<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
Q&A WITH YOUR PORTFOLIO MANAGERS 4
GLOSSARY OF TERMS 6
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 7
FINANCIAL STATEMENTS 10
NOTES TO FINANCIAL STATEMENTS 14
REPORT OF INDEPENDENT AUDITORS 17
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 18
FUND OFFICERS AND IMPORTANT ADDRESSES 19
</TABLE>
It is times like these when money-management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
July 20, 2000
Dear Shareholder,
Whether you have held your fund for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your fund is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we move through the second half of 2000, count on us to
continue to draw on the wisdom of our 74 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is
the theme of a national advertising campaign that we recently kicked off. The
message emphasizes our depth of investment-management history, as well as our
firm belief that with the right investments, anyone can realize life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
BEGINNING IN THE SECOND QUARTER OF 2000, EVIDENCE OF SLOWER ECONOMIC GROWTH IN
THE UNITED STATES EMERGED. HOWEVER, ANALYSTS BELIEVE IT MAY HAVE BEEN PREMATURE
TO ASSUME THAT THE U.S. ECONOMY HAS SLOWED TO A SUSTAINABLE, NONINFLATIONARY
PACE, WITH THE GROSS DOMESTIC PRODUCT (GDP), A MEASURE OF ECONOMIC GROWTH, UP
5.2 PERCENT ANNUALIZED IN THE SECOND QUARTER OF 2000.
CONSUMER SPENDING AND EMPLOYMENT
CONSUMER SPENDING REMAINED THE MAIN ENGINE OF GROWTH BEHIND THE U.S. ECONOMY.
LIVING STANDARDS AND SPENDING HABITS WERE BOOSTED BY STRONG GAINS IN REAL
INCOME, AND INDIVIDUAL WEALTH INCREASED SUBSTANTIALLY, PRIMARILY DUE TO A
BUOYANT STOCK MARKET. NONETHELESS, DATA RELEASED IN THE SECOND QUARTER OF 2000
REFLECTED A MINOR DECREASE IN THE SPENDING OF INDIVIDUALS. IN JUNE, THE CONSUMER
PRICE INDEX (CPI), THE LEADING INFLATION INDICATOR, ROSE HIGHER THAN
EXPECTED--0.6 PERCENT MORE THAN THE PREVIOUS MONTH. THAT HEIGHTENED CONCERNS
ABOUT INFLATION AND THE PROSPECT OF ADDITIONAL FEDERAL RESERVE BOARD
INTEREST-RATE INCREASES.
THE U.S. LABOR MARKET WAS STILL ROBUST DURING THIS TIME, AND JOB INSECURITY
CONTINUED TO DECLINE. SOLID EMPLOYMENT GROWTH WAS ACCOMPANIED BY UNUSUALLY LARGE
GAINS IN PRODUCTIVITY, WHICH LIMITED THE RISE IN UNIT LABOR COSTS ACROSS THE
WHOLE ECONOMY. GIVEN THE HIGH EMPLOYMENT NUMBERS AND STRONG LEVELS OF
PRODUCTIVITY, ANALYSTS BELIEVE AN INCREASE IN INTEREST RATES TO WARD OFF
INFLATION AND FURTHER SLOW THE ECONOMY IS POSSIBLE.
INTEREST RATES AND INFLATION
DURING THE PAST FEW MONTHS, PERSISTENT STRENGTH IN CONSUMER SPENDING ACCOMPANIED
BY A VERY TIGHT LABOR MARKET, RESULTED IN SOME INFLATION. THE CPI REACHED A
LEVEL OF 2.7 PERCENT IN JANUARY 2000 AND 3.7 PERCENT IN JUNE 2000, CLEARLY
DEMONSTRATING SIGNS OF INFLATION.
