<PAGE>
[AIM LOGO APPEARS HERE] Dear Shareholder:
[Photo of Money markets spent much of the fiscal year
Charles T. Bauer, ended March 31, 1997, trying to anticipate
Chairman of the Federal Reserve Board policy. As the fiscal
LETTER Board of the Fund year opened, one-year tax-free notes were
TO OUR appears here] yielding approximately 3.60%. That yield
SHAREHOLDERS rose closer to 4.00% by early summer, partly
because strong economic growth in the second
quarter of 1996 fueled speculation that the
Fed would raise rates, and partly because a
generous supply of securities in the tax-
free market dampened prices and boosted
yields.
Concern about Fed policy subsided later in 1996, as the
economic data repeatedly testified to two things: an economy
growing at a sustainable pace, and a mild rate of inflation.
Markets remained stable late in 1996 through early 1997. As the
fiscal year ended, one-year municipal securities were trading in
the 3.70% to 3.75% range.
Toward the close of the fiscal year, in his semiannual
testimony before Congress, Federal Reserve Board Chairman Alan
Greenspan reignited speculation about an interest rate rise when
he spoke of the Open Market Committee's vigilance about
"potentially inflationary expansion." Thus, the Fed's March 25,
1997, decision to raise the target federal funds rate 25 basis
points was widely anticipated. Nevertheless, the decision
rekindled volatility, as no one could be certain whether short-
term rates would be raised again.
YOUR INVESTMENT PORTFOLIO
As shown in the performance chart on the next page, the Cash
Reserve Portfolio Institutional Cash Reserve Shares' continued
emphasis on its strict investment discipline kept the Portfolio
very competitive throughout the fiscal year. The Portfolio seeks
to generate as high a level of federally tax-exempt income as is
consistent with preservation of capital and maintenance of
liquidity through investments in high-quality short-term
municipal securities. The Portfolio invests solely in securities
rated "First Tier" as defined in Rule 2a-7 under the Investment
Company Act of 1940. Net assets of the Institutional Cash Reserve
Shares of the Portfolio stood at $966.6 million at the close of
the fiscal year.
<TABLE>
<CAPTION>
Yields as of 3/31/97
Average Seven-Day
Monthly Yield Yield
<S> <C> <C>
Cash Reserve Portfolio
Institutional Cash
Reserve Shares 3.08% 3.29%
IBC Tax-Free Money Fund
Averages Institutions Only(TM) 2.97% 3.15%
IBC All Tax-Free Money
Fund Averages 2.76% 2.93%
</TABLE>
The Portfolio continues to hold an AAAm credit quality rating,
the highest given by Standard & Poor's Corporation, a widely
known credit rating agency. The AAAm rating is historical and is
based on an analysis of the Portfolio's credit quality,
composition, management, and weekly portfolio reviews. As with
any money market fund, your investment in the Cash Reserve
Portfolio is neither insured nor guaranteed by the U.S.
government, the FDIC, the Federal Reserve Board, or any other
agency, and there can be no assurance the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
(continued)
<PAGE>
OUTLOOK FOR THE FUTURE
As the fiscal year closed, the future of short-term interest
rates was uncertain. On the one hand, the Fed rarely raises or
lowers interest rates only once when it changes the direction of
monetary policy, so many expect further rate hikes. In addition,
predictions of first-quarter 1997 economic growth run as high as
a 4.5% annual pace, a rate the Fed would regard as unsustainable
and an occasion for further monetary tightening. Gross domestic
product growth was actually at a 5.6% annual rate during the
first quarter, as reported after the fiscal year closed.
On the other hand, inflation remains moderate: just 2.8% for
the calendar year ended March 31, 1997, according to the U.S.
Department of Labor. Thus, even those anticipating further rate
hikes believe their extent will be limited given the absence of
inflation and the presumption that the Fed has acted preemptively
to thwart future price increases.
In the wake of the Fed's March 25 rate-hike announcement,
yields on tax-free short-term securities did not increase quite
as much as yields on taxable issues. As expected, tax-free rates
did rise again in mid-April, shortly after the close of the
fiscal year, as tax-filing season fueled redemptions from money
market funds.
Because of its relatively short weighted average maturity, the
Cash Reserve Portfolio can respond quickly to changes in the
interest rate environment. As of the close of the fiscal year,
the Portfolio's weighted average maturity was 26 days.
AIM/INVESCO MERGER FINALIZED
We are pleased to announce that the merger of A I M Management
Group Inc. and INVESCO plc was concluded on February 28, 1997.
AIM is now part of one of the world's largest independent
investment management groups with approximately $160 billion in
assets under management as of March 31, 1997.
The merger creates a company with the financial strength
necessary to meet your needs in an increasingly competitive
financial services environment, both in the United States and
worldwide. Though now under one holding company, AIM and INVESCO
will continue to operate as separate entities. Therefore, this
merger will not change the portfolio management, investment
style, or name of any of the AIM funds you own. The merger's
completion begins a new and promising era for AIM, one we believe
will yield exciting opportunities.
We are pleased to send you this report concerning your
investment. AIM is committed to customer service and to the
primary goals of safety, liquidity and yield in institutional
fund management. We are ready to respond to your comments about
this report and to any questions you may have. Please contact one
of our representatives at 800-659-1005 if we may be of service.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
The annual shareholder meeting of Tax-Free Investments Co. and
the Cash Reserve Portfolio was held on February 7, 1997. For
details of the business transacted at that meeting, please see
Supplementary Proxy Information - Shareholder Meeting after the
financial statements of this report.
2
<PAGE>
AVERAGE MONTHLY YIELD COMPARISON
12 months ended 3/31/97 (Yields are average monthly yields for the
month-ends shown)
<TABLE>
<CAPTION> IBC Tax-Free Money Fund
TFIC Institutional Averages Institutions Only (TM)(2) IBC All Tax-Free
Cash Reserve Shares(1) Yield Money Fund Averages(TM)(3)
<S> <C> <C> <C>
4/96 3.32% 3.18% 2.97%
5/96 3.53 3.37 3.16
6/96 3.21 3.08 2.88
7/96 2.94 2.87 2.67
8/96 3.34 3.17 2.98
9/96 3.36 3.21 3.00
10/96 3.31 3.16 2.96
11/96 3.32 3.17 2.98
12/96 3.43 3.26 3.07
1/97 3.23 3.09 2.90
2/97 3.20 3.06 2.87
3/97 3.08 2.97 2.76
</TABLE>
(1) Yields shown above are net of expenses.
(2) Average yield for all Tax-Free Money Funds (Institutions Only) category
compiled by IBC Money Market Insight(TM)
(3) Average yield for all Tax-Free Money Funds category compiled by IBC Money
Market Insight(TM)
TFIC Institutional Cash Reserves Shares' 7-day SEC yield as of March 31, 1997
was 3.29%.
Past performance cannot guarantee comparable future results.
