<PAGE>
[AIM LOGO APPEARS HERE] Dear Shareholder:
[PHOTO of During the six-month period ended September 30,
Charles T. Bauer, 1997, markets worried that healthy economic
Chairman of the growth would prompt the Federal Reserve Board
LETTER Board of The Fund, (the Fed) to raise interest rates to help contain
TO OUR APPEARS HERE] inflation. However, there was little evidence of
SHAREHOLDERS inflationary pressures. Consequently, the Fed
left interest rates unchanged during the six months covered
by this report.
However, the economy continued to grow steadily--at a 3.30% and
3.50% annualized rate during the second quarter and third quarter
of 1997, respectively. This strong growth pattern heightened
uncertainty about Fed policy, which led to increased volatility
in the money markets.
In short-term tax-free markets, the yield curve was generally
flat during the reporting period. As the period opened, one-year
tax-free issues were yielding 3.90%, only about 10 basis points
more than one-month issues. As the traditional June U.S.
Treasury note-issuance period neared, many funds reduced their
reinvestment risk and raised liquidity. Yield on the one-year
issues rose toward the 4.00% range, about 90% of the yield on
U.S. Treasury bills. In the June note sales, the yield on
one-year notes had retreated to about 3.80%. By the close of the
reporting period, yields were 3.85% for one-year issues and 3.70%
for one-month issues.
YOUR INVESTMENT PORTFOLIO
For the six months ended September 30, 1997, the Private
Investment Class of the Cash Reserve Portfolio maintained its
competitive position, as shown in the table above. The Portfolio
also maintained the quality of its holdings, consistent with its
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. Net assets of the Private Investment Class of
the Portfolio stood at $39.4 million at the close of the
reporting period, up from $37.5 million at its outset.
The Cash Reserve 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
<TABLE>
<CAPTION>
Yields as of 9/30/97
Average Seven-Day
Monthly Yield Yield
<S> <C> <C>
Cash Reserve Portfolio
Private Investment Class 3.32% 3.58%
IBC All Tax-Free
Money Fund Averages(TM) 3.15% 3.35%
IBC Tax-Free Money Funds-Stockbroker
and General Purpose(TM) 3.11% 3.29%
-------------------------------------------------------------------------------
</TABLE>
(continued)
<PAGE>
investments in high-quality, short-term municipal securities. It
invests solely in securities rated "First Tier" as defined in
Rule 2a-7 under the Investment Company Act of 1940.
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, or a bank, and there can be no assurance
the Portfolio will be able to maintain a stable net asset value
of $1.00 per share.
OUTLOOK FOR THE FUTURE
As of the close of the reporting period, the general expectation
was that the economy would grow at a sustainable annual pace of
2.00% to 3.00% and that inflation would remain under control.
However, underlying strength in various economic indicators,
including consumer spending and capital expenditures by
companies, continued to signal the potential for faster growth,
which could trigger higher short-term interest rates in the
coming months.
In October, shortly after the reporting period ended, Fed
Chairman Alan Greenspan raised the specter of an interest-rate
hike by suggesting in congressional testimony that economic
growth had been on an "unsustainable track" and that financial
markets reflected an "optimistic outlook." Later in the month,
world financial markets were jolted by currency devaluations in
Southeast Asia and a dramatic decline in equity markets both here
and abroad. The consensus of market watchers was that this market
turmoil probably had significantly reduced any potential near-
term rate hike, as the Fed would probably not take any action
that could destabilize the markets further.
Whichever direction interest rates move, the tax-free market
will possibly lag in its reaction to the change. The abundance of
short-term cash in the markets may lead to only a slight change
in rates on tax-free money market instruments.
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
2
<PAGE>
SCHEDULE OF INVESTMENTS
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ALABAMA - 2.07%
Birmingham (City of) (YMCA-Birmingham);
Public Park
and Recreation Board RB
4.10% 06/01/16(b)(c) -- VMIG-1 $ 3,350 $ 3,350,000
- -------------------------------------------------------------------------------
BMC Special Care Facilities Financing
Authority (VHA of Alabama Inc. Capital
Asset Financing Program); Variable Rate
Hospital RB
4.15% Series 1985 E 12/01/30(b)(d) A-1 Aaa 4,600 4,600,000
- -------------------------------------------------------------------------------
4.15% Series 1985 G 12/01/30(b)(d) A-1 Aaa 6,390 6,390,000
- -------------------------------------------------------------------------------
Marshall (County of); Special Obligation
School Refunding Series 1994 Warrants
4.125% 02/01/12(b)(c) A-1+ -- 2,775 2,775,000
- -------------------------------------------------------------------------------
University of Alabama; Hospital Series
1997 B RB
4.15% 10/01/07(b)(c) A-1+ VMIG-1 3,200 3,200,000
- -------------------------------------------------------------------------------
20,315,000
- -------------------------------------------------------------------------------
ALASKA - 0.84%
Alaska Housing Finance Corp.; General
Mortgage Series 1991 A RB
4.00% 06/01/26(b) A-1+ VMIG-1 3,250 3,250,000
- -------------------------------------------------------------------------------
Valdez (City of) (ARCO Transportation
Alaska, Inc. Project); Marine Terminal
Refunding Series 1994 B RB
4.25% 05/01/31(b)(d) A-1 VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
8,250,000
- -------------------------------------------------------------------------------
ARIZONA - 2.32%
Apache (County of) Industrial Development
Authority (Tucson Electric); Series 1983
C IDR
4.15% 12/15/18(b)(c) A-1 VMIG-1 12,400 12,400,000
- -------------------------------------------------------------------------------
Chandler (City of) Industrial Development
Authority (Southpark Apartments Project);
Multifamily Housing Series 1989 RB
4.10% 12/01/02(b)(c) A-1+ -- 4,125 4,125,000
- -------------------------------------------------------------------------------
Maricopa (County of) (Arizona Public
Service Co.);
Series 1994 A PCR
3.75% 05/01/29(b)(c) A-1+ P-1 4,200 4,200,000
- -------------------------------------------------------------------------------
Pima (County of) Industrial Development
Authority (Tucson Electric Co. Project);
Refunding Series 1982 A IDR
4.10% 06/15/22(b)(c) A-1+ VMIG-1 2,000 2,000,000
