<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 3
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS 4
TOP FIVE SECTORS 4
Q&A WITH YOUR PORTFOLIO MANAGERS 5
GLOSSARY OF TERMS 9
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 10
FINANCIAL STATEMENTS 16
NOTES TO FINANCIAL STATEMENTS 22
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 29
FUND OFFICERS AND IMPORTANT ADDRESSES 30
RESULTS OF SHAREHOLDER VOTES 31
</TABLE>
One of the greatest shifts we've seen is the increasing importance of investing
for many Americans.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
April 3, 2000
Dear Shareholder,
As we enter a new century--and millennium--it seems appropriate to take a look
back at the progress that's been made over the last 100 years and how the world
of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is now
available to most people. In fact, almost 79 million individuals--who represent
almost half of all U.S. households--own stocks either directly or through mutual
funds. This is even more impressive when considering that just 16 years earlier,
only 19 percent of households owned stocks. Another important shift has been the
need for retirement planning beyond a pension plan or Social Security. The
Investment Company Institute, the leading mutual fund industry association,
reports that 77 percent of all
mutual fund shareholders earmarked retirement as their primary
financial goal in 1998.
Through all the changes in the investment environment over the
past century, the general principles that have made
generations of investors successful remain the same. Some that have stood the
test of time include:
- - Investing for the long-term
- - Basing investment decisions on sound research
- - Building a diversified portfolio
- - Acting on the value of professional investment advice
While no one can predict the future, at Van Kampen we believe that these ideas
will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
[SIG]
Richard F. Powers, III
Chairman
Van Kampen
Asset Management, Inc.
</TABLE>
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH REMAINED VIBRANT DURING THE REPORTING PERIOD DUE TO STRONG
CONSUMER AND GOVERNMENT SPENDING, AS WELL AS YEAR 2000-RELATED INVENTORY
BUILD-UP. GROSS DOMESTIC PRODUCT (GDP), THE PRIMARY MEASURE OF ECONOMIC GROWTH,
INCREASED AT AN ANNUALIZED RATE OF 6.9 PERCENT IN THE FOURTH QUARTER OF 1999,
ITS FASTEST GROWTH RATE SINCE 1996. WITH GDP MEASURING 4.1 PERCENT FOR 1999,
THIS WAS THE THIRD SUCCESSIVE YEAR IN WHICH GDP EXCEEDED 4 PERCENT.
STRONG GDP DATA, AMONG OTHER FACTORS, PROMPTED THE FEDERAL RESERVE BOARD TO TAKE
AN ACTIVE STANCE IN TEMPERING ECONOMIC GROWTH TO WARD OFF INFLATION. THE FED
INCREASED THE FEDERAL FUNDS RATE BY 0.25 PERCENT FOUR TIMES SINCE JUNE 1999, AND
AN ADDITIONAL INCREASE IS WIDELY ANTICIPATED IN LATE MARCH. [EDITOR'S NOTE: THE
FED RAISED THE FEDERAL FUNDS RATE BY 0.25 PERCENT ON MARCH 21.] DESPITE THE
SURGING ECONOMY, THE CONSUMER PRICE INDEX (CPI)--A MEASURE OF
INFLATION--REMAINED MODEST, RISING JUST 2.7 PERCENT DURING THE 12 MONTHS ENDED
FEBRUARY 29, 2000.
ALTHOUGH THE CPI POSTED FAVORABLE NUMBERS, INFLATIONARY PRESSURES CONTINUED TO
BUILD IN LABOR COSTS AND CONSUMER SPENDING RATES. THE JOB MARKET REMAINED TIGHT
AS UNEMPLOYMENT DROPPED TO A 30-YEAR LOW. AS A RESULT, THE EMPLOYMENT COST INDEX
HAS REFLECTED ESCALATING LABOR COSTS, AS EMPLOYERS HAVE INCREASED COMPENSATION
AND BENEFITS TO ATTRACT WORKERS.
RISING INTEREST RATES DID LITTLE TO CURB CONSUMER SPENDING. SHOPPERS SPENT
FREELY IN LATE 1999 AND INTO THE NEW YEAR, AND CONSUMER CONFIDENCE REMAINS VERY
HIGH DUE TO PLENTIFUL JOBS, ACCELERATING PERSONAL INCOME, AND LOW INFLATION.
INTEREST RATES AND INFLATION
(February 28, 1998 - February 29, 2000)
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Feb 98 5.50 1.40
5.50 1.40
5.50 1.40
May 98 5.50 1.70
5.50 1.70
5.50 1.70
Aug 98 5.50 1.60
5.25 1.50
5.00 1.50
Nov 98 4.75 1.50
4.75 1.60
4.75 1.70
Feb 99 4.75 1.60
4.75 1.70
4.75 2.30
May 99 4.75 2.10
5.00 2.00
5.00 2.10
Aug 99 5.25 2.30
5.25 2.60
5.25 2.60
Nov 99 5.50 2.60
5.50 2.70
5.50 2.70
Feb 00 5.75 3.20
</TABLE>
Interest rates are represented by the closing midline federal funds rate on the
last day of
each month. Inflation is indicated by the annual percent change of the Consumer
Price Index for all urban consumers at the end of each month.
2
<PAGE> 4
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of February 29, 2000)
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SIX-MONTH TOTAL RETURN BASED ON
NAV(1) 115.83% 115.02% 115.07%
- -------------------------------------------------------------------------
Six-month total return(2) 103.42% 110.02% 114.07%
- -------------------------------------------------------------------------
One-year total return(2) 148.12% 157.29% 161.35%
- -------------------------------------------------------------------------
Five-year average annual total
return(2) 46.65% 47.24% 47.26%
- -------------------------------------------------------------------------
Ten-year average annual total
return(2) 31.43% N/A N/A
- -------------------------------------------------------------------------
Life-of-Fund average annual total
return(2) 21.07% 33.62%(3) 34.78%
- -------------------------------------------------------------------------
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 ("CDSC"). On purchases of Class A shares of $1 million or
more, a CDSC of 1% may be imposed on certain redemptions made within one year of
purchase. Returns for Class B shares are calculated without the effect of the
maximum 5% CDSC, charged on certain redemptions made within one year of purchase
and declining thereafter to 0% after the fifth year. Returns for Class C shares
are calculated without the effect of the maximum 1% CDSC, charged on certain
redemptions made within one year of purchase. If the sales charges were
included, total returns would be lower.