3
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
ALABAMA - 2.04%
Birmingham (City of) (YMCA-Birmingham);
Public Park
and Recreation Board RB
3.55% 06/01/16(b)(c) -- VMIG-1 $ 3,390 $ 3,390,000
- -------------------------------------------------------------------------------
BMC Special Care Facilities Financing
Authority (VHA of Alabama Inc. Capital
Asset Financing Program); Variable Rate
Hospital
Series 1985 RB
3.45% 12/01/30(b)(d) A-1 Aaa 4,000 4,000,000
- -------------------------------------------------------------------------------
Marshall (County of); Special Obligation
School Refunding Series 1994 Warrants
3.50% 02/01/12(b)(c) A-1+ -- 2,775 2,775,000
- -------------------------------------------------------------------------------
Port City Medical Board of Mobile Alabama
(The) (Mobile Infirmary Association);
Series 1992 A RB
3.50% 07/25/97(c)(e) A-1+ P-1 10,300 10,300,000
- -------------------------------------------------------------------------------
20,465,000
- -------------------------------------------------------------------------------
ALASKA - 1.13%
Alaska Housing Finance Corp.; General
Mortgage Series 1991 A RB
3.45% 06/01/26(b) A-1+ VMIG-1 8,900 8,900,000
- -------------------------------------------------------------------------------
Valdez (City of) (ARCO Transportation
Alaska, Inc. Project); Marine Terminal
Refunding Series 1994 A RB
3.45% 05/16/97(e) A-1 VMIG-1 2,400 2,400,000
- -------------------------------------------------------------------------------
11,300,000
- -------------------------------------------------------------------------------
ARIZONA - 2.42%
Apache (County of) Industrial Development
Authority (Tucson Electric); Series 1983
C IDR
3.45% 12/15/18(b)(c) A-1 VMIG-1 5,900 5,900,000
- -------------------------------------------------------------------------------
Arizona (State of) Agricultural
Improvement and Power District (Salt
River Project); Promissory Notes
3.45% 04/07/97 A-1+ P-1 3,000 3,000,140
- -------------------------------------------------------------------------------
3.55% 06/13/97 A-1+ P-1 9,570 9,570,000
- -------------------------------------------------------------------------------
Maricopa (County of) Union High School
District No. 210;
Series 1995 A GO
5.75% 07/01/97 AA Aa 1,000 1,004,836
- -------------------------------------------------------------------------------
Pima (County of) Industrial Development
Authority (Tucson Electric Co. Project);
Refunding Series 1982 A IDR
3.50% 06/15/22(b)(c) A-1+ VMIG-1 2,000 2,000,000
- -------------------------------------------------------------------------------
Tempe (City of) Industrial Development
Authority (Elliot's Crossing Apartment
Project); Variable Rate Demand
Multifamily Housing Series RB
3.45% 10/01/08(b)(c) A-1+ -- 2,800 2,800,000
- -------------------------------------------------------------------------------
24,274,976
- -------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
COLORADO - 3.49%
Adams (County of) Industrial Development
(Clear Creek Business); Series 1984 RB
3.55% 11/01/08(b)(c) -- VMIG-1 $ 8,300 $ 8,300,000
- -------------------------------------------------------------------------------
Colorado (State of) General Fund; Series
1996 A TRAN
4.50% 06/27/97 SP-1+ -- 5,000 5,007,338
- -------------------------------------------------------------------------------
Colorado Housing Finance Authority
(Coventry Village Project); Multifamily
Housing Revenue Series 1996 B RB
3.55% 10/15/16(b)(c) A-1+ -- 5,370 5,370,000
- -------------------------------------------------------------------------------
Colorado Housing Finance Authority
(Winridge Project); Adjustable
Refunding Multifamily Housing Series
1993 RB
3.50% 02/01/23(b)(c) A-1+ -- 12,715 12,715,000
- -------------------------------------------------------------------------------
Douglas (County of) (Autumn Chase
Project); Variable Rate Demand
Multifamily Housing Series 1985 RB
3.45% 07/01/06(b)(c) -- VMIG-1 3,700 3,700,000
- -------------------------------------------------------------------------------
35,092,338
- -------------------------------------------------------------------------------
CONNECTICUT - 0.36%
Connecticut (State of) (Transportation
Infrastructure Purpose S-1); Special
Tax Obligation RB
3.40% 12/01/10(b)(c) A-1+ VMIG-1 2,225 2,225,000
- -------------------------------------------------------------------------------
Connecticut (State of) Power and Light
Development Authority;
Series 1993 A RB
3.50% 09/01/28(b)(c) A-1+ VMIG-1 1,425 1,425,000
- -------------------------------------------------------------------------------
3,650,000
- -------------------------------------------------------------------------------
DELAWARE - 0.10%
Delaware Transportation Authority
System; RB
7.00% 07/01/97(d) AAA Aaa 1,000 1,008,198
- -------------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 0.38%
District of Columbia (The American
University Issue); Variable Rate Weekly
Demand Series 1985 RB
3.45% 10/01/15(b)(c) -- VMIG-1 3,800 3,800,000
- -------------------------------------------------------------------------------
FLORIDA - 4.49%
Alachua (County of) Health Facility
Authority (Shands Teaching Hospital);
Series 1996 B RB
3.50% 12/01/26(b)(d) A-1+ VMIG-1 13,700 13,700,000
- -------------------------------------------------------------------------------
Brevard (County of) Housing Finance
Authority (Palm Place Project);
Multifamily Housing Series 1985 RB
3.55% 12/01/07(b)(c) -- VMIG-1 7,500 7,500,000
- -------------------------------------------------------------------------------
Florida Housing Finance Agency
(Woodlands Project); Adjustable Rate
Multifamily Housing Series 1985 SS RB
3.45% 12/01/07(b)(c) A-1+ VMIG-1 2,000 2,000,000
- -------------------------------------------------------------------------------
Gulf Breeze (City of)(Florida Municipal
Bond Fund); Variable Rate Demand Series
1995 A RB
3.46% 03/31/21(b)(c) A-1 -- 10,000 10,000,000
- -------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
Florida - (continued)
Putnam County Development Authority
(Seminole Electric Cooperative, Inc.
Project); National Rural Utilities
Cooperative Finance Corp. Guaranteed
Floating/Fixed Rate Pooled
Series 1984 H-1 PCR
3.45% 03/15/14(b)(c) A-1+ P-1 $ 3,915 $ 3,915,000
- -------------------------------------------------------------------------------
Sunshine State Governmental Financing
Commission (Florida State Board of
Administration); Government Financing
Program Tax Exempt Commercial Notes
3.55% 06/20/97(d) A-1+ -- 8,000 8,000,000
- -------------------------------------------------------------------------------
45,115,000
- -------------------------------------------------------------------------------
GEORGIA - 3.81%
Cobb (County of) Housing Authority
(Greenhouse Frey Apartment Project);
Multifamily Housing RB
3.45% 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
Decatur County Bainbridge Industrial
Development Authority (Kaiser
Agriculture Chemical Inc. Project);
Series 1985 IDR
3.50% 12/01/02(b)(c) A-1+ -- 2,100 2,100,000
- -------------------------------------------------------------------------------
Dekalb (County of) Housing Authority
(Camden Brook Project); Multifamily
Housing Series 1995 RB
3.45% 06/15/25(b)(c) A-1+ VMIG-1 6,000 6,000,000
- -------------------------------------------------------------------------------
Dekalb (County of) Housing Authority
(Clairmont Crest Project); Multifamily
Housing Series 1995 RB
3.45% 06/15/25(b)(c) A-1+ -- 7,600 7,600,000
- -------------------------------------------------------------------------------
Dekalb (County of) Private Hospital
Authority (Egleston Children's Hospital
at Emory University Health Care System
Project); Variable Rate Demand Series
1995 A RAN
3.45% 03/01/24(b)(c) A-1+ VMIG-1 3,000 3,000,000
- -------------------------------------------------------------------------------
Development Authority of Dekalb County
(Radiation Sterilizers, Inc. Project);
Variable Rate Demand Series 1985 IDR
3.60% 03/01/05(b)(c) A-1 -- 4,600 4,600,000
- -------------------------------------------------------------------------------
Municipal Gas Authority of Georgia
(Agency Project); Series 1996 A RB
3.45% 11/01/06(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
Roswell (City of) Housing Authority;
Multifamily Housing RB
3.45% 08/01/30(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
38,300,000
- -------------------------------------------------------------------------------
ILLINOIS - 12.21%
Burbank (City of) (Service Merchandise
Co. Inc. Project); Floating Rate
Monthly Demand Industrial Building
Series 1984 RB
3.45% 09/15/24(b)(c) A-1+ -- 3,600 3,600,000
- -------------------------------------------------------------------------------
Chicago (City of); Tender Notes Series
1996 GO
3.55% 10/31/97(c)(e) SP-1+ MIG-1 4,000 4,000,000
- -------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
Illinois - (continued)
Cook (County of)(Catholic Charities
Housing Development Corp. Project);
Adjustable Demand Series 1988 A-1 RB
3.50% 01/01/28(b)(c) -- VMIG-1 $ 1,700 $ 1,700,000
- -------------------------------------------------------------------------------
Cook (County of) High School District No.
