<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Glossary of Terms................................ 3
Portfolio Management Review...................... 4
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 8
Statement of Operations.......................... 9
Statement of Changes in Net Assets............... 10
Financial Highlights............................. 11
Notes to Financial Statements.................... 12
</TABLE>
TFMM SAR 2/99
<PAGE> 2
LETTER TO SHAREHOLDERS
January 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together, we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
Despite a stormy year in the global economy, the United States ended 1998
with only a moderate slowdown in growth. The nation's gross domestic product, a
measure of economic health, grew 3.9 percent during the year, matching 1997's
growth rate and indicating that our nation's economy remains strong. A
continuation of low inflation--only a 1.6 percent increase in the consumer price
index over the last 12 months--also helped sustain the domestic economy and kept
inflation-adjusted interest rates attractive.
Although the year ended on a positive note, the economic environment was
quite unsettled in the third quarter, with the Asian financial crisis
contributing to slowing corporate profits in the United States. Given the
uncertainty surrounding emerging market nations and the near-collapse of a major
U.S. hedge fund, the stock and bond markets experienced significant volatility
during this period. With instability as a backdrop, American and foreign
investors alike pursued a flight to quality--seeking the relative safety of
large-company stocks and government bonds.
In the last few months of the year the global financial situation improved
in conjunction with the Federal Reserve's interest rate decreases. In response
to declining corporate profits and mounting international concerns, the Fed
lowered interest rates three times, with 0.25 percent cuts in September,
October, and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to keep the economy growing.
Dozens of foreign central banks also reduced interest rates in an effort to
stimulate their economies. These actions gave a boost to investor confidence and
encouraged a return to a more diversified range of investments in the last few
months of the year.
Continued on page 2
1
<PAGE> 3
MARKET REVIEW
The bond market continued to rally as interest rates fell during the year,
with U.S. Treasury securities outpacing corporate and municipal bonds in price
appreciation. Investors' desire for safer investments amid the global economic
storm led to strong demand for high-quality bonds. In fact, the U.S. Treasury
bond was considered one of the most attractive places to invest by both domestic
and international investors, propelling the 30-year Treasury yield to 4.71
percent in October--its lowest yield since the federal government began selling
these bonds in 1977. Meanwhile, the prices of municipal bonds across the credit
quality spectrum were suppressed by excess supply, as many bond issuers took
advantage of low interest rates to refinance outstanding debt and issue new
bonds. At several points during the year, the yield on a AAA-rated long-term
municipal bond surpassed the yield of the 30-year U.S. Treasury bond--an unusual
occurrence given municipals' tax-exempt status.
OUTLOOK
Our outlook for the domestic economy is positive, and we anticipate
continued low inflation and healthy economic growth. However, the aftereffects
of the global economic slowdown may continue to put pressure on corporate
earnings in the first half of the year. Internationally, we anticipate that low
interest rates and declining inflation will lead to improvements in troubled
areas such as Asia and Latin America. With the successful launch of the euro,
the new European transnational currency, we believe that many foreign markets
will become increasingly attractive in 1999.
In the long term, we are optimistic that the stock market will continue its
record growth, although we could experience additional volatility in the months
ahead if concerns about high stock valuations and increasing earnings pressure
become more pronounced. Combined with growing questions about corporate and
government reactions to the Year 2000 computer problem, we could see an
increasingly cautious market by mid-year.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG.]
Richard F. Powers III
Chairman
Van Kampen Investment Advisory Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen 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.
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.
2
<PAGE> 4
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to 1 percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis-point move.
FEDERAL FUNDS RATE: The interest rate charged by one financial institution
lending federal funds to another. This overnight rate is used to meet banks'
daily reserve requirements. The Federal Reserve Board uses 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 system 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.
GENERAL OBLIGATION BONDS: Bonds backed by the full faith and credit (taxing
authority) of the issuer for timely payment of interest and principal. These
bonds are issued to finance essential government projects, such as highways
and schools.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
MUNICIPAL BOND: A debt security issued by a state, municipality, or other
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,
potentially, 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.