- -------------------------------------------------------------------------------
22,725,000
- -------------------------------------------------------------------------------
ARKANSAS - 0.31%
Fayetteville Public Facilities Board
(Butterfield Trail Village Project);
Variable Rate Demand Refunding Series
1997 RB
3.85% 09/01/27(b)(c) -- VMIG-1 3,000 3,000,000
- -------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
COLORADO - 5.46%
Adams (County of) Industrial Development
(Clear Creek Business); Series 1984 RB
4.20% 11/01/08(b)(c) -- VMIG-1 $ 8,300 $ 8,300,000
- -------------------------------------------------------------------------------
Colorado (State of) General Fund; Series
1997 A TRAN
4.50% 06/26/98 SP-1+ -- 5,000 5,022,967
- -------------------------------------------------------------------------------
Colorado Housing Finance Authority
(Coventry Village Project); Multifamily
Housing Refunding Series 1996 B RB
4.10% 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
4.15% 02/01/23(b)(c) A-1+ -- 12,715 12,715,000
- -------------------------------------------------------------------------------
Denver Department of Aviation; Airport
System Subordinate
Series 1997 B RB
4.15% 12/01/20(b)(c) A-1+ VMIG-1 10,000 10,000,000
- -------------------------------------------------------------------------------
Douglas (County of) (Autumn Chase
Project); Variable Rate Demand
Multifamily Housing Series 1985 RB
3.80% 07/01/06(b)(c) -- VMIG-1 12,100 12,100,000
- -------------------------------------------------------------------------------
53,507,967
- -------------------------------------------------------------------------------
CONNECTICUT - 0.43%
Connecticut (State of) Power and Light
Development Authority;
Series 1993 A RB
4.00% 09/01/28(b)(c) A-1+ VMIG-1 4,205 4,205,000
- -------------------------------------------------------------------------------
DELAWARE - 0.32%
Delaware (State of) Economic Development
Authority; Adjustable Rate Hospital
Series C RB
4.05% 12/01/15(b)(c) A-1+ VMIG-1 3,100 3,100,000
- -------------------------------------------------------------------------------
FLORIDA - 5.17%
Brevard (County of) Housing Finance
Authority (Palm Place Project);
Multifamily Housing Series 1985 RB
4.15% 12/01/07(b)(c) -- VMIG-1 7,500 7,500,000
- -------------------------------------------------------------------------------
Florida Housing Finance Agency (Parrots
Landing Project); Multifamily Housing
Series 1985 AA RB
4.15% 06/15/25(b)(c) A-1+ -- 8,635 8,635,000
- -------------------------------------------------------------------------------
Florida State Board of Education; Public
Education
Series B GO
5.00% 06/01/98 AA+ Aa2 1,700 1,712,158
- -------------------------------------------------------------------------------
Gainesville (City of); Series C Utility
System Bonds
3.85% 10/02/97 A-1+ P-1 5,491 5,490,945
- -------------------------------------------------------------------------------
Gulf Breeze (City of) (Florida Municipal
Bond Fund); Variable Rate Demand Series
1995 A RB
4.15% 03/31/21(b)(c) A-1 -- 9,900 9,900,000
- -------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Florida - (continued)
Jacksonville (City of) Health Facilities
Authority (St. Vincent Depaul Health
Systems); Refunding RB
9.10% 12/01/97(f) AAA Aaa $ 2,000 $ 2,017,131
- -------------------------------------------------------------------------------
Lee (County of) Housing Finance Authority
(Forestwood Apartments Project); Housing
Series 1995A RB
4.15% 06/15/25(b)(c) A-1+ -- 8,000 8,000,000
- -------------------------------------------------------------------------------
Palm Beach (County of) Health Facility
Authority (Refunding Pooled Loan
Program); Series 1985 RB
3.80% 11/07/97(c) A-1+ VMIG-1 3,500 3,500,000
- -------------------------------------------------------------------------------
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
4.10% 03/15/14(b)(c) A-1+ P-1 3,915 3,915,000
- -------------------------------------------------------------------------------
50,670,234
- -------------------------------------------------------------------------------
GEORGIA - 5.02%
Cobb (County of) Housing Authority
(Greenhouse Frey Apartment Project);
Multifamily Housing RB
4.15% 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
Cobb-Marietta Coliseum and Exhibit Hall
Authority; Junior Lien Series 1996 A RB
4.10% 10/01/26(b)(c) A-1+c Aaa 12,930 12,930,000
- -------------------------------------------------------------------------------
Decatur County Bainbridge Industrial
Development Authority (Kaiser
Agriculture Chemical Inc. Project);
Series 1985 IDR
3.75% 12/01/02(b)(c) A-1+ -- 2,100 2,100,000
- -------------------------------------------------------------------------------
Dekalb (County of) Housing Authority
(Clairmont Crest Project); Multifamily
Housing Refunding Series 1995 RB
4.15% 06/15/25(b)(c) A-1+ -- 6,400 6,400,000
- -------------------------------------------------------------------------------
Dekalb (County of) Private Hospital
Authority (Egleston Children's Hospital
at Emory University Health Care System
Project); Variable Rate Demand Series
1994 A RAN
4.15% 03/01/24(b)(c) A-1+ VMIG-1 2,340 2,340,000
- -------------------------------------------------------------------------------
Development Authority of Dekalb County
(Radiation Sterilizers, Inc. Project);
Variable Rate Demand Series 1985 IDR
3.75% 03/01/05(b)(c) A-1 -- 4,600 4,600,000
- -------------------------------------------------------------------------------
Georgia (State of); Series A GO
7.70% 02/01/98 AA+ Aaa 2,000 2,025,463
- -------------------------------------------------------------------------------
Gwinnett (County of) Housing Authority
(Greens Apartment Project); Variable
Rate Demand Multifamily Housing Series
1995 RB
4.15% 06/15/25(b)(c) A-1+ -- 10,300 10,300,000
- -------------------------------------------------------------------------------
Savannah (City of) Housing Authority
(Somerset Place Project); Variable Rate
Demand Multifamily Housing Series 1996 A
RB
4.10% 06/15/26(b)(c) A-1+ -- 3,500 3,500,000
- -------------------------------------------------------------------------------
49,195,463
- -------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
IDAHO - 0.51%
Idaho (State of); Series 1997 TAN
4.625% 06/30/98 SP-1+ MIG-1 $ 5,000 $ 5,026,715
- -------------------------------------------------------------------------------
ILLINOIS - 9.75%
Burbank (City of) (Service Merchandise
Co. Inc. Project); Floating Rate Monthly
Demand Industrial Building Series 1984
RB
3.70% 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
- -------------------------------------------------------------------------------
Cook (County of) High School District No.