SINCE JUNE 1999, THE FEDERAL RESERVE HAS INCREASED THE FEDERAL FUNDS RATE SIX
TIMES BY A TOTAL OF 175 BASIS POINTS TO LOWER ECONOMIC GROWTH AND DECREASE ANY
FUTURE FEARS OF INFLATION. THESE INCREASES IN INTEREST RATES HELPED SLOW THE
INTEREST-SENSITIVE AUTO AND HOUSING MARKETS.
MANY OBSERVERS BELIEVE INTEREST RATES COULD BE LIFTED FURTHER IN COMING MONTHS.
WHILE MARKETS HAVE EXPERIENCED MUCH SHORT-TERM VOLATILITY, THE MARKET'S OUTLOOK
COULD IMPROVE ONCE INTEREST-RATE HIKES CEASE.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998 -- June 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Jun 98 2.10
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.20
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(June 30, 1998 -- June 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 98 5.50 1.70
5.50 1.70
5.50 1.60
Sep 98 5.25 1.50
5.00 1.50
4.75 1.50
Dec 98 4.75 1.60
4.75 1.70
4.75 1.60
Mar 99 4.75 1.70
4.75 2.30
4.75 2.10
Jun 99 5.00 2.00
5.00 2.10
5.25 2.30
Sep 99 5.25 2.60
5.25 2.60
5.50 2.60
Dec 99 5.50 2.70
5.50 2.70
5.75 3.20
Mar 00 6.00 3.70
6.00 3.00
6.50 3.10
Jun 00 6.50 3.70
</TABLE>
Interest rates are represented by the closing midline federal funds target 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.
3
<PAGE> 5
Q&A WITH YOUR PORTFOLIO MANAGERS
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 AND INFLUENCED
THE FUND'S RETURN DURING THE 12 MONTHS ENDED JUNE 30, 2000. THE TEAM IS LED BY
MICHAEL BIRD, PORTFOLIO MANAGER, WHO HAS MANAGED THE FUND SINCE AUGUST 1999 AND
HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1993. THE FOLLOWING DISCUSSION
REFLECTS HIS VIEWS ON THE FUND'S PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE
MARKET ENVIRONMENT IN WHICH THE FUND OPERATED, AND HOW DID THE FUND PERFORM
IN THAT ENVIRONMENT?
A Concerns that a continuing strong
economy might ignite inflation spurred generally higher interest rates during
the fund's fiscal year. Rising employment costs, strong consumer spending, and
spikes in commodities prices contributed to several rate hikes--six since June
1999--approved by the Federal Reserve Board (the Fed). With the most recent
increase in May 2000, the federal funds rate, a key short-term lending rate,
ended the period at 6.5 percent.
A volatile equity market didn't help the fixed-income market, which
struggled with the challenges of rising interest rates and, mid-period, the
effects of the year 2000 (Y2K) date change. Concerns that computer problems
might make it difficult for investors to liquidate their investments in the
final weeks of the year ultimately led yield spreads to widen between Treasuries
and other types of bonds, such as corporate, high-yield, and mortgage-backed
securities. However, investors' fears proved unfounded.
During this time, we continued to see a shortage of fixed-rate notes in the
short-term municipal bond market, with budget surpluses in many municipalities
decreasing the need to issue new debt. As a result, short-term bond issuance was
characterized by fewer and smaller deals than in recent years.
For the 12-month period ended June 30, 2000, the fund produced a total
return of 2.88 percent, and generated a seven-day average yield of 3.98 percent.
The yield reflects the current earnings of the fund more closely than the total
return calculation. As a result of recent market activity, current performance
may vary from figures shown. 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 6.22 percent to equal the
tax-free yield earned by the fund. Past performance is no guarantee of future
results.
4
<PAGE> 6
Q HOW DID YOU MANAGE THE FUND
IN LIGHT OF THESE CONDITIONS?
