<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Portfolio of Investments......................... 4
Statement of Assets and Liabilities.............. 6
Statement of Operations.......................... 7
Statement of Changes in Net Assets............... 8
Financial Highlights............................. 9
Notes to Financial Statements.................... 10
Report of Independent Accountants................ 13
</TABLE>
TFMM ANR 8/97
<PAGE> 2
LETTER TO SHAREHOLDERS
July 28, 1997
Dear Shareholder,
As you know, Van Kampen American
Capital was acquired by Morgan
Stanley Group Inc., a world leader in
asset management. On February 5,
1997, Morgan Stanley Group Inc. and
Dean Witter, Discover & Co. agreed to
merge; the merger was completed on [PHOTO]
May 31, creating the combined company
of Morgan Stanley, Dean Witter,
Discover & Co. This preeminent global
financial services firm boasts a DENNIS J. MCDONNELL AND DON G. POWELL
market capitalization of $21 billion
and leading market positions in securities, asset management, and credit
services. Additionally, I am very pleased to announce that Philip N. Duff,
formerly the chief financial officer of Morgan Stanley, has joined Van Kampen
American Capital as president and chief executive officer. I will continue as
chairman of the firm. We are confident that the partnership of Van Kampen
American Capital and Morgan Stanley will continue to work to the benefit of our
fund shareholders as we move into the next century.
ECONOMIC AND MARKET REVIEW
With a portfolio comprised exclusively of short-term debt securities, the
performance of the Tax Free Money Fund is tied closely to the behavior of
short-term interest rates. During the 12 months ended June 30, 1997, short-term
rates fluctuated in a narrow range, tracking changes in economic activity,
Federal Reserve Board interest rate policy, and the supply-and-demand
fundamentals of the short-term municipal debt market.
The economy grew at a moderate 2.1 percent pace in the third quarter of
1996, then picked up steam at the end of the year with a 3.8 percent annual
growth rate. By the first quarter of 1997, growth soared at a 4.9 percent pace,
its highest in almost 10 years. Fearful that this strength might reignite
inflation pressures, the Fed raised short-term interest rates one-quarter of a
percentage point in late March, sending the yield on one-year municipal
securities up to 3.92 percent from 3.59 percent at the beginning of the year.
When economic activity softened during the second quarter of 1997, the Fed
refrained from any further tightening, and the yield on the one-year municipal
securities retreated.
By the beginning of June, however, the yield was up to 3.85 percent in
anticipation of the sharp rise in supply that typically occurs in June and July,
when many state and local governments begin their new fiscal years. Nearly 45
percent of all short-term municipal notes issued in 1996 were sold during this
"note season."
Continued on page two
1
<PAGE> 3
PORTFOLIO STRATEGY
We focused on only the highest quality short-term municipal securities. In
addition, we adjusted the Fund's average maturity to reflect our expectations
about future interest rates. We anticipated a sharp increase in supply in June,
which could cause rates to jump. As a result, we reduced the portfolio's average
maturity to 38 days at the end of May, compared to 58 days at the beginning of
April. When the shorter-term securities matured and repaid their principal (par
value), the proceeds were reinvested in higher-yielding issues. As of June 30,
the Fund's average maturity was 28 days, compared to an average of 47 days among
tax-free money market funds tracked by IBC Financial Data.
We expect that interest rates will gradually decline over the coming months,
as the excess supply of short-term municipal securities dissipates and the
economy grows at a modest pace. As a result, we expect to extend the average
maturity of the Fund by selectively purchasing slightly longer-term issues that
are priced well.
During the reporting period, the Fund's portfolio was comprised of a diverse
mixture of securities whose yields reset frequently, ranging from one day to one
month. We selectively purchased securities that reflected our market outlook and
could be acquired at reasonable prices.