201 (Cicero); GO
7.30% 12/01/97(d) AAA Aaa 6,500 6,652,936
- -------------------------------------------------------------------------------
Du Page Water Commission; RB
6.875% 05/01/97(f) AAA -- 1,000 1,022,598
- -------------------------------------------------------------------------------
East Peoria (City of) (Radnor/East Peoria
Partnership Project); Multifamily
Housing Series 1983 RB
3.65% 06/01/08(b)(c) -- Aa3 6,070 6,070,000
- -------------------------------------------------------------------------------
Illinois (State of); Sales Tax Series E
RB
8.10% 06/15/97(f) AAA Aaa 1,435 1,475,693
- -------------------------------------------------------------------------------
Illinois Development Finance Authority;
Variable Rate Demand Notes Series 1996-
1997A
3.50% 06/30/97(b)(c) A-1+ -- 6,600 6,600,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(American College of Surgeons Project);
Tax Exempt Series 1996 RB
3.45% 08/01/26(b)(c) A-1+ -- 10,000 10,000,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Chicago Symphony Orchestra Project);
Variable/Fixed Rate Demand Series 1996
RB
3.50% 06/01/31(b)(c) A-1+ VMIG-1 5,129 5,129,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Commonwealth Edison Co.); PCR
3.45% Series A 12/01/06(b)(d) A-1 VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Institutional Gas Technology Project);
Variable Rate Series 1993 RB
3.50% 09/01/18(b)(c) A-1+ -- 2,600 2,600,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Jewish Charities Revenue Anticipation
Notes Program); Variable Rate Demand
Series 1996-1997B RAN
3.50% 06/30/97(b)(c) A-1+ -- 5,225 5,225,000
- -------------------------------------------------------------------------------
Illinois Educational Facilities Authority
(Museum of Science & Industry); Variable
Rate Series 1992 RB
3.50% 10/15/06(c)(e) -- VMIG-1 9,000 9,000,000
- -------------------------------------------------------------------------------
Illinois Educational Facilities Authority
(Pooled Financing Program); Adjustable
Rate Series 1985 RB
3.50% 12/01/05(b)(d) A-1+ VMIG-1 3,780 3,780,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority;
Revolving Fund Pooled Series D
3.50% 08/01/15(b)(c) A-1+ VMIG-1 4,550 4,550,000
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
Illinois - (continued)
Illinois Health Facilities Authority
(Streetville Corp.); Variable Rate
Series 1994 RB
3.50% 08/15/24(b)(c) A-1+ P-1 $ 3,000 $ 3,000,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Advocate Health Care Network); Variable
Rate Series 1997 B RB
3.55% 08/15/22(b)(d) A-1+ VMIG-1 10,140 10,140,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Northwestern Memorial Hospital);
Variable Rate Series 1995 RB
4.00% 08/15/25(b)(d) A-1+ VMIG-1 7,800 7,800,000
- -------------------------------------------------------------------------------
Marseilles (City of) (Kaiser Agricultural
Chemicals Inc. Project); Variable Rate
Demand Series 1985 IDR
3.50% 01/01/98(b)(c) A-1+ -- 3,750 3,750,000
- -------------------------------------------------------------------------------
Oak Forest (City of) (Homewood Pool);
Series 1989 RB
3.50% 07/01/24(b)(c) -- VMIG-1 3,000 3,000,000
- -------------------------------------------------------------------------------
Village of Lisle (Four Lakes Project
Phase Five); Multifamily Housing
Revenue Refunding Series 1996
3.45% 09/15/26(b)(c) A-1+ -- 15,380 15,380,000
- -------------------------------------------------------------------------------
Village of Northbrook (Euromarket
Designs, Inc. Project); Variable Rate
Demand Refunding Series 1993 IDR
3.50% 07/01/02(b)(c) A-1+ -- 3,100 3,100,000
- -------------------------------------------------------------------------------
122,575,227
- -------------------------------------------------------------------------------
INDIANA - 2.51%
Auburn (City of) (Sealed Power Corp.
Project); Variable Rate Demand Economic
Development Series 1985 RB
3.55% 07/01/10(b)(c) -- VMIG-1 1,200 1,200,000
- -------------------------------------------------------------------------------
Indianapolis (City of); Local Public
Improvement Series 1996 F RB
4.125% 07/10/97 SP-1 -- 3,000 3,004,789
- -------------------------------------------------------------------------------
Indianapolis (City of) (Childrens Museum
Project); Economic Development Floating
Rate Series 1995 RB
3.45% 10/01/25(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
Indianapolis (City of) (Jewish Community
Campus Project); Variable Rate Economic
Development RB
3.45% 04/01/05(b)(c) -- VMIG-1 2,395 2,395,000
- -------------------------------------------------------------------------------
Petersburg (City of) (Indianapolis Power
and Light Co. Project); Adjustable Rate
Tender Securities Series 1995 B PCR
3.45% 01/01/23(b)(d) A-1+ VMIG-1 2,700 2,700,000
- -------------------------------------------------------------------------------
Rockport (City of) Indiana Development
Authority (AEP Generating Company
Project); Series 1995 A PCR
3.80% 07/01/25(b)(d) A-1c Aaa 3,900 3,900,000
- -------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
Indiana - (continued)
Rockport (City of) Indiana Development
Authority (AEP Generating Company
Project B); Series 1995 B PCR
3.85% 07/01/25(b)(d) A-1c Aaa $ 1,600 $ 1,600,000
- -------------------------------------------------------------------------------
Sullivan (City of) (Hoosier Energy Rural
Electric Cooperative, Inc.); National
Rural Utilities Cooperative Finance
Corp. Series 1985 L-1 Commercial Notes
3.40% 05/16/97(c)(e) A-1+ P-1 5,400 5,400,000
- -------------------------------------------------------------------------------
25,199,789
- -------------------------------------------------------------------------------
IOWA - 0.17%
Iowa Higher Education Loan Authority;
Private College Facility RB
3.45% 12/01/15(b)(d) A-1+ VMIG-1 1,700 1,700,000
- -------------------------------------------------------------------------------
KANSAS - 0.50%
Mission (City of) (Silverwood Apartment
Project); Multifamily RB
3.45% 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
KENTUCKY - 1.32%
Mason County (East Kentucky Power
Cooperative, Inc. Project); National
Rural Utilities Cooperative Finance
Corp. Guaranteed Floating/Fixed Rate
Pooled Sereis 1984 B-2 PCR
3.45% 10/15/14(b)(c) A-1 Aa3 9,150 9,150,000
- -------------------------------------------------------------------------------
Mayfield (City of) (Kentucky League of
Cities Funding Trust Pooled Lease
Financing Program); Variable Rate Multi-
City Lease
Series 1996 RB
3.55% 07/01/26(b)(c) A-1 VMIG-1 4,100 4,100,000
- -------------------------------------------------------------------------------
13,250,000
- -------------------------------------------------------------------------------
LOUISIANA - 0.95%
East Baton Rouge Mortgage Finance
Authority (GNMA and FNMA Mortgage-Backed
Securities Program); Single Family
Mortgage Refunding Series 1996 C-1 RB
3.85% 04/03/97(e)(f) -- VMIG-1 2,000 2,000,000
- -------------------------------------------------------------------------------
Louisiana Public Facilities Authority
(Greenbriar Hospital Inc. Project);
Variable Rate Demand Series 1984 RB
3.50% 11/01/14(b)(c) -- Aa2 2,500 2,500,000
- -------------------------------------------------------------------------------
Louisiana Public Facilities Authority
(Willi-Knighton Medical Center Project);
Hospital Series 1995 RB
3.50% 09/01/25(b)(d) A-1 VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
9,500,000
- -------------------------------------------------------------------------------
MARYLAND - 0.35%
Prince George (County of) Housing
Authority (Laurel-Oxford Associates
Apartment Project); Mortgage Series 1985
RB
3.525% 10/01/07(b)(c) -- VMIG-1 3,500 3,500,000
- -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
MASSACHUSETTS - 0.15%
Massachusetts Health & Educational
Facilities Authority (Harvard
University Issue); Variable Rate
Demand Series 1 RB
3.30% 08/01/17(b)(d) A-1+ VMIG-1 $ 1,500 $ 1,500,000
- -----------------------------------------------------------------------------
MICHIGAN - 5.89%
Jackson County Economic Development
Corp. (Sealed Power Corp.); Economic
Development Variable Refunding RB
3.55% 10/01/19(b)(c) -- VMIG-1 1,000 1,000,000
- -----------------------------------------------------------------------------
Michigan (State of); Full Faith &
Credit General Obligation Notes
Series 1997
4.50% 09/30/97 SP-1+ MIG-1 7,000 7,035,340
- -----------------------------------------------------------------------------
Michigan State Hospital Finance
Authority
(Hospital Equipment Loan Program);
Hospital RB
3.55% Pooled Series 1994 A
12/01/23(b)(c) -- VMIG-1 5,600 5,600,000
- -----------------------------------------------------------------------------
3.55% Pooled Series 1995 A
12/01/23(b)(c) -- VMIG-1 2,900 2,900,000
- -----------------------------------------------------------------------------
3.55% Pooled Series 1996 A
12/01/23(b)(c) -- VMIG-1 6,900 6,900,000
- -----------------------------------------------------------------------------
Michigan State Strategic Fund (Detroit
Edison Co.);
Limited Obligation RB
4.00% 09/01/30(b)(c) A-1+ P-1 5,000 5,000,000
- -----------------------------------------------------------------------------
Michigan State Strategic Fund
(Peachwood Center Association
Project); Limited Obligation Series
1995 RB
3.45% 06/01/16(b)(c) A-1+ -- 2,350 2,350,000
- -----------------------------------------------------------------------------
Michigan State Underground Storage
Tank Financial Assurance Authority;
Series I RB
5.00% 05/01/97(d) AAA Aaa 6,500 6,505,948
- -----------------------------------------------------------------------------
Michigan Strategic Fund (Consumer's
Power Corp.); Variable Rate Demand
Series 1988 A PCR
3.80% 04/15/18(b)(c) -- P-1 4,844 4,843,500
- -----------------------------------------------------------------------------
Michigan Strategic Fund (260 Brown St.