A Due to the depressed supply of
fixed-rate notes, we were very careful in our selection of the issues that were
available during this time. We believed that issues in the six-month to one-year
sector were expensive relative to the market and would not add significant value
to the portfolio. Instead, we maintained our focus on smaller bond issues; these
issues tend to be overlooked by larger investors in the municipal market, and,
as a result, usually offer higher yields in order to attract buyers. For
example, we recently purchased part of a serial bond issue from Missouri for a
health and education facility at Washington University. We were able to identify
this issue and purchase it at an attractive price due to diligent analysis by
our research staff.
We also invested approximately half of the fund's assets in highly liquid
variable-rate notes. Toward the end of 1999, fixed-rate notes became slightly
more attractive and less expensive as investors began to sell fixed-rate
municipals in favor of shorter-term paper, such as variable-rate notes.
Consequently, fixed-rate notes began to look more attractive as yields
increased. Because we were already well positioned for Y2K, we were able to take
advantage of this situation by purchasing a few fixed-rate notes.
Q WHAT IS YOUR OUTLOOK FOR
THE MARKET OVER THE COMING MONTHS?
A With an eye on the Fed, we'll
continue to monitor key economic statistics for signs of an economic slowdown
and clues about the Fed's interest-rate bias. If inflationary pressures
continue, even at a moderate level, it's anticipated that the Fed will continue
to increase rates toward the end of the year.
We believe that supply in the variable-rate sector will remain abundant,
while supply in the fixed-rate note sector will be light by comparison. We will
continue to pursue relative stability, daily liquidity, and a competitive level
of income, and will look to add value through careful security selection.
5
<PAGE> 7
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
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.
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.
LIQUIDITY: The ease with which an investor can buy or sell a security at a
reasonable price.
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.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
YIELD: The annual rate of return on an investment, expressed as a percentage.
6
<PAGE> 8
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
June 30, 2000
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) SECURITY DESCRIPTION DATE PURCHASE COST
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 100.3%
DATES 24.3%
$1,400 Brazos River Auth TX Utils Elec Co Proj
Ser 1996 B (AMBAC Insd).................. 07/03/00 4.800% $ 1,400,000
3,600 Iowa Fin Auth Rev Burlington Med Cent
(FSA Insd)............................... 07/03/00 4.700 3,600,000
1,400 Jackson Cnty, MS Port Fac Rev Chevron Inc
Proj Rfdg................................ 07/03/00 4.550 1,400,000
600 New York City (LOC: Chase Manhattan
Bank).................................... 07/03/00 4.500 600,000
800 New York City Ser B (FGIC Insd).......... 07/01/00 4.750 800,000
300 New York City Ser B (FGIC Insd).......... 07/01/00 4.750 300,000
700 New York City Ser B (FGIC Insd).......... 07/01/00 4.750 700,000
-----------
TOTAL DATES................................................... 8,800,000
-----------
7 DAY FLOATERS 44.5%
450 Calhoun Cnty, MI Econ Dev Corp Rev (LOC:
Comerica Bank)........................... 07/06/00 4.550 450,000
1,500 Floyd Cnty, GA Dev Auth Rev Berry College
Inc Proj (LOC: SunTrust Bank)............ 07/05/00 4.800 1,500,000
1,000 Franklin Cnty, TN Hlth & Edl Facs Brd Rev
Univ of the South........................ 07/05/00 4.800 1,000,000
500 Gibson Cnty, IN Pollutn Ctl Rev Toyota
Mtr Mfg Proj Ser A....................... 07/01/00 4.150 500,000
500 Gibson Cnty, IN Pollutn Ctl Rev Toyota