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (5.75% for A shares) or
contingent deferred sales charge ("CDSC"). Returns for Class B shares are
calculated with the effect of the maximum 5% CDSC, charged on certain
redemptions made within one year of purchase and declining thereafter to 0%
after the fifth year. Returns for Class C shares are calculated with the effect
of the maximum 1% CDSC, charged on certain redemptions made within one year of
purchase.
(3) The total return reflects the conversion of Class B shares into Class A
shares six years after the end of the calendar month in which the shares were
purchased.
See the Comparative Performance section of the current prospectus. An investment
should be made with an understanding of the risks that an investment in equity
securities entails. These include the risk that the financial condition of the
issuers of the securities in the portfolio, or the condition of the stock market
in general, may worsen and, therefore, the value of Fund shares may decline.
Past performance does not guarantee future results. Investment return and net
asset value will fluctuate with market conditions. Fund shares, when redeemed,
may be worth more or less than their original cost.
Because the prices of common stocks and other securities fluctuate, the value of
an investment in the Fund will vary upon the Fund's investment performance.
Foreign securities may magnify volatility due to changes in foreign exchange
rates, the political and economic uncertainties in foreign countries, and the
potential lack of liquidity, government supervision, and regulation.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS
(as a percentage of long-term investments--February 29, 2000)
<TABLE>
<S> <C> <C>
1. JDS UNIPHASE 5.9%
Makes products used in optical
networks for the telecommunications
and cable television industries.
2. VERITAS SOFTWARE 3.6%
Makes software designed to enhance
electronic information storage.
3. VERISIGN 3.1%
Provides Internet-based trust
services needed by Web sites, enter-
prises, and individuals to conduct
secure electronic commerce and
communications.
4. NETWORK APPLIANCE 3.0%
Provides storage and data-access
solutions.
5. BROADVISION 2.7%
Develops software solutions that
personalize e-business.
6. LSI LOGIC 2.5%
Develops semiconductor products and
computer-storage systems solutions.
7. BROADCOM 2.2%
Makes semiconductors used in
high-speed data and video-
transmission products.
8. CONEXANT SYSTEMS 1.9%
Supplies semiconductor products for a
broad range of communications
applications.
9. SIEBEL SYSTEMS 1.8%
Helps enable electronic business-to-
business commerce.
10. COMVERSE TECHNOLOGY 1.7%
Develops systems and software for
multimedia communications and
information processing applications.
</TABLE>
TOP FIVE SECTORS*
(as a percentage of long-term investments)
* These sectors represent broad groupings of related industries.
[BAR GRAPH]
<TABLE>
<S> <C> <C>
February 29, 2000 August 31, 1999
Technology 78.30 57.50
Health Care 6.30 7.50
Consumer Services 5.90 10.60
Utilities 3.40 0.80
Producer Manufacturing 3.30 4.20
</TABLE>
4
<PAGE> 6
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH REPRESENTATIVES OF THE ADVISER OF THE VAN KAMPEN EMERGING
GROWTH FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
DURING THE PAST SIX MONTHS. THE REPRESENTATIVES INCLUDE GARY M. LEWIS, SENIOR
PORTFOLIO MANAGER, WHO HAS MANAGED THE FUND SINCE 1989 AND WORKED IN THE
INVESTMENT INDUSTRY SINCE 1979. HE IS JOINED BY DUDLEY BRICKHOUSE, MATTHEW HART
(NEW TO THE FUND AS OF FEBRUARY 2000), JANET LUBY, AND DAVID WALKER, PORTFOLIO
MANAGERS, AND STEPHEN L. BOYD, CHIEF INVESTMENT OFFICER FOR EQUITY INVESTMENTS.
THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE DURING
THE SIX MONTHS ENDED FEBRUARY 29, 2000.
Q HOW WAS THE FUND AFFECTED BY
MARKET CONDITIONS DURING THE REPORTING PERIOD?
A It was an extremely favorable
market environment for the Fund. Technology stocks, which made up a substantial
portion of the Fund's investments during the reporting period, continued their
outstanding performance of late. This was especially the case during the final
quarter of 1999, when the NASDAQ stock index, which includes a heavy weighting
in technology companies, rose an impressive 48 percent. In the first two months
of the new year, technology stocks continued their strong results, while "blue
chip" stocks started falling out of favor with investors. As a result, the
NASDAQ powered to record highs in February while the Dow Jones Industrial
Average dropped below the 10,000 mark for the first time since April 1999.
Q IN WHAT AREAS OF THE MARKET DID
YOU FIND ATTRACTIVE INVESTMENTS?
A The Fund's investment approach
(see next page) leads us to the areas of the market where we believe we can find
the best stocks at any given time. As a consequence, during the reporting period
the Fund was invested heavily in companies taking advantage of burgeoning
technologies such as the Internet and wireless communications, to name just two
examples of market areas that we believe have enormous growth potential. This
weighting in technology stocks significantly benefited the Fund's results, as
stocks in this area were overwhelmingly the best performers in the stock market
during the period.
5
<PAGE> 7
THE MANAGERS' INVESTMENT APPROACH
REGARDLESS OF MARKET CONDITIONS, WE FOLLOW A CONSISTENT INVESTMENT STRATEGY IN
MANAGING THE FUND: TO LOOK FOR STOCKS WITH RISING EARNINGS EXPECTATIONS AND
RISING VALUATIONS. WE INVEST THE FUND'S ASSETS IN THOSE COMPANIES WE BELIEVE
HAVE THE POTENTIAL TO OUTPERFORM EARNINGS EXPECTATIONS, AND WE SELL STOCKS IF
THEIR UNDERLYING COMPANIES' EARNINGS ESTIMATES OR VALUATIONS ARE DECLINING. WE
MANAGE THE FUND USING A "BOTTOM UP" APPROACH, MEANING THAT WE EVALUATE EACH
COMPANY INDIVIDUALLY BEFORE DECIDING TO INVEST.