Associates Project); Convertible
Variable Rate Demand Limited
Obligation
Series 1985 RB
3.40% 10/01/15(b)(c) -- VMIG-1 3,650 3,650,000
- -----------------------------------------------------------------------------
Michigan Strategic Fund (The Norcor
Corp. Project); IDR
3.45% 12/01/00(b)(c) -- P-1 4,400 4,400,000
- -----------------------------------------------------------------------------
Monroe (County of) (Detroit Edison
Co.); Limited Obligation Revenue
Adjusting Refunding Series 1992 CC RB
4.00% 10/01/24(b)(c) -- P-1 4,000 4,000,000
- -----------------------------------------------------------------------------
Wayne County School District; State
School Aid
Limited Tax Series 1996 GO
4.50% 05/01/97 SP-1+ -- 5,000 5,002,189
- -----------------------------------------------------------------------------
59,186,977
- -----------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
MINNESOTA - 1.90%
Bloomington (City of) Port Authority
(Mall of America Project); Special Tax
Revenue Series 1996 B RB
3.50% 02/01/13(b)(d) A-1+ VMIG-1 $ 2,000 $ 2,000,000
- -------------------------------------------------------------------------------
Duluth (City of) (Miller-Dwan Medical
Center); Variable Rate Demand Health
Facilities Series 1996 RB
3.80% 06/01/19(b)(c) A-1+ -- 7,000 7,000,000
- -------------------------------------------------------------------------------
Mankato (City of) (Northern States Power
Co. Project); Floating Collateralized
Series 1985 PCR
3.55% 03/01/11(b)(d) AA- A1 2,900 2,900,000
- -------------------------------------------------------------------------------
Minneapolis (City of) Community
Development Agency (Walker Methodist
Health Systems); Adjustable Refunding
Series 1995 RB
3.50% 04/01/10(b)(c) A-1 -- 6,000 6,000,000
- -------------------------------------------------------------------------------
Red Wing (City of) Industrial Development
Authority (Northern States Power Co.);
Floating Rate Collateralized Series 1985
PCR
3.55% 03/01/11(b)(d) AA- A1 1,200 1,200,000
- -------------------------------------------------------------------------------
19,100,000
- -------------------------------------------------------------------------------
MISSOURI - 2.22%
Kansas (City of) (Sleepy Hollow Apartment
Project); Multifamily Housing Series
1996 RB
3.45% 09/15/26(b)(c) A-1+ -- 7,500 7,500,000
- -------------------------------------------------------------------------------
Missouri Health & Educational Facilities
Authority (St. Francis Medical Center);
Variable Rate Demand Health Facilities
Series 1996 A RB
3.80% 06/01/26(b)(c) A-1+ -- 3,500 3,500,000
- -------------------------------------------------------------------------------
Missouri State Environmental Improvement
& Energy Resource Authority (Associated
Electric Cooperative, Inc. Project);
Pooled
Series 1993-M RB
3.45% 12/15/03(b)(c) AA- VMIG-1 2,490 2,490,000
- -------------------------------------------------------------------------------
Saint Louis County Industrial Development
Authority (Bonhomme Village Apartments
Association Project); Variable Rate
Demand Housing Series 1985 RB
3.65% 10/01/07(b)(c) -- VMIG-1 6,900 6,900,000
- -------------------------------------------------------------------------------
Sikeston (City of) Missouri; Electric
Revenue RB
5.10% 06/01/97(d) AAA Aaa 1,865 1,869,650
- -------------------------------------------------------------------------------
22,259,650
- -------------------------------------------------------------------------------
MISSISSIPPI - 1.60%
Jackson (County of) (Chevron U.S.A. Inc.
Project); Series 1993 PCR
3.80% 12/01/16(b) -- P-1 2,900 2,900,000
- -------------------------------------------------------------------------------
3.80% 06/01/23(b) -- P-1 6,100 6,100,000
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
Mississippi - (continued)
Perry (County of) (Leaf River Forest
Project); Series 1989 PCR
3.50% 10/01/12(b)(c) -- P-1 $ 7,100 $ 7,100,000
- -------------------------------------------------------------------------------
16,100,000
- -------------------------------------------------------------------------------
MONTANA - 0.40%
Montana (State of); Series 1996 TRAN
4.50% 06/27/97 SP-1+ MIG-1 4,000 4,007,483
- -------------------------------------------------------------------------------
NEVADA - 0.20%
Clark (County of) (Nevada Power Co.
Project);
Series 1995 D-1 PCR
3.45% 10/01/11(b)(c) A-1+ -- 2,000 2,000,000
- -------------------------------------------------------------------------------
NEW HAMPSHIRE - 1.33%
New Hampshire Higher Educational and
Health Facilities Authority (VHA of New
England Capital Asset Financial
Program); Variable Rate Hospital Series
1985 G RB
3.45% Series G 12/01/25(b)(d) A-1 Aaa 7,925 7,925,000
- -------------------------------------------------------------------------------
New Hampshire Housing Finance Authority
(EQR-Bond Partnership-Manchester
Project); Multifamily Housing Refunding
Series 1996 RB
3.45% 09/15/26(b)(c) -- VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
New Hampshire Industrial Development
Authority (Bangor Hydro-Electric Co.
Project); Variable Rate Demand Series
1983 PCR
3.40% 01/01/09(b)(c) A-1+ -- 400 400,000
- -------------------------------------------------------------------------------
13,325,000
- -------------------------------------------------------------------------------
NEW MEXICO - 1.96%
Farmington (City of) (Public Service Co.
of New Mexico San Juan Project); Series
1997 B PCR
3.45% 04/01/22(b)(c) A-1+ P-1 14,000 14,000,000
- -------------------------------------------------------------------------------
Hurley (Town of) (Kennecott Santa Fe
Corp. Project); Unit Priced Demand
Adjustable Series 1985 PCR
3.80% 12/01/15(b)(d) A-1+ P-1 4,600 4,600,000
- -------------------------------------------------------------------------------
Las Cruces (City of); Joint Utility
Refunding and Improvement Series 1997 A
RB
4.00% 07/01/97 AAA Aaa 1,070 1,071,034
- -------------------------------------------------------------------------------
19,671,034
- -------------------------------------------------------------------------------
NEW YORK - 18.25%
Eagle Tax Exempt Trust; Class A COP(g)
3.56% Series 97C4703 01/01/01(e)(f) A-1+c Aaa 10,800 10,800,000
- -------------------------------------------------------------------------------
3.61% Series 1993 E 08/01/06(b)(d) A-1+c -- 15,000 15,000,000
- -------------------------------------------------------------------------------
3.61% Series 1993 F 08/01/06(b)(d) A-1+c -- 20,500 20,500,000
- -------------------------------------------------------------------------------
3.61% Series 943902 05/01/07(b)(d) A-1+c -- 17,800 17,800,000
- -------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
New York - (continued)
3.61% Series 943901 06/15/07(b)(d) A-1+c -- $ 14,500 $ 14,500,000
- ------------------------------------------------------------------------------
3.61% Series 94C2102 06/01/14(b)(c) A-1+c -- 10,100 10,100,000
- ------------------------------------------------------------------------------
3.56% Series 97C4702 01/01/20(b)(d) A-1+c Aa1 9,500 9,500,000
- ------------------------------------------------------------------------------
3.61% Series 950901 06/01/21(b)(d) A-1+c -- 12,700 12,700,000
- ------------------------------------------------------------------------------
3.56% Series 943207 07/01/29(b)(d) A-1+c -- 14,200 14,200,000
- ------------------------------------------------------------------------------
Eagle Tax Exempt Trust (Washington
Public Power Supply System Project No.
2); Series 964703 Class A COP
3.56% 07/01/11(b)(d)(g) A-1+c -- 5,600 5,600,000
- ------------------------------------------------------------------------------
Merrill Lynch Group Float Program, New
York State Medical Facilities Finance
Agency (St. Lukes-Roosevelt Hospital
Center); Floating Option Tax-Exempt
Receipts Series PA-113 1993 A Mortgage
RB
3.55% 02/15/29(b)(d) A-1+c -- 9,700 9,700,000
- ------------------------------------------------------------------------------
New York (City of); General Obligation
Fiscal Series 1997 B RAN
4.50% 06/30/97(c) SP-1+ MIG-1 20,500 20,546,728
- ------------------------------------------------------------------------------
New York City Housing Development Corp.