201 (Cicero); GO
7.30% 12/01/97(c) AAA Aaa 6,500 6,538,233
- -------------------------------------------------------------------------------
East Peoria (City of) (Radnor/East Peoria
Partnership Project); Multifamily
Housing Series 1983 RB
4.30% 06/01/08(b)(c) -- Aa3 5,770 5,770,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Adventist Health System/Sunbelt
Obligated Group); Variable Rate Demand
Series 1997 A RB
4.15% 11/15/27(b)(c) A-1+ VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(American College of Surgeons Project);
Tax Exempt Series 1996 RB
4.15% 08/01/26(b)(c) A-1+ -- 10,000 10,000,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Jewish Charities Revenue Anticipation
Note Program); Variable Rate Demand
Series 1997-1998 A RAN
4.10% 06/30/98(b)(c) A-1+ -- 9,720 9,720,000
- -------------------------------------------------------------------------------
Illinois Educational Facilities Authority
(Pooled Financing Program); Adjustable
Rate Series 1985 RB
4.05% 12/01/05(b)(d) A-1+ VMIG-1 3,780 3,780,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority;
Revolving Fund Pooled Series D RB
4.05% 08/01/15(b)(c) A-1+ VMIG-1 3,800 3,800,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Advocate Health Care Network); Variable
Rate Demand Series 1997 B RB
4.15% 08/15/22(b)(c) A-1+ VMIG-1 9,940 9,940,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Northwestern Memorial Hospital);
Variable Rate Demand Series 1995 RB
3.80% 08/15/25(b)(d) A-1+ VMIG-1 13,000 13,000,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Streetville Corp.); Variable Rate
Series 1994 RB
4.05% 08/15/24(b)(c) A-1+ P-1 3,000 3,000,000
- -------------------------------------------------------------------------------
Marseilles (City of) (Kaiser Agricultural
Chemicals Inc. Project); Variable Rate
Demand Series 1985 IDR
3.75% 01/01/98(b)(c) A-1+ -- 3,750 3,750,000
- -------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Illinois - (continued)
Oak Forest (City of) (Homewood Pool);
Series 1989 RB
4.05% 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 RB
4.15% 09/15/26(b)(c) A-1+ -- 10,700 10,700,000
- -----------------------------------------------------------------------------
95,598,233
- -----------------------------------------------------------------------------
INDIANA - 1.78%
Auburn (City of) (Sealed Power Corp.
Project); Variable Rate Demand
Economic Development Series 1985 RB
3.70% 07/01/10(b)(c) -- VMIG-1 1,200 1,200,000
- -----------------------------------------------------------------------------
Indiana Health Facility Financing
Authority (St. Anthony Medical Center,
Inc.); Variable Rate Demand Series
1997 RB
4.10% 05/01/17(b)(c) -- VMIG-1 2,000 2,000,000
- -----------------------------------------------------------------------------
Indianapolis (City of) (Jewish
Community Campus Project); Variable
Rate Economic Development RB
4.05% 04/01/05(b)(c) -- VMIG-1 2,295 2,295,000
- -----------------------------------------------------------------------------
Indianapolis (City of); Local
Improvement Series 1997 B RB
4.375% 01/08/98 SP-1+ -- 6,000 6,009,803
- -----------------------------------------------------------------------------
Petersburg (City of) (Indianapolis
Power and Light Co. Project);
Adjustable Rate Tender Securities
Series 1995 B PCR
4.00% 01/01/23(b)(d) A-1+ VMIG-1 6,000 6,000,000
- -----------------------------------------------------------------------------
17,504,803
- -----------------------------------------------------------------------------
IOWA - 3.14%
Iowa Higher Education Loan Authority;
Private College Facility RB
4.15% 12/01/15(b)(d) A-1+ VMIG-1 12,435 12,435,000
- -----------------------------------------------------------------------------
Iowa School Corporations (Iowa School
Cash Anticipation Program); Warrant
Certificates TRAN
4.25% Series 1997-1998 B 01/30/98(d) AAA -- 6,250 6,258,150
- -----------------------------------------------------------------------------
4.50% Series 1997-1998 A 06/26/98(d) SP-1+ MIG-1 12,000 12,059,385
- -----------------------------------------------------------------------------
30,752,535
- -----------------------------------------------------------------------------
KANSAS - 0.92%
Mission (City of) (Silverwood Apartment
Project); Multifamily RB
4.15% 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- -----------------------------------------------------------------------------
Wichita (City of); General Obligation
Renewal and Improvement Series 192
Temporary Notes
4.50% 02/26/98 SP-1+ MIG-1 4,000 4,010,701
- -----------------------------------------------------------------------------
9,010,701
- -----------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
KENTUCKY - 2.21%
Kentucky Asset/Liability Commission;
General Fund Series 1997 A TRAN
4.50% 06/25/98 SP-1+ MIG-1 $ 7,500 $ 7,534,329
- -------------------------------------------------------------------------------
Mayfield (City of) (Kentucky League of
Cities Funding Trust Pooled Lease
Financing Program); Variable Rate Multi-
City Lease
Series 1996 RB
4.20% 07/01/26(b)(c) A-1 VMIG-1 4,100 4,100,000
- -------------------------------------------------------------------------------
Trimble (County of) (Louisville Gas and
Electric Co. Project); Series 1992 A PCR
3.80% 11/20/97(d)(e) A-1+ VMIG-1 10,000 10,000,000
- -------------------------------------------------------------------------------
21,634,329
- -------------------------------------------------------------------------------
LOUISIANA - 2.28%
Louisiana Public Facilities Authority
(Sisters of Charity of the Incarnate
Word); Unit Priced Demand Adjustable
Series 1997 E RB
4.10% 07/01/23(b)(d) A-1+c VMIG-1 9,900 9,900,000
- -------------------------------------------------------------------------------
Louisiana Public Facilities Authority
(Willis-Knighton Medical Center
Project); Hospital Series 1995 RB
4.10% 09/01/25(b)(d) A-1 VMIG-1 12,500 12,500,000
- -------------------------------------------------------------------------------
22,400,000
- -------------------------------------------------------------------------------
MICHIGAN - 3.15%
Jackson County Economic Development Corp.