Q WHAT WERE SOME OF THE
INVESTMENTS THAT MOST HELPED THE FUND'S PERFORMANCE?
A Increasingly, companies have been
reengineering their business practices to take advantage of the Internet's cost
efficiencies, leading to many investment opportunities in technology stocks.
As we mentioned in your last shareholder report, we continued to invest the
Fund's assets in businesses that are creating the infrastructure supporting the
Internet. At the end of the reporting period, the Fund's largest holding and
strongest contributor to performance was JDS Uniphase, which produces optical-
networking equipment to transmit data over the Internet. Similarly, the Fund's
performance was helped by an investment in SDL, which develops semiconductor
lasers and other fiber-optic products. This company has benefited from heavy
demand resulting from the Internet's rapid growth.
Other technology companies that helped Fund performance included the
following:
- - Broadcom, a semiconductor manufacturer whose products enable data transmission
to homes and businesses;
- - Veritas Software and Network Appliance, makers of products that help enhance
access to stored electronic data;
- - VeriSign, which helps enable secure data transmission over the Internet; and
- - BroadVision, a software developer whose products enhance Internet-based
commerce.
Of course, not all of the stocks in the Fund performed as favorably, nor is
there any guarantee that any of the stocks mentioned above will continue to
perform as well in the future. For additional Fund portfolio highlights, please
refer to page 4.
6
<PAGE> 8
Q DID ANY STOCKS HURT THE
FUND'S PERFORMANCE?
A The Fund's performance was
strong during the reporting period, and more of our investments were winners
than losers. Nevertheless, some of the stocks we selected for the Fund performed
more poorly than we had hoped. For example, we were disappointed in the
performance of consumer-electronics retailer Best Buy. As with most
retailers--which have not tended to perform well when interest rates are
rising--Best Buy saw its stock price decline in the fourth quarter of 1999. More
than any other stock, Best Buy had a negative impact on the Fund--we eliminated
the holding during the reporting period.
Other stocks in the Fund whose performance disappointed us included Tyco and
VISX, both of which we also sold from the Fund during the reporting period.
Tyco's previously strong results reversed themselves in early October when the
author of a short-selling newsletter questioned Tyco's accounting
methods--specifically, how the company accounted for its corporate acquisitions.
VISX, meanwhile, saw its stock weaken as the increasingly competitive
environment in laser-vision correction led the company to lower its prices,
cutting into profitability. We sold the Fund's position in VISX relatively early
in the reporting period, thus avoiding a more substantial negative impact on the
Fund.
Q HOW DID THE FUND PERFORM
DURING THE REPORTING PERIOD?
A Thanks largely to effective stock
selection in the technology area, the Fund continued its recent strong
performance. During the six months ended February 29, 2000, the Fund returned
115.83 percent(1) (Class A shares at net asset value; if the sales charge of
5.75 percent were included, the return would have been lower). By comparison,
the Standard & Poor's 400 MidCap Index returned 18.09 percent. The S&P 400
MidCap Index is an unmanaged, broad-based index that reflects the general
performance of 400 domestic mid-cap stocks. This index is a statistical
composite that doesn't include any commissions or fees that would be paid by an
investor purchasing the securities it represents. Such costs would lower the
performance of the index. Also, keep in mind that you can't invest directly in
an index.
Please refer to the chart and footnotes on page 3 for additional Fund
performance results. Past performance does not guarantee future results.
(1) The Fund's performance during the six-month reporting period can largely be
attributed to investments in the technology sector, which performed favorably
during that time. This performance was achieved during a rising market, and
there is no guarantee that this performance record or the circumstances leading
to it can ever be repeated. As the Fund expects to have a substantial portion of
its assets invested in stocks of emerging growth companies, the Fund will be
subject to more volatility and erratic movements than will the market in
general.
7
<PAGE> 9
Q WHAT IS YOUR OUTLOOK FOR
THE FUND?
A We remain optimistic and believe
that the Internet is a dynamic force that continues to drive dramatic change in
how companies conduct business. We believe that this change will create many
unique and exciting investment opportunities. Against this positive outlook for
company fundamentals, we remain mindful of stock valuations. The higher
valuations get, the greater the negative impact on the Fund if investors were to
lose their enthusiasm for growth stocks, causing valuations to fall.
Our outlook also depends in part on whether the Federal Reserve continues to
increase interest rates to help limit inflationary pressures. Inflation
continues to be moderate, but it is uncertain how long this trend will continue,
particularly if rising oil prices contribute to a general rise in the cost of
living. A sharp rise in wages could also spur the Fed to continue raising
interest rates. Although recent rate increases have had only a moderate effect
on stock prices, additional rate hikes could have a more substantial impact.
8
<PAGE> 10
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
BLUE-CHIP STOCKS: Stocks of large, well-known companies that have a long record
of growth. Examples of blue-chip stocks include General Motors, International
Business Machines (IBM), Coca-Cola, and General Electric.
BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual stocks, rather than economic and market cycles.
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load"). In most
cases, there is no redemption fee (contingent deferred sales charge).
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing this
amount by the number of shares outstanding. The NAV does not include any initial
or contingent deferred sales charge; if these charges were included, the NAV
would decrease.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.
9
<PAGE> 11
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL THE SPECIFIC HOLDINGS OF YOUR FUND AT THE END OF THE
REPORTING PERIOD.