(Parkgate Tower); Variable Rate Demand
Resolution Series 1 1985 RB
3.30% 12/01/07(b)(c) A-1+ VMIG-1 5,870 5,870,000
- ------------------------------------------------------------------------------
New York City Municipal Water Finance
Authortiy; Water and Sewer System
Adjustable Rate Series 1994 G RB
3.85% 06/15/24(b)(d) A-1+ VMIG-1 2,000 2,000,000
- ------------------------------------------------------------------------------
New York State Energy Research and
Development Authority (Niagara Mohawk
Power Corp.); PCR
3.80% Series 1985 A 07/01/15(b)(c) A-1+ -- 6,800 6,800,000
- ------------------------------------------------------------------------------
3.80% Series 1985 C 12/01/25(b)(c) -- P-1 2,600 2,600,000
- ------------------------------------------------------------------------------
Triborough (The) Bridge and Tunnel
Authority; Special Obligation Variable
Rate Demand Series 1994 RB
3.45% 01/01/24(b)(d) A-1+ VMIG-1 5,000 5,000,000
- ------------------------------------------------------------------------------
183,216,728
- ------------------------------------------------------------------------------
NORTH CAROLINA - 2.87%
Alamance (County of) Industrial
Facilities & Pollution Control
Financing Authority (Science
Manufacturing Inc. Project); Series
1985 IDR
3.90% 04/01/15(b)(c) -- P-1 3,000 3,000,000
- ------------------------------------------------------------------------------
New Hanover (County of) Industrial
Facilities and Pollution Control
Financing Authority (Gang-Nail
Systems, Inc. Project);
Series 1984 IDR
3.50% 12/01/99(b)(c) -- P-1 5,600 5,600,000
- ------------------------------------------------------------------------------
North Carolina Educational Facilities
Finance Agency (Elon College); Series
1997 RB
3.35% 01/01/19(b)(c) A-1+ VMIG-1 5,000 5,000,000
- ------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
North Carolina - (continued)
North Carolina Educational Facilities
Finance Agency (Guillford College
Project); Variable Rate Demand/Fixed
Rate Series 1993 RB
3.80% 09/01/23(b)(c) A-1+ -- $ 2,100 $ 2,100,000
- -------------------------------------------------------------------------------
North Carolina Medical Care Commission
Retirement Community (Adult Communities
Total Services Inc.); Variable Rate
Demand Series 1996 RB
3.50% 11/15/09(b)(c) A-1+ -- 5,655 5,655,000
- -------------------------------------------------------------------------------
North Carolina Medical Care Community
Hospital (Baptist Hospitals Project);
RB
3.45% 06/01/12(b)(c) A-1+ VMIG-1 4,000 4,000,000
- -------------------------------------------------------------------------------
North Carolina Municipal Power Agency
Number 1 (Catawba Project) Tax Exempt
Commercial Notes
3.40% 05/21/97(c) A-1+ P-1 3,500 3,500,000
- -------------------------------------------------------------------------------
28,855,000
- -------------------------------------------------------------------------------
OHIO - 2.14%
Cuyahoga (County of) (S&R Playhouse
Realty Co.); Adjustable Rate Demand
Series 1984 IDR
3.65% 12/01/09(b(c) -- MIG-1 635 635,000
- -------------------------------------------------------------------------------
Franklin (County of) (Bricker & Eckler
Building Co. Project); Variable Rate
Demand Series 1984 IDR
3.65% 11/01/14(b)(c) -- P-1 8,800 8,800,000
- -------------------------------------------------------------------------------
Lucas (County of) (Lutheran Homes
Society Project); Adjustable Rate
Demand Health Care Facilities Series
1996 RB
3.45% 11/01/19(b)(c) A-1+ -- 2,800 2,800,000
- -------------------------------------------------------------------------------
Marion (County of) (Pooled Lease
Program); Hospital RB
3.55% 10/01/22(b)(c) A-1+ -- 2,095 2,095,000
- -------------------------------------------------------------------------------
Ohio Building Authority (Art Facilities
Building Fund Projects); State
Facilities Series 1997 A RB
4.00% 10/01/97 AA- Aa3 3,180 3,184,889
- -------------------------------------------------------------------------------
Ohio Housing Finance Agency (Kenwood
Congregate Retirement Community
Project); Variable Rate Demand
Multifamily Housing Series 1985 RB
3.35% 12/01/15(b)(c) -- VMIG-1 956 956,000
- -------------------------------------------------------------------------------
Summit (County of) Various Purpose
Notes; Series 1996 B General Obligation
BAN
4.00% 06/05/97 -- MIG-1 3,000 3,001,800
- -------------------------------------------------------------------------------
21,466 21,472,689
- -------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
OKLAHOMA - 1.00%
Oklahoma Water Resource Board State Loan
Program;
Series 1994 A RB
3.50% 09/01/97(e) A-1+ -- $ 10,000 $ 10,000,000
- -------------------------------------------------------------------------------
OREGON - 0.59%
Portland (City of) (South Park Block
Project); Multifamily Housing Refunding
Series 1988 A RB
3.45% 12/01/11(b)(c) A-1+ -- 5,900 5,900,000
- -------------------------------------------------------------------------------
PENNSYLVANIA - 2.78%
Commonwealth of Pennsylvania; First
Series 1996-1997 TAN
4.50% 06/30/97 SP-1+ MIG-1 14,550 14,582,217
- -------------------------------------------------------------------------------
Delaware County Industrial Development
Authority (Henderson-Radnor Joint
Venture Project); Limited Obligation
Series 1985 IDR
3.55% 04/01/15(b)(c) -- Aa3 855 855,000
- -------------------------------------------------------------------------------
Emmaus (City of) General Authority;
Series 1996 RB
3.65% 12/01/28(b)(d) A-1+ -- 3,000 3,000,000
- -------------------------------------------------------------------------------
Schuykill County Industrial Development
Authority (Gilberton Power Project);
Variable Rate Resources Recovery Series
1985 RB
3.45% 12/01/02(b)(c) A-1 -- 2,300 2,300,000
- -------------------------------------------------------------------------------
Wilkes-Barre (City of) Industrial
Development Authority (Toys "R" Us/Penn
Inc. Project); Economic Development
Series 1984 RB
3.425% 07/01/14(b)(c) -- A1 2,300 2,300,000
- -------------------------------------------------------------------------------
York (City of) General Authority;
Adjustable Rate Pooled Financing Series
1996 RB
3.50% 09/01/26(b)(c) A-1 -- 4,900 4,900,000
- -------------------------------------------------------------------------------
27,937,217
- -------------------------------------------------------------------------------
RHODE ISLAND - 0.13%
Rhode Island and Providence Plantations;
Lease Participation Certificates
Correctional Facilities Refunding
Series 1997 RB
4.75% 10/01/97(d) AAA Aaa 1,290 1,296,734
- -------------------------------------------------------------------------------
SOUTH CAROLINA - 0.89%
Horry (County of) (Carolina Treatment
Center); Variable Rate Demand Series
1984 RB
3.45% 12/01/14(b)(c) -- Aa2 2,300 2,300,000
- -------------------------------------------------------------------------------
Rock Hill (City of); Utilities System RB
3.45% 01/01/22(b)(d) A-1+ VMIG-1 6,675 6,675,000
- -------------------------------------------------------------------------------
8,975,000
- -------------------------------------------------------------------------------
TENNESSEE - 3.39%
Health, Educational and Housing Facility
Board of Shelby County (Rhodes
College); Variable Rate Demand
Educational Facilities Series 1985 RB
3.45% 08/01/10(b)(c) A-1+ -- 2,075 2,075,000
- -------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
Tennessee - (continued)
Industrial Development Board of the City
of Knoxville (Toys "R" Us Inc.,
Project); Series 1984 IDR
3.65% 05/01/14(b)(c) -- A1 $ 1,150 $ 1,150,000
- ------------------------------------------------------------------------------
Knox (County of) Industrial Development
Authority (Centre Square II, Ltd.
Project); Floating Rate Monthly Demand
Series 1984 IDR
3.35% 12/01/14(b)(c) A-1+ -- 5,400 5,400,000
- ------------------------------------------------------------------------------
Knox (County of) Industrial Development
Authority (Old Kingston Properties);
Floating Rate Industrial Series 1984
IDR
3.35% 12/01/14(b)(c) A-1+ -- 3,500 3,500,000
- ------------------------------------------------------------------------------
Knox (County of) Industrial Development
Authority (Professional Plaza, Ltd.