(Sealed Power Corp.); Economic
Development Variable Refunding RB
3.70% 10/01/19(b)(c) -- VMIG-1 1,000 1,000,000
- -------------------------------------------------------------------------------
Michigan State Hospital Finance Authority
(Hospital Equipment Loan Program);
Adjustable Series 1996 A RB
4.15% 12/01/23(b)(c) -- VMIG-1 6,900 6,900,000
- -------------------------------------------------------------------------------
Michigan State Strategic Fund (Peachwood
Center Association Project); Limited
Obligation Series 1995 RB
3.95% 06/01/16(b)(c) A-1+ -- 2,275 2,275,000
- -------------------------------------------------------------------------------
Michigan Strategic Fund (Consumer's Power
Project); Project A Limited Obligation
RB
3.80% 06/15/10(b)(c) A-1+ Aa3 7,500 7,500,000
- -------------------------------------------------------------------------------
Michigan Strategic Fund (Consumer's Power
Corp.); Variable Rate Demand Series 1988
A PCR
3.85% 04/15/18(b)(c) -- P-1 5,266 5,266,000
- -------------------------------------------------------------------------------
Michigan Strategic Fund (260 Brown St.
Associates Project); Convertible
Variable Rate Demand Limited Obligation
Series 1985 RB
3.70% 10/01/15(b)(c) -- VMIG-1 3,550 3,550,000
- -------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Michigan - (continued)
Michigan Strategic Fund (The Norcor Corp.
Project); IDR
3.75% 12/01/00(b)(c) -- P-1 $ 4,400 $ 4,400,000
- -------------------------------------------------------------------------------
30,891,000
- -------------------------------------------------------------------------------
MINNESOTA - 1.23%
Bloomington (City of) Port Authority (Mall
of America Project); Special Tax Revenue
Series 1996 B RB
4.15% 02/01/13(b)(c) A-1+ VMIG-1 2,000 2,000,000
- -------------------------------------------------------------------------------
Mankato (City of) (Northern States Power
Co. Project); Floating Collateralized
Series 1985 PCR
4.25% 03/01/11(b) AA- Aa3 2,900 2,900,000
- -------------------------------------------------------------------------------
Minneapolis (City of) Community
Development Agency (Walker Methodist
Health Systems); Adjustable Refunding
Series 1995 RB
4.15% 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
4.25% 03/01/11(b) AA- A1 1,200 1,200,000
- -------------------------------------------------------------------------------
12,100,000
- -------------------------------------------------------------------------------
MISSOURI - 1.07%
Kansas City (Sleepy Hollow Apartment
Project); Multifamily Housing Series 1996
RB
4.15% 09/15/26(b)(c) A-1+ -- 7,500 7,500,000
- -------------------------------------------------------------------------------
Kansas City Industrial Development
Authority (Ewing Marion Kauffman
Foundation Project); Series 1997 RB
3.90% 04/01/27(b)(d) A-1+ -- 3,000 3,000,000
- -------------------------------------------------------------------------------
10,500,000
- -------------------------------------------------------------------------------
MISSISSIPPI - 0.72%
Perry (County of) (Leaf River Forest
Project); Series 1989 PCR
4.10% 10/01/12(b)(c) -- P-1 7,100 7,100,000
- -------------------------------------------------------------------------------
NEVADA - 0.71%
Clark (County of) (Nevada Power Co.
Project);
Series 1995 D-1 PCR
4.15% 10/01/11(b)(c) A-1+ -- 2,000 2,000,000
- -------------------------------------------------------------------------------
4.15% 10/01/23(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
7,000,000
- -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW HAMPSHIRE - 0.55%
New Hampshire Housing Finance Authority
(EQR-Bond
Partnership-Manchester Project);
Multifamily Housing Refunding Series
1996 RB
4.15% 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
3.70% 01/01/09(b)(c) A-1+ -- 400 400,000
- ------------------------------------------------------------------------------
5,400,000
- ------------------------------------------------------------------------------
NEW MEXICO - 1.12%
Albuquerque (City of) Airport;
Adjustable Refunding Subordinated Lien
Series 1995 RB
4.10% 07/01/14(b)(d) AAA VMIG-1 5,000 5,000,000
- ------------------------------------------------------------------------------
Farmington (City of) (Public Service Co.
