,786
<INVESTMENTS-AT-VALUE> 3,990,250,816
<RECEIVABLES> 54,692,740
<ASSETS-OTHER> 114,897
<OTHER-ITEMS-ASSETS> 689
<TOTAL-ASSETS> 4,045,059,142
<PAYABLE-FOR-SECURITIES> 57,584,078
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,396,954
<TOTAL-LIABILITIES> 105,981,032
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,365,467,231
<SHARES-COMMON-STOCK> 55,776,816
<SHARES-COMMON-PRIOR> 48,248,427
<ACCUMULATED-NII-CURRENT> (14,670,133)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,693,004
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,316,731,030
<NET-ASSETS> 2,304,016,017
<DIVIDEND-INCOME> 3,318,514
<INTEREST-INCOME> 5,687,530
<OTHER-INCOME> 0
<EXPENSES-NET> (23,551,504)
<NET-INVESTMENT-INCOME> (14,545,460)
<REALIZED-GAINS-CURRENT> 165,757,421
<APPREC-INCREASE-CURRENT> 267,079,055
<NET-CHANGE-FROM-OPS> 418,291,016
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (187,560,886)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41,871,250
<NUMBER-OF-SHARES-REDEEMED> (39,341,530)
<SHARES-REINVESTED> (4,998,669)
<NET-CHANGE-IN-ASSETS> 333,315,283
<ACCUMULATED-NII-PRIOR> (124,673)
<ACCUMULATED-GAINS-PRIOR> 178,065,625
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,008,650
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,551,504
<AVERAGE-NET-ASSETS> 2,095,702,621
<PER-SHARE-NAV-BEGIN> 40.844
<PER-SHARE-NII> (0.101)
<PER-SHARE-GAIN-APPREC> 4.318
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (3.753)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 41.308
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> EMG GROWTH B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 2,673,519,786
<INVESTMENTS-AT-VALUE> 3,990,250,816
<RECEIVABLES> 54,692,740
<ASSETS-OTHER> 114,897
<OTHER-ITEMS-ASSETS> 689
<TOTAL-ASSETS> 4,045,059,142
<PAYABLE-FOR-SECURITIES> 57,584,078
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,396,954
<TOTAL-LIABILITIES> 105,981,032
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,119,819,162
<SHARES-COMMON-STOCK> 37,685,085
<SHARES-COMMON-PRIOR> 31,462,288
<ACCUMULATED-NII-CURRENT> (14,670,133)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,693,004
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,316,731,030
<NET-ASSETS> 1,464,166,476
<DIVIDEND-INCOME> 3,318,514
<INTEREST-INCOME> 5,687,530
<OTHER-INCOME> 0
<EXPENSES-NET> (23,551,504)
<NET-INVESTMENT-INCOME> (14,545,460)
<REALIZED-GAINS-CURRENT> 165,757,421
<APPREC-INCREASE-CURRENT> 267,079,055
<NET-CHANGE-FROM-OPS> 418,291,016
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (124,322,361)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,145,637
<NUMBER-OF-SHARES-REDEEMED> (2,397,597)
<SHARES-REINVESTED> 3,474,757
<NET-CHANGE-IN-ASSETS> 243,782,011
<ACCUMULATED-NII-PRIOR> (124,673)
<ACCUMULATED-GAINS-PRIOR> 178,065,625
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,008,650
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,551,504
<AVERAGE-NET-ASSETS> 1,311,346,422
<PER-SHARE-NAV-BEGIN> 38,789
<PER-SHARE-NII> (0.245)
<PER-SHARE-GAIN-APPREC> 4.062
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (3.753)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 38.853
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> EMG GROWTH C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 2,673,519,786
<INVESTMENTS-AT-VALUE> 3,990,250,816
<RECEIVABLES> 54,692,740
<ASSETS-OTHER> 114,897
<OTHER-ITEMS-ASSETS> 689
<TOTAL-ASSETS> 4,045,059,142
<PAYABLE-FOR-SECURITIES> 57,584,078
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,396,954
<TOTAL-LIABILITIES> 105,981,032
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 134,037,816
<SHARES-COMMON-STOCK> 4,328,251
<SHARES-COMMON-PRIOR> 3,556,170
<ACCUMULATED-NII-CURRENT> (14,670,133)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,693,004
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,316,731,030
<NET-ASSETS> 170,895,617
<DIVIDEND-INCOME> 3,318,514
<INTEREST-INCOME> 5,687,530
<OTHER-INCOME> 0
<EXPENSES-NET> (23,551,504)
<NET-INVESTMENT-INCOME> (14,545,460)
<REALIZED-GAINS-CURRENT> 165,757,421
<APPREC-INCREASE-CURRENT> 267,079,055
<NET-CHANGE-FROM-OPS> 418,291,016
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (14,246,795)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,055,520
<NUMBER-OF-SHARES-REDEEMED> (636,885)
<SHARES-REINVESTED> 353,446
<NET-CHANGE-IN-ASSETS> 30,956,383
<ACCUMULATED-NII-PRIOR> (124,673)
<ACCUMULATED-GAINS-PRIOR> 178,065,625
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,008,650
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,551,504
<AVERAGE-NET-ASSETS> 152,065,819
<PER-SHARE-NAV-BEGIN> 39,351
<PER-SHARE-NII> (0.248)
<PER-SHARE-GAIN-APPREC> 4.134
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (3.753)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 39.484
<EXPENSE-RATIO> 1.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