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS* 93.7%
CONSUMER DISTRIBUTION 0.9%
Home Depot, Inc........................................... 1,500,000 $ 86,718,750
The Gap, Inc.............................................. 615,000 29,712,187
Tiffany & Co.............................................. 900,000 57,768,750
---------------
174,199,687
---------------
CONSUMER SERVICES 5.5%
AT&T Corp. -- Liberty Media Group, Class A (a)............ 1,500,000 78,375,000
CBS Corp.................................................. 1,350,000 80,409,375
Clear Channel Communications, Inc. (a).................... 1,000,000 66,625,000
Comcast Corp., Class A.................................... 910,000 38,675,000
Echostar Communications Corp., Class A (a)................ 2,650,000 302,100,000
Entercom Communications Corp. (a)......................... 117,300 4,933,931
Hispanic Broadcasting Corp. (a)........................... 499,000 46,625,313
Infinity Broadcasting Corp. .............................. 828,125 26,448,242
InfoSpace.com, Inc. (a)................................... 230,000 49,910,000
Omnicom Group, Inc........................................ 1,000,000 94,187,500
TMP Worldwide, Inc. (a)................................... 600,000 81,562,500
UnitedGlobalCom, Inc., Class A (a)........................ 107,300 11,212,850
Univision Communications, Inc., Class A (a)............... 1,300,000 132,437,500
Young & Rubicam, Inc...................................... 700,000 35,350,000
---------------
1,048,852,211
---------------
ENERGY 0.8%
Apache Corp............................................... 1,250,000 45,625,000
BJ Services Co............................................ 1,500,000 85,593,750
Devon Energy Corp......................................... 475,000 17,693,750
---------------
148,912,500
---------------
FINANCE 0.7%
Lehman Brothers Holdings, Inc............................. 850,000 61,625,000
Marsh & McLennan Cos., Inc................................ 400,000 30,950,000
S1 Corp. (a).............................................. 450,000 45,281,250
---------------
137,856,250
---------------
HEALTHCARE 5.9%
Affymetrix, Inc. (a)...................................... 293,000 84,860,125
Allergan, Inc............................................. 1,000,000 50,312,500
Biogen, Inc. (a).......................................... 370,000 39,936,875
Cree Research, Inc. (a)................................... 300,000 56,362,500
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HEALTHCARE (CONTINUED)
Genentech, Inc. (a)....................................... 369,000 $ 71,170,875
Human Genome Sciences, Inc. (a)........................... 250,000 54,562,500
Immunex Corp. (a)......................................... 475,000 93,782,813
Incyte Pharmaceuticals, Inc. (a).......................... 350,000 96,446,875
Ivax Corp. (a)............................................ 900,000 20,475,000
Medimmune, Inc. (a)....................................... 865,000 171,702,500
Millennium Pharmaceuticals, Inc. (a)...................... 325,000 84,540,625
PE Corp. - PE Biosystems Group (a)........................ 1,250,000 131,875,000
PE Corp. - Celera Genomics Group (a)...................... 300,000 73,200,000
QLT PhotoTherapeutics, Inc. (a)........................... 760,000 54,245,000
Teva Pharmaceutical Industries Ltd. -- ADR (Israel)....... 800,000 34,500,000
---------------
1,117,973,188
---------------
PRODUCER MANUFACTURING 3.1%
ASM Lithography Holding NV -- ADR (Netherlands) (a)....... 750,000 96,093,750
Corning, Inc.............................................. 1,420,000 266,960,000
E-Tek Dynamics, Inc. (a).................................. 250,000 68,312,500
Metromedia Fiber Network, Inc. (a)........................ 1,850,000 132,997,656
Zebra Technologies Corp., Class A (a)..................... 300,000 19,968,750
---------------
584,332,656
---------------
TECHNOLOGY 73.4%
Adobe Systems, Inc........................................ 500,000 51,000,000
Advanced Fibre Communications, Inc. (a)................... 650,000 44,281,250
Altera Corp. (a).......................................... 1,250,000 99,687,500
Amdocs Ltd. (a)........................................... 900,000 66,768,750
Amkor Technology, Inc. (a)................................ 350,000 18,178,125
Analog Devices, Inc. (a).................................. 1,750,000 274,750,000
Applied Materials, Inc. (a)............................... 500,000 91,468,750
Applied Micro Circuits Corp. (a).......................... 825,000 226,926,563
Ariba, Inc. (a)........................................... 350,000 92,575,000
Bea Systems, Inc. (a)..................................... 1,350,000 170,859,375
Broadcom Corp., Class A (a)............................... 2,000,000 394,750,000
BroadVision, Inc. (a)..................................... 1,875,000 473,554,687
Brocade Communications Systems, Inc. (a).................. 550,000 159,018,750
Check Point Software Technologies Ltd. (a)................ 1,200,000 244,725,000
Cisco Systems, Inc. (a)................................... 881,210 116,484,947
Citrix Systems, Inc. (a).................................. 2,700,000 284,681,250
Clarify, Inc. (a)......................................... 500,000 72,156,250
CMGI, Inc. (a)............................................ 250,000 32,390,625
Comverse Technology, Inc. (a)............................. 1,550,000 305,156,250
Conexant Systems, Inc. (a)................................ 3,500,000 343,875,000
Cypress Semiconductor Corp. (a)........................... 500,000 22,812,500
EMC Corp. (a)............................................. 1,750,000 208,250,000
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Emulex Corp. (a).......................................... 200,000 $ 32,000,000
Ericsson (L M) Telephone Co., Class B -- ADR (Sweden)..... 550,000 52,800,000
Exodus Communications, Inc. (a)........................... 2,050,000 291,868,750
Flextronics International Corp. (a)....................... 1,594,200 97,046,925
Foundry Networks, Inc. (a)................................ 200,000 27,937,500
Gemstar International Group Ltd. (a)...................... 3,700,000 280,737,500
Go2Net, Inc. (a).......................................... 300,000 26,100,000
HomeStore.com, Inc. (a)................................... 132,000 9,017,250
i2 Technologies, Inc. (a)................................. 1,350,000 220,725,000
Inktomi Corp. (a)......................................... 750,000 102,843,750
Intel Corp................................................ 1,000,000 113,000,000
Jabil Circuit, Inc. (a)................................... 400,000 27,775,000
JDS Uniphase Corp. (a).................................... 4,000,000 1,054,500,000
Juniper Networks, Inc. (a)................................ 800,000 219,450,000
KLA -- Tencor Corp. (a)................................... 2,350,000 183,153,125
Lam Research Corp. (a).................................... 800,000 124,900,000
LSI Logic Corp. (a)....................................... 7,000,000 448,437,500
Macromedia, Inc. (a)...................................... 700,000 60,506,250
McLeodUSA, Inc. (a)....................................... 1,250,000 110,000,000
Mercury Interactive Corp. (a)............................. 1,700,000 163,837,500
Microchip Technology, Inc. (a)............................ 412,500 25,755,469
MicroStrategy, Inc., Class A (a).......................... 630,000 87,609,375
Motorola, Inc............................................. 973,750 166,024,375