For bonds and notes, the yield is the annual interest divided by the market
price.
3
<PAGE> 5
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
six months. The team is led by Reid J. Hill, 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 six-month
period ended December 31, 1998.
Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND HAS
OPERATED DURING THE PAST SIX MONTHS?
A Overall, the U.S. bond market enjoyed a rally during the reporting period.
As many international markets were plagued by economic crisis, many
investors moved their assets into U.S. Treasuries, causing the 30-year
Treasury bond yield to drop to 4.72 percent in October, its lowest level since
the federal government began selling these bonds in 1977. This flight toward
Treasuries created liquidity problems in the bond market as transaction costs
increased.
During the reporting period, availability of short-term municipal bonds
broke out of the seasonal pattern they have generally followed the past few
years, as supply of these bonds has tended to peak in late June and early July.
This summer, however, there was a shortage of fixed-rate notes in the short-term
municipal bond market, as the strength of the economy led to a decline in
borrowing for municipal projects. These conditions affected bond issuance in two
ways--we saw smaller deals and fewer of them.
Q HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
A Going into the period, our original strategy was to take advantage of the
expected seasonal increase in supply during July and extend our weighted
average maturity to the 70-day mark. Because the short supply of
fixed-rate bonds made purchasing them too expensive, we chose to remain patient.
As a result, we kept the average maturity in the neutral 45- to 50-day range and
looked for opportunities on an individual basis.
In general, the short-term municipal bond market offers two types of
bonds--fixed-rate and variable-rate. We typically invest about 60 percent of the
Fund's assets in variable-rate notes and 40 percent in fixed-rate notes. We
prefer the variable-rate notes because they are liquid, inexpensive, and have no
price fluctuation--only yield fluctuation. With the shortage of fixed-rate notes
in July, the Fund's allocation moved toward 70 percent variable-rate notes. We
acquired some small positions in fixed-rate notes at prices that we believed
were more attractive than the larger deals available at the beginning of the
period.
Q HOW DID THE FUND PERFORM DURING THE SIX-MONTH REPORTING PERIOD?
A As of December 31, 1998, the Fund's seven-day average yield was 3.04
percent, while the Fund posted a six-month total return of 1.36 percent.
By comparison,
4
<PAGE> 6
the average performance for tax-free money market funds, as calculated by Lipper
Analytical Services, Inc., was 1.41 percent for the six-month period.
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 4.75 percent to equal the tax-free yield
earned by this Fund.
Q WHAT IS YOUR ECONOMIC OUTLOOK FOR THE MONTHS AHEAD?
A We expect to continue to see a slowing economy, and we expect no further
action by the Fed during the first quarter of 1999. Interest rate
adjustments like these should not affect the Fund because the short-term
municipal bond market generally anticipates such interventions.
Therefore, with few changes expected in the short-term, we plan to continue
to invest approximately 70 percent of the Fund in variable-rate notes, and seek
out smaller offerings in fixed-rate notes. We will also continue to monitor the
short-term municipal bond market for seasonal patterns, including opportunities
to invest in variable-rate securities when cash exits the market--during tax and
holiday seasons.