of New Mexico San Juan Project); Series
1997 B PCR
4.10% 04/01/22(b)(c) A-1+ P-1 6,000 6,000,000
- ------------------------------------------------------------------------------
11,000,000
- ------------------------------------------------------------------------------
NEW YORK - 15.34%
Eagle Tax Exempt Trust; Class A COP(g)
4.18% Series 97C4703 01/01/01(b)(f) A-1+c Aaa 10,800 10,800,000
- ------------------------------------------------------------------------------
4.23% Series 1993 E 08/01/06(b)(d) A-1+c -- 15,000 15,000,000
- ------------------------------------------------------------------------------
4.23% Series 1993 F 08/01/06(b)(d) A-1+c -- 20,500 20,500,000
- ------------------------------------------------------------------------------
4.18% Series 943802 05/01/07(b)(d) A-1+c -- 17,800 17,800,000
- ------------------------------------------------------------------------------
4.23% Series 943901 06/15/07(b)(d) A-1+c -- 14,500 14,500,000
- ------------------------------------------------------------------------------
4.23% Series 94C2102 06/01/14(b)(c) A-1+c -- 10,100 10,100,000
- ------------------------------------------------------------------------------
4.18% Series 97C4702 01/01/20(b)(d) A-1+c -- 9,500 9,500,000
- ------------------------------------------------------------------------------
4.23% Series 950901 06/01/21(b)(f) A-1+c -- 12,700 12,700,000
- ------------------------------------------------------------------------------
4.18% 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) 1996 A Series 964703 Class A COP
4.18% 07/01/11(b)(c)(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
4.15% 02/15/29(b)(d)(g) A-1+c -- 9,700 9,700,000
- ------------------------------------------------------------------------------
New York City Municipal Water Finance
Authority; Commercial Paper Series 4
3.80% 10/16/97(c) A-1+ P-1 10,000 10,000,000
- ------------------------------------------------------------------------------
150,400,000
- ------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NORTH CAROLINA - 4.26%
North Carolina Medical Care Commission;
Variable Rate Hospital Series 1996 A RB
4.10% 10/01/16(b)(c) -- VMIG-1 $12,930 $ 12,930,000
- -------------------------------------------------------------------------------
North Carolina Medical Care Commission
(Moses H. Cone Memorial Hospital
Project); Hospital Series 1993 RB
4.05% 10/01/23(b)(d) A-1+ -- 13,200 13,200,000
- -------------------------------------------------------------------------------
North Carolina Medical Care Commission
(Lexington Memorial Hospital Project);
Series 1997 RB
4.10% 04/01/10(b)(c) -- VMIG-1 6,100 6,100,000
- -------------------------------------------------------------------------------
North Carolina Medical Care Commission
Retirement Community (Adult Communities
Total Services Inc.); Variable Rate
Demand Series 1996 RB
4.10% 11/15/09(b)(c) A-1+ -- 5,655 5,655,000
- -------------------------------------------------------------------------------
Raleigh-Durham Airport Authority
(American Airlines Project); Special
Facilities Series 1995 B-1 RB
3.90% 11/01/15(b)(c) A-1+ -- 3,900 3,900,000
- -------------------------------------------------------------------------------
41,785,000
- -------------------------------------------------------------------------------
OHIO - 2.15%
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
4.30% 11/01/14(b)(c) -- P-1 8,700 8,700,000
- -------------------------------------------------------------------------------
Marion (County of) (Pooled Lease
Program); Hospital RB
4.15% 10/01/22(b)(c) A-1+ -- 1,540 1,540,000
- -------------------------------------------------------------------------------
Ohio Building Authority (Art Facilities
Building Fund Projects);
State Facilities Series 1997 A RB
4.00% 10/01/97 AA- Aa3 3,180 3,180,000
- -------------------------------------------------------------------------------
Ohio Elementary and Secondary Education;
Capital Facilities
Series 1997 A RB
3.90% 12/01/97 AA- Aa3 1,000 1,000,000
- -------------------------------------------------------------------------------
Ohio Housing Finance Agency (Kenwood
Congregate Retirement Community
Project); Variable Rate Demand
Multifamily Housing Series 1985 RB
3.70% 12/01/15(b)(c) -- VMIG-1 956 956,000
- -------------------------------------------------------------------------------
Summit (County of) Various Purpose Notes;
Series 1997 A General Obligation BAN
4.50% 06/04/98 SP-1+ MIG-1 5,000 5,020,422
- -------------------------------------------------------------------------------
21,031,422
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OKLAHOMA - 1.02%
Oklahoma Water Resource Board State Loan
Program;
Series 1994 A RB
3.75% 03/02/98(e) A-1+ -- $10,000 $ 10,000,000
- ------------------------------------------------------------------------------
OREGON - 2.15%
Klamath Falls (City of) (Salt Caves
Hydroelectric); Adjustable/Fixed
Refunding RB
4.50% Series 1986 C 05/01/98(b)(c)(e) SP-1+ -- 10,000 10,035,975
- ------------------------------------------------------------------------------
4.50% Electric Series E
05/01/98(b)(e)(f) SP-1+ -- 8,250 8,281,504
- ------------------------------------------------------------------------------
Oregon (State of) Veteran Welfare;
Variable Rate Demand Series 73 F GO
4.05% 12/01/17(b)(c) A-1+ VMIG-1 2,800 2,800,000
- ------------------------------------------------------------------------------
21,117,479
- ------------------------------------------------------------------------------
PENNSYLVANIA - 3.19%
Delaware County Industrial Development
Authority (Henderson-Radnor Joint
Venture Project); Limited Obligation
Series 1985 IDR
4.05% 04/01/15(b)(c) -- Aa3 855 855,000
- ------------------------------------------------------------------------------
Emmaus (City of) General Authority;
Series 1996 RB
4.05% 12/01/28(b)(c) A-1+ -- 3,000 3,000,000
- ------------------------------------------------------------------------------
Philadelphia School District; Series
1997-1998 TRAN
4.50% 06/30/98(c) SP-1+ MIG-1 5,000 5,019,707
- ------------------------------------------------------------------------------
Quakertown Hospital Authority (HPF
Group); Series 1985 A RB
3.90% 07/01/05(b)(c) -- VMIG-1 9,300 9,300,000
- ------------------------------------------------------------------------------
Schuykill County Industrial Development
Authority (Gilberton Power Project);
Variable Rate Resource Recovery Series
1985 RB
4.15% 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
3.93% 07/01/14(b)(c) -- A1 2,300 2,300,000
- ------------------------------------------------------------------------------
York (City of) General Authority;
Adjustable Rate Pooled Financing Series
1996 RB
4.05% 09/01/26(b)(c) A-1 -- 8,550 8,550,000
- ------------------------------------------------------------------------------
31,324,707
- ------------------------------------------------------------------------------
RHODE ISLAND - 0.84%
Rhode Island and Providence Plantations;
Lease Participation Certificates
Correctional Facilities Refunding
Series 1997 RB
4.75% 10/01/97(c) AAA Aaa 1,290 1,290,000
- ------------------------------------------------------------------------------
Rhode Island Port Authority and Economic
Development Corp.; Newport Electric
Energy Facilities Revenue Series
Electric Corp. Project RB
4.15% 09/01/11(b)(c) A-1+ VMIG-1 6,925 6,925,000
- ------------------------------------------------------------------------------
8,215,000
- ------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
SOUTH CAROLINA - 1.01%
Horry (County of) (Carolina Treatment
Center); Variable Rate Demand Series 1984
RB
4.15% 12/01/14(b)(c) -- Aa2 $ 2,300 $ 2,300,000
- -------------------------------------------------------------------------------
Rock Hill (City of); Utilities System RB
4.15% 01/01/22(b)(c) A-1+ VMIG-1 7,575 7,575,000
- -------------------------------------------------------------------------------
9,875,000
- -------------------------------------------------------------------------------
TENNESSEE - 2.33%
Health, Educational and Housing Facility
Board of Shelby County (Rhodes College);
Variable Rate Demand Educational
Facilities Series 1985 RB
3.75% 08/01/10(b)(c) A-1+ -- 1,945 1,945,000
- -------------------------------------------------------------------------------
Industrial Development Board of the City
of Knoxville (Toys "R" Us Inc., Project);
Series 1984 IDR
4.30% 05/01/14(b)(c) -- A1 1,150 1,150,000
- -------------------------------------------------------------------------------
Industrial Development Board of the
Metropolitan Government of Nashville &
Davidson County (Amberwood Ltd Project);
Multifamily Housing RB
4.38% Series 1993 A 07/01/13(b)(c) -- VMIG-1 2,250 2,250,000
- -------------------------------------------------------------------------------
4.38% Series 1993 B 07/01/13(b)(c) A-1 VMIG-1 1,910 1,910,000
- -------------------------------------------------------------------------------
Knox (County of) Industrial Development
Authority (Centre Square II, Ltd.