National Semiconductor Corp. (a).......................... 1,600,000 120,200,000
Network Appliance, Inc. (a)............................... 2,850,000 537,937,500
Network Solutions, Inc., Class A (a)...................... 833,600 268,783,900
Nokia Corp. -- ADR (Finland).............................. 1,000,000 198,312,500
Nortel Networks Corp...................................... 1,550,000 172,825,000
Novellus Systems, Inc. (a)................................ 750,000 44,484,375
Oracle Corp. (a).......................................... 700,000 51,975,000
Peregrine Systems, Inc. (a)............................... 800,000 43,700,000
Phone.com, Inc............................................ 300,000 41,887,500
PMC Sierra, Inc........................................... 1,000,000 193,062,500
Portal Software, Inc. (a)................................. 500,000 37,562,500
QLogic Corp. (a).......................................... 1,400,000 218,400,000
Qualcomm, Inc. (a)........................................ 2,000,000 284,875,000
Rational Software Corp. (a)............................... 1,000,000 71,125,000
Real Networks, Inc. (a)................................... 1,200,000 84,375,000
RF Micro Devices, Inc. (a)................................ 1,400,000 193,637,500
SanDisk Corp. (a)......................................... 500,000 44,500,000
Sanmina Corp. (a)......................................... 500,000 58,531,250
Scient Corp. (a).......................................... 200,000 14,150,000
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Scientific-Atlanta, Inc................................... 1,000,000 $ 102,687,500
SDL, Inc. (a)............................................. 700,000 287,000,000
Siebel Systems, Inc. (a).................................. 2,250,000 312,046,875
STMicroelectronics NV -- ADR (Netherlands)................ 925,000 185,000,000
Sun Microsystems, Inc. (a)................................ 1,700,000 161,925,000
Sycamore Networks, Inc. (a)............................... 261,000 38,628,000
Symbol Technologies, Inc.................................. 500,000 47,562,500
Taiwan Semiconductor Manufacturing Co., Ltd. -- ADR
(Taiwan) (a).............................................. 774,900 46,348,706
Teradyne, Inc. (a)........................................ 530,000 46,110,000
Texas Instruments, Inc.................................... 1,750,000 291,375,000
TIBCO Software, Inc. (a).................................. 450,000 58,950,000
VeriSign, Inc. (a)........................................ 2,150,000 543,950,000
VERITAS Software Corp. (a)................................ 3,200,000 633,200,000
VerticalNet, Inc. (a)..................................... 125,000 27,500,000
Viant Corp. (a)........................................... 250,000 9,484,375
Vignette Corp. (a)........................................ 600,000 138,300,000
Vishay Intertechnology, Inc. (a).......................... 365,000 15,695,000
Vitesse Semiconductor Corp. (a)........................... 1,250,000 129,765,625
Western Wireless Corp. (a)................................ 950,000 46,075,000
Xilinx, Inc. (a).......................................... 3,000,000 239,250,000
Yahoo!, Inc. (a).......................................... 850,000 135,734,375
---------------
13,897,288,322
---------------
TRANSPORTATION 0.2%
Kansas City Southern Industries, Inc...................... 500,000 39,375,000
---------------
UTILITIES 3.2%
Calpine Corp. (a)......................................... 800,000 73,200,000
China Telecom Hong Kong Ltd. -- ADR (China) (a)........... 215,000 39,963,125
Level 3 Communications, Inc. (a).......................... 550,000 62,631,250
Nextel Communications, Inc. (a)........................... 1,500,000 205,125,000
NEXTLINK Communications, Inc., Class A (a)................ 900,000 99,168,750
VoiceStream Wireless Corp. (a)............................ 900,000 119,756,250
---------------
599,844,375
---------------
TOTAL LONG-TERM INVESTMENTS 93.7%
(Cost $6,735,565,753)................................................ 17,748,634,189
---------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION VALUE
<S> <C> <C>
SHORT-TERM INVESTMENTS 5.6%
COMMERCIAL PAPER 1.6%
Prudential Funding Corp. ($150,000,000 par, yielding 5.523%, 03/01/00
maturity)............................................................ $ 150,000,000
General Electric Capital Corp. ($150,000,000 par, yielding 6.350%,
03/01/00 maturity)................................................... 150,000,000
---------------
300,000,000
---------------
REPURCHASE AGREEMENTS 1.6%
Bank of America Securities ($80,491,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 02/29/00, to
be sold on 03/01/00 at $80,504,057).................................. 80,491,000
DLJ Mortgage Acceptance Corp. ($35,815,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 02/29/00, to
be sold on 03/01/00 at $35,820,740).................................. 35,815,000
State Street Bank & Trust Co. ($150,905,000 par collateralized by
U.S. Government obligations in a pooled cash account, dated 02/29/00,
to be sold on 03/01/00 at $150,928,348).............................. 150,905,000
Warburg Dillon Read ($42,350,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 02/29/00, to
be sold on 03/01/00 at $42,356,776).................................. 42,350,000
---------------
309,561,000
---------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 2.4%
Federal Home Loan Bank Consolidated Discount Notes ($70,146,000 par,
yielding 5.72%, 03/01/00 maturity)................................... 70,146,000
Federal Home Loan Bank Consolidated Discount Notes ($50,000,000 par,
yielding 5.54%, 03/10/00 maturity)................................... 49,930,750
Federal Home Loan Mortgage Discount Notes ($50,000,000 par, yielding
5.62%, 03/14/00 maturity)............................................ 49,898,528
Federal Home Loan Mortgage Discount Notes ($25,000,000 par, yielding
5.67%, 03/21/00 maturity)............................................ 24,921,250
Federal Home Loan Mortgage Discount Notes ($50,000,000 par, yielding
5.71%, 03/03/00 maturity)............................................ 49,984,139
Federal Home Loan Mortgage Discount Notes ($50,000,000 par, yielding
5.77%, 04/18/00 maturity)............................................ 49,615,333
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR FUND'S INVESTMENTS
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Federal National Mortgage Association Discount Notes ($50,000,000
par, yielding 5.83%, 05/25/00 maturity).............................. $ 49,311,736
Student Loan Marketing Discount Notes ($100,000,000 par, yielding
5.72%, 03/01/00 maturity)............................................ 100,000,000
---------------
443,807,736
---------------
TOTAL SHORT-TERM INVESTMENTS 5.6%
(Cost $1,053,368,736).............................................. 1,053,368,736
---------------
TOTAL INVESTMENTS 99.3%
(Cost $7,788,934,489).............................................. 18,802,002,925
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%.......................... 134,554,032
---------------
NET ASSETS 100.0%................................................... $18,936,556,957
===============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR--American Depositary Receipt
* The common stocks are classified by sectors which represent broad groupings
of related industries.
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