Overall, we will continue to seek the Fund's objective of relative stability
of principal, 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.]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Description Date Purchase Cost
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS
DATES 30.3%
$1,000 Brazos River Auth TX Utils Elec Co Proj Ser
1996 B (AMBAC Insd)........................... 01/04/99 4.300% $ 1,000,000
1,000 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
American Airls Ser 1983 C (LOC: Royal Bank of
Canada)....................................... 01/04/99 4.100 1,000,000
300 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
American Airls Ser 1983 D (LOC: Royal Bank of
Canada)....................................... 01/04/99 4.100 300,000
900 New York City Muni Wtr Fin Auth Wtr Swr Sys
Ser 1995 A (FGIC Insd)........................ 01/04/99 4.150 900,000
400 New York City Ser B (FGIC Insd)............... 01/04/99 5.000 400,000
400 New York City Ser B (FGIC Insd)............... 01/04/99 5.000 400,000
1,800 North AL Environmental Impt Auth Pollutn Ctl
Rev (LOC: Bank of Nova Scotia)................ 01/04/99 4.100 1,800,000
1,000 Perry Cnty, MS Pollutn Ctl Rev Ser 1992 Rfdg
(LOC: Wachovia Bank).......................... 01/04/99 4.100 1,000,000
1,500 Port of Portland, OR Pollutn Ctl Rev (LOC:
Bank of Nova Scotia).......................... 01/04/99 4.100 1,500,000
800 Sullivan Cnty, TN Indl Dev Board Pollutn Ctrl
Rev (LOC: Union Bank of Switzerland).......... 01/04/99 3.100 800,000
1,000 Uinta Cnty, WY Pollutn Ctl Rev Rfdg (Gtd:
Chevron USA, Inc.)............................ 01/04/99 4.100 1,000,000
-----------
TOTAL DATES................................... 10,100,000
-----------
7 DAY FLOATERS 48.9%
750 Calhoun Cnty, MI Econ Dev Corp Rev (LOC:
Comerica Bank)................................ 01/07/99 3.800 750,000
1,235 City of Sterling Heights, MI Econ Dev Corp Rev
Rfdg (LOC: First Chicago/NBD Corp)............ 01/07/99 3.900 1,235,000
1,500 Crossett, AR Pollutn Ctl Rev Adj Ref GA
Pacific Corp. Proj (LOC: Suntrust Bank)....... 01/07/99 3.850 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)................................ 01/06/99 4.100 1,110,000
1,400 Georgia Muni Gas Auth Gas Rev Adj Agy Proj Ser
C (LOC: Morgan Guaranty)...................... 01/06/99 4.150 1,400,000
1,500 Illinois Dev Fin Auth Rev American Osteopathic
Associates (LOC: Harris Trust & Savings
Bank)......................................... 01/07/99 3.200 1,500,000
1,000 Illinois Dev Fin Auth Rev Roosevelt Univ Ser
1995 (LOC: Amer Nat'l Bank & Trust of
Chicago)...................................... 01/06/99 3.750 1,000,000
1,600 Iowa Fin Auth Rev Burlington Med Cent (FSA
Insd)......................................... 01/07/99 3.850 1,600,000
1,000 Montgomery Cnty, MD Hsg Oppntys Comm Hsg Rev
(LOC: Keybank N.A.)........................... 01/06/99 4.150 1,000,000
1,300 Quad Cities, IL Reg Econ Dev Auth Seaberg Indl
Inc Proj (LOC: Norwest Bank).................. 01/07/99 3.400 1,300,000
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Description Date Purchase Cost
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
7 DAY FLOATERS (CONTINUED)
$ 700 Utah St Brd Regents Student Ln Rev Ser 1993 A
(Gtd: Student Ln Marketing Assn.)............. 01/06/99 4.000% $ 700,000
1,170 Virginia Small Business Fin Auth Rev Indl Dev
Coral Graphic (LOC: Chase Manhattan Bank)..... 01/07/99 4.050 1,170,000
1,500 Washington St Hsg Fin Comm Multi-Family Mtg
Rev Rfdg (LOC: Harris Trust & Savings Bank)... 01/05/99 4.100 1,500,000
500 Wisconsin St Hlth Fac Auth Rev Franciscan
Health Care A-1 (LOC: Toronto Dominion
Bank)......................................... 01/07/99 4.000 500,000
-----------
TOTAL 7 DAY FLOATERS.............................................. 16,265,000
-----------
COMMERCIAL PAPER 3.0%
1,000 Wayne Cnty, MI Downriver Sewage Disp Sys (LOC:
Comerica Bank)................................ 04/15/99 3.150 1,000,000
-----------
BONDS/NOTES 27.5%
425 Clark Cnty, NV Regl Tran Comm Medium Term
Bonds (AMBAC Insured)......................... 07/01/99 4.250 426,146
1,000 Dallas, TX.................................... 02/15/99 4.500 1,001,587
300 DuPage Cnty, IL Fst Presv Dist Rfdg Ser A..... 11/01/99 5.000 304,380
1,155 Fox Vly Technical College Dist WI Promissory
Nts Ser B..................................... 06/01/99 4.200 1,158,018
1,000 Greater Tx Student Ln Corp Ser 1996 A Rfdg
(Gtd: Student Ln Marketing Assn.)............. 03/01/99 3.600 1,000,000
1,000 Intermountain Pwr Agy UT Pwr Supply Rev Ser
A............................................. 07/01/99 (b) 3.650 1,037,037
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 1,012,273
155 Maricopa Cnty, AZ Indl Dev Auth Multi-Family
Hsg Rev (FSA Insd)............................ 01/01/99 3.900 155,000
1,500 Missouri Rural Wtr Fin Corp Pub Projs Constr
Nts........................................... 11/15/99 4.500 1,515,915
875 Regional Waste Sys, Inc. ME Solid Waste Res
Recovery Rev Ser Q............................ 07/01/99 3.600 881,984
-----------