PORTFOLIO HOLDINGS BY INVESTMENT TYPE
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996 (1)
<S> <C> <C> <C>
Seven-Day Floaters.............. 36.7% Seven-Day Floaters.............. 38.3%
Dates........................... 44.7% Dates........................... 24.4%
Bonds/Notes..................... 14.0% [PIE CHART] Bonds/Notes..................... 28.9% [PIE CHART]
Updates (Commercial Paper)...... 4.6% Updates (Commercial Paper)...... 8.4%
</TABLE>
(1) Unaudited
PERFORMANCE SUMMARY
As of June 30, the Fund generated a seven-day average yield of 3.72 percent
and a one-year total return of 2.82 percent. By comparison, the average
performance for tax-exempt money market funds, as calculated by Lipper
Analytical Services, Inc., was 2.98 percent for the 12-month period.
Because income from the Fund is exempt from federal income tax, it is
important to compare its seven-day yield to an equivalent taxable rate. For
shareholders in the federal income tax bracket of 36 percent, the seven-day
yield of the Fund is equivalent to 5.81 percent in a taxable money market fund.
Continued on page three
2
<PAGE> 4
OUTLOOK
We continue to see strength in the economy, but we do not believe that the
4.9 percent growth pace of the first quarter will be repeated in the final
quarters of this year. While labor productivity and manufacturing remained
strong in the second quarter, retail sales fell, and the unemployment rate,
which had slipped below 5.0 percent in April and May, edged up to that level in
June.
We expect that growth will pick up again during the second half of the year
because the economy's strong underlying fundamentals, including consumer
confidence, job growth, and moderate inflation, remain intact. As a result, we
believe the Federal Reserve will not raise rates again before year end. Thank
you for your continued confidence in your investment with Van Kampen American
Capital.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Fund shares are not guaranteed or insured by the U.S. government, and there is
no assurance that the Fund will be able to maintain a stable net asset value of
$1.00.
3
<PAGE> 5
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Security Description Date Purchase Cost
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS
DATES 44.4%
$1,400 Brazos River Auth TX Utils Elec Co Proj Ser
1996 B (AMBAC Insd)........................... 07/01/97 5.550% $ 1,400,000
1,700 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
American Airls Ser 1983 D (LOC: Royal Bank of
Canada)....................................... 07/01/97 4.150 1,700,000
1,200 Jackson Cnty, MS Port Fac Rev Chevron Inc Proj
Rfdg.......................................... 07/01/97 4.000 1,200,000
1,500 New York City Muni Wtr Fin Auth Wtr Swr Sys
Ser 1995 A (FGIC Insd)........................ 07/01/97 5.500 1,500,000
900 New York City Ser B (FGIC Insd)............... 07/01/97 5.500 900,000
1,500 New York City Ser B (FGIC Insd)............... 07/01/97 5.500 1,500,000
2,200 New York City Ser B (FGIC Insd)............... 07/01/97 5.500 2,200,000
1,300 Pinal Cnty, AZ Indl Dev Auth Pollutn Ctl Rev
Ser 1984 (LOC: Nat'l Westminster Bank)........ 07/01/97 4.000 1,300,000
1,500 Port of Portland, OR Pollutn Ctl Rev (LOC:
Bank of Nova Scotia).......................... 07/01/97 4.100 1,500,000
1,500 Sullivan Cnty, TN Indl Dev Board Pollutn Ctrl
Rev (LOC: Union Bank of Switzerland).......... 07/01/97 4.100 1,500,000
-----------
Total Dates....................................................... 14,700,000
-----------
7 DAY FLOATERS 36.6%
900 Calhoun Cnty, MI Econ Dev Corp Rev (LOC:
Comerica Bank)................................ 07/07/97 4.150 900,000
1,400 City of Chillicothe, IA Pollutn Ctl Rev
Midwest Pwr Sys Ser 1993 A Rfdg (Gtd: Midwest
Power Systems, Inc.).......................... 07/07/97 4.200 1,400,000
1,380 City of Sterling Heights, MI Econ Dev Corp Rev
Rfdg (LOC: First Chicago/NBD Corp)............ 07/07/97 4.150 1,380,000
1,300 Dade Cnty, FL Fltg Capital Asset Acquisition
Ser S (LOC: Sanwa Bank Ltd.).................. 07/07/97 4.450 1,300,000
1,110 Fort Bend, TX Indl Dev Corp Indl Dev Rev W.W.