February 29, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $7,788,934,489)..................... $18,802,002,925
Cash........................................................ 85,336
Receivables:
Fund Shares Sold.......................................... 199,774,354
Investments Sold.......................................... 185,345,369
Dividends................................................. 189,871
Other....................................................... 265,317
---------------
Total Assets............................................ 19,187,663,172
---------------
LIABILITIES:
Payables:
Investments Purchased..................................... 170,719,408
Fund Shares Repurchased................................... 64,760,377
Distributor and Affiliates................................ 8,546,951
Investment Advisory Fee................................... 5,647,215
Capital Gain Distributions................................ 183,006
Accrued Expenses............................................ 901,513
Trustees' Deferred Compensation and Retirement Plans........ 347,745
---------------
Total Liabilities....................................... 251,106,215
---------------
NET ASSETS.................................................. $18,936,556,957
===============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $ 7,244,692,708
Net Unrealized Appreciation................................. 11,013,068,436
Accumulated Net Realized Gain............................... 721,759,676
Accumulated Net Investment Loss............................. (42,963,863)
---------------
NET ASSETS.................................................. $18,936,556,957
===============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $10,413,998,292 and 90,344,275 shares of
beneficial interest issued and outstanding)............. $ 115.27
Maximum sales charge (5.75%* of offering price)......... 7.03
---------------
Maximum offering price to public........................ $ 122.30
===============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $7,040,095,892 and 66,875,825 shares of
beneficial interest issued and outstanding)............. $ 105.27
===============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $1,482,462,773 and 13,808,311 shares of
beneficial interest issued and outstanding)............. $ 107.36
===============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
16
<PAGE> 18
Statement of Operations
For the Six Months Ended February 29, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 20,256,335
Dividends (net of foreign withholding taxes of $19,518)..... 3,708,375
---------------
Total Income............................................ 23,964,710
---------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Class
A, B and C of $7,494,984, $21,181,419, and $3,842,026,
respectively)............................................. 32,518,429
Investment Advisory Fee..................................... 24,287,533
Shareholder Services........................................ 5,695,474
Custody..................................................... 527,185
Legal....................................................... 352,000
Trustees' Fees and Related Expenses......................... 51,938
Other....................................................... 3,237,446
---------------
Total Expenses.......................................... 66,670,005
Less Credits Earned on Cash Balances.................... 9,925
---------------
Net Expenses............................................ 66,660,080
---------------
NET INVESTMENT LOSS......................................... $ (42,695,370)
===============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 731,043,012
---------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,171,609,699
End of the Period......................................... 11,013,068,436
---------------
Net Unrealized Appreciation During the Period............... 8,841,458,737
---------------
NET REALIZED AND UNREALIZED GAIN............................ $ 9,572,501,749
===============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 9,529,806,379
===============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
Statement of Changes in Net Assets
For the Six Months Ended February 29, 2000 and the Year Ended August 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss.............................. $ (42,695,370) $ (44,011,853)
Net Realized Gain................................ 731,043,012 1,276,474,142
Net Unrealized Appreciation During the Period.... 8,841,458,737 1,602,280,582
--------------- ---------------
Change in Net Assets from Operations............. 9,529,806,379 2,834,742,871
--------------- ---------------
Distributions from Net Realized Gain:
Class A Shares................................. (682,223,944) (128,077,038)
Class B Shares................................. (512,733,036) (97,408,811)
Class C Shares................................. (89,607,816) (11,808,076)
--------------- ---------------
Total Distributions.............................. (1,284,564,796) (237,293,925)
--------------- ---------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... 8,245,241,583 2,597,448,946
--------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 8,410,348,908 8,647,337,210
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................... 1,137,089,896 220,329,357
Cost of Shares Repurchased....................... (6,317,255,945) (7,517,072,085)
--------------- ---------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... 3,230,182,859 1,350,594,482
--------------- ---------------
TOTAL INCREASE IN NET ASSETS..................... 11,475,424,442 3,948,043,428
NET ASSETS:
Beginning of the Period.......................... 7,461,132,515 3,513,089,087
--------------- ---------------
End of the Period (Including accumulated net
investment loss of $42,963,863 and $268,493,
respectively).................................. $18,936,556,957 $ 7,461,132,515
=============== ===============
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS A SHARES FEBRUARY 29, --------------------------------------------
2000(A) 1999(A) 1998(A) 1997 1996(A)
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD................. $ 60.000 $ 36.129 $ 40.844 $ 34.347 $ 31.59
--------- -------- -------- -------- --------
Net Investment Loss........ (.168) (.228) (.212) (.127) (.096)
Net Realized and Unrealized
Gain/Loss................ 64.740 26.408 (.750) 8.177 6.043
--------- -------- -------- -------- --------
Total from Investment
Operations................. 64.572 26.180 (.962) 8.050 5.947
Less Distributions from Net
Realized Gain.............. 9.302 2.309 3.753 1.553 3.190
--------- -------- -------- -------- --------
NET ASSET VALUE, END OF THE
PERIOD..................... $ 115.270 $ 60.000 $ 36.129 $ 40.844 $ 34.347
========= ======== ======== ======== ========
Total Return (b)............. 115.83%* 75.10% (2.19%) 24.44% 20.54%
Net Assets at End of the
Period (In millions)....... $10,414.0 $4,156.4 $1,990.8 $1,970.7 $1,438.5
Ratio of Expenses to Average
Net Assets (c)............. .85% .97% 1.00% 1.05% 1.10%
Ratio of Net Investment Loss
to Average Net Assets
(c)........................ (.42%) (.45%) (.50%) (.30%) (.29%)
Portfolio Turnover........... 40%* 124% 103% 92% 91%
</TABLE>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge ("CDSC"). On purchases of $1 million or more, a CDSC of 1% may
be imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower.