Mtr Mfg Proj Ser A....................... 07/05/00 4.900 500,000
1,400 Illinois Dev Fin Auth Rev Amer
Osteopathic Assoc (LOC: Harris Trust &
Savings Bank)............................ 07/06/00 4.800 1,400,000
1,000 Illinois Dev Fin Auth Rev Roosevelt Univ
Ser 1995 (LOC: American Nat'l Bank &
Trust of Chicago)........................ 07/05/00 4.800 1,000,000
1,000 Louisiana Loc Govt Envir Facs Cmnty Dev
Auth Rev Shreveport Indp (MBIA Insd)..... 07/01/00 4.500 1,000,000
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
YOUR FUND'S INVESTMENTS
June 30, 2000
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) SECURITY DESCRIPTION DATE PURCHASE COST
<C> <S> <C> <C> <C>
7 DAY FLOATERS (CONTINUED)
$1,000 Montgomery Cnty, MD Hsg Oppntys Comm Hsg
Rev (FNMA Insd).......................... 07/05/00 4.950% $ 1,000,000
1,600 North Miami, FL Edl Facs Rev Miami Cnty
Day Sch Proj (LOC: Bank of America)...... 07/06/00 4.800 1,600,000
1,175 Quad Cities Regl Econ Dev Auth IL Indl
Dev Rev Var Seaberg Inds Inc Proj (LOC:
Norwest Bank)............................ 07/01/00 4.350 1,175,000
1,000 Seattle, WA Wtr Sys Rev (LOC: Bayerische
Landesbank Girozent)..................... 07/05/00 4.950 1,000,000
1,020 Virginia Small Business Fin Auth Rev Indl
Dev Coral Graphic (LOC: Chase Manhattan
Bank).................................... 07/06/00 5.000 1,020,000
1,500 Washington St Hsg Fin Comm Multi-Family
Mtg Rev Rfdg (LOC: Harris Trust & Savings
Bank).................................... 07/04/00 5.100 1,500,000
500 Wisconsin St Hlth Facs Auth Rev
Franciscan Hlthcare Ser A-1 (LOC: Toronto
Dominion Bank)........................... 07/05/00 4.950 500,000
1,000 Wisconsin St Hlth Facs Auth Rev
Franciscan Hlthcare Ser A-2 (LOC: Toronto
Dominion Bank)........................... 07/05/00 4.950 1,000,000
-----------
TOTAL 7 DAY FLOATERS 44.5%................................... 16,145,000
-----------
BONDS/NOTES 31.5%
1,000 Arizona Sch Dist Tax Antic Note Ser A.... 07/31/00 4.050 999,213
850 Cobb Cnty, GA Wtr & Swr Rev Ser A Rfdg... 07/01/00 4.600 850,000
225 Dade Cnty, FL Sch Brd Ctfs Partn Ser A
(AMBAC Insd)............................. 05/01/01 4.600 225,077
1,000 Dallas, TX Area Rapid Trans Ser B........ 07/11/00 4.200 1,000,000
1,000 Greater TX Student Ln Corp Ser 1996 A
Rfdg (Gtd: Student Ln Marketing Assn).... 03/01/01 4.280 1,000,000
825 Iowa Student Ln Liquidity Corp Student Ln
Rev Ser A................................ 03/01/01 6.350 835,092
500 Memphis, TN.............................. 07/01/00 5.000 500,000
420 Minnesota St Hsg Fin Agy Single Family
Mtg Ser D................................ 07/01/00 4.500 420,000
300 Missouri St Hlth & Edl Facs Auth Edl
Washington Univ Ser D.................... 12/15/00 4.350 300,000
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
YOUR FUND'S INVESTMENTS
June 30, 2000
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) SECURITY DESCRIPTION DATE PURCHASE COST
<C> <S> <C> <C> <C>
BONDS/NOTES (CONTINUED)
$ 475 Missouri St Hlth & Edl Facs Auth Edl
Washington Univ Ser D.................... 06/15/01 4.450% $ 475,000
1,000 Municipal Elec Auth GA Ser 1985 A........ 08/01/00 4.150 1,000,000
1,000 New Mexico St Severance Tax Rfdg Ser A... 07/01/00 5.000 1,000,000
550 Shelby Cnty, TN Rfdg Amt Ser A........... 08/01/00 5.250 550,202
1,400 Texas St Ser A........................... 08/31/00 4.500 1,401,781
870 University Cincinnati OH Rcpts Bond Antic
Notes Ser AY-1........................... 10/05/00 5.250 871,448
-----------
TOTAL BONDS/NOTES 31.5%...................................... 11,427,813
-----------
TOTAL INVESTMENTS 100.3% (A)........................................... 36,372,813
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3%)........................... (112,048)
-----------
NET ASSETS 100.0%...................................................... $36,260,765
===========
</TABLE>
(a) At June 30, 2000, cost is identical for both book and federal income tax
purposes.