Grainger Proj Rfdg (LOC: The Northern Trust
Company)...................................... 07/07/97 4.150 1,110,000
1,500 Harris Cnty, TX Hlth Fac Dev Corp Hosp Rev Ser
B (MBIA Insured).............................. 07/07/97 4.150 1,500,000
1,000 Illinois Dev Fin Auth Rev Roosevelt Univ Ser
1995 (LOC: Amer Nat'l Bank & Trust of
Chicago)...................................... 07/07/97 4.150 1,000,000
1,100 Illinois Dev Fin Auth Rev Ser 1994 Lake Forest
Academy (LOC: The Northern Trust Company)..... 07/07/97 4.150 1,100,000
300 Minnesota St Higher Edl Coordinating Brd Ser
1994 A Rfdg (LOC: Norwest Bank)............... 07/07/97 4.150 300,000
1,000 Pleasant Hill, CA Redev Agy Var Hsg Chateau
III Proj Ser A (LOC: Heller Financial)........ 07/07/97 4.100 1,000,000
500 Utah St Brd Regents Student Ln Rev Ser 1993 A
(Gtd: Student Ln Marketing Assn.)............. 07/07/97 4.250 500,000
600 Washington St Hsg Fin Comm Multi-Family Mtg
Rev Rfdg (LOC: Harris Trust & Savings Bank)... 07/07/97 4.250 600,000
-----------
Total 7 Day Floaters.............................................. 12,090,000
-----------
</TABLE>
See Notes to Financial Statements
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Security Description Date Purchase Cost
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UPDATES (COMMERCIAL PAPER) 4.5%
$1,500 Wayne Cnty, MI Downriver Swr Disp Sys Ser 1994
B (LOC: Comerica Bank)........................ 07/15/97 3.500% $ 1,500,000
-----------
BONDS/NOTES 14.0%
1,500 Chicago, IL Mandatory Tender Nts Ser 1997
(LOC: Morgan Guaranty)........................ 02/05/98 3.650 1,500,000
1,010 City of Ashdown, AR Indl Dev Rev Ser 1981
(Gtd: Allied Signal Corp.).................... 11/01/97 4.000 1,009,940
1,000 Greater Texas Student Ln Corp Ser 1996 A Rfdg
(Gtd: Student Ln Marketing Assn.)............. 03/01/98 3.700 1,000,000
1,110 Texas St Tax & Rev Antic Nts Ser 1996......... 08/29/97 4.750 1,111,553
-----------
Total Bonds/Notes................................................. 4,621,493
-----------
TOTAL INVESTMENTS 99.5%(A)................................................ 32,911,493
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%................................ 152,933
-----------
NET ASSETS 100.0%......................................................... $33,064,426
-----------
</TABLE>
(a) At June 30, 1997, cost of investments is identical for both book and federal
income tax purposes.