(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 Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
19
<PAGE> 21
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS B SHARES FEBRUARY 29, ----------------------------------------
2000(A) 1999(A) 1998(A) 1997 1996(A)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $ 55.558 $ 33.840 $ 38.789 $ 32.938 $ 30.65
-------- -------- -------- -------- -------
Net Investment Loss......... (.432) (.575) (.515) (.270) (.349)
Net Realized and Unrealized
Gain/Loss................. 59.447 24.602 (.681) 7.674 5.827
-------- -------- -------- -------- -------
Total from Investment
Operations.................. 59.015 24.027 (1.196) 7.404 5.478
Less Distributions from Net
Realized Gain............... 9.302 2.309 3.753 1.553 3.190
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF THE
PERIOD...................... $105.271 $ 55.558 $ 33.840 $ 38.789 $32.938
======== ======== ======== ======== =======
Total Return (b).............. 115.02%* 73.78% (2.98%) 23.51% 19.61%
Net Assets at End of the
Period (In millions)........ $7,040.1 $2,850.2 $1,357.6 $1,220.4 $ 757.3
Ratio of Expenses to Average
Net Assets (c).............. 1.60% 1.74% 1.79% 1.85% 1.90%
Ratio of Net Investment Loss
to Average Net Assets (c)... (1.17%) (1.22%) (1.29%) (1.10%) (1.10%)
Portfolio Turnover............ 40%* 124% 103% 92% 91%
</TABLE>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining thereafter to 0% after the
fifth year. If the sales charge was included, total returns would be lower.
(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 Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
20
<PAGE> 22
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
CLASS C SHARES FEBRUARY 29, ----------------------------------------
2000(A) 1999(A) 1998(A) 1997 1996(A)
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $ 56.519 $34.391 $39.351 $33.384 $ 31.02
-------- ------- ------- ------- -------
Net Investment Loss......... (.441) (.583) (.523) (.273) (.354)
Net Realized and Unrealized
Gain/Loss................. 60.584 25.020 (.684) 7.793 5.908
-------- ------- ------- ------- -------
Total from Investment
Operations.................. 60.143 24.437 (1.207) 7.520 5.554
Less Distributions from Net
Realized Gain............... 9.302 2.309 3.753 1.553 3.190
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF THE
PERIOD...................... $107.360 $56.519 $34.391 $39.351 $33.384
======== ======= ======= ======= =======
Total Return (b).............. 115.07%* 73.79% (2.96%) 23.56% 19.60%
Net Assets at End of the
Period (In millions)........ $1,482.5 $ 454.5 $ 164.7 $ 139.9 $ 82.4
Ratio of Expenses to Average
Net Assets (c).............. 1.60% 1.74% 1.79% 1.85% 1.89%
Ratio of Net Investment Loss
to Average Net Assets (c)... (1.18%) (1.21%) (1.29%) (1.10%) (1.10%)
Portfolio Turnover............ 40%* 124% 103% 92% 91%
</TABLE>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower.
(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 Van Kampen's
reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
21
<PAGE> 23
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Emerging Growth Fund (the "Fund") is organized as a Delaware business
trust, and is registered as a diversified open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund seeks capital
appreciation by investing primarily in common stock of companies that are
considered by the Fund's investment adviser 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 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 to the Fund.
22
<PAGE> 24
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
C. INCOME AND EXPENSES Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Discounts on debt securities
purchased are accreted over the expected life of each applicable security.
Premiums on debt securities are not amortized. Income and expenses of the Fund
are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Accumulated realized gain/loss differs for financial and tax reporting
purposes as a result of the deferral of losses relating to wash sale
transactions.
At February 29, 2000, for federal income tax purposes, cost of long- and
short-term investments is $7,792,812,622; the aggregate gross unrealized
appreciation is $11,049,254,685 and the aggregate gross unrealized depreciation
is $40,064,382, resulting in net unrealized appreciation of $11,009,190,303.
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.