Project); Floating Rate Monthly Demand
Series 1984 IDR
3.35% 12/01/14(b)(c) A-1+ -- 2,900 2,900,000
- ------------------------------------------------------------------------------
Knox County Industrial Development Board
(Weisgarber Partners Ltd Project);
Floating Rate Series 1984 IDR
3.35% 12/01/14(b)(c) A-1+ -- 700 700,000
- ------------------------------------------------------------------------------
Nashville and Davidson (County of)
Industrial Development Board of Metro
Government (Amberwood Ltd Project);
Multifamily Housing RB
3.76% Series 1993 A 07/01/13(b)(c) -- VMIG-1 2,345 2,345,000
- ------------------------------------------------------------------------------
3.76% Series 1993 B 07/01/13(b)(c) A-1 VMIG-1 1,990 1,990,000
- ------------------------------------------------------------------------------
Tennessee State School Bond Authority;
Higher Educational Facilities BAN
3.45% Series 1997 A 03/01/98(b)(d) A-1+ VMIG-1 7,000 7,000,000
- ------------------------------------------------------------------------------
3.45% Series A 07/02/01(b) A-1+ VMIG-1 2,000 2,000,000
- ------------------------------------------------------------------------------
3.45% Series C 07/02/01(b) A-1+ VMIG-1 5,000 5,000,000
- ------------------------------------------------------------------------------
34,060,000
- ------------------------------------------------------------------------------
TEXAS - 10.44%
Angelina & Neches River Authority
Industrial Development Corp.; Solid
Waste Disposal Series 1984 C RB
4.00% 05/01/14(b)(c) -- P-1 2,700 2,700,000
- ------------------------------------------------------------------------------
Angelina & Neches River Authority
Industrial Development Corp. (Temple
Inland Marine); Series 1984 D RB
4.00% 05/01/14(b)(c) -- P-1 3,300 3,300,000
- ------------------------------------------------------------------------------
Bexar (County of) Texas Housing Finance
Authority (Fountainhead Apartments);
Multifamily RB
3.45% 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- ------------------------------------------------------------------------------
Brazos River Harbor Navigation District
of Brazoria County (Hoffman-La Roche
Inc. Project); Series 1985 RB
3.425% 04/01/02(b)(c) -- A1 2,750 2,750,000
- ------------------------------------------------------------------------------
Dallas Area Rapid Transit; Sales Tax
Revenue Series B Commercial Paper Notes
3.55% 05/28/97(c) A-1+ P-1 5,000 5,000,000
- ------------------------------------------------------------------------------
Harris (County of); Sub Lein Toll Road
Series D RB
3.30% 08/01/15(b)(c) A-1+ VMIG-1 8,400 8,400,000
- ------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
Texas - (continued)
Harris County Health Facilities
Development Corp. (Buckner Retirement
Services, Inc. Project); Series 1996
RB
3.50% 08/15/26(b)(c) -- VMIG-1 $ 17,800 $ 17,800,000
- ------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Greater Houston
Pooled Health); Series 1985 A RB
3.55% 11/01/25(b)(c) A-1 -- 2,900 2,900,000
- ------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Gulf Coast Regional
Blood Center Project); Series 1992 RB
3.45% 04/01/17(b)(c) A-1 -- 3,450 3,450,000
- ------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Memorial Hospital
System Project); Series 1997 B RB
3.35% 06/01/24(b)(d) -- VMIG-1 5,000 5,000,000
- ------------------------------------------------------------------------------
North Central Texas Health Facilities
Development Authority (Presbyterian
Medical Center); Series 1985 C RB
3.80% 12/01/15(b)(d) A-1 VMIG-1 2,300 2,300,000
- ------------------------------------------------------------------------------
Nueces County Health Facilities
Development Corp. (Driscoll Childrens
Hospital); Floating Rate Demand
Hospital Series 1985 RB
3.45% 07/01/15(b)(c) -- VMIG-1 2,570 2,570,000
- ------------------------------------------------------------------------------
Tarrant (County of) Texas Housing
Finance Corp. (Windcastle Project);
Multifamily Housing RB
3.55% 08/01/26(b)(c) A-1+ -- 2,100 2,100,000
- ------------------------------------------------------------------------------
Texas (State of); Series 1996 TRAN
4.75% 08/29/97 SP-1+ MIG-1 21,000 21,074,669
- ------------------------------------------------------------------------------
Texas Department of Housing and
Community Affairs; SFM Tax Exempt
Refunding Series B Commercial Paper
Notes
3.60% 06/26/97(d) A-1+ -- 2,655 2,655,000
- ------------------------------------------------------------------------------
Texas Department of Housing and Urban
Affairs (Remington Hill Department);
Multifamily Housing Refunding Series
1993 B RB
3.50% 02/01/23(b)(c) A-1+ -- 13,880 13,880,000
- ------------------------------------------------------------------------------
Texas State Public Finance Authority;
Building RB
6.40% 02/01/98(d) AAA Aaa 1,850 1,891,505
- ------------------------------------------------------------------------------
Trinity River Industrial Development
Authority (Radiation Sterilizers, Inc.
Project); Variable Rate Demand IDR
3.60% Series 1985 A 11/01/05(b)(c) A-1 -- 500 500,000
- ------------------------------------------------------------------------------
3.60% Series 1985 B 11/01/05(b)(c) A-1 -- 1,650 1,650,000
- ------------------------------------------------------------------------------
104,921,174
- ------------------------------------------------------------------------------
UTAH - 2.06%
Bountiful (City of) (Bountiful Gateway
Park Project); Adjustable Rate
Refunding Series 1987 IDR
3.75% 12/01/97(b)(c) A-1+ -- 3,785 3,785,000
- ------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
Utah - (continued)
Intermountain Power Agency; Variable Rate
Power Supply Refunding Series 1985 E
Commercial Notes
3.50% 08/22/97(c) A-1+ VMIG-1 $ 8,200 $ 8,200,000
- -------------------------------------------------------------------------------
State Board of Regents of the State of
Utah (University Inn Project); Variable
Rate Demand Series 1985 IDR
4.00% 12/01/15(b)(c) -- P-1 8,655 8,655,000
- -------------------------------------------------------------------------------
20,640,000
- -------------------------------------------------------------------------------
VERMONT - 0.71%
Vermont Educational and Health Buildings
(VHA New England); Financing Agency RB
3.45% Series E 12/01/25(b)(d) A-1 Aaa 2,500 2,500,000
- -------------------------------------------------------------------------------
3.45% Series F 12/01/25(b)(d) A-1+ Aaa 2,100 2,100,000
- -------------------------------------------------------------------------------
Vermont (State of) Health and Education
Building Finance Agency (VHA of New
England Capital Asset Finance Program);
Variable Rate Hospital Series 1985 G RB
3.45% 12/01/25(b)(d) A-1+ Aaa 2,560 2,560,000
- -------------------------------------------------------------------------------
7,160,000
- -------------------------------------------------------------------------------
VIRGINIA - 2.30%
Henrico (County of) Virginia Industrial
Development Authority (Hermitage
Project); Variable Rate Health
Facilities Bonds Series 1994 RB
3.90% 05/01/24(b)(c) -- VMIG-1 6,071 6,070,500
- -------------------------------------------------------------------------------
Industrial Development Authority of the
City of Lynchburg (VHA Mid-Atlantic
States, Inc.); Capital Asset Financing
Program Variable Rate Hospital Series
1985 F RB
3.50% 12/01/25(b)(d) A-1 Aaa 1,000 1,000,000
- -------------------------------------------------------------------------------
Industrial Development Authority of the
City of Norfolk (Sentara Hospitals-
Norfolk Project); Series 1990 A
Commercial Paper Notes
3.50% 05/22/97(e) A-1+ VMIG-1 14,985 14,985,000
- -------------------------------------------------------------------------------
Peninsula Ports Authority of Virginia
(Dominion Terminal Associates Project);
Coal Terminal Refunding Series 1987 D RB
3.70% 07/01/16(b)(c) -- P-1 1,000 1,000,000
- -------------------------------------------------------------------------------
23,055,500
- -------------------------------------------------------------------------------
WASHINGTON - 0.14%
Clark (County of) (Evergreen School
District No. 114); Unlimited Tax Series
1996 GO
6.00% 06/01/97(c) AAA Aaa 1,440 1,445,183
- -------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
RATING(a) PAR
S&P MOODY'S (000) VALUE
WEST VIRGINIA - 2.35%
West Virginia Hospital Finance
Authority (VHA Mid-Atlantic States,
Inc. Capital Asset Financing
Program); RB
3.50% Series 1985 B 12/01/25(b)(d) A-1+ Aaa $ 3,000 $ 3,000,000
- ------------------------------------------------------------------------------
3.50% Series 1985 C 12/01/25(b)(d) A-1 Aaa 3,500 3,500,000
- ------------------------------------------------------------------------------
3.50% Series 1985 D 12/01/25(b)(d) A-1 -- 1,400 1,400,000
- ------------------------------------------------------------------------------
3.50% Series 1985 E 12/01/25(b)(d) A-1 Aaa 1,400 1,400,000
- ------------------------------------------------------------------------------
3.50% Series 1985 F 12/01/25(b)(d) A-1 Aaa 5,700 5,700,000
- ------------------------------------------------------------------------------
3.50% Series 1985 H 12/01/25(b)(d) A-1 Aaa 8,600 8,600,000
- ------------------------------------------------------------------------------
23,600,000
- ------------------------------------------------------------------------------
WISCONSIN - 1.10%
Wisconsin (State of); GO
4.50% 06/16/97 SP-1+ MIG-1 6,000 6,007,766
- ------------------------------------------------------------------------------
Wisconsin (State of); Series C GO
7.00% 05/01/97(e)(f) AAA AAA 1,000 1,012,524
- ------------------------------------------------------------------------------
Wisconsin Health and Education
Facilities Authority (Wheaton
Franciscan Services, Inc. System);
Variable Rate Demand Series 1997 RB
3.35% 08/15/16(b)(c) A-1+ VMIG-1 4,000 4,000,000
- ------------------------------------------------------------------------------
11,020,290
- ------------------------------------------------------------------------------
WYOMING - 0.25%
Uinta (County of) (Chevron USA
Project); Series 1993 PCR
3.80% 08/15/20(e) -- P-1 2,500 2,500,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 103.27% 1,036,936,187(h)
- ------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -
(3.27%) (32,825,030)
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $1,004,111,157
==============================================================================
</TABLE>
INVESTMENT ABBREVIATIONS:
<TABLE>
<C> <S>
BAN Bond Anticipation Notes
COP Certificates of Participation
GO General Obligation Bonds
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
</TABLE>
<TABLE>
<S> <C>
RAN Revenue Anticipation Notes
RB Revenue Bonds
TAN Tax Anticipation Notes
TRAN Tax and Revenue Anticipation Notes
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Ratings assigned by Moody's Investors Service, Inc. ("MOODY'S") and
Standard & Poor's Corporation ("S&P"). Ratings are not covered by
Independent Auditor's Report.