AMBAC--AMBAC Indemnity Corporation
FGIC--Financial Guaranty Insurance Company
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
9
<PAGE> 11
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market.... $36,372,813
Receivables:
Interest.................................................. 300,172
Investments Sold.......................................... 30,000
Fund Shares Sold.......................................... 28,163
Other....................................................... 9,816
-----------
Total Assets............................................ 36,740,964
-----------
LIABILITIES:
Payables:
Custodian Bank............................................ 200,597
Distributor and Affiliates................................ 35,159
Income Distributions...................................... 22,259
Fund Shares Repurchased................................... 16,024
Trustees' Deferred Compensation and Retirement Plans........ 152,207
Accrued Expenses............................................ 53,953
-----------
Total Liabilities....................................... 480,199
-----------
NET ASSETS.................................................. $36,260,765
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an
unlimited number of shares authorized).................... $36,274,524
Accumulated Net Realized Loss............................... (13,759)
-----------
NET ASSETS (Equivalent to $1.00 per share for 36,278,684
shares outstanding)....................................... $36,260,765
===========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
Statement of Operations
For the Year Ended June 30, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $1,310,771
----------
EXPENSES:
Investment Advisory Fee..................................... 176,265
Distribution (12b-1) and Service Fees....................... 88,065
Shareholder Services........................................ 68,014
Trustees' Fees and Related Expenses......................... 36,403
Shareholder Reports......................................... 33,261
Registration and Filing Fees................................ 28,482
Audit....................................................... 24,522
Legal....................................................... 8,057
Custody..................................................... 7,708
Other....................................................... 17,305
----------
Total Expenses.......................................... 488,082
Investment Advisory Fee Reduction....................... 176,265
Less Credits Earned on Cash Balances.................... 2,767
----------
Net Expenses............................................ 309,050
----------
NET INVESTMENT INCOME....................................... $1,001,721
==========
NET REALIZED GAIN........................................... $ -0-
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $1,001,721
==========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
Statement of Changes in Net Assets
For the Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 1,001,721 $ 876,447
Net Realized Gain....................................... -0- 3,512
------------- -------------
Change in Net Assets from Operations.................... 1,001,721 879,959
------------- -------------
Distributions from Net Investment Income................ (1,001,690) (876,415)
Distributions in Excess of Net Investment Income........ -0- (31)
------------- -------------
Distributions from and in Excess of Net Investment
Income................................................ (1,001,690) (876,446)
------------- -------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES................................. 31 3,513
------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold............................... 116,122,679 203,834,945
Net Asset Value of Shares Issued Through Dividend
Reinvestment.......................................... 1,001,690 876,446
Cost of Shares Repurchased.............................. (114,396,469) (203,186,961)
------------- -------------
NET CHANGE IN NET ASSETS FROM
CAPITAL TRANSACTIONS.................................. 2,727,900 1,524,430
------------- -------------
TOTAL INCREASE IN NET ASSETS............................ 2,727,931 1,527,943
NET ASSETS:
Beginning of the Period................................. 33,532,834 32,004,891
------------- -------------
End of the Period (Including accumulated distributions
in excess of net investment income of $31 in 1999).... $ 36,260,765 $ 33,532,834
============= =============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
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,
-----------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------
<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................... .029 .025 .029 .028 .029
Less Distributions from and in Excess of
Net Investment Income................. .029 .025 .029 .028 .029
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD............ $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return*............................. 2.88% 2.55% 2.93% 2.82% 2.93%
Net Assets at End of Period (In
millions)............................... $36.3 $33.5 $32.0 $33.1 $35.6
Ratio of Expenses to Average Net
Assets*................................. .88% .84% .83% .85% .85%
Ratio of Net Investment Income to Average
Net Assets*............................. 2.84% 2.53% 2.89% 2.78% 2.89%
* 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.............................. 1.38% 1.34% 1.40% 1.45% 1.53%
Ratio of Net Investment Income to Average
Net Assets.............................. 2.34% 2.03% 2.32% 2.17% 2.21%
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000
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 seek to provide investors a high level of current
income exempt from federal income taxes consistent with the preservation of
capital and liquidity through investments in a diversified portfolio 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 is accreted and any 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, 2000, the Fund had an accumulated capital loss carryforward
for tax purposes of $13,759 which will expire on June 30, 2001.