F. EXPENSE REDUCTIONS During the six months ended February 29, 2000, the Fund's
custody fee was reduced by $9,925 as a result of credits earned on overnight
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 NET ASSETS % PER ANNUM
<S> <C>
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%
</TABLE>
23
<PAGE> 25
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
For the six months ended February 29, 2000, the Fund recognized expenses of
approximately $352,000 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended February 29, 2000, the Fund recognized expenses of
approximately $267,700 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended February
29, 2000, the Fund recognized expenses of approximately $4,821,400. Transfer
agency fees are determined through negotiations with the Fund's Board of
Trustees and are based on competitive benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
24
<PAGE> 26
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
3. CAPITAL TRANSACTIONS
At February 29, 2000, capital aggregated $3,637,108,980, $2,846,100,261 and
$761,483,467 for Classes A, B, and C, respectively. For the six months ended
February 29, 2000, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................ 87,660,541 $ 6,673,589,933
Class B............................................ 16,598,955 1,254,784,392
Class C............................................ 6,160,367 481,974,583
----------- ---------------
Total Sales.......................................... 110,419,863 $ 8,410,348,908
=========== ===============
Dividend Reinvestment:
Class A............................................ 7,839,482 $ 590,861,726
Class B............................................ 6,861,910 472,991,465
Class C............................................ 1,041,922 73,236,705
----------- ---------------
Total Dividend Reinvestment.......................... 15,743,314 $ 1,137,089,896
=========== ===============
Repurchases:
Class A............................................ (74,430,154) $(5,607,314,767)
Class B............................................ (7,885,971) (604,484,617)
Class C............................................ (1,435,249) (105,456,561)
----------- ---------------
Total Repurchases.................................... (83,751,374) $(6,317,255,945)
=========== ===============
</TABLE>
25
<PAGE> 27
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
At August 31, 1999, capital aggregated $1,979,972,088, $1,722,809,021 and
$311,728,740 for Classes A, B, and C, respectively. For the year ended August
31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................ 147,365,988 $ 7,385,533,602
Class B............................................ 20,174,832 961,208,279
Class C............................................ 6,262,136 300,595,329
------------ ---------------
Total Sales.......................................... 173,802,956 $ 8,647,337,210
============ ===============
Dividend Reinvestment:
Class A............................................ 2,789,895 $ 118,849,554
Class B............................................ 2,309,440 91,592,399
Class C............................................ 245,102 9,887,404
------------ ---------------
Total Dividend Reinvestment.......................... 5,344,437 $ 220,329,357
============ ===============
Repurchases:
Class A............................................ (135,984,083) $(6,833,274,241)
Class B............................................ (11,300,817) (534,381,291)
Class C............................................ (3,254,698) (149,416,553)
------------ ---------------
Total Repurchases.................................... (150,539,598) $(7,517,072,085)
============ ===============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996, and any dividend reinvestment plan Class B shares
received thereon, automatically convert to Class A shares eight years after the
end of the calendar month in which the shares were purchased. Class B shares
purchased before June 1, 1996, and any dividend reinvestment plan Class B shares
received thereon, automatically convert to Class A shares six years after the
end of the calendar month in which the shares were purchased. For the six months
ended February 29, 2000 and the year ended August 31, 1999, 2,781,948 and
3,288,828 Class B shares converted to Class A shares, respectively, and are
shown in the above tables 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 Class C shares received thereon, automatically convert to
Class A shares ten years after the end of the calendar month in which such
shares were purchased. Class C shares purchased on or after January 1, 1997 do
not possess a conversion feature. For the six months ended February 29, 2000 and
the year end August 31, 1999, no Class C shares converted to Class A shares. The
CDSC for Class B and C shares will be
26
<PAGE> 28
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
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 29, 2000, Van Kampen, as Distributor for
the Fund, received net commissions on sales of the Fund's Class A shares of
approximately $2,850,700 and CDSC on redeemed shares of approximately
$2,335,000. 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 $5,547,539,540 and $4,340,498,074,
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.
The Fund may invest in futures contracts, a type of derivative. A futures
contract is an agreement involving the delivery of a particular asset on a
specified 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
underlying the index or to manage the Fund's overall exposure to the equity
markets. Upon entering into
27
<PAGE> 29
NOTES TO
FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
futures contracts, the Fund maintains, in a segregated account with its
custodian, cash or liquid securities with a value equal to its obligation under
the futures contracts. During the period the futures contract is open, payments
are received from or made to the broker based upon changes in the value of the
contract (the variation margin).
There were no transactions in futures contracts during the six months ended
February 29, 2000.
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended February 29, 2000, are payments retained by Van Kampen
of approximately $18,153,700.
7. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered in to a $650,000,000 committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each Fund is permitted to
utilize the facility in accordance with the restrictions of its prospectus. In
the event the demand for the credit facility meets or exceeds $650 million on a
complex-wide basis, each Fund will be limited to its pro-rata percentage based
on the net assets of each participating fund. Interest on borrowings is charged
under the agreement at a rate of 0.50% above the federal funds rate per annum.
An annual commitment fee of 0.09% per annum is charged on the unused portion of
the credit facility, which each Fund incurs based on its pro-rate percentage of
quarterly net assets. The Fund has not borrowed against the credit facility
during the period.
28
<PAGE> 30
VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth*
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Small Cap Value
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income*
Global Franchise
Global Government Securities*
Global Managed Assets*
International Magnum
Latin American
Strategic Income
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- - call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- - e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
29
<PAGE> 31
FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN EMERGING GROWTH FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*(1)
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Drive
Chicago, Illinois 60601
(1) Appointed Executive Vice President and Chief Investment Officer effective
April 3, 2000.
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After September 30,
2000, the report, if used with prospective investors, must be accompanied by a
quarterly performance update.
30
<PAGE> 32
RESULTS OF
SHAREHOLDER VOTES
An adjourned special meeting of the shareholders of the Fund was held on
November 12, 1999, where shareholders voted on the proposal to approve replacing
the Fund's fundamental investment policy regarding investing in small-and
medium-sized companies with a non-fundamental investment policy.
1) With regard to this proposal, 43,838,077 shares voted for the proposal,
7,242,260 shares voted against, 3,722,179 shares abstained and 28,442,613 shares
represented broker non-votes.
31
<PAGE> 33
YOUR NOTES
32