(b) Demand security: payable upon demand by the Fund at specified intervals no
greater than thirteen months. Interest rates are redetermined periodically.
Rate shown is the rate in effect on March 31, 1997.
(c) Security is secured by a letter of credit.
(d) Security is secured by bond insurance.
(e) Security has an outstanding call or mandatory put by the issuer. Par value
and maturity date reflect such call or put.
(f) Security is secured by an escrow fund.
(g) The Fund may invest in synthetic municipal instruments of which the value
and return are derived from underlying securities. The types of synthetic
municipal instruments in which the Fund may invest include variable rate
instruments. These instruments involve the deposit into a trust of one or
more long-term tax-exempt bonds or notes ("Underlying Bonds"), and the
sales of certificates evidencing interests in the trust to investors such
as the Fund. The trustee receives the long-term fixed rate interest
payments on the Underlying Bonds, and pays certificate holders short-term
floating or variable interest rates which are reset periodically. A
"variable rate trust certificate" evidences an interest in a trust
entitling the certificate holder to receive variable rate interest based on
prevailing short-term interest rates and also typically providing the
certificate holder with the conditional right to put its certificate at par
value plus accrued interest. Because synthetic municipal instruments
involve a trust and a third party conditional put feature, they involve
complexitites and potential risks that may not be present where a municipal
security is owned directly.
(h) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
19
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $1,036,936,187
- ------------------------------------------------------------------------
Cash 71,176
- ------------------------------------------------------------------------
Receivables for:
Investments sold 245,000
- ------------------------------------------------------------------------
Interest 6,171,284
- ------------------------------------------------------------------------
Reimbursement from advisor 13,000
- ------------------------------------------------------------------------
Investment for deferred compensation plan 24,694
- ------------------------------------------------------------------------
Other assets 70,953
- ------------------------------------------------------------------------
Total assets 1,043,532,294
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 36,361,701
- ------------------------------------------------------------------------
Dividends 2,820,829
- ------------------------------------------------------------------------
Deferred compensation 24,694
- ------------------------------------------------------------------------
Accrued advisory fees 135,309
- ------------------------------------------------------------------------
Accrued directors' fees 5,570
- ------------------------------------------------------------------------
Accrued administrative service fees 11,662
- ------------------------------------------------------------------------
Accrued transfer agent fees 8,000
- ------------------------------------------------------------------------
Accrued distribution fees 7,733
- ------------------------------------------------------------------------
Accrued operating expenses 45,639
- ------------------------------------------------------------------------
Total liabilities 39,421,137
- ------------------------------------------------------------------------
NET ASSETS $1,004,111,157
========================================================================
NET ASSETS:
Institutional Shares $ 966,567,457
========================================================================
Private Investment Class $ 37,543,700
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Shares:
Authorized 3,000,000,000
- ------------------------------------------------------------------------
Outstanding 966,579,148
========================================================================
Private Investment Class:
Authorized 1,000,000,000
- ------------------------------------------------------------------------
Outstanding 37,544,154
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $36,350,163
- -----------------------------------------------------------------------
EXPENSES:
Advisory fees 2,346,148
- -----------------------------------------------------------------------
Transfer agent fees 85,916
- -----------------------------------------------------------------------
Administrative service fees 70,077
- -----------------------------------------------------------------------
Directors' fees 15,006
- -----------------------------------------------------------------------
Distribution fees (Note 2) 169,413
- -----------------------------------------------------------------------
Other expenses 232,418
- -----------------------------------------------------------------------
Total expenses 2,918,978
- -----------------------------------------------------------------------
Less fees waived and expenses assumed by advisor (733,219)
- -----------------------------------------------------------------------
Net expenses 2,185,759
- -----------------------------------------------------------------------
Net investment income 34,164,404
- -----------------------------------------------------------------------
Net realized gain on sales of investments 79,682
- -----------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (5,777)
- -----------------------------------------------------------------------
Net increase in net assets resulting from operations $34,238,309
=======================================================================
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 34,164,404 $ 40,503,678
- -----------------------------------------------------------------------------
Net realized gain on sales of investments 79,682 292,222
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments (5,777) (30,577)
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 34,238,309 40,765,323
- -----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Shares (33,140,042) (39,402,142)
- -----------------------------------------------------------------------------
Private Investment Class (1,024,362) (1,101,536)
- -----------------------------------------------------------------------------
Capital stock transactions - net:
Institutional Shares (42,543,201) (1,106,286)
- -----------------------------------------------------------------------------
Private Investment Class 2,402,025 5,845,831
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets (40,067,271) 5,001,190
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,044,178,428 1,039,177,238
- -----------------------------------------------------------------------------
End of period $1,004,111,157 $1,044,178,428
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in):
Institutional Shares $ 966,579,148 $1,009,122,349
- -----------------------------------------------------------------------------
Private Investment Class 37,544,154 35,142,129
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (12,145) (91,827)
- -----------------------------------------------------------------------------
Unrealized appreciation of investments -- 5,777
- -----------------------------------------------------------------------------
$1,004,111,157 $1,044,178,428
=============================================================================
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Tax-Free Investments Co. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company. The Company is organized as a Maryland
corporation consisting of one portfolio, the Cash Reserve Portfolio (the
"Fund"). The Fund consists of two different classes of shares, the
Institutional Cash Reserve Shares ("Institutional Shares") and the Private
Investment Class. Matters affecting each class are voted on exclusively by the
shareholders of each class. The investment objective of the Fund is to generate
as high a level of tax-exempt income as is consistent with preservation of
capital and maintenance of liquidity.
The following is a summary of significant accounting policies 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 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. Securities Valuations - The Fund uses the amortized cost method of valuing
investment portfolio securities which has been determined by the Board of
Directors of the Company to represent the fair value of the Fund's
investments.
B. Securities Transactions and Investment Income - Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and,
when appropriate, discounts on investments, is earned from settlement date
and is recorded on the accrual basis. Interest income is allocated to each
class daily, based upon each class' pro rata share of the total shares of
the Fund outstanding. Discounts, other than original issue, on short-term
obligations are amortized to unrealized appreciation for financial reporting
purposes.
C. Dividends and Distributions to Shareholders - It is the policy of the Fund
to declare daily dividends from net investment income. Such dividends are
paid monthly. Distributions from net realized capital gains, if any, are
declared and paid annually. Net capital gains cannot be distributed to the
extent they can be offset by any capital loss carryovers of the Fund.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $175,320 (which may be carried forward to offset future
taxable gains, if any) which expires, if not previously utilized, through
the year 2004. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized. In addition, the Fund
intends to invest in sufficient municipal securities to allow it to qualify
to pay "exempt interest dividends," as defined in the Internal Revenue Code,
to shareholders.
E. Expenses - Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are applicable to more than one class are allocated between
the classes.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.25% of
the first $500 million of the Fund's average daily net assets plus 0.20% of the
Fund's average daily net assets in excess of $500 million.
AIM has voluntarily agreed to reduce its fee from the Fund to the extent
necessary so that the amount of ordinary expenses of the Institutional Shares
(excluding interest, taxes, brokerage commissions, directors' fees,
extraordinary expenses and federal registration fees) paid or incurred by the
Institutional Shares does not exceed 0.20% of the Institutional Shares' average
daily net assets. As a result, AIM's advisory fee on the Private Investment
Class is reduced in the same proportion as the Institutional Shares. For the
year ended March 31, 1997, AIM reduced its advisory fee from the Fund by
$625,513 and assumed expenses of $23,000.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended March 31, 1997, the Fund
reimbursed AIM $70,077 for such services.