Project); Floating Rate Monthly Demand
Series 1984 IDR
3.70% 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
3.70% 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
3.70% 12/01/14(b)(c) A-1+ -- 2,900 2,900,000
- -------------------------------------------------------------------------------
Knox (County of) Industrial Development
Board (Weisgarber Partners); Floating
Rate Series 1984 IDR
3.70% 12/01/14(b)(c) A-1+ -- 700 700,000
- -------------------------------------------------------------------------------
Tennessee State School Bond Authority;
Higher Educational Facilities BAN
4.10% Series 1996 A 03/01/98(b) A-1+ VMIG-1 3,100 3,100,000
- -------------------------------------------------------------------------------
22,855,000
- -------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS - 11.61%
Bexar (County of) Texas Housing Finance
Authority (Altamonte Apt. Project);
Series 1996 RB
4.15% 09/15/26(b)(c) A-1+ -- $ 5,800 $ 5,800,000
- -------------------------------------------------------------------------------
Bexar (County of) Texas Housing Finance
Authority (Fountainhead Apartments);
Multi-Family RB
4.15% 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
3.93% 04/01/02(b)(c) -- A1 2,750 2,750,000
- -------------------------------------------------------------------------------
Dallas Area Rapid Transit; Sales Tax
Revenue Commercial Paper Notes
3.75% 10/09/97(c) A-1+ P-1 3,000 3,000,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Greater Houston
Pooled Health); Series 1985 A RB
4.15% 11/01/25(b)(c) A-1 -- 2,800 2,800,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Gulf Coast Regional
Blood Center Project); Series 1992 Blood
Center RB
4.20% 04/01/17(b)(c) A-1 -- 3,450 3,450,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Methodist Hospital);
Hospital Series 1994 RB
3.90% 12/01/25(b)(d) A-1+ -- 20,000 20,000,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (St. Lukes Episcopal
Hospital); Series 1997 B RB
3.85% 02/15/27(b) A-1+ -- 4,000 4,000,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (TIRR Project); Series
1987 Hospital RB
3.80% 10/01/17(b)(c) -- VMIG-1 4,000 4,000,000
- -------------------------------------------------------------------------------
Houston (City of); Series 1997 TRAN
4.50% 06/30/98 SP-1+ MIG-1 14,000 14,065,280
- -------------------------------------------------------------------------------
Midlothian (City of) (Holnam, Inc.); IDR
4.15% 12/01/09(b)(c) -- P-1 6,000 6,000,000
- -------------------------------------------------------------------------------
North Harris & Montgomery Community
College District; Variable Rate
Unlimited Tax GO Series 1997
3.89% 01/15/98(c)(e) -- VMIG-1 5,000 5,001,247
- -------------------------------------------------------------------------------
Tarrant (County of) Texas Housing Finance
Corp. (Windcastle Project); Multifamily
Housing RB
4.20% 08/01/26(b)(c) A-1+ -- 2,100 2,100,000
- -------------------------------------------------------------------------------
Texas (State of); Series 1997 TRAN
4.75% 08/31/98 SP-1+ MIG-1 16,000 16,127,150
- -------------------------------------------------------------------------------
Texas Department of Housing and Community
Affairs; SFM Tax Exempt Refunding Series
B Commercial Paper Notes
3.80% 10/23/97(c) A-1+ -- 1,815 1,815,000
- -------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Texas - (continued)
Texas Department of Housing and Urban
Affairs (Remington Hill Development);
Multi-Family Housing Refunding Series
1993 B RB
4.00% 02/01/23(b)(c) A-1+ -- $ 13,880 $ 13,880,000
- ------------------------------------------------------------------------------
Texas State Public Finance Authority
Building RB
6.40% 02/01/98(c) AAA Aaa 1,850 1,866,764
- ------------------------------------------------------------------------------
Trinity River Industrial Development
Authority (Radiation Sterilizers, Inc.