D. DISTRIBUTION OF INCOME AND GAINS The Fund declares dividends from net
investment income daily and automatically reinvests such dividends daily. Net
14
<PAGE> 16
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000
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.
E. EXPENSE REDUCTIONS During the year ended June 30, 2000, the Fund's custody
fee was reduced by $2,767 as a result of credit earned on overnight cash
balances.
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 DAILY 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, 2000, the Adviser voluntarily waived $176,265 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, 2000, the Fund recognized expenses of
approximately $1,600, 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, 2000, the Fund recognized expenses of
approximately $19,200 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, 2000,
the Fund recognized expenses of approximately $45,800. Transfer agency fees are
determined through negotiations with the Fund's Board of Trustees and are based
on competitive market benchmarks.
15
<PAGE> 17
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000
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, 2000 and June 30, 1999, capital aggregated $36,274,524 and
$33,546,624, respectively. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
<S> <C> <C>
Beginning Shares....................................... 33,550,784 32,026,330
------------ ------------
Shares Sold............................................ 116,122,679 203,834,945
Shares Issued Through Dividend Reinvestment............ 1,001,690 876,446
Shares Repurchased..................................... (114,396,469) (203,186,937)
------------ ------------
Net Change in Shares Outstanding....................... 2,727,900 1,524,454
------------ ------------
Ending Shares.......................................... 36,278,684 33,550,784
============ ============
</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, as amended, 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,
2000, are payments retained by Van Kampen of approximately $32,600.
16
<PAGE> 18
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of Van Kampen Tax Free Money Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Van Kampen Tax Free Money Fund (the "Fund"), as
of June 30, 2000, and the related statement of operations, changes in net assets
and financial highlights for the year then ended. 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 based on
our audit. The statement of changes in net assets of the Fund for the year ended
June 30, 1999, and the financial highlights for each of the four years in the
period then ended were audited by other auditors whose report dated August 5,
1999, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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, 2000, 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 audit provides a reasonable basis for our
opinion.
In our opinion, the 2000 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund at June 30, 2000, the results of its operations, changes in
net assets and financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States.
[SIG]
Chicago, Illinois
August 10, 2000
17
<PAGE> 19
VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income
Tax Managed Global Franchise
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return*
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
18
<PAGE> 20
FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN TAX FREE MONEY FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
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
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, 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 AUDITORS(1)
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
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, 2000. The Fund designated 100% of the income distributions as a
tax-exempt income distribution.
(1) Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Board of Trustees has engaged Ernst & Young LLP
to be the Fund's independent auditors.
KPMG LLP, located at 303 West Wacker Drive, Chicago, IL 60601 ("KPMG"), ceased
being the Fund's independent auditors effective April 14, 2000. The cessation of
the client-auditor relationship between the Fund and KPMG was based solely on a
possible future business relationship by KPMG with an affiliate of the Fund's
investment adviser.
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After December 31,
2000, the report, if used with prospective investors, must be accompanied by a
quarterly performance update.
19
