<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Portfolio Management Review...................... 3
Glossary of Terms................................ 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 9
Statement of Operations.......................... 10
Statement of Changes in Net Assets............... 11
Financial Highlights............................. 12
Notes to Financial Statements.................... 13
Report of Independent Accountants................ 16
</TABLE>
TFMM ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG.]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory
Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Investment Advisory
Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</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
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN TAX FREE MONEY FUND
We recently spoke with the management team of the Van Kampen Tax Free Money Fund
about the key events and economic forces that shaped the markets during the past
12 months. The team is led by Reid J. Hill, portfolio manager, who has managed
the Fund since August 1995 and has worked in the investment industry since 1994.
Mr. Hill is joined by Michael Bird, portfolio manager, and Peter W. Hegel, chief
investment officer for fixed-income investments. The following excerpts reflect
their views on the Fund's performance during the 12-month period ended June 30,
1999.
Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND HAS
OPERATED DURING THE PAST 12 MONTHS?
A At the beginning of the period, there was a shortage of fixed-rate notes
in the short-term municipal bond market, as the strong economy led to a
decline in borrowing for municipal projects. These conditions affected
bond issuance in two ways--we saw smaller deals and less of them.
During the first quarter of 1999, the Dow Jones Industrial Average broke
through the 10,000 point ceiling, and climbed past 11,000 points. The U.S.
economy remained strong, leading the Fed to raise the federal funds interest
rate by 0.25 percent on June 30. Consequently, some nervous investors fled to
more stable shelter--including money market funds--near the end of the period.
Q HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
A Because the short supply of fixed-rate notes at the beginning of the
period made purchasing them too expensive, we chose to remain patient and
focus on smaller bond issues. Consequently, we paid less for these bonds
than we would have had we participated in larger issues. We continued this
strategy throughout the period. In addition, we avoided purchasing commercial
paper because we felt it was too expensive compared to the smaller bond issues.
Our only exposure to commercial paper is a municipal bond issue from Wayne
County, Michigan that we roll over on an annual basis.
Overall, our strategy of focusing on smaller issues helped returns. In
addition to buying smaller issues, we invested approximately 60 percent of the
fund in variable notes. Late in the period, our returns, compared to some of our
peers, suffered as many began purchasing a new derivative product.
3
<PAGE> 5
Q CAN YOU PROVIDE AN EXAMPLE OF A SMALL ISSUE YOU PURCHASED DURING THE
PERIOD?
A We recently purchased a serial bond issue from the Missouri State Health
and Education Facility Authority for Washington University. Serial bonds
are a group of bonds from the same issue, where blocks of the issue have
different maturity dates. Demand for this municipal offering was weak because it
was a small issue and we purchased it at what we felt was an attractive price.
Q HOW DID THE FUND PERFORM DURING THE 12-MONTH REPORTING PERIOD?
A As we discussed, focusing on smaller issues helped returns. As of June 30,
1999, the Fund's seven-day average yield was 2.82 percent, while the Fund
posted a 12-month total return of 2.55 percent. The yield quotation more
closely reflects the current earnings of the Fund than the total return
quotation. By comparison, the average performance for tax-free money market
funds, as calculated by Lipper Analytical Services, Inc., was 2.68 percent for
the 12-month period. Past performance does not guarantee future results.
Because income from the Fund is exempt from federal income tax, it is
important to compare its effective seven-day average yield to an equivalent
taxable rate. Shareholders in the 36 percent federal income tax bracket would
need a taxable-equivalent rate of 4.41 percent to equal the tax-free yield
earned by this Fund.
Q WHAT IS YOUR ECONOMIC OUTLOOK FOR THE MONTHS AHEAD?
A As expected, the Fed raised interest rates at the end of the period, but
surprised the market by abandoning its tightening bias and adopting a
neutral stance on interest rates. Interest rate adjustments like these
should not affect the Fund because the short-term municipal bond market
generally anticipates such interventions.
We expect to continue our strategy of investing in smaller municipal bond
issues, and anticipate stronger supply of variable-rate notes. Overall, we will
continue to seek the Fund's objective of relative stability, daily liquidity,
and a competitive level of income, and we will look to add value through careful
security selection.
[SIG.]
Reid J. Hill
Portfolio Manager
[SIG.]
Michael Bird
Portfolio Manager
[SIG.]
Peter W. Hegel
Chief Investment
Officer
Fixed Income
Investments
4
<PAGE> 6
GLOSSARY OF TERMS
FEDERAL FUNDS RATE: The interest rate charged by one financial institution
lending overnight funds to another. The Federal Reserve Board adjusts the
federal funds rate to affect the direction of interest rates.
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.
MATURITY DATE: The date a bond expires, usually at face value.