Project); Variable Rate Demand IDR
3.75% Series 1985 A 11/01/05(b)(c) A-1 -- 500 500,000
- ------------------------------------------------------------------------------
3.75% Series 1985 B 11/01/05(b)(c) A-1 -- 1,650 1,650,000
- ------------------------------------------------------------------------------
113,805,441
- ------------------------------------------------------------------------------
UTAH - 0.41%
Davis (County of); Series 1997 TRAN
4.25% 12/31/97(h) -- -- 2,750 2,753,333
- ------------------------------------------------------------------------------
Salt Lake (City of); Series 1997 TRAN
4.50% 06/30/98 -- MIG-1 1,300 1,305,678
- ------------------------------------------------------------------------------
4,059,011
- ------------------------------------------------------------------------------
VERMONT - 0.83%
Vermont Educational and Health Building
Finance Authority (VHA New England);
Variable Rate Hospital Series 1985 B RB
4.15% 12/01/25(b)(d) A-1 Aaa 1,000 1,000,000
- ------------------------------------------------------------------------------
Vermont Educational and Health Buildings
(VHA New England); Financing Agency
Revenue 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
4.15% 12/01/25(b)(d) A-1+ Aaa 2,560 2,560,000
- ------------------------------------------------------------------------------
8,160,000
- ------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
VIRGINIA - 1.84%
Alexandria Redevelopment and Housing
Authority (Goodwin Project); Residential
Care Facilities RB Series 1996 B RB
4.10% 10/01/06(b)(c) A-1 -- $ 3,420 $ 3,420,000
- ------------------------------------------------------------------------------
Fairfax (County of); Public Improvement
Series 1997 A GO
5.50% 06/01/98 AAA -- 3,700 3,740,618
- ------------------------------------------------------------------------------
Henrico (County of) Virginia Industrial
Development Authority (Hermitage
Project); Variable Rate Health
Facilities Series 1994 RB
3.95% 05/01/24(b)(c) -- VMIG-1 803 803,000
- ------------------------------------------------------------------------------
Industrial Development Authority of the
City of Lynchburg (VHA Mid-Atlantic
States, Inc.) Capital Asset Financing
Program; Variable Rate Hospital Series
1985 F RB
4.15% 12/01/25(b)(d) A-1 Aaa 1,000 1,000,000
- ------------------------------------------------------------------------------
Petersburg (City of) Hospital Authority
(Southside Regional Medical Center);
Variable Rate Hospital Facility Series
1997 RB
4.10% 07/01/17(b)(c) A-1 -- 3,125 3,125,000
- ------------------------------------------------------------------------------
Waynesboro (City of) (Residential Care
Facilities); Industrial Development
Authority IDR
4.10% 12/15/28(b)(c) A-1 -- 6,000 6,000,000
- ------------------------------------------------------------------------------
18,088,618
- ------------------------------------------------------------------------------
WASHINGTON - 0.65%
Industrial Development Corp. of Port
Townsend (Port Townsend Paper Corp.
Project); Series 1988 A Variable Rate
Refunding RB
4.10% 03/01/09(b)(c) -- VMIG-1 3,100 3,100,000
- ------------------------------------------------------------------------------
Washington Public Power Project Supply
System (Projects No. 1 and 3); Refunding
Electric Series 1993 1A-1 RB
4.15% 07/01/17(b)(c) A-1+ VMIG-1 3,300 3,300,000
- ------------------------------------------------------------------------------
6,400,000
- ------------------------------------------------------------------------------
WEST VIRGINIA - 1.24%
West Virginia Hospital Finance Authority
(VHA Mid-Atlantic States, Inc. Capital
Asset Financing Program); RB
4.15% Series 1985 B 12/01/25(b)(d) A-1+ Aaa 3,000 3,000,000
- ------------------------------------------------------------------------------
4.15% Series 1985 C 12/01/25(b)(d) A-1+ Aaa 3,500 3,500,000
- ------------------------------------------------------------------------------
4.15% Series 1985 F 12/01/25(b)(d) A-1 Aaa 5,700 5,700,000
- ------------------------------------------------------------------------------
12,200,000
- ------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WISCONSIN - 2.37%
Milwaukee (City of); Series G GO
5.00% 06/15/98 AA+ Aa1 $ 2,165 $ 2,182,758
- -------------------------------------------------------------------------------
Wisconsin (State of); GO
4.50% 06/15/98 SP-1+ MIG-1 21,000 21,097,712
- -------------------------------------------------------------------------------
23,280,470
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 102.32% 1,003,484,128(i)
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (2.32%) (22,793,461)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $ 980,690,667
===============================================================================
</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 Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("MOODY'S").
(b) Demand security: payable upon demand by the Fund at specified intervals no
greater than thirteen months. Interest rates are redetermined periodically.
Rates shown are the rates in effect on 09/30/97.
(c) Secured by a letter of credit.
(d) Secured by bond insurance.
(e) Subject to an irrevocable call or mandatory put by the issuer. Maturity
date and par value reflect such call or put.
(f) Secured by an escrow fund of U.S. Treasury obligations.
(g) The Fund may invest in synthetic municipal instruments the value of and
return on which 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 sale 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) Unrated; determined by the investment advisor to be of comparable quality
to the rated securities in which the Fund may invest, pursuant to
guidelines for the determination of quality adopted by the Board of
Directors and followed by the investment advisor.
(i) Cost for federal income tax purposes is $1,003,483,854.
See Notes to Financial Statements.