See Notes to Financial Statements
5
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market.... $32,911,493
Cash........................................................ 201,049
Receivables:
Interest.................................................. 193,619
Fund Shares Sold.......................................... 808
Other....................................................... 5,433
-----------
Total Assets.......................................... 33,312,402
-----------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 57,032
Distributor and Affiliates................................ 35,568
Deferred Compensation and Retirement Plans.................. 97,777
Accrued Expenses............................................ 57,599
-----------
Total Liabilities..................................... 247,976
-----------
NET ASSETS.................................................. $33,064,426
-----------
NET ASSETS CONSIST OF:
Capital..................................................... $33,085,766
Accumulated Undistributed Net Investment Income............. 127
Accumulated Net Realized Loss............................... (21,467)
-----------
NET ASSETS (Equivalent to $1.00 per share for 33,085,766
shares outstanding)....................................... $33,064,426
-----------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $1,277,361
----------
EXPENSES:
Investment Advisory Fee..................................... 176,206
Distribution (12b-1) and Service Fees....................... 88,041
Shareholder Services........................................ 66,034
Registration................................................ 40,218
Shareholder Reports......................................... 32,200
Trustees Fees and Expenses.................................. 29,551
Audit....................................................... 27,595
Legal....................................................... 8,097
Custody..................................................... 5,513
Other....................................................... 38,774
----------
Total Expenses.......................................... 512,229
Less Fees Waived and Expenses Reimbursed ($176,206 and
$37,478, respectively)................................ 213,684
----------
Net Expenses............................................ 298,545
----------
NET INVESTMENT INCOME....................................... $ 978,816
----------
NET REALIZED GAIN........................................... $ 3,111
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 981,927
----------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 978,816 $ 1,019,399
Net Realized Gain........................................... 3,111 -0-
------------ ------------
Change in Net Assets from Operations........................ 981,927 1,019,399
Distributions from Net Investment Income.................... (978,689) (1,019,399)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... 3,238 -0-
------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................................... 94,162,306 67,200,916
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 978,689 1,019,399
Cost of Shares Repurchased.................................. (97,712,684) (65,762,478)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... (2,571,689) 2,457,837
------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... (2,568,451) 2,457,837
NET ASSETS:
Beginning of the Period..................................... 35,632,877 33,175,040
------------ ------------
End of the Period (Including accumulated undistributed net
investment income of $127 and $0, respectively)........... $ 33,064,426 $ 35,632,877
============ ============
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
----------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Net Investment Income....................... .028 .029 .027 .017 .019
Less Distributions from Net Investment
Income.................................... .028 .029 .027 .017 .019
----- ----- ----- ----- -----
Net Asset Value, End of Period.............. $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return*............................... 2.82% 2.93% 2.73% 1.70% 1.93%
Net Assets at End of Period (In millions)... $33.1 $35.6 $33.2 $37.4 $43.1
Ratio of Expenses to Average Net Assets*.... .85% .85% .89% .81% .72%
Ratio of Net Investment Income to Average
Net Assets*............................... 2.78% 2.89% 2.68% 1.69% 1.92%
* If certain expenses had not been assumed
by VKAC, total return would have been
lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets..... 1.45% 1.53% 1.38% 1.29% .97%
Ratio of Net Investment Income to Average
Net Assets................................ 2.17% 2.21% 2.20% 1.20% 1.67%
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Tax Free Money Fund (the "Fund") is organized as a
Delaware business trust. The Fund is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to provide a high level of current
income exempt from federal income taxes consistent with the preservation of
capital and liquidity through investment in a broad range of municipal
securities that will mature within 12 months of the date of purchase. The Fund
commenced investment operations on November 5, 1986.
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 are valued at amortized cost, which
approximates market. Under this valuation method, a portfolio instrument is
valued at cost and any discount or premium is amortized on a straight-line basis
to the maturity of the instrument.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
Interest income is recorded on an accrual basis.
C. 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, if any, to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1997, the Fund had an accumulated capital loss carryforward
of $21,467 which expires between June 30, 1998 and June 30, 2001. Of this
amount, $3,166 will expire on June 30, 1998.
10
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1997
- --------------------------------------------------------------------------------
D. DISTRIBUTION OF INCOME AND GAINS--The Fund declares dividends from net
investment income daily and automatically reinvests such dividends daily. Net
realized gains, if any, are distributed annually. Shareholders can elect to
receive the cash equivalent of their daily dividends at each month end.