TOTAL BONDS/NOTES................................................. 9,142,340
-----------
TOTAL INVESTMENTS 109.7% (A).............................................. 36,507,340
LIABILITIES IN EXCESS OF OTHER ASSETS (9.7%).............................. (3,213,826)
-----------
NET ASSETS 100.0%......................................................... $33,293,514
===========
</TABLE>
(a) At December 31, 1998, cost is identical for both book and federal income tax
purposes.
(b) Prerefunded date shown, stated maturity 07/01/11.
See Notes to Financial Statements
7
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market.... $36,507,340
Cash........................................................ 88,895
Receivables:
Interest.................................................. 236,788
Fund Shares Sold.......................................... 22,564
Other....................................................... 5,063
-----------
Total Assets.......................................... 36,860,650
-----------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 3,326,175
Distributor and Affiliates................................ 43,983
Income Distributions...................................... 17,283
Trustees' Deferred Compensation and Retirement Plans........ 113,179
Accrued Expenses............................................ 66,516
-----------
Total Liabilities..................................... 3,567,136
-----------
NET ASSETS.................................................. $33,293,514
-----------
NET ASSETS CONSIST OF:
Capital..................................................... $33,309,405
Accumulated Distributions in Excess of Net Investment
Income.................................................... (70)
Accumulated Net Realized Loss............................... (15,821)
-----------
NET ASSETS (Equivalent to $1.00 per share for 33,312,511
shares outstanding)....................................... $33,293,514
===========
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $614,172
--------
EXPENSES:
Investment Advisory Fee..................................... 88,426
Distribution (12b-1) and Service Fees....................... 44,124
Shareholder Services........................................ 35,870
Shareholder Reports......................................... 14,720
Accounting.................................................. 13,603
Trustees' Fees and Expenses................................. 8,492
Audit....................................................... 8,470
Legal....................................................... 4,287
Custody..................................................... 2,311
Other....................................................... 6,806
--------
Total Expenses.......................................... 227,109
Less Investment Advisory Fees Waived.................... 88,426
--------
Net Expenses............................................ 138,683
--------
NET INVESTMENT INCOME....................................... $475,489
========
NET REALIZED GAIN........................................... $ 2,480
========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $477,969
========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1998
and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30, 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income...................................... $ 475,489 $ 940,491
Net Realized Gain.......................................... 2,480 60
------------ -------------
Change in Net Assets from Operations....................... 477,969 940,551
------------ -------------
Distributions from Net Investment Income................... (475,489) (940,618)
Distributions in Excess of Net Investment Income........... (38) (32)
------------ -------------
Distributions from and in Excess of Net Investment
Income................................................... (475,527) (940,650)
------------ -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES........ 2,442 (99)
------------ -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.................................. 82,437,216 112,337,824
Net Asset Value of Shares Issued Through Dividend
Reinvestment............................................. 475,489 940,650
Cost of Shares Repurchased................................. (81,626,524) (114,337,910)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS......... 1,286,181 (1,059,436)
------------ -------------
TOTAL INCREASE/DECREASE IN NET ASSETS...................... 1,288,623 (1,059,535)
NET ASSETS:
Beginning of the Period.................................... 32,004,891 33,064,426
------------ -------------
End of the Period (Including accumulated undistributed net
investment income of ($70) and ($32), respectively)...... $ 33,293,514 $ 32,004,891
============ =============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
Six Months Ended -----------------------------
December 31, 1998 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.................. .014 .029 .028 .029 .027
Less Distributions from and in Excess
of Net Investment Income............. .014 .029 .028 .029 .027