17
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $1,003,484,128
- ------------------------------------------------------------------------
Cash 519,679
- ------------------------------------------------------------------------
Receivables for:
Investments sold 8,340,310
- ------------------------------------------------------------------------
Interest 5,699,394
- ------------------------------------------------------------------------
Investment for deferred compensation plan 28,010
- ------------------------------------------------------------------------
Other assets 54,144
- ------------------------------------------------------------------------
Total assets 1,018,125,665
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 34,200,000
- ------------------------------------------------------------------------
Dividends 2,999,725
- ------------------------------------------------------------------------
Deferred compensation 28,010
- ------------------------------------------------------------------------
Accrued advisory fees 134,102
- ------------------------------------------------------------------------
Accrued directors' fees 3,005
- ------------------------------------------------------------------------
Accrued administrative service fees 6,039
- ------------------------------------------------------------------------
Accrued transfer agent fees 8,050
- ------------------------------------------------------------------------
Accrued distribution fees 8,209
- ------------------------------------------------------------------------
Accrued operating expenses 47,858
- ------------------------------------------------------------------------
Total liabilities 37,434,998
- ------------------------------------------------------------------------
NET ASSETS $ 980,690,667
========================================================================
NET ASSETS:
Institutional Shares $ 941,307,910
========================================================================
Private Investment Class $ 39,382,757
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Shares:
Authorized 3,000,000,000
- ------------------------------------------------------------------------
Outstanding 941,310,656
========================================================================
Private Investment Class:
Authorized 1,000,000,000
- ------------------------------------------------------------------------
Outstanding 39,382,872
========================================================================
NET ASSET VALUE PER SHARE:
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
STATEMENT OF OPERATIONS
For the six months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest income $19,771,780
- ------------------------------------------------------------------
EXPENSES:
Advisory fees 1,170,373
- ------------------------------------------------------------------
Transfer agent fees 50,006
- ------------------------------------------------------------------
Administrative service fees 36,490
- ------------------------------------------------------------------
Custody fees 46,632
- ------------------------------------------------------------------
Directors' fees 4,658
- ------------------------------------------------------------------
Distribution fees (Note 2) 90,848
- ------------------------------------------------------------------
Other expenses 95,310
- ------------------------------------------------------------------
Total expenses 1,494,317
- ------------------------------------------------------------------
Less fees waived and expenses assumed by advisor (385,059)
- ------------------------------------------------------------------
Net expenses 1,109,258
- ------------------------------------------------------------------
Net investment income 18,662,522
- ------------------------------------------------------------------
Net realized gain on sales of investments 9,010
- ------------------------------------------------------------------
Net unrealized appreciation of investments 274
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $18,671,806
==================================================================
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended September 30, 1997 and the year ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 18,662,522 $ 34,164,404
- -----------------------------------------------------------------------------
Net realized gain on sales of investments 9,010 79,682
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 274 (5,777)
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 18,671,806 34,238,309
- -----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Shares (18,056,576) (33,140,042)
- -----------------------------------------------------------------------------
Private Investment Class (605,946) (1,024,362)
- -----------------------------------------------------------------------------
Capital stock transactions - net:
Institutional Shares (25,268,492) (42,543,201)
- -----------------------------------------------------------------------------
Private Investment Class 1,838,718 2,402,025
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets (23,420,490) (40,067,271)
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,004,111,157 1,044,178,428
- -----------------------------------------------------------------------------
End of period $ 980,690,667 $1,004,111,157
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in):
Institutional Shares $ 941,310,656 $ 966,579,148
- -----------------------------------------------------------------------------
Private Investment Class 39,382,872 37,544,154
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (3,135) (12,145)
- -----------------------------------------------------------------------------
Unrealized appreciation of investments 274 --
- -----------------------------------------------------------------------------
$ 980,690,667 $1,004,111,157
=============================================================================
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
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
six months ended September 30, 1997, AIM reduced its advisory fee from the Fund
by $339,635.
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 six months ended September 30,
1997, the Fund reimbursed AIM $36,490 for such services.
21
<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 six months ended September 30, 1997, the Private Investment
Class accrued $45,424 as compensation to FMC under the Plan. FMC waived fees of
$45,424 during 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 six months
ended September 30, 1997, the Fund paid AIFS $50,006 for such services. Certain
officers and directors of the Company are directors or officers of AIM, AIFS
and FMC. On September 19, 1997, the Board of Directors of the Fund approved the
appointment of AIM Fund Services, Inc. ("AFS") as transfer agent of the Fund to
be effective in late 1997 or early 1998.
During the six months ended September 30, 1997, the Fund paid legal fees of
$4,913 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 six months ended September 30,
1997 and the year ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 MARCH 31, 1997
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Shares 2,397,971,576 $ 2,397,971,576 4,746,443,085 $ 4,746,443,085
- -----------------------------------------------------------------------------------------
Private Investment
Class 123,145,981 123,145,981 204,111,511 204,111,511
- -----------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Shares 968,069 968,069 192,345 192,345
- -----------------------------------------------------------------------------------------
Private Investment
Class 546,080 546,080 860,021 860,021
- -----------------------------------------------------------------------------------------
Redeemed:
Institutional Shares (2,424,208,137) (2,424,208,137) (4,789,178,631) (4,789,178,631)
- -----------------------------------------------------------------------------------------
Private Investment
Class (121,853,343) (121,853,343) (202,569,507) (202,569,507)
- -----------------------------------------------------------------------------------------
Net increase
(decrease) (23,429,774) $ (23,429,774) (40,141,176) $ (40,141,176)
=========================================================================================
</TABLE>
22
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Private Investment
Class capital stock outstanding during the six months ended September 30, 1997
and each of the years in the five-year period ended March 31, 1997.
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, ------------------------------------------
1997 1997 1996 1995 1994 1993
------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------- ------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income 0.02 0.03 0.03 0.03 0.02 0.02
- ----------------------- ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment income (0.02) (0.03) (0.03) (0.03) (0.02) (0.02)
- ----------------------- ------- ------- ------- ------- ------- ------
Net asset value, end of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======================= ======= ======= ======= ======= ======= ======
Total return 3.36%(a) 3.07% 3.41% 2.80% 2.07% 2.43%
======================= ======= ======= ======= ======= ======= ======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $39,383 $37,544 $35,139 $29,286 $16,601 $9,593
======================= ======= ======= ======= ======= ======= ======
Ratio of expenses to
average net assets(b) 0.45%(c) 0.45% 0.45% 0.45% 0.45% 0.45%
======================= ======= ======= ======= ======= ======= ======
Ratio of net investment
income to average net
assets(d) 3.33%(c) 3.02% 3.35% 2.89% 2.05% 2.22%
======================= ======= ======= ======= ======= ======= ======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.77% (annualized), 0.83%, 0.76%, 1.17%, 1.15% and 1.40%, for the six
months ended September 30, 1997 and the periods 1997-1993, respectively.
(c) Ratios are annualized and based on average net assets of $36,239,835.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 3.01% (annualized), 2.65%, 3.04%, 2.17%, 1.35% and
1.28%, for the six months ended September 30, 1997 and the periods 1997-
1993, respectively.
23
<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 Cash Reserve
Gary T. Crum Sr. Vice President Portfolio
Carol F. Relihan Sr. Vice President & Secretary ----------------------------------------
Dana R. Sutton Vice President & Assistant Treasurer Private Investment SEMI-
Stuart W. Coco Vice President Class ANNUAL
Melville B. Cox Vice President REPORT
Karen Dunn Kelley Vice President
J. Abbott Sprague Vice President
P. Michelle Grace Assistant Secretary
Nancy L. Martin Assistant Secretary SEPTEMBER 30, 1997
Ofelia M. Mayo Assistant Secretary
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
This report may be distributed only to current shareholders or [LOGO APEARS HERE]
to persons who have received a current prospectus. FUND MANAGEMENT COMPANY
</TABLE>