MUNICIPAL BOND: A debt security issued by a state, municipality, or other state
or local government entity to finance capital expenditures of public
projects, such as the construction of highways, public works, or school
buildings. Interest on public-purpose municipal bonds is exempt from federal
income taxes and, in some states, from state and local income taxes.
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.
VARIABLE-RATE NOTE: A short-term municipal debt security issued when either
general interest rates are expected to change or the length of time before
permanent funding is received is uncertain.
YIELD: The annual rate of return on an investment, expressed as a percentage.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Description Date Purchase Cost
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS
DATES 11.2%
$ 300 Brazos River Auth TX Utils Elec Co Proj
Ser 1996 B (AMBAC Insd)................ 07/01/99 3.650% $ 300,000
1,550 New York City Muni Wtr Fin Auth Wtr Swr
Sys Ser 1995 A (FGIC Insd)............. 07/01/99 3.550 1,550,000
1,200 New York City Ser B (FGIC Insd)........ 07/01/99 4.000 1,200,000
200 Perry Cnty, MS Pollutn Ctl Rev Ser 1992
Rfdg (LOC: Wachovia Bank).............. 07/01/99 3.400 200,000
500 Sullivan Cnty, TN Indl Dev Brd Pollutn
Ctrl Rev (LOC: Union Bank of
Switzerland)........................... 07/01/99 3.800 500,000
-----------
TOTAL DATES.................................................. 3,750,000
-----------
7 DAY FLOATERS 48.6%
600 Calhoun Cnty, MI Econ Dev Corp Rev
(LOC: Comerica Bank)................... 07/01/99 3.550 600,000
1,235 City of Sterling Heights, MI Econ Dev
Corp Rev Rfdg (LOC: First Chicago/NBD
Corp).................................. 07/01/99 3.650 1,235,000
1,500 Floyd Cnty, GA Dev Auth Rev Berry
College Inc Proj (LOC: Suntrust
Bank).................................. 07/07/99 3.750 1,500,000
1,110 Fort Bend Cnty, TX Indl Dev Corp Indl
Dev Rev W.W. Grainger Proj Rfdg (LOC:
The Northern Trust Company)............ 07/07/99 3.600 1,110,000
1,400 Georgia Muni Gas Auth Gas Rev Adj Agy
Proj Ser C (LOC: Morgan Guaranty)...... 07/07/99 3.500 1,400,000
1,500 Illinois Dev Fin Auth Rev American
Osteopathic Associates (LOC: Harris
Trust & Savings Bank).................. 07/01/99 3.200 1,500,000
1,000 Illinois Dev Fin Auth Rev Roosevelt
Univ Ser 1995 (LOC: Amer Nat'l Bank &
Trust of Chicago)...................... 07/07/99 3.550 1,000,000
1,500 Iowa Fin Auth Rev Burlington Med Cent
(FSA Insd)............................. 07/01/99 3.050 1,500,000
1,000 Montgomery Cnty, MD Hsg Oppntys Comm
Hsg Rev (LOC: Keybank N.A.)............ 07/07/99 3.400 1,000,000
1,300 Quad Cities, IL Reg Econ Dev Auth
Seaberg Indl Inc Proj (LOC: Norwest
Bank).................................. 07/01/99 3.750 1,300,000
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Description Date Purchase Cost
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7 DAY FLOATERS (CONTINUED)
$1,150 Virginia Small Business Fin Auth Rev
Indl Dev Coral Graphic (LOC: Chemical
Bank).................................. 07/01/99 3.850% $ 1,150,000
1,500 Washington St Hsg Fin Comm Multi-Family
Mtg Rev Rfdg (LOC: Harris Trust &
Savings Bank).......................... 07/06/99 3.550 1,500,000
500 Wisconsin St Hlth Fac Auth Rev
Franciscan Hlthcare A-1 (LOC: Toronto
Dominion).............................. 07/07/99 3.300 500,000
1,000 Wisconsin St Hlth Fac Auth Rev
Franciscan Hlthcare A-2 (LOC: Toronto
Dominion).............................. 07/07/99 3.300 1,000,000
-----------
TOTAL 7 DAY FLOATERS 48.6%.................................. 16,295,000
-----------
BONDS/NOTES 39.8%
720 Clark Cnty, NV Indl Dev Rev Southwest
Gas Corp Proj Ser A (AMBAC Insd)....... 11/01/99 3.600 720,000
425 Clark Cnty, NV Regl Tran Comm Medium
Term Bonds (AMBAC Insd)................ 07/01/99 4.250 425,000
300 DuPage Cnty, IL Forest Presv Dist Ser A
Rfdg................................... 11/01/99 5.000 301,775
1,000 Greater TX Student Ln Corp Ser 1996 A
Rfdg (Gtd: Student Ln Marketing
Assn).................................. 03/01/00 3.700 1,000,000
1,500 Hawaii St Arpt Sys Rev Rfdg Ser 1993
(MBIA Insd)............................ 07/01/99 5.400 1,500,000
1,000 Intermountain Pwr Agy UT Pwr Supply Rev
Ser A (b).............................. 07/01/99 7.200 1,020,094
250 King Cnty, WA Ser D.................... 12/01/99 4.600 251,116
650 Laredo, TX Intl Toll Brdg Rev Ser A
(MBIA Insd)............................ 10/01/99 3.500 650,000
1,000 Maine St Genl Purp..................... 07/01/99 6.100 1,000,000
800 Milwaukee, WI Met Sewage Dist Ser A.... 10/01/99 6.600 806,705
1,000 Minnesota St Rfdg...................... 08/01/99 4.800 1,001,276
1,500 Missouri Rural Wtr Fin Corp Pub Projs
Constr Nts............................. 11/15/99 4.500 1,506,862
855 Missouri St Hlth & Edl Facs Auth Edl
Washington Univ Ser A.................. 06/15/00 3.350 855,000
550 Rankin Cnty, MS Sch Dist Rfdg (MBIA
Insd).................................. 02/01/00 4.000 552,526
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Description Date Purchase Cost
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS/NOTES (CONTINUED)
$ 875 Regional Waste Sys, Inc. ME Solid Waste
Res Recovery Rev Ser Q................. 07/01/99 3.600% $ 875,000
900 Seattle, WA Wtr Sys Rev................ 08/01/99 5.375 901,614
-----------
TOTAL BONDS/NOTES 39.8%..................................... 13,366,968
-----------
TOTAL INVESTMENTS 99.6% (A).......................................... 33,411,968
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4%........................... 120,866
-----------
NET ASSETS 100.0%.................................................... $33,532,834
===========