----- ----- ----- ----- -----
Net Asset Value, End of Period......... $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return*.......................... 1.36%** 2.93% 2.82% 2.93% 2.73%
Net Assets at End of Period (In
millions)............................ $33.3 $32.0 $33.1 $35.6 $33.2
Ratio of Expenses to Average Net
Assets*.............................. .79% .83% .85% .85% .89%
Ratio of Net Investment Income to
Average Net Assets*.................. 2.69% 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............................... 1.29% 1.40% 1.45% 1.53% 1.38%
Ratio of Net Investment Income to
Average Net Assets................... 2.19% 2.32% 2.17% 2.21% 2.20%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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, 1998, the Fund had an accumulated capital loss carryforward
for tax purposes of $18,301 which will expire between June 30, 1999 and June 30,
2001. Of this amount, $4,541 will expire in 1999. Net realized gains or losses
differ for financial reporting and tax purposes primarily as a result of post-
October losses which may not be recognized for tax purposes until the first day
of the following fiscal year.
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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.
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 six months ended December 31, 1998, the Fund recognized expenses of
approximately $1,000, 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 December 31, 1998, the Fund recognized expenses of
approximately $16,900 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. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
December 31, 1998, the Fund recognized expenses of approximately $22,700.
Beginning in 1998, the transfer agency fees are determined 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.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 December 31, 1998 and June 30,
1998, capital aggregated $33,309,405 and $32,023,224, respectively. Transactions
in shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30, 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares.............................. 32,026,330 33,085,766
-------------- -------------
Shares Sold................................... 82,437,216 112,337,824
Shares Issued Through Dividend Reinvestment... 475,489 940,650
Shares Repurchased............................ (81,626,524) (114,337,910)
-------------- -------------
Net Change in Shares Outstanding.............. 1,286,181 (1,059,436)
-------------- -------------
Ending Shares................................. 33,312,511 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 six months ended December 31,
1998, are payments retained by Van Kampen of approximately $16,500.
14
<PAGE> 16
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
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
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
15
<PAGE> 17
VAN KAMPEN 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*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*- Chairman
PAUL G. YOVOVICH
OFFICERS
DENNIS J. MCDONNELL*
President
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 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 LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "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 June 30, 1999, the report, if used with prospective
investors, must be accompanied by a quarterly performance update.
16
<PAGE> 18
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.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> TAX FREE MONEY A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 36,507,340
<INVESTMENTS-AT-VALUE> 36,507,340
<RECEIVABLES> 259,352
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 93,958
<TOTAL-ASSETS> 36,860,650
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,567,136
<TOTAL-LIABILITIES> 3,567,136
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,309,405
<SHARES-COMMON-STOCK> 33,312,511
<SHARES-COMMON-PRIOR> 32,026,330
<ACCUMULATED-NII-CURRENT> (70)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (15,821)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33,293,514
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 614,172
<OTHER-INCOME> 0
<EXPENSES-NET> (138,683)
<NET-INVESTMENT-INCOME> 475,489
<REALIZED-GAINS-CURRENT> 2,480
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 477,969
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (475,527)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 82,437,216
<NUMBER-OF-SHARES-REDEEMED> (81,626,524)
<SHARES-REINVESTED> 475,489
<NET-CHANGE-IN-ASSETS> 1,288,623
<ACCUMULATED-NII-PRIOR> (32)
<ACCUMULATED-GAINS-PRIOR> (18,301)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 88,426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 227,109
<AVERAGE-NET-ASSETS> 35,016,894
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.014
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.014)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