For the year ended June 30, 1997, 100% of the income distributions made by
the Fund were exempt from Federal income taxes. In January, 1998, the Fund will
provide tax information to shareholders for the 1997 calendar year.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen American
Capital Investment Advisory Corp. (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 $500 million...................................... .500 of 1%
Next $500 million....................................... .475 of 1%
Next $500 million....................................... .425 of 1%
Over $1.5 billion....................................... .375 of 1%
</TABLE>
For the year ended June 30, 1997, the Fund recognized expenses of
approximately $5,100, 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 year ended June 30, 1997, the Fund recognized expenses of
approximately $20,900 representing Van Kampen American Capital Distributors,
Inc's. or its affiliates' (collectively "VKAC") cost of providing accounting,
cash management and legal services to the Fund.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended June
30, 1997, the Fund recognized expenses of approximately $42,900, 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
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1997
- --------------------------------------------------------------------------------
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.
3. CAPITAL TRANSACTIONS
The Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $.01 per share. At June 30, 1997 and 1996, capital
aggregated $33,085,766 and $35,657,455, respectively. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1997 June 30, 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares............................. 35,657,455 33,199,618
----------- -----------
Shares Sold.................................. 94,162,306 67,200,916
Shares Issued Through Dividend
Reinvestment............................... 978,689 1,019,399
Shares Repurchased........................... (97,712,684) (65,762,478)
----------- -----------
Net Change in Shares Outstanding............. (2,571,689) 2,457,837
----------- -----------
Ending Shares................................ 33,085,766 35,657,455
=========== ===========
</TABLE>
4. 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 the Fund's average net assets are
accrued daily. Included in these fees for the year ended June 30, 1997, are
payments to VKAC of approximately $31,700.
12
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Tax Free Money Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Tax Free Money Fund (the "Fund"), including the
portfolio of investments, as of June 30, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Tax Free Money Fund as of June 30, 1997, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
July 31, 1997
13
<PAGE> 15
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds or
Morgan Stanley retail funds.
14
<PAGE> 16
VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON*
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
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 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
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker 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., 1997. 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, the sales charge, and
other pertinent data. After December 31, 1997, the report must be accompanied by
a quarterly performance update, if applicable.
15
<PAGE> 17
RESULTS OF SHAREHOLDER VOTES
A Special Meeting of Shareholders of the Fund was held on May 28, 1997, where
shareholders voted on a new investment advisory agreement, the election of
Trustees and the ratification of KPMG Peat Marwick LLP as independent public
accountants. With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Fund,
16,275,888 shares voted for the proposal, 479,769 shares voted against and
1,174,285 shares abstained. With regard to the election of J. Miles Branagan as
elected trustee of the Fund, 17,504,139 shares voted in his favor and 425,803
shares withheld. With regard to the election of Richard M. DeMartini as elected
trustee of the Fund, 17,504,139 shares voted in his favor and 425,803 shares
withheld. With regard to the election of Linda Hutton Heagy as elected trustee
of the Fund, 17,489,159 shares voted in her favor and 440,784 shares withheld.
With regard to the election of R. Craig Kennedy as elected trustee of the Fund,
17,504,076 shares voted in his favor and 425,867 shares withheld. With regard to
the election of Jack E. Nelson as elected trustee of the Fund, 17,929,942 shares
voted in his favor and 425,803 shares withheld. With regard to the election of
Don G. Powell as elected trustee of the Fund 17,504,139 shares voted in his
favor and 425,803 shares withheld. With regard to the election of Jerome L.
Robinson as elected trustee of the Fund, 17,574,636 shares voted in his favor
and 355,306 shares withheld. With regard to the election of Phillip B. Rooney as
elected trustee of the Fund, 17,504,139 shares voted in his favor and 425,803
shares withheld. With regard to the election of Fernando Sisto as elected
trustee of the Fund, 17,502,063 shares voted in his favor and 427,879 shares
withheld. With regard to the election of Wayne W. Whalen as elected trustee of
the Fund, 17,576,713 shares voted in his favor and 353,230 shares withheld. With
regard to the ratification of KPMG Peat Marwick LLP as independent public
accountants for the Fund, 17,240,094 shares voted for the proposal, 250,332
shares voted against and 439,517 shares abstained.
16