</TABLE>
(a) At June 30, 1999, cost is identical for both book and federal income tax
purposes.
(b) Prerefunded date shown, stated maturity 07/01/11.
AMBAC--AMBAC Indemnity Corporation
FGIC--Financial Guaranty Insurance Company
FSA--Financial Security Assurance Inc.
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market.... $33,411,968
Cash........................................................ 118,605
Receivables:
Interest.................................................. 292,652
Fund Shares Sold.......................................... 8,275
Other....................................................... 13,475
-----------
Total Assets.......................................... 33,844,975
-----------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 52,735
Distributor and Affiliates................................ 30,789
Income Distributions...................................... 13,347
Trustees' Deferred Compensation and Retirement Plans........ 133,152
Accrued Expenses............................................ 82,118
-----------
Total Liabilities..................................... 312,141
-----------
NET ASSETS.................................................. $33,532,834
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an
unlimited number of shares authorized).................... $33,546,624
Accumulated Distributions in Excess of Net Investment
Income.................................................... (31)
Accumulated Net Realized Loss............................... (13,759)
-----------
NET ASSETS (Equivalent to $1.00 per share for 33,550,784
shares outstanding)....................................... $33,532,834
===========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $1,166,174
----------
EXPENSES:
Investment Advisory Fee..................................... 173,708
Distribution (12b-1) and Service Fees....................... 86,720
Shareholder Services........................................ 72,095
Shareholder Reports......................................... 26,883
Accounting.................................................. 26,464
Trustees' Fees and Related Expenses......................... 26,371
Registration and Filing Fees................................ 18,868
Legal....................................................... 9,354
Custody..................................................... 5,403
Other....................................................... 17,569
----------
Total Expenses.......................................... 463,435
Investment Advisory Fee Reduction....................... 173,708
----------
Net Expenses............................................ 289,727
----------
NET INVESTMENT INCOME....................................... $ 876,447
==========
NET REALIZED GAIN........................................... $ 3,512
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 879,959
==========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 876,447 $ 940,491
Net Realized Gain................................ 3,512 60
------------- -------------
Change in Net Assets from Operations............. 879,959 940,551
------------- -------------
Distributions from Net Investment Income......... (876,415) (940,618)
Distributions in Excess of Net Investment
Income......................................... (31) (32)
------------- -------------
Distributions from and in Excess of Net
Investment Income.............................. (876,446) (940,650)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... 3,513 (99)
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 203,834,945 112,337,824
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................... 876,446 940,650
Cost of Shares Repurchased....................... (203,186,961) (114,337,910)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... 1,524,430 (1,059,436)
------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS............ 1,527,943 (1,059,535)
NET ASSETS:
Beginning of the Period.......................... 32,004,891 33,064,426
------------- -------------
End of the Period (Including accumulated
distributions in excess of net investment
income of ($31) and ($32), respectively)....... $ 33,532,834 $ 32,004,891
============= =============
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
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,
-------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------
<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................. .025 .029 .028 .029 .027
Less Distributions from and in Excess
of Net Investment Income............ .025 .029 .028 .029 .027
----- ----- ----- ----- -----
Net Asset Value, End of Period........ $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return*......................... 2.55% 2.93% 2.82% 2.93% 2.73%
Net Assets at End of Period (In
millions)........................... $33.5 $32.0 $33.1 $35.6 $33.2
Ratio of Expenses to Average Net
Assets*............................. .84% .83% .85% .85% .89%
Ratio of Net Investment Income to
Average Net Assets*................. 2.53% 2.89% 2.78% 2.89% 2.68%
* If certain expenses had not been
assumed by Van Kampen, total return
would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net
Assets.............................. 1.34% 1.40% 1.45% 1.53% 1.38%
Ratio of Net Investment Income to
Average Net Assets.................. 2.03% 2.32% 2.17% 2.21% 2.20%
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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, 1999, the Fund had an accumulated capital loss carryforward
for tax purposes of $13,759 which will expire on June 30, 2001.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
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.