23
<PAGE>
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Company, FMC acts as the exclusive distributor of
capital stock of the Institutional Shares and the Private Investment Class. The
Company has adopted a master distribution plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act with respect to the Private Investment Class. The Plan
provides that the Private Investment Class may pay up to a 0.50% maximum annual
rate of the Private Investment Class' average daily net assets. Of this amount,
the Fund may pay an asset-based sales charge to FMC and the Fund may pay a
service fee of 0.25% of the average daily net assets of the Private Investment
Class to selected broker-dealers and other financial institutions who offer
continuing personal shareholder services to their customers who purchase and
own shares of the Private Investment Class. Any amounts not paid as a service
fee under such Plan would constitute an asset-based sales charge. The Plan also
imposes a cap on the total amount of sales charges, including asset-based sales
charges, that may be paid by the Fund with respect to the Private Investment
Class. During the year ended March 31, 1997, the Private Investment Class
accrued $169,413 as compensation to FMC under the Plan. FMC waived fees of
$84,706 duirng the same period.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Institutional Fund Services, Inc. ("AIFS") a fee for providing
transfer agent and shareholder services to the Fund. During the year ended
March 31, 1997, the Fund paid AIFS $85,916 for such services. Certain officers
and directors of the Company are directors or officers of AIM, AIFS and FMC.
During the year ended March 31, 1997, the Fund paid legal fees of $7,203 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended March 31, 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Shares 4,746,443,085 $ 4,746,443,085 5,051,588,995 $ 5,051,588,995
- -----------------------------------------------------------------------------------------
Private Investment
Class 204,111,511 204,111,511 218,503,050 218,503,050
- -----------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Shares 192,345 192,345 99,312 99,312
- -----------------------------------------------------------------------------------------
Private Investment
Class 860,021 860,021 1,064,127 1,064,127
- -----------------------------------------------------------------------------------------
Redeemed:
Institutional Shares (4,789,178,631) (4,789,178,631) (5,052,794,593) (5,052,794,593)
- -----------------------------------------------------------------------------------------
Private Investment
Class (202,569,507) (202,569,507) (213,721,346) (213,721,346)
- -----------------------------------------------------------------------------------------
Net increase
(decrease) (40,141,176) $ (40,141,176) 4,739,545 $ 4,739,545
=========================================================================================
</TABLE>
24
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Institutional Share's capital
stock outstanding during each of the years in the eight-year period ended March
31, 1997, the eleven months ended March 31, 1989 and the year ended April 30,
1988.
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989
-------- ---------- ---------- ---------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------- -------- ---------- ---------- ---------- -------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income 0.03 0.04 0.03 0.02 0.03 0.04 0.06 0.06 0.05
- ---------------------- -------- ---------- ---------- ---------- -------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income (0.03) (0.04) (0.03) (0.02) (0.03) (0.04) (0.06) (0.06) (0.05)
- ---------------------- -------- ---------- ---------- ---------- -------- ---------- ---------- ---------- ----------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====================== ======== ========== ========== ========== ======== ========== ========== ========== ==========
Total return 3.33% 3.67% 3.06% 2.33% 2.66% 4.09% 5.68% 6.22% 5.67%(a)
====================== ======== ========== ========== ========== ======== ========== ========== ========== ==========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $966,567 $1,009,039 $1,009,891 $1,040,595 $994,828 $1,191,209 $1,156,557 $1,114,813 $1,062,479
====================== ======== ========== ========== ========== ======== ========== ========== ========== ==========
Ratio of expenses to
average net assets(b) 0.20%(c) 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%(a)
====================== ======== ========== ========== ========== ======== ========== ========== ========== ==========
Ratio of net investment
income to average net
assets(d) 3.27%(c) 3.59% 3.01% 2.30% 2.66% 4.00% 5.52% 6.03% 5.52%(a)
====================== ======== ========== ========== ========== ======== ========== ========== ========== ==========
<CAPTION>
APRIL 30,
1988
-----------
<S> <C>
Net asset value,
beginning of period $1.00
- -------------------- -----------
Income from
investment operations:
Net investment income 0.04
- -------------------- -----------
Less
distributions:
Dividends from
net investment
income (0.04)
- -------------------- -----------
Net asset value,
end of period $1.00
==================== ===========
Total return 4.56%
==================== ===========
Ratios/supplemental
data:
Net assets, end
of period (000s
omitted) $1,192,604
==================== ==========
Ratio of expenses to
average net
assets(b) 0.21%
==================== ==========
Ratio of net
investment income to
average net assets(d) 4.47%
==================== ==========
</TABLE>
(a)Annualized.
(b) After waiver of advisory fees and/or expense reimbursements. Ratios of
expenses to average net assets prior to waiver of advisory fees and/or
expense reimbursements were 0.26%, 0.26%, 0.26%, 0.28%, 0.26%, 0.26%,
0.27%, 0.28%, 0.28%(annualized) and 0.29% for the periods 1997-1988,
respectively.
(c) Ratios are based on average net assets of $1,013,970,754.
(d) After waiver of advisory fees and/or expense reimbursements. Ratios of net
investment income to average net assets prior to waiver of advisory fees
and/or expense reimbursements were 3.21%, 3.53%, 2.95%, 2.22%, 2.60%,
3.94%, 5.46%, 5.95%, 5.44%(annualized) and 4.40%, for the periods 1997-
1988, respectively.
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Tax-Free Investments Co.
We have audited the accompanying statement of assets and liabilities of the
Cash Reserve Portfolio (a Portfolio of Tax-Free Investments Co.), including the
schedule of investments, as of March 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the eight-year period then ended, the
eleven-month period ended March 31, 1989, and the year ended April 30, 1988.
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
March 31, 1997, by correspondence with the custodian and brokers. 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 the
Cash Reserve Portfolio as of March 31, 1997, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the eight-year period then ended, the eleven-month period ended March 31,
1989, and the year ended April 30, 1988, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
May 2, 1997
- --------------------------------------------------------------------------------
SUPPLEMENTAL PROXY INFORMATION - SHAREHOLDER MEETING
An annual meeting of shareholders of Tax-Free Investments Co. (the "Company")
was held on February 7, 1997. The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson, and Louis Sklar.
(2) To approve a new Investment Advisory Agreement between the Company and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) To ratify KPMG Peat Marwick LLP as independent accountants for the
Company's fiscal year ended March 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes for Against Abstentions
--------------- --------- ------- -----------
<C> <S> <C> <C> <C>
(1) Charles T. Bauer......................... 714,318,928 0 0
Bruce L. Crockett........................ 714,318,928 0 0
Owen Daly II............................. 714,318,928 0 0
Carl Frischling.......................... 714,318,928 0 0
Robert H. Graham......................... 714,318,928 0 0
John F. Kroeger.......................... 714,318,928 0 0
Lewis F. Pennock......................... 714,318,928 0 0
Ian W. Robinson.......................... 714,318,928 0 0
Louis Sklar.............................. 714,318,928 0 0
Approval of the new Investment Advisory
(2) Agreement................................ 714,318,928 0 0
Elimination of Fundamental Investment
(3) Policy................................... 714,318,928 0 0
(4) Ratification of KPMG Peat Marwick LLP.... 714,318,928 0 0
</TABLE>
26
<PAGE>
This page intentionally left blank.
27
<PAGE>
<TABLE>
<S> <C>
DIRECTORS
Charles T. Bauer Robert H. Graham Tax-Free
Bruce L. Crockett John F. Kroeger Investments Co.
Owen Daly II Lewis F. Pennock (TFIC)
Jack Fields Ian W. Robinson
Carl Frischling Louis S. Sklar
OFFICERS
Charles T. Bauer Chairman
Robert H. Graham President
John J. Arthur Sr. Vice President & Treasurer
Gary T. Crum Sr. Vice President
Carol F. Relihan Sr. Vice President & Secretary
Dana R. Sutton Vice President & Assistant Treasurer Cash Reserve
Stuart W. Coco Vice President Portfolio
Melville B. Cox Vice President -----------------------------------------------------
Karen Dunn Kelley Vice President
J. Abbott Sprague Vice President Institutional Cash ANNUAL
P. Michelle Grace Assistant Secretary Reserve Shares REPORT
David L. Kite Assistant Secretary
Nancy L. Martin Assistant Secretary
Ofelia M. Mayo Assistant Secretary MARCH 31, 1997
Kathleen J. Pflueger Assistant Secretary
Samuel D. Sirko Assistant Secretary
Stephen I. Winer Assistant Secretary
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046
(800) 347-1919
DISTRIBUTOR
Fund Management Company
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
(800) 659-1005
CUSTODIAN
The Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
LEGAL COUNSEL TO FUND
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
LEGAL COUNSEL TO DIRECTORS
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
TRANSFER AGENT
A I M Institutional Fund Services, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
AUDITORS
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Bldg.
Houston, TX 77002
This report may be distributed only to current shareholders or [LOGO APPEARS HERE]
to persons who have received a current prospectus. FUND MANAGEMENT COMPANY
</TABLE>