Due to inherent differences in the recognition of certain expenses under
generally accepted accounting principles and federal income tax purposes, the
amount of distributed net investment income may differ for a particular period.
These differences are temporary in nature, but may result in book basis
distribution in excess of net investment income for certain periods. For the
year ended June 30, 1999, permanent book and tax differences related to the
expiration of $1,030 of the tax basis capital loss carryforward during 1999 have
been reclassified from accumulated net realized loss to capital.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen
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, 1999, the Adviser voluntarily waived $173,708 of
its investment advisory fees. This waiver is voluntary in nature and can be
discontinued at the Adviser's discretion.
For the year ended June 30, 1999, the Fund recognized expenses of
approximately $1,700, 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, 1999, the Fund recognized expenses of
approximately $34,100 representing Van Kampen Funds Inc's. or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal 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 year ended June 30, 1999,
the Fund recognized expenses of approximately $45,600. Transfer agency fees are
determined
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
through negotiations with the Fund's Board of Trustees and are based on
competitive market 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.
3. CAPITAL TRANSACTIONS
At June 30, 1999 and June 30, 1998, capital aggregated $33,546,624 and
$32,023,224, respectively. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares.......................... 32,026,330 33,085,766
------------- -------------
Shares Sold............................... 203,834,945 112,337,824
Shares Issued Through Dividend
Reinvestment............................ 876,446 940,650
Shares Repurchased........................ (203,186,937) (114,337,910)
------------- -------------
Net Change in Shares Outstanding.......... 1,524,454 (1,059,436)
------------- -------------
Ending Shares............................. 33,550,784 32,026,330
============= =============
</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, 1999, are
payments retained by Van Kampen of approximately $31,800.
15
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Van Kampen Tax Free Money Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Tax Free Money Fund (the "Fund"), including the portfolio of investments,
as of June 30, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for 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, 1999, 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 Tax Free Money Fund as of June 30, 1999, 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 LLP
Chicago, Illinois
August 5, 1999
16
<PAGE> 18
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
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
Capital Preservation
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
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 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
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
17
<PAGE> 19
VAN KAMPEN TAX FREE MONEY FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*- Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
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
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
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
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during its taxable year ended
June 30, 1999. The Fund designated 100% of the income distributions as a
tax-exempt income distribution.
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999. 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 December 31, 1999, the report, if used with
prospective investors, must be accompanied by a quarterly performance update.
18
<PAGE> 20
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
19
<PAGE> 21
VAN KAMPEN FUNDS
YOUR NOTES:
20
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>11
<NAME> TAX FREE MONEY A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 33,411,968
<INVESTMENTS-AT-VALUE> 33,411,968
<RECEIVABLES> 300,927
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 132,080
<TOTAL-ASSETS> 33,844,975
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 312,141
<TOTAL-LIABILITIES> 312,141
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,546,624
<SHARES-COMMON-STOCK> 33,550,784
<SHARES-COMMON-PRIOR> 32,026,330
<ACCUMULATED-NII-CURRENT> (31)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13,759)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,532,834
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,166,174
<OTHER-INCOME> 0
<EXPENSES-NET> (289,727)
<NET-INVESTMENT-INCOME> 876,447
<REALIZED-GAINS-CURRENT> 3,512
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 879,959
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (876,446)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 203,834,945
<NUMBER-OF-SHARES-REDEEMED> (203,186,937)
<SHARES-REINVESTED> 876,446
<NET-CHANGE-IN-ASSETS> 1,527,943
<ACCUMULATED-NII-PRIOR> (32)
<ACCUMULATED-GAINS-PRIOR> (18,301)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 173,708
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 463,435
<AVERAGE-NET-ASSETS> 34,695,417
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.025
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.025)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.84
</TABLE>
